[Federal Register Volume 77, Number 221 (Thursday, November 15, 2012)]
[Rules and Regulations]
[Pages 68210-68565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26902]



[[Page 68209]]

Vol. 77

Thursday,

No. 221

November 15, 2012

Part II





 Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 416, 419, 476, et al.





 Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Electronic Reporting Pilot; Inpatient 
Rehabilitation Facilities Quality Reporting Program; Revision to 
Quality Improvement Organization Regulations; Final Rule

  Federal Register / Vol. 77 , No. 221 / Thursday, November 15, 2012 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 416, 419, 476, 478, 480, and 495

[CMS-1589-FC]
RIN 0938-AR10


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Electronic Reporting Pilot; Inpatient 
Rehabilitation Facilities Quality Reporting Program; Revision to 
Quality Improvement Organization Regulations

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) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2013 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare services paid under the 
OPPS and those paid under the ASC payment system. In addition, this 
final rule with comment period updates and refines the requirements for 
the Hospital Outpatient Quality Reporting (OQR) Program, the ASC 
Quality Reporting (ASCQR) Program, and the Inpatient Rehabilitation 
Facility (IRF) Quality Reporting Program. We are continuing the 
electronic reporting pilot for the Electronic Health Record (EHR) 
Incentive Program, and revising the various regulations governing 
Quality Improvement Organizations (QIOs), including the secure 
transmittal of electronic medical information, beneficiary complaint 
resolution and notification processes, and technical changes. The 
technical changes to the QIO regulations reflect CMS' commitment to the 
general principles of the President's Executive Order on Regulatory 
Reform, Executive Order 13563 (January 18, 2011).

DATES: Effective Date: This final rule with comment period is effective 
on January 1, 2013.
    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 must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on December 
31, 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 
1, 2013, 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-1589-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-1589-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-1589-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, (401) 786-4617, for issues related to new CPT and 
Level II HCPCS codes, exceptions to the 2 times rule, and new 
technology APCs.
    Anita Bhatia, (410) 786-7236, Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program--Program Administration and Reconsideration 
Issues.
    Douglas Brown, (410) 786-0028, for issues related to Electronic 
Health Record (EHR) Incentive Program Electronic Reporting Pilot.
    Carrie Bullock, (401) 786-0378, for issues related to blood 
products.
    Erick Chuang, (410) 786-1816, for issues related to OPPS APC 
weights, mean calculation, copayments, wage index, outlier payments, 
and rural hospital payments.
    Caroline Gallaher, (410) 786-8705, for issues related to Inpatient 
Rehabilitation Facility (IRF) Quality Reporting Program.
    Shaheen Halim (410) 786-0641, Hospital Outpatient Quality Reporting 
Program (OQR)--Measures Issues and Publication of Hospital OQR Program 
Data, and Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program--Measures Issues and Publication of ASCQR Program Data.
    Twi Jackson, (410) 786-1159, for issues related to device-dependent 
APCs, no cost/full credit and partial credit devices, hospital 
outpatient visits, extended assessment and management composite APCs, 
and inpatient-only procedures.
    Thomas Kessler, (401) 786-1991, for issues related to QIO 
regulations.

[[Page 68211]]

    Marina Kushnirova, (410) 786-2682, for issues related to OPPS 
status indicators and comment indicators.
    Barry Levi, (410) 786-4529, for issues related to OPPS pass-through 
devices, brachytherapy sources, intraoperative radiation therapy 
(IORT), brachytherapy composite APC, multiple imaging composite APCs, 
cardiac resynchronization therapy composite APC, and cardiac 
electrophysiologic evaluation and ablation composite APC.
    Jana Lindquist, (410) 786-4533, for issues related to partial 
hospitalization and community mental health center (CMHC) issues.
    Ann Marshall, (410) 786-3059, for issues related to hospital 
outpatient supervision, outpatient status, proton beam therapy, and the 
Hospital Outpatient Payment (HOP) Panel.
    John McInnes, (410) 786-0378, for issues related to new technology 
intraocular lenses (NTIOLs) and packaged items/services.
    James Poyer, (410) 786-2261, Hospital Outpatient Quality 
Reporting--Program Administration, Validation, and Reconsideration 
Issues.
    Char Thompson, (410) 786-2300, for issues related to OPPS drugs, 
radiopharmaceuticals, biologicals, blood clotting factors, cost-to-
charge ratios (CCRs), and ambulatory surgical center (ASC) payments.
    Marjorie Baldo, (410) 786-4617, for all other issues related to 
hospital outpatient and ambulatory surgical center payments not 
previously identified.

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 4:00 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 in 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 OPPS/ASC 
proposed rule, all of the Addenda 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the 
ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html. 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

AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
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
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter associated urinary tract infection
CBSA Core-Based Statistical Area
CCI Correct Coding Initiative
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Medicare] Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CQM Clinical quality measure
CR Change request
CSAC Consensus Standards Approval Committee
CY Calendar year
DFO Designated Federal Official
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-Related Group
DSH Disproportionate share hospital
EACH Essential access community hospital
eCQM Electronically specified clinical quality measure
ECT Electroconvulsive therapy
ED Emergency department
E/M Evaluation and management
EHR Electronic health record
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Public Law 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HITECH Health Information Technology for Economic and Clinical 
Health [Act] (found in the American Recovery and Reinvestment Act of 
2009, Public Law 111-5)
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD Implantable cardioverter defibrillator
ICU Intensive care unit
IHS Indian Health Service
IMRT Intensity Modulated Radiation Therapy
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IOM Institute of Medicine
IORT Intraoperative radiation treatment
IPF Inpatient Psychiatric Facility
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument

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IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
LDR Low dose rate
LOS Length of Stay
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
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
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PCR Payment-to-cost ratio
PE Practice expense
PEPPER Program for Evaluating Payment Patterns Electronic Report
PHP Partial hospitalization program
PHS Public Health Service [Act], Public Law 96-88
PPI Producer Price Index
PPS Prospective payment system
PQRS Physician Quality Reporting System
PT Physical therapy
QDC Quality data code
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
RTI Research Triangle Institute, International
RVU Relative value unit
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SI Status indicator
SIR Standardized infection ratio
SLP Speech-language pathology
SNF Skilled Nursing Facility
SRS Stereotactic Radiosurgery
TEP Technical Expert Panel
TMS Transcranial Magnetic Stimulation Therapy
TOPs Transitional Outpatient Payments
UR Utilization review
USPSTF United States Preventive Services Task Force
UTI Urinary tract infection
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
    A. Executive Summary of This Final Rule With Comment Period
    1. Purpose
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Legislative and Regulatory Authority for the Hospital OPPS
    C. Excluded OPPS Services and Hospitals
    D. Prior Rulemaking
    E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel 
or the Panel), Formerly Named the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received in Response to the CY 2013 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule 
With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment 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 Costs Used for 
Ratesetting
    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 Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    d. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Brachytherapy Sources
    e. Calculation of Composite APC Criteria-Based 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 (APC 0108)
    f. Geometric Mean-Based Relative Payment Weights
    3. Changes to Packaged Services
    a. Background
    b. Clarification of Regulations at 42 CFR 419.2(b)
    c. Packaging Recommendations of the HOP Panel (``The Panel'') at 
its February 2012 Meeting
    d. Packaging Recommendations of the HOP Panel (``The Panel'') at 
its August 2012 Meeting
    e. Other Packaging Proposals and Policies for CY 2013
    f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals
    (1) Existing Packaging Policies
    (2) Clarification of Packaging Policy for Anesthesia Drugs
    g. Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' 
Drugs and Devices)
    h. Summary of Proposals
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payments 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 Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act
    1. Background
    2. Payment Adjustment for Certain Cancer Hospitals for CY 2013
    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 CY 2012 Level II HCPCS and CPT Codes 
Effective April 1, 2012 and July 1, 2012 for Which We Solicited 
Public Comments in the CY 2013 OPPS/ASC Proposed Rule
    2. Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2013 for Which We Are Soliciting Public 
Comments in this CY 2013 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

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    2. Movement of Procedures From New Technology APCs to Clinical 
APCs
    3. Payment Adjustment Policy for Radioisotopes Derived From Non-
Highly Enriched Uranium (HEU) Sources
    a. Background
    b. Payment Policy
    D. OPPS APC-Specific Policies
    1. Cardiovascular and Vascular Services
    a. Cardiac Telemetry (APC 0213)
    b. Mechanical Thrombectomy (APC 0653)
    c. Non-Congenital Cardiac Catheterization (APC 0080)
    d. Endovascular Revascularization of the Lower Extremity (APCs 
0083, 0229, and 0319)
    e. External Electrocardiographic Monitoring (APC 0097)
    f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)
    2. Gastrointestinal Services
    a. Laparoscopic Adjustable Gastric Band (APC 0132)
    b. Transoral Incisionless Fundoplication (APC 0422)
    c. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    3. Integumentary System Services
    a. Extracorporeal Shock Wave Wound Treatment (APC 0340)
    b. Application of Skin Substitute (APCs 0133 and 0134)
    c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)
    4. Nervous System Services
    a. Scrambler Therapy (APC 0275)
    b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)
    c. Paravertebral Neurolytic Agent (APC 0207)
    d. Programmable Implantable Pump (APC 0691)
    e. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    5. Ocular Services: Placement of Amniotic Membrane (APC 0233)
    6. Radiology Oncology
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Device Construction for Intensity Modulated Radiation Therapy 
(IMRT) (APC 0305)
    c. Other Radiation Oncology Services (APCs 0310 and 0412)
    d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, 0067 and 0127)
    e. Intraoperative Radiation Therapy (IORT) (APC 0412)
    (1) Background
    (2) CY 2013 Proposals and Final Policies for CPT Codes 77424, 
77425, and 77469
    7. Imaging
    a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397)
    b. Level II Nervous System Imaging (APC 0402)
    c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    8. Respiratory Services
    a. Bronchoscopy (APC 0415)
    b. Upper Airway Endoscopy (APC 0075)
    9. Other Services
    a. Payment for Molecular Pathology Services
    b. Bone Marrow (APC 0112)
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 2013 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments to 
Offset Costs Packaged into APC Groups
    a. Background
    b. CY 2013 Policy
    3. Clarification of Existing Device Category Criterion
    a. Background
    b. Clarification of CY 2013 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 
2012
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2013
    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
    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 2013 Payment Policy
    4. Payment Policy for Therapeutic Radiopharmaceuticals
    5. Payment for Blood Clotting Factors
    6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital 
Claims Data
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Policies for Hospital Outpatient Visits
    C. Transitional Care Management
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2013
    C. Coding Changes
    D. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Would 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. Conditions of Payment for Physical Therapy, Speech-Language 
Pathology, and Occupational Therapy Services in Hospitals and CAHs
    B. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
XI. Outpatient Status: Solicitation of Public Comments in the CY 
2013 OPPS/ASC Proposed Rule
    A. Background
    B. Summary of Public Comments Received
    1. Part A to Part B Rebilling
    2. Clarifying Current Admission Instructions or Establishing 
Specified Clinical Criteria
    3. Hospital Utilization Review
    4. Prior Authorization
    5. Time-Based Criteria for Inpatient Admission
    6. Payment Alignment
    7. Public Comments on Other Topics
    a. Rules for the External Review of Inpatient Claims
    b. Improving Beneficiary Protections
    c. Revising the Qualifying Criteria for Skilled Nursing Facility 
(SNF) Coverage
    C. Summary
XII. CY 2013 OPPS Payment Status and Comment Indicators
    A. CY 2013 OPPS Payment Status Indicator Definitions
    B. CY 2013 Comment Indicator Definitions
XIII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. GAO Recommendations
    C. OIG Recommendations
XIV. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. 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 2012 for Which We

[[Page 68214]]

Solicited Public Comments in the CY 2013 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 2013 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 2013 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 2013
    d. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    e. ASC Treatment of Surgical Procedures Removed From the OPPS 
Inpatient List for CY 2013
    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 
2013
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Payment for the Cardiac Resynchronization Therapy Composite
    e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy 
Composite
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2013
    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 2013 and 
Deadline for Public Comments
    4. Payment Adjustment
    5. Revisions to the Major NTIOL Criteria Described in 42 CFR 
416.195
    6. Request for Public Comment on the ``Other Comparable Clinical 
Advantages'' Improved Outcome
    7. Announcement of CY 2013 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 2013 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2013 ASC Payment Rates
XV. Hospital Outpatient Quality Reporting Program Updates
    A. Background
    1. Overview
    2. Statutory History of the Hospital Outpatient Quality 
Reporting (Hospital OQR) Program
    3. Measure Updates and Data Publication
    a. Process for Updating Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Process for Retention of Hospital OQR Program Measures 
Adopted in Previous Payment Determinations
    C. Removal or Suspension of Quality Measures From the Hospital 
OQR Program Measure Set
    1. Considerations in Removing Quality Measures From the Hospital 
OQR Program
    2. Removal of One Chart-Abstracted Measure for the CY 2013 and 
Subsequent Years Payment Determinations
    3. Suspension of One Chart-Abstracted Measure for the CY 2014 
and Subsequent Years Payment Determinations
    4. Deferred Data Collection of OP-24: Cardiac Rehabilitation 
Measure: Patient Referral From an Outpatient Setting for the CY 2014 
Payment Determination
    D. Quality Measures for CY 2015 Payment Determination
    E. Possible Quality Measures Under Consideration for Future 
Inclusion in the Hospital OQR Program
    F. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2013 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2013
    G. Requirements for Reporting of Hospital OQR Data for the CY 
2014 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program for the CY 2014 Payment Determination and Subsequent 
Years
    a. Background
    b. General Requirements
    c. Chart-Abstracted Measure Requirements for CY 2014 and 
Subsequent Payment Determination Years
    d. Claims-Based Measure Data Requirements for the CY 2014 and CY 
2015 Payment Determinations
    e. Structural Measure Data Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    f. Data Submission Requirements for OP-22: ED-Patient Left 
Without Being Seen for the CY 2015 Payment Determination
    g. Population and Sampling Data Requirements for the CY 2014 
Payment Determination and Subsequent Years
    3. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2014 
Payment Determination and Subsequent Years
    a. Random Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2014 Payment Determination and 
Subsequent Years
    b. Targeting and Targeting Criteria for Data Validation 
Selection for CY 2014 Payment Determination and for Subsequent Years
    c. Methodology for Encounter Selection for the CY 2014 Payment 
Determination and Subsequent Years
    d. Validation Score Calculation for the CY 2014 Payment 
Determination and Subsequent Years
    H. Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2014 Payment Determination and Subsequent Years
    I. Extraordinary Circumstances Extension or Waiver for the CY 
2013 Payment Determination and Subsequent Years
    J. Electronic Health Records (EHRs)
    K. 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Eligible Hospitals and CAHs
XVI. Requirements for the Ambulatory Surgical Centers Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the ASC Quality Reporting (ASCQR) 
Program
    3. History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. ASCQR Program Quality Measures
    3. ASC Measure Topics for Future Consideration
    4. Clarification Regarding the Process for Updating ASCQR 
Program Quality Measures
    C. Requirements for Reporting of ASC Quality Data
    1. Form, Manner, and Timing for Claims-Based Measures for the CY 
2014 Payment Determination and Subsequent Payment Determination 
Years
    a. Background
    b. Form, Manner, and Timing for Claims-Based Measures for the CY 
2015 Payment Determination and Subsequent Payment Determination 
Years
    2. Data Completeness and Minimum Threshold for Claims-Based 
Measures Using QDCs
    a. Background
    b. Data Completeness Requirements for the CY 2015 Payment 
Determination and Subsequent Payment Determination Years
    3. Other Comments on the ASCQR Program
    D. Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements
    1. Statutory Background
    2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet 
the ASCQR Program Requirements for the CY 2014 Payment Determination 
and Subsequent Payment Determination Years

[[Page 68215]]

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting 
Program Updates
    A. Overview
    B. Updates to IRF QRP Measures Which Are Made as a Result of 
Review by the National Quality Forum (NQF) Process
    C. Process for Retention of IRF Quality Measures Adopted in 
Previous Fiscal Year Rulemaking Cycles
    D. Measures for the FY 2014 Payment Determination
    1. Clarification Regarding Existing IRF Quality Measures That 
Have Undergone Changes During the NQF Measure Maintenance Processes
    2. Updates to the ``Percent of Residents Who Have Pressure 
Ulcers That Are New or Worsened'' Measure
XVIII. Revisions to the Quality Improvement Organization (QIO) 
Regulations (42 CFR Parts 476, 478, and 480)
    A. Summary of Changes
    B. Quality of Care Reviews
    1. Beneficiary Complaint Reviews
    2. Completion of General Quality of Care Reviews
    C. Use of Confidential Information That Explicitly or Implicitly 
Identifies Patients
    D. Secure Transmissions of Electronic Versions of Medical 
Information
    E. Active Staff Privileges
    F. Technical Corrections
XIX. Files Available to the Public Via the Internet
XX. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs (Sec.  495.8)
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. 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. Hospital OQR Program Measures for the CY 2014 Payment 
Determination
    c. Hospital OQR Program Measures for CY 2015
    3. Hospital OQR Program Validation Requirements for CY 2014
    4. Hospital OQR Program Reconsideration and Appeals Procedures
    5. ASCQR Program Requirements
    a. Claims-Based Outcome Measures for the CY 2014 Payment 
Determination
    b. Claims-Based Process, Structural, and Volume Measures for the 
CY 2015 and CY 2016 Payment Determinations
    c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension Requests; Reconsideration 
Requests
    6. IRF QRP
    a. Pressure Ulcer Measure
    b. CAUTI Measure
XXI. Waiver of Proposed Rulemaking and Response to Comments
    A. Waiver of Proposed Rulemaking
    B. Response to Comments
XXII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for OPPS and ASC Payment Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of OPPS Changes in This Final Rule With 
Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of OPPS Changes on Hospitals
    (3) Estimated Effects of OPPS Changes on CMHCs
    (4) Estimated Effect of OPPS Changes on Beneficiaries
    (5) Estimated Effects of OPPS Changes on Other Providers
    (6) Estimated Effects of OPPS Changes on the Medicare and 
Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of ASC Payment System Final Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of ASC Payment System Final Policies on 
ASCs
    (3) Estimated Effects of ASC Payment System Final Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Effects of the Revisions to the QIO Regulations
    d. Accounting Statements and Tables
    e. Effects of Requirements for the Hospital OQR Program
    f. Effects of the EHR Electronic Reporting Pilot
    g. Effects of Proposals for the ASCQR Program
    h. Effects of Updates to the IRF QRP
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIII. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Final Rule With Comment Period

1. Purpose
    In this final rule with comment period, we are updating the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments and Ambulatory 
Surgical Centers (ASCs) beginning January 1, 2013. Section 1833(t) of 
the Social Security Act (the Act) requires us to annually review and 
update the relative payment weights and the conversion factor for 
services payable under the Outpatient Prospective Payment System 
(OPPS). Under section 1833(i) of the Act, we annually review and update 
the ASC payment rates. We describe these and various other statutory 
authorities in the relevant sections of this final rule.
    In addition to establishing payment rates for CY 2013, we are 
updating and implementing new requirements under the Hospital 
Outpatient Quality Reporting (OQR) Program, the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program, and the Inpatient 
Rehabilitation Facility (IRF) Quality Reporting Program. We are 
continuing the electronic reporting pilot for the Electronic Health 
Record (EHR) Incentive Program and making revisions to the regulations 
governing the Quality Improvement Organizations (QIOs), including the 
secure transmittal of electronic medical information, beneficiary 
complaint resolution and notification processes, and technical 
corrections. The technical changes to the QIO regulations that we are 
making to improve the regulations reflect CMS' commitment to the 
principles of the President's Executive Order on Regulatory Reform, 
Executive Order 13563 (January 18, 2011).
2. Summary of the Major Provisions
     OPPS Update: For CY 2013, we are increasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.8 percent. This increase is based on the 
final hospital inpatient market basket percentage increase of 2.6 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.7 percentage points, and minus a 0.1 percentage 
point adjustment required by the Affordable Care Act. Under this final 
rule with comment period, we estimate that total payments for CY 2013, 
including beneficiary cost-sharing, to the more than 4,000 facilities 
paid under the OPPS (including general acute care hospitals, children's 
hospitals, cancer hospitals, and community mental health centers 
(CMHCs)), will be approximately $48.1 billion, an increase of 
approximately $4.6 billion compared to CY 2012 payments, or $600 
million excluding our estimated changes in enrollment, utilization, and 
case-mix.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals failing to meet the hospital 
outpatient quality reporting requirements, by applying a reporting 
factor of 0.980 to the OPPS payments and copayments for all applicable 
services.
     Geometric Mean-Based Relative Payment Weights: CMS has 
discretion under the statute to set OPPS payments based upon either the 
estimated mean or median costs of services within an Ambulatory Payment 
Classification (APC) group, the unit of payment. To improve our cost 
estimation process, for

[[Page 68216]]

CY 2013 we are using the geometric mean costs of services within an APC 
to determine the relative payment weights of services, rather than the 
median costs that we have used since the inception of the OPPS. Our 
analysis shows that the change to means will have a limited payment 
impact on most providers, with a small number experiencing payment gain 
or loss based on their service-mix.
     Rural Adjustment: We are continuing the adjustment of 7.1 
percent to the OPPS payments to certain rural sole community hospitals 
(SCHs), including essential access community hospitals (EACHs). This 
adjustment will apply to all services 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 cost.
     Cancer Hospital Payment Adjustment: For CY 2013, we are 
continuing our policy to provide additional payments to cancer 
hospitals so that the hospital's payment-to-cost ratio (PCR) with the 
payment adjustment is equal to the weighted average PCR for the other 
OPPS hospitals using the most recent submitted or settled cost report 
data. Based on those data, a target PCR of 0.91 will be used to 
determine the CY 2013 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the payment amount associated with the 
cancer hospital payment adjustment will be the additional payment 
needed to result in a PCR equal to 0.91 for each cancer hospital.
     Payment Adjustment Policy for Radio-Isotopes Derived from 
Non-Highly Enriched Uranium Sources: We are exercising our statutory 
authority to make payment adjustments necessary to ensure equitable 
payments in order to provide an adjustment for CY 2013 to cover the 
marginal cost of hospital conversion to the use of non-HEU sources of 
radio-isotopes used in medical imaging. The adjustment will cover the 
marginal cost of radio-isotopes produced from non-HEU sources over the 
costs of radio-isotopes produced by HEU sources.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2013, payment for the acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals that do not have pass-through 
status will be set at the statutory default of average sales price 
(ASP) plus 6 percent.
     Supervision of Hospital Outpatient Therapeutic Services: 
We are clarifying the application of the supervision regulations to 
physical therapy, speech-language pathology, and occupational therapy 
services that are furnished in OPPS hospitals and critical access 
hospitals (CAHs). In addition, in this final rule we note that we will 
extend the enforcement instruction one final year through CY 2013. This 
additional year, which we expect will be the final year of the 
extension, will provide additional opportunities for stakeholders to 
bring their issues to the Hospital Outpatient Payment Panel.
     Outpatient Status: We are concerned about recent increases 
in the length of time that Medicare beneficiaries spend as outpatients 
receiving observation services. In addition, hospitals continue to 
express concern about Medicare Part A to Part B rebilling policies when 
a hospital inpatient claim is denied because the inpatient admission 
was not medically necessary. In the CY 2013 OPPS/ASC proposed rule (77 
FR 45155 through 45157), we provided an update on the Part A to Part B 
Rebilling Demonstration that is in effect for CY 2012 through CY 2014, 
which was designed to assist us in evaluating these issues. We also 
solicited public comments on potential clarifications or changes to our 
policies regarding patient status that may be appropriate, which we 
discuss in this final rule with comment period.
     Ambulatory Surgical Center Payment Update: For CY 2013, we 
are increasing payment rates under the ASC payment system by 0.6 
percent. This increase is based on a projected CPI-U update of 1.4 
percent minus a multifactor productivity adjustment required by the 
Affordable Care Act that is projected to be 0.8 percent. Based on this 
update, we estimate that total payments to ASCs (including beneficiary 
cost-sharing and estimated changes in enrollment, utilization, and 
case-mix), for CY 2013 will be approximately $4.074 billion, an 
increase of approximately $310 million compared to estimated CY 2012 
payments.
     New Technology Intraocular Lenses: We are revising the 
regulations governing payments for new technology intraocular lenses 
(NTIOLs) to require that the IOL's labeling, which must be approved by 
the FDA, contain a claim of a specific clinical benefit based on a new 
lens characteristic in comparison to currently available IOLs. We also 
are revising the regulations to require that any specific clinical 
benefit referred to in Sec.  416.195(a)(2) must be supported by 
evidence that demonstrates that the IOL results in a measurable, 
clinically meaningful, improved outcome.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we address the public comments received 
as a result of our solicitation in the proposed rule on our approach 
for future measure selection and development as well as certain 
measures for future potential inclusion in the ASCQR Program measure 
set. We are finalizing our approach to future measure selection and 
development for the ASCQR Program. For the CY 2015 payment 
determination and subsequent years' payment determinations, we are 
adopting requirements for claims-based measures regarding the dates for 
submission and payment of claims and data completeness. We also are 
finalizing our policy regarding how the payment rates will be reduced 
in CY 2014 and in subsequent calendar years for ASCs that fail to meet 
program requirements, and we are clarifying our policy on updating 
measures.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are not establishing any new measures for 
CY 2013. We also are not specifying any new targeting criteria to 
select hospitals for validation of medical records. We are confirming 
the removal or suspension of data collection for specific measures. We 
are specifying that the criteria we will consider when determining 
whether to remove measures for the Hospital Inpatient Quality Reporting 
(IQR) Program will also apply to the Hospital OQR Program. We are 
providing that measures adopted in future rulemaking are automatically 
adopted for all subsequent year payment determinations unless we 
remove, suspend, or replace them. We are making changes to 
administrative forms used in the program. We are extending the deadline 
for submitting a notice of participation form and to enter structural 
measures data.
     Electronic Health Record (EHR) Incentive Program: For the 
EHR Incentive Program, we are extending the 2012 Medicare EHR Incentive 
Program Electronic Reporting Pilot for Eligible Hospitals and CAHs 
through 2013, exactly as finalized for 2012. We recently issued a final 
rule (77 FR 53968) for Stage 2 of the Medicare and Medicaid EHR 
Incentive Programs.
     Inpatient Rehabilitation Facility Quality Reporting 
Program (IRF QRP): We are: (1) Adopting updates on one (out of two) 
previously adopted measure for the IRF QRP that will affect annual 
prospective payment amounts for FY 2014; (2) adopting a nonrisk-
adjusted version of an NQF-endorsed pressure ulcer measure for the IRF 
QRP, and we will not publicly report any pressure ulcer measure data 
until we begin risk adjustment of these data; (3) adopting a

[[Page 68217]]

policy that will provide that any measure that has been adopted for use 
in the IRF QRP will remain in effect until the measure is actively 
removed, suspended, or replaced; and (4) adopting policies regarding 
when notice-and-comment rulemaking will be used to update existing IRF 
QRP measures.
     Revisions to the Quality Improvement Organization (QIO) 
Regulations: We are revising the QIO program regulations to: (1) Give 
QIOs the authority to send and receive secure transmissions of 
electronic versions of medical information; (2) provide more detailed 
and improved procedures for QIOs when completing Medicare beneficiary 
complaint reviews and general quality of care reviews, including 
procedures related to a new alternative dispute resolution process 
called ``immediate advocacy''; (3) increase the information 
beneficiaries receive in response to QIO review activities; (4) convey 
to Medicare beneficiaries the right to authorize the release of 
confidential information by QIOs; and (5) make other technical changes 
that are designed to improve the regulations. The technical changes to 
the QIO regulations that we are making to improve the regulations 
reflect CMS' commitment to the principles of the President's Executive 
Order on Regulatory Reform, Executive Order 13563 (January 18, 2011).
3. Summary of Costs and Benefits
    In sections XXII. and XXIII. of this final rule with comment 
period, we set forth a detailed analysis of the regulatory and 
federalism impacts that the changes will have on affected entities and 
beneficiaries. Key estimated impacts include the following:
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
    Table 57 in section XXII. of this final rule with comment period 
displays the distributional impact all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2013 compared to all estimated 
OPPS payments in CY 2012. We estimate that the policies in this final 
rule will result in a 1.9 percent overall increase in OPPS payments to 
providers. We estimate that the increase in OPPS expenditures, 
including beneficiary cost-sharing, will be approximately $600 million, 
not taking into account potential changes in enrollment, utilization, 
and case-mix. Taking into account estimated spending changes that are 
attributable to these factors, we estimate an increase of approximately 
$4.571 billion in OPPS expenditures, including beneficiary cost-
sharing, for CY 2013 compared to CY 2012 OPPS expenditures. We estimate 
that total OPPS payments, including beneficiary cost-sharing, will be 
$48.1 billion for CY 2013.
    We estimated the isolated impact of our OPPS policies on CMHCs 
because CMHCs are only paid for partial hospitalization services under 
the OPPS. Continuing the provider-specific structure that we adopted 
for CY 2011 and basing payment fully on the type of provider furnishing 
the service, we estimate a 4.4 percent decrease in CY 2013 payments to 
CMHCs relative to their CY 2012 payments.
(2) Impacts of Basing APC Relative Payment Weights on Geometric Mean 
Costs
    We estimate that our final policy to base the APC relative payment 
weights on the geometric mean costs rather than the median costs of 
services within an APC will not significantly impact most providers. 
Payments to very low volume urban hospitals and to hospitals for which 
disproportionate share hospital (DSH) data are not available will 
increase by an estimated 2.5 and 4.3 percent, respectively. The 
hospitals for which DSH data are not available are largely non-IPPS 
psychiatric hospitals. In contrast, payments to CMHCs will decrease by 
an estimated 3.9 percent due to basing the relative payment weights on 
the geometric mean costs of services rather than the median costs of 
services.
(3) Impacts of the Updated Wage Indices
    We estimate no significant impacts related to updating the wage 
indices and applying the frontier State wage index. Adjustments to the 
wage indices other than the frontier State wage adjustment will not 
significantly affect most hospitals. The updated wage indices will most 
affect urban hospitals in the Pacific and East South Central regions 
and rural hospitals in the Mountain and Pacific regions.
(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2013 payment policies 
for hospitals that are eligible for the rural adjustment or for the 
cancer hospital payment adjustment. We are not making any change in 
policies for determining the rural and cancer hospital payment 
adjustments, and the adjustment amounts do not significantly impact the 
budget neutrality adjustments for these policies.
(5) Impacts of the OPD Fee Schedule Increase Factor
    We estimate that, for most hospitals, the application of the OPD 
fee schedule increase factor of 1.8 percent to the conversion factor 
for CY 2013 will mitigate the small negative impacts of the budget 
neutrality adjustments. Certain low volume hospitals and hospitals for 
which DSH data are not available will experience larger increases 
ranging from 4.5 percent to 8.2 percent. As a result of the OPD fee 
schedule increase factor and other budget neutrality adjustments, we 
estimate that rural and urban hospitals will experience similar 
increases of approximately 1.8 percent for urban hospitals and 2.1 
percent for rural hospitals. Classifying hospitals by teaching status 
or type of ownership suggests that these hospitals will receive similar 
increases.
b. Impacts of the ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the CY 2013 payment 
rates compared to estimated CY 2012 payment rates ranges between -3 
percent for respiratory system procedures, integumentary system 
procedures, and cardiovascular system procedures and 3 percent for 
nervous system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our CY 2013 policies to significantly affect the 
number of hospitals that do not receive a full annual payment update.
d. Impacts of the EHR Incentive Program Proposal
    There are no changes from the 2012 OPPS/ASC final rule to the costs 
or impact for the 2013 Medicare EHR Incentive Program Electronic 
Reporting Pilot for Hospitals and CAHs.
e. Impacts of the ASCQR Program
    We do not expect our CY 2013 final policies to significantly affect 
the number of ASCs that do not receive a full annual payment update 
beginning in CY 2014.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security 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

[[Page 68218]]

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 parts 410 and 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); the Medicare and Medicaid Extenders Act of 2010 
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act 
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; and 
most recently the Middle Class Tax Relief and Job Creation Act of 2012 
(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012.
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the 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. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C. 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 CMHCs), 
and certain inpatient hospital services designated by the Secretary 
that are furnished to inpatients who are entitled to Part A and have 
exhausted their Part A benefits, or who are not so entitled.
    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 (or mean cost, if elected by the Secretary) 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 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 
clinical information and cost 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.

C. 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 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 IPPS. We set forth the services that are excluded from payment 
under the OPPS in regulations at 42 CFR 419.22.
    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; CAHs; hospitals located outside of 
the 50 States, the District of Columbia, and Puerto Rico; and Indian 
Health Service (IHS) hospitals.

D. 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

[[Page 68219]]

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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the 
Panel), Formerly Named the Advisory Panel on Ambulatory Payment 
Classification Groups (APC Panel)

1. Authority of the 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 external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel) to fulfill this requirement. 
In CY 2011, based on section 222 of the PHS Act which gives 
discretionary authority to the Secretary to convene advisory councils 
and committees, the Secretary expanded the panel's scope to include the 
supervision of hospital outpatient therapeutic services in addition to 
the APC groups and weights. To reflect this new role of the panel, the 
Secretary changed the panel's name to the Advisory Panel on Hospital 
Outpatient Payment (the HOP Panel, or the Panel). The Panel is not 
restricted to using data compiled by CMS, and in conducting its review 
it may use data collected or developed by organizations outside the 
Department.
2. Establishment of the Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the HOP Panel, at that time named the APC Panel. This 
expert panel, which may be composed of up to 19 appropriate 
representatives of providers (currently employed full-time, not as 
consultants, in their respective areas of expertise), reviews clinical 
data and advises CMS about the clinical integrity of the APC groups and 
their payment weights. Since CY 2012, the Panel also is charged with 
advising the Secretary on the appropriate level of supervision for 
individual hospital outpatient therapeutic services. The 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 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 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 
charter was amended on November 15, 2011 and the Panel was renamed to 
reflect expanding the Panel's authority to include supervision of 
hospital outpatient therapeutic services and therefore to add CAHs to 
its membership.
    The current Panel membership and other information pertaining to 
the 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. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meeting taking 
place on August 27-28, 2012. Prior to each meeting, we publish a notice 
in the Federal Register to announce the meeting and, when necessary, to 
solicit nominations for Panel membership and to announce new members.
    The Panel has established an operational structure that, in part, 
currently includes the use of three subcommittees to facilitate its 
required 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 Panel and for recommending options for resolving them. 
The Visits and Observation Subcommittee reviews and makes 
recommendations to the Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC relative 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 APC 
placement of HCPCS codes regarding services for which separate payment 
is made.
    Each of these subcommittees was established by a majority vote from 
the full Panel during a scheduled Panel meeting, and the Panel 
recommended that the subcommittees continue at the August 2012 Panel 
meeting. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
February 2012 and August 2012 Panel meetings are included in the 
sections of this final rule that are specific to each recommendation. 
For discussions of earlier Panel meetings and recommendations, we refer 
readers to previously published 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.

F. Public Comments Received in Response to the CY 2013 OPPS/ASC 
Proposed Rule

    We received approximately 668 timely pieces of correspondence on 
the CY 2013 PPS/ASC proposed rule that appeared in the Federal Register 
on July 30, 2012 (77 FR 45061). We note that we received some public 
comments that were outside the scope of the proposed rule and that are 
not addressed in this 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 subject-matter headings.

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 61 timely pieces of correspondence on the 
CY 2012 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 30, 2011 (76 FR 74122), some of which 
contained 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. Summaries of these public comments on 
topics that were open to comment and our responses to them are set 
forth in various sections of this final rule with comment period under 
the appropriate subject-matter headings.

[[Page 68220]]

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment 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 2013 OPPS/ASC proposed rule (77 FR 45071), for the CY 
2013 OPPS, we proposed to recalibrate the APC relative payment weights 
for services furnished on or after January 1, 2013, and before January 
1, 2014 (CY 2013), using the same basic methodology that we described 
in the CY 2012 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 2013, 
we used approximately 141 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, 2011, and before January 1, 2012. For this final rule with 
comment period, for the purpose of recalibrating the final APC relative 
payment weights for CY 2013, we used approximately 153 million final 
action claims (claims for which all disputes and adjustments have been 
resolved and payment has been made) for HOPD services furnished on or 
after January 1, 2011, and before January 1, 2012. 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 153 million final action claims for services 
provided in hospital outpatient settings used to calculate the final CY 
2013 OPPS payment rates for this final rule with comment period, 
approximately 121 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 
approximately 121 million claims, approximately 5 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 116 million claims, we created approximately 120 million 
single records, of which approximately 81 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 39 
million multiple procedure claims using the process we discuss later in 
this section). Approximately 1 million claims were trimmed out on cost 
or units in excess of 3 standard deviations from the 
geometric mean, yielding approximately 120 million single bills for 
ratesetting. 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 
payment 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 2013 
ratesetting some portion of approximately 95 percent of the CY 2011 
claims containing services payable under the OPPS.
    The final APC relative weights and payments for CY 2013 in Addenda 
A and B to this final rule with comment period (which are available via 
the Internet on the CMS Web site) were calculated using claims from CY 
2011 that were processed through June 30, 2012. While we have 
historically based the payments on median hospital costs for services 
in the APC groups, we proposed in the CY 2013 OPPS/ASC proposed rule 
(77 FR 45071) to establish the cost-based relative payment weights of 
the CY 2013 OPPS using geometric mean costs, as discussed in section 
II.A.2.f. of this final rule with comment period. Therefore, on the CMS 
Web site, along with Addenda A and B, we provided a file that presented 
payment information for the proposed CY 2013 OPPS payments based on 
geometric mean costs compared to those based on median costs. Under 
this methodology, we select claims for services paid under the OPPS and 
match these claims to the most recent cost report filed by the 
individual hospitals represented in our claims data. We continue to 
believe that it is appropriate to use the most current full calendar 
year claims data and the most recently submitted cost reports to 
calculate the relative costs underpinning the APC relative payment 
weights and the CY 2013 payment rates.
b. Use of Single and Multiple Procedure Claims
    For CY 2013, in general, we proposed to continue to use single 
procedure claims to set the costs on which the APC relative payment 
weights are based. We generally use single procedure claims to set the 
estimated 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 
enables 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 2012 OPPS/ASC final rule with comment period (76 FR 74132 
through 74134). In addition, for CY 2008 (72 FR 66614 through 66664), 
we increased packaging and created the first composite APCs, and 
continued

[[Page 68221]]

those policies through CY 2012. Increased packaging and creation of 
composite APCs also increased the number of bills that we were able to 
use for ratesetting 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 in developing the OPPS relative weights on which payments are 
based. We have continued the composite APCs for multiple imaging 
services through CY 2012. We did not receive any public comments on 
this policy, and therefore, we are finalizing our proposal to continue 
this policy for CY 2013. We refer readers to section II.A.2.e. of this 
final rule with comment period for a discussion of the use of claims in 
modeling the 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 2013 
OPPS. This methodology enabled us to create, for this final rule with 
comment period, approximately 81 million ``pseudo'' single procedure 
claims, including multiple imaging composite ``single session'' bills 
(we refer readers to section II.A.2.e.(5) of this final rule with 
comment period for further discussion), to add to the approximately 39 
million ``natural'' single procedure claims. For this final rule with 
comment period, ``pseudo'' single procedure and ``single session'' 
procedure bills represented approximately 67 percent of all single 
procedure bills used for ratesetting purposes.
    For CY 2013, we proposed to bypass 480 HCPCS codes that were 
identified in Addendum N to the CY 2013 OPPS/ASC proposed rule (which 
was 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 2013, data available for the February 27, 2012 
meeting of the Advisory Panel on Hospital Outpatient Payment (the 
Panel) from CY 2011 claims processed through September 30, 2011, and CY 
2010 claims data processed through June 30, 2011, used to model the 
payment rates for CY 2012) to determine whether it would be appropriate 
to add additional codes to the previous year's bypass list. For CY 
2013, we proposed to continue to bypass all of the HCPCS codes on the 
CY 2012 OPPS bypass list, with the exception of HCPCS codes that we 
proposed to delete for CY 2013, which are listed in Table 1 of the 
proposed rule. We also proposed to remove HCPCS codes that are not 
separately paid under the OPPS because the purpose of the bypass list 
is to obtain more data for those codes relevant to ratesetting. In 
addition, we proposed to add to the bypass list for CY 2013 HCPCS codes 
not on the CY 2012 bypass list that, using either the CY 2012 final 
rule data (CY 2010 claims) or the February 27, 2012 Panel data (first 9 
months of CY 2011 claims), met the empirical criteria for the bypass 
list that are summarized below. Finally, to remain consistent with the 
CY 2013 final policy to develop OPPS relative payment weights based on 
geometric mean costs, we proposed that the median cost of packaging 
criterion instead be based on the geometric mean cost of packaging. The 
entire list proposed for CY 2013 (including the codes that remain on 
the bypass list from prior years) was open to public comment in the CY 
2013 OPPS/ASC proposed rule. 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. As we proposed, the criteria for the bypass list are:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The geometric mean cost of packaging observed in the 
``natural'' single procedure claims is equal to or less than $55. This 
criterion also limits the amount of error in redistributed costs. 
During the assessment of claims against the bypass criteria, we do not 
know the dollar value of the packaged cost that should be appropriately 
attributed to the other procedures on the claim. Therefore, ensuring 
that redistributed costs associated with a bypass code are small in 
amount and volume protects the validity of cost estimates for low cost 
services billed with the bypassed service.
    We note that, in the CY 2013 OPPS/ASC proposed rule (77 FR 45072), 
we proposed to establish the CY 2013 OPPS relative payment weights 
based on geometric mean costs. To remain consistent in the metric used 
for identifying cost patterns, we proposed to use the geometric mean 
cost of packaging to identify potential codes to add to the bypass 
list. The development of the CY 2013 OPPS relative payment weights 
based on geometric mean costs is discussed in greater detail in section 
II.A.2.f. of this final rule with comment period.
    In response to public comments on 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. Based on the same rationale described for the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74133), we proposed for CY 2013 
to continue to update the packaged cost threshold by the market basket 
increase. By applying the final CY 2012 market basket increase of 1.9 
percent to the prior non-rounded dollar threshold of $52.76 (76 FR 
74133), we determined that the threshold remains for CY 2013 at $55 
($53.76 rounded to $55, the nearest $5 increment). Therefore, we 
proposed to set the geometric mean packaged cost threshold on the CY 
2011 claims at $55 for a code to be considered for addition to the CY 
2013 OPPS bypass list.
     The code is not a code for an unlisted service. Unlisted 
codes do not describe a specific service, and thus their costs would 
not be appropriate for bypass list purposes.
    In addition, we proposed to continue to include on the bypass list 
HCPCS codes that CMS medical advisors

[[Page 68222]]

believe have minimal associated packaging based on their clinical 
assessment of the complete CY 2013 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 certain HCPCS codes on the bypass list in order to purposefully 
direct the assignment of packaged costs to a companion code where 
services always appear together and where there would otherwise be few 
single procedure claims available for ratesetting. For example, we have 
previously discussed our reasoning for adding HCPCS code G0390 (Trauma 
response team associated with hospital critical care service) and the 
CPT codes for additional hours of drug administration to the bypass 
list (73 FR 68513 and 71 FR 68117 through 68118).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of this 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 costs. ``Overlap bypass codes'' 
that are members of the multiple imaging composite APCs are identified 
by asterisks (*) in Addendum N to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    Addendum N to this final rule with comment period includes the list 
of bypass codes for CY 2013. The list of bypass codes contains codes 
that were reported on claims for services in CY 2011 and, therefore, 
includes codes that were in effect in 2011 and used for billing but 
were deleted for CY 2012. We retained these deleted bypass codes on the 
CY 2013 bypass list because these codes existed in CY 2011 and were 
covered OPD services in that period, and CY 2011 claims data are used 
to calculate CY 2013 payment rates. Keeping these deleted bypass codes 
on the bypass list potentially allows us to create more ``pseudo'' 
single procedure claims for ratesetting purposes. ``Overlap bypass 
codes'' that were members of the proposed multiple imaging composite 
APCs are identified by asterisks (*) in the third column of Addendum N 
to this final rule with comment period. HCPCS codes that we are adding 
for CY 2013 are identified by asterisks (*) in the fourth column of 
Addendum N. Table 1 of the proposed rule contained the list of codes 
that we proposed to remove from the CY 2013 bypass list for CY 2013 (77 
FR 45073).
    Comment: One commenter supported the proposal to include CPT codes 
76881 (Ultrasound, extremity, nonvascular, real-time with image 
documentation; complete) and 76882 (Ultrasound, extremity, nonvascular, 
real-time with image documentation; limited, anatomic specific) on the 
CY 2013 OPPS bypass list.
    Response: We appreciate the commenter's support.
    Comment: Several commenters expressed appreciation for our efforts 
to include multiple procedure claims in the ratesetting process through 
processes such as the bypass list and date of service stratification, 
which are used to create ``pseudo'' single claims. However, the 
commenters remained concerned about the limited number of claims used 
to model brachytherapy APCs 0312 (Radioelement Applications), 0651 
(Complex Interstitial Radiation Source Application), and 8001 (LDR 
Prostate Brachytherapy Composite) and encouraged CMS to continue 
exploring potential methodologies through which more claims data could 
be used in OPPS ratesetting.
    Response: We appreciate the commenters' support of our efforts to 
include more appropriate claims data for ratesetting purposes. As 
discussed above, one of the challenges in modeling the APC costs on 
which the OPPS/ASC relative payment weights are based is appropriately 
allocating the packaged cost associated with a service, when multiple 
separately payable procedures appear on the claim. However, recognizing 
the challenges associated with obtaining additional information, we 
will continue to explore potential methodologies through which we would 
be able to derive accurate cost data from the multiple major procedure 
claims made available to us.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process and the 
final CY 2013 bypass list of 480 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 2013 bypass list because these codes were either 
deleted from the HCPCS before CY 2011 (and therefore were not covered 
OPD services in CY 2011) or were not separately payable codes under the 
CY 2013 OPPS because these codes are not used for ratesetting (and 
therefore would not need to be bypassed). None of these deleted codes 
are ``overlap bypass'' codes.

[[Page 68223]]

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c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45073), for CY 2013, 
we proposed to continue to use the hospital-specific overall ancillary 
and departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the proposed CY 2013 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 2011 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2010. For the CY 2013 OPPS proposed rates, we used the set of 
claims processed during CY 2011. 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2011 
(the year of the claims data we used to calculate the proposed CY 2013 
OPPS payment rates) and found that the National Uniform Billing 
Committee (NUBC) did not add any new revenue codes to the NUBC 2011 
Data Specifications Manual.
    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, as detailed in the CY 2007 OPPS/ASC final rule 
with comment period, is the calculation of blood costs, as discussed in 
section II.A.2.d.(2) of 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 hospitals that filed 
outpatient claims in CY 2011 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 2010. For the proposed rule, we used the most recently 
submitted cost reports to calculate the CCRs to be used to calculate 
costs for the proposed CY 2013 OPPS payment rates. If the most recently 
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 above for all purposes that require use of an overall 
ancillary CCR. We proposed to continue this longstanding methodology 
for the calculation of costs for CY 2013.
    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. This issue was evaluated in a report by Research Triangle 
Institute, International (RTI). 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 (73 FR 48458 through 
45467). Specifically, we created one cost center for ``Medical Supplies 
Charged to Patients'' and one cost center for ``Implantable Devices 
Charged to Patients,'' essentially splitting the then current cost 
center for ``Medical

[[Page 68224]]

Supplies Charged to Patients'' into one cost center for low-cost 
medical supplies and another cost center for high-cost implantable 
devices in order to mitigate some of the effects of charge compression. 
In determining the items that should be reported in these respective 
cost centers, we adopted commenters' recommendations that hospitals 
should use revenue codes established by the AHA's NUBC to determine the 
items that should be reported in the ``Medical Supplies Charged to 
Patients'' and the ``Implantable Devices Charged to Patients'' cost 
centers. 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.
    The cost center for ``Implantable Devices Charged to Patients'' has 
been available for use for cost reporting periods beginning on or after 
May 1, 2009. As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 
45074), 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. In preparation for the CY 2013 
proposed rule, we assessed the availability of data in the 
``Implantable Devices Charged to Patients'' cost center using cost 
reports in the December 31, 2011 quarter ending update of HCRIS, which 
was the latest upload of the cost report data that we could use for the 
CY 2013 proposed rule. We determined that 2,063 hospitals, out of 
approximately 3,800 hospitals, utilized the ``Implantable Devices 
Charged to Patients'' cost center. Because we believe that this is a 
sufficient amount of data from which to generate a meaningful analysis, 
we proposed to use data from the ``Implantable Devices Charged to 
Patients'' cost center to create a distinct CCR for use in calculating 
the OPPS relative payment weights for CY 2013.
    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 and CY 2009 OPPS/ASC proposed and final rules, RTI also 
found that the costs and charges of CT scans, MRIs, and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
concluded that both the IPPS and the OPPS relative payment weights 
would better estimate the costs of those services if CMS were to add 
standard costs centers for CT scans, MRIs, 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, MRIs, and cardiac catheterization. The new 
standard cost centers for CT scans, MRIs, 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. However, because 
cost reports that were filed on the revised cost report Form CMS-2552-
10 are not currently accessible in the HCRIS, we were unable to 
calculate distinct CCRs for CT scans, MRIs, and cardiac catheterization 
using the new standard cost centers for these services. We believe that 
we will have cost report data available for an analysis of creating 
distinct CCRs for CT scans, MRIs, and cardiac catheterization for the 
CY 2014 OPPS rulemaking.
    Comment: Many commenters supported CMS' proposal to use data from 
the ``Implantable Devices Charged to Patients'' cost center to create a 
distinct CCR for use in calculating the OPPS relative payment weights 
for CY 2013. The commenters also encouraged CMS to continue to engage 
in educational efforts related to the use of the new cost center so 
that hospitals understand how to accurately report data in the new cost 
center. In addition, the commenters suggested that the Medicare 
administrative contractors (MACs) develop an audit program that would 
identify hospitals that have not reported data for the new cost center.
    Response: We appreciate the commenters' support of our proposal to 
use data from the ``Implantable Devices Charged to Patients'' cost 
center to create a distinct CCR. We agree with commenters 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 under 
the new Medicare cost report form CMS-2552-10. The new cost report form 
also facilitates greater audit scrutiny from the MACs. Line 121 of 
Worksheet S-2, Part I, of cost report form CMS-2552-10 asks ``Did this 
facility incur and report costs for implantable devices charged to a 
patient? Enter in column 1 `Y' for yes and `N' for no.''
    Comment: Two commenters recommended that CMS wait until CY 2014 
OPPS rulemaking to determine if the ``Implantable Devices Charged to 
Patients'' cost center should be used to create a distinct CCR. The 
commenters did not believe that data from 2,063 hospitals provide a 
meaningful representation of all of the hospitals subject to the OPPS 
from which to base the proposal to use the new cost center for CY 2013.
    Response: We disagree with the commenters and believe that data 
from the 2,063 hospitals that utilized the ``Implantable Devices 
Charged to Patients'' cost center, out of approximately 3,800 
hospitals, are sufficient and appropriate for creating a distinct CCR 
to use in the calculation of the CY 2013 OPPS relative payment weights.
    Comment: Commenters expressed disappointment that, because the 
revised cost report Form CMS-2552-10 was not accessible in the HCRIS at 
the time of the proposed rule, CMS was not able to create distinct CCRs 
for CT scans, MRIs, and cardiac catheterization services for use in the 
calculation of the CY 2013 OPPS relative payment weights. The 
commenters urged CMS to analyze the data in the new CT scan, MRI, and 
cardiac catheterization cost centers when the data are available and 
utilize the new cost centers in the development of the OPPS relative 
payment weights as soon as possible.
    Response: We expect that we will have sufficient and appropriate 
cost report data available for an analysis of creating distinct CCRs 
for CT scans, MRIs, and cardiac catheterization for the CY 2014 
rulemaking. If so, as was done for the ``Implantable Devices Charged to 
Patients'' cost center for the CY 2013 OPPS/ASC proposed rule, we 
expect to provide an impact analysis in the CY 2014 OPPS/ASC proposed 
rule that will enable the public to assess the full impact of the use 
of the new CCRs specific to CT scans, MRIs, and cardiac catheterization 
on payments for all services.
    Comment: One commenter recommended that CMS require the use of the 
new nonstandard cost center for cardiac rehabilitation instead of 
making its use optional.
    Response: We created the new nonstandard cost center for cardiac 
rehabilitation because we believed that

[[Page 68225]]

this would facilitate more accurate cost reporting for these services. 
The nonstandard cost centers are additional common cost centers 
available to hospitals for reporting when preparing their Medicare 
hospital cost report. To the extent hospitals provide services captured 
by nonstandard cost centers, they should report the relevant 
nonstandard cost centers as well. However, we do not specify a revenue 
code-to-cost center crosswalk that hospitals must adopt to prepare the 
cost report and, therefore, we do not believe that we should require 
hospitals to use the nonstandard cost center for cardiac 
rehabilitation.
    After consideration of the public comments we received, we are 
finalizing our proposal to use data from the ``Implantable Devices 
Charged to Patients'' cost center to create a distinct CCR for use in 
calculating the OPPS relative payment weights for CY 2013.
2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate OPPS payment rates for CY 2013. The 
Hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an 
accounting of claims used in the development of the final payment 
rates. 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. The CMS 
Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, 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 2011 claims that were used to 
calculate the final payment rates for the CY 2013 OPPS.
    In the history of the OPPS, we have traditionally established the 
scaled relative weights on which payments are based using APC median 
costs, which is a process most recently described in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74188). However, as discussed 
in more detail in section II.A.2.f. of this final rule with comment 
period, we proposed to use geometric mean costs to calculate the 
relative weights on which the CY 2013 OPPS payment rates are based. 
While this policy changes the cost metric on which the relative 
payments are based, the data process in general remains the same, under 
the methodologies that we use to obtain appropriate claims data and 
accurate cost information in determining estimated service cost.
    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 costs 
we used to establish the relative weights used in calculating the OPPS 
payment rates for CY 2013 shown in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site). For the proposed rule, we provided a comparison file so that 
the public could provide meaningful comment on our proposal to base the 
CY 2013 OPPS relative payment weights on geometric mean costs. We refer 
readers to section II.A.4. of this final rule with comment period for a 
discussion of the conversion of APC costs to scaled payment weights.
    Comment: Commenters expressed concern with respect to the 
volatility of the OPPS payment rates from year to year. The commenters 
suggested a ``stability policy'' and suggested that the 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 2012 OPPS/ASC final 
rule with comment period (76 FR 74139), there are a number of factors 
that contribute to cost 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 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, we believe that implementing the policy 
suggested by the commenters would make payments less reflective of the 
true service costs, which would be contrary to a purpose of our 
proposed CY 2013 policy of establishing relative payment weights based 
on geometric mean 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.
a. Claims Preparation
    For this final rule with comment period, we used the CY 2011 
hospital outpatient claims processed through June 30, 2012, to 
calculate the geometric mean costs of APCs that underpin the relative 
payment weights for CY 2013. To begin the calculation of the relative 
payment weights for CY 2013, we pulled all claims for outpatient 
services furnished in CY 2011 from the national claims history file. 
This is not the population of claims paid under the OPPS, but all 
outpatient claims (including, for example, critical access hospital 
(CAH) claims and hospital claims for clinical laboratory services for 
persons who are neither inpatients nor outpatients of the hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example, providers submit claims 
with a condition code 21 to elicit an official denial notice from 
Medicare and document that a service is not covered. We then excluded 
claims for services furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands because 
hospitals in those geographic areas are not paid under the OPPS, and, 
therefore, we do not use claims for services furnished in these areas 
in ratesetting.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 121 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B

[[Page 68226]]

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 on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not 
use in establishing relative costs 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 only influenza and pneumococcal pneumonia 
(PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; 
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 
arithmetic and geometric mean and median cost and a per day arithmetic 
and geometric 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 past several years, we have developed payment policy for 
nonpass-through separately paid drugs and biologicals based on a 
redistribution methodology that accounts for pharmacy overhead by 
allocating cost from packaged drugs to separately paid drugs. This 
typically would have required us to reduce the cost associated with 
packaged coded and uncoded drugs in order to allocate that cost. 
However, for CY 2013, as we proposed, we are paying for separately 
payable drugs and biologicals under the OPPS at ASP + 6 percent, based 
upon the statutory default described in section 1833(t)(14)(A)(iii)(II) 
of the Act. Therefore, under this policy, we do not redistribute the 
packaged cost. 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 in CY 2013.
    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 
removed from the inpatient list for CY 2012 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 2013, as we proposed, we are continuing the policy we 
implemented for CY 2012 to exclude line-item data for pass-through 
drugs and biologicals (status indicator ``G'' for CY 2011) and nonpass-
through drugs and biologicals (status indicator ``K'' for CY 2011) 
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 2012 OPPS/ASC final rule with comment period (76 
FR 74141) 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

[[Page 68227]]

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 data used for ratesetting purposes.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2013 OPPS, 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 are presented 
below.) For CY 2013, as we proposed, we are continuing 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 2013, as we proposed, we are 
continuing to assign 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. As we proposed, we are treating these codes in the same manner 
for data purposes for CY 2013 as we have treated them since CY 2008. 
Specifically, we are continuing 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 geometric mean 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, as we proposed, we divided the remaining claims into 
the following five groups:
    1. Single Procedure Major Claims: Claims with a single separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''); claims with 
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where 
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' 
on the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    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.
(2) Creation of ``Pseudo'' Single Procedure Claims
    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 procedure 
claim).
    We also use the bypass codes listed in Addendum N to this final 
rule with comment period (which is available via the Internet on our 
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

[[Page 68228]]

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 final CY 2013 ``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. If one unit of a 
single, separately payable procedure code remained on the claim after 
removal of the multiple units of the bypass code, we created a 
``pseudo'' single procedure claim from that residual claim record, 
which retained the costs of packaged revenue codes and packaged HCPCS 
codes. This enabled us to use claims that would otherwise be multiple 
procedure claims and could not be used.
    We then assessed the claims to determine if the criteria for the 
multiple imaging composite APCs, discussed in section II.A.2.e.(5) of 
this final rule with comment period, were met. If 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 costs on which the CY 2013 OPPS payments are 
based. Having identified ``single session'' claims for the imaging 
composite APCs, we reassessed the claim to determine if, after removal 
of all lines for bypass codes, including the ``overlap bypass codes,'' 
a single unit of a single separately payable code remained on the 
claim. If so, we attributed the packaged costs on the claim to the 
single unit of the single remaining separately payable code other than 
the bypass code to create a ``pseudo'' single procedure claim. We also 
identified line-items of overlap bypass codes as a ``pseudo'' single 
procedure claim. This allowed us to use more claims data for 
ratesetting purposes.
    As we proposed, we also examine 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 2012 relative payment 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 2012 relative payment weight to create a ``pseudo'' single 
procedure claim for that code: Additional units of the status indicator 
``Q1'' HCPCS code with the highest CY 2012 relative payment 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 
geometric mean cost for the status indicator ``Q1'' HCPCS code.
    Similarly, if 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 2012 relative 
payment weight 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 ``Q2'' HCPCS code that had the highest CY 2012 relative payment 
weight to create a ``pseudo'' single procedure claim for that code: 
Additional units of the status indicator ``Q2'' HCPCS code with the 
highest CY 2012 relative payment 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.
    If 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 payment weight for CY 2012 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 2012 relative payment 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 selected status indicator ``Q2'' HCPCS codes 
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY 
2012 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2011 relative payment weight, it became 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, if they met the criteria for single procedure claims. 
Conditionally packaged codes are identified using status indicators 
``Q1'' and ``Q2,'' and are described in section XII.A. of this final 
rule with comment period.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to

[[Page 68229]]

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 costs.
    After consideration of the public comments we received, we are 
finalizing our proposals to continue to apply the methodology described 
above for the purpose of creating ``pseudo'' single procedure claims 
for the CY 2013 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process
    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 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, and as we proposed, we 
are continuing to compare the final list of packaged revenue codes that 
we are adopting for CY 2013 to the revenue codes that the I/OCE will 
package for CY 2013 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 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 on the CY 2010 
proposed list of packaged revenue codes.
    For CY 2013, as we did for CY 2012, we reviewed the changes to 
revenue codes that were effective during CY 2011 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we are packaging for CY 2013. 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 2013, we proposed to 
continue to package the costs that we derive from the charges reported 
without HCPCS code under the revenue codes displayed in Table 2 below 
for purposes of calculating the geometric mean costs on which the final 
CY 2013 OPPS/ASC payment rates 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 (77 FR 45079 through 45081), we are finalizing the 
proposed packaged revenue codes for CY 2013, 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 2011, the year of 
the claims data on which the final CY 2013 OPPS payment rates are 
based.
BILLING CODE 4120-01-P

[[Page 68230]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.001


[[Page 68231]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.002


[[Page 68232]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.003

BILLING CODE 4120-01-C
    In accordance with our longstanding policy, we proposed to continue 
to exclude: (1) claims that had zero costs after summing all costs on 
the claim; and (2) claims containing packaging flag number 3. Effective 
for services furnished on or after July 1, 2004, the I/OCE assigned 
packaging flag number 3 to claims on which hospitals submitted token 
charges less than $1.01 for a service with status indicator ``S'' or 
``T'' (a major separately payable service under the OPPS) for which the 
fiscal intermediary or MAC was required to allocate the sum of charges 
for services with a status indicator equaling ``S'' or ``T'' based on 
the relative payment 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 proposed to continue these processes for the 
CY 2013 OPPS.
    For the remaining claims, we then standardized 60 percent of the 
costs of the claim (which we have previously determined to be the 
labor-related portion) for geographic differences in labor input costs. 
We made this adjustment by determining the wage index that applied to 
the hospital that furnished the service and dividing the cost for the 
separately paid HCPCS code furnished by the hospital by that wage 
index. The claims accounting that we provide for the proposed and final 
rule contains the formula we use to standardize the total cost for the 
effects of the wage index. As has been our policy since the inception 
of the OPPS, we 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 geometric mean costs.
    In accordance with our longstanding practice, we also proposed to 
exclude 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 116 million 
claims were left. Using these approximately 116 million claims, we 
created approximately 120 million single and ``pseudo'' single 
procedure claims, of which we used slightly more than 120 million 
single bills (after trimming out approximately 1 million claims as 
discussed in section II.A.1.a. of this final rule with comment period) 
in the CY 2013 geometric mean cost development and ratesetting.
    As discussed above, the OPPS has historically developed the 
relative weights on which APC payments are based using APC median 
costs. For the CY 2013 OPPS, we proposed to calculate the APC relative 
payment weights using geometric mean costs; therefore, the following 
discussion of the 2 times rule violation and the development of the 
relative payment weight refers to geometric means. For more detail 
about the CY 2013 OPPS/ASC policy to calculate relative payment weights 
based on geometric means, we refer readers to section II.A.2.f. of this 
final rule with comment period.
    We proposed to use these claims to calculate the CY 2013 geometric 
mean costs for each separately payable HCPCS code and each APC. The 
comparison of HCPCS code-specific and APC geometric mean costs 
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 shall not be treated as 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 within 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 (the 
2 times rule). While we have historically applied the 2 times rule 
based on median costs, as part of the CY 2013 policy to develop the 
OPPS relative payment weights based on geometric mean costs, we also 
are applying the 2 times rule based on geometric mean costs. For a 
detailed discussion of the CY 2013 policy to develop the APC relative 
payment weights based on geometric mean costs, we refer readers to 
section II.A.2.f. of this final rule with comment period.
    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 geometric mean cost to be 
significant. 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 120 million single procedure or single session claims we 
use for establishing geometric mean costs. Similarly, a HCPCS code for 
which there are fewer than 99 single bills and which comprises less 
than 2

[[Page 68233]]

percent of the single major claims within an APC will have a negligible 
impact on the APC geometric mean. We note that this method of 
identifying significant HCPCS codes within an APC for purposes of the 2 
times rule was used in prior years under the median-based cost 
methodology. Under our CY 2013 policy to base the relative payment 
weights on geometric mean costs, we believe that this same 
consideration for identifying significant HCPCS codes should apply 
because the principles are consistent with their use in the median-
based cost methodology. 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 geometric mean. Finally, we reviewed the 
geometric mean costs for the services for which we 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 geometric mean 
costs and for other reasons. The APC geometric means were recalculated 
after we reassigned the affected HCPCS codes. Both the HCPCS code-
specific geometric means and the APC geometric means were weighted to 
account for the inclusion of multiple units of the bypass codes in the 
creation of ``pseudo'' single procedure claims.
    Comment: Some commenters asked that CMS provide an adjustment for 
medical education costs under the OPPS. These commenters stated that 
CMS indicated that it would study the costs and payment differential 
among different classes of providers in the April 7, 2000 OPPS final 
rule but has not done so. The commenters requested that CMS conduct its 
own analysis and that, if that analysis showed a difference in their 
payment to cost ratios (similar to the comparison study performed to 
calibrate the cancer hospital payment adjustment) due to the unique 
missions of teaching hospitals, CMS should add a teaching payment 
adjustment under the OPPS.
    Response: Unlike payment under the IPPS, the law does not 
specifically provide for payment for direct or indirect graduate 
medical education costs to be made under the OPPS. Section 
1833(t)(2)(E) of the Act states that the Secretary shall establish, in 
a budget neutral manner ``* * * other adjustments as determined to be 
necessary to ensure equitable payments, such as adjustments for certain 
classes of hospitals.'' We have not found such an adjustment to be 
necessary to ensure equitable payments to teaching hospitals and, 
therefore, have not developed such an adjustment. As the commenters 
recognized, the cancer hospital payment adjustment discussed in section 
II.F. of this final rule with comment period was established based on 
section 1833(t)(18) of the Act. Similarly, those hospitals were 
permanently held harmless and continued to receive TOPs under section 
1833(t)(7)(d)(ii) of the Act. Furthermore, in this final rule with 
comment period, we have developed OPPS relative payment weights that we 
believe provide appropriate and adequate payment for the complex 
medical services, such as new technology services and device-dependent 
procedures, which we understand are furnished largely by teaching 
hospitals. The impacts of the final CY 2013 policies, by class of 
hospital, are displayed in Table 57 in section XXII. of this final rule 
with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2013 methodology for calculating the costs 
upon which the CY 2013 OPPS payment rates are based.
    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 
geometric mean 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 
geometric mean costs. Section II.A.2.e. of this final rule with comment 
period discusses the calculation of composite APC criteria-based 
geometric mean costs. Section VIII.B. of this final rule with comment 
period addresses the methodology for calculating the geometric mean 
costs for partial hospitalization services.
(2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    At the August 27-28, 2012 meeting of the Advisory Panel on Hospital 
Outpatient Payment (the Panel), we provided the Data Subcommittee with 
a list of all APCs fluctuating by greater than 10 percent when 
comparing the CY 2013 OPPS/ASC proposed rule costs based on CY 2011 
claims processed through June 30, 2012, to those based on CY 2012 OPPS/
ASC final rule data (CY 2010 claims processed through June 30, 2011). 
The Data Subcommittee reviewed the fluctuations in the APC costs and 
their respective weights.
    At the August 27-28, 2012 Panel meeting, the Panel made a number of 
recommendations related to the data process. The Panel's 
recommendations and our responses follow.
    Recommendation: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that Traci Rabine serve as the 
acting chair of the Data Subcommittee for the August 2012 HOP Panel 
meeting.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that CMS continue to provide a 
list of APCs fluctuating by more than 10 percent in costs.
    CMS Response: We are accepting this recommendation.
d. Calculation of Single Procedure APC Criteria-Based 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 2013 OPPS/ASC proposed rule (77 FR 45081 through 45082), 
we proposed for CY 2013 to use the standard methodology for calculating 
costs for device-dependent APCs that was finalized in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74148 through 74151). This 
methodology utilizes claims data that generally represent the full cost 
of the required device and the most recent cost report data. 
Specifically, we proposed to calculate the costs for device-dependent 
APCs for CY 2013 using only the subset of single procedure claims from 
CY 2011 claims data that pass the procedure-to-device and device-to-

[[Page 68234]]

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, 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 costs for device-dependent APCs 
gives us the most appropriate costs for device-dependent APCs in which 
the hospital incurs the full cost of the device. In Table 4A of the 
proposed rule, we listed the APCs for which we proposed to use our 
standard device-dependent APC ratesetting methodology for CY 2012.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel created several new CPT codes 
describing services related to device-dependent APCs, to be effective 
beginning January 1, 2013. Our standard process for dealing with new 
CPT codes effective on January 1 for the upcoming calendar year is to 
assign each 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'' in Addendum B to the final rule with comment period 
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 for 60 
days following the publication of the final rule with comment period. 
As with all new CPT codes, we encourage interested stakeholders to 
review those codes identified with the ``NI'' in Addendum B and 
assigned to device-dependent APCs and submit public comments on those 
assignments.
    Our interim assignment of some of the new CPT codes for CY 2013 to 
device-dependent APCs prompted us to change the titles of two APCs to 
reflect more accurately the clinical configurations of those APCs for 
CY 2013. Specifically, we assigned, on an interim basis, the following 
codes to device-dependent APC 0107, currently titled ``Insertion of 
Cardioverter-Defibrillator'': CPT code 0319T (Insertion or replacement 
of subcutaneous implantable defibrillator system with subcutaneous 
electrode), 0321T (Insertion of subcutaneous implantable defibrillator 
pulse generator only with existing subcutaneous electrode), and 0323T 
(Removal of subcutaneous implantable defibrillator pulse generator with 
replacement of subcutaneous implantable defibrillator pulse generator 
only). We note that the title of APC 0108 is currently ``Insertion/
Replacement/Repair of AICD Leads, Generator and Pacing Electrode.'' In 
order to streamline and simplify the titles of APCs 0107 and 0108, 
which both contain procedures for the implantation of cardioverter-
defibrillator pulse generators, leads, and electrodes, we are revising 
their titles to reflect the insertion of cardioverter-defibrillators 
without specifying the component pieces involved. Specifically, we are 
revising the title of APC 0107 to read ``Level I Implantation of 
Cardioverter-Defibrillator'' and the title of APC 0108 to read ``Level 
II Implantation of Cardioverter-Defibrillator.''
    The creation of new CPT codes involving intracoronary stent 
placement procedures for CY 2013 also requires us to create nine new 
HCPCS C-codes and to delete two existing HCPCS G-codes in order to 
maintain the correct implementation of existing OPPS policy for CY 
2013. Specifically, since CY 2003, under the OPPS, we assign coronary 
stent placement procedures to separate APCs based on the use of 
nondrug-eluting or drug-eluting stents (APC 0104 (Transcatheter 
Placement of Intracoronary Stents) or APC 0656 (Transcatheter Placement 
of Intracoronary Drug-Eluting Stents), respectively). In order to 
effectuate this policy, we created HCPCS G-codes G0290 (Transcatheter 
placement of a drug eluting intracoronary stent(s), percutaneous, with 
or without other therapeutic intervention, any method; single vessel) 
and G0291 (Transcatheter placement of a drug eluting intracoronary 
stent(s), percutaneous, with or without other therapeutic intervention, 
any method; each additional vessel) for drug-eluting intracoronary 
stent placement procedures that parallel existing CPT codes 92980 
(Transcatheter placement of an intracoronary stent(s), percutaneous, 
with or without other therapeutic intervention, any method; single 
vessel) and 92981 (Transcatheter placement of an intracoronary 
stent(s), percutaneous, with or without other therapeutic intervention, 
any method; each additional vessel), which are used to describe 
nondrug-eluting intracoronary stent placement procedures. CPT codes 
92980 and 92981 are assigned to APC 0104, while HCPCS codes G0290 and 
G0291 are assigned to APC 0656. We refer readers to the CY 2003 OPPS 
final rule with comment period (67 FR 66732 through 66734) for more 
information regarding the initial implementation of this policy.
    Effective January 1, 2013, the AMA's CPT Editorial Panel is 
deleting CPT codes 92980 and 92981 and replacing them with the 
following new CPT codes:
     CPT code 92928 (Percutaneous transcatheter placement of 
intracoronary stent(s), with coronary angioplasty when performed; 
single major coronary artery or branch), 92929 (Percutaneous 
transcatheter placement of intracoronary stent(s), with coronary 
angioplasty when performed; each additional branch of a major coronary 
artery (List separately in addition to code for primary procedure));
     CPT code 92933 (Percutaneous transluminal coronary 
atherectomy, with intracoronary stent, with coronary angioplasty when 
performed; single major coronary artery or branch);
     CPT code 92934 (Percutaneous transluminal coronary 
atherectomy, with intracoronary stent, with coronary angioplasty when 
performed; each additional branch of a major coronary artery (List 
separately in addition to code for primary procedure));
     CPT code 92937 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of intracoronary 
stent, atherectomy and angioplasty, including distal protection when 
performed; single vessel);
     CPT code 92938 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of intracoronary 
stent, atherectomy and angioplasty, including distal protection when 
performed; each additional branch subtended by the bypass graft (List 
separately in addition to code for primary procedure));
     CPT code 92941 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of intracoronary stent, atherectomy and angioplasty, 
including aspiration thrombectomy when performed, single vessel);
     CPT code 92943 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of

[[Page 68235]]

intracoronary stent, atherectomy and angioplasty; single vessel); and
     CPT code 92944 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
intracoronary stent, atherectomy and angioplasty; each additional 
coronary artery, coronary artery branch, or bypass graft (List 
separately in addition to code for primary procedure)).
    In order to maintain the existing policy of differentiating payment 
for intracoronary stent placement procedures involving nondrug-eluting 
and drug-eluting stents, we are deleting HCPCS codes G0290 and G0291 
and replacing them with the following new HCPCS C-codes to parallel the 
new CPT codes:
     HCPCS code C9600 (Percutaneous transcatheter placement of 
drug eluting intracoronary stent(s), with coronary angioplasty when 
performed; single major coronary artery or branch);
     HCPCS code C9601 (Percutaneous transcatheter placement of 
drug-eluting intracoronary stent(s), with coronary angioplasty when 
performed; each additional branch of a major coronary artery (List 
separately in addition to code for primary procedure));
     HCPCS code C9602 (Percutaneous transluminal coronary 
atherectomy, with drug eluting intracoronary stent, with coronary 
angioplasty when performed; single major coronary artery or branch);
     HCPCS code C9603 (Percutaneous transluminal coronary 
atherectomy, with drug-eluting intracoronary stent, with coronary 
angioplasty when performed; each additional branch of a major coronary 
artery (List separately in addition to code for primary procedure));
     HCPCS code C9604 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of drug-eluting 
intracoronary stent, atherectomy and angioplasty, including distal 
protection when performed; single vessel);
     HCPCS code C9605 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of drug-eluting 
intracoronary stent, atherectomy and angioplasty, including distal 
protection when performed; each additional branch subtended by the 
bypass graft (List separately in addition to code for primary 
procedure));
     HCPCS code C9606 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of drug-eluting intracoronary stent, atherectomy and 
angioplasty, including aspiration thrombectomy when performed, single 
vessel);
     HCPCS code C9607 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
drug-eluting intracoronary stent, atherectomy and angioplasty; single 
vessel); and
     HCPCS code C9608 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
drug-eluting intracoronary stent, atherectomy and angioplasty; each 
additional coronary artery, coronary artery branch, or bypass graft 
(List separately in addition to code for primary procedure)).
    The interim APC assignment for CPT codes 92928, 92933, 92929, 
92934, 92937, 92938, 92941, 92943, and 92944 is APC 0104, and the 
interim APC assignment for HCPCS codes C9600, C9601, C9602, C9603, 
C9604, C9605, C9606, C9607, and C9608 is APC 0656 for CY 2013.
    Comment: One commenter requested that CPT code 0304T (Insertion or 
removal and replacement of intracardiac ischemia monitoring system 
including imaging supervision and interpretation when performed and 
intra-operative interrogation and programming when performed; device 
only) be placed in APC 0107 (Level I Implantation of Cardioverter-
Defibrillators (ICDs)), rather than APC 0090 (Insertion/Replacement of 
Pacemaker Pulse Generator), because CPT code 0304T describes the 
insertion or removal and replacement of a device, which is similar to 
other CPT codes assigned to APC 0107, such as CPT code 33262 (Removal 
of pacing cardioverter-defibrillator pulse generator with replacement 
of pacing cardioverter-defibrillator pulse generator; single lead 
system). The commenter also stated that 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 existing generator) is better aligned 
with APC 0107 than with its current APC assignment of APC 0655 
(Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker 
or Pacing Electrode).
    Response: We disagree with the commenter's assertion that CPT codes 
0304T and 33224 should be placed in APC 0107. APC 0107 includes 
procedures involving the insertion of a cardioverter-defibrillator, and 
CPT codes 0304T and 33224 do not describe such procedures.
    Comment: One commenter suggested that CMS consider the assignment 
of different APCs for upgrades to a pacemaker or cardioverter-
defibrillator based on the number of leads inserted, which can result 
in cost differences among procedures.
    Response: The commenter did not provide specific CPT codes for 
pacemaker or cardioverter-defibrillator insertion procedures for us to 
consider. Generally speaking, however, we believe that our standard 
ratesetting methodology for device-dependent APCs would appropriately 
capture hospitals' varying costs based on the number of leads inserted 
during these procedures because we use data from hospital claims and 
cost reports that would reflect any such differences in costs.
    Comment: Commenters expressed appreciation for the proposed 
increase in payment for the cochlear implant procedure, described by 
CPT code 69930 (Cochlear device implantation, with or without 
mastoidectomy) which is assigned to APC 0259 (Level VII ENT 
Procedures). However, the commenters also expressed concern that the 
increase does not reflect the actual cost of the procedure and device. 
The commenters indicated potential coding errors by major hospital 
facilities where claims for less expensive osseointegrated auditory 
device implant procedures (such as those assigned to APC 0425 (Level II 
Arthroplasty or Implantation with Prosthesis)) were included in the 
dataset used for calculation of cochlear implants, and requested that 
CMS review the APC 0259 source data and remove the claims that were 
inadvertently included as part of the original dataset to ensure the 
appropriate payment.
    Response: We employ procedure-to-device and device-to-procedure 
edits to ensure that the appropriate procedures and devices are 
correctly billed together and those same edits are again used in 
modeling the OPPS payment rates for the respective device-dependent 
APCs. Only claims containing the appropriate procedure and device code 
pairings are used to model the estimated APC cost for device-dependent 
APCs. We also note that the cochlear implant procedure and the 
osseointegrated

[[Page 68236]]

auditory device implant procedures are in different APCs; therefore, 
only single claims containing one of these procedures would be used to 
model the estimated APC cost for their respective APCs. Further, claims 
with multiple major procedures generally are not entered into the 
dataset used for calculating estimated APC costs. Therefore, we do not 
believe that the inclusion of claims containing both cochlear implant 
procedures and osseointegrated auditory device implant procedures would 
result in inaccurate procedure or APC cost estimations.
    Comment: Some commenters pointed out an apparent discrepancy 
between the listed proposed payment rate for APC 0425 in Addendum B to 
the CY 2013 OPPS/ASC proposed rule when compared to the listed proposed 
payment rate for APC 0425 in the data file entitled ``CY 2013 OPPS 
Comparison Between Proposed Geometric Mean and Median-Based Payments.'' 
Commenters requested that CMS review its proposed payment rates and 
determine which proposed payment rate reflects the correct geometric 
mean cost for APC 0425 for use in CY 2013 OPPS ratesetting.
    Some commenters also requested that CMS reconfigure APC 0425 to 
ensure the procedures in the APC are similar from both a cost and 
clinical cohesion perspective and thereby facilitate Medicare hospital 
outpatient payment rates that are more in line with hospitals' actual 
costs for orthopedic arthroplasty procedures. Specifically, the 
commenters argued that the osseointegrated auditory device implant 
procedures assigned to APC 0425, such as the procedure described by CPT 
code 69714 (Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy), are not related to the orthopaedic 
joint replacement procedures also assigned to APC 0425. The commenters 
also stated the proposed composition of APC 0425 violated the 2 times 
rule because CPT code 69717 (Replacement (including removal of existing 
device), osseointegrated implant, temporal bone, with percutaneous 
attachment to external speech processor/cochlear stimulator; without 
mastoidectomy) has a proposed mean cost of $5,382 and CPT code 25446 
(Arthroplasty with prosthetic replacement; distal radius and partial or 
entire carpus (total wrist)) has a proposed mean cost of $15,020.
    Response: We recognize the discrepancy between the proposed payment 
rate for APC 0425 in Addendum B to the CY 2013 OPPS/ASC proposed rule 
and the proposed payment rate for APC 0425 listed in the ``CY 2013 OPPS 
Comparison Between Proposed Geometric Mean and Median-Based Payments'' 
data file. The cost statistics used in the generation of the ``CY 2013 
OPPS Comparison Between Proposed Geometric Mean and Median-Based 
Payments'' data file did not reflect the final configuration of the 
proposed CY 2013 OPPS relative payment weights; thus, the proposed 
payment rate reflected in that data file was inaccurate.
    We believe that the current configuration of APC 0425 is 
appropriate as all procedures within the APC share clinical and 
resource similarity. Specifically, we disagree with the commenters who 
asserted that the osseointegrated auditory device implant procedures 
assigned to APC 0425 are not related to the orthopaedic joint 
replacement procedures also assigned to APC 0425. As we have stated in 
the past (73 FR 68539), all procedures assigned to APC 0425, including 
the osseointegrated auditory device implant procedures, involve the 
implantation of a prosthetic device into bone. We also note the 
assignments of CPT codes 69717 and 25446 to APC 0425 do not violate the 
2 times rule as the commenters claimed. As discussed in section 
III.B.2. of the proposed rule and this final rule with comment period, 
we consider only those HCPCS codes that are significant, based on the 
number of claims, in making this determination. 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 cost to be significant. CPT codes 69717 and 25446 do 
not meet this criteria and their inclusion in the same APC, therefore, 
does not violate the 2 times rule because they are not considered 
significant.
    Comment: One commenter stated that CMS should study further the 
claims for any device-dependent APC for which the calculated proposed 
payment reduction would be greater than 10 percent and take action to 
correct issues that may artificially reduce these payments.
    Response: We routinely examine all APCs with a greater than 10 
percent fluctuation in costs as part of our annual rulemaking process.
    Comment: Commenters supported CMS' determination that urology 
procedures in APCs 0385 (Level I Prosthetic Urological Procedures), 
0386 (Level II Prosthetic Urological Procedures), and 0674 (Prostate 
Cryoablation) should be categorized as device-dependent APCs. The 
commenters also requested the mandatory reporting of all HCPCS device 
C-codes on hospital claims for services involving devices and asserted 
that CMS should require complete and correct coding for packaged 
services. The commenters urged CMS to continue to promote device coding 
edits, while encouraging hospitals to remain vigilant in reporting the 
costs of performing device related services, and educating hospitals on 
the importance of accurate coding for devices, supplies, and other 
technologies.
    Response: We appreciate the commenters' support and will continue 
to promote device coding edits, as well as encourage hospitals to 
report all costs in performing device related services. As we have 
stated in the past (73 FR68535 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. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (73 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.
    After consideration of the public comments we received, we are 
finalizing our proposed policy to use the standard methodology for 
calculating costs for device-dependent APCs for CY 2013 that was 
finalized in the CY 2012 OPPS/ASC final rule with comment period.

[[Page 68237]]

    Table 3 below lists the APCs for which we used our standard device-
dependent APC ratesetting methodology for CY 2013. 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 payment rates for these 
device-dependent APCs for CY 2013.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.005

(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 2013 OPPS/ASC proposed rule (77 FR 45082 through 45083), 
we proposed to continue for CY 2013 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 costs upon which the proposed CY 
2013 payment rates for blood and blood products were based using the 
actual blood-specific CCR for hospitals that reported costs and charges 
for a blood cost center and a hospital-specific simulated blood-
specific CCR for hospitals that did not report costs and charges for a 
blood cost center. We noted that we used geometric mean unit costs for 
each blood and blood product to calculate the proposed payment rates, 
consistent with the methodology we proposed for other items and 
services, discussed in section II.A.2.f. of the proposed rule and this 
final rule with comment period.
    We stated in the proposed rule that 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 stated in the proposed rule that we 
believe that it yields more accurate estimated costs for these 
products.
    Comment: Some commenters expressed concern that the proposed APC 
payment rates for some blood products are less than the acquisition 
costs of those products, citing a published study of a national survey 
of blood acquisition and overhead costs. According to the commenters, 
the safety and availability of blood may be jeopardized without 
adequate payment. The commenters asked that CMS formally consider and 
evaluate potential alternative methodologies for setting APC payment 
rates for blood products, preferably by seeking input from affected 
stakeholders. The commenters also stated that the use of the geometric 
mean methodology to calculate blood costs would result in lower payment 
rates compared to the use of median costs to calculate the payment 
rates for blood and blood products and urged CMS to use the median cost 
instead.
    Response: As we have stated in the past (75 FR 71838 through 71839 
and 76 FR 74152), we continue to believe that using blood-specific CCRs 
applied to hospital claims data results in payment that appropriately 
reflect hospitals' relative costs of providing blood and blood products 
as reported to us by

[[Page 68240]]

hospitals. We will consider any information presented to us from 
affected stakeholders regarding alternative ratesetting methodologies. 
We address the use of geometric mean costs to calculate blood payment 
rates in section II.A.2.c. of this final rule with comment period.
    Comment: One commenter expressed concern regarding coding and 
payment for pre-storage pooled, leukocyte reduced platelets. According 
to the commenter, hospitals currently bill for pre-storage pooled, 
leukocyte reduced platelets using HCPCS code P9031 (Platelets, 
leukocytes reduced, each unit) based on the number of platelet 
concentrates (PCs) that are combined to create one unit of the blood 
product. The commenter stated that because the number of PC units used 
to make a therapeutic dose of pre-storage pooled, leukocyte reduced 
platelets is variable, blood centers must notify hospitals of the 
number of PCs in each therapeutic dose for the hospital's billing 
purposes, even though it does not affect the cost of the product to the 
hospital.
    According to the commenter, a new technology exists that can make a 
unit of pre-storage pooled, leukocyte reduced platelets out of fewer 
PCs. However, the commenter expressed concern that the current coding 
and payment based on the use of HCPCS code P9031 unfairly and 
inappropriately disadvantages the use of this technology. The commenter 
indicated that where a greater number of PCs are needed to make a unit 
of pre-storage pooled, leukocyte reduced platelets, the hospital may 
end up being paid at a rate that significantly exceeds the cost of the 
product. However, according to the commenter, where the blood center 
can make the pre-storage pooled, leukocyte reduced platelets using 
fewer PCs, the hospital may end up receiving payment that is not 
sufficient to cover the cost of the product.
    The commenter stated that a separate code will be necessary to 
differentiate pre-storage pooled, leukocyte reduced platelets from 
other platelet products, and that an application for a unique HCPCS 
code is currently pending. The commenter urged CMS, for OPPS purposes, 
to take action to ensure appropriate payment for pre-storage pooled, 
leukocyte reduced platelets, regardless of whether a new HCPCS code is 
created.
    Response: The outcome of the commenter's application for a unique 
HCPCS code for pre-storage pooled, leukocyte reduced platelets is 
beyond the scope of OPPS rulemaking. We note that it is an expected and 
appropriate outcome of a prospective payment system that hospitals 
would receive payments that are less than their costs in some cases and 
exceed their costs in other cases, as the commenter described is 
occurring in the case of pre-storage pooled, leukocyte reduced 
platelets. Therefore, we do not believe that it is necessary for us to 
take action to ensure appropriate payment for pre-storage pooled, 
leukocyte reduced platelets at this time. However, we are interested in 
hearing from other stakeholders regarding the current incentives and 
disincentives that exist in the marketplace for pre-storage pooled, 
leukocyte reduced platelets and invite public comment on payment for 
the blood product described by HCPCS code P9031 in this final rule with 
comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, 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, for CY 2013. We continue 
to believe that this methodology in CY 2013 will result in costs for 
blood and blood products that appropriately reflect the relative 
estimated costs of these products for hospitals without blood cost 
centers and, therefore, for these blood products in general.
    We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site) for 
the final CY 2013 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) Brachytherapy Sources
    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173 (MMA), mandated the creation of additional groups 
of covered OPD services that classify devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) (``brachytherapy 
sources'') separately from other services or groups of services. The 
additional groups must reflect the number, isotope, and radioactive 
intensity of the brachytherapy sources furnished and must include 
separate groups for palladium-103 and iodine-125 sources. For the 
history of OPPS payment for brachytherapy sources, we refer readers to 
prior OPPS proposed and final rules. As we have stated previously (72 
FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 75 FR 71978, and 76 
FR 74160), 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 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 averaging the extremely high and low values, in 
contrast to 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, has provided 
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.
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45087), we 
proposed to use the costs from CY 2011 claims data for setting the 
proposed CY 2013 payment rates for brachytherapy sources, as we 
proposed for most other items and services that will be paid under the 
CY 2013 OPPS. We based the proposed rates for brachytherapy sources 
using geometric mean unit costs for each source, consistent with the 
methodology proposed for other items and services, discussed in section 
II.A.2.f. of the proposed rule. We proposed to continue the other 
payment policies for brachytherapy sources we finalized and first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537). We 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). 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

[[Page 68241]]

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 and CY 2012, 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 
specified at 42 CFR 419.43(d). In addition, implementation of 
prospective payment for brachytherapy sources provides opportunities 
for eligible hospitals to receive additional payments in CY 2013 under 
certain circumstances through the 7.1 percent rural adjustment, as 
described in section II.E. of the proposed rule and this final rule 
with comment period.
    We referred readers to Addendum B to the proposed rule (which was 
available via the Internet on the CMS Web site) for the proposed CY 
2013 payment rates for brachytherapy sources, identified with status 
indicator ``U.'' We invited public comment on this proposed policy and 
also requested recommendations for new HCPCS codes to describe new 
brachytherapy sources consisting of a radioactive isotope, including a 
detailed rationale to support recommended new sources. In the proposed 
rule, we provided an appropriate address for receipt of these 
recommendations; the address is repeated at the end of this section. We 
indicated that we will continue to add new brachytherapy source codes 
and descriptors to our systems for payment on a quarterly basis.
    Comment: A number of commenters opposed our proposal to base the 
payment for brachytherapy sources on geometric mean costs, while other 
commenters supported the proposal. Commenters also addressed other 
payment issues related to brachytherapy:
    First, some commenters claimed that there are longstanding problems 
with OPPS claims data for brachytherapy source payment. For example, 
commenters stated that high dose rate (HDR) sources can be used to 
treat multiple patients because they decay over a 90-day period. The 
commenters stated that, as a result, the per source cost depends on the 
number of patients treated as well as the number of treatments and the 
intensity of the treatments within the 90-day period, making adequate 
payment for all hospitals difficult. Commenters asserted, as further 
examples of problems with our claims data, that our claims data 
continue to show a huge variation in unit costs on claims across 
hospitals; that more than half of the brachytherapy APCs have proposed 
payment rates based on 50 or fewer hospitals; and that our claims data 
contain rank order anomalies between high-activity palladium-103 (HCPCS 
code C2635) and low-activity palladium-103 sources (HCPCS codes 2640 
and C2641), claiming that high-activity palladium-103 always costs more 
than low-activity palladium-103.
    Second, commenters stated that brachytherapy source payments 
proposed for CY 2013 are unstable and fluctuate significantly from CY 
2012 levels. They expressed concern about unpredictable changes in 
payment rates for brachytherapy sources from year to year, stating that 
proposed rates for some sources would change significantly, ranging 
from a decrease of 14.2 percent for HCPCS code C2643 (Brachytherapy 
source, non-stranded, cesium-131, per source) to an increase of 216 
percent for HCPCS code C1716 (Brachytherapy source, non-stranded, gold-
198, per source).
    Response: In response to the commenters' concerns regarding the 
proposal to base payment for brachytherapy sources on geometric mean 
cost, we refer readers to section II.A.2.f. of this final rule with 
comment period, where we address the use of the geometric means 
methodology for determining OPPS payments for brachytherapy sources for 
CY 2013.
    We disagree with the commenters who stated that the CY 2013 
proposed payment rates for brachytherapy sources based on geometric 
mean cost would change payment levels significantly from the CY 2012 
payment rates. While the commenters are correct that the proposed CY 
2013 payment rate changes range from -14.2 to 216 percent, when we 
compare the CY 2013 proposed payment rates to the CY 2012 final payment 
rates, we find that 10 of the 16 brachytherapy source codes will 
receive increases or decreases of less than 10 percent, indicating 
stability for the majority of the brachytherapy sources. Moreover, when 
we compare the CY 2013 proposed payment rates to the CY 2012 final 
payment rates, we find that 10 of the 16 brachytherapy source codes 
will receive increased payment amounts per source, while 6 of the 16 
codes will receive decreased payments per source.
    With regard to the commenters who articulated concerns about 
perceived longstanding problems such as variability of brachytherapy 
source payment rates (which they have repeatedly opined in prior 
years), we are pleased that, unlike in past years, the commenters did 
not express objection to prospective payment for brachytherapy sources. 
As we stated previously (72 FR 66782, 74 FR 60534, 75 FR 71979, and 76 
FR 74161), 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, and 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 in costs for other component items and services and because 
relative weights are typically estimated using a smaller set of claims.
    As we have stated previously (75 FR 71979 and 76 FR 74161), 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, some sources may have 
costs and payment rates based on 50 or fewer hospitals 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

[[Page 68242]]

brachytherapy source claims for many cases and comprise the universe of 
hospitals using particular low-volume sources, for which we are 
required to pay separately by statute. Further, our methodology for 
estimating costs for brachytherapy sources utilizes all line-item 
charges for those sources, which allows us to use all hospital reported 
charge and estimated cost information to set payment rates for these 
items. Therefore, no brachytherapy source claims are lost. We believe 
that prospective payment rates based on claims from those hospitals 
furnishing a particular source appropriately reflect the cost of that 
source for hospitals.
    In the case of high and low activity iodine-125 sources, our claims 
data show that the hospitals' relative costs for the high activity 
source as reported on hospital claims and in cost report data are 
greater than the low activity sources, as we have noticed in the past. 
However, this relationship is reversed for palladium-103 sources, as a 
few commenters pointed out. As we have stated in the past (75 FR 71979 
and 76 FR 74162), we do not have any 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 8 hospitals reported 
this service in CY 2010, compared to 139 and 203 hospitals for low-
activity palladium-103 sources described by HCPCS codes C2640 and 
C2641, respectively. As we stated regarding this issue in the CYs 2010, 
2011, and 2012 OPPS/ASC final rules with comment period (74 FR 60535, 
75 FR 71979, and 76 FR 74162, respectively), it is clear that fewer 
hospitals furnished high-activity palladium-103 sources than low-
activity palladium-103 sources, and we expect that the hospital cost 
distribution for those hospitals could be different than the cost 
distribution of the large number of hospitals reporting the low-
activity sources. These varied cost distributions clearly contribute to 
the observed relationship in 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 will not yield valid 
costs for those hospitals furnishing the different brachytherapy 
sources upon which CY 2013 prospective payments rates are based.
    As we indicated in the CYs 2011 and 2012 OPPS/ASC final rules with 
comment period (75 FR 71980 and 76 FR 74162, respectively), we agree 
that high dose rate (HDR) brachytherapy sources such as HDR iridium-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-192, 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, and 76 FR 
74162). For most of these OPPS services, our practice is to establish 
prospective payment rates based on the costs from hospitals' claims 
data to provide incentives for efficient and cost effective delivery of 
these services.
    Comment: One commenter requested that CMS establish appropriate 
payment for HCPCS code A9527 (Iodine, I-125, sodium iodide solution, 
therapeutic, per millicurie (mCi)), claiming that the source has not 
been available for patients from June 2010 to July 2012, when it became 
available for purchase by providers. The commenter stated that the 
claims from two hospitals that reported HCPCS code A9527 are erroneous. 
The commenter requested that CMS use external data based upon actual 
hospital invoices to assign payment for HCPCS code A9527, which, 
according to the commenter, cost hospitals in CY 2012 $28.00 per 
millicurie (mCi), which is above the proposed payment rate of $20.86.
    Response: We have been paying for I-125 brachytherapy solution 
since 2003, both as HCPCS code A9527 and its predecessor code in the 
OPPS, C2632 (Brachytherapy solution, iodine-125, per mCi). Our claims 
data over the period of 2004 through 2011 show a consistent range of 
costs of $16.83 to $29.42 per mCi, with several thousand units of 
claims in most of those years. The claims data for HCPCS code A9527 
reflect claims for 8 providers, rather than 2 as indicated by the 
commenter. Therefore, we believe that we are obtaining adequate and 
consistent data on HCPCS code A9527. We will maintain our use of claims 
data for HCPCS code A9527 in our OPPS ratesetting for CY 2013.
    Comment: One commenter requested that CMS add a new C-code and APC 
for a high-activity cesium-131 brachytherapy source, which is designed 
to generate isotropic emission of therapeutic radiation and to be used 
primarily for the treatment of head and neck and eye cancer.
    Response: We appreciate the commenter informing us of a new high-
activity cesium-131 source. However, our evaluation process of new 
sources for addition to our set of codes is beyond the scope of this 
rulemaking. As we state elsewhere in this final rule with comment 
period, and in previous rules, such as the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74163), we ask 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. We suggest to the 
commenter to send its recommendation for this new brachytherapy source, 
along with the detailed rationale to support the new source, to the 
address provided at the end of this section. We will continue to add 
new brachytherapy source codes and descriptors to our systems on a 
quarterly basis.
    Comment: One commenter supported CMS' proposal to continue the 
policy of paying for new sources for which we have no claims data, with 
prospective payment rates based on the consideration of external data 
as well as other relevant information. The commenter expressed 
appreciation for CMS' efforts to establish appropriate payment rates 
for brachytherapy sources in a timely manner, and recommended that CMS 
finalize this proposal.
    Response: We appreciate the support and recognition of our efforts 
to provide appropriate and timely payment. We are finalizing our 
proposal to pay for new sources using external data and other relevant 
information.
    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 geometric mean costs for 
CY 2013. We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) for the final CY 2013 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

[[Page 68243]]

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 payment rates based on consideration of external data and other 
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 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 relative 
weights to scaling for purposes of budget neutrality.
    As stated in the proposed rule (77 FR 45087), 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 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 necessary, high quality care and 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 policies for extended assessment and management services, low 
dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation services, mental health services, multiple 
imaging services, and cardiac resynchronization therapy 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) and the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more 
recent background.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45087 through 45094), 
we proposed for CY 2013 to continue our composite policies for extended 
assessment and management services, LDR prostate brachytherapy, cardiac 
electrophysiologic evaluation and ablation services, mental health 
services, multiple imaging services, and cardiac resynchronization 
therapy 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), II.A.2.e.(5), and II.A.2.e.(6), 
respectively, of the proposed rule.
    Comment: One commenter encouraged CMS to create payments that drive 
hospitals to develop low cost deliveries of care instead of rewarding 
them for excess deliveries of care, such as beneficiaries receiving up 
to three CT scans in a single emergency department visit.
    Response: We agree with the commenter that it is important to 
create payment methodologies that encourage efficiency. As we have 
stated in the past, we believe that composite APCs enable hospitals to 
manage their resources with maximum flexibility by monitoring and 
adjusting the volume and efficiency of services themselves. With 
respect to CT scans in particular, as we discuss in section 
II.A.2.e.(5) of this final rule with comment period, we provide a 
single payment each time a hospital bills more than one CT on the same 
date of service.
    The final composite policies for extended assessment and management 
services, LDR prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation services, mental health services, multiple 
imaging services, and cardiac resynchronization therapy services are 
discussed in the following sections (II.A.2.e.(1), II.A.2.e.(2), 
II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), 
respectively) of this final rule with comment period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45088), 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 2013. Beginning 
in 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 the two composite APCs as appropriate. We refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 
through 74165) for a full discussion of this longstanding policy.
    For CY 2013, we proposed to continue the extended assessment and 
management composite APC payment methodology and criteria for APCs 8002 
and 8003 that we finalized for CYs 2009 through 2012. 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 
also proposed to calculate the costs for APCs 8002 and 8003 using the 
same methodology that we used to calculate the costs for composite APCs 
8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we proposed 
to use all single and ``pseudo'' single procedure claims from CY 2011 
that met the criteria for payment of each composite APC and apply the 
standard packaging and trimming rules to the claims before calculating 
the CY 2013 costs. The proposed CY 2013 cost resulting from this 
methodology for composite APC 8002 was approximately $446, which was 
calculated from 17,072 single and ``pseudo'' single claims that met the 
required criteria. The proposed CY 2013 cost for composite APC 8003 was 
approximately $813, which was calculated from 255,231 single and 
``pseudo'' single claims that met the required criteria.
    We did not receive any public comments on this proposal. We are 
finalizing our proposed policy, without modification, to calculate the 
costs for APCs 8002 and 8003 using the same

[[Page 68244]]

methodology that we used to calculate the costs for composite APCs 8002 
and 8003 for the CY 2008 OPPS (72 FR 66649). The final CY 2013 cost 
resulting from this methodology for composite APC 8002 is approximately 
$453, which was calculated from 19,028 single and ``pseudo'' single 
claims that met the required criteria. The final CY 2013 cost for 
composite APC 8003 is approximately $821, which was calculated from 
284,861 single and ``pseudo'' single claims that met the required 
criteria.
    At its August 2012 meeting, the Advisory Panel on Hospital 
Outpatient Payment (the Panel) recommended that CMS continue to report 
clinic/emergency department visit and observation claims data and, if 
CMS identifies changes in patterns of utilization or cost, that CMS 
bring those issues to the Visits and Observation Subcommittee. 
Additionally, the Panel recommended that CMS examine the costs and 
frequency for Level I and Level II Extended Assessment and Management 
Composite APCs associated with greater than 24 hours of observation, if 
available, and report the findings to the Visits and Observation 
Subcommittee. The Panel recommended that Scott Manaker, M.D., Ph.D., be 
named the chair of the Visits and Observation Subcommittee. The Panel 
recommended that the work of the Visits and Observation Subcommittee 
continue. We are accepting these recommendations and will provide the 
requested data to the Panel at a future meeting.
(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), which are 
generally present together on claims for the same date of service in 
the same operative session. 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 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. 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 2013 OPPS/ASC proposed rule (77 FR 45088 through 45089), 
we proposed for CY 2013 to continue to pay for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 through CY 2012. That is, we proposed to use CY 
2011 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 2012 
practice, we proposed not to use the claims that met these criteria in 
the calculation of the costs for APC 0163 (Level IV Cystourethroscopy 
and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial 
Radiation Source Application), the APCs to which CPT codes 55875 and 
77778 are assigned, respectively. We proposed to continue to calculate 
the costs for APCs 0163 and 0651 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 stated that we continue 
to believe that data from claims reporting both services required for 
LDR prostate brachytherapy provide the most accurate cost upon which to 
base the composite APC payment rate.
    Using a partial year of CY 2011 claims data available for the CY 
2013 proposed rule, we were able to use 650 claims that contained both 
CPT codes 55875 and 77778 to calculate the cost upon which the proposed 
CY 2013 payment for composite APC 8001 was based. The proposed cost for 
composite APC 8001 for CY 2013 was approximately $3,362.
    Comment: A few commenters supported the proposed payment 
methodology and policy for APC 8001. The commenters also supported the 
continued use of the LDR prostate brachytherapy composite APC 
methodology and the proposed increase in payment for CY 2013.
    Response: We appreciate the commenters' support.
    We are finalizing, without modification, our proposed policy for 
composite APC 8001. Using a full year of CY 2011 claims data available 
for this CY 2013 final rule with comment period, we were able to use 
677 claims that contained both CPT codes 55875 and 77778 to calculate 
the cost upon which the final CY 2013 payment for composite APC 8001 is 
based. The final cost for composite APC 8001 for CY 2013 is 
approximately $3,348.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    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. 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)). 
Calculating a composite APC for these services allowed us to utilize 
many more claims than were available to establish the individual APC 
costs for these services, and advanced our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the 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

[[Page 68245]]

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 CPT 
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 2013 OPPS/ASC proposed rule (77 FR 45089), we proposed 
for CY 2013 to continue to pay for cardiac electrophysiologic 
evaluation and ablation services using the composite APC methodology 
proposed and implemented for CY 2008 through CY 2012. We stated that we 
continue to believe that the cost for these services 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. Consistent with our practice since CY 
2008, we proposed not to use the claims that met the composite payment 
criteria in the calculation of the costs for APCs 0085 and 0086, to 
which the CPT codes in both Groups A and B for composite APC 8000 are 
otherwise assigned. We proposed that the costs for APCs 0085 and 0086 
would continue to be calculated using single procedure claims. For CY 
2013, using a partial year of CY 2011 claims data available for the 
proposed rule we were able to use 11,358 claims containing a 
combination of Group A and Group B CPT codes to calculate a proposed 
cost of approximately $11,458 for composite APC 8000.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel created five new CPT codes 
describing cardiac electrophysiologic evaluation and ablation services, 
to be effective January 1, 2013. These five new codes are:
     CPT code 93653 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathway, accessory 
atrioventricular connection, cavo-tricuspid isthmus or other single 
atrial focus or source of atrial re-entry);
     CPT code 93654 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of ventricular tachycardia or 
focus of ventricular ectopy including intracardiac electrophysiologic 
3D mapping, when performed, and left ventricular pacing and recording, 
when performed);
     CPT code 93655 (Intracardiac catheter ablation of a 
discrete mechanism of arrhythmia which is distinct from the primary 
ablated mechanism, including repeat diagnostic maneuvers, to treat a 
spontaneous or induced arrhythmia (List separately in addition to code 
for primary procedure));
     CPT code 93656 (Comprehensive electrophysiologic 
evaluation including transseptal catheterizations, insertion and 
repositioning of multiple electrode catheters with induction or 
attempted induction of an arrhythmia with atrial recording and pacing, 
when possible, right ventricular pacing and recording, His bundle 
recording with intracardiac catheter ablation of arrhythmogenic focus, 
with treatment of atrial fibrillation by ablation by pulmonary vein 
isolation); and
     CPT code 93657 (Additional linear or focal intracardiac 
catheter ablation of the left or right atrium for treatment of atrial 
fibrillation remaining after completion of pulmonary vein isolation 
(List separately in addition to code for primary procedure)).
    The CPT Editorial Panel also deleted two electrophysiologic 
ablation codes, CPT code 93651 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathways, accessory 
atrioventricular connections or other atrial foci, singly or in 
combination) and CPT code 93652 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of ventricular tachycardia), 
effective January 1, 2013.
    Our standard process for dealing with new CPT codes effective on 
January 1 for the upcoming calendar year is to assign each 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'' in 
Addendum B to the final rule with comment period to identify it as a 
new interim APC assignment for the new year and the APC assignment for 
the new CPT codes is then open to public comment for 60 days following 
the publication of the final rule with comment period.
    New CPT codes 93653, 93654, and 93656 are primary 
electrophysiologic services that encompass evaluation as well as 
ablation, while new CPT codes 93655 and 93657 are add-on codes. Because 
CPT codes 93653, 93654, and 93656 already encompass both evaluation and 
ablation services, we are assigning them to composite APC 8000 with no 
further requirement to have another electrophysiologic service from 
either Group A or Group B furnished on the same date of service, and we 
are assigning them interim status indicator ``Q3'' (Codes that may be 
paid through a composite APC) in Addendum B to this final rule with 
comment period. To facilitate implementing this policy, we are 
assigning CPT codes 93653, 93654, and 93656 to a new Group C, which 
will be paid at the composite APC 8000 payment rate. (We note that we 
will use single and ``pseudo'' single claims for CPT codes 93653, 
93654, and 93656 when they become available for calculating the costs 
upon which the payment rate for APC 8000 will be based in future 
ratesetting.) Because CPT codes 93655 and 93657 are dependent services 
that may only be performed as ancillary services to the primary CPT 
codes 93653, 93654, and 93656, we believe that packaging CPT codes 
93655 and 93657 with the primary procedures is appropriate, and we are 
assigning them interim status indicator ``N.'' Because the CPT 
Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 
2013, we are deleting them from the Group B code list, leaving only CPT 
93650 (Intracardiac catheter ablation of atrioventricular node 
function, atrioventricular conduction for creation of complete heart 
block, with or without temporary pacemaker placement) in Group B at 
this time.
    As is our usual practice for new CPT codes that were not available 
at the time of the proposed rule, our treatment of new CPT codes 93653, 
93654, 93655, 93656, and 93657 is open to public comment for a period 
of 60 days following the publication of this final rule with comment 
period.
    We did not receive any public comments on our proposal to continue 
to pay for cardiac electrophysiologic evaluation and ablation services 
using the composite APC methodology. We are finalizing our proposed 
policy for CY 2013 to continue to pay for cardiac

[[Page 68246]]

electrophysiologic evaluation and ablation services using the composite 
APC methodology proposed and implemented for CY 2008 through CY 2012. 
We note that we are modifying our proposal for CY 2013 to reflect the 
CPT coding changes as discussed above. For CY 2013, using a full year 
of CY 2011 claims data available for this final rule with comment 
period, we were able to use 12,235 claims containing a combination of 
Group A and Group B CPT codes to calculate a final cost of 
approximately $11,466 for composite APC 8000.
    Table 4 below lists the groups of procedures upon which we will 
base composite APC 8000 for CY 2013.
BILLING CODE 4120-01-P

[[Page 68247]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.006


[[Page 68248]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.007

(4) Mental Health Services Composite APC (APC 0034)
(a) Mental Health Services Composite Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed 
for CY 2013 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 provided by a hospital, which we consider to be the 
most resource-intensive of all outpatient mental health treatments for 
CY 2013. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 to 18455) for the initial discussion of 
this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    Specifically, we proposed that 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 for a hospital, those 
specified mental health services would be assigned to APC 0034 (Mental 
Health Services Composite). We proposed to continue to set the payment 
rate for APC 0034 at the same rate as we pay for APC 0176 (Level II 
Partial Hospitalization (4 or more services) for Hospital-Based PHPs), 
which is the maximum partial hospitalization per diem payment for a 
hospital, and that the hospital would continue to be paid one unit of 
APC 0034. Under this policy, the I/OCE would continue to determine 
whether to pay for these specified mental health services individually 
or 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.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2013 proposal, without modification, to 
continue our longstanding policy of limiting the aggregate payment for 
specified less resource-intensive mental health services furnished on 
the same date by a hospital to the payment for APC 0176, which is the 
maximum partial hospitalization per diem payment for a hospital for CY 
2013.
(b) Coding Changes
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel deleted 16 psychotherapy and 
psychiatric diagnostic evaluation CPT codes to which the mental health 
services composite APC methodology applies, and replaced them with 12 
new CPT codes, to be effective January 1, 2013. The new and deleted CPT 
codes are included in Table 5 below. Our standard process for 
addressing new CPT codes effective on January 1 for the upcoming 
calendar year is to assign each 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'' in Addendum B to the 
final rule with comment period 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 for 60 days following the publication of 
the final rule with comment period.

[[Page 68249]]

    Because the new mental health CPT codes in Table 5 replace CPT 
codes that are subject to the mental health composite APC, and because 
all of the HCPCS codes in the respective APCs to which these codes are 
assigned for CY 2013 are subject to the mental health composite APC, 
the new separately payable mental health CPT codes also will be 
assigned to composite APC 0034 with an interim status indicator of 
``Q3'' (Codes that may be paid through a composite APC) in Addendum B 
to this final rule with comment period. The single code APC assignment, 
the composite APC assignment, and the interim status indicator 
assignment for each of these new CPT codes are included in Table 5 
below. As discussed above for new CPT codes that were not available at 
the time of the proposed rule, our treatment of these new mental health 
CPT codes is open to public comment for a period of 60 days following 
the publication of this final rule with comment period. The current 
single code APC assignments for all of the HCPCS codes to which the 
mental health composite APC policy applies, along with their composite 
APC assignment and their APC assignments when the composite methodology 
does not apply, can be found in Addendum M to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
BILLING CODE 4120-01-P

[[Page 68250]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.008


[[Page 68251]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.009

BILLING CODE 4120-01-C
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    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, in order to reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session (73 FR 41448 through 41450). 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 8 of the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74171 through 74175).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement under 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.
    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).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed to 
continue for CY 2013 to pay for all multiple imaging procedures within 
an imaging family performed on the same date of service using the 
multiple imaging composite APC payment methodology. We stated that we 
continue to believe that this policy would reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session. The proposed CY 2013 payment rates 
for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 
8006, APC 8007, and APC 8008) were based on costs calculated from a 
year of CY 2011 claims available for the CY 2013 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 costs, we used the 
same methodology that we used to calculate the final CY 2012 costs for 
these composite APCs, as described in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74169). The imaging HCPCS codes that we 
removed from the bypass list for purposes of calculating the proposed 
multiple imaging composite APC costs, pursuant to our established 
methodology (76 FR 74169), appeared in Table 11 of the proposed rule.
    We were able to identify approximately 1.0 million ``single 
session'' claims out of an estimated 1.5 million potential composite 
cases from our ratesetting claims data, more than half of all eligible 
claims, to calculate the proposed CY 2013 costs for the multiple 
imaging composite APCs.
    Comment: One commenter supported the proposed payment rate for APC 
8004, while acknowledging the increased proposed payment rate for the 
ultrasound composite and for other standard (non-composite) ultrasound 
procedures.
    Response: We appreciate the commenter's support.
    Comment: Several commenters supported CMS' decision not to propose 
any new multiple imaging composite APCs, and requested that CMS analyze 
the potential impact on utilization and access for any newly proposed 
multiple imaging composite APCs, and to provide notice and seek comment 
for any new proposals.
    Response: We appreciate the feedback regarding the multiple imaging 
composite APCs. As is our usual practice, we will analyze our claims 
data and provide public notice and seek comment for any new proposals 
through our annual rulemaking process.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to calculate 
multiple imaging composite APC costs for CY 2013 pursuant to our 
established methodology. For this final rule with comment period, we 
were able to identify approximately 1.0 million ``single session'' 
claims out of an

[[Page 68252]]

estimated 1.6 million potential composite cases from our ratesetting 
claims data, more than half of all eligible claims, to calculate the 
final CY 2013 costs for the multiple imaging composite APCs.
    Table 6 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC costs for CY 2013. Table 7 below lists the 
OPPS imaging family services that overlap with HCPCS codes on the CY 
2013 bypass list. We note that we mistakenly did not include CPT code 
70547 (Magnetic resonance angiography, neck; without contrast 
material(s)) on this list in the proposed rule. We are adding it to 
this list for the final rule with comment period because it is part of 
the MRI and MRA with and without contrast imaging family and is also on 
the CY 2013 bypass list.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.015

BILLING CODE 4120-01-C
(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizing a pacing electrode implanted in combination with an 
implantable cardioverter defibrillator (ICD) is known as CRT-D. 
Hospitals commonly report the implantation of a CRT-D system using CPT 
code 33225 (Insertion of pacing electrode, cardiac venous system, for 
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual 
chamber system) (List separately in addition to code for primary 
procedure)) and CPT code 33249 (Insertion or repositioning of electrode 
lead(s) for single or dual chamber pacing cardioverter-defibrillator 
and insertion of pulse generator). As described in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74176), over the past several 
years, stakeholders have pointed out significant fluctuations in the 
payment rate for CPT code 33225 and 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 claims upon 
which to calculate an accurate cost. In response to these concerns, we 
established a policy beginning in CY 2012 to recognize CPT codes 33225 
and 33249 as a single, composite service when the procedures are 
performed on the same day and to assign them to APC 0108 (Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) 
when they appear together on a claim with the same date of service. We 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74176 through 74182) for a full description of how we developed 
this policy.
    As described in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74182), hospitals continue to use the same CPT codes to report 
CRT-D implantation services, 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 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 is also 
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 is 
assigned to APC 0655.
    In order to ensure that hospitals correctly code for CRT services 
in the future, we also finalized a policy in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74182) 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 one of the following procedures to insert an ICD or 
pacemaker, as specified by the AMA in the CPT codebook:
     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 the CY 2013 OPPS/ASC proposed rule (77 FR45094), we proposed to 
continue for CY 2013 to recognize CRT-D as a single, composite service 
as described above and finalized in the CY 2012 OPPS/ASC final rule 
with comment period. 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, which, because of its add-on 
code status, is always performed in conjunction with another procedure 
and, therefore, to address the inherent ratesetting challenges 
associated with CPT code 33225. We also noted that this policy is 
consistent with the principles of a prospective payment system, 
specifically to place

[[Page 68259]]

similar services that utilize technologies with varying costs in the 
same APC in order to promote efficiency and decision making based on 
individual patient's clinical needs rather than financial 
considerations. In calculating the costs upon which the proposed 
payment rate for APC 0108 was based for CY 2013, for the proposed rule, 
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 
9,790 single claims from the CY 2013 proposed rule claims data to 
calculate a proposed cost of approximately $31,491 for APC 0108. 
Because CPT codes 33225 and 33249 may be treated as a composite service 
for payment purposes, we proposed to continue to assign them status 
indicator ``Q3'' (Codes that may be paid through a composite APC) in 
Addendum B to the proposed rule. The assignment of CPT codes 33225 and 
33249 to APC 0108 when treated as a composite service was also 
reflected in Addendum M to the proposed rule (which is available via 
the Internet on the CMS Web site).
    As we noted in the proposed rule (77 FR 45094), we revised the 
claims processing edits in place for CPT code 33225 due to revised 
guidance from the AMA in the CPT code book specifying the codes that 
should be used in conjunction with CPT code 33225. Specifically, on 
February 27, 2012, the AMA posted a correction as errata to the CY 2012 
CPT code book on the AMA Web site at http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This correction removed CPT code 33222 
(Revision or relocation of skin pocket for pacemaker) as a service that 
should be provided in conjunction with CPT code 33225, and added CPT 
codes 33228 (Removal of permanent pacemaker pulse generator with 
replacement of pacemaker pulse generator; dual lead system), 33229 
(Removal of permanent pacemaker pulse generator with replacement of 
pacemaker pulse generator; multiple lead system), 33263 (Removal of 
pacing cardioverter-defibrillator pulse generator with replacement of 
pacing cardioverter-defibrillator pulse generator; dual lead system), 
and 33264 (Removal of pacing cardioverter-defibrillator pulse generator 
with replacement of pacing cardioverter-defibrillator pulse generator; 
multiple lead system). In accordance with this revised guidance, we 
deleted CPT code 33222 as a code that can satisfy the claims processing 
edit for CPT code 33225, and added CPT codes 33228, 33229, 33263, and 
33264 as codes that can satisfy this edit beginning in CY 2012.
    Comment: One commenter requested that CMS delay the status 
indicator change from ``T'' to ``Q3'' for CPT code 33225, stating that 
CMS does not have sufficient cost data to allow a composite payment for 
this procedure. The commenter also asked that CPT code 33225 be 
assigned to APC 0655 while CMS carries out further analysis.
    Response: We disagree with the commenter that we do not have 
sufficient cost data to allow a composite payment for the procedure 
described by CPT code 33225. For this final rule with comment period, 
we were able to use 3,413 single claims containing the CRT-D composite 
service, defined as the combination of CPT codes 33225 and 33249 with 
the same date of service, to calculate the cost of APC 0108. We note 
that we did not propose to change the status indicator for CPT code 
33225 from ``T'' to ``Q3'' for CY 2013 as the commenter indicated; 
rather, we proposed to continue to apply the ``Q3'' status indicator to 
CPT code 33225 in accordance with the status indicator and policy for 
this code finalized in the CY 2012 OPPS/ASC final rule with comment 
period. We also note that, when not performed on the same day as the 
service described by CPT code 33249, the service described by CPT code 
33225 is assigned to APC 0655 and not paid as a composite service.
    After consideration of the public comment we received, we are 
finalizing our proposed policy, without modification, to continue to 
recognize CRT-D as a single, composite service as described above and 
finalized in the CY 2012 OPPS/ASC final rule with comment period. In 
calculating the costs upon which the final payment rate for APC 0108 is 
based for CY 2013, 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 11,251 single claims 
from the CY 2013 final rule claims data to calculate a final cost of 
approximately $31,561 for APC 0108. Because CPT codes 33225 and 33249 
may be treated as a composite service for payment purposes, we are 
continuing to assign them status indicator ``Q3'' (Codes that may be 
paid through a composite APC) in Addendum B to this final rule with 
comment period.
f. Geometric Mean-Based Relative Payment Weights
    As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45094 
through 45098), when the Medicare program was first implemented, 
payment for hospital services (inpatient and outpatient) was based on 
hospital-specific reasonable costs attributable to furnishing services 
to Medicare beneficiaries. Although payment for most Medicare hospital 
inpatient services became subject to a PPS under section 1886(d) of the 
Act in 1983, Medicare hospital outpatient services continued to be paid 
based on hospital-specific costs. This methodology for payment provided 
little incentive for hospitals to furnish such outpatient services 
efficiently and in a cost effective manner. At the same time, advances 
in medical technology and changes in practice patterns were bringing 
about a shift in the site of medical care from the inpatient setting to 
the outpatient setting.
    In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. 
L. 99-509), the Congress paved the way for development of a PPS for 
hospital outpatient services. Section 9343(g) of OBRA 1986 mandated 
that fiscal intermediaries require hospitals to report claims for 
services under the Healthcare Common Procedure Coding System (HCPCS). 
Section 9343(c) of OBRA 1986 extended the prohibition against 
unbundling of hospital services under section 1862(a)(14) of the Act to 
include outpatient services as well as inpatient services. The codes 
under the HCPCS enabled us to determine which specific procedures and 
services were billed, while the extension of the prohibition against 
unbundling ensured that all nonphysician services provided to hospital 
outpatients were reported on hospital bills and captured in the 
hospital outpatient data that were used to develop an outpatient PPS.
    The brisk increase in hospital outpatient services further led to 
an interest in creating payment incentives to promote more efficient 
delivery of hospital outpatient services through a Medicare outpatient 
PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus 
Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 101-508) 
required that we develop a proposal to replace the hospital outpatient 
payment system with a PPS and submit a report to the Congress on the 
proposed system. The statutory framework for the OPPS was established 
by the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) with section 
4523 amending section 1833 of

[[Page 68260]]

the Act by adding subsection (t), which provides for a PPS for hospital 
outpatient department services and the BBRA of 1999 (Pub. L. 106-113), 
with section 201 further amending section 1833(t) of the Act. The 
implementing regulations for these statutory authorities were codified 
at 42 CFR part 419, effective for services furnished on or after August 
1, 2000.
    Section 1833 of the Act sets forth the methodological requirements 
for developing the PPS for hospital outpatient services (the OPPS). At 
the onset of the OPPS, there was significant concern over observed 
increases in the volume of outpatient services and corresponding 
rapidly growing beneficiary coinsurance. Accordingly, much of the focus 
was on finding ways to address those issues. Section 1833(t)(2)(C) of 
the Act initially provided that relative payment weights for covered 
outpatient department services be established based on median costs 
under section 4523(a) of the BBA of 1997. Later, section 201(f) of the 
BBRA of 1999 amended section 1833(t)(2)(C) of the Act to allow the 
Secretary the discretion to base the establishment of relative payment 
weights on either median or mean hospital costs. Since the OPPS was 
initially implemented, we have established relative payment weights 
based on the median hospital costs for both statistical reasons and 
timely implementation concerns. The proposed rule for the OPPS was 
published prior to the passage of the BBRA of 1999, which amended the 
Act to permit the use of mean costs. At that time, we noted that making 
payment for hospital outpatient services based on the median cost of 
each APC was a way of discouraging upcoding that occurs when individual 
services that are similar have disparate median costs, as well as 
associating services for which there are low claims volume into the 
appropriate classifications based on clinical patterns and their 
resource consumption (63 FR 47562).
    As discussed in the CY 2000 OPPS final rule with comment period (65 
FR 18482 through 18483), initial implementation of the payment system 
for hospital outpatient services was delayed due to multiple extensions 
of the proposed rule comment period, Year 2000 (Y2K) system concerns, 
and other systems challenges in developing the OPPS. Even though the 
BBRA of 1999 passed during that period of time, and provided the 
Secretary with the discretion to establish relative payment weights 
under the OPPS based on mean hospital costs, we determined that 
reconstructing the database to evaluate the impact of using mean costs 
would have postponed implementation of the OPPS further. There were 
important challenges at the time, including being responsive to 
stakeholder comments regarding the initial OPPS and addressing 
implementation issues so that the payment and claims processing systems 
would work correctly. To do so in a timely manner was critical; 
therefore, median costs were selected as an appropriate metric on which 
to base payment relativity, both based on the statistical reasons noted 
above and practical implementation concerns.
    In addition to the reasons discussed above, developing relative 
payment weights based on median costs was a way of attenuating the 
impact of cost outlier cases. In an environment where facility coding 
practices were still in their infancy, median costs served to minimize 
the impact of any coding errors. Using median costs to establish 
service cost relativity served the same function as any measure of 
central tendency (including means), ensuring that the relative payment 
weights used in the OPPS would, in general, account for the variety of 
costs associated with providing a service.
    Since the beginning of the OPPS and throughout its development, we 
have striven to find ways to improve our methods for estimating the 
costs associated with providing services. The dialogue with the public 
regarding these issues, the meaningful information and recommendations 
that the Panel (previously the APC Panel) has provided, and the 
policies we have established to better derive the costs on which OPPS 
payment is calculated have contributed to improving cost estimation. 
However, challenges remain in our continuing effort to better estimate 
the costs associated with providing services. These challenges include 
our limited ability to obtain more meaningful information from the 
claims and cost report data available and ensuring that the approach 
used to calculate the payments for services accurately captures the 
relative costs associated with providing the services. Over the years, 
we have implemented many changes to the OPPS cost modeling process to 
help address these challenges.
    To obtain more information from the claims data we have available, 
we first began bypassing codes from the standard process to develop 
``pseudo'' single claims in CY 2003 (67 FR 66746). In CY 2006, this 
concept later evolved into the bypass list (and its corresponding 
criteria for addition) which allows us to extract more cost information 
from claims that would otherwise be unusable for modeling service cost 
(70 FR 68525). In CY 2008, we examined clinical areas where packaging 
of services was appropriate, which allows us to use more claims in 
modeling the payments for primary procedures and encourage providers to 
make cost efficient choices where possible (72 FR 66610 through 66649). 
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), 
we noted that this packaging approach increased the number of 
``natural'' single bills, while simultaneously reducing the universe of 
codes requiring single bills for ratesetting. Beginning in CY 2008, we 
also established composite APCs for services that are typically 
provided together in the same encounter, allowing us to use even more 
previously unusable claims (due to containing multiple separately 
payable major codes) for modeling service cost, as well as develop APCs 
that reflect the combined encounter (72 FR 66650 through 66658). We 
have implemented many steps to obtain more information from the claims 
and cost report data available to us, and continue to examine ways in 
which we can derive more meaningful information on service costs for 
use in ratesetting.
    In our experience in working with the OPPS, we also have 
implemented many processes to ensure that the cost information we 
derive from cost reports and claims data is accurate. In the beginning 
of the OPPS, we implemented a cost trim of three standard deviations 
outside the geometric mean cost, similar to the cost data trim in the 
IPPS, because it would ensure that the most aberrant data were removed 
from ratesetting (65 FR 18484). We also have implemented similar trims 
to the hospital departmental CCR and claims based unit data related to 
the services (71 FR 67985 through 67987).
    During the CY 2008 rulemaking cycle, we contracted with Research 
Triangle Institute, International (RTI) to examine possible 
improvements to the OPPS cost estimation process after RTI had 
investigated similar issues in the IPPS setting (72 FR 66659 through 
66602). There was significant concern that charge compression, which 
results from 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, was influencing the cost estimates on which the OPPS 
relative payment weights are based. Based on RTI's recommendations in 
its July 2008 report, available on the Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf, in CY 2009, we finalized

[[Page 68261]]

modifications to the Medicare cost report form to create an 
``Implantable Medical Devices Charged to Patients'' cost center to 
address public commenters' concerns related to charge compression in 
the ``Medical Supplies Charged to Patients'' cost center (73 FR 48458 
through 48467). These modifications helped to address potential issues 
related to hospital mark-up practices and how they are reflected in the 
CCRs on the Medicare hospital cost reporting form.
    In CY 2010, we incorporated a line item trim into our data process 
that removed lines that were eligible for OPPS payment in the claim 
year but received no payment, presumably because of a line item 
rejection or denial due to claims processing edits (74 FR 60359). This 
line item trim was developed with the goal of using additional lines to 
model prospective payment.
    In addition to these process changes that were designed to include 
more accurate cost data in ratesetting, we have developed a number of 
nonstandard modeling processes to support service or APC specific 
changes. For example, in the device-dependent APCs, we have 
incorporated edits into the cost estimation process to ensure that the 
full cost of the device is incorporated into the primary procedure.
    While we have already implemented numerous changes to the data 
process in order to obtain accurate resource cost estimates associated 
with providing a procedure, we continue to examine possible areas of 
improvement. In the past, commenters have expressed concern over the 
degree to which payment rates reflect the costs associated with 
providing a service, believing that, in some cases, high cost items or 
services that might be packaged are not accordingly reflected in the 
payment weights (72 FR 66629 through 66630 and 66767). As mentioned 
above, in the CY 2008 OPPS/ASC final rule with comment period, we 
developed a packaging policy that identified a number of clinical areas 
where services would be commonly performed in a manner that was 
typically ancillary and supportive to other primary procedures. 
Packaging for appropriate clinical areas provides an incentive for 
efficient and cost-effective delivery of services. In that final rule 
with comment period, we recognized that there were strengths and 
weaknesses associated with using median costs as the metric for 
developing the OPPS relative payment weights (72 FR 66615). Medians are 
generally more stable than means because they are less sensitive to 
extreme observations, but they also do not reflect subtle changes in 
cost distributions. As a result, the use of medians rather than means 
under the OPPS usually results in relative payment weight estimates 
being less sensitive to packaging decisions, as well as changes in the 
cost model due to factors such as the additional claims processed 
between the proposed rule and the final rule.
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated costs of providing a service or package of services for a 
particular patient (73 FR 68570). Establishing the cost-based relative 
payment weights based on a measure of central tendency, such as means 
or medians, ensures that the payments for the package of services 
should generally account for the variety of costs associated with 
providing those services. Prospective payments are ultimately adjusted 
for budget neutrality and updated by an OPD update factor, which 
affects the calculated payments, but the accuracy of the cost-based 
weights is critical in ensuring that the relative payment weights are 
adjusted appropriately.
    We recognize that median costs have historically served and may 
continue to serve as an appropriate measure on which to establish 
relative payment weights. However, as discussed above, the metric's 
resistance to outlier observations is balanced by its limited ability 
to be reflective of changes to the dataset used to model cost or 
changes beyond the center of the dataset. While there was significant 
concern in the initial years of the OPPS regarding outlier cost values 
and the possible introduction of potentially aberrant values in the 
cost modeling, hospital experience in coding under the system, the data 
modeling improvements we have made to obtain more accurate cost 
information while removing erroneous data, and other changes in our 
experience with the system have all lessened the potential impact of 
error values (rather than actual, accurate cost outliers). As noted 
above, over the history of the OPPS, we have made multiple refinements 
to the data process to better capture service costs, respond to 
commenter concerns regarding the degree to which OPPS relative payment 
weights accurately reflect service cost and APC payment volatility from 
year to year, and better capture the variety of resource cost 
associated with providing a service as provided under section 
1833(t)(2)(C) of the Act. In the CY 2013 OPPS/ASC proposed rule (77 FR 
45098), we proposed for CY 2013 to shift the basis for the CY 2013 APC 
relative payment weights that underpin the OPPS from median costs to 
geometric mean-based costs.
    Geometric means better encompass the variation in costs that occur 
when providing a service because, in addition to the individual cost 
values that are reflected by medians, geometric means reflect the 
magnitude of the cost measurements, and are thus more sensitive to 
changes in the data. We believe developing the OPPS relative payment 
weights based on geometric mean costs would better capture the range of 
costs associated with providing services, including those cases 
involving high-cost packaged services, and those cases where very 
efficient hospitals have provided services at much lower costs. The use 
of geometric mean-based costs also would allow us to detect changes in 
the cost of services earlier, because changes in cost often diffuse 
into the industry over time as opposed to impacting all hospitals 
equally at the same time. Medians and geometric means both capture the 
impact of uniform changes, that is, those changes that influence all 
providers, but only geometric means capture cost changes that are 
introduced slowly into the system on a case-by-case or hospital-by-
hospital basis.
    We stated that an additional benefit of this proposed policy 
relates to the 2 times rule, described in section III.B. of the 
proposed rule, which is our primary tool for identifying clinically 
similar services that have begun to deviate in terms of their financial 
resource requirements. We stated that basing HCPCS projections on 
geometric mean costs would increase the sensitivity of this tool as we 
configure the APC mappings because it would allow us to detect 
differences when higher costs occur in a subset of services even if the 
number of services does not change. This information would allow us to 
better ensure that the practice patterns associated with all the 
component codes appropriately belong in the same APC.
    In addition to better incorporating those cost values that surround 
the median and, therefore, describing a broader range of clinical 
practice patterns, we stated in the proposed rule that basing the 
relative payment weights on geometric mean costs may also promote 
better stability in the payment system. In the short term, geometric 
mean-based relative payment weights would make the relative payment 
weights more reflective of the service costs. Making this change also 
may promote more payment stability in the long term by including a 
broader range of observations in the relative payment

[[Page 68262]]

weights, making them less susceptible to gaps in estimated cost near 
the median observation and also making changes in the relative payment 
weight a better function of changes in estimated service costs.
    We noted that this proposed change would bring the OPPS in line 
with the IPPS, which utilizes hospital costs derived from claims and 
cost report data to calculate prospective payments, and specifically, 
mean costs rather than median costs to form the basis of the relative 
payment weights associated with each of the payment classification 
groups. We stated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74181) our intent 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 based on financial considerations rather than clinical needs. 
By adopting a means cost-based approach to calculating relative payment 
weights under the OPPS, we stated that we expect to achieve greater 
consistency between the methodologies used to calculate payment rates 
under the IPPS and the OPPS, which would put us in a better position 
from an analytic perspective to make cross-system comparisons and 
examine issues of payment parity.
    For the reasons described above, in the CY 2013 OPPS/ASC proposed 
rule (77 FR 45098), we proposed to establish the CY 2013 OPPS relative 
payment weights based on geometric mean costs. While this would involve 
a change to the metric used to develop the relative payment weights, 
the use of claims would not be affected. We proposed to continue to 
subset claims using the data processes for modeling the standard APCs 
and the criteria-based APCs described in section II.A.2. of the 
proposed rule, where appropriate. The reasoning behind implementing 
modeling edits or changes in the criteria-based APCs would not be 
affected because the process of developing the relative payment weights 
based on a measure of central tendency is the last step of the modeling 
process, and occurs only once the set of claims used in ratesetting has 
been established.
    One important step that occurs after the development of relative 
payment weights is the assignment of individual HCPCS codes (services) 
to APCs. In our analysis of the impacts of a process conversion to 
geometric means, we determined that the change to means would not 
significantly influence the application of the 2 times rule. Very few 
services would need to be shifted to new APCs because of 2 times rule 
violations because the use of geometric means would resolve some 
violations that would exist under the use of medians, even as it 
creates other violations due to new cost projections. The net impact of 
the proposed change results in seven more violations of the 2 times 
rule created by the entire rebasing process than would exist if median-
based values were used.
    During the development of this proposed policy, we also determined 
that the cumulative effect of data shifts over the 12 years of OPPS 
introduced a number of inconsistencies in the APC groupings based on 
clinical and resource homogeneity. We believe that a shift to payments 
derived from geometric means would improve our ability to identify 
resource distinctions between previously homogenous services, and we 
intend to use this information over the next year to reexamine our APC 
structure and assignments to consider further ways of increasing the 
stability of payments for individual services over time.
    We noted that this proposed policy to establish all OPPS relative 
payment weights using geometric mean costs would apply to all APCs that 
would have previously been paid based on median costs. In addition, we 
proposed to calculate the relative payment weights for line item based 
payments such as brachytherapy sources, which were discussed in section 
II.A.2.d.(6) of the proposed rule, as well as blood and blood products, 
which were discussed in section II.A.2.d.(2) of the proposed rule, 
based on their proposed geometric mean costs for the CY 2013 OPPS.
    We indicated that the CY 2013 proposed policy to base relative 
payment weights on geometric mean costs would specifically include the 
CMHC and hospital-based partial hospitalization program APCs, which 
were previously based on median per diem costs. Their estimated 
payments would continue to be included in the budget neutral weight 
scaling process, and their treatment is similar to other nonstandard 
APCs discussed in section II.A. of the proposed rule. The process for 
developing a set of claims that is appropriate for modeling these APCs 
would continue to be the same as in recent years, with the only 
proposed difference being that a geometric mean per diem cost would be 
calculated rather than a median per diem cost. The proposed CY 2013 
partial hospitalization payment policies were described in section 
VIII. of the proposed rule.
    In the proposed rule, we stated that we believe it is important to 
make the transition from medians to means across all APCs in order to 
capture the complete range of costs associated with all services, and 
to ensure that the relative payment weights of the various APCs are 
properly aligned. If some OPPS payments calculated using relative 
payment weights are based on means while others are based on medians, 
the ratio of the two payments will not accurately reflect the ratio of 
the relative costs reported by the hospitals. This is of particular 
significance in the process of establishing the budget neutral weight 
scaler, discussed in section II.A.4. of the proposed rule.
    We noted that the few exceptions to the applications of the 
geometric mean-based relative payment weights would be the same 
exceptions that exist when median-based weights are applied, including 
codes paid under different payment systems or not paid under the OPPS, 
items and services not paid by Medicare, items or services paid at 
reasonable cost or charges reduced to cost, among others. For more 
information about the various proposed payment status indicators for CY 
2013, we referred readers to Addendum D1 to the proposed rule (which 
was available via the Internet on the CMS Web site).
    We proposed for CY 2013 that payment for nonpass-through separately 
payable drugs and biologicals will continue to be developed through its 
own separate process. Payments for drugs and biologicals are included 
in the budget neutrality adjustments, under the requirements in section 
1833(t)(9)(B) of the Act, but the budget neutral weight scaler is not 
applied to their payments because they are developed through a separate 
methodology, outside the relative payment weight based process. We 
noted that, for CY 2013, we proposed to pay for nonpass-through 
separately payable drugs and biologicals under the OPPS at ASP+6 
percent, based upon the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act. Also, as is our standard 
methodology, for CY 2013, we proposed to use payment rates based on the 
ASP data from the fourth quarter of CY 2011 for budget neutrality 
estimates, packaging determinations, and the impact analyses. For items 
that did not have an ASP-based payment rate, such as some therapeutic 
radiopharmaceuticals, we proposed to use their mean unit cost derived 
from the CY 2011 hospital claims data to determine their per day cost. 
The nonpass-through separately payable drug and biological payment 
policy for CY 2013 is described in greater detail in section V.B. of 
the proposed rule and this final rule with comment period.

[[Page 68263]]

    Comment: Many commenters expressed cautious support for the 
proposal to calculate the relative payment weights based on geometric 
mean costs. The commenters believed that the inclusion of additional 
cost data in developing the APC relative payment weights would 
represent an improvement to the ratesetting process, while the 
generally limited provider impacts and enhanced sensitivity to cost 
changes in calibrating the 2 times rule would be appropriate. While the 
commenters supported improvements in the accuracy of the OPPS relative 
payment weights and the goals of the proposed policy, they requested 
that CMS proceed with caution and transparency in this process to avoid 
unintended consequences on beneficiaries and hospitals. The commenters 
also suggested that CMS monitor changes in frequency and cost 
distributions for services for several years to ensure that no access 
to care issues develop as a result of the geometric means-based payment 
policy. Several commenters requested a transitional approach to 
relative payment weights based on geometric mean costs to mitigate any 
potentially negative payment effects.
    Response: We appreciate the commenters' support. As discussed in 
the CY 2013 OPPS/ASC proposed rule, we believe that using geometric 
mean costs to calculate the APC relative payment weights will make them 
more reflective of the range of service costs, introduce greater 
sensitivity to the 2 times rule, as well as potentially allow for 
cross-system payment comparisons (77 FR 45094). We believe that the 
numerous changes we have made to the data process to obtain additional 
information from the available cost report and claims data and ensure 
the accuracy of the cost estimation, in addition to hospital experience 
with the OPPS, have prepared us to make this incremental change. We 
agree that the change to base the relative payment weights on geometric 
mean costs is appropriate.
    We recognize the concerns that commenters have regarding a 
transitional process towards geometric mean-based APC payment and the 
possibility that payment fluctuations based on both the naturally 
occurring variation from year to year and those variations associated 
with basing the relative payment weights on geometric mean costs may 
occur. However, we do not believe that an approach to geometric mean-
based OPPS relative payment weights beyond the changes we have proposed 
for the CY 2013 OPPS is necessary or appropriate. Prior to proposing 
this change, we evaluated the last 4 years of OPPS claims data to model 
the fluctuations that would have resulted from geometric or arithmetic 
means in comparison to our traditional medians. We determined that 
there was no significant difference in the degree of fluctuation with 
geometric means or with medians, and we also believe that the one-time 
differences created by the switch are typically small; therefore, we do 
not believe that a transition period is necessary. In the CY 2013 OPPS/
ASC proposed rule, we noted that we made limited changes in APC 
assignments except where necessary as a result of the proposal to base 
the relative payment weights on geometric mean costs and stated our 
intention to further examine appropriate OPPS reconfigurations in the 
future to resolve potential clinical or resource homogeneity 
inconsistencies in the future to promote stability (77 FR 45097). 
Geometric mean costs more fully encompass the range of costs, including 
packaged costs, associated with providing a service and, therefore, may 
result in payments that are more reflective of actual cost. 
Transitioning into a geometric mean-based system would not be 
practical, as one of the overarching goals of using geometric mean 
costs is better relativity across the OPPS. Applying a phased-in 
approach would potentially distort the relativity of the OPPS payment 
weights. As we discuss in section II.A.2 of this final rule with 
comment period, there are various reasons that contribute to cost 
fluctuation from year to year. We believe that artificially introducing 
stability into the payment system could potentially distort the 
relativity of the payment system, especially when doing so could 
potentially dampen both decreases and increases.
    We agree that continued monitoring of changes in cost distributions 
and the frequency of services is important in understanding the impact 
of basing the APC relative payment weights on geometric mean costs. 
However, we note that the frequency of services may change from year to 
year based on a variety of factors, issues unrelated to OPPS payment, 
and situations where APC overpayment may have potentially led to 
inappropriate incentives to provide care. Despite the consideration of 
the many reasons that may cause service frequency and cost structures 
to change over time, we will continue to monitor these data, as well as 
make that information available online through the cost statistics 
files associated with each rulemaking cycle.
    Comment: A number of commenters disagreed with the proposal to base 
the CY 2013 OPPS/ASC relative payment weights on geometric mean costs. 
Many of these commenters preferred continued use of median costs in the 
ratesetting process. Several commenters believed that the geometric 
mean costs were inappropriate for OPPS ratesetting for statistical 
reasons, including their heightened sensitivity to lower cost inliers 
and lowered sensitivity for high-cost outliers relative to arithmetic 
means. Other commenters were concerned about the range between minimum 
and maximum cost values for each APC, and believed them to be 
implausible. A few commenters stated that while there have been 
advances in coding practice over the past decade, the same problems of 
upcoding and outliers will continue to exist, and that the original 
selection of median costs would continue to be appropriate. One 
commenter suggested that, beyond the initial years of the OPPS, there 
have been no cost reporting and coding practice improvements over the 
years.
    Response: We noted in the CY 2013 OPPS/ASC proposed rule that 
median costs have historically served and may continue to serve as an 
appropriate measure on which to base the relative payment weights (77 
FR 45096). However, we believe that a policy of developing the relative 
payment weights based on geometric mean costs would represent an 
improvement beyond our current use of the cost information available to 
us.
    In our discussion in the CY 2013 OPPS/ASC proposed rule relating to 
basing the relative payment weights on geometric mean costs, we stated 
that there are a variety of reasons that one metric might be more 
appropriate than the other. However, the reasoning for selecting one 
metric relative to any others must be considered in the context of the 
issues at that time. In our discussion of our proposal to develop the 
relative payment weights based on geometric mean costs, we described 
the issues at the initial development of the OPPS and our original 
reasons for selecting median costs as the preferred metric. We also 
described in the proposed rule the many data process changes that we 
made over the history of the OPPS, including various trimming 
methodologies, processes to generate more information from the claims 
and cost report data available to us, steps to address charge 
compression, modeling and payment edits, modeling configurations to 
make payment more reflective of the service or services provided, and 
others (77 FR 45095 through 45096). In addition, we discussed our 
belief that CMS and hospital experience with the OPPS as well as the 
coding methodologies for

[[Page 68264]]

payment would have improved over the past decade. Finally, we discussed 
various aspects of the geometric means proposal that would affect other 
policy areas, such as ASC payment, application of the 2 times rule, and 
other payment methodologies under the OPPS. For these reasons, we 
established the CY 2013 OPPS/ASC proposal to base the relative payment 
weights using geometric mean costs (77 FR 45094 through 45098).
    We recognize that there are different aspects of each statistical 
metric that may make any of them preferable to the others. Means-based 
methodologies, whether arithmetic means or geometric means, incorporate 
a broader range of estimated cost values into the relative payment 
weights, whereas medians are less sensitive to that range of costs as 
well as any changes in them. Depending on whether sensitivity towards 
changes in service costs is viewed as a relevant objective or not may 
guide whether selecting means or medians is a preferable alternative. 
As described above, several commenters have suggested that the lack of 
sensitivity towards cost changes is precisely why medians remain the 
preferable option. However, in the CY 2013 OPPS/ASC proposed rule, we 
noted comments in the past expressing concern regarding the degree to 
which payment rates failed to reflect the costs associated with 
providing a service (77 FR 45096). In light of those concerns, we 
believe that geometric means and their ability to better reflect 
packaging patterns and ranges in cost represent an improvement in our 
cost estimation process.
    With regards to the varying level of sensitivity towards cost 
outliers that geometric means represent, as described above, there are 
various benefits and drawbacks to each selected metric. Accordingly, 
the relative payment weights associated with any service may rise or 
fall, depending on the specific distribution of reported costs, and 
where the geometric mean appears not only relative to the median but 
also that of APC 606 (Level 3 Hospital Clinic Visits). While commenters 
have suggested that there is a systemic risk for ``implausible'' 
values, we believe that many of the outlier values present in the data 
represent actual cost outliers rather than errors, with different 
accounting assumptions creating different populations of values. At the 
low-cost and high-cost ends of the cost spectrum for each APC, there is 
thus the potential for both ``spurious'' (atypical and/or incorrect) 
data as well as accurate data to appear. Furthermore, while the minimum 
and maximum values identify the most extreme outlier values, they do 
not necessarily reflect the distribution of costs within the model; the 
minimum and maximum values may not accurately represent the range of 
costs describing the codes with greatest representation within an APC.
    While commenters suggested that there has not been much of an 
improvement we believe the possibility exists that conditions and 
circumstances have stabilized to a certain degree over the past decade. 
Part of the argument for medians at the inception of the OPPS was that 
the coding system was still new, as was our use of claims data to 
calculate prospective payments. Given the many improvements we have 
made to our internal process of modeling and using data, we would 
expect that coding and cost reporting practices have improved over that 
time period as both CMS and hospitals have had the opportunity to 
develop more experience with the system.
    Comment: Some commenters believed that aligning the OPPS relative 
payment weights on geometric mean costs would hamper hospitals' ability 
to plan budgets for each year, given the degree to which payments might 
fluctuate. The commenters also believed that geometric mean costs would 
lead to greater instability of OPPS payment. Some commenters were 
concerned about the negative impacts of APC payments declining due to 
use of geometric mean costs, believing that those changes hindered 
hospitals' ability to provide high quality health care.
    Response: We do not believe that the policy of calculating relative 
payment weights based on geometric mean costs will inevitably lead to 
greater payment instability. There are a variety of factors that may 
contribute to payment volatility from year to year, as we have 
previously described in section II.A.2. of this final rule with comment 
period. While there may be some interim fluctuation in the short term 
as we realign the OPPS to be based on geometric mean costs, we expect 
many of those issues to stabilize over time. When discussing payment 
stability, the natural inclination is to view stability as a fixed 
numerical value that stays the same over time. We evaluated this 
numerical definition of stability and determined that it was not 
significantly greater when geometric means were used. However, another 
view of payment stability is through the relationship between costs and 
the degree to which they are reflected in payments. We believe that a 
policy of using geometric mean costs to develop the APC relative 
payment weights will make them more reflective of the costs associated 
with providing services. Further, using geometric mean costs helps 
ensure that the relative payment weights accurately reflect the 
distribution of costs associated with providing services, and mitigates 
the possibility that any fluctuation occurs due to gaps in the 
distribution of the model, rather than any material changes to the 
service costs.
    We also disagree with the commenter's belief that use of geometric 
mean costs in calculating the relative payment weights will lead to 
hospitals being unable to provide access to high-quality health care. 
Geometric mean costs encompass a broader range of costs, and will 
result in payments that more fully reflect the range of costs both on 
the low and high ends, than median-based costs. We believe that this 
will ultimately be an improvement in the data process as well as OPPS 
payment policy. Although, as commenters have noted, there are many APC 
payment rates that decline as a result of the alignment of relative 
payments weights based on geometric mean costs, we note that a number 
of APC payment rates also increase as a result of this policy. We 
believe that, for most provider classes that furnish a mixed array of 
services to meet the various needs of their patients, the financial 
impacts from the changes in APC payment rates will be relatively 
limited. In consideration of all of those factors, we believe that the 
use of geometric mean costs will result in APC payments that are more 
reflective of the range of service costs.
    Comment: One commenter believed that median costs and the fact that 
they do not reflect subtle changes in cost distributions was 
appropriate to use to determine the OPPS payment rates, given aberrant 
coding, billing, and charging practices by hospitals. The commenter 
also believed that OPPS outlier payments would address issues where 
high-cost services did not have those costs reflected in their APC 
payments. Several commenters suggested that lack of sensitivity towards 
packaging patterns when using median cost was why median costs would be 
a more appropriate metric. Other commenters believed that the hospital 
claims do not provide reliable data and that the Medicare cost report 
data at the departmental level are not accurate because there is no 
financial incentive to report accurate data. Commenters also stated 
that RTI identified flawed cost data and pointed out that charges on 
hospital claims do not match those on the cost reports. One commenter 
requested that CMS delay the proposal to use geometric mean

[[Page 68265]]

costs in ratesetting until it can verify that the data are not flawed.
    Response: We appreciate the need for accurate and reliable cost 
information for use in the OPPS ratesetting process. Many of the 
changes we have made to our data process over the past decade have 
arisen with consideration of the need for accurate and reliable cost 
information. To a certain extent, we can mitigate the issues raised by 
those concerns through data process changes like trimming 
methodologies, such as those for the line items as well as cost and 
unit outliers, and modeling changes, such as those for composite and 
device-dependent methodologies, to more accurately estimate cost. 
However, more broadly, we rely on OPPS providers to submit accurate 
cost and charge information to establish the relativity in the OPPS on 
which APC payments are based.
    We value the comments that stakeholders provide with regards to 
potential data improvements as well as methods by which we can obtain 
more accurate data. In situations such as the proton beam APCs for the 
CY 2013 OPPS/ASC proposed rule and subsequent information about cost 
report revisions and inaccurate coding, we must balance our reliance on 
information from OPPS providers with the complementing goal of 
obtaining accurate cost information. As we described in the CY 2013 
OPPS/ASC proposed rule, we have taken steps to address issues such as 
charge compression in areas such as the former ``Medical Supplies 
Charged to Patients'' cost center by establishing a new standard cost 
center for ``Implantable Medical Devices Charged to Patients.''
    In the case of calculating relative payment weights based on 
geometric mean costs, we believe that such a change, while affecting 
the OPPS very broadly, would not involve much manipulation of the data. 
Although several commenters have suggested that the lack of sensitivity 
towards cost outliers is appropriate, we also have received comments 
and HOP Panel presentations in the past regarding the degree to which 
APC relative payments fail to reflect high-cost packaged services. 
Calculating relative payment weights based on geometric mean cost is 
one way of being responsive to those concerns regarding the degree to 
which correctly reported claims with unusually high costs are 
incorporated into the relative payment weights. While we agree that 
OPPS outliers do help mitigate the financial risk associated with 
performing certain services that require additional complexity or 
resources, we also believe that developing the relative payment weights 
based on geometric mean-based costs will help ensure that payments are 
more reflective of the range of service cost.
    In the CY 2013 OPPS/ASC proposed rule, in our proposal to base the 
CY 2013 relative payments weights on geometric mean costs, we described 
the many changes we have made since the inception of the OPPS to 
improve upon our data process. These improvements have helped us obtain 
more information from the claims and cost report data we have available 
to us, in addition to ensuring the accuracy of the resource cost 
estimates we use to model the APC relative payment weights. While we 
continue to look for ways in which we can improve the OPPS and our 
modeling of the estimated costs used to develop the relative payment 
weights, we do not believe that the cost information and methods 
through which we establish the relative payment weights are inherently 
flawed. Aligning the relative payment weights based on geometric mean 
costs may be a significant change in how the relative payment weights 
are calculated; however, the change can be viewed as incremental based 
on the other data improvements throughout the history of the OPPS, as 
described earlier in this section.
    We believe that incentives exist for accurate cost reporting beyond 
direct financial incentives. We believe that external perceptions of 
incorrect reporting are based primarily on the failure to consider 
limitations of the data collection methodology when making assumptions 
and conclusions. The Medicare cost report form allows hospitals to 
report in a manner that is consistent with their own financial 
accounting systems and, therefore, should be accurate for each 
individual hospital.
    The regulations at 42 CFR 413.24(f)(4)(iv) specify the 
certification statement on the first page of the Medicare cost report 
(Hospital and Hospital Heath Care Complex Cost Report, Form CMS-2552-
10) that must be signed by the hospital's administrator or chief 
financial officer certifying that the data contained in the cost report 
are true and accurate. Also included on the certification page is a 
``penalty statement'' which conveys to the hospital official signing 
the cost report that misrepresentation or falsification of any 
information contained in the cost report is punishable by criminal, 
civil, and administrative action, fine, and/or imprisonment under 
Federal law. Further, the ``penalty statement'' also states that if 
services identified in the cost report were provided or procured 
through the payment directly or indirectly of a kickback or were 
otherwise illegal, then criminal, civil, and administrative action, 
fine, and/or imprisonment may result. We believe that the possibility 
of mandatory cost report adjustments by fiscal intermediaries or MACs 
where erroneous amounts are found to exist and the possibility of 
Federal prosecution where potentially false claims and/or fraudulent 
conduct are found to exist act as reasonable incentives to complete the 
cost report accurately. Further, the cost report data and their use in 
the OPPS cost estimation and payment rate development process, combined 
with potential penalties for inaccurate reporting, provide financial 
incentive for reporting costs accurately.
    We recognize that hospitals are complex entities, each having their 
own accounting systems and reporting methodology. As such, the cost and 
charge data that they provide through the Medicare cost report forms 
are structured in a way that reflects their own internal accounting 
systems. Although we would obtain the most accurate information by 
using a highly structured reporting format across hospitals, in using 
these data for OPPS ratesetting, we must balance between our use of 
these data for the cost estimation process and the burden associated 
with forcing hospitals to convert to a government-mandated standardized 
financial management system. The current mechanism allows us to collect 
information that is accurate in the aggregate and that further, at a 
granular level, reflects the relative allocation of costs to 
departments and services by the industry as a whole without creating 
additional burden.
    We note that while the RTI investigation into charge compression 
and the calculation of the relative payment weights yielded areas where 
the cost estimation process could be improved, there was no suggestion 
that the process or data itself were fundamentally flawed. We also note 
that we have tried to be responsive to the concerns raised in the RTI 
report regarding charge compression and the accuracy of the relative 
payment weights, for example, through the creation of the new 
``Implantable Medical Devices Charged to Patients'' standard cost 
center or through the packaged cost redistribution to account for 
pharmacy overhead in the past several years. Regarding the concern 
about the matching process between the data used to calculate the CCRs 
on the Medicare cost report and the claims-

[[Page 68266]]

based charges, we note that we use the most updated accurate 
information made available to us and match them to the degree possible 
to accurately calculate estimated costs. In the revenue code-to-cost 
center modeling crosswalk that we use to estimate cost, the hierarchy 
of cost center CCRs is based on our best assumption of where those 
revenue code charges would be placed even though it may not necessarily 
reflect every hospitals' individual cost report structure.
    As discussed earlier in this section, we have made many 
improvements to the OPPS data process over the course of the past 
decade. Many of those changes were intended to either derive more 
information from the claims and cost report data we have available to 
us, while others were intended to estimate cost in a way that more 
accurately represented the provision of the service and associated 
resources. We believe that basing the relative payment weights on 
geometric mean costs will improve the degree to which our APC payments 
reflect the range of resource costs associated with providing services, 
and represents an incremental data improvement. Therefore, we do not 
believe it is appropriate to postpone the use of geometric mean costs 
in establishing the CY 2013 OPPS/ASC relative payment weights.
    Comment: Several commenters requested clarification regarding why 
CMS selected geometric mean costs as the metric for our proposed policy 
for calculating the CY 2013 OPPS/ASC relative payment weights rather 
than arithmetic mean costs. Other commenters noted that using 
arithmetic means would bring the OPPS even further in line with the 
IPPS ratesetting methodology.
    Response: While developing the proposal to establish the CY 2013 
OPPS/ASC relative payment weights using geometric mean costs, we also 
reviewed the volatility associated and impact of an OPPS based on 
arithmetic mean costs. We also considered many of the same issues that 
commenters described with respect to the use of arithmetic means, 
including whether their ability to more sensitively consider the 
variety of cost patterns, provide a better reflection of total costs, 
and to synchronize the OPPS system with the IPPS methodology, would be 
a preferable option among the three metrics.
    We noted that because only natural and ``pseudo'' single major 
claims would be used to model the relativity of the OPPS, arithmetic 
means would not truly reflect total cost in the system. Although 
arithmetic mean costs would be more sensitive towards outlier values 
than both geometric mean costs and median costs, there would also be 
greater volatility associated with the use of them due to their 
sensitivity towards outlier values. Similarly, the short-term 
transition from medians to arithmetic means would also include a 
greater range of both positive and negative provider payment impacts 
and would result in the need for more reconfiguration of the APCs to 
resolve 2 times rule violations than geometric mean costs. While we 
have discussed our intention to perform a thorough review of the OPPS 
in the future that may involve more significant reconfiguration, that 
review would be performed with the goal of developing more accurate and 
stable payment rates, to the extent that they reflect the range of 
service costs. Although we stated the possibility of using these 
geometric mean based payments for exploring cross-system payment 
comparisons, we recognize that there may be aspects of each payment 
system data methodology that may be unique. While using arithmetic mean 
costs would potentially capture the full range of costs better than 
both geometric means and medians, that benefit has limited value in a 
relative system such as the OPPS, where all total costs are reduced to 
relative rates. Conversely, it also would potentially allow an 
inappropriate impact due to aberrant values because there would be no 
mitigation of the influence of outlier costs, which could be accurate 
or aberrant values. Therefore, we viewed the use of geometric mean 
costs as a balanced approach between both the strengths and weaknesses 
of using medians and arithmetic means.
    Comment: Several commenters expressed concern with regard to the 
decline in APC payment to CMHCs due to use of the geometric mean cost 
for calculating the OPPS relative payment weights, and recommended that 
CMS continue to monitor the impact of its payment policies on CMHCs.
    Response: Over the past several years, we have made changes to the 
calculation of PHP relative payment weights to more accurately align 
their PHP APC payments to their specific costs. These changes to PHP 
relative payment weights have included establishing a separate cost 
estimation process based on provider type as well as a two-tiered APC 
payment system under which we pay one amount for days with 3 services 
and a higher amount for days with 4 or more services for both CMHC and 
hospital-based PHPs. As discussed in the CY 2013 OPPS/ASC proposed 
rule, we believe that the use of geometric mean costs rather than 
median costs in the ratesetting process is one such improvement because 
it allows the payment metric to consider a broader range of service 
costs (77 FR 45097). We will continue to monitor the impact of our 
payment policies on OPPS providers, including CMHCs.
    Comment: One commenter was concerned with the minimum and maximum 
values associated with APCs 0690 (Level I Electronic Analysis of 
Devices) and 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices). In the case of APC 0690, the commenter suggested 
that the APC payment rate be set to the median cost and not allowed to 
drop below the payment that CMS would have calculated using medians. 
For CPT 0307T (Removal of intracardiac ischemia monitoring device), the 
commenter also believed that its placement in APC 0105 was appropriate. 
However, the commenter requested that CMS perform an analysis to 
determine whether some of the procedures might be more appropriately 
placed in a different APC.
    Response: In the case of both of these APCs, the presence of high-
cost, low-volume services in the claims used to model each APC creates 
outliers that foster the perception that the services spread more 
evenly across the range between the minimum and maximum values than 
actually is the case. Those minimum and maximum values represent 
individual points at the most extreme ends of the model, and include 
service cost estimations that do not contribute significantly enough to 
the APC weight to be considered in the application of the 2 times rule. 
In that sense, those values can be misleading because the minimum and 
maximum should be considered as the most extreme outlier cases; we 
evaluate the range through the application of the 2 times rule, which 
only considers services that have sufficient volume to demonstrate 
stability and reliability and which significantly contribute to the 
relative payment weight of the APC. Both medians and means are measures 
of central tendency and have strengths and weaknesses when considering 
the degree to which they accurately represent the dataset. Similarly, 
the minimum and maximum values are informative in identifying the most 
extreme outliers of a dataset but do not necessarily reflect the bulk 
of the distribution.
    For CPT codes 0305T and 0306T which are assigned to APC 0690, we 
note that the geometric mean cost ($34.78) was slightly higher than the

[[Page 68267]]

median cost ($33.71) for the APC in the data used for the CY 2013 OPPS/
ASC proposed rule. In addition, after calculation of budget neutrality 
and other adjustments, the national unadjusted payment rate for a 
geometric mean cost-based APC payment was proposed to be higher than a 
median cost-based one for CY 2013. Finally, for prospective APC payment 
rates which are calculated through the standard process, we would not 
pay using the cost as a rate but we would use the estimated costs to 
establish the relative payment weights on which OPPS payments are 
based. Therefore, we are not setting the payment rate for APC 0690 at 
the median cost.
    We appreciate the commenters' support regarding the placement of 
CPT code 0307T in APC 0105. We do not agree that having a wide 
distribution of costs in an APC necessarily implies that a problem in 
the construction of the APC exists, particularly in cases where we 
believe the clinical placement and resource use is appropriate. As 
described above, the minimum and maximum values identified within each 
CPT or APC are the most extreme outliers, and may not necessarily 
reflect where the majority of the cost estimates are within each code. 
For application of the 2 times rule discussed in section III.B. of this 
final rule with comment period, we only consider codes that are 
``significant'' in their contribution towards the cost estimates in the 
APC as being useful in the identification of how similar the services 
within an APC are to each other, from a cost perspective. However, this 
does not eliminate the need to consider clinical factors when 
constructing the APC assignments. We do not believe that differences in 
the distribution of costs for a service automatically creates the need 
for further study, especially because the purpose of geometric mean 
costs is to more fully include those cost observations. Similarly, the 
APC configurations are intended to group together services with 
clinical and resource homogeneity. However, in the CY 2013 OPPS/ASC 
proposed rule, we stated our intention of using the information we have 
available to us to reexamine the APC structure and assignments to 
consider further ways of increasing the stability of payments over 
time, and will consider these issues as we do so in the future.
    Comment: Commenters expressed concern with regard to the impact of 
the use of geometric mean-based costs for other specific APCs as well 
as certain clinical areas. APCs that commenters requested specific 
detail about included APCs 0690 (Level I Electronic Analysis of 
Devices); 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices); 0331 (Combined Abdomen and Pelvis CT without 
Contrast); 0334 (Combined Abdomen and Pelvis CT with Contrast); 0383 
(Cardiac Computed Tomographic Imaging); 0336 (Magnetic Resonance 
Imaging and Magnetic Resonance Angiography without Contrast); 0337 
(Magnetic Resonance Imaging and Magnetic Resonance Angiography without 
Contrast followed by Contrast); 0308 (Positron Emission Tomography 
(PET) imaging); 0402 (Level II Nervous System Imaging); 0408 (Level III 
Tumor/Infection Imaging); 0169 (Lithotripsy); 0385 (Level I Prosthetic 
Urological Procedures); 0386 (Level II Prosthetic Urological 
Procedures); and 0674 (Prostate Cryoablation). Other clinical areas 
that commenters expressed concern about included otolaryngological and 
orthopaedic procedures. One commenter requested that CMS ensure that 
there was no disproportionate impact to any given medical specialty.
    Response: In the case of these APCs, generally the issue is that 
the geometric mean costs reflect lower cost values than otherwise 
indicated by the median value. We have identified numerous other data 
issues or policies beyond the use of geometric mean costs that may 
attribute to potential declines in the relative payment weight.
    For APCs 0331 and 0334, this is the first year where actual data 
are available for ratesetting based on the new CY 2011 computed 
tomography of abdomen/pelvis codes: CPT codes 74176 (Computed 
tomography, abdomen and pelvis; without contrast material); 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 more discussion 
on the Computed Tomography of Abdomen/Pelvis APCs, we refer readers to 
section II.A.7.c. of this final rule with comment period.
    Another influencing factor may be the use of the new standard cost 
center for ``Implantable Devices Charged to Patient''. For device-
dependent APCs 0385, 0386, and 0674, there may be effects based on use 
of the new standard cost center CCR being mapped to revenues codes 
where appropriate. For a discussion of the cost report CCRs used to 
estimate service cost, we refer readers to section II.A.1.c. of this 
final rule with comment period.
    For APC 0169, the estimated costs of the APC may have changed based 
on corrections to the revenue code-to-cost center crosswalk described 
in the second correction notice to the CY 2012 OPPS/ASC final rule with 
comment period (77 FR 24409). Further, because CPT code 50590 
(Lithotripsy, extracorporeal shock wave) is the only code used to model 
the APC, any variation with the estimated costs for the CPT code will 
directly affect the APC relative payment weight.
    For all the APCs referenced by commenters, the relative payment 
weights based on using geometric mean costs now include a greater range 
of resource costs associated with furnishing the services. Declines in 
their APC relative payment weights can partially be attributable to 
these changes in the degree to which the relative payment are 
reflective of costs. As we have noted, there also may be additional 
influencing factors that have led to those changes, including use of 
actual rather than simulated claims data, the use of the new 
``Implantable Medical Devices Charged to Patients'' standard cost 
center, the corrections we made to our revenue code-to-cost center 
modeling crosswalk in our data process, and others. We also note that, 
because of budget neutrality, for each APC that commenters identified 
as having decreased payments, there are other APCs that have increased 
payments. As a general matter, we believe that, in their totality, the 
newly based APC payment rates better reflect the underlying costs in 
both cases.
    We have typically analyzed the impacts of any proposals at the CPT 
code, APC, and provider levels of granularity, as most hospitals 
furnish a variety of services to Medicare beneficiaries. We do not 
believe that observed declines or increases in the payments for codes 
are typically associated with any individual specialty because, as we 
have noted, there are both increases and decreases in relative payment 
weight associated with this proposal. Additionally, changes generally 
are due to the degree to which medians were insensitive to the range of 
service costs.
    Comment: One commenter expressed concern regarding the impact of 
geometric means-based payment on blood products because many of the 
blood product APCs would experience declines in payment. The commenter 
recommended that blood products continue to be separately paid based on 
simulated median costs or that a CY 2013 payment floor be set at the CY 
2012 APC payment rates.

[[Page 68268]]

    Response: While we appreciate the concerns expressed by the 
commenter, we do not believe that it is appropriate to establish the 
relative payment weights using different cost metrics for various APC 
categories. Doing so would potentially distort the cost relativity and 
APC payments of services paid through the OPPS. We note that, to ensure 
that the cost estimation process for blood products is as accurate as 
possible, we have continued to use simulated CCRs where appropriate, as 
discussed under section II.A.d.2. of this final rule with comment 
period. Similarly, we do not believe that setting a payment floor for a 
specific set of services is appropriate. The estimated resource costs 
associated with providing a service change from year to year and 
establishing arbitrary payment floors would decrease the degree to 
which APC payments reflect the range of costs associated with providing 
a service.
    Comment: Commenters also expressed concern regarding the use of 
geometric mean costs as the basis for APC relative payment weights for 
brachytherapy sources and recommended that they not be used in 
establishing the relative payment weights. The commenters believed that 
geometric mean costs would be inappropriate for use in ratesetting, in 
particular for the case of brachytherapy sources.
    One commenter stated that the geometric mean is inappropriate for 
use in determining payment levels under the OPPS because it will 
overemphasize the weight of low and potentially spurious values in the 
data. The commenter had other statistical concerns regarding the extent 
to which there were high-cost and low-cost outliers that they believed 
were not plausible values as well as variation in estimated costs for 
brachytherapy relative to other OPPS services. The commenter attributed 
that variation as being due to hospital reporting practices, and 
contrasted that variation in the OPPS to the IPPS, where the commenter 
believed the main concern was high-cost outliers and high-cost values. 
Under the commenter's belief that geometric means would pay 
inadequately for brachytherapy, the commenter also believed it would 
create a disincentive to use brachytherapy in the treatment of cancer 
and create access to care issues. The commenter stated that CMS would 
be acting contrary to the intent of the cost-based payment extensions 
for brachytherapy payment from CY 2004 through CY 2009. Further, the 
commenter stated that CMS did not provide sufficient warning to other 
policymakers in CYs 2010 and 2011 regarding the likelihood that it 
might potentially change the cost metric used to establish relative 
payment weights. The commenter believed that geometric mean costs 
should not be used to develop the relative payment weights of 
brachytherapy sources.
    Response: As with all other OPPS services that would be affected by 
the proposed policy, we do not believe that the use of geometric mean 
costs in establishing the APC relative payment weights for 
brachytherapy sources is inappropriate. While the use of geometric mean 
costs will include the weight of low values in the data, we note that 
it also better incorporates cost observations from the higher values in 
the data. This can be seen in the increases in the relative payment 
weight for certain brachytherapy sources based on using geometric mean 
costs. As discussed earlier in this section, the values now being 
included could potentially include spurious values on both ends of the 
dataset, as well as legitimate and accurate data. We believe that 
encompassing a broader range of service costs in establishing the 
relative payment weights is a technical improvement and may increase 
the degree to which payments reflect the range of costs associated with 
providing a service.
    Both the IPPS and OPPS contain reporting variations due to the 
different charging practices among hospitals. While we agree that some 
of the variations in cost outlier values may be due to the fact that 
brachytherapy sources rely on charges and costs associated with a CCR, 
that does not imply that they are necessarily inappropriate, as all 
OPPS payments rely on charges and CCRs. As we have noted earlier in 
this section, as long as providers are using generally acceptable 
accounting practices (GAAP), and the cost report structure reflects 
their charging practices, we believe that this results in accurate 
calculations. While the commenter has suggested that the variation in 
the costs of brachytherapy sources is inappropriate, this can be 
attributed to both accounting and real cost differences among the 
various providers that furnish the service in addition to low frequency 
of line items which may be used to model cost. Although medians may be 
less sensitive to cost outliers, or even the range of costs, we believe 
that is both a strength and a weakness of that metric, but is not a 
reflection of greater or lesser accuracy. While commenters have 
provided examples with a sample size of three values to illustrate 
their point regarding sensitivity to low cost values, we note that 
cases with this order of extreme observations used to model the 
relative payment weights would be exceptionally rare. For example, the 
commenter posited a reported charge of $0.01 which is not only 
extremely unlikely but also is not supported by institutional claims 
processing. In situations where there are few claims available to model 
the service costs, the basic issue is the claims volume and their use 
in establishing the relative payment weights, and not necessarily the 
fact that medians or geometric means are used. We can address small 
claim volumes in some cases through assigning similar services based on 
resource costs or clinical similarity to the same APCs. However, this 
method of addressing variability based on low claims volume is 
unavailable as a tool for line item cost-based APCs.
    We do not believe that changes in payment based on the use of 
geometric mean costs will create a disincentive towards using 
brachytherapy as a viable option in the treatment of cancer. As we 
noted earlier in this section, there is variation even among the 
brachytherapy APCs, which suggests that some of those APC payment rates 
may now better reflect the range of costs associated with them. There 
also is extreme variation in the costs reported by individual hospitals 
for each service within the APC. In considering whether a median cost-
based system or a geometric mean-based system is more appropriate at 
this juncture, the inclination is to view declines in payments as 
aberrant, without consideration of increases in payment. However, it is 
equally possible that medians and their lack of sensitivity towards 
outliers may have led to more payments based on overstated costs than 
would have been appropriate when considering the broader range of 
service costs. As discussed in an earlier response, we will continue to 
monitor the impact of this proposal to base the relative payment 
weights on geometric mean costs.
    With respect to the comments regarding the process through which we 
establish payment policy for each prospective payment year, we note 
that the OPPS rulemaking process occurs annually, and is intended to 
give providers notice as well as the opportunity to inform rulemaking 
and express their stances regarding various policy proposals. While 
being able to prepare for each rulemaking cycle so that each 
prospective payment policy proposal is known years in advance may be 
preferred by commenters, it is not operationally feasible. As we have 
discussed in this section, as well as in the CY 2013 OPPS/ASC proposed 
rule,

[[Page 68269]]

the situations that were pressing during the inception of the initial 
OPPS, and the changes we have made since then, have allowed us to 
consider different issues as well as areas for improvement. We believe 
that basing the relative payment weights on geometric mean costs is one 
such improvement. Although Congress did extend the prior cost-based 
methodology for brachytherapy sources from CYs 2004 through 2009, we 
note that no such additional extension has been enacted. Further, the 
discretion to use a median-based or mean-based system in establishing 
the OPPS relative payment weights predates those extensions, as 
authorized by section 201(f) of the BBRA of 1999.
    While we recognize the concerns regarding the payments for 
brachytherapy sources based on geometric mean costs, we continue to 
believe that this change will result in more accuracy in the cost 
estimation. We do not believe that paying for some services based on 
median costs while using geometric mean costs for other services is 
appropriate, equitable, or consistent with statute. Further, using 
different cost metrics for different services could distort the 
relativity of services within the system and increase the inaccuracy 
and instability of service payment.
    Comment: Several commenters noted that they had difficulty modeling 
the budget neutrality and impact calculations, and suggested that CMS 
provide a more thorough explanation before proceeding with the proposal 
to establish OPPS relative payment weights based on geometric mean 
costs. The commenters stated that lack of a study, in particular one 
that studies the effect of using geometric mean costs as the basis for 
the relative payment weights over time, made it difficult for them to 
make an informed decision. The commenters also stated that an 
explanation regarding the impacts was necessary before proceeding, with 
several commenters noting that the effect of basing the relative 
payment weights on geometric mean costs was not evenly distributed by 
provider types. One commenter disagreed that there would generally be 
limited financial impact to hospitals, due to the fluctuations in 
certain APCs. Some commenters claimed that the proposal to base the 
relative payment weights on geometric mean costs disproportionately 
affected teaching hospitals. Other commenters asked CMS to provide a 
list of APCs whose costs fluctuated above a certain threshold each 
year, so that those APCs could be identified through rulemaking for 
public comment and to allow for presentations before the HOP Panel. A 
few commenters expressed concern in using geometric mean costs for 
small sample sizes, as was the case with those associated with proton 
beam therapy.
    Response: For the past several years, each OPPS/ASC rule has 
included a discussion summarizing both our data process, as well as the 
calculations associated with budget neutrality and hospital impacts. 
However, we also make available online a claims accounting document 
that summarizes in great detail the claims manipulation that goes into 
modeling the costs used to develop the relative payment weights, as 
well as the calculations and data processes used to model budget 
neutrality and the hospital impacts each cycle. The budget neutrality 
and hospital impacts portions of this document were developed beginning 
with the CY 2007 OPPS proposed rule, and have been available for every 
OPPS rulemaking cycle thereafter.
    While we appreciate the concerns that commenters have with regard 
to studying the effects over time, we believe that any increased 
fluctuations due to geometric mean-based payments are generally not 
significant enough to create cause for concern. This data process 
change applied to the cost metric used to develop the relative payment 
weights more fully captures the range of costs associated with 
providing a service. However, service costs and APC payments fluctuate 
over time for a variety of reasons, as we have previously discussed in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74139). As 
we have discussed earlier in this section, we will continue to monitor 
the impact of using geometric mean costs to establish the APC relative 
payment weights and any changes in service frequency or beneficiary 
access. Our investigation into the impact of using geometric mean costs 
to establish the relative payment weights also suggest that there 
should be limited volatility in the payment rates after this initial 
change. We note that some services do have payment decreases associated 
with using geometric mean-based relative weights. However, many 
services also experience payment increases as a result of the geometric 
mean-based calculation, presumably because the relative payment weights 
more accurately reflect higher costs associated with provisions of 
those services. Finally, we note that the one-time effect of converting 
from medians to means this year is not to be confused with the much 
less significant effect of year-to-year variation associated with 
means.
    We agree with the commenters' concern regarding the issue of APCs 
with small sample sizes. However, our concern has less to do with the 
use of geometric mean costs being used to model the relative payment 
weights where they are appropriate, but more with the degree to which a 
substantive cost baseline can be established. In general, APCs with 
relatively low service costs or those where there is low claims volume 
tend to be more vulnerable to cost and payment volatility. We continue 
to examine methods and APC configurations, such as larger bundles, to 
mitigate any concerns related to those issues. As the commenter 
discussed regarding the case of proton beam therapy, there are 
situations where the costs of the service reflect only provision from a 
small number of providers and, therefore, may not establish a broad 
baseline as is the case for most APCs. However, in the case of the 
proton beam APCs, a sufficiently large volume of claims had been 
provided and the geometric means helped carry out our intention of 
capturing the full range of costs. As discussed in the APC-specific 
policy section of this final rule with comment period, section II.D., 
the issues relayed by the commenter primarily were due to presumed 
idiosyncrasies and errors in the submission of the cost reports, which, 
in turn, affected the estimation of costs, and was further impacted by 
the coding practices at an individual provider. We note that the 
potential of these issues to affect the relative payment weights would 
occur both under a median-based system, provided there was enough 
significant volume, as well as under geometric mean costs.
    In both the CY 2013 OPPS/ASC proposed rule and in this CY 2013 
OPPS/ASC final rule with comment period, we have included a column in 
the impact tables that separately shows the effects of the use of 
geometric mean costs on the APC relative payment weights. At a very 
basic level, provider categories that experienced more significant 
negative or positive payment impacts did so because of the mix of 
services furnished by those providers based on our claims data. We note 
that the OPPS provider payment impacts identified in section XXIII. of 
this CY 2013 OPPS/ASC final rule are relatively limited. Some 
commenters have stated that the policy of developing relative payment 
weights using geometric mean costs disproportionately affects teaching 
hospitals; other commenters have noted that the impacts are not 
identical based on the provider categories. That differential in the 
impacts is to be

[[Page 68270]]

expected based on this policy, just as any estimated payment impact 
based on the mix of services that a hospital provides will vary from 
year to year. Because this policy affects the calculation of the 
relative payment weights and does not affect the relative payment 
weights uniformly, it is natural for the changes in those weights to 
have corresponding variation reflected in the provider impacts based on 
the mix of services furnished by providers. In the provider impact 
table in this CY 2013 OPPS/ASC final rule with comment period, we note 
that, even among major and minor teaching hospitals, there are 
different estimated impacts based on this policy. We further note that, 
while the payment category may reflect an increase or decrease in total 
estimated payment, even among the hospitals in that category, there may 
be differential impacts that may not necessarily be in the same 
direction. As discussed earlier in this section, we will continue to 
monitor any changes that may be associated with the policy of 
calculating the relative payment weights using geometric mean costs.
    We make available with each proposed rule and final rule cost 
statistics files that include information about costs by CPT code and 
APC, as well as modeling and total frequency information for each code. 
Addenda A and B which show the payment rates associated with each rule, 
also are made available on the CMS Web site. Therefore, the information 
to continue monitoring changes in APC payment, code frequency, and cost 
are made available to the public.
    Comment: One commenter supported the goal of making cross-system 
payment comparison of payment parity. Two commenters cautioned against 
using OPPS payments based on geometric mean costs as a basis for 
examining payment parity across the prospective payment systems. They 
noted that other factors may be involved that would cause those 
comparisons to potentially be inappropriate, including the acuity of 
the patients, case-mix, ratesetting methodologies, and resource use in 
different care settings, as well as different payment adjustments in 
each system.
    Response: While we believe that each of the payment systems has an 
internally consistent methodology, we recognize the value of including 
useful information in making potential payment comparisons. We note 
that we already implement cross-system payment and utilization 
comparisons in cases such as the MPFS DRA imaging cap, the ASC cap on 
separately payable radiology services, the cap on ASC office-based 
covered surgical procedures, and the comparison of service provision 
across settings for purposes of the inpatient list. The goal in making 
any potential payment comparisons is to analyze the differences and 
similarities in as appropriate a manner as possible.
    As we discussed in the CY 2012 OPPS/ASC final rule with comment 
period, in the context of the proposed Cardiac Resynchronization 
Therapy composite APC, there are various goals associated with making 
cross-system payment comparisons, including ensuring that we do not 
create an inappropriate payment incentive to provide services in one 
setting of care as opposed to another, using more accurate information 
where it is available, and constructing the payment groups to be more 
clinically and resource similar to each other where appropriate, among 
others (76 FR 74179 through 74182). We specifically noted that there 
could be many payment approaches that could be chosen for comparison 
purposes for any given item or service (76 FR 74181).
    After consideration of the public comments we received, we are 
finalizing our proposal to develop the APC relative payment weights 
using geometric mean costs in the manner described above.
    As we also discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 
45097), under the revised ASC payment system that was effective January 
1, 2008, we established a standard ASC ratesetting methodology that 
bases payment for most ASC covered surgical procedures and some covered 
ancillary services on the OPPS relative payment weights (72 FR 42491 
through 42493). Therefore, because we proposed to calculate CY 2013 
OPPS relative payment weights using geometric mean costs, we also 
proposed that CY 2013 ASC payment rates under the standard ASC 
ratesetting methodology would be calculated using the OPPS relative 
payment weights that are based on geometric mean costs. We noted that 
basing the relative payment weights on geometric mean costs rather than 
median costs affects the proposed CY 2013 payment rates. We stated that 
differences in the proposed payment rates, as with any changes from 
year to year, affect other parts of the OPPS, including the copayments 
described in section II.I. of the proposed rule as well as the fixed-
dollar outlier threshold described in section II.G. of the proposed 
rule.
    We did not receive any public comments on the adoption of OPPS 
relative payment weights based on geometric means in the ASC system. 
For a more detailed discussion of the ASC ratesetting methodology, we 
refer readers to section XIV. of this final rule with comment period.
    Under the CY 2013 proposed policy to base the relative payment 
weights on geometric mean costs, we also proposed to revise the related 
regulations that currently reflect a median cost-based OPPS to instead 
reflect a geometric mean cost-based OPPS. Specifically, we proposed to 
revise 42 CFR 419.31, which describes the 2 times rule discussed in 
section III.B. of the proposed rule and this final rule with comment 
period and the development of relative payment weights based on the 
cost metrics discussed in section II.A.4 of the proposed rule and this 
final rule with comment period.
    Comment: One commenter stated that CMS did not address why it did 
not apply the 2 times rule based on geometric means while continuing to 
use medians for calculating the relative weights because the commenter 
believed that it would improve the detection of changes in service cost 
while basing relative payment weights on the less volatile median.
    Response: In the CY 2013 OPPS/ASC proposed rule, we discussed the 
impact of evaluating the 2 times rule based on geometric mean costs 
rather than median costs, noting that while doing so did not 
significantly affect the application of the rule, it created several 
additional 2 times rule violations in the rebasing process (77 FR 
45097). Similar to the IPPS and since the inception of the OPPS, we 
have used a statistical outlier trim of three standard deviations 
beyond the geometric mean cost, even though we have historically used 
median costs as the metric on which to base the relative payment 
weights. The application of the 2 times rule is inherently tied to the 
configuration of the APCs and, therefore, how individual codes are 
paid. To apply the 2 times rule based on geometric mean cost and 
reconfigure the APCs based on that metric, while calculating relative 
payment weights based on medians, would be an inconsistency in the data 
process in the same way that using geometric mean costs for some 
services and median costs for others would be. Further, section 
1833(t)(2) of the Act states that the application of the 2 times rule 
should be based on the metric selected in section 1833(t)(2)(C) of the 
Act.
    After consideration of the public comments we received, we are 
finalizing our proposal to apply the 2 times rule based on geometric 
mean costs and the corresponding changes in 42 CFR 419.31.

[[Page 68271]]

    In section XXII. of this final rule with comment period, which 
discusses the regulatory impact analysis, we are providing an 
additional column in the impact tables for the OPPS that identifies the 
estimated impact due to APC recalibration of a geometric means-based 
OPPS as well as a column that estimates the impact of recalibration 
based on CY 2011 claims and historical cost report data. As depicted in 
the impact tables, many provider categories will experience limited 
impacts under the final policy to base the OPPS relative payment 
weights on geometric means. We note that the impact tables only 
estimate the OPPS payment impact based on the most current available 
claims and cost report data, and that providers' actual payments may 
vary, depending on the mix of services provided in the actual claims 
year. Also, the budget neutral payment adjustments ensure that, under a 
geometric mean-based system or a median cost-based system, aggregate 
OPPS payments will remain the same.
    Section XXII. of this final rule with comment period contains an 
OPPS provider impact table that estimates the effect of policy changes 
and budget neutrality adjustments on provider payment under the CY 2013 
OPPS. Column 3 of the impact table shows the estimated impact by 
provider category of calculating the CY 2013 OPPS payments based on 
geometric mean costs rather than median costs. While the policy to 
shift the basis for relative payment weights to geometric mean costs 
may involve some changes to the relative weights on which OPPS payments 
are based, providers will generally experience limited impacts to 
payment as a result of the CY 2013 final policy. Those provider 
categories that are estimated to experience increased payments as a 
result of the policy to base the CY 2013 relative payment weights on 
geometric mean costs generally included non-IPPS hospitals that 
provided psychiatric, hospital-based PHPs, and other services whose 
relative payment weights increased based on geometric mean costs. As 
noted above, we recognize that there may be fluctuations in the 
relative payment weights based on this CY 2013 final policy, but we 
believe that this policy represents an improvement that more accurately 
estimates the costs associated with providing services.
    In our experience developing the OPPS, we have implemented many 
changes to obtain more cost information from the claims and cost report 
data available to us, in an effort to arrive at more accurate estimates 
of service cost. Many of those changes are described above and in prior 
OPPS final rules. Despite the challenges created by the complexity of 
the data and the diversity of facility accounting systems, we continue 
to examine possible process and data changes that may further improve 
precision, validity, and utility. Commenters have historically 
expressed concerns about the degree to which OPPS relative payment 
weights are reflective of the service costs associated with providing 
them, APC payment rate volatility from year to year, and other cost 
modeling related issues. We recognize that some of those issues will 
remain because they are related to naturally occurring changes in the 
economic environment, clinical practice, and the nature of payment 
systems, among other reasons. However, we believe that basing the OPPS 
relative payment weights on geometric means better captures the range 
of costs associated with providing services, improves payment accuracy 
while limiting year-to-year volatility, and allows reconfigurations in 
the APC environment using a metric that provides greater computational 
depth. For these reasons, and those discussed above, we are basing the 
CY 2013 OPPS/ASC final relative payment weights on geometric mean 
costs.
3. Changes to Packaged Services
a. Background
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging, where the payment may be more or less than the 
estimated cost of providing a specific service or bundle of specific 
services for a particular patient. However, with the exception of 
outlier cases, overall payment is adequate to ensure access to 
appropriate care. The OPPS packages payment for multiple interrelated 
services into a single payment to create incentives for providers to 
furnish services in the most efficient way by enabling hospitals to 
manage their resources with maximum flexibility, thereby encouraging 
long-term cost containment. For example, where there are a variety of 
supplies that could be used to furnish a service, some which are more 
expensive than others, packaging encourages hospitals to use the most 
cost-efficient item that meets the patient's needs, rather than to 
routinely use a more expensive item, which could result if separate 
payment is provided for the items. Packaging also encourages hospitals 
to negotiate 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 scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated 
with higher cost cases requiring many ancillary services and lower cost 
cases requiring fewer ancillary services. For these reasons, packaging 
payment for items and 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 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.''
    We assign status indicator ``N'' to those HCPCS codes of dependent 
services 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 to 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 with one or more 
separately paid primary services with the status indicator of ``S,'' 
``T,'' ``V,'' or ``X'' furnished in the hospital outpatient encounter. 
A T-packaged code describes a code whose payment is only packaged with 
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

[[Page 68272]]

respective criteria for packaged payment. STVX-packaged codes and T-
packaged codes are conditionally packaged. We refer readers to section 
XII.A.1. of this final rule with comment period and Addendum D1, which 
is available via the Internet on the CMS Web site with other Addenda, 
for a complete listing of status indicators and the meaning of each 
status indicator.
    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 to establish prospective payment rates. We encourage 
hospitals to report all HCPCS codes that describe packaged services 
provided, unless the CPT Editorial Panel or CMS provides 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 Medicare beneficiaries.
    In addition to the packaged items and services listed in 42 CFR 
419.2(b), 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 with 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. Packaging under the OPPS also 
includes composite APCs, which are described 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 2013 
OPPS/ASC proposed rule (77 FR 45098 through 45101), we invited public 
comments regarding our packaging proposal for the CY 2013 OPPS.
b. Clarification of the Regulations at 42 CFR 419.2(b)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45099), we proposed to 
clarify the regulatory language at 42 CFR 419.2(b) to make explicit 
that the OPPS payments for the included costs of the nonexclusive list 
of items and services covered under the OPPS referred to in this 
paragraph are packaged into the payments for the related procedures or 
services with which such items and services are provided. We stated 
that this proposed clarification is consistent with our interpretation 
and application of 42 CFR 419.2(b) since the inception of the OPPS. We 
invited public comments on this clarification.
    Comment: One commenter objected to the proposed clarification of 
the regulatory language at 42 CFR 419.2(b). The commenter expressed 
concern that the proposed changes to the regulatory language are 
ambiguous and may result in confusion for hospitals and contractors. 
The commenter believed that Medicare audit contractors will try to 
assert that all services furnished during a particular encounter, such 
as E/M visits, drug administration, X-rays, or other ancillary tests, 
are all related to the main procedure or service received. The 
commenter further stated that this may lead to payment denials or 
monies taken during audits and/or post-payment reviews based on the 
proposed clarification. Therefore, the commenter recommended that CMS 
abandon this proposal because the current regulatory language is clear 
and instructs all entities about CMS' packaging principles.
    Another commenter did not object to the proposed wording change 
from ``included costs'' to ``packaged costs'' because, the commenter 
stated, CMS did not propose to add or alter any of the examples of 
packaged items and services, and the language used already notes that 
the list provided is not an inclusive one. However, the commenter was 
concerned that the proposed addition of the phrase ``the payments for 
which are packaged into the payment for the related procedures or 
services'' introduces a new concept that may lead to a broad 
interpretation of the regulatory text. The commenter expressed concern 
that when audits of OPPS accounts occur, the proposed regulatory text 
may be used to broaden the packaging concept beyond accurate CPT coding 
by using a subjective interpretation of the term ``related''. 
Therefore, the commenter requested that CMS not add the phrase ``the 
payments for which are packaged into the payment for the related 
procedures or services''.
    Response: We disagree with the commenters' assertion that the 
proposed clarification of the regulatory text at 42 CFR 419.2(b) is 
ambiguous or confusing. We note our proposal simply clarifies our 
longstanding policy of packaging, which is a fundamental concept of the 
OPPS. Specifying that included costs are packaged under the OPPS and 
that the payment for these packaged costs is packaged into the payment 
of the related procedures or services is consistent with our 
longstanding policies related to packaging. In addition, we disagree 
with the commenter's statement that the proposed addition to 42 CFR 
419.2(b) of the phrase ``the payment for which are packaged into the 
payment for the related procedures or services'' introduces a new 
concept into the current regulation text.
    As we have repeatedly stated, since the inception of the OPPS, 
packaging payment for items and services that are typically ancillary 
and supportive to a primary service has been a fundamental part of the 
OPPS. The concept of packaging entails that the costs for packaged 
services that are billed with a status indicator of ``N'' are packaged 
into the costs of the separately paid primary service with which they 
are billed. This then means that no separate APC payment is made for 
the packaged service alone but payment is instead included in the 
payment for the service or procedure with which the packaged service 
has been billed.
    We believe that our clarification of the regulations at 42 CFR 
419.2(b) is consistent with the concept of packaging under the OPPS and 
does not deviate in any way from our current and longstanding policies 
regarding packaging under the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to clarify 42 CFR 
419.2(b) to make explicit that the OPPS payments for the included costs 
of the nonexclusive list of items and services covered under the OPPS 
referred to in this paragraph are packaged into the payments for the 
related procedures or services with which such items and services are 
provided.
c. Packaging Recommendations of the HOP Panel (``The Panel'') at Its 
February 2012 Meeting
    During its February 2012 meeting, the Panel made five 
recommendations related to packaging and to the function of the 
subcommittee. One additional recommendation that originated from

[[Page 68273]]

the APC Groups and Status Indicator (SI) Assignment Subcommittee about 
observation services is discussed in section II.A.2.e. of this final 
rule with comment period. The report of the February 2012 meeting of 
the Panel may be found on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present each of the Panel's five packaging recommendations 
and our responses to those recommendations.
    Panel Recommendation: CMS should delete HCPCS code G0259 (Injection 
procedure for sacroiliac joint; arthrography) and HCPCS code G0260 
(Injection procedure for sacroiliac joint; provision of anesthetic, 
steroid and/or other therapeutic agent, with or without arthrography), 
and instead use CPT code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid, with image guidance (fluoroscopy or CT) 
including arthrography, when performed) with a status indicator of 
``T,'' and assign CPT code 27096 to APC 0207 (Level III Nerve 
Injections).
    Response: In the CY 2013 OPPS/ASC proposed rule, we did not accept 
the Panel's recommendation to delete HCPCS code G0259 and G0260 and 
instead use CPT code 27096 with a status indicator of ``T'' and assign 
CPT code 27096 to APC 0207. For CY 2012, we assigned CPT code 27096 to 
status indicator ``B,'' meaning that this code is not payable under the 
OPPS. In order to receive payment for procedures performed on the 
sacroiliac joint with or without arthrography or with image guidance 
under the OPPS, hospitals must use either HCPCS code G0259, which is 
assigned to status indicator ``N'' for CY 2012, or HCPCS code G0260, 
which is assigned to status indicator ``T'' for CY 2012, as 
appropriate. CMS created HCPCS codes G0259 and G0260 to separate and 
distinguish the image guidance procedure from the therapeutic injection 
procedure for the sacroiliac joint. As stated above, guidance 
procedures are packaged under the OPPS because we believe that they are 
typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and are an integral part of the primary service 
they support.
    We believe that the existence of HCPCS codes G0259 and G0260 is 
necessary to assign appropriate packaged payment for the image guidance 
procedure, according to our established packaging policy, and separate 
payment for the therapeutic injection procedure. Therefore, we did not 
accept the Panel's recommendation and followed the previously 
established policy to continue to assign HCPCS code G0259 to status 
indicator ``N,'' HCPCS code G0260 to status indicator ``T,'' and CPT 
code 27096 to status indicator ``B'' for CY 2013.
    Comment: Several commenters disagreed with CMS' proposal to not 
accept the Panel's recommendation on HCPCS codes G0259 and G0260 and to 
continue to assign a status indicator of ``B'' for CPT code 27096. One 
commenter expressed concern that the continued use of HCPCS codes G0259 
and G0260 instead of the CPT code 27096 is administratively burdensome 
to hospitals because it does not allow standardized code reporting 
among all payers.
    Another commenter stated that there is no CPT code that would 
describe the radiological portion of the procedure to be reported in 
addition to HCPCS code G0259 because the AMA deleted CPT code 73054. As 
of January 1, 2012, the commenter stated that CPT code 27096 is always 
a complete procedure that includes the injection of a diagnostic or 
therapeutic agent and the associated imaging. The commenter recommended 
that CMS recognize CPT code 27096 and assign the appropriate APC code 
to this CPT code based on the CY 2011 claims data for HCPCS code G0259 
with CPT code 73542 and HCPCS code G0260 or modify the descriptor of 
HCPCS code G0259 to include the radiological portion of the procedure 
and assign the appropriate status indicator and APC for the complete 
procedure.
    One commenter stated that CPT codes 77003 (Fluoroscopic guidance 
and localization of needle or catheter tip for spine or paraspinous 
diagnostic or therapeutic injection procedures (epidural or 
subarachnoid)) and 77012 (Computed tomography guidance for needle 
placement (eg, biopsy, aspiration, injection, localization device), 
radiological supervision and interpretation) that are billed with HCPCS 
code G0260 have a NCCI edit with an indicator of ``1.'' Therefore, the 
commenter stated that CPT codes 77003 and 77012 cannot be reported with 
modifier ``59'' because the imaging guidance is not separate and 
distinct and it is instead part of the procedure. The commenter stated 
that providers cannot accurately report the cost of the imaging 
guidance (either fluoroscopy or CT) due to the CCI edits and the fact 
that the HCPCS code G0260 descriptor does not indicate if either 
fluoroscopy or CT imaging is bundled into the procedure code. 
Therefore, the commenter asked that CMS establish a new HCPCS code to 
describe the sacroiliac injection procedure performed with imaging 
(fluoroscopy or CT) or allow the reporting of CPT code 27096 and revise 
the status indicator from ``B'' to ``T.''
    Response: We continue to believe that assigning HCPCS codes G0259 
to status indicator ``N'' is necessary in order to designate 
appropriate packaged payment for the image guidance procedure, 
according to our established packaging policy, and separate payment for 
the therapeutic injection procedure. However, we will reevaluate the 
descriptors for HCPCS code G0259 and G0260 for CY 2014 in light of the 
commenter's concerns on the AMA's modification of the descriptor for 
CPT code 27096 in CY 2012 to include the arthrography services 
described by CPT code 73542.
    After consideration of the public comments we received, for CY 
2013, we are continuing to assign a status indicator of ``N'' to HCPCS 
code G0259, a status indicator of ``T'' to HCPCS code G0260, which is 
assigned to APC 0207 with a final CY 2013 geometric mean cost of 
approximately $582, and a status indicator of ``B'' to CPT code 27096.
    Panel Recommendation: CMS provide data to the APC Groups and SI 
Subcommittee on the following arthrography services, so that the 
Subcommittee can consider whether the SI for these services should be 
changed from ``N'' to ``S'':
     HCPCS code 21116 (Injection procedure for 
temporomandibular joint arthrography);
     HCPCS code 23350 (Injection procedure for shoulder 
arthrography or enhanced CT/MRI shoulder arthrography);
     HCPCS code 24220 (Injection procedure for elbow 
arthrography);
     HCPCS code 25246 (Injection procedure for wrist 
arthrography);
     HCPCS code 27093 (Injection procedure for hip 
arthrography; without anesthesia);
     HCPCS code 27095 (Injection procedure for hip 
arthrography; with anesthesia);
     HCPSC code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid with image guidance (fluoroscopy or CT) 
including arthrography when performed);
     HCPCS code 27370 (Injection procedure for knee 
arthrography); and
     HCPCS code 27648 (Injection procedure for ankle 
arthrography).
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we accepted 
the Panel's recommendation that CMS provide data to the APC Groups and 
SI Assignment Subcommittee on CPT codes 21116, 23350, 24220, 25246, 
27093, 27095, 27096, 27370, and 27648 at a future Panel meeting.

[[Page 68274]]

    We did not receive any public comments on this recommendation.
    Panel Recommendation: CMS change the status indicator for HCPCS 
code 19290 (Preoperative placement of needle localization wire, breast) 
from ``N'' to ``Q1'' and continue to monitor the frequency of the code 
when used in isolation.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we agreed with 
the Panel that a status indicator of ``Q1'' is appropriate for CPT code 
19290. This status indicator will allow for separate payment when this 
procedure is performed alone or packaged payment when this procedure is 
performed with an associated surgical procedure. Therefore, as we 
proposed, we are accepting the Panel's recommendation and assigning CPT 
code 19290 to APC 0340 (Minor Ancillary Procedures) and status 
indicator ``Q1'' for the CY 2013 OPPS. APC 0340 has a final geometric 
mean cost of approximately $51 (as compared to approximately $50 
calculated for the proposed rule) for CY 2013.
    Comment: Several commenters supported CMS' proposal to reassign 
HCPCS code 19290 from ``N'' to ``Q1''. However, one commenter 
recommended that CMS review the APC assignments for HCPCS codes 19290 
and 19295 (Image guided placement, metallic localization clip, 
percutaneous, during breast biopsy/aspiration (list separately in 
addition to code for primary procedure) during the CY 2014 rulemaking 
cycle and propose a more appropriate and higher paying APC for these 
services.
    Response: We appreciate the commenters' support. For CY 2013, we 
are accepting the Panel's recommendation and finalizing our proposal to 
assign a status indicator of ``Q1'' to HCPCS code 19290, which is 
assigned to APC 0340 with a CY 2013 final payment rate of approximately 
$51. 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 assignments for CPT codes 19290 and 
19295.
    Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., 
remain the chair of the APC Groups and SI Subcommittee.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated 
that we accepted the Panel's recommendation that Judith Kelly, 
R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and SI 
Assignment Subcommittee.
    We did not receive any public comments on this recommendation. We 
appreciate the services of Ms. Kelly as chair of the Subcommittee for 
CY 2012.
    Panel Recommendation: The work of the APC Groups and SI Assignment 
Subcommittee continue.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated 
that we accepted the Panel's recommendation that the work of the APC 
Groups and SI Assignment Subcommittee continue.
    We did not receive any public comments on this recommendation.
d. Packaging Recommendations of the HOP Panel (``The Panel'') at Its 
August 2012 Meeting
    During its August 2012 meeting, the Panel accepted the report of 
the Subcommittee for APC Groups and Status Indicator (SI) Assignments, 
heard several public presentations related to packaged services and APC 
grouping and status indicator assignments, and made two recommendations 
related to the function of the subcommittee. The subcommittee also made 
recommendations with regard to APC assignment of specific services that 
are discussed in section III.D. of this final rule with comment period. 
The report for the August 2012 meeting of the Panel may be found on the 
CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present the two recommendations related to the function of 
the subcommittee. Recommendations that evolved from the discussions of 
the Subcommittee on APC Groups and SI Assignments that are specific to 
the APC assignment of HCPCS codes and the removal of HCPCS codes from 
the inpatient list are discussed in section III. and IX., respectively, 
of this final rule with comment period.
    Panel Recommendation: The Panel recommends that Jacqueline Phillips 
be named chair of the APC Groups and SI Assignments Subcommittee.
    CMS Response: We accept the Panel's recommendation that Jacqueline 
Phillips be named chair of the APC Groups and SI Assignments 
Subcommittee. We thank Ms. Judith Kelly for her service as chair of the 
APC Groups and SI Assignments Subcommittee, and we welcome Ms. Phillips 
as chair of the APC Groups and SI Assignments Subcommittee.
    Panel Recommendation: The Panel recommends that the work of the APC 
Groups and SI Assignments Subcommittee continue.
    CMS Response: We are accepting the APC Panel's recommendation that 
the work of the APC Groups and SI Assignments Subcommittee continue.
e. Other Packaging Proposals and Policies for CY 2013
    The HCPCS codes that we proposed to be packaged either 
unconditionally (for which we continue to assign status indicator 
``N''), or conditionally (for which we continue to assign status 
indicator ``Q1'', ``Q2'', or ``Q3''), were displayed in Addendum B of 
the CY 2013 OPPS/ASC proposed rule. The supporting documents for the CY 
2013 OPPS/ASC proposed rule, including but not limited to Addendum B, 
are available at the CMS Webs site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To 
view the status indicators by HCPCS code in Addendum B, select ``CMS 
1589'' and then select the folder labeled ``2013 OPPS Proposed Rule 
Addenda'' or ``2013 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 payment 
because the policies are based on several flawed assumptions. The 
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 HOPDs as to inpatient 
services. One commenter stated that, under the IPPS, hospitals have an 
incentive to provide care in an efficient manner to ensure the lowest 
cost for the patient's diagnosis. In contrast, in HOPDs, 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

[[Page 68275]]

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: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74186), 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 practitioner 
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 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. Whether 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 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 service 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 
hospitals 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: One commenter stated that continued reporting by CMS on 
utilization of all packaged services and access to care will be 
essential to ensure that Medicare's payment policies do not restrict 
beneficiaries' access to necessary care. The commenter asked that CMS 
make annual reports to the HOP Panel on reporting of services subject 
to CMS' expanded packaging services.
    Response: Each year, we make 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 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, stakeholders 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 cost for every 
independent service. However, stakeholders 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.
    Furthermore, we are not required, nor do we intend, to make annual 
reports to the Panel regarding services that are subject to CMS' 
packaging policies. We note that the Panel did not recommend at either 
the February 2012 meeting or the August 2012 meeting that CMS present 
annual reports on services subject to CMS' packaging services.
    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. The 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 calculations of future payment rates for that Medicare 
Severity-Diagnosis Related Group (MS-DRG). The commenters further 
stated that, under the IPPS, hospitals report only the data required to 
assign a case to the highest paying appropriate MS-DRG, even though 
other data might affect payment in the long term. The commenters stated 
that they saw no reason to believe that the current approach would have 
a different outcome unless CMS gives clear instruction to continue 
coding for all items and services provided and provides some incentive 
to do so. The commenters asked that CMS require complete and correct 
coding for packaged services.
    Response: We do not believe that there has been or will be a 
significant change in what hospitals report and charge for the 
outpatient service 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 (73 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

[[Page 68276]]

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 that service to Medicare and all other payers. We encourage 
hospitals to report on their claim for payment all HCPCS codes that 
describe packaged service that were furnished, unless the CPT Editorial 
Panel or CMS provides other guidance. To the extent that hospitals 
include separate charges for packaged services on their claims, the 
estimated costs of those packaged services are then added to the costs 
of separately paid procedures on the same claims and used in 
establishing payment rates for the separately paid services. It is 
impossible to know with certainty whether hospitals are failing to 
report HCPCS codes and charges for service 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 service they furnish, if the hospital's charge for the 
independent services also reflects the charge for all ancillary and 
supportive service it typically provides, the absence of HCPCS codes 
and separate charges would not result in inappropriately low 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: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74188), 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. 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.
    Comment: One commenter expressed concern over a statement made in 
the proposed rule that indicated that CMS might propose to bundle 
payment for [services] that [it] now refers to as ``independent 
[services'']. The commenter stated that CMS did not provide any 
statutory authority that would allow it to move away from a fundamental 
OPPS policy, that only ``dependent services'' are potentially 
considered as part of a bundled reimbursement methodology. The 
commenter further stated that packaging payment for multiple services 
that are not interrelated presents no efficiency or resource management 
incentives, because, by definition, these services are not related, 
meaning there are no efficiencies to be gained and no overlap in 
resources expended.
    Response: In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we 
noted that we use the term ``independent service'' to refer to the 
HCPCS codes that represent the primary therapeutic or diagnostic 
modality into which we package payment for the dependent service. We 
also noted that, in future years, as we consider the development of 
larger payment groups that more broadly reflect services provided in an 
encounter or episode of care, it is possible that we might propose to 
bundle payment for a service that we now refer to as ``independent.'' 
We disagree with the commenter that we do not have the statutory 
authority to consider larger payment bundles that more broadly reflect 
services provided in an encounter or episode of care. Our statutory 
authority is defined in section 1833(t)(2)(B) of the Act, which allows 
the OPPS to establish groups of covered HOPD services, namely APC 
groups, and use them as the basic unit of payment.
    Furthermore, for CY 2008, we expanded packaging to services that 
were once considered independent services and items, such as nonpass-
through contrast agents and observation services. We now consider these 
services to be ancillary and supportive to a primary diagnostic or 
therapeutic modality and have assigned these services an 
unconditionally packaged status indicator of ``N.'' It follows then 
that items or services that are currently considered to be 
``independent'' services within this final rule with comment period may 
be packaged where appropriate in future years, after taking into 
consideration the clinical nature of the item or service and then 
determining whether or not that item or service is considered ancillary 
and supportive to a primary diagnostic or therapeutic modality.
    We note that we did not make any new proposals to develop 
additional payment bundles for CY 2013, but that we will likely do so 
in future rulemaking. For CY 2013, we proposed to continue to package 
the payment for items and services in seven categories with the primary 
diagnostic or therapeutic modality to which we believe that these items 
and services are typically ancillary and supportive. Because the 
commenter does not question the appropriateness of these seven 
categories of packaged payment given in the proposed rule nor does the 
commenter question the appropriateness of a specific APC assignment for 
a packaged HCPCS or CPT code, we cannot fully address the commenter's 
concerns about bundling multiple services that are not interrelated and 
that may or may not present efficiency or resource management 
incentives. We continue to believe that the seven categories of 
packaged services and items are appropriate to encourage hospital 
efficiency, flexibility, and ultimately cost containment.
    Comment: One commenter requested that CMS change the status 
indicator for HCPCS code L8604 (Injectable bulking agent, dextranomer/
hyaluronic acid copolymer implant, urinary tract, 1 ml, includes 
shipping and necessary

[[Page 68277]]

supplies) from ``N'' to ``A.'' The commenter argued that this would 
allow HCPCS code L8604 to be paid under a different fee schedule and 
would allow for access to the product SOLESTA[supreg] in the HOPD. The 
commenter also asked that CMS cover and pay for SOLESTA[supreg] in the 
same manner as other hyaluronic acid products and assign 
SOLESTA[supreg] a separate and unique HCPCS code.
    Response: HCPCS code L8604 describes several products that are 
implantable prosthetic devices. According to 42 CFR 419.2(b)(11), 
implantable prosthetic devices are packaged under the OPPS. Therefore, 
status indicator ``N'' is the correct status indicator for HCPCS code 
L8604. We also note that any coverage, reclassification, or HCPCS code 
change requests for SOLESTA[supreg] are outside the scope of this final 
rule with comment period. Such issues are addressed by processes 
outside the OPPS/ASC rule by either CMS' HCPCS Workgroup or CMS' 
Coverage and Analysis Group.
    Comment: One commenter requested that CMS assign HCPCS code J7665 
(Mannitol, administered through an inhaler, 5 mg) to a status indicator 
of ``K'' for CY 2013. The commenter stated that the product that is 
described by HCPCS code J7665 is a drug indicated for the assessment of 
bronchial hyperresponsiveness in individuals at least six years of age 
without clinically apparent asthma and that, consistent with its FDA 
labeling, the product that is described by HCPCS code J7665 can only be 
used in an institutional setting or a physician's office. The commenter 
argued that HCPCS code J7665 was incorrectly assigned a status 
indicator of ``N'' because this product is approved as a drug through 
the NDA process and should be paid under the OPPS as a separately paid 
drug as opposed to a supply under the OPPS.
    Response: We agree with the commenter that HCPCS code J7665 can be 
administered in the HOPD. However, we do not believe that the product 
described by HCPCS code J7665 is a separately payable drug as we have 
described here within this final rule with comment period, and is 
instead a supply with costs included in the payment under the OPPS as 
described in 42 CFR 419.2(b). Mannitol (HCPCS code J7665), when 
administered through an inhaler, is always used as a supply in 
bronchial challenge testing. Therefore, for CY 2013, we are assigning a 
status indicator of ``N'' to HCPCS code J7665.
    After consideration of the public comments we received, for CY 
2013, we are finalizing our proposed policy to continue 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.
f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals
(1) Existing Packaging Policies
    In the OPPS, we currently package five categories of drugs, 
biologicals, and radiopharmaceuticals (unless temporary pass-through 
status applies): (1) Those with per day costs at or below the packaging 
threshold; (2) diagnostic radiopharmaceuticals; (3) contrast agents; 
(4) anesthesia drugs; and (5) drugs treated as surgical supplies. 
Anesthesia drugs are discussed further in section II.A.3.c.(2) of this 
final rule with comment period. For detailed discussions of the 
established packaging policies for diagnostic radiopharmaceuticals and 
contrast agents, we refer readers to the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66765 through 66768). For further details on 
drugs treated as surgical supplies, we refer readers to the CY 2003 
OPPS final rule (67 FR 66767) and Chapter 15, Section 50.2 of the 
Medicare Benefit Policy Manual.
(2) Clarification of Packaging Policy for Anesthesia Drugs
    It has been longstanding OPPS policy to package ``anesthesia'' and 
``supplies and equipment for administering and monitoring anesthesia or 
sedation,'' as described in 42 CFR 419.2(b)(4) and (b)(5). As described 
above, items and services paid under the OPPS that are typically 
ancillary and supportive to a primary diagnostic or therapeutic 
modality and, in those cases, are considered dependent items and 
services are packaged into the payment of their accompanying 
independent primary service. In accordance with our current policy on 
packaging items and services, drugs that are used to produce anesthesia 
in all forms are ancillary and supportive to a primary diagnostic or 
therapeutic modality, and are included in our definition of 
``anesthesia'' as described in Sec.  419.2(b)(4) and (b)(5). However, 
we recognize that some anesthesia drugs may qualify for transitional 
pass-through status under section 1833(t)(6) of the Act. Therefore, in 
the CY 2013 OPPS/ASC proposed rule (77 FR45100), we proposed to clarify 
that our general policy is to package drugs used to produce anesthesia, 
and that those anesthesia drugs with pass-through status will be 
packaged upon the expiration of pass-through status. We invited public 
comment on our clarification of the existing packaging policies for 
anesthesia drugs under Sec.  419.2(b)(4) and (b)(5).
    Comment: Commenters objected to the proposed clarification of the 
OPPS policy on anesthesia and all future policies that expand the 
packaging of drugs, through the increase of the drug packaging 
threshold or otherwise. The commenters expressed their concern over the 
increase in packaging for drugs in general and urged CMS not to 
finalize this policy. The commenters also stated their concern that the 
CMS drug packaging polices used in the HOPD could encourage hospitals 
to under utilize critically important drugs and ultimately compromise 
beneficiary's access to care and undercut CMS' work to improve the 
quality of care. The commenters urged CMS not to finalize this 
proposal, to conduct a careful review to assess the effect of packaging 
on quality of care, and to forego any new packaging policies as a 
whole.
    One commenter expressed support for the clarification of this 
policy. The commenter further encouraged CMS to continue to monitor 
packaged drugs and biologicals to ensure they are appropriately paid.
    Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we 
proposed to clarify the existing policies related to nonpass-through 
and pass-through anesthesia drugs. It has been our longstanding policy 
to package anesthesia drugs, which are drugs that are used to produce 
anesthesia in all forms and are ancillary and supportive to a primary 
diagnostic or therapeutic modality, that are not on pass-through status 
as included costs under the OPPS, as described in 42 CFR 419.2(b)(4) 
and (b)(5). However, we also clarified in the proposed rule that 
anesthesia drugs are eligible for transitional pass-through status as a 
drug, as provided in section 1833(t)(6) of the Act. Therefore, we noted 
that we were not finalizing a new policy to package nonpass-through 
anesthesia drugs but were clarifying in our preamble language our 
currently existing policies.
    In addition, as we stated above, we continue to believe that 
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. We address additional 
comments on packaging for drugs, biologicals, diagnostic 
radiopharmaceuticals, and contrast agents below in section II.A.3.f. 
and section V.A. of this final rule with comment period.

[[Page 68278]]

    After consideration of the public comments we received, we are 
finalizing this proposed clarification for CY 2013. Anesthesia drugs 
that are used to produce anesthesia in all forms are ancillary and 
supportive to a primary diagnostic or therapeutic modality under 42 CFR 
419.2(b)(4) and (b)(5). Therefore, nonpass-through anesthesia drugs are 
packaged under the OPPS. New anesthesia drugs 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 payment for the procedures or 
services associated with the new anesthesia drug are eligible for 
transitional pass-through status as a drug or biological, as described 
in section 1833(t)(6) of the Act. We discuss OPPS transitional pass-
through payment for additional costs of drugs, biologicals, and 
radiopharmaceuticals in section V.A. of this final rule with comment 
period.
g. 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 
the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009, we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim, regardless of their per day cost (73 
FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals 
and contrast agents collectively as ``policy-packaged'' drugs. We refer 
to implantable biologicals as ``devices'' because, in CY 2010, we 
finalized a policy to treat implantable biologicals as devices for OPPS 
payment purposes (74 FR 60471 through 60477).
    As set forth at Sec.  419.2(b), as a prospective payment system, 
the OPPS establishes a national payment rate, standardized for 
geographical wage differences, 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, and in 
general, these costs include, but are 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 efficiency 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 had expired; (2) diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service, rather 
than serving themselves as a therapeutic modality; and (3) section 
1833(t)(14)(A)(iii) of the Act required that payment for specified 
covered outpatient drugs (SCODs) be set prospectively based on a 
measure of average hospital acquisition cost (76 FR 74307).
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we 
stated that we believe it is appropriate to continue to treat 
diagnostic radiopharmaceuticals and contrast agents differently from 
specified covered outpatient drugs (SCODs) for CY 2013. Therefore, 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 2013. 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 for 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: Commenters objected to CMS' proposal to package payment of 
all nonpass-through diagnostic radiopharmaceuticals and contrast agents 
in CY 2013. 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 commenters 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.
    One commenter supported CMS' continued packaging policy for 
diagnostic radiopharmaceuticals and contrast agents that do not have 
pass-through status. The commenter noted that diagnostic 
radiopharmaceuticals are supplies that are necessary to the provision 
of the service in which they are used and, like other supplies, payment 
for them should be part of the payment for the service.
    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), the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74307), we continue to believe that diagnostic 
radiopharmaceuticals and contrast agents are different from other drugs

[[Page 68279]]

and biologicals for several reasons. We note that the statutorily 
required OPPS drug packaging threshold, as described in section 
1833(t)(16)(B) of the Act, 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, 2011, and 2012 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 the efficient use 
of hospital resources. While we recognize this variability from case to 
case, on average under a prospective payment system, we expect payment 
to cover the costs for the services furnished. In the past, we have 
classified different groups of drugs for specific payment purposes, as 
evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 anti-
emetics and their exemption from the drug packaging threshold. We note 
that we treat diagnostic radiopharmaceuticals and contrast agents as 
``policy-packaged'' drugs because our policy is to package payment for 
all of the products in this 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 an independent service, similar to implantable non-
biological devices that are always packaged. Therefore, we currently 
package payment of 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 2013 OPPS/ASC proposed (77 FR 45101), we continue to believe 
that payment should be packaged for nonpass-through implantable 
biologicals for CY 2013.
    We are continuing our CY 2009 policy for CY 2013 as discussed 
below, which packages payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals into 
the payment for their associated procedures. We also continue to 
believe that the line-item estimated cost for nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, or implantable 
biologicals in our claims data is a reasonable approximation of average 
acquisition and preparation and handling costs for nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, and 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 nonpass-through 
diagnostic radiopharmaceuticals and responded to our instructions to 
include charges for diagnostic radiopharmaceutical handling in their 
charges for the diagnostic radiopharmaceutical products. Further, 
because the standard OPPS packaging methodology packages the total 
estimated cost of each nonpass-through diagnostic 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 nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, or implantable 
biologicals, rather than the cost. In addition, as we noted in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68646), these 
drugs, biologicals, or diagnostic 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 
not considered to be SCODs. Similarly, drugs and biologicals with per 
day costs of less than the drug packaging threshold for CY 2013, which 
is discussed in section V.B. of this final rule with comment period, 
that are packaged and for which a separate APC has not been established 
also are not SCODs. This reading is consistent with our final packaging 
payment policy, as discussed in this section, whereby we package 
payment for nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and 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. Some commenters noted that CMS' 
identification of HCPCS code A0544 (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. Furthermore, many commenters urged CMS to classify dosimetric 
doses used in radiopharmaceutical procedures as therapeutic in nature, 
and allow for separate payment for that dosimetric dose.
    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), the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74308), 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 continued 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 HCPSC code 
A9544 is a diagnostic radiopharmaceutical. While it is not used to 
necessarily diagnose a general disease state, we understand that 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 not different than the use of a laboratory 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

[[Page 68280]]

service, on which its intent is 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: Commenters recommended using the ASP methodology and the 
proposed statutory default rate of ASP+6 percent to make payment for 
nonpass-through diagnostic radiopharmaceuticals and contrast agents. 
The commenters noted that it would be inconsistent for CMS to treat 
diagnostic radiopharmaceuticals and contrast agents as ``drugs'' for 
pass-through payment purposes and provide payment for diagnostic 
radiopharmaceuticals and contrast agents that have pass-through status 
based on the ASP methodology, and, then, after the diagnostic 
radiopharmaceutical's or contrast agent'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 manufacturer to 
voluntarily submit ASP data, and then default to the mean unit cost 
when ASP data are unavailable. Some commenters recommended that CMS use 
ASP data as a benchmark for determining costs for diagnostic 
radiopharmaceuticals that are packaged.
    One commenter stated that payment for diagnostic 
radiopharmaceuticals should not be paid at ASP+6 percent for the 
reasons commenters provided when CMS proposed to make payment at ASP+6 
percent in prior years. Specifically, the commenter noted that the ASP 
statute excludes reporting of the ASP for diagnostic 
radiopharmaceuticals and, therefore, such reporting would need to be 
voluntary. However, in terms of voluntary reporting of diagnostic 
radiopharmaceuticals, the commenter further noted that CMS could never 
be confident that it would receive reports from all manufacturers of 
any particular diagnostic radiopharmaceutical. Moreover, the commenter 
stated, high volume diagnostic radiopharmaceuticals are furnished using 
generators that hospitals use for up to 28 days to provide doses of 
diagnostic radiopharmaceuticals as needed and therefore the 
manufacturer, who would report the ASP under penalty of perjury, would 
never be able to certify the actual number of doses furnished with 
confidence. The commenter finally noted that packaging is consistent 
with the general principles of a prospective payment system, one goal 
of which is to encourage hospital cost containment.
    Response: As we stated above, the statutorily required OPPS drug 
packaging threshold has expired, and we continue to believe that 
nonpass-through 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 and contrast agents should be paid under the ASP 
methodology, that nonpass-through diagnostic radiopharmaceuticals and 
contrast agents 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, contrast agents, 
and implantable biologicals 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 (73 FR 68646) and restate 
above, drugs, biologicals, or radiopharmaceuticals for which we have 
not established a separate APC will receive packaged payment under the 
OPPS, and are considered not to be SCODs. We continue to believe that 
the line-item estimated cost for nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals in 
our claims data is a reasonable approximation of average acquisition 
and preparation and handling costs for diagnostic radiopharmaceuticals, 
contrast agents, and 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 
nonpass-through 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 nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals, 
when each of these items is ancillary or supportive to an independent 
service, is contrary to this principle of a prospective payment system.
    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 CY 2006 
OPPS final rule with comment period (70 FR 68653 through 68657), 
numerous commenters advised CMS that diagnostic radiopharmaceuticals 
are formulated, distributed, compounded, and administered in unique 
distribution channels that preclude the determination of ASP relevant 
to a diagnostic radiopharmaceutical HCPCS codes. 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 its 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 with comment period, 
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 (or contrast agents or implantable biologicals) 
should be paid separately under the OPPS such that manufactures 
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

[[Page 68281]]

aggregate payment for the accompanying services.
    Comment: Commenters recommended that CMS modify the way that it 
applies the ``2 times'' rule for nuclear medicine APCs by including the 
cost of the packaged diagnostic radiopharmaceutical drugs in its 
analysis and not just the cost of services. The commenters argued that 
this is mandated by the statute, which provides that an APC group 
cannot be considered comparable with respect to the use of resources if 
the highest cost for an item or service in the APC group is more than 
two times greater than the lowest cost for an item or service within 
the same APC group. Therefore, the commenters believed that it is 
logical that as long as CMS views the packaged nuclear medicine service 
and the radiopharmaceutical as one unit for APC payment purposes, it 
should consider both components together in applying the 2 times rule 
and analysis to APC payment.
    Response: While the language in section 1833(t)(2) of the Act 
regarding the 2 times rule describes consideration of both items and 
services for purposes of identifying exceptions to the rule, it does so 
within the context of services that belong to an APC group. 
Unconditionally packaged items and services, being associated with the 
particular item or service being modeled for separate payment, would 
not individually belong to any APC group. However, these 
unconditionally packaged costs would be incorporated into the system 
through the separately paid items or services with which they appear on 
the claim, and would thus be factored into the ultimate consideration 
of the 2 times rule. Therefore, consideration of items and services 
within each APC only applies to the separately paid HCPCS and CPT codes 
assigned to each APC and would thus not include any discrete 
calculation for packaged costs with regards to the two times rule.
    Comment: One commenter recommended that CMS establish a threshold 
for radiopharmaceutical drugs that would trigger separate payment when 
the cost of the radiopharmaceutical is greater than the total APC 
payment or over another threshold value.
    Response: Consistent with the CY 2013 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 because 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 this 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 
and 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 polices 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 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 diagnostic radiopharmaceuticals or another 
relatively high cost element in the patient's course of care.
    Comment: One commenter requested that CMS present additional, 
detailed information regarding how the agency ensures that the full 
cost of diagnostic radiopharmaceuticals are captured in the associated 
packaged APC procedural payments, including the validation methods used 
by the agency.
    Response: The data that CMS used to calculate, propose, and 
finalize APC assignments and rates, including costs associated with 
diagnostic radiopharmaceuticals, for the CY 2013 OPPS, are available 
for purchase under a CMS data use agreement through the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatinetPPS/index.html. This Web site includes information 
about purchasing the ``OPPS Limited Data Set,'' which now includes the 
additional variable previously available only in the OPPS Identifiable 
Data set, including ICD-9-CMS diagnosis codes and revenue code payment 
amounts.
    As we state above, we discuss in detail in section II.A.2. of this 
final rule with comment period the availability to the public of the 
use of 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.
    We continue to believe that the cost of a diagnostic 
radiopharmaceutical is captured into the associated packaged APC 
procedural payment. We see no need at this time to provide further data 
analyses.
    For CY 2013, we proposed to make an additional payment of $10 for 
diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope 
produced by non-HEU methods (77 FR 45121). We proposed to base this 
payment on the best available estimations of the marginal costs 
associated with non-HEU radioisotope production, pursuant to our 
authority described in section 1833(t)(2)(E) of the Act which allows us 
to establish ``other adjustments as determined to be necessary to 
ensure equitable payments'' under the OPPS. We described this policy in 
further detail in section III.C.3. of the proposed rule.
    We received numerous comments on this proposal, including comments 
that suggested that separate payment for diagnostic 
radiopharmaceuticals is the most effective way to encourage hospital 
conversion from HEU to non-HEU sources that utilize Tc-99m. We have 
addressed these comments on the proposed payment for non-HEU sources 
that recommended separate payment for diagnostic radiopharmaceuticals 
above and in section III.C.3. of this final rule with comment period.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we 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

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nonbiological devices that are always packaged. We continued to follow 
this policy in CY 2012 (76 FR 74306 through 74310). Specifically, we 
continue to 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. In the CY 2013 OPPS/ASC proposed rule (77 FR45101), for CY 2013, 
we proposed to continue to apply the policies finalized in CY 2012, to 
package payment for nonpass-through implantable biologicals 
(``devices'') that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body.
    Comment: One commenter requested that HCPCS code Q4130 (Strattice 
tm, per square centimeter) be assigned status indicator ``K'' for CY 
2013 because, the commenter argued, HCPCS code Q4130 is a skin 
substitute graft for chronic wounds and a surgical biological implant 
for breast reconstruction and hernia repair procedures. The commenter 
stated that assigning HCPCS code Q4130 to a status indicator of ``K'' 
would signify its use as a biological skin substitute graft for which 
separate payment is available.
    The commenter further noted that Transmittal 2418 of the Medicare 
Claims Processing Manual lists HCPCS code Q4130 in table 5 of the 
transmittal, along with other biologicals with ``dual'' use.
    Response: HCPCS code Q4130 was assigned a status indicator of ``N'' 
in the CY 2013 OPPS/ASC proposed rule, signifying that the product that 
is represented by this code is an implantable biological device. We 
continue to believe that the product described by HCPCS code Q4130 is 
an implantable biological device, as evidenced by language within the 
510(k) FDA clearance which lists the product described by HCPCS code 
Q4130 as a surgical mesh intended for the reinforcement of soft tissue 
repaired by sutures or suture anchors during tendon repair surgery 
including reinforcement of rotator cuff, patella, Achilles, biceps, 
quadriceps, or other tendons. Further indications of use include the 
repair of body wall defects which require the use of reinforcing or 
bridging material to obtain the desired surgical outcome. As we stated 
above, the payment for nonpass-through implantable biologicals, or 
implanted devices, is packaged into the payment for the primary 
procedure. Therefore, we are continuing to assign a status indicator of 
``N'' to HCPCS code Q4130 for CY 2013. Additionally, we are correcting 
the table within Transmittal 2418 which contains a list of skin 
substitutes only.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period expressed concern that Medicare contractors 
had been inadvertently making separate payment for nonpass-through 
biological implants as they process OPPS claims for breast 
reconstruction and hernia repair procedures. The commenter stated that 
these procedure claims included claims for biological implants, 
including HCPCS codes Q4100 through Q4130. The commenter noted that 
HCPCS code Q4116 (Alloderm, per square centimeter) in particular was 
paid separately on several occasions. Therefore, the commenter 
recommended that CMS take several steps to prevent further billing 
errors with respect to the OPPS payment policy for implantable 
biologicals.
    Response: For the April 2012 quarterly update, we installed logic 
changes in the I/OCE to allow for separate payment for separately 
payable skin substitute HCPCS codes that are coded with skin substitute 
procedure CPT codes only. We reminded hospitals that HCPCS codes 
describing skin substitutes should only be separately reported when 
used with one of the CPT codes describing the application of a skin 
substitute (CPT codes 15271 through 15278). Therefore, we have 
previously addressed the commenters' concerns.
    Under the OPPS, HCPCS codes that describe skin substitute products, 
with a separately payable status indicator of ``K'' or ``G'' that are 
billed with a skin substitute application procedure, will receive 
separate payment for both the skin substitute product and the 
procedure. Payment for skin substitute HCPCS codes that are billed with 
other procedures will be packaged into the payment for the 
corresponding procedure.
    After consideration of the public comments we received, we are 
finalizing our 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 diagnostic radiopharmaceuticals and contrast agents 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 diagnostic radiopharmaceuticals, contrast 
agents, 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'' alone 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 
radiopharmaceuticals in their long code descriptors. We believe that 
the current descriptors accurately discriminate between those 
radiopharmaceuticals that 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 will be packaged in CY 2013.
    We refer reader to section III.D.1.f. of this final rule with 
comment period for a discussion of comments related to echocardiography 
services furnished with and without contrast. For more information on 
how we set CY 2013 payment rates for nuclear medicine procedures in 
which diagnostic radiopharmaceuticals are used an 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).
h. Summary of Proposals
    As we proposed, we are finalizing, for this final rule with comment 
period, the HCPCS codes that we unconditionally packaged (for which we 
continue to assign status indicator ``N''), or conditionally packaged 
(for which we continue to assign status indicators ``Q1,'' ``Q2,'' or 
``Q3''), and those codes are displayed in Addendum B of this final rule 
with comment period (which is available via the Internet on the CMS Web 
site). The supporting documents for this CY 2013 OPPS/ASC final rule 
with comment period, including, but not limited to, Addendum B, are 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To

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view the status indicators by HCPCS code in Addendum B, select ``CMS 
1589-FC'' and then select the folder labeled ``2013 OPPS Final Rule 
Addenda'' from the list of supporting files. Open the zipped file and 
select Addendum B, which is available as both an Excel file and a text 
file.
4. Calculation of OPPS Scaled Payment Weights
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45101), we proposed 
for CY 2013 to calculate the relative payment weights for each APC for 
CY 2013 shown in Addenda A and B to the proposed rule (which were 
available via the Internet on the CMS Web site) using the APC costs 
discussed in sections II.A.1. and II.A.2. of the proposed rule. 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 for 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). 
For CY 2013, we proposed to base the relative payment weights on which 
OPPS payments will be made by using geometric mean costs, as described 
in section II.A.2.f. of the proposed rule. However, in an effort to 
maintain consistency in calculating unscaled weights that represent the 
cost of some of the most frequently provided services, we proposed to 
continue to use the cost of the mid-level clinic visit APC (APC 0606) 
in calculating unscaled weights. Following our general methodology for 
establishing relative payment weights derived from APC costs, but using 
the proposed CY 2013 geometric mean cost for APC 0606, for CY 2013, we 
proposed to assign APC 0606 a relative payment weight of 1.00 and to 
divide the geometric mean cost of each APC by the proposed geometric 
mean cost for APC 0606 to derive the proposed unscaled relative payment 
weight for each APC. We stated that the choice of the APC on which to 
base the proposed relative payment 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 2013 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 2012 scaled relative payment weights to 
the estimated aggregate weight using the CY 2013 unscaled relative 
payment weights. For CY 2012, we multiplied the CY 2012 scaled APC 
relative weight applicable to a service paid under the OPPS by the 
volume of that service from CY 2011 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 2013, as we proposed, we performed the same 
process using the CY 2013 unscaled relative payment weights rather than 
scaled relative payment weights. We then calculated the weight scaler 
by dividing the CY 2012 estimated aggregate weight by the CY 2013 
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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    As we proposed, in this final rule with comment period, we include 
estimated payments to CMHCs in our comparison of estimated unscaled 
weights in CY 2013 to estimated total weights in CY 2012 using CY 2011 
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 payment weights for purposes of 
budget neutrality. The CY 2013 unscaled relative payment weights were 
adjusted by multiplying them by a weight scaler of 1.3596 to ensure 
that the CY 2013 relative payment weights are budget neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act 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 SCODs (as discussed in section V.B.3. of this final rule) was 
included in the budget neutrality calculations for the CY 2013 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights based on the geometric mean costs for 
the CY 2013 OPPS. Therefore, for the reasons set forth in the proposed 
rule (77 FR 45101), 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 relative payment weights were adjusted 
by a weight scaler of 1.3596 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 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.
    We noted in the proposed rule that we were providing additional 
information, in association with the proposed rule, so that the public 
could provide meaningful comment on our proposed policy to base the CY 
2013 OPPS relative payment weights on geometric mean costs. The scaled 
relative payment weights listed in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site) incorporate the 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 the Secretary to 
update the conversion factor used to determine the 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 2013 IPPS/LTCH PPS 
final rule (77 FR 53414), consistent with current law,

[[Page 68284]]

based on IHS Global Insight, Inc.'s second quarter 2012 forecast of the 
FY 2013 market basket increase, the FY 2013 IPPS market basket update 
is 2.6 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) 
of the Act, as added by section 3401(i) of Pub. L. 111-148 and as 
amended by section 10319(g) of that law and further amended by section 
1105(e) of Public Law 111-152, provide adjustments to the OPD fee 
schedule increase factor for CY 2013.
    Specifically, section 1833(t)(3)(F)(i) of the Act requires that, 
for 2012 and subsequent years, 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. 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''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51689 through 51692), we finalized our methodology for calculating and 
applying the MFP adjustment. In the FY 2013 IPPS/LTCH PPS proposed rule 
(77 FR 27975 through 27976), we discussed the calculation of the 
proposed MFP adjustment for FY 2013, which was 0.8 percentage point.
    We proposed that if more recent data became subsequently available 
after the publication of the proposed rule (for example, a more recent 
estimate of the market basket increase and the MFP adjustment), we 
would use such data, if appropriate, to determine the CY 2013 market 
basket update and the MFP adjustment, components in calculating the OPD 
fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) 
of the Act, in this CY 2013 OPPS/ASC final rule with comment period. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53414), we discussed the 
calculation of the final MFP adjustment for FY 2013, which is 0.7 
percentage point.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that for 
each of year 2010 through 2019, the OPD fee schedule increase factor 
under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment 
described in section 1833(t)(3)(G) of the Act. For CY 2013, section 
1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction 
to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) 
of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) 
and 1833(t)(3)(G)(ii) of the Act, in the CY 2013 OPPS/ASC proposed rule 
(77 FR 45102), we proposed to apply a 0.1 percentage point reduction to 
the OPD fee schedule increase factor for CY 2013.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 for a year, and may result in payment rates under the OPPS for 
a year being less than such payment rates for the preceding year. As 
described in further detail below, using the final methodology and more 
recent data would result in an OPD fee schedule increase factor of 1.8 
percent for the CY 2013 OPPS (2.6 percent, which is the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.7 percentage point MFP adjustment, less the 0.1 percentage 
point additional adjustment).
    We note that hospitals that fail to meet the Hospital OQR Program 
reporting requirements are subject to an additional reduction of 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 for their services, as required by section 1833(t)(17) of 
the Act. As a result, using the final methodology and more recent data, 
those hospitals failing to meet the Hospital OQR Program reporting 
requirements will receive an OPD fee schedule increase factor of -0.2 
(2.6 percent, which is the final estimate of the hospital inpatient 
market basket percentage increase, less the final 0.7 percentage point 
MFP adjustment, less the 0.1 percentage point additional adjustment, 
less 2.0 percentage points for the Hospital OQR Program reduction). For 
further discussion of the Hospital OQR Program, we refer readers to 
section XV.F. of this final rule with comment period.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45103), we proposed to 
amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to 
reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, 
for CY 2013, we reduce the OPD fee schedule increase factor by the MFP 
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 an additional 0.1 percentage point for CY 2013.
    Comment: Several commenters expressed support for the OPD fee 
schedule increase factor because they believed it would better align 
payment with hospital costs.
    Response: We appreciate the commenters' support.
    We did not receive any public comments on the proposed amendment to 
42 CFR 419.32(b)(1)(iv)(B) to add a new paragraph (4) to reflect the 
requirements in section 1833(t)(3)(F) of the Act. For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and adopting as final the amendment to 42 CFR 419.32(b)(1)(iv)(B), as 
proposed.
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2013 conversion factor. Therefore, we are 
finalizing our proposed methodology for calculating the budget 
neutrality adjustment factors, as described in the following 
discussion.
    As we proposed, to set the OPPS conversion factor for CY 2013, we 
are increasing the CY 2012 conversion factor of $70.016 by 1.8 percent. 
In accordance with section 1833(t)(9)(B) of the Act, we are further 
adjusting the conversion factor for CY 2013 to ensure that any 
revisions made to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis (77 FR 45103). We are 
calculating an overall budget neutrality factor of 0.9998 for wage 
index changes by comparing total estimated payments from our simulation 
model using the final FY 2013 IPPS wage indices to those payments using 
the current (FY 2012) IPPS wage indices, as adopted on a calendar year 
basis for the OPPS.
    For CY 2013, we did not propose to make a change to our rural 
adjustment policy, and as discussed in section II.E. of this final rule 
with comment period, we are not making any changes to the rural 
adjustment policy. Therefore, the budget neutrality factor for the 
rural adjustment is 1.0000.
    For CY 2013, we are finalizing our proposal to continue previously 
established policies for implementing the cancer hospital payment 
adjustment described in section 1833(t)(18) of the Act, as discussed in 
section II.F. of this final rule with comment period. We are 
calculating a CY 2013 budget neutrality adjustment factor for the 
cancer hospital payment adjustment by comparing the estimated total CY 
2013 payments under section 1833(t) of the Act including the CY 2013 
cancer hospital payment adjustment to the estimated CY 2013 total 
payments using the CY 2012 final cancer hospital payment adjustment 
under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The 
difference in the CY 2013 estimated payments as a result of applying 
the CY 2013 cancer hospital payment adjustment relative to the CY 2012 
final cancer hospital

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payment adjustment does not have a significant impact on the budget 
neutrality calculation. Therefore, we are applying a budget neutrality 
adjustment factor of 1.0000 to the conversion factor to ensure that the 
cancer hospital payment adjustment is budget neutral.
    For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2013 
would equal approximately $74 million, which represents 0.15 percent of 
total projected CY 2013 OPPS spending. Therefore, the conversion factor 
is also adjusted by the difference between the 0.22 percent estimate of 
pass-through spending for CY 2012 and the 0.15 percent estimate of CY 
2013 pass-through spending, resulting in an adjustment for CY 2013 of -
0.07 percent. Finally, estimated payments for outliers remain at 1.0 
percent of total OPPS payments for CY 2013.
    The OPD fee schedule increase factor of 1.8 percent for CY 2013 
(that is, the estimate of the hospital inpatient market basket 
percentage increase of 2.6 percent less the 0.7 percentage point MFP 
adjustment and less the 0.1 percentage point required under section 
1833(t)(3)(F) of the Act), the required wage index budget neutrality 
adjustment of approximately 0.9998, the cancer hospital payment 
adjustment of 1.0000, 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 2013 of $71.313.
    As we stated in the proposed rule, hospitals that fail to meet the 
reporting requirements of the Hospital OQR Program will continue to be 
subject to a further reduction of 2.0 percentage points to 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 Program requirements and the payment reduction for 
hospitals that fail to meet those requirements, we refer readers to 
section XV.F. of this final rule with comment period. To calculate the 
CY 2013 reduced market basket conversion factor for those hospitals 
that fail to meet the requirements of the Hospital OQR Program for the 
full CY 2013 payment update, we are making all other adjustments 
discussed above, but using a reduced OPD fee schedule update factor of 
-0.2 percent (that is, the OPD fee schedule increase factor of 1.8 
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 results in a reduced conversion factor for CY 
2013 of $69.887 for those hospitals that fail to meet the Hospital OQR 
requirements (a difference of -$1.426 in the conversion factor relative 
to those hospitals that met the Hospital OQR requirements).
    In summary, for CY 2013, we are using a final conversion factor of 
$71.313 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
geometric mean costs. For further discussion regarding our final policy 
to base the CY 2013 OPPS relative payment weights on geometric mean 
costs, we refer readers to section II.A.2.f. of this final rule with 
comment period. We are finalizing our proposed amendment to Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2013 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are using a reduced 
conversion factor of $69.887 in the calculation of payments for 
hospitals that fail to comply with the Hospital OQR Program 
requirements to reflect the reduction to the OPD fee schedule increase 
factor that is required by section 1833(t)(17) of the Act.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to account for geographic wage 
differences in a portion of the OPPS payment rate, which includes the 
copayment standardized amount and is attributable to labor and labor-
related costs. This portion of the OPPS payment rate is called the OPPS 
labor-related share. This adjustment must be made in a budget neutral 
manner and budget neutrality is discussed in section II.B. of this 
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, as we proposed, we are not 
revising this policy for the CY 2013 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 APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the 
same FY 2013 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 (63 FR 47576), 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 contained provisions affecting the wage 
index. These provisions were discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74191). As discussed in that final rule 
with comment period, section 10324 of the Affordable Care Act requires 
a ``frontier State'' wage index floor of 1.00 in certain cases. For the 
CY 2013 OPPS, as we proposed, we are implementing this provision in the 
same manner as we did for CY 2012. That is, frontier State hospitals 
will receive a wage index of 1.00 if the otherwise applicable wage 
index (including reclassification, rural floor, and rural floor budget 
neutrality) is less than 1.00. Similar to our current policy for HOPDs 
that are affiliated with multicampus hospital systems, 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 through 50161 and 76 FR 51586, 
respectively) and the FY 2013 IPPS/

[[Page 68286]]

LTCH PPS final rule (77 FR 53369 through 53370) 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 final FY 2013 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 2013 IPPS/LTCH PPS final rule (77 FR 53365 
through 53374) for a detailed discussion of all changes to the FY 2013 
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 102 of the Medicare and Medicaid Extender Act extended, 
through FY 2011, section 508 reclassifications as well as certain 
special exceptions. The most recent extension of these special wage 
indices was included in section 302 of the Temporary Payroll Tax Cut 
Continuation Act of 2011 (Pub. L. 112-78), as amended by section 3001 
of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 
112-96). These legislative provisions extended certain section 508 
reclassifications and special exception wage indices for a 6-month 
period during FY 2012, from October 1, 2011 through March 31, 2012. We 
implemented this extension in a notice (CMS-1442-N) published in the 
Federal Register on April 20, 2012 (77 FR 23722). As we did for CY 
2010, we revised wage index values for certain special exception 
hospitals from January 1, 2012 through June 30, 2012, 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 end date under the 
OPPS for certain nonsection 508 and nonspecial exception providers to 
receive special wage indices was June 30, 2012, instead of March 31, 
2012, so that these providers also received a full 6 months of payment 
under the revised wage index comparable to the IPPS. However, section 
508 reclassifications and special exceptions have not been reauthorized 
since their expiration under Pub. L. 112-96 and, therefore, are no 
longer applicable.
    For purposes of the OPPS, as we proposed, we are continuing our 
policy in CY 2013 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 2013 IPPS/LTCH PPS final rule (available via the Internet on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for 
the out-migration adjustment and hospitals that will receive the 
adjustment for FY 2013. 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) payment adjustment, effective for the fiscal year in 
which the hospital receives the out-migration adjustment. We refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53371) 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 from the FY 2013 IPPS/LTCH PPS final rule 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 2013 OPPS. Addendum L is available via the Internet on the 
CMS Web site.
    In response to concerns frequently expressed by providers and other 
relevant parties that the current wage index system does not 
effectively reflect the true variation in labor costs for a large 
cross-section of hospitals, two studies were undertaken by the 
Department. First, section 3137(b) of the Affordable Care Act required 
the Secretary to submit to Congress a report that includes a plan to 
comprehensively reform the Medicare wage index applied under section 
1886(d) of the Act. In developing the plan, the Secretary was directed 
to take into consideration the goals for reforming the wage index that 
were set forth by the Medicare Payment Advisory Commission (MedPAC) in 
its June 2007 report entitled ``Report to Congress: Promoting Greater 
Efficiency in Medicare'' and to ``consult with relevant affected 
parties.'' Second, the Secretary commissioned the Institute of Medicine 
(IOM) to ``evaluate hospital and physician geographic payment 
adjustments, the validity of the adjustment factors, measures and 
methodologies used in those factors, and sources of data used in those 
factors.'' Reports on both of these studies for geographic adjustment 
to hospital payments recently have been released. For summaries of the 
studies, their findings, and recommendations on reforming the wage 
index system, we refer readers to section IX.B. of the preamble of the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53660 through 53664).
    Comment: Several commenters expressed disappointment that CMS did 
not set forth a proposal in the CY 2013 OPPS/ASC proposed rule to begin 
reform of the wage index process and simply proposed to continue 
adopting the IPPS fiscal year wage indexes. Several commenters 
encouraged CMS to expedite wage index reform to create a more equitable 
system that adequately pays hospitals for care provided to Medicare 
beneficiaries. A few commenters supported the continuation of the 
current wage index system; one commenter suggested that, as more 
comprehensive reforms continue to be developed, they encompass the 
goals of minimizing volatility, discouraging manipulation of the 
system, and limiting adverse effects on high wage area markets.
    Response: In the CY 2012 OPPS/ASC proposed rule, we solicited 
comment on possible alternative wage index systems under the OPPS (76 
FR 42212 through 42213). However, in the CY 2012 OPPS/ASC final rule 
with comment period, we stated our belief that maintaining the current 
policy of adopting the fiscal year IPPS wage index and adopting it in 
the OPPS on a calendar year basis would continue to be appropriate, 
given our longstanding use of the fiscal year IPPS wage index in the 
OPPS on a calendar year basis (76 FR 74192) and the broader wage index 
reform currently under development and consideration (76 FR 74193). In 
the CY 2013 OPPS/ASC proposed rule, we proposed that continuing to use 
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 (77 FR 45105). As discussed above, 
the FY 2013 IPPS/LTCH PPS final rule contains a discussion of a MedPAC 
report and an IOM study focused on potential models for wage

[[Page 68287]]

index reform (77 FR 53660 through 53664).
    After consideration of the public comments we received, we are 
finalizing our policy to adopt the FY 2013 IPPS wage index for the CY 
2013 OPPS in its entirety, including the rural floor, geographic 
reclassifications, and all other wage index adjustments. As stated 
earlier in this section, we continue to believe that using the IPPS 
wage index as the source of an adjustment factor for the OPPS is 
reasonable and logical, given the inseparable, subordinate status of 
the HOPD within the hospital overall. Therefore, we are using the final 
FY 2013 IPPS wage indices for calculating OPPS payments in CY 2013. 
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 2013 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the final FY 2013 
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 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). We discuss our policy for using default 
CCRs, including setting the ceiling threshold for a valid CCR, in the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 
68599) in the context of our adoption of an outlier reconciliation 
policy for cost reports beginning on or after January 1, 2009.
    For CY 2013, 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 proposed CY 2013 OPPS relative payment 
weights. Table 12 published in the proposed rule (77 FR 45106) listed 
the proposed CY 2013 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 proposed to 
adjust ratios from submitted cost reports to reflect the 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 proposed to weight each hospital's CCR by the volume of separately 
paid line-items on hospital claims corresponding to the year of the 
majority of cost reports used to calculate the overall CCRs. We refer 
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66680 through 66682) and prior OPPS rules for a more detailed 
discussion of our established methodology for calculating the statewide 
average default CCRs, including the hospitals used in our calculations 
and our trimming criteria.
    Comment: One commenter expressed concern that Florida has the 
lowest CCR in the United States for both rural and urban areas. The 
commenter suggested that the statewide average default CCRs for Florida 
are ``significantly skewed'' due to cost report information submitted 
by hospitals in the Miami area and recommended that CMS evaluate the 
data used to calculate the CCRs in order to validate this assumption.
    Response: As detailed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66680 through 66682), we use only valid CCRs to 
calculate the default ratios. That is, we remove the CCRs for all-
inclusive hospitals and CAHs, we identify and remove any obvious error 
CCRs, and we trim any outliers. The Florida statewide average default 
CCRs have been very stable over the last several years. Contrary to the 
commenter's belief that we use statewide average default CCRs to 
estimate the costs (from charges on claims) that are used to calculate 
the OPPS relative weights, Medicare contractors use statewide average 
default CCRs to determine outlier payments, payments for pass-through 
devices, and monthly interim transitional corridor payments for 
hospitals with no available cost report.
    After consideration of the public comment we received on our CY 
2013 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 2013 OPPS relative weights. We used this 
methodology to calculate the statewide average default CCRs listed in 
Table 8 below.
    For this CY 2013 OPPS/ASC final rule with comment period, 
approximately 62 percent of the submitted cost reports utilized in the 
default ratio calculations represented data for cost reporting periods 
ending in CY 2010, and approximately 38 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 2012 and CY 2013 are modest and the few 
significant changes are associated with areas that have a small number 
of hospitals.
    Table 8 below lists the finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2013.
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BILLING CODE 4120-01-C

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes
    The OPPS was implemented in CY 2000 under the Balanced Budget Act 
of 1997 (BBA) (Pub. L. 105-33). The Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made 
major changes in the hospital OPPS, including adding a new paragraph 
(7) to section 1833(t) of the Act, effective as if included in the 
enactment of the BBA. Section 1833(t)(7) of the Act sets forth that 
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), and 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 types

[[Page 68291]]

of hospitals excepted from the policy described above, cancer hospitals 
and children's hospitals. Specifically, 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 all hospitals for covered OPD services furnished 
before January 1, 2004. However, section 411 of Public Law 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 of Public Law 109-171 
also reduced the TOPs to rural hospitals from 100 percent of the 
difference between the provider's OPPS payments and the pre-BBA amount. 
This provision provided that, in cases in which the OPPS payment was 
less than the provider's pre-BBA amount, the amount of payment would be 
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 Transmittal 
877, we did not specifically address whether TOPs applied to essential 
access community hospitals (EACHs), which are considered to be SCHs 
under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, by law, 
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 with 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 (the Medicare 
Improvements for Patients and Providers Act of 2008) 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 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 the issuance 
of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) 
of the Affordable Care Act (Pub. L. 111-148) amended section 
1833(t)(7)(D)(i)(III) of the Act by extending the period of TOPs to 
rural hospitals that are not SCHs with 100 beds or fewer for 1 year, 
for services provided before January 1, 2011. Section 3121(a) of the 
Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act 
and extended the period of TOPs to SCHs (including EACHs) for 1 year, 
for services provided before January 1, 2011, and section 3121(b) of 
the Affordable Care Act removed the 100-bed limitation applicable to 
such SCHs for covered OPD services furnished on or 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 self-implementing 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 to the hospital 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 the removal of 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 to the 
hospital 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) are no longer eligible for TOPs, in 
accordance with section 108 of the MMEA. In the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74199), we revised our

[[Page 68292]]

regulations Sec.  419.70(d) to conform the regulation text to the self-
implementing provisions of section 108 of the MMEA described above.
    Subsequent to the issuance of the CY 2012 OPPS/ASC final rule with 
comment period, section 308 of the Temporary Payroll Tax Cut 
Continuation Act of CY 2011 (Pub. L. 112-78), as amended by section 
3002 of the Middle Class Tax Relief and Jobs Creation Act (Pub. L. 112-
96), extended through December 31, 2012, 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, 2013, 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.
    Section 308 of Public Law 112-78 also extended through February 29, 
2012, the hold harmless provision for an SCH (as defined in section 
1886(d)(5)(D)(iii) of the Act), including an EACH, without the bed size 
limitation. Therefore, for such hospitals, for services furnished 
before March 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. However, section 
3002 of Public Law 112-96 extended through December 31, 2012, the hold 
harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) 
of the Act), including an EACH, that has no more than 100 beds. 
Therefore, for such hospitals, for services furnished before January 1, 
2013, 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. Accordingly, as we proposed in the 
CY 2013 OPPS/ASC proposed rule (77 FR 45108), we are revising Sec.  
419.70(d) of the regulations to reflect the TOPs extensions and 
amendments described in section 308 of Public Law 112-78 and section 
3002 of Public Law 112-96.
    Effective for services provided on or after March 1, 2012, SCHs 
(including EACHs) with greater than 100 beds are no longer eligible for 
TOPs, in accordance with section 308 of Public Law 112-78. Effective 
for services provided on or after January 1, 2013, a rural hospital 
with 100 or fewer beds that is not an SCH and an SCH (including an 
EACH) are no longer eligible for TOPs, in accordance with section 3002 
of Public Law 112-96.
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 Public Law 108-173. Section 411 gave 
the Secretary the authority to make an adjustment to OPPS payments for 
rural hospitals, effective January 1, 2006, if justified by a study of 
the difference in costs by APC between hospitals in rural areas and 
hospitals in urban areas. Our analysis showed a difference in costs for 
rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 
adjustment for rural SCHs of 7.1 percent for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of 
the Act.
    In CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) to clarify 
that EACHs are also eligible to receive the rural SCH adjustment, 
assuming these entities otherwise meet the rural adjustment criteria. 
Currently, three hospitals are classified as EACHs, and as of CY 1998, 
under section 4201(c) of Public Law 105-33, a hospital can no longer 
become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outlier payments and copayments. We stated in the CY 2006 
OPPS final rule with comment period (70 FR 68560) that 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 2012. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45109), we proposed to 
continue for CY 2013 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. We indicated in the proposed 
rule that we intend to reassess the 7.1 percent adjustment in the 
future by examining differences between urban hospitals' costs and 
rural hospitals' costs using updated claims data, cost reports, and 
provider information.
    Comment: Several commenters expressed support for the proposed 
continuation of the 7.1 percent rural SCH adjustment. A few commenters 
also suggested that the rural SCH adjustment also apply to urban SCHs. 
One commenter suggested that the 7.1 percent payment adjustment also be 
applied to MDHs, given that their inpatient classification was set to 
expire in October 2012.
    Response: We agree that it is appropriate to continue the 7.1 
percent adjustment for rural SCHs (including EACHs) as we proposed for 
CY 2013. We note that the rural SCH adjustment was developed under the 
authority described in section 1833(t)(13) of the Act, which applies 
specifically to rural hospitals. Although commenters have suggested 
that the rural SCH adjustment also apply to urban SCHs, the study 
authorized under section 1833(t)(13)(A) of the Act specifically focuses 
on APC costs incurred by rural hospitals, as they exceed those costs 
incurred by hospitals in urban areas. Moreover, the Secretary's 
authority to make an adjustment based on that study was with respect to 
a determination that costs incurred by rural hospitals exceed those 
costs incurred by urban hospitals and to reflect those higher costs. 
Therefore, the authority to make any such adjustment was limited to 
reflect the higher costs incurred by such applicable rural hospitals. 
Although the MDH classification is currently set to expire, we note 
that the definition of a MDH at 1886(d)(5)(G)(iv)(III) of the Act 
specifically excludes sole community hospitals, to which the rural 
adjustment applies. Further, as we discussed in the CY 2006 OPPS final 
rule, our analysis of urban SCHs as well as rural MDHs did not support 
the application of a

[[Page 68293]]

rural adjustment (70 FR 68560 through 68561).
    After consideration of the public comments we received, we are 
finalizing our CY 2013 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 2013, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs. We 
continue to believe that the adjustment is appropriate for application 
in CY 2013.

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

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals 
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) 
under the OPPS for covered outpatient hospital services. There are 11 
cancer hospitals that meet the classification criteria in section 
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted 
from payment under the IPPS. With the Medicare, Medicaid and SCHIP 
Balanced Budget Refinement Act of 1999, Congress created section 
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in 
Payment,'' to serve as a permanent payment floor by limiting cancer 
hospitals' potential losses under the OPPS. Through section 
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full 
amount of the difference between payments for covered outpatient 
services under the OPPS and a ``pre-BBA'' amount. That is, cancer 
hospitals are permanently held harmless to their ``pre-BBA'' amount, 
and they receive 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.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the 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. After conducting the study required by 
section 3138, we determined in 2012 that outpatient costs incurred by 
the 11 specified cancer hospitals were greater than the costs incurred 
by other OPPS hospitals. For a complete discussion regarding the cancer 
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74200 through 74201).
    Based on our findings that costs incurred by cancer hospitals were 
greater than the costs incurred by other OPPS hospitals, we finalized a 
policy to provide a payment adjustment to the 11 specified cancer 
hospitals that reflects the higher outpatient costs as discussed in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 
74206). Specifically, we adopted a policy to provide additional 
payments to each of the 11 cancer hospitals so that each cancer 
hospital's final PCR for services provided in a given calendar year is 
equal to the weighted average PCR (which we refer to as the ``target 
PCR'') for other hospitals paid under the OPPS. The target PCR is set 
in advance of the calendar year and is calculated using the most recent 
submitted or settled cost report data that are available at the time of 
final rulemaking for the calendar year. The amount of the payment 
adjustment is made on an aggregate basis at cost report settlement. 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 are assessed as usual after all payments, 
including the cancer hospital payment adjustment, have been made for a 
cost reporting period. For CY 2012, the target PCR for purposes of the 
cancer hospital payment adjustment is 0.91.
2. Payment Adjustment for Certain Cancer Hospitals for CY 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 
continue our policy to provide additional payments to cancer hospitals 
so that each cancer hospital's final PCR is equal to the weighted 
average PCR (or ``target PCR'') for the other OPPS hospitals using the 
most recent submitted or settled cost report data that were available 
at the time of the proposed rule. To calculate the proposed CY 2013 
target PCR, we used the same extract of cost report data from HCRIS, as 
discussed in section II.A. of the proposed rule, used to estimate costs 
for the CY 2013 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 
estimated that, on average, the OPPS payments to other hospitals 
furnishing services under the OPPS were approximately 91 percent of 
reasonable cost (weighted average PCR of 0.91). Based on these data, we 
proposed a target PCR of 0.91 that would be used to determine the CY 
2013 cancer hospital payment adjustment that would be paid at cost 
report settlement. Therefore, we proposed that the payment amount 
associated with the cancer hospital payment adjustment to be determined 
at cost report settlement would be the additional payment needed to 
result in a proposed target PCR equal to 0.91 for each cancer hospital.
    Comment: Some commenters suggested that the PCR is only one 
component of the adjustment needed to account for the differences in 
providing cancer care. The commenters suggested that CMS utilize a 
methodology that they stated would ensure that the 11 cancer hospitals' 
losses (on a per unit PCR basis) equal the losses (on a per unit PCR 
basis) of the other PPS hospitals. The commenters provided details of 
this ``equivalent loss per unit'' methodology which they indicate would 
result in a target PCR equal to 0.94 for CY 2013.
    Response: Section 3138 of the Affordable Care Act provides that if 
the Secretary determines under section 1833(t)(18)(A) of the Act that 
costs

[[Page 68294]]

incurred by cancer hospitals exceed those costs of other hospitals 
furnishing services under section 1833(t), the Secretary shall provide 
for an appropriate adjustment under section 1833(t)(2)(E) of the Act, 
to reflect the higher costs. Because the statute requires that we 
provide a cancer hospital payment adjustment to reflect the higher 
costs, not losses, incurred at cancer hospitals, we believe that it 
would be inappropriate to revise our cancer hospital payment adjustment 
policy so that the target PCR is calculated based on the cancer 
hospitals' losses per unit PCR compared to the other OPPS hospitals' 
losses per unit PCR.
    Comment: Commenters stated that CMS should not recalculate the 
target PCR annually because the cancer hospitals require payment 
stability and predictability in order to provide services to Medicare 
beneficiaries.
    Response: We believe that annual recalculation of the target PCR 
will provide a timely assessment of the changes in OPPS payments 
relative to costs and, therefore, will enable us to provide payment 
adjustments to cancer hospitals that are accurate and equitable. In 
addition, it is unlikely that the target PCR (the weighted average PCR 
for the other OPPS hospitals) would fluctuate significantly from year 
to year. The target PCR is 0.91 for purposes of the CY 2012 cancer 
hospital payment adjustment and remained at 0.91 when recalculated for 
the CY 2013 OPPS/ASC proposed rule and this final rule with comment 
period. In addition to the apparent stability of the target PCR, 
because the target PCR is set in advance of each calendar year, cancer 
hospitals can easily predict the amount of their hospital-specific 
payment adjustment associated with the target PCR for the following 
year and budget accordingly.
    Comment: Commenters stated that CMS must make the cancer hospital 
payment adjustment effective for services furnished on or after January 
1, 2011, in order to comply with section 3138 of the Affordable Care 
Act.
    Response: As explained in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71886 through 71887), we did not finalize the 
proposed cancer hospital adjustment for CY 2011 for a variety of 
reasons, including, ultimately, a determination that further study and 
deliberation of the issues were necessary. 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 that subsection. Several commenters on the CY 2011 OPPS/ASC 
proposed rule raised concerns about the agency's study of costliness 
conducted under section 1833(t)(18)(A) of the Act; for example, one 
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, public 
comments arguing against implementing a cancer hospital payment 
adjustment for CY 2011, and our determination that further study and 
deliberation were necessary, we decided to not finalize a cancer 
hospital payment adjustment for CY 2011. We note that, because the 
cancer hospital payment adjustment is budget neutral, the lack of a 
cancer hospital payment adjustment for CY 2011 also meant that other 
payments were not reduced for CY 2011 to offset the increased payments 
from the adjustment.
    Comment: One commenter noted that, although CMS indicated the 
estimated percent by which each cancer hospital's OPPS payments would 
be increased under the cancer hospital payment adjustment policy in the 
CY 2012 OPPS/ASC proposed and final rules, CMS did not include this 
information in the CY 2013 OPPS/ASC proposed rule. The commenter 
requested that CMS include this information in the CY 2013 OPPS/ASC 
final rule with comment period.
    Response: We agree with the commenter that it would be informative 
to provide the estimated percentage increase in CY 2013 OPPS payments 
to each cancer hospital due to the cancer hospital payment adjustment 
policy. Therefore, we are including that information in the last column 
of Table 9 below.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue our policy to provide additional 
payments to cancer hospitals so that each cancer hospital's final PCR 
is equal to the weighted average PCR for the other OPPS hospitals using 
the most recent submitted or settled cost report data that were 
available at the time of this final rule with comment period. To 
calculate the final CY 2013 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 costs for the CY 2013 
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 2011 claims data that we used to model 
the impact of the final CY 2013 APC relative weights (4,026 hospitals) 
because it is appropriate to use the same set of hospitals that we are 
using to calibrate the modeled CY 2013 OPPS. The cost report data for 
the hospitals in this dataset were from cost report periods with fiscal 
year ends ranging from 2010 to 2011. We then removed the cost report 
data of the 48 hospitals located in Puerto Rico from our dataset 
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 the cost report data of 182 hospitals because the cost report 
data that were not complete (missing aggregate OPPS payments, 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 an analytic file of 3,796 hospitals 
with cost report data.
    Using this smaller dataset of cost report data, 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). Based on these data, we will use a 
target PCR of 0.91 to determine the CY 2013 cancer hospital payment 
adjustment to be paid at cost report settlement. Therefore, the payment 
amount associated with the cancer hospital payment 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.
    Table 9 below indicates the estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2013 due to the cancer hospital 
payment adjustment policy. The actual amount of the CY 2013 cancer 
hospital payment adjustment for each cancer hospital will be determined 
at cost report settlement and will depend on each hospital's CY 2013 
payments and costs. 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 68295]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.019

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2011, the outlier threshold was determined to be 
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 outlier payments 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. However, 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, in our CY 2009 
OPPS/ASC final rule with comment period (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 2011 OPPS payment, 
using available CY 2011 claims and the revised OPPS expenditure 
estimate for the 2012 Trustee's Report, is approximately 1.2 percent of 
the total aggregated OPPS payments. Therefore, for CY 2011, we estimate 
that we paid 0.2 percent above the CY 2011 outlier target of 1.0 
percent of total aggregated OPPS payments.
    As explained in the CY 2012 OPPS/ASC final rule with comment period 
(77 FR 74207 through 74209), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2012. The outlier thresholds were set so 
that estimated CY 2012 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2011 claims data and CY 2012 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2012 will be approximately 
0.9 percent of the total CY 2012 OPPS payments. The difference between 
1.0 percent and 0.9 percent is reflected in the regulatory impact 
analysis in section XXII. of this final rule with comment period. We 
note that we provide estimated CY 2013 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Proposed Outlier Calculation
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 
continue for CY 2013 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, 
an amount equal to 0.12 percent of outlier payments (or 0.0012 percent 
of total OPPS payments) 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

[[Page 68296]]

threshold as a proportion of total estimated OPPS outlier payments. As 
discussed in section VIII.C. of the CY 2013 OPPS/ASC 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 rate 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 2013 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 $2,400 fixed-dollar 
threshold.
    We proposed to calculate the fixed-dollar threshold using largely 
the same methodology as we did in CYs 2011 and 2012 (75 FR 71887 
through 71889 and 76 FR 74207 through 74209). For purposes of 
estimating outlier payments for the proposed rule, we used the 
hospital-specific overall ancillary CCRs available in the April 2012 
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.
    In order to estimate the CY 2013 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2011 claims using the 
same inflation factor of 1.1406 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2013 IPPS/LTCH PPS proposed 
rule (77 FR 28142). We used an inflation factor of 1.0680 to estimate 
CY 2012 charges from the CY 2011 charges reported on CY 2011 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). As 
we stated in the CY 2005 OPPS final rule with comment period (69 FR 
65845), we believe that the use of these charge inflation factors are 
appropriate for the OPPS because, with the exception of the inpatient 
routine service cost centers, hospitals use the same ancillary and 
outpatient cost centers to capture costs and charges for inpatient and 
outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we proposed in the CY 2013 OPPS/ASC 
proposed rule to apply the same CCR inflation adjustment factor that we 
applied for the FY 2013 IPPS outlier calculation to the CCRs used to 
simulate the CY 2013 OPPS outlier payments to determine the fixed-
dollar threshold. Specifically, for CY 2013, we proposed to apply an 
adjustment factor of 0.9790 to the CCRs that were in the April 2012 
OPSF to trend them forward from CY 2012 to CY 2013. The methodology for 
calculating this proposed adjustment was discussed in the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 28142 through 28144). We note that, due 
to the issue described in the IPPS proposed rule correction notice 
published on June 11, 2012, the operating and capital CCR inflation 
factors were reversed (77 FR 34326). In estimating the proposed CY 2013 
OPPS fixed-dollar outlier threshold, we applied the corrected CCR 
inflation factor.
    Therefore, to model hospital outlier payments for the proposed 
rule, we applied the overall CCRs from the April 2012 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9790 to approximate CY 2013 CCRs) to charges on CY 2011 claims that 
were adjusted (using the charge inflation factor of 1.1406 to 
approximate CY 2013 charges). We simulated aggregated CY 2013 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 2013 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $2,400, combined 
with the 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 $2,400 
were 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 rate 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 Program requirements. For hospitals that fail to 
meet the Hospital OQR Program requirements, we proposed to continue the 
policy that we implemented in CY 2010 that the hospitals' costs will 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 XV. of this final rule with 
comment period.
    Comment: Several commenters expressed concern with respect to the 
relative increase in the proposed CY 2013 OPPS fixed-dollar outlier 
threshold of $2,400. The commenters believed that the increase in the 
fixed-dollar threshold would bring about a drastic reduction in outlier 
payments as well as the ability to furnish services to beneficiaries. 
Commenters also suggested CMS to reconsider the fixed-dollar threshold 
value, confirm that the data used to develop the threshold were 
accurate, and provide data to support the increase in the threshold. 
Commenters also suggested alternative fixed-dollar threshold setting 
methodologies such as a 3-year transition to the threshold or a 
calculation based on prior year estimated percent OPPS outlier 
spending.
    Response: As indicated above, we introduced a fixed-dollar 
threshold in order to better target outlier payments to those high-cost 
and complex procedures where a very costly service could present a 
hospital with significant

[[Page 68297]]

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. While commenters have expressed concern based on 
the assumption that OPPS outlier payments made under an increased 
fixed-dollar threshold would decrease, we note that the threshold may 
increase or decrease from year to year, to maintain the 1.0 percent 
outlier spending target. While we described issues related to the 
charge and CCR inflation factors in the CY 2013 OPPS/ASC proposed rule, 
there were no other errors in the methodology (77 FR 45111). The 
methodology for determining the OPPS fixed-dollar threshold is 
described in this section, the LDS files used to model the threshold 
that are available for public purchase, and a detailed claims 
accounting document that is available online, which all support the 
determination of the fixed-dollar threshold. We do not believe that a 
transitional methodology to determine the outlier threshold or a 
methodology that takes into account prior spending is appropriate 
because the relationship between a hospital's costs and the APC payment 
rates changes each year.
3. Final Outlier Calculation
    Consistent with historical practice, we use updated data for this 
final rule with comment period for our outlier calculation. For CY 
2013, we are applying the overall CCRs from the July 2012 OPSF with a 
CCR adjustment factor of 0.9880 to approximate CY 2013 CCRs to charges 
on the final CY 2011 claims that were adjusted to approximate CY 2013 
charges (using the final 2-year charge inflation factor of 1.0894). 
These are the same CCR adjustment and charge inflation factors that 
were used to set the IPPS fixed-dollar threshold for the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53695 through 53696). We simulated 
aggregated CY 2013 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 
2013 OPPS payments. We estimate that a fixed-dollar threshold of 
$2,025, 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 2013, 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 $2,025 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 rate 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, and 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 
2013, we are not incorporating any assumptions about the effects of 
reconciliation into our calculation of the OPPS fixed-dollar outlier 
threshold in this final rule with comment period.

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. 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 payment weight determined under section 
II.A. of this final rule with comment period. Therefore, the national 
unadjusted payment rate for most APCs contained in Addendum A to this 
final rule with comment period (which is 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 available via the Internet on the CMS Web 
site) was calculated by multiplying the CY 2013 scaled weight for the 
APC by the CY 2013 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 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 XV. 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,

[[Page 68298]]

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.
    We did not receive any public comments on the proposed calculation 
of an adjusted Medicare payment. Therefore, we are finalizing the 
calculation of an adjusted Medicare payment, where appropriate, in the 
manner described as follows. Individual providers interested in 
calculating the payment amount that they will 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 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 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 2013 OPPS fee schedule increase factor of 1.8 
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 2013 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 extended section 508 and certain additional 
special exception hospital reclassifications from October 1, 2010 
through September 30, 2011. Section 302 of the Temporary Payroll Tax 
Cut Continuation Act of 2011 (Pub. L. 112-78) as amended by section 
3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. 
L. 112-96) extended section 508 and certain additional special 
exception hospital reclassifications from October 1, 2011 through March 
31, 2012. Therefore, these reclassifications will not apply to the CY 
2013 OPPS. (For further discussion of the changes to the FY 2013 IPPS 
wage indices, as applied to the CY 2013 OPPS, we refer readers to 
section II.C. of this final rule with comment period). We proposed to 
continue 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 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2013 IPPS and listed as Table 4J in the FY 2013 IPPS/LTCH PPS final 
rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 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 unadjusted payment 
rate for the specific service by the wage index.
    Xa is the labor-related portion of the national unadjusted payment 
rate (wage adjusted).
    X a = .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 + X a
    Step 6. If a provider is an SCH, set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an 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 used 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

[[Page 68299]]

(Level I Excision/Biopsy). The CY 2013 full national unadjusted payment 
rate for APC 0019 is $336.38. The reduced national unadjusted payment 
rate for a hospital that fails to meet the Hospital OQR Program 
requirements is $329.65. This reduced rate is calculated by multiplying 
the reporting ratio of 0.980 by the full unadjusted payment rate for 
APC 0019.
    The FY 2013 wage index for a provider located in CBSA 35644 in New 
York is 1.2971. The labor-related portion of the full national 
unadjusted payment is $261.79 (.60 * $336.38 * 1.2971). The labor-
related portion of the reduced national unadjusted payment is $256.55 
(.60 * $329.65 * 1.2971). The nonlabor-related portion of the full 
national unadjusted payment is $134.55 (.40 * $336.38). The nonlabor-
related portion of the reduced national unadjusted payment is $131.86 
(.40 * $329.65). The sum of the labor-related and nonlabor-related 
portions of the full national adjusted payment is $396.34 ($261.79 + 
$134.55). The sum of the reduced national adjusted payment is $388.41 
($256.55 + $131.86).

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 
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, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected to 
the amount of the inpatient deductible.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45113), 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 national unadjusted copayment amounts for services payable under 
the OPPS that will be effective January 1, 2013, are shown in Addenda A 
and B to this final rule with comment period (which are available via 
the Internet on the CMS Web site). As discussed in section XV. of this 
final rule with comment period, for CY 2013, the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
equals 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 note that APC copayments may increase or decrease each year 
based on changes in the calculated APC payment rates due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. The CY 2013 proposed policy to base APC relative weights on 
geometric mean costs would also affect the APC payment rates and, 
through them, the corresponding beneficiary copayments. However, as 
described in the CY 2004 OPPS/ASC final rule with comment period, the 
development of the copayment methodology generally moves beneficiary 
copayments closer to 20 percent of OPPS APC payments (68 FR 63458 
through 63459). For a more detailed discussion of the final policy to 
base the APC relative payment weights on geometric mean costs, we refer 
readers to section II.A.2.f. of this final rule with comment period.
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2013. Therefore, for the 
reasons set forth in the proposed rule (77 FR 45113), we are finalizing 
our CY 2013 copayment methodology without modification.
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, $67.28 is 20 percent of the full national 
unadjusted payment rate of $336.38. 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 payment percentage to the adjusted payment rate 
for a service calculated under section II.H. of this final rule with 
comment period, with

[[Page 68300]]

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, 2013, are shown in Addenda A and B to this 
final rule with comment period (which are 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 2013 OPD fee schedule increase 
factor discussed in section II.B. 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.

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 surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
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 public comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process. 
As we proposed in the CY 2013 OPPS/ASC proposed (77 FR 45114), in Table 
10 below (Table 13 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 the payment rates associated with codes effective July 1 were 
not available to us in time for incorporation into the Addenda of the 
proposed rule, the Level II HCPCS codes and the Category III CPT codes 
implemented through the July 2012 OPPS quarterly update CR 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 
2012 OPPS quarterly update were included in Addendum B. Nevertheless, 
we requested public comments on the codes included in the July 2012 
OPPS quarterly update and included these codes in the preamble of the 
proposed rule.
BILLING CODE 4120-01-P

[[Page 68301]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.020

    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 2013 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2013 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2012 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2012. We also sought public 
comments in the CY 2012 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2011. These new codes, 
with an effective date of October 1, 2011, or January 1, 2012, 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 2012 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 2012 OPPS/ASC 
final rule with comment period. We are responding to public comments 
and finalizing our interim OPPS treatment of these codes in this CY 
2013 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 2012 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A., III.D., V.B., and IX of this final rule with comment period. 
Table 11 below lists the long descriptors for the CPT codes that were 
assigned to comment indicator ``NI'' for which we received public 
comments to the CY 2012 OPPS/ASC final rule with comment period and the 
specific sections where the comments are addressed.

[[Page 68302]]

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[[Page 68303]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.022


[[Page 68304]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.023

BILLING CODE 4120-01-C
1. Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective 
April 1, 2012 and July 1, 2012 for Which We Solicited Public Comments 
in the CY 2013 OPPS/ASC Proposed Rule
    Through the April 2012 OPPS quarterly update CR (Transmittal 2418, 
Change Request 7748, dated March 2, 2012) and the July 2012 OPPS 
quarterly update CR (Transmittal 2483, Change Request 7847, dated June 
8, 2012), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2012, we made 
effective 13 new Level II HCPCS codes and 7 Category III CPT codes. 
Specifically, 5 new Level II HCPCS codes were effective for the April 
2012 update and another 8 new Level II HCPCS codes were effective for 
the July 2012 update for a total of 13. Seven new Category III CPT 
codes were effective for the July 2012 update. Of the 13 new Level II 
HCPCS codes, we recognized for separate payment 11 of these codes, and 
of the 7 new Category III CPT codes, we recognized for separate payment 
all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS 
and Category III CPT codes that are recognized for separate payment for 
CY 2013.
    Through the April 2012 OPPS quarterly update CR, we allowed 
separate payment for each of the five new Level II HCPCS codes. 
Specifically, as displayed in Table 12 below, we provided separate 
payment for HCPCS codes C9288, C9289, C9290, C9291 and C9733.

[[Page 68305]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.024

    In the CY 2013 OPPS/ASC proposed rule (77 FR 45115), we solicited 
public comments on the proposed status indicators and APC assignments 
for Level II HCPCS codes C9288, C9289, C9290, C9291, and C9733, which 
were listed in Table 14 of the proposed rule (77 FR 45115) and now 
appear in Tables 12 and 13 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 C9288, C9289, C9290, 
and C9291. However, we received several public comments on HCPCS code 
C9733, which are addressed in section III.D.7.a. of this final rule 
with comment period.
    For CY 2013, the HCPCS Workgroup replaced HCPCS codes C9288, C9289, 
and C9291 (which was replaced with HCPCS code Q2046, effective July 1, 
2012) with permanent HCPCS J-codes. Table 13 below list the replacement 
HCPCS J-codes for the temporary HCPCS C-codes. Consistent with our 
general policy of using permanent HCPCS codes 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 
C9288, C9289, and C9291/Q2046, effective January 1, 2013, in Table 13.
    In this final rule with comment period, we are assigning the Level 
II HCPCS codes listed in Table 13 below to the specific APCs and status 
indicators for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.025


[[Page 68306]]


    For CY 2013, we note that we are not making any changes to the 
status indicators and APC assignments for HCPCS code C9290 and C9733. 
That is, HCPCS code C9290 will continue its pass-through status and 
will also continue to be assigned to APC 9290 for CY 2013. Similarly, 
HCPCS code C9733 will continue to be assigned to status indicator 
``Q2'' and also will continue to be assigned to APC 0397 for CY 2013.
    Furthermore, because HCPCS code J9019 describes the same drug and 
the same dosage currently designated by HCPCS code C9289, this drug 
will continue its pass-through status in CY 2013. Therefore, we are 
assigning HCPCS code J9019 to the same status indicator and APC as its 
predecessor HCPCS code, as shown in Table 13.
    However, we note that the replacement code for HCPCS code C9291, 
which was replaced with HCPCS code Q2046 effective July 1, 2012, did 
not describe the same dosage descriptor, and consequently, the 
replacement HCPCS code was assigned a new APC number. Specifically, 
HCPCS code Q2046, which has a dosage descriptor of 1 mg, was assigned 
to APC 1420 effective July 1, 2012. Because the predecessor HCPCS code 
C9291 was assigned to pass-through status, HCPCS code Q2046 also was 
assigned to pass-through status for CY 2013. Similarly, the replacement 
code for HCPCS code C9288 does not describe the same dosage descriptor, 
and, consequently, its replacement HCPCS code J0716 was assigned a new 
APC. Specifically, HCPCS code C9288 has a dosage descriptor of 1 vial; 
however, its replacement HCPCS code J0716 has a dosage descriptor of 
``up to 120 milligrams.'' Therefore, effective January 1, 2013, HCPCS 
codes J0716 is assigned to APC 1431, a different APC, to maintain data 
consistency for future rulemaking. Because the predecessor HCPCS code 
C9288 was assigned to pass-through status, HCPCS code J0716 will 
continue to be assigned status indicator ``G'' for CY 2013.
    As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45115 
through 45116), through the July 2012 OPPS quarterly update CR, which 
included HCPCS codes that were made effective July 1, 2012, we allowed 
separate payment for 6 of the 8 new Level II HCPCS codes. Specifically, 
as displayed in Table 14 below (also Table 14 of the proposed rule), we 
provided separate OPPS payment for HCPCS codes C9368, C9369, Q2045, 
Q2046, Q2048, and Q2049.
[GRAPHIC] [TIFF OMITTED] TR15NO12.026

    We note that three of the Level II HCPCS Q-codes that were made 
effective July 1, 2012, were previously described by HCPCS J-codes or 
C-codes that were separately payable under the hospital OPPS. First, 
HCPCS code Q2045 replaced HCPCS code J1680 (Injection, human fibrinogen 
concentrate, 100 mg), beginning July 1, 2012. HCPCS code J1680 was 
assigned to status indicator ``K'' (Nonpass-through drugs and 
nonimplantable biologicals, including therapeutic radiopharmaceuticals; 
paid under OPPS; separate APC payment) on

[[Page 68307]]

January 1, 2012. However, because HCPCS code J1680 was replaced by 
HCPCS code Q2045 effective July 1, 2012, we changed its status 
indicator to ``E'' (Not Payable by Medicare) effective July 1, 2012. 
Because HCPCS code Q2045 describes the same drug as HCPCS code J1680, 
we continued its separate payment status and assigned it to status 
indicator ``K'' effective July 1, 2012. However, because the dosage 
descriptor for HCPCS code Q2045 is not the same as HCPCS code J1680, we 
assigned HCPCS code Q2045 to a new APC to maintain data consistency for 
future rulemaking. Specifically, HCPCS code Q2045 was assigned to APC 
1414 effective July 1, 2012.
    Second, HCPCS code Q2046 replaced HCPCS code C9291 effective July 
1, 2012. HCPCS code C9291 was assigned pass-through status when it was 
effective April 1, 2012. Because HCPCS code Q2046 describes the same 
product as HCPCS code C9291, we continued its pass-through status and 
assigned HCPCS code Q2046 to status indicator ``G'' as well as assigned 
it to the same APC, specifically APC 9291, effective July 1, 2012. 
HCPCS code C9291 was deleted on June 30, 2012.
    Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, 
doxorubicin hydrochloride, all lipid formulations, 10 mg) with new 
HCPCS code Q2048, effective July 1, 2012. Consequently, the status 
indicator for HCPCS code J9001 was changed to ``E'' (Not Payable by 
Medicare) effective July 1, 2012. Because HCPCS code Q2048 describes 
the same drug as HCPCS code J9001, we continued its separate payment 
status and assigned HCPCS code Q2048 to status indicator ``K'' 
effective July 1, 2012. In addition, because, HCPCS code Q2049 is 
similar to HCPCS code Q2048, we assigned HCPCS code Q2049 to status 
indicator ``K'' effective July 1, 2012.
    Of the 15 HCPCS codes that were effective July 1, 2012, we did not 
recognize for separate OPPS payment two HCPCS codes because they are 
both paid under a payment system other than OPPS. Specifically, HCPCS 
code Q2047 was assigned to status indicator ``A'' (Not paid under OPPS; 
paid by fiscal intermediaries/MACs under a fee schedule or payment 
system other than OPPS), and HCPCS code Q2034 was assigned to status 
indicator ``L'' (Not paid under OPPS; paid at reasonable cost).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we solicited 
public comments on the proposed status indicators and APC assignments 
for the HCPCS codes that were listed in Table 15 of the proposed rule 
and now appear in Table 14 and 15 of this final rule with comment 
period.
    We did not receive any other public comments on the new Level II 
HCPCS codes that were implemented in July 2012. We are adopting as 
final, without modification, our proposal to assign the Level II HCPCS 
codes listed in Table 15 to the APCs and status indicators as proposed 
for CY 2013.
    Table 15 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2012, with their final status 
indicators and APC assignments for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.027

    We note that the HCPCS Workgroup replaced HCPCS codes C9368, C9369, 
Q2045, Q2046, Q2047, and Q2048 with HCPCS codes Q4132, Q4133, J7178, 
J0178, J0890, and J9002, respectively, effective January 1, 2013. 
Because

[[Page 68308]]

HCPCS codes Q4132, Q4133, and J0178 describe the same products 
currently designated by HCPCS codes C9368, C9369, and Q2046, 
respectively, these products will continue their pass-through status in 
CY 2013. Therefore, we are assigning HCPCS codes Q4132, Q4133 and J0178 
to the same status indicators and APCs as their predecessor HCPCS 
codes, which share the same dosage descriptors, as shown in Table 15. 
We note that because HCPCS codes Q2045 and Q2048 are assigned to status 
indicator ``K'' (Nonpass-Through Drugs; Paid under OPPS; Separate APC 
payment), their replacement HCPCS codes J7178 and J9002, which share 
the same code descriptors as their predecessor codes, also will 
continue their nonpass-through status and APC assignments in CY 2013.
    Finally, HCPCS code Q2047 will be replaced with HCPCS code J0890 
effective January 1, 2013. Because HCPCS code J0890 describes the same 
product currently designated by HCPCS code Q2047, this product will 
continue to be assigned to the same status indicator as its predecessor 
HCPCS code, as shown in Table 15.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), 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 CPT 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. For the July 2012 update, 
there were no new Category I CPT vaccine codes. Through the July 2012 
OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated 
June 8, 2012), we allowed separate OPPS payment for all seven new 
Category III CPT codes effective July 1, 2012. Specifically, as 
displayed in Table 16 of the proposed rule and in Table 16 below, we 
allowed separate payment for Category III CPT codes 0302T, 0303T, 
0304T, 0305T, 0306T, 0307T, and 0308T.
    We received one public comment on one of the Category III CPT codes 
that were implemented in July 2012, specifically on CPT code 0304T, 
which is addressed in section II.A.2.d.(1) of this final rule with 
comment period. Table 16 below lists the Category III CPT codes that 
were implemented in July 2012, along with their final status indicators 
and APC assignments, for CY 2013. The final payment rates for these 
codes can be found in Addendum B to this CY 2013 OPPS/ASC final rule 
with comment period (which is available via the Internet on the CMS Web 
site).
BILLING CODE 4120-01-P

[[Page 68309]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.028

BILLING CODE 4120-01-C
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45114 through 45117), 
we solicited public comments on the CY 2013 proposed status indicators 
and the proposed APC assignments and payment rates for the Level II 
HCPCS codes and the Category III CPT codes that were effective April 1, 
2012, and July 1, 2012, through the respective OPPS quarterly update 
CRs. These codes were listed in Tables 14, 15, and 16 of the proposed 
rule. We proposed to finalize their status indicators and their APC 
assignments and payment rates, if applicable, in this CY 2013 OPPS/ASC 
final rule with comment period. Because the new Category III CPT and 
Level II HCPCS codes that become effective for July are not available 
to us in time for incorporation into the Addenda to the OPPS/ASC 
proposed rule, our policy is to include the codes, their proposed 
status indicators,

[[Page 68310]]

proposed APCs (where applicable), and proposed payment rates (where 
applicable) in the preamble of the proposed rule but not in the Addenda 
to the proposed rule. These codes were listed in Tables 15 and 16, 
respectively, of the proposed rule. We proposed to incorporate these 
codes into Addendum B to this CY 2013 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 2012 
OPPS update CR and displayed in Table 14 were included in Addendum B to 
the proposed rule (which was available via the Internet on the CMS Web 
site), where their proposed CY 2013 payment rates were also shown.
    We did not receive any additional public 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 were implemented or modified through the April 2012 or July 2012 
OPPS update CR are found in Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
2. Process for New Level II HCPCS Codes That Will Be Effective October 
1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective 
January 1, 2013 for Which We Are Soliciting Public Comments in This CY 
2013 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. For CY 2013, 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. In addition, the CPT and Level II HCPCS codes that will be 
effective January 1, 2013, are flagged with comment indicator ``NI'' in 
Addendum B to the OPPS/ASC final rule with comment period. 
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 2013 OPPS/ASC proposed rule (77 FR 45117 through 45118), we 
proposed to continue this process for CY 2013. Specifically, for CY 
2013, we proposed to include in Addendum B to this CY 2013 OPPS/ASC 
final rule with comment period the new Category I and III CPT codes 
effective January 1, 2013 (including the Category III CPT codes that 
were released by the AMA in July 2012) that would be incorporated in 
the January 2013 OPPS quarterly update CR and the new Level II HCPCS 
codes, effective October 1, 2012, or January 1, 2013, that would be 
released by CMS in its October 2012 and January 2013 OPPS quarterly 
update CRs. As proposed, in this final rule with comment period, the 
October 1, 2012 and January 1, 2013 codes are flagged with comment 
indicator ``NI'' in Addendum B to this CY 2013 OPPS/ASC final rule with 
comment period to indicate that we have assigned them an interim OPPS 
payment status for CY 2013. As 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 2014 OPPS/ASC final rule with comment period.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal to flag new Level II HCPCS codes that 
become effective October 1, 2012, and new CPT and Level II HCPCS codes 
that become effective January 1, 2013 with comment indicator ``NI'' in 
Addendum B to this CY 2013 OPPS/ASC final rule with comment period to 
indicate that these codes have been assigned an interim OPPS payment 
status for CY 2013. In addition, because these codes have been assigned 
to comment indicator ``NI,'' their status indicators and their APC 
assignments and payment rates, if applicable, are open to public 
comment and will be finalized in the CY 2014 OPPS/ASC final rule with 
comment period.

B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
codes to identify and group the services within each APC. The APCs are 
organized such that each group is homogeneous both clinically and in 
terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We have also 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:
    (a) Use of an operating, treatment, or procedure room;
    (b) Use of a recovery room;
    (c) Observation services;
    (d) Anesthesia;
    (e) Medical/surgical supplies;
    (f) 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);
    (g) Incidental services such as venipuncture;
    (h) 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

[[Page 68311]]

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 2012 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, multiple imaging services, and 
cardiac resynchronization therapy 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 cost of the services included in 
that APC, relative to the hospital 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 HOP Panel 
recommendations for specific services for the CY 2013 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 cost for an item or service in the group is more than 2 times 
greater than the lowest cost for an item or service within the same 
group (referred to as the ``2 times rule''). In the CY 2013 OPPS/ASC 
proposed rule (77 FR 45118), for CY 2013, we proposed to use the cost 
of the item or service in implementing this provision, as discussed in 
section II.A.2.f. of this final rule with comment period. 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 cost of the highest cost item or service within an 
APC group is more than 2 times greater than the cost 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 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 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 cost. In the CY 2013 OPPS/ASC proposed rule (77 FR 
45118), 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 2013.
    In the CY 2013 OPPS/ASC proposed rule, we identified APCs with 2 
times rule violations 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 2013 OPPS/ASC proposed rule. Rather, it was 
published and made available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 
times rule 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 accommodate proposed HCPCS code reassignments. In many 
cases, the proposed HCPCS code reassignments and associated APC 
reconfigurations for CY 2013 included in the proposed rule were related 
to changes in costs of services that were observed in the CY 2011 
claims data newly available for CY 2013 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 2013. Addendum B of the CY 2013 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 2012 Addendum B Update 
(available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B of this final rule with comment 
period (available via the Internet on the CMS Web site) identifies with 
the ``CH'' comment indicator the final CY 2013 changes compared to the 
codes' status as reflected in the October 2012 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 2013, we reviewed all the APCs to determine 
which APCs would not satisfy the 2 times rule. Then 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 utilization;

[[Page 68312]]

     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 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs that 
we proposed to exempt from the 2 times rule for CY 2013 based on the 
criteria cited above and based on claims data processed from January 1, 
2011, through December 31, 2011.
    We note that, for cases in which a recommendation by the HOP Panel 
appears to result in or allow a violation of the 2 times rule, we 
generally accept the Panel's recommendation because those 
recommendations are based on explicit consideration of resource use, 
clinical homogeneity, site of service, and the quality of the claims 
data used to determine the APC payment rates.
    For the CY 2013 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data for dates of service 
between January 1, 2011, and December 31, 2011, 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, 2011, and 
December 31, 2011, that were processed on or before June 30, 2012 and 
updated CCRs, if available. Thus, after considering the public comments 
we received on the CY 2013 OPPS/ASC proposed rule and making changes to 
APC assignments based on those comments, we analyzed the CY 2011 claims 
data used for this final rule with comment period to identify the APCs 
with 2 times rule violations. Based on the final CY 2011 claims data, 
we found that there are 19 APCs with 2 times rule violations, a 
cumulative decrease of 2 APCs compared to the proposed rule. We applied 
the criteria as described earlier to identify the APCs that are 
exceptions to the 2 times rule for CY 2013, and identified two 
additional APCs that meet the criteria for exception to the 2 times 
rule for this final rule with comment period:
     APC 0148 (Level I Anal/Rectal Procedures)
     APC 0254 (Level V ENT Procedures)
    In addition, we also determined that four APCs no longer violated 
the 2 times rule:
     APC 0128 (Echocardiogram with Contrast)
     APC 0173 (Level II Partial Hospitalization (4 or more 
services) for CMHCs)
     APC 0604 (Level 1 Hospital Clinic Visits)
     APC 0655 (Insertion/Replacement/Conversion of a Permanent 
Dual Chamber Pacemaker or Pacing)
    As discussed in section III.D.1.f. of this final rule with comment 
period, because of concerns raised regarding the 2 times rule violation 
for echocardiography services, and after further analysis of our claims 
data, we deleted APC 0128 and replaced it with two new APCs to correct 
the 2 times rule violation. Specifically, APC 0128 has been replaced 
with APC 0177 (Level I Echocardiogram with Contrast) and APC 0178 
(Level II Echocardiogram with Contrast). We have not included in this 
count those APCs where a 2 times rule violation is not a relevant 
concept, such as APC 0375 (Ancillary Outpatient Services when Patient 
Expires), with an APC cost set based on multiple procedure claims; 
therefore, we have identified only final APCs, including those with 
criteria-based costs, such as device-dependent APCs, with 2 times rule 
violations.
    Comment: Several commenters urged CMS to reassign HCPCS G0379 
(Direct admission of patient for hospital observation care) from APC 
0604 (Level 1 Hospital Clinic Visits) to APC 0608 (Level 5 Hospital 
Clinic Visits). In particular, the commenters requested that CMS assign 
HCPCS G0379 to the same APC as CPT code 99205 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 5)) when the Composite APC 8002 (Level I Extended Assessment & 
Management Composite) criteria are not met. The commenters indicated 
that the reassignment of HCPCS code G0379 to APC 0608 would be 
appropriate because it would resolve the 2 times rule violation in APC 
0604 and also align the resources with a high-level hospital visit when 
the criteria for Composite APC 8002 are not met. The commenters 
suggested that continuing to assign HCPCS code G0379 to APC 0604 would 
result in continued underpayments to HOPDs when the services and claims 
processing requirements for APC 8002 are not met for a direct referral. 
The commenters further added that this same issue was discussed during 
the February 2012 HOP Panel meeting, and that after the discussion, the 
Panel recommended that CMS reassign HCPCS code G0379 from APC 0604 to 
an appropriate APC. The commenters urged CMS to accept the Panel's 
recommendation.
    Response: Based on the recommendation of the HOP Panel at its 
February 2012 meeting, we reviewed our claims data for HCPCS code 
G0379. Our analyses revealed that the level of hospital resources used 
to provide HCPCS code G0379 is about the same as for CPT code 99205. In 
particular, our claims data show similar geometric mean costs for HCPCS 
code G0379 and CPT code 99205. Specifically, our claims data show a 
geometric mean cost of approximately $181 for HCPCS code G0379 based on 
2,368 single claims (out of 3,975 total claims), and a geometric mean 
cost of approximately $179 based on 95,017 single claims (out of 
104,246 total claims) for CPT code 99205. Based on our review of the 
claims data associated with HCPCS code G0379 and CPT code 99025, we 
agree with the commenters that the reassignment of HCPCS code G0379 to 
APC 0608 is appropriate. Because APC assignments are made based on 
consideration of both hospital resources and clinical homogeneity, we 
believe this reassignment improves the clinical homogeneity of APC 0608 
and appropriately aligns the resource costs of HCPCS code G0379 to 
those procedures assigned to APC 0608.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal with modification to reassign HCPCS 
code G0379 from APC 0604 to APC 0608, which has a final CY 2013 
geometric mean cost of approximately $181.
    Comment: One commenter indicated that APC 0623 violates the 2 times 
rule and requested that CMS review the costs associated with CPT code 
36260 (Insertion of implantable intra-arterial infusion pump (eg, for 
chemotherapy of liver)) and reassign the CPT code to a more appropriate 
APC.
    Response: Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 
APCs that violated the 2 times rule for CY 2013. APC 0623 does not 
appear in Table 17 and assignment of CPT code 36260 to APC 0623 does 
not violate the 2 times rule. As stated above, in determining whether a 
2 times rule violation exist in an APC, we consider only those HCPCS 
codes that are significant based on the number of claims. 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 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

[[Page 68313]]

use for establishing 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 cost. For this CY 2013 OPPS/ASC final rule with comment period, 
there are only 3 single claims for CPT code 36260 (each of the 3 total 
claims). Because CPT code 36260 does not represent a significant HCPCS 
code based on the number of claims, it does not violate the 2 times 
rule.
    After consideration of the public comments we received and our 
review of the CY 2011 costs from hospital claims and cost report data 
available for this final rule with comment period, we are finalizing 
our proposals with some modifications. Specifically, we are finalizing 
our exemption of 17 of the original APCs (that appeared in Table 17 of 
the CY 2013 OPPS/ASC proposed rule with comment period and also appears 
in Table 17 below) from the 2 times rule for CY 2013. We are removing 
four APCs that no longer violated the 2 times rule and decreasing the 
number of APC exceptions from 21 to 19 APCs, as described previously in 
this section. Our final list of 19 APCs exempted from the 2 times rule 
for CY 2013 is displayed in Table 17 below.
[GRAPHIC] [TIFF OMITTED] TR15NO12.029

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

[[Page 68314]]

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 Procedure, 
Not Discounted When Multiple) and the other set with a status indicator 
of ``T'' (Significant Procedure, Multiple Reduction Applies). 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 projected utilization for Medicare beneficiaries 
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 2013 OPPS/ASC 
proposed rule (77 FR 45120), for CY 2013, we proposed to retain 
services within New Technology APC groups until we gather sufficient 
claims data to enable us to assign the service to a clinically 
appropriate APC. The flexibility associated with this policy allows us 
to move a service from a New Technology APC in less than 2 years if 
sufficient 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 18 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 2013.
    In the CY 2013 OPPS/ASC proposed rule, we noted that currently, in 
CY 2012, there are three procedures described by HCPCS G-codes 
receiving payment through a New Technology APC(77 FR 45121). 
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 1505 (New 
Technology--Level V ($300-$400)); HCPCS code G0418 (Surgical pathology, 
gross and microscopic examination for prostate needle saturation biopsy 
sampling, 41-60 specimens) is assigned to New Technology APC 1506 (New 
Technology--Level VI ($400-$500)); 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 1508 (New Technology--Level VIII ($600-$700)). These 
HCPCS codes have been assigned to New Technology APCs since CY 2009.
    Analysis of the hospital outpatient data for claims submitted in 
CYs 2009, 2010, and 2011 indicate that prostate needle saturation 
biopsy procedures are rarely performed on Medicare beneficiaries. For 
OPPS claims submitted from CY 2009 through CY 2011, our final rule 
claims data show very minimal claims for HCPCS code G0417, G0418, and 
G0419, as shown in Table 18.

[[Page 68315]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.030

    Given the continued lack of cost data for these HCPCS codes, we 
proposed to reassign these procedures to an APC that is appropriate 
from a clinical standpoint (77 FR 45121). Specifically, we proposed to 
reassign HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 
(Level V Pathology), with a proposed APC payment rate of approximately 
$160 for CY 2013. We stated that we believe that all three procedures, 
as described by HCPCS codes G0417, G0418, and G0419, are comparable 
clinically to other pathology services currently assigned to APC 0661 
and likely require similar resources. Table 18 of the proposed rule 
listed the HCPCS G-codes and associated status indicators that we 
proposed to reassign from New Technology APCs 1505, 1506, and 1508 to 
APC 0661 for CY 2013.
    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 these codes to APC 0661. We note that APC 0661 is the same APC 
to which the other HCPCS G-code for prostate needle saturation biopsy 
procedure, G0416 (Surgical pathology, gross and microscopic examination 
for prostate needle saturation biopsy sampling, 1-20 specimens), is 
assigned. In addition, for the CY 2013 update, we are revising the long 
descriptor for HCPCS code G0416 to read ``Surgical pathology gross and 
microscopic examination for prostate needle saturation biopsy sampling 
10-20 specimens'' effective January 1, 2013. The final CY 2013 
geometric mean cost for APC 0661 is approximately $162.
    Table 19 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 2013. The final CY 2013 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).
[GRAPHIC] [TIFF OMITTED] TR15NO12.031


[[Page 68316]]


3. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly 
Enriched Uranium Sources
a. Background
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the elderly 
(Medicare) population. Technetium-99 (Tc-99m), the radioisotope used in 
the majority of such diagnostic imaging services, is currently produced 
in legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The Administration has established an agenda to eliminate domestic 
reliance on these reactors, and is promoting the conversion of all 
medical radioisotope production to non-HEU sources. Alternative methods 
for producing Tc-99m without HEU are technologically and economically 
viable, and conversion to such production has begun and is expected to 
be completed within a 5-year time period. We expect this change in the 
supply source for the radioisotope used for modern medical imaging will 
introduce new costs into the payment system that are not accounted for 
in the historical claims data.
    Full Cost Recovery, which is routinely considered in CMS payment 
under Medicare, is the accounting practice used by producers and 
suppliers to describe the recovery of all contributing costs. Unlike 
legacy sources that often benefit from government subsidized 
multifunction facilities, the cost of these alternative methods will be 
increased over the cost of medical radioisotopes produced using HEU 
because hospitals' payments to producers and suppliers will have to 
cover capital expense (such as, for example, the cost of building new 
reactors, particle accelerators, or other very long-term investments), 
as well as all other new industry-specific ancillary costs (such as, 
for example, the cost of long-term storage of radioactive waste). 
Hospitals that use medical radioisotopes that are produced from non-HEU 
sources can expect producers and suppliers to pass on to them the full 
impact of these costs.
    In the short term, some hospitals will be able to depend on low 
cost legacy producers using aging subsidized reactors while other 
hospitals will be forced to absorb the full cost of non-HEU alternative 
sources. Over several years, we believe that these cost differentials 
will promote increased regional shortages and create larger cost 
differentials and greater cost variations among hospitals. As a result, 
we believe this change in supply source will create a significant 
payment inequity among hospitals resulting from factors that are 
outside of normal market forces.
b. Payment Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45121 through 45123), 
we proposed to exercise our authority to establish ``other adjustments 
as determined to be necessary to ensure equitable payments'' under the 
OPPS in accordance with section 1833(t)(2)(E) of the Act. We stated 
that we do not believe that we can ensure equitable payments to 
hospitals over the next 4 to 5 years in the absence of an adjustment to 
account for the significant payment inequities created by factors that 
will likely arise due to the change in supply source for the 
radioisotope used commonly in modern medical imaging procedures. We 
proposed to provide an adjustment for the marginal cost for 
radioisotopes produced from non-HEU sources over the costs for 
radioisotopes produced by HEU sources. We stated that we believe such 
an adjustment would ensure equitable payments in light of the 
Administration's HEU agenda, market influences, cost differentials, and 
cost variations that will create significant payment inequities among 
hospitals.
    For CY 2013, we proposed to make an additional payment of $10, 
which is an amount based on the best available estimations of the 
incremental costs associated with non-HEU Tc-99m production as 
calculated using the Full Cost Recovery accounting methodology. We 
proposed to establish a new HCPCS code, QXXXX (Tc-99m from non-HEU 
source, full cost recovery add-on, per dose), to describe the Tc-99m 
radioisotope produced by non-HEU methods and used in a diagnostic 
procedure. Under the proposal, hospitals would be able to report this 
HCPCS Q-code once per dose along with any diagnostic scan or scans 
furnished using Tc-99m as long as the Tc-99m doses used can be 
certified by the hospital as coming from non-HEU sources and have been 
priced using a Full Cost Recovery accounting methodology. The HCPCS Q-
code would be used to pay hospitals for the additional (incremental) 
cost of using Tc-99m from a non-HEU source.
    Under the proposal, hospitals would not be required to make a 
separate certification of the non-HEU source on the claim; the 
inclusion of the new HCPCS code QXXXX on the claim would indicate that 
the hospital has met the conditions of the service definition as it 
does for any billed service. However, in the event of an audit, we 
stated that hospitals would be expected to be able to produce 
documentation that the individual dose delivered to the patient was 
completely produced from a non-HEU source. We proposed three ways in 
which hospitals could accomplish this.
    First, the hospital could produce documentation such as invoices or 
patient dose labels or tracking sheets that indicated that the 
patient's dose was completely produced from non-HEU sources and priced 
based on Full Cost Recovery. In this first case, the supplier would be 
expected to be able to trace a specific dose of Tc-99m to a completely 
non-HEU batch. Current pharmacy recordkeeping is generally able to 
trace all components of radiopharmaceuticals back to their source 
production batches. A hospital would not be compliant with the HCPCS Q-
code definition if the documentation indicated the supplier produced a 
mixed batch and labeled a fraction of the doses equal to the non-HEU 
fraction in the batch.
    Second, a hospital could produce documentation that the entire 
batch of Tc-99m doses derives from non-HEU sources for a specified 
period of time, for example, the time that a single non-HEU based 
generator is in use. This approach would obviate the need for specific 
dose tracking from a claims audit perspective, although that 
information is typically required for other purposes. An attestation 
from the generator supplier would be sufficient evidence for the 
hospital, as would invoices that show that all doses of Tc-99m during a 
specified period came from inherently non-HEU alternative sources.
    Third, if the industry was to implement labeling of generators and/
or doses with labels attesting to 100 percent non-HEU sources priced 
based on Full Cost Recovery, documentation of labeled isotope usage 
using either the specific dose approach or the 100 percent hospital 
usage approach could provide evidence of hospital compliance. The 
hospital would be required to retain appropriate documentation within 
the hospital (including pharmacy) records but would not need to keep 
any specific documentation within the individual medical record. Also, 
we would consider a dose to be priced based on Full Cost Recovery when 
the supplier could attest that the supply chain adheres to usual 
industry practices to account for Full Cost Recovery, specifically 
including the capital cost of sustainable production and the 
environmental cost of waste management.
    To reduce the administrative overhead for hospitals, we proposed 
not

[[Page 68317]]

to require hospitals to separately track additional costs for Tc-99m 
doses from non-HEU sources, but to include the cost of the radioisotope 
in the cost of the diagnostic radiopharmaceutical as usual, reporting 
only a token $1 charge for the HCPCS code QXXXX line. Under the 
proposal, we would continue to calculate the total costs of 
radionuclide scans using claims data, and would periodically 
recalculate the estimated incremental cost of Tc-99m from non-HEU 
sources based on Full Cost Recovery, using models relying on the best 
available industry reports and projections, and would adjust the 
payment for HCPCS code QXXXX accordingly, reducing the payment for the 
scans by the amount of cost paid through HCPCS code QXXXX payment. We 
stated that we believe this proposal allows us to continuously 
compensate for unanticipated changes in Tc-99m cost attributable to new 
non-HEU supply sources while avoiding a double payment for the 
increased cost.
    Comment: The vast majority of commenters conceptually agreed with 
CMS' proposed payment policy. However, the commenters differed in 
opinion on how CMS should implement a proposal to encourage hospitals 
to switch from Tc-99m derived from HEU sources to Tc-99m derived from 
non-HEU sources.
    Many commenters disagreed specifically with CMS' proposal to make 
an additional payment of $10 per dose for Tc-99m radioisotopes produced 
by non-HEU methods, used in a diagnostic procedure. These commenters 
agreed that an additional payment is necessary in order to ensure that 
hospitals are fully paid for the additional costs incurred for the use 
of non-HEU Tc-99m radioisotopes, but the commenters argued that the 
additional $10 payment is insufficient and inadequate to incentivize 
hospitals to change their current practices and transition purchases of 
Tc-99m to non-HEU sources. The commenters suggested that CMS instead 
adjust or increase the payment amount to more adequately cover any 
additional costs to providers.
    One commenter asked that CMS conduct a study of the actual costs at 
a time when non-HEU Tc-99m is actually available to hospitals, and 
propose an adjustment that will better reflect both the marginal 
additional costs of the non-HEU sources and the administrative and 
compliance burden on hospitals.
    Another commenter recommended that CMS establish HCPCS code QXXXX 
(Tc-99m from non-HEU sources, full cost recovery add-on, per dose) and 
make an interim payment of $10 per unit for CY 2013 and CY 2014. The 
commenter further suggested that, beginning in CY 2015, CMS calculate 
the cost of the service described by the recommended code based on the 
standard CMS payment methodology because the calculations will be based 
on charges for services furnished in CY 2013, and for CY 2015 and years 
following, CMS will have estimated costs on which to base the 
additional payment for the HCPCS Q-code. In addition, the commenter 
recommended that CMS carefully track the phase-out of the HEU sources 
and eliminate HCPCS code QXXXX once HEU is phased out of the market in 
the United States.
    Overall, most of the commenters encouraged CMS to continue to work 
with pertinent stakeholders and providers in the industry on this 
issue.
    Response: We agree with the commenters that $10 is not a large 
incentive payment to promote a conversion to non-HEU sources of Tc-99m. 
However, we are concerned that many commenters have mischaracterized 
this payment. We did not create an additional payment to promote the 
Administration's initiative to eliminate domestic reliance on legacy 
production processes producing Tc-99m from HEU, as that is outside the 
scope of the OPPS. Rather, the industry has conveyed to us that this 
conversion to non-HEU sources will occur in response to U.S. strategic 
policy, but that cost considerations have created barriers to that 
movement. One of the cost considerations is the fact that non-HEU 
sourced Mo-99, the Tc-99m precursor, is expected to cost more than 
current sources from legacy reactors, and this increased cost will 
adversely impact hospitals. In evaluating that concern, we determined 
that there is, in fact, a probability not only that costs will increase 
but that those costs will not be passed on uniformly as the industry 
converts. Therefore, we used our authority to ensure payment equity 
among hospitals by proposing to create this additional payment to 
address the incremental cost of obtaining Tc-99m from the new sources 
of supply. Although commenters have opined that a larger payment would 
be a better incentive to support non-HEU conversion, the purpose for 
the additional payment is limited to mitigating any adverse impact of 
existing payment policy and is based on the authority set forth at 
section 1833(t)(2)(E) of the Act.
    Most of the comments raising concerns about the inadequacy of the 
additional payment suggested that we did not account for the 
administrative costs involved in implementing this additional payment 
at the hospital level, at the radiopharmacy level, and at the level of 
the generator manufacturer. However, we note that previous discussions 
with the industry indicated that the actual costs of conversion, 
distinct from the administrative costs of billing, are confined to the 
producer (reactor) and the processor and are passed down through the 
supply chain from there. In our own analysis, we concurred with that 
finding and calculated a payment that would readily cover the 
additional cost of this change in supply as it is passed down the 
supply chain. We do not believe that it promotes efficiency to add 
administrative markup to this increased cost of a supply, especially 
given that we believe that the administrative cost of adding a new 
service into the billing system should be small at the hospital and the 
pharmacy levels. Moreover, due to the small absolute difference in cost 
between non-HEU and HEU sourced Tc-99m, we do not believe that 
significant inequities would exist in hospital costs until a 
significant amount of more expensive non-HEU Mo-99 enters the system, 
at which point any administrative cost would be spread over a large 
number of claims.
    Finally, we agree with commenters who stated that this additional 
payment should be updated as better data become available. We stated in 
the proposed rule that we intend to look at the amount of the add-on 
payment and potentially update it as better economic information 
becomes available. Although we did not limit ourselves to the 
methodology beyond a commitment to use the best available data, we also 
did not propose using our usual OPPS methodologies to update the 
payment. We had specifically advised hospitals that separate reporting 
of the cost of Tc-99m from non-HEU sources was not required for several 
reasons. First, a particular generator manufacturer could elect to 
provide HEU and non-HEU generators at the same averaged cost, a method 
that would enable the client hospitals to defray any overall cost 
increase as non-HEU generators became randomly available. Because there 
could still be an incremental cost differential incurred by doing 
business with that manufacturer as compared with a purely non-HEU 
manufacturer, our normal OPPS methods would show no incremental cost 
and thus could not be used to mitigate a payment inequity. Second, we 
noted that separate reporting of the costs of the two sources or the 
calculation and reporting of a cost differential would significantly 
increase the administrative burden on hospitals,

[[Page 68318]]

a burden of which we have been particularly mindful.
    Comment: Several commenters asked that CMS provide separate payment 
for all diagnostic radiopharmaceuticals, regardless of their per day 
cost, as this policy would support conversion to non-HEU sources. A few 
commenters recommended that CMS unpackage all radiopharmaceuticals that 
meet the annual packaging threshold. They also suggested that CMS 
unpackage all radiopharmaceuticals that use Tc-99m, regardless of their 
per day cost. One commenter suggested that the proposed add-on payment 
of $10 be made in addition to separate payment for the diagnostic 
radiopharmaceutical.
    The commenters emphasized their concern over increased costs of 
conversion to 100 percent non-HEU for radioisotopes. One commenter 
argued that separate payment would provide a direct, measurable 
incentive to the entire radiopharmaceutical market supply chain to 
support the efforts to convert from HEU to non-HEU sources. 
Additionally, the commenter stated that separate payment would allow 
CMS to obtain accurate hospital cost data on the cost of both HEU and 
non-HEU radiopharmaceuticals.
    Response: We have already discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66765 through 66768) the reasons why 
the agency has determined that it is appropriate to package payment for 
a diagnostic radiopharmaceutical into the payment for the nuclear 
medicine scan, and we have finalized this policy again in section 
II.A.3.f. of this final rule with comment period. However, specifically 
from the standpoint of this add-on payment to ensure equitable payments 
to hospitals, a separate payment for the diagnostic radiopharmaceutical 
would not unpackage the cost of the radioisotope from the much larger 
cost of the drug component, nor would it differentiate between HEU and 
non-HEU sources. Therefore, unpackaging the cost of the diagnostic 
radiopharmaceutical would not create a differential payment to ensure 
payment equity amongst hospitals.
    Comment: Several commenters were concerned with CMS' proposal that 
Tc-99m doses be derived 100 percent from non-HEU sources in order to 
receive the additional $10 payment. A few commenters stated that it 
would be impossible to accurately predict the percentage of Tc-99m 
doses that will be comprised 100 percent from non-HEU sources. Other 
commenters expressed concern over the significant costs that will be 
incurred for segregating 100 percent non-HEU sources, especially in the 
radiopharmacy.
    Response: We agree with the commenters that it will be impossible 
to accurately predict the percentage of Tc-99m doses that will be 
comprised of 100 percent of non-HEU sourced material, but that is 
because it will be impossible to predict the percentage of non-HEU Tc-
99m available to manufacturers at any point in time. This presumption 
is one of the reasons that led us to the conclusion that payment for 
doses where 100 percent comes from non-HEU sources was the only 
reasonable option. We do not need to predict the amount of non-HEU Mo-
99 available to the industry to establish a blend; instead, the HCPCS 
Q-code can be used whenever and wherever enough non-HEU Tc-99m is 
available to be kept separate down to the level of the generator or 
patient dose. Multiple codes to reflect different blends are not 
needed, and we do not need to create smaller payments for blends that 
reflect smaller amounts of non-HEU material. Because payment must be 
driven by cost, a 20-percent blend would be limited to 20 percent of 
the $10 cost or $2, and hospitals are already concerned that the $10 
additional payment is a small payment when they consider it against the 
effort involved in making tracking and billing changes.
    However, we do not believe that any costs created by changes in 
radiopharmacy procedures will be significant in the charges passed on 
to hospitals. We do understand that there may be some instances in 
which a radiopharmacy will have both a non-HEU and an HEU generator, 
and the pharmacy will need to determine whether it wants to keep those 
sources separate or blend them and eschew labeling of a non-HEU source. 
We also understand that this may be a larger issue at the generator 
manufacturer level, especially very early in the conversion when non-
HEU Mo-99 is scarce. On the other hand, when non-HEU Mo-99 is scarce, 
the incremental cost of higher priced non-HEU Mo-99 is small and the 
blending of small amounts of non-HEU Mo-99 will not create payment 
inequities among hospitals. We expect that as conversion progresses and 
more non-HEU Mo-99 enters the supply chain, manufacturing processes may 
evolve. Ultimately, there is no requirement to use this HCPCS Q-code or 
label non-HEU based Mo-99; the payment exists as a tool if it is 
necessary to reduce payment inequities that might occur as a 
consequence of industry conversion to non-HEU based Mo-99.
    One of the concerns about reporting doses derived from 100 percent 
non-HEU sources had to do with compliance concerns if, in the process 
of switching between an HEU and a non-HEU run, the manufacturer or 
pharmacy did not add in an extra step of flushing lines to ensure that 
cross-contamination did not occur. Our understanding is that using 
different sources for consecutive manufacturing runs would not create 
source contamination of more than 1 or 2 percent based on usual 
manufacturing processes. We note that it is not our intent to introduce 
unnecessary inefficiencies solely to support payment, and in this case 
we can confirm that production steps, such as cleaning lines, should be 
driven by FDA manufacturing requirements, not by payment 
artificialities. We believe that manufacturing steps that do not risk 
reducing the non-HEU sourced Mo-99 or Tc-99m to less than 95 percent of 
the generator, elution or dose (that is, do not risk reducing the 
content of the dose supplied to the patient to less than 95 percent 
non-HEU sourced Tc-99m) are consistent with a product that is 
completely derived from a non-HEU source. Therefore, we are modifying 
our proposal to state that any dose of Tc-99m that can be traced to a 
Mo-99 supply containing no more than 5 percent HEU sourced Mo-99 shall 
be considered to be completely derived from non-HEU sources for the 
purposes of this final rule with comment period, this additional 
payment, and any compliance practices that support it. It is our 
understanding that the normal manufacturing records will still support 
processes that created the non-HEU supply.
    Comment: One commenter expressed concern regarding the 
administrative and financial burden that hospitals may incur upon 
adoption of this proposed policy. The commenter stated that these 
burdens may exceed the marginal additional cost of moving to non-HEU 
sources. The commenter believed that the proposed policy would result 
in additional administration and documentation burdens which include 
the following additional expenses: expenses for developing and 
maintaining policies to track, certify, and document HEU versus non-HEU 
sources in order to use the newly required HCPCS Q-code; new compliance 
program checks and monitoring to ensure the appropriate codes are used 
and documentation is maintained should an audit be conducted; 
additional personnel time and resources to create and maintain line 
items on the hospital charge master for non-HEU versus HEU codes and 
charges; and additional resources to

[[Page 68319]]

develop nuclear medicine department information technology 
infrastructure, as well as billing policies for documentation and use 
of the new HCPCS Q-code.
    Another commenter also believed that this proposal would create a 
significant burden on hospitals by requiring them to obtain, document, 
and track information from the supplier and thereby create an 
unnecessary level of complexity for hospitals that could result in code 
errors and omissions on claims. The commenter urged CMS not to finalize 
this proposal.
    Response: We do not believe that this additional payment will 
result in a significant administrative burden to hospitals. We note 
that most hospitals have computerized inventory and billing systems 
that are able to track low-cost items such as needles and aspirins. We 
have reiterated in our response to public comments in this final rule 
with comment period that we expect hospitals requesting this additional 
payment to be able to track a dose that has been labeled or claimed as 
``non-HEU sourced'' and do not expect hospitals to audit the validity 
of such claims made by their suppliers. We also note that the cost of 
adding a new code to the hospital chargemaster is not large, and that a 
hospital is not being subject to a significant payment inequity if the 
cost of adding a new code to the chargemaster actually exceeds the 
added cost of non-HEU sourced Tc99m to the hospital. Hospitals that are 
not experiencing high volumes of significantly increased costs are not 
obligated to use this additional payment as its use is entirely 
optional.
    Comment: One commenter asked that CMS confirm in this final rule 
with comment period that hospitals will not be required to audit or 
otherwise independently verify manufacturer or radiopharmacy 
documentation that a dose/injection meets the standard of non-HEU 
priced at Full Cost Recovery.
    A few commenters expressed concern regarding the compliance and 
liability burden that adopting this policy may place on hospitals. 
These commenters stated that hospitals may be uncomfortable attesting 
that the supplies they receive are from non-HEU sources when there is 
no reliable guarantee that the products are from non-HEU sources. 
Further, the commenters stated that they believe that the term 
``attesting'' in the ASP model is significantly different from what 
they believe is the original intent of this proposal. Therefore, the 
commenters suggested that CMS clarify the adequate documentation 
necessary to confirm that the provider obtained a dose that is 100 
percent from non-HEU sources.
    Response: We are aware that providers must exert considerable 
effort to conscientiously perform their compliance responsibilities 
over such a vast health care system, and we specifically attempted to 
offer examples of acceptable compliance steps to alleviate that burden 
in this instance. We acknowledge that the end product used by hospitals 
is effectively homogenous, and there is no practical way for a hospital 
to prove chemically that a supply purported to be derived from a non-
HEU source truly meets those requirements. On the other hand, the 
radiopharmaceutical industry is a heavily regulated industry closely 
monitored by the Food and Drug Administration, and it is our 
understanding that if a supplier indicates that a source is non-HEU, 
manufacturing records will be able to confirm that. We are confident 
that claims by suppliers as to the source of the Tc-99m used can be 
satisfactorily audited through usual manufacturing processes without 
creating additional requirements for hospitals. We do not expect 
hospitals to assay doses of drugs to ensure that they received what the 
invoice claimed, and we do not expect any chemical or physical 
verification here. It was our intent in the proposed rule to indicate 
that providers are expected to exercise due diligence, and to ensure 
that their claims are supported by internal records of some type, but 
that facilities could accept any tracking mechanism by a supplier 
(invoice, label, contract, among others) regarding a non-HEU source as 
satisfactory proof for the purposes of the facility.
    We also note that any use of the word ``attestation'' in the 
proposed rule was meant only to indicate a formal statement by one 
party to assure another party of the source and composition. We further 
note that these were examples in the proposed rule rather than 
requirements.
    Comment: Several commenters asked that CMS publish the methodology 
and data used to establish the additional payment amount of $10 for Tc-
99m derived from non-HEU sources.
    Response: There are two data sources on which we relied. First, the 
Organization for Economic Cooperation and Development--Nuclear Energy 
Agency (OECD-NEA) has published several economic analyses of the world 
market for Tc-99m, which are pertinent for the United States because, 
at present, our entire supply comes from foreign sources. Although some 
members of the industry have opined that these data are not accurate 
because the data include little information from U.S. suppliers, the 
fact remains that there is currently no supply available domestically. 
Thus, while the data we used may not reflect all of the unique market 
forces present in the domestic market, this data source provides the 
best estimation of the costs of non-HEU sources compared to HEU sources 
because the manufacturing steps are primarily performed overseas and 
therefore reflect the global market. Nonetheless, as an additional data 
source, we invited industry entities to submit additional information 
regarding their manufacturing and supply costs, production levels, and 
prices. However, given that the industry is small with limited numbers 
of competitors at each level of the supply chain, most American 
companies were reluctant to provide information and were insistent on 
confidentiality (as protected by FOIA Exemption 4) to safeguard the 
sensitive (business competitive) information that they did share. 
Therefore, we accepted supplemental information from the industry and 
pledged to maintain its confidentiality, and consequently are unable to 
provide details of the additional information. We can disclose our 
methodology and refer readers to the OECD-NEA models that form the 
basis of our model, noting that the supplemental information submitted 
to date has not significantly altered the conclusions drawn by the 
OECD-NEA.
    To estimate costs, we tracked costs through the entire supply 
chain, using a building block approach to add the cost of each step 
onto the steps that occurred before it. Because the OECD-NEA provided 
ranges rather than point estimations, we used an averaging approach to 
factor in the possible low cost, the possible high cost, and the most 
likely ``expected'' cost. This is a common estimation technique used in 
business when significant uncertainty exists. By avoiding optimistic 
assumptions, we were able to model a payment that reflects not only the 
likely costs but ones that would also be adequate to cover unexpected 
costs in one or more of the manufacturing steps.
    In response to the request to provide as much detail about our 
methodology as possible, we are detailing that methodology here. We 
used a supply chain model to accumulate costs through the Tc-99m supply 
chain based on--
    (Unit Cost of Supply/Production Efficiency) + Unit Production Cost 
+ ((Fixed Production Costs + Overhead)/Units Produced) = Unit 
Production Cost = Downstream Unit Cost of Supply.
    In tracking units (efficiency), we allowed for product loss during 
production and for product loss as a

[[Page 68320]]

function of time (decay). We applied this model across a supply chain 
that consisted of--
    Irradiator/Producer > Processor > Generator Manufacturer > Nuclear 
Pharmacy > Hospital > Patient.
    Using a Program Evaluation and Review Technique (PERT) 3-point 
estimation applied to costs, we based the upper and lower bounds on the 
OECD-NEA economic models for Full Cost Recovery (2011) and non-HEU 
Conversion (2012), given that U.S. supply is based on the global 
market. We then varied the expected value to model a range of outcomes. 
Finally we calculated the incremental cost of process changes by 
subtracting current costs. Almost all of the incremental costs of 
switching to non-HEU sources occur in the irradiation and the 
processing steps, with very little impact on generator assembly, 
generator elution, or the preparation of the patient dose. We noted 
that any artificial costs of tracking during conversion would not be 
reflected in the final post-conversion costs of supply. Due to the wide 
variation in cost projections, we rounded up to the nearest $5 as most 
of the estimators could not be regarded as sufficiently precise to 
justify a more precise value until actual cost data become available. 
This methodology resulted in a projection that fully accounts for the 
cost of conversion in almost all probable scenarios and that also 
accounts for or significantly offsets the costs of Full Cost Recovery 
under most combinations of assumptions. Therefore, the $10 value can be 
expected to offset any payment inequities under most likely 
combinations of cost changes within the Tc-99m supply chain.
    Comment: One commenter stated that suppliers of Mo-99 are currently 
working toward full conversion to non-HEU sources by 2015. However, the 
commenter stated that it is estimated that only 10 percent of the Tc-
99m doses used in the United States could be produced from 100 percent 
non-HEU sources in 2013. The commenter further believed that the 
proposed policy will cause a substantial increase in material costs, 
require duplicative effort in the preparation of radiopharmaceutical 
doses, add additional administrative costs, increase the costs for non-
HEU products, and create a disincentive for hospitals that cannot 
purchase non-HEU products as they would be unwilling to pay higher 
prices for their nuclear pharmaceutical products when they are not 
receiving any additional benefits.
    The commenter instead suggested that these impacts can be reduced 
by establishing a threshold amount of Mo-99 that must be used by a 
generator manufacturer for CY 2013, based on information provided by 
the OECD-NEA and other pertinent stakeholders. The commenter stated 
that this amount could then be adjusted upward in later years. The 
commenter further explained that, in order for a technetium generator 
to be considered ``compliant'' with the requirements for the additional 
payment, the manufacturer of that generator would need to certify to 
providers that it used at least the established threshold amount of 
non-HEU sourced Mo-99 in the production of its generators for CY 2013 
and for subsequent quarters. In turn, the hospitals that purchased the 
Tc-99m doses prepared by complaint manufactures would receive separate 
payment during that specific period. The commenter stated that this 
approach would require a downward adjustment to the proposed $10 
additional payment to reflect the lower amount of non-HEU Mo-99.
    Response: We acknowledge the desirability of a simplified payment 
for non-HEU sourced material in the generators, and agree that the 
proposed blended payment would be much easier to implement. However, we 
note that we do not have the authority to create that type of payment. 
Within the OPPS, we depend on reported costs, as calculated from claims 
and cost report information, to set prospective payments. Our authority 
to deviate from this system in this instance is based on the authority 
of the Secretary to adjust payments if necessary to ensure payment 
equity among hospitals. A payment adjustment based on industry-wide 
thresholds would not create a payment differential among those 
hospitals with predominantly higher cost non-HEU sources and those 
hospitals with predominantly lower cost HEU sources. However, although 
we lack the authority to create a special payment to cover rising costs 
at the industry or manufacturer level, we note that the normal OPPS 
payment mechanism does exactly that: as costs rise, those costs will be 
passed on globally to hospitals and reflected in their charges adjusted 
to costs and, therefore, ultimately reflected in the prospective 
payments calculated by our usual methodology. This add-on payment 
merely ensures equitable payments to hospitals through the transition 
where non-HEU sources are not uniformly distributed, while our 
established OPPS mechanisms will ensure that the total costs of new 
sources are incorporated into final payments year by year. We also have 
previously stated that we believe that costly changes in manufacturing 
solely to facilitate a transitional payment are not likely to occur, 
and that instead the payment can be expected to trigger small 
administrative changes. We expect that expensive changes in industry 
processes will not be driven by an interim payment but will occur only 
when those changes will continue to be necessary or desirable after the 
transition is complete.
    Comment: A few commenters suggested that CMS, at a minimum, allow a 
payment adjustment for lower percentages (less than 100 percent) of 
non-HEU sources and institute a multiyear phase-in period. One 
commenter suggested that CMS establish a ``threshold quotient'' of non-
HEU content in Tc-99m radiopharmaceuticals during CY 2013 and allow 
partial payment of the $10 additional payment amount. The commenter 
explained that this would require CMS to accept a given percentage 
amount of non-HEU source content and pay a corresponding percentage of 
the proposed $10 additional payment amount. The commenter gave the 
example of a payment of $1.50 for Tc-99m sources that contain 15 
percent non-HEU, as $1.50 is 15 percent of the $10 proposed additional 
payment amount. The commenter also suggested that CMS could further 
promote the conversion to 100 percent non-HEU sources by adopting 
industry-wide targets for conversion, which would include conversion to 
25 percent in CY 2013, 50 percent in CY 2014, 75 percent in CY 2015, 
and 100 percent in CY 2016.
    Another commenter suggested that a 10-percent industry threshold 
program be considered for CY 2013 in lieu of the 100 percent non-HEU 
sources proposed requirement. The commenter stated that a payment of no 
less than $10 could be given for non-HEU documented doses and that this 
would be more reflective of the short-term non-HEU Mo-99 supply.
    Response: As noted above, our authority to establish this 
additional payment is based on the necessity to ensure equitable 
payments to hospitals, an authority that does not allow us to develop 
payments to promote the conversion of the industry to non-HEU sources. 
Therefore, our ability to create industry-wide payments is limited. We 
considered using one or more thresholds ranging from 10 percent to 80 
percent to pay for blended sources that were not derived entirely from 
non-HEU sourced Mo-99, but determined that to be impractical for 
several reasons. First, the use of multiple codes to describe different 
mixtures of HEU and non-HEU

[[Page 68321]]

sourced Mo-99 is immeasurably more complex than a simple single all or 
nothing coding choice, and many commenters were concerned about the 
complexity of even our proposed coding schema. Second, any blend of HEU 
and non-HEU sourced material will, as mentioned by the commenters, have 
reduced additional costs in proportion to the percentage of the blend. 
Because many commenters were concerned that $10 was small compared to 
the administrative effort they believed might be involved, we did not 
believe that a significantly smaller payment would be acceptable to 
that level of the supply chain.
    Comment: Several commenters suggested that CMS extend the $10 
additional payment for non-HEU sources for at least 5 years. The 
commenters stated that this period of time will be required to convert 
fully to non-HEU sources. Another commenter requested clarification of 
the proposed implementation date and methodology for calculating the 
total costs of radionuclide scans using claims data and the periodic 
recalculation of the estimated marginal cost of non-HEU Full Cost 
Recovery sources using models relying on the best available industry 
reports and projections, resulting in an adjustment in the payment of 
the proposed HCPCS code QXXXX accordingly, reducing the payment for the 
scans by the amount of cost paid through the HCPCS code QXXXX payment.
    Response: Although we typically propose only the payments for the 
subsequent calendar year except in the case of adjustments that need to 
be phased in over multiple years, we did state our current expectations 
of the state of the industry and our expectations of a probable need 
for this additional payment over multiple years. We stated that our 
current expectation is that the transition to non-HEU sourced Mo-99 
will be completed within 4 to 5 years. Therefore, we expect there may 
be a need to make differential payments for a period of 4 to 5 years. 
We will reassess, and propose, on an annual basis, whether such an 
adjustment under section 1833(t)(2)(E) of the Act continues to be 
necessary and whether any changes to the adjustment are needed. Again, 
our current expectation is that this additional payment will be needed 
for the duration of the industry's conversion to alternative methods to 
producing Tc-99m without HEU, which is expected to be completed within 
4 to 5 years.
    With respect to the request for clarification regarding future 
adjustments of this proposed payment, we note that the payment is being 
applied in addition to the standard procedure payment amount for 
nuclear medicine scans, including the diagnostic radioisotope and 
pharmaceutical, that is paid based on reported costs. As more non-HEU 
sourced Mo-99 is used, the costs reported by hospitals will contain 
costs associated with non-HEU conversion. Because the HCPCS code QXXXX 
is the indicator of non-HEU Mo-99 use and is also the vehicle for the 
additional payment, the rate at which extra payments are made will 
exactly follow the rate at which non-HEU sources are reported with 
their attendant additional costs. Therefore, even as we increase the 
payment for the nuclear medicine scan with radioisotope in the future 
due to increasing radioisotope costs, we expect to offset (reduce) the 
payment by the amount of the non-HEU add-on payment to avoid paying 
twice for non-HEU costs. This approach has the effect of using the add-
on payment to make an additional payment for the cost of non-HEU 
sourced Mo-99 in the year that the cost appears, rather than waiting 18 
months until the cost is reflected in the claims data. Consistent with 
our OPPS methods, though, we will still be basing the final payments 
for the nuclear medicine scans on the aggregate costs of the scan and 
its radioisotopes and pharmaceuticals as reported by hospitals. For 
example, suppose that 20 percent of hospitals in CY 2013 report non-HEU 
Tc-99m usage billed with HCPCS code QXXXX. The OPPS payment for the 
scan with its diagnostic radioisotope will still reflect 100 percent of 
the reported CY 2011 costs. The $10 from HCPCS code QXXXX will 
represent additional money because the higher cost non-HEU Tc-99m was 
not reflected in the CY 2011 cost data. However, when we set the rates 
for CY 2015, those 20 percent of the hospitals who used non-HEU Tc-99m 
in CY 2013 will have reported higher costs for scans in the CY 2013 
claims data because they had an additional cost from the non-HEU Tc-99m 
that they used. To eliminate a double payment, we will need to make an 
adjustment, such as removing the total dollars paid by HCPCS code QXXXX 
in CY 2013 (that is, the estimated additional cost of the non-HEU 
sourced isotope in those 20 percent of the claims) from the total 
reported procedure dollars in CY 2013 before setting the base procedure 
rate for CY 2015. We note that this offset does not reduce the payment 
for the scan below its current level; it only keeps the payment from 
going up as the cost of the radioisotope rises, because the increased 
cost of the radioisotope is being paid separately using HCPCS code 
QXXXX. In fact, in CY 2015, the utilization of non-HEU sourced Tc-99m 
should have continued to climb well beyond 20 percent. As in CY 2013, 
the dollars associated with increased utilization, that is, HCPCS code 
QXXXX billing in excess of the 20 percent, will again represent 
additional money over the total costs reflected in the CY 2013 claims.
    Comment: A few commenters suggested that CMS alter the description 
of the proposed HCPCS code QXXXX by adding the word ``study'' into the 
descriptor in order to make this definition more consistent with the 
arcana of the radiopharmaceutical industry. The commenters stated that 
the descriptor for the HCPCS Q-code therefore would be HCPCS code QXXXX 
(Tc-99m from non-HEU source, full cost recovery add-on, per study 
dose). The commenters stated that it would be logical to add the word 
``study'' because several nuclear cardiology procedures could require 
multiple Tc-99m doses administered alone with one CPT procedure code. 
Thus, they believed that providers would purchase one to three study 
doses. The commenters further suggested that CMS clarify in this final 
rule with comment period that the add-on payment would apply to each 
per study dose of the complete service as described by the CPT 
procedure code. Therefore, the commenters stated, providers would be 
able to bill the HCPCS Q-code with multiple units and be paid $10 per 
the number of study doses provided during the procedure described by 
the CPT code, as appropriate.
    Response: We acknowledge that it was our intent that this 
additional payment would be applied per study dose, such as the dose 
for the study performed at rest and the dose for the study performed 
with exercise. Therefore, we accept these recommendations and are 
modifying the proposed HCPCS definition to include the word ``study'' 
as follows: HCPCS code Q9969 (Tc-99m from non-highly enriched uranium 
source, full cost recovery add-on, per study dose).
    Comment: Several commenters requested that CMS clarify the proposal 
which requires a reduction to the payment for the scans by the amount 
of cost paid through the proposed HCPCS code QXXXX. The commenters were 
not sure whether the payment offset would be applied uniformly to all 
hospitals or only to those hospitals reporting non-HEU source doses. 
The commenters further requested that no reduction in

[[Page 68322]]

payment for nuclear scans by made as a result of the additional $10 
payment amount.
    Response: Although commenters were not making this comment in the 
context of budget neutrality, the considerations that caused us to 
create a payment offset were driven by precisely that statutory 
constraint. As discussed above, because hospitals will not be required 
to separately report costs for non-HEU radioisotopes, all increased 
costs will be reported as part of the charges for the nuclear scans. To 
preserve budget neutrality, an additional payment in one place must be 
accompanied by an offset somewhere else. To prevent double payment for 
the radioisotope, this offset will have to come from the payment for 
nuclear scans. Because all hospitals use the same codes for scans, and 
because parallel families of codes for scans using HEU and non-HEU 
sourced Tc-99m were not feasible, the offset will be applied to all 
hospitals. However, this offset will not occur until the claims data 
show non-HEU payments, at which time reported charges will presumably 
also reflect these increases in radioisotope costs. Thus, under the 
current expectations, if 10 percent of CY 2013 claims for a given 
nuclear scan show a $10 non-HEU add-on payment, $1 (10 percent of $10) 
will be offset in CY 2015 from the nuclear scan payment. However, if 
the 10 percent of hospitals claiming the $10 add-on payment also had 
$10 in increased costs, the calculated cost of a scan using CY 2013 
data will have increased by $1 (10 percent of $10). The payment for CY 
2015 would therefore increase by $1 because of the new costs in the 
claims data, and that new $1 will then be removed (offset) to go 
exclusively to the hospitals that are actually using the non-HEU 
sourced Tc-99m and are carrying the added cost. Therefore, we note that 
we are not reducing payments to all hospitals to offset the cost of 
this payment; rather, we are ensuring that the added costs of the non-
HEU sourced Tc-99m go only to the hospitals incurring the costs and 
that their payments are not diluted by increased payments to uninvolved 
facilities. In this way, we are not offsetting the current nuclear scan 
payment by the $10 non-HEU add-on payment even though we currently plan 
to offset future payment increases to the extent necessary to avoid 
double payments, as those increased costs will be included in the costs 
reported by hospitals.
    Comment: Several commenters suggested that CMS use the average 
sales price (ASP) methodology to establish the additional payment 
amount for Tc-99m based on non-HEU sources. One commenter suggested 
that CMS use the ASP data when available as a benchmark for determining 
costs that are packaged. A few commenters suggested that payment based 
on the ASP methodology be applied in the same manner CMS pays for 
therapeutic radiopharmaceuticals. The commenters stated that this will 
establish transparency in the ratesetting for radioisotopes derived 
from non-HEU sources.
    Response: We note that the ASP methodology does not apply to the 
Tc-99m radioisotope but only to the radiopharmaceutical that results 
from the combination of the isotope with the pharmaceutical moiety. 
Moreover, the ASP methodology is particularly unsuited to use on the 
radioisotope component alone because the isotope does not have an ASP. 
The radioisotope is typically produced by a generator and, whereas the 
ASP of a generator can be determined, the cost of a single dose is 
highly dependent on the number and timing of elutions of the generator, 
information that is not captured in the ASP. In fact, ASP is marginally 
valuable for Tc-99m radiopharmaceuticals only because the cost of the 
drug component is typically large compared to the cost of the isotope. 
This fact also argues against the comment that ASP would increase 
``transparency'' of the cost of Tc-99m: There is no additional 
transparency of an isotope packaged into a payment with the drug than 
there is for an isotope packaged into a payment with the scan. Finally, 
the use of the ASP methodology would not differentiate between the cost 
of a non-HEU sourced Tc-99m and the cost of using an HEU source, which 
is the purpose of this payment. The proposed additional payment 
accounts for the increased cost of the isotope, which meets both 
incremental payment and transparency goals.
    Comment: A few commenters recommended that CMS establish parallel 
codes for the use of HEU and non-HEU sourced radiopharmaceuticals to 
collect cost data for future ratesetting. Most of the commenters were 
concerned with the complexity involved in adding and reporting a single 
code.
    Response: We do not believe that an entire set of parallel codes 
would lessen the complexity or the administrative cost and, in fact, we 
believe it would significantly increase them. We acknowledge that this, 
like many other options we have had on other issues, could 
significantly improve the accuracy of our ratesetting. However, based 
on other comments from the hospitals that would have to use these 
parallel codes, we do not believe that we or the hospitals would 
consider the increased administrative cost to be worth the slight 
increase in payment precision.
    Comment: A few commenters requested that CMS clarify the meaning of 
``calculation by `Full Cost Recovery' ''. Some commenters also 
requested clarification of what this method encompasses.
    Response: Full Cost Recovery is a concept that is well known to the 
producers, processors, and manufacturers but is not commonly discussed 
by radiopharmacies and hospitals. Unlike other supplies, radioisotopes 
typically require nuclear reactors for initial production, and many of 
the capital and environmental costs are not captured in the prices. For 
example, some reactors were built decades ago for other purposes and 
can be used (relatively) ``free of charge'' because it costs almost the 
same to run the reactor and do nothing as it does to run the reactor 
and irradiate some uranium. This has implications on the accounting of 
capital costs, which, in many cases, were or are recovered by other 
uses to which the reactors were put. Similarly, moderately enriched 
uranium left over from previous programs may be cheaply downgraded and 
provided at a ``low'' cost because the alternative is to allow it to 
decay in storage with no consequent benefit. In both cases, the Tc-99m 
produced is obtained by hospitals at a bargain price, but not at a 
price that is sustainable because the old reactors will need to be 
replaced and the enriched uranium will be depleted. There are other 
unique costs for radioisotopes, such as the need to make arrangements 
for long-term storage of radioactive waste. Failure to account for 
those costs can lower the price of the radioisotope for some hospitals 
today but creates a long-term problem in that other hospitals must pick 
up the costs. Full Cost Recovery is the accounting principle that 
ensures that all of these long-term costs are included in cost 
calculations.
    Full Cost Recovery is obviously not important to the hospitals 
although, because it is critically important in providing for the long-
term supply of the radioisotope, it is actually a major underlying 
cause of payment inequities associated with this transition. From the 
standpoint of this final rule with comment period then, Full Cost 
Recovery is coupled to the non-HEU criterion for purposes of the 
additional payment. Just as manufacturers will indicate that certain 
Tc-99m doses are derived from non-HEU sources, it is our expectation 
that the irradiator (reactor) and the processor of the non-HEU Mo-

[[Page 68323]]

99 will be able to confirm that Full Cost Recovery accounting was used 
in setting the price of the non-HEU sourced Mo-99, an accounting 
principle that is considered integral to the conversion to non-HEU 
sources. We expect the generator manufacturer to affirm to the 
radiopharmacy that its source is non-HEU, with this designation 
including accounting according to Full Cost Recovery. As mentioned 
earlier, we consider this affirmation to be sufficient for the 
radiopharmacy and the hospital, regardless of whether the affirmation 
is in the form of a letter or statement, a notation on the invoice, or 
a label on the vial or tracking slip. We do not believe that 
independent verification is necessary or even possible for the 
radiopharmacy and the hospital and require only their due diligence in 
accepting claims made by their suppliers. The costs of new capital 
expenses such as new reactors, including all their associated costs, 
are factored into the manufacturer's price of the Tc-99m and passed 
down to hospitals, and the additional payment is made to account for 
those unique costs that the hospitals will incur.
    Comment: One commenter asked that CMS delay finalizing the proposal 
until CY 2014 so that hospitals have adequate time to implement the 
proposed change. Another commenter recommended that CMS postpone the 
implementation of the proposed policy until CY 2015, so that hospitals 
could avoid the complexities of handling and segregating HEU sources 
versus non-HEU sources. Another commenter expressed doubt that 
hospitals would be able to obtain Tc-99m derived from non-HEU sources 
in CY 2013. Therefore, they requested that the proposal be deferred 
until CY 2014.
    One commenter expressed concern about the availability of non-HEU 
sources because they were told by their suppliers that a 100 percent 
non-HEU source supply is unavailable for CY 2012 and also will be 
unavailable by CY 2013. The commenter questioned whether this issue 
should be addressed by a payment system and suggested that this issue 
instead be addressed by the Administration as opposed to CMS. The 
commenter further suggested that the implementation of this proposal be 
delayed until there is some availability of 100 percent non-HEU sourced 
isotopes in this country.
    Response: We considered the timing of this proposed additional 
payment after advice and consultation from both the Mo-99 industry and 
other U.S. agencies. We were initially advised that it is the 
understanding of the industry that conversion to non-HEU sources is 
already underway and is expected to be completed by the end of 2016. We 
understand this remains the case. We are aware that currently 
commercial Tc-99m is not readily available in the United States as it 
is in the world market, but that there also has not been a demand from 
within the United States. We do understand there is an expectation that 
it will make an appearance in CY 2013.
    We acknowledge that the supply of non-HEU sourced Mo-99 may be 
small in CY 2013. However, we believe, as the industry believes, that 
conversion to non-HEU sourced Tc-99m is inevitable and will occur over 
the next several years. From the standpoint of the Medicare payment 
system, it is important for us to have some mechanism in place to 
mitigate any adverse impact on hospitals. If the supply is very low, 
hospitals will not be significantly disadvantaged and may elect to not 
make use of this additional payment in CY 2013. Conversely, if the 
supply starts to increase, some hospitals may be forced to shoulder a 
disproportionate share of the cost due to supplier relationships and 
contract status; this additional payment will create an opportunity for 
those hospitals to mitigate that cost. We fully expect that utilization 
of this additional payment will be small in CY 2013 but will increase 
in CYs 2014, 2015, and 2016 as this conversion occurs. We reiterate 
that the normal mechanisms of the OPPS will ultimately incorporate 
increased costs into APC calculations with resultant increased payments 
for the nuclear scans that use this radioisotope that will allow us to 
retire or modify this payment and incorporate the entire additional 
cost into the base payment. This additional payment will enable 
hospitals to avoid any inequities caused by suddenly rising local costs 
that are not able to be captured in a timely fashion by usual methods. 
Based on the timetable for conversion and the rescue nature of the 
payment, we believe that a delay until CY 2014 or CY 2015 is 
unnecessary.
    Comment: Several commenters suggested that an additional separate 
payment be given in other Medicare settings, including the physician's 
office and ASC, for radioisotopes derived from non-HEU sources. One 
commenter recommended that these additional payments also be made under 
Medicaid, the Department of Defense/Veterans Affairs, Indian Health 
Services health programs, and any other government health programs 
where nuclear medicine procedures are covered. This commenter 
acknowledged that its comments are outside the scope of the OPPS/ASC 
final rule with comment period.
    Response: We agree with the commenter that addressing additional 
payments for radioisotopes derived from non-HEU sources in other 
settings and payment systems, such as the Physician's Office, Medicaid, 
the Department of Defense/Veterans Affairs, Indian Health Services 
health programs, and any other government health programs where nuclear 
medicine procedures are covered, is outside the scope of the proposed 
rule and cannot be addressed in this final rule with comment period. In 
addition, we note that the Medicare authority for this additional 
payment is based on the need to establish equitable payments for 
hospitals. The authority to make equitable adjustments under section 
1833(t)(2)(E) of the Act does not extend to the ASC setting. We do use 
a HCPCS Q-code as the vehicle for this additional payment so that other 
payers and other payment systems could use this code if desired.
    After consideration of the public comments we received, we are 
finalizing our proposed policy with the modifications discussed above. 
Specifically, we are modifying the policy to provide that a product 
identified as non-HEU sourced must be at least 95 percent derived from 
non-HEU sources. We also are finalizing our proposal to establish a 
HCPCS code for Tc-99m from non-HEU sources with a revised code 
definition. The number and title of the new HCPCS code is HCPCS code 
Q9969 (Tc-99m from non-highly enriched uranium source, full cost 
recovery add-on, per study dose) for CY 2013. HCPCS code Q9969 is 
assigned to APC 1442 (Non-HEU TC-99M Add-On/Dose) with a status 
indicator of ``K'' and a CY 2013 payment rate of $10.

D. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services
a. Cardiac Telemetry (APC 0213)
    For CY 2013, we proposed to reassign CPT code 93229 (External 
mobile cardiovascular telemetry with electrocardiographic recording, 
concurrent computerized real time data analysis and greater than 24 
hours of accessible ecg data storage (retrievable with query) with ecg 
triggered and patient selected events transmitted to a remote attended 
surveillance center for up to 30 days; technical support for connection 
and patient instructions for use, attended surveillance, analysis and 
physician prescribed transmission of daily and emergent data reports) 
from APC 0209 (Level II Extended EEG,

[[Page 68324]]

Sleep, and Cardiovascular Studies), which had a proposed rule payment 
rate of approximately $808, to APC 0340 (Minor Ancillary Procedures), 
which had a proposed rule payment rate of approximately $49.
    Comment: One commenter disagreed with CMS' proposal to reassign CPT 
code 93229 to APC 0340 because the service described by CPT code 93229 
involves the use of sophisticated technology requiring 24-hour, 7 days 
a week monitoring by a technician for up to 30 days, which according to 
the commenter, is not a minor procedure. According to the commenter, 
the proposed rule payment rate of approximately $49 is significantly 
lower than the MPFS payment rate of $694, and much lower than the 
average contractual arrangement charge to hospitals of $674. The 
commenter explained that while this procedure is performed primarily by 
independent diagnostic testing facilities (approximately 98 percent), 
this service is provided in the HOPD setting under contractual 
arrangements with hospitals. The commenter stated that the CPT code is 
fairly new because it was effective January 1, 2009, and suggested that 
the low geometric mean cost for the service could be attributed to 
miscoding by hospitals. The commenter believed that hospitals may be 
reporting CPT code 93229 incorrectly when they are actually performing 
other remote cardiac tests, such as the services described by CPT code 
93226 (External electrocardiographic recording up to 48 hours by 
continuous rhythm recording and storage; scanning analysis with report) 
or CPT code 93271 (External patient and, when performed, auto activated 
electrocardiographic rhythm derived event recording with symptom-
related memory loop with remote download capability up to 30 days, 24-
hour attended monitoring; transmission and analysis), that require 
fewer resources. In addition, the commenter questioned the validity of 
the claims data, given the low number of claims billed under the OPPS. 
The commenter requested that CMS delay the reassignment of the service 
described by CPT code 93229 to APC 0340, and urged CMS to maintain CPT 
code 93229 in APC 0209 until more data are available to determine an 
appropriate payment for the service.
    Response: The commenter is correct that CPT code 93229 was 
effective January 1, 2009. However, we believe that since that time 
hospitals have familiarized themselves with how to code this service 
appropriately. We have no reason to believe that hospitals are 
incorrectly reporting the service described by CPT code 93229, and note 
that we do not specify the methodologies that hospitals must use to set 
charges for this, or any other, procedure. The calculation of OPPS 
relative payment weights that reflect the relative resources required 
for HOPD services is the foundation of the OPPS. We rely on hospitals 
to bill all HCPCS codes accurately in accordance with their code 
descriptors and CPT and CMS instructions, as applicable, and to report 
charges on claims and charges and costs on their Medicare hospital cost 
report appropriately.
    We do not agree with the commenter that it is necessary to delay 
the reassignment of CPT code 93229 to APC 0340. We examined our claims 
data for the last 3 years, given the concerns raised by the commenter 
regarding the low number of claims. Our analysis revealed that the 
claims submitted for the service described by CPT code 93229 have 
steadily increased since CY 2009, but the cost for the procedure has 
been significantly lower than the APC payment rate. Specifically, the 
cost for the service described by CPT code 93229 in CY 2009 was 
approximately $287, based on 103 single claims (out of 114 total 
claims), approximately $260 in CY 2010, based on 184 single claims (out 
of 184 total claims), and approximately $172 for CY 2011, based on 
1,949 single claims (out of 1,949 total claims). Based on the claims 
data, we have no reason to believe that the claims data used to 
calculate the cost for CPT code 93229 for CY 2013 does not 
appropriately reflect the hospitals cost for providing this service.
    In addition, because of concerns raised by the commenter regarding 
reassigning CPT code 93229 to an APC that is labeled ``Minor Ancillary 
Procedures,'' further review of our claims data for this final rule 
with comment period showed that CPT code 93229 would be more 
appropriately assigned to APC 0213 (Level I Extended EEG, Sleep, and 
Cardiovascular Studies) than APC 0340 based on its clinical homogeneity 
and resource costs in relation to the other procedures assigned to APC 
0213. Our claims data show a geometric mean cost of approximately $172 
for CPT code 93229, which is relatively similar to the final geometric 
mean cost of approximately $178 for APC 0213.
    Further, we recognize that the MPFS pays separately for CPT code 
93229, but the MPFS and the OPPS are very different payment systems. 
Each system is established under a different set of statutory and 
regulatory principles, and the policies established under the MPFS do 
not have bearing on the payment policies under the OPPS.
    In summary, after consideration of the public comment we received, 
we are finalizing our CY 2013 proposal, with modification. 
Specifically, we are reassigning CPT code 93229 from APC 0209 to APC 
0213 (instead of the proposed APC 0340) for CY 2013. The final CY 2013 
geometric mean cost for APC 0213 is approximately $178.
b. Mechanical Thrombectomy (APC 0653)
    For CY 2013, we proposed to continue to assign CPT code 36870 
(Thrombectomy, percutaneous, arteriovenous fistula, autogenous or 
nonautogenous graft (includes mechanical thrombus extraction and intra-
graft thrombolysis)) to APC 0653 (Level I Hand Musculoskeletal 
Procedures), which had a proposed rule payment rate of approximately 
$2,445.
    Comment: Some commenters expressed concern regarding the proposed 
19.7 percent reduction in the payment rate for the APC in which the 
procedure describing a mechanical thrombectomy by arteriovenous access, 
CPT code 36870, is assigned. The commenters believed that such a 
reduction would impede Medicare beneficiary's access to the procedure. 
In addition, the commenters stated that CMS offered no explanation for 
the payment rate reduction, nor permitted adequate notice for a 
meaningful opportunity to comment. The commenters requested that CMS 
delay its proposal to reduce the payment rate for mechanical 
thrombectomy by AV access until stakeholders have been given a 
meaningful opportunity to comment.
    Response: On an annual basis, CMS evaluates hospital outpatient 
claims data to determine the cost of procedures and services paid under 
the OPPS to ensure appropriate APC assignment for the following year. 
This evaluation generally results in establishing new APCs, reassigning 
procedures and services to more appropriate APCs, or deleting APCs that 
are no longer applicable. In addition, this evaluation may result in 
revising relative payment weights, as well as wage and other 
adjustments, to take into account changes in medical practices, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. The OPPS proposed rule is published 
annually in the summer and is the mechanism used by CMS to inform the 
public of the proposed changes for the upcoming year and provide an 
opportunity for comment. As has been

[[Page 68325]]

our practice, we encourage the public to submit their comments on 
issues addressed in the proposed rule. Comments received in response to 
the proposed rule are addressed in the final rule with comment period, 
which is also published annually in the winter.
    For the CY 2013 update, our analysis of the latest hospital 
outpatient data for claims submitted for services provided during CY 
2011 shows a geometric mean cost for CPT code 36870 of approximately 
$2,662, based on 539 single claims (out of 50,476 total claims), which 
is relatively similar to the proposed rule payment rate of 
approximately $2,748 for APC 0653. Based on our claims data, we believe 
that APC 0653 is the most appropriate APC assignment for CPT code 36870 
based on its clinical homogeneity and resource costs in relation to the 
other procedures assigned to the APC. Consistent with our policy of 
reviewing APC assignments annually, we will again reevaluate the cost 
of CPT code 36870 and its APC assignment in CY 2013 for the CY 2014 
rulemaking cycle.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal without modification. We will continue 
to maintain CPT code 36870 in APC 0653 for CY 2013. The final CY 2013 
geometric mean cost for APC 0653 is approximately $2,748.
c. Non-Congenital Cardiac Catheterization (APC 0080)
    For CY 2011, the AMA's CPT Editorial Panel restructured the Cardiac 
Catheterization section of the CPT codebook so that combinations of 
services that were previously reported using multiple codes are now 
reported with one CPT code. This revision deleted several non-
congenital cardiac catheterization-related CPT codes from the 93500 
series and created new CPT codes in the 93400 series and in the 93500 
series. We discussed these coding changes in detail in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71846 through 71849), 
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. As discussed in that 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 costs 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 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 the services that were reported by the 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 non-congenital catheterization-related CPT codes in 
APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT code 
level costs and the payment rate for APC 0080 of approximately $2,698. 
We noted that, because the CPT codes listed in Table 11 were new for CY 
2011, they were identified with comment indicator ``NI'' in Addendum B 
to that final rule with comment period to indicate that the interim APC 
assignment was subject to public comment. We specifically requested 
public comment on our methodology for simulating the costs for these 
new CY 2011 CPT codes, in addition to public comments on the payment 
rates themselves (75 FR 71848).
    For CY 2012, we continued to use the CY 2011 methodology in 
determining the APC assignments for the new cardiac catheterization CPT 
codes. That is, we continued to use the CY 2011 methodology in 
determining the APC assignments for the cardiac catheterization CPT 
codes by using the existing hospital outpatient claims and the cost 
report data from the predecessor cardiac catheterization CPT codes to 
simulate an estimated cost for the new cardiac catheterization CPT 
codes in determining the appropriate APC assignments. Specifically, we 
used the CY 2010 hospital outpatient claims data and the most recent 
cost report data to create simulated costs for the new separately 
payable CPT codes for CY 2012 to determine the payment rates for the 
APC to which the cardiac catheterization CPT codes were assigned. For 
CY 2012, we did not make any changes to the CY 2011 APC assignments of 
any of the CPT codes assigned to APC 0080 because the claims data 
supported continuation of these APC assignments.
    As we discussed in the CY 2013 OPPS/ASC proposed rule, because the 
cardiac catheterization CPT codes were new for CY 2011, CY 2013 is the 
first year that claims data are available for ratesetting for these 
specific CPT codes (77 FR 45084 through 45085). For CY 2013, our 
analysis of the CY 2011 claims data available for the proposed rule 
showed no violation of the 2 times rule for the cardiac catheterization 
CPT codes because the lowest cost of a CPT code with significant claims 
data in APC 0080 was approximately $1,716 (for CPT code 93451), while 
the highest cost of a CPT code with significant claims data was 
approximately $3,308 (for CPT code 93461). We stated in the proposed 
rule that we believe that the cardiac catheterization CPT codes 
continue to be appropriately assigned to APC 0080 based on clinical 
homogeneity and resource costs. Therefore, for CY 2013, we proposed to 
continue to assign the cardiac catheterization CPT codes to APC 0080.
    Comment: One commenter pointed out that CPT codes 93463 
(Pharmacologic agent administration (eg, inhaled nitric oxide, 
intravenous infusion of nitroprusside, dobutamine, milrinone, or other 
agent) including assessing hemodynamic measurements before, during, 
after and repeat pharmacologic agent administration, when performed 
(list separately in addition to code for primary procedure)) and 93464 
(Physiologic exercise study (eg, bicycle or arm ergometry) including 
assessing hemodynamic measurements before and after (list separately in 
addition to code for primary procedure)), which appeared in Table 5 
(Proposed APCs to Which Non-Congenital Cardiac Catheterization CPT 
Codes Would Be Assigned for CY 2013) of the CY 2013 OPPS/ASC proposed 
rule do not appear to represent cardiac catheterization procedures.
    Response: CPT codes 93463 and 93464 are packaged procedures. These 
CPT codes appeared in Table 5 of the CY 2013 OPPS/ASC proposed rule 
because these procedures are performed

[[Page 68326]]

in conjunction with cardiac catheterization procedures. CPT code 93463 
is an add-on code that describes a pharmacologic agent that may be 
administered when a cardiac catherization procedure is performed. 
Similarly, CPT code 93464 is an add-on code that describes a 
physiologic exercise test that may be combined with a cardiac 
catheterization. Because these procedures are used in conjunction with 
cardiac catherization procedures, we believe that listing them in Table 
5 of the CY 2013 OPPS/ASC proposed rule was appropriate.
    After consideration of the public comment that we received, we are 
finalizing our proposal, without modification, to continue to assign 
the cardiac catheterization CPT codes to APC 0080 for CY 2013, as 
listed below in Table 20 below. The final CY 2013 geometric mean cost 
for APC 0080 is approximately $2,726.
[GRAPHIC] [TIFF OMITTED] TR15NO12.032

d. 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 under the Endovascular Revascularization section of the 
2011 CPT codebook 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 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 the most recent 
cost report data to create simulated costs for 12 of the 16 new 
separately payable CPT codes for CY 2011. Because the endovascular 
revascularization CPT codes were 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 costs, we 
selected claims that we believe met the definition for each of the new 
endovascular revascularization CPT codes. Table 7 showed the criteria 
we

[[Page 68327]]

applied to select a claim to be used in the calculation of the costs 
for the new CPT 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 the 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 costs for the procedures, we 
assigned each CPT code to appropriate APCs based on their clinical 
homogeneity and resource use. Of the 16 CPT 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 the 
remaining 2 CPT codes. Table 8 of the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71845) displayed their final CY 2011 APC 
assignments and CPT code costs. We noted that, because these CPT codes 
were new for CY 2011, they were assigned comment indicator ``NI'' in 
Addendum B to the CY 2011 OPPS/ASC final rule with comment period to 
identify them as new interim APC assignments for CY 2011, and subject 
to public comment. We specifically requested public comment on our 
methodology for simulating the costs for these new CY 2011 CPT codes in 
addition to public comments on the payment rates themselves (75 FR 
71845).
    As stated in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology 
to determine the APC assignments for the CPT codes that describe 
endovascular revascularization of the lower extremity. Because previous 
endovascular revascularization CPT codes were in existence prior to CY 
2011 and assigned to designated APCs, we continued to use existing 
hospital outpatient claims and cost report data from the established 
CPT codes to simulate estimated costs for the endovascular 
revascularization CPT codes to determine the appropriate APC 
assignments for CY 2012, as we did for CY 2011. In the CY 2012 OPPS/ASC 
final rule with comment period, we also revised the title of APC 0083 
from ``Coronary or Non-Coronary Angioplasty and Percutaneous 
Valvuloplasty'' to ``Coronary Angioplasty, Valvuloplasty, and Level I 
Endovascular Revascularization of the Lower Extremity''; revised the 
title of APC 0229 from ``Transcatheter Placement of Intravascular 
Shunts and Stents'' to ``Level II Endovascular Revascularization of the 
Lower Extremity''; and revised the title of APC 0319 from 
``Endovascular Revascularization of the Lower Extremity'' to ``Level 
III Endovascular Revascularization of the Lower Extremity''.
    Because the endovascular revascularization of the lower extremity 
CPT codes were new for CY 2011, CY 2013 is the first year of claims 
data that are available for ratesetting for these specific CPT codes. 
For CY 2013, review of the procedures with significant claims data in 
APCs 0083, 0229, and 0319 did not show 2 times rule violations in these 
APCs. In the CY 2013 OPPS/ASC proposed rule, we stated that we believe 
that the endovascular revascularization CPT codes assigned to APCs 
0083, 0229, and 0319 continue to be appropriately assigned based on 
clinical homogeneity and resource costs. Therefore, we proposed to 
continue to assign the endovascular revascularization CPT codes to APCs 
0083, 0229, and 0319 for CY 2013 (77 FR 45083 through 45084).
    Comment: Several commenters believed that the assignment of CPT 
code 37183 (Revision of transvenous intrahepatic portosystemic shunt(s) 
(tips) (includes venous access, hepatic and portal vein 
catheterization, portography with hemodynamic evaluation, intrahepatic 
tract recanulization/dilatation, stent placement and all associated 
imaging guidance and documentation) and 37210 (Uterine fibroid 
embolization (ufe, embolization of the uterine arteries to treat 
uterine fibroids, leiomyomata), percutaneous approach inclusive of 
vascular access, vessel selection, embolization, and all radiological 
supervision and interpretation, intraprocedural roadmapping, and 
imaging guidance necessary to complete the procedure) to APC 0229 
(Level II Endovascular Revascularization of the Lower Extremity) 
violated the 2 times rule. The commenter believed that these two codes 
should be reassigned to APC 0083 (Coronary Angioplasty, Valvuloplasty, 
and Level I Endovascular Revascularization of the Lower Extremity).
    Response: As stated above, in determining whether a 2 times rule 
violation exists in an APC, we consider only those HCPCS (both CPT and 
Level II Alphanumeric HCPCS codes) codes that are significant based on 
the number of claims. For purposes of identifying significant HCPCS 
codes for examination to determine if they violate 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 
cost to be significant (75 FR 71832). This longstanding definition of 
when a 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 costs. Similarly, a code for 
which there are fewer than 99 single claims and which comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC cost.
    For this CY 2013 OPPS/ASC final rule with comment period, our 
analysis of the CY 2011 claims data showed that CPT code 37183 had 211 
single claims (out of 302 total claims) while CPT code 37210 had 211 
single claims (out of 254 total claims). Of the 12 procedures assigned 
to APC 0229, only 5 procedures meet the definition of significant 
claims. Specifically, CPT codes 37205 (Transcatheter placement of an 
intravascular stent(s) (except coronary, carotid, vertebral, iliac, and 
lower extremity arteries), percutaneous; initial vessel), 37221 
(Revascularization, endovascular, open or percutaneous, iliac artery, 
unilateral, initial vessel; with transluminal stent placement(s), 
includes angioplasty within the same vessel, when performed), 37225 
(Revascularization, endovascular, open or percutaneous, femoral, 
popliteal artery(s), unilateral; with atherectomy, includes angioplasty 
within the same vessel, when performed), 37226 (Revascularization, 
endovascular, open or percutaneous, femoral, popliteal artery(s), 
unilateral; with transluminal stent placement(s), includes angioplasty 
within the same vessel, when performed), and 37229 (Revascularization, 
endovascular, open or percutaneous, tibial, peroneal artery, 
unilateral, initial vessel; with atherectomy, includes angioplasty 
within the same vessel, when performed) have significant claims data to 
determine whether a violating of the 2 times rule exists within APC 
0229. Review of the procedures assigned to APC 0229 revealed that the 
range of the CPT geometric mean costs for the procedures with 
significant claims data is between approximately $7,013 (for CPT code 
37205, which represents 14 percent of the single claims) and 
approximately $9,915 (for CPT code

[[Page 68328]]

37229, which represents 5 percent of the single claims). Taking into 
consideration all of the codes with significant claims that are 
assigned to APC 0229, CPT codes 37183 and 37210 do not meet the 
definition of significant claims to determine if there is a violation 
of the 2 times rule within APC 0229.
    Therefore, based on the clinical similarity to other procedures 
currently assigned to APC 0229, and because there is no determination 
of a violation of the 2 times rule, we are continuing to assign CPT 
codes 37183 and 37210 to APC 0229 for CY 2013. For CY 2013, APC 0229 
has a final geometric mean cost of approximately $8,905.
    Comment: Several commenters recommended the reassignment of add-on 
CPT code 37223 (Revascularization, endovascular, open or percutaneous, 
iliac artery, each additional ipsilateral iliac vessel; with 
transluminal stent placement(s), includes angioplasty within the same 
vessel, when performed (list separately in addition to code for primary 
procedure)) from APC 0083 to APC 0229 because the proposed geometric 
mean cost of the procedure is similar to the geometric mean costs of 
procedures assigned to APC 0229 (although the commenters also pointed 
out that the cost data calculated from single claims for CPT code 37223 
are unreliable because CPT code 37223 is an add-on code and would not 
appear by itself on a claim). Some commenters also argued that the 
assignment of CPT code 37223 to APC 0083 results in a violation of the 
2 times rule. The commenters stated that the reassignment of CPT code 
37223 to APC 0229 would be consistent with CMS' policy of assigning 
add-on codes to the same APC as their base codes. In addition, the 
commenters asserted that this reassignment would not only ensure 
patient access for this therapeutic procedure, but also would promote 
clinical homogeneity and similar resource cost of procedures assigned 
to APC 0229 and provide accurate payment for the procedure.
    Response: Although there are many add-on codes that have been 
assigned to the same APC as their base code, there are some procedures 
that are add-on codes that have been assigned to different APCs from 
their base or primary codes. In establishing an appropriate APC 
assignment, we take into consideration the clinical homogeneity and 
similarity in resource use associated with the procedure or service. 
This determination may result in the same APC assignment for both the 
base code and the add-on code, or in different APC assignments, as 
illustrated in Table 21 below. Therefore, we disagree with the 
commenters' assertion that we should reassign CPT code 37223 to APC 
0229 so that it is in the same APC as its base code.
    We also do not agree with commenters that the composition of APC 
0083 constitutes a violation of the 2 times rule because CPT code 37223 
does not have sufficient single claims to qualify as a significant 
procedure for purposes of applying the 2 times rule, as described 
earlier in this section. Based on our understanding of the procedure, 
we continue to believe that APC 0083 is the most appropriate assignment 
for CPT code 37223 based on clinical considerations and similarity in 
resource use to other procedures assigned to APC 0083, as we have 
stated in the past (76 FR 74156).
[GRAPHIC] [TIFF OMITTED] TR15NO12.033

    Further, in response to the commenters' concerns regarding 
providing accurate payment for the procedure described by CPT code 
37223 to ensure patient access, we believe that the payment rate for 
the procedure does not inhibit HOPDs from performing the procedure. The 
OPPS, like other Medicare payment systems, is budget neutral and 
overall increases in payments are limited to the 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 
payment rates are adequate to ensure access to services.

[[Page 68329]]

    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 37223 to APC 0083 for CY 2013.
    Comment: One commenter believed that CPT codes 37234 
(Revascularization, endovascular, open or percutaneous, tibial/peroneal 
artery, unilateral, each additional vessel; with transluminal stent 
placement(s), includes angioplasty within the same vessel, when 
performed (list separately in addition to code for primary procedure)), 
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 (list separately in addition to 
code for primary procedure)) are inappropriately assigned to APC 0083, 
and recommended that they be reassigned to APC 0229. The commenter 
indicated that these procedures involve both angioplasty with stent 
placements, similar to the procedure described by 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), which is 
assigned to APC 0229. The commenter also stated that CPT codes 37234 
and 37235 are similar to the stent procedures described by CPT codes 
37205 (Transcatheter placement of an intravascular stent(s) (except 
coronary, carotid, vertebral, iliac, and lower extremity arteries), 
percutaneous; initial vessel) and 37206 (Transcatheter placement of an 
intravascular stent(s) (except coronary, carotid, vertebral, iliac, and 
lower extremity arteries), percutaneous; each additional vessel (list 
separately in addition to code for primary procedure)), which are 
assigned to APC 0229. The commenter concluded that the payment rate for 
APC 0083 does not reflect the resources associated with placement of a 
cardiovascular stent; therefore, CPT codes 37234 and 37235 should be 
reassigned to APC 0229.
    Response: We continue to believe that APC 0083 is the most 
appropriate assignment for these CPT codes based on clinical and 
resource considerations. We do not agree that the procedures described 
by CPT codes 37234 and 37235 are dissimilar to other procedures in APC 
0083 because they involve a stent. In addition, an analysis of CY 2011 
claims data shows only one single claim for CPT code 37234 (out of 153 
total claims) and no single claims (out of 31 total claims) for CPT 
code 37235. Therefore, the outpatient claims data do not support an APC 
reassignment of these CPT codes. Because these CPT codes were made 
effective January 1, 2011, CY 2011 is the first year of claims data 
available for CPT codes 37234 and 37235. Consistent with CMS' policy of 
reviewing APC assignments annually, we will reevaluate the cost of 
these procedures and their APC assignments next year for the CY 2014 
rulemaking cycle.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 37234 and 37235 to APC 0083, which has a CY 2013 final 
geometric mean cost of approximately $4,139.
    Table 22 below provides the list of endovascular revascularization 
CPT codes assigned to APCs 0083, 0229, and 0319 for CY 2013.

[[Page 68330]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.034

e. External Electrocardiographic Monitoring (APC 0097)
    In the CY 2012 OPPS/ASC final rule with comment period, we assigned 
new CPT codes 0296T (External electrocardiographic recording) and 0297T 
(External electrocardiographic recording; scanning analysis with 
report) on an interim basis to APC 0097 (Level I Non-Invasive 
Physiologic Studies), which has a CY 2012 payment rate of approximately 
$68 and a CY 2013 proposed payment rate of approximately $67.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period supported our placement of CPT code 0296T in 
APC 0097. The commenter stated that the service described by CPT code 
0296T is clinically similar to other services in that APC. However, the 
commenter believed that CPT code 0297T would be more appropriately 
assigned to APC 0692 (Level II Electronic Analysis of Devices), which 
has a CY 2013 proposed rule cost of approximately $113). The commenter 
argued that CPT code 0297T is similar in nature and in required 
resources to CPT code 93271 (Electrocardiographic monitoring and 
analysis), which is assigned to APC 0692, because it has a similar 
monitoring period and requires similar network and information 
technology resources.
    Response: Based on our understanding of the resources that are 
required to furnish the services described by CPT codes 93271 and 
0297T, we do not agree with the commenter. The service described by CPT 
code 93271 includes 24-hour attended monitoring, while the service 
described by CPT 0297T does not. Therefore, we believe that CPT code 
0297T is more clinically similar to the services assigned to APC 0097. 
Therefore, for CY 2013, we will continue to assign this service to APC 
0097, which has a final CY 2013 geometric mean cost of approximately 
$68. We will reevaluate the APC placement using our standard 
ratesetting methodology when we receive claims data for these services.
f. Echocardiography (APCs 0177, 0178, 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 
procedures without contrast followed by procedures 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)

[[Page 68331]]

     APC 0270 (Level III Echocardiogram Without Contrast)
    For CY 2013, we proposed payment rates for these APCs of 
approximately $571, $212, $392, and $558, respectively.
    Comment: One commenter expressed concern regarding the APC 
assignment of the procedures for fetal echocardiography to APC 0697. 
The commenter believed that this APC classification and payment rate 
are inconsistent with the resources required to perform fetal 
echocardiography studies. These resources, the commenter noted, 
substantially exceed the resources generally needed for adult services. 
Therefore, the commenter recommended that CMS reassign fetal 
echocardiography 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) to the same APC as 
adult echocardiography procedures, APC 0269 (Level II Echocardiogram 
Without Contrast).
    Response: For the CY 2013 OPPS/ASC proposed rule, we proposed to 
assign CPT codes 76825 and 76826 to APC 0697, which had a proposed 
payment rate of $211.71. As we stated in the CY 2012 OPPS/ASC final 
rule with comment period, because these codes have been in existence 
for almost 20 years, and have been reportable under the 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 
beneficiaries. Analysis of our claims data from past years revealed 
that these procedures are relatively low volume procedures. CPT code 
76825 has had fewer than 330 single claims for ratesetting for each 
year with a cost that has ranged between approximately $88 and 
approximately $140. Similarly, CPT code 76826 has had fewer than 50 
single claims for ratesetting for each year with a cost that has ranged 
between approximately $85 and approximately $92. For this CY 2013 OPPS/
ASC final rule with comment period, CPT codes 76826 and 76825 are 
assigned APCs with payment rates that exceed their respective 
individual geometric mean costs. Therefore, based on our claims data, 
we believe that CPT codes 76825 and 76826 are appropriately assigned to 
APC 0697 for CY 2013 based on their clinical homogeneity and resource 
costs of the other procedure assigned to APC 0697.
    Comment: Several commenters expressed concern regarding a violation 
of the 2 times rule for APC 0128 and urged CMS not to finalize an 
exemption from the 2 times rule for APC 0128. The commenters stated 
that the assignment of HCPCS codes C8924 (Transthoracic 
echocardiography with contrast, or without contrast followed by with 
contrast, real-time with image documentation (2d), includes m-mode 
recording, when performed, follow-up or limited study) and C8930 
(Transthoracic echocardiography, with contrast, or without contrast 
followed by with contrast, real-time with image documentation (2d), 
includes m-mode recording, when performed, during rest and 
cardiovascular stress test using treadmill, bicycle exercise and/or 
pharmacologically induced stress, with interpretation and report; 
including performance of continuous electrocardiographic monitoring, 
with physician supervision) to APC 0128 results in a violation of the 2 
times rule in particular, and that the other procedures assigned to APC 
0128 are not clinically comparable in nature, therefore resulting in an 
APC payment rate that does not reflect the wide range of resources 
utilized for the procedures assigned to APC 0128. The commenters 
further recommended that CMS reconfigure APC 0128 so that the 
procedures are clinically similar with respect to resources. One 
commenter recommended that CMS adopt three levels of contrast-enhanced 
APCs that parallel the three APCs that have been established for non-
contrast enhanced procedures.
    Response: As stated above, we have four separate APCs to which 
echocardiography services are assigned. Procedures that utilize 
contrast agents are currently assigned to APC 0128, while procedures 
without contrast agents are assigned to one of three APCs, specifically 
APC 0270, APC 0269, or APC 0697. In the CY 2013 OPPS/ASC proposed rule, 
we proposed a payment rate for APC 0128 of approximately $571 for CY 
2013. As we do every year, we reviewed our claims data for the services 
assigned to APC 0128. Based on our review, and taking into 
consideration the public comments received in response to the final 
rule with comment period, we agree with commenters that APC 0128 has a 
2 times violation that cannot be exempted for this CY 2013 OPPS/ASC 
final rule with comment period. As we have stated in section III.B. of 
this final rule with comment period, we make exemptions to the 2 times 
rule's limit on the variation of costs within each APC group in unusual 
cases, such as low volume items and services. In deciding to propose 
exemptions to the 2 times rule, we look at the respective APC's 
resource homogeneity, clinical homogeneity, hospital outpatient 
setting, frequency of service (volume), and opportunity for upcoding 
and code fragmentation. We believe that, for this CY 2013 OPPS/ASC 
final rule with comment period, it would be inappropriate to exempt APC 
0128 from the 2 times rule and to continue to assign echocardiography 
services utilizing contrast agents to one APC, based on our evaluation 
of the aforementioned criteria. Therefore, for CY 2013, we are 
splitting APC 0128 to create two new level APCs: APC 0177 (Level I 
Echocardiogram with Contrast) and APC 0178 (Level II Echocardiogram 
with Contrast).
    After consideration of the public comments we received, we are 
finalizing our proposals, with the modifications mentioned above, to 
continue to calculate the costs of the HCPCS codes describing the non-
contrast echocardiography procedures based on APCs 0697, 0269, and 
0270, and to calculate the costs for the HCPCS codes describing 
contrast echocardiography procedures based on new APCs 0177 and 0178. 
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 (72 FR 68542 through 68544), 
and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60374 
through 60383).
    Table 23 below shows the procedure assignments and the final 
geometric mean cost assigned to echocardiography APCs, including the 
new Level I and Level II Echocardiogram with Contrast APCs.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.035

BILLING CODE 4120-01-C
2. Gastrointestinal Services
a. Laparoscopic Adjustable Gastric Band (APC 0132)
    Effective January 1, 2006, the AMA's CPT Editorial Panel 
established CPT code 43770 (Laparoscopy, surgical, gastric restrictive 
procedure; placement of adjustable gastric restrictive device (eg, 
gastric band and subcutaneous port components)) to describe the 
bariatric placement of an adjustable band by laparoscopy. From January 
1, 2006 through December 31, 2011, CPT code 43770 was assigned to 
status indicator ``C'' to indicate that the procedure was not paid 
separately under the OPPS because the procedure was considered an 
``inpatient'' procedure. However, in the CY 2012 OPPS/ASC final rule 
(76 FR 74355), we stated that we received a comment requesting that 
this CPT code be removed from the inpatient list and assigned to a 
separately payable APC, effective January 1, 2012. Based on input from 
our physicians and review of our claims data, we determined that it was 
appropriate to remove CPT code 43770 from the inpatient list because 
patients undergoing this procedure can typically be managed 
postoperatively as outpatients. Consequently, we assigned CPT code 
43770 to APC 0131 (Level II Laparoscopy), effective January 1, 2012.
    At the August 2012 HOP Panel meeting, a presenter requested that 
the Panel recommend to CMS the reassignment of CPT code 43770 from APC 
0131 to a new APC. The commenter expressed concern about the existing 
APC assignment and indicated that APC 0131 does not adequately cover 
the costs of performing the procedure. After discussion of the

[[Page 68333]]

procedure and review of the hospital outpatient claims data, the Panel 
recommended that CPT code 43770 remain in APC 0131 for the CY 2013 
update.
    For CY 2013, we proposed to continue to assign CPT code 43770 to 
APC 0131, which had a proposed rule payment rate of approximately 
$3,497.
    Comment: Several commenters disagreed with the proposal to continue 
to assign CPT code 43770 to APC 0131 because the procedure is different 
from other procedures assigned to this APC. According to one commenter, 
the procedures assigned to APC 0131 are less intensive (for example, 
resource cost) than CPT code 43770. Another commenter stated that the 
procedures assigned to APC 0131 are not similar to CPT code 43770 
because this procedure includes the implantation of a gastric band 
device as well as a port device, while the other procedures assigned to 
this APC do not. In addition, some commenters believed that assignment 
of CPT code 43770 to APC 0131 violates the 2 times rule. According to 
the commenters, there is no existing APC that includes procedures that 
are comparable to the procedures described by CPT code 43770, both 
clinically and in terms of resource utilization. Therefore, they 
requested that CMS establish a new APC for CPT code 43770 to ensure the 
most appropriate payment for this procedure.
    However, we received conflicting statements on the issue of 
clinical comparability from some of the commenters. One commenter 
stated that, although there is no existing APC that accurately fits 
with CPT code 43770, the commenter mentioned that APC 0132 (Level III 
Laparoscopy) does include some procedures that are more clinically 
comparable to CPT code 43770 than the procedures assigned to APC 0131, 
and suggested that APC 0132 would be an appropriate APC assignment for 
this procedure. Another commenter considered suggesting a reassignment 
of CPT code 43770 to APC 0132 but stated that the procedures assigned 
to APC 0132 are not comparable in terms of resource utilization. 
Although most of the commenters agreed that establishing a new APC for 
CPT code 43770 would be more appropriate, some commenters suggested 
assigning the procedure to APC 0132 as an interim APC assignment if a 
new APC cannot be established for the CY 2013 update.
    Response: We do not agree with the commenters' assertion that 
assigning CPT code 43770 to APC 0131 violates the 2 times rule. In 
determining whether a 2 times rule violation exists in an APC, we 
consider only those HCPCS codes that are significant based on the 
number of claims. 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 comprise at least 2 percent of the single major 
claims used to establish the costs of the procedures assigned to an APC 
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 costs. Similarly, a HCPCS code for which 
there are fewer than 99 single claims and which comprises less than 2 
percent of the single major claims within an APC will have a negligible 
impact on the costs of the procedures in an APC. For the CY 2013 OPPS/
ASC proposed rule, claims data for CPT code 43770 showed 171 single 
claims out of 216 total claims and comprised less than 1 percent of the 
claims for procedures within APC 0131. Although CPT code 43770 had more 
than 99 single major claims, it did not contribute to at least 2 
percent of the single major claims for procedures within APC 0131. 
Therefore, in the CY 2013 OPPS/ASC proposed rule, we determined that 
assigning CPT code 43770 to APC 0131 did not violate the 2 times rule 
because it did not meet the definition of a significant HCPCS code.
    As stated above, the HOP Panel made a recommendation to continue to 
assign CPT code 43770 to APC 0131 for the CY 2013 update. However, 
after the Panel meeting, we reviewed our more recent claims data for 
this final rule with comment period, and our analysis revealed that the 
procedure would be more appropriately assigned to APC 0132 (Level III 
Laparoscopy). Specifically, our analysis showed 213 single claims (out 
of 262 total claims) for CPT code 43770 with a geometric mean cost of 
approximately $7,410. Furthermore, our analysis revealed that CPT code 
43770 meets the definition of significant claims because the procedure 
represents more than 99 single major claims and contribute to at least 
2 percent of the claims for procedures within APC 0132. Consequently, 
we do not agree with the Panel's recommendation, and are reassigning 
CPT code 43770 to APC 0132.
    In summary, after consideration of the public comments we received, 
we are revising the APC assignment for CPT code 43770 from APC 0131 to 
0132 for CY 2013. The final CY 2013 geometric mean cost for APC 0132 is 
approximately $5,268.
b. Transoral Incisionless Fundoplication (APC 0422)
    For CY 2013, we proposed to continue to assign CPT code C9724 
(Endoscopic full-thickness plication in the gastric cardia using 
endoscopic plication system (eps); includes endoscopy) to APC 0422 
(Level III Upper GI Procedures), which had a proposed payment rate of 
approximately $1,878.
    We note that at the August 2012 HOP Panel meeting, a presenter 
requested that the Panel recommend to CMS the reassignment of HCPCS 
code C9724 from APC 0422 to a new APC, or alternatively, to establish a 
new APC with a descriptor of ``Level IV Upper GI Procedures.'' The 
commenter stated that the payment rate for APC 0422 does not cover the 
cost of providing the procedure. After discussion of the procedure and 
review of the hospital outpatient claims data, the Panel recommended 
that HCPCS code C9724 remain in APC 0422 for the CY 2013 update.
    Comment: Several commenters disagreed with the proposal to continue 
to assign HCPCS code C9724 to APC 0422. The commenters stated that the 
proposed payment rate for APC 0422 would not cover the cost of 
performing the procedure. According to the commenters, the cost of 
performing the procedure is approximately $5,000. The commenters urged 
CMS to either reassign HCPCS code C9724 to APC 1565 (New Technology--
Level XXVIII ($5000-$5500)), which had a proposed payment rate of 
approximately $5,250, or establish a new APC titled ``Level IV Upper GI 
Procedures'' with a payment rate of approximately $5,000.
    Response: HCPCS code C9724, which was established by CMS effective 
April 1, 2005, describes an endoscopic full-thickness plication 
procedure for the treatment of gastroesophageal reflux disease (GERD). 
Since April 2005, HCPCS code C9724 has been assigned to APC 0422. 
Because this code has been in existence since April 2005, we have 
claims data for several years. For this final rule with comment period, 
which is based on claims submitted from January 1, 2011 through 
December 31, 2011, our data show a geometric mean cost of approximately 
$5,728 based on 24 single claims (out of 120 total claims) for HCPCS 
code C9724. In addition, we agree with the Panel's recommendation to 
maintain HCPCS code C9724 in APC 0422 for the CY 2013 update. Based on 
the clinical similarity to other

[[Page 68334]]

procedures currently assigned to APC 0422, and because there is no 
violation with the 2 times rule, we will continue to assign HCPCS code 
C9724 to APC 0422. Consistent with CMS' policy of reviewing APC 
assignments annually, we will reevaluate the cost of HCPCS code C9724 
and its APC assignment for the CY 2014 rulemaking cycle.
    In addition, because of concerns related to the current descriptor 
for HCPCS code C9724, we are revising the long descriptor to read 
``Endoscopic full-thickness plication of the stomach using endoscopic 
plication system (eps); includes endoscopy,'' effective January 1, 
2013. This change in the long descriptor is necessary to accurately 
describe how the procedure is currently performed.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal without modification and will continue 
to maintain HCPCS code C9724 in APC 0422. The final CY 2013 geometric 
mean cost for APC 0422 is approximately $1,921.
c. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    The AMA's CPT Editorial Panel created CPT code 0242T 
(Gastrointestinal tract transit and pressure measurement, stomach 
trough colon, wireless capsule, with interpretation and report) 
effective January 1, 2011. For CY 2011, we initially assigned CPT code 
0242T to APC 0361 (Level II Alimentary Tests), with a payment rate of 
$282.48.
    For CY 2012, we maintained the assignment of CPT code 0242T to APC 
0361 with a payment rate of $285.59. We noted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74242) that we routinely make 
assignments of new CPT codes to clinical APCs before we have claims 
data that are indicative of the resource 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 stated in the CY 2012 OPPS/ASC final rule with comment period 
that, as was the case when we made the initial assignment for CY 2011, 
we continued to believe that there are relevant clinical similarities 
between the service described by CPT code 0242T and other services 
assigned to APC 0361 to continue to justify this APC assignment. The 
service described by CPT code 0242T and the services assigned to APC 
0361 all involve tests of the alimentary canal. We believed that the 
clinical attributes and CY 2012 costs of the services assigned to APC 
0361 supported the initial assignment of CPT code 0242T to APC 0361. We 
indicated that we routinely make assignments of new CPT codes to 
clinical APCs before we have claims data to indicate the procedural 
resource costs, and that we generally wait until claims data are 
available before reassignment to a new APC. For CY 2012, we maintained 
our assignment of CPT code 0242T to APC 0361, which has a final median 
cost of $285.89, and we stated that we would review this assignment for 
CY 2013 when some claims data should be available for this procedure.
    For CY 2013, we proposed to maintain the assignment of CPT code 
0242T to APC 0361, which had a proposed rule geometric mean cost of 
approximately $311 and a proposed payment rate of approximately $303. 
We now have a small number of claims for use in CY 2013 for CPT code 
0242T, which had a proposed rule geometric mean cost of approximately 
$613. The range of procedure level costs in APC 0361 for the CY 2013 
proposed rule was approximately $214 to approximately $633. This range 
of costs does not constitute a 2 times rule violation because the range 
of costs for procedures with significant volume in the APC is 
approximately $302 to approximately $406.
    We did not receive any public comments on our proposed APC 
assignment of CPT code 0242T to APC 0361.
    At the August 2012 meeting of the HOP Panel, the Panel recommended 
that CMS assign CPT code 0242T to APC 0142 (Level I Small Intestine 
Endoscopy), based on the procedure's proposed rule mean cost of 
approximately $613, with a frequency of 8 claims.
    Our CY 2013 final rule claims data show a cost of approximately 
$497 for CPT code 0242T, based on 8 claims. Our analysis comparing the 
proposed rule data and the final rule data for CPT code 0242T shows 
that one claim was dropped and another added, resulting in the 
fluctuation in geometric mean costs for the small number of claims 
between the proposed rule dataset and the final rule dataset for this 
procedure. The CY 2013 final geometric mean cost for APC 0361 is 
approximately $311, which includes a range of costs for procedures in 
the APC of approximately $209 to approximately $633. The CY 2013 final 
geometric mean cost for APC 0142 is approximately $772, which includes 
a range of costs for procedures in the APC of approximately $569 to 
approximately $826. Therefore, based on the final rule geometric mean 
cost for CPT code 0242T, assignment of the code to APC 0361 is 
appropriate. We also continue to believe that CPT code 0242T is similar 
clinically to other procedures assigned to APC 0361. Therefore we are 
maintaining our assignment of the CPT code 0242T procedure to APC 0361 
for CY 2013.
    We note that the CPT Editorial Panel is replacing the CPT code for 
the procedure described by CPT code 0242T with a Category I CPT code, 
CPT code 91112 (Gastrointestinal transit and pressure measurement, 
stomach trough colon, wireless capsule, with interpretation and 
report), effective January 1, 2013. Therefore, we are deleting CPT code 
0242T from the OPPS effective January 1, 2013, and assigning 
replacement CPT code 91112 to APC 0361 for this procedure.
3. Integumentary System Services
a. Extracorporeal Shock Wave Wound Treatment (APC 0340)
    In the CY 2012 OPPS/ASC final rule with comment period, we assigned 
new CPT codes 0299T (Extracorporeal shock wave for integumentary wound 
healing, initial wound) and 0300T (Extracorporeal shock wave for 
integumentary wound healing, each additional wound) on an interim basis 
to APC 0340 (Minor Ancillary Procedures), which has a CY 2012 payment 
rate of approximately $46 and a CY 2013 proposed rule payment rate of 
approximately $49.
    Comment: One commenter objecting to the interim APC assignment of 
CPT codes 0299T and 0300T believed that the assignment is not 
consistent clinically or in terms of the resources associated with the 
shock wave treatment procedures. The commenter stated that these 
services are more similar clinically and in related resources to the 
high-energy shock wave procedure for musculoskeletal conditions that is 
assigned to APC 0050 (Level II Musculoskeletal Procedures Except Hand 
and Foot), which has a CY 2012 payment rate of approximately $2,269. 
The commenter believed that assignment of these codes to a New 
Technology APC would be appropriate to gather cost data, and indicated 
that they would submit an application for new technology payments for 
these codes to CMS.
    We received other similar comments to the proposed rule from 
several clinicians in the field who were involved in the initial 
clinical trial of the extracorporeal shock wave procedure. These 
commenters discussed

[[Page 68335]]

the clinical trial and the clinical attributes of this treatment, 
indicating that it offers significantly greater clinical benefit than 
other wound healing therapies at a considerably lower cost. They 
objected to CMS' assignment of CPT codes 0299T and 0300T to APC 0340. 
The commenters believed that the payment rate for this APC would 
inhibit the use of this emerging technology and would prevent patient 
access to the treatment.
    Response: We agree with the commenters that it may be more 
appropriate in terms of clinical and resource similarity to assign CPT 
codes 0299T and 0300T to an APC other than APC 0340. However, we do not 
agree that CPT codes 0299T and 0300T should be assigned to APC 0050. 
Having considered the information provided by the commenters, and based 
on our evaluation of clinical and resource similarity to existing 
services, we believe that placement in APC 0133 (Level I Skin Repair) 
would be more appropriate for these services until claims data are 
available. For CY 2013, we are placing CPT codes 0299T and 0300T in APC 
0133, which has a final geometric mean cost of approximately $88. We 
will reevaluate the APC placement when claims data are available for CY 
2014.
b. Application of Skin Substitute (APCs 0133 and 0134)
    For CY 2012, we made assignments for several new (replacement) CPT 
codes for the application of skin substitutes. We assigned CPT code 
15272 (Application of skin substitute graft to trunk, arms, legs, total 
wound surface area up to 100 sq cm; each additional 25 sq cm or part 
thereof) and CPT code 15276 (Application of skin substitute graft to 
face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet 
and/or multiple digits, total wound surface area up to 100 sq cm; each 
additional 25 sq cm or part thereof) to APC 0133 (Level I Skin Repair), 
which has a CY 2012 payment rate of approximately $84 and a CY 2013 
proposed payment rate of approximately $86. We assigned CPT code 15274 
(Application of skin substitute graft to trunk, arms, legs, total wound 
surface area greater than or equal to 100 sq cm; each additional 100 sq 
cm or part thereof) and CPT code 15278 (Application of skin substitute 
graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, 
hands, feet and/or multiple digits, total wound surface area greater 
than or equal to 100 sq cm; each additional 100 sq cm or part thereof) 
to APC 0134 (Level II Skin Repair), which has a CY 2012 payment rate of 
approximately $228 and a CY 2013 proposed payment rate of approximately 
$252.
    Comment: One commenter stated that CMS should have assigned the new 
codes to the APC that includes their predecessor base codes so that a 2 
times rule violation is avoided. They requested that for CY 2013, CMS 
reassign CPT codes 15272 and 15276 to APC 0134, crosswalking them to 
the predecessor add-on CPT code 15341 and assign them to the same APC 
as the former base CPT code 15340. Similarly, the commenter requested 
that CMS reassign CPT codes 15274 and 15278 to APC 0135 (Level III Skin 
Repair) which includes their applicable base codes (CPT codes 15273 and 
15277).
    Response: As we indicated in the CY 2012 OPPS/ASC final rule (76 FR 
74269), we assigned these four replacement CPT codes for CY 2012 based 
on their clinical and estimated resource similarity to the services in 
their assigned APCs. We also took into account the size descriptions in 
the new codes' long descriptors. There was not a one-to-one crosswalk 
between the old skin substitute application codes and the new CPT 
codes, as suggested by the commenter. Several of the old CPT codes map 
to a single new code. Therefore, we made the most appropriate 
assignment based on clinical homogeneity and estimated resource 
similarity, taking into account all of the former procedures that are 
now encompassed by a single code and the new coding structure for the 
family of codes.
    For CY 2013, we will continue to assign CPT codes 15272 and 15276 
to APC 0133, which has a final geometric mean cost of approximately 
$88, and CPT codes 15274 and 15278 to APC 0134, which has a final 
geometric mean cost of approximately $259. We will reevaluate the 
placement of these codes when claims data become available in the CY 
2014 rulemaking cycle.
c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)
    Effective January 1, 2008, the CPT Editorial Panel created CPT code 
0183T (Low Frequency, Non-Contact, Non-Thermal Ultrasound). Since that 
time, we have assigned this service to either APC 0013 (Level II 
Debridement and Destruction) or APC 0015 (Level III Debridement and 
Destruction). Initially, for CY 2008 and CY 2009, we placed this 
service in the higher Level III APC 0015, with a payment rate of 
approximately $100. Based on our review of the first year of hospital 
claims data (CY 2008 claims), for CY 2010 we reassigned the service to 
the lower Level II APC 0013, with a payment rate of approximately $59. 
For CY 2011 and CY 2012, due to a change in the estimated cost of CPT 
code 0183T, we reassigned it to the higher level APC 0015, with a 
payment rate of approximately $105 in CY 2011 and approximately $103 in 
CY 2012.
    For CY 2013, we proposed to reassign CPT 0183T to APC 0013 because 
its proposed rule geometric mean cost of approximately $89 was closer 
to the proposed rule geometric mean cost of APC 0013 (approximately 
$73) than the proposed rule geometric mean cost of APC 0015 
(approximately $110).
    Comment: One commenter objected to the reassignment of CPT code 
0183T to APC 0013 because the commenter's estimated cost of furnishing 
this service of approximately $101 would be greater than its proposed 
payment. The commenter believed that procedures currently assigned to 
APC 0013 and those assigned to APC 0015 are not homogeneous clinically 
or in terms of resource requirements. The commenter requested that CMS 
split APC 0013 and APC 0015 to create a third APC, such that APC 0013 
would include the services with costs less than $80; the new APC would 
include services with costs between $80 and $110; and APC 0015 would 
include services with costs greater than or equal to $110.
    Another commenter recommended that CMS merge APC 0013 and APC 0015, 
arguing that both APCs are for skin procedures and noting that the 
proposed cost for the highest volume service in APC 0013, described by 
CPT code 17000 (Destruction of premalignant lesions; first lesion), is 
more than half of the cost of the highest volume service in APC 0015, 
described by CPT code 97597 (Open wound debridement; first 20 sq cm or 
less).
    Response: The final rule geometric mean cost of CPT code 0183T and 
APC 0013 (approximately $88 and $74, respectively) did not change 
significantly from their proposed rule costs and remain very similar. 
There also is no significant change in the final rule geometric mean 
cost of APC 0015 (approximately $110). We note that merging the two 
APCs as one commenter suggested would create several 2-times rule 
violations, and we see no clinical or other need to further split the 
APCs. Therefore, because the geometric mean cost of CPT code 0183T 
continues to be closer to the geometric mean cost of APC 0013 than that 
of APC 0015, and because merging the APCs would create several 2 times 
rule violations, for CY 2013, we are finalizing our proposal to 
reassign CPT code 0183T to APC 0013.

[[Page 68336]]

4. Nervous System Services
a. Scrambler Therapy (APC 0275)
    For the CY 2012 update, the AMA's CPT Editorial Panel established 
Category III CPT code 0278T (Transcutaneous electrical modulation pain 
reprocessing (eg, scrambler therapy), each treatment session (includes 
placement of electrodes)) effective January 1, 2012. CPT code 0278T 
describes a transcutaneous electrical modulation pain reprocessing 
procedure and involves the use of four to five electrodes that deliver 
electrical stimulation to treat chronic chemo-induced neuropathic pain. 
Based on the nature of the procedure, which can be performed by 
physicians, nurses, or physical therapists, the therapy involves 10 
sessions (1 session per day for 10 days), and each session takes 
approximately between 30 and 45 minutes.
    In Addendum B of the CY 2012 OPPS/ASC final rule with comment 
period, we assigned CPT code 0278T to APC 0215 (Level I Nerve and 
Muscle Tests) which has a CY 2012 payment rate of approximately $44. We 
also assigned this CPT code comment indicator ``NI'' to indicate that 
the code was new for CY 2012 with an interim APC assignment that was 
subject to public comment following the publication of the final rule 
with comment period. Specifically, the code's APC assignment and status 
indicator were subject to public comment. We received one public 
comment regarding the interim APC assignment for CPT code 0278T which 
we address below in this section.
    We note that we do not discuss APC or status indicator assignments 
for new codes for the upcoming year in the proposed rule because the 
new codes are not available when we publish the proposed rule. Rather, 
as has been our practice in the past, we implement new HCPCS codes in 
the OPPS final rule with comment period, at which time we invite public 
comments regarding the treatment of the new codes. We subsequently 
respond to those comments in the final rule with comment period for the 
following year's OPPS update.
    As has been our practice since the implementation of the OPPS in 
2000, we carefully review all new procedures before assigning them to 
an APC. In determining the APC assignment for CPT code 0278T, we took 
into consideration the clinical and resource characteristics involved 
with Scrambler Therapy. Based on our initial review of the components 
of these services and consultation with our medical advisors, we 
assigned CPT code 0278T to APC 0215 for CY 2012.
    At the February 2012 HOP Panel meeting, a presenter requested the 
reassignment of CPT code 0278T from APC 0215 to APC 0206 (Level II 
Nerve Injections) based on resource cost and clinical homogeneity. The 
presenter stated that the assignment of CPT code 0278T to APC 0215 is 
not appropriate because the procedures in this APC are primarily 
diagnostic in nature, whereas CPT code 0278T represents a therapeutic 
procedure. The presenter further added that the time and cost involved 
with providing the service associated with CPT code 0278T is 
considerably greater than the time and cost involved for procedures 
assigned to APC 0215, and recommended that the Scrambler Therapy would 
be more appropriately assigned to APC 0206 because the procedures in 
APC 0206 are mostly therapeutic in nature and represent similar costs. 
At the February 2012 meeting, the Panel made no recommendation to 
reassign CPT code 0278T from its current APC 0215 assignment for CY 
2013.
    In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT code 0278T to APC 0215. At the August 2012 HOP 
Panel meeting, the same presenter at February 2012 Panel meeting made 
the same request to the Panel to recommend to CMS to reassign CPT code 
0278T to a more appropriate APC. Specifically, at the August 2012 HOP 
Panel meeting, the requester recommended that CPT code 0278T be 
reassigned to APC 0204 (Level I Nerve Injections) based on clinical and 
cost considerations. During the discussion, one of the Panel members 
pointed out that the procedures assigned to APC 0204 represent nerve 
injections, which is in contrast to how the procedure described by CPT 
code 0278T is delivered because the procedure associated with the 
Scrambler Therapy does not involve injections. After discussion of the 
issue, the HOP Panel recommended that CMS assign CPT code 0278T to APC 
0218 (Level II Nerve and Muscle Tests).
    Comment: One commenter to the CY 2012 OPPS/ASC final rule with 
comment period recommended the reassignment of CPT code 0278T from APC 
0215 to APC 0206 based on the commenter's cost analysis. Alternatively, 
the commenter recommended assignment of CPT code 0278T to APC 0204 
because this is the APC assigned to unlisted CPT code 64999 (Unlisted 
procedure, nervous system), which would be used to report the Scrambler 
Therapy if CPT code 0278T had not been established.
    Response: As a new Category III CPT code for CY 2012, we do not yet 
have hospital claims data for the procedure. Category III CPT codes are 
temporary codes that describe emerging technology, procedures, and 
services, and are created by the AMA to allow for data collection for 
new services or procedures. Under the OPPS, we generally assign a 
payment rate to a new Category III CPT code based on input from a 
variety of sources, including but not limited to, review of resource 
costs and clinical homogeneity of the service to existing procedures, 
information from specialty societies, input from CMS medical advisors, 
and other information available to us. Based on our review of the 
clinical characteristics of the service described by CPT code 0278T and 
the information provided by the commenter, we do not believe that we 
have sufficient clinical or cost information to justify a reassignment 
to a different APC at this time. As we do every year for other services 
and procedures under the OPPS, we will review the claims data for CPT 
code 0278T for CY 2012 for the CY 2014 rulemaking cycle. Because CPT 
code 0278T was a new code for CY 2012, the first time we will have 
claims data for this procedure is next year for the CY 2014 update, and 
at which time we will reevaluate the APC assignment for this code.
    Comment: Some commenters recommended a range of the appropriate 
payment for CPT code 0278T based on their internal analysis. One 
commenter recommended that CPT code 0278T be assigned to an APC that 
has a payment rate of between $124 to $144 based on their analysis, by 
taking into consideration the site of service, staff time involved, and 
system costs associated with providing the therapy. Another commenter 
stated that the total cost of providing Scrambler Therapy is 
approximately $274; however, an initial payment of approximately $184 
may be adequate for hospitals to initiate treatment. The commenter 
further stated that the proposed payment rate of approximately $81 for 
APC 0218, which was recommended by the HOP Panel at the August 2012 
meeting, is adequate. However, the commenter asserted that the proposed 
payment rate of approximately $150 for New Technology APC 1540 (New 
Technology--Level III ($100--$200)) would be more appropriate.
    Response: After further review of the HOP Panel recommendation at 
the August 2012 meeting and consideration of the public comments that 
we received on this particular procedure, we believe that we should 
continue to assign the

[[Page 68337]]

Scrambler Therapy to APC 0215. Therefore, we are not accepting the 
Panel's recommendation to reassign CPT code 0278T to APC 0218. In 
addition, we do not agree with the commenter that CPT code 0278T should 
be assigned to New Technology APC 1540. Based on our understanding of 
the procedure, we believe that APC 0215 is the most appropriate APC 
assignment for CPT code 0278T based on its similarity to other 
procedures assigned to APC 0215. We will review the claims data for CPT 
0278T next year for the CY 2014 rulemaking to determine whether an APC 
reassignment for the Scrambler Therapy is necessary.
    After consideration of the public comments received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 0278T to APC 0215 for CY 2013. The final CY 2013 
geometric mean cost for APC 0215 is approximately $44.
b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)
    Since July 2006, CPT codes have existed to describe Transcranial 
Magnetic Stimulation Therapy (TMS) therapy. The initial CPT codes were 
temporary Category III CPT codes, specifically, CPT code 0160T 
(Therapeutic repetitive transcranial magnetic stimulation treatment 
planning) and 0161T (Therapeutic repetitive transcranial magnetic 
stimulation treatment delivery and management, per session), that were 
effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted 
CPT code 0160T on December 31, 2010, and replaced it with CPT code 
90867 (Therapeutic repetitive transcranial magnetic stimulation (tms) 
treatment; initial, including cortical mapping, motor threshold 
determination, delivery and management) effective January 1, 2011. 
Similarly, CPT code 0161T was deleted on December 31, 2010, and was 
replaced with CPT code 90868 (Therapeutic repetitive transcranial 
magnetic stimulation (tms) treatment; subsequent delivery and 
management, per session) effective January 1, 2011. In CY 2012, the 
AMA's CPT Editorial Panel established an additional TMS therapy code, 
specifically CPT code 90869 (Therapeutic repetitive transcranial 
magnetic stimulation (tms) treatment; subsequent motor threshold re-
determination with delivery and management), that was effective January 
1, 2012.
    In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 90867, 90868, and 90869 to APC 0218 (Level 
II Nerve and Muscle Tests), which had a proposed payment rate of 
approximately $81.
    Comment: One commenter disagreed with the proposed APC assignment 
and stated that the TMS therapy codes are not similar to the services 
assigned to APC 0218. The commenter recommended three options on the 
appropriate APC assignment.
    Under the first option, the commenter recommended the reassignment 
of CPT codes 90867, 90868, and 90869 to APC 0216 (Level III Nerve and 
Muscle Tests), which had a proposed payment rate of approximately $182. 
The commenter also recommended the revision of the APC title 
description to read ``Level III Nerve and Muscle Tests & TMS''. The 
commenter stated that the TMS therapy services are similar to the 
services described by CPT codes 95961 (Functional cortical and 
subcortical mapping by stimulation and/or recording of electrodes on 
brain surface, or of depth electrodes, to provoke seizures or identify 
vital brain structures; initial hour of physician attendance), 95962 
(Functional cortical and subcortical mapping by stimulation and/or 
recording of electrodes on brain surface, or of depth electrodes, to 
provoke seizures or identify vital brain structures; each additional 
hour of physician attendance (list separately in addition to code for 
primary procedure)), and 96000 (Comprehensive computer-based motion 
analysis by video-taping and 3d kinematics), which are assigned to APC 
0216.
    Under the second option, the commenter recommended the 
establishment of a new APC for the three TMS therapy CPT codes, and 
further recommended revising the APC title description to read 
``Transcranial Magnetic Stimulation''.
    Under the third option, the commenter suggested assigning CPT codes 
90867, 90868, and 90869 to APC 0320 (Electroconvulsive Therapy), which 
had a proposed payment rate of approximately $441. Although TMS therapy 
is clinically related to electroconvulsive therapy (ECT), the commenter 
stated that its resource costs are lower than ECT.
    Response: We appreciate the commenter's thoughtful suggestions on 
the APC assignments for CPT codes 90867, 90868, and 90869. We do not 
agree with the commenter that the procedures described by CPT codes 
90867, 90868, and 90869 would be appropriately assigned to 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. However, based on the latest claims data used for this 
rulemaking, we do agree with the commenter's suggestion that APC 0216 
would be the more appropriate APC assignment for the three TMS therapy 
CPT codes. Analysis of our more recent claims data revealed that the 
resources associated with CPT codes 90867, 90868, and 90869 are similar 
to those services assigned to APC 0216. Specifically, for claims 
submitted during CY 2011, which were used for this final rule with 
comment period, CPT code 90867 showed a geometric mean cost of 
approximately $190 based on 15 single claims (out of 18 total claims), 
and a geometric mean cost of approximately $233 for CPT code 90868 
based on 609 single claims (out of 614 total claims). In addition, 
review of the procedures assigned to APC 0216 showed that the range of 
the geometric mean cost for the procedures with significant claims data 
is between approximately $146 (for CPT code 92584 
(Electrocochleography)) and approximately $233 (for CPT code 90868 
(Tcranial magn stim tx deli)). Based on the clinical and resource 
similarity to other procedures currently assigned to this APC, we 
believe it is appropriate to reassign the TMS therapy services to APC 
0216. Although CPT code 90869 is a new code for CY 2012, we believe 
that it is appropriate to reassign this service to APC 0216, similar to 
the APC assignment of CPT codes 90867 and 90868. Because of this 
reassignment, we also are revising the APC title descriptions of APCs 
0215, 0216, and 0218 to appropriately reflect the services within each 
APC. Specifically, we are revising the APC title description of APC 
0215 from ``Level I Nerve and Muscle Tests'' to ``Level I Nerve and 
Muscle Services''; the title description of APC 0218 from ``Level II 
Nerve and Muscle Tests'' to ``Level II Nerve and Muscle Services''; and 
the title description of APC 0216 from ``Level III Nerve and Muscle 
Tests'' to ``Level III Nerve and Muscle Services''.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, with modification. That is, we are 
reassigning CPT codes 90867, 90868, and 90869 from APC 0218 to APC 
0216, which has a final CY 2013 geometric mean cost of approximately 
$189. Table 24 below shows the final APC assignments for CPT codes 
90867, 90868, and 90869 for CY 2013.

[[Page 68338]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.036

c. Paravertebral Neurolytic Agent (APC 0207)
    Effective January 1, 2012, the AMA's CPT Editorial Panel created 
CPT code 64633 (Destruction by neurolytic agent, paravertebral facet 
joint nerve(s), with imaging guidance (fluoroscopy or ct); cervical or 
thoracic, single facet joint). For CY 2012, we assigned new CPT code 
64633 on an interim basis to APC 0207 (Level III Nerve Injections). 
This interim APC assignment was consistent with our standard process 
for dealing with new CPT codes effective on January 1 for the upcoming 
calendar year, which is to assign each code to the APC that we believe 
contains services that are comparable with respect to clinical 
characteristics and resources required to furnish the service. CPT code 
64633 was assigned a comment indicator of ``NI'' in Addendum B to the 
CY 2012 OPPS/ASC final rule with comment period to identify it as a new 
interim APC assignment for the new year and the APC assignment for this 
new code was open to public comment for 60 days following the 
publication of the CY 2012 OPPS/ASC final rule with comment period. For 
CY 2013, we proposed to continue to assign CPT code 64633 to APC 0207, 
which had a proposed payment rate of approximately $568.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period objected to the assignment of CPT code 64633 
to APC 0207 because the commenter believed that the payment rate for 
APC 0207 substantially underpays providers for this service.
    Response: Due to the lack of any claims data for CPT code 64633, we 
have no way to validate or substantiate the claim made by the 
commenter. We expect to have CY 2012 claims data for CPT code 64633 
available in CY 2013 in preparation for the CY 2014 rulemaking cycle 
and will reevaluate the APC assignment of CPT code 64633 at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 64633 to APC 0207, which has a final CY 2013 APC 
geometric mean cost of approximately $582.
d. Programmable Implantable Pump (APC 0691)
    Effective January 1, 2012, the AMA's CPT Editorial Panel created 
two new CPT codes that combine pump refill and programming/analysis 
procedures: CPT code 62369 (Electronic analysis of programmable, 
implanted pump for intrathecal or epidural drug infusion (includes 
evaluation of reservoir status, alarm status, drub prescription 
status); with reprogramming and refill) and CPT code 62370 (Electronic 
analysis of programmable, implanted pump for intrathecal or epidural 
drug infusion (includes evaluation of reservoir status, alarm status, 
drub prescription status); with reprogramming and refill (requiring 
physician's skill)). For CY 2012, CPT codes 62369 and 62370 received a 
new interim APC assignment to APC 0691 (Level III Electronic Analysis 
of Devices), consistent with our standard process for dealing with new 
CPT codes effective on January 1 for the upcoming calendar year, which 
is to assign each code to the APC that we believe contains services 
that are comparable with respect to clinical characteristics and 
resources required to furnish the service. CPT codes 62369 and 62370 
were both given a comment indicator of ``NI'' in Addendum B to the CY 
2012 OPPS/ASC final rule with comment period to identify it as a new 
interim APC assignment for the new year and the APC assignment for 
these two new codes was open to public comment for 60 days following 
the publication of the CY 2012 OPPS/ASC final rule with comment period. 
For CY 2013, we proposed to continue to assign CPT codes 62369 and 
62370 to APC 0691, which had a proposed payment rate of approximately 
$192.
    Comment: Commenters who responded to the CY 2012 OPPS/ASC final 
rule with comment period objected to the assignment of CPT codes 62369 
and 62370 to APC 0691 because they believed that the payment rate for 
APC 0691 substantially underpays providers for these services.
    Response: Due to the lack of any claims data for CPT codes 62369 
and 62370, we have no way to validate or substantiate the claim made by 
commenters. We expect to have CY 2012 claims data for CPT codes 62369 
and 62370 in CY 2013 in preparation for the CY 2014 rulemaking cycle 
and will reevaluate the APC assignment of CPT codes 62369 and 62370 at 
that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 62369 and 62370 to APC 0691, which has a final CY 2013 
APC geometric mean cost of approximately $197.
e. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    For CY 2013, we proposed to continue to assign CPT code 64569 
(Revision or replacement of cranial nerve (eg, vagus nerve) 
neurostimulator electrode array, including connection to existing pulse 
generator) to APC 0687 (Revision/Removal of Neurostimulator 
Electrodes), which had a proposed CY 2013 payment rate of approximately 
$1,576.
    Comment: Commenters objected to the assignment of CPT code 64569 in 
APC 0687 because they stated that this code is used to report both the 
revision and the replacement of neurostimulator electrodes. The 
commenters believed that hospital resources are substantially greater 
when neurostimulator electrodes are being replaced rather than revised. 
The commenters asked CMS to reassign CPT code 64569 to device-dependent 
APC 0040 (Level I Implantation/Revision/Replacement of

[[Page 68339]]

Neurostimulator Electrodes) or assign new HCPCS codes to differentiate 
between electrode replacements (with a new electrode) and electrode 
revisions (without a new electrode) so that electrode revisions map to 
APC 0687 and electrode replacements map to APC 0040. The commenters 
noted that, like CPT code 64569, the procedures currently assigned to 
APC 0040 involve the implantation of a new electrode, either as an 
initial implant or as a replacement, while all of the procedures 
currently assigned to APC 0687, with the exception of CPT code 64569, 
are defined as ``revision or removal'' or simply ``removal'' of 
electrodes. The commenters stated that the resources associated with 
the procedure described by CPT code 64569 are similar to the resources 
associated with the procedures assigned to APC 0040.
    Response: We agree with the commenters that the resources 
associated with the procedure described by CPT code 64569 are similar 
to the resources associated with procedures assigned to APC 0040, and 
that these procedures share clinical characteristics. We note that the 
CY 2013 final rule geometric mean cost for CPT code 64569 of 
approximately $5,473 is more consistent with the CY 2013 final rule 
geometric mean cost of APC 0040 of approximately $4,526 than with the 
CY 2013 final rule geometric mean cost of APC 0687 of approximately 
$1,554. Therefore, we are modifying our proposal and assigning CPT code 
64569 to APC 0040 for CY 2013.
5. Ocular Services: Placement of Amniotic Membrane (APC 0233)
    In CY 2011, 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's 
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's CPT Editorial Panel established 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, single-layer 
technique. In the CY 2011 OPPS/ASC final rule with comment period (75 
FR 72402), we assigned CPT code 65778 to APC 0239 (Level II Repair and 
Plastic Eye Procedures), which had a payment rate of approximately 
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye 
Procedures), which had a payment rate of approximately $519.
    In addition, consistent with our longstanding policy for new codes, 
we assigned these two new CPT codes to interim APCs for CY 2011. 
Specifically, we assigned 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 the codes were new with interim APC 
assignments that were subject to public comment. In accordance with our 
longstanding policy, our interim APC assignment for each code was based 
on our understanding of the resources required to furnish the service 
as defined in the code descriptor and input from our physicians.
    At the Panel's February 28-March 1, 2011 meeting, a presenter 
requested the reassignment of CPT codes 65778 and 65779 to APC 0244 
(Corneal and Amniotic Membrane Transplant), 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 65778 and 65779 were 
previously reported under the original version of CPT code 65780, which 
did not specify ``multiple layers,'' and as such these new CPT codes 
should continue to be assigned to APC 0244. Further, the presenter 
stated that the costs of the procedures described by CPT codes 65778 
and 65779 are very similar to the cost of the procedure described by 
CPT code 65780.
    The Panel recommended that CMS reassign the APC assignments for 
both CPT codes 65778 and 65779. Specifically, the Panel recommended the 
reassignment of CPT code 65778 from APC 0239 to APC 0233 (Level III 
Anterior Segment Eye Procedures), and the reassignment of CPT code 
65779 from APC 0255 to APC 0233. In addition, the Panel recommended 
that CMS furnish data when data become available for these two codes. 
We noted at that time that because these CPT codes were effective 
January 1, 2011, the first available claims data for these codes would 
be for the CY 2013 OPPS rulemaking cycle.
    We accepted the Panel's recommendations. However, in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74247), we indicated 
that, while we agreed with the Panel's recommendation to reassign CPT 
codes 65778 and 65779 to APC 0233, we believed that CPT code 65778 
should be assigned to a conditionally packaged status indicator of 
``Q2'' to indicate that the procedure would be packaged when it is 
reported with another procedure that is also assigned to status 
indicator ``T''; but in all other circumstances, the CPT code would be 
paid separately. Because the procedure described by CPT code 65778 
would rarely be provided as a separate, stand-alone service in the 
HOPD, and because the procedure would almost exclusively be provided in 
addition to and following another procedure or service, we proposed to 
reassign CPT code 65778 a conditionally packaged status indicator of 
``Q2.'' In addition, 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.
    At the August 10-11, 2011 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 status indicator ``T.'' Based on 
information presented at the meeting, and after further discussion of 
the issue, the Panel recommended that CMS reassign the status indicator 
for CPT code 65778 from conditionally packaged ``Q2'' to status 
indicator ``T.'' Several commenters also urged CMS not to finalize its 
proposal to conditionally package CPT code 65778 by assigning it status 
indicator ``Q2'' and instead adopt the Panel's recommendation to assign 
status indicator ``T.''
    After consideration of the Panel's August 2011 recommendation and 
the public comments that we received in response to the CY 2012 OPPS/
ASC

[[Page 68340]]

proposed rule, we finalized our proposal and reassigned the status 
indicator for CPT code 65778 from ``T'' to ``Q2'' effective January 1, 
2012 (76 FR 74246). Given the clinical characteristics of this 
procedure, we believed that conditionally packaging CPT code 65778 was 
appropriate under the OPPS.
    For the CY 2013 OPPS update, we proposed (77 FR 45123) to continue 
to assign CPT code 65778 a conditionally packaged status indicator of 
``Q2.'' Similarly, we stated that we believe that we should assign CPT 
code 65779 to a conditionally packaged status indicator of ``Q2.'' 
Therefore, for CY 2013, we proposed to revise the status indicator for 
CPT code 65779 from status indicator ``T'' to ``Q2'' to indicate that 
the procedure would be packaged when it is reported with another 
procedure that is also assigned status indicator ``T,'' but in all 
other circumstances, the CPT code would be paid separately. This 
reassignment would enable hospitals to perform either procedures (CPT 
code 65778 or 65779) when appropriate, and would not differentiate one 
procedure from the other because of the status indicator assignment 
under the OPPS.
    As indicated at the February 28-March 1, 2011 Panel meeting, 
because CPT codes 65778 and 65779 were effective January 1, 2011, the 
first available claims data for these codes would be in CY 2012 for the 
CY 2013 OPPS rulemaking. We now have claims data for CPT codes 65778 
and 65779, and our data show that both procedures are performed in the 
HOPD setting. Analysis of the CY 2011 claims data available for the 
proposed rule, which was based on claims processed from January 1 
through December 31, 2011, revealed that the estimated cost for CPT 
code 65778 is approximately $1,025 based on 33 single claims (out of 
130 total claims), and the estimated cost for CPT code 65779 is 
approximately $2,303 based on 35 single claims (out of 260 total 
claims). Based on the clinical similarity to other procedures currently 
assigned to APC 0233, and because there was no violation with the 2 
times rule, we stated that we believe that we should continue to assign 
both CPT codes 65778 and 65779 to APC 0233, which had a payment rate of 
approximately $1,150. Review of the procedures assigned to APC 0233 
showed that the range of the cost for the procedures with significant 
claims data is between approximately $859 (for CPT code 65400 (Removal 
of eye lesion)) and approximately $1,397 (for CPT code 66840 (Removal 
of lens material)).
    In summary, for CY 2013, we proposed to continue to assign CPT code 
65778 to a conditionally packaged status indicator of ``Q2'' and to 
reassign the status indicator for CPT code 65779 from ``T'' to ``Q2,'' 
similar to CPT code 65778. In addition, we proposed to continue to 
assign both CPT codes 65778 and 65779 to APC 0233, which had a proposed 
geometric mean cost of approximately $1,150. Both procedures and their 
CY 2013 APC assignments were displayed in Table 19 of the proposed 
rule.
    At the August 2012 HOP Panel Meeting, a presenter urged the Panel 
to recommend to CMS not to conditionally package CPT code 65779 for CY 
2013, and instead, assign status indicator ``T'' to the code. Based on 
the information presented at the meeting, and after further discussion 
of the issue, the HOP Panel made no recommendation to revise the status 
indicator assignment for CPT code 65779.
    Comment: One commenter urged CMS not to finalize its proposal to 
conditionally package CPT code 65779 by assigning it status indicator 
``Q2,'' and recommended that CMS continue to assign the code status 
indicator ``T.'' The commenter expressed concern that assigning a 
``Q2'' status indicator to CPT code 65779 would impede access to this 
procedure because, in a majority of the cases (84 percent), hospitals 
perform this procedure with another procedure. Consequently, a ``Q2'' 
status indicator would result in no payment for CPT code 65779. The 
commenter further recommended that CMS assign CPT code 65779 to APC 
0244, or another APC that better reflects the resources associated with 
the procedure, such as APC 0241 (Level IV Repair and Plastic Eye 
Procedures) or APC 0234 (Level IV Anterior Segment Eye Procedures).
    Response: We believe that the revision in status indicator for CPT 
code 65779 would enable hospitals to perform either procedures (CPT 
code 65778 or 65779) when appropriate, and would not differentiate one 
procedure from the other because of the status indicator assignment 
under the hospital OPPS. In addition, because CPT codes 65778 and 65779 
were new for CY 2011, CY 2013 is the first year of claims data that we 
have available for ratesetting for both CPT codes. Analysis of the CY 
2011 claims data revealed a geometric mean cost of approximately $989 
for CPT code 65778 based on 36 single claims (out of 142 total claims), 
and approximately $2,314 for CPT code 65779 based on 37 single claims 
(out of 280 total claims). Review of the procedures assigned to APC 
0233 showed that the range of the CPT geometric mean cost for the 
procedures with significant claims data is between approximately $867 
(for CPT code 65400 (Removal of eye lesion)) and approximately $1,390 
(for CPT code 66840 (Removal of lens material)). Based on the clinical 
similarity to other procedures currently assigned to APC 0233, and 
because there is no violation with the 2 times rule, we believe that we 
should continue to assign CPT code 65779 to APC 0233, which has a final 
geometric mean cost of approximately $1,162 for CY 2013.
    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. For CPT codes 65778 and 
65779, we will again reevaluate their APC assignments for the CY 2014 
OPPS rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our CY 2013 proposal, without modification, to assign status 
indicator ``Q2'' to CPT code 65779. When the service is furnished with 
a separately payable surgical procedure with status indicator ``T'' on 
the same day, payment for CPT code 65779 is packaged. Otherwise, 
payment for CPT code 65779 is made separately through APC 0233, which 
has a final CY 2013 geometric mean cost of approximately $1,162. The 
amniotic membrane procedures and their CY 2013 final APC assignments 
are displayed in Table 25 below.

[[Page 68341]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.037

6. Radiology Oncology
a. Proton Beam Therapy (APCs 0664 and 0667)
    APC 0664 (Level I Proton Beam Radiation Therapy) includes two 
procedures: CPT code 77520 (Proton treatment delivery; simple, without 
compensation), which had a CY 2013 proposed rule cost of approximately 
$331 (based on 185 single claims of 185 total claims submitted for CY 
2011); and CPT code 77522 (Proton treatment delivery; simple, with 
compensation), which had a proposed rule cost of approximately $1,191 
(based on 14,279 single claims of 15,405 total claims submitted for CY 
2011). APC 0667 (Level II Proton Beam Radiation Therapy) also includes 
two procedures: CPT code 77523 (Proton treatment delivery, 
intermediate), which had a proposed rule cost of approximately $920 
(based on 3,009 single claims out of 3,202 total claims submitted for 
CY 2011), and CPT code 77525 (Proton treatment delivery, complex), 
which had a proposed rule cost of approximately $483 (based on 1,400 
single claims out of 1,591 total claims submitted for CY 2011). Based 
on these CY 2011 claims data, under the current APC structuring the 
proposed rule cost of APC 0664 was approximately $1,171, and the 
proposed rule cost of APC 0667 was approximately $750.
    Because only a few hospitals bill Medicare for these services, 
their payment rates, which are set annually based on claims data 
according to the standard OPPS ratesetting methodology, may fluctuate 
significantly from year to year. For CY 2013, under the current APC 
assignments, the proposed rule cost of APC 0664 was approximately the 
same as its CY 2012 payment rate of $1,184. However, the proposed rule 
cost of APC 0667 decreased substantially from the CY 2012 payment rate. 
We also observed that for CY 2013, as in several prior years, the lower 
level APC 0664 did not include the lower cost services among the four 
CPT codes. For CY 2013, we proposed to improve the resource homogeneity 
within the proton beam therapy APCs by including the services requiring 
fewer resources in APC 0664 (Level I) and the services requiring 
greater resources in APC 0667 (Level II). Specifically, we proposed to 
reassign CPT code 77522 to APC 0667 and to reassign CPT code 77525 to 
APC 0664. Under the proposed reassignment, the estimated cost of APC 
0664 was approximately $462, and the estimated cost of APC 0667 was 
approximately $1,138. We invited public comments on this proposal.
    Comment: Several commenters indicated that the decrease in the cost 
of APC 0667 is attributable to inaccurate coding and cost reporting 
during part of CY 2010 and part of CY 2011, on the part of one 
hospital. The commenters stated that one hospital's services that 
should have been billed as CPT code 77523 were instead billed as CPT 
code77525, which has a lower estimated cost. They stated that these 
services were also reported under an unintended cost center in the 
hospital's cost report, and argued that the current APC configuration 
better reflects the clinical similarity and relative resources used to 
furnish proton beam therapy services. We received a comment from the 
hospital in question indicating the same. This provider also stated 
that these issues were corrected and do not affect any claims in CY 
2012. These commenters requested that we therefore forego using the CY 
2011 claims data to set CY 2013 rates because they are based in part on 
inaccurate data reported by one of the few billing providers. They 
requested that CMS maintain both the CY 2012 payment rates and the 
current CY 2012 APC configuration through CY 2013, and the HOP Panel 
agreed with this recommendation at its August 2012 public meeting.
    One commenter recommended that CMS obtain corrected data from the 
provider in question and use the corrected data in updating the CY 2012 
proton beam therapy payment rates for CY 2013. The commenter 
recommended that if CMS could not accomplish this in time for 
publication of the CY 2013 final rule, CMS exclude the reportedly 
erroneous data from its ratesetting process and update the CY 2012 
payments for proton beam services for CY 2013 using the remaining 
claims data. In either event, the commenter recommended that we not 
restructure the APCs this year because despite what the cost data show, 
simple and complex proton beam therapy services are not clinically 
homogenous.
    Another commenter supported the proposed reduction in payments for 
proton beam services. The commenter stated that given the cost of 
establishing and staffing proton beam centers, proton beam therapy does 
not yield commensurate benefit over other therapies.
    Response: We appreciate the public comments and the HOP Panel's 
recommendation. After consideration of the public comments we received, 
we are updating the payment rates for proton beam therapy for CY 2013 
to reflect the most recently available claims data from all providers. 
Therefore, we are not maintaining the CY 2013 payment rates at CY 2012 
levels, and we are not excluding the reportedly erroneous data from the 
ratesetting process. However, we are maintaining the current APC 
structure for CY 2013 and will reevaluate the costs and appropriateness 
of the APC structuring for proton beam services next year. Using the 
current APC assignments for proton beam services, the CY 2013 final 
geometric mean cost of APC 0664 (including CPT codes 77520 and 77522) 
is approximately $1,169. The CY 2013 final geometric mean cost of APC 
0667 (including CPT codes 77523 and 77525) is approximately $702.

[[Page 68342]]

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) 
(APC 0305)
    Effective January 1, 2010, the CPT Editorial Panel created CPT code 
77338 (Construction of multi-leaf collimator (MLC) device(s) for IMRT 
per IMRT plan) to report all of the devices furnished under a single 
IMRT treatment plan. The code was created as part of an effort to 
consolidate the reporting of multiple services or units of service into 
a single code. For CY 2011, we assigned CPT 77338 to APC 0310 (Level 
III Therapeutic Radiation Treatment Preparation) based on a simulated 
cost of approximately $792 that we calculated using CY 2009 claims data 
for the predecessor CPT code 77334 ((Treatment devices, design and 
construction; complex (irregular blocks, special shields, compensators, 
wedges, molds or casts)).
    For CY 2012, using our standard ratesetting methodology and the 
first year of available claims data for CPT code 77338, and based upon 
a final rule cost of approximately $188, we reassigned this service 
from APC 0310 to APC 0305 (Level II Therapeutic Radiation Treatment 
Preparation) with a final payment rate of approximately $264. In our 
response to public comments, we noted several possible reasons for the 
discrepancy in the reported cost of the service relative to its 
predecessor code. We stated that it is not unusual for providers to 
bill a given service in a manner that is inconsistent with what we 
would expect based on the definition of a new code. We also noted 
potential clinical reasons for the apparent anomaly, such as the 
inclusion of labor-intensive physical blocks, shields, and molds in the 
service described by CPT code77334, and 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. We stated that we saw no basis to ignore our robust set of 
single procedure claims submitted by a significant number of hospitals 
by continuing to simulate a cost for CPT code 77338.
    In the CY 2013 OPPS/ASC proposed rule Addenda, based on a proposed 
rule cost of approximately $293, we proposed to continue the current 
assignment of CPT code 77338 for CY 2013 to APC 0305, and to add this 
service to the bypass list which would increase the number of claims 
that could be used in setting its payment rate.
    Comment: One commenter objected to the continued assignment of CPT 
code 77338 to APC 0305. The commenter again noted the low estimated 
cost of this service compared to its predecessor code, and continued to 
believe that providers are inappropriately coding the service. They 
requested that for CY 2013, we simulate the cost of this service using 
the alternative methodology that we used in CY 2011, and that we 
reassign the service to APC 0310, which has a final rule cost of 
approximately $1,013.
    Response: As we noted last year, we see no reason to discard the 
reported claims data for CPT code 77338, which has a CY 2013 final rule 
geometric mean cost of approximately $297. For the reasons previously 
discussed, for CY 2013 we will continue assigning this CPT code to APC 
0305, which has a final geometric mean cost of approximately $299. We 
will reevaluate whether this placement is appropriate next year when 
additional claims data are available.
c. Other Radiation Oncology Services (APCs 0310 and 0412)
    Comment: One commenter addressed the proposed payment rates for the 
following services: CPT code 77418 (Radiation treatment delivery 
intensity modulated radiotherapy), which is assigned to APC 0412 (Level 
II Radiation Therapy) and is separately paid; CPT code 77295 (3-D 
Therapeutic radiology simulation-aided field setting), which is 
assigned to APC 0310 (Level III Therapeutic Radiation Treatment 
Preparation) and is also separately paid; CPT code 77373 (Stereotactic 
body radiation therapy delivery), which has a status indicator of ``B'' 
(Not covered under the OPPS); and CPT code 77014 (CT scan for therapy 
guidance), which has status indicator of ``N'' and is packaged. The 
commenter expressed concern about perceived decreases in payment for 
these services.
    Response: Under our standard ratesetting methodology, we proposed a 
slight payment increase for CPT 77418 from approximately $459 in CY 
2012 to approximately $484 in CY 2013, based on a CY 2013 proposed rule 
geometric mean cost of $497. Similarly, we proposed a slight payment 
increase for CPT 77295 from approximately $953 in CY 2012 to 
approximately $985 in CY 2013, based on a CY 2013 proposed rule 
geometric mean cost of $988. The final CY 2013 geometric mean cost of 
CPT 77418 is approximately $498, and the final CY 2013 geometric mean 
cost of CPT 77295 is approximately $991.
    Since 2007, we have not recognized CPT code 77373 under the OPPS, 
and hospitals should instead report this service using HCPCS code G0251 
(Linear accelerator based stereotactic radiosurgery, delivery). HCPCS 
code G0251 is assigned to APC 0065 (Level I Stereotactic Radiosurgery, 
MRgFUS, and MEG), whose payment rate also increased from CY 2012 (final 
CY 2012 payment of approximately $902) to CY 2013 (final CY 2013 
geometric mean cost of approximately $1,007). CPT code 77014 has been 
packaged under the OPPS since 2008 when we implemented our guidance 
services policy.
d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, 0067, and 0127)
    For CY 2013, 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), which had a CY 2013 
proposed payment rate of approximately $8,011.
    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 2013. 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), which had a CY 2013 
proposed payment rate of approximately $3,294; 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), which had a CY 2013 proposed payment rate of approximately 
$967; 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), which had a CY

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2013 proposed payment rate of approximately $2,361.
    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 urged CMS to reevaluate the APC assignments 
for the linear accelerator-based (LINAC) and robotic Cobalt-60 based 
stereotactic radiosurgery (r-SRS) HCPCS codes. The commenter stated 
that no clinical data exist to support the need for differential 
payments for LINAC-based and Cobalt-60 r-SRS procedures. The commenter 
further explained that there is no clinical evidence to suggest that 
one system is superior to the other, and the costs of purchasing and 
maintaining the devices are similar. The commenter recommended that CMS 
assign HCPCS code G0339 and CPT code 77371 to the same APC, thereby 
establishing payment parity for the complete course of treatment for 
intracranial and other head and neck r-SRS, regardless of equipment or 
energy source. In addition, the commenter argued that this APC 
reevaluation is necessary to protect the Medicare program and 
beneficiaries from excessive costs associated with Cobalt-60-based 
system, when both the LINAC-based and Cobalt-60-based systems are 
similar in clinical homogeneity and resource costs.
    Response: We disagree with the commenter's argument that the LINAC-
based and Cobalt-60 based systems have similar resource costs. For the 
past several years, we have seen resource differences based on the 
geometric mean costs for the LINAC-based and Cobalt-60-based systems, 
and analysis of our claims data show that the geometric mean costs for 
LINAC-based and Cobalt-60-based SRS procedures differ significantly. 
Since CY 2007, when CPT code 77371 became effective, our claims data 
have shown consistently a cost of more than $7,000 for the service 
associated with the Cobalt-60-based system, which is higher than the 
mean cost of approximately $3,500 for the LINAC-based system (described 
by HCPCS G-code G0339).
    Analysis of the updated CY 2011 claims data used for this final 
rule with comment period indicates that the code-specific geometric 
mean costs for the LINAC-based and Cobalt-60-based systems continue to 
differ. Our updated claims data on the hospital outpatient claims 
available for CY 2013 ratesetting show a geometric mean cost of 
approximately $8,138 for CPT code 77371 based on 410 single claims (out 
of a total of 4,598 claims), which is significantly higher than the 
geometric mean costs associated with HCPCS codes G0173, G0251, G0339, 
and G0340. Specifically, our claims data indicate a geometric mean cost 
of approximately $2,605 for HCPCS code G0173 based on 923 single claims 
(out of a total of 1,597 claims), a geometric mean cost of 
approximately $1,007 for HCPCS code G0251 based on 12,965 single claims 
(out of a total of 13,746 claims), a geometric mean cost of 
approximately $3,497 for HCPCS code G0339 based on 8,287 single claims 
(out of a total of 10,462 claims), and a geometric mean cost of 
approximately $2,423 for HCPCS code G0340 based on 25,444 single claims 
(out of a total of 25,708 claims). Because the geometric mean costs of 
HCPCS code G0339 and CPT code 77371 differ significantly, we do not 
believe it would be appropriate to provide OPPS payment through a 
single APC for these r-SRS treatment delivery services in CY 2013. We 
continue to believe that APC 0127 is an appropriate APC assignment for 
CPT code 77371, and, similarly, that APC 0067 is an appropriate APC 
assignment for HCPCS code G0339 based on consideration of the clinical 
characteristics associated with these procedures and based on the 
geometric mean costs for these services calculated from the most 
recently available hospital outpatient claims and cost report data. 
Consistent with our current policy to annually assess the 
appropriateness of the APC assignments for all services under the 
hospital OPPS, we will continue to monitor our claims data for the SRS 
treatment delivery services in the future.
    As we have stated in the past (74 FR 60456), the OPPS is a 
prospective payment system, where APC payment rates are based on the 
relative costs of services as reported to us by hospitals according to 
the most recent claims and cost report data as described in section 
II.A. of this final rule with comment period. The 2 times rule 
specifies that the mean cost of the highest cost item or service within 
a payment group may be no more than 2 times greater than the mean cost 
of the lowest cost item or service within the same group. Based on the 
2 times rule, HCPCS code G0339 and CPT code 77371 could not be assigned 
to the same APC and, because hospitals continue to report very 
different costs for these services, we believe it is appropriate to 
maintain their assignments to different payment groups for CY 2013. As 
a matter of payment policy, the OPPS does not set payment rates for 
services based on considerations of clinical effectiveness. 
Furthermore, in accordance with the statute, we budget neutralize the 
OPPS each year in the annual update so that projected changes in 
spending for certain services are redistributed to payment for other 
services.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue to 
assign CPT code 77371 to APC 0127, which has a final CY 2013 APC 
geometric mean cost of approximately $8,138, and to continue to assign 
HCPCS code G0339 to APC 0067, which has a final CY 2013 APC geometric 
mean cost of approximately $3,395.
e. Intraoperative Radiation Therapy (IORT) (APC 0412)
(1) Background
    The AMA's CPT Editorial Panel created three new Category I CPT 
codes for intraoperative radiation therapy (IORT), effective January 1, 
2012: CPT codes 77424 (Intraoperative radiation treatment delivery, x-
ray, single treatment session); 77425 (Intraoperative radiation 
treatment delivery, electrons, single treatment session); and 77469 
(Intraoperative radiation treatment management). As with all new CPT 
codes for CY 2012, these three codes were included in Addendum B to the 
CY 2012 OPPS/ASC final rule with comment period (available via the CMS 
Web site), effective on January 1, 2012. In accordance with our 
standard practice each year, our clinicians review the many CPT code 
changes that will be effective in the forthcoming year and make 
decisions regarding status indicators and/or APC assignments based on 
their understanding of the nature of the services. We are unable to 
include proposed status indicators and/or APC assignments in the 
proposed rule for codes that are not announced by the AMA's CPT 
Editorial Panel prior to the issuance of the proposed rule. Therefore, 
in accordance with our longstanding policy, we include, in the final 
rule with comment period, interim status indicators and/or APC 
assignments for all new CPT codes that are announced by the AMA's CPT 
Editorial Panel subsequent to the issuance of the OPPS/ASC proposed

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rule to enable payment for new services as soon as the codes are 
effective.
    We identified the new codes for IORT for CY 2012 in Addendum B to 
the CY 2012 OPPS/ASC final rule with comment period as being open to 
public comment by showing a comment indicator of ``NI'' and made 
interim status indicator assignments for each of these new IORT codes, 
based on our understanding of the clinical nature of the services they 
describe. Specifically, for CY 2012, we packaged these IORT service 
codes with the surgical procedures with which they are billed, 
assigning them interim status indicators of ``N'' (Items and Services 
Packaged into APC Rates). We did so based on a policy that was adopted 
in the CY 2008 OPPS final rule with comment period (72 FR 66610 through 
66659) to package services that are typically ancillary and supportive 
of a principal diagnostic or therapeutic procedure, which would 
generally include intraoperative services. Because IORT are 
intraoperative services furnished as a single dose during the time of 
the related surgical session, we packaged them into the payment for the 
principal surgical procedures with which they are performed based on 
claims data used for the CY 2012 OPPS/ASC final rule with comment 
period.
    Subsequent to issuance of the CY 2012 OPPS/ASC final rule with 
comment period, stakeholders provided comments on the interim status of 
these IORT service codes for CY 2012, asserting that these services are 
not ancillary to the surgical procedures, urging us to unpackage these 
codes, and requesting that we assign them to an APC reflective of the 
resources used to provide the IORT services. Commenters who responded 
to the CY 2012 OPPS/ASC final rule with comment period argued that IORT 
services described by CPT codes 77424 and 77425 are separate, distinct, 
and independent radiation treatment services from the surgical services 
to remove a malignant growth. According to the commenters, IORT is 
performed separately by a radiation oncologist and a medical physicist 
when there is concern for residual unresected cancer because of narrow 
margins related to the surgical resection. A number of the commenters 
provided varied estimates of the cost of IORT as between $4,000 and 
$7,000 per treatment, and some commenters cited a hospital survey of 
per treatment costs for the procedure described by CPT code 77424 of 
$4,441.17 and for the procedure described by CPT code 77425 of 
$6,897.50.
    One commenter stated that the x-ray intraoperative service 
described by CPT code 77424 has previously been reported with CPT code 
0182T (High dose rate electronic brachytherapy, per fraction), which is 
a separately paid OPPS service. However, the commenter pointed out that 
it would not be proper to report intraoperative radiation therapy with 
CPT code 0182T because now CPT codes 77424 and 77425 more specifically 
and accurately describe the intraoperative radiation services. One 
commenter recommended that CPT code 77425 be mapped to a new technology 
APC.
(2) CY 2013 Proposals for CPT Codes 77424, 77425, and 77469
    Based on the public comments and information received on the IORT 
policies contained in the CY 2012 OPPS/ASC final rule with comment 
period, and after further review and consideration of those public 
comments and the clinical nature of the IORT procedures, we agreed that 
IORT services are not the typical intraoperative services that we 
package, as they are not integral to or dependent upon the surgical 
procedure to remove a malignancy that precedes IORT. Therefore, for CY 
2013, we proposed to unpackage CPT codes 77424 and 77425 and assign 
them to APC 0412, currently titled ``IMRT Treatment Delivery'' (77 FR 
45124). We stated that IORT treatment services are clinically similar 
to other radiation treatment forms, such as IMRT treatment, which are 
assigned to APC 0412. Furthermore, we proposed to change the title of 
APC 0412 to ``Level III Radiation Therapy'' to encompass a greater 
number of clinically similar radiation treatment modalities. The CY 
2013 proposed rule geometric mean cost for APC 0412, based on CY 2011 
claims data, was approximately $496. We also proposed to monitor 
hospitals' costs for furnishing the services described by CPT codes 
77424 and 77425.
    In the CY 2013 proposed rule, we stated that we believe that CPT 
code 77469 should receive equal treatment to other radiation management 
codes, such as CPT code 77431 (Radiation therapy management with 
complete course of therapy consisting of 1 or 2 fractions only) and CPT 
code 77432 (Stereotactic radiation treatment management of cranial 
lesion(s) (complete course of treatment consisting of 1 session)), 
which are assigned status indicator ``B'' (Codes that are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type (12x and 13x)) and are not paid under the OPPS. Therefore, we 
proposed that the appropriate status indicator code assignment for CPT 
code 77469 be ``B'' for nonpayable status under the OPPS for CY 2013, a 
change from its current CY 2012 status indicator assignment of ``N'' 
for packaged payment status.
    At its August 2012 meeting, the HOP Panel recommended that CMS 
assign CPT code 77424 and CPT code 77425 to APC 0313 (Brachytherapy), 
and consider renaming the APC ``Brachytherapy and Intraoperative 
Radiation Therapy.'' The Panel also recommended that CMS present to the 
Panel cost data regarding CPT codes 77424 and 77425, when available or 
by the August 2013 Panel meeting.
    Comment: Many commenters supported the proposal to unpackage CPT 
codes 77424 and 77425, but objected to the proposed assignment of these 
codes to APC 0412. The commenters asserted that APC 0412 is neither 
reflective of the clinical characteristics nor the resources needed to 
perform the IORT services described by CPT codes 77424 and 77425. The 
commenters pointed out the clinical differences between IORT and IMRT, 
in that IORT provides a much higher dose of radiation during a single 
fraction (session) lasting about 45 minutes, while IMRT provides lower 
doses over multiple fractions lasting about 15 minutes. The commenters 
asserted that IMRT's cost over the full course of therapy is $17,000 to 
$20,000, much higher than IORT's cost.
    Many commenters requested that CMS assign CPT codes 77424 and 77425 
to an appropriate APC based on clinical similarity to other radiation 
treatments and suggested that CMS use external cost data to estimate 
the costs of IORT, because cost data from hospital claims are not yet 
available for these new CPT codes. Some commenters recommended that CPT 
codes 77424 and 77425 be assigned to APC 0313 (Brachytherapy), which 
has a proposed payment rate of approximately $685, because the IORT 
services are more similar to brachytherapy services than the IMRT 
services currently assigned to APC 0412. These commenters asserted that 
both IORT and brachytherapy involve placement of a radiation source 
inside or next to the area of the body requiring treatment, while IMRT, 
which is a form of external beam radiation therapy, delivers radiation 
from outside the body. The commenters opined that CPT codes 77424 and 
77425 and the APC 0313 brachytherapy procedures have similar resource 
costs, particularly because the X-ray based IORT procedure is 
comparable to high dose rate (HDR) brachytherapy, and the X-ray based 
IORT system may be used for the delivery of fractionated breast 
brachytherapy, often billed with CPT

[[Page 68345]]

code 0182T (High dose rate electronic brachytherapy, per fraction), 
which is assigned to APC 0313.
    Several other commenters stated that IORT is very different than 
HDR brachytherapy, as well as IMRT and multi-fraction stereotactic 
radiosurgery, in terms of both clinical characteristics and resource 
costs. Commenters stated that IORT capital equipment can only be used 
for IORT in the operating room, and not for other forms of radiation 
therapy, resulting in less patient utilization over which to spread 
costs. These commenters recommended that CMS assign CPT codes 77424 and 
77425 to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and 
MEG), which has a proposed payment rate of approximately $3,294. These 
commenters believed that IORT is more similar clinically to 
stereotactic radiosurgery (SRS) than IMRT, pointing out that SRS may be 
delivered in single or multiple fraction therapy and has many fewer 
(that is, 2 to 5) fractions, making it more similar to IORT, in that 
regard. A few commenters recommended that CMS assign IORT to a New 
Technology APC, with a wide range of recommended payment rates, from 
approximately $4,000 to approximately $7,000, citing various data 
estimates and sources including a survey of hospitals.
    Regarding our proposal to change the status indicator for CPT code 
77469 to ``B'' and make the service non-payable, one commenter 
supported the proposed change on the basis that it is consistent with 
our policy regarding other radiation treatment management codes.
    Response: We appreciate all of the feedback we received on the CY 
2012 interim status indicator assignment of ``N'' to CPT codes 77424 
and 77425 and the CY 2013 proposal to assign these CPT codes to APC 
0412. As stated in the CY 2013 OPPS/ASC proposed rule and described 
above, we agree with the commenters that IORT services are not the 
typical intraoperative services that we package, as they are not 
integral to or dependent upon the surgical procedure to remove a 
malignancy that precedes IORT.
    We agree with commenters that the resource costs of APC 0412 do not 
fit well with single fraction radiation therapy technologies, such as 
IORT. However, we believe the resource costs of IORT can be 
accommodated by one of the existing APCs for radiation therapy, and 
therefore, a new technology APC assignment is not needed. From a 
clinical standpoint, we agree with commenters that the procedures 
described by CPT codes 77424 and 77425 share important characteristics 
with SRS, particularly because SRS may be a single fraction therapy or 
involve many fewer fractions than IMRT. Based on the range of claimed 
costs provided by the commenters, which are all based on external 
costs, as we do not yet have claims data, there is clearly a wide range 
of reported or estimated costs for IORT services, and, as some 
commenters indicate, there may be a difference in the cost structures 
of CPT codes 77424 and 77425.
    After consideration of the public comments we received, we believe 
that an appropriate initial APC assignment for CPT codes 77424 and 
77425 is APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), 
in terms of clinical characteristics, and the range of estimated costs 
for IORT services. Therefore, for CY 2013, we are assigning CPT codes 
77424 and 77425 to APC 0065, which has a CY 2013 final geometric mean 
cost of approximately $1,006. We will review the APC assignment of CPT 
codes 77424 and 77425, individually, once we have OPPS hospital claims 
data. Regarding the Panel recommendation that we present to the Panel 
cost data regarding CPT codes 77424 and 77425, we agree to provide cost 
data from claims for these service codes when available.
7. Imaging
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397)
    Effective April 1, 2012, we created HCPCS code C9733 (Non-
ophthalmic fluorescent vascular angiography (FVA)) for a service that 
became known to us via the new technology APC application process. We 
assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which has a 
CY 2012 payment rate of $154.87 and a status indicator assignment of 
``Q2.'' The ``Q2'' status indicator provides that the service will have 
packaged APC payment if billed on the same date of service as a HCPCS 
code assigned status indicator ``T''; and in all other circumstances, 
there is a separate APC payment for the service. We proposed to 
continue to assign HCPCS code C9733 to APC 0397 for CY 2013, which had 
a CY 2013 proposed payment rate of $192.21, and to continue the 
assignment of the code to the ``Q2'' status indicator.
    The HOP Panel, at its August 2012 meeting, recommended that CMS 
maintain a status indicator of ``Q2'' for HCPCS code C9733, while 
making no recommendation as to its APC assignment. The proposed payment 
rate for APC 0397 was $197.08, with a range in individual procedure 
geometric mean costs from $140.78 to $202.97. We proposed the 
assignment of HCPCS code C9733 to APC 0397 because we believed that the 
service described by HCPCS code C9733 is similar in clinical 
characteristics to other vascular imaging services. We do not have 
claims cost data available for HCPCS code C9733 because it was made 
effective on April 1, 2012. For new HCPCS codes, our longstanding 
policy is to wait until we have claims data on new services before 
considering them for reassignment to clinical APCs other than the 
originally assigned APC.
    Comment: A number of commenters were appreciative that CMS created 
a new HCPCS code for non-ophthalmic FVA, but were concerned with the 
packaged status that would result from assigning HCPCS code C9733 
status indicator ``Q2'' because the procedure is usually performed with 
a service having a ``T'' status indicator. A few commenters pointed out 
that FVA is effective in assessing perfusion in tissue, and is 
particularly useful when vascular function is diminished. A number of 
commenters pointed out that the procedure is performed intraoperatively 
for this purpose, and is a valuable tool to assist the surgeon with 
clinical decision-making. Commenters also pointed out that the non-
ophthalmic FVA procedure has been used primarily in the hospital 
inpatient setting, and only recently offered in the hospital outpatient 
setting; therefore, outpatient data are only beginning to accumulate. 
However, commenters believed that because the ``Q2'' status indicator 
will typically result in packaging the cost of the procedure, the 
procedure will not be performed at many hospitals. The commenters 
asserted that it was very important that CMS change the status 
indicator of HCPCS code C9733 to ``S,'' which is the same status 
indicator as all other procedures assigned to APC 0397. Moreover, some 
commenters stated that other vascular imaging procedures, such as 
Doppler Ultrasound, fluoroscopy, and magnetic resonance angiography 
(MRA), are alternatives to the procedure described by HCPCS code C9733 
and are assigned status indicator ``S'' rather than status indicator 
``Q2.'' Another commenter noted that other modalities used for tissue 
perfusion screening in the hospital outpatient setting are assigned to 
APC 0096 (Level II Noninvasive Physiologic Studies), and these 
procedures also are assigned status indicator ``S.'' The commenter 
opined that assignment of status indicator ``Q2'' will encourage 
outpatient clinics to schedule multiple

[[Page 68346]]

visits to avoid the packaging of HCPCS code C9733. One commenter 
claimed that only a small number of APCs have more than one status 
indicator for their assigned procedures, and that no other HCPCS C-
codes have a status indicator of ``Q2.'' The commenter asserted that 
packaged status should only be assigned to procedures where data 
indicate that the costs and services associated with the procedure are 
integral to existing procedures.
    One commenter asserted that the assignment of HCPCS code C9733 to 
APC 0397 is not appropriate based on the costs of the procedure, and 
estimated that the cost is approximately $2,100 per procedure. The 
commenter stated that this estimate is based on a $6,000 monthly lease 
payment of the system's capital with 5 times per month use, disposable 
kit costs of approximately $800, plus $100 in indirect costs. The 
commenter recommended the assignment of HCPCS code C9733 to APC 0279 
(Level II Angiography and Venography), which has a CY 2013 proposed 
payment rate of approximately $2,219, or assignment of the C-code to 
New Technology APC 1522 (Level XXII New Technology), which has a CY 
2013 proposed payment rate of $2,250, for at least a 3-year 
transitional period, until the costs to perform the non-ophthalmic FVA 
procedure are known, in order to package the procedure.
    A few commenters were concerned that the HOP Panel, and perhaps CMS 
as well, were confusing the HCPCS code C9733 technology with a ``Wood's 
Lamp.'' The commenters explained the differences in the two 
technologies, indicating that there are clinically significant 
differences as a result of the properties of the fluorescent dyes with 
which they are used.
    Response: We believe that, when the non-ophthalmic FVA procedure is 
performed with a surgical procedure, it is ancillary to the surgical 
service, providing imaging services that are supportive and adjunctive 
to the surgical service. As a number of commenters stated, the 
procedure is used intraoperatively to assist the surgeon. In those 
instances when the service described by HCPCS code C9733 is performed 
as a stand-alone service, it is separately paid. Therefore, we believe 
the ``Q2'' status indicator is appropriate. Regarding the comment that 
there are only a few APCs that have more than one status indicator, we 
assign status indicators to HCPCS codes, not to APCs. APCs are 
sometimes composed of procedures that have similar roles in the overall 
provision of services (for example, they are either major or minor 
services, serve an adjunct role), but this is not always the case. We 
disagree that the ``Q2'' status indicator will encourage multiple 
clinic visits. In cases where surgery requires intraoperative imaging 
to assess tissue perfusion, the procedure described by HCPCS code C9733 
cannot be provided separate from the surgery. Regarding the estimated 
cost of the procedure that a commenter provided, we note that the 
assumptions regarding the use of the capital equipment markedly affects 
the estimate of the cost of the procedure. The commenter's assumed use 
of the equipment at 5 times per month, results in the $1,200 monthly 
capital cost. However, an assumed monthly use of 20 times results in 
$300 monthly costs, and 30 times per month results in $200 monthly 
capital costs, and so on. Low utilization of a new technology can 
result in aberrantly high per case cost estimates and illustrates why 
it is important for us to wait until hospital outpatient claims data 
become available to us for use in ratesetting. We understand the 
differences between the non-ophthalmic FVA and Wood's Lamp 
technologies, and assure the commenters that our decision is not based 
on any confusion regarding the two technologies.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal to assign HCPCS code C9733 to APC 0397 
and to continue to assign the code to status indicator ``Q2.'' APC 0397 
has a CY 2013 final geometric mean cost of approximately $340, which we 
note is a significant increase over the CY 2012 proposed rule mean 
cost.
b. Level II Nervous System Imaging (APC 0402)
    For CY 2013, we proposed to continue to assign CPT code 78607 
(Brain imaging, tomographic (spect)) in APC 0402 (Level II Nervous 
System Imaging), which had a proposed payment rate of approximately 
$477.
    Comment: Some commenters requested that CMS assess the accuracy of 
the payment rate calculation for APC 0402. One commenter stated that 
the proposed 22-percent payment reduction does not appear to be due to 
any significant reduction in hospital charges for the procedures 
included in the APC or the shift from the use of medical charges to the 
use of the geometric mean cost. Another commenter requested that CMS 
reassess its APC payment rate calculation, including the proposed 
geometric mean cost of brain SPECT, which is described by CPT code 
78607, and only phase in a change to the APC payment rate if the data 
support a reduction.
    Response: We reviewed our claims data and, for the CY 2013 update, 
used more claims to determine the payment rate for APC 0402, as 
compared to the CY 2012 update. For the CY 2012 final rule with comment 
period, there were 2,593 single claims (out of 4,643 total claims), 
while for the CY 2013 proposed rule, there were 3,062 single claims 
(out of 4,793 total claims) used to calculate the proposed payment rate 
for APC 0402. Also, as indicated in the file that we made available 
with the proposed rule entitled ``CY 2013 OPPS Comparison Between 
Proposed Geometric Mean and Median Based Payments,'' the proposed 
payment rate using either payment methodology shows a decrease in the 
payment rate for APC 0402 for the CY 2013 update. That is, the CY 2013 
proposed payment rate for APC 0402, based on the median cost 
methodology, was approximately $497, while the geometric mean cost 
methodology resulted in a CY 2013 proposed payment rate of 
approximately $477. While the proposed payment rate decreased for APC 
0402, overall, the use of the geometric mean methodology has been 
positive for many services. In addition, basing the OPPS payment 
calculations on geometric means aligns the metric used in the 
ratesetting methodology for the OPPS with that used for the IPPS.
    Further examination of the claims data used for this final rule 
with comment period revealed an increase in services assigned to APC 
0402. Specifically, our claims data show a geometric mean cost of 
approximately $472 based on 3,446 single claims (out of 5,345 total 
claims). Similarly, we saw the same pattern of increase in services and 
cost for CPT code 78607 from the proposed rule claims data to this 
final rule claims data. That is, for the CY 2013 OPPS/ASC proposed 
rule, the proposed geometric mean cost for CPT code 78607 was 
approximately $490 based on 2,295 single claims (out of 2,573 total 
claims), while the final rule geometric mean cost is approximately $468 
based on 2,592 single claims (out of 2,902 total claims). We note that 
CPT code 78607 represents 75 percent of the claims for services 
assigned to APC 0402. Because of the robust claims, we believe that our 
claims data accurately reflect the resource costs of the procedures 
assigned to APC 0402, including the service described by CPT code 
78607. We do not believe that applying a phase-in change to the APC 
payment rate for the brain SPECT CPT code 78607 is necessary, given the 
significant claims data for this procedure.

[[Page 68347]]

    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 78607 to APC 0402. The final CY 2013 geometric mean 
cost for APC 0402 is approximately $472.
c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    For CY 2011, the AMA's CPT Editorial Panel established three new 
CPT codes to describe computed tomography of the abdomen and pelvis. 
CPT codes 74176 (Computed tomography, abdomen and pelvis; without 
contrast material), 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) were effective January 1, 2011. As shown in Table 26, for CY 
2011, these services were paid under one of two methods under the OPPS. 
They were either paid separately through a single APC or through a 
composite APC. We assigned CPT code 74176 to APC 0332 (Computed 
Tomography Without Contrast), CPT code 74177 to APC 0283 (Computed 
Tomography With Contrast), and CPT code 74178 to APC 0333 (Computed 
Tomography Without Contrast Followed By Contrast). We also assigned CPT 
code 74176 to composite APC 8005 (CT and CTA Without Contrast 
Composite), and CPT codes 74177 and 74178 to composite 8006 (CT and CTA 
With Contrast Composite). We assigned the CPT codes to status indicator 
``Q3'' to indicate that they were eligible for composite payment under 
the multiple imaging composite APC methodology when they are furnished 
with other computed tomography procedures performed on the same patient 
on the same day.
[GRAPHIC] [TIFF OMITTED] TR15NO12.038

    Consistent with our longstanding policy for new codes, in Addendum 
B of the CY 2011 OPPS/ASC final rule with comment period, we assigned 
these new CPT codes to interim APCs for CY 2011, with comment indicator 
``NI'' to denote that the codes were new and the interim APC assignment 
would be open to public comment. In accordance with our longstanding 
policy to provide codes to enable payment to be made for new services 
as soon as the code is effective, our interim APC assignment for each 
code was based on our understanding of the resources required to 
furnish the service and its clinical characteristics as defined in the 
code descriptor.
    As we described in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74259), in general, stakeholders who provided comments on 
the interim APC assignments of these CPT codes for CY 2011 stated that 
the most appropriate approach to establishing payment for these new 
codes was to assign the procedures described by the codes 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 services under the OPPS than 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. In 
addition, at the February 28-March 1, 2011 Panel meeting, several 
presenters expressed their concern and disagreement with our single APC 
assignments for these new codes. The presenters stated that the payment 
rates for the single APC assignments reflected only half of the true 
costs of these services based on their internal calculated costs. 
Similar to the public commenters, the presenters indicated that, prior 
to CY 2011, these services were reported using a combination of codes, 
and suggested that CMS revise the methodology to include these 
combinations of codes to determine accurate payment rates for these 
services. Specifically, the presenters indicated that simulating the 
costs for CPT codes 74176, 74177, and 74178 using historical claims 
data from the predecessor codes would result in the best estimates of 
costs for these CPT codes and, therefore, the most accurate payment 
rates.
    After examination of our claims data for the predecessor codes, and 
after considering the various concerns and recommendations that we 
received on this issue (specifically, the views of the stakeholders who 
met with us to discuss this issue, the comments received in response to 
the CY 2011 OPPS/ASC final rule with public comment period, and input 
from the Panel at its February 28-March 1, 2011 meeting), we proposed 
to revise our payment methodology for CPT codes 74176, 74177, and 74178 
for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs 
for CPT codes 74176, 74177, and 74178 using historical claims data from 
the predecessor codes to determine the most accurate payment rates for 
these CPT codes. This new proposed payment methodology necessitated 
establishing two new APCs, specifically, APC 0331 (Combined Abdominal 
and Pelvis CT Without Contrast) to which CPT code 74176 would be 
assigned, and

[[Page 68348]]

APC 0334 (Combined Abdominal and Pelvis CT With Contrast) to which CPT 
codes 74177 and 74178 would be assigned. In addition, we proposed to 
continue to assign CPT code 74176 to composite APC 8005 and CPT codes 
74177 and 74178 to composite APC 8006 for CY 2012.
    Based on the feedback that we received from the Panel at its August 
10-11, 2011 meeting, and the public comments received in response to 
the CY 2012 OPPS/ASC proposed rule in support of the proposed revised 
payment methodology for CPT codes 74176, 74177, and 74178, we finalized 
our proposals in the CY 2012 OPPS/ASC final rule with comment period. 
Specifically, we reassigned CPT code 74176 from APC 0332 to APC 0331, 
CPT code 74177 from APC 0283 to APC 0334, and CPT code 74178 from APC 
0333 to APC 0334. (We refer readers to the CY 2012 OPPS/ASC final rule 
with comment period for a detailed description of the methodology we 
used to simulate the costs of these procedures using claims data for 
the predecessor CPT codes (76 FR 74259 through 74262).) We also 
continued with our composite APC assignments for these codes. 
Specifically, we continued to assign CPT code 74176 to composite APC 
8005 and CPT codes 74177 and 74178 to composite APC 8006. Table 27 
below shows the payment rates for these CPT codes for the CY 2012 
update.
[GRAPHIC] [TIFF OMITTED] TR15NO12.039

    We stated in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74262) that we would reassess whether there is a continued need 
for these APCs for the CY 2013 OPPS/ASC update once we have actual 
charges for these services. Because CPT codes 74176, 74177, and 74178 
became effective on January 1, 2011, we have hospital claims data 
available for these codes that we can use for ratesetting for the first 
time. In the CY 2013 OPPS/ASC proposed rule (77 FR 45086), we stated 
that analysis of the latest CY 2011 hospital outpatient claims data for 
the CY 2013 OPPS/ASC proposed rulemaking update, which was based on 
claims processed with dates of service from January 1, 2011 through 
December 31, 2011, revealed a decrease in costs for the three 
procedures, compared to the costs simulated using the predecessor CPT 
codes for CY 2012. CPT code 74176 showed a proposed geometric mean cost 
of approximately $314 based on 312,493 single claims (out of 713,662 
total claims), while CPT code 74177 showed a proposed geometric mean 
cost of approximately $476 based on 367,002 single claims (out of 
951,296 total claims). In addition, CPT code 74178 showed a proposed 
geometric mean cost of approximately $537 based on 184,580 single 
claims (out of 267,401 total claims). Because we used hospital claims 
data specific to CPT codes 74176, 74177, and 74178, we stated that we 
believe these costs accurately reflect the resources associated with 
providing computed tomography of the abdomen and pelvis as described by 
these CPT codes in the HOPD.
    Furthermore, our analysis of the CY 2011 claims data available for 
the proposed rule showed no 2 times rule violation for either APC 0331 
or APC 0334. Therefore, for CY 2013, we proposed to continue to assign 
CPT code 74176 to APC 0331 and CPT codes 74177 and 74178 to APC 0334. 
(Because we have claims data available for these three CPT codes, we 
will no longer simulate their costs using the predecessor codes as we 
did in CY 2012.) In addition, we proposed to continue to assign these 
codes to their existing composite APCs for CY 2013. Specifically, we 
proposed to continue to assign CPT code 74176 to composite APC 8005, 
and to assign CPT codes 74177 and 74178 to composite APC 8006.
    Comment: Several commenters expressed concern with the decreased 
payment rates for APCs 0331 and 0334, and suggested that the coding 
changes that occurred in CY 2011 for CPT codes 74176, 74177, and 74178, 
attributed to the payment reduction. Some of the commenters believed 
that because the codes were new in CY 2011, hospitals have not had 
enough time to appropriately adjust their charge masters to accurately 
reflect the CY 2011 coding changes. One commenter urged CMS to take 
whatever action necessary to mitigate the payment cuts for CY 2013. 
Some of commenters requested that CMS delay the use of claims data and 
continue the use of historical data for an additional year to give more 
time for education and adjustment of hospital charge masters.
    Response: We believe that hospitals have a process in place to 
adjust to the numerous coding changes that occur annually. There are 
hundreds of coding changes (that is, CPT, Level II Alphanumeric HCPCS, 
and ICD-9-CM codes) that occur every year, and hospitals make changes 
to their internal systems (for example, coding, charge masters, 
grouper, business office systems, among other) accordingly to capture 
these changes so that their claims are processed timely and accurately.
    Because of the substantial claims data that we have for these 
procedures, we see no reason to delay the use of the claims data in 
determining the costs for

[[Page 68349]]

CPT codes 74176, 74177, and 74178. Specifically, we were able to use at 
least 1 million claims that were submitted during CY 2011 in 
determining the payment rates for CPT codes 74176, 74177, and 74178. 
Our analysis for this final rule with comment period revealed a 
geometric mean cost of approximately $315 for CPT code 74176 based on 
333,144 single claims (out of 769,757 total claims), a geometric mean 
cost of approximately $477 for CPT code 74177 based on 388,506 single 
claims (out of 1,024,117 total claims), and a geometric mean cost of 
approximately $538 for CPT code 74178 based on 194,216 single claims 
(out of 283,435 total claims). We have no reason to believe that our 
claims data, as reported by hospitals, do not accurately reflect the 
hospital costs for CPT codes 74176, 74177 and 74178.
    After consideration of the public comments received, we are 
finalizing our CY 2013 proposal, without modification. Specifically, 
for CY 2013, we are continuing to assign CPT code 74176 to APC 0331 and 
CPT codes 74177 and 74178 to APC 0334. In addition, we are continuing 
to assign these CPT codes to their existing composite APCs for CY 2013. 
Specifically, we are continuing to assign CPT code 74176 to composite 
APC 8005, and to assign CPT codes 74177 and 74178 to composite APC 
8006.
    Table 28 below lists the computed tomography of the abdomen and 
pelvis CPT codes along with their status indicators, and single and 
composite APC assignments for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.040

8. Respiratory Services
a. Bronchoscopy (APC 0415)
    CPT code 31629 (Bronchoscopy, rigid or flexible, including 
fluoroscopic guidance, when performed; with transbronchial needle 
aspiration biopsy(s), trachea, main stem and/or lobar bronchus(i)) was 
established by the AMA's CPT Editorial Panel in 1987. CPT code 31634 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with balloon occlusion, with assessment of air leak, with 
administration of occlusive substance (eg, fibrin glue), if performed) 
was established effective January 1, 2011. CPT code 31629 has been 
assigned to APC 0076 (Level I Endoscopy Lower Airway) since August 
2000, when the hospital OPPS was implemented, while CPT code 31634 has 
been assigned to APC 0076 since the code was effective on January 1, 
2011.
    In the CY 2013 OPPS/ASC proposed rule, we proposed to reassign both 
CPT codes 31629 and 31634 from APC 0076 to APC 0415 (the Level II 
Endoscopy Lower Airway). Consistent with CMS' policy of reviewing APC 
assignments annually for any 2 times rule violations and 
appropriateness of APC assignments based on the latest hospital 
outpatient claims data, we evaluated the resource cost associated with 
the procedures assigned to APC 0076 for the CY 2013 rulemaking update. 
Based on our analysis, we determined that the configuration of APC 0076 
violated the 2 times rule. To eliminate the 2 times rule violation, we 
proposed to reassign CPT codes 31629 and 31634 from APC 0076 to APC 
0415 because we believe this APC appropriately reflects these services 
based on their resource costs as well as clinical homogeneity.
    At the August 2012 HOP Panel meeting, a presenter requested that 
the Panel recommend to CMS not to reassign CPT codes 31629 and 31634 to 
APC 0415 for CY 2013. The presenter stated that including both 
procedures in APC 0415 would result in a 2 times rule violation. In 
addition, the presenter recommended that CPT codes 31629 and 31634 be 
reassigned to APC 0074 (Level IV Endoscopy Upper Airway) instead of APC 
0415. After discussion of the procedures and review of the hospital 
outpatient claims and cost report data, the Panel recommended that CPT 
codes 31629 and 31634 be reassigned from APC 0076 to APC 0415 for the 
CY 2013 OPPS update.
    Comment: Some commenters disagreed with the proposal to include CPT 
codes 31629 and 31634 in APC 0415, and indicated that including both 
procedures reduces the proposed payment rate for APC 0415 by at least 
23 percent. One commenter specified that adding CPT codes 31629 and 
31634, which have greater volumes of lower geometric mean costs than 
other services assigned to APC 0415, reduces the overall payment of APC 
0415. One commenter indicated that the reduction in payment would 
hinder patient access to the pulmonary services listed under APC 0415 
and recommended alternative endoscopy lower airway APC configurations, 
such as establishing a new APC titled ``Level III Endoscopy Lower 
Airway'' for six lower endoscopy procedures, that would include both 
CPT codes 31629 and 31634 as well as four other lower endoscopy 
procedures. Specifically, the commenter suggested including 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)), 31636 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with placement of bronchial stent(s) (includes tracheal/
bronchial dilation as required), initial bronchus), 31638 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with revision of tracheal or bronchial stent inserted at 
previous session (includes tracheal/bronchial

[[Page 68350]]

dilation as required)), and CPT codes 31629 and 31634. The commenter 
explained that CPT codes 31626, 31631, 31636, and 31638 are different 
from other procedures assigned to APC 0415 because they require 
implanting medical devices in the patient (fiducial markers, stents), 
which results in extra cost. Another commenter requested that CMS 
reevaluate the endoscopy lower airway APCs (0076 and 0415) as more 
claims data become available for newer procedures, and to meet with 
stakeholders to discuss the future reconfiguration of APCs for 
endoscopy lower airway.
    Response: As indicated above, we proposed to revise the APC 
assignments for CPT codes 31629 and 31634 after our analysis of the 
claims data for the CY 2013 rulemaking revealed a 2 times rule 
violation in APC 0076. Based on the latest hospital outpatient claims 
data for this final rule with comment period, we do not agree with the 
commenters that we should implement an alternative configuration for 
endoscopy lower airway APCs because the existing APCs are sufficient to 
reflect the costs of all of the procedures assigned to these APCs. We 
continue to believe that APC 0415 is the most appropriate APC 
assignment for CPT codes 31629 and 31634 because their resource costs 
are relatively similar to the procedures assigned to APC 0415. 
Therefore, we are accepting the Panel's recommendation and will assign 
both procedures to APC 0415. For the CY 2013 update, our analysis of 
the claims data submitted during CY 2011 and used for this final rule 
with comment period show a geometric mean cost of approximately $1,381 
based on 2,699 single claims (out of 12,209 total claims) for CPT code 
31629, and a relatively similar geometric mean cost of approximately 
$1,394 for CPT code 31634 based on 10 single claims (out of 16 total 
claims). Consistent with CMS' policy of reviewing APC assignments 
annually, we will again reevaluate the clinical similarity and resource 
use of the procedures in APC 0415 for the CY 2014 rulemaking cycle. 
Finally, we note that we regularly accept meetings from interested 
parties throughout the year, and we encourage stakeholders to continue 
a dialogue with us during the rulemaking cycle and throughout the year 
on this issue.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to reassign CPT 
codes 31629 and 31634 from APC 0076 to APC 0415. The final CY 2013 
geometric mean cost for APC 0415 is approximately $1,617.
b. Upper Airway Endoscopy (APC 0075)
    For CY 2013, we proposed to continue to assign CPT codes 31295 
(Nasal/sinus endoscopy, surgical; with dilation of maxillary sinus 
ostium (eg, balloon dilation), transnasal or via canine fossa;), 31296 
(Nasal/sinus endoscopy, surgical; with dilation of frontal sinus ostium 
(eg, balloon dilation)), and 31297 (Nasal/sinus endoscopy, surgical; 
with dilation of sphenoid sinus ostium (eg, balloon dilation)) to APC 
0075 (Level V Endoscopy Upper Airway), which had a CY 2013 proposed 
payment rate of approximately $2,039. In addition, we proposed to 
reassign CPT code 31541 (Laryngoscopy, direct, operative, with excision 
of tumor and/or stripping of vocal cords or epiglottis; with operating 
microscope or telescope) from APC 0074 (Level IV Endoscopy Upper 
Airway) to APC 0075.
    Comment: Commenters objected to the assignment of CPT codes 31295, 
31296, and 31297 to APC 0075 because the commenters believed that the 
payment rate for APC 0075 substantially underpays providers. The 
commenters recommended that CMS create split APCs for sinus surgery 
with balloon catheter and without balloon catheter, the former of which 
should be deemed device-dependent to appropriately account for the cost 
of such procedures. The commenters also requested that CMS not finalize 
its proposal to reassign CPT 31541 to APC 0075 and, instead, maintain 
the code in APC 0074 for CY 2013.
    Response: We believe that the most clinically appropriate APC 
assignment for CPT codes 31295, 31296, and 31297 is APC 0075, which 
includes other nasal and sinus endoscopy procedures. When assigning 
procedures to an APC, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. 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 geometric mean cost 
of all of the procedures assigned to APC 0075 is approximately $4,000. 
Therefore, even the nonclaims 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 the geometric mean costs for 
procedures assigned to APC 0075. We do not agree with the commenters 
that new APCs should be created to differentiate between sinus surgery 
with balloon catheter and without balloon catheter, as APC 0075 
accurately reflects a reasonable distribution of resource costs 
reflected in the group of clinically similar services currently 
assigned to the APC. We note that there is currently no 2 times rule 
violation in APC 0075. We do not agree with the commenters that CPT 
code 31541 should continue to be assigned to APC 0074, as CPT code 
31541's geometric mean cost of approximately $1,962 is higher than the 
geometric mean cost for any service currently assigned to APC 0074 and 
would result in a 2 times rule violation for APC 0074 as well. We 
believe that the geometric mean cost and clinical characteristics of 
CPT code 31541 justify its assignment to APC 0075 for CY 2013.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue to 
assign CPT codes 31295, 31296, and 31297 to APC 0075, and reassign CPT 
code 31541 to APC 0075, which has a final CY 2013 APC geometric mean 
cost of approximately $2,085.
9. Other Services
a. Payment for Molecular Pathology Services
    For the January 2012 update, the AMA's CPT Editorial Panel 
established 101 new molecular pathology services CPT codes that were 
designated as either Molecular Pathology Procedures Tier 1 or Molecular 
Pathology Procedures Tier 2 effective January 1, 2012. Tier 1 consisted 
of CPT codes 81200 through 81383, while Tier 2 consisted of CPT codes 
81400 through 81408. However, these new molecular pathology CPT codes 
are not valid for payment under Medicare for CY 2012.
    Instead, molecular pathology tests for CY 2012 are billed using 
combinations of longstanding CPT codes that describe each of the 
various steps required to perform a given test. This billing method is 
called ``stacking'' because different ``stacks'' of codes are billed 
depending on the components of the furnished test. Currently, all of 
the stacking codes are paid under the Clinical Laboratory Fee Schedule 
(CLFS) and one stacking code, CPT code 83912 (Molecular diagnostics; 
interpretation and report), is paid on both the CLFS and the Medicare 
Physician Fee Schedule (MPFS). Payment for the interpretation and 
report of a molecular pathology test when furnished and billed by a 
physician is made under the MPFS using the professional component (PC, 
or modifier ``26'') of CPT code 83912

[[Page 68351]]

(83912-26). Payment for the interpretation and report of a molecular 
pathology test when furnished by nonphysician laboratory staff is made 
under the CLFS using CPT code 83912. Thus, under Medicare, molecular 
pathology services are paid under a fee schedule other than the OPPS.
    In Addendum B of the CY 2012 OPPS/ASC final rule with comment 
period, we assigned the 101 molecular pathology services CPT codes to 
status indicator ``B'' to indicate that Medicare recognizes another 
more specific HCPCS code for the service, as well as to comment 
indicator ``NI'' to indicate that the CPT code was new for CY 2012 and 
that public comments would be accepted on the interim APC assignment 
for the new code, if applicable. We subsequently corrected the status 
indicator assignment for these CPT codes from ``B'' to ``E'' to 
indicate that they are not paid by Medicare in Addendum B of the CY 
2012 OPPS/ASC final rule with comment period that was posted on the CMS 
Web site. In the CY 2013 OPPS/ASC proposed rule, we proposed to 
reassign the status indicator for the 101 molecular pathology services 
CPT codes from ``E'' to ``A'' for CY 2013 to indicate that the codes 
would be paid under a Medicare fee schedule and not under the OPPS. The 
public comments that we received in response to the CY 2012 OPPS/ASC 
final rule with comment period and the CY 2013 OPPS/ASC proposed rule 
are addressed below.
    Comment: One commenter to the CY 2012 OPPS/ASC final rule with 
comment period requested that CMS consider paying separately for the 
molecular pathology services under the OPPS, and recommended that CMS 
reassign the services to status indicator ``X'' (Paid under OPPS; 
separate APC payment).
    Several commenters who responded to the CY 2013 OPPS/ASC proposed 
rule requested clarification of the status indicator assignment and 
payment status for the molecular pathology services. One commenter 
indicated that CMS did not specify whether CPT codes 81200 through 
81299, 81300 through 81383, and 81400 through 81408 will continue to be 
assigned status indicator ``E'' under the OPPS.
    Another commenter pointed out that CMS did not specifically discuss 
the 101 molecular pathology services CPT codes in the CY 2013 OPPS/ASC 
proposed rule, but did propose to assign status indicator ``A'' to the 
new molecular pathology services CPT codes. The commenter believed that 
CMS is unsure as to how these services will be paid, whether they will 
be paid under the MPFS or under the CLFS. The commenter recommended 
that CMS pay for the molecular pathology services codes under the MPFS 
to cover the professional interpretation and work components, and under 
the OPPS to cover the technical component of the services when provided 
in a HOPD.
    Response: Molecular pathology services are not paid under the OPPS. 
As explained above, molecular pathology services currently are billed 
using stacking codes that are paid under the CLFS with one stacking 
code, specifically, CPT code 83912, being paid under both the CLFS and 
the MPFS. For the CY 2013 update, the CPT ``stacking'' codes 83890 
through 83914 will be deleted on December 31, 2012, and will be 
replaced with 115 new molecular pathology CPT codes. Specifically, this 
includes the 101 molecular pathology services CPT codes discussed above 
plus an additional 14 new Tier I Molecular Pathology Procedure CPT 
codes that the AMA's CPT Editorial Panel established effective January 
1, 2013. In addition, CMS established one HCPCS G-code effective 
January 1, 2013. With the exception of the HCPCS G-code, the 115 
molecular pathology CPT codes will be paid under the CLFS. Payment for 
the interpretation and report of a molecular pathology test when 
furnished and billed by a physician will be made under the MPFS using 
the professional component-only HCPCS code G0452 (Molecular pathology 
procedure; physican interpretation and report). We refer readers to the 
CY 2013 MPFS final rule with comment period for further information on 
the molecular pathology services CPT codes.
    Although we did not discuss this issue in the preamble of the CY 
2013 OPPS/ASC proposed rule, we proposed to assign the 101 molecular 
pathology services CPT codes to status indicator ``A'' for the CY 2013 
update. Specifically, we assigned the 101 molecular pathology services 
CPT codes to status indicator ``A'' in Addendum B to the proposed rule 
(which is available via the Internet on the CMS Web site). We note that 
HCPCS codes listed in Addenda A and B are subject to comment, and 
responses to the comments received are addressed in the final rule with 
comment period.
    For CY 2013, the 101 molecular pathology services CPT codes will be 
assigned to status indicator ``A'' because they will be paid under the 
CLFS. Consistent with the OPPS assignment for the 101 molecular 
pathology services, the 14 new CPT codes also will be assigned to 
status indicator ``A'' for CY 2013. Specifically, CPT codes 81201 
through 81203, 81235, 81252 through 81254, 81321 through 81326, and 
81479 will be assigned to status indicator ``A'' because they will be 
paid under the CLFS. In addition, HCPCS code G0452 will be assigned to 
status indicator ``B'' to indicate that the HCPCS code describes a 
professional component-only service that is paid under the MPFS.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposal, without modification, to assign the 101 
molecular pathology services CPT codes to status indicator ``A'' for CY 
2013. Consistent with the OPPS assignment for the 101 molecular 
pathology services, the 14 new CPT codes also will be assigned to 
status indicator ``A'' for CY 2013. In addition, HCPCS code G0452 will 
be assigned to status indicator ``B'' under the OPPS for the CY 2013 
update.
b. Bone Marrow (APC 0112)
    For CY 2013, we proposed to continue to assign CPT code 38240 (Bone 
marrow or blood-derived peripheral stem cell transplantation; 
allogeneic) and CPT code 38241 (Bone marrow or blood-derived peripheral 
stem cell transplantation; autologous) to APC 0112 (Apheresis and Stem 
Cell Procedures), which had a CY 2013 proposed payment rate of 
approximately $2,878.
    Comment: One commenter requested that CMS create separate APCs for 
autologous and allogeneic transplants in recognition of the cost 
difference between the two procedures. In addition, the commenter urged 
CMS to develop an alternate ratesetting methodology for low volume 
services or services performed by a small number of providers to more 
accurately capture their costs.
    Response: We believe that CPT codes 38240 and 38241 are both 
appropriately assigned to APC 0112 based on clinical homogeneity. We 
note that there is no 2 times rule violation in APC 0112; therefore, we 
do not agree with the commenter's suggestion that we need to create 
separate APCs for autologous and allogeneic transplants. We appreciate 
the commenter's interest in developing an alternate ratesetting 
methodology for low-volume services as we are always eager to find 
improved methods to more accurately capture costs of services performed 
in the hospital outpatient setting.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 38240 and 38241 to APC 0112,

[[Page 68352]]

which has a final CY 2013 APC geometric mean cost of approximately 
$2,972.

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 the date on which pass-through payment is effective for the 
category, which 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 four 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 made effective for pass-through payment 
October 1, 2010; HCPCS codes C1830 (Powered bone marrow biopsy needle) 
and C1840 (Lens, intraocular (telescopic)), which we made effective for 
pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)), which we 
made effective for pass-through payment January 1, 2012. In the CY 2012 
OPPS/ASC final rule with comment period, we finalized the expiration of 
pass-through payment for HCPCS code C1749, which will expire after 
December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, we 
will package the costs of the HCPCS code C1749 device into the costs of 
the procedures with which the devices are reported in the hospital 
claims data used in OPPS ratesetting.
b. CY 2013 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 categories C1830 and C1840 were established 
for pass-through payments on October 1, 2011, 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 2013. Also, device pass-through category 
C1886 was established for pass-through payments on January 1, 2012, and 
will have been eligible for pass-through payments for at least 2 years 
but less than 3 years as of the end of CY 2013. Therefore, in the CY 
2013 OPPS/ASC proposed rule (77 FR 45125), we proposed a pass-through 
payment expiration date for device categories C1830, C1840, and C1886 
of December 31, 2013. Under our proposal, beginning January 1, 2014, 
device categories C1830, C1840, and C1886 will no longer be eligible 
for pass-through payments, and their respective device costs would be 
packaged into the costs of the procedures with which the devices are 
reported in the claims data.
    Comment: One commenter expressed concern that under the CMS 
proposal to expire device HCPCS code C1886 from pass-through payment, 
CMS will have difficulty in establishing a payment rate that will 
reflect all costs associated with bronchial thermoplasty, the procedure 
with which the HCPCS code C1886 device is used. The commenter indicated 
that the two bronchial thermoplasty codes, CPT code 0276T 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with bronchial thermoplasty, 1 lobe) and CPT code 0277T 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with bronchial thermoplasty, 2 or more lobes) are subject to 
noncoverage policies for all Category III CPT codes for all but two 
MACs, resulting in few Medicare claims for CY 2012, the year for which 
CPT codes 0276T and 0277T are reported for bronchial thermoplasty, and 
which will be used for CY 2014 ratesetting. The commenter estimated 
that there are nine Medicare claims for bronchial thermoplasty in CY 
2011, available for CY 2013 ratesetting, which were billed with HCPCS 
codes C9730 and C9731. The commenter requested that CMS delay the 
expiration of pass-through status for HCPCS code C1886 because of 
limited data available for CY 2014 ratesetting, and because two 
Category 1 CPT codes related to bronchial thermoplasty are expected to 
become effective January 1, 2013, which would result in these 
procedures being removed from the MAC local coverage determinations for 
noncovered services.
    Response: We created HCPCS code C1886 as a new device category 
effective January 1, 2012. As such, there are no claims for HCPCS code 
C1886 in our CY 2011 claims data. However, although we have no claims 
data for CY 2011, we have over 300 units of HCPCS code C1886 reported 
in the first 8 months of CY 2012, with robust cost data. Therefore, we 
believe that we will have sufficient CY 2012 claims on which to base 
payment rates for the bronchial thermoplasty procedures with which 
HCPCS code C1886 is billed.
    After consideration of the public comment we received, we are 
finalizing our proposal to expire from pass-through payment HCPCS C1886 
on December 31, 2013, and to package its costs with the costs of the 
procedures with which it is billed.
    We did not receive any public comments regarding our proposals to 
expire pass-through payment eligibility for device categories C1830 and 
C1840 and to package their respective costs into the costs of the 
procedures with which the devices are reported. Therefore, we are 
finalizing our proposals to expire from pass-through payment these 
device categories, and to package their costs with the costs of the 
procedures with which they are billed.
    We also received a number of comments related to packaging the 
costs of HCPCS code C1749 into the costs of the procedures with which 
the HCPCS code C1749 device are reported, a policy we finalized in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74278). We are 
discussing these public comments in this section instead of the section 
on packaging because of their relationship to device pass-through 
payment.
    Comment: A few commenters asserted that packaging payment for the 
HCPCS code C1749 device (retrograde colonoscope or Third Eye 
Retroscope) into the costs of colonoscopy procedure codes, with which 
it is billed, after the period of pass-through payment ends on December 
31, 2012, will not provide adequate payment for use of the device.
    One commenter based this assertion on a study of CY 2011 Medicare 
claims data (which the commenter summarized in its comment letter) for 
7 diagnostic colonoscopy procedures found in APC

[[Page 68353]]

0143 (Lower GI endoscopy) performed with HCPCS code C1749, finding that 
the weighted geometric mean costs of procedures in which HCPCS code 
C1749 was used is approximately $969; the cost of the same 7 
colonoscopy procedures without HCPCS code C1749 is approximately $437, 
showing a cost difference of approximately $532, which it attributed to 
the cost of the HCPCS code C1749 device. At the same time, the 
commenter pointed out that it identified 688 claims for these 7 
colonoscopy procedure codes that included units of HCPCS code C1749, 
while there were 1,067,828 claims for the same 7 procedure codes that 
did not include HCPCS code C1749 on the claim, or only 0.064 percent of 
the total claims for these 7 codes that included HCPCS code C1749. 
Therefore, the commenter claimed that the proposed rates for existing 
colonoscopy procedures do not fairly reflect the costs of HCPCS code 
C1749. The commenter further asserted that the proposed APC 0143 
payment rate of $691.58 would not pay hospitals adequately for the cost 
of a procedure using the HCPCS code C1749 device. The commenter claimed 
that the payment shortfall would be even greater in the ASC setting, 
where the proposed payment rate for colonoscopies is $389.60. The 
commenter requested that CMS create a G-code (entitled ``colonoscopy, 
flexible, proximal to splenic flexure; with continuous retrograde 
examination'') to be billed along with existing colonoscopy procedure 
codes when using the HCPCS code C1749 device; assign the new G-code and 
its costs to a unique device dependent APC under the OPPS and a device-
intensive APC under the ASC payment system; and require that HCPCS code 
C1749 be billed with the new G-code.
    Some commenters suggested that CMS continue to pay for HCPCS code 
C1749 separately, based on OPPS claims data, from the APC payment for 
the procedure under a unique device-dependent APC in the OPPS and a 
device-intensive APC for ASC payment because the HCPCS code C1749 
device represents the primary cost of this procedure. Another commenter 
requested that CMS extend the pass-through payment for HCPCS code C1749 
through CY 2013 to help further data collection for the device 
regarding its clinical role and to ensure access to the device for 
endoscopists' use.
    A number of commenters, including those who were patients or 
relatives of patients, emphasized the importance of being examined by 
the Third Eye Retroscope, the device upon which HCPCS code C1749 is 
based, because it provides dramatically improved detection rates of 
pre-cancerous adenomas, and urged CMS to improve payment for the HCPCS 
code C1749 procedure. Several commenters claimed that the proposal did 
not provide a code or payment to report use of the HCPCS code C1749 
device.
    Response: HCPCS code C1749 was created for device pass-through 
payment of the retrograde colonoscope effective October 1, 2010. Under 
the statute, hospitals are paid for devices eligible for pass-through 
payment, which is payment for the device in addition to the usual APC 
payment rate, for at least 2 but not more than 3 years from the date we 
establish pass-through payment. We finalized the expiration of pass-
through payment eligibility for HCPCS code C1749 on December 31, 2012, 
and, consistent with our normal ratesetting methodology for expired 
device pass-through payment, we finalized in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74278) our policy to package the costs 
of the HCPCS code C1749 device with the procedures with which it is 
billed, effective January 1, 2013 (76 FR 74278). For CY 2013, there are 
692 units of HCPCS code C1749 reported in our CY 2011 OPPS claims data, 
with a geometric mean cost of approximately $536. For CY 2013, these 
costs would be packaged into the procedures with which HCPCS code C1749 
are billed. CY 2011 was the first complete year that HCPCS code C1749 
was effective, and we assume that utilization of this new device will 
grow over time.
    We do not agree with the commenter that using the HCPCS code C1749 
retrograde colonoscope during a colonoscopy is a separate procedure, 
and therefore would require a G-code to describe a separate procedure. 
We believe that the retrograde colonoscopic portion of the procedure 
entails a small incremental amount of colonoscopy procedure time, as it 
is primarily used during withdrawal of the colonoscope, and there are 
few additional resource costs (such as procedure room time, equipment 
costs) other than the HCPCS code C1749 device itself, according to the 
commenter in its study of the 7 colonoscopy procedure codes. Therefore, 
the retrograde portion of the procedure is not a separate procedure on 
which to base a new G-code. Therefore, we will package costs for HCPCS 
code C1749 with the colonoscopic procedures with which they are billed 
according to our standard policy. Because we are declining to create a 
G-code to describe the retrograde colonoscopic portion of colonoscopy 
procedures, there is no need to create a new, dedicated device-
dependent APC, as requested by the commenter.
    We also do not agree with the commenter's alternate suggestion that 
separate payment is needed for HCPCS code C1749 at this time. HCPCS 
code C1749 is currently under separate payment under the pass-through 
provision, and once pass-through status expires, device costs are 
packaged into the payment for the procedure.
    Regarding the commenter's request that we extend the eligibility 
for pass-through payment of HCPCS code C1749 through CY 2013, based on 
the statutory limits at section 1833(t)(6)(B)(iii) of the Act and 
related payment policies not permitting partial year rate changes, we 
are not able to further extend pass-through payment for HCPCS code 
C1749. Moreover, we will be able to track the HCPCS code C1886 device 
utilization in CY 2013 even without the pass-through payment 
eligibility because HCPCS code C1749 will still be required to be 
reported with the procedures with which it is billed.
    The commenters who believe that HCPCS codes for pass-through 
devices become inactive when pass-through status for a device expires 
are incorrect. Under our longstanding policy, once the period of device 
pass-through payment is complete, we package the costs of the devices 
with the procedures with which they are billed. In the case of HCPCS 
code C1749, as stated previously, it is our proposal to package the 
device costs with the colonoscopy procedures with which the retrograde 
colonoscope is billed, effective January 1, 2013, to maintain HCPCS 
code C1749 for the device, and to require hospitals to include HCPCS 
code C1749 and its costs on the claims for the procedures with which it 
is billed. This will provide assurance that the costs of HCPCS code 
C1749 will be represented in our claims data and accounted for in the 
relevant APC payment rates.
    After consideration of the public comments we received, we are 
finalizing our proposals concerning the expiration for pass-through 
payment eligibility for device category codes C1830, C1840, and C1886 
as of December 31, 2013, and to package the device costs with the 
respective procedures with which these devices are billed. Furthermore, 
we are maintaining our previous decision to package the costs of HCPCS 
code C1749 with the procedures with which it is billed, as of January 
1, 2013.

[[Page 68354]]

2. Provisions for Reducing Transitional Pass-through Payments To Offset 
Costs Packaged Into APC Groups
a. Background
    Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional 
pass-through payment for an eligible device as the amount by which the 
hospital's charges for a device, adjusted to cost (cost of device) 
exceeds the portion of the otherwise applicable Medicare outpatient 
department fee schedule amount (APC payment amount) associated with the 
device. 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) for purposes of estimating the portion of the otherwise 
applicable APC payment amount associated with the device. For eligible 
device categories, we deduct 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, from the charges 
adjusted to cost for the device, as provided by section 
1833(t)(6)(D)(ii) of the Act, to determine the eligible device's pass-
through payment amount. We have consistently employed an established 
methodology to estimate the portion of each APC payment rate that could 
reasonably be attributed to the cost of an associated device eligible 
for pass-through payment, using claims data from the period used for 
the most recent recalibration of the APC rates (72 FR 66751 through 
66752). We establish and update the applicable device APC offset 
amounts for eligible pass-through device categories through the 
transmittals that implement the quarterly OPPS updates.
    We currently have published a list of all procedural APCs with the 
CY 2012 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. 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).
    Beginning in CY 2010, we include packaged costs related to 
implantable biologicals in the device offset calculations in accordance 
with our policy that the pass-through evaluation process and payment 
methodology for implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) and that 
are newly approved for pass-through status beginning on or after 
January 1, 2010, be the device pass-through process and payment 
methodology only (74 FR 60476).
b. CY 2013 Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45125), we proposed to 
continue, for CY 2013, our established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
(that is, reflect) 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. We proposed to continue our 
policy, for CY 2013, 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 2013, 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 2013 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.
    In addition, we proposed to update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html the list of all procedural APCs with 
the final CY 2013 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 2013 device 
pass-through payment applications and by CMS in reviewing those 
applications.
    Comment: One commenter recommended that all biologicals, including 
implantable biologicals that are approved by the FDA under biological 
license applications (BLAs), be treated as drugs, rather than as 
devices, for pass-through payment purposes for CY 2013. The commenter 
claimed that when Congress enacted the current payment system for SCODs 
that previously had pass-through status, it intended for biologicals 
approved under BLAs to be paid under the specific statutory provisions 
for drugs. The commenter argued that it is only logical, then, that 
Congress would have intended for these BLA-approved therapies to be 
paid as pass-through drugs as well. The commenter requested that, if 
CMS continues to evaluate implantable biologicals under the pass-
through device criteria, CMS clarify its policy that the device pass-
through criteria apply only to biologicals if they are solely 
surgically implanted according to their FDA approved indications. The 
commenter stated that the current regulation at 42 CFR 419.64(a)(4) is 
unclear how we would evaluate pass-through eligibility of a biological 
that has both surgically implanted and nonimplantable indications. The 
commenter stated that the explanation CMS provided in the CY 2012 OPPS/
ASC final rule with comment period, that ``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 
indications in which the

[[Page 68355]]

biological is not surgically implanted or inserted'' (76 FR 74280), is 
unclear and inconsistent with what CMS has stated previously in policy 
and billing instructions. The commenter recommended that CMS revise the 
regulation text so that if refers to ``a biological that is not always 
surgically implanted into the body.''
    Response: As stated in previous OPPS/ASC final rules with comment 
period, we evaluate implantable biologicals that function as, and are 
substitutes for, implantable devices for OPPS payment purposes. This is 
done regardless of their category of FDA approval (74 FR 60476; 75 FR 
71924; 76 FR 74279 through 74280). We do not believe it is necessary to 
make our OPPS payment policies regarding implantable biologicals 
dependent on categories of FDA approval, the intent of which is to 
ensure the safety and effectiveness of medical products.
    We do not agree with the commenter who asserted that Congress 
intended biologicals approved under BLAs to be paid under the specific 
OPPS statutory provisions that apply to SCODs, including the pass-
through provisions. Moreover, as we stated in previous 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 they also meet our criteria for payment as a device (74 FR 
60476; 75 FR 71924; and 76 FR 74280). We continue to believe that 
implantable biologicals meet both the definitions of a device and a 
biological and that, for payment purposes, it is appropriate for us to 
consider implantable biologicals as implantable devices in all cases, 
and not as biologicals.
    We do not agree with the commenter's assertion that the explanation 
offered in the CY 2012 OPPS/ASC final rule with comment period of the 
regulation text at 42 CFR 419.64(a)(4)(iii) which indicates that a 
biological for drug pass-through payment purposes must not be 
surgically implanted or inserted into the body, is inconsistent with 
our prior description of this policy, the application of this policy to 
date, and billing instruction to hospitals. Our policy and application 
process have consistently reflected that implantable biologicals are 
subject to the device application process since the beginning of CY 
2010. For CYs 2010, 2011, and 2012, we finalized the same policy that 
the pass-through evaluation process and payment methodology for 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice), and that are newly 
approved for pass-through status as of January 1, 2010, be the device 
pass-through process and payment methodology only (74 FR 60476, 75 FR 
71924, and 76 FR 74280, respectively). We have not established a policy 
in any year that stated that implantable biologicals needed to be 
solely surgically inserted or implanted to be subject to the device 
pass-through process and payment methodology. Furthermore, there is no 
inconsistency with our policy and billing instructions regarding pass-
through devices or implantable biologicals because there are no billing 
instructions regarding the device pass-through application process. 
Rather, application instructions are found on the CMS Web site 
(currently at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf). The language on 
the device application web site is consistent with the language in the 
CYs 2010, 2011, and 2012 final rules with comment period, stating that, 
as of January 1, 2010, implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or natural orifice) 
are being evaluated for device pass-through payment under the 
instructions using the device pass-through process. We reiterate our 
explanation provided in the CY 2012 final rule with comment period (76 
FR 74280) regarding the regulatory language at 42 CFR 419.64(a)(4), 
that 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 also are indications in which the biological is not surgically 
implanted or inserted. We will add similar language to our device and 
drug pass-through application Web sites as well.
    We are finalizing the following proposals for CY 2013: to continue 
our established methodology to estimate the portion of each APC payment 
rate that could reasonably reflect the cost of an associated device 
eligible for pass-through payment; to continue 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; to 
continue our established policies for calculating and setting the 
device APC offset amounts for each device category eligible for pass-
through payment; and 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, 
and, if device costs packaged into the existing APC structure are 
associated with the new category, to deduct the device APC offset 
amount from the pass-through payment for the device category.
    For CY 2013, we also are finalizing our proposal and continuing our 
policy established in CY 2010 to include implantable biologicals in our 
calculation of the device APC offset amounts, and 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 2013 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.
    In addition, we will update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html the list of all procedural APCs with 
the final CY 2013 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 2013 device 
pass-through payment applications and by CMS in reviewing those 
applications.
3. Clarification of Existing Device Category Criterion
a. Background
    Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to 
establish a new device category for pass-through payment for which none 
of the pass-through categories in effect (or that were previously in 
effect) is appropriate. Commenters who responded to our various 
proposed rules, as well as applicants for new device categories, had 
expressed concern that some of our existing and previously in effect 
device category descriptors were overly broad, and that the device 
category descriptors as they are currently written may preclude some 
new technologies from qualifying for establishment of a new device 
category for pass-through payment (70 FR 68630 through 68631). As a 
result of these comments, we finalized a policy, effective January 1, 
2006, to create an additional category for devices that meet all of the 
criteria required to establish a new category for

[[Page 68356]]

pass-through payment in instances where we believe that an existing or 
previously in effect category descriptor does not appropriately 
describe the new device. Accordingly, effective January 1, 2006, we 
revised Sec.  419.66(c)(1) of the regulations to reflect this policy 
change. In order to determine if a new device is appropriately 
described by any existing or previously in effect category of devices, 
we apply two tests based upon our evaluation of information provided to 
us in the device category application. First, an applicant for a new 
device category must show that its device is not similar to devices 
(including related predicate devices) whose costs are reflected in the 
currently available OPPS claims data in the most recent OPPS update. 
Second, an applicant must demonstrate that utilization of its device 
provides a substantial clinical improvement for Medicare beneficiaries 
compared with currently available treatments, including procedures 
utilizing devices in any existing or previously in effect device 
categories. We consider a new device that meets both of these tests not 
to be appropriately described by any existing or previously in effect 
pass-through device categories (70 FR 68630 through 68631).
b. Clarification of CY 2013 Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, 
for CY 2013, to clarify the test that requires an applicant for a new 
device category to show that its device is not similar to devices 
(including related predicate devices) whose costs are reflected in the 
currently available OPPS claims data in the most recent OPPS update. We 
clarified that this test includes showing that a new device is not 
similar to predicate devices that once belonged in any existing or 
previously in effect pass-through device categories. Under this test, a 
candidate device may not be considered to be appropriately described by 
any existing or previously in effect pass-through device categories if 
the applicant adequately demonstrates that the candidate device is not 
similar to devices (including related predicate devices) that belong or 
once belonged to an existing or any previously in effect device 
category, and that the candidate device is not similar to devices whose 
costs are reflected in the OPPS claims data in the most recent OPPS 
update. The substantial clinical improvement criterion, which also must 
be satisfied in every case, as indicated in Sec.  419.66(c)(2) of our 
regulations, is separate from the criterion that a candidate device not 
be similar to devices in any existing or previously in effect pass-
through categories. We invited public comments regarding this proposed 
clarification.
    We did not receive any public comments on our proposal to clarify 
the test that requires an applicant for a new device category to show 
that its device is not similar to devices (including related predicate 
devices) whose costs are reflected in the currently available OPPS 
claims data. Therefore, we are clarifying our existing policy as noted 
above.

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

1. Background
    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 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 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, 
for CY 2013, 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. (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.)
    For CY 2013, 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 
2013 OPPS/ASC proposed rule (77 FR 45127) 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 2013 OPPS/ASC proposed rule (77 FR 45127), 
we examined the offset amounts calculated from the CY 2013 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 2012 continue to meet the criteria for 
CY 2013, and to determine whether

[[Page 68357]]

other APCs to which the policy did not apply in CY 2012 would meet the 
criteria for CY 2013. Based on the CY 2011 claims data available for 
the proposed rule, we did not propose any changes to the APCs and 
devices to which this policy applies.
    Table 20 of the CY 2013 OPPS/ASC proposed rule (77 FR 45127) listed 
the proposed APCs to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2013, 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 21 of the CY 2013 OPPS/ASC proposed rule (77 FR 45128) listed 
the proposed devices to which the payment adjustment policy for no 
cost/full credit and partial credit devices would apply in CY 2013. We 
stated in the CY 2013 proposed rule (77 FR 45127) 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 2013, 
consistent with the three criteria discussed earlier in this section, 
based on the final CY 2011 claims data available for the CY 2013 OPPS/
ASC final rule with comment period. The updated lists of APCs and 
devices appear below in Table 29 and Table 30, respectively, of this 
final rule with comment period. We note that there are no changes to 
the lists of APCs and devices compared to the proposed rule for CY 
2013.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45127), we proposed, 
for CY 2013, that 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 21 of the proposed rule is present on the claim, and 
the procedure code maps to an APC listed in Table 20 of the proposed 
rule. We also proposed that OPPS payments for implantation procedures 
to which the ``FC'' modifier is appended are reduced by 50 percent of 
the device offset when both a device code listed in Table 21 of the 
proposed rule is present on the claim and the procedure code maps to an 
APC listed in Table 20 of the proposed rule. 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.
    Comment: Commenters reported that there are some instances in which 
the hospital receives a full credit for only one component of a 
pacemaker or ICD replacement procedure that involves both a lead and a 
generator. Specifically, the commenters noted that the 2012 CPT Code 
Book states that when a pulse generator insertion involves the 
insertion or replacement of one or more lead(s), use system CPT codes 
33206 (Insertion of new or replacement of permanent pacemaker with 
transvenous electrode(s); atrial), 33207 (Insertion of new or 
replacement of permanent pacemaker with transvenous electrode(s); 
ventricular), and 33208 (Insertion of new or replacement of permanent 
pacemaker with transvenous electrode(s); atrial and ventricular) for 
pacemakers or CPT code 33249 (Insertion or replacement of permanent 
pacing cardioverter-defibrillator system with transvenous lead(s), 
single or dual chamber) for pacing cardioverter-defibrillators. The 
commenters noted that hospitals would still be required to assign an 
``FB'' or ``FC'' modifier to the procedure code representing the 
replacement procedure, and the applicable offset would be applied to 
the entire APC payment, even when only one of the devices involved in 
the procedure was received at no cost or with full or partial credit. 
According to the commenters, the offset reduction may actually be much 
greater or much less than the credit received by the hospital, 
depending upon the component that was credited. The commenters 
requested that CMS alleviate this issue by allowing hospitals to bill 
individual CPT codes for each component of the replacement procedure, 
rather than requiring the reporting of a full system as suggested by 
the CPT guidance. The commenters stated that this would allow the FB or 
FC modifiers and the respective offsets to be applied accurately to the 
payment for the individual component receiving the credit, rather than 
being broadly applied to the APC payment for the entire replacement.
    Response: We agree with the commenters that hospitals would be 
required to assign an ``FB'' or ``FC'' modifier to the procedure code 
representing the pacemaker or ICD replacement procedure as they 
describe, and that the applicable offset would be applied to the entire 
APC payment, even when just one of the devices involved in the 
procedure (that is, a lead or a generator) was received at no cost or 
with full or partial credit. However, we do not agree that this is 
problematic. As the commenter noted, the offset reduction may actually 
be much greater or much less than the credit received by the hospital, 
depending upon the component that was credited. As we have stated in 
the past (76 FR 74282), 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. However, 
because averaging is inherent in a prospective payment system, we do 
not believe this is inappropriate. Therefore, we do not agree that we 
should allow hospitals to bill individual CPT codes for each component 
of the replacement procedure, rather than requiring the reporting of a 
full system as suggested by the CPT guidance, as the commenters 
suggested.
    Comment: One commenter noted that the no cost/full credit and 
partial credit adjustment policy applies only when expensive devices 
are replaced and requested clarification regarding the assignment of 
the ``FB/FC'' modifier to devices that providers receive at no cost or 
at an ``inexpensive'' cost. According to the commenter, providers lack 
clear guidelines to determine what is meant by ``inexpensive.'' The 
commenter also noted that there are inconsistencies between the ``FB/
FC'' modifier list and the list of device-dependent APCs in the CY 2013 
OPPS/ASC proposed rule, specifically that the FB/FC listing is not an 
inclusive listing of all device-dependent APCs.
    Response: As we stated in the Medicare Claims Processing Manual 
(Pub. 100-04, Chapter 4, Section 61.3.1), when a hospital furnishes a 
device received without cost or with full credit from a manufacturer, 
the hospital must append modifier ``-FB'' to the procedure code (not 
the device code) that reports the service provided to furnish the 
device. As we stated in the Medicare Claims Processing Manual (Pub. 
100-04, Chapter 4, Section 61.3.3), when a hospital receives a partial 
credit of 50 percent or more of the cost of a new replacement device 
due to warranty, recall, or field action, the hospital must append 
modifier ``-FC'' to the procedure code (not on the device code) that 
reports the service provided to replace the device. This guidance does 
not instruct providers to determine whether a no cost/full credit or 
partial credit device is ``expensive'' or ``inexpensive.'' Rather, 
providers should append the ``FB'' and ``FC'' modifiers to

[[Page 68358]]

all procedures that meet the requirements of these instructions. The I/
OCE determines, on a claim by claim basis, when to apply the no cost/
full credit and partial credit device adjustment policy (that is, when 
both a specified device code is present on the claim, and the procedure 
code to which the ``FB'' or ``FC'' modifier is appended maps to a 
specified APC, as described previously in this section).
    Regarding the comment that there are inconsistencies between the 
``FB/FC'' modifier list and the list of device-dependent APCs in the CY 
2013 OPPS/ASC proposed rule, we believe that the commenter is referring 
to the fact that Table 20 in the CY 2013 OPPS/ASC proposed rule (the 
list of proposed APCs to which the no cost/full credit and partial 
credit device adjustment policy would apply (77 FR 45127)) and Table 4A 
(the list of proposed device-dependent APCs (77 FR 45082)) are not 
identical. The commenter is correct that the list of APCs to which the 
no cost/full credit and partial credit device adjustment policy will 
apply in CY 2013 in this section and the list of device-dependent APCs 
in section II.A.2.d.(1) of the proposed rule and this final rule with 
comment period are not the same. We believe this is appropriate 
because, as we describe earlier in this section, we use the following 
criteria to determine the list of APCs to which this policy will apply: 
(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. Not all device-dependent APCs 
meet these criteria, and therefore are appropriately excluded from the 
list of APCs to which the no cost/full credit and partial credit device 
adjustment policy applies.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue the 
established no cost/full credit and partial credit adjustment policies. 
Table 29 below lists the APCs to which the payment adjustment policy 
for no cost/full credit and partial credit devices will apply in CY 
2013 and displays the final adjustment percentages for both no cost/
full credit and partial credit circumstances. Table 30 below lists the 
devices to which the no cost/full credit and partial credit device 
adjustment policy will apply for CY 2013, consistent with the three 
selection criteria discussed earlier in this section and based on the 
CY 2011 claims data available for this final rule with comment period.
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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 2013 pass-through drugs and biologicals 
and their designated APCs were assigned status indicator ``G'' in 
Addenda A and B to the proposed rule and in this final rule with 
comment period, which are available via the Internet on the CMS Web 
site.
    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. However, we note that the 
Part B drug CAP program has been postponed since CY 2009, and such a 
program has not been reinstated for CY 2013.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64. These regulations 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/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    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. For CY 2012, we estimated the OPPS pass-through payment 
for drugs and biologicals to be $19 million. Our OPPS pass-through 
payment estimate for drugs and biologicals in CY 2013 is $22 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/
Medicare/Medicare-Fee-for-Service-Payment/

[[Page 68363]]

HospitalOutpatientPPS/passthrough--payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2012
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45128), we proposed 
that the pass-through status of 23 drugs and biologicals would expire 
on December 31, 2012, as listed in Table 22 of the proposed rule (77 FR 
45129). 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, 2012. These drugs and biologicals were approved for pass-
through status on or before January 1, 2011. 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 and contrast agents, 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 $80), as discussed further 
in section V.B.2. of this final rule with comment period. If the drug's 
or biological's estimated per day cost is less than or equal to the 
applicable OPPS drug packaging threshold, we would package payment for 
the drug or biological into the payment for the associated procedure in 
the upcoming calendar year. If the estimated per day cost of the drug 
or biological is greater than the OPPS drug packaging threshold, we 
would provide separate payment at the applicable relative ASP-based 
payment amount (which is ASP+6 percent for CY 2013, as discussed 
further in section V.B.3. of this final rule with comment period). 
Section II.A.3.e. of this final rule with comment period discusses the 
packaging of all nonpass-through contrast agents and diagnostic 
radiopharmaceuticals.
    Comment: Several commenters recommended that CMS continue pass-
through status for new drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, for 3 years. The commenters 
asserted that providing pass-through status for 3 years would help 
provide a more current and accurate data set on which to base payment 
amounts of the procedure when the diagnostic radiopharmaceutical or 
contrast agent is subsequently packaged. The commenters further 
recommended that CMS expire pass-through status for drugs and 
biologicals on a quarterly as opposed to an annual basis. One commenter 
disagreed with a prior CMS proposal to begin the pass-through payment 
eligibility period on the date of first sale of the drug in the United 
States following FDA approval. The commenter however approved of the 
concurrent proposal made at that time that would require CMS to accept 
and expire pass-through applications for drugs and biologicals on a 
quarterly basis.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74287), as described in section V.A. 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 
but not more than 3 years, after the product's first payment as a 
hospital outpatient service under Medicare Part B. We continue to 
believe that this period of payment facilitates dissemination of these 
new products into clinical practice and facilitates the collection of 
sufficient 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-though payment for no more than 
3 years as the statute requires. Further, we are confident that the 
period of time for which drugs, biologicals, contrast agents, and 
radiopharmaceuticals receive pass-through status, which is at least 2 
but no more than 3 years, is adequate for CMS to collect the sufficient 
amount of data to make a packaging determination.
    We further note that we are in full compliance with the 
requirements of the Act, which states that pass-through status is given 
for at least 2 but no 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 into an APC if it is 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 on such status. We 
expire pass-though status on an annual basis. Depending on when a drug 
is initially approved for pass-through status, the drug receives pass-
through payment for at least 2 but not more than 3 years.
    Comment: Commenters, including several medical societies, 
individual practitioners, and a manufacturer, requested that CMS 
appropriately pay for HCPCS code C9275 (Injection, hexaminolevulinate 
hydrochloride, 100 mg, per study dose). Some commenters believed that 
payment would be eliminated for HCPCS code C9275 and requested that CMS 
evaluate its statutory authority and establish appropriate payment as 
necessary. One commenter recommended that CMS either continue to pay 
separately for HCPCS code C9275 because, the commenter argued, an 
insufficient amount of claims data have been collected, or assign HCPCS 
code C9275 to a new technology APC with the accompanying blue light 
cystoscopy procedure until sufficient claims are gathered to determine 
assignment of an appropriate clinical APC category. The commenter 
further argued that because C9275 will always be used with the blue 
light cystoscopy procedure, packaging C9275 will result in zero payment 
for the imaging agent, since current cystoscopy APCs do not include 
costs of imaging agents.
    The commenter stated that if CMS chooses to not provide payment for 
HCPCS code C9275 as a separately billable product, CMS should use its 
``waiver authority'' under section 1833(t)(2)(E) of the Act to ensure 
that equitable payments are made under the OPPS for C9275. The 
commenter noted that, for CY 2013, CMS used this statutory authority to 
propose an

[[Page 68364]]

additional payment for radioisotopes derived from non-HEU sources.
    Response: We proposed for CY 2013 to package the payment, for all 
contrast agents, that are not on pass-through status, into the payment 
for the associated service. We continue to believe that all nonpass-
through contrast agents function effectively as supplies that are 
ancillary and supportive to an independent service. The product 
described by HCPCS code C9275 is a contrast agent that was approved for 
pass-through status beginning on January 1, 2011. For the CY 2013 OPPS/
ASC proposed rule (77 FR 45128 through 45129), we proposed to expire 
pass-through status for this product because it had received at least 2 
and no more than 3 years, as permitted by the Act in section 
1833(t)(6). We note that because we expire pass-through status on an 
annual basis and not a quarterly basis, we cannot extend the pass-
through status for HCPCS code C9275 for an additional number of years 
because it would be counter to our current policy. Therefore, we 
believe that our proposal to expire pass-through status for HCPCS code 
C9275 for CY 2013 is appropriate.
    We disagree with the commenter that a sufficient amount of data was 
not collected for HCPCS code C9275 during its period under pass-through 
status. As we stated previously, we believe this pass-through period of 
payment facilitates dissemination for new products into clinical 
practice and facilitates the collection of hospital claims data, 
reflective of their costs for future OPPS ratesetting. 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, where the 
product is being used, into their chargemasters based on the 
utilization and costs observed in our claims data. We believe a 
sufficient amount of claims data has been collected in this case and we 
see no reason to exempt C9275 as an extraordinary case from our 
longstanding packaging policy to package payment for nonpass-through 
contrast agents.
    We also do not believe that it is appropriate to extend separate 
payment for HCPCS code C9275 based on section 1833(t)(2)(E) of the Act. 
We believe that all hospitals have the opportunity to bill for and 
receive equitable payment for HCPCS code C9275. Hospitals can bill for 
an appropriate unlisted code for the cystoscopy procedure and include 
the costs of the product currently reported by HCPCS code C9275 in that 
specific claim, in order to receive payment for the procedure and the 
product. Therefore, we do not believe that there is an inequity that 
should be adjusted. Additionally, we do not believe that an additional 
payment amount should be made for HCPCS code C9275, for the reasons 
given in this final rule with comment period, to ensure equitable 
payments are made to hospitals. Further, extending the pass-through 
status for HCPCS code C9275 beyond 3 years would not be permitted under 
the statutory requirements of section 1833(t)(6) of the Act.
    We believe that commenters have erroneously stated that payment 
will not be made under the OPPS or that an insufficient amount of 
payment will be given to the product described by HCPCS code C9275. We 
remind commenters that products that are packaged under the OPPS 
receive payment that is packaged into the payment for the associated 
procedure. 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. Payment for the packaged product is then 
included in the payment for the independent service. For HCPCS code 
C9275, hospitals may bill an unlisted code for the cystoscopy procedure 
and include the costs for HCPCS code C9275 on that claim. These costs 
will additionally be included in future ratesetting for these products.
    We continue to 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. Therefore, we believe that HCPCS code C9275 is 
appropriately packaged for CY 2013 and we are finalizing our proposal 
to expire pass-through status for C9275 and assign this HCPCS code to a 
status indicator of ``N'' for CY 2013.
    We note that comments pertaining to a potential future new 
technology APC assignment or new technology APC application for HCPCS 
code C9275 and the accompanying blue light cystoscopy procedure are 
outside the scope of this final rule with comment period.
    Comment: One commenter requested that CMS review the claims used in 
calculating the packaging status of HCPCS code J7183 (Injection, von 
willebrand factor complex (human), wilate, 1 i.u. vwf:rco) and assign 
HCPCS code J7183 to status indicator ``K'' as pass-through status has 
expired, but the cost per day exceeds $80.
    Response: We appreciate the commenter's diligence. HCPCS code J7183 
was erroneously assigned to a status indicator of ``N'' for the CY 2013 
OPPS/ASC proposed rule (77 FR 45129). The per day cost for HCPCS code 
J7183 for this final rule with comment period exceeds the $80 packaging 
threshold for CY 2013. Therefore, we are finalizing our proposal, with 
modification, to expire the pass-through status for HCPCS code J7183 
and assign it to a status indicator of ``K'' for CY 2013.
    After consideration of the public comments we received, we are 
finalizing our proposal, with modification as described above, to 
expire the pass-through status of the 23 drugs and biologicals listed 
in Table 31 below. We are assigning HCPCS code J7183 to status 
indicator ``K'' for CY 2013. Table 31 lists the drugs and biologicals 
for which pass-through status will expire on December 31, 2012, the 
status indicators, and the assigned APCs for CY 2013.
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3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45129), we proposed to 
continue pass-through status in CY 2013 for 21 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, 2012. These drugs and biologicals, which were approved for 
pass-through status between April 1, 2011 and July 1, 2012, were listed 
in Table 23 of the proposed rule (77 FR 45130 through 45131). The APCs 
and HCPCS codes for these drugs and biologicals approved for pass-
through status through April 1, 2012 were assigned status indicator 
``G'' in Addenda A and B of the proposed rule. Addenda A and B for the 
proposed rule were available via the Internet on the CMS Web site.
    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 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 and we proposed to continue to provide payment for drugs and 
biologicals with pass-through status at a rate of ASP+6 percent in CY 
2013, the amount that drugs and biologicals receive under section 
1842(o) of the Act.
    Thus, for CY 2013, 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 2013. 
We proposed that a $0.00 pass-through payment amount would be paid for 
most pass-through drugs and biologicals under the CY 2013 OPPS because 
the difference between the amount authorized under section 1842(o) of 
the Act, which is ASP+6 percent, and the portion of the otherwise 
applicable OPD fee schedule that the Secretary determines is 
appropriate, proposed at ASP+6 percent, is $0.
    In the case of pass-through contrast agents and diagnostic 
radiopharmaceuticals, their pass-through payment amount would be equal 
to ASP+6 percent because, if not on pass-through status, payment for 
these products would be packaged into the associated procedure. 
Therefore, we proposed that 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 2013 pass-through payment amount for these policy-packaged products.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2013 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).
    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 reviewed drugs with pass-through status for CY 
2013 that will change from C-codes to J-codes for CY 2013. For our CY 
2013 review, we have determined that HCPCS code J1741 (Injection, 
ibuprofen, 100 mg) describes the product reported under HCPCS code 
C9279 (Injection, ibuprofen, 100 mg), HCPCS code J0485 (Injection, 
belatacept, 1 mg) describes the product reported under HCPCS code C9286 
(Injection, belatacept, 1 mg), HCPCS code J9042 (Injection, brentuximab 
vedotin, 1 mg) describes the code reported under HCPCS code C9287 
(Injection, brentuximab vedotin, 1 mg), HCPCS code J0716 (Injection, 
centruroides immune f(ab)2, up to 120 milligrams) describes the code 
reported under HCPCS code C9288 (Injection, centruroides (scorpion) 
immune f(ab)2 (equine), 1 vial), and HCPCS code J9019 (Injection, 
asparaginase (erwinaze), 1,000 iu) describes the code reported under 
HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 1,000 
international units (I.U.)).
    In CY 2013, as is consistent with our CY 2012 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 2013, 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

[[Page 68367]]

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: 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. A few 
commenters approved of the proposal to use the ASP methodology that 
would provide payment based on WAC if ASP information is not available, 
and payment at 95 percent of AWP if WAC information is not available. 
Another commenter requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through status. The 
commenter gave an example amount of ASP+10 percent. Finally, one 
commenter, in response to both the proposal to continue to pay for 
drugs and biologicals on pass-through status and those not on pass-
through status at ASP+6 percent, suggested that CMS explore alternative 
payment mechanisms that reward the pharmaceutical care provided by 
specialty trained pharmacists who ensure safe and effective medication 
use and provide for screening of drug interactions and 
contraindications.
    Response: As discussed above, the statutorily mandated pass-through 
payment for pass-through drugs and biologicals for CY 2013 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 (ASP+6 percent for CY 2013) 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 2013, consistent with our CY 2012 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 2013, we 
proposed to follow the standard ASP methodology to determine its pass-
through payment rate 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 2013, 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 readers may also refer to the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Finally, we note that the comment that suggested that CMS explore 
alternative payment mechanisms that reward the pharmaceutical care 
provided by specialty trained pharmacists who ensure safe and effective 
medication use and provide for screening of drug interactions and 
contraindications is outside the scope of this final rule with comment 
period.
    Comment: One commenter stated that HCPCS code J1572 (Injection, 
immune globulin (flebogamma/flebogamma dif), intravenous, non-
lyophilized (e.g. liquid), 500 mg) received an approval for a labeling 
change for the extraction process on January 20, 2012, but that this 
did not constitute the approval of a ``new drug.'' The commenter 
requested that CMS reevaluate the status indicator for HCPCS code J1572 
and assign it to a status indicator of ``K'' instead of ``G'' for CY 
2013, because the original FDA approval date for the product of 
December 15, 2003 does not meet the criteria for pass-through status.
    Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45129 
through 45131), we proposed to continue pass-through status for HCPCS 
code J1572 for the remainder of CY 2013. HCPCS code J1572 replaced 
HCPCS code Q4091 on January 1, 2008. The product described by HCPCS 
code J1572 also received FDA approval on December 15, 2003. When we 
reviewed the drug pass-through application for the product described by 
HCPCS code J1572, we concluded that the product described by HCPCS code 
J1572 had not previously received pass-through payment under the OPPS 
and had a cost that was not insignificant in relation to the OPD fee 
schedule amount. Therefore, we approved pass-through status for HCPCS 
code J1572 beginning on July 1, 2011. We believe that we appropriately 
assigned pass-through status to HCPCS code J1572 and we continue to 
believe that pass-through status should continue through CY 2013.
    We disagree with the commenter that HCPCS code J1572 does not meet 
the criteria for pass-through status because the original FDA approval 
date for this product was December 15, 2003. We note that section 
1833(t)(6)(A)(iv)(I) of the Act allows for pass-through payment for a 
device, drug, or biological as long as payment for such item was not 
being made as an outpatient hospital service as of December 31, 1996. 
Furthermore, we reiterate that the statute provides in section 
1833(t)(6)(B)(iii) of the Act that pass-through status shall be in 
effect for a period of at least 2 but no more than 3 years of pass-
through payment. Therefore, we believe continuing pass-through status 
for HCPCS code J1572 is appropriate.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period requested clarification on the dosage 
descriptor for HCPCS code J9179 (Injection, eribulin mesylate, 0.1 mg). 
The commenter noted that the final rule display version referenced 
inconsistent dosage size.
    Response: As displayed in Table 32 below, the correct dosage 
descriptor for HCPCS code J9179 is 0.1mg. HCPCS code J9179 will 
continue on pass-through status, with a status indicator of ``G,'' for 
CY 2013.
    After consideration of the public comments we received, we are 
finalizing our proposal to provide payment for drugs, biologicals, 
diagnostic and therapeutic radiopharmaceuticals and contrast agents 
that are granted pass-through status based on the ASP methodology. If a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2013, 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

[[Page 68368]]

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 II.A.3.d. of this final rule 
with comment period, over the last 5 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic radiopharmaceuticals 
and contrast agents is packaged into payment for the associated 
procedure. We proposed to continue the packaging of these items, 
regardless of their per day cost, in CY 2013. As stated earlier, pass-
through payment is the difference between the amount authorized under 
section 1842(o) of the Act 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 2012, 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 
2013. Similarly, we proposed that the associated copayment amount for 
pass-through anesthesia drugs that would otherwise be packaged if the 
item did not have pass-through status would be zero for CY 2013. As 
discussed in further detail in section II.3.c.(2) of this final rule 
with comment period, we are clarifying that our general policy is to 
package drugs used for anesthesia, and that those anesthesia drugs with 
pass-through status will be packaged upon the expiration of pass-
through status.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, or anesthesia drug 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 were available via the Internet on 
the CMS Web site).
    Comment: Commenters supported the CY 2013 proposal to continue to 
set the associated copayment amounts for pass-through diagnostic 
radiopharmaceuticals and contrast agents 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 2013 OPPS/ASC proposed rule (77 FR 45129 through 
45130), 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 of 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 and 
contrast agents. We also believe that the copayment amount should be 
zero for anesthesia drugs that would otherwise be packaged if the item 
did not have pass-through status.
    After consideration of the public comments received, we are 
finalizing our proposal, without modification, 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 
2013. We are also finalizing our proposal to extend this policy to 
anesthesia drugs that have pass-through status, and to set a copayment 
amount of zero for these drugs for CY 2013.
    The 26 drugs and biologicals that we are continuing on pass-through 
status for CY 2013 or have been granted pass-through status as of 
January 2013 are displayed in Table 32 below.
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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 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 2013, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45131), we proposed to continue to package payment 
for all nonpass-through diagnostic radiopharmaceuticals and contrast 
agents, as discussed in section II.A.3.e. of the proposed rule and 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 
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 2013. 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 diagnostic 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 following: 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

[[Page 68371]]

instructions are contained within the I/OCE CMS specifications on the 
CMS Web site at http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/index.html.
    For CY 2013 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 24 
of the proposed rule (77 FR 45132) 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.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our policy, 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 2013 and future years. In addition, we 
will continue to reduce the payment amount for procedures in the APCs 
listed in Table 33 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 2012, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2013, we 
proposed to continue to apply the diagnostic radiopharmaceutical offset 
policy to payment for pass-through diagnostic radiopharmaceuticals.
    Comment: Commenters recommended that CMS continue to apply 
radiopharmaceutical edits for nuclear medicine procedures using 
radiopharmaceuticals as long as diagnostic radiopharmaceuticals are 
packaged. The commenters noted that the proposed rule was silent on 
whether CMS will continue this policy for CY 2013 and they requested 
that CMS confirm in the final rule that it will continue to apply the 
radiopharmaceutical edits and use only claims with a 
radiopharmaceutical code in determining nuclear medicine APC rates.
    Response: Beginning in CY 2008, we implemented nuclear medicine 
procedure-to-radiolabeled product claims processing edits in the I/OCE 
that required a diagnostic radiopharmaceutical to be present on the 
same claim as a nuclear medicine procedure for payment under the OPPS 
to be made. These edits ensure that hospitals submit correctly coded 
claims that report the HCPCS codes for the products and their charges 
that are necessary for performance of nuclear medicine procedures. 
Although we do not discuss our policy regarding nuclear medicine-to-
radiolabeled product claims processing edits in this final rule with 
comment period, we will continue to annually update and implement this 
list in accordance with our original finalized policy. We refer readers 
to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60384 
through 60390) for a detailed discussion of the nuclear medicine 
procedure-to-radiolabeled product edits and the evolution of our edit 
policy. In addition, specific instructions for the nuclear medicine 
procedure-to-radiolabeled product claims processing edits are contained 
within the I/OCE CMS specifications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/02OCEQtrReleaseSpecs.asp#TopOfPage.
    Comment: A few commenters recommended that CMS publish preliminary 
offset amounts for diagnostic radiopharmaceuticals and contrast agents 
with the proposed rule to allow for meaningful assessment of and public 
comment on the data.
    Response: The exact data used to calculate all of the proposed and 
final payment rates, including the associated offset amounts, for the 
CY 2013 OPPS are available for purchase under a CMS data use agreement 
through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HhospitalOutpatientPPS/index.html. 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 do not post the offset amounts by 
APC until publication of the final rule with comment period because we 
assign services to APCs based on our estimate of their full resource 
cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals and contrast agents. The offset amount is the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of predecessor diagnostic radiopharmaceuticals and contrast 
agents when considering a new diagnostic radiopharmaceutical and 
contrast agent for pass-through payment and has no bearing on APC 
assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to apply the 
diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described in the CY 2013 
OPPS/ASC proposed rule (77 FR 45131).
    Table 33 below displays the APCs to which nuclear medicine 
procedures will be assigned in CY 2013 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.
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BILLING CODE 4120-01-C
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 
and the otherwise applicable OPD fee schedule amount. There currently 
are no contrast agents with pass-through status under the OPPS. 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.
    Although there are no contrast agents with pass-through status, we 
believe that a payment offset is necessary in the event that a new 
contrast agent is approved for pass-through status during CY 2013, in 
order to provide an appropriate transitional pass-through payment for 
them 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 2013 OPPS/ASC proposed rule (77 FR 45132), we 
proposed for CY 2013 to deduct from the payment for new pass-through 
contrast agents that are approved for pass-through status as a drug or 
biological during CY 2013, 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 2013, as we 
did in CY 2012, 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 to 
redefine ``policy-packaged'' drugs as only nonpass-through diagnostic 
radiopharmaceuticals and contrast agents (74 FR 60495 through 60499). 
To

[[Page 68373]]

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 2013 
to recognize that when a contrast agent with pass-through status is 
billed with any procedural APC listed in Table 25 of the proposed rule 
(77 FR 45132 through 45133), 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.
    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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html 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.
    We proposed to identify procedural APCs for which we expect a 
contrast offset could be applicable in the case of a pass-through 
contrast agent as any procedural APC with a ``policy-packaged'' drug 
amount greater than $20 that is not a nuclear medicine APC identified 
in Table 33 above, and these APCs are displayed in Table 34 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 (70 FR 60483 through 60484). 
For CY 2013, we proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 25 of the proposed rule (77 FR 45132 through 45133), 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.
    Comment: One commenter urged CMS to publish the proposed offset 
amount for contrast agents in the proposed rule to allow interested 
stakeholders the opportunity to review the data and comment on the 
amount of the offset.
    Response: As we stated previously, the exact data used to calculate 
all of the proposed and final payment rates, including the associated 
offset amounts, for the CY 2013 OPPS are available for purchase under a 
CMS data use agreement through the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. 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 do not 
post 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 contrast agents. 
The offset amount is the portion of each APC payment rate that could 
reasonably be attributed to the cost of a predecessor contrast agent 
when considering a new diagnostic radiopharmaceutical and contrast 
agent for pass-through payment and has no bearing on APC assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2013 without modification.
BILLING CODE 4120-01-P

[[Page 68374]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.050

BILLING CODE 4120-01-C

B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status

1. Background
    Under the CY 2012 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

[[Page 68375]]

packaged items and supplies whose costs are recognized and paid within 
the national OPPS payment rate for the associated procedure or service. 
(Transmittal A-01-133, issued on November 20, 2001, explains in greater 
detail the rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
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; for CY 2011, we set the packaging threshold at $70; and for CY 
2012, we set the packaging threshold at $75.
    Following the CY 2007 methodology, for the CY 2013 OPPS/ASC 
proposed rule (77 FR 45133), 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 2013 and 
rounded the resulting dollar amount ($81.59) to the nearest $5 
increment, which yielded a figure of $80. In performing this 
calculation, we used the most recent forecast of the quarterly index 
levels for the PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' 
Office of the Actuary (OACT). (We note that we did not propose a change 
to the PPI that is used to calculate the threshold for CY 2013; 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 2013 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 2013 OPPS/ASC proposed rule (77 FR 45134), to determine 
the proposed CY 2013 packaging status for all nonpass-through drugs and 
biologicals that are not policy packaged, 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 2011 and were 
paid (via packaged or separate payment) under the OPPS. We used data 
from CY 2011 claims processed before January 1, 2012 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 2013, 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 2013, 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+6 percent (which is the payment rate we proposed for separately 
payable drugs and nonimplantable biologicals for CY 2013, as discussed 
in more detail in section V.B.3.b. of this final rule with comment 
period) to calculate the CY 2013 proposed rule per day costs. We used 
the manufacturer submitted ASP data from the fourth quarter of CY 2011 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2012) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2013 we proposed to use 
payment rates based on the ASP data from the fourth quarter of CY 2011 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
was available via the Internet on the CMS Web site) because these were 
the most recent data available for use at the time of development of 
the proposed rule. These data were also the bases for drug payments in 
the physician's office setting, effective April 1, 2012. 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 
2011 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 identify 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 2011 HCPCS codes that were 
reported to the CY 2012 HCPCS codes that we displayed in Addendum B of 
the proposed rule (which was available via the Internet on the CMS Web 
site) for payment in CY 2013.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $80 for CY 2013. The

[[Page 68376]]

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 $75 for CY 2013. 
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 argued for parity across the payment systems and they 
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 hospital update factor for the year, reflective 
of all statutory adjustments. One commenter believed that these dollar 
figures are arbitrary and recommended that CMS tie the threshold for 
separate payment to the annual market basket rather than randomly 
assigning thresholds for separate payment for these products.
    One commenter noted that increasing the packaging threshold could 
have the unintended impact of undermining conversion to LEU sources of 
diagnostic radiopharmaceuticals if CMS adopts a proposal to unbundle 
diagnostic radiopharmaceuticals from the APC rate under the policy 
packaging rule without also waiving the dollar threshold for 
radiopharmaceuticals produced from LEU sources.
    Response: As discussed in detail in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66758 through 66767), 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), the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71940 through 71943), 
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74300 
through 74301), 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 (which 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 relative value of 
each component. Under the MPFS, separate payment is made for each 
service provided in the physician's office; when individual drugs are 
administered to beneficiaries 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 for these 
drugs, 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 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 drug packaging threshold for the CY 2013 
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 updating the packaging threshold of $50 for the CY 2005 OPPS 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 2013 or to eliminate or to 
freeze the packaging threshold at $75.
    We disagree with the commenters who suggested that CMS should limit 
increases in the outpatient drug packaging threshold amount to the 
hospital update factor for the year, reflective of all statutory 
adjustments or the market basket update. 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 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 strongly disagree with the commenter who suggested 
that our methodology for updating the packaging threshold is arbitrary 
and recommended that CMS tie the threshold for separate payment to the 
annual market basket rather than randomly assigning thresholds for 
separate payment for these products. As we have stated above, 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 manufacturer, we believe that the PPI for Prescription Drugs is 
an appropriate price index to use to update the packaging threshold for 
CY 2007 and subsequent years. Therefore, we believe that our continued 
methodology of updating the

[[Page 68377]]

CY 2005 $50 packaging threshold for inflation based on the PPI for 
Prescription Drugs is not arbitrary in nature nor does it have the 
effect of randomly assigning a payment threshold for drugs. Our 
methodology continues to be an accurate way to apply an annual 
inflation adjustment factor that is consistent with the practices of 
many health care payment policy areas, and many other areas of 
government policy, that acknowledge real costs by using an inflation 
adjustment factor instead of a static dollar value.
    Finally, we disagree with commenters that increasing the packaging 
threshold could have the unintended impact of undermining conversion to 
LEU sources. As we discuss in section II.A.3.e. of this final rule with 
comment period, we are finalizing our proposals for CY 2013 to continue 
to package payment for all nonpass-through diagnostic 
radiopharmaceuticals. Therefore, diagnostic radiopharmaceuticals will 
not be subject to the packaging threshold and will instead be packaged 
regardless of their per day cost. Additionally, as we discuss in 
section III.A.C.3., removing the diagnostic radiopharmaceutical so that 
this cost is passed through directly to Medicare is not consistent with 
the fundamental concept of packaging under the OPPS. Moreover, the 
diagnostic radiopharmaceutical is never separately billed, being a 
supply in the diagnostic procedure it supports, so the true cost cannot 
be captured by single service claims. Most significantly from the 
standpoint of payment for non-HEU sources, however, a separate payment 
for the diagnostic radiopharmaceutical does not unbundle the cost of 
the isotope from the much larger cost of the drug component, nor does 
it differentiate between HEU and non-HEU sources, so it does not create 
a differential payment to further the CMS goals of payment equity or 
the Administration's goal of promoting non-HEU conversion.
    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 anticancer treatment regiment to treat nausea. 
One commenter believed that CMS packaged all 5-HT3 antiemetic drugs 
(HCPCS codes J1260 (Injection, dolasetron mesylate, 10 mg), J1626 
(Injection, granisetron hydrochloride, 100 mcg), J2405 (Injection, 
ondansetron hydrochloride, per 1 mg), J2469 (Injection, palonosetron 
hcl, 25 mcg), Q0166 (Granisetron hydrochloride, 1 mg, oral, FDA-
approved prescription anti-emetic, for use as a complete therapeutic 
substitute for an iv anti-emetic at the time of chemotherapy treatment, 
not to exceed a 24 hour dosage regimen), Q0180 (Dolasetron mesylate, 
100 mg, oral, FDA-approved prescription antiemetic, for use as a 
complete therapeutic substitute for an iv anti-emetic at the time of 
chemotherapy treatment, not to exceed a 24 hour dosage regimen)). The 
commenter opposed the packaging of these drugs.
    Response: We continue to believe that use of these antiemetics is 
an integral part of an anticancer treatment regimen and that OPPS 
claims data demonstrate their increasingly common hospital outpatient 
utilization. As 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, allows us to continue our policy of not specifically 
exempting these products from the OPPS drug packaging threshold.
    Additionally, we clarify that we did not propose to assign a 
packaged payment status indicator to all 5-HT3 antiemetic codes in the 
CY 2013 OPPS/ASC proposed rule. HCPCS code J2469 (Injection, 
palonosetron hcl, 25 mcg) had a per day cost above the proposed $80 
packaging threshold and was assigned a separately payable status 
indicator of ``K'' for the proposed rule. HCPCS code J2469 has a CY 
2013 estimated per day cost, from the CY 2011 claims data, above the CY 
2013 drug packaging threshold and therefore will receive separate 
payment in CY 2013.
    Comment: One commenter recommended that CMS not package any drugs 
used in anticancer regimens.
    Response: We disagree with the commenter for the reasons mentioned 
above. We believe that packaging certain items, including items used in 
anticancer 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 anticancer regimen or in outpatient 
treatment of other significant disease 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 
anticancer 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 not providing 
any exceptions to the standard drug packaging methodology for any class 
of drugs, including anticancer therapies, for CY 2013.
    Since publication of the CY 2013 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 2013 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 2013. We then rounded the resulting updated dollar amount 
($81.91) to the nearest $5 increment, which yielded a figure of $80. 
Therefore, after consideration for the public comments we received, and 
consistent with our methodology for establishing the packaging 
threshold using the most recent PPI forecast data, we are adopting a CY 
2013 packaging threshold of $80. 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 OPPS/ASC 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 2013 OPPS/ASC final rule with 
comment period, we proposed to use ASP data from the first quarter of 
CY 2012, 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, 2012, along with updated hospital claims 
data from CY

[[Page 68378]]

2011. We note that we also proposed to use these data for budget 
neutrality estimates and impact analyses for this CY 2013 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 2012. 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, 2012. These physician's office 
payment rates will then be updated in the January 2013 OPPS update, 
based on the most recent ASP data to be used for physician's office and 
OPPS payment as of January 1, 2013. For items that do not currently 
have an ASP-based payment rate, we proposed to recalculate their mean 
unit cost from all of the CY 2011 claims data and updated cost report 
information available for this CY 2013 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 2013 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 cost fluctuates relative to the proposed CY 
2013 OPPS drug packaging threshold and the drug's payment status 
(packaged or separately payable) in CY 2012. Specifically, for CY 2013, 
consistent with our historical practice, we proposed to apply the 
following policies to these HCPCS codes for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals whose relationship to 
the proposed $80 drug packaging threshold changes 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 2012 and that were proposed for separate 
payment in CY 2013, and that then have per day costs equal to or less 
than $80, based on the updated ASPs and hospital claims data used for 
this CY 2013 final rule with comment period, would continue to receive 
separate payment in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2012 and that are proposed for separate payment in 
CY 2013, and that then have per day costs equal to or less than $80, 
based on the updated ASPs and hospital claims data used for this CY 
2013 final rule with comment period, would remain packaged in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2013 but then have per day 
costs greater than $80, based on the updated ASPs and hospital claims 
data used for this CY 2013 final rule with comment period, would 
receive separate payment in CY 2013.
    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 cost 
fluctuates relative to the CY 2013 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2012. 
Therefore, we are finalizing our proposal, without modification, for CY 
2013.
    We note that HCPCS codes J2700 (Injection, oxacillin sodium, up to 
250 mg) and J9218 (Leuprolide acetate, per 1 mg) were paid separately 
for CY 2012 and were proposed for separate payment in the CY 2013 OPPS/
ASC proposed rule and had final per day costs of less than the $80 drug 
packaging threshold, based on updated ASPs and the CY 2011 hospital 
claims data available for this CY 2013 final rule with comment period. 
Therefore, HCPCS codes J2700 and J9218 will continue to be paid 
separately in CY 2013 according to the established methodology set 
forth above.
    In addition, we proposed to package HCPCS codes J0365 (Injection, 
aprotonin, 10,000 kiu), J1460 (Injection, gamma globulin, 
intramuscular, 1 cc), J1560 (Injection, gamma globulin, intramuscular, 
over 10 cc), J7183 (Injection, von willebrand factor complex (human), 
wilate, 1 i.u. vwf:rco), and Q4105 (Integra dermal regeneration 
template (drt), per square centimeter) for CY 2013. Using updated ASPs 
and the CY 2011 hospital claims data available for this final rule with 
comment period, HCPCS codes J0365, J1460, J1560, J7183, and Q4105 now 
have per day costs greater than $80. In accordance with our established 
policy for such cases, for CY 2013 we will pay for HCPCS codes J0365, 
J1460, J1560, J7183, and Q4105 separately.
    Finally, because we did not have claims data for HCPCS codes J1452 
(Injection, fomivirsen sodium, intraocular, 1.65 mg) and J1835 
(Injection, itraconazole, 50 mg) in the CY 2013 OPPS/ASC proposed rule, 
we had proposed a status indicator of ``E'' for these products in CY 
2013. However, since publication of the proposed rule, we have received 
claims data and the per day cost for these products are more than the 
$80 CY 2013 packaged threshold. These products will be paid separately 
and will be assigned a status indicator of ``K'' for CY 2013.
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 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

[[Page 68379]]

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 2013, 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 2013 OPPS/ASC proposed rule (77 FR 45135), 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 
2013.
    For CY 2013, 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 2011 claims data 
and our pricing information at ASP+6 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. The following drugs 
did not have pricing information available for the ASP methodology for 
this CY 2013 OPPS/ASC final rule and, as is our current policy for 
determining the packaging status of other drugs, we used the mean unit 
cost available from the fourth quarter CY 2011 claims data to make the 
packaging determinations for these drugs: HCPCS codes J3472 (Injection, 
hyaluronidase, ovine, preservative free, per 1000 usp units), Q0171 
(Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription 
antiemetic, for use as a complete therapeutic substitute for an IV 
antiemetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen), Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, 
FDA approved prescription anti-emetic, for use as a complete 
therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen), Q0175 
(Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for 
use as a complete therapeutic substitute for an IV anti-emetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen), Q0176 (Perphenazine, 8 mg, oral, FDA approved prescription 
anti-emetic, for use as a complete therapeutic substitute for an IV 
anti-emetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen), Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA 
approved prescription anti-emetic, for use as a complete therapeutic 
substitute for an IV anti-emetic at the time of chemotherapy treatment, 
not to exceed a 48-hour dosage regimen), and Q0178 (Hydroxyzine 
pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as 
a complete therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen).
    For all other drugs and biologicals that have HCPCS codes 
describing different dosages, we then multiplied the weighted average 
ASP+6 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).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2013 proposal, without modification. The 
packaging status of each drug and biological HCPCS code to which this 
methodology would apply is displayed in Table 35 below.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
3. Payment for Drugs and Biologicals Without Pass-Through Status That 
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 
Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. Most physician Part B drugs are paid at ASP+6 percent 
pursuant to section 1842(o) and section 1847A of the Act.

[[Page 68383]]

    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.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii)(I) of the Act to 
SCODs, as required by statute, but we also apply it to separately 
payable drugs and biologicals that are not SCODs, which is a policy 
choice rather than a statutory requirement. In the CY 2013 OPPS/ASC 
proposed rule, we proposed to apply section 1833(t)(14)(A)(iii)(II) of 
the Act to all separately payable drugs and biologicals. Although we 
did not distinguish SCODs in that discussion, we note that we are 
required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, 
but we are choosing to apply it to other separately payable drugs and 
biologicals, consistent with our history of using the same payment 
methodology for all separately payable drugs and biologicals.
    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. In response 
to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 
42729), we discussed our belief that, because of the varied handling 
resources required to prepare different forms of drugs, it would be 
impossible to exclusively and appropriately assign a drug to a certain 
overhead category that would apply to all hospital outpatient uses of 
the drug. Therefore, our CY 2006 OPPS proposal included a proposal to 
establish three distinct Level II HCPCS C-codes and three corresponding 
APCs for drug handling categories to differentiate overhead costs for 
drugs and biologicals (70 FR 42730). We also proposed: (1) To combine 
several overhead categories recommended by MedPAC; (2) to establish 
three drug handling categories, as we believed that larger groups would 
minimize the number of drugs that may fit into more than one category 
and would lessen any undesirable payment policy incentives to utilize 
particular forms of drugs or specific preparation methods; (3) to 
collect hospital charges for these HCPCS C-codes for 2 years; and (4) 
to ultimately base payment for the corresponding drug handling APCs on 
CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal regarding pharmacy overhead and 
urged us not to finalize this policy, as it would be administratively 
burdensome for hospitals to establish charges for HCPCS codes for 
pharmacy overhead and to report them. Therefore, we did not finalize 
this proposal for CY 2006. Instead, we established payment for 
separately payable drugs and biologicals at ASP+6 percent, which we 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). 
Hereinafter, we refer to this methodology as our standard drug payment 
methodology. We concluded that payment for drugs and biologicals and 
pharmacy overhead at a combined ASP+6 percent rate would serve as an 
acceptable proxy for the combined acquisition and overhead costs of 
each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD and awaited the 
accumulation of CY 2006 data as discussed in the prior year's rule.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs while continuing our 
efforts to improve the available data. We also proposed to instruct 
hospitals to remove the pharmacy overhead charge for both packaged and 
separately payable drugs and biologicals from the charge for the drug 
or biological and report the pharmacy overhead charge on an uncoded 
revenue code line on the claim. We believed that this would provide us 
with an avenue for collecting pharmacy handling cost data specific to 
drugs in order to package the overhead costs of these items into the 
associated procedures, most likely drug administration services. 
Similar to the public response to our CY 2006 pharmacy overhead 
proposal, the overwhelming majority of commenters did not support our 
CY 2008 proposal and urged us to not finalize this policy (72 FR 
66761). At its September 2007 meeting, the APC Panel recommended that 
hospitals not be required to separately report charges for pharmacy 
overhead and handling and that payment for overhead be included as part 
of drug payment. The APC Panel also recommended that CMS continue to 
evaluate alternative methods to standardize the capture of pharmacy 
overhead costs in a manner that is simple to implement at the 
organizational level (72 FR 66761). Because of concerns expressed by 
the APC Panel and public commenters, we did not finalize the proposal 
to instruct hospitals to separately report pharmacy overhead charges 
for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66763), we finalized a policy of providing payment for 
separately payable drugs and biologicals and their pharmacy overhead at 
ASP+5 percent as a transition from their CY 2007 payment of ASP+6 
percent to payment based on the equivalent average ASP-based payment 
rate calculated from hospital claims according to our standard drug 
payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC 
final rule with comment period. Hospitals continued to include charges 
for pharmacy overhead costs in the line-item charges for the associated 
drugs reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology. We also continued to explore mechanisms to improve 
the available data. We proposed to split the

[[Page 68384]]

``Drugs Charged to Patients'' cost center into two cost centers: One 
for drugs with high pharmacy overhead costs and one for drugs with low 
pharmacy overhead costs (73 FR 41492). We noted that we expected that 
CCRs from the proposed new cost centers would be available in 2 to 3 
years to refine OPPS drug cost estimates by accounting for differential 
hospital markup practices for drugs with high and low overhead costs. 
After consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable nonpass-through drugs and biologicals 
based on costs calculated from hospital claims at a 1-year transitional 
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our 
standard drug payment methodology from the final rule claims data and 
cost report data. We did not finalize our proposal to split the single 
standard ``Drugs Charged to Patients'' cost center into two cost 
centers largely due to concerns raised by hospitals about the 
associated administrative burden. Instead, we indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68659) that we would 
continue to explore other potential approaches to improve our drug cost 
estimation methodology, thereby increasing payment accuracy for 
separately payable drugs and biologicals.
    In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, 
a group of pharmacy stakeholders (hereinafter referred to as the 
pharmacy stakeholders), including some cancer hospitals, some 
pharmaceutical manufacturers, and some hospital and professional 
associations, commented that CMS should pay an acquisition cost of 
ASP+6 percent for separately payable drugs, should substitute ASP+6 
percent for the packaged cost of all packaged drugs and biologicals on 
procedure claims, and should redistribute the difference between the 
aggregate estimated packaged drug cost in claims and payment for all 
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while significantly increasing payment accuracy for 
individual drugs and procedures by redistributing drug cost from 
packaged drugs. Their suggested approach would provide a separate 
overhead payment for each separately payable drug or biological at one 
of three different levels, depending on the pharmacy stakeholders' 
assessment of the complexity of pharmacy handling associated with each 
specific drug or biological (73 FR 68651 through 68652). Each 
separately payable drug or biological HCPCS code would be assigned to 
one of the three overhead categories, and the separate pharmacy 
overhead payment applicable to the category would be made when each of 
the separately payable drugs or biologicals was paid.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we 
acknowledged the limitations of our data and our availability to find a 
method to improve that data in a way that did not impose unacceptable 
administrative burdens on providers. Accepting that charge compression 
was a reasonable but unverifiable supposition, we proposed to 
redistribute between one-third and one-half of the estimated overhead 
cost associated with coded packaged drugs and biologicals with an ASP, 
which resulted in our proposal to pay for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals that did not 
have pass-through payment status at ASP+4 percent. We calculated 
estimated overhead cost for coded packaged drugs and biologicals by 
determining the difference between the aggregate claims cost for coded 
packaged drugs and biologicals with an ASP and the ASP dollars (ASP 
multiplied by the drug's or biological's units in the claims data) for 
those same coded drugs and biologicals; this difference was our 
estimated overhead cost for coded packaged drugs and biologicals. In 
our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR 
35326 through 35333), we stated that we believed that approximately 
$150 million of the estimated $395 million total in pharmacy overhead 
cost, specifically between one-third and one-half of that cost, 
included in our claims data for coded packaged drugs and biologicals 
with reported ASP data should be attributed to separately payable drugs 
and biologicals and that the $150 million serves as the adjustment for 
the pharmacy overhead costs of separately payable drugs and 
biologicals. As a result, we also proposed to reduce the costs of coded 
drugs and biologicals that are packaged into payment for procedural 
APCs to offset the $150 million adjustment to payment for separately 
payable drugs and biologicals. In addition, we proposed that any 
redistribution of pharmacy overhead cost that may arise from the CY 
2010 final rule data would occur only from some drugs and biologicals 
to other drugs and biologicals, thereby maintaining the estimated total 
cost of drugs and biologicals that we calculate based on the charges 
and costs reported by hospitals on claims and cost reports. As a result 
of this approach, no redistribution of cost would occur from other 
services to drugs and biologicals or vice versa.
    While we had no way of assessing whether this current distribution 
of overhead cost to coded packaged drugs and biologicals with an ASP 
was appropriate, we acknowledged that the established method of 
converting billed charges to costs had the potential to ``compress'' 
the calculated costs to some degree. Further, we recognized that the 
attribution of pharmacy overhead costs to packaged or separately 
payable drugs and biologicals through our standard drug payment 
methodology of a combined payment for acquisition and pharmacy overhead 
costs depends, in part, on the treatment of all drugs and biologicals 
each year under our annual drug packaging threshold. Changes to the 
packaging threshold may result in changes to payment for the overhead 
cost of drugs and biologicals that do not reflect actual changes in 
hospital pharmacy overhead cost for those products. For these reasons, 
we stated that we believed some portion, but not all, of the total 
overhead cost that is associated with coded packaged drugs and 
biologicals (the difference between aggregate cost for those drugs and 
biologicals on the claims and ASP dollars for the same drugs and 
biologicals), based on our standard drug payment methodology, should, 
at least for CY 2010, be attributed to separately payable drugs and 
biologicals.
    We acknowledged that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for coded 
packaged drugs and biologicals with reported ASP data in the CY 2010 
claims data may be too high (74 FR 35327 and 35328). 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

[[Page 68385]]

packaged drugs and biologicals was $132 million, whereas one-half was 
$198 million.
    Within the one-third to one-half parameters, we proposed 
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 for their pharmacy 
overhead costs. Based on this redistribution, we proposed a CY 2010 
payment rate for separately payable drugs and biologicals of ASP+4 
percent.
    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 (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 the 
cost of separately payable drugs and biologicals (74 FR 60517). We 
stated that 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 drugs and biologicals captured by 
these uncoded packaged drug costs (74 FR 60511 through 60513). In 
addition, as in prior years, we 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). 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, including an analysis of 
uncoded packaged drug and biological cost and our evaluation of the 
services with which uncoded packaged drug cost appears in the claims 
data. We conducted this analysis in an effort to assess how much 
uncoded drugs resemble coded packaged drugs (75 FR 71966). We stated 
that, in light of this information, we were not confident that the 
drugs captured by uncoded drug cost are the same drugs captured by 
coded packaged drug cost, and therefore, we did not believe we could 
assume that they are the same drugs, with comparable overhead and 
handling costs. Without being able to calculate the ASP for these 
uncoded packaged drugs and biologicals and without being able to gauge 
the magnitude of overhead complexity associated with these drugs and 
biologicals, we did not believe that we should have assumed that the 
same amount of proportional overhead should be redistributed between 
coded and uncoded packaged drugs, and therefore, we redistributed $50 
million from uncoded packaged drugs and $150 million from coded 
packaged drugs (75 FR 71966). We reiterated our commitment to continue 
to refine our drug pricing methodology and noted that we would continue 
to pursue the most appropriate methodology for establishing payment for 
drugs and biologicals under the OPPS and continue to evaluate the 
appropriateness of this methodology when we establish each year's 
payment for drugs and biologicals under the OPPS (75 FR 71967).
    For CY 2012, we continued our overhead adjustment methodology of 
redistributing \1/3\ to \1/2\ of allocated overhead for coded packaged 
drugs or $150 million plus an additional $50 million in allocated 
overhead for uncoded packaged drugs. Additionally, we finalized a 
policy to update these amounts by the PPI for pharmaceuticals and 
redistributed $161 million in allocated overhead from coded packaged 
drugs and $54 million from uncoded packaged drugs. We further finalized 
a policy to hold the redistributed proportion of packaged drugs 
constant between the proposed and the final rule, which increased the 
final redistribution amount in the CY 2012 final rule to $240.3 million 
($169 million from coded packaged drugs and $71.3 million from uncoded 
packaged drugs). This approach resulted in a final payment rate of 
ASP+4 percent for separately payable drugs.
b. CY 2013 Payment Policy
    In reexamining our current drug payment methodology for the CY 2013 
OPPS/ASC proposed rule, we reviewed our past efforts to determine an 
appropriate payment methodology for drugs and biologicals, as described 
above. Since the inception of the OPPS, we have remained committed to 
establishing a drug payment methodology that is predictable, accurate, 
and appropriate. Pharmacy stakeholders and the hospital community have 
also, throughout the years, continually emphasized the importance of 
both predictable and accurate payment rates for drugs, noting that a 
payment methodology that emphasizes predictability and accuracy leads 
to appropriate payment rates that reflect the cost of drugs and 
biologicals (including overhead) in HOPDs. Pertinent stakeholders also 
have noted that predictable and accurate payment rates minimize the 
effect of anomalies in the claims data that may incorrectly influence 
the future payment for services. We understand that, with predictable 
payment rates, hospitals are better able to plan for the future.
    As discussed above, since CY 2006, we have attempted to establish a 
drug payment methodology that reflects hospitals' acquisition costs for 
drugs and biologicals while taking into account relevant pharmacy 
overhead and related handling expenses. We have attempted to collect 
more data on hospital overhead charges for drugs and biologicals by 
making several proposals that would require hospitals to change the way 
they report the cost and charges for drugs. None of these proposals 
were adopted due to significant stakeholder concern, including that 
hospitals stated that it would be administratively burdensome to report 
hospital overhead charges. We established a payment policy for 
separately payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost

[[Page 68386]]

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). As we previously stated, we refer to this methodology as our 
standard drug payment methodology.
    In CY 2010, taking into consideration comments made by the pharmacy 
stakeholders and acknowledging the limitations of the reported data due 
to charge compression and hospitals' reporting practices, we added an 
``overhead adjustment'' (an internal adjustment of the data) by 
redistributing cost from coded and uncoded packaged drugs and 
biologicals to separately payable drugs in order to provide more 
appropriate payments for drugs and biologicals in the HOPD. We 
continued this overhead adjustment methodology through CY 2012, and 
further refined our overhead adjustment methodology by finalizing a 
policy to update the redistribution amount for inflation and keep the 
redistribution ratio constant between the proposed rule and the final 
rule.
    Application of the standard drug payment methodology, with the 
overhead adjustment, has always yielded a finalized payment rate in the 
range of ASP+4 percent to ASP+6 percent for nonpass-through separately 
payable drugs. We believe that the historic ASP+4 to ASP+6 percentage 
range is an appropriate payment rate for separately payable drugs and 
biologicals administered within the HOPD, including acquisition and 
pharmacy overhead and related expenses. However, because of continuing 
uncertainty about the full cost of pharmacy overhead and acquisition 
cost, based in large part on the limitations of the submitted hospital 
charge and claims data for drugs, we are concerned that the continued 
use of our current standard drug payment methodology (including the 
overhead adjustment) still may not appropriately account for average 
acquisition and pharmacy overhead cost and, therefore, may result in 
payment rates that are not as predictable, accurate, or appropriate as 
they could be.
    Section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative 
methodology for determining payment rates for SCODs wherein, if 
hospital acquisition cost data are not available, payment shall be 
equal (subject to any adjustment for overhead costs) 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. Considering stakeholder and provider feedback, 
continued limitations of the hospital claims and cost data on drugs and 
biologicals, and Panel recommendations, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45140), we proposed for CY 2013 to pay for 
separately payable drugs and biologicals at ASP+6 percent based on 
section 1833(t)(14)(A)(iii)(II) of the Act, hereinafter referred to as 
the statutory default.
    As noted above, section 1833(t)(14)(A)(iii)(II) of the Act 
authorizes the Secretary to calculate and adjust, as necessary, the 
average price for a drug in the year established under section 1842(o), 
1847A, or 1847B of the Act, as the case may be, in determining payment 
for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, physician 
Part B drugs are paid at ASP+6 percent. We believe that proposing the 
statutory default of ASP+6 percent is appropriate at this time as it 
yields increased predictability in payment for separately payable drugs 
and biologicals under the OPPS. We believe that ASP+6 percent is an 
appropriate payment amount because it is consistent with payment 
amounts yielded by our drug payment methodologies over the past 7 
years. We proposed that the ASP+6 percent payment amount for separately 
payable drugs and biologicals requires no further adjustment, and 
represents the combined acquisition and pharmacy overhead payment for 
drugs and biologicals for CY 2013.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45140), we proposed 
that payments for separately payable drugs and biologicals are included 
in the budget neutrality adjustments, under the requirements in section 
1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is 
not applied in determining payments for these separately paid drugs and 
biologicals.
    Comment: Commenters strongly supported CMS' proposal to pay for 
separately payable drugs and biologicals based on the statutory default 
rate of ASP+6 percent. The commenters stated that ASP+6 percent is 
administratively simple, improves stability of drug and biological 
payments, and better covers the costs of drug acquisition and pharmacy 
overhead than the payment rates CMS has finalized in previous years. 
The commenters noted that, by contrast, the current payment methodology 
involves complex calculations and an annual overhead adjustment in 
which costs are redistributed from packaged drugs to separately payable 
drugs. Another commenter supported CMS' proposal to pay for separately 
payable drugs and biologicals because it believed that this change in 
the payment methodology will prevent the inappropriate shifting of 
overhead costs from contrast agents. One commenter also expressed 
support for the proposal and noted the importance of finalizing the 
proposal, as more hospitals seek to access preferred drug pricing under 
the 340B program.
    One commenter noted that the implementation of the survey of 
hospital drug costs required by section 1833(t)(14)(D)(iii), instead of 
the proposed statutory default rate of ASP+6 percent, would impose a 
costly administrative burden on both hospitals and CMS without 
demonstrating an equivalent benefit compared to the use of the average 
sales price that is based on the certified sales price of the drugs and 
biologicals. Other commenters supported CMS' proposal to pay for drugs 
and biologicals at ASP+6 percent because neither the GAO nor CMS have 
conducted the periodic surveys required by the statute since CY 2005 on 
average acquisition costs. They argued that, in the absence of current 
survey data on average acquisition costs, the statute requires that 
payment be set at the statutory default rate of ASP+6 percent and that 
an additional adjustment for overhead be made.
    Several commenters agreed with CMS and noted that this proposal 
allowed for stable and predictable payment rates for separately paid 
drugs and biologicals while removing the need to address charge 
compression and other issues. One commenter noted, in particular, that 
the proposal eliminates the issues related to the inclusion of 340B 
sales in the rate calculation. The commenter further recommended that 
CMS continue its policy of paying 340B and non-340B hospitals at the 
same rate for separately paid drugs and biologicals. Other commenters 
noted that payment for the acquisition and overhead costs of drugs and 
biologicals at ASP+6 percent will help to protect patients' access to 
care in the most clinically appropriate setting. The commenters also 
argued that this payment rate would create parity with the physician 
office setting.
    Finally, many of the comments supported CMS' goal to establish a 
payment methodology that accurately and predictably estimates 
acquisition and overhead costs for separately paid drugs and 
biologicals.
    Response: We appreciate the commenters' support. For several years, 
we have attempted to identify a methodology for paying for the average 
acquisition cost and pharmacy overhead costs for SCODs in a manner that 
is both appropriate and that is not burdensome

[[Page 68387]]

to hospitals. After several years of refining a payment methodology, 
which has included the standard payment methodology and the overhead 
adjustment methodology, we determined in the CY 2013 OPPS/ASC proposed 
rule (77 FR 45140) that, because of continuing uncertainty about the 
full cost of pharmacy overhead and acquisition cost, based in large 
part on the limitations of the submitted hospital charge and claims 
data for drugs, the continued use of our current standard drug payment 
methodology (including the overhead adjustment) still may not 
appropriately account for average acquisition and pharmacy overhead 
cost and therefore may result in payment rates that are not as 
predictable, accurate, or appropriate as they could be. Therefore, we 
proposed to pay for separately payable drugs and biologicals at the 
statutory default rate of ASP+6 percent, as is consistent with section 
1833(t)(14)(iii)(II) of the Act which requires an alternative 
methodology for determining payment rates for SCODs wherein, if 
hospital acquisition cost data are not available, payment shall be 
equal (subject to any adjustment for overhead costs) to the payment 
rates established under the methodology described in section 1842(o), 
section 1847A, or section 1847B of the Act, as calculated and adjusted 
by the Secretary as necessary.
    In the past, commenters, pertinent stakeholders, and the HOP Panel 
(previously known as the APC Panel) have strongly advocated for the use 
of the statutory default payment rate of ASP+6 percent. As we stated in 
the proposed rule, we believe that our proposal is consistent with 
these previous comments and we agree with the commenters that proposing 
a payment rate of ASP+6 percent based on the statutory default for 
separately payable drugs and biologicals is appropriate at this time. 
We agree with commenters that the statutory default obviates both the 
need to utilize complex calculations for acquisition and overhead costs 
and the requirement to collect data from hospital surveys, which would 
prove to be burdensome to both hospitals and to CMS. Additionally, we 
agree with commenters that the statutory default payment rate of ASP+6 
percent eliminates the 340B program concerns many commenters have 
expressed in the past. Therefore, we believe that the statutory default 
payment rate of ASP+6 percent is appropriate for CY 2013.
    Comment: Several commenters supported CMS' proposal of ASP+6 
percent but stated their concerns that this level of payment is not 
sufficient to cover both drug acquisition and pharmacy overhead cost. 
The commenters stated that they considered this an improvement over the 
rate used in previous years and that this payment rate should be the 
minimum level of payment, or the payment floor, necessary to cover 
acquisition costs alone. Therefore, the commenters recommended that CMS 
finalize ASP+6 percent as the payment rate for acquisition costs alone 
and provide an additional, separate payment for hospital pharmacy 
overhead costs. One commenter also expressed concern whether ASP+6 
percent is sufficient to cover both acquisition and handling. However, 
the commenter stated that the ASP+6 percent proposed payment rate is 
preferable to CMS continuing to attempt to determine what level of 
redistribution from packaged drugs to separately payable drugs should 
occur on an annual basis. One commenter reaffirmed the notion that 
ASP+6 percent should be the minimum level of payment that should be 
provided to cover hospitals' drug acquisition costs but the commenter 
recommended that CMS reconsider ASP+6 percent to be the minimum payment 
level to cover drug acquisition costs in both the physician's office 
and the hospital outpatient setting. The commenter argued that this 
would create payment parity and also enable the creation of a 
supplemental system to make a separate and additional ASP plus 
percentage amount to hospitals to cover their significant overhead 
costs.
    One commenter supported CMS' proposal and stated that if CMS should 
finalize its policy to pay for separately payable drugs and biologicals 
at ASP+6 percent, CMS should not pay for pharmacy overhead, which is 
permitted but not required by section 1833(t)(14)(E)(iii) of the Act, 
in addition to the ASP+6 percent payment because payment at ASP+6 
percent already includes payment for pharmacy overhead equal to 5 
percent of ASP (the difference between ASP+6 percent and the ASP+1 
percent that the OIG found to be the average acquisition cost of 
hospital drugs and biologicals in a study conducted by the OIG in 2010) 
(https://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf). Moreover, the 
commenter further noted that payment for separately payable drugs and 
biologicals under section 1842(o) of the Act at 106 percent of ASP 
includes payment for the services of the pharmacy from which the 
physician purchases the drugs and biologicals. Therefore, the commenter 
further noted, if CMS pays hospitals ASP+6 percent for separately paid 
drugs and biologicals, it is also paying for the associated pharmacy 
overhead and should pay nothing more.
    Response: We disagree with the commenters who stated that ASP+6 
percent should be the payment for the acquisition cost alone and that 
separate payment for overhead should be made. We note that while the 
statute states that payment for SCODs under section 
1833(t)(14)(A)(iii)(II) of the Act equals the payment rates established 
in the physician's office, subject to any adjustment for overhead 
costs, the statute does not mandate that such an adjustment for 
overhead be made. We believe that the payment rate of ASP+6 percent 
includes a sufficient amount for overhead costs for separately payable 
drugs and biologicals and we see no further evidence that any 
additional adjustment for overhead is required. As we stated in the 
proposed rule, we believe that the historic ASP+4 to ASP+6 percentage 
range is an appropriate payment rate for separately payable drugs and 
biologicals administered within the HOPD, including acquisition and 
pharmacy overhead and related expenses, and we have not seen any 
evidence to indicate that these rates have limited beneficiary access 
to drugs, insufficiently paid for acquisition and overhead costs for 
drugs administered in the HOPD, or caused a migration of care from the 
hospital outpatient setting to the physician's office. To the contrary, 
we continue to see increases in the utilization of drugs and 
biologicals administered in the outpatient department in our claims 
data, even at payment rates of ASP+4 or 5 percent. Therefore, we 
believe that ASP+6 percent is an appropriate payment rate for 
separately payable drugs and biologicals.
    Additionally, we agree with the commenter who cited the OIG study 
conducted in 2010, which used first quarter 2009 Medicare payment 
amounts compared to first quarter 2009 hospital acquisition costs for 
33 separately payable drugs. The OIG concluded that, in the aggregate, 
Medicare payments were 1 percent higher than acquisition costs amounts 
for the responding non-340B hospitals for the selected separately 
payable drugs. This study supports our position that the ASP+6 
percentage amount proposed for CY 2013 sufficiently pays for overhead 
and acquisition costs for drugs and requires no further adjustment.
    We continue to believe that ASP+6 percent based on the statutory 
default is appropriate for hospitals for CY 2013 and that this 
percentage amount

[[Page 68388]]

includes payment for acquisition and overhead cost. Furthermore, many 
hospitals and major hospital associations supported our proposed ASP+6 
percent for CY 2013 and made no request for additional payment for 
overhead costs in their comments to the CY 2013 OPPS/ASC proposed rule. 
Therefore, we believe that a payment rate of ASP+6 percent is 
appropriate for CY 2013.
    Comment: A few commenters supported CMS' proposal, but recommended 
that CMS examine ways to compensate hospitals for the unique, higher 
overhead and handling costs associated with therapeutic 
radiopharmaceuticals.
    Response: As we stated above, we continue to believe that ASP+6 
percent based on the statutory default is appropriate for hospitals for 
CY 2013 and that this percentage amount includes payment for 
acquisition and overhead cost. We see no evidence that an additional 
overhead adjustment is required for separately payable drugs, 
biologicals and therapeutic radiopharmaceuticals for CY 2013.
    Comment: One commenter remained concerned that the comparison of 
ASP to cost is not an ``apple to apples'' comparison because the cost 
data incorporate data from hospitals that receive 340B program 
discounts from drugs they purchase. The commenter further stated that 
the ASP calculation excludes 340B program sales, which underestimates 
the aggregate costs of drugs for most hospitals and the ASP-based rate 
that CMS produces by comparing aggregate costs to ASP is too low. The 
commenter asked that CMS review its cost calculation to ASP to ensure 
that 340B program drugs are not artificially reducing the CMS 
calculation.
    Response: For CY 2013, we proposed to pay for separately payable 
drugs and biologicals at ASP+6 percent based on the statutory default 
established in section 1833(t)(14)(A)(iii)(II) of the Act. While we 
understand that commenters were previously concerned about the impact 
of 340B hospital data on our previous standard and overhead adjustment 
methodology calculations, we did not in fact propose to continue these 
methodologies for CY 2013.
    Comment: One commenter supported CMS' proposal to increase the 
payment rate for SCODs to ASP+6 percent for CY 2013. However, the 
commenter believed that the law requires that SCOD payment rates, other 
than the ASP+6 percent default rate, must be set on a drug by drug 
basis, as mandated by section 1833(t)(14)(A)(iii)(I) of the Act. 
Therefore, the commenter recommended that CMS perform an 
individualized, drug by drug determination for the payment rate for 
each SCOD.
    Response: Section 1833(t)(14)(A)(iii)(I) 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, subject to any 
adjustment of overhead costs. 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), section 1847A, or section 1847B of the 
Act, as calculated and adjusted by the Secretary as necessary. 
Previously under the standard methodology and the overhead adjustment 
methodology, we established ASP as a proxy for the average acquisition 
cost. However, we did not propose to use the authority given under 
section 1833(t)(14)(A)(iii)(I) of the Act to pay for SCODs for CY 2013. 
For CY 2013, we instead proposed to pay for separately payable drugs 
and biologicals based on the statutory authority established in section 
1833(t)(14)(A)(iii)(II) of the Act.
    Comment: One commenter recommended that CMS design a payment 
strategy that would maintain one formula for health care prescribers, 
but develop a multi-tiered reimbursement strategy that would encourage 
the use of generic drugs over their branded counterparts, using ASP+6 
percent as an appropriate base for the most expensive drugs and 
providing additional reimbursement for multi-source generic drugs. 
Another commenter recommended that CMS adopt a new policy of assigning 
each ``branded prescription drug'' a unique HCPCS code, so that Part B 
utilization of these drugs can be accurately determined.
    Response: We made no such proposal to develop a multi-tiered 
payment strategy that would encourage the use of generic drugs over 
their branded counterparts, using ASP+6 percent as an appropriate base 
for the most expensive drugs and providing additional payment for 
multi-source generic drugs. The commenters' recommendation to assign a 
unique HCPCS code for each ``branded prescription drug'' is outside the 
scope of this final rule with comment period.
    Comment: One commenter asked that, for CY 2014, CMS consider paying 
for influenza and PPV vaccines at 106 percent of ASP.
    Response: This comment is outside the scope of the CY 2013 OPPS/ASC 
final rule. However, we plan to address this issue in an upcoming 
rulemaking cycle.
    Comment: One commenter supported CMS' proposal to pay for 
separately payable drugs at ASP+6 percent, but the commenter urged CMS 
to consider the effect of its coding practices on brand manufacturers' 
annual fee payment under section 9008 of the Patient Protection and 
Affordable Care Act (ACA) and asked that CMS support the exclusion of 
wholesaler prompt pay discounts from the ASP calculations of separately 
payable drugs.
    Response: Comments about individual ASP calculations for drugs and 
biologicals, or the inclusion or exclusion of prompt pay discounts in 
these calculations, are outside the scope of this final rule with 
comment period.
    At its February 2012 Panel meeting, the Panel made four 
recommendations on drugs and biologicals paid under the OPPS. First, 
the Panel recommended that CMS require hospitals to bill all drugs that 
are described by Healthcare Common Procedure Coding System (HCPCS) 
codes under revenue code 0636. While we agree that drugs and 
biologicals may be reported under revenue code 0636, we believe that 
drugs and biologicals may also be appropriately reported in revenue 
code categories other than revenue code 0636, including but not limited 
to, revenue codes 025x and 062x. As we stated in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71966), we recognize that 
hospitals may carry the costs of drugs and biologicals in multiple cost 
centers and that it may not be appropriate to report the cost of all 
drugs and biologicals in one specified revenue code. Additionally, we 
generally require hospitals to follow National Uniform Billing 
Committee (NUBC) guidance for the choice of an appropriate revenue code 
that is also appropriate for the hospital's internal accounting 
processes. Therefore, we are not accepting the Panel's recommendation 
to require hospitals to bill all drugs that are described by HCPCS 
codes under revenue code 0636. 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. 
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 may improve payment accuracy for

[[Page 68389]]

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, when specific 
HCPCS codes are available for those drugs and biologicals.
    Comment: Some 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. One commenter recommended that CMS 
not require hospitals to report the HCPCS code for each drug and 
biological in revenue code 0636 because to do so would impose an 
unreasonable burden on hospitals without a commensurate benefit to the 
accuracy of Medicare payment for drugs and biologicals under the OPPS 
if CMS finalizes its proposal to pay separately paid drugs at ASP+6 
percent. Moreover, the commenter continued, in the case of packaged 
drugs and biologicals, the charges that are reported with revenue codes 
but without HCPCS codes are reduced to costs by application of the CCR 
for the cost center that applies to the revenue code under which the 
charges are reported and are packaged into the cost of the service. The 
commenter further stated that, therefore, to require that all drugs and 
biologicals be reported under any specific revenue code would require 
hospitals to revise their cost accounting systems to accommodate such a 
change because the revenue code in which charges are reported must 
correspond to the cost center in which the costs are reported on the 
cost report for the cost report to be completed correctly and for the 
cost of packaged drugs and biologicals to be calculated correctly.
    Response: We do not accept the commenter's recommendation that CMS 
require drugs and biologicals to be reported under revenue code 0636. 
We do agree with the commenter who recommended that CMS not require 
hospitals to report the HCPCS code for each drug and biological in 
revenue code 0636 because doing so would impose an unreasonable burden 
on hospitals. Further, we agree that charges that are reported with 
revenue codes but without HCPCS codes are reduced to costs by 
application of the CCR for the cost center that applies to the revenue 
code under which the charges are reported and are packaged into the 
cost of the service. As we stated in the CY 2013 OPPS/ASC proposed 
rule, we believe that drugs and biologicals may also be appropriately 
reported in revenue code categories other than revenue code 0636, 
including, but not limited to, revenue codes 025x and 062x. As we 
stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71966), we recognize that hospitals may carry the costs of drugs and 
biologicals in multiple cost centers and that it may not be appropriate 
to report the cost of all drugs and biologicals in one specified 
revenue code. Additionally, we generally require hospitals to follow 
National Uniform Billing Committee (NUBC) guidance for the choice of an 
appropriate revenue code that is also appropriate for the hospital's 
internal accounting processes. Therefore, we are not accepting the 
Panel's recommendation to require hospitals to bill all drugs that are 
described by HCPCS codes under revenue code 0636.
    However, we are reiterating once again in this CY 2013 OPPS/ASC 
final rule with comment period that the OPPS ratesetting as a whole, 
not just for drugs and biologicals, 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. Therefore, we continue to encourage hospitals to 
report a charge for each service they furnish, either by billing the 
HCPCS code and a charge for that service if separate reporting is 
consistent with CPT and CMS instructions or by reporting the charge for 
the packaged service with an appropriate revenue code but without a 
HCPCS code, when specific HCPCS codes are unavailable.
    Second, the Panel recommended that CMS exclude data from hospitals 
that participate in the 340B program from its ratesetting calculations 
for drugs. Under the proposed statutory default payment rate of ASP+6 
percent, hospitals' 340B status does not affect the drug payment rate.
    Third, the Panel recommended that CMS freeze the packaging 
threshold at $75 until the drug payment issue is more equitably 
addressed. The OPPS is based on the concept of payment for groups of 
services that share clinical and resource characteristics. We believe 
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, we are not 
accepting the Panel's recommendation to freeze the packaging threshold 
at $75 until the drug payment issue is more equitably addressed. 
Instead, as discussed in section V.B.2. of the proposed rule and this 
final rule with comment period, we proposed and are finalizing an OPPS 
drug packaging threshold for CY 2013 of $80. However, we do believe 
that we have addressed the drug payment issue by proposing to pay for 
separately paid drugs and biologicals at ASP+6 percent for CY 2013 
based upon the statutory default.
    Finally, the Panel recommended that CMS pay hospitals for 
separately payable drugs at a rate of ASP+6 percent. This Panel 
recommendation is consistent with our CY 2013 proposed payment rate 
based upon the statutory default under section 1833(t)(14)(A)(iii)(II) 
of the Act, which authorizes us to pay for drugs and biologicals under 
the OPPS at ASP+6 percent, when hospital acquisition cost data are not 
available.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act, hereinafter referred to as the 
statutory default. The ASP+6 percent payment amount for separately 
payable drugs and biologicals requires no further adjustment and 
represents the combined acquisition and pharmacy overhead payment for 
drugs and biologicals for CY 2013. As we stated in the proposed rule 
(77 FR 45140), our goals continue to be to develop a methodology that 
accurately and predictably estimates acquisition and overhead costs for 
separately payable drugs and biologicals in order to pay for them 
appropriately. If a better payment methodology is developed in the 
future then the proposed policy to pay ASP+6 percent according to the 
statutory default would be an interim step in the development of this 
payment policy. We recognize the challenges in doing so given the 
current data sources and the object of maintaining the smallest 
administrative burden possible.
    In addition, we are finalizing our proposal which states that 
payment for separately payable drugs and biologicals be included in the 
budget neutrality adjustments, under the requirements of section 
1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is 
not applied in determining payment of these separately paid drugs and 
biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period, which 
illustrate the final CY 2013 payment of ASP+6 percent for separately 
payable nonpass-

[[Page 68390]]

through drugs and biologicals and ASP+6 percent for pass-through drugs 
and biologicals, reflect either ASP information that is the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting effective October 1, 2012, or WAC, AWP or mean unit cost 
from 2011 claims data and updated cost report information available for 
this final rule with comment period. In general, these published 
payment rates are not reflective of actual January 2013 payment rates. 
This is because payment rates for drugs and biologicals with ASP 
information for January 2013 will be determined through the standard 
quarterly process where ASP data submitted by manufacturers for the 
third quarter of 2012 (July 1, 2012 through September 30, 2012) are 
used to set the payment rates that are released for the quarter 
beginning in January 2013 near the end of December 2012. In addition, 
payment rates for drugs and biologicals in Addenda A and B to this 
final rule with comment period for which there was no ASP information 
available for October 2012 are based on mean unit cost in the available 
CY 2011 claims data. If ASP information becomes available for payment 
for the quarter beginning in January 2013, we will price payment for 
these drugs and biologicals based on their newly available ASP 
information. Finally, there may be drugs and biologicals that have ASP 
information available for this final rule with comment period 
(reflecting October 2012 ASP data) that do not have ASP information 
available for the quarter beginning in January 2013. These drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2011 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2013 
payment purposes and are only illustrative of the CY 2013 OPPS payment 
methodology using the most recently available information at the time 
of issuance of this final rule with comment period.
4. Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 2012, we established a 
policy to pay for separately paid therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. We allow 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. If ASP information is 
unavailable for a therapeutic radiopharmaceutical, then we base 
therapeutic radiopharmaceutical payment on mean unit cost data derived 
from hospital claims. 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 2013. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45141), we proposed for CY 2013 to pay all nonpass-through, separately 
payable therapeutic radiopharmaceuticals at ASP+6 percent, based on the 
statutory default described in section 1833(t)(14)(A)(iii)(II) of the 
Act. We proposed to continue to set payment rates for therapeutic 
radiopharmaceuticals 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 2011 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. For a complete 
history of the OPPS payment policy for therapeutic 
radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule 
with comment period (69 FR 65811), the CY 2006 OPPS final rule with 
comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60524).
    Comment: Commenters supported CMS' proposal to pay for separately 
payable therapeutic radiopharmaceuticals under the statutory default 
payment rate of ASP+6 percent, if ASP data is submitted to CMS. The 
commenters also supported CMS' proposal to continue to set payment 
rates for therapeutic radiopharmaceuticals based on ASP information, if 
available, for a ``patient ready'' dose. One commenter recommended that 
CMS use its discretion and continue to pay on the basis of hospital 
specific reasonable cost-finding where ASP information is not 
available.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for therapeutic radiopharmaceuticals 
based on ASP or mean unit cost if ASP information is not available 
would provide appropriate payment for these products. 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 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 (the usual process relies on alternative data sources such 
as WAC or AWP when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data), we 
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 are not available. We have stated previously, in the CY 
2008 OPPS/ASC final rule with comment period, that we continue to 
believe that payment on a claims-specific basis is not consistent with 
the payment of times and services on a prospective basis under the OPPS 
and may lead to extremely high or low payment to hospitals for 
radiopharmaceuticals, even when those products would be expected to 
have relatively predictable and consistent acquisition and holding 
costs across individual clinical cases and hospitals. For CY 2013, 
Medicare pays for only a few outpatient services at reasonable cost. 
These services include, but are not limited to, corneal tissue 
acquisition and influenza vaccines, and are paid at reasonable cost in 
part because the input costs for future years are highly 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

[[Page 68391]]

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, therapeutic radiopharmaceutical 
payment based on mean unit cost is an appropriate proxy for hospitals' 
acquisition and handling data.
    Comment: One commenter requested that CMS create a HCPCS J-code for 
tositumomab, currently provided under a radioimmunotherapy regimen and 
billed as part of HCPCS code G3001 (Administration and supply of 
tositumomab, 450 mg). The commenter argued that because tositumomab is 
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 commenter recommended that payment for all of the BEXXAR[supreg] 
drug components be paid as a SCOD.
    Response: We have consistently noted that unlabeled tositumomab is 
not approved as either a drug or a radiopharmaceutical. It is a supply 
that is required as part of the radioimmunotherapy treatment regimen 
(as noted in 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. Payment for 
unlabeled tositumomab is included in the payment for the administration 
procedure (described by HCPCS code G3001). Therefore, we do not agree 
with the commenter's recommendation that we should assign a separate 
HCPCS code to unlabeled tositumomab, which is a packaged supply.
    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 
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 2013, therapeutic radiopharmaceuticals will be 
paid based on the statutory default payment rate of ASP+6 percent. The 
final CY 2013 payment rates for nonpass-through separately payable 
therapeutic radiopharmaceuticals are included in Addenda A and B to the 
proposed rule (which is available via the Internet on the CMS Web 
site).
5. Payment for Blood Clotting Factors
    For CY 2012, 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 2012, we provided payment for blood 
clotting factors under the OPPS at ASP+4 percent, plus an additional 
payment for the furnishing fee. We note that when blood clotting 
factors are provided in physicians' offices under Medicare Part B and 
in other Medicare settings, a furnishing fee is also applied to the 
payment. The CY 2012 updated furnishing fee is $0.181 per unit.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45141), we proposed to 
pay for blood clotting factors at ASP+6 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 policy to pay for a 
furnishing fee for blood clotting factors under the OPPS is consistent 
with the methodology applied in the physician office and inpatient 
hospital setting, and first articulated in the CY 2006 OPPS final rule 
with comment period (70 FR 68661) and 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 were 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 proposed to 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/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    Comment: 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. 
These commenters also supported CMS' proposal to pay for separately 
payable drugs at ASP+6 percent based on the statutory default, for CY 
2013.
    Response: We appreciate the commenters' support. We continue to 
believe that applying the furnishing fee for blood clotting factors is 
appropriate for CY 2013. 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. Additionally, for the reasons discussed in section 
V.B.3. of this final rule with comment period, we agree with the 
commenters that ASP+6 percent based on the statutory default is an 
appropriate payment rate for CY 2013.
    After consideration of the public comments we received, we are 
finalizing our 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 payment of 
an updated furnishing fee. We will announce the actual figure of the 
percent change in the applicable CPI and the updated furnishing fee 
calculation based on that figure through the applicable program 
instructions and posting on the CMS Web site.
6. 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) did 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,

[[Page 68392]]

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 and the CY 2012 OPPS/ASC final rule with comment 
period at ASP+4 percent (76 FR 74330 through 74332).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45142), we proposed to 
provide payment for new CY 2013 drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals), nonimplantable biologicals, and 
therapeutic radiopharmaceuticals, at ASP+6 percent, consistent with the 
proposed CY 2013 payment methodology for other separately payable 
nonpass-through drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals to pay at ASP+6 percent based on the statutory 
default. We believe this proposed policy would ensure that new nonpass-
through drugs, nonimplantable biologicals and therapeutic 
radiopharmaceuticals would be treated like other drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals under the OPPS.
    We also proposed to continue to package payment for all new 
nonpass-through diagnostic radiopharmaceuticals and contrast agents 
with HCPCS codes but without claims data (those new CY 2013 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 and contrast agents, as 
discussed in more detail in section II.A.3.g. of this final rule with 
comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2013, we proposed to continue the policy we implemented 
beginning in CY 2005 of using the WAC for the product to establish the 
initial payment rate for new nonpass-through drugs and biologicals with 
HCPCS codes, but which are without OPPS claims data and are not 
diagnostic radiopharmaceuticals and contrast agents. 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 2013 at ASP+6 
percent) for items that have not been granted pass-through status. This 
proposed policy, which utilizes the ASP methodology that requires us to 
use WAC data when ASP data are unavailable and 95 percent of AWP when 
WAC and ASP data are unavailable, for new nonpass-through drugs and 
biologicals with an ASP, is consistent with prior years' policies for 
these items, and 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.
    Similarly, we proposed to continue 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, for CY 2013 we proposed to 
announce any changes to the payment amounts for new drugs and 
biologicals in this CY 2013 OPPS/ASC final rule with comment period and 
also on a quarterly basis on the CMS Web site during CY 2013 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

[[Page 68393]]

rates for new therapeutic radiopharmaceuticals would also be changed 
accordingly based on later quarter ASP submissions. We note that the 
new CY 2013 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 2013 OPPS/ASC final rule with comment period (which is 
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 
2013 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2011 and/or CY 2012 for which we did not have CY 2011 
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 2013, 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+6 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 did not receive any public comments on our proposal to use 
estimated per day costs for these drugs and biologicals or on the 
resulting packaging status of these drugs and biologicals. Therefore, 
for the reasons described in our proposed rule, we are finalizing our 
CY 2013 proposal, with modification, to use the estimated number of 
units per day included in Table 37 below to determine estimated per day 
costs for the corresponding drugs and biologicals for CY 2013. For 
those drugs and biologicals without CY 2011 claims data that we 
determine to be separately payable in CY 2013, payment will be made at 
ASP+6 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 proposed estimated units per day and status indicators for 
these items were displayed in Table 27 of the proposed rule (77 FR 
45143).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45143), 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 2013. We proposed to pay separately for 
items with an estimated per day cost greater than $80 (with the 
exception of diagnostic radiopharmaceuticals and contrast agents, which 
we proposed to continue to package regardless of cost as discussed in 
more detail in section II.A.3.d. of this final rule with comment 
period) in CY 2013. We proposed that the CY 2013 payment for separately 
payable items without CY 2011 claims data would be ASP+6 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 note that if the WAC is also unavailable, we 
would make payment at 95 percent of the most recent AWP available.
    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+6 percent under the statutory default. 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 
responding to the CY 2013 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 agent with HCPCS codes but without 
OPPS claims data. We summarize these comments and provide our response 
in section II.A.3.e. of this final rule with comment period. We are 
finalizing our CY 2013 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 2012 
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+6 percent 
for CY 2013, consistent with the final CY 2013 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 2013. 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 become 
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 2013, we also proposed to continue our CY 2012 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

[[Page 68394]]

new therapeutic radiopharmaceuticals with HCPCS codes but without pass-
through status. However, commenters responding to the CY 2013 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 2013, as discussed in section 
V.B.3.c. of this final rule with comment period.
    We are finalizing our CY 2013 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 are 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 2013 
that do not have pass-through status.
    Consistent with other ASP-based payments, for CY 2013, we proposed 
to announce any changes to the payment amounts for new drugs and 
biologicals in the CY 2013 OPPS/ASC final rule with comment period and 
also on a quarterly basis on the CMS Web site during CY 2013 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 2013 HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals were not available at 
the time of development of the proposed rule. However, they are 
included in Addendum B to this CY 2013 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 2013 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 2013 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.
BILLING CODE 4120-01-P

[[Page 68395]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.054

BILLING CODE 4120-01-C
    Finally, there were 19 drugs and biologicals, shown in Table 28 of 
the proposed rule (77 FR 45144), that were payable in CY 2011, but for 
which we lacked CY 2011 claims data and any other pricing information 
for the ASP methodology for the CY 2013 OPPS/ASC proposed rule. In CY 
2009, for similar items without CY 2007 claims data and without pricing 
information for the ASP methodology, we stated that we were unable to 
determine their per day cost and we packaged these items for the year, 
assigning these items status indicator ``N.''
    For CY 2010, we 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 became 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. We continued this policy for CY 2011 and 
CY 2012 (75 FR 71973 and 76 FR 74334).
    For CY 2013, we proposed to continue to assign status indicator 
``E'' to drugs and biologicals that lack CY 2011 claims data and 
pricing information for the ASP methodology. All drugs and biologicals 
without CY 2011 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 2013 were displayed in Table 28 of 
the proposed rule (77 FR 45144). If pricing information becomes 
available, we proposed to assign the products status indicator ``K'' 
and pay for them separately for the remainder of CY 2013.
    Comment: Several commenters disagreed with CMS' proposal to assign 
a status indicator ``E'' to HCPCS code Q4102 (Talymed, per square 
centimeter) for CY 2013. The commenters requested a status indicator of 
``K'' to more closely align the product with others on the market, such 
as the products represented by HCPCS code Q4101 and Q4102. The 
commenters indicated that a status indicator of ``E'' would make it 
impossible for the necessary claims data and pricing to be collected.
    The manufacturers of the product that is described by HCPCS code 
Q4101 assured CMS that they will be submitting ASP data shortly and 
anticipate that CMS will replace the

[[Page 68396]]

status indicator ``E'' with the status indicator ``K'' upon submission 
of this data.
    Response: For this final rule with comment period, we have not 
received ASP pricing information in order to assign a status indicator 
of ``K'' to HCPCS code Q4101. Therefore, according to our longstanding 
policy, we will continue to assign HCPCS code Q4101 to a status 
indicator of ``E.'' If pricing information becomes available, we will 
assign HCPCS code Q4101 a status indicator ``K'' and pay for it 
separately for the remainder of CY 2013. We cannot assign a payable 
status indicator to products that have no available payment 
information.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period expressed concern that the assignment of 
status indicator ``E'' to HCPCS code Q4128 was a technical error that 
should have been changed to status indicator ``K'' effective January 1, 
2012.
    Response: For the CY 2012 OPPS/ASC final rule with comment period, 
HCPCS code Q4128 (Flexhd or allopatch hd, per square centimeter) was 
not erroneously assigned a status indicator of ``E'' because we did not 
have ASP pricing information available to us at the time of the 
publication of the final rule. However, during CY 2012, we received 
pricing information for HCPCS code Q4128 and assigned status indicator 
``K'' to this code. For CY 2013, this HCPCS code continues to have a 
status indicator of ``K'' and the price is published in Addendum B of 
this final rule with comment period.
    After the proposed rule was published, we were able to use updated 
CY 2011 claims data and ASP pricing information for HCPCS code J1452 
(Injection, fomivirsen sodium, intraocular, 1.65 mg), HCPCS code J1835 
(Injection, itraconazole, 50 mg), and HCPCS code J9212 (Injection, 
interferon alfacon-1, recombinant, 1 microgram). Therefore, we are 
assigning HCPCS code J1452, HCPCS code J1835, and HCPCS code J9212 a 
status indicator of ``K'' for CY 2013. The revised status indicators 
for these HCPCS codes are included in Addendum B to this CY 2013 OPPS/
ASC final rule with comment period (which is available via the Internet 
on the CMS Web site).
    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 Q4134 (Hmatrix, per square centimeter), Q4135 
(Mediskin, per square centimeter), and Q4136 (Ez-derm, per square 
centimeter) as lacking CY 2011 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 2013 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 Q4134, Q4135, and Q4136.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign status 
indicator ``E'' to these drugs and biologicals. As was our policy in CY 
2012, if pricing information becomes available for these products in CY 
2013, we will assign the products status indicator ``K'' and pay for 
them separately for the remainder of CY 2013.
    All drugs and biologicals without CY 2011 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 2013 are displayed in Table 37 below.

[[Page 68397]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.055

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 not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year.
    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 estimate the pass-through spending to determine whether 
payments exceed the applicable percentage and the appropriate pro rata 
reduction to the conversion factor for the projected level of pass-
through spending in the following year to ensure that total estimated 
pass-through spending for the prospective payment year is budget 
neutral, as required by section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2013 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 2013. 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 of items consists of items that we know are newly 
eligible, or project may be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2012 or beginning in CY 2013. 
The sum of the CY 2013 pass-through estimates for these two groups of 
device categories equals the total CY 2013 pass-through spending 
estimate for device categories with pass-through status. We base the 
device pass-through estimated payments for each device category on the 
amount of payment as established in section 1833(t)(6)(D)(ii) of the 
Act, and as outlined in previous rules, including the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74335 through 74336). We note 
that, beginning in CY 2010, the pass-through evaluation process and 
pass-through payment for implantable biologicals newly approved for 
pass-through payment beginning on or after January 1, 2010, that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice), is the device pass-through process and payment 
methodology (74 FR 60476). As has been our past practice (76 FR 74335), 
we

[[Page 68398]]

include an estimate of any implantable biologicals eligible for pass-
through payment in our estimate of pass-through spending for devices.
    For drugs and nonimplantable 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. We note that the Part B drug CAP program has been 
postponed since CY 2009, and such a program was not proposed to be 
reinstated for CY 2013. Because we will pay for most nonpass-through 
separately payable drugs and nonimplantable biologicals under the CY 
2013 OPPS at ASP+6 percent, as we discussed in section V.B.3. of this 
final rule with comment period, which represents the otherwise 
applicable fee schedule amount associated with most pass-through drugs 
and nonimplantable biologicals, and because we will pay for CY 2013 
pass-through drugs and nonimplantable biologicals at ASP+6 percent, as 
we discussed in section V.A. of this final rule with comment period, 
our estimate of drug and nonimplantable biological pass-through payment 
for CY 2013 for this group of items is zero, as discussed below. 
Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, 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 2013 will be paid at ASP+6 
percent like other pass-through drugs and nonimplantable biologicals. 
Therefore, our estimate of pass-through payment for all diagnostic 
radiopharmaceuticals and contrast agents with pass-through status 
approved prior to CY 2013 is not zero. In section V.A.4. of this final 
rule with comment period, we discuss our policy to determine if the 
cost of certain ``policy-packaged'' drugs, including diagnostic 
radiopharmaceuticals and contrast agents, are already packaged into the 
existing APC structure. If we determine that a ``policy-packaged'' drug 
approved for pass-through payment resembles predecessor diagnostic 
radiopharmaceuticals or contrast agents already included in the costs 
of the APCs that are associated with the drug receiving pass-through 
payment, we are offsetting the amount of pass-through payment for 
diagnostic radiopharmaceuticals or contrast agents. For these drugs, 
the APC offset amount is the portion of the APC payment for the 
specific procedure performed with the pass-through radiopharmaceuticals 
or contrast agents, which we refer to as the ``policy-packaged'' drug 
APC offset amount. If we determine that an offset is appropriate for a 
specific diagnostic radiopharmaceutical or contrast agent receiving 
pass-through payment, we reduce our estimate of pass-through payment 
for these drugs by this amount.
    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 for CY 2012 and that will continue to be 
eligible for pass-through payment in CY 2013. 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 2012 
or beginning in CY 2013. The sum of the CY 2013 pass-through estimates 
for these two groups of drugs and nonimplantable biologicals equals the 
total CY 2013 pass-through spending estimate for drugs and 
nonimplantable biologicals with pass-through status.

B. Estimate of Pass-Through Spending

    In the CY 2013 OPPS/ASC proposed rule (77 FR 45145), we proposed to 
set the applicable pass-through payment percentage limit at 2.0 percent 
of the total projected OPPS payments for CY 2013, consistent with 
section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY 
2004 through CY 2012 (76 FR 74336).
    For the first group of devices for pass-through payment estimation 
purposes, there currently are three device categories eligible for 
pass-through payment for CY 2013: C1830 (Powered bone marrow biopsy 
needle); C1840 (Lens, intraocular (telescopic)); and C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable). In the 
proposed rule, we estimated that CY 2013 pass-through expenditures 
related to these three eligible device categories would be 
approximately $42 million. In estimating our CY 2013 pass-through 
spending for device categories in the second group, we include: Device 
categories that we knew at the time of the development of the proposed 
rule will be newly eligible for pass-through payment in CY 2013 (of 
which there are none); additional device categories that we estimate 
could be approved for pass-through status subsequent to the development 
of the proposed rule and before January 1, 2013; and contingent 
projections for new device categories established in the second through 
fourth quarters of CY 2013. We proposed to use the general methodology 
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66778), while also taking into account recent OPPS experience in 
approving new pass-through device categories. For the proposed rule, 
the estimate of CY 2013 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 2013 (spending for the first group of device 
categories ($42 million) plus spending for the second group of device 
categories ($10 million)) would be $52 million.
    We did not receive any public comments regarding our proposed pass-
through spending estimate for devices. Therefore, for CY 2013, we are 
continuing to use our established methodology for estimating pass-
through spending for device categories. For this final rule with 
comment period, using our established methodology and updated data and 
information, we estimate CY 2013 pass-through spending for the first 
group of device categories to be $42, and the CY 2013 pass-through 
spending for the second group of device categories to be $10 million. 
The total estimated pass-through spending for device categories for CY 
2013 (spending for the first group of device categories ($42 million) 
plus spending for the second group of device categories ($10 million)) 
is $52 million.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45146), to estimate CY 
2013 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 2013, 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

[[Page 68399]]

regarding those drugs or nonimplantable biologicals, to project the CY 
2013 OPPS utilization of the products.
    For the known drugs and nonimplantable biologicals (excluding 
diagnostic radiopharmaceuticals and contrast agents) that will be 
continuing on pass-through status in CY 2013, in the proposed rule (77 
FR 45145), we estimated the pass-through payment amount as the 
difference between ASP+6 percent and the payment rate for nonpass-
through drugs and nonimplantable biologicals that will be separately 
paid at ASP+6 percent, which is zero for this group of drugs. Because 
payment for a diagnostic radiopharmaceutical or contrast agent is 
packaged if the product was not paid separately due to its pass-through 
status, we proposed to include in the CY 2013 pass-through estimate the 
difference between payment for the drug or biological at ASP+6 percent 
(or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is 
not available) and the ``policy-packaged'' drug APC offset amount, if 
we determined that the diagnostic radiopharmaceutical or contrast agent 
approved for pass-through payment resembles predecessor diagnostic 
radiopharmaceuticals or contrast agents already included in the costs 
of the APCs that are associated with the drug receiving pass-through 
payment. In the proposed rule, using the proposed methodology described 
above, we calculated a CY 2013 proposed spending estimate for this 
first group of drugs and nonimplantable biologicals of approximately 
$13 million.
    We did not receive any public comments on our proposed methodology 
for calculating the spending estimate for the first group of drugs and 
nonimplantable biologicals. Therefore, for this final rule with comment 
period, we are finalizing our proposed methodology. Using our 
established methodology and updated data and information, we calculated 
a final CY 2013 spending estimate for the first group of drugs and 
nonimplantable biologicals of approximately $15 million.
    In the proposed rule (77 FR 45146), to estimate CY 2013 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 are newly eligible for 
pass-through payment in CY 2013, additional drugs and nonimplantable 
biologicals that we estimate could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2013, 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 2013), 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 2013 pass-through payment 
estimate. We also proposed to consider the most recent OPPS experience 
in approving new pass-through drugs and nonimplantable biologicals. 
Using our proposed methodology for estimating CY 2013 pass-through 
payments for this second group of drugs, we calculated a proposed 
spending estimate for this second group of drugs and nonimplantable 
biologicals of approximately $19 million.
    We did not receive any public comments on our proposed methodology 
for estimating CY 2013 pass-through payments for this second group of 
drugs and nonimplantable biologicals. Therefore, for this final rule 
with comment period, are finalizing our proposed methodology. Using 
that methodology and updated data and information, we calculated a 
final CY 2013 spending estimate for this second group of drugs and 
implantable biologicals of approximately $7 million.
    As discussed in section V.A. of this final rule with comment 
period, radiopharmaceuticals are considered drugs for pass-through 
purposes. Therefore, we include radiopharmaceuticals in our CY 2013 
pass-through spending estimate for drugs and nonimplantable 
biologicals. Our CY 2013 estimate for total pass-through spending for 
drugs and nonimplantable biologicals (spending for the first group of 
drugs and nonimplantable biologicals ($15 million) plus spending for 
the second group of drugs and nonimplantable biologicals ($7 million)) 
equals $22 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 2013 and those device categories, drugs, and biologicals 
that first become eligible for pass-through payment during CY 2013 will 
be approximately $74 million (approximately $52 million for device 
categories and approximately $22 million for drugs and nonimplantable 
biologicals), which represents 0.15 percent of total projected OPPS 
payments for CY 2013. We estimate that pass-through spending in CY 2013 
will not amount to 2.0 percent of total projected OPPS CY 2013 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, including trauma team activation. As we 
proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45146 through 
45148), for CY 2013, we are continuing to recognize these CPT and HCPCS 
codes describing clinic visits, Type A and Type B emergency department 
visits, and critical care services, which are listed below in Table 38, 
for CY 2013. We refer readers to the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74338 through 74346) for a full discussion of our 
longstanding policy on OPPS payment for hospital outpatient visits.
BILLING CODE 4120-01-P

[[Page 68400]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.056


[[Page 68401]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.057

BILLING CODE 4120-01-C
    At its August 27-28, 2012 meeting, the HOP Panel recommended that 
CMS move HCPCS code G0379 (Direct admission of patient for hospital 
observation care) to APC 0608 (Level 5 Hospital Clinic Visits). We are 
accepting this recommendation, as discussed below in this section.

B. Policies for Hospital Outpatient Visits

    We proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45147 
through 45148), for CY 2013, to continue our longstanding policies 
related to hospital outpatient visits, which includes clinic visits, 
emergency department visits, and critical care services. Specifically, 
we proposed to continue to recognize the definitions of a new patient 
and an established patient, which are based on whether the patient has 
been registered as an inpatient or outpatient of the hospital within 
the 3 years prior to a visit. We also proposed to continue to apply our 
policy of calculating costs for clinic visits under the OPPS using 
historical hospital claims data through five levels of clinic visit 
APCs (APCs 0604 through 0608). In addition, we proposed to continue to 
recognize Type A emergency departments and Type B emergency departments 
for payment purposes under the OPPS, and to pay for Type A emergency 
department visits based on their costs through the five levels of Type 
A emergency department APCs (APCs 0609 and 0613 through 0616) and to 
pay for Type B emergency department visits based on their costs through 
the five levels of Type B emergency department APCs (APCs 0626 through 
0630). 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 APC assignments and payment rates for these hospital outpatient 
visits. Finally, we proposed to continue to instruct 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. We note 
that our continued expectation is that hospitals' internal guidelines 
will comport with the principles listed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66805). We encourage hospitals with 
specific questions related to the creation of internal guidelines to 
contact their servicing fiscal intermediary or MAC. We refer readers to 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 
through 74346) for a full historical discussion of these longstanding 
policies. We note recent reports in the public media of billing 
inaccuracies in hospital outpatient clinic visits, and remind hospitals 
that we are committed to vigorously enforcing our payment policies and 
will pursue appropriate action against any potentially fraudulent 
activities we identify.
    We also proposed to continue the methodology established in the CY 
2011 OPPS/ASC final rule with comment period for calculating a payment 
rate for critical care services that includes packaged payment of 
ancillary services. 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

[[Page 68402]]

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 was 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 
believed it was inappropriate to pay separately in CY 2011 for the 
ancillary services that hospitals may now report in addition to 
critical care services (75 FR 71988). Therefore, for CY 2011, we 
continued to recognize the existing CPT codes for critical care 
services and established a payment rate based on historical data, into 
which the cost of the ancillary services was 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 would 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 these 
services 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 are conditionally packaged into the payment for critical care 
services when provided on the same date of service as critical care 
services for CY 2011 were listed in Addendum M to that final rule with 
comment period.
    Because the CY 2012 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 final rule with 
comment period (76 FR 74343 through 74344), we continued 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 claims data, into which the cost of the ancillary 
services is intrinsically packaged for CY 2012. We also continued 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.
    As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 
45148), the CY 2011 hospital claims data on which the CY 2013 payment 
rates are based reflect the first year of claims billed under the 
revised CPT guidance to allow the reporting of all the ancillary 
services and their associated charges separately when they are provided 
in conjunction with critical care. Because our policy to establish 
relative payment weights based on geometric mean cost data for CY 2013 
represents a change from our historical practice to base payment rates 
on median costs, and because we now have hospital claims data for the 
first time reflecting the revised coding guidance for critical care, we 
reviewed the CY 2011 hospital claims data available for the proposed 
rule and determined that the data show increases in both the mean and 
median line item costs as well as the mean and median line item charges 
for CPT code 99291, when compared to CY 2010 hospital claims data. 
Specifically, the mean and median line item costs increased 13 percent 
and 16 percent, respectively, and the mean and median line item charges 
increased 11 percent and 14 percent, respectively. Additionally, when 
compared to CY 2010 hospital claims data, CY 2011 hospital claims data 
showed no substantial change in the ancillary services that are present 
on the same claims as critical care services, and also showed continued 
low volumes of many ancillary services. We stated in the proposed rule 
that, had the majority of hospitals changed their billing practices to 
separately report and charge for the ancillary services formerly 
included in the definition of critical care CPT codes 99291 and 99292, 
we would have expected to see a decrease in the costs and charges for 
these CPT codes, and a significant increase in ancillary services 
reported on the same claims. We indicated that the lack of a 
substantial change in the services reported on critical care claims, 
along with the increases in the line item costs and charges for 
critical care services, strongly suggests that many hospitals did not 
change their billing practices for CPT code 99291 following the 
revision to the CPT coding guidance effective January 1, 2011.
    In light of not having claims data to support a significant change 
in hospital billing practices, we stated in the proposed rule that we 
continue to believe that it is inappropriate to pay separately in CY 
2013 for the ancillary services that hospitals may now report in 
addition to critical care services. Therefore, for CY 2013, we 
proposed, to continue our CY 2011 and CY 2012 policy to recognize the 
existing CPT codes for critical care services and establish a payment 
rate based on historical claims data. We also 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. We 
stated that we will continue to monitor the hospital claims data for 
CPT code 99291 in order to determine whether revisions to this policy 
are warranted based on changes in hospitals' billing practices.
    Comment: One commenter indicated that because hospitals have used 
internal, hospital-defined guidelines for over 10 years, CMS should not 
move to standard national guidelines. In the absence of national 
guidelines for visit reporting, some commenters urged CMS to support a 
request to the AMA's CPT Editorial Panel to create unique CPT codes for 
hospital reporting of emergency department and clinic visits.
    Response: We agree with the commenter that we should not move to 
national guidelines for visits in CY 2013. As we have in the past (76 
FR 74345 through 74346), we acknowledge that it would be desirable to 
many hospitals to have national guidelines. However, we also understand 
that it would be disruptive and administratively burdensome to other 
hospitals that have successfully adopted internal guidelines to 
implement any new set of national guidelines while we address the 
problems that would be inevitable in the case of any new set of 
guidelines that would be applied by thousands of hospitals. As we have 
also stated in the past (76 FR 74346), 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.
    Comment: One commenter recommended that CMS reassign HCPCS code 
G0379 to APC 0608 (Level 5 Hospital Clinic 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 mean cost and 
clinical characteristics to CPT code 99205 (Office or other outpatient 
visit for the evaluation and management of a new patient (Level 5)). 
The commenter pointed out that the

[[Page 68403]]

mean cost for HCPCS code G0379 is more similar to the mean cost for APC 
0608 than it is to the mean cost for APC 0604. The commenter argued 
that the resources associated with HCPCS code G0379 resemble those 
expended for high-level clinic visits more than resources for low-level 
clinic visits, and noted that CMS' claims logic for composite APC 8002 
(Level I Extended Assessment and Management) treats HCPCS code G0379 
similarly to high-level clinic visit CPT codes 99205 and 99215 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 5)).
    Response: We agree with the rationale set forth by the commenter 
and with the Panel, which recommended CMS reassign HCPCS code G0379 
from APC 0604 to APC 0608. Therefore, we are reassigning HCPCS code 
G0379 to APC 0608 for CY 2013.
    Comment: Commenters 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.
    Response: 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 mean 
cost calculation for critical care.
    Comment: One commenter argued that the ancillary services 
associated with critical care do not meet CMS' criteria for packaging. 
The commenter suggested that, rather than packaging the ancillary 
services associated with critical care, CMS use CY 2008 cost data for 
CPT code 99291 updated with an overall inflation factor to recalculate 
the cost of critical care exclusive of bundled ancillary services.
    Response: As we discussed above in this section and in the CY 2013 
OPPS/ASC proposed rule (76 45147 through 45148), the policy to package 
ancillary services associated with critical care was implemented in CY 
2011 and resulted from a change in CPT guidance effective January 1, 
2011. We packaged the ancillary services because the costs of those 
ancillary services were already intrinsically included in the cost 
calculated for critical care; to pay for the ancillary services 
separately result in overpayment. Because the claims data for critical 
care for CY 2011 do not reflect that hospitals have changed their 
billing practices in response to the revised CPT guidance effective 
January 1, 2011--that is, they have not adjusted their charging 
practices to reflect that the ancillary services are no longer included 
in the definition of critical care--we continue to believe that the 
costs of the ancillary services continue to be reflected in the 
hospitals' charges for critical care, and that to pay separately for 
the ancillary services would be inappropriate. We also do not agree 
with the commenter that we should use claims data from CY 2008 to 
calculate costs for critical care. We remind the commenter that the 
OPPS is a system of averages, in which the costs of services, 
calculated from the most recent year's claims data, are weighted 
relative to the other services in the system, for that given year. To 
utilize a payment rate derived from claims outside of the most recent 
claims data, despite any update by the overall inflation factor, would 
be inconsistent with the standard methodology of the OPPS, and would 
not allow for that service to be appropriately valued relative to the 
other services in the OPPS.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals related hospital outpatient visits, 
with one modification. As described above, we are reassigning HCPCS 
code G0379 to APC 0608 for CY 2013.

C. Transitional Care Management

    In the CY 2013 MPFS proposed rule (77 FR 44774 through 44780), we 
discussed a multiple year strategy exploring the best means to 
encourage the provision of primary care and care coordination services 
to Medicare beneficiaries. As part of the strategy discussed in that 
proposed rule, we proposed to address the non-face-to-face work 
involved in hospital or SNF discharge care coordination by creating a 
HCPCS G-code for care management involving the transition of a 
beneficiary from care furnished by a treating physician during a 
hospital stay (inpatient, outpatient observation services, or 
outpatient partial hospitalization), SNF stay, or CMHC partial 
hospitalization program to care furnished by the beneficiary's 
physician or qualified nonphysician practitioner in the community. As 
discussed in the CY 2013 MPFS proposed rule, care management involving 
the transition of a beneficiary from care furnished by a treating 
physician during a hospital or a SNF stay to the beneficiary's primary 
physician or qualified nonphysician practitioner in the community could 
avoid adverse events such as readmissions or subsequent illnesses, 
improve beneficiary outcomes, and avoid a financial burden on the 
health care system. Successful efforts to improve hospital discharge 
care coordination and care transitions could improve the quality of 
care while simultaneously decreasing costs.
    The proposed HCPCS G-code included in the CY 2013 MPFS proposed 
rule, GXXX1, specifically describes post-discharge transitional care 
management services, which include all non-face-to-face services 
related to the transitional care management, furnished by the community 
physician or nonphysician practitioner within 30 calendar days 
following the date of discharge from an inpatient acute care hospital, 
psychiatric hospital, LTCH, SNF, and IRF; discharge from hospital 
outpatient observation or partial hospitalization services; or 
discharge from a PHP at a CMHC, to the community-based care. The post-
discharge transitional care management services include non-face-to-
face care management services provided by clinical staff member(s) or 
office-based case manager(s) under the supervision of the community 
physician or qualified nonphysician practitioner.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45148 through 45159), 
we stated that while we do not pay for physician or nonpractitioner 
professional services under the OPPS (42 CFR 419.22), we recognize that 
certain elements of the transitional care coordination services 
described by proposed HCPCS code GXXX1 could be provided to a hospital 
outpatient as an ancillary or supportive service in conjunction with a 
primary diagnostic or therapeutic service that would be payable under 
the OPPS, such as a clinic visit. We stated that, as described in 
section II.A.3. of the proposed rule, we package payment for services 
that are typically ancillary and supportive to a primary service. While 
we do not make separate payment for such services, their costs are 
included in the costs of other services furnished by the hospital to 
the beneficiary on the same day. We indicated in the CY 2013 OPPS/ASC 
proposed rule that, because transitional care management services

[[Page 68404]]

described by HCPCS code GXXX1 may be ancillary and supportive to a 
primary service provided to a hospital outpatient, we proposed to 
assign HCPCS code GXXX1 a status indicator of ``N'' (Items and Services 
Packaged into APC Rates), signifying that its payment would be packaged 
(77 FR 45159).
    Comment: The majority of commenters supported the proposed 
development of a HCPCS G-code to identify the non-face-to-face work 
involved in hospital or SNF discharge care coordination. Some 
commenters supported establishing a HCPCS G-code as a short-term 
solution to capture the non-face-to-face services, but suggested that 
in the long term, CMS consider generating new CPT codes specific to the 
post-discharge transitional care management that would also capture 
face-to-face components of transitional care. Some commenters also 
stated that the requirements for billing the post-discharge 
transitional care services (regardless of whether they are identified 
with the new HCPCS G-code or a CPT code) should not be arduous or 
complex. A few commenters expressed concern that the proposed HCPCS G-
code for transitional care management would be duplicative of discharge 
day management services described by other CPT codes. Some commenters 
requested that CMS establish a separate APC for the proposed HCPCS G-
code with a status indicator of ``S'' or ``X'' for transitional care 
management services or assign the HCPCS G-code to APC 0605 (Level 2 
Hospital Clinic Visits).
    Response: For the reasons outlined in the CY 2013 MPFS final rule 
with comment period, we are adopting the following CPT transitional 
care management codes in place of the proposed HCPCS G-code: CPT code 
99495 (Transitional care management services w/moderate medical 
decision complexity; Face to face visit within 14 days) and CPT code 
99496 (Transitional care management services w/high medical decision 
complexity; Face to face visit within 7 days). We agree with the 
commenters that the requirements for billing the post-discharge 
transitional care management services should not be arduous or complex, 
and we refer readers to the CY 2013 MPFS final rule with comment period 
for a full discussion of the billing requirements for CPT codes 99495 
and 99496. We also refer readers to the CY 2013 MPFS final rule with 
comment period for a full discussion of why we do not believe that 
recognition of the transitional care management services described by 
CPT codes 99495 and 99496 is duplicative of services described by other 
CPT codes.
    The CPT transitional care management code 99495 includes the 
following required elements:
     Communication (direct contact, telephone, electronic) with 
the patient and/or caregiver within 2 business days of discharge;
     Medical decision-making of at least moderate complexity 
during the service period; and
     Face-to-face visit, within 14 calendar days of discharge.
    CPT code 99496 includes the following required elements:
     Communication (direct contact, telephone, electronic) with 
the patient and/or caregiver within 2 business days of discharge;
     Medical decision-making of high complexity during the 
service period; and
     Face-to-face visit, within 7 calendar days of discharge.
    As we describe in the CY 2013 MPFS final rule with comment period, 
the services described by CPT codes 99495 and 99496 are for an 
established patient whose medical and/or psychosocial problems require 
moderate or high complexity medical decision-making during transitions 
in care from an inpatient hospital setting (including acute hospital, 
rehabilitation hospital, long-term acute care hospital), partial 
hospital, observation status in a hospital, or SNF/nursing facility, to 
the patient's community setting (home, domiciliary, rest home, or 
assisted living). Transitional care management commences upon the date 
of discharge and continues for the next 29 days.
    Transitional care management is comprised of one face-to-face visit 
within the specified timeframes, in combination with non-face-to-face 
services that may be performed by the physician or other qualified 
health care professional and/or licensed clinical staff under his or 
her direction. Because the transitional care management services 
described by CPT codes 99495 and 99496 involve at least one face-to-
face visit, (unlike the proposed HCPCS G-code), we believe that CPT 
codes 99495 and 99496 represent a primary, independent service that 
should be separately payable under the OPPS. We are assigning CPT code 
99495 to APC 0605 (Level 2 Hospital Clinic Visit) and CPT code 99496 to 
APC 0606 (Level 3 Hospital Clinic Visit) on an interim basis for CY 
2013. As with all new CPT codes, these interim assignments are open to 
public comment for a period of 60 days following the publication of 
this final rule with comment period.
    As we discuss in the CY 2013 MPFS final rule with comment period, 
we are adopting these new transitional care management codes to provide 
a separate reporting mechanism to the community physician for these 
services in the context of the broader CMS multi-year strategy to 
recognize and support primary care and care management. We wish to 
emphasize again that the policies we are finalizing in this final rule 
with comment period may be short-term payment strategies that may be 
modified and/or revised over time to be consistent with broader primary 
care and care management initiatives. We refer readers to the CY 2013 
MPFS final rule with comment period for a full discussion of post-
discharge transitional care management services in particular and, more 
broadly, the multiple year strategy exploring the best means to 
encourage primary care and care coordination services.

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. Section 1861(ff)(1) of the Act defines partial hospitalization 
services as ``the items and services described in paragraph (2) 
prescribed by a physician and provided under a program described in 
paragraph (3) under the supervision of a physician pursuant to an 
individualized, written plan of treatment established and periodically 
reviewed by a physician (in consultation with appropriate staff 
participating in such program), which plan sets forth the physician's 
diagnosis, the type, amount, frequency, and duration of the items and 
services provided under the plan, and the goals for treatment under the 
plan.'' Section 1861(ff)(2) of the Act describes the items and services 
included in partial hospitalization services. Section 1861(ff)(3)(A) of 
the Act specifies that a partial hospitalization program (PHP) is a 
program furnished by a hospital to its outpatients or by a community 
mental health center (CMHC) (as defined in subparagraph (B)), and 
``which is a distinct and organized intensive ambulatory treatment 
service offering less than 24-hour-daily care other than in an 
individual's home or in an inpatient or residential setting.'' Section 
1861(ff)(3)(B) of the Act defines community mental health center.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the

[[Page 68405]]

authority to designate the OPD services to be covered under the OPPS. 
The 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 Medicare Part B 
services furnished to hospital outpatients designated by the Secretary, 
which include partial hospitalization services (65 FR 18444 through 
18445).
    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, we have 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 July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the median per diem costs have been used to calculate 
the relative payment weights for PHP APCs.
    From CY 2003 through CY 2006, the median per diem costs for CMHCs 
fluctuated significantly from year to year, while the median per diem 
costs 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 
cost by computing a separate per diem cost for each day rather than for 
each bill. We refer readers to a complete discussion of these 
refinements in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66670 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.B. 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 submitted for days when fewer 
than 3 units of therapeutic services are provided (73 FR 68694).
    Furthermore, for CY 2009, we revised the regulations at 42 CFR 
410.43 to codify existing basic PHP patient eligibility criteria and to 
add a reference to current physician certification requirements at 42 
CFR 424.24 to conform our regulations to our longstanding policy (73 FR 
68694 through 68695). 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.3. 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 APC 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 (74 FR 60556 through 60559).
    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 a PHP 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 in section X.C. of the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71990).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we also 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). In the CY 2011 
OPPS/ASC proposed rule, we proposed that CMHC APC medians would be 
based only on CMHC data and hospital-based PHP APC medians 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 the final rule with 
comment period (75 FR 71991), for CY 2011, using CY 2009 claims data, 
CMHC costs had significantly decreased again. We attributed the 
decrease to the lower cost structure of CMHCs compared to hospital-
based PHP providers, 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 also were concerned that paying 
hospital-based PHPs at a lower rate than their cost structure reflects 
could lead to hospital-based PHP closures and possible access problems 
for Medicare beneficiaries, given that hospital-based PHPs offer the 
widest access to PHP services because they are located across the 
country. Creating the four payment rates (two for CMHCs and two for 
hospital-based PHPs) based on each provider's data 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 data by provider type was supported by 
several hospital-based PHP commenters who responded to the

[[Page 68406]]

CY 2011 OPPS/ASC proposed rule (75 FR 71992).
    For CY 2011, we instituted a 2-year transition period for CMHCs 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 
per diem costs were calculated by taking 50 percent of the difference 
between the CY 2010 final hospital-based PHP 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 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.
    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 payment 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). We refer readers to 
the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 10-
949, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, No. 11-50682, 2012 WL 
2161137 (5th Cir. June 15, 2012) (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 payment 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.'' On July 25, 2011, the District Court dismissed the 
plaintiffs' complaint and application for preliminary injunction for 
lack of subject-matter jurisdiction, which the plaintiffs appealed to 
the United States Court of Appeals for the Fifth Circuit. On June 15, 
2012, the Court of Appeals affirmed the District Court's dismissal for 
lack of subject-matter jurisdiction and found that the Secretary's 
payment rate determinations for PHP services are not a facial violation 
of a clear statutory mandate. (Paladin at *6).
    For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74348 through 74352), we determined the relative 
payment weights for PHP services provided by CMHCs based on data 
derived solely from CMHCs and the relative payment weights for 
hospital-based PHP services based exclusively on hospital data. The 
statute is reasonably interpreted to allow the relative payment weights 
for the OPPS payment rates for PHP services provided by CMHCs to be 
based solely on CMHC data and relative payment weights for hospital-
based PHP services to be based exclusively on hospital 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), we developed the APCs, as set forth in 42 CFR 419.31 of the 
regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 
through 47569). As discussed above, 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 both hospital-based and CMHC-based settings, only on the 
basis of 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. For CY 2009, we established new APCs for PHP 
services based exclusively on hospital data. Specifically, we adopted a 
two-tiered APC methodology (in lieu of the original APC 0033) under 
which CMS paid one rate for days with 3 services (APC 0172) and a 
different payment rate for days with 4 or more services (APC 0173). 
These two new APCs were established using only hospital data. For CY 
2011, we added two new APCs (APCs 0175 and 0176) for PHP services 
provided by hospitals and based the relative payment weights for these 
APCs solely on hospital data. APCs 0172 and 0173 were designated for 
PHP services provided by CMHCs and were based on a mixture of hospital 
and CMHC data. As the Secretary argued in the Paladin case, the courts 
have consistently held that the phrase ``based on'' does not mean 
``based exclusively on.'' Thus, the relative payment weights for the 
two APCs for PHP services provided by CMHCs in CY 2011 were ``based 
on'' hospital data, no less than the relative payment weights for the 
two APCs for hospital-based PHP services.
    Although we used hospital data to establish the relative payment 
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we 
believe that we have the authority to discontinue the use of hospital 
data in determining the OPPS relative payment weights for PHP services 
provided by CMHCs. 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 provided by CMHCs based on ``new cost data, and other relevant 
information and factors.''

B. PHP APC Update for CY 2013

    In the CY 2013 OPPS/ASC proposed rule (77 FR 45094 through 45098 
and 45151), we proposed to develop the relative payment weights that 
underpin the OPPS using geometric means rather than the current median-
based methodology. We stated that this

[[Page 68407]]

proposal to base the relative payment weights on geometric means would 
also apply to the per diem costs used to determine the relative payment 
weights for the four PHP APCs (77 FR 45151). We stated that, for PHP 
APCs, as with all other OPPS APCs, the proposal to base the relative 
payment weights on geometric means rather than medians would not affect 
the general process to establish appropriate claims for modeling. We 
stated that, as with the current median-based methodology, the PHP APC 
per diem payment rates would continue to be calculated by computing a 
separate per diem cost for each day of PHP service. When there are 
multiple days of PHP services entered on a claim, a unique cost would 
continue to be computed for each day of care. However, a geometric mean 
would be used to calculate the per diem costs rather than a median. We 
stated that the process would still be repeated separately for CMHCs 
and hospital-based PHPs using that provider's claims data for the two 
categories of days with 3 services and days with 4 or more services. We 
stated that the four PHP APC per diem costs would continue to be 
included in the scaling of all APCs under the OPPS to the mid-level 
office visit (APC 0606). For a detailed discussion of the CY 2013 OPPS 
weight scaler, we refer readers to section II.A.4. of this final rule 
with comment period.
    In the CY 2013 OPPS/ASC proposed rule, for CY 2013, using CY 2011 
claims data, we computed proposed CMHC PHP APC geometric mean per diem 
costs for Level I (3 services per day) and Level II (4 or more services 
per day) services using only CY 2011 CMHC claims data, and hospital-
based PHP APC geometric mean per diem costs for Level I and Level II 
services using only CY 2011 hospital-based PHP claims data. These 
proposed geometric mean per diem costs were shown in Table 30 of the CY 
2013 OPPS/ASC proposed rule (77 FR 45151) and are reprinted below.
[GRAPHIC] [TIFF OMITTED] TR15NO12.058

    Under the CY 2013 proposal to base the OPPS relative payment 
weights on geometric mean costs, the proposed geometric mean per diem 
costs for CMHCs would continue to be substantially lower than the 
proposed geometric mean per diem costs for hospital-based PHPs for the 
same units of service. For CY 2013, the proposed geometric mean per 
diem costs for days with 3 services (Level I) were approximately $88 
for CMHCs and approximately $183 for hospital-based PHPs. The proposed 
geometric mean per diem costs for days with 4 or more services (Level 
II) were approximately $112 for CMHCs and approximately $233 for 
hospital-based PHPs. We stated that this analysis indicated that there 
continue to be fundamental differences between the cost structures of 
CMHCs and hospital-based PHPs.
    The CY 2013 proposed geometric mean per diem costs for CMHCs 
calculated under the proposed CY 2013 methodology using CY 2011 claims 
data also have decreased compared to the CY 2012 final median per diem 
costs for CMHCs established in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74352), with per diem costs for Level I services 
decreasing from approximately $98 to approximately $88, and costs for 
Level II services decreasing from approximately $114 to approximately 
$112. In contrast, the CY 2013 proposed geometric mean per diem costs 
for hospital-based PHPs calculated under the proposed CY 2013 
methodology using CY 2011 claims data have increased compared to the CY 
2012 final median per diem costs for hospital-based PHPs, with per diem 
costs for Level I services increasing from approximately $161 to 
approximately $183, and per diem costs for Level II services increasing 
from approximately $191 to approximately $233.
    To provide a comparison in the CY 2013 OPPS/ASC proposed rule, we 
also calculated PHP median per diem costs for CY 2013 using CY 2011 
claims data (77 FR 45151 through 45152). We computed median per diem 
costs for each provider type using that provider's claims data for 
Level I services and for Level II services. These comparative median 
per diem costs were shown in Table 31 of the CY 2013 OPPS/ASC proposed 
rule (77 FR 45152) and are reprinted and discussed below.

[[Page 68408]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.059

    The proposed geometric mean per diem costs for hospital-based PHPs 
for Level I and Level II services calculated under the proposed CY 2013 
methodology using CY 2011 claims data would be higher than the median 
per diem costs calculated under the current median-based methodology, 
using CY 2011 claims data. For hospital-based PHPs, the per diem costs 
would increase from approximately $164 under the current median-based 
methodology to approximately $183 under the proposed geometric mean-
based methodology for Level I services, and from approximately $225 to 
approximately $233 for Level II services.
    The proposed geometric mean per diem costs for CMHCs for Level I 
services calculated under the proposed CY 2013 methodology using CY 
2011 claims data would be approximately the same as the median per diem 
costs calculated under the current median-based methodology, using CY 
2011 claims data. The proposed geometric mean per diem costs for CMHCs 
for Level II services calculated under the proposed CY 2013 methodology 
using CY 2011 claims data would be slightly lower than the median per 
diem costs calculated under the current median-based methodology, using 
CY 2011 claims data. For CMHCs, the per diem costs would be 
approximately $88 under both the current median-based methodology and 
the proposed geometric mean-based methodology for CMHC Level I 
services, and would decrease from approximately $121 under the current 
median-based methodology to approximately $112 under the proposed 
geometric mean-based methodology for CMHC Level II services.
    We stated that the data analysis also shows that 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 
provided. The median per diem costs for Level I services were 
approximately $88 for CMHCs and approximately $164 for hospital-based 
PHPs. The median per diem costs for Level II services were 
approximately $121 for CMHCs and approximately $225 for hospital-based 
PHPs. We stated that the significant difference in per diem costs 
between CMHCs and hospital-based PHPs emphasizes the distinct cost 
structures between the two provider types.
    Finally, we stated that the data analysis indicates that CMHC 
median per diem costs for Level I services would have decreased from CY 
2012 final median per diem costs (using CY 2010 claims data) 
(established in the CY 2012 OPPS/ASC final rule with comment period (76 
FR 74352)) to CY 2013 (using CY 2011 claims data) from approximately 
$98 to approximately $88, using only CMHC claims data. The CMHC median 
per diem costs for Level II services would have slightly increased from 
CY 2012 final median per diem costs (using CY 2010 claims data) to CY 
2013 (using CY 2011 claims data) from approximately $114 to 
approximately $121, using only CMHC claims data. Hospital-based PHP 
median per diem costs for Level I and Level II services would have 
increased from the CY 2012 final median per diem costs (using CY 2010 
claims data) to CY 2013 (using CY 2011 claims data) from approximately 
$161 to approximately $164 for Level I services and from approximately 
$191 to approximately $225 for Level II services, using only hospital 
claims data.
    In summary, while we have historically based the OPPS payments on 
median costs for services in the APC groups, for CY 2013, we proposed 
to calculate the relative payment weights for the OPPS APCs using 
geometric means, including the four PHP APCs, as discussed in section 
II.A.2.f. of the proposed rule. We invited public comments on these 
proposals.
    Comment: A few commenters representing CMHCs opposed the proposed 
conversion from the historically applied median-based methodology to 
the geometric mean-based methodology and the resulting CMHC payment 
rates. The commenters believed that the median cost approach is more 
stable and less sensitive to extreme observations and, therefore, a 
more appropriate methodology. One CMHC commenter preferred the median-
based methodology because it resulted in a higher payment rate for the 
CMHC APC for Level II services than when calculated using a geometric 
mean-based methodology. The commenters recommended that CMS continue 
using a median-based methodology and not change to a geometric mean-
based methodology for calculating the per diem costs.
    Response: We acknowledge the commenters' concern about the change 
from the median-based methodology to the geometric mean-based 
methodology and its impact on CMHCs. In the CY 2013 OPPS/ASC proposed 
rule, we proposed to develop the OPPS relative

[[Page 68409]]

payment weights using geometric mean cost for all APCs that were 
previously calculated using median cost, including the PHP APCs (77 FR 
45094 through 45098 and 45151). Under the CY 2013 proposal, OPPS 
payments to CMHCs for partial hospitalization also would be calculated 
based on geometric mean per diem costs, rather than the previous use of 
median per diem costs. This would help ensure that the relativity of 
the OPPS payment weights was properly aligned. As discussed in section 
II.A.2.f. of this final rule with comment period, we do not believe 
that paying for some services based on median costs while using 
geometric mean costs for other services is appropriate, equitable, or 
consistent with statute. Therefore, our CY 2013 proposal was to develop 
the OPPS relative payment weights using geometric mean costs for any 
services previously calculated using median costs, whether that was on 
a standard, per diem, or line item basis (77 FR 45097).
    In the CY 2013 OPPS/ASC proposed rule, we recognized that median 
costs had historically served as an appropriate measure on which to 
establish relative payment weights. However, in our proposal to 
establish the CY 2013 OPPS relative payment weights using geometric 
mean cost, we discussed a number of reasons why we believed that 
changing to geometric mean cost would represent an incremental 
improvement as well as be appropriate. These reasons included changes 
CMS has made throughout the history of the OPPS with the goal of 
deriving more accurate information from available claims and cost 
report data, as well as benefits of using a metric that more accurately 
describes the range of costs associated with providing services.
    While commenters have suggested that medians are more appropriate 
because they are less sensitive to outlier observations, in particular 
for CMHCs, we believe that including those outlier observations in 
developing the weights and capturing the full range of service costs 
will lead to more accurate relative payment weights. In addition to 
better incorporating those cost values that surround the median and, 
therefore, describing a broader range of cost patterns, basing the 
relative payment weights on geometric mean costs may also promote 
better stability in the payment system by making OPPS payments more 
reflective of the range of costs associated with providing services. In 
the short term, geometric mean-based relative payment weights would 
make the relative payment weights more reflective of the service costs. 
However, making this change also may promote more payment stability in 
the long term by including a broader range of observations in the 
relative payment weights, making them less susceptible to gaps in 
estimated cost near the median observation and also making changes in 
the relative payment weight a better function of changes in estimated 
service costs.
    We note that using the geometric means would increase the relative 
payment weights for some services and decrease the relative payment 
weights for others. We believe those updated relative payment weights 
to be more reflective of the costs associated with providing those 
services, which is consistent with the goal of developing relative 
payment weights that accurately describe service costs. As described in 
the CY 2013 OPPS/ASC proposed rule, we have made a number of changes in 
the history of the OPPS to derive more information from what is 
available to us and ensure that the cost information we use for 
ratesetting is as accurate as possible. We believe that making changes 
consistent with those goals is preferable, rather than choosing one 
methodology or another simply due to the numeric payment rates that 
arise from any different methodology.
    Thus, for the reasons discussed above, we believe that using 
geometric mean costs to calculate the relative payment weights for the 
OPPS represents an improvement to our cost estimation process and will 
lead to relative payment weights that are more reflective of service 
cost patterns. For these reasons, we disagree with the commenters' 
assertion that use of the median-based methodology is a preferable 
option. We believe that this change is appropriate and requires all 
OPPS services previously paid through median-based calculations 
(including CMHC based per diem costs) to transition together to 
geometric mean cost calculations to establish accurate cost relativity 
in the system. Therefore, we are finalizing the geometric mean-based 
methodology in this final rule with comment period. For a more detailed 
discussion of geometric mean-based relative payment weights, we refer 
readers to section II.A.2.f. of this final rule with comment period.
    Comment: Several hospital-based PHP providers supported the 
conversion from a median-based methodology to a geometric mean-based 
methodology and the resulting hospital-based PHP per diem payments. 
These commenters also recommended that CMS continue to recognize the 
cost structure differences between hospital-based PHPs and CMHCs by 
calculating four separate PHP APCs based on each providers' own unique 
data, and stated that it was a necessary improvement to help ensure PHP 
access in hospital-based settings for the future. The commenters also 
encouraged CMS to continue to refine data analysis strategies that help 
bring payment accuracy as well as stability to the partial 
hospitalization benefit in order to allow programs that meet the needs 
of Medicare beneficiaries to exist.
    Response: We appreciate the commenters' support of the two-tiered, 
four PHP APC per diem payment rates based on each providers' own unique 
data. We continue to believe that it is important to calculate PHP APC 
per diem payment rates based on the data for each type of provider in 
order to appropriately pay for PHP services, which will support 
continued access to quality services. We are constantly monitoring the 
OPPS in search of potential refinements that would improve the accuracy 
and stability of the payment system. Over the past several years, we 
have made changes to PHP APC per diem payment rates to more accurately 
align the payments with costs. These changes have included establishing 
separate APC per diem payment rates for CMHCs and hospital-based 
providers based on each providers' costs as well as a two-tiered APC 
per diem payment rate for both CMHC and hospital-based PHPs under which 
we pay one amount for days with 3 services and another amount for days 
with 4 or more services. As discussed in the CY 2013 OPPS/ASC proposed 
rule, we believe that the use of geometric mean costs rather than 
median costs in the ratesetting process is another improvement, because 
it allows the payment metric to consider a broader range of service 
costs among other factors (77 FR 45097). We will continue to monitor 
the impact of our payment policies on the PHP benefit and providers.
    Comment: A few CMHC providers requested that CMS suspend 
implementation of the proposed PHP APC per diem payment rates for CMHCs 
and maintain the current CY 2012 CMHC PHP APC per diem payment rates as 
a means to preserve CMHCs. The commenters stated that many of the CMHCs 
throughout the country have already closed due to CMS' ongoing payment 
rate reductions. Another commenter stated that no business in the 
United States or anywhere else in the world can survive and continue to 
operate after such a decrease over 3 years. The commenter further 
stated that it appeared that the goal of CMS was to substantially 
reduce the total number of CMHCs participating in the Medicare

[[Page 68410]]

program and consequentially reduce payments nationwide. One commenter 
expressed concern that, instead of being rewarded, CMHCs are being 
targeted and punished for providing more cost-effective services than 
the hospital-based PHPs. This same commenter was ``highly offended'' by 
the following sentence from the CY 2012 OPPS/ASC proposed rule (77 FR 
45150): ``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.'' 
The commenter stated that the sentence implies ``CMHCs provide less 
valuable services than hospital-based PHPs, hire less qualified staff, 
and overall perform very poorly compared to hospital based PHPs.''
    Several commenters expressed concern that the proposed reductions 
to the CMHC PHP APC per diem payment rates could further erode the 
viability of the safety net system, and make it more difficult for 
patients to receive needed mental health care and services. One of 
these commenters also stated that if patients are unable to receive 
care in a CMHC, many will have only the emergency departments as a last 
resort.
    Response: We understand the concerns raised by the commenters 
regarding CMHC APC per diem payment rate reductions. We are not 
targeting or trying to punish specific providers, and we are not trying 
to reduce the number of CMHCs participating in the Medicare program. 
However, we continue to believe that it is important to calculate PHP 
APC per diem payment rates based on the data for each type of provider 
in order to appropriately pay for services. CMHCs' costs have 
fluctuated significantly and then generally declined over the years. 
CMHCs' costs also have remained significantly lower than hospital-based 
PHPs' costs, which have been relatively stable since the inception of 
the OPPS. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74347), we stated that CMHCs have a lower cost structure than hospital-
based PHP providers because the data showed and continue to show that 
CMHCs provide fewer PHP services in a day and use less costly staff 
than hospital-based PHPs. In other words, hospital-based providers have 
traditionally provided more services than CMHCs during a PHP day. 
Providing fewer services during a PHP day results in less overhead 
expense for the provider; that is, less time the provider needs to pay 
staff, less time the provider needs to heat the building, and less time 
the provider needs to light the building. Therefore, providing fewer 
PHP services during a day directly contributes to a lower overall cost 
structure. We did not intend to offend any of our providers. We also 
did not mean to imply that, in comparison to hospital-based PHPs, CMHCs 
provide inferior, less valuable or poor quality services; we were only 
stating the differences in these providers' cost structures based on 
our cost analysis.
    In light of these differences in cost structures between provider 
types, it was inappropriate to continue to treat CMHCs and hospital-
based PHP providers in the same manner. We were concerned that paying 
hospital-based PHPs at a lower rate than their cost structure reflects 
could lead to closures and possible access problems for hospital-based 
programs providing services to Medicare beneficiaries, given that 
hospital-based PHPs offer the widest access to PHP services because 
they are located across the country. Paying providers based on the four 
PHP APC per diem payment rates supports continued access to the PHP 
benefit, while also providing appropriate payment based on the unique 
cost structures of CMHCs and hospital-based PHPs. We believe that the 
CMHC APC per diem payment rates accurately reflect the cost data of the 
CMHCs.
    The PHP APC per diem payment rates are directly related to the 
accuracy of the claims and cost reports submitted by providers. It is 
imperative that providers submit accurate claims and cost reports in 
order for the payment rates to most accurately reflect the providers' 
costs. The resulting PHP APC per diem payment rates reflect the cost of 
what providers expend to maintain such programs. So, it is unclear why 
this would lead to program or business closures. As we stated in the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74350), 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, and Federal and State fraud and abuse 
efforts, among others. It does not directly imply that closure could be 
due to reduced payment rates alone, especially when these payment rates 
reflect the costs of PHP providers.
    In response to the commenters' concerns that further reduction in 
the CMHC PHP APC per diem payment rates could further erode the 
viability of the safety net system and make it more difficult for 
patients to receive needed mental health services, we take such 
concerns seriously. Currently, we monitor facility closings and 
openings to make sure that access issues do not exist, and we will 
continue to do so in the future. We also remain steadfast in our 
concern regarding access to care for all beneficiaries, while also 
providing appropriate payments for such care. A PHP is not the only 
program in which a Medicare beneficiary is able to receive needed 
mental health care. Although not equivalent to a PHP, Medicare provides 
payment for outpatient mental health services in addition to PHP 
services. Many beneficiaries in need of mental health treatment receive 
other outpatient services generally from hospital programs which are 
available nationwide, and no evidence suggests that there is an 
increase in adverse outcomes due to lack of access to care. Other forms 
of access to mental health services remain available. We continue to 
believe that it is important to calculate PHP APC per diem payment 
rates based on the data of each type of provider in order to 
appropriately pay for PHP services, which will support continued access 
to quality services.
    Commenters also requested that we suspend implementation of the 
proposed CY 2013 PHP APC per diem payment rates for CMHCs, and that we 
pay based on the CY 2012 per diem payment rates to preserve CMHCs. As 
discussed above, we cannot establish payment rates that do not 
accurately reflect the current cost data. We believe that having 
separate payment rates for CMHCs and hospital-based providers based on 
each providers' costs as well as a two-tiered APC per diem payment rate 
for both CMHC and hospital-based PHPs under which we pay one amount for 
days with 3 services and another amount for days with 4 or more 
services along with using geometric means to more accurately reflect 
the costs associated with providing OPPS services supports the PHP 
benefit and pays providers appropriately for the services that they 
provide. For these reasons, we are not suspending implementation of the 
CY 2013 PHP APC per diem payment rates for CMHCs.
    Comment: One commenter stated that the database of claim payments 
used in calculating the new payment rates includes at least two 
providers indicted for fraud, and recommended that these claims be 
removed.
    Response: We strive to ensure that the claims we use for modeling 
the OPPS payment rates contain accurate cost information on services. 
In addition, we note that providers with questionable data are subject 
to further investigation. We request that the commenter provide us with 
more details regarding those providers.
    Comment: One commenter suggested that, instead of calculating the 
PHP APC

[[Page 68411]]

per diem payment rates using claims data, CMS should use the quality of 
the provided services to base payments, including record reviews, 
denials due to lack of medical necessity or inadequate documentation, 
site visits, interviews with patients, and most importantly patient 
outcomes. Another commenter recommended that CMS establish quality and 
outcome criteria to judge performance that would influence future 
ratesetting, and provide rewards to individual providers for 
outstanding quality and outcomes.
    Response: Sections 1833(t)(2) and 1833(t)(9) of the Act set forth 
the requirements for establishing and adjusting the OPPS payment rates, 
including the PHP payment rates. The existing policies and procedures 
implementing these statutory provisions do not consider quality 
measures when setting base payment rates. However, we note that section 
1833(t)(17) of the Act implements an outpatient quality reporting 
program for subsection (d) hospitals that applies a payment reduction 
for hospitals that fail to meet the program requirements.
    Comment: One commenter requested that CMS establish a ratesetting 
task force to review the CMS ratesetting methodology and CMHCs' and 
hospital-based PHPs' costs as a means to identify fair and adequate 
payment rates for both. Another commenter requested an open discussion 
with CMS and associations whose members are PHP providers.
    Response: We maintain positive working relationships with various 
industry leaders representing both CMHCs and hospital-based PHP 
providers with whom we have consistently met over the years to discuss 
industry concerns and ideas. These relationships have provided 
significant and valued input regarding PHP ratesetting. We also hold 
Hospital Outpatient Open Door Forum calls monthly, in which all 
individuals are welcome to participate and/or submit questions 
regarding specific issues, including questions related to PHPs.
    Furthermore, we initiate rulemaking annually, through which we 
receive public comments on proposals set forth in a proposed rule and 
respond to those comments in a final rule. All individuals are provided 
an opportunity to comment, and we give consideration to each comment 
that we receive.
    Given the relationships that we have established with various 
industry leaders and the various means for us to receive comments and 
recommendations, we believe that we receive adequate input regarding 
ratesetting and take that input into consideration when establishing 
the payment rates. We continue to welcome any input and information 
that the industry is willing to provide.
    Comment: A few commenters addressed issues related to the costs 
used to calculate the PHP APC per diem payment rates. One commenter 
expressed concern that CMS' ratesetting methodology does not take into 
consideration the array of services that are delivered in PHPs, such as 
assisting with appointments regarding social security and Medicare; 
housing searches; primary healthcare; eye and dental services; working 
with families; obtaining prescription medications; and accessing 
transportation, food banks and food stamps.
    Two commenters expressed concern that CMHCs must retain the same 
level of licensed staff as hospital-based PHPs, yet the discrepancy 
between the proposed CMHC and hospital-based PHP per diem payment rates 
is now significant. The commenters stated that because all PHPs must 
hire psychiatrists, licensed clinicians, licensed supervisors, and 
bachelor-level case managers, it is difficult to understand why and how 
CMS calculated such different payment rates for essentially the same 
services.
    Lastly, one commenter further questioned why a licensed therapist 
in a community-based treatment setting can be paid $110.27 for a 45 to 
50 minute individual counseling session, while a CMHC is expected to 
deliver up to 6 hours of care per day including treatment, food, 
transportation, among others, for $111.89 per day (for 4 or more 
services).
    Response: Section 1861(ff) of the Act and 42 CFR 410.43 describe 
the items and services included in partial hospitalization services. As 
set forth in these sections, partial hospitalization services generally 
consist of a variety of group, individual, and family psychotherapy 
sessions, supplemented with occupational therapy, the services of 
social workers, trained psychiatric nurses, and other staff trained to 
work with psychiatric patients, drugs and biologicals furnished for 
therapeutic purposes that cannot be self-administered, diagnostic 
services, education and training, and certain activity therapies 
designed to stabilize an acute episode of mental illness. The PHP APC 
per diem payment rate is the bundled payment for these partial 
hospitalization services. Physician services that meet the requirements 
of Sec.  415.102(a) for payment on a fee schedule basis, physician 
assistant services, nurse practitioner and clinical nurse specialist 
services, and qualified psychologist services are separately covered 
(as are services furnished to skilled nursing facility residents as 
defined in Sec.  411.15(p)) and are not paid as partial hospitalization 
services (Sec.  410.43(b)). Further, section 1861(ff)(2)(I) of the Act 
explicitly excludes meals and transportation from the items and 
services included in partial hospitalization services.
    Regarding the concern about the discrepancy between the proposed 
CMHC and hospital-based PHP per diem payment rates, as discussed above, 
we believe that it is important to calculate PHP APC per diem payment 
rates based on the data for each type of provider in order to 
appropriately pay for services. We base the PHP APC per diem payment 
rates on claims and cost reports submitted by providers. The resulting 
PHP APC per diem payment rates reflect the cost of what providers 
expend to maintain such programs.
    In response to the commenter who questioned why the payment to a 
CMHC for a full day of mental health treatment is about the same as the 
amount a therapist is paid for one individual counseling session, we 
believe the commenter is comparing the professional fee the therapist 
is paid under the MPFS for providing a therapy service ($110.27, 
according to the commenter) to the proposed Level II APC per diem 
payment rate to a CMHC under the OPPS for CY 2013 ($111.89). We believe 
that this is not an appropriate comparison because these payments are 
for completely different services. It is important to note that CMHCs 
receive the per diem amount per person per day. Thus, assuming the PHP 
has 10 patients, the facility is receiving over $1,000 for the day. 
That amount, which is intended to cover the facility's per diem cost 
for a day of PHP, includes the cost of staff who are not authorized to 
bill Medicare Part B as discussed above. Again, we base the PHP APC per 
diem payment rates on claims and cost reports submitted by providers. 
Thus, resulting PHP APC per diem payment rates reflect the cost of what 
providers expend to maintain such programs.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2013 proposal, without modification, to update 
the four PHP APC per diem payment rates based on geometric mean cost 
levels calculated using the most recent claims data for each provider 
type. The updated PHP APCs geometric mean per diem costs for PHP 
services that we are finalizing for CY 2013 are shown in Tables 39 and 
40 below. We will continue our efforts to explore payment

[[Page 68412]]

reforms that will support quality and result in greater payment 
accuracy and reduction of fraud and abuse within the partial 
hospitalization program.
[GRAPHIC] [TIFF OMITTED] TR15NO12.060

C. Coding Changes

    CPT codes are established by the AMA and the Level II HCPCS codes 
are established by the CMS HCPCS Workgroup. CPT and Level II HCPCS 
codes are used to report procedures, services, and items and supplies 
under the hospital OPPS. These codes are updated and changed throughout 
the year.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel deleted 28 psychiatric CPT codes, 
including those related to PHP services, and replaced them with 12 new 
CPT codes, effective January 1, 2013. For a detailed explanation of the 
OPPS treatment of new, deleted or revised CPT and Level II HCPCS codes 
we refer readers to section III.A. of this final rule with comment 
period. As a result of the AMA's CPT coding changes to the psychiatric 
CPT codes, we are making corresponding changes to the PHP code set that 
is used for billing and documenting PHP services. Specifically, we are 
making the following changes:
     The initial E/M codes are being separated based on whether 
the service was completed by a physician (CPT code 90792 (Initial 
evaluation with medical services done by a physician)), or a 
nonphysician (CPT code 90791 (Initial evaluation done by a non-
physician)). Currently, for PHPs, E/M services are billed under: CPT 
codes 90801 (Psychiatric diagnostic interview examination) and 90802 
(Interactive psychiatric diagnostic interview). Effective January 1, 
2013, CPT codes 90801 and 90802 will be deleted and the E/M services 
will be billed using the following CPT codes: CPT code 90791 
(Psychiatric diagnostic evaluation (no medical services) when completed 
by a non-physician) and CPT code 90792 (Psychiatric diagnostic 
evaluation (with medical services) when completed by a physician).
     The psychotherapy codes will no longer be for a range of 
time, but for a specific period of time. The following CPT codes that 
are currently used to bill for and document PHP individual 
psychotherapies will be deleted in CY 2013: CPT code 90816 (Psytx hosp 
20-30 min); CPT code 90817 (Psytx hosp 20-30 min w/e&m); CPT code 90818 
(Psytx hosp 45-50 min); CPT code 90819 (Psytx hosp 45-50 min w/e&m); 
CPT code 90821 (Psytx hosp 75-80 min); CPT code 90822 (Psytx hosp 75-80 
min w/e&m); CPT code 90823 (Intac psytx hosp 20-30 min); CPT code 90824 
(Intac psytx hsp 20-30 w/e&m); CPT code 90826 (Intac psytx hosp 45-50 
min); CPT code 90827 (Intac psytx hsp 45-50 w/e&m); CPT code 90828 
(Intac psytx hosp 75-80 min); and CPT code 90829 (Intac psytx hsp 75-80 
w/e&m). These codes will be replaced with the following new 
psychotherapy CPT codes: CPT codes 90832 (Psychotherapy, 30 minutes); 
CPT codes 90834 (Psychotherapy, 45 minutes); and CPT codes 90837 
(Psychotherapy, 60 minutes). If the time spent for psychotherapy is 
more than half the time of the code, then that code can be used to bill 
for PHP services. For example, if the time spent for psychotherapy is 
16 minutes up to 37 minutes, CPT code 90832 (Psychotherapy, 30 minutes) 
would be used. For psychotherapy lasting 38 to 52 minutes, CPT code 
90834 (Psychotherapy, 45 minutes) would be used, and for psychotherapy 
lasting 53 minutes or more, CPT code 90837 (Psychotherapy, 60 minutes) 
would be used. When psychotherapy is provided during the same encounter 
as an E/M service, there will be timed add-on CPT codes for 
psychotherapy that are to be used by psychiatrists to indicate that 
psychotherapy was provided during the same encounter as an E/M service. 
When E/M services are completed with

[[Page 68413]]

psychotherapy, the following CPT codes may be used effective January 1, 
2013: Appropriate E/M code (not selected on basis of time) and CPT code 
+90833 (30-minute psychotherapy add-on code); Appropriate E/M code (not 
selected on basis of time) and CPT code +90836 (45-minute psychotherapy 
add-on code); and Appropriate E/M code (not selected on basis of time) 
and CPT code +90838 (60-minute psychotherapy add-on code). The 
following table provides a list of the PHP-related individual 
psychotherapy CPT codes that will be deleted December 31, 2012.
BILLING CODE 4120-01-P

[[Page 68414]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.061


[[Page 68415]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.062

     Instead of separate codes for interactive psychotherapy, 
there is now an add-on CPT code for interactive complexity, which may 
be used when the patient encounter is more complex because of the need 
to involve people other than the patient (CPT code +90785). This add-on 
CPT code can be used with initial evaluation codes, with the 
psychotherapy codes, with the nonfamily group psychotherapy code, and 
with the E/M codes when they are used in conjunction with psychotherapy 
services. The CPT manual includes specific guidelines as to what 
constitutes interactive complexity that should be understood before 
this add-on CPT code is used. Documentation must clearly indicate 
exactly what the complexity was.
    Beginning on January 1, 2013, interactive psychotherapy should be 
billed using the psychiatric evaluation codes, the psychotherapy and 
psychotherapy add-on CPT codes, and the group (nonfamily) psychotherapy 
CPT code +90785 (Interactive psychotherapy).
    Relevant coding requirements must be followed. We recommend 
learning how to accurately bill for and document these new codes. More 
information may be found on the CPT/AMA Web site: http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt.page.
    All other PHP CPT and HCPCS codes will remain unchanged and active 
for billing and documentation of PHP services. We refer readers to the 
table below that highlights which PHP CPT/HCPCS codes are changing and 
which PHP CPT/HCPCS codes will remain unchanged and active for billing 
and documentation of services.
    The following Table 42 provides a crosswalk between the CPT/HCPCS 
code options in CY 2012 and the CPT/HCPCS code options that are 
effective on January 1, 2013.

[[Page 68416]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.063


[[Page 68417]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.064

    The following Table 43 shows all of the billable PHP revenue and 
CPT/HCPCS codes effective on January 1, 2013. This table is also 
located in the Medicare Claims Processing Manual, Pub. 100-04, Chapter 
4, Section 260.1, which is available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf.

[[Page 68418]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.065

D. 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 charges for 
PHP services provided 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. 
Therefore, we designated a portion of the estimated OPPS outlier target 
amount specifically for CMHCs, consistent with the percentage of 
projected payments to CMHCs under the OPPS each year, excluding outlier 
payments. In addition, further analysis indicated that using the same 
OPPS outlier threshold for both hospitals and CMHCs did not limit 
outlier payments to high-cost cases and resulted in excessive outlier 
payments to CMHCs. Therefore, beginning in CY 2004, we established a 
separate outlier threshold for CMHCs. The separate outlier threshold 
for CMHCs has resulted in more commensurate outlier payments.
    The separate outlier threshold for CMHCs resulted in $1.8 million 
in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier 
payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 
million was paid to CMHCs in outlier payments. We believe this 
difference in outlier payments indicates that the separate outlier 
threshold for CMHCs has been successful in keeping outlier payments to 
CMHCs in line with the percentage of OPPS payments made to CMHCs.
    We proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45153) to 
continue our policy of identifying 1.0 percent of the aggregate total 
payments under the OPPS for outlier payments for CY 2013. We proposed 
that a portion of that 1.0 percent, an amount equal to 0.12 percent of 
outlier payments (or 0.0012 percent of total OPPS payments) would be 
allocated to CMHCs for PHP outlier payments. In section II.G. of the CY 
2013 OPPS/ASC proposed rule, for the hospital outpatient outlier 
payment policy, we proposed to set a dollar threshold in addition to an 
APC multiplier threshold (77 FR 45110 through 45111). 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 2013 at 3.40 times the APC payment amount 
and the CY 2013 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 
rate for APC 0173, the outlier payment will be calculated as 50 percent 
of the amount by which the cost exceeds 3.40 times the APC 0173 payment 
rate. We invited public comments on these proposals.
    We did not receive any public comments regarding our proposed 
outlier policy. Therefore, we are finalizing our CY 2013 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 2013, 
as proposed, we are setting the outlier threshold at 3.40 multiplied by 
the APC payment amount and the CY 2013 outlier percentage applicable to 
costs in excess of the threshold at 50 percent.

IX. Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

    We refer readers to the CY 2012 final rule with comment period (76 
FR 74352 through 74353) for a full historical discussion of our 
longstanding policies on how we identify procedures that are typically 
provided only in an inpatient setting (referred to as the inpatient 
list) and, therefore, will not be paid by Medicare under the OPPS; and 
on the criteria that we use to review the inpatient list each year to 
determine whether or not any procedures should be removed from the 
list.

B. Changes to the Inpatient List

    In the CY 2013 OPPS/ASAC proposed rule (77 FR 45153), for CY 2013, 
we proposed to use the same methodology (described in the November 15, 
2004 final rule with comment period (69 FR 65835)) of reviewing the 
current list of procedures on the inpatient list to

[[Page 68419]]

identify any procedures that are being performed a significant amount 
of the time on an outpatient basis, and appropriately may be removed 
from the list. The established criteria upon which we make such a 
determination are as follows:
    1. Most outpatient departments are equipped to provide the services 
to the Medicare population.
    2. The simplest procedure described by the code may be performed in 
most outpatient departments.
    3. The procedure is related to codes that we have already removed 
from the inpatient list.
    4. A determination is made that the procedure is being performed in 
numerous hospitals on an outpatient basis.
    5. 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.
    Using this methodology, we identified two procedures that 
potentially could be removed from the inpatient list for CY 2013: CPT 
code 22856 (Total disc arthroplasty (artificial disc), anterior 
approach, including discectomy with end plate preparation (includes 
osteophytectomy for nerve root or spinal cord decompression and 
microdissection), single interspace, cervical); and CPT code 27447 
(Arthroplasty, knee, condyle and plateau; medical and lateral 
compartments with or without patella resurfacing (total knee 
arthroplasty)). We then reviewed the clinical characteristics and 
related evidence for these two potential procedures for possible 
removal from the inpatient list and found them to be appropriate 
candidates for removal from the inpatient list. For CY 2013, we 
proposed to remove the procedures described by CPT codes 22856 and 
27447 from the inpatient list because we believe that the procedures 
may be appropriately provided as hospital outpatient procedures for 
some Medicare beneficiaries, based upon the evaluation criteria 
mentioned above and should thus be paid under the OPPS.
    The two procedures that we proposed to remove from the inpatient 
list for CY 2013 and their CPT codes, long descriptors, proposed APC 
assignments, and proposed status indictors were displayed in Table 34 
of the proposed rule.
    Comment: A few commenters supported CMS' proposal to remove CPT 
code 27447 (Total knee arthroplasty) from the list of inpatient 
procedures, and asserted that this procedure may be appropriately 
provided on an outpatient basis for some Medicare beneficiaries, given 
thorough preoperative screening by medical teams with significant 
experience and expertise involving knee replacement procedures. The 
commenters referenced a study presented at the American Academy of 
Orthopedic Surgeons 2009 annual meeting, which noted recent advances in 
total knee replacement procedures, including improved perioperative 
anesthesia, and expedited rehabilitation protocols, as well as 
significant enhancements to the postoperative process, such as 
improvements in pain management, early mobilization, careful 
monitoring, and that early preventive intervention for the most common 
medical complications have decreased the average length of hospital 
stays to the point that total knee arthroplasty can now be performed on 
an outpatient basis in certain cases. The commenters noted significant 
success involving same day discharge for patients who met the screening 
criteria and whose experienced medical teams were able to perform the 
procedure early enough in the day for the patients to achieve 
postoperative goals, allowing home discharge by the end of the day. The 
commenters remarked that the benefits of providing total knee 
arthroplasty on an outpatient basis will lead to significant 
enhancements in patient well-being and cost savings to the Medicare 
program, including shorter hospital stays resulting in fewer medical 
complications, improved results, and enhanced patient satisfaction.
    A few commenters urged CMS to group total knee arthroplasty into a 
new APC with unicompartmental knee replacement or to group these two 
procedures with other clinically similar orthopedic implant procedures 
from APC 0425 to create a more clinically homogenous APC for resource-
intensive arthroplasty, if CMS finalized its proposal to remove total 
knee arthroplasty from the inpatient list. One commenter requested CMS 
to assign CPT code 27447 a status indicator of ``S.''
    The majority of commenters asked that CMS retract its proposal to 
remove CPT code 27447 from the inpatient list. Commenters argued that 
CPT code 27447 is not being performed in numerous hospitals on an 
outpatient basis and noted that the published average length of stay 
for this procedure is over 3 days, with a recommended best practice 
target of 3 days when no complications exist. Commenters stated that 
removing CPT code 27447 from the inpatient list will create a dangerous 
situation for Medicare beneficiaries, who are older and more medically 
complex patients, as there are serious potential adverse effects, 
including inadequate pain management, unsafe ambulation, and risk for 
falls. Commenters also noted that patients undergoing total knee 
replacement often have several comorbidities and increased risks, such 
as death, loss of a limb, nerve damage resulting from neurovascular 
injury, myocardial infarction (MI), pulmonary embolism (PE), deep vein 
thrombosis (DVT), and infection and loss of mobility, as well as 
anaphylaxis, obstructive sleep apnea, and aspiration of stomach 
contents into the lungs. Several commenters stated that many patients 
will require some type of sub acute rehabilitation, which could include 
a SNF, and if these patients are not admitted, they will not meet their 
qualifying 3-day inpatient stay and will not be eligible for SNF care, 
which likely will lead to poor outcomes postoperatively. Some 
commenters stated that Medicare patients require greater than 24 hours 
of inpatient hospital care following total knee replacement procedures 
for clinical reasons, including anesthesia recovery, physical therapy, 
blood loss monitoring, and pain control, which often includes 
intravenous pain medications for 24 to 48 hours following the 
procedure, and the outpatient setting cannot handle the high acuity for 
the extended postoperative care that this type of patient requires. 
Other commenters stated that they do not believe that the clinical 
characteristics of CPT code 27447 justify its selection as an 
appropriate candidate for removal from the inpatient list.
    Commenters pointed out that, while Medicare's definition of 
outpatient surgery specified that it includes the care provided during 
the normal recovery period, which is defined as less than 24 hours, the 
length of stay for total knee arthroplasty patients is markedly longer 
than 24 hours for outpatient surgery recovery. In addition, the 
commenters noted that, according to the Medicare Claims Processing 
Manual, Chapter 4, section 180.7, `` `Inpatient only' services are 
generally, but not always, surgical services that require inpatient 
care because of the nature of the procedure, the typical underlying 
physical condition of patients who require the service, or the need for 
at least 24 hours of postoperative recovery time or monitoring before 
the patient can be safely discharged.'' Several commenters cited the 
lack of any evidence-based publications supporting outpatient total 
knee arthroplasty in

[[Page 68420]]

patients over the age of 65 and asserted that patients having total 
knee replacement surgery as outpatients were significantly more likely 
to die or need readmission within 90 days, compared with inpatients 
remaining in the hospital for 3 to 4 days, according to a study 
presented at the February 2012 American Association of Orthopedic 
Surgery meeting. Commenters also noted, according to the same study, 
the rates of subsequent revision surgery were nearly doubled in 
patients having 1-day hospital stays compared with the 3- to- 4-day 
standard.
    Commenters further noted that performing total knee arthroplasty in 
the outpatient setting may impact the types of rehabilitation services 
available to patients upon completion of the surgery, and may make 
justifying the medical necessity of inpatient rehabilitation more 
difficult. Furthermore, commenters expressed concern that commercial 
carriers will change total knee arthroplasty to an outpatient 
procedure, thereby making it more difficult to get such a procedure 
authorized.
    Commenters also stated that all hospitals do not have the robotics 
available for less invasive surgical technique and only a few centers 
across the country are routinely doing knee replacement as outpatients, 
and even those hospitals are doing them on specific patient types. One 
commenter remarked that, while outpatient joint replacements are 
possible in hospitals in major cities with large resources and an 
educated skilled support staff, it would be dangerous to the patient to 
perform outpatient total knee arthroplasties in small rural 
communities, as there are limited nurses, therapists, and other support 
staff in many communities across the country.
    Some commenters expressed concern about the effects of CMS' 
proposed removal of CPT 27447 on participants in the CMS Innovation 
Center's (CMMI's) Bundled Payments for Care Improvement (BPCI) 
initiative.
    Response: We appreciate all of the public comments we received on 
the removal of CPT code 27447 from the inpatient list. In light of all 
of these public comments, for CY 2013, we have decided not to remove 
CPT code 27447 from the inpatient list as we proposed. Based on the 
public comments, we have concerns regarding whether this procedure may 
be appropriately provided as a hospital outpatient procedure for some 
Medicare beneficiaries based upon the evaluation criteria above.
    Comment: The majority of commenters supported CMS' proposal to 
provide payment for CPT code 22856 in the hospital outpatient setting, 
but recommended assigning CPT code 22856, as well as CPT codes 22551 
and 22554, to APC 0052 (Level IV Musculoskeletal Procedures Except Hand 
and Foot), APC 0425 (Level II Arthroplasty or Implantation of 
Prosthesis), or a newly created APCs in order to appropriately 
compensate hospitals for their costs associated with this procedure. 
One commenter believed that CPT code 22856, for patient safety reasons, 
should remain on the inpatient list.
    Response: We appreciate commenters' support of our proposal to 
provide payment for CPT code 22856 in the hospital outpatient setting. 
We believe that this procedure may be appropriately provided as a 
hospital outpatient procedure for some Medicare beneficiaries based 
upon the evaluation criteria above. However, we do not agree with the 
commenters' recommendation to assign CPT code 22856, as well as CPT 
codes 22551 and 22554, to APC 0052, 0425, or a newly created APC. We 
believe that CPT code 22856, as well as CPT codes 22551 and 22554, are 
appropriately placed in APC 0208.
    Comment: Several commenters requested that CMS remove 39 additional 
CPT codes from the CY 2012 inpatient 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.
    Response: We reevaluated data on the 39 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 44 below. As a result of the reevaluation, we remain convinced 
that these procedures can be safely performed only in the inpatient 
setting.
BILLING CODE 4120-01-P

[[Page 68421]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.066


[[Page 68422]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.067


[[Page 68423]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.068

BILLING CODE 4120-01-C
    Comment: Some commenters requested that CMS add CPT codes 44206 
(Laparoscopy, surgical; colectomy, partial, with end colostomy and 
closure of distal segment (Hartmann type procedure)), 44207 
(Laparoscopy, surgical; colectomy, partial, with anastomosis, with 
coloproctostomy (low pelvic anastomosis)), 44208 (Laparoscopy, 
surgical; colectomy, partial, with anastomosis, with coloproctostomy 
(low pelvic anastomosis) with colostomy), and 44213 (Laparoscopy, 
surgical, mobilization (take-down) of splenic flexure performed in 
conjunction with partial colectomy (List separately in addition to 
primary procedure)) to the inpatient list.
    Response: We note that CPT codes 44206, 44207, 44208, and 44213 
have been payable in the outpatient setting for a number of years 
without significant concern raised by the public. Therefore, we find no 
reason to reassign CPT codes 44206, 44207, 44208, and 44213 to the 
inpatient list at this time.
    Comment: A number of commenters requested that the inpatient list 
be eliminated in its entirety, and if the inpatient list cannot be 
eliminated in its entirety, an appeals process be developed. Commenters 
also requested that the inpatient list be reviewed clinically. In 
addition, commenters expressed concern about the way Recovery Audit 
Contractors (RACs) target procedures removed from the inpatient list 
and encouraged CMS to provide a period to allow hospitals to make the 
appropriate adjustments without being at risk of an audit. The 
commenters urged CMS to provide, in both regulatory language and 
transmittals, that procedures with APC payment rates can be performed, 
covered, and paid by Medicare on an inpatient basis when medical 
necessity is documented and the physician has ordered inpatient status.
    Response: We appreciate these comments and thoughtful suggestions. 
We continue to believe that the inpatient list is a valuable tool for 
ensuring that the OPPS only pays for services that can safely and 
appropriately be performed in the hospital outpatient setting, and we 
will not eliminate the inpatient only list at this time. We do not plan 
to adopt a specific appeals process for claims related to inpatient 
procedures performed in the HOPD in light of the added administrative 
burden, and the existing processes established for a beneficiary or a 
provider to appeal a specific claim remain in effect. We are committed 
to clinically reviewing the inpatient list timely to reflect changes in 
medical practice, and we plan to continue our current practice of 
reviewing procedures for removal from the inpatient list through the 
formal notice-and-comment rulemaking process. The inpatient list is 
made available to the public through the OPPS/ASC final rule with 
comment period at least 60 days prior to its effective date of January 
1 of the upcoming year. We believe that the 60 days between the release 
of the OPPS/ASC final rule with comment period and the effective date 
of January 1 of the upcoming year provide sufficient time for hospitals 
to make the appropriate adjustments to reflect the upcoming year's 
inpatient list. As we have stated in Section 180.7 of Chapter 4 of the 
Medicare Claims Processing Manual, procedures removed from the 
inpatient list may be appropriately furnished in either the inpatient 
or outpatient settings and such procedures continue to be payable when 
furnished in the inpatient setting.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period supported CMS' decision to assign a status 
indicator of ``C'' to Category III codes 0293T (Insertion of left 
atrial hemodynamic monitor; complete system, includes implanted 
communication module and pressure sensor lead in left atrium including 
transseptal access, radiological supervision and interpretation, and 
associated injection procedures, when performed) and 0294T (Insertion 
of left atrial hemodynamic monitor; pressure sensor lead at time of 
insertion of pacing cardioverter-defibrillator pulse generator 
including radiological supervision and interpretation and associated 
injection procedures, when performed (list separately in addition to 
primary procedure)).
    Response: We appreciate the commenter's support.
    At its August 27-28, 2012 meeting, the Panel recommended that CMS 
remove HCPCS code 22856 from the list of inpatient procedures. We are 
accepting this recommendation.
    After consideration of the public comments we received, we are 
modifying our proposal and only removing CPT code 22856 from the CY 
2013 inpatient list. CPT code 27447 will remain on the inpatient list 
for CY 2013.
    The procedure that we are removing from the inpatient list for CY 
2013 and its CPT code, long descriptor, APC assignment, and status 
indictor are displayed in Table 45 below.

[[Page 68424]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.069

    The complete list of codes to be paid by Medicare in CY 2013 only 
as inpatient procedures is included as Addendum E to this final rule 
with comment period (which is available via the Internet on the CMS Web 
site).

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

A. Conditions of Payment for Physical Therapy, Speech-Language 
Pathology, and Occupational Therapy Services in Hospitals and CAHs

    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74360 
through 74371), we clarified that hospital outpatient therapeutic 
services and supplies, including those 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 42 CFR 410.27 when they are paid under the OPPS or paid to 
CAHs under section 1834(g) of the Act. We issued this clarification in 
response to inquiries regarding the application of these conditions of 
payment to radiation therapy services that are described under section 
1861(s)(4) of the Act when these services are furnished to hospital 
outpatients.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74369), in our response to public comments on the CY 2012 OPPS/ASC 
proposed rule, we indicated that the supervision and other requirements 
of Sec.  410.27 do not apply to professional services or to services 
that are paid under other fee schedules such as the Clinical Laboratory 
Fee Schedule (CLFS). After the publication of the CY 2012 OPPS/ASC 
final rule with comment period, we continued to receive questions about 
the applicability of the regulations to physical therapy (PT), speech-
language pathology (SLP), and occupational therapy (OT) services 
furnished in CAHs. Several stakeholders expressed concern that the 
rules could be applied differently in CAHs than in OPPS hospitals. The 
stakeholders were concerned that OPPS hospitals, which are paid for 
outpatient therapy services at the applicable amount based on the 
Medicare Physician Fee Schedule (MPFS), would not be subject to the 
regulations, but that CAHs, which are paid for outpatient therapy 
services on a reasonable cost basis, would be subject to them.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45154), we clarified 
that it was not our intent in the CY 2012 OPPS/ASC final rule with 
comment period to establish different requirements for CAHs and for 
OPPS hospitals for the same services. We clarified that the limited set 
of PT/SLP/OT services that are paid under the OPPS are subject to the 
supervision requirements in Sec.  410.27, whether they are furnished in 
OPPS hospitals or CAHs. The PT/SLP/OT services that are not paid under 
the OPPS and are paid instead at the applicable amount based on the 
MPFS are not subject to the supervision requirements in Sec.  410.27, 
whether they are furnished in OPPS hospitals or in CAHs.
    Comment: Commenters expressed appreciation and support for the 
clarification in the proposed rule. One commenter requested that CMS 
rescind the requirement of direct supervision for all PT/SLP/OT 
services, regardless of whether they are furnished as therapy services 
and paid at the applicable amount under the MPFS or are furnished as 
nontherapy services and paid under the OPPS.
    Response: Stakeholders may direct requests for changes in the 
minimum required level of supervision for therapeutic services, 
including therapy or other services that are hospital outpatient 
services, to the independent review process that we established for 
considering such requests in the CY 2012 OPPS/ASC final rule with 
comment period. The instructions for submitting a request are discussed 
in the CY 2012 final rule with comment period and are available on the 
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
    In this final rule with comment period, we are clarifying that the 
supervision and other requirements of the regulation at Sec.  410.27 
apply to facility services that are paid to hospitals under the OPPS 
and to these same services when they are furnished in CAHs and paid on 
a reasonable cost basis. In OPPS hospitals, the requirements of Sec.  
410.27 do not apply to professional services that are separately billed 
under the MPFS or to PT, SLP, and OT services that are billed by the 
hospital as therapy services and are paid at the applicable amount 
based on the MPFS. The requirements of Sec.  410.27 also do not apply 
to these same professional and PT, SLP, and OT services when they are 
furnished in CAHs.
    In OPPS hospitals, a small subset of ``sometimes therapy'' PT, SLP, 
and OT services are paid under the OPPS when they are not furnished as 
therapy, meaning not under a certified therapy plan of care. Because 
the supervision and other conditions of payment under Sec.  410.27 
apply to this subset of ``sometimes therapy'' services when they are 
furnished in OPPS hospitals as nontherapy services (because they are 
paid under the OPPS and not based on the MPFS), those conditions of 
payment also apply to this subset of ``sometimes therapy'' services 
when they are furnished as nontherapy in CAHs. When OPPS hospitals and 
CAHs furnish these services as therapy services (under a therapy plan 
of care by a qualified therapist), the conditions of payment under 
Sec.  410.27 do not apply because

[[Page 68425]]

OPPS hospitals are paid for these services based on the MPFS and not 
under the OPPS. As we did in the CY 2013 OPPS/ASC proposed rule, we are 
providing a list of the ``sometimes therapy'' services that may be paid 
under the OPPS in Table 46 below.
BILLING CODE 4120-20-P
[GRAPHIC] [TIFF OMITTED] TR15NO12.070

B. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals

    As we indicated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74371), we extended through CY 2012 the notice of 
nonenforcement of the requirement for direct supervision of outpatient 
therapeutic services furnished in CAHs and small rural hospitals having 
100 or fewer beds (available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_
overview.asp). We extended this enforcement instruction to our 
contractors for another year, through CY 2012, to allow time for the 
initiation of supervision reviews by the Advisory Panel on Hospital 
Outpatient Payment (the Panel), which began in early 2012 and are 
continuing in accordance with the provisions of the CY 2012 OPPS/ASC 
final rule with comment period.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45154), we requested 
that CAHs and small rural hospitals submit to CMS for potential 
evaluation by the Panel at its summer meeting any services for which 
they anticipate difficulty complying with the direct supervision 
standard in CY 2013. We stated that, in developing evaluation requests, 
hospitals should refer to the evaluation criteria that we finalized in 
the CY 2012 OPPS/ASC final rule with comment period. In order to give 
hospitals additional opportunity during CY 2012 to become familiar with 
the new submission and review process at the summer Panel meeting, and 
to allow hospitals time to meet the required supervision levels for the 
services that would be considered for CY 2013, we indicated that we 
anticipated extending the nonenforcement instruction one

[[Page 68426]]

additional year through CY 2013. We stated that we expect that CY 2013 
will be the final year for the instruction, regardless of the services 
reviewed by the Panel during its summer meeting.
    Comment: Most commenters supported an extension of the enforcement 
instruction another year through CY 2013, and reiterated requests made 
in previous years that we limit CAHs to the requirements in their 
staffing Conditions of Participation (CoPs) by making the definition of 
``direct supervision'' in Sec.  410.27 consistent with the CAH staffing 
CoPs. These CoPs require that a doctor of medicine or osteopathy, nurse 
practitioner, clinical nurse specialist, or physician assistant be 
available to furnish patient care services at all times the CAH 
operates (Sec.  485.631) and be available on site within 30 minutes 
(Sec.  485.618). They apply to all services that are furnished by a 
CAH. In contrast, for payment of most outpatient therapeutic services, 
under Sec.  410.27 the CAH (like all OPPS hospitals) must furnish 
direct supervision, meaning the supervising physician or appropriate 
nonphysician practitioner is immediately available to furnish 
assistance and direction for the duration of the service. The 
requirement in Sec.  410.27 does not apply to CAH inpatient services or 
to CAH outpatient diagnostic services.) Some commenters similarly 
requested that CMS require only general supervision in CAHs and small 
rural hospitals, meaning the services would be furnished under the 
supervising physician's or appropriate nonphysician practitioner's 
overall direction and control but he or she need not be physically 
present.
    One commenter stated that while the commenter understands the need 
to allow CAHs and small rural hospitals to become compliant with the 
recent clarifications regarding the outpatient supervision 
requirements, and while the commenter shares the concerns of these 
facilities regarding the available supply of certain types of 
physicians, the supervision requirements should be applied uniformly 
across all care settings for reasons of patient safety. In addition, 
several commenters offered suggestions for improving the subregulatory 
supervision review process.
    Response: We appreciate the suggestions for improving the 
supervision review process and will take them into consideration for 
future Panel meetings. Regarding the supervision requirements for 
payment of hospital and CAH outpatient services, we previously 
discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74362) that 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). As we indicated in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72000 through 
72005), we elected not to limit the CAHs to their CoPs or to exclude 
them from the direct supervision requirement for payment because we 
believe that Medicare should purchase outpatient services from CAHs and 
other hospitals that are of the same basic level of safety and quality. 
In addition, while CoPs apply to all services that a hospital or a CAH 
furnishes, the payment rule in Sec.  410.27 applies only to outpatient 
therapeutic services.
    Regarding the enforcement instruction, as we discussed in the CY 
2013 OPPS/ASC proposed rule, we will extend the enforcement instruction 
one additional year through CY 2013. This additional year, which we 
expect to be the final year of the extension, will provide additional 
opportunities for stakeholders to bring their issues to the Panel, and 
for the Panel to evaluate and provide us with recommendations on those 
issues.
    The Panel held its second meeting on supervision levels for 
outpatient therapeutic services in August 2012, and considered several 
stakeholder requests for a reduction in the minimum required level of 
supervision for certain services. These included observation services; 
administration of certain drugs and agents; and selected bladder, skin/
wound care, injection/infusion, intravenous and central venous access 
services. In accordance with the subregulatory review process finalized 
in the CY 2012 OPPS/ASC final rule with comment period, we are 
currently reviewing public comments on the agency's preliminary 
decisions regarding supervision levels for these services based upon 
the Panel's recommendations. We will issue our final decisions on these 
services prior to January 1, 2013 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

XI. Outpatient Status: Solicitation of Public Comments in the CY 2013 
OPPS/ASC Proposed Rule

A. Background

    Under section 402(a)(1)(A) of the Social Security Amendments of 
1967 (Pub. L. 90-248), the Secretary is permitted to engage in 
demonstration projects to determine whether changes in the methods of 
payment for health care and services under the Medicare program would 
increase the efficiency and economy of those services through the 
creation of incentives to those ends without adversely affecting the 
quality of such services. Under this statutory authority, CMS has 
implemented the Medicare Part A to Part B Rebilling (AB Rebilling) 
Demonstration, which allows participating hospitals to receive 90 
percent of the allowable Part B payment for Part A short-stay claims 
that are denied on the basis that the inpatient admission was not 
reasonable and necessary. Participating hospitals can rebill these 
denied Part A claims under Part B and be paid for additional Part B 
services than would usually be payable when an inpatient admission is 
deemed not reasonable and necessary. This demonstration is slated to 
last for 3 years, from CY 2012 through CY 2014.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45155 through 45157), 
we provided an update of the status of the demonstration. In addition, 
we solicited public comments on a related issue: potential policy 
changes we could make to improve clarity and consensus among providers, 
Medicare, and other stakeholders regarding the relationship between 
admission decisions and appropriate Medicare payment, such as when a 
Medicare beneficiary is appropriately admitted to the hospital as an 
inpatient and the cost to hospitals associated with making this 
decision.
    In the proposed rule, we discussed that when a Medicare beneficiary 
arrives at a hospital in need of medical or surgical care, the 
physician or other qualified practitioner must decide whether to admit 
the beneficiary for inpatient care or treat him or her as an 
outpatient. In some cases, when the physician admits the beneficiary 
and the hospital provides inpatient care, a Medicare claims review 
contractor, such as the Medicare Administrative Contractor (MAC), the 
Recovery Audit Contractor (RAC), or the Comprehensive Error Rate 
Testing (CERT) Contractor, determines that inpatient care was not 
reasonable and necessary under section 1862(a)(1)(A) of the Act and 
denies the hospital inpatient claim for payment. In these cases, under 
Medicare's longstanding policy, hospitals may rebill a separate 
inpatient claim for only a limited set of Part B services, referred to 
as ``Inpatient Part B'' or ``Part B Only'' services (Section 10, 
Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-02)). The 
hospital also may bill Medicare Part B for any outpatient services that 
were provided in the 3-day payment window prior to the admission 
(Section 10.12, Chapter 4 of the Medicare Claims Processing Manual

[[Page 68427]]

(Pub. 100-04)). These claims are subject to the timely filing 
restrictions.
    Once a Medicare beneficiary is discharged from the hospital, the 
hospital cannot change the beneficiary's patient status from inpatient 
to outpatient and then submit an outpatient claim because of the 
potentially significant impact on beneficiary liability. As we discuss 
below, hospital inpatients have significantly different Medicare 
benefits and liabilities than hospital outpatients, notably coverage of 
self-administered drugs and, for patients who are admitted to the 
hospital as inpatients for 3 or more consecutive calendar days, 
Medicare coverage of postacute SNF care (to the extent all other SNF 
coverage requirements are met). To enable beneficiaries to make 
informed financial and other decisions prior to hospital discharge, 
Medicare allows the hospital to change a beneficiary's inpatient status 
to outpatient (using condition code 44 on an outpatient claim) and bill 
all medically necessary services that it provided to Part B as 
outpatient services, but only if the change in patient status is made 
prior to discharge, the hospital has not submitted a Medicare claim for 
the admission, and both the practitioner responsible for the care of 
the patient and the utilization review committee concur with the 
decision (Section 50.3, Chapter 1 of the Medicare Claims Processing 
Manual (Pub. 100-04); MLN Matters article SE0622, Clarification of 
Medicare Payment Policy When Inpatient Admission Is Determined Not To 
Be Medically Necessary, Including the Use of Condition Code 44: 
``Inpatient Admission Changed to Outpatient,'' September 2004). 
Medicare beneficiaries are provided with similar protections, which are 
outlined in the Hospital Conditions of Participation (CoPs). For 
example, in accordance with 42 CFR 482.13(b), Medicare beneficiaries 
have the right to participate in the development and implementation of 
their plan of care and treatment, to make informed decisions, and to 
accept or refuse treatment. Informed discharge planning between the 
patient and the physician is important for patient autonomy and for 
achieving efficient outcomes.
    In the proposed rule, we stated that while the limited scope of 
allowed rebilling for ``Inpatient Part B'' services protects Medicare 
beneficiaries and provides disincentives for hospitals to admit 
patients inappropriately, hospitals have expressed concern that this 
policy provides inadequate payment for resources that they have 
expended to take care of the beneficiary in need of medically necessary 
hospital care, although not necessarily at the level of inpatient care. 
A significant proportion of the Medicare CERT error rate consists of 
short (1- or 2-day) stays where the beneficiary received medically 
necessary services that the CERT contractor determined should have been 
provided as outpatient services and not as inpatient services. 
Hospitals have indicated that often they do not have the necessary 
staff (for example, utilization review (UR) staff or case managers) on 
hand after normal business hours to confirm the physician's decision to 
admit the beneficiary. Thus, for a short-stay admission, the hospital 
may be unable to timely review and change a beneficiary's patient 
status from inpatient to outpatient prior to discharge in accordance 
with the condition code 44 requirements.
    In the proposed rule, we indicated that we have heard from various 
stakeholders that hospitals appear to be responding to the financial 
risk of admitting Medicare beneficiaries for inpatient stays that may 
later be denied upon contractor review by electing to treat 
beneficiaries as outpatients receiving observation services, often for 
longer periods of time, rather than admitting them as inpatients. In 
recent years, the number of cases of Medicare beneficiaries receiving 
observation services for more than 48 hours, while still small, has 
increased from approximately 3 percent in 2006 to approximately 7.5 
percent in 2010. This trend is concerning because of its effect on 
Medicare beneficiaries. There could be significant financial 
implications for Medicare beneficiaries of being treated as outpatients 
rather than being admitted as inpatients, of which CMS has informed 
beneficiaries.\1\ For instance, if a beneficiary is admitted as an 
inpatient, the beneficiary pays a one-time deductible for all hospital 
services provided during the first 60 days in the hospital. As a 
hospital inpatient, the beneficiary would not pay for self-administered 
drugs or have any copayments for the first 60 days; whereas if the 
beneficiary is treated as an outpatient, the beneficiary has a 
copayment for each individual outpatient hospital service received. 
While the Medicare copayment for a single outpatient hospital service 
cannot be more than the inpatient hospital deductible, the 
beneficiary's total copayment for all outpatient services received may 
be more than the inpatient hospital deductible. In addition, usually 
self-administered drugs provided in an outpatient setting are not 
covered by Medicare Part B and hospitals may charge the beneficiary for 
them. Also, the time spent in the hospital as an outpatient is not 
counted towards the 3-day qualifying inpatient stay that section 
1861(i) of the Act requires for Medicare Part A coverage of postacute 
care in a SNF.
---------------------------------------------------------------------------

    \1\ CMS Pamphlets: ``Are You a Hospital Inpatient or Outpatient? 
If You Have Medicare--Ask!'', CMS Product No. 11435, Revised, 
February 2011; ``How Medicare Covers Self-Administered Drugs Given 
in Hospital Outpatient Settings,'' CMS Product No. 11333, Revised, 
February 2011.
---------------------------------------------------------------------------

    As a result of these concerns related to the impact of extended 
time as an outpatient on Medicare beneficiaries, the CERT error rate, 
and the impact on hospitals of a later inpatient denial, CMS initiated 
the AB Rebilling Demonstration for a 3-year period for hospitals. This 
demonstration is voluntary and allows participating hospitals to rebill 
outside of the usual timely filing requirements for services relating 
to all inpatient short-stay claims that are denied for lack of medical 
necessity because the inpatient admission was not medically necessary. 
Under the demonstration, hospitals may receive 90 percent of the 
Medicare allowable payment for all Part B services that would have been 
medically necessary had the beneficiaries originally been treated as 
outpatients and not admitted as inpatients. We note that hospitals 
cannot rebill for observation services, which, by definition, must be 
ordered prospectively to determine whether an inpatient admission is 
necessary (Chapter 1, Section 50.3.2 of the Medicare Claims Processing 
Manual (Pub. 100-04); FAQ 2723, available on the CMS Web site at 
https://questions.cms.gov/faq.php?id=5005&faqId=2723). Hospitals that 
participate in the AB Rebilling Demonstration will waive any appeal 
rights associated with the denied inpatient claims eligible for 
rebilling. Under the demonstration, Medicare beneficiaries are 
protected from any adverse impacts of expanded rebilling. For example, 
hospitals cannot bill beneficiaries for self-administered drugs or 
additional cost-sharing that would be required under Medicare Part B. 
The demonstration will inform us on the impact that expanded rebilling 
may have on the Medicare Trust Funds, beneficiaries, hospitals, and the 
CERT error rate. The demonstration is designed to evaluate potential 
impacts of expanded rebilling on admission and utilization patterns, 
including whether expanded rebilling would reduce hospitals' incentive 
to make appropriate initial admission decisions.
    Hospitals expressed significant interest in the AB Rebilling

[[Page 68428]]

Demonstration, which began on January 1, 2012. The demonstration was 
approved to accept up to 380 hospitals. In order to participate in the 
demonstration, a hospital must not be receiving periodic interim 
payments from CMS, and must be a Medicare-participating hospital as 
defined by section 1886(d) of the Act, a category that includes all 
hospitals paid under the Medicare IPPS, but excludes hospitals paid 
under the IPF PPS, the IRF PPS, and the LTCH PPS, and cancer hospitals, 
CAHs, and children's hospitals.
    The hospitals that volunteered to participate and were accepted in 
the demonstration began rebilling in early spring of 2012. More 
information about the demonstration is available on the CMS Web site 
at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/Part_A_to_Part_B_Rebilling_Demonstration.html. We 
stated in the proposed rule that we plan to conduct an evaluation of 
the demonstration during and after its completion.

B. Summary of Public Comments Received

    While we are implementing the AB Rebilling Demonstration, we also 
solicited public comments in the CY 2013 OPPS/ASC proposed rule on 
other actions that we could potentially undertake to address 
stakeholders' concerns. In the proposed rule, we stated that there may 
be several ways of approaching the multifaceted issues that have been 
raised in recent months around a beneficiary's patient status and 
Medicare hospital payment. Given the complexity of this topic, we 
sought public perspectives on potential options the agency might adopt 
to provide more clarity and consensus regarding patient status for 
purposes of Medicare payment. We invited commenters to draw on their 
knowledge of these issues to offer any suggestions that they believe 
would be most helpful to them in addressing the current challenges, 
while keeping in mind the various impacts in terms of recently observed 
increases in the length of time for which patients receive observation 
services, beneficiary liability, Medicare spending, and the feasibility 
of implementation of any suggested changes for both the Medicare 
program and hospitals.
    We received approximately 350 public comments in response to our 
solicitation in the CY 2013 OPPS/ASC proposed rule from hospitals and 
hospital associations, physician associations, rehabilitative and long-
term care facilities, beneficiaries, beneficiary advocacy 
organizations, Quality Improvement Organizations (QIOs), organizations 
specializing in medical necessity review, and other interested parties. 
The commenters provided significant input, and the majority requested 
that CMS not implement a comprehensive solution or set of solutions 
regarding patient status in the CY 2013 OPPS/ASC final rule with 
comment period. Instead, many commenters recommended that CMS develop 
an informed course of action in the upcoming months through a formal, 
ongoing dialogue with all interested stakeholders (for example, through 
open door forums or a task force). A few commenters recommended a more 
immediate course of action to limit beneficiary liability for SNF care 
and for the difference in beneficiary cost-sharing between hospital 
inpatient and outpatient services.
    In this section, we summarize the feedback we received in response 
to our solicitation of public comments in the CY 2013 OPPS/ASC proposed 
rule. We are not providing responses to the public comments we received 
because in the proposed rule we strictly solicited public comments, and 
did not propose any changes in policy. We will consider the feedback we 
received from the public as we move forward. We structured our summary 
of the public comments around key suggestions that we have heard from 
stakeholders in the following areas: (1) Part A to Part B Rebilling; 
(2) Clarifying Current Admission Instructions or Establishing Specified 
Clinical Criteria; (3) Hospital Utilization Review; (4) Prior 
Authorization; (5) Time-Based Criteria for Inpatient Admission; (6) 
Payment Alignment; and (7) Public Comments on Other Topics (including 
Rules for External Review of Inpatient Claims, Improving Beneficiary 
Protections, and Revising the Qualifying Criteria for SNF Coverage). We 
summarize the public comments below in the context of each of these 
suggestions.
1. Part A to Part B Rebilling
    Some stakeholders have suggested that, when a Part A inpatient 
claim is denied because an inpatient level of care was not reasonable 
and necessary although some medical care was necessary, CMS allow 
hospitals to rebill Medicare and receive payment for all Part B 
services that would have been payable had the patient originally been 
treated as an outpatient rather than an inpatient. As we describe 
above, the AB Rebilling Demonstration allows participating providers to 
receive 90 percent of the allowable payment amount for such services 
(except observation services) as Part B Inpatient services. Because 
establishing such a policy on a national basis could result in 
increases in Medicare expenditures and could affect beneficiary 
liability for hospital care, CMS implemented the demonstration to 
assess Medicare spending and other outcomes while protecting 
beneficiaries from any increase in liability.
    Comments: Commenters expressed some support for the AB Rebilling 
Demonstration as an important step in determining what types of policy 
clarifications are needed. The commenters noted that the beneficiary 
protections against changes in liability are a key benefit of the 
demonstration. While some commenters expressed appreciation for the 
opportunity for increased Part B payment to hospitals, they disagreed 
with the demonstration's requirement to forego appeals of the denied 
inpatient claims eligible for rebilling. One commenter requested that 
CMS provide interim reports to stakeholders describing the 
demonstration's evaluation criteria and its progress towards meeting 
its goals.
    Some commenters recommended that CMS establish a national policy 
allowing the rebilling of all Part B services that would have been 
payable if the patient had been treated as an outpatient rather than 
admitted as an inpatient because, according to the commenters, 
outpatient and inpatient services are sometimes indistinguishable. The 
commenters believed that the Medicare statute does not preclude such a 
policy and that, due to the recent focus on claims audit and review, 
hospitals would have no incentive to admit beneficiaries 
inappropriately in response to a more generous rebilling policy. 
However, other commenters expressed concern that there would be such an 
incentive. They indicated that allowing expanded rebilling with a 
change in bill type from a Part A claim to a Part B claim would remove 
the incentive to bill accurately, as hospitals would file more 
inpatient claims under Part A in order to receive the (typically 
higher) Diagnosis-Related Group (DRG) payment under the IPPS, knowing 
that, in the event of the inpatient claim being denied, they could 
rebill under Part B and receive the same (typically lower) OPPS payment 
they would have received if they had billed an outpatient claim 
initially.
    Several commenters suggested that allowing full Part B rebilling 
would negate and undermine the designs of the OPPS and the IPPS. The 
commenters stated that OPPS payments are established to compensate 
hospitals for the care provided in the outpatient setting, and that 
they act as a natural

[[Page 68429]]

complement to the IPPS. They indicated that making the two payment 
systems retroactively interchangeable would result in the payment rates 
calculated under each system being miscalibrated and failing to adjust 
appropriately over time to migration of services from the inpatient to 
the outpatient setting. In addition, according to the commenters, a 
national policy allowing full Part B rebilling would provide an unfair 
market advantage to providers who make inappropriate inpatient 
admission determinations over those who do not. The commenters reasoned 
that Medicare's current policies are well-founded, longstanding, widely 
known and largely followed, and that the current challenges do not 
warrant the extensive resources that full rebilling and other policy 
changes would entail.
    Some commenters indicated that a national policy allowing full Part 
B rebilling following the denial of an inpatient claim would have 
limited utility because typically the timely filing period has lapsed 
by the time the inpatient claim is denied, providers could not appeal 
the inpatient claim, and providers would not receive the Part A payment 
that they seek. In addition, according to the commenters, the manual 
process of recoding the inpatient claim as an outpatient claim is 
costly. A few commenters suggested that CMS allow rebilling of all Part 
B services but apply a penalty by limiting payment to a discounted 
amount. Other commenters were concerned about the significant financial 
burden of Part B rebilling for beneficiaries who have Part A coverage 
but do not have coverage for Part B services.
    Some commenters also suggested that CMS allow hospitals to change a 
beneficiary's inpatient status to outpatient after discharge in order 
to submit a Part B outpatient claim either prior to or after submitting 
an inpatient claim. Other commenters recommended that CMS extend the 
timely filing deadline to 1 year from the date of service or 6 months 
to 1 year from the date of the inpatient claim denial, whichever is 
later. Some commenters suggested that CMS extend the timely filing 
deadline only for claims that are denied after a significant amount of 
time has passed since the date of service.
    Commenters suggested mechanisms to protect beneficiaries from 
increases in their liability associated with any of these policy 
changes. For example, several commenters believed that hospitals could 
waive any increases in beneficiary cost-sharing or that CMS could 
provide coverage for self-administered drugs in the outpatient 
department, cap the sum of outpatient services at the inpatient 
deductible, or establish annual maximum out-of-pocket costs. Many 
commenters also recommended the modernization and reform of the SNF 
qualification criteria (we describe these comments further below).
2. Clarifying Current Admission Instructions or Establishing Specified 
Clinical Criteria
    In recent months, we have heard from some stakeholders who 
suggested a need for us to clarify our current instructions regarding 
the circumstances under which Medicare will pay for an admission in 
order to improve hospitals' ability to make appropriate admission 
decisions. Stakeholders have suggested the establishment of more 
specific clinical criteria for admission and payment such as adopting 
specific clinical measures because, according to the commenters, the 
current criteria are not clear-cut. We have issued longstanding 
instructions that the need for admission is a complex medical judgment 
that depends upon multiple factors, including an expectation that the 
beneficiary will require an overnight stay in the hospital or need more 
than 24 hours of care, the patient's medical history and current 
medical needs, the types of facilities available to inpatients and to 
outpatients, the hospital's policies, the relative appropriateness of 
outpatient and inpatient treatment, and other factors (Section 10, 
Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-02)). We 
stated in the CY 2013 OPPS/ASC proposed rule that we are interested in 
receiving public comments and suggestions regarding whether and how we 
might improve our current instructions and clarify the application of 
Medicare payment policies for both hospitals and physicians, keeping in 
mind the challenges of implementing national standards that are broad 
enough to contemplate the range of clinical scenarios but prescriptive 
enough to provide greater clarity.
    Comments: The public comments reflected a widespread understanding 
and agreement with CMS' guidance that the inpatient admission decision 
is ultimately a complex medical judgment that involves the 
consideration of many factors. Many commenters indicated that if 
Medicare adopted more specific guidelines or criteria, the clinical 
judgment of the treating physician should have primacy. A recurrent 
comment was that this judgment would always be necessary in certain 
cases, and should take precedence over other criteria that may be used. 
Many commenters were concerned that decision-making tools (such as 
Interqual Clinical Decision Support or the Milliman Care Guidelines, 
alternatively described by commenters as commercial or proprietary 
screening tools), which are designed for use as guidelines rather than 
prescriptive tools, do not take into account patient ``risk'' and may 
undermine the physician's judgment.
    In addition, many commenters believed that any selected criteria 
must apply equally to Medicare contractors, hospitals, and others and 
should match the audit review criteria. Many commenters expressed 
concern that Medicare's claims review contractors inappropriately 
disregard the physician's judgment, and do not employ a physician in 
making their determinations. (We describe the comments on external 
review criteria in further detail below). One commenter indicated that 
commercial screening tools do not always comport with Medicare rules. 
The commenter provided as an example that one popular tool fails to 
distinguish scheduled replacement pacemaker procedures from the 
placement of a new pacemaker on an emergency basis. Some of the public 
comments received from physicians identified what they characterized as 
significant problems with the accuracy, validity, and transparency of 
proprietary screening tools, including use of appropriateness standards 
that are not accepted by the relevant physician specialties and failure 
to follow Medicare payment policy.
    Nevertheless, many commenters expressed support for various types 
of national criteria. These criteria included evidence-based guidelines 
such as the Agency for Healthcare Research and Quality's National 
Clearinghouse Guidelines or other rules developed in consultation with 
physician societies. Some commenters supported the use of specific 
proprietary screening tools such as Interqual Clinical Decision Support 
or the Milliman Care Guidelines. Other commenters favored more 
transparent criteria similar to the Correct Coding Initiative (CCI) 
that are adapted for Medicare and are developed using physician input. 
One commenter indicated that the CCI edits have proven more cost-
effective than proprietary tools. A few commenters suggested that use 
of the Program for Evaluating Payment Patterns Electronic Report 
(PEPPER) reports, which provide hospital-specific Medicare data 
statistics for discharges that are vulnerable to improper payments, 
would allow for continuous improvement in utilization and coding. One 
commenter noted that it would be useful to choose the set of

[[Page 68430]]

criteria that are used by Medicaid and other payers, in order to 
facilitate uniform documentation that supports the specific criteria 
required by the various screening tools.
    Some commenters pointed out process improvements that hospitals and 
physicians should make, regardless of whether CMS adopts specific 
clinical criteria or issues more specific admission instructions. 
Several commenters stated that physicians should improve their 
documentation in support of the patient status that they order, and 
that sometimes it is not clear whether the physician ordered inpatient 
admission or outpatient observation services. The commenters suggested 
that physicians document the need for admission in a standardized field 
on electronic health records or elsewhere. Other commenters emphasized 
the importance of the role of the hospital in selecting patient status 
for purposes of billing because they believed that the physician is 
focused on ordering the necessary care and, for good reason according 
to the commenters, is not occupied with the nuances of patient status 
designation for payment purposes.
3. Hospital Utilization Review
    In the proposed rule, we asked commenters to consider the 
responsibility of hospitals to utilize all of the tools necessary to 
make appropriate initial admission decisions. We stated that we believe 
this is important because some hospitals have indicated that simply 
having case management and UR staff available to assist in decision-
making outside of regular business hours may improve the accuracy of 
admission decisions.
    Comments: Several commenters stated that some hospitals do not have 
UR staff on hand outside normal business hours or on weekends to assist 
with patient status determinations, and that this is especially 
problematic for patients with short inpatient stays. The commenters 
expressed varying opinions on hospital UR. Some commenters recognized 
that Medicare's regulations require the collaboration of the treating 
physician and the hospital's UR staff in making the appropriate patient 
status determination, and believed that neither party is dispensable. 
Several commenters indicated that 24-hour, 7 days a week availability 
of hospital UR and/or case management staff should be a hospital best 
practice, as it assists in making appropriate admission determinations 
for short-stay cases where the need for admission is unclear. Several 
commenters opined that Medicare should require the availability of 
hospital UR on a 24-hour/7 days a week basis. One commenter stated that 
CMS should develop a certification process of ``deeming'' acceptable 
individual hospital UR processes, using a standard of 24-hour/7 days a 
week availability, confirmation by an external physician, and adherence 
to the hospital CoPs. Another commenter recommended the use of a 
condition code on claims to track whether UR confirmation of 
appropriate patient status is associated with fewer claim denials. Some 
commenters preferred reinforcement of hospital UR over the institution 
of external guidelines for admission.
    However, several commenters indicated that Medicare's current UR 
requirements in the CoPs should be eliminated because of the 
administrative cost to the hospital, or because they do not result in 
more accurate admission determinations that are commensurate with their 
associated cost. One association believed that hospital UR will have 
limited utility as long as admission criteria are unclear. Yet another 
physician professional association stated that hospitals should be 
required to submit their claims based on the admitting physician's 
judgment rather than the opinion of another physician in the hospital.
4. Prior Authorization
    In our proposed rule, we also invited public comments on the 
potential use of prior authorization for payment of a hospital 
inpatient admission.
    Comments: Many commenters believed that the concept of using prior 
authorization on a targeted basis was promising and worthy of 
consideration. To facilitate administrative feasibility, many 
commenters suggested that it be used selectively for elective 
procedures, specific services that are not designated as inpatient-only 
services under the OPPS, or conditions that are at high-risk for 
inappropriate inpatient admission. The commenters were concerned that 
mandatory prior authorization could become a barrier to the provision 
of urgent care, and some recommended that CMS exclude patients in the 
emergency department or those receiving critical care. Alternatively, 
the commenters suggested that prior authorization be used as an adjunct 
method for cases not meeting the admission criteria of commercial 
screening tools.
    Several commenters believed that prior authorization is feasible 
because hospitals already have an infrastructure for obtaining prior 
authorization for commercial insurers. The commenters suggested that 
CMS could similarly redirect current resources towards a prior 
authorization program. Several commenters suggested an online tool for 
prior authorization.
    A few commenters opposed prior authorization altogether based on 
administrative burden, and many commenters believed that it would need 
to result in guaranteed payment in order to be useful. One commenter 
observed that retrospective review is still required in many cases when 
prior authorizations are obtained from commercial insurers, due to 
incomplete or inaccurate prior authorization information and changes in 
what was planned or expected when the initial clinical information was 
submitted. The commenter stated that for this reason, commercial 
insurers reserve the right to perform, and often do perform, 
retrospective audits based on the completed medical record. In 
addition, the commenter stated that the CERT error rate evidences that 
the vast majority of providers understand and follow the current 
Medicare statutes and rules. Thus, according to the commenter, 
requiring prior authorization will add significant cost to the program 
without eliminating the inpatient error rate, at a time when the 
Medicare Trust Fund is at risk.
5. Time-Based Criteria for Inpatient Admission
    In the proposed rule, we stated that some stakeholders have 
suggested that CMS has authority to define whether a patient is an 
inpatient or an outpatient. They believed that it may be permissible 
and appropriate for us to redefine ``inpatient'' using parameters in 
addition to medical necessity and a physician order that we currently 
use, such as length of stay (LOS) or other variables. For example, 
currently a beneficiary's anticipated LOS at the hospital may be a 
factor in determining whether the beneficiary should be admitted to the 
hospital, but is not the only factor. We have issued instructions that 
state that, typically, the decision to admit should be made within 24 
to 48 hours, and that expectation of an overnight stay may be a factor 
in the admission decision (Section 20.6, Chapter 6 and Section 10, 
Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-02)). 
However, we stated in the proposed rule that we are interested in 
hearing from stakeholders regarding whether it may be appropriate and 
useful to establish a point in time after which the encounter becomes 
an inpatient stay if the beneficiary is still receiving medically 
necessary care to treat or evaluate his or her condition. We indicated 
that such a policy could

[[Page 68431]]

potentially limit the amount of time that a beneficiary is treated as 
an outpatient receiving observation services before the hospital 
encounter becomes inpatient, provided the additional time in the 
hospital is medically necessary. Currently, we do not specify a limit 
on the time a beneficiary may be an outpatient receiving observation 
services, although, in the past, we have limited payment of observation 
services to a specific timeframe, such as 24 or 48 hours. Some in the 
hospital community have indicated that it may be helpful for the agency 
to establish more specific criteria for patient status in terms of how 
many hours the beneficiary is in the hospital, or to provide a limit on 
how long a beneficiary receives observation services as an outpatient. 
We invited public comments regarding whether there would be more 
clarity regarding patient status under such alternative approaches to 
defining inpatient status. We also noted that it is important for CMS 
to maintain its ability to audit and otherwise carry out its statutory 
obligation to ensure that the Medicare program pays only for reasonable 
and necessary care. We asked that commenters consider opportunities for 
inappropriately taking advantage of the Medicare system that time-based 
and other changes in criteria for patient status may create.
    Comments: Some commenters expressed interest and support for 
criteria that are strictly time-based, based largely on a primary goal 
of eliminating extended observation cases. These commenters supported 
defining a patient as an inpatient after 24, 48, or 72 hours, and noted 
that such a policy could improve the problem of beneficiaries not 
qualifying for needed SNF care due to their outpatient status. One 
commenter believed that a 48-hour benchmark made sense because it is 
consistent with the activities that are required under the CoPs within 
the first 48 hours of a hospital stay. Another commenter suggested 
establishing a second decision point during the observation period, 
when the physician must reevaluate whether the patient needs to be 
admitted as an inpatient. However, the commenter noted that this may 
increase administrative complexity without commensurate benefit.
    Some commenters representing the hospital community believed that 
patients who have been actively monitored for more than 24 to 48 hours 
as outpatients under observation and cannot be safely discharged are 
likely sufficiently complex cases that would benefit from being 
admitted as an inpatient, regardless of whether they technically meet 
inpatient admission criteria. The commenters posited that observation 
services are more comparable to inpatient care than they are to other 
outpatient services, and that this fact would be more accurately 
reflected by a time-based admission policy. A few commenters suggested 
that CMS limit observation care to 24 hours, with exceptions for 
physician discretion. Several commenters suggested that CMS clarify the 
definition and parameters of outpatient observation services to help 
stakeholders determine when it is appropriate to furnish observation 
services and for how long. Another commenter suggested that CMS limit a 
patient's time in observation by requiring additional assessments and 
increased documentation of involvement by the physician.
    In contrast, many commenters expressed reservations about a time-
based approach. Some commenters posited that inpatient and outpatient 
services are different in nature. One physician association stated that 
the primary difference between the inpatient and outpatient setting is 
the availability of nurses (and related staff) and advanced technology 
in the inpatient setting, which accounts for the added cost of 
inpatient care. The commenter recommended structuring an inpatient DRG 
payment around short-stay admissions where the physician believes that 
these added components of care are necessary. Other commenters were 
concerned that under a time-based policy, the level of service would no 
longer be taken into account in hospital payment and that such a policy 
would inappropriately negate the need for medical necessity review. 
Some commenters stated that the medical review would simply shift to 
assessing the necessity of the patient's LOS as an outpatient or 
whether the patient needed continuing hospital care at the time they 
became an inpatient. Some commenters believed that a time-based policy 
would result in additional short inpatient stays than under current 
Medicare guidance. Therefore, these commenters believed that hospitals 
would continue to be subject to audit risk and that short-stay audits 
would simply increase.
    Another commenter expressed concern that hospitals may be 
substituting outpatient observation services for inpatient admissions 
in order to maximize their outpatient drug revenues under the Federal 
340B Drug Pricing Program. The commenter recommended that CMS modify 
the definitions of ``outpatient'' and ``inpatient'' to explicitly 
clarify that a patient's status determination should be based solely on 
appropriate clinical judgment, and should not be influenced by 
financial motives under programs such as the 340B Drug Pricing Program.
    Some commenters opposed time-based rules because, according to the 
commenters, it would undermine the judgment of the treating physician. 
Other commenters noted that the absence of objective clinical criteria 
for choosing a timeframe would render time-based criteria for admission 
arbitrary. Several commenters opposed limiting observation services to 
24 hours because hospitals often need more time (particularly up to 48 
hours) to evaluate diagnostic testing and develop the right treatment 
plan. They noted that practice patterns vary widely nationally and 
among facilities in the same region. Other commenters were concerned 
that a policy of never counting certain days as inpatient days could 
actually reduce beneficiary access to SNF care. Other commenters 
believed that a time-based policy would need refinement around issues 
like requirement of a physician order for inpatient admission.
    Several commenters opposed time-based criteria because such 
criteria may conflict with the provision of inpatient surgical care for 
patients who require only short admissions. The commenters pointed out 
that such a policy could conflict with Medicare's inpatient only list, 
and that as the standard of practice evolves to enable longer inpatient 
services to be furnished during short (1- or 2-day) inpatient stays, 
those services would no longer qualify as inpatient services. One 
commenter stated that there are some procedures that are so inherently 
complex that they may be performed only on an inpatient basis, 
regardless of how long (or short) the time was that the patient spent 
in the hospital. The commenter stated that establishing a bright-line 
time rule could create a situation whereby these services could be 
denied solely on the basis of the time spent in the hospital while 
ignoring the level of service required for subjecting a patient to an 
inherently risky procedure. The commenter expressed concern that CMS 
might require that all patients, regardless of clinical presentation, 
first undergo a period of 48 hours of observation before being admitted 
as inpatients to the hospital, despite the fact that their medical 
condition and treatment plan may be wholly consistent with an inpatient 
admission upon presentation to the hospital.
    Several commenters recommended that rather than limiting the 
timeframe for observation services, observation care should be 
furnished in dedicated observation units in emergency

[[Page 68432]]

departments rather than on floor units. They cited studies showing that 
the dedicated units save costs compared to inpatient care and 
demonstrate shorter timeframes than the floor units for diagnosing or 
discharging.
6. Payment Alignment
    In the proposed rule, we asked commenters to consider how aligning 
payment rates more closely with the resources expended by a hospital 
when providing outpatient care versus inpatient care of short duration 
might reduce payment disparities and influence financial incentives and 
disincentives to admit.
    Comments: Commenters expressed significant interest in various 
means of improving the alignment of payment for what they termed 
equivalent outpatient and short inpatient hospital stays. Most of the 
commenters who supported payment alignment suggested developing a DRG 
for short inpatient stays, although several commenters recommended an 
expanded outpatient APC payment in addition to or in lieu of a short-
stay DRG. Some commenters suggested basing the payment for short-stay 
inpatient admissions on a percentage of the related DRG by mean LOS. 
For example, if the mean LOS for a given DRG is 3 days, then the 
hospital would be paid one-third of that DRG for an inpatient admission 
with a 1-day stay. Several commenters suggested a short-stay outlier 
policy similar to the LTCH PPS, or a policy similar to the IPPS 
transfer policy. Other commenters more broadly suggested developing a 
resource-based payment structure specifically for short-stay, lower 
acuity admissions.
    Some commenters noted, however, that aligning payment rates would 
reduce but not eliminate the financial risk of claim denial. According 
to the commenters, a payment alignment approach would not eliminate the 
potential for continued use of observation care over inpatient 
admission. One commenter asserted that the resources expended by a 
hospital for inpatient and outpatient care are already aligned when the 
care is billed appropriately.
7. Public Comments on Other Topics
    We received a number of public comments on other related issues.
a. Rules for the External Review of Inpatient Claims
    Comments: Many commenters expressed concerns about the criteria 
that are used by Medicare's contractors to determine the medical 
necessity of hospital inpatient admissions. The commenters were 
concerned that the review criteria being utilized by contractors do not 
match the admission criteria set forth in Medicare's guidance. In 
particular, according to the commenters, contractors are not employing 
physicians in making their medical necessity determinations, even 
though Medicare instructs that the admission decision is a complex 
medical judgment that involves forecasting a potential (not definite) 
need for an overnight stay or more than 24 hours of hospital care, or 
the risk of harm to the patient if not admitted (predictability of an 
adverse event). The commenters asserted that, as a result, claims 
reviewers inappropriately base their judgment on information that was 
not predictable or available to the physician at the time of admission.
    Many commenters recommended that CMS increase its oversight of the 
Agency's medical review contractors, and ensure that its review rules 
are being followed. Commenters asked that CMS require all review 
contractors to use the same criteria to determine medical necessity 
that physicians and hospitals are required to use in making the 
inpatient admission decision; to use a physician reviewer in accordance 
with the QIO claim review standard, or to consult with the treating 
physician or a physician in the same specialty as the admitting 
physician; and to provide justification to the treating physician in 
support of a claim denial. According to the commenters, the review 
criteria that are used should apply uniformly to Medicare contractors, 
hospitals, and others.
    Several commenters indicated that physician payment for 
professional services should be denied whenever inpatient hospital 
payment is denied, due to the role of the physician in the admission 
decision. In contrast, some physician commenters were concerned that 
they already are often inappropriately at risk for denial of their Part 
B claim when a hospital inpatient claim is denied, or when a hospital 
changes a patient's status to outpatient without their knowledge such 
that the place of service on the physician claim does not match that 
claimed by the hospital. They stated that, in some cases, the hospital 
does not bill Medicare, so there is no companion claim at all. 
Similarly, some physicians expressed concern that hospitals use ``black 
box'' proprietary tools to identify allegedly inappropriate admissions 
and change the patient's status to outpatient without the knowledge of 
the patient or the physician. These commenters also expressed concern 
for any adverse impact on beneficiary liability.
b. Improving Beneficiary Protections
    Comments: Many commenters suggested means of improving beneficiary 
protections against unforeseen changes in his or her liability. These 
included providing Medicare coverage for self-administered drugs in the 
hospital outpatient department, waiving beneficiary coinsurance, 
capping the sum of outpatient services at the inpatient deductible, or 
establishing annual maximum out-of-pocket costs. Some commenters 
suggested that Medicare clarify and strengthen beneficiary notification 
and appeal rights regarding changes in patient status and the receipt 
of observation care. For example, according to the commenters, Medicare 
should require a straightforward explanation to beneficiaries of the 
cost-sharing implications of being an outpatient receiving observation 
services compared to being an inpatient. One QIO noted that as part of 
their case review activities, QIOs review beneficiary appeals of 
inpatient hospital discharges to assure that patients are medically 
ready to move to the next level of care. The QIO believed that if a 
beneficiary receives only outpatient observation services and is not an 
inpatient, he or she has no right to appeal his or her discharge from 
the hospital to the QIO. The QIO stated that it often receives 
complaints from beneficiaries who believe they are being discharged 
prematurely, only to find out that the QIO cannot review that care 
because the hospital classified the stay as observation rather than 
inpatient.
    Some commenters suggested means of penalizing hospitals for 
inappropriate admission patterns. They provided examples such as 
developing quality measures with payment penalties to identify 
instances of inappropriate use of observation care for patients meeting 
inpatient admission criteria, or counting time spent receiving 
observation services as inpatient time for the purposes of hospital 
readmission penalties. Other commenters recommended improving physician 
education regarding the beneficiary liabilities that are associated 
with patient status to facilitate patient status determinations that 
take beneficiary cost-sharing into account.
c. Revising the Qualifying Criteria for Skilled Nursing Facility (SNF) 
Coverage
    Comments: Many commenters recommended that Congress and/or CMS 
modernize and revise the SNF qualification rules. Many beneficiaries, 
beneficiary representatives, SNFs, and others requested that CMS count 
the

[[Page 68433]]

time a beneficiary spends as an outpatient receiving observation 
services towards the 3-day hospital inpatient stay that is required for 
coverage of SNF care. Many commenters indicated that the statutory 
time-based rule that requires a beneficiary to have a 3-day inpatient 
hospital stay in order to qualify for SNF care is obsolete, given the 
advances in medical care, the trend towards reduced LOS, and the 
migration of services from inpatient to outpatient over the course of 
the Medicare program's history. These commenters recommended that this 
rule be replaced with clinically meaningful criteria that are not time-
based or based on patient status.
    A few commenters asserted that CMS could use its statutory 
authority under section 1812(f) of the Act (as enacted by section 123 
of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-
248) to waive the 3-day qualification rule. Some commenters asserted 
that the criteria for using this authority would be met, namely that 
there would be no increase in associated costs to the Medicare program 
and that the acute nature of the SNF benefit would be maintained. The 
Act provides that the Secretary shall provide for coverage of extended 
care services which are not post-hospital extended care services at 
such time and for so long as the Secretary determines that the 
inclusion of such services will not result in any increase in the total 
payments made under Title XVIII, and will not alter the acute care 
nature of the SNF benefit. Other commenters believed that new statutory 
authority would be required to change the SNF criteria, and they 
expressed their support for bills they stated have been introduced in 
the Congress to count time in observation as inpatient time for 
purposes of SNF qualification. Some commenters recommended waiving the 
3-day rule for certain diagnoses that benefit from short inpatient 
stays and speedy access to postacute rehabilitative services. They 
indicated that some beneficiaries require only a brief hospital 
assessment, rather than a lengthy stay in acute care, prior to long-
term skilled care, and that it is not uncommon for patients with 
hospital stays of less than 3 days to require follow up care in a SNF.

C. Summary

    We appreciate all of the public comments that we received on this 
multi-faceted topic. We will take all of the public comments that we 
received into consideration as we consider future actions that we could 
potentially undertake to provide more clarity and consensus regarding 
patient status for purposes of Medicare payment.

XII. CY 2013 OPPS Payment Status and Comment Indicators

A. CY 2013 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 2013 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. 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 OPPS/ASC 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We did not receive any public comments related to the definitions 
of the OPPS status indicators, and therefore, as we proposed in the CY 
2013 OPPS/ASC proposed rule (77 FR 45157), for CY 2013, we are not 
making any changes to the definitions of status indicators that were 
listed in Addendum D1 of the CY 2012 OPPS/ASC final rule with comment 
period. We believe that these definitions of the OPPS status indicators 
continue to be appropriate for CY 2013.
    The complete list of the final CY 2013 status indicators and their 
definitions is displayed in Addendum D1 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

B. CY 2013 Comment Indicator Definitions

    In the CY 2013 OPPS/ASC proposed rule (77 FR 45158), for the CY 
2013 OPPS, we proposed to use the same two comment indicators that are 
in effect for the CY 2012 OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
    We proposed to use the ``CH'' comment indicator in the CY 2013 
OPPS/ASC proposed rule to indicate HCPCS codes for which the status 
indicator or APC assignment, or both, are proposed for change in CY 
2013 compared to their assignment as of June 30, 2012. We stated that 
we believed that using the ``CH'' indicator in the CY 2013 OPPS/ASC 
proposed rule would facilitate the public's review of the changes that 
we were proposing for CY 2013. We stated that the use of the comment 
indicator ``CH'' in association with a composite APC indicates that the 
configuration of the composite APC is proposed to be changed in the CY 
2013 OPPS/ASC final rule with comment period.
    We proposed to use the ``CH'' comment indicator in the CY 2013 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2013 compared to their assignment as of December 31, 2012.
    In addition, any existing HCPCS codes with substantial revisions to 
the code descriptors for CY 2013 compared to the CY 2012 descriptors 
are labeled with comment indicator ``NI'' in Addendum B to the CY 2013 
OPPS/ASC final rule with comment period. However, as we stated in the 
proposed rule, in order to receive the comment indicator ``NI,'' the CY 
2013 revision to the code descriptor (compared to the CY 2012 
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 for comment as part of the CY 2013 OPPS/ASC final rule 
with comment period. Like all codes labeled with comment indicator 
``NI,'' as we stated in the CY 2013 OPPS/ASC proposed rule, we will 
respond to public comments and finalize their OPPS treatment in the CY 
2014 OPPS/ASC final rule with comment period.
    In accordance with our usual practice, CPT and Level II HCPCS codes 
that are

[[Page 68434]]

new for CY 2013 are also labeled with comment indicator ``NI'' in 
Addendum B to the CY 2013 OPPS/ASC final rule with comment period.
    Only HCPCS codes with comment indicator ``NI'' in this CY 2013 
OPPS/ASC final rule with comment period are subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in this CY 2013 
OPPS/ASC final rule with comment period are not open to public comment, 
unless we specifically request additional comments elsewhere in this 
final rule with comment period. The CY 2013 treatment of HCPCS codes 
that appear in this CY 2013 OPPS/ASC final rule with comment period to 
which comment indicator ``NI'' is not appended was open for public 
comment during the comment period for the proposed rule, and we 
indicated that we would respond to those comments in this CY 2013 OPPS/
ASC final rule with comment period.
    We did not receive any public comments on the proposed comment 
indicators. We believe that the CY 2012 definitions of the OPPS status 
indicators continue to be appropriate for CY 2013, and therefore, as 
proposed, we are continuing to use those definitions without 
modification for CY 2013. The final definitions are listed in Addendum 
D2 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

XIII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

    The Medicare Payment Advisory Commission (MedPAC) was established 
under section 1805 of the Act to advise the Congress on issues 
affecting the Medicare program. As required under the statute, MedPAC 
submits reports to Congress no later than March and June of each year 
that contain its Medicare payment policy recommendations. In our CY 
2013 OPPS/ASC proposed rule, we noted several recommendations regarding 
the OPPS from the March 2012 report (``Report to the Congress: Medicare 
Payment Policy,'' available on MedPAC's Web site at: http://www.medpac.gov/documents/Mar12_EntireReport.pdf). Since the 
publication of the proposed rule, MedPAC has not made any other 
recommendations regarding the OPPS, although we discuss MedPAC's public 
comments to our proposed rule in the applicable sections of this final 
rule with comment period.
    In its March report, MedPAC recommended that Congress increase 
payment rates for the OPPS in CY 2013 by 1.0 percent. We discuss our 
final policy to follow the statutory requirements for the CY 2013 OPD 
fee schedule increase factor in section II.B of this final rule with 
comment period.
    In addition, MedPAC recommended that Congress enact legislation to 
reduce payment rates for evaluation and management office visits 
provided in hospital outpatient departments to the rates paid for these 
services in physician offices. MedPAC recommended that the change be 
phased in over 3 years. During the phase-in, MedPAC stated that the 
associated payment reductions to hospitals with a disproportionate 
share patient percentage at or above the median should be limited to 2 
percent of overall Medicare payments. MedPAC also recommended that the 
Secretary of Health and Human Services conduct a study by January 2015 
to examine whether this policy change would reduce access to ambulatory 
physician and other services for low-income patients. Congress has not 
enacted such legislation.

B. GAO Recommendations

    Congress established the U.S. Government Accountability Office 
(GAO) under the Budget and Accounting Act of 1921 (Pub. L. 67-13) as an 
independent agency that advises Congress and the heads of Executive 
agencies regarding Federal program expenditures. The GAO conducts 
audits and other analyses to ensure that Federal funds are being spent 
efficiently and effectively. Since the issuance of the CY 2012 OPPS/ASC 
final rule with comment period, the GAO has not released any reports 
regarding the OPPS.

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 Department of Health and Human Services programs and the health 
and welfare of program beneficiaries. The OIG conducts independent 
audits, inspections, and investigations to improve the efficiency of 
these programs and to identify and prevent fraud, waste and abuse. 
Since the issuance of the CY 2012 OPPS/ASC final rule with comment 
period, the OIG has not made any recommendations regarding the OPPS.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to ASCs, we refer readers to the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74377 through 74378) and the June 
12, 1998 proposed rule (63 FR 32291 through 32292). For a discussion of 
prior rulemaking on the ASC payment system, we refer readers to the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74378 through 
74379).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for 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 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 
directly crosswalk or are clinically similar to ASC covered surgical 
procedures (72 FR 42478).
    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: (1) Brachytherapy sources; (2) certain implantable items 
that have pass-through status under the OPPS; (3) certain items and 
services that we designate as contractor-priced, including, but not 
limited to, procurement of corneal tissue; (4) certain drugs and 
biologicals for which separate payment is allowed under the

[[Page 68435]]

OPPS; and (5) 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 XIV.B. of 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 update 
change requests (CRs) for ASC services throughout the year (January, 
April, July, and October). CMS releases new Level II 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 these ASC 
quarterly update CRs. Thus, 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 only through the January quarterly update. New Category I 
CPT vaccine codes are released twice a year and, therefore, are 
implemented through the January and July quarterly updates. We refer 
readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for the 
process used to update the HCPCS and CPT codes (76 FR 42291).
    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. We did not receive any public comments 
on this process. Therefore, we are continuing our established process 
without modification for determining the list 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
    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 surgical 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.
    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 during the annual OPPS/ASC rulemaking process regarding 
whether or not they meet the criteria for payment in the ASC setting as 
covered surgical procedures and, if so, whether or not 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.
    We have separated our discussion below into two sections based on 
whether we proposed to solicit public comments in the CY 2013 OPPS/ASC 
proposed rule (and respond to those comments in this CY 2013 OPPS/ASC 
final rule with comment period) or whether we are soliciting public 
comments in this CY 2013 OPPS/ASC final rule with comment period (and 
responding to those comments in the CY 2014 OPPS/ASC final rule with 
comment period).
    We note that we sought public comment in the CY 2012 OPPS/ASC final 
rule with comment period on the new CPT and Level II HCPCS codes that 
were effective January 1, 2012. We also sought public comments in the 
CY 2012 OPPS/ASC final rule with comment period on the new Level II 
HCPCS codes effective October 1, 2011. These new codes, with an 
effective date of October 1, 2011, or January 1, 2012, were flagged 
with comment indicator ``NI'' in Addenda AA and BB to the CY 2012 OPPS/
ASC final rule with comment period to indicate that we were assigning 
them an interim payment status and payment rate, if applicable, which 
were subject to public comment following publication of the CY 2012 
OPPS/ASC final rule with comment period. In the proposed rule, we 
stated that we would respond to public comments and finalize the ASC 
treatment of these codes in this CY 2013 OPPS/ASC final rule with 
comment period.
    We did not receive any public comments regarding our process for 
recognizing new Category I and Category III CPT codes and Level II 
HCPCS codes under the ASC payment system and are implementing our 
proposed policy as final, without modification, for CY 2013.
2. Treatment of New Level II HCPCS Codes and Category III CPT Codes 
Implemented in April and July 2012 for Which We Solicited Public 
Comments in the CY 2013 OPPS/ASC Proposed Rule
    In the April and July CRs, we made effective for April 1, 2012 or 
July 1, 2012, respectively, a total of 12 new Level II HCPCS codes and 
5 new Category III CPT codes that were not addressed in the CY 2012 
OPPS/ASC final rule with comment period. The 12 new Level II HCPCS 
codes describe covered ancillary services.
    In the April 2012 ASC quarterly update (Transmittal 2425, CR 7754, 
dated March 16, 2012), we added one new radiology Level II HCPCS code 
and four new drug and biological Level II HCPCS codes to the list of 
covered ancillary services. Specifically, as displayed in Table 36 of 
the CY 2013 OPPS/ASC proposed rule (77 FR 45160), we added the 
following codes to the list of covered ancillary services:
     HCPCS code C9288 (Injection, centruroides (scorpion) 
immune f(ab)2 (equine), 1 vial);
     HCPCS code C9289 (Injection, asparaginase Erwinia 
chrysanthemi, 1,000international units (I.U.));
     HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg);

[[Page 68436]]

     HCPCS code C9291 (Injection, aflibercept, 2 mg vial); and
     HCPCS code C9733 (Non-ophthalmic fluorescent vascular 
angiography).
    In the July 2012 quarterly update (Transmittal 2479, Change Request 
7854, dated May 25, 2012), we added seven new drug and biological Level 
II HCPCS codes to the list of covered ancillary services. Specifically, 
as displayed in Table 37 of the CY 2013 OPPS/ASC proposed rule (77 FR 
45161), we added the following codes to the list of covered ancillary 
services:
     HCPCS code C9368 (Grafix core, per square centimeter);
     HCPCS code C9369 (Grafix prime, per square centimeter);
     HCPCS code Q2034 (Influenza virus vaccine, split virus, 
for intramuscular use (Agriflu));
     HCPCS code Q2045 (Injection, human fibrinogen concentrate, 
1 mg);
     HCPCS code Q2046 (Injection, aflibercept, 1 mg);
     HCPCS code Q2048 (Injection, doxorubicin hydrochloride, 
liposomal, doxil, 10 mg); and
     HCPCS code Q2049 (Injection, doxorubicin hydrochloride, 
liposomal, imported lipodox, 10 mg).
    We noted that HCPCS code Q2045 replaced code J1680, HCPCS code 
Q2046 replaced code C9291, and HCPCS code Q2048 replaced code J9001 
beginning July 1, 2012.
    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 the 10 new Level II HCPCS codes 
that are separately paid when provided in ASCs. We assigned payment 
indicator ``L1'' (Influenza vaccine; pneumococcal vaccine; packaged 
item/service; no separate payment made) or payment indicator ``N1'' 
(Packaged service/item; no separate payment made) to the two new Level 
II HCPCS codes that are packaged when provided in ASCs. In the CY 2013 
OPPS/ASC proposed rule (77 FR 45160), we solicited public comment on 
the proposed CY 2013 ASC payment indicators and payment rates for the 
covered ancillary services listed in Tables 36 and 37 of the proposed 
rule (77 FR 45160 through 45161). Those HCPCS codes became payable in 
ASCs, beginning in April or July 2012, and are paid at the ASC rates 
posted for the appropriate calendar quarter on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/11_Addenda_Updates.html.
    The HCPCS codes listed in Table 36 of the proposed rule were 
included in Addendum BB to the proposed rule (which was available via 
the Internet on the CMS Web site). We noted that all ASC addenda are 
only available via the Internet on the CMS Web site. Because the 
payment rates associated with the new Level II HCPCS codes that became 
effective for July 2012 (listed in Table 37 of the 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 2013 OPPS/ASC final rule with comment 
period. Thus, the codes implemented by the July 2012 ASC quarterly 
update CR and their proposed CY 2013 payment rates (based on July 2012 
ASP data) that were displayed in Table 37 were not included in Addendum 
BB to the proposed rule (which was available via the Internet on the 
CMS Web site). The final list of covered ancillary services and the 
associated payment weights and payment indicators is included in 
Addendum BB to this CY 2013 OPPS/ASC final rule with comment period, 
consistent with our annual update policy. We solicited public comment 
on these proposed payment indicators and the proposed payment rates for 
the new Level II HCPCS codes that were newly recognized as ASC covered 
ancillary services in April and July 2012 through the quarterly update 
CRs, as listed in Tables 36 and 37 of the proposed rule. We proposed to 
finalize their payment indicators and their payment rates in this CY 
2013 OPPS/ASC final rule with comment period.
    We did not receive any public comments regarding our proposals. We 
are adopting as final for CY 2013 the ASC payment indicators for the 
ancillary services described by the new Level II HCPCS codes 
implemented in April and July 2012 through the quarterly update CRs as 
shown below, in Tables 47 and 48, respectively. These new HCPCS codes 
are also displayed in Addendum BB to this final rule with comment 
period. We note that after publication of the CY 2013 OPPS/ASC proposed 
rule, the CMS HCPCS Workgroup created permanent HCPCS J-codes for CY 
2013 to replace certain temporary HCPCS C-codes made effective for CY 
2012. These permanent CY 2013 HCPCS J-codes are listed alongside the 
temporary CY 2012 HCPCS C-codes in Tables 47 and 48 below.
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    Through the July 2012 quarterly update CR, we also implemented ASC 
payment for five new Category III CPT codes as ASC covered surgical 
procedures, effective July 1, 2012. These codes were listed in Table 38 
of the CY 2013 OPPS/ASC proposed rule (77 FR 45161), along with their 
proposed payment indicators and proposed payment rates for CY 2013. 
Because the payment rates associated with the new Category III CPT 
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. The codes listed in Table 38 of the 
proposed

[[Page 68438]]

rule and their final payment indicators and rates are included in 
Addendum AA to this CY 2013 OPPS/ASC final rule with comment period.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45161), we proposed to 
assign payment indicator ``G2'' (Non-office-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) to three of the five new Category III CPT codes implemented in 
July 2012 and to assign payment indicator ``J8'' (Device-intensive 
procedure added to ASC list in CY 2008 or later; paid at adjusted rate) 
to the remaining two new Category III CPT codes implemented in July 
2012. We believe that these procedures would not be expected to pose a 
significant safety risk to Medicare beneficiaries or would not be 
expected to 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 2012 through the 
quarterly update CR, as listed in Table 38 of the proposed rule (77 FR 
45161). We proposed to finalize their payment indicators and their 
payment rates in this CY 2013 OPPS/ASC final rule with comment period.
    We did not receive any public comments regarding this proposal. We 
are adopting as final for CY 2013 the ASC payment indicators for the 
covered surgical procedures described by the new Category III CPT codes 
implemented in the July 2012 CR as shown below in Table 49. The new CPT 
codes implemented in July 2012 are also displayed in Addendum AA to 
this final rule with comment period (which is available via the 
Internet on the CMS Web site).
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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 2013 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 
2013 OPPS/ASC proposed rule (77 FR 45161 through 45162), we proposed to 
continue this process for CY 2013. Specifically, for CY 2013, we 
proposed to include in Addenda AA

[[Page 68439]]

and BB to the CY 2013 OPPS/ASC final rule with comment period the new 
Category I and III CPT codes effective January 1, 2013, that would be 
incorporated in the January 2013 ASC quarterly update CR and the new 
Level II HCPCS codes, effective October 1, 2012 or January 1, 2013, 
that would be released by CMS in its October 2012 and January 2013 ASC 
quarterly update CRs. We stated that these codes would be flagged with 
comment indicator ``NI'' in Addenda AA and BB to this CY 2013 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 2013 OPPS/ASC final rule with comment period and would be 
finalized in the CY 2014 OPPS/ASC final rule with comment period.
    We did not receive any public comments regarding this proposed 
process. For CY 2013, 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. In the CY 2013 OPPS/ASC proposed rule (77 FR 45162), 
we proposed to update the list of ASC covered surgical procedures by 
adding 16 procedures to the list. We determined that these 16 
procedures would not be expected to pose a significant safety risk to 
Medicare beneficiaries and would not be expected to require an 
overnight stay if performed in ASCs.
    The 16 procedures that we proposed to add to the ASC list of 
covered surgical procedures, including their HCPCS code long 
descriptors and proposed CY 2013 payment indicators, were displayed in 
Table 39 of the proposed rule (77 FR 45162). We invited public comment 
on this proposal.
    Comment: Many commenters supported the addition of the procedures 
listed in Table 39 of the CY 2013 OPPS/ASC proposed rule to the list of 
ASC covered surgical procedures.
    One commenter believed that CPT codes 0299T (Extracorporeal shock 
wave for integumentary wound healing, high energy, including topical 
application and dressing care; initial wound) and 0300T (Extracorporeal 
shock wave for integumentary wound healing, high energy, including 
topical application and dressing care) should not be added to the list 
of ASC covered surgical procedures. The commenter agreed with CMS that 
these codes would not pose a significant safety risk to Medicare 
beneficiaries and would not be expected to require an overnight stay if 
performed in an ASC. However, the commenter believed that additional 
information on the clinical efficacy and outcomes of these services 
should be collected before adding these procedures to the list of ASC 
covered surgical procedures.
    Response: We appreciate commenters' support of the proposed 
addition of the procedures listed in Table 39 of the CY 2013 OPPS/ASC 
proposed rule to the list of ASC covered surgical procedures for CY 
2013. With regard to the commenter's belief that CPT codes 0299T and 
0300T should not be added to the list of ASC covered surgical 
procedures until additional information regarding the clinical efficacy 
and outcomes of these services is collected, our policy is to review 
all HCPCS codes that are currently paid under the OPPS to identify any 
procedures that are currently excluded from the ASC list of covered 
procedures that we believe would not pose a safety risk to Medicare 
beneficiaries and would not require an overnight stay if performed in 
an ASC (42 CFR 416.166). We do not make our assessment regarding what 
codes should be included on the list of covered surgical procedures 
based on data regarding the clinical efficacy and outcomes of the 
services. Because it is our expectation that the procedures identified 
by CPT codes 0299T and 0300T would not pose a significant safety risk 
to Medicare beneficiaries or require an overnight stay if performed in 
an ASC, we do not agree with the commenter that these procedures should 
continue to be excluded from the list of ASC covered surgical 
procedures.
    Comment: One commenter reiterated a previous request that, with 
knowledge of the anatomic location, CMS should apply the safety 
criteria to the entire spectrum of services reportable by an unlisted 
code. The commenter believed that under such an analysis, CMS would 
determine that the following unlisted codes associated with eye 
procedures would not compromise patient safety and, therefore, should 
be added to the list of ASC covered surgical procedures: CPT code 66999 
(Unlisted procedure, anterior segment of eye), CPT code 67299 (Unlisted 
procedure, posterior segment);, CPT code 67399 (Unlisted procedure, 
ocular muscle); CPT code 67999 (Unlisted procedure, eyelids); CPT code 
68399 (Unlisted procedure, conjunctiva); and CPT code 68899 (Unlisted 
procedure, lacrimal system).
    Response: As we have stated in the past (72 FR 42484 through 42486; 
75 FR 72032; and 76 FR 74380, and 74399), procedures that are reported 
by the CPT unlisted codes are not eligible for addition to the ASC list 
because our charge requires us to evaluate each surgical procedure for 
potential safety risk and expected need for overnight monitoring and to 
exclude such procedures from ASC payment. It is not possible to 
evaluate procedures that would be reported by unlisted CPT codes 
according to these criteria. This final policy is discussed in detail 
in the August 2, 2007 final rule (72 FR 42484 through 42486).
    Comment: In addition to the procedures listed in Table 39 of the CY 
2013 OPPS/ASC proposed rule, commenters requested that CMS add the 
procedures described by the 57 CPT codes displayed in Table 50 below to 
the list of ASC covered surgical procedures. Commenters argued that 
these procedures are as safe as procedures that are currently on the 
list of ASC covered procedures and, based on a survey, ASCs report 
positive outcomes when these procedures are performed on non-Medicare 
patients.
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[[Page 68441]]


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    Response: We reviewed all of the eligible surgical procedures that 
commenters requested for addition to the ASC list of covered surgical 
procedures. Of the 57 requested procedures, we did not review the 22 
procedures that are reported by CPT codes that are on the OPPS 
inpatient list. These procedures are not paid under the OPPS and, 
therefore, are not eligible for addition to the list of ASC covered 
procedures. The procedures that are paid only as inpatient procedures 
are identified with an asterisk in Table 50. In addition, the procedure 
that is identified by CPT code 27096 (Injection procedure for 
sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy 
or ct) including arthrography when performed) is not paid under the 
OPPS and, therefore, is not eligible for addition to the list of ASC 
covered procedures.
    With regard to the remaining procedures in Table 50 that commenters 
requested be added to the list of ASC covered surgical procedures, we 
do not agree that most of the procedures 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 
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 50, 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. Several of the urology procedures appear to require major 
invasion of a body cavity. However, we agree with commenters that the 
procedures described by CPT codes 0274T, 0275T, 58541, 58542, 58570, 
58571, 63001, 63003, and 63005 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 codes to the ASC list of 
covered surgical procedures for CY 2013.
    After consideration of the public comments we received, we are 
finalizing the addition of the 16 procedures that we proposed to add to 
the list of ASC covered surgical procedures for CY 2013. We are also 
adding 9 of the procedures requested by the commenters to the CY 2013 
list of

[[Page 68442]]

ASC covered surgical procedures. The procedures, their descriptors, and 
payment indicators are displayed in Table 51 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 2013 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the CY 2013 OPPS/ASC proposed rule, we followed our 
policy to annually review and update the surgical procedures for which 
ASC payment is made and to identify new procedures that may be 
appropriate for ASC payment, including their potential designation as 
office-based. We reviewed CY 2011 volume and utilization data and the 
clinical characteristics for all surgical procedures that are assigned 
payment indicator ``G2'' (Non-office-based surgical procedure added in 
CY 2008 or later; payment based on OPPS relative payment weight) in CY 
2012, as well as for those procedures assigned one of the temporary 
office-based payment indicators, specifically ``P2*,'' ``P3*,'' or 
``R2*'' in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74400 through 74408).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45163), we stated that 
our review of the CY 2011 volume and utilization data resulted in our 
identification of six covered 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 six CPT codes we 
proposed to permanently designate as office-based were listed in Table 
40 of the CY 2013 OPPS/ASC proposed rule (77 FR 45163), and are listed 
in Table 52 below. We invited public comments on this proposal.
    Comment: One commenter disagreed with the policy to make payment at 
the lower of the ASC rate or the MPFS nonfacility PE RVU payment amount 
for procedures that CMS identifies as office-based. This commenter 
expressed concern that this policy does not provide adequate payment 
for some services performed in an ASC.
    Response: We have responded to this comment in the past and we 
continue to

[[Page 68445]]

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 prevent 
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 the CY 2010, 
CY 2011, and CY 2012 OPPS/ASC final rules with comment period (74 FR 
60605 through 60607; 75 FR 72034 through 72036; and 76 FR 74401, 
respectively).
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal to designate the procedures displayed 
in Table 52 below as permanently office-based for CY 2013.
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    We also reviewed CY 2011 volume and utilization data and other 
information for the eight procedures finalized for temporary office-
based status in the CY 2012 OPPS/ASC final rule with comment period (76 
FR 74404 through 74408). Among these eight procedures, there were very 
few claims data for six procedures: CPT code 0099T

[[Page 68447]]

(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 C9800 (Dermal injection 
procedure(s) for facial lipodystrophy syndrome (LDS) and provision of 
Radiesse or Sculptra dermal filler, including all items and supplies); 
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 2013 OPPS/ASC proposed rule (77 FR 45163) to 
maintain their temporary office-based designations for CY 2013.
    The volume and utilization data for the remaining two procedures 
that have temporary office-based designations for CY 2012 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 2013. Consequently, we 
proposed to assign payment indicator ``G2'' to the following two 
covered surgical procedure codes in CY 2013:
     CPT code 37761 (Ligation of perforator vein(s), 
subfascial, open, including ultrasound guidance, when performed, 1 
leg); and
     CPT code 0232T (Injection(s), platelet rich plasma, any 
tissue, including image guidance, harvesting and preparation when 
performed).
    The proposed CY 2013 payment indicator designations for the eight 
procedures that were temporarily designated as office-based in CY 2012 
were displayed in Table 41 of the CY 2013 OPPS/ASC proposed rule (77 FR 
45164). The procedures for which the proposed office-based designations 
for CY 2013 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 invited public comments on this proposal.
    We did not receive any public comments that addressed our proposal 
to continue to designate six of the eight procedures, which were 
designated as temporarily office-based for CY 2012, as temporarily 
office-based for CY 2013. Therefore, we are finalizing our proposal to 
designate the six procedures listed in Table 41 of the CY 2013 OPPS/ASC 
proposed rule (77 FR 45164) and restated in Table 53 below, which were 
designated as temporarily office-based for CY 2012, as temporarily 
office-based for CY 2013. In addition, we did not receive any public 
comments that addressed our proposal to not designate as office-based 
in CY 2013 the two remaining procedures that were designated as 
temporarily office-based for CY 2012. Therefore, we are finalizing our 
proposal to not provide an office-based designation to the 2 procedures 
listed in Table 41 of the CY 2013 OPPS/ASC proposed rule (77 FR 45164), 
and restated below in Table 53, which were designated as temporarily 
office-based for CY 2012.

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BILLING CODE 4120-01-C
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

[[Page 68449]]

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.
(2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45164), we proposed 
for CY 2013 to update the ASC list of covered surgical procedures that 
are eligible for payment according to our device-intensive procedure 
payment methodology, 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 2011 OPPS claims and cost report data 
available for the proposed rule. The OPPS device-dependent APCs are 
discussed further in section II.A.2.d.(1) of this final rule with 
comment period.
    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 2013 were listed in Table 42 of 
the CY 2013 OPPS/ASC proposed rule (77 FR 45165 through 45166). The CPT 
code, the CPT code short descriptor, the proposed CY 2013 ASC payment 
indicator (PI), the proposed CY 2013 OPPS APC assignment, the proposed 
CY 2013 OPPS APC device offset percentage, and an indication if the 
full credit/partial credit (FB/FC) device adjustment policy would apply 
were also listed in Table 42 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 this proposal.
    Comment: Some commenters expressed the same general concerns made 
in previous rulemakings 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 apply the device-intensive payment methodology to all procedures 
for which CMS can establish a median device cost, regardless of whether 
the procedures are assigned to APCs that are designated as device-
dependent under the OPPS. In a related suggestion, the commenters urged 
CMS to establish the threshold used to determine device-intensive 
procedures at 50 percent of the ``unadjusted'' ASC payment rate (OPPS 
relative weight X ASC conversion factor) instead of the OPPS payment 
rate. The commenters also made the same argument as made in prior 
rulemakings--that CMS should not adjust the device portion of the ASC 
payment for device-intensive procedures by the wage index.
    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.
    We do not agree with the commenters that the device-intensive 
methodology should be applied to all procedures where a device offset 
can be established, regardless of whether the procedure is assigned to 
a device-dependent APC under the OPPS. Nor do we agree with the 
commenters who suggest using a threshold to determine device-intensive 
procedures that is based on 50 percent of the ASC payment rate instead 
of the OPPS payment rate. 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 the CY 2010, CY 2011, and CY 2012 OPPS/ASC final rules with comment 
period (74 FR 60608 and 60609; 75 FR 72039; and 76 FR 74409, 
respectively).
    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 the CY 
2009, CY 2010, CY 2011, and CY 2012 OPPS/ASC final rules with comment 
period (73 FR 68735; 74 FR 60608 through 60609; 75 FR 72039; and 76 FR 
74409, respectively).
    After consideration of the public comments we received, we are 
designating the ASC covered surgical procedures displayed in Table 54 
below as device-intensive for CY 2013. The CPT code, the CPT code short 
descriptor, the final CY 2013 ASC payment indicator (PI), the final CY 
2013 OPPS APC assignment, the final CY 2013 OPPS APC device offset 
percentage, and an indication if the full credit/partial credit (FB/FC) 
device adjustment policy will apply are also listed in Table 54 of this 
final rule with comment period. As we discuss in section XIII.B.3. of 
the CY 2013 OPPS/ASC proposed rule (77 FR 45161 through 45162) 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, 2012 and January 1, 2013 in this final rule with comment 
period. Because these codes were not available to us until after the CY 
2013 OPPS/ASC proposed rule was published, these codes were not 
included in that rule. We have reviewed these new codes and have added 
six of these CPT codes to Table 54 because they are ASC covered 
surgical procedures and are assigned to device-dependent APCs that meet 
the ASC device-intensive criteria. Specifically, we added the following 
new codes to the list of ASC device-intensive procedures: CPT code 
0316T (Vagus nerve blocking therapy (morbid obesity); replacement of 
pulse generator); CPT code 0319T (Insertion or replacement of 
subcutaneous implantable defibrillator system with subcutaneous 
electrode); CPT code 0321T (Insertion of subcutaneous implantable 
defibrillator pulse generator only with existing subcutaneous 
electrode); CPT code 0323T (Removal of subcutaneous implantable 
defibrillator pulse generator with replacement of subcutenous 
implantable defibrillator pulse generator only); CPT code 24370 
(Revision of total elbow arthroplasty, including allograft when 
performed; humeral or ulnar component); and CPT code 24371 (Revision of 
total elbow arthroplasty, including allograft when performed; humeral 
and ulnar component). These new device-intensive procedures are flagged 
with comment indicator ``NI'' in Addendum AA to this OPPS/ASC final 
rule with comment period to indicate that we are assigning them an 
interim payment status which is subject to public comment. We will 
respond to any public comments received in the CY 2014 OPPS/ASC final 
rule with

[[Page 68450]]

comment period. 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.
d. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    We generally discuss the no cost/full credit and partial credit 
devices under the heading entitled ``ASC Payment for Covered Surgical 
Procedures.'' However, because the no cost/full credit and partial 
credit device policy applies to a subset of device-intensive 
procedures, we believe it would be clearer to discuss the device-
intensive procedure policy and the no cost/full credit and partial 
credit device policy consecutively and to consolidate the tables that 
we usually publish separately. 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 and final CY 2013 OPPS APCs and devices subject to 
the adjustment policy are discussed in section IV.B.2. of this final 
rule with comment period. The established ASC policy adopts the OPPS 
policy and reduces payment to ASCs when a specified device is furnished 
without cost or with 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 68744).
    Consistent with the OPPS, in the CY 2013 OPPS/ASC proposed rule (77 
FR 45165), 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 2013. 
Table 42 of the proposed rule (77 FR 45165 through 45166) 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 2013. Specifically, we stated that when a procedure that 
is listed in Table 42 of the proposed rule is subject to the no cost/
full credit or partial credit device adjustment policy and is performed 
to implant a device that is listed in Table 43 of the proposed rule (77 
FR 45166 through 45167), where that device is furnished at no cost or 
with full credit from the manufacturer, the ASC would append the HCPCS 
``FB'' modifier on the line with the procedure to implant the device. 
The contractor would reduce payment to the ASC by the device offset 
amount that we estimate represents the cost of the device when the 
necessary device is furnished without cost to the ASC or with full 
credit. We would provide the same amount of payment reduction based on 
the device offset amount in ASCs that would apply under the OPPS under 
the same circumstances. We continue to believe that the reduction of 
ASC payment in these circumstances is necessary to pay appropriately 
for the covered surgical procedure being furnished by the ASC.
    For partial credit, we proposed to reduce the payment for 
implantation procedures listed in Table 42 of the proposed rule that 
are subject to the no cost/full credit or partial credit device 
adjustment policy 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 42 of the proposed rule that is 
subject to the no cost/full credit or partial credit device adjustment 
policy, when the facility receives a partial credit of 50 percent or 
more of the cost of a device listed in Table 43 of the proposed rule. 
In order to report that they received a partial credit of 50 percent or 
more of the cost of a new device, ASCs would have the option of either: 
(1) Submitting the claim for the device replacement procedure to their 
Medicare contractor after the procedure's performance but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount. We invited public comments on these proposals
    We did not receive any comments on our CY 2013 proposal to continue 
the no cost/full credit and partial credit device adjustment policy for 
ASCs. For CY 2013, as we proposed, we will reduce the payment for the 
device implantation procedures listed in Table 54 below that are 
subject to the adjustment 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 55, below, and the associated implantation 
procedure code is listed in Table 54. In addition, for CY 2013, we will 
reduce the payment for implantation procedures listed in Table 54 that 
are subject to the adjustment 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 
55, the ASC must append the modifier ``FC'' to the associated 
implantation procedure code if the procedure is listed in Table 54.
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e. ASC Treatment of Surgical Procedures Removed From the OPPS Inpatient 
List for CY 2013
    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. As stated in the CY 2013 OPPS/ASC proposed rule 
(77 FR 45167), we evaluated each of the two procedures we proposed to 
remove from the OPPS inpatient list for CY 2013 based on the criteria 
for exclusion from the list of covered ASC surgical procedures. As 
stated in the proposed rule, we believe that these two procedures 
should continue to be excluded from the ASC list of covered surgical 
procedures for CY 2013 because they would be expected to pose a 
significant risk to beneficiary safety or to require an overnight stay 
in ASCs. The CPT codes for these two procedures and their long 
descriptors were listed in Table 44 of the proposed rule (77 FR 45167). 
We invited public comments on this proposal.
    We did not receive any public comments regarding the procedures 
that we proposed to exclude from the list of ASC covered procedures for 
CY 2013 that were proposed for removal from the CY 2013 OPPS inpatient 
list. However, as detailed in section IX of this final rule with 
comment period, the proposal to remove the procedure described by CPT 
code 27447 (Arthroplasty, knee, condyle and plateau; medical and 
lateral compartments with or without patella resurfacing (total knee 
arthroplasty)) from the OPPS inpatient list is not being finalized for 
CY 2013. Based on public comments received, CPT code 27447 will remain 
on the OPPS inpatient list for CY 2013. Therefore, we are finalizing 
our proposal to continue to exclude the procedure described by the CPT 
code 22856, which is listed in Table 56 below, from the list of ASC 
covered surgical procedures for CY 2013. In addition, we are excluding 
CPT code 27447 because it will remain on the OPPS inpatient list for CY 
2013.
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2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, in the 
CY 2013 OPPS/ASC proposed rule (77 FR 45167), we proposed to update the 
ASC list of covered ancillary services to reflect the proposed payment 
status for the services under the CY 2013 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 2013. For example, a covered 
ancillary service that was separately paid under the revised ASC 
payment system in CY 2012 may be proposed for packaged status under the 
CY 2013 OPPS and, therefore, also under the ASC payment system for CY 
2013. Comment indicator ``CH,'' discussed in section XIV.F. of the CY 
2013 OPPS/ASC proposed rule (77 FR 45172), 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 2013.
    Except for the Level II HCPCS codes listed in Table 37 of the CY 
2013 OPPS/ASC proposed rule (77 FR 45161), all ASC covered ancillary 
services and their proposed payment indicators for CY 2013 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

[[Page 68456]]

the OPPS. All CY 2013 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 indicators ``G2'' and ``A2.'' Payment indicator ``A2'' was 
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. Although the 4-year transitional 
period has ended and payment indicator ``A2'' is no longer required to 
identify surgical procedures subject to transitional payment, we 
retained payment indicator ``A2'' because it is used to identify 
procedures that are exempted from application of the office-based 
designation.
    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 2012 OPPS/ASC final rule with comment period (76 
FR 74377 through 74451), we updated the CY 2011 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' and ``J8'' using CY 2010 data, consistent with the CY 2012 OPPS 
update. Payment rates for device-intensive procedures also were updated 
to incorporate the CY 2012 OPPS device offset percentages.
    Payment rates for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE 
RVU-based amount (we refer readers to the CY 2013 MPFS final rule with 
comment period) or the amount calculated using the ASC standard 
ratesetting methodology for the procedure. In the CY 2012 OPPS/ASC 
final rule with comment period, 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 2012 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 2012 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 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45168), we proposed to 
update ASC payment rates for CY 2013 using the established rate 
calculation methodologies under Sec.  416.171. We note that, as 
discussed in section II.A.2.f. of that proposed rule (77 FR 45094 
through 45098), because we proposed to base the OPPS relative payment 
weights on geometric mean costs for CY 2013, the ASC system would shift 
to the use of geometric means to determine relative payment weights 
under the ASC standard ratesetting methodology. We proposed to continue 
to use the amount calculated under the ASC standard ratesetting 
methodology for procedures assigned payment indicators ``A2'' and 
``G2.''
    We proposed that payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
(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 2013 OPPS proposal that 
reflects updated proposed OPPS device offset percentages, and to make 
payment for office-based procedures at the lesser of the proposed CY 
2013 MPFS nonfacility PE RVU-based amount or the proposed CY 2013 ASC 
payment amount calculated according to the standard ratesetting 
methodology. We invited public comments on these proposals.
    We did not receive any public comments on our proposal to calculate 
CY 2013 payment rates for ASC-covered surgical procedures according to 
our established methodologies. Therefore, we are finalizing our CY 2013 
proposal, without modification, to calculate the CY 2013 final ASC 
payment rates for ASC-covered surgical procedures according to our 
established methodologies.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
    As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45168), 
section 1833(a)(1) and section 1833(b)(1) of the Act 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 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 procedures and covered 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 categories of services in 
the CY 2013 OPPS/ASC proposed rule. We identify the specific services 
with a double asterisk in Addenda AA and BB to this CY 2013 OPPS/ASC 
final rule with comment period.
d. 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.'' In the CY 2012 OPPS/ASC final rule with 
comment period, we finalized our proposal to establish the CY 2012 ASC 
payment rate for CRT-D services 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. ASCs use the 
corresponding HCPCS Level II G-code (G0448) for proper reporting when 
the procedures

[[Page 68457]]

described by CPT codes 33225 and 33249 are performed on the same date 
of service. For a complete discussion of our policy regarding payment 
for CRT-D services in ASCs, we refer readers to the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74427 through 74428). We did not 
propose any changes to our current policy regarding ASC payment for 
CRT-D services for CY 2013.
e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite
    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 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 on the same date of services to the Medicare 
beneficiary being treated with LDR brachytherapy for prostate cancer.
    As detailed in section II.A.2.e.(2) of the CY 2013 OPPS/ASC 
proposed rule (77 FR 45088 through 45089), in CY 2008 under the OPPS, 
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 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. We implemented this policy in 
the OPPS because reliance on single procedure claims to set payment 
rates for these services resulted in the 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 (72 
FR 66652 through 66655).
    Currently under the ASC payment system, ASCs receive separate 
payment for the component services that comprise the LDR Prostate 
Brachytherapy Composite when the two services are provided on the same 
date of service. Specifically, ASCs that report CPT codes 55875 and 
77778 on the same date of service receive a payment for CPT code 55875 
where the payment rate is based on the OPPS relative payment weight for 
single procedure claims, and a separate payment for CPT code 77778 
where payment is the lower of the rate based on the OPPS relative 
payment weight for single procedure claims or the MPFS nonfacility PE-
RVU based amount.
    A commenter to the CY 2012 OPPS/ASC proposed rule (76 FR 74429 
through 74430) requested that CMS pay for LDR prostate brachytherapy 
services under the ASC payment system based on the composite OPPS 
payment rate rather than making two separate payments for the service 
reported by CPT codes 55875 and 77778. The commenter 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 costs from single-service claims 
that CMS has acknowledged are mostly incorrectly coded claims. We 
responded that we would 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 are 
performed on the same date of service in an ASC.
    Because we agree that data from OPPS claims reporting both services 
required for LDR prostate brachytherapy provide the most accurate 
relative payment weight upon which to base ASC payment for the 
component services, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45169), we proposed to establish an ASC payment rate that is based on 
the OPPS relative payment weight applicable to APC 8001 when CPT codes 
55875 and 77778 are performed on the same date of service in an ASC. We 
also proposed to create a HCPCS Level II G-code so that ASCs can 
properly report when the procedures described by CPT codes 55875 and 
77778 are performed on the same date of service and, therefore, receive 
the appropriate LDR Prostate Brachytherapy Composite payment. We stated 
that the payment rate associated with the LDR prostate brachytherapy 
composite will be temporarily identified by HCPCS G-code ``GXXX1'' in 
Addendum AA to the CY 2013 OPPS/ASC proposed rule and the permanent 
HCPCS G-code that will identify this composite for ASCs will appear in 
this final rule with comment period. When not performed on the same day 
as the service described by CPT code 55875, the service described by 
CPT code 77778 will continue to be assigned to APC 0651. When not 
performed on the same day as the service described by CPT code 77778, 
the service described by CPT code 55875 will continue to be assigned to 
APC 0163. We invited public comment on this proposal.
    Comment: Several commenters supported CMS' proposal to establish an 
ASC payment rate that is based on the OPPS relative payment weight 
applicable to APC 8001 when CPT codes 55875 and 77778 are performed on 
the same date of service in an ASC.
    Response: We appreciate commenters' support of our proposal. We are 
finalizing our proposal, without modification, to establish the CY 2013 
ASC payment rate for LDR prostate brachytherapy services based on the 
OPPS relative payment weight applicable to APC 8001 when CPT codes 
55875 and 77778 are performed on the same date of service in an ASC. 
ASCs will use the corresponding HCPCS Level II G-code (G0458) for 
proper reporting when the procedures described by CPT codes 55875 and 
77778 are performed on the same date of service, and therefore receive 
the appropriate LDR prostate brachytherapy composite payment. When not 
performed on the same day as the service described by CPT code 55875, 
the service described by CPT code 77778 will continue to be assigned to 
APC 0651. When not performed on the same day as the service described 
by CPT code 77778, the service described by CPT code 55875 will 
continue to be assigned to APC 0163.
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 or 
conditionally packaged

[[Page 68458]]

(status indicators ``N,'' ``Q1,'' and ``Q2'') under the OPPS. In the CY 
2013 OPPS/ASC proposed rule (77 FR 45169), we further clarified our 
policy regarding the payment indicator assignment of codes that are 
conditionally packaged in the OPPS (status indicators ``Q1'' and 
``Q2''). Under the OPPS, a conditionally packaged code describes a 
HCPCS code where the payment is packaged when it is provided with a 
significant procedure but is separately paid when the service appears 
on the claim without a significant procedure. Because ASC services 
always include a surgical procedure, HCPCS codes that are conditionally 
packaged under the OPPS are always packaged (payment indictor ``N1'') 
under the ASC payment system. Thus, our final policy aligns 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 MPFS. We set the payment indicator to ``Z2'' 
for these 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.
    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 MPFS), we finalized in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 
through 74430) 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.
    ASC payment policy for brachytherapy sources mirrors the payment 
policy under the OPPS. ASCs are paid for brachytherapy sources provided 
integral to ASC covered surgical procedures at prospective rates 
adopted under the OPPS or, if OPPS rates are unavailable, at 
contractor-priced rates (72 FR 42499). 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 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 42508 through 42509; 42 CFR 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 four 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), HCPCS code C1840 (Lens, 
intraocular (telescopic)), and HCPCS code C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)). Payment 
amounts for HCPCS codes C1749, C1830, C1840, and C1886 under the ASC 
payment system are contractor priced. In the CY 2012 OPPS/ASC final 
rule with comment period, we finalized the expiration of pass-through 
payment for HCPCS code C1749, which will expire after December 31, 2012 
(76 FR 74278). Therefore, after December 31, 2012, the HCPCS code C1749 
device costs will be packaged into the costs of the procedures with 
which the devices are reported in the hospital claims data used in the 
development of the OPPS relative payment weights that will be used to 
establish ASC payment rates for CY 2013.
b. Payment for Covered Ancillary Services for CY 2013
    For CY 2013, 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 2013 OPPS and 
ASC payment rates (77 FR 45170). The proposed CY 2013 OPPS payment 
methodologies for brachytherapy sources and separately payable drugs 
and biologicals were discussed in section II.A. and section V.B. of 
that proposed rule, respectively, and we proposed to set the CY 2013 
ASC payment rates for those services equal to the proposed CY 2013 OPPS 
rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2013 payment for separately payable covered radiology 
services was based on a comparison of the CY 2013 proposed MPFS 
nonfacility PE RVU-based amounts (we referred readers to the CY 2013 
MPFS proposed rule) and the proposed CY 2013 ASC payment rates 
calculated according to the ASC standard ratesetting methodology and 
then set at the lower of the two amounts (except as discussed below for 
nuclear medicine procedures and radiology services that use contrast 
agents). Alternatively, payment for a radiology service may be packaged 
into the payment for the ASC covered surgical procedure if the 
radiology service is packaged or conditionally 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

[[Page 68459]]

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. As finalized in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74429 through 74430), payment indicators for radiology 
services that use contrast agents are set to ``Z2'' 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. In the CY 2013 
OPPS/ASC proposed rule (77 FR 45170), we proposed for CY 2013 to 
continue these modifications to the payment methodology and, therefore, 
set the payment indicator to ``Z2'' for these covered ancillary 
radiology services that involve nuclear medicine procedures or that use 
contrast agents.
    Most covered ancillary services and their proposed payment 
indicators were listed in Addendum BB to the CY 2013 OPPS/ASC proposed 
rule (which is available via the Internet on the CMS Web site). We 
invited public comment on these proposals.
    Comment: One commenter expressed appreciation to CMS for its 
responsiveness in the CY 2011 OPPS/ASC final rule with comment period 
to stakeholder concerns regarding ASC payment for nuclear medicine 
procedures. However, the commenter suggested that ASC payment policy 
for nuclear medicine procedures would be further improved by providing 
separate payment for the diagnostic radiopharmaceuticals that are used 
in nuclear medicine procedures.
    Response: As we stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72050) regarding separate payment for diagnostic 
radiopharmaceuticals used in ASCs, we do not agree with the commenter 
that we should establish separate payment for diagnostic 
radiopharmaceuticals under the ASC payment system because we follow the 
OPPS packaging policies which require that payment for these items is 
always packaged.
    After consideration of the public comments we received, we are 
providing CY 2013 payment for covered ancillary services in accordance 
with the policies finalized in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74430). Covered ancillary services and their 
final CY 2013 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 Pub. L. 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 major criteria set out at 42 CFR 
416.195:
     42 CFR 416.195(a)(1): The IOL is approved by the FDA;
     42 CFR 416.195(a)(2): Claims 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;
     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
     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 improved 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 with the associated qualifying IOL models, at the link entitled 
``NTIOL Application Determination Reference document Updated 01/06/
2012,'' posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
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/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html. 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

[[Page 68460]]

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 2013 and Deadline for 
Public Comments
    As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45171), 
we did not receive any requests for review to establish a new NTIOL 
class for CY 2013 by the March 2, 2012 due date (this due date was 
stated in the CY 2012 OPPS/ASC final rule with comment period at 76 FR 
74443).
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 
in the CY 2013 OPPS/ASC proposed rule (77 FR 45171), we did not propose 
to revise the payment adjustment amount for CY 2013.
5. Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195
    The last significant revisions to the regulations containing the 
substantive NTIOL evaluation criteria under 42 CFR 416.195 occurred in 
2007. In the CY 2013 OPPS/ASC proposed rule (77 FR 45171), we proposed 
significant revisions to Sec.  416.195(a)(2) and Sec.  416.195(a)(4). 
We stated our belief that revising Sec.  416.195 is necessary in order 
to improve the quality of the NTIOL applications. In recent years, we 
have received low quality NTIOL applications that may have been due in 
part to overly-broad evaluation criteria.
    We proposed to revise Sec.  416.195(a)(2) to require that the IOL's 
FDA-approved labeling contains a claim of a specific clinical benefit 
imparted by a new lens characteristic. The IOL would have to have a new 
lens characteristic in comparison to currently available IOLs. We also 
proposed to revise Sec.  416.195(a)(4) to require that any specific 
clinical benefit referred to in Sec.  416.195(a)(2) would have to be 
supported by evidence that demonstrated that the IOL results in a 
measurable, clinically meaningful, improved outcome. Improved outcomes 
include: (i) Reduced risk of intraoperative or postoperative 
complication or trauma; (ii) accelerated postoperative recovery; (iii) 
reduced induced astigmatism; (iv) improved postoperative visual acuity; 
(v) more stable postoperative vision; and (vi) other comparable 
clinical advantages.
    The proposed revision to Sec.  416.195(a)(2) is necessary because 
recent NTIOL applications have not included FDA labeling claims of 
clinical benefit. Instead, the candidate IOLs have, in most cases, had 
some characteristic for which the applicant has tried to prove clinical 
relevance through various kinds of evidence that have not been 
evaluated by the FDA because the evidence is not associated with a 
labeling claim. The result has been the submission of low quality 
evidence that has been insufficient for NTIOL status. We believe that 
the quality of the evidence would improve if applicants were required 
to obtain a labeling claim for the NTIOL benefit and therefore have the 
evidence for such benefit evaluated by FDA. We believe that this 
proposed approach would better serve CMS, FDA, and the applicants 
because any ultimate grant of NTIOL status would be supported by a 
labeling claim. The manufacturer could then advertise the NTIOL benefit 
without running afoul of FDA advertising limitations. We would have the 
benefit of an FDA review of the relevant evidence, which would be 
particularly valuable because the FDA has a dedicated team of 
scientists, physicians, and engineers who are experts in evaluating 
IOLs.
    The proposed revision to Sec.  416.195(a)(4) is necessary to insure 
that the claim is clinically relevant and represents an improved 
outcome for Medicare beneficiaries. We requested public comments on 
these proposed revisions to the NTIOL regulations.
    Comment: Several commenters supported our proposed changes to the 
NTIOL regulations. These commenters believed that the proposed changes 
will better insure that any grants of NTIOL status will be supported by 
rigorous scientific evidence.
    Response: We appreciate these comments and the commenters' support 
for our efforts to require rigor and accountability in the NTIOL 
program.
    Comment: One commenter disagreed with the proposed revision to 
416.195(a)(2), complaining that obtaining a label claim is difficult 
and time consuming. In addition, this commenter made the following main 
points:
     It is not the FDA's job to review evidence related to an 
NTIOL application;
     FDA does not typically evaluate claims of comparative 
clinical benefits, and is not obligated to do so;
     Clinical studies to support a label claim require 
substantial time and resources, and there is no guarantee that such 
efforts will be successful;
     Other new technology programs, such as transitional pass-
through payments, do not require a claim of clinical benefit;
     Requiring a claim of clinical benefit would provide 
extended exclusivity to the first company to establish the NTIOL class;
     Requiring a claim of clinical benefit will limit patient 
access to new technology.
    Response: We believe that this commenter's objections reflect at 
least a partial misunderstanding of the proposal. Our current 
regulations require that the FDA approved label contain information 
about the clinical benefit of a candidate IOL. They provide two options 
for satisfying this requirement; the candidate lens must have either: 
(1) claims of specific clinical benefits in comparison with currently 
available IOLs approved by the FDA for use in labeling and advertising; 
or (2) lens characteristics with established clinical relevance in 
comparison with currently available IOLs approved by the FDA for use in 
labeling and advertising. Both of these options require evaluation by 
the FDA. In recent years, lens manufacturers have used Option 2 to 
claim, for example, that the applicant lens had a specific lens 
characteristic (for example, blue filter, availability in .25 D 
increments, absence of glistenings, packaging in a disposable injector) 
listed somewhere in the FDA labeling; however, the manufacturer would 
provide no information about the clinical relevance of this 
characteristic in the FDA's labeling. The manufacturer would submit to 
CMS weak or nonexistent evidence of a clinical benefit that it claimed 
could be attributed to the characteristic described on the FDA-approved 
label. We believe that to remedy this problem and to clarify the intent 
of this regulation it is necessary that the label contain a claim of a 
clinical benefit, which would be supported by evidence evaluated by the 
FDA.
    Regarding this commenter's statement about the scope of FDA's 
duties, the evaluation of clinical evidence in support of a labeling 
claim is a core function of the FDA and is something that they do on a 
daily basis. There is nothing unusual about the FDA's proposed role as 
it relates to evaluating evidence in support of a labeling claim

[[Page 68461]]

that could be used to satisfy the requirements for NTIOL status. This 
rule does not usurp or interfere with any functions currently carried 
out by the FDA.
    Regarding this commenter's other points, the various new technology 
payment programs we administer have somewhat different requirements, 
depending on the statutory authority and the specific purposes of the 
various programs. We believe that Congress intended that NTIOL status 
function as an incentive for innovation. If requiring a claim of 
clinical benefit results in a longer period of a single manufacturer 
utilizing a new NTIOL class exclusively, we believe that such extended 
exclusivity would serve as an additional inducement for manufacturers 
to innovate and seek NTIOL status for their innovations. While we agree 
with the commenter that seeking a label claim requires time and effort, 
we believe that this process will better serve NTIOL applicants in that 
having a claim of a clinical benefit will substantially increase the 
likelihood of ultimate NTIOL approval.
    Finally, this commenter predicted that if we finalize these 
proposed changes to the regulations, then Medicare beneficiaries will 
have reduced access to new IOL technology. We disagree that the 
proposed changes to the NTIOL regulations will affect patient access to 
IOLs. For example, one of the 2012 NTIOL candidate IOLs had been on the 
market for 10 years and was the U.S. market leader at the time of NTIOL 
application. Lack of NTIOL status did not limit patient access to this 
IOL and we believe that it would also be unlikely to result in limited 
access to future IOLs. We also believe that having NTIOLs supported by 
a labeling claim of clinical benefit will increase patient confidence 
that they are receiving a medical device with a real evidence-based 
benefit versus existing technology.
    After consideration of the public comments we received, we are 
finalizing the proposed changes to the NTIOL regulations.
6. Request for Public Comment on the ``Other Comparable Clinical 
Advantages'' Improved Outcome
    Section 416.195(a)(4)), discussed above, lists the following 
improved outcomes: (i) Reduced risk of intraoperative or postoperative 
complication or trauma; (ii) accelerated postoperative recovery; (iii) 
reduced induced astigmatism; (iv) improved postoperative visual acuity; 
(v) more stable postoperative vision; and (vi) other comparable 
clinical advantages.
    This list is from the original 1994 NTIOL statutory provision. 
Because this provision is almost 20 years old, outcomes (i) through (v) 
have only limited relevance to modern cataract surgery. For example, 
regarding outcome (i), it is unclear what, if any, type of IOL could 
reduce the risk of complication or trauma associated with cataract 
surgery, or what, if any, contemporary cataract surgery complication 
could be affected by a new type of IOL. As for outcome (ii), 
postoperative recovery is already rapid in uncomplicated cataract 
surgery; therefore, it is difficult to see how it could be 
significantly accelerated. Also, regarding outcome (iii), clinically 
significant induced astigmatism would be reflective of poor surgical 
technique and would not depend upon IOL design. Regarding outcome (iv), 
currently available IOLs provide such high quality postoperative visual 
acuity that it would be difficult to measure clinically significant 
improved postoperative visual acuity due to a new type of IOL. Finally, 
for outcome (v), postoperative vision is typically stable after 
uncomplicated cataract surgery, so again it would be difficult to 
improve upon this outcome.
    The last of the listed improved outcomes is the nonspecific 
category described as ``other comparable clinical advantages.'' Given 
that present-day cataract surgery is such a successful procedure that 
results in significantly improved vision for almost all patients who 
undergo the procedure and who are appropriate candidates for cataract 
surgery, in the CY 2013 OPPS/ASC proposed rule (77 FR 45172), we 
solicited comments on what potential benefits associated with a new IOL 
could be considered to be a ``comparable clinical advantage'' as 
compared to the list of the five improved outcomes from the statute and 
regulation described above.
    Comment: Several commenters supported retaining the ``comparable 
clinical advantage'' outcome as an open-ended category as necessary to 
accommodate future innovations. One commenter offered the following 
examples of potential comparable clinical advantages:
     Reduced incidence of posterior capsular opacity;
     Improved delivery to reduce error and minimize changes to 
the wound from insertion'
     Reduced inflammation;
     Reduced astigmatism;
     Improved vision;
     Improved vision stability; and
     Improved quality of life.
    Response: It is important that companies consider all of the 
various possibilities for new clinical advantages, and we appreciate 
the range of potential issues that could be addressed through new IOL 
technology. However, some significant questions remain. For example, it 
could be that the incidence of some of these complications so low such 
that it would be impossible to design a study to measure any 
improvement due to a new IOL. It also could be that some surgical 
complications could be the result of surgical technique that could not 
be easily compensated for with a new IOL design. We also remind 
stakeholders that innovations that provide greater surgeon convenience, 
but no direct patient benefit, would not qualify for NTIOL status. 
Also, vision improvements cannot be merely improved optical performance 
but must relate to a meaningful improved outcome in visual performance.
    The list of improved outcomes in the regulation is statutory and 
therefore we are not modifying it. After consideration of the public 
comments we received, we are adopting, without modification, our NTIOL 
proposals.
7. Announcement of CY 2013 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, 2014, 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 1, 
2013. 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

[[Page 68462]]

covered surgical procedures and covered ancillary services, 
respectively, under the revised ASC payment system. The ASC payment 
indicators in Addendum DD1 are intended to capture policy relevant 
characteristics of HCPCS codes that may receive packaged or separate 
payment in ASCs, such as whether they were on the ASC list of covered 
services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new 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 
2013 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 2012 OPPS/
ASC final rule with comment period. These addenda can be found in a 
file labeled ``January 2012 ASC Approved HCPCS Code and Payment Rates'' 
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 2013 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.
2. ASC Payment and Comment Indicators
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45172), we did not 
propose any changes to the definitions of the ASC payment and comment 
indicators for CY 2013. We referred readers to Addenda DD1 and DD2 to 
the CY 2013 OPPS/ASC proposed rule (which were available via the 
Internet on the CMS Web site) for the complete list of ASC payment and 
comment indicators proposed for the CY 2013 update.
    We did not receive any public comments on the ASC payment and 
comment indicators. Addenda DD1 and DD2 to this final rule with comment 
period (which are available via the Internet on the CMS Web site) 
contain the complete list of payment and commenter indicators for the 
CY 2013 update.

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 2012 MedPAC ``Report to the Congress: Medicare 
Payment Policy'' included the following recommendations relating 
specifically to the ASC payment system for CY 2013:
    Recommendation 5-1: ``The Congress should update the payment rates 
for ambulatory surgical centers by 0.5 percent for calendar year 2013. 
The Congress should also require ambulatory surgical centers to submit 
cost data.''
    Regarding the ASC payment update for CY 2013, MedPAC further stated 
that: ``On the basis of our payment adequacy indicators, the lack of 
ASC cost data, and our concerns about the potential effect of ASC 
growth on overall program spending, we believe a moderate update of 0.5 
percent is warranted for CY 2013.'' With regard to the collection of 
cost data, MedPAC indicated that cost data are needed to fully assess 
ASC payment adequacy under the revised ASC payment system and to 
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 to annually update ASC payment rates.
    CMS Response: We note that MedPAC's recommendation is for the 
Congress to increase ASC payment rates by 0.5 percent in CY 2013 and 
require ASCs to submit cost data. Congress has not yet acted on these 
recommendations. In the CY 2013 OPPS/ASC proposed rule (77 FR 45172), 
we proposed to continue our current policy to update the ASC conversion 
factor using the CPI-U, and we did not propose to require ASCs to 
submit cost data in the proposed rule. However, as discussed in section 
XIV.H.2.b. of the proposed rule (77 FR 45174), while we believe the 
CPI-U is appropriate to apply to update the ASC payment system, the 
CPI-U may not best reflect inflation for the goods and services 
provided by ASCs and, therefore, we sought public comment on the type 
of cost information that would be feasible to collect from ASCs that 
would assist us in determining possible alternatives to using the CPI-U 
to update ASC payment rates for inflation. In section XIV.H.2.b. of 
this final rule with comment period, we summarize and respond to the 
public comments we received regarding the ASC update and the 
feasibility of collecting ASC cost data.

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 the OPPS relative payment 
weights. Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system (the ASC conversion factor is 
multiplied by the relative payment weights calculated for many ASC 
services in order to establish payment rates). That is, application of 
the ASC conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 equal to 
aggregate Medicare expenditures that would have occurred in CY 2008 in 
the absence of the revised

[[Page 68463]]

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 
adopted a policy to make the system budget neutral in subsequent 
calendar years (72 FR 42532 through 42533).
    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 the OPPS, 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 XIV.D.2.b. of this final rule with comment period), the 
established policy is to set the payment rate at the lower of the MPFS 
unadjusted nonfacility PE RVU-based amount or the amount calculated 
using the ASC standard ratesetting methodology. 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 42517 through 
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 period (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 recommendation that was 
made in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), and CY 2012 
(76 FR 74446) rulemakings--that is, that CMS adopt for the ASC payment 
system the same wage index values used for hospital payment under the 
OPPS.
    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 continue to believe that the unadjusted hospital wage 
indices, which are updated yearly and are used by almost all Medicare 
payment systems, appropriately account for geographic variance in labor 
costs for ASCs. We refer readers to our response to this comment in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72059). We 
discuss our budget neutrality adjustment for changes to the wage 
indices below in section XIV.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 2013, 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.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2013 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 42533). We note that, as

[[Page 68464]]

discussed in section II.A.2.f. of the CY 2013 OPPS/ASC proposed rule 
(45094 through 45098) and in this final rule with comment period, 
because we proposed to base the OPPS relative payment weights on 
geometric mean costs for CY 2013, the ASC system would shift to the use 
of geometric means to determine relative payment weights under the ASC 
standard ratesetting methodology. Consistent with our established 
policy, in the CY 2013 OPPS/ASC proposed rule (77 FR 45173), we 
proposed to scale the CY 2013 relative payment weights for ASCs 
according to the following method. Holding ASC utilization and the mix 
of services constant from CY 2011, we proposed to compare the total 
payment using the CY 2012 ASC relative payment weights with the total 
payment using the CY 2013 relative payment weights to take into account 
the changes in the OPPS relative payment weights between CY 2012 and CY 
2013. We proposed to use the ratio of CY 2012 to CY 2013 total payment 
(the weight scaler) to scale the ASC relative payment weights for CY 
2013. The proposed CY 2013 ASC scaler was 0.9331 (77 FR 45174) 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 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 2013 proposed rule, we had available 
98 percent of CY 2011 ASC claims data. For this final rule with comment 
period, we have approximately 99 percent of all ASC claims data for CY 
2011.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2011 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2011 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/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
    We did not receive any comments and, therefore, we are finalizing 
our CY 2013 ASC relative payment weight scaling methodology, without 
modification.
    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 2013 scaler adjustment is 0.9324. 
This scaler adjustment is necessary to make the difference in aggregate 
ASC payments calculated using the CY 2012 ASC relative payment weights 
and the CY 2013 relative payment weights budget neutral. We calculated 
the difference in aggregate payments due to the change in relative 
payment weights holding constant the ASC conversion factor, the most 
recent CY 2011 ASC utilization from our claims data, and the CY 2012 
wage index values. For this final CY 2013 calculation, we used the CY 
2012 ASC conversion factor updated by the CY 2013 CPI-U, which is 
projected to be 1.4 percent, less the multifactor productivity 
adjustment of 0.8 percent, as discussed below in section XIV.H.2.b. of 
this final rule with comment period.
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 2013 ASC payment system, in 
the CY 2013 OPPS/ASC proposed rule (77 FR 45174), we proposed to 
calculate and apply a budget neutrality adjustment to the ASC 
conversion factor for supplier level changes in wage index values for 
the upcoming year, just as the OPPS wage index budget neutrality 
adjustment is calculated and applied to the OPPS conversion factor. For 
CY 2013, we calculated this proposed adjustment for the ASC payment 
system by using the most recent CY 2011 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2013 pre-floor and pre-reclassified 
hospital wage indices. Specifically, holding CY 2011 ASC utilization 
and service-mix and the proposed CY 2013 national payment rates after 
application of the weight scaler constant, we calculated the total 
adjusted payment using the CY 2012 pre-floor and pre-reclassified 
hospital wage indices and the total adjusted payment using the proposed 
CY 2013 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 2012 pre-floor and pre-reclassified hospital wage indices 
to the total adjusted payment calculated with the proposed CY 2013 pre-
floor and pre-reclassified hospital wage indices and applied the 
resulting ratio of 1.0002 (the proposed CY 2013 ASC wage index budget 
neutrality adjustment) to the CY 2012 ASC conversion factor to 
calculate the proposed CY 2013 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, ``if the 
Secretary has not updated amounts established'' under the revised ASC 
payment system 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.'' The statute, therefore, does not mandate the adoption of 
any particular update mechanism, but it requires the payment amounts to 
be increased by the CPI-U in the absence of any update. Because the 
Secretary updates the ASC payment amounts annually, we adopted a 
policy, which we codified at 42 CFR 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).
    Stakeholders, as well as MedPAC, have commented throughout the 
years that the CPI-U may not adequately measure inflation for the goods 
and services provided by ASCs (for example, 76 FR 74444, 74448 through 
74450; 73 FR 68757; and 72 FR 66859). While we believe the CPI-U is 
appropriate to apply to update the ASC payment

[[Page 68465]]

system, we are aware that the CPI-U is highly weighted for housing and 
transportation and may not best reflect inflation in the cost of 
providing ASC services. In developing the CY 2013 OPPS/ASC proposed 
rule, we considered possible alternatives to using the CPI-U to update 
ASC payment rates for inflation.
    ASC stakeholders have urged us to adopt the hospital market basket 
to update ASC payment rates for inflation when commenting on each 
proposed rule since the beginning of the revised ASC payment system (72 
FR 66859; 73 FR 68757; 74 FR 60628 through 60629; 75 FR 72063; and 76 
FR 74449). We considered the hospital market basket as an alternative 
to the CPI-U and, while the items included in the hospital market 
basket seem reflective of the kinds of costs incurred by ASCs, as 
stated in the CY 2012 OPPS/ASC final rule with comment period, 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 
reflective of costs associated with providing services in ASCs (76 FR 
74450). As other possible alternatives to the CPI-U update, we 
considered using the physician's practice expense (PE) component of the 
Medicare Economic Index (MEI) update, as well as using an average of 
the hospital market basket update and the PE component of the MEI 
update. However, until we have more information regarding the cost 
inputs of ASCs, we are not confident that any of these alternatives are 
a better proxy for ASC costs than the CPI-U. Therefore, in the CY 2013 
OPPS/ASC proposed rule (77 FR 45174), we proposed a continuation of the 
established policy of basing the ASC update on the CPI-U. In addition, 
we requested public comment on the type of cost information that would 
be feasible to collect from ASCs in the future in order to determine if 
one of these alternative updates or an ASC-specific market basket would 
be a better proxy for ASC cost inflation than the CPI-U.
    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 
effective with the calendar year beginning January 1, 2011. The statute 
defines the productivity adjustment to 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) (the ``MFP adjustment''). 
Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the 
Secretary to provide for a reduction in any annual update for failure 
to report on quality measures. Clause (v) of section 1833(i)(2)(D) of 
the Act 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 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized a policy that ASCs begin submitting data on 
quality measures for services beginning on October 1, 2012 for the CY 
2014 payment determination under the ASCQR Program. Section XVI.D. of 
the CY 2013 OPPS/ASC proposed rule (77 FR 45192 through 45193) provided 
a discussion of the proposed payment reduction to the annual update for 
ASCs that fail to meet the ASCQR Program requirements. In summary, we 
proposed to calculate reduced national unadjusted payment rates using 
the ASCQR Program reduced update conversion factor that would apply to 
ASCs that fail to meet their quality reporting requirements. The 
reduced rates would apply beginning in CY 2014. We proposed that 
application of the 2.0 percentage point reduction to the annual update 
factor, which currently is the CPI-U, may result in the update to the 
ASC payment system being less than zero for a year for ASCs that fail 
to meet the ASCQR Program requirements. We proposed changes to 
Sec. Sec.  416.160(a)(1) and 416.171 to reflect this proposal. Comments 
to this proposal are addressed in section XVI.D.2 of this final rule 
with comment period.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative number. Thus, in the instance where the percentage change in 
the CPI-U for a year is negative, we would hold the CPI-U update factor 
for the ASC payment system to zero. For the CY 2014 payment 
determination and subsequent payment determination years, under section 
1833(i)(2)(D)(iv) of the Act, we would reduce the annual update by 2.0 
percentage points for an ASC that fails to submit quality information 
under the rules established by the Secretary in accordance with section 
1833(i)(7) of the Act. 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 annual update factor, after application of any quality 
reporting reduction 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 annual update factor after 
application of any quality reporting reduction would result in an MFP-
adjusted update factor that is less than zero, the resulting 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 2013 OPPS/ASC proposed rule (77 FR 45175), for the 12-
month period ending with the midpoint of CY 2013, the CPI-U update was 
projected to be 2.2 percent. Because the ASCQR Program does not affect 
payment rates until CY 2014, there would be no quality reporting 
reduction to the CPI-U for CY 2013. The MFP adjustment for the period 
ending with the midpoint of CY 2013 was projected to be 0.9 percent 
based on the methodology for calculating the MFP adjustment finalized 
in the CY 2011 MPFS final rule with comment period (75 FR 73394 through 
73396) as revised in the CY 2012 MPFS final rule with comment period 
(76 FR 73300 through 73301). We proposed to reduce the CPI-U update of 
2.2 percent by the MFP adjustment of 0.9 percent, resulting in an MFP-
adjusted CPI-U update factor of 1.3 percent. Therefore, as stated in 
the CY 2013 OPPS/ASC proposed rule (77 FR 45175), we proposed to apply 
a 1.3 percent MFP-adjusted CPI-U update factor to the CY 2012 ASC 
conversion factor.
    For CY 2013, we also proposed to adjust the CY 2012 ASC conversion 
factor ($42.627) by the wage adjustment for budget neutrality of 1.0002 
in addition to the MFP-adjusted update factor of 1.3 percent discussed 
above, which resulted in a proposed CY 2013 ASC conversion factor of 
$43.190 (77 FR 45175). We invited public comments on these proposals.
    Comment: Commenters expressed varied opinions regarding the 
feasibility of requiring ASCs to submit cost data to the Secretary. One 
commenter believes that CMS should require ASCs to submit

[[Page 68466]]

cost data so that an appropriate market basket for ASC annual updates 
can be identified and so that analysts can determine the costs of an 
efficient provider of ASC services. The commenter believes that 
reporting such data is feasible because businesses such as ASCs 
typically keep record of their costs for filing taxes and other 
purposes. In addition, this commenter pointed out that other small 
providers, including home health agencies and hospices, submit cost 
data to CMS.
    Other commenters (predominantly commenters who represent ASCs) 
opposed a requirement that ASCs submit cost data to CMS. The commenters 
believed that a requirement to submit cost data would be both 
unnecessary and administratively burdensome for ASCs.
    Further, some commenters stated that requiring ASCs to submit cost 
data that would not be directly tied to receipt of payment would likely 
result in the submission of data that is unreliable. These commenters 
also maintained that using cost data to develop an ASC-specific market 
basket would not provide a more accurate reflection of ASC cost growth. 
Commenters believed that creating a single set of cost weights that are 
representative of the industry average would relate to few ASCs as most 
centers are specialized and would have a cost structure that is 
specific to the procedures they provide. These commenters also stated 
that, by CMS' own description, the hospital market basket itself is an 
imperfect measure of hospital outpatient costs but CMS has rationalized 
use of the hospital market basket as the best available measure of 
costs in the hospital outpatient setting. The commenters believe that, 
likewise, the best available proxy to measure costs in the ASC setting 
is the hospital market basket. Commenters expressed frustration that 
CMS has not adopted the hospital market basket to update ASC payment 
rates and urged the agency to not waste precious resources collecting 
ASC cost data when this reasonable measure of input prices is readily 
available.
    Response: We thank all of the commenters for their thoughts 
regarding the type of cost information that would be feasible to 
collect from ASCs in the future in order to determine if an alternative 
update or an ASC-specific market basket would be a better proxy for ASC 
cost inflation compared to the CPI-U. We will keep the commenters' 
perspectives about collecting cost information from ASCs in mind as we 
consider this issue further.
    Comment: As in previous years, commenters requested that CMS adopt 
the hospital market basket to update the ASC payment system instead of 
using the CPI-U. The commenters explained that the CPI-U does not 
fairly represent the costs borne by the ASC industry because the prices 
measured in the basket of goods comprising the index reflect the types 
and weights of categories typical of an American household, rather than 
an outpatient surgical provider. Commenters believed that the hospital 
market basket more closely reflects the cost structure of ASCs than 
does the basket of goods included in the CPI-U. Commenters stated that 
adopting the hospital market basket to update ASC payment rates would 
minimize the divergence in CY 2013 payments in ASCs compared to HOPDs 
and would ensure continued beneficiary access to ASCs.
    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 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. Commenters also requested that the 10-year MFP measurement 
period be uniform in ASCs and HOPDs so that there is no discrepancy in 
the estimates of the MFP that will provide additional divergence 
between the ASC and HOPD updates.
    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. Hospitals provide a much wider 
range of services, such as room and board and emergency services, and 
the costs associated with providing these services are not part of the 
ASC cost structure. Therefore, at this time, we do not believe that it 
is appropriate to use the hospital market basket for the ASC annual 
update.
    We recognize that the CPI-U is an output price index that accounts 
for productivity. However, section 1833(i)(2)(D)(v) of the Act requires 
the agency to reduce the annual update factor by the MFP adjustment. 
For the reasons stated above, we do not believe that the hospital 
market basket would appropriately reflect the cost structures of ASCs, 
and because we do not have cost data on ASCs, we are not able to 
recommend a more accurate update. Therefore, the CPI-U remains the most 
appropriate update. Regarding alignment of the MFP adjustment across 
payment systems, for reasons stated in the CY 2011 MPFS final rule with 
comment period (75 FR 73396), we believe that it is more appropriate to 
align the MFP adjustment with the update timeframes for each payment 
system rather than aligning the MFP adjustment across payment systems.
    After consideration of the public comments we received, we are 
applying our established methodology for determining the final CY 2013 
ASC conversion factor. Using more complete CY 2011 data for this final 
rule with comment period than was available for the proposed rule, we 
calculated a wage index budget neutrality adjustment of 1.0008. Based 
on updated data, the CPI-U for the 12-month period ending with the 
midpoint of CY 2013 is now projected to be 1.4 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 0.8 percent, resulting in 
an MFP-adjusted CPI-U update factor of 0.6 percent. The final ASC 
conversion factor of $42.917 is the product of the CY 2012 conversion 
factor of $42.627 multiplied by the wage index budget neutrality 
adjustment of 1.0008 and the MFP-adjusted CPI-U payment update of 0.6 
percent. We also are finalizing proposed changes to Sec. Sec.  
416.160(a)(1) and 416.171, without modification, regarding the 
reduction to payment rates beginning in CY 2014 for ASCs that fail to 
meet the ASCQR Program requirements.
3. Display of CY 2013 ASC Payment Rates
    Addenda AA and BB to this CY 2013 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 2013 for covered 
surgical procedures and covered ancillary services, respectively. These 
addenda contain several types of information related to the CY 2013 
payment rates. Specifically,

[[Page 68467]]

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 2013. 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 in this final rule with 
comment period.
    The values displayed in the column titled ``CY 2013 Payment 
Weight'' are the relative payment weights for each of the listed 
services for CY 2013. 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 and brachytherapy sources that are separately 
paid under the OPPS, or services that are contractor-priced or paid at 
reasonable cost in ASCs.
    To derive the CY 2013 payment rate displayed in the ``CY 2013 
Payment'' column, each ASC payment weight in the ``CY 2013 Payment 
Weight'' column was multiplied by the CY 2013 conversion factor of 
$42.917. The conversion factor includes a budget neutrality adjustment 
for changes in the wage index values and the annual update factor as 
reduced by the productivity adjustment (as discussed in section 
XIV.H.2.b. of this final rule with comment period).
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2013 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2013 Payment'' column displays the CY 
2013 national unadjusted ASC payment rates for all items and services. 
The CY 2013 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 2012.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are to be excluded from payment in ASCs for CY 
2013.
    We did not receive any public comments regarding the continuation 
of our policy to provide CY 2013 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 2013 for covered 
surgical procedures and covered ancillary services, respectively, and 
provide additional information related to the CY 2013 rates.

XV. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality 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 have financial 
incentives for the reporting of quality data to CMS.
    CMS also has implemented quality reporting programs for long term 
care hospitals, inpatient rehabilitation hospitals, the hospice 
program, ambulatory surgical centers (the Ambulatory Surgical Center 
Quality Reporting (ASCQR) Program), as well as a program for physicians 
and other eligible professionals, known as the Physician Quality 
Reporting System (PQRS) (formerly known as the Physician Quality 
Reporting Initiative (PQRI)). CMS has recently finalized quality 
reporting programs for inpatient psychiatric facilities and PPS-exempt 
cancer hospitals.
    Finally, CMS has implemented a Hospital Value-Based Purchasing 
Program and an end-stage renal disease (ESRD) Quality Incentive Program 
(76 FR 628 through 646) that link 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 national priorities for improved quality and efficiency of 
care for Medicare beneficiaries as reflected in the National Quality 
Strategy, as well as conditions for which wide cost and treatment 
variations have been reported, despite established clinical guidelines. 
Our ultimate goal is to align the clinical quality measure requirements 
of the Hospital OQR Program and various other programs, such as the 
Hospital IQR Program, the ASCQR Program, and the Medicare and Medicaid 
Electronic Health Record (EHR) Incentive Programs, authorized by the 
Health Information Technology for Economic and Clinical Health Act, so 
that the burden for reporting will be reduced. As appropriate, we will 
consider the adoption of measures with electronic specifications, to 
enable the collection of this information as part of care delivery. 
Establishing such an alignment will require interoperability between 
electronic health records (EHRs), and CMS data collection systems, with 
data being calculated and submitted via certified EHR technology; 
additional infrastructural development on the part of hospitals and 
CMS; and the adoption of standards for capturing, formatting, and 
transmitting the data elements that make up the measures. Once these 
activities are accomplished, the adoption of many measures that rely on 
data obtained directly from EHRs will enable us to expand the Hospital 
OQR Program measure set with less cost and burden to hospitals.
    In implementing this and other quality reporting programs, we 
generally applied the same principles for the development and the use 
of measures, with some differences:
     Our overarching goal is to support the National Quality 
Strategy's goal of better health care for individuals, better health 
for populations, and lower costs for health care. The Hospital OQR 
Program will help achieve these goals by creating transparency around 
the quality of care at hospital outpatient departments to support 
patient decision-making and quality

[[Page 68468]]

improvement. Given the availability of well validated measures and the 
need to balance breadth with minimizing burden, measures should take 
into account and address, as fully as possible, the six domains of 
measurement that arise from the six priorities of the National Quality 
Strategy: Clinical care; Person- and caregiver-centered experience and 
outcomes; Safety; Efficiency and cost reduction; Care coordination; and 
Community/population health. More information regarding the National 
Quality Strategy can be found at: http://www.healthcare.gov/law/resources/reports/. HHS engaged a wide range of stakeholders to develop 
the National Quality Strategy, as required by the Affordable Care Act.
     Pay-for-reporting and public reporting should rely on a 
mix of standards, processes, outcomes, efficiency, and patient 
experience of care measures, including measures of care transitions and 
changes in patient functional status.
     To the extent possible and recognizing differences in 
payment system maturity and statutory authorities, measures should be 
aligned across Medicare and Medicaid public reporting and incentive 
payment systems to promote coordinated efforts to improve quality. 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.
     We weigh the relevance and the utility of measures 
compared to the burden on hospitals in submitting data under the 
Hospital OQR Program. The collection of information burden on providers 
should be minimized to the extent possible. To this end, we are working 
toward the eventual adoption of electronically-specified measures so 
that data can be calculated and submitted via certified EHR technology 
with minimal burden. We also seek 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 
databases. In recent years we have adopted measures that do not require 
chart abstraction, including structural measures and claims-based 
measures that we can calculate using other data sources.
     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. We take into 
account the views of the Measure Application Partnership (MAP). The MAP 
is a public-private partnership convened by the National Quality Forum 
(NQF) for the primary purpose of providing input to HHS on selecting 
performance measures for quality reporting programs and pay for 
reporting programs. The MAP views patient safety as a high priority 
area and it strongly supports the use of NQF-endorsed safety measures. 
Accordingly, we consider the MAP's recommendations in selecting quality 
and efficiency measures. Information about the MAP can be found at 
http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx
     Measures should be developed with the input of providers, 
purchasers/payers, consumers, and other stakeholders. Measures should 
be aligned with best practices among other payers and the needs of the 
end users of the measures. We take into account widely accepted 
criteria established in medical literature.
     HHS Strategic Plan and Initiatives. HHS is the U.S. 
government's principal agency for protecting the health of all 
Americans. HHS accomplishes its mission through programs and 
initiatives. Every 4 years HHS updates its Strategic Plan and measures 
its progress in addressing specific national problems, needs, or 
mission-related challenges. The goals of the HHS Strategic Plan for 
Fiscal Years 2010 through 2015 are to: Transform Health Care; Advance 
Scientific Knowledge and Innovation; Advance the Health, Safety, and 
Well-Being of the American People; Increase Efficiency, Transparency, 
and Accountability of HHS Programs; and Strengthen the Nation's Health 
and Human Services Infrastructure and Workforce (http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf). HHS prioritizes policy and 
program interventions to address the leading causes of death and 
disability in the United States, including heart disease, cancer, 
stroke, chronic lower respiratory diseases, unintentional injuries and 
preventable behaviors. Initiatives such as the HHS Action Plan to 
Reduce Healthcare-associated Infections (HAIs) in clinical settings and 
the Partnership for Patients exemplify these programs.
     CMS Strategic Plan. We strive to ensure that measures for 
different Medicare and Medicaid programs are aligned with priority 
quality goals, that measure specifications are aligned across settings, 
that outcome measures are used whenever possible, and that quality 
measures are collected from EHRs as appropriate.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 
through 74452), we responded to public comment on many of these 
principles. In the CY 2013 OPPS/ASC proposed rulemaking, we generally 
applied the same principals for our considerations for future measures, 
with some differences.
    Comment: Many commenters supported CMS' general principles of 
measure development, selection, and implementation, specifically, CMS' 
combined approach of using process and outcomes measures, as well as 
our intent to adopt NQF-endorsed measures whenever feasible, and to 
align measures across settings under different quality reporting 
programs. One commenter stated that CMS should only adopt measures that 
are useful for hospital outpatient departments to improve their quality 
performance.
    A few commenters recommended that the Hospital OQR Program only 
adopt NQF-endorsed measures which undergo established sound, and timely 
measure maintenance and update procedures. Several commenters urged 
that CMS proceed cautiously when considering adopting non-NQF-endorsed 
measures, which in some cases may not have been rigorously field-tested 
and may end up in subsequent suspension or implementation deferral. 
Commenters requested that CMS delay adoption of measures in the future 
until specification problems are completely ironed out so that 
hospitals do not have to spend resources on preparing for incompletely 
specified or untested measures.
    Response: As discussed, we usually focus on measures appropriate to 
the specific provider category that reflect the level of care and the 
most important areas of service and measures for that provider 
category. Section 1833(t)(17)(C)(i) of the Act requires the Secretary 
to ``develop measures that the Secretary determines to be appropriate 
for the measurement of the quality of care (including medication 
errors) furnished by hospitals in outpatient settings and that reflect 
consensus among affected parties and, to the extent feasible and 
practicable, shall include measures set forth by one or more national 
consensus building entities.'' This provision does not require that the 
measures we adopt for the Hospital OQR Program be endorsed by any 
particular entity, and we believe that consensus among affected parties 
can be achieved by means other than endorsement by a national consensus 
building entity, including through the

[[Page 68469]]

measure development process, through broad acceptance and use of the 
measure(s), and through public comment.
    Generally, we prefer to adopt NQF-endorsed measures. We rely on NQF 
to endorse only those measures that have met the rigorous field testing 
requirement and we do not re-test these measures prior to adoption. 
However, in some circumstances, as with OP-19, when we find the 
specifications require revision after the measure has been adopted, CMS 
chooses to suspend a measure rather than requiring continued data 
collection to alleviate burden on hospitals.
    We strive to field test each measure we use in our programs. 
However, on rare occasions, we adopt measures that were developed and 
tested by other measure stewards. With respect to the commenters who 
recommended that, in the future, we delay adoption of measures until 
specification problems are completely resolved so that hospitals would 
not have to spend resources on preparing for incompletely specified or 
untested measures, we believe the commenters may have been referring 
specifically to one measure-- OP-24: Cardiac Rehabilitation Patient 
Referral from an Outpatient Setting. For that measure, we are delaying 
data collection until January 1, 2014, and its application toward a 
payment determination will be for CY 2015 rather than CY 2014. If our 
interpretation of the comment was correct, we understand the 
commenter's concerns. However, we clarify that because we have not 
added any OP-24 measure specifications to the Specification Manual yet, 
it is highly unlikely that hospitals would have spent resources in 
preparing for this measure.
    In instances where we develop our measures, we do proceed with 
caution, employing a rigorous consensus-based measure development and 
field testing process that incorporates broad stakeholder input. 
Therefore, we believe it is reasonable to adopt measures developed in 
this manner whether or not they achieve NQF endorsement. For those 
measures that we have not developed, we strive to obtain testing 
information on the technical aspects from the developer and to work 
with the developer to create specifications that enable standardized 
collection in national programs. In the case of measures we do not 
develop, the above specification process may occur after adoption of 
the measure in a reporting program, but prior to implementing data 
collection.
    Comment: Some commenters supported CMS' goal to align measures in 
the Hospital IQR, Hospital OQR, and Medicare and Medicaid EHR Incentive 
Programs. Commenters also commended CMS for striving for quality 
reporting that is based upon meaningful and comparable measures.
    Response: We thank the commenters for supporting our strategy to 
align measures across settings and programs whenever feasible and to 
move toward more meaningful measures in our programs.
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. Measure Updates and Data Publication
a. Process for Updating Quality Measures
    Technical specifications for the Hospital OQR Program measures are 
listed in the Hospital OQR Specifications Manual, which is posted on 
the CMS QualityNet Web site at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228772438492.
    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 an additional subregulatory process for 
making updates to the measures we have adopted for the Hospital OQR 
Program. This process is necessary so that the Hospital OQR measures 
are calculated based on the most up-to-date scientific and consensus 
standards. Under this process, when a national consensus building 
entity updates the specifications for a measure that we have adopted 
for the Hospital OQR Program, we update our specifications for that 
measure accordingly. For measures that are not endorsed by a national 
consensus building entity, the subregulatory process is based on 
scientific advances as determined necessary by CMS, in part, through 
our measure maintenance process involving Technical Expert Panels (73 
FR 68767). We provide notice of the updates via the QualityNet Web 
site, http://www.QualityNet.org, and in the Hospital OQR Specifications 
Manual.
    We generally release the Hospital OQR Specifications Manual every 6 
months and release addenda as necessary. This release schedule provides 
at least 3 months of advance notice for nonsubstantive changes such as 
changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 months of 
advance notice for changes to data elements that would require 
significant systems changes.
    Comment: One commenter believed that conversion of measures to use 
ICD-10-CM/PCS and eMeasure formats should be considered a substantial 
change and should warrant the proposed rulemaking process. One 
commenter asserted that there are shortcomings in the CMS subregulatory 
process. The commenter was concerned that this rapid subregulatory 
process may not include a field review of the measure. Secondly, the 
commenter stated that some measure changes affect data accuracy and 
completeness, such as change of diagnosis, procedure codes and changes 
to exclusions to the patient population and extended application of the 
measure to other hospital locations. The commenter believed that these 
are substantive changes rather than non-substantive changes as noted by 
CMS.
    Response: We will be transitioning all of our billing and 
measurement systems from ICD-9 to ICD-10. We intend to solicit public 
comment on the ICD-10 versions of our measure specifications through 
future rulemaking prior to implementation. We normally incorporate 
coding updates for the measures using our established subregulatory 
process because such updates do not change the basic underlying 
concepts being measured. This is theoretically true of moving from ICD-
9 to the ICD-10 coding system (or eMeasure format). However, we 
recognize that in moving to ICD-10 coding (or eMeasure format) there 
may be some nuances in the measures that when translated result in 
unanticipated differences in performance, rendering prior measure 
results untrendable with results for the same measures under the new 
coding system. We also intend to study this effect further once 
implementation has occurred and data are available to do so.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504), we indicated 
that examples of what we might generally regard as nonsubstantive 
changes to measures might include updated

[[Page 68470]]

diagnosis or procedure codes, medication updates for categories of 
medications, or a broadening of age ranges. We believe that 
nonsubstantive changes may also include updates to NQF-endorsed 
measures based upon changes to guidelines upon which the measures are 
based. We note that the NQF process has already incorporated an 
opportunity for public comment and engagement in the measure 
maintenance process.
    We will continue to use rulemaking to adopt substantive updates 
made by the NQF to the endorsed measures we have adopted for the 
Hospital OQR Program. Examples of changes that we might generally 
consider to be substantive would be those in which the changes are so 
significant that the measure is no longer the same measure, or when a 
standard of performance assessed by a measure becomes more stringent 
(for example, changes in acceptable timing of medication, NQF expansion 
of endorsement of a previously endorsed measure to a new setting, 
procedure/process, or test administration). However, these and other 
changes would need to be evaluated on a case-by-case basis to determine 
whether or not a change to a measure is in fact substantive.
    Comment: A few commenters expressed concern that the CMS procedures 
for notifying providers of significant changes to quality measures and 
general changes to the Hospital OQR Program may be problematic at 
times, as email blasts, one of the CMS communication methods, do not 
always reach the appropriate quality measure personnel. The commenters 
requested consistency in transparency of CMS' communications to 
hospitals, vendors, and QIOs and requested sufficient notice be given 
to hospitals regarding the new start date of any measure changes.
    Response: We thank these commenters for feedback on communication. 
We endeavor to communicate clearly to all Hospital OQR Program 
stakeholders. We offer email blasts to subscribers who sign up to 
receive them, indicating they prefer to receive information by email. 
The QualityNet Web site contains a full list of all email blasts sent, 
and it is available for any stakeholder to review at any time. We do 
not intend the listserv to replace QualityNet as the primary source for 
information and resources for the Hospital OQR Program.
    We offer a helpline that is available weekdays to offer technical 
support and assistance to callers, in an effort to help any caller 
successfully comply with program requirements. Please find this 
helpline and program contact information by visiting the QualityNet Web 
site at https://www.qualitynet.org. From this page, choose ``Hospitals-
Outpatient'' from the drop down menus across the top of the page, then 
click on ``Support Contact.''
    Comment: A few commenters appreciated the 6-month advance notice of 
data elements and system changes but noted that the 6-month period for 
measure update and Specifications Manual release may not provide 
sufficient time for hospitals to make changes in data elements and 
system. Another commenter requested more detailed instructions on chart 
abstraction be provided because the training Qs and As posted on the 
QualityNet Web site are insufficient and appear to contradict the 
Specifications Manual at times.
    Response: Our experience with this and other quality reporting 
programs indicates that 6 months' notice is sufficient for hospitals 
and their vendors to accommodate data element and system changes. We 
provide detailed abstraction instructions in our measure Specifications 
Manual, and provide additional guidance through Qs and As posted on the 
QualityNet Web site, and by offering periodic training.
    We will take into consideration the recommendation to provide more 
detailed instructions on chart abstraction due to insufficient Qs and 
As posted on the QualityNet Web site. We are aware of a specific 
situation we corrected earlier this year. Under the ED Throughput 
topic, we had two contradictory answers posted within our Qs and As for 
a brief period. We have corrected the situation and we apologize for 
the confusion it may have caused.
    We will address this comment by having our primary support 
contractor review the current and incoming Qs and As to look for 
opportunities to incorporate answers into the Specifications Manual 
where appropriate. We strive to maintain high quality Qs and As that 
stakeholders can use as a reference for chart abstraction and measure 
specifications.
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 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. To meet these requirements, data that a hospital has 
submitted for the Hospital OQR Program are typically provided to 
hospitals for a preview period via QualityNet, and then displayed on 
CMS Web sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov following the preview period. The Hospital 
Compare Web site is an interactive Web tool that assists beneficiaries 
by providing information on hospital quality of care. We believe this 
information motivates beneficiaries to work with their doctors and 
hospitals to discuss the quality of care hospitals provide to patients, 
thus 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 CMS Certification Number (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. That 
is, in a situation in which a larger hospital has taken over ownership 
of a smaller hospital, the smaller hospital's CCN will be replaced by 
the larger hospital's CCN (the principal CCN). For data display 
purposes, we will only display data received under the principal CCN. 
If both hospitals are submitting data, those data are not 
distinguishable in the warehouse; and the data is calculated together 
as one hospital.
    Consistent with our current policy, we make Hospital IQR and 
Hospital OQR data publicly available whether or not the data have been 
validated for payment purposes. The Hospital Compare Web site currently 
displays information covering process of care, structural, ED 
throughput timing, health IT, and imaging efficiency measure data under 
the Hospital OQR Program.
    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

[[Page 68471]]

listservs, CMS email blasts, memoranda, Hospital Open Door Forums, 
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: One commenter urged CMS to continue to use both 
stakeholders and focus groups to develop and evaluate terminology to 
present user-friendly measurement data on Hospital Compare. The 
commenter believed this procedure would help to decrease misinformation 
and unnecessary alarm to patients. Another commenter questioned the 
value of the ``old'' data and the ``outdated time-frame of data 
collection period'' presented in Hospital Compare, in facilitating 
health care decisions by Medicare beneficiaries.
    Response: On Hospital Compare, we strive to provide consumers with 
meaningful information that they can use to help make healthcare 
decisions. When warranted, we use formative consumer testing to assure 
the language and display of information makes sense to consumers before 
posting. Formative testing allows CMS to adjust displays and language 
so that they are more meaningful to consumers based on consumer 
feedback. At the same time, we believe that it is critical to maintain 
the integrity of the measure intent, thereby not simplifying the data 
too much as to risk making the information so general that it is not 
meaningful.
    The data we publicly report do not all have the same performance 
period. For example, the process-of-care measures are collected 
quarterly and are displayed as a rolling four quarters of data on 
Hospital Compare. We allow 4 to 4.5 months after the reporting quarter 
for hospitals to submit their complete data to the CMS clinical data 
warehouse. In contrast, the outcomes measures are calculated using 3 
years of data from Medicare fee for service claims.
    Comment: One commenter was concerned that the display of the 
acceptable quality range and benchmarks publicly reported for the 
Outpatient Imaging Efficiency (OIE) measures may cause unnecessary 
alarm to consumers.
    Response: We appreciate the commenter's concerns. To provide 
meaningful performance benchmarks, we will emphasize the ``within 
range'' rates and facility outlier results in a facility's public 
reporting so as to minimize the potential for negatively affecting 
access to imaging services. In addition, we continue to use both 
stakeholder and focus groups for developing and evaluating terminology 
for presenting measurement data to the public, in order to avoid 
misleading or alarming patients unnecessarily.

B. Process for Retention of Hospital OQR Program Measures Adopted in 
Previous Payment Determinations

    In past rulemakings, we have proposed to retain previously adopted 
measures for each payment determination on a year-by-year basis and 
invited public comments on the proposal to retain such measures for all 
future payment determinations unless otherwise specified. In the CY 
2013 OPPS/ASC proposed rule (77 FR 45178), for the purpose of 
streamlining the rulemaking process, beginning with this rulemaking, we 
proposed that when we adopt measures for the Hospital OQR Program 
beginning with a payment determination and subsequent years, these 
measures are automatically adopted for all subsequent year payment 
determinations unless we propose to remove, suspend, or replace the 
measures. We invited public comment on this proposal.
    Comment: Some commenters recognized the importance of stability and 
consistency in the Hospital OQR Program set and supported the proposed 
automatic retention of Hospital OQR Program measures adopted in a 
previous year for subsequent payment year determinations. One commenter 
stated that proposed rulemakings should be devoted to address new 
changes rather than repeating discussions of continuing measures 
previously adopted. However, the commenter urged CMS to publish the 
full list of measures to be continued, in the OPPS/ASC proposed rule 
each year. The commenter believed publishing the list of measures would 
provide the public the opportunity to comment and to share experience 
on current measures.
    Response: We appreciate the commenters' recognition of the 
importance of our goal to streamline the administrative process in 
rulemaking. As suggested by the commenters, we will continue to publish 
the full list of measures to be continued in the OPPS proposed rules, 
for the public to provide input and share experience.
    Comment: A few commenters urged that CMS continue to propose all 
Hospital OQR Program measures adopted, on an annual basis. Commenters 
were concerned that if measure retention occurs without going through 
the rulemaking process year by year, irrelevant and obsolete measures 
may not be removed timely, and the transparency of the rulemaking 
process will be compromised.
    Response: We do not believe the proposed measure retention policy 
will compromise the transparency in rulemaking or slow down the removal 
or suspension of problematic measures. Rather, the measure retention 
policy would enhance administrative efficiency while providing clear 
expectations to hospital providers. Should we decide there is a need to 
remove or suspend a measure for concerns of patient safety, we will act 
expeditiously to remove or suspend the measure between rulemaking 
cycles. We will notify the public by using memoranda, email blasts 
distributed through QualityNet, and news postings on the ``Splash 
page'' on QualityNet. We will thereafter confirm the removal or 
suspension of the measure through rulemaking.
    In the FY 2010 IPPS/LTCH PPS rulemaking, we adopted a process for 
the Hospital IQR Program for immediate measure removal based on 
evidence that the continued use of the measure as specified raises 
patient safety concerns. In the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60634), we adopted this same policy to be used in 
the Hospital OQR Program. Furthermore, should we determine that a 
measure is problematic based upon other criteria stated in the CY 2013 
OPPS/ASC proposed rule (77 FR 45178), we will utilize rulemaking to 
propose the removal or suspension of the measure and obtain public 
comment prior to determining whether to remove or suspend the measure.
    After consideration of the public comments we received, we are 
finalizing the automatic retention of Hospital OQR Program measures 
adopted in previous payment determinations for subsequent year payment 
determinations.

[[Page 68472]]

C. Removal or Suspension of Quality Measures From the Hospital OQR 
Program Measure Set

1. Considerations in Removing Quality Measures From the Hospital OQR 
Program
    In the FY 2010 IPPS/LTCH PPS rulemaking, we finalized a process for 
immediate retirement of Hospital IQR Program measures based on evidence 
that the continued use of the measure as specified raises patient 
safety concerns (74 FR 43864 through 43865). We adopted this same 
immediate measure retirement policy for the Hospital OQR Program in the 
CY 2010 OPPS/ASC final rule with comment period (74 FR 60634).
    In previous Hospital IQR Program rulemakings, we have referred to 
the removal of measures from the Hospital IQR Program as 
``retirement.'' We have used this term to indicate that Hospital IQR 
Program measures are no longer included in the Hospital IQR Program 
measure set for one or more indicated reasons. However, we note that 
this term may imply that other payers/purchasers/programs should cease 
using these measures that are no longer required for the Hospital IQR 
Program. In order to clarify that this is not our intent, we stated in 
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28034) that we will use 
the term ``remove'' rather than ``retire'' to refer to the action of no 
longer including a measure in the Hospital IQR Program. In the CY 2013 
OPPS/ASC proposed rule (77 FR 45178), we proposed to adopt the same 
terminology of ``removal'' in the Hospital OQR Program to indicate our 
action of discontinuing a measure in the Hospital OQR Program.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we finalized 
a set of criteria to use when determining whether to remove Hospital 
OQR Program measures. These criteria are: (1) Measure performance among 
hospitals is so high and unvarying that meaningful distinctions and 
improvements in performance can no longer be made (``topped out'' 
measures); (2) performance or improvement on a measure does not result 
in better patient outcomes; (3) a measure does not align with current 
clinical guidelines or practice; (4) the availability of a more broadly 
applicable (across settings, populations, or conditions) measure for 
the topic; (5) the availability of a measure that is more proximal in 
time to desired patient outcomes for the particular topic; (6) the 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic; and (7) collection or public 
reporting of a measure leads to negative unintended consequences such 
as patient harm. These criteria were suggested by commenters during 
Hospital IQR Program rulemaking, and we determined that these criteria 
are also applicable in evaluating Hospital OQR Program quality measures 
for removal. In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), we 
proposed to apply these measure removal criteria in the Hospital OQR 
Program as well, and we invited public comments on these proposals.
    In addition to these criteria, we take into account the views of 
the Measure Application Partnership (MAP) in the evaluation of measure 
removal. The MAP is a public-private partnership convened by the NQF 
for the primary purpose of providing input to HHS on selecting 
performance measures for certain quality reporting programs and pay for 
performance programs. The MAP views patient safety as a high priority 
area and it strongly supports the use of NQF-endorsed measures. 
Furthermore, for efficiency and streamlining purposes, we strive to 
eliminate redundancy of similar measures.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), we did not 
propose to retire any measures from the Hospital OQR Program.
    Comment: A few commenters agreed with CMS that the term ``removal'' 
is preferable to ``retirement'' as the measure at issue may still be 
relevant in other payers/purchasers/programs. The commenters supported 
all of the proposed measure removal criteria. One commenter noted that 
CMS should not always choose the availability of measures applicable to 
a broader patient population as a measure removal criterion, over 
focused measures targeted at subsets of patient population. The 
commenter asserted that in some instances, condition-specific measures 
are warranted.
    Response: We thank the commenters for the support of the measure 
removal criteria. We are cognizant that some focused measures targeted 
at subsets of patient population are also relevant in the Hospital OQR 
Program. We want to clarify that before considering the removal of a 
measure in any given situation, we first assess whether the removal 
criteria are relevant. We would not be likely to propose the removal of 
a measure because there is a measure with broader applicability if what 
we seek to measure requires a more targeted, condition or patient-
specific assessment. We might, on the other hand, consider removal of a 
measure based on the availability of a measure that is more strongly 
associated with desired patient outcomes for a particular topic, since 
this might result in a focused measure that is targeted to subsets of 
patient populations. In any given situation, we will focus only on 
removal criteria that are relevant to a particular set of 
circumstances. If more than one of the measure removal criteria appears 
to be relevant, we intend to take a balanced approach in assessing the 
value of each of the different criteria in a given situation before 
removing any measure.
    Comment: One commenter requested that besides using CMS program 
data, CMS should also solicit input from developers and analyze data 
from EHRs and registries to identify topped-out measures. To avoid the 
unintended consequence of hospitals not spending resources on specific 
interventions due to measure removal, one commenter urged CMS to 
suspend the measures at issue rather than removing measures whenever 
feasible. In addition, the commenter requested that CMS solicit public 
input before suspending or removing a measure.
    Response: We expect hospitals to always follow appropriate standard 
of care and clinical guidelines in exercising positive interventions, 
regardless of whether a measure is being suspended or removed. Should 
we propose to remove measures using the rulemaking process, we seek 
input from the public, including measure developers and entities using 
EHRs to collect the measures. However, in the case of suspension or 
removal due to patient safety concerns, action would need to be taken 
quickly and may not coincide with rulemaking cycles. Should this occur, 
we would seek to suspend measures in situations where we believe the 
measure can be re-specified in a manner that would not be overly 
prescriptive or overly burdensome to providers.
    Comment: A few commenters urged CMS to closely align its measure 
removal with the MAP recommendations. The commenters cited as examples 
of measures that should be removed 7previously adopted Hospital OQR 
Program measures that are not NQF-endorsed and not recommended by the 
MAP.
    Response: As we have already stated, we consider all of the MAP 
input we receive, including its recommendations for removal of 
measures, before making a decision about removing or keeping any 
particular measure. We did not include any proposals regarding the 7 
measures that the commenters mentioned in the CY 2013 OPPS/ASC

[[Page 68473]]

proposed rule. As such, we are not making any revisions to these 
measures in this rulemaking. However, we thank the commenters for these 
measure removal suggestions and will take them into consideration for 
future measure removal.
    We note that section 1833(t)(17)(C)(i) of the Act requires the 
Secretary to develop measures that the Secretary determines to be 
appropriate for the measurement of the quality of care furnished by 
hospitals in outpatient settings and that reflect consensus among 
affected parties and, to the extent feasible and practicable to include 
measures set forth by one or more national consensus building entities. 
The Act does not require that the measures we adopt for the Hospital 
OQR Program be endorsed by any particular entity, such as the NQF. In 
addition, we believe that consensus among affected parties can be 
reflected by means other than endorsement by a national consensus 
building entity, including consensus achieved during the measure 
development process, consensus shown through broad acceptance and use 
of measures, and consensus through public comment. Finally, the Act 
does not require us to do more than consider MAP input.
    Comment: One commenter inquired about the criteria for resuming 
data collection for measures that are removed or temporarily suspended 
from the Hospital OQR Program.
    Response: Measures that are removed must be proposed through 
rulemaking in order to be added back to the program prior to collecting 
data. For suspended measures, we will strive to align with the regular 
quarterly collection cycle that has been established for chart-
abstracted measures, and we will provide sufficient notice (at least 3 
months) prior to resuming collection of suspended measures. We will 
notify hospitals of resumed collection the same way we notify them of 
suspension--through QualityNet memoranda and email blasts. We also 
intend to issue addenda to Specifications Manual releases. However, 
should we determine that the re-specified measure is substantively 
changed; that is, changes have been made that affect the underlying 
quality concepts being measured, we would use rulemaking to formally 
propose to replace the suspended measure with the modified measure. As 
we have noted in an earlier response, examples of changes that we might 
generally consider to be substantive would be those in which the 
changes are so significant that the measure is no longer the same 
measure, or when a standard of performance assessed by a measure 
becomes more stringent.
    After consideration of the public comments we received, we are 
finalizing the term ``removal'' to indicate future action of 
discontinuing a measure in the Hospital OQR Program. Also, we are 
finalizing the adoption of the measure removal criteria used in the 
Hospital IQR Program for the Hospital OQR Program. We also thank the 
commenters for the suggestions to keep, remove, or change the status of 
some of the measures we previously adopted. At this time, we intend to 
keep the measures as adopted.
2. Removal of One Chart-Abstracted Measure for the CY 2013 and 
Subsequent Years Payment Determinations
    In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43863), we 
established a precedent to immediately remove a measure from a measure 
set using a subregulatory notification process followed by subsequent 
confirmation in rulemaking in situations when there is a reason to 
believe that continued collection of the measure raises patient safety 
concerns, and the measure cannot be reasonably revised in a manner that 
would alleviate the concern without being overly complex. For CY 2013 
and subsequent year payment determinations, we are confirming what we 
stated in our August 13, 2012, memorandum ``Removal of Hospital 
Outpatient Quality Reporting Measure (OQR) 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'' that we have removed measure OP-16. (To review 
this memorandum, visit http://www.qualitynet.org; from this page, 
choose ``Hospitals-Outpatient'' from the drop down menus across the top 
of the page, then click on ``Email-Notifications.'' Memoranda are 
listed by date of publication.)
    We adopted measure OP-16 for the Hospital OQR Program for the CY 
2013 payment determination with data collection beginning with January 
1, 2012 encounters. However, we are removing OP-16 from the Hospital 
OQR measure set based on patient safety concerns. On July 11, 2012 the 
Food and Drug Administration (FDA) issued a Class I recall on several 
point of care (POC) testing kits, including those that provide Troponin 
results. The Class I recall was due to an increased frequency of false 
positive and false negative results. FDA defines a Class I recall as: 
``a situation in which there is a reasonable probability that the use 
of or exposure to a violative product will cause serious adverse health 
consequences or death.'' The FDA safety alert appears at the following 
Web site: http://www.fda.gov/Safety/MedWatch/SafetyInformation/SafetyAlertsforHumanMedicalProducts/ucm311405.htm.
    While OP-16 did not specify which type of laboratory equipment 
should be used to obtain Troponin results, hospitals may be using these 
POC tests in order to expedite results. We understand that the FDA 
considers the size of this recent Class I recall to be large. Due to 
the magnitude of this recall, we became concerned that continued 
collection of the measure may potentially impact patient safety because 
of the high probability of false results associated with the equipment. 
We chose to remove the measure from the program rather than suspend the 
measure because revision of the measure to address this issue would 
result in an overly prescriptive and complex measure. On August 13, 
2012, we released a memorandum ``Removal of Hospital Outpatient Quality 
Reporting Measure (OQR) 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.'' This memorandum notified the Hospital OQR Program 
stakeholder community to cease chart abstraction for the OP-16 measure 
immediately, and that CMS will not publically report, validate or use 
in the CY 2013 payment determination any data collected on this 
measure. The memorandum dated August 13, 2012 is available for review 
at the QualityNet Web site. To review this memorandum, access http://
www.qualitynet.org; from this page, choose ``Hospitals-Outpatient'' 
from the drop down menus across the top of the page, then click on 
``Email-Notifications.'' Memoranda are listed by date of publication.) 
Since the memorandum was issued, we have received two Congressional 
inquiries from POC device manufacturers indicating that our decision to 
remove the measure will impact them negatively. One commenter also 
indicated that the measure has encouraged increased communication in 
the Emergency Department and expressed concern that removal of the 
measure would result in reduced communication.
    We emphasize that despite the removal of OP-16 from the Hospital 
OQR Program, we expect hospitals to continue the timely triage, 
diagnosis

[[Page 68474]]

and treatment of cardiac and other patients in the ED according to 
established clinical guidelines. We also expect that hospitals will 
continue their efforts to improve communication and throughput in the 
ED.
    Although we have requested immediate discontinuation of chart 
abstraction for OP-16, CMS is unable to cease data collection in the 
system until January 1, 2013, when we have made certain system changes. 
In order to overcome CMS's system limitation, hospitals can choose to 
submit a meaningless value for this measure through December 31, 2012. 
We ask hospitals not to submit a blank value for OP-16, as a lack of a 
populated value for OP-16 will cause a case to be rejected. If a case 
is rejected due to lack of data, this could impact a hospital's ability 
to meet the Hospital OQR requirements. Some vendors may have the 
capability to provide a default value for OP-16. Hospitals are 
encouraged to work with their vendors to determine options to populate 
the OP-16 data field at submission.
    Comment: A few commenters supported the removal of OP-16 and 
believed that there was insufficient evidence to link this process 
measure to patient outcomes. However, some commenters were concerned 
that the removal of OP-16 may undermine the importance of Troponin 
testing or the need to receive the results of Troponin testing in a 
timely manner. Commenters asserted that clinical guidelines for the 
diagnostic evaluation of patients with AMI or presumed cardiac chest 
pain still recommend receiving results from cardiac marker testing, 
including Troponin, within 60 minutes. The commenters urged that CMS 
either reconsider the removal of OP-16 or provide guidance on when the 
measure will be reinstated. Commenters added that currently, there are 
new and improved Troponin testing technologies available that would 
meet the intent of OP-16.
    Response: We thank the commenter for the support of the removal of 
this measure. We also clarify that hospitals should not cease testing 
Troponin and other cardiac markers, nor should they cease following 
clinical guidelines for diagnosis and treatment of cardiac patients 
based on our decision to remove OP-16 from the Hospital OQR Program. We 
are considering initiating a call for measures for this program, and 
will consider suggestions for measures on this and other topics that 
are submitted through such a process for future rulemaking.
    Comment: A few commenters perceived the CMS' instruction to submit 
a blank value for OP-16 to be burdensome and stated that hospitals or 
their vendors should not have to bear the responsibility of submitting 
meaningless data. Commenters urged CMS to work with contractors to 
derive a technical solution that would not require hospitals to submit 
meaningless data.
    Response: As we stated in our memorandum, we urge hospitals to work 
with their data submission vendors on low-burden ways to populate 
fields for measures that are suspended or removed until such time as 
our system changes can be made. In the case of OP-16, this will be 
January 1, 2013. We have asked our systems developers to add 
functionality to remove a measure from the data collection system 
without any delay and this feature will be incorporated into a future 
release of our hospital reporting data collection system. In addition, 
we have added a business requirement for our contractor to fix this as 
soon as possible and it has been prioritized as high as possible given 
all the competing demands on contract programmers.
    We are confirming the removal of measure 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 from the Hospital OQR Program in this final rule 
with comment period.
3. Suspension of One Chart-Abstracted Measure for the CY 2014 and 
Subsequent Years Payment Determinations
    In April of this year, we took immediate action to suspend OP-19 
because of patient safety concerns. We chose to suspend this measure 
rather than to immediately remove the measure from the program because 
the probability of harm occurring was relatively low, any potential 
harm that occurred would not be the direct result of patient care 
rendered at facilities, and the measure steward believed that the 
measure could be quickly re-specified in a manner that would mitigate 
the concerns raised by hospitals and stakeholders.
    For CY 2014 and subsequent year payment determinations, we are 
confirming that we have suspended the collection of measure OP-19: 
Transition Record with Specified Elements Received by Discharged ED 
Patients, which specifies patients or their caregivers (emphasis added) 
receive a transition record at the time of ED discharge. We adopted 
measure OP-19 for the Hospital OQR Program for the CY 2013 payment 
determination with data collection beginning with January 1, 2012 
encounters. Since data collection for this measure began, concerns have 
been raised about the current measure specifications, including 
potential privacy concerns related to releasing certain elements of the 
transition record to a patient who is being discharged from an 
emergency department or the patient's caregiver. Some examples provided 
by hospitals of this were the release of sensitive lab results or 
radiological findings to a parent, spouse, or guardian of a minor 
patient, or to the responsible party for a physically incapacitated 
patient.
    In regard to the issue of patient safety, there is evidence that, 
in some cases, following the measure as currently specified could lead 
to patient harm especially when the medical results relate to 
pregnancy. During field testing of this measure, some women refused to 
accept transition records that documented pregnancy results. While it 
is unclear what motivated these particular women to decline to receive 
transition records, literature supports a rationale for why pregnant 
women may be reluctant to receive documentation of pregnancy results; 
under certain circumstances, pregnancy is associated with increased 
risk of physical violence from a current or former male partner 
(Richardson, J. et al., 2002. Identifying domestic violence: cross 
sectional study in primary care, British Medical Journal).
    After consideration of these issues and internal review of the 
measure specifications, we decided to suspend data collection for OP-19 
effective with January 1, 2012 encounters until further notice. On 
April 2, 2012 we released a memorandum ``Temporary Suspension of 
Hospital Outpatient Quality Reporting Measure OP-19: Transition Record 
with Specified Elements Received by Discharged Patients.'' This 
memorandum notified the Hospital OQR Program stakeholder community that 
we had suspended data collection for the OP-19 measure effective with 
January 1, 2012 encounters and until further notice.
    On April 12, 2012, we released a memorandum, ``Revised: Temporary 
Suspension of Hospital Outpatient Quality Reporting Measure OP-19: 
Transition Record with Specified Elements Received by Discharged 
Patients'' to make clear our intent not to use any data submitted on 
this measure for payment determinations, public reporting, or in 
validation. The revised SDPS Memo is available for review at the 
QualityNet Web site (http://www.qualitynet.org) under the option

[[Page 68475]]

``Email Notifications'' within the ``Hospitals--Outpatient'' drop down 
menu found at the top of the page.
    When NQF completes its maintenance review on this measure, and we 
have incorporated the necessary changes to the measure specifications 
in our measure manual, we anticipate being able to resume data 
collection, and will notify hospitals of changes in the suspension 
status of the measure for Hospital OQR via email blast.
    Because CMS system constraints prevent immediate cessation of data 
collection, hospitals must continue to submit information for this 
measure during this temporary suspension. The data collection system 
currently requires a populated value for OP-19. During the period of 
time that the measure is suspended, hospitals may choose to populate 
their OP-19 submission field with a value that is not meaningful. 
Hospitals should not submit a null value because the lack of data for 
OP-19 will cause the submitted case to be rejected entirely from the 
data warehouse. In other words, failure to populate the OP-19 field 
could compromise reporting data for other measures for that same case 
because more than one measure can be reported within a single case.
    Some vendors may have the capability to provide a default value for 
this measure to reduce data abstraction. Hospitals are encouraged to 
work with their vendors to determine options to reduce abstraction 
burden.
    If a case is rejected from the data warehouse on the basis of a 
system error due to the current system's inability to accept a case 
without OP-19 data populated, in the event that the rejected case would 
have also fulfilled reporting requirements for one or more other 
measures, this rejection would could affect a hospital's ability to 
meet Hospital OQR Program requirements.
    Therefore, we recommend continuing to submit a value for OP-19, 
although we will not use data submitted on OP-19 for payment 
determinations, will not publicly report these data, and will not 
validate these data until all concerns are resolved and measure 
specifications are refined as necessary.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), because the 
developer is working to revise the measure specifications to address 
the concerns raised by affected parties, and the measure is undergoing 
NQF maintenance review this year, we did not propose to remove the 
measure from the program at this time. After completion of the NQF 
maintenance process, we anticipate that normal program operations for 
this measure could resume once we have updated the Hospital OQR 
Specifications Manual and made any necessary changes to our data 
collection infrastructure. However, should we determine that these 
concerns cannot be addressed, we would propose to remove this measure 
in a future OPPS/ASC rule. We invited public comment on the suspension 
of OP-19 until further notice. We also invited public comment on 
whether the measure should be removed from the program at this time.
    Comment: A few commenters strongly urged CMS to retain the OP-19 
measure, with the ongoing revision of the measure specifications to 
address privacy concerns.
    Some commenters advocated the removal of this measure on grounds 
that are completely different from CMS's rationale for removing this 
measure. Some commenters were concerned that many patients may not be 
able to comprehend most of the data elements (for example, lab tests 
and results, and procedures performed in the ED) required by the 
measure, which would be in the transition record. Many commenters 
believed that the provision of transition records by EDs would not 
enhance coordination between sites of care. Rather, the commenters 
stated it will increase the likelihood of confusion for the patients. 
Commenters were concerned that: (1) the transition records including 
instructions issued upon ED discharge are not final and may be changed 
subsequently by the observation unit staff, should the patient be put 
in the observation unit; and (2) the ED transition records may conflict 
with the subsequent transition record provided by the receiving 
provider, such as the home health care agency. In the commenters' view, 
the Emergency Medical Treatment and Labor Act (EMTALA) regulation 
already provides for the transfer of records that include communication 
between nurses and physicians. Some commenters suggested the provision 
of a simplified, user-friendly ED visit summary to patients would be a 
better alternative.
    A few commenters requested clarification of the data elements 
specified in the Specifications Manual: major procedures and tests; 
patient instructions; follow up care; ED patient population; and 
medication types. Commenters stated that the data elements specified in 
the Specifications Manual are too vague and leave room for different 
interpretation. One commenter recommended creating individual measures 
to address each of the items that need to be included in the ED visit 
summary.
    One commenter requested limiting the transition record information 
to include only diagnostic test procedures performed in the ED. One 
commenter did not view patients put on observation as ED patients and 
requested they be treated as exclusions in the measure specification. 
These commenters did not discuss their reasons for requesting these 
changes.
    One commenter stated that currently, since hospitals are at 
different stages of implementing electronic health records technology, 
the time taken to generate electronic transition records will vary 
greatly. For some hospitals, this may potentially delay the discharge 
of patients from the ED.
    Response: We appreciate the support and the recommendations from 
the commenters. As for the comments on clarification of data elements 
in the Specifications Manual, we note that there are no specific 
requirements related to what constitutes appropriate documentation that 
must be transferred to the next site of care.
    We are aware of the concerns expressed by the commenters. Since the 
suspension of OP-19 on April 2, 2012, we have been actively working 
with the American Medical Association Physician Consortium for 
Performance Improvement (AMA-PCPI) (the measure stewards) to clarify 
the specifications of this measure. The intent of OP-19 is to require a 
transition record to patients discharged directly to home or home 
health, not those patients who would otherwise be transferred to an 
acute care facility, regardless of EMTALA status. It is our hope that 
the revised specifications will address the commenters' concerns prior 
to reinstatement of the measure in the Hospital OQR Program.
    Comment: Many commenters perceived the submission of a blank value 
for OP-19, as requested by CMS, to be burdensome and stated that 
hospitals or their vendors should not have to bear the responsibility 
of submitting meaningless data. Commenters requested that CMS refine 
specifications so that hospitals do not have to submit meaningless 
data.
    Response: As we stated in our April 12, 2012 revised memorandum, we 
urge hospitals to work with their data submission vendors on low-burden 
ways to populate fields for measures that are suspended or removed 
until such time as our system changes can be made.
    We are confirming the suspension until further notice of measure 
OP-19: Transition Record with Specified Elements Received by Discharged 
ED Patients, effective with January 1, 2012

[[Page 68476]]

encounters. We are working with the measure steward, the AMA, to 
enhance OP-19 for future use. When the measure specifications have been 
updated and reviewed by the NQF, we will consider implementation of the 
revised measure.
4. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: 
Patient Referral From an Outpatient Setting for the CY 2014 Payment 
Determination
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized OP-24: Cardiac Rehabilitation Measure: Patient Referral From 
an Outpatient Setting for the CY 2014 payment determination and 
indicated that the applicable quarters for data collection for this 
measure would be 1st quarter CY 2013 and 2nd quarter CY 2013 (76 FR 
74464, 74481). In order for us to adhere to this data collection 
schedule, we would have needed to have published the measure 
specifications in the July 2012 release of the Hospital OQR 
Specifications Manual. While there are NQF-endorsed specifications for 
this measure, in order to implement standardized data collection on a 
national scale, we must include detailed abstraction instructions for 
chart-based measures in our Specifications Manual. These instructions 
were not completed and tested in time to include in the July 2012 
release of the Specifications Manual, which includes collection 
instructions for measures beginning January 1, 2013. This was an 
unanticipated delay in implementation that we do not expect to be a 
regularly occurring issue for the Hospital OQR Program.
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45179), we 
proposed to defer the data collection for this measure to January 1, 
2014 encounters. We also proposed that the measure would no longer be 
used for the CY 2014 payment determination, and that its first 
application would be for the CY 2015 payment determination. The data 
collection deferral for this measure is detailed in the ``Form, Manner, 
and Timing'' section of this final rule with comment period. We invited 
public comments on these proposals.
    Comment: Many commenters supported the proposed deferred data 
collection of this measure until detailed instructions for data 
collection are completed. Commenters believed the measure is beneficial 
for patients with cardiovascular diseases and they were hopeful that 
the measure could be included into the Hospital OQR program for 
implementation beginning with January 1, 2014 encounters.
    Response: With the inclusion of the abstraction instructions for 
this chart-abstracted measure in our July 2013 release of the 
Specifications Manual, we anticipate that data collection can begin 
with January 1, 2014 encounters.
    Comment: One commenter asked if the data for this measure could be 
collected through claims instead of chart-abstraction. Also, the 
commenter viewed this measure as merely documentation of a referral 
being offered as the patient could have refused the referral to enroll 
in a cardiac rehabilitation program.
    Response: This measure cannot be collected via claims because 
patient referral is not captured in claims data. We recognize that this 
measure does not focus on whether the patient actually enrolls in a 
cardiac rehabilitation program. Rather, the measure focuses on the 
process of referring a patient to a cardiac rehabilitation or secondary 
prevention program.
    Comment: One commenter requested clarification on: (1) What setting 
will be included in the denominator for the measure population; (2) 
definition of an outpatient practice; and (3) definition of an 
outpatient clinic practice. The commenter interpreted the measure 
specification developed by the American Association of Cardiovascular 
and Pulmonary Rehabilitation, American College of Cardiology 
Foundation, and the American Heart Association (AACVPR/AACF/AHA) Task 
Force to mean that the measure is intended for physicians providing 
follow-up care to patients after an acute event, and not for hospital 
outpatient department care. The commenter, therefore, suggested the 
removal of the current OP-24 measure and adoption of the measure 
``Cardiac Rehabilitation Patient Referral from an Inpatient Setting'' 
for the Hospital OQR Program.
    Response: We intend to operationalize the measure for patients seen 
for ongoing care at outpatient clinics affiliated with hospitals. The 
measure is designed for the outpatient setting and the denominator is 
intended to be the percentage of patients who had a qualifying event/
diagnosis during the previous 12 months and have not participated in an 
outpatient cardiac rehabilitation program. Given the measure focus on 
the process of referring a hospital outpatient clinic patient to a 
cardiac rehabilitation program, we expect it will incentivize Hospital 
Outpatient Departments (HOPDs) to better coordinate the care that their 
patients receive. We agree that the measure could also be appropriate 
as a measurement for physicians' follow-up care. We are currently 
working on the definitions the commenter has requested, outpatient 
practices and outpatient clinic practices, in the context of the HOPD.
    After consideration of the public comments we received, we are 
finalizing the deferred data collection for OP-24 from January 1, 2013 
to January 1, 2014 encounters for the CY 2015 payment determination.

D. Quality Measures for the CY 2015 Payment Determination

    We previously finalized 26 measures for the CY 2015 Hospital OQR 
Program measure set in the 2012 OPPS/ASC rulemaking (76 FR 74472 
through 74474).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45179), taking into 
consideration the time and effort for CMS to develop, align, and 
implement the infrastructure necessary to collect data on the Hospital 
OQR Program measures and make payment determinations, as well as the 
time and effort on the part of hospital outpatient departments to plan 
and prepare for reporting additional measures, we did not propose any 
additional quality measures for CY 2015 and subsequent years payment 
determinations in this rulemaking.
    As discussed above, we have removed OP-16 as of August 2012, we 
suspended measure OP-19 and deferred data collection for OP-24 until 
the measure specifications can be further refined.
    In summary, in this final rule with comment period, we are not 
adopting additional measures for the CY 2015 payment determination, and 
we are retaining 25 of the 26 measures previously adopted for the CY 
2014 payment determination for CY 2015 and subsequent year payment 
determinations.
    Set out below are the previously adopted measures which we are 
retaining for the CY 2014, CY 2015, and subsequent years payment 
determinations under the Hospital OQR Program.
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BILLING CODE 4120-01-C
    Comment: Many commenters commended CMS' pausing in the expansion of 
the Hospital OQR Program by not proposing any new measures for the CY 
2014 and CY 2015 payment determinations. Commenters appreciated CMS' 
recognition of burden from quality reporting on providers.
    Response: We thank the commenters for supporting our decision not 
to add any new measures. We plan to continue to find ways to strike a 
balance between quality reporting and burden reduction for providers.
    We received comments on some of the previously finalized measures 
that we have proposed to continue using under the Hospital OQR Program.
    Comment: Commenters expressed support and opposition to the adopted 
measures from previous rulemakings. Commenters also provided 
suggestions on these measures, regarding measure implementation, adding 
exceptions, and revising measure specifications.
    Response: We thank the commenters for their comments; those 
supporting our previously finalized proposals as well as those in 
opposition. We will consider all of these views for future rulemaking 
and Hospital OQR Program development.

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

    The current measure set for the Hospital OQR Program includes 
measures that assess process of care, imaging efficiency patterns, care 
transitions, ED throughput efficiency, the use of HIT care 
coordination, patient safety, and volume. We anticipate that as EHR 
technology evolves and more infrastructure is put into place, we will 
have the capacity to accept electronic reporting of many clinical 
chart-abstracted measures that are currently part of the Hospital OQR 
Program using certified EHR technology. We work diligently toward this 
goal. We believe that this future progress at a future date, such as FY 
2015, would significantly reduce the administrative burden on hospitals 
under the Hospital OQR Program to report chart-abstracted measures. We 
recognize that considerable work needs to be done by measure owners and 
developers to make this possible with respect to the clinical quality 
measures targeted for e-specifications. This includes completing 
electronic specifications for measures, pilot testing, reliability and 
validity testing, and implementing such specifications into certified 
EHR technology to capture and calculate the results, and implementing 
the systems.
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the hospital outpatient setting. Therefore, through 
future rulemaking, we intend to propose new measures that help us 
further our goal of achieving better health care and improved health 
for Medicare beneficiaries who receive health care in hospital 
outpatient settings. In addition, we are considering initiating a call 
for input to assess the following measure domains: clinical quality of 
care; care coordination; patient safety; patient and caregiver 
experience of care; population/community health; and efficiency. We 
believe this approach will promote better care while bringing the 
Hospital OQR Program in line with other established quality reporting 
and pay for performance programs such as the Hospital IQR Program.
    We invited public comment on this approach and on our suggestions 
and rationale for possible quality measures for future inclusion in the 
Hospital OQR Program.
    Comment: One commenter noted that it is important to address the 
priority areas in the National Quality Strategy; however, the commenter 
also suggested that measure selection should not be limited to only 
those that fall inside the six domains, as this would hinder 
improvement in other areas in HOPDs.
    Response: We note that the six domains of measurement that arise 
from the six priorities of the National Quality Strategy are some of 
our considerations in measure selection. We also weigh other aspects of 
measures as delineated in our measure selection criteria.
    Comment: A few commenters strongly supported CMS in considering 
whether to initiate a call to get input to assess the measure domains. 
One commenter requested that CMS use the same process used in past 
rulemakings by providing a list of measures under consideration for 
future years for public input.
    Response: In the past, we have solicited comments on a list of 
measures in the rule that are under consideration for future years of 
the program. Although we did not provide a list in this year's 
rulemaking, we will take this comment under consideration in future 
years.
    In addition, we will consider hosting a call for measures for the 
Hospital OQR Program in the future.
    Comment: Commenters suggested that CMS add the following measures 
to the Hospital OQR Program: a comprehensive ``medication

[[Page 68479]]

management'' measure set; a system of care metric that looks at the 
overall median time to PCI in transferred patients to capture the 
entire process of care; a stroke measure set for outpatients; measures 
for diabetes care, congestive heart failure, heart attack, breast 
cancer detection rate, central-line associated blood stream infection, 
chronic obstructive pulmonary disease, coronary artery disease, and 
depression screening.
    Response: We thank the commenters for the input on future measures 
and will take them into consideration in future measure selections.
    Comment: One commenter strongly encouraged CMS to adopt registry-
based measures for which providers submit quality data directly to a 
registry instead of to CMS.
    Response: We thank the commenter for the recommendation for 
registry reporting. We intend to continue considering how registry 
reporting may be leveraged as a reporting mechanism for this and other 
quality programs.
    Comment: A few commenters recommended that for burden reduction, 
CMS should harmonize measures in the Medicare and Medicaid EHR 
Incentive Programs and the Hospital OQR Program as well as limiting 
adopting future measures to e-specified measures only.
    Response: As we stated previously, coordinated efforts to align 
measures in the Medicare and Medicaid public reporting programs and 
incentive payment systems have been ongoing, and we are working toward 
the eventual adoption of electronically-specified measures so that data 
can be calculated and submitted via certified EHR technology with 
minimal burden.
    Comment: One commenter recommended that CMS refrain from adopting 
claims-based measures which the commenter believed are purely 
administrative in nature and yield little value in measuring quality of 
care.
    Response: While we recognize the merits of chart-abstracted 
measures, we also believe that claims may still be needed to identify 
prior events and diagnosis for measures that require look-back periods, 
involving the matching of data for a single patient over a long period 
of time (for example, 1 year of prior history) across multiple 
settings. Claims-based measurement facilitates the use of historical 
and longitudinal information on Medicare beneficiaries across 
providers.
    Comment: Commenters also expressed views and provided suggestions 
regarding additional topics and previously finalized proposals 
including:
     Topped-out measures;
     ED measures;
     Outpatient imaging efficiency measures; and
     Removal of additional adopted measures.
    Response: We appreciate the commenters' views on these additional 
topics or our previously finalized measures. However, these additional 
topics were not the subject of our proposed rule. It is our policy to 
retain previously adopted measures unless we specifically propose to 
remove or suspend measures, or take action outside of rulemaking to do 
so for patient safety reasons. We will consider these suggestions in 
future Hospital OQR Program development.

F. Payment Reduction for Hospitals That Fail To Meet the Hospital OQR 
Program Requirements for the CY 2013 Payment Update

1. Background
    Section 1833(t)(17) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), states 
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 will incur a 2.0 percentage point 
reduction to their Outpatient Department (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 that meet the reporting requirement 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

[[Page 68480]]

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 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 found in 
Addendum B of 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, OPPS 
outlier payments made for high cost and complex procedures 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), in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72099), and in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74478). 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 
2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), 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 2013 annual payment update factor. For the CY 2013 
OPPS, the reporting ratio is 0.980, calculated by dividing the reduced 
conversion factor of $69.887 by the full conversion factor of $71.313. 
We proposed to continue to apply the reporting ratio to all services 
calculated using the OPPS conversion factor. For the CY 2013 OPPS, we 
proposed to apply the reporting ratio, when applicable, to all HCPCS 
codes to which we have assigned status indicators ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' ``U,'' 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 2013 proposal to apply the Hospital OQR 
Program reduction in the manner described above and, therefore, are 
finalizing our proposal, without modification.
    Therefore, for the CY 2013 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 Hospital OQR Program 
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 Hospital OQR Program 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.

G. Requirements for Reporting of Hospital OQR Data for the CY 2014 
Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination 
and Subsequent Years
    In order 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

[[Page 68481]]

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 administrative requirements for the payment 
determination requirements for the CY 2013 and subsequent years' 
payment updates in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74479 through 74487).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), with respect 
to the payment determinations for CY 2014 and subsequent years, we 
proposed one modification to these requirements. Under current 
requirements, CMS deadlines for hospitals to submit notice of 
participation forms are based on the date identified as a hospital's 
Medicare acceptance date on the CMS Certification and Survey Provider 
Enhanced Reporting (CASPER) system. Deadlines are based on whether a 
hospital's Medicare acceptance date falls before January 1 of the year 
prior to the annual payment update, or on or after January 1 of the 
year prior to the annual payment update (for example, 2013 would be the 
year prior to the affected CY 2014 annual payment update). Currently, 
for a hospital whose Medicare acceptance date is before January 1 of 
the year prior to the affected payment update affected, the notice of 
participation form is due by March 31 of the year prior to the affected 
annual payment update (76 FR 74479 through 74480). We proposed to 
extend this deadline for hospitals, as described below.
    Hospitals with Medicare acceptance dates before January 1 of the 
year prior to the affected annual payment update: For the CY 2014 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, 2013 would be the year 
prior to the affected CY 2014 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 July 31, 
rather than March 31, of the year prior to the affected annual payment 
update. We proposed a deadline of July 31 to give hospitals the maximum 
amount of 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 chart-abstracted data for the first quarter 
of the year's services which are due August 1.
    We invited public comment on this proposed modification to Hospital 
OQR Program administrative requirements for the CY 2014 and subsequent 
years' payment determinations.
    Comment: Several commenters supported the proposal to extend the 
deadline to submit a participation form for a hospital that is not 
currently participating in Hospital OQR and wishes to participate in 
OQR to July 31, rather than March 31, of the year prior to the affected 
annual payment update.
    Response: We thank these commenters for supporting our proposal to 
extend the deadline for submitting a participation form for a hospital 
that is not currently participating in Hospital OQR and wishes to 
participate.
    After consideration of the public comments received, we are 
finalizing our proposal to extend the deadline for a hospital that is 
not currently participating in the Hospital OQR Program and wishes to 
participate in the Program to submit a participation form by July 31, 
rather than March 31, of the year prior to the affected annual payment 
update.
2. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program for the CY 2014 Payment Determination and Subsequent Years
a. Background
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), we did not 
propose any additional measures for the CY 2014 payment determination 
year. 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 finalized for the CY 2011 
payment determination (74 FR 60637); 15 measures finalized for the CY 
2012 payment determination (75 FR 72083 through 72084); 23 measures 
finalized for the CY 2013 payment determination (75 FR 72090); and 26 
measures finalized for the CY 2014 and CY 2015 payment determinations 
(76 FR 74469 and 74473).
    Because of the clarification in the measure table in section XV.D 
above that public reporting for OP-15: Use of Brain Computed Tomography 
(CT) in the Emergency Department for Atraumatic Headache is not planned 
until July 2013 at the earliest, we confirm this measure will not be 
used in the CY 2014 payment determination. We will confirm our intent 
to include or exclude this measure in the CY 2015 payment determination 
in future rulemaking.
    We refer readers to section XV.C.2 of this final rule with comment 
period for a discussion of measure 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. Due to a patient safety concern, this measure 
has been removed from the OQR Program measure set.
    We refer readers to section XV.C.3. of this final rule with comment 
period for a discussion of measure OP-19: Transition Record with 
Specified Elements Received by Discharged ED Patients. Because the data 
collection for this measure is currently suspended, this measure will 
not be used in the CY 2014 payment determination. We will indicate 
whether data collection for this measure will resume in time for the CY 
2015 payment determination in future rulemaking.
    We refer readers to section XV.C.4. of this final rule with comment 
period for a discussion of measure OP-24: Cardiac Rehabilitation 
Patient Referral From an Outpatient Setting. We proposed not to use 
this measure in the CY 2014 payment determination and deferred data 
collection for this measure until the CY 2015 payment determination.
b. General Requirements
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45183), we proposed to 
continue the policy 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. We refer 
readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74480 through 74482) for a discussion of these requirements.
c. Chart-Abstracted Measure Requirements for CY 2014 and Subsequent 
Payment Determination Years
    The table in section XV.D. of this final rule with comment period 
includes measures that are collected by abstracting the information 
from patient charts. In this final rule with comment period, we are 
confirming removal of one chart-abstracted measure from the program, 
OP-16: Troponin Results for Emergency Department acute myocardial 
infarction (AMI) patients or chest pain patients (with Probable Cardiac 
Chest Pain) Received Within 30 minutes of Arrival. For a full 
discussion of this removal, please refer to section XV.C.2. of this 
final rule with comment period.

[[Page 68482]]

    Comment: Several commenters supported the proposal not to collect 
data for measures that CMS proposed to exclude from the CY 2014 payment 
determination.
    Response: We thank the commenters for supporting our proposal 
regarding collection of data for measures which are to be excluded from 
the CY 2014 payment determination. A discussion of measures that are 
under review or have been removed from the program is found in section 
XV.C. above.
    After consideration of the public comments received, we are 
finalizing our proposal to exclude chart abstracted measures OP-19 and 
OP-24, from the CY 2014 payment determination. In addition, in this 
final rule with comment period, we are confirming the removal of chart-
abstracted measure OP-16. Thus, the following chart-abstracted measures 
remain in the Hospital OQR Program and data for these measures is 
required for the CY 2014 payment determination:
     OP-1: Median Time to Fibrinolysis
     OP-2: Fibrinolytic Therapy Received Within 30 Minutes
     OP-3: Median Time to Transfer to Another Facility for 
Acute Coronary Intervention
     OP-4: Aspirin at Arrival
     OP-5: Median Time to ECG
     OP-6: Timing of Antibiotic Prophylaxis
     OP-7: Prophylactic Antibiotic Selection for Surgical 
Patients
     OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients
     OP-20: Door to Diagnostic Evaluation by a Qualified 
Medical Professional
     OP-21: ED--Median Time to Pain Management for Long Bone 
Fracture
     OP-22: ED Patient Left Without Being Seen
     OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke 
or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 
45 Minutes of Arrival
    Of those measures for which we proposed to collect data for in CY 
2014, the form and manner for submission of one of these measures, OP-
22: ED Patient Left Without Being Seen, is unique, and the form and 
manner for this measure is detailed in section XV.G.2.f. of this final 
rule with comment period.
    For the chart-abstracted measures for which we have finalized that 
we will collect data for the CY 2014 payment determination, we proposed 
that the applicable quarters for data collection would be as follows: 
3rd quarter CY 2012, 4th quarter CY 2012, 1st quarter CY 2013, and 2nd 
quarter CY 2013 for hospitals that are continuing participants; newly 
participating hospitals would follow reporting requirements as outlined 
in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74480) 
and in section XV.G.1. of this final rule with comment period.
    In general, submission deadlines would be approximately 4 months 
after the last day of each calendar quarter. Thus, for example, the 
submission deadline for data for services furnished during the first 
quarter of CY 2013 (January-March 2013) would be on or around August 1, 
2013. We proposed to post actual submission deadlines on the http://www.QualityNet.org Web site.
    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 previously adopted measures which 
we are retaining for the CY 2014 payment determination, found in the 
table in section XV.D above. 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.
    For the CY 2015 payment determination, we proposed that the 
applicable quarters for previously finalized chart-abstracted measures 
would be as follows: 3rd quarter CY 2013, 4th quarter CY 2013, 1st 
quarter CY 2014, and 2nd quarter CY 2014.
    Hospitals that did not participate in the CY 2014 Hospital OQR 
Program, but would like to participate in the CY 2015 Hospital OQR 
Program, and that have a Medicare acceptance date on the CASPER system 
before January 1, 2014, would begin data submission with respect to 1st 
quarter CY 2014 encounters using the previously adopted measures which 
we are retaining for the CY 2015 payment determination, found in the 
table in section XV.D above. For those hospitals with Medicare 
acceptance dates on or after January 1, 2014, data submission must 
begin with the first full quarter following the submission of a 
completed online participation form. We invited public comments on 
these proposals.
    Comment: Some commenters encouraged CMS to improve alignment among 
CMS quality reporting programs; specifically, they would like to see 
alignment of data submission deadlines and encounter/discharge periods. 
These commenters urged CMS to review its programs for opportunities to 
harmonize program design. These commenters stated their belief that 
aligning program design and measures supports stakeholders in 
fulfilling CMS' requirements, whereas lack of alignment results in 
stakeholders competing for resources to fulfill requirements.
    Response: We thank these commenters for their suggestions. We agree 
that end users and stakeholders, especially those that fulfill 
reporting requirements for multiple programs, would benefit from 
standardized program requirements.
    Besides the Hospital OQR Program, we have a significant number of 
quality data reporting or incentive programs. Currently, we are working 
on integrating the Hospital OQR, Hospital Inpatient Quality Reporting 
(IQR) Program, and the Hospital Value-Based Purchasing (VBP) Program 
more fully to meet the requirements of the Health Information 
Technology for Economic and Clinical Health Act. This statute promotes 
driving transformation through the adoption and use of health 
information technology (HIT), electronic health records (EHR) and 
health information organizations (HIOs)
    We agree with commenters that alignment is important to reduce 
stakeholder burden, and we will also continue to consider opportunities 
to align program requirements for programs outside of the Hospital OQR, 
IQR, and VBP Programs.
    Comment: Many commenters supported the proposed data submission 
deadlines for chart-abstracted measures.
    Response: We thank these commenters for supporting the proposed 
deadlines.
    After consideration of the public comments we received, we are 
finalizing our proposals for the applicable quarters for chart 
abstracted measures for the CY 2014 and CY 2015 payment determinations 
and for subsequent years. We are finalizing our proposals for 
submission deadlines for chart abstracted data for the CY 2014 payment 
determination and for subsequent years, and for posting these deadlines 
on the QualityNet Web site. We are finalizing our proposals for 
hospitals who are newly participating or who are resuming participation 
in the OQR program to submit a notice of participation and begin 
submitting data to the OQR Program.
d. Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 
Payment Determinations
    The table in section XV.D. of this final rule with comment period 
includes

[[Page 68483]]

measures that the Hospital OQR Program collects by accessing electronic 
claims data submitted by hospitals for reimbursement.
    OP-15 is a claims-based measure that has not been implemented for 
public reporting through rulemaking (76 FR 74456), and it is not 
required for the CY 2014 payment determination.
    Therefore, the 6 remaining claims-based measures set out below will 
be included for the CY 2014 payment determination:
     OP-8: MRI Lumbar Spine for Low Back Pain
     OP-9: Mammography Follow-up Rates
     OP-10: Abdomen CT--Use of Contrast Material
     OP-11: Thorax CT--Use of Contrast Material
     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)
    We will continue our policy of calculating the measures using the 
hospital's Medicare claims data as specified in the Hospital OQR 
Specifications Manual; therefore, no additional data submission is 
required for hospitals. In the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74483), we stated that for the CY 2013 and CY 2014 
payment updates, we will use paid Medicare FFS claims for services 
furnished from January 1, 2010 to December 31, 2010 and January 1, 2011 
to December 31, 2011, respectively.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), for the CY 
2015 Hospital OQR payment determination, we proposed to use paid 
Medicare FFS claims for services from a 12-month period from July 1, 
2012 through June 30, 2013 for the calculation of the claims-based 
measures. While this would be a departure from the traditional 12-month 
calendar year period we have used for these measures, we proposed this 
period in order to align the data period for inpatient and outpatient 
claims based measures reported on the Hospital Compare Web site, and 
also to be able to post more recent data for the outpatient imaging 
efficiency on the Web site. We invited public comment on this proposal.
    Comment: Some commenters supported the proposal to move away from 
the traditional 12-month data period to align the data period for 
inpatient and outpatient claims based measures reported on the Hospital 
Compare Web site, and also to be able to post more recent data for the 
outpatient imaging efficiency on the Web Site.
    Response: We thank these commenters for supporting our efforts to 
align the data collection period for the Hospital OQR Program with that 
of the Hospital IQR Program.
    Comment: One commenter questioned why CMS needs such a long delay 
in claims utilization. This commenter believed that CY 2011 claims are 
not appropriate to use in the CY 2014 payment determination.
    Response: We have proposed to adjust the time period of when 
services are furnished; doing so moves the period away from the 
traditional January-December time period to make it six months more 
current. Regarding the data lag for claims based data, for the CY 2015 
payment determination year, we proposed using paid, FFS claims for 
services during the time period from July 1, 2012 through June 30, 
2013. Calculations based on this time period would be publicly reported 
on Hospital Compare in July 2014, and we would make actual payment 
determinations for the CY 2015 payment year on or around December 1, 
2014.
    For claims from the period July 1, 2012 through June 30, 2013, the 
data lag, or time elapsed until payment determination is made, is 
approximately 17 months at the longest (for data from July 1, 2012) to 
5 months at shortest (for data from June 30, 2013). This is due to 
several factors. First, we allow three months after the last date of 
service to pass before pulling the data extract for claims based 
measures in order to ensure that we are capturing most of the final 
paid claims through the last date of service (in this example, the last 
date of service is June 30, 2012). Second, it takes three to six months 
to build our analytic files for the measures, generate calculations, 
and ensure their accuracy. For some claims-based measures, we generate 
and deliver detailed confidential reports for hospitals. About two 
months prior to public reporting, we allow 30 days for hospitals to 
preview their data, after which we deliver final public reporting files 
for the Hospital Compare Web site.
    With our proposal, we believe we have adequately balanced the need 
for current data with the need to have a stable set of FFS claims data 
for a payment determination and a preview process that takes into 
account the needs of hospital stakeholders.
    Comment: One commenter believed that there is an inconsistency in 
the use of Medicare claims versus data from all patients. According to 
the commenter, CMS stated that it will use only Medicare FFS claims for 
structural measures, but proposes to use data from all patients (for 
example, including non-Medicare patients) for other measures.
    Response: We do not use Medicare FFS claims for structural 
measures. For structural measures, hospitals currently review the time 
period covered in the reporting period to answer questions about 
registry use, safe surgery checklist use, etc. The structural measures 
in the Hospital OQR Program apply to the hospital outpatient department 
setting.
    For clarification, the Hospital OQR chart-abstracted 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 FFS claims. The structural measures apply to the 
hospital outpatient department.
    We 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 us to publicly report the quality 
measure data submitted under the Hospital OQR Program, including 
measures that we calculate using Medicare claims and all other 
submitted data, including non-Medicare data.
    After consideration of the public comments we received, we are 
finalizing our proposals for the data periods we will use for claims-
based measures for the CY 2014 and CY 2015 payment determinations.
e. Structural Measure Data Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    A summary of the previously finalized structural measures that we 
require for the CY 2014 and subsequent years payment determinations is 
set out below:
     OP-12: The Ability for Providers With HIT To Receive 
Laboratory Data Electronically Directly Into Their Qualified/Certified 
EHR System as Discrete Searchable Data
     OP-17: Tracking Clinical Results Between Visits
     OP 25: Safe Surgery Check List Use
     OP 26: Hospital Outpatient Volume on Selected Outpatient 
Surgical Procedures
    We previously finalized that for the CY 2014 payment determination, 
hospitals will 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. In the CY 2013 OPPS/
ASC proposed rule (77 FR 45184), we proposed to extend this submission 
deadline. Under this

[[Page 68484]]

proposed change, for the CY 2014 payment determination, hospitals would 
be required to submit data on all structural measures between July 1, 
2013 and November 1, 2013 with respect to the time period from January 
1, 2012 to December 31, 2012. In section XV.G.2.f. of this final rule 
with comment period, we describe how this proposal would likewise 
extend the deadline to submit data for OP-22: ED Patient Left Without 
Being Seen. We proposed to continue this schedule so that, for the CY 
2015 payment determination, hospitals would be required to submit data 
on all structural measures between July 1, 2014 and November 1, 2014 
with respect to the time period from January 1, 2013 to December 31, 
2013. We invited public comments on these proposals.
    Comment: Two commenters supported the change in the 12-month period 
because it better aligns the reporting period with that of other claims 
based measures displayed on Hospital Compare.
    Response: We agree that this alignment is beneficial and we seek to 
align programs to the extent possible. We are finalizing this policy as 
proposed.
    After consideration of the public comments we received, we are 
finalizing the proposal that, for the CY 2014 payment determination, 
hospitals would be required to submit data on all structural measures 
between July 1, 2013 and November 1, 2013 with respect to the time 
period from January 1, 2012 to December 31, 2012, and for the CY 2015 
payment determination, hospitals would be required to submit data on 
all structural measures between July 1, 2014 and November 1, 2014 with 
respect to the time period from January 1, 2013 to December 31, 2013.
f. Data Submission Requirements for OP-22: ED Patient Left Without 
Being Seen for the CY 2015 Payment Determination
    OP-22: ED Patient Left Without Being Seen is a chart-abstracted 
measure for which aggregate data is collected via a Web-based tool, as 
previously finalized. In other words, for purposes of data collection, 
this measure is treated like a structural measure. For this reason, it 
is collected on the same schedule as the structural measures described 
above, and, in the CY 2013 OPPS/ASC proposed rule (77 FR 45184) we 
proposed to extend the submission window for all structural measures, 
including OP-22. In the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74485), with respect to OP-22, we stated that hospitals would be 
required to submit data once for the CY 2014 payment determination via 
a Web-based tool located on the QualityNet Web site. For the CY 2014 
payment determination, we proposed that hospitals would be required to 
submit data, including numerator and denominator counts, between July 
1, 2013 and November 1, 2013 (comparable to the submission window that 
we proposed for the structural measures data collection in the section 
above) with respect to the time period of January 1, 2012 to December 
31, 2012.
    For the CY 2015 payment determination, we proposed to continue this 
policy. Hospitals would be required to submit data between July 1, 2014 
and November 1, 2014 with respect to the time period of January 1, 2013 
to December 31, 2013. We invited public comment on these proposals.
    Comment: Some commenters opposed data collection for OP-22: ED 
Patient Left Without Being Seen. These commenters noted that OP-22 is 
not NQF-endorsed and believed it is not a clear measure of quality of 
care for a variety of reasons: Because there are credible reasons why a 
patient might choose to leave an ER prior to treatment; the measure 
disadvantages ED's in areas where an ED is used as a primary care 
facility; and there are no underlying patient records to validate this 
data.
    Response: We thank the commenters for their feedback. Please refer 
to section XV.C.1 of this final rule with comment period for a 
discussion of measure OP-22.
    After consideration of the public comments we received, we are 
finalizing our proposal to extend the data submission window for OP-22.
g. Population and Sampling Data Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), for the CY 
2014 payment determination and subsequent years, we proposed to 
continue our policy that hospitals may submit voluntarily 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, but they will not be 
required to do so. Where hospitals do choose to submit this data, the 
deadlines for submission are the same as those for reporting data for 
chart-abstracted measures, and hospitals may also choose to submit data 
prior to these deadlines. The deadline schedule is available on the 
QualityNet Web site. We refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72101 through 72103) and the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74482 through 74483) for 
discussions of these policies. We invited public comments on these 
proposals.
    Comment: One commenter appreciated the policy that program 
participants can continue to submit population and sampling data 
voluntarily.
    Response: We believe there is no need to require the submission of 
population and sampling data due to the high level of voluntary 
submission of these data.
    After consideration of the public comments we received, we are 
finalizing our policies for population and sampling data requirements 
for the CY 2014 payment determination and subsequent years.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS for the CY 2014 Payment 
Determination and Subsequent Years
a. Random Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2014 Payment Determination and 
Subsequent Years
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74484 
through 74485), similar to our approach for the CY 2012 payment 
determination (75 FR 72103 through 72106), we adopted a policy to 
validate chart-abstracted patient-level data submitted directly to CMS 
from randomly selected hospitals for the CY 2013 payment determination.
    For the CY 2013 payment determination, we reduced the number of 
randomly selected hospitals from 800 to 450.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), we proposed to 
continue this policy for the CY 2014 payment determination and for 
subsequent years. We refer readers to the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74484) for a discussion of sample size, 
eligibility for validation selection, and encounter minimums for chart 
abstracted data submitted directly to CMS from randomly selected 
hospitals. We invited public comment on this proposal.
    Comment: One commenter was pleased that the number of hospitals 
selected dropped from 800 to 450 for the CY 2013 payment determination.
    Response: We thank this commenter for supporting our proposal to 
maintain the sample size for hospitals selected for validation. We note 
that in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552)

[[Page 68485]]

the total base sample size of hospitals included in the annual 
validation random sample has recently been reduced from 800 to 400, to 
reduce overall burden. For both the Hospital IQR and Hospital OQR 
Programs, we believe we can reduce the annual random sample size 
without adversely affecting our ability to infer reliability of the 
chart-abstracted clinical data submitted to the programs.
    After consideration of the public comments we received, we are 
finalizing our proposal to retain our sample size for hospitals 
randomly selected for data validation of chart-abstracted measures for 
the CY 2014 payment determination and subsequent years.
b. Targeting and Targeting Criteria for Data Validation Selection for 
the CY 2014 Payment Determination and Subsequent Years
    In the CY 2011 OPPS/ASC proposed rule (75 FR 46380) we discussed 
applying, to CY 2013 and subsequent years' data submission, criteria to 
determine whether a hospital would be included in our validation 
selection based on abnormal data patterns or a specific situation. At 
that time we provided, for public comment, specific examples of what we 
thought could be appropriate criteria.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72106) we stated our belief that the targeting criteria we shared for 
comment were reasonable. We considered one commenter's concern that we 
should use targeting criteria to ensure we do not over-select a 
hospital for validation. We reiterated our intent to propose the 
specific targeting criteria in the upcoming CY 2012 OPPS/ASC proposed 
rule (76 FR 42332), in order to finalize and apply it to 2012 encounter 
data collected for the CY 2013 validation process year. We did so, and 
finalized our proposal without modification in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74485).
    In summary, we finalized our intent to select a random sample of 
hospitals for validation purposes, and to select an additional 50 
hospitals based on specific criteria designed to measure whether the 
data these hospitals have reported raises a concern regarding data 
accuracy.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for the CY 
2014 payment determination and subsequent years, we proposed to 
continue these policies and to continue to use the targeting criteria 
finalized previously. Specifically, a hospital will be preliminarily 
selected for validation based on targeting criteria if it:
     Fails the validation requirement that applies to the 
previous year's payment determination. For example, if a hospital was 
selected for validation for the CY 2013 payment determination year, 
either on a random or targeted basis, and the hospital did not meet the 
75 percent validation score for the designated time period, based upon 
our validation process, for the designated time period, the hospital 
would be included in the targeted sample pool for the CY 2014 payment 
determination); or
     Has an outlier value for a measure based on the data it 
submitted, based on finalized criteria from the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74485).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42333) and CY 2012 
OPPS/ASC final rule with comment period (76 FR 74486) we describe 
additional data validation conditions under consideration for the CY 
2014 payment determination and subsequent years. We thank those who 
commented on the CY 2012 proposed additional data validation targeting 
conditions and will take their views under consideration as we develop 
any future proposals on these issues. In the CY 2013 OPPS/ASC proposed 
rule (77 FR 45185), we did not propose any additional targeting 
criteria to use in selecting the additional 50 hospitals we include in 
the validation process for CY 2014 payment determination or in 
subsequent years. We invited public comment on this proposal.
    Comment: One commenter believed that CMS quality measures should be 
based strictly on data derived either through claims or data 
abstracting on the Medicare population, not on all patients who are 
treated in the outpatient setting.
    Response: Data submitted to the Hospital OQR Program are intended 
to provide the public with information on as many patients treated in 
the outpatient hospital setting as possible, including both Medicare 
and non-Medicare patients. As noted above, however, claims-based data 
collection is limited to Medicare FFS patients.
    The Hospital OQR Program requires this data to be submitted under 
section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act. That provision states 
that subsection (d) hospitals that do not report data required for the 
quality measures selected by the Secretary in the form and manner 
required by the Secretary will not receive the full payment rate 
update. We modeled the Hospital OQR Program after the Hospital IQR 
Program.
    In order for us to evaluate the care of the Medicare population 
which is a subset of the entire population, we look at data of the 
whole population, to ensure Medicare beneficiaries are receiving the 
same level of care as non-Medicare beneficiaries receive. Because we 
collect chart-abstracted quality measure data on both Medicare and non-
Medicare patients, we believe it is appropriate to establish sampling 
criteria that apply to the same populations, which include both 
Medicare and non-Medicare patients.
    Comment: One commenter advocated selecting a valid sample based on 
local practice patterns, desiring inter-rater reliability. This 
commenter suggested that CMS select all 450 hospitals using criteria 
that measure whether the data hospitals have reported raises a concern 
regarding accuracy.
    Response: We interpret the commenter to be suggesting that sampling 
criteria should be refined in order to reflect local practice patterns. 
Because we use quality measures reflecting national consensus, we do 
not believe that such further refinement is necessary. Regarding inter-
rater reliability, this should not be affected by the criteria used for 
sample selection.
    Comment: One commenter believed that our sample sizes would be 
acceptable if they were the only Federal data submission requirement. 
This commenter believed that the records requested by the Hospital OQR 
Program are in addition to those that are already established as part 
of the Federal integrity audit processes (for example, RAC, Medicaid 
Integrity, ZPIC, and MAC). The commenter encourages CMS to review the 
validation process with respect to other CMS data requirements.
    Response: We understand the commenter's concern regarding multiple 
Federal medical record requests. For Hospital OQR Program validation, 
we have worked to limit overall burden by reducing the number of 
hospitals participating annually in validation through our random 
sampling of hospitals. In addition, hospitals are reimbursed for 
photocopying and mailing costs. We agree that efforts should be made to 
keep record requests for validation purposes at the minimum necessary 
to ensure accuracy of submitted data.
    We refer readers to section XV.J. Electronic Health Records (EHRs), 
below, for a discussion of how Hospital IQR and Hospital OQR Programs 
are transitioning to the use of certified EHR technology, for measures 
that otherwise require information from the clinical

[[Page 68486]]

record. We look forward to the adoption of EHR technology as a means to 
reduce burden, allowing us to collect data for measures without the 
need for manual chart abstraction, and we will explore validating these 
data in ways that likewise reduce burden to providers.
    Comment: One commenter would like CMS to clearly identify whether a 
record has been requested as a result of random selection or targeted 
selection.
    Response: We interpret this commenter's suggestion to mean that we 
should indicate whether we selected a hospital for validation as a 
result of random or targeted selection.
    For example, because all hospitals are eligible for random 
selection, a hospital that failed validation in one payment 
determination year would not know whether it was selected for 
validation in the subsequent payment determination year based on random 
or targeted selection. The hospital might have been selected in either 
of these categories.
    We have refrained from noting on what basis a hospital is selected 
on public Web sites, since our targeting criteria are based on possible 
data quality issues.
    However, we do have that information available. If a hospital would 
like to understand why it was selected for validation, the hospital may 
call the support contractor and request that information. Contact 
information for the Hospital OQR support contractor is available at 
https://qualitynet.org.
    After consideration of the public comments we received, we are 
finalizing our proposal not to include any additional targeting 
criteria to use in selecting the additional 50 hospitals we include in 
the validation process for the CY 2014 payment determination or in 
subsequent years.
c. Methodology for Encounter Selection for the CY 2014 Payment 
Determination and Subsequent Years
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for each 
selected hospital (random or targeted), we proposed to continue the 
approach we adopted in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74485 through 74486) for the CY 2014 payment 
determination and subsequent years. For the CY 2014 payment 
determination, for each selected hospital (random or targeted), we 
would continue 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 complete 
supporting medical record documentation that corresponds to the 
encounter. We refer readers to 42 CFR 482.24(c)(2) for a definition of 
what is expected in a medical record submitted for validation. The 
validation process requires full supporting medical documentation, 
including ECG tapes and/or other pieces of a medical record that may 
not be stored in a single location. The hospital must ensure a full 
medical record goes to the contractor for accurate validation.
    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 
of hospitals per year will be 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 would be 
validating data from April 1 to March 31 of the year preceding the 
payment determination year. This provides validation results data in 
time to use to make the payment determination. For example, encounter 
data from April 1, 2012 to March 31, 2013 provides a full year of the 
most recent data possible to validate in time to make the CY 2014 
payment determination. We invited public comment on our proposal to 
continue to use our established methodology for encounter selection and 
to continue to use our annual schedule for encounters to be validated 
and used in payment determinations.
    We did not receive any public comments regarding our proposal to 
continue to use our established methodology for encounter selection and 
our annual schedule for encounters to be validated and used in payment 
determinations. As a result, we are finalizing our proposal to continue 
to use our established methodology for encounter selection and our 
annual schedule for encounters to be validated and used in payment 
determinations.
d. Validation Score Calculation for the CY 2014 Payment Determination 
and Subsequent Years
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45185) we proposed to 
retain the medical record return policy that we finalized in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72104) for the CY 
2014 payment determination and subsequent years. For the CY 2014 
payment determination, we proposed to continue the validation score 
policies we adopted in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74486), for the CY 2013 payment determination. We 
proposed to use the validation calculation approach finalized for the 
CY 2012 and CY 2013 payment determinations 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.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for the CY 
2014 payment determination and subsequent years, we proposed to use the 
medical record validation procedure we finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72105). A designated CMS 
contractor would, for each quarter that applies to the validation, ask 
each of the selected hospitals to submit medical documentation for up 
to 12 randomly selected cases submitted to and accepted by the OPPS 
Clinical Warehouse. The CMS contractor would request paper copies of 
medical documentation corresponding to selected cases from each 
hospital via certified mail or another trackable method that requires a 
hospital representative to sign for the request letter. A trackable 
method would be used so that we would be assured that the hospital 
received the request. The hospital would have 45 calendar days from the 
date of the request as documented in the request letter to submit the 
requested documentation and have the documentation received by the CMS 
contractor. If the hospital does

[[Page 68487]]

not comply within 30 calendar days of receipt of the initial medical 
documentation request, the CMS contractor would send a second letter by 
certified mail or other trackable method to the hospital, reminding the 
hospital that paper copies of the requested documentation must be 
submitted and received within 45 calendar days following the date of 
the initial CMS contractor request. If the hospital does not submit the 
requested documentation and the documentation is not received by the 
CMS contractor within the 45 calendar days, then the CMS contractor 
would assign a ``zero'' score to each data element for each selected 
case and the case would fail for all measures in the same topic (for 
example, OP-6 and OP-7 measures for a Surgical Care case).
    We proposed that the letter from the designated CMS contractor 
would be addressed to the hospital's medical record staff identified by 
the hospital for the submission of records under the Hospital IQR 
Program (that is, the hospital's medical records staff identified by 
the hospital to its State QIO). If CMS has evidence that the hospital 
received both letters requesting medical records, the hospital would be 
deemed responsible for not returning the requested medical record 
documentation and the hospital would not be allowed to submit such 
medical documentation as part of its reconsideration request so that 
information not utilized in making a payment determination is not 
included in any reconsideration request.
    Once the CMS contractor receives the requested medical 
documentation, the contractor would independently reabstract the same 
quality measure data elements that the hospital previously abstracted 
and submitted, and the CMS contractor would then compare the two sets 
of data to determine whether the two sets of data match. Specifically, 
the CMS contractor would conduct a measures level validation by 
calculating each measure within a submitted case using the 
independently reabstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement would then be calculated. 
The validation score for a hospital would equal the total number of 
measure matches divided by the total number of measures multiplied by 
100 percent.
    We invited public comment on our proposals regarding the medical 
record request policy for the CY 2014 payment determination and 
subsequent payment determination years.
    Comment: Many commenters supported our proposal to continue the 45 
day time period for medical record submission. These commenters noted 
that they appreciated the Hospital OQR Program's consistency with the 
RAC auditing.
    Response: We thank these commenters for their support. We agree 
that the 45 day time period to submit medical record documentation for 
validation is reasonable and has the additional benefit of being 
consistent with RAC medical documentation requests.
    To receive the full OPPS OPD fee schedule increase factor for CY 
2014, 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 and CY 2013 payment 
determinations (75 FR 72105 and 76 FR 74486). We also proposed to use 
the same medical record documentation submission procedures that we 
also finalized for the CY 2012 and CY 2013 payment determinations (75 
FR 72104 and 76 FR 74486). We invited public comments on these 
proposals.
    Comment: One commenter expressed concerns regarding the strict 
validation of ED throughput measures, and recommended that CMS adopt 
the 5 minute allowance for the Hospital OQR Program, which was 
previously adopted for the Hospital IQR Program.
    Response: We thank this commenter for expressing this concern. We 
believe the commenter is referring to our policy requiring validation 
of measures requiring time values. The commenter is referring to the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53549).
    We agree with the commenter that requiring time values to match 
exactly is not realistic based on our historical experience with 
clinical data abstraction, the recognition that hospital clocks may 
vary from system to system such that the same time may be recorded 
differently depending on the source, and the limited clinical 
significance of small deviations in time. We note that this particular 
concern affects the validation score for the CY 2014 payment 
determination as well as for future years.
    Accordingly, we are finalizing that, for the CY 2014 payment 
determination and for subsequent years, we will not require, when 
scoring the following chart-abstracted measures, that these measures 
have matching numerator and denominator states:
     OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients
     OP-19: Transition Record with Specified Elements Received 
by Discharged ED Patients (this measure is currently suspended and will 
not be used in the CY 2014 payment determination. We intend to confirm 
whether this measure will be included in future payment determinations 
in future rulemaking).
     OP-20: Door to Diagnostic Evaluation by a Qualified 
Medical Professional
     OP-21: ED--Median Time to Pain Management for Long Bone 
Fracture
     OP-22: ED Patient Left Without Being Seen
     OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke
    Instead, for scoring of these measures, we will allow a 5 minute 
variance between the time abstracted by the hospital and that 
abstracted by the Clinical Data Abstraction Center (CDAC).
    After consideration of the public comments we received, we are 
finalizing our proposals as modified regarding the validation score 
calculation methodology and timeframe for submission of medical record 
documentation requested for validation.

H. Hospital OQR Reconsideration and Appeals Procedures for the CY 2014 
Payment Determination 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 could 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

[[Page 68488]]

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. This process required that a hospital's CEO 
sign any request for a reconsideration.
    In the CY 2011 and CY 2012 OPPS/ASC final rules with comment 
periods (75 FR 72106 through 72108 and 76 FR 74486 through 75587), we 
continued this process for the CY 2012 and CY 2013 payment updates with 
some modification. In the CY 2011 OPPS/ASC final rule with comment 
period(75 FR 72107), we finalized that the CEO was not required to sign 
the reconsideration request form.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45186), we proposed to 
continue this process, with additional modifications, for the CY 2014 
payment determination and subsequent years' payment determinations. We 
have now realized that, in eliminating the requirement that a CEO sign 
a request form, we did not include any requirement for a signature on 
the reconsideration request form. To increase accountability, we 
proposed for the CY 2014 payment determination and subsequent years' 
payment determinations, that the hospital designate a contact on its 
reconsideration request form, who may or may not be the CEO. We would 
communicate with this designee. We also proposed that the hospital's 
designee must sign its reconsideration request form. This process is 
consistent with our recently adopted proposals for reconsideration 
requests under the ASCQR Program (77 FR 53643 through 53644).
    Under this 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 2014 payment determination, the request must be 
submitted by February 3, 2014) 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] Designated hospital personnel contact information, including 
name, email address, telephone number, and mailing address (must 
include physical address, not just a post office box). We proposed that 
the designee, who may or may not be the hospital's CEO, must sign the 
form submitted to request reconsideration.
    [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). Hospitals 
submit this documentation to a designated CMS contractor which has 
authority to review patient level information. We 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 
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 proposed these requirements for the CY 2014 payment 
determination year program and for subsequent years. We invited public 
comment on these proposed changes.
    Comment: Many commenters supported the proposal that the CEO or 
designee be able to sign the reconsideration request form.
    Response: We thank these commenters for their support.
    Following receipt of a request for reconsideration, CMS--
     Provides an email acknowledgement, using the contact 
information provided in the reconsideration request, to the designated 
hospital personnel notifying them that the hospital's request has been 
received.
     Provides a formal response to the hospital-designated 
personnel, using the contact information provided in the 
reconsideration request, notifying the hospital of the outcome of the 
reconsideration process.
     Applies policies that we finalized for the CY 2012 and CY 
2013 payment determinations regarding the scope of our review when a 
hospital requests reconsideration because it failed our validation 
requirement.
    These policies are as follows:
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more data elements were 
classified as mismatches, we 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 of the complete 
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 of the complete 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 
is initially limited. We would review only to determine whether the 
medical documentation submitted in response to the designated CMS 
contractor's request was the correct and complete documentation. If we 
determine that the hospital did submit the correct and complete medical 
documentation, we abstract the data elements and compute a new 
validation score for the encounter. If we conclude that the hospital 
did not submit the correct and complete medical record documentation, 
we do 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 
45 calendar day timeframe (which we are finalizing in this final rule 
with comment period), our review is initially limited to determining 
whether the CMS contractor received the requested medical record 
documentation within 45 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 abstract data elements from 
the medical record documentation submitted by the

[[Page 68489]]

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 
45 calendar day period, we do not further consider the hospital's 
request.
    If a hospital is dissatisfied with the result of a Hospital OQR 
reconsideration decision, the hospital is able to file an appeal under 
42 CFR Part 405, Subpart R (PRRB appeal).
    We invited public comment on the modifications we proposed to the 
Hospital OQR Program reconsideration and appeals procedures.
    Comment: One commenter thanked CMS for fully describing the process 
for making a reconsideration request.
    Response: We thank the commenter and appreciate the support. We 
agree that the program process for reconsiderations should be clear and 
fully described.
    After consideration of the public comments we received, we are 
finalizing our proposals to the Hospital OQR Program reconsideration 
and appeals procedures.

I. Extraordinary Circumstances Extension or Waiver for the CY 2013 
Payment Determination 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 a modification to 
eliminate redundancy in the information a hospital must provide in the 
request. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74478 through 74479), for CY 2012 and subsequent years, we retained 
these procedures with one modification. The CY 2012 modification 
allowed that the original procedures for requesting an extension or 
waiver of quality data submission would thereafter also extend to 
include medical record documentation submission for purposes of 
complying with our validation requirement for the Hospital OQR Program. 
In the CY 2013 OPPS/ASC proposed rule (77 FR 45187), we proposed to 
retain these procedures with a modification for CY 2013 and subsequent 
years.
    We proposed to modify one element of the information required on 
the CMS request form. Under the procedures set out in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74479), hospitals were 
required to submit ``CEO and any other designated personnel contact 
information'' (emphasis added), the CEO was required to sign the form, 
and CMS was required to respond to the CEO and additional designated 
hospital personnel. The information required in CY 2013 and subsequent 
years would include ``CEO or other hospital-designated personnel 
contact information'' (emphasis added). This proposed change would 
allow the hospital to designate an appropriate, non-CEO, contact at its 
discretion. This individual would be responsible for the submission, 
and would be the one signing the form. Therefore, the hospital's 
designated-contact may or may not hold the title of CEO. We invited 
public comment on this proposed modification to the process for 
granting extraordinary circumstances extensions or waivers for the 
Hospital OQR Program.
    Comment: Many commenters supported the proposal that the hospital 
should designate its own most appropriate contact for the signing and 
submission of the extraordinary circumstance extension and waiver form.
    Response: We appreciate these commenters' support.
    Thus, we proposed that, 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 or other hospital-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 designated 
contact, whether or not that individual is the 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 an email acknowledgement using the contact information 
provided in the request notifying the designated contact that the 
hospital's request has been received;
    (2) Provide a formal response to the hospital's designated contact 
using the contact information provided in the request notifying them of 
our decision; and
    (3) Complete our review of any CY 2013 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. We invited public 
comments on these proposals.
    Comment: One commenter thanked CMS for fully describing the process 
for making a request for an extension or waiver of program 
requirements.
    Response: We thank this commenter for supporting our efforts.
    After consideration of the public comments we received, we are 
finalizing our proposed modifications to the procedures for requesting 
an extension or waiver of Hospital OQR Program requirements.

J. 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

[[Page 68490]]

for future EHR submission of electronic clinical quality measures 
(eCQMs), as they are referred to in the EHR Incentive Program), by 
sponsoring the creation of electronic specifications for eCQMs under 
consideration for the Hospital IQR Program. Through the Medicare and 
Medicaid 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, eCQMs via hospital EHRs for Hospital IQR Program and Hospital 
OQR Program measures. We expect the Hospital IQR and Hospital OQR 
Programs to transition to the use of electronic specifications for 
eCQMs that otherwise require information from the clinical record. This 
would allow us to collect data for eCQMs 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 for the Hospital IQR 
Program. We also anticipate such a transition for hospital outpatient 
measures, although likely somewhat after the transition for hospital 
inpatient measures. This is because we hope to first align the eCQMs in 
the Medicare EHR Incentive Program with the Hospital IQR Program 
measures. 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 many eCQMs based on clinical record data.
    As noted below, the Medicare and Medicaid EHR Incentive Programs--
Stage 2 final rule (77 FR 54088) requires electronic reporting of eCQMs 
beginning in 2014 for eligible hospitals and CAHs that are beyond the 
first year of Stage 1 of meaningful use. Under our timeline for EHR-
based submission under the Hospital OQR Program, some eligible 
hospitals would be in their second year of Stage 2 reporting and these 
eligible hospitals could be using two methods to report similar 
information for the Medicare and Medicaid EHR Incentive Programs and 
the Hospital OQR Program. In the CY 2013 OPPS/ASC proposed rule (77 FR 
45188), we stated that we had considered allowing, but not requiring, 
EHR-based submission at the earliest possible date, so as to reduce the 
burden of hospitals. We did not propose this approach because we 
believe that it would not be consistent with our goal that measure 
results that must be publicly reported should be based on consistent, 
comparable results among reporting hospitals and because our first 
priority is the align EHR-based submissions under the Hospital IQR 
Program. We invited public comment on this issue.
    Comment: A few commenters pointed out that the transition from 
manual to electronic submission is a huge task and could be very labor 
intensive. Another commenter stated that the timeline to transition to 
electronic reporting is too aggressive. Some commenters urged CMS to 
immediately allow data submission via chart abstraction or 
electronically to ease the burden of quality reporting. Another 
commenter agreed with CMS's consideration for a full migration to 
electronic quality measurement and reporting. The commenter stated it 
is inappropriate to report data using chart-abstraction and electronic 
submission concurrently in the interim.
    Response: We understand the transition to electronic submission is 
an immense undertaking that requires intense collaboration among 
stakeholders. As stated earlier, we still believe that public reporting 
should be consistent and comparable among reporting hospitals. We 
intend to move toward a full migration to electronic quality 
measurement and reporting. In addition, the EHR Incentive Program has 
incorporated eCQMs that are part of various hospital reporting 
programs, including the Hospital IQR and Hospital OQR Programs, in 
order to maximize financial incentives to help with this transition.
    Comment: One commenter urged CMS to lay out its vision for 
electronic reporting, stating that it is overly burdensome for 
hospitals to collect and report data via chart abstraction and 
electronically.
    Response: We have previously stated our vision, including in the 
Medicare and Medicaid EHR Incentive Programs--Stage 2 final rule (77 FR 
54053). We noted that our alignment efforts focus on several fronts 
including using the same eCQMs for different programs, standardizing 
the measure development and electronic specification processes across 
our programs, coordinating quality measurement stakeholder involvement 
efforts, and identifying ways to minimize multiple submission 
requirements and mechanisms. We gave the example that we are working 
toward allowing eCQM data submitted via certified EHR technology 
(CEHRT) by eligible professionals (EPs), eligible hospitals and CAHs to 
apply to other CMS quality reporting programs. A longer-term vision 
would be hospitals and clinicians reporting through a single, aligned 
mechanism for multiple CMS programs. For EPs, we have finalized such an 
alignment between the PQRS and the EHR Incentive Program, and we expect 
hospital reporting programs such as Hospital IQR and Hospital OQR 
Programs to follow.
    In order to properly transition to electronic reporting, it is 
imperative that we take a staggered approach to electronic reporting in 
order to allow for careful review of the infrastructure and data 
integrity during the process. We have and will continue to look for 
ways to reduce reporting burden. We note that providers could collect 
data in EHRs even if the submission of the data is not done 
electronically for all quality reporting programs.
    Comment: One commenter strongly recommended that all eCQMs should 
be field-tested and validated prior to implementation.
    Response: We agree with the commenter that eCQMs should be tested 
and validated prior to implementation. We are collaborating with the 
NQF, measure stewards, and the ONC to develop accurate, and medical-
record compatible electronic specifications while maintaining the 
integrity of the measures as endorsed.
    We thank the commenters for submitting comments on the use of EHRs 
in the Hospital OQR Program and will take these comments into 
consideration as we develop future policies on this issue.

K. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 
Eligible Hospitals and CAHs

    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized the voluntary 2012 Electronic Reporting Pilot for eligible 
hospitals and CAHs participating in the Medicare EHR Incentive Program 
for FY 2012 and also revised our regulations at Sec.  495.8(b)(2) 
accordingly. We refer readers to the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74489 through 74492) for detailed discussion of 
the 2012 Electronic Reporting Pilot.
    We proposed to continue the Electronic Reporting Pilot for FY 2013 
as finalized for FY 2012. We proposed to revise our regulations at 
Sec.  495.8(b)(2)(vi) to reflect the continuation of the Electronic 
Reporting Pilot for FY 2013, and also to remove the reference to Sec.  
495.6(f)(9) in order to conform with the proposed changes to Sec.  
495.6(f) that were included in the Medicare and Medicaid EHR Incentive 
Programs--Stage 2 proposed rule (77 FR 13817). (We note we recently 
published the Medicare and Medicaid EHR Incentive Programs--Stage 2 
final rule

[[Page 68491]]

(77 FR 53968).)We invited public comments on these proposals.
    We noted in the proposed rule that we finalized reporting clinical 
quality measures for the Medicare EHR Incentive Program by attestation 
of clinical quality measure results in the CY 2012 OPPS/ASC final rule 
with comment period for FY 2012 and subsequent years, such as FY 2013 
(76 FR 74489). Thus, eligible hospitals and CAHs may continue to report 
clinical quality measure results as calculated by CEHRT by attestation 
for FY 2013, as they did for FYs 2011 and 2012. We also noted the 
intent of CMS to move to electronic reporting. In the Medicare and 
Medicaid EHR Incentive Programs--Stage 2 final rule, we finalized that 
the Medicare EHR Incentive Program would require electronic reporting 
of clinical quality measures beginning in FY 2014 for eligible 
hospitals and CAHs that are beyond the first year of Stage 1 of 
meaningful use (77 FR 54088).
    Comment: A few commenters stated that some eCQMs have not been 
sufficiently validated. One commenter also stated that not enough 
clinical quality measures in the Hospital IQR and Hospital OQR Programs 
are electronically specified, noting that some data elements are not 
always captured in CEHRT and still require manual review and input. A 
few commenters stated that electronic specifications have not undergone 
field testing.
    Response: The clinical quality measures finalized in the Medicare 
and Medicaid EHR Incentive Programs--Stage 2 final rule (77 FR 53968) 
for reporting beginning with FY 2014 have either undergone feasibility 
testing in EHR systems and clinical settings or were finalized in the 
Stage 1 final rule for reporting in FYs 2011 and 2012, and 
specifications have been and will continue to be updated based on 
experiences with reporting those clinical quality measures in the EHR 
Incentive Program.
    In addition, the Office of the National Coordinator for Health 
Information Technology's (ONC) 2014 Edition EHR certification criteria 
explicitly requires that EHR technology presented for certification 
must be able to capture the requisite data for each and every clinical 
quality measure to which the EHR technology is requested to be 
certified (see 45 CFR 170.314(c)(1) and 77 FR 54226 through 54232). 
Therefore EHR technology that is certified to the 2014 Edition EHR 
certification criteria should include all of the data elements needed 
for each and every clinical quality measure to which an EHR technology 
is certified for the purposes of the EHR Incentive Program (for a list 
of these measures, including other quality measure programs that use 
the same measure, please refer to Table 10 of the Medicare and Medicaid 
EHR Incentive Programs--Stage 2 final rule at 77 FR 54083 through 
54087). Finally, we do not believe that many of the issues experienced 
by providers with eCQMs in 2011 and 2012 of the EHR Incentive Program 
would continue.
    We expect that eCQMs that will be electronically reported in 
hospital reporting programs such as the Hospital OQR Program would have 
undergone the same or similar processes as the eCQMs in the EHR 
Incentive Program (for more information, please refer to the Medicare 
and Medicaid EHR Incentive Programs--Stage 2 final rule 77 FR 54053 
through 54056, section B.3. Criteria for Selecting CQMs and section 
B.4. CQM Specification). As the transition to electronic reporting 
becomes more ubiquitous in the hospital reporting programs, we expect 
that more eCQMs would be created de novo based on data that is readily 
available in EHR systems rather than retooled from paper-based 
specifications.
    Comment: Several commenters stated that CMS should establish a 
process for updating specifications for eCQMs. These commenters also 
suggested that we establish a mechanism through which vendors and 
providers can offer feedback on problematic or unclear measures.
    Response: The Electronic Reporting Pilot, which began in FY 2012 
and is being finalized to continue in FY 2013, is used in part as a 
mechanism for testing the entire infrastructure for reporting eCQMs, 
including the ability to accurately abstract clinical quality data from 
EHRs, transmit them to CMS, and for CMS to receive the data. The EHR 
Incentive Program is currently the only CMS quality reporting program 
using electronic clinical quality measures for hospitals. The process 
of updating specifications regularly is expected to continue in order 
to maintain alignment with current clinical guidelines and ensure that 
the measure remains relevant and actionable within the clinical care 
setting.
    In addition, we expect to make updates based on experiences of 
vendors, providers, and CMS during the process of reporting clinical 
quality data. We currently have various forums in which vendors and 
providers can provide feedback, such as the joint CMS and the Joint 
Commission ePilot vendor conference call, national partners' calls and 
open door forums. We continue to engage with the vendor and provider 
communities to keep an open dialogue for feedback and continuous 
improvement in electronic quality measurement.
    Comment: One commenter did not support CMS having direct access to 
a facility's EHR for data abstraction.
    Response: We have not proposed nor do we intend to directly access 
a facility's EHR for data abstraction. The Electronic Reporting Pilot 
for the Medicare EHR Incentive Program (established in the CY 2012 
OPPS/ASC final rule with comment period and being finalized to continue 
in FY 2013 in this final rule with comment period) is expected to be 
the basis for electronic reporting of clinical quality data in Hospital 
IQR and Hospital OQR Programs, as well as potentially in other hospital 
reporting programs.
    Comment: Several commenters were concerned about participation 
levels in the Electronic Reporting Pilot and suggested flexibility with 
data transmission standards, such as using standards that EHR vendors 
already use. One commenter urged CMS to perform a comprehensive 
assessment of the pilot.
    Response: The submission period for the first Electronic Reporting 
Pilot (that is, the pilot established for FY 2012) is October 1, 2012 
through November 30, 2012. Therefore, when this final rule with comment 
period is published, the submission period for the first Electronic 
Reporting Pilot for hospitals would not yet be completed and a 
comprehensive assessment would not yet be possible. The data 
transmission standard used in the Electronic Reporting Pilot (Quality 
Reporting Data Architecture category I, or QRDA-I) has also been 
finalized in the Medicare and Medicaid EHR Incentive Programs--Stage 2 
final rule as a standard that we will accept beginning with FY 2014 (77 
FR 54088). ONC has also included QRDA-I in its 2014 Edition EHR 
certification criteria, which means that CEHRT should be capable of 
transmitting data using this standard if certified to the 2014 Edition 
EHR certification criteria. Therefore, it is a standard that we believe 
will continue to be used more widely for electronic reporting of 
clinical quality measures. As stated previously, we have and will 
continue to engage with the vendor community in order to continue to 
improve the ease and accuracy of electronic transmission of clinical 
quality data.
    Comment: One commenter provided suggestions on development and 
selection of future electronic clinical

[[Page 68492]]

quality measures, including considerations such as measure validity, 
quality improvement potential, reporting burden, and the National 
Quality Strategy described in the Medicare and Medicaid EHR Incentive 
Programs--Stage 2 final rule (77 FR 54054).
    Response: We appreciate the suggestions on development and 
selection of future electronic clinical quality measures; however, this 
is outside the scope of this rulemaking. We will consider these 
suggestions when developing new electronic clinical quality measures 
and in future rulemaking when selecting new measures in our quality 
reporting programs.
    Comment: One commenter stated that it is inconsistent for the 
Electronic Reporting Pilot to collect only Medicare data when reporting 
of all payer data is instrumental to meeting the goals of national 
initiatives as well as needed for Hospital Compare. This commenter was 
concerned that submission of patient-level data is inconsistent with 
the requirement in the EHR Incentive Program to report summary-level 
data and could have adverse consequences for patient privacy.
    Response: In order to work towards the goal of transitioning our 
quality reporting programs to electronic reporting, we are piloting the 
electronic submission of patient-level data, which is the data level 
required in the hospital reporting programs, such as the Hospital IQR 
and Hospital OQR Programs. Whether the data are submitted to us through 
a manual process or electronically, all parties are expected to comply 
with HIPAA as applicable in order to maintain patient confidentiality 
and secure data transmission. Since this is a pilot, we limited the 
data submission to Medicare patients only in order to limit the 
reporting burden on participating hospitals during the pilot phase.
    Comment: One commenter suggested piloting both the QRDA-I (patient-
level) and QRDA-III (aggregate-level) transmission formats in 2013.
    Response: We proposed to continue the Electronic Reporting Pilot 
for FY 2013 exactly as adopted for FY 2012, which only included the 
QRDA-I transmission format. The QRDA-III format is currently being 
finalized and is not ready for full implementation in FY 2013.
    Comment: Several commenters supported continuing the Electronic 
Reporting Pilot through the EHR Incentive Program. One of these 
commenters specifically supported the electronic reporting of clinical 
quality measures under the terms in the EHR Incentive Program.
    Response: We thank the commenters for the support to continue the 
Electronic Reporting Pilot and for electronically-reported clinical 
quality measures.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue the Electronic Reporting Pilot for 
FY 2013, as finalized for FY 2012. We are revising our regulations as 
proposed at Sec.  495.8(b)(2)(vi) to reflect the continuation of the 
Electronic Reporting Pilot for FY 2013 and to remove the reference to 
Sec.  495.6(f)(9).

XVI. Requirements for the Ambulatory Surgical Center Quality Reporting 
(ASCQR) Program

A. Background

1. Overview
    We refer readers to section XV.A.1. of this final rule with comment 
period for a general overview of our quality reporting programs.
2. Statutory History of the ASC Quality Reporting (ASCQR) Program
    We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74492 through 74493) for a detailed 
discussion of the statutory history of the ASCQR Program.
3. History of the ASCQR Program
    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 quality reporting 
requirements. However, in these rules, we indicated that we intended to 
implement a quality reporting program for ASCs in the future.
    In preparation for proposing a quality reporting program for ASCs, 
in the CY 2011 OPPS/ASC proposed rule (75 FR 46383), we solicited 
public comments on 10 measures. In addition to preparing to propose 
implementation of a quality reporting program for ASCs, HHS developed a 
plan to implement a value-based purchasing (VBP) program for payments 
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 details this plan. This report is found on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/Downloads/C_ASC_RTC-2011.pdf. Currently, we do not have 
express statutory authority to implement an ASC VBP program. If and 
when legislation is enacted that authorizes CMS to implement an ASC VBP 
program, we will develop the program and propose its implementation 
through notice-and-comment rulemaking.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination. We adopted 
quality measures for the CY 2014, CY 2015, and CY 2016 payment 
determination years and finalized some data collection and reporting 
timeframes for these measures. We also adopted policies with respect to 
the maintenance of technical specifications and updating of measures, 
publication of ASCQR Program data, and, for the CY 2014 payment 
determination, data collection and submission requirements for the 
claims-based measures. For a discussion of these final policies, we 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74492 through 74517).
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74515), we indicated our intent to issue proposals for administrative 
requirements, data validation and completeness requirements, and 
reconsideration and appeals processes in the FY 2013 IPPS/LTCH PPS 
proposed rule, rather than in the CY 2013 OPPS/ASC proposed rule, 
because the FY 2013 IPPS/LTCH PPS proposed rule was scheduled to be 
finalized earlier and prior to data collection for the CY 2014 payment 
determination, which is to begin with services furnished on October 1, 
2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through 
53644), we issued final policies for administrative requirements, data 
completeness requirements, extraordinary circumstances waiver or 
extension requests, and a reconsideration process. For a complete 
discussion of these policies, we refer readers to the FY 2013 IPPS/LTCH 
PPS final rule.
    Because we included proposals for the ASCQR Program in the FY 2013

[[Page 68493]]

IPPS/LTCH PPS proposed rule, we limited the number of proposals in the 
CY 2013 OPPS/ASC proposed rule. In addition, in an effort to prevent 
confusion regarding what we proposed in the CY 2013 OPPS/ASC proposed 
rule and what we proposed in the FY 2013 IPPS/LTCH PPS proposed rule, 
in the CY 2013 OPPS/ASC proposed rule, we limited our discussion of the 
proposals contained in the FY 2013 IPPS/LTCH PPS proposed rule 
primarily to background related to the proposals in the CY 2013 OPPS/
ASC proposed rule.
    Comment: Two commenters supported the implementation of a pay-for-
performance program (that is, an ASC Value-Based Purchasing (VBP) 
Program) by CY 2016 to reward high performing facilities and penalize 
low performing facilities. The commenters also recommended that the 
measure set for such a program focus not only on clinical outcomes and 
include clinical process, structural, and patient experience of care 
measures, but also minimize burden.
    Response: Currently, we do not have the statutory authority to 
implement an ASC VBP Program. If legislation is enacted that authorizes 
CMS to implement such a program for ASCs, we will consider these 
recommendations.

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    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 under 
section 1833(t)(17)(C)(i) of the Act state that measures developed 
shall ``be appropriate for the measurement of 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 addition to following the statutory requirements, in selecting 
measures for the ASCQR 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 the ASCQR Program 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, 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 discussed above, the Hospital OQR Program statute only 
requires that we adopt measures that are appropriate for the 
measurement of the quality of care furnished by hospitals in outpatient 
settings, reflect consensus among affected parties, and, to the extent 
feasible and practicable, include measures set forth by one or more 
national consensus building entities. Therefore, measures are not 
required to be endorsed by the NQF or any other national consensus 
building entity and, as we have noted in a 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. 
Further, the Secretary has broader authority under the ASCQR Program 
statute, as discussed above, to adopt non-endorsed measures or measures 
that do not reflect consensus for the ASCQR Program because, under the 
ASCQR Program statute, these Hospital OQR Program provisions apply 
``except as the Secretary may otherwise provide.''
    In developing the ASCQR Program, we applied the principles set 
forth in the CY 2011 OPPS/ASC proposed rule and final rule with comment 
period (76 FR 42337 through 42338 and 74494 through 74495, 
respectively). Although we did not propose any new measures for the 
ASCQR Program in the CY 2013 OPPS/ASC proposed rule as discussed below, 
we stated that we plan to apply the following principles in future 
measure selection and development for the ASCQR Program. These 
principles were applied in developing other quality reporting programs 
and many are the same principles applied in developing the ASCQR 
Program last year.
     Our overarching goal is to support the National Quality 
Strategy's goal of better health care for individuals, better health 
for populations, and lower costs for health care. The ASCQR Program 
will help achieve these goals by creating transparency around the 
quality of care provided by ASCs to support patient decision-making and 
quality improvement. More information regarding the National Quality 
Strategy can be found at: http://www.healthcare.gov/law/resources/reports/quality03212011a.html. HHS engaged a wide range of stakeholders 
to develop the National Quality Strategy, as required by the Affordable 
Care Act.
     Pay-for-reporting and public reporting programs should 
rely on a mix of standards, process, outcomes, and patient experience 
of care measures. 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 the 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.
     We weigh the relevance and the utility of measures 
compared to the burden on ASCs for submitting data under the ASCQR 
Program. The collection of information burden on providers and 
suppliers should be minimized to the extent possible. To this end, we 
continuously seek to adopt electronic-specified measures so that data 
can be calculated and submitted via certified EHR technology with 
minimal burden. We also seek to use measures based on alternative 
sources of data that do not require chart abstraction or that use data 
already being reported by ASCs.
     We take into account the views of the Measure Application 
Partnership (MAP). The MAP is a public-private partnership convened by 
the NQF for the primary purpose of providing input to HHS on selecting 
performance measures for quality reporting programs and pay-for-
reporting programs. The MAP views patient safety as a high priority 
area and it strongly supports the use of NQF-endorsed safety measures. 
Accordingly, we consider the MAP's recommendations in selecting quality 
and efficiency measures (we refer readers to the Web sites at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx, and http://

[[Page 68494]]

www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=69885).
     Measures should be developed with the input of providers/
suppliers, purchasers/payers and other stakeholders. Measures should be 
aligned with best practices among other payers and the needs of the end 
users of the measures. We take into account widely accepted criteria 
established in medical literature.
     HHS' Strategic Plan and Initiatives. HHS is the U.S. 
Government's principal agency for protecting the health of all 
Americans. HHS accomplishes its mission through programs and 
initiatives. Every 4 years, HHS updates its Strategic Plan and measures 
its progress in addressing specific national problems, needs, or 
mission-related challenges. The current goals of the HHS Strategic Plan 
can be located on the Web site at: http://www.hhs.gov/secretary/about/priorities/strategicplan2010-2015.pdf.
     CMS Strategic Plan. We strive to ensure that measures for 
different Medicare and Medicaid programs are aligned with priority 
quality goals, that measure specifications are aligned across settings, 
that outcome measures are used whenever possible, and that quality 
measures are collected from EHRs as appropriate.
    We believe that ASCs are similar to HOPDs, insofar as the delivery 
of surgical and related nonsurgical services. Similar standards and 
guidelines can be applied between HOPDs and ASCs with respect to 
surgical care improvement because many of the same surgical procedures 
are provided in both settings. Measure harmonization assures that 
comparable care in these 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.
    We invited public comment on this approach for future measure 
selection and development for the ASCQR Program.
    Comment: Some commenters supported CMS' efforts to establish the 
ASCQR Program. One commenter emphasized that ASCQR Program measures 
should reflect ASC facility-level accountability rather than physician-
level accountability.
    Response: We appreciate the commenters' support for the 
implementation of the ASCQR Program. The measures we adopted for the 
ASCQR Program are directly attributable to ASCs. The quality data are 
submitted by ASCs and are reported at a facility-level and not at a 
physician-level. We finalized a policy to publish ASC quality data by 
CMS Certification Number (CCN) in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74514 through 74515), which is a facility-level 
identifier.
    Comment: A few commenters asserted that ASCs are small entities and 
the utilization of EHR technology in the ASC industry is limited. 
Nonetheless, commenters requested that CMS consider electronic 
submission as an option for ASCs that have implemented EHR technology.
    Response: We recognize that many ASCs are small entities and some 
may have limited EHR technology. We are still in the beginning stages 
of implementing the ASCQR Program, and we will need to assess the 
readiness of ASCs prior to considering an option of allowing electronic 
submission of measures for the ASCQR Program.
    Comment: One commenter encouraged the adoption of NQF-endorsed 
measures to ensure that field testing and the consensus process are 
rigorous. Another commenter urged CMS to facilitate direct 
representation from the ASC industry on either the National Priorities 
Partnership (NPP) or the MAP to formulate priorities for outpatient 
settings and coordinate efforts across inpatient and outpatient 
settings.
    Response: 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, sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of 
the Act, read together, require that the Secretary develop measures 
that the Secretary determines to be appropriate for the measurement of 
quality of care (including medication errors) furnished by ASCs 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. Therefore, measures are not 
required to be endorsed by the NQF or any other national consensus 
building entity and, as we have noted in a previous rulemaking (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. Further, section 1833(i)(7)(B) 
of the Act states that these provisions shall apply to the ASCQR 
Program ``except as the Secretary may otherwise provide.'' Thus, the 
Secretary has broad authority under the ASCQR Program statute to adopt 
non-endorsed measures or measures that do not reflect consensus.
    As required by section 1890A of the Act, as added by section 3014 
of the Affordable Care Act, we submit measures under consideration for 
this Program (and other programs utilizing quality measures) to the MAP 
by December 1 of each year, at the same time that we make the list of 
measures available to the public. We consider the recommendations 
issued by the MAP prior to proposing measures for the ASCQR Program.
    We encourage stakeholders interested in direct representation on 
either the NPP or the MAP to submit nominations to the NQF for 
consideration. The NQF holds open calls for membership nominations 
annually for both the NPP and the MAP, followed by a public comment 
period for vetting of balanced stakeholder groups.
    Comment: A few commenters strongly supported CMS' measure selection 
criteria for ASCs. Commenters also commended CMS' effort to align some 
of the measures for the ASCQR Program with the Hospital OQR Program 
measures, and encouraged greater alignment of the measures so that 
Medicare beneficiaries can compare ASC and HOPD quality data.
    Response: We appreciate the commenters' support for CMS' measure 
selection criteria. We believe that ASCs are similar to HOPDs, insofar 
as they deliver similar surgical and related nonsurgical services. 
Therefore, many of the measures may be applicable across these two 
settings. We agree with the commenters that greater harmonization of 
measures across these programs would allow beneficiaries to compare 
quality of care for similar services across these settings, and we will 
seek greater alignment in future program years.
    After consideration of the public comments we received, we are 
finalizing our approach for future measure selection and development 
for the ASCQR Program.
2. ASCQR Program Quality Measures
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination and adopted 
measures for the CY 2014, CY 2015, and CY 2016 payment determinations. 
We also finalized our policy to retain measures from one calendar year 
payment determination to the next so

[[Page 68495]]

that measures adopted for a previous payment determination year would 
be retained for subsequent payment determination years (76 FR 74504, 
74509, and 74510).
    We adopted the following five claims-based measures for the CY 2014 
payment determination for services furnished between October 1, 2012 
and December 31, 2012: (1) Patient Burns (NQF 0263); (2) 
Patient Fall (NQF 0266); (3) Wrong Site, Wrong Side, Wrong 
Patient, Wrong Procedure, Wrong Implant (NQF 0267); (4) 
Hospital Transfer/Admission (NQF 0265); and (5) Prophylactic 
Intravenous (IV) Antibiotic Timing (NQF 0264).
    For the CY 2015 payment determination, we retained the five claims-
based measures we adopted for the CY 2014 payment determination and 
adopted the following two structural measures: (1) Safe Surgery 
Checklist Use; and (2) ASC Facility Volume Data on Selected ASC 
Surgical Procedures. We specified that reporting for the structural 
measures would be between July 1, 2013 and August 15, 2013 for services 
furnished between January 1, 2012 and December 31, 2012, using an 
online measure submission Web page available at: https://
www.QualityNet.org. We did not specify the data collection period for 
the five claims-based measures for the CY 2015 payment determination.
    For the CY 2016 payment determination, we finalized the retention 
of the seven measures from the CY 2015 payment determination (five 
claims-based measures and two structural measures) and adopted 
Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
0431), a process of care, healthcare-associated infection 
measure (HAI). We specified that data collection for the influenza 
vaccination measure would be via the National Healthcare Safety Network 
(NHSN) from October 1, 2014 through March 31, 2015. We did not specify 
the data collection period for the claims-based or structural measures.
    We stated that, to the extent we finalize some or all of the 
measures for future payment determination years, we would not be 
precluded from adopting additional measures or changing the list of 
measures for future payment determination years through annual 
rulemaking cycles so that we may address changes in program needs 
arising from new legislation or from changes in HHS' and CMS' 
priorities.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45191), considering 
the time and effort required for us to develop, align, and implement 
the infrastructure necessary to collect data on the ASCQR Program 
quality measures and make payment determinations, and likewise the time 
and effort required on the part of ASCs to plan and prepare for quality 
reporting, we did not propose to delete or add any quality measures for 
the ASCQR Program for the CY 2014, CY 2015, and CY 2016 payment 
determination years, or to adopt quality measures for subsequent 
payment determination years. For readers' reference, the following 
table lists the ASCQR Program quality measures that were previously 
finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74504 through 74511).

[[Page 68496]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.088

    Comment: Many commenters applauded CMS' plan of not adding new 
measures to the ASCQR Program at this time because it would allow ASCs 
adequate time to adapt to reporting requirements for the initial 
measure set for the CY 2014 payment determination.
    Response: We appreciate the commenters' support.
3. ASC Measure Topics for Future Consideration
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the ASC setting. Therefore, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45191), we stated that, through future rulemaking, 
we intend to propose new measures consistent with the principles 
discussed in section XVI.B.1. of the proposed rule, in order to select 
quality measures that address clinical quality of care, patient safety, 
and patient and caregiver experience of care. We invited public comment 
specifically on the inclusion of procedure-specific measures for 
cataract surgery, colonoscopy, endoscopy, and for anesthesia-related 
complications in the ASCQR Program measure set.
    Comment: Commenters either supported or suggested the inclusion of 
the following measure topics under the ASCQR Program:
     Patient Experience of Care
     Surgical Site Infection
     Surgical Complications
     Anesthesia-Related Complications
     Otolaryngology
     Gastroenterology
     Equipment Reprocessing
     Adverse Events after Discharge
    Response: We appreciate the commenters' suggestions for future 
measure topics for the ASCQR Program.
4. Clarification Regarding the Process for Updating ASCQR Program 
Quality Measures
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized our proposal to follow the same process for updating the 
ASCQR Program measures that we adopted for the Hospital OQR Program's 
measures (76 FR 74513 through 74514). This process includes the same 
subregulatory process for the ASCQR Program as used for the Hospital 
OQR Program for updating measures, including issuing regular manual 
releases at 6-month intervals, providing addenda as necessary, and 
providing at least 3 months of advance notice for nonsubstantive 
changes such as changes to ICD-9-CM, CPT, NUBC, and HCPCS codes, and at 
least 6 months' notice for substantive changes to data elements that 
would require significant systems changes. We provided a citation to 
the CY 2009 OPPS/ASC final rule with comment period where the final 
Hospital OQR Program policies are discussed (73 FR 68766 through 
68767).
    In examining last year's finalized policy for the ASCQR Program, we 
recognize that we may need to provide

[[Page 68497]]

additional clarification of the ASCQR Program policy in the context of 
the previously finalized Hospital OQR Program policy in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68766 through 68767). 
Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45191), we 
sought to more clearly articulate the policy that we adopted for the 
ASCQR Program, which is the same policy that has been adopted for the 
Hospital OQR Program.
    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 measures we have adopted for the Hospital OQR Program. 
This process is necessary so that the Hospital OQR measures are 
calculated based on the most up-to-date scientific evidence and 
consensus standards. Under this process, when a national consensus 
building entity updates the specifications for a measure that we have 
adopted for the Hospital OQR Program, we update our specifications for 
that measure accordingly and provide notice as described above and in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514). An 
example of such an entity is the NQF. For measures that are not 
endorsed by a national consensus building entity, the subregulatory 
process is based on scientific advances as determined necessary by CMS, 
in part, through our measure maintenance process involving Technical 
Expert Panels (73 FR 68767). We invited public comment on this 
clarification of the finalized ASCQR Program policy of using a 
subregulatory process to update measures.
    Comment: A few commenters requested that CMS consider the measure 
changes made by measure developers and stewards of measures, as these 
can occur at any time based on a change in evidence, consensus 
standards, or other factors that merit an update. With respect to 
measures that are not endorsed by a national entity, the commenters 
recommended that CMS consult with ASC clinical and operational experts. 
Further, the commenters suggested that the Technical Expert Panels 
(TEPs), which are charged with maintenance of the ASCQR Program 
measures, include substantial representation from the ASC community and 
relevant surgical specialty societies.
    Response: We regularly monitor changes to measures adopted for the 
ASCQR Program and other quality programs that are made by measure 
stewards, as well as the evidence upon which the measures are based. 
The current ASCQR Program measure set has been implemented with input 
by ASC stakeholders, including the measure stewards, as well as other 
affected parties.
    For NQF-endorsed measures, measure developers and stewards are 
expected to present these changes to the NQF for review annually. We 
would incorporate these changes based upon the NQF's acceptance. For 
non-NQF-endorsed measures, we evaluate changes to measures recommended 
by our contractors' surgical TEP, which includes outpatient ASC 
surgical representatives.
    In summary, we clarified that we adopted the Hospital OQR Program's 
process for updating the ASCQR Program measures that was finalized in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), which is explained above.

C. Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 
Payment Determination and Subsequent Payment Determination Years
a. Background
    In the CY 2012 OPPS/ASC final rule with comment period, we adopted 
claims-based measures for the CY 2014, CY 2015, and CY 2016 payment 
determination years (76 FR 74504 through 74511). We also finalized 
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 (76 FR 74515 through 74516). As stated in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), ASCs 
will add the appropriate QDCs on their Medicare Part B claims forms, 
the Form CMS-1500s submitted for payment, to submit the applicable 
quality data. A listing of the QDCs with long and short descriptors is 
available in Transmittal 2425, Change Request 7754 released March 16, 
2012 (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Transmittals-Items/ASC-CR7754-R2425CP.html). Details on 
how to use these codes for submitting numerator and denominator 
information are available in the ASCQR Program Specifications Manual 
located on the QualityNet Web site (https://www.QualityNet.org). We 
also finalized the data collection period for the CY 2014 payment 
determination, as the Medicare fee-for-service ASC claims submitted for 
services furnished between October 1, 2012 and December 31, 2012. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53640), we adopted a policy 
that claims for services furnished between October 1, 2012 and December 
31, 2012, would have to be paid by the Medicare administrative 
contractor (MAC) by April 30, 2013, to be included in the data used for 
the CY 2014 payment determination. We believe that this claim paid date 
will allow ASCs sufficient time to submit claims while allowing CMS 
sufficient time to complete required data analysis and processing to 
make payment determinations and to supply this information to 
administrative contractors.
b. Form, Manner, and Timing for Claims-Based Measures for the CY 2015 
Payment Determination and Subsequent Payment Determination Years
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45192) we proposed 
that, for the CY 2015 payment determination and subsequent payment 
determination years, an ASC must submit complete data on individual 
claims-based quality measures through a claims-based reporting 
mechanism by submitting the appropriate QDCs on the ASC's Medicare 
claims. We proposed that the data collection period for the claims-
based quality measures would be for the calendar year 2 years prior to 
a payment determination. We also proposed that the claims for services 
furnished in each calendar year would have to be paid by the MAC by 
April 30 of the following year of the ending data collection time 
period to be included in the data used for the payment determination. 
Thus, for example, for the CY 2015 payment determination, we proposed 
the data collection period to be claims for services furnished in CY 
2013 (January 1, 2013 through December 31, 2013) which are paid by the 
MAC by April 30, 2014. We believe that this claim paid date would allow 
ASCs sufficient time to submit claims while allowing CMS sufficient 
time to complete required data analysis and processing to make payment 
determinations and to supply this information to administrative 
contractors. We invited public comment on these proposals.
    Comment: Some commenters agreed with CMS' proposals to begin the 
data collection period for claims-based measures in the calendar year 2 
years prior to a payment determination, and to establish the policy 
that the claims for services furnished in each calendar year would have 
to be paid by the MAC by April 30 of the following year of the ending 
data collection time period to be included in the data used for the

[[Page 68498]]

payment determination. The commenters stated that they believed the 
April 30 deadline would allow sufficient time for claims processing.
    However, other commenters believed the proposed period for the 
collection of claims data may be too abbreviated to capture all 
pertinent data. Because ASCs have up to 1 year to submit claims for 
services furnished, some commenters suggested that the period for the 
collection of claims data be as close to 1 year from the date the 
service was furnished to be included in a payment determination. Some 
commenters suggested that CMS establish a longer time period for the 
claims payment deadline in order to include all available claims data 
in the data used for payment determinations; one commenter suggested a 
June 30 deadline rather than April 30 deadline.
    Response: We appreciate the commenters' support of our proposals 
regarding the period for the collection of claims data and the time 
allowed for data processing to be included in payment determinations. 
We agree that sufficient time should be allowed for claims processing 
to obtain complete data. We have conducted an internal analysis of 
claims submission by ASCs and have found that over 90 percent of the 
ASC claims are submitted and paid within the proposed timeframe. 
Therefore, we believe at this time that the proposed April 30 claims 
paid date is the latest date that would allow CMS to acquire and 
analyze the claims data, make payment determinations, and importantly, 
provide sufficient time for the MACs to program their systems. However, 
as we gain more experience and our systems become established, we will 
explore whether allowing more time for claims processing may be 
possible; if so, we will propose such changes through notice-and-
comment rulemaking.
    Comment: One commenter expressed concern with the lag between the 
quality data reporting period and the payment reductions under the 
ASCQR Program by basing payment adjustments on participation a full 2 
years before the results of a payment determination take effect.
    Response: We understand the commenter's concern with the lag 
between when data are reported and when payment is affected, and we 
will strive to reduce this lag without significant adverse effects on 
data completeness and quality. However, we note that with the data 
collection period ending December 31 for the payment determinations 
becoming effective beginning January 1, the lag basically is 1 year 
past the end of the data collection period. Based upon our current 
experience, we believe the timeline we are finalizing provides a 
balance between data completeness and expediency.
    Comment: One commenter stated that the ASCQR Program's use of the 
term ``claims-based'' is not consistent with the Hospital IQR Program's 
use and does generate additional costs to the organization. The 
commenter stated that claims-based measures under the Hospital IQR 
Program truly means that CMS can obtain the data solely based on coding 
data without the organization taking additional steps of manually 
applying quality coding and having a clinician review the record for 
inclusion/exclusion criteria. The commenter further stated that for 
process measures, it is not accurate to label them as ``claims-based'' 
and state that this process is not time consuming and costly.
    Response: We understand the commenter's concerns. However, we are 
clarifying that we have used the term ``claims-based'' to indicate the 
data source and mechanism for data submission as well as to 
differentiate claims-based measures from measures based on manual 
chart-abstracted data. We believe that a claims-based mechanism for 
data collection is less time consuming and less costly than such chart-
abstracted quality measures. In addition, the use of the term ``claims-
based'' for the claims-based ASCQR Program quality measures is 
consistent with the Physician Quality Reporting Program (PQRS), which 
also uses QDCs for the reporting of quality data via claims.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification that, for the CY 2015 
payment determination and subsequent payment determination years, an 
ASC must submit complete data on individual claims-based quality 
measures through a claims-based reporting mechanism by submitting the 
appropriate QDCs on the ASC's Medicare claims. We also are finalizing 
that the data collection period for such claims-based quality measures 
will be for the calendar year 2 years prior to a payment determination 
and that the claims for services furnished in each calendar year will 
have to be paid by the MAC by April 30 of the following year of the 
ending data collection time period to be included in the data used for 
the payment determination.
2. Data Completeness and Minimum Threshold for Claims-Based Measures 
Using QDCs
a. Background
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized our proposal that data completeness for claims-
based measures for the CY 2014 payment determination 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 claims. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53641), we finalized our policy for the CY 2014 and CY 2015 payment 
determination years that the minimum threshold for successful reporting 
be that at least 50 percent of claims meeting measure specifications 
contain QDCs. We believe that 50 percent is a reasonable minimum 
threshold based upon the considerations discussed above for the initial 
implementation years of the ASCQR Program. We stated in that final rule 
that we intend to propose to increase this percentage for subsequent 
payment determination years as ASCs become more familiar with reporting 
requirements for the ASCQR Program.
    Comment: One commenter asked what method CMS would use to assess 
when to raise the required threshold for the level of completeness.
    Response: We plan to monitor the level of completeness for 
submitting QDCs and to monitor the ASCQR Program for issues as they 
arise. Based upon program experience, we will assess what level of 
completeness should be required. Any changes in the threshold level for 
completeness of reporting for ASCQR Program claims-based measures will 
be proposed through notice-and-comment rulemaking.
b. Data Completeness Requirements for the CY 2015 Payment Determination 
and Subsequent Payment Determination Years
    After publication of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 
28101 through 28105), we realized that we did not propose a methodology 
for determining data completeness for the CY 2015 payment determination 
and subsequent payment determination years. Therefore, in the CY 2013 
OPPS/ASC proposed rule (77 FR 45192), we proposed that data 
completeness for claims-based measures for the CY 2015 payment 
determination and subsequent payment determination years be

[[Page 68499]]

determined by comparing the number of Medicare claims (where Medicare 
is the primary or secondary payer) meeting measure specifications that 
contain the appropriate QDCs with the number of Medicare claims (where 
Medicare is the primary or secondary payer) that would meet measure 
specifications, but did not have the appropriate QDCs on the submitted 
claims for the CY 2015 payment determination and subsequent payment 
determination years. We stated that this method is the same method for 
determining data completeness for claims-based measures that was 
finalized in the CY 2012 OPPS/ASC final rule with comment period for 
the CY 2014 payment determination (76 FR 74516).
    However, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we 
stated that, because private payers would not have QDCs in their 
required HCPCS data files until January 1, 2013, claims with QDCs 
received prior to January 1, 2013 could be rejected for invalid codes. 
Because it is not possible for ASCs to submit differing codes on 
primary versus secondary payer claims for at least some payers, we 
specified that only claims where Medicare is the primary payer--not the 
secondary payer--will be used in the calculation of data completeness 
for the CY 2014 payment determination.
    We invited public comment on this proposal.
    Comment: One commenter asked how ASCs would be notified of their 
claim completeness percentages and encouraged CMS to post claim 
completeness percentages on the QualityNet Web site (http://www.QualityNet.org).
    Response: We appreciate the commenter's suggestion. We intend to 
supply preliminary completeness percentages and other data submission 
information to ASCs prior to the closing of the data submission 
deadline in April 2013 either electronically or by the mailing of a 
facility-specific report so ASCs can assess their data completeness 
levels. In addition, ASCs can use their remittance information to 
assess if QDCs have been successfully processed by MACs.
    We did not receive any public comments regarding our proposal that 
data completeness for claims-based quality measures for the CY 2015 
payment determination and subsequent payment determination years be 
determined by comparing the number of Medicare claims (where Medicare 
is the primary or secondary payer) meeting measure specifications that 
contain the appropriate QDCs with the number of Medicare claims (where 
Medicare is the primary or secondary payer) that would meet measure 
specifications, but did not have the appropriate QDCs on the submitted 
claims for the CY 2015 payment determination and subsequent payment 
determination years. Therefore, we are finalizing this proposal without 
modification.
3. Other Comments on the ASCQR Program
    Comment: Commenters expressed views and provided suggestions 
regarding additional topics and previously finalized policies for which 
we did not make proposals in the CY 2013 OPPS/ASC proposed rule, 
including comments and suggestions on the following:
     The NHSN infrastructure;
     Retention of quality measures from one calendar year to 
the next;
     Case thresholds for determining completeness of reporting;
     Alternative methods of data collection for certain 
finalized measures;
     The utility of certain finalized measures;
     Public reporting of data, including previewing data prior 
to public display;
     Patient exclusions for specific measures;
     Data collection and submission time periods for finalized 
measures;
     Validation;
     Mechanisms for opting out of reporting due to lack of 
cases meeting measure specifications;
     The use of alternatives to claims-based reporting such as 
registries and EHRs;
     The use of administrative claims data for the 
identification of HAIs;
     ASCQR Program implementation date; and
     Educational outreach to ASCs regarding the ASCQR Program.
    Response: We greatly appreciate the commenters' views on these new 
topics and our previously finalized policies. Although we did not make 
proposals in the CY 2013 OPPS/ASC proposed rule on these topics or 
finalized policies, we will consider all of these views for future 
rulemaking and program development. For information on the ASCQR 
program, we refer readers to the information posted on the QualityNet 
Web site (http://www.QualityNet.org) and the CMS Web site (http://www.cms.hhs.gov) under the Quality Initiatives and ASC sections.

D. Payment Reduction for ASCs That Fail To Meet the ASCQR Program 
Requirements

1. Statutory Background
    Section 1833(i)(2)(D)(iv) of the Act states that the Secretary may 
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).'' Paragraph (7) contains 
subparagraphs (A) and (B). Subparagraph (A) of paragraph (7) states the 
Secretary may provide that an ASC that does not submit ``data required 
to be submitted on measures selected under this paragraph with respect 
to a year'' to the Secretary in accordance with this paragraph 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 this reduction applies only with respect to the year involved and 
will not be taken into account in computing any annual increase factor 
for a subsequent year. Subparagraph (B) of paragraph (7) makes many of 
the provisions of the Hospital OQR Program applicable to the ASCQR 
Program ``[e]xcept as the Secretary may otherwise provide.'' Finally, 
section 1833(i)(2)(D)(v) of the Act states that, in implementing the 
revised ASC payment system for 2011 and each subsequent year, ``any 
annual update under such system for the year, after application of 
clause (iv) [regarding the reduction in the annual update for failure 
to report on quality measures] shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II).'' Section 
1833(i)(2)(D)(v) of the Act also states that the ``application of the 
preceding sentence may result in such update being less than 0.0 for a 
year, and may result in payment rates under the [revised ASC payment 
system] for a year being less than such payment rates for the preceding 
year.''
2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet the 
ASCQR Program Requirements for the CY 2014 Payment Determination and 
Subsequent Payment Determination Years
    The national unadjusted payment rates for many services paid under 
the ASC payment system equal the product of the ASC conversion factor 
and the scaled relative payment weight for the APC to which the service 
is assigned. Currently, the ASC conversion factor is equal to the 
conversion factor calculated for the previous year updated by the MFP-
adjusted CPI-U update factor,

[[Page 68500]]

which is the adjustment set forth in section 1833(i)(2)(D)(v) of the 
Act. The MFP-adjusted CPI-U update factor is the Consumer Price Index 
for all urban consumers (CPI-U), which currently is the annual update 
for the ASC payment system, minus the MFP adjustment. As discussed in 
the CY 2011 MPFS final rule with comment period (75 FR 73397), if the 
CPI-U is a negative number, the CPI-U would be held to zero. Under the 
ASCQR Program, any annual update would be reduced by 2.0 percentage 
points for ASCs that fail to meet the reporting requirements of the 
ASCQR Program. This reduction would apply beginning with the CY 2014 
payment rates. For a complete discussion of the calculation of the ASC 
conversion factor, we refer readers to section XIV.H. of this final 
rule with comment period.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45193), in order to 
implement the requirement to reduce the annual update for ASCs that 
fail to meet the ASCQR Program requirements, we proposed that we would 
calculate two conversion factors: a full update conversion factor and 
an ASCQR Program reduced update conversion factor. We proposed to 
calculate the reduced national unadjusted payment rates using the ASCQR 
Program reduced update conversion factor that would apply to ASCs that 
fail to meet their quality reporting requirements for that calendar 
year payment determination. We proposed that application of the 2.0 
percentage point reduction to the annual update may result in the 
update to the ASC payment system being less than zero prior to the 
application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to this final rule with comment period, which are available 
via the Internet on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,'' 
``Z2,'' as well as the service portion of device-intensive procedures 
identified by ``J8.'' We proposed that payment for all services 
assigned the payment indicators listed above would be subject to the 
reduction of the national unadjusted payment rates for applicable ASCs 
using the ASCQR Program reduced update conversion factor.
    The conversion factor is not used to calculate the ASC payment 
rates for separately payable services that are assigned status 
indicators other than payment indicators ``A2,'' ``G2,'' ``J8,'' 
``P2,'' ``R2,'' and ``Z2.'' These services include separately payable 
drugs and biologicals, pass-through devices that are contractor-priced, 
brachytherapy sources that are paid based on the OPPS payment rates, 
and certain office-based procedures and radiology services where 
payment is based on the MPFS PE RVU amount and a few other specific 
services that receive cost-based payment. As a result, we also proposed 
that the ASC payment rates for these services would not be reduced for 
failure to meet the ASCQR Program requirements because the payment 
rates for these services are not calculated using the ASC conversion 
factor and, therefore, not affected by reductions to the annual update.
    Office-based surgical procedures (performed more than 50 percent of 
the time in physicians' offices) and separately paid radiology services 
(excluding covered ancillary radiology services involving certain 
nuclear medicine procedures or involving the use of contrast agents, as 
discussed in section XIV.D.2.b. of this final rule with comment period) 
are paid at the lesser of the MPFS non-facility PE RVU-based amounts 
and the standard ASC ratesetting methodology. We proposed that the 
standard ASC ratesetting methodology for this comparison would use the 
ASC conversion factor that has been calculated using the full ASC 
update adjusted for productivity. This is necessary so that the 
resulting ASC payment indicator, based on the comparison, assigned to 
an office-based or radiology procedure is consistent for each HCPCS 
code regardless of whether payment is based on the full update 
conversion factor or the reduced update conversion factor.
    For ASCs that receive the reduced ASC payment for failure to meet 
the ASCQR Program requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced copayment liability for 
beneficiaries. Therefore, we proposed that the Medicare beneficiary's 
national unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies would be based on the reduced national 
unadjusted payment rate.
    We proposed that all other applicable adjustments to the ASC 
national unadjusted payment rates would apply in those cases when the 
annual update is reduced for ASCs that fail to meet the requirements of 
the ASCQR Program. For example, the following standard adjustments 
would apply to the reduced national unadjusted payment rates: the wage 
index adjustment, the multiple procedure adjustment, the interrupted 
procedure 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 payment for ASCs that 
do not meet the ASCQR Program requirements.
    We invited public comment on these proposals but did not receive 
any public comments. Therefore, we are finalizing our proposals without 
modification regarding the process for reducing ASC payment rates for 
ASCs that fail to meet the ASCQR Program requirements for the CY 2014 
payment determination and subsequent payment determination years.

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program 
Updates

A. Overview

    In accordance with section 1886(j)(7) of the Act, as added by 
section 3004 of the Affordable Care Act, the Secretary established a 
quality reporting program (QRP) for Inpatient Rehabilitation Facilities 
(IRFs). The IRF Quality Reporting Program (IRF QRP) was implemented in 
the FY 2012 IRF PPS final rule (76 FR 47836). We refer readers to the 
FY 2012 IRF PPS final rule (76 FR 47873 through 47883) for a detailed 
discussion on the background and statutory authority for the IRF QRP.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45193 through 45196), 
we proposed to: (1) Adopt updates to a previously adopted measure for 
the IRF QRP that will affect the annual prospective payment amounts in 
FY 2014; (2) adopt a policy that would provide that any measure that 
has been adopted for use in the IRF QRP will remain in effect until the 
measure is actively removed, suspended, or replaced; and (3) adopt 
policies regarding when rulemaking will be used to update existing IRF 
QRP measures.
    While we generally would expect to publish IRF QRP proposals in the 
annual IRF PPS rule, there are no proposals for substantive changes to 
the IRF PPS this year; therefore, we published only an IRF PPS payment 
update notice for FY 2013.\2\ Because full notice-and-comment 
rulemaking is required for the proposals mentioned above in regard to 
the IRF QRP, we needed to identify an appropriate rulemaking vehicle in 
which we could insert our IRF QRP proposals. Because the CY 2013 OPPS/
ASC proposed rule was already scheduled to include

[[Page 68501]]

additional pay-for-reporting proposals for the Hospital OQR Program and 
quality reporting requirements for the ASCQR Program, it offered an 
opportunity to allow the public to review all three quality programs' 
proposals in concert with one another in a timeframe that would be 
appropriate for implementing the IRF QRP proposals in time for the FY 
2014 IRF PPS payment cycle. Therefore, we elected to include the IRF 
QRP proposals in the CY 2013 OPPS/ASC proposed rule.
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    \2\ The FY 2013 IRF PPS Payment Update Notice was published in 
the Federal Register on July 30, 2012 (77 FR 44618). We refer 
readers to: http://www.gpo.gov/fdsys/pkg/FR-2012-07-30/pdf/2012-18433.pdf.
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B. Updates to IRF QRP Measures Which Are Made as a Result of Review by 
the National Quality Forum (NQF) Process

    Section 1886(j)(7) of the Act generally requires the Secretary to 
adopt measures that have been endorsed by the entity with a contract 
under section 1890(a) of the Act. This contract is currently held by 
the National Quality Forum (NQF). The NQF is a voluntary consensus 
standard-setting organization with a diverse representation of 
consumer, purchaser, provider, academic, clinical, and other health 
care stakeholder organizations. The NQF was established to standardize 
health care quality measurement and reporting through its consensus 
development process.\3\
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    \3\ For more information about the NQF Consensus Development 
Process, we refer readers to the Web site at: http://www.qualityforum.org/Measuring_Performance/Maintenance_of_NQF-Endorsed%C2%AE_Performance_Measures.aspx).
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    The NQF's responsibilities include: (1) Reviewing new quality 
measures and national consensus standards for measuring and publicly 
reporting on performance; (2) providing annual measure maintenance 
updates to be submitted by the measure steward for endorsed quality 
measures; (3) providing measure maintenance endorsement on a 3-year 
cycle; (4) conducting required follow-up reviews of measures with time-
limited endorsement for consideration of full endorsement; and (5) 
conducting ad hoc reviews of endorsed quality measures, practices, 
consensus standards, or events when there is adequate justification for 
a review.\4\ In the normal course of measure maintenance, the NQF 
solicits information from measure stewards for annual reviews and in 
order to review measures for continued endorsement in a specific 3-year 
cycle. In this measure maintenance process, the measure steward is 
responsible for updating and maintaining the currency and relevance of 
the measure and for confirming existing specifications to the NQF on an 
annual basis.\5\ As part of the ad hoc review process, the ad hoc 
review requester and the measure steward are responsible for submitting 
evidence to be reviewed by a NQF technical expert panel (TEP) which, in 
turn, provides input to the Consensus Standards Approval Committee 
(CSAC). This committee then makes a recommendation to the NQF Board on 
endorsement status and/or specification changes for the measure, 
practice, or event.
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    \4\ For more information about the NFQ Ad Hoc Review process, we 
refer readers to the Web site at: http://www.qualityforum.org/Projects/ab/Ad_Hoc_Reviews/CMS/Ad_Hoc_Reviews-CMS.aspx).
    \5\ For more information about the NQF Measure Maintenance 
process, we refer readers to the NQF Web site at: http://www.qualityforum.org/Measuring_Performance/Improving_NQF_Process/Process_Assessment_Measure_Maintenance.aspx.
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    Through the NQF's measure maintenance process, the NQF-endorsed 
measures are sometimes updated to incorporate changes that we believe 
do not substantially change the nature of the measure. Examples of such 
changes that we gave in the CY 2013 OPPS/ASC proposed rule (77 FR 
45194) included updated diagnosis or procedure codes, changes to 
exclusions to the patient population, definitions, or extension of the 
measure's endorsement to apply to other settings. We stated in the 
proposed rule that we believed these types of maintenance changes are 
distinct from more substantive changes to measures that result in what 
can be considered new or different measures, and that they do not 
trigger the same agency obligations under the Administrative Procedure 
Act.
    In the CY 2013 OPPS/ASC proposed rule, we proposed that if the NQF 
updates an endorsed measure that we have adopted for the IRF QRP in a 
manner that we consider to not substantially change the nature of the 
measure, we would use a subregulatory process to incorporate those 
updates to the measure specifications that apply to the program. 
Specifically, we would revise the information that is posted on the CMS 
IRF QRP Web site at: http://www.cms.gov/IRF-Quality-Reporting/ so that 
it clearly identifies the updates and provides links to where 
additional information on the updates can be found. In addition, we 
would refer IRFs to the NQF Web site for the most up-to-date 
information about the quality measures (http://www.qualityforum.org/ org/). 
We would provide sufficient lead time for IRFs to implement the changes 
where changes to the data collection systems would be necessary.
    We proposed to continue to use the rulemaking process to adopt 
changes to measures that we consider to substantially change the nature 
of the measure. We believe that our proposal adequately balances our 
need to incorporate NQF updates to NQF-endorsed IRF QRP measures in the 
most expeditious manner possible, while preserving the public's ability 
to comment on updates to measures that so fundamentally change an 
endorsed measure that it is no longer the same measure that we 
originally adopted. We noted that, in the FY 2013 IPPS/LTCH PPS 
proposed rule, we proposed a similar policy for the Long-Term Care 
Hospital Quality Reporting (LTCHQR) Program (77 FR 53652 through 
53653). CMS finalized a modified version of this policy for the LTCHQR 
Program, as discussed below.
    Comment: Many of the commenters supported the use of the 
subregulatory process to incorporate NQF updates to measures that do 
not substantially change the nature of the measure. One commenter 
believed that this approach would be reasonable, as long as the use of 
the subregulatory process does not create any additional burden for 
IRFs. Another commenter stated that not all NQF updates need to be 
subject to a formal rulemaking process before the update can be 
implemented.
    Response: We appreciate the commenters' support of our proposal. 
However, in response to some of the concerns expressed by other 
commenters below, and to be consistent with the policy that we have 
adopted for other quality reporting programs, we are finalizing this 
proposal with the modifications discussed below.
    Comment: Several commenters supported the proposal to use the 
subregulatory process to incorporate non-substantial NQF updates to 
quality measures that are made between rulemaking cycles. However, the 
commenters expressed concern regarding how CMS would define substantial 
and non-substantial changes. The commenters were concerned that even 
slight changes to a measure's specifications will cause them to incur 
significant burden. The commenters urged CMS to use great caution in 
making decisions about what should be classified as a substantial 
change and a non-substantial change. One commenter expressed concern 
regarding the lack of specificity in the definition of a substantial 
change to a measure. One commenter suggested that the decision on 
whether a change to a measure rises to the level of substantial should 
be made by giving consideration not only to the measure itself, but 
also to what data the provider is required to report on the changed 
measure and how it would impact providers. Another commenter expressed 
concern that there was a lack of specificity by both CMS and the NQF 
regarding the definition of

[[Page 68502]]

a substantive change in a measure. Several commenters disagreed with 
the examples of substantial and non-substantial changes to a measure 
that were presented in the CY 2013 OPPS/ASC proposed rule. Another 
commenter urged CMS to consider any update to a measure that requires 
any additional data collection as a substantial change and thus subject 
to the more formal rulemaking process.
    Response: The NQF regularly maintains its endorsed measures through 
annual and triennial reviews, which may result in the NQF making 
updates to the NQF-endorsed measures. We believe that it is important 
to have a subregulatory process in place, which we can use to 
incorporate non-substantive changes made by the NQF to measures we have 
adopted for use in the IRF QRP. Such a policy would allow for IRF QRP 
measures to be updated quickly and with a minimum amount of burden to 
IRF providers. However, we do recognize that some changes the NQF might 
make to its endorsed measures are substantive in nature and, therefore, 
it might not be appropriate for CMS to adopt these changes to the 
measures used in the IRF QRP using a subregulatory process.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45194), we proposed a 
policy to use a subregulatory process to adopt changes made to quality 
measures by the NQF that we consider to be non-substantial in nature. 
We further proposed to continue using the rulemaking process to adopt 
changes made by the NQF if we consider them to substantially change the 
nature of a measure. We have recently reconsidered these proposals in 
light of modified policies that were finalized in other quality 
reporting programs, such as the LTCHQR Program and the Hospital IQR 
Program. We have also reconsidered our proposals regarding this policy 
in light of the public comments we received. We believe that 
consistency and harmonization among the Medicare quality reporting 
programs is vitally important and helps to reduce provider burden.
    In the FY 2013 IPPS/LTCH final rule (77 FR 53504) we indicated 
examples of what we might generally regard as non-substantive changes 
to measures might include, but are not limited to, updated diagnosis or 
procedure codes, medication updates for categories of medications, or a 
broadening of age ranges. We believe that non-substantive changes may 
also include updates to NQF-endorsed measures based upon changes to 
guidelines upon which the measures are based. We noted that the NQF 
process has already incorporated an opportunity for public comment and 
engagement in the measure maintenance process.
    We stated that we will continue to use rulemaking to adopt 
substantive updates made by the NQF to the endorsed measures we have 
adopted for the IRF Quality Reporting Program. Examples of changes that 
we might generally consider to be substantive would include, but are 
not limited to, those circumstances in which the changes are so 
significant that the measure is no longer the same measure, or when a 
standard of performance assessed by a measure becomes more stringent 
(for example, changes in acceptable timing of medication, NQF expansion 
of endorsement of a previously endorsed measure to a new setting, 
procedure/process, or test administration). However, these and other 
changes would need to be evaluated on a case-by-case basis to determine 
whether or not a change to a measure is in fact substantive. We intend 
to follow this modified policy when making changes to all IRF QRP 
measures.
    Comment: One commenter recommended that CMS clearly identify 
subregulatory updates, provide links to where additional information 
about the updates can be found, and provide sufficient lead time for 
IRFs to implement any changes related to the NQF's updates. Another 
commenter recommended that CMS confer with a sufficient number of 
stakeholders in the rehabilitation hospital community to apprise them 
of the impending change and to seek informal feedback and input prior 
to adopting the measure's change. Further, the commenter recommended 
that CMS conduct testing of the change to determine its effectiveness 
before implementation.
    Response: In the event that any measure that has been previously 
adopted for use in the IRF QRP is updated in a manner that we deem to 
be non-substantive in nature, we will use the subregulatory process to 
incorporate those changes. We will ensure that stakeholders are fully 
informed about these changes and that they have been afforded adequate 
lead time to make any necessary changes. Some of the methods that we 
will use to keep our stakeholders informed include: posting of 
information on the IRF QRP Web page \6\; holding special open door 
forums, posting information in the CMS weekly E-News publication, and 
responding to provider questions that we receive through the IRF QRP 
helpdesk.\7\ While we expect to provide notice to stakeholders when we 
intend to seek NQF's review of measures, the NQF process incorporates 
an opportunity for public comment and engagement in the measure 
maintenance process.\8\
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    \6\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-Reporting/.
    \7\ [email protected].
    \8\ For information about the NQF consensus development process, 
we refer readers to the NQF Web site at: http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process%e2%80%99s_Principle/Public_and_Member_Comment.aspx.
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    After consideration of the public comments we received, we are 
adopting as final a policy to: (a) Utilize a subregulatory process to 
incorporate updates to the IRF QRP quality measures that are not 
substantive in nature; and (b) continue use of the rulemaking process 
to adopt changes to measures that we consider to be substantive in 
nature.

C. Process for Retention of IRF Quality Measures Adopted in Previous 
Fiscal Year Rulemaking Cycles

    We expect that the measures that we adopt for purposes of the IRF 
QRP will remain current and useful for a number of years after their 
initial adoption. While we could elect to adopt measures for each 
fiscal year's payment determinations, we believe that it would be 
easier for all parties concerned if we adopt the measures in perpetuity 
with an expectation that we will propose to remove, suspend or replace 
measures through future rulemaking, if necessary. Therefore, for the 
purpose of streamlining the rulemaking process, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45194), we proposed that when we initially adopt a 
measure for the IRF QRP for a payment determination, that measure will 
be automatically adopted for all subsequent fiscal year's payment 
determinations or until such time as we might propose and finalize the 
measure's removal, suspension, or replacement.
    Quality measures may be considered for removal by CMS if: (1) 
Measure performance among IRFs is so high and unvarying that meaningful 
distinctions in improvements in performance can no longer be made; (2) 
performance or improvement on a measure does not result in better 
patient outcomes; (3) a measure does not align with current clinical 
guidelines or practice; (4) a more broadly applicable measure (across 
settings, populations, or conditions) for the particular topic is 
available; (5) a measure that is more proximal in time to desired 
patient outcomes for the particular topic is

[[Page 68503]]

available; (6) a measure that is more strongly associated with desired 
patient outcomes for the particular topic becomes available; or (7) 
collection or public reporting of a measure leads to negative 
unintended consequences.
    For any such removal, the public will be given an opportunity to 
comment through the next annual rulemaking process. However, if there 
is reason to believe that continued data collection of a measure raises 
potential safety concerns, we will take immediate action to remove the 
measure from the IRF QRP and not wait for the annual rulemaking cycle. 
Such measures will be promptly removed with IRFs and the public being 
immediately notified of such a decision through the usual IRF QRP 
communication channels, including listening sessions, memos, email 
notifications, and Web site postings. In such instances, the immediate 
removal of a measure will also be formally confirmed in the next annual 
rulemaking cycle. We invited public comment on our proposal that once a 
quality measure is adopted, it is retained for use in the subsequent 
fiscal year's payment determinations unless otherwise stated.
    Comment: One commenter suggested that CMS should be required to re-
propose quality measures each year so that stakeholders have the 
opportunity to submit comments before measures are finalized for use. 
The commenter stated that there needs to be a continuing opportunity 
for the public to comment each year on not only measures that are being 
proposed, but also on measures that were previously adopted. Further, 
the commenter expressed concern that this policy would result in a 
scenario in which stakeholder comments about previously adopted 
measures would not be given proper consideration.
    Response: Our proposal to retain previously finalized IRF QRP 
measures for future years aligns with our policy to retain measures for 
future years in other Medicare quality reporting programs such as the 
LTCHQR Program and the Hospital IQR Program. We plan to review quality 
measures that have been adopted for use in the IRF QRP on at least an 
annual basis to make sure that each measure remains relevant, valid and 
reliable. The optimum time to perform this review would be at the time 
when we review and analyze the quality measure data received from IRFs 
for any given reporting period or data reporting cycle. Some of the IRF 
QRP measures may be reviewed more often, depending upon the frequency 
with which we receive data for these measures or whether other 
circumstances prompt review. We will perform ad hoc reviews of IRF QRP 
quality measures if we find any indication that a measure is no longer 
valid, reliable or that continued collection of data for this measure 
leads to negative unintended consequences. Regardless of the type of 
review performed, if our analysis of these data reveals that a quality 
measure meets any of the above-stated enumerated criteria for removal 
(for reasons other than patient safety) we will propose to remove that 
measure in the next rulemaking cycle. If, at any time, we discover that 
an IRF quality measure poses a potential safety concern, we will take 
immediate action to remove that measure from the IRF QRP.
    We have provided IRFs with a mechanism by which to submit comments 
regarding quality measures that have previously been adopted for use in 
the IRF QRP. IRFs may submit comments regarding quality measures that 
are already being used in the IRF QRP through the IRF QRP helpdesk 
email box.\9\ We will give full consideration to any comments that we 
receive.
---------------------------------------------------------------------------

    \9\ [email protected].
---------------------------------------------------------------------------

    Finally, we also plan to solicit input in regard to the quality 
measures that are already being used in the IRF QRP from technical 
experts, as well as the public, through venues such as listening 
sessions, special open door forums, and national provider calls. These 
venues will provide IRFs with several ways to provide us with input on 
quality measures that are currently in use under the IRF QRP. We will 
give equal consideration to comments that we receive in regard to 
measures, whether they are being proposed or have previously been 
finalized for use under the IRF QRP. This will help to ensure that each 
of the adopted measures remains appropriate for continued inclusion in 
the IRF QRP.
    After consideration of the public comments we received, we are 
finalizing our proposal to retain adopted quality measures for 
subsequent reporting periods (and the associated annual payment 
determinations) unless we propose to remove, suspend, or replace these 
measures.
    We proposed to apply this principle to the two measures that were 
selected for use in the IRF QRP beginning on October 1, 2012. These 
adopted measures are: (1)) An application of the NHSN Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome measure (NQF 
0138),\10\ and (2) An application of the Percent of Residents 
with Pressure Ulcers that Are New or Worsened measure (NQF 
0678). We also invited public comment on our proposal to apply 
the principle of retention to the two above-stated quality measures 
that were adopted for use under the IRF QRP in the FY 2012 IRF PPS 
final rule (76 FR 47874 through 47878) for the second and all 
subsequent reporting periods (and associated payment determinations).
---------------------------------------------------------------------------

    \10\ The CAUTI measure that was adopted in the FY 2012 IRF PPS 
final rule (76 FR 47836 through 47915) was titled ``Urinary 
Catheter-Associated Urinary Tract Infection [CAUTI] Rate Per 1,000 
Urinary Catheter Days for ICU patients.'' However, this measure was 
submitted by the CDC (measure steward) to the NQF for a measure 
maintenance review. As part of their NQF submission, the CDC asked 
for changes to the measure, including expansion of the scope of the 
measure to non-ICU settings, including IRFs. The NQF approved the 
CDC's request on January 12, 2012. Due to the changes that were made 
to the measure, the CDC believed that it was appropriate that the 
measure title be changed. This measure is now titled ``National 
Health Safety Network (NHSN) Catheter Associated Urinary Tract 
Infection (CAUTI) Outcome Measure.''
---------------------------------------------------------------------------

    Likewise, we invited public comment on our proposed use of the 
process, as stated above, for retention of any additional future 
quality measures that may be adopted for use in the IRF QRP.
    Comment: Two commenters supported CMS' proposal for retention of 
the two quality measures that were previously finalized for use under 
the IRF QRP.
    Response: We appreciate the commenters' support of our proposed 
approach for retention of the two quality measures adopted for use 
under the IRF QRP.
    After consideration of the public comments we received, for the 
reasons set forth above, we are finalizing our proposal to apply this 
policy of retention of IRF QRP quality measures to the two measures 
that were finalized in the FY 2012 IRF PPS final rule. These measures 
are (1) An application of the NHSN Catheter-Associated Urinary Tract 
Infection (CAUTI) Outcome Measure (NQF 0138) (previously 
titled ``CAUTI rate per 1,000 urinary catheter days, for Intensive Care 
Unit Patients''); and (2) An application of the Percent of Residents 
with Pressure Ulcers that Are New or Worsened measure (NQF 
0678).\11\ Although we are retaining these measures for the 
IRF QRP, we discuss below certain updates that we are making with 
respect to each of them.
---------------------------------------------------------------------------

    \11\ This measure was recently reviewed by the NQF and the scope 
of the measure was expanded to include post-acute care settings such 
as IRFs. Patients in post-acute care settings are referred to as 
``patients'' as opposed to ``residents'', which is a term used in 
the nursing home setting. To reflect the expansion in the scope of 
this measure, the title was changed to ``Percent of Patients/
Residents with Pressure Ulcers that Are New or Worsened (NQF 
0678)'' (emphasis added).

---------------------------------------------------------------------------

[[Page 68504]]

D. Measures for the FY 2014 Payment Determination

    We have previously identified the measurement of pressure ulcers 
and the prevalence of urinary tract infections (UTI) as two critical 
areas for quality measurement under the IRF QRP. While section 
1886(j)(7) of the Act generally requires the adoption of endorsed 
measures, there were no NQF-endorsed measures for the two desired areas 
in the IRF context at the time CMS was conducting its rulemaking. As 
section 1886(j)(7)(D)(ii) of the Act authorizes the use of measures 
that are not endorsed when there are no feasible and practicable 
endorsed options, in the FY 2012 IRF PPS final rule (76 FR 47874 
through 47878), we adopted applications of an NQF-endorsed pressure 
ulcer measure that had been endorsed for use in skilled nursing 
facilities (NQF 0678) and a CDC measure, the CDC's Urinary 
Catheter Associated Urinary Tract Infection [CAUTI] rate per 1, 000 
urinary catheter days, for Intensive Care Unit [ICU] Patients (NQF 
0138), that had NQF endorsement for use in intensive care 
settings of hospitals.
1. Clarification Regarding Existing IRF Quality Measures That Have 
Undergone Changes During NQF Measure Maintenance Processes
    In the FY 2012 IRF PPS final rule (76 FR 47874 through 47876), we 
used the endorsement exception authority under section 
1886(j)(7)(D)(ii) of the Act. This authority permitted us to adopt the 
Urinary Catheter-Associated Urinary Tract Infection [CAUTI] rate per 
1,000 urinary catheter days, for Intensive Care Unit [ICU] Patients 
measure (NQF 0138). We chose to adopt this measure because 
there was no NQF-endorsed CAUTI measure available to assess the 
prevalence of urinary CAUTI rates in the IRF setting.
    As stated in section XVII.C. of this final rule with comment 
period, the CAUTI measure steward, the CDC, submitted the CAUTI measure 
to the NQF for a scheduled measure maintenance review in late 2011. At 
that time, the CDC also filed a request to expand the CAUTI measure to 
non-ICU settings, including IRFs. The NQF granted the CDC's request for 
an expansion of the scope of endorsement of the CAUTI measure to 
additional non-ICU care settings, including ``rehabilitation 
hospitals.'' The NQF defined the term ``rehabilitation hospitals'' as 
including both freestanding IRFs, as well as IRF units that are located 
within an acute care facility. Despite the expansion in the scope of 
endorsement of the CAUTI measure, the original NQF endorsement number 
(NQF 0138) was retained. However, the measure was re-titled 
``National Health Safety Network (NHSN) Catheter Associated Urinary 
Tract Infection (CAUTI) Outcome Measure.'' \12\
---------------------------------------------------------------------------

    \12\ http://www.qualityforum.org/MeasureDetails.aspx?actid=0&SubmissionId=1121#k=0138&e=0&st=&sd=&s=n&so=a&p=1&mt=&cs=&ss=.
---------------------------------------------------------------------------

    As amended, the expanded CAUTI measure includes a different data 
calculation method, which is referred to as the standardized infection 
ratio (SIR).\13\ The change in the data calculation method does not, 
however, change the way in which IRFs will submit CAUTI data to the 
CDC. IRFs will still be required to submit their CAUTI data to the CDC 
via the National Healthcare Safety Network (NHSN) online system.
---------------------------------------------------------------------------

    \13\ Centers for Disease Control and Prevention (2012, January), 
Catheter Associated Urinary Tract Infection Event. Retrieved from: 
http://www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTIcurrent.pdf.
---------------------------------------------------------------------------

    Under the originally endorsed version of the CAUTI measure, the CDC 
calculated an infection rate per 1,000 urinary catheter days. Under the 
new method, CDC will use a SIR calculation method, which is comprised 
of the observed number of infections over the expected number of 
infections.\14\ The SIR calculation consists of an ``observed'' rate of 
CAUTI infections over the ``expected rate'' of CAUTI infections for 
that particular healthcare location. The CDC calculates the ``expected 
rate'' of CAUTI infections from CAUTI data that is reported to them by 
healthcare facilities. According to the epidemiologists at the CDC, 
they will need to analyze approximately 12 months of CAUTI data in 
order to calculate the ``expected rate'' of CAUTI infections for any 
given healthcare facility.
---------------------------------------------------------------------------

    \14\ http://www.cdc.gov/nhsn/pdfs/pscmanual/
7psccauticurrent.pdf.
---------------------------------------------------------------------------

    We believe that the SIR calculation method is a more accurate way 
to calculate the CAUTI measure results for comparative purposes because 
it takes into account an IRF's case mix. In addition, use of the SIR 
calculation does not require any change to the type of data required to 
be submitted by IRFs or the method of data submission that IRFs must 
use in order to comply with the CAUTI measure reporting requirements.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we made the 
following proposals in regards to the CAUTI measure: (1) We proposed to 
adopt the changes made to the NQF 0138 CAUTI measure, which 
will apply to the FY 2014 annual payment update determination; (2) we 
proposed to adopt the CAUTI measure, as revised by the NQF on January 
12, 2012, for the FY 2015 payment determination and all subsequent 
fiscal year's payment determinations; and (3) we proposed to 
incorporate, for use under the IRF QRP, any future changes to the CAUTI 
measure to the extent these changes are consistent with our proposal in 
section XVII.B. of the CY 2013 OPPS/ASC proposed rule to update 
measures.
    Comment: Several commenters supported our proposal to adopt the 
changes made by the NQF to the CAUTI measure. Several commenters also 
supported use of the SIR calculation. The commenters also supported the 
delay in the implementation of the SIR calculation by the CDC. One 
commenter agreed that CMS should delay public reporting of the CAUTI 
measure data until after the CDC has collected enough data to calculate 
the expected CAUTI infection rate that will be used in the SIR 
calculations.
    Response: We agree that use of the SIR calculation will be a more 
accurate method for risk stratified calculation of the CAUTI measure 
data. We also agree that public reporting of the CAUTI measure data 
should not take place until sufficient baseline data has been collected 
by the CDC.
    Comment: One commenter expressed concern regarding CMS being able 
to properly risk adjust the CAUTI data results using the SIR 
calculation. The commenter was concerned that IRFs caring for more 
complicated patients will appear to have worse quality outcomes than 
other IRFs that care for less specialized patients, unless CMS can make 
the proper type of risk adjustments. The commenter further expressed 
concern that the SIR calculation method will be unable to provide 
adequate risk adjustment when comparing IRFs that have a specialized 
patient population to other IRFs that tend to have a more general 
patient population.
    Response: After the IRF QRP begins, the CDC will take time to 
collect and analyze the CAUTI measure data in an amount that is 
sufficient to calculate an ``expected rate'' of CAUTI infection for IRF 
locations/units. The CDC needs up to 12 months of CAUTI data from 
various IRF's in order to calculate the ``expected'' CAUTI rates for 
the IRFs locations and units. These expected CAUTI infection rates can 
then be used to calculate a SIR for each IRF that includes adjustment 
for the patient population mix. The CDC and their subject matter 
experts, will make a determination with regard to how the

[[Page 68505]]

patient population mix will be used in the risk adjustment for the SIR.
    Comment: One commenter expressed concern regarding IRFs being held 
accountable for CAUTI infections that a patient acquired prior to an 
admission or transfer into that IRF.
    Response: To help determine where the CAUTI infection may have 
developed, the CAUTI measure specifications incorporate a ``transfer 
rule.'' The ``transfer rule'' provides that if a patient develops a 
CAUTI within 48 hours of transfer from another location, the CAUTI is 
attributed back to the transferring location (http://www.cdc.gov/nhsn/
pdfs/pscmanual/7psccauticurrent.pdf). We believe that the use of the 
transfer rule to the CAUTI measure calculations will help ensure that 
CAUTI infections are properly attributed to the facility where they 
originated.
    Comment: One commenter suggested that pediatric patients should be 
excluded from the CAUTI measure because it has not been NQF-endorsed 
for the pediatric population due to low frequency of catheter use and 
difficulty in attributing UTIs.
    Response: We disagree with the commenter's suggestion that 
pediatric patients should be excluded from this measure for the reasons 
stated below. The measure specifications for the NQF 0138 
CAUTI measure exclude patients in a neonatal ICU, but otherwise have no 
other age based exclusions. The target population age range for the NQF 
0138 CAUTI measure is described in the measure specifications 
as follows: ``Patients of all ages are eligible except patients in 
Levels I, II, II/III and III nurseries, and in locations where patients 
do not reside overnight.'' (Emphasis added)
    Second, we believe that it is important to gather and analyze CAUTI 
measure data from patients of all age groups so that we can study the 
rate of CAUTI infections in not only adults and the elderly, but also 
in children. There are several IRFs that specialize in the 
rehabilitation of pediatric patients. Many other IRFs also treat 
pediatric patients. We would be remiss in our duty to measure the 
quality of care in the IRF setting if we did not gather CAUTI measure 
data from these IRFs on their pediatric patients.
    After consideration of the public comments we received, we are 
finalizing our proposals to: (1) Adopt the changes made to the NHSN 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(NQF 0138) as applicable to the FY 2014 annual payment update 
determination; and (2) adopt the NHSN Catheter-Associated Urinary Tract 
Infection (CAUTI) Outcome Measure (NQF 0138) measure for the 
FY 2015 payment determination and all subsequent fiscal year payment 
determinations thereafter.
2. Updates to the ``Percent of Residents Who Have Pressure Ulcers That 
Are New or Worsened'' Measure
    In the FY 2012 IRF PPS final rule (76 FR 47876 through 47878), we 
again used the endorsement exception authority under section 
1886(j)(7)(D)(ii) of the Act to adopt an application of the ``Percent 
of Residents with Pressure Ulcers that Are New or Worsened'' measure 
(NQF 0678). We selected this measure because there was no 
other NQF-endorsed measure available to assess the percentage of 
patients with pressure ulcers that are new or worsened in the IRF 
setting at that time. We recognized that the NQF endorsement of this 
measure was, at that time, limited to short-stay nursing home patients, 
but we noted our belief that this measure was highly relevant to 
patients in any setting who are at risk of pressure ulcer development 
and a high priority quality issue in the care of IRF patients. 
Therefore, in the FY 2012 IRF PPS final rule, we finalized the adoption 
of an application of the NQF-endorsed 0678 pressure ulcer 
measure. We also stated that we would request that the NQF extend its 
endorsement of this short-stay nursing home pressure ulcer measure to 
the IRF setting (76 FR 47876 through 47878).
    In April 2012, CMS filed an ad hoc request for review of the NQF 
0678 short-stay pressure ulcer measure with the NQF. As part 
of that request, we asked the NQF to expand its endorsement of the 
measure to several other care settings, including IRFs. As we noted in 
the FY 2012 IRF PPS final rule, we believe this measure is highly 
applicable to all post acute care settings, including IRFs (76 FR 
47876). We stated in the proposed rule that if the pressure ulcer 
measure was revised by the NQF, we anticipated that it would be re-
titled ``Percent of Patients or Residents with Pressure Ulcers That Are 
New or Worsened'' (NQF 0678) (emphasis added) so as to reflect 
the expansion in the scope of the applicable patient population.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we noted that, 
as of the publication of that proposed rule, the NQF review process for 
the NQF 0678 pressure ulcer measure expansion request was 
still in progress. We proposed that if the NQF expands the scope of 
endorsement for this measure to the IRF setting, without any 
substantive changes, we would adopt and use the NQF-endorsed pressure 
ulcer measure in the IRF QRP, in accordance with the policy set forth 
above in section XVII.B. of that proposed rule. We believed that, in 
this anticipated scenario, the pressure ulcer measure, as revised, 
would be substantively the same measure, although broader in scope, 
than the current NQF-endorsed 0678 pressure ulcer measure. We 
invited public comments on our proposed use of this policy. For the 
reasons stated below, we have decided not to finalize this proposal.
    In the meantime, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45196), we proposed to proceed with our plan, as finalized in the FY 
2012 IRF PPS final rule, to use an application of the Percent of 
Residents With Pressure Ulcers that Are New or Worsened (NQF 
0678) measure for the FY 2014 payment determination and all 
subsequent fiscal year payment determinations. For the reasons stated 
below, we will collect only part of the pressure ulcer measure data as 
part of the pressure ulcer measure that we adopted last year. We have 
decided to adopt a non-risk-adjusted version of the NQF 0678 
short-stay pressure ulcer measure, and will not publicly report the 
measure data until such time that we are able to collect data on the 
IRF-PAI necessary to calculate risk-adjusted measure rates.
    Comment: Many commenters supported the use of the ``Percent of 
Residents with Pressure Ulcers That Are New or Worsened'' (NQF 
0678) measure in the IRF QRP. The commenters also supported 
CMS' request to expand this measure to the IRF setting. One commenter 
expressed support for the use of the updated pressure ulcer measure, 
but recommended adding the term ``patients'' to the title of this 
measure.
    Response: We appreciate the commenters' support and agree that 
adding the word ``patients'' to the title of the revised pressure ulcer 
measure will help to distinguish the IRF population from patients in 
nursing homes who are typically referred to as ``residents.'' However, 
for the reasons discussed below, at this time, we are adopting a non-
risk-adjusted version of the NQF-endorsed pressure ulcer measure (NQF 
0678).
    Comment: One commenter expressed doubt regarding the applicability 
of the pressure ulcer measure to the IRF setting.
    Response: We believe that pressure ulcer development and worsening 
is an issue that is highly relevant to the IRF

[[Page 68506]]

setting. Pressure ulcers are high-volume and high-cost adverse events 
across the spectrum of health care settings from acute hospitals to 
home health. Patients in the IRF setting may have medically complex 
conditions and severe functional limitations, and are, therefore, at 
high risk for the development, or worsening, of pressure ulcers. 
Pressure ulcers are serious medical conditions and an important measure 
of quality. Pressure ulcers can lead to serious, life threatening 
infections, which substantially increase the total cost of care. Even 
if the proportion of patients in IRFs with new or worsening pressure 
ulcers is small, any such cases are particularly troubling.
    Comment: One commenter urged CMS to remove this measure from the 
IRF QRP until such time as the issues that have been raised in 
stakeholder calls regarding the measure specifications and definitions 
can be resolved. The commenter stated that CMS has given conflicting 
guidance on how to stage pressure ulcers and document pressure ulcer 
data on the Inpatient Rehabilitation Facility--Patient Assessment 
Instrument (IRF-PAI) during several different provider outreach 
activities. The commenter opposed ``back-staging'' of pressure ulcers, 
and suggested that the IRF-PAI does not allow for the documentation of 
unstageable pressure ulcers that develop after the patient is admitted. 
Another commenter expressed concern that the modifications to the 
``Quality Indicator'' section of the IRF-PAI are confusing. The 
commenter stated that the pressure ulcer questions that were added to 
the IRF-PAI do not account for all categories of pressure ulcers, such 
as unstageable pressure ulcers and suspected deep tissue injuries. Two 
commenters suggested that CMS delay implementation of the pressure 
ulcer measure and take time to work with IRFs and the National Pressure 
Ulcer Advisory Panel (NPUAP) to develop a standardized approach to 
reporting pressure ulcers.
    Response: We have made several different types of training 
opportunities available to the IRF provider community. We held special 
open door forums on November, 29, 2011, and April 19, 2012. We also 
provided a full day in-person provider training on May 2, 2012. Most 
recently, we initiated a four-part series of special open door forums 
held on July 26, 2012; August 16, 2012; September 20, 2012; and October 
18, 2012. PowerPoint slides used at the IRF Open Door Forums are 
available on the IRF QRP Web page. (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-Reporting/). Documentation 
of the collection of pressure ulcer data is contained in Section 4 of 
the IRF-PAI training manual. This manual is available on the CMS Web 
site (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Downloads/IRFPAI-manual-2012.pdf).
    During each of these training/outreach activities, we provided 
individuals with information regarding the IRF quality reporting 
program, including information about CAUTI and pressure ulcer data 
reporting. The information that we have offered to providers at each of 
the outreach activities noted above has been consistent.
    We have also engaged the help of two widely known experts in the 
area of skin conditions and wound care. These experts have served as 
consultants to CMS and have taught our outreach activities. These 
experts have given presentations on how to stage and report pressure 
ulcer data. One of these experts was a guest lecturer at our provider 
training, which took place on May 2, 2012. Our pressure ulcer experts 
also attended the open door forums held on July 26, 2011, August 16, 
2012, and October 18, 2012. At three of the open door forums held, 
these experts were available to answer questions from providers.
    In addition, we held an open door forum on September 20, 2012, that 
dealt exclusively with the issue of pressure ulcer staging and 
documentation on the IRF-PAI. We also presented answers to questions 
that had been previously raised as well as a copy of a properly 
completed ``Quality Indicator'' section (questions 48A to 50C) of the 
IRF-PAI, which corresponded to the scenarios presented in each 
question. We believed that showing examples of a properly completed 
IRF-PAI for each question would help to reduce the confusion that IRFs 
were experiencing regarding the coding of pressure ulcer data on the 
IRF-PAI. We also discussed during this open door forum the issue of 
``back-staging'' pressure ulcers, and explained that we do not, nor 
have we ever recommended, ``back-staging'' pressure ulcers in the IRF 
QRP.
    We have provided IRFs with written guidance related to the staging 
of pressure ulcers, collection of pressure ulcer data, and 
documentation of pressure ulcer data in the ``Quality Indicator'' 
section of the IRF-PAI. This written guidance is contained in Section 4 
of the IRF-PAI training manual. This manual is available on the CMS Web 
site (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Downloads/IRFPAI-manual-2012.pdf).
    We recognize that the format and structure of the pressure ulcer 
questions, which are located in the ``Quality Indicator'' section of 
the revised IRF-PAI has resulted in some unintended limitations in the 
type and amount of pressure ulcer data that can be collected. We will 
continue to work with stakeholders to address their concerns and make 
the appropriate modifications to the data collection instrument over 
time. In the meantime, we will continue with the collection of the 
pressure ulcer measure data using the questions contained in the 
``Quality Indicator'' section of the IRF-PAI.
    We do not believe that it would be in the best interest of many of 
the IRF providers if we were to delay the use of the pressure ulcer 
measure in the IRF QRP until such time as the IRF-PAI is modified. We 
recognize that IRFs have incurred a significant financial burden 
preparing their EHR systems and staff to report pressure ulcer measure 
data beginning on October 1, 2012.\15\
---------------------------------------------------------------------------

    \15\ For quality reporting purposes, only those patients that 
are admitted on after 10/01/2012 will be included in the measure. 
Data obtained from patients that are admitted before 10/01/2012 but 
discharged after 10/01/2012 will not be used in the measure 
calculations. For more information about this policy, we refer 
readers to the IRF-PAI training manual.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern that revisions to the IRF-
PAI do not allow IRFs to adequately document suspected deep tissue 
injury (DTI) that is present when the patient is admitted to the IRF. 
The commenter stated that DTIs are ``wounds'' that are evolving or in 
the process of ``declaring'' their final stage. The commenter stated 
that if the suspected DTI cannot be adequately recorded upon admission, 
and the wound later progresses to its final stage (stage 3 or 4), it 
will appear that the IRF was responsible for the pressure ulcer, 
instead of the location where the DTI occurred.
    Response: We believe that it is important to do a thorough 
admission assessment on each patient who is admitted to an IRF at the 
soonest possible time after admission. This admission assessment should 
include a through skin assessment and should include the documentation 
of the presence of any pressure ulcers as well as any unstageable 
pressure ulcers, including suspected deep tissue injury. The IRF-PAI 
admission assessments must be performed within 3 days after admission. 
However, the IRF staff would also document the admission

[[Page 68507]]

assessment findings in their medical records as well.
    We also agree with the commenter that it is not possible to 
directly document suspected DTIs on the revised IRF-PAI (which became 
effective on October 1, 2012) immediately when doing the IRF-PAI 
admission assessment. However, an IRF provider can and certainly 
should, as part of its normal patient assessment and good care, perform 
the skin assessment and note any finding of suspected DTI or pressure 
ulcers at any stage in the patient's medical record. Documentation of 
pressure ulcer data on the IRF-PAI is not a replacement for proper 
clinical documentation in a patient's medical record.
    A suspected DTI is one of three types of unstageable pressure 
ulcers, which can be documented on the IRF-PAI after it becomes 
stageable and ``declares'' its final stage. We believe that we have 
given IRF providers instructions about how to document unstageable 
pressure ulcers on the IRF-PAI on several different occasions. This 
issue was discussed during a question and answer session that took 
place during the IRF QRP special open door forum held on July 26, 2012, 
and at another IRF QRP special open door forum held on August 16, 2012. 
In addition, this issue was discussed again at another IRF QRP special 
open door forum held on September 20, 2012. The September 20, 2012 open 
door forum was devoted solely to the discussion of staging and 
documentation of pressure ulcers on the IRF-PAI. PowerPoint slides used 
during the September 20, 2012 special open door forum included 
scenarios in the form of questions and answers, as well as examples of 
the IRF-PAI with the correct coding to correspond to the scenario 
presented in each question. As noted above, the PowerPoint slides used 
at any of the IRF QRP open door forums are available to IRFs on the IRF 
QRP Web page (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-Reporting/).
    Also, we have provided written guidance on how to document 
unstageable pressure ulcers that have become stageable on the IRF-PAI 
in Section 4 of the IRF-PAI training manual. On page IV-3 of Section 4 
of the IRF-PAI training manual, suspected deep tissue injury is defined 
as one of the three types of unstageable pressure ulcers. Section 4 of 
the IRF-PAI training manual further states that unstageable pressure 
ulcers that are present at the time of admission are not documented on 
the IRF-PAI.
    As documented in Section 4 of the IRF-PAI training manual, if a 
pressure ulcer is unstageable upon admission, but becomes stageable 
later during the patient's IRF stay, this pressure ulcer should be 
considered as present on admission, at the stage at which it first 
becomes stageable. The admission assessment should be modified to 
reflect this. For example, if the IRF had documented on the patient's 
admission assessment that there were no pressure ulcers on admission, 
and then a suspected DTI progressed to a Stage 2 or higher pressure 
ulcer, the IRF would change the admission assessment to document the 
final stage of that pressure ulcer. Doing so will help to ensure that 
the IRF-PAI reflects that this pressure ulcer was present on admission, 
and what stage the ulcer was when it first became stageable. We believe 
that this effectively prevents the finding that an unstageable pressure 
ulcer that became stageable during the IRF stay developed during the 
patient's IRF stay and/or is attributed to the IRF.
    Comment: One commenter expressed concern about making comparisons 
in pressure ulcer rates between IRFs because of the differences in 
patient populations that are served by each IRF. The commenter 
suggested that CMS develop a mechanism whereby these IRFs are not 
unfairly compared against peers that do not care for like populations 
of patients in any public reporting of the pressure ulcer measure data 
or other quality measures.
    Response: The specifications for both the application of the 
pressure ulcer measure that we adopted in the FY 2012 IRF PPS final 
rule, as well as the specifications for the updated NQF-endorsed 
version of the measure (NQF 0678), include data elements that 
allow the measure to be risk adjusted when calculated in the IRF 
setting. These risk adjustment specifications take into consideration 
items such as the patient's height, weight, and co-morbid conditions. 
When we were revising the ``Quality Indicator'' section of the IRF-PAI 
by replacing the old voluntary quality items with the mandatory 
pressure ulcer questions, we worked within the existing format and 
framework of the IRF-PAI. We recognize that placement of quality 
measurement data items within the format of the IRF-PAI has resulted in 
some unintended limitations in the type and amount of pressure ulcer 
data that can be collected.
    We will continue to work with stakeholders to address their 
concerns and make the appropriate modifications to the ``Quality 
Indicator'' section of the IRF-PAI. However, we do not believe that it 
would benefit IRFs to delay the start of the pressure ulcer measure 
data reporting during the time that we are working to make the 
necessary revision to the IRF-PAI. We say this for several reasons. 
First, evaluating the pressure ulcer data that is reported to us during 
the first several reporting periods is one of the best ways for us to 
see what changes and modifications are needed to the IRF-PAI to ensure 
that it properly collects all of the data elements needed to calculate 
risk-adjusted rates. Second, many IRFs have incurred a significant 
amount of time and money to prepare themselves to report pressure ulcer 
data. Also, use of a non-risk adjusted version of the NQF-endorsed 
pressure ulcer measure will not cause IRF providers any increased 
burden because it will not require any change in the way that IRFs are 
required to collect and report pressure ulcer data.
    After giving full consideration to the public comments we have 
received, we have decided to: (1) Adopt a non-risk-adjusted version 
(numerator and denominator data only) of the NQF 0678 pressure 
ulcer measure; (2) collect the pressure ulcer measure data using the 
current version of the IRF-PAI; and (3) not begin public reporting of 
pressure ulcer measure data until we have: (a) Thoroughly reviewed and 
researched this matter and consulted technical experts; (b) made 
appropriate modifications to the ``Quality Indicator'' section of the 
IRF-PAI to add the risk adjustment items; and (c) adopted the NQF-
endorsed pressure ulcer measure (0678) and notified 
stakeholders of our intentions through the rulemaking process.
    Comment: MedPAC made suggestions related to additional quality 
measures that it believed CMS should add to the IRF QRP. MedPAC 
suggested that CMS develop a risk-adjusted readmission measure. 
Further, MedPAC requested that CMS comment, in this final rule with 
comment period, on the progress of the development of this type of 
readmission measure. MedPAC also urged CMS to consider adding a measure 
of functional improvement. MedPAC pointed out that regaining functional 
status represents a central goal of IRF care.
    Response: We appreciate MedPAC's input. We agree that both a risk-
adjusted readmission measure and a measure of functional improvement 
would be extremely valuable measures of quality in the IRF setting. We 
are working to develop and implement these measures in the IRF QRP at 
the soonest possible time. We invite MedPAC to meet with the CMS IRF 
QRP team for further discussion of these quality measures.

[[Page 68508]]

    Comment: One commenter made reference to the IRF quality measures 
that CMS included on a list made publicly available in late 2012 in 
accordance with section 1890A(a)(2) of the Act. The commenter noted 
that none of these measures were proposed for adoption into the IRF QRP 
in the proposed rule. This commenter offered their opinion and 
rationale as to whether some of measures should, or should not be added 
to the IRF QRP. The measures are as follows:
     Incidence of potentially preventable venous 
thromboembolism (VTE)--The commenter stated that this measure requires 
considerable clarification because, many, if not most, rehabilitation 
patients are at very high risk for VTE. The commenter further pointed 
out that many IRF patients are on VTE prophylaxis, yet, some of the IRF 
patients still get VTEs.
     Health care worker influenza immunization--This commenter 
supported adoption of this measure as long as data is reported by IRFs 
to NHSN;
     The percent of patients/residents on a scheduled pain 
medication regimen on admission who self-report--The commenter stated 
that in intensive rehabilitation, providers need to strike a balance 
between relieving pain completely, and avoiding overmedication so that 
the patient can safely participate in an intensive rehabilitation 
program;
     Percent of nursing home residents who were assessed and 
appropriately given the seasonal influenza vaccine--Because most 
patients that enter IRFs were previously hospitalized, it is likely 
that their influenza vaccination status already was established in the 
hospital during the flu season. The commenter further stated that, in 
some cases, with repeat questioning, some patients may elect 
vaccination after they have left the acute care facility or had a 
change of mind within the facility;
     Percent of nursing home residents who were assessed and 
appropriately given the pneumococcal vaccine.--This commenter stated 
that the same problems that may occur with the patient influenza 
vaccination measure may also occur with this measure;
     Functional improvement measure--Of particular note is that 
the commenter expressed opposition to the use of a functional measure 
that is based upon the FIM\TM\ scale. The commenter stated that data 
related to FIM\TM\ change are impacted dramatically by high rates of 
discharges back to acute care hospitals from rehabilitation facilities 
caring for the most complex and unstable rehabilitation patients. The 
commenter further stated that if quality measures for rehabilitation 
emphasize FIM\TM\ change during rehabilitation, it is quite possible 
that IRFs will be incentivized to deny admission to the most complex 
patients who, in fact, have the greatest need for rehabilitation.
    Response: We appreciate the commenter's thoughts and suggestions 
offered regarding the above-stated quality measures. All of these 
measures remain under active consideration for future adoption into the 
IRF QRP, and we will consider this information during future rulemaking 
cycles when we are selecting quality measures for inclusion under the 
IRF QRP.

XVIII. Revisions to the Quality Improvement Organization (QIO) 
Regulations (42 CFR Parts 476, 478, and 480)

A. Summary of Changes

    The Utilization and Quality Control Peer Review Program was 
originally established by sections 142 and 143 of the Tax Equity and 
Fiscal Responsibility Act (TEFRA) of 1982 (Pub. L. 97-248). The name of 
the individual organizations covered under the program was previously 
changed from ``Peer Review Organizations'' to ``Quality Improvement 
Organizations'' through rulemaking (67 FR 36539). In the CY 2013 OPPS/
ASC proposed rule (77 FR 45196 through 45205), we identified several 
changes that we proposed because they are essential to remedying 
longstanding problematic aspects of the QIOs' review activities. These 
proposed changes would enable us to improve the QIO program by ensuring 
that QIOs are better able to meet the needs of Medicare beneficiaries.
    Several of the proposed changes are specific to the QIOs' 
processing of quality of care reviews, which includes beneficiary 
complaint reviews. Although references are made to QIO sanction 
activities, the proposed changes did not impact QIO sanction activities 
or the regulations located in 42 CFR part 1004.
    In addition, as part of our review of our regulations in light of 
the President's Executive Order on Regulatory Reform, Executive Order 
13563 (January 18, 2011), we have identified several technical 
corrections that would improve the readability and use of the QIO 
regulations.

B. Quality of Care Reviews

    Section 9353(c) of Public Law 99-509 amended section 1154(a) of the 
Act (adding a new paragraph (14)) to require that QIOs (then PROs), 
effective August 1, 1987, conduct an appropriate review of all written 
complaints from beneficiaries or their representatives about the 
quality of services (for which payment may otherwise be made under 
Medicare) not meeting professionally recognized standards of health 
care. This authority was in addition to the QIOs' already existing 
authority under section 1154(a)(1)(B) of the Act to perform quality of 
care reviews. In order to provide more clarity regarding the QIOs' 
roles, in the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we proposed 
to add a definition of ``quality of care review'' under Sec.  476.1 to 
make clear that this review type refers to both beneficiary complaint 
reviews (written or oral) and general quality of care reviews. We also 
proposed to add under Sec.  476.1 definitions for ``beneficiary 
complaint'' to mean a complaint by a beneficiary or a beneficiary's 
representative alleging that the quality of services received by the 
beneficiary did not meet professionally recognized standards of care 
and may consist of one or more quality of care concerns; ``beneficiary 
complaint review'' to mean a review conducted by a QIO in response to 
the receipt of a written beneficiary complaint to determine whether the 
quality of Medicare covered services provided to beneficiaries was 
consistent with professionally recognized standards of health care; and 
``general quality of care review'' to mean a review conducted by a QIO 
to determine whether the quality of services provided to a 
beneficiary(s) was consistent with professionally recognized standards 
of health care. We proposed that a general quality of care review may 
be carried out as a result of a referral to the QIO or a QIO's 
identification of a potential concern during the course of another 
review activity or through the analysis of data. In addition, we 
proposed to revise the language under Sec.  476.71(a)(2) to make clear 
that the scope of a QIO's review includes the right to conduct quality 
of care reviews, including beneficiary complaint reviews and general 
quality of care reviews, as well as a new review process that QIOs can 
offer Medicare beneficiaries called ``immediate advocacy,'' which is 
described more fully in section XVIII.B.1. of this final rule with 
comment period.
    We proposed additional changes to the QIO regulations related to 
the following issues:
1. Beneficiary Complaint Reviews
    At the time QIOs assumed the authority under section 9353(c) of 
Public Law 99-509 to conduct reviews of written beneficiary complaints, 
we

[[Page 68509]]

made a decision to rely upon the existing regulations for certain 
requirements (for example, the timeframes for requesting medical 
records and the practitioner's right to consent to the release of 
specific findings to beneficiaries), and to subsequently establish 
other remaining procedural requirements through manual instructions. 
While this approach has provided QIOs with a basic framework for 
completing the reviews, we have become aware of other issues that need 
to be addressed through the promulgation of new regulations as well as 
revisions to existing regulations.
    In 2003, the United States Court of Appeals for the District of 
Columbia Circuit issued a decision in the case of Public Citizen, Inc. 
v. U.S. Department of Health and Human Services (332 F.3d 654, June 20, 
2003) (referred to below as Public Citizen) in which the court 
determined that QIOs must, at a minimum, notify a complainant of the 
results of its review. We recently completed a comprehensive revision 
to the manual instructions governing both beneficiary complaints and 
quality of care reviews, which, in part, was designed to ensure 
compliance with this court decision (Transmittal 17, April 6, 2012, CMS 
Manual System, Pub. 100-10 Medicare Quality Improvement Organizations, 
Chapter 5, Quality of Care Review) (available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R17QIO.pdf). 
These new instructions were effective May 7, 2012. While these manual 
revisions were necessary, we believe that additional regulatory changes 
are needed in order to improve QIO operations. In order to subject 
these additional changes to the processing of beneficiary complaint 
reviews and general quality of care reviews to notice-and-comment 
rulemaking, in the proposed rule, we proposed to add new Sec. Sec.  
476.110, 476.120, 476.130, 476.140, 476.150, 476.160, and 476.170 as 
described below in this section. We also proposed to add new 
definitions of ``authorized representative'', ``appointed 
representative; ``beneficiary representative'' and ``quality 
improvement initiative,'' and revise the definition of ``preadmission 
certification'' in Sec.  476.1. In addition, to ensure consistency with 
the proposed revisions to or additional sections under Part 476, we 
proposed to revise Sec. Sec.  480.107, 480.132, and 480.133, as 
discussed more fully below.
    The proposed revisions to the regulations under Part 476 include 
several changes that would improve the beneficiary's experience when 
contacting a QIO about the quality of health care he or she has 
received and also shorten key timeframes so that beneficiaries can 
achieve resolution of their health care concerns in less time. We 
proposed regulations under new proposed Sec.  476.110 regarding a new 
alternative dispute resolution process called ``immediate advocacy.'' 
We proposed to add a definition of ``immediate advocacy'' under Sec.  
476.1, and to make clear that this process is specific to oral 
complaints. We proposed to define ``immediate advocacy'' as an informal 
alternative dispute resolution process used to quickly resolve an oral 
complaint that a beneficiary or his or her representative has regarding 
the quality of health care received, and that this process involves a 
QIO representative's direct contact with the provider and/or 
practitioner.
    Comment: Several commenters expressed support for the proposed 
definitions and stated that the availability of clear definitions would 
help ensure consistent interpretation and application of rules and 
processes, as well as prevent confusion and dissatisfaction for 
beneficiaries, providers, practitioners, and QIOs. Other commenters, 
although supportive of the definitions, raised concerns with specific 
definitions such as the inclusion of ``oral beneficiary complaints'' in 
the definition of quality of care reviews, because, in the opinion of 
the commenters, beneficiary complaints must be written. In addition, 
other commenters suggested that the wording of a beneficiary complaint 
should be modified to denote that a complaint must contain at least one 
quality of care concern because nonmedical, ancillary issues, including 
perceptions that staff are impolite, it is too hot or cold in the 
facility, or complaints about the reception process in the waiting 
room, are not considered to be quality of care issues. Moreover, some 
commenters suggested that the definition of beneficiary complaint 
should be modified so that the focus is not on whether the care met 
professionally recognized standards because care, even when meeting 
professionally recognized standards of care, could raise quality issues 
that a QIO should address.
    One commenter believed that a definition of professionally 
recognized standards of health care should be included because it is 
not clear what this entails. Another commenter requested further 
clarification regarding what is considered as an episode of care and 
asked if it relates to one setting, one continuous course of treatment 
across multiple settings, or something else.
    Response: We appreciate the commenters' support of our proposed 
definitions. With regard to the inclusion of oral beneficiary 
complaints in the definition of quality of care reviews, we recognize 
that, under section 1154(a)(14) of the Act, QIOs are required to review 
written complaints submitted by Medicare beneficiaries. However, 
section 1154(a)(1)(B) of the Act also gives QIOs general authority to 
conduct quality of care reviews based on concerns conveyed from a 
variety of different sources, regardless of the manner in which these 
concerns have been conveyed. Therefore, a QIO can review concerns that 
have been expressed orally by any parties, including beneficiaries. 
Moreover, with regard to the comment that all beneficiary complaints 
include at least one quality of care concern and that nonmedical, 
ancillary issues should be excluded, we do not believe that the statute 
limits the concept of a beneficiary complaint in this way. 
Beneficiaries have the right to lodge complaints under section 1154 
(a)(14) of the Act based on their perception that the quality of 
services they received did not meet recognized standards of care. This 
concept of a complaint does not require that the complaint allege a 
concern that the QIO believes could actually relate to a violation of a 
standard of care, only that the complaint be about the quality of 
services not meeting the standard. Many beneficiaries are not in the 
position of being able to determine whether or not some aspect of their 
care actually violated a medical standard--nor should beneficiaries be 
discouraged from filing complaints because they must first make a 
judgment about standards of care. Additionally, we believe that the 
examples provided, such as impolite staff, the facility being too hot 
or too cold, or the reception process in the waiting room, can 
potentially contribute to the QIO's overall assessment of whether 
particular services met standards of care. The specific facets that 
impact the quality of care are not always readily quantifiable, and the 
QIO must consider various factors before determining whether an issue 
does or does not relate to the standard of care received. As such, we 
are not making any change to the definition at this time.
    While we considered the concern that quality of care issues could 
be evident even where professionally recognized standards of care are 
met, we believe that QIOs must fulfill their statutory obligation to 
focus their efforts on determining, in any given situation,

[[Page 68510]]

whether professionally recognized standards of care have been met. At 
this time, we also have determined that a definition of professionally 
recognized standards of care is not something we can define for all 
QIOs in all States. Section 1154(a)(6) of the Act specifically requires 
that each QIO apply professionally developed norms of care based upon 
typical patterns of practice within the QIO's own geographic area as 
principal points of evaluation and review, taking into consideration 
national norms where appropriate. The norms of care must be based on a 
list of specific elements that each QIO must consider. The intricacies 
on what must go into a standard of care are further discussed in the 
QIO regulations at 42 CFR 476.1 (definitions of norms; standards; and 
regional norms, criteria, and standards), and 42 CFR 476.100, which 
includes details on establishing these elements of review for a QIO's 
particular locale. Moreover, the QIOs have extensive experience in 
identifying and implementing their own standards of care. Regarding the 
questions about an ``episode of care,'' this term is designed to 
incorporate flexibility so that QIOs can identify the best approach to 
assessing complaints. As such, we believe that defining the term could 
unintentionally restrict QIOs' flexibility to link different settings 
and/or services when the QIO believes that a particular complaint spans 
a beneficiary's experience with medical care across different settings 
and/or services. An ``episode'' in one case might therefore be 
different for different beneficiaries.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45197 through 45199), 
we proposed an informal review process for beneficiary complaints. 
Historically, the only option available to beneficiaries, regardless of 
the severity or type of issue, has been the right to file a written 
complaint. Once a written complaint is received, the QIO is then 
obligated to conduct a formal peer review of the complaint, which 
includes a review of the beneficiary's medical information. Although 
this peer review process is effective, it can be quite lengthy and 
burdensome on providers and practitioners, given the various steps that 
must be completed by the QIO prior to the QIO rendering its final 
decision, with providers and practitioners cooperating with the QIO 
throughout this process. These steps include the time needed by the QIO 
to follow up with beneficiaries to ensure receipt of the complaint in 
writing, request and receive the medical information from the provider 
and/or practitioner, discuss the QIO's interim decision with the 
practitioner and/or provider, respond to a practitioner's and/or 
provider's request that a QIO conduct a re-review of the initial peer 
reviewer's decision, and obtain the practitioner's consent to the 
release of specific findings in the final letter to the beneficiary. By 
regulation, QIOs must disclose to patients or their representatives 
information they have requested within 30 calendar days (42 CFR 
480.132); it is possible that obtaining a practitioner's consent alone 
could take 30 calendar days. Even if there are no delays at any point 
in the current peer review process, it can take over 150 calendar days 
for a QIO to complete its review of a beneficiary's written complaint.
    At times, the length of the current peer review process can render 
the beneficiary's original concern moot, particularly where the 
beneficiary's concern relates to a communication issue between his or 
her providers and/or practitioners, the prescribing of medications, or 
the failure to receive a necessary medical item, such as a wheelchair. 
For these types of concerns, we believe that requiring a beneficiary to 
submit the complaint in writing and waiting more than 150 calendar days 
so that the QIO can complete its review does not provide prompt and 
customer friendly service to Medicare beneficiaries. Moreover, at 
times, certain issues raised by a Medicare beneficiary in a complaint 
may not even be documented in the beneficiary's medical information. 
This is particularly true for complaints related to communication or 
coordination issues surrounding the beneficiary's care. Thus, a QIO may 
actually know at the outset of a review that the peer review process 
will not divulge any information related to the beneficiary's 
complaint.
    We believe that, under an informal process such as ``immediate 
advocacy,'' the QIO would be able to offer an alternative to a Medicare 
beneficiary in those situations where a resolution is needed more 
quickly than the current traditional peer review process. We believe 
that the proposed new informal process would also be beneficial in 
those instances where information relevant to a complaint would most 
likely not be contained in the medical information or where the 
Medicare beneficiary may simply be put off by the formality of the 
traditional peer review process. We specified in proposed Sec.  
476.110(a) that this new informal process would be available for oral 
complaints so that there is a clear distinction from the process 
requiring a written complaint under section 1154(a)(14) of the Act. 
Again, the proposed definition of ``immediate advocacy'' under Sec.  
476.1 also would make this clear.
    We also proposed that the use of ``immediate advocacy'' would not 
be available if the QIO makes a preliminary determination that the 
complaint includes concerns that could be deemed significant, 
substantial, or gross and flagrant violations of the standard of care 
to which a beneficiary is entitled (proposed Sec.  476.110(a)(2)(ii)). 
In addition, we proposed to add definitions of ``quality of care 
concern'' and ``significant quality of care concern'' under Sec.  
476.1, and to incorporate the definitions of ``gross and flagrant 
violation'' and ``substantial violation in a substantial number of 
cases'' as these two terms are used in 42 CFR 1004.1. Section 1004.1 
covers definitions that apply to a QIO's sanction authority under 42 
CFR part 1004. We proposed to define ``quality of care concern'' to 
mean a concern that care provided did not meet a professionally 
recognized standard of health care, and that a general quality of care 
review or a beneficiary complaint review may cover a single concern or 
multiple concerns. ``Significant quality of care concern'' would mean a 
determination by the QIO that the quality of care provided to a 
beneficiary(s) did not meet the standard of care and while not a gross 
and flagrant or substantial violation of the standard, represents a 
noticeable departure from the standard that could reasonably be 
expected to have a negative impact on the health of a beneficiary. 
``Gross and flagrant violation'' would mean that a violation of an 
obligation specified in section 1156(a) of the Act has occurred in one 
or more instances which presents an imminent danger to the health, 
safety, or well-being of a program patient or places the program 
patient unnecessarily in high-risk situations (as specified in 42 CFR 
1004.1). ``Substantial violation in a substantial number of cases'' 
would mean a pattern of providing care that is inappropriate, 
unnecessary, or does not meet recognized professional standards of 
care, or is not supported by the necessary documentation of care as 
required by the QIO (as specified in 42 CFR 1004.1).
    We stated that we believe that the proposed definitions would give 
improved clarity to the distinctions made among concerns that do not 
meet the standard of care and demonstrate that QIOs are responsible for 
reviewing all quality-related cases to determine whether care provided 
to a beneficiary could have violated a standard, and to

[[Page 68511]]

address any violation, not just the most significant or flagrant 
failures to meet a standard of care. With regard to ``immediate 
advocacy,'' we believe that this informal process is not appropriate 
for those situations where a QIO preliminarily determines that a 
complaint could involve a ``gross and flagrant'' or ``substantial'' 
concern. In these circumstances, the QIO would not offer the immediate 
advocacy process, but instead would inform the beneficiary of the right 
to file a written complaint. Moreover, while we proposed to exclude the 
use of the immediate advocacy process for those instances where 
``significant quality of care concerns'' might be present, we requested 
public comments regarding whether the immediate advocacy process should 
be made available for these concerns as well. In addition, while we 
proposed to restrict the use of the immediate advocacy process to a 
period of 6 months after a beneficiary has received the care at issue 
(proposed Sec.  476.110(a)(1)), we also requested public comments on 
whether this time period should be extended beyond 6 months, whether 
based on the proposed structure or in order to accommodate the 
potential broadening of its use for ``significant quality of care 
concerns.'' The public comments that we received are discussed later in 
this section.
    We proposed, under proposed Sec.  476.110(a)(2), to specify that 
the immediate advocacy process can be used for issues that are not 
directly related to the clinical quality of health care itself or that 
accompany or are incidental to the medical care received, but might, as 
a general matter, contribute to a standard of care not being met. This 
includes, but is not limited to, issues such as delays in obtaining 
much needed medical items (for example, wheelchairs). In addition, 
under Sec.  476.110(a)(3), we proposed that the Medicare beneficiary 
must agree to the disclosure of his or her name in order for the 
immediate advocacy process to be used. We believe that it is important 
for the Medicare beneficiary to disclose his or her name because the 
immediate advocacy process is based on the need for open discussions to 
quickly resolve a beneficiary's concerns. Moreover, we also proposed 
that all parties orally consent to the use of immediate advocacy 
(proposed Sec.  476.110(a)(4)). Because our goal is to work with the 
providers and practitioners to resolve a beneficiary's concerns, we 
believe that consent is necessary. The use of oral consent, and not 
written consent, is in keeping with the cost-saving attributes of 
alternative dispute resolution processes.
    Although we believe that the immediate advocacy process will be of 
great value to Medicare beneficiaries, providers, practitioners, and 
the QIOs, we recognize that, for some, the process may not provide the 
desired resolution. In addition, there could be situations where a QIO 
determines, after the immediate advocacy process has begun, that more 
serious concerns are evident. Therefore, we proposed under Sec.  
476.110(b) that the QIO and either party can discontinue participation 
in immediate advocacy at any time and the steps a QIO will take when 
this occurs. This includes informing the beneficiary of his or her 
right to submit a written complaint.
    Under proposed Sec.  476.110(c), we proposed to convey the need to 
maintain the confidentiality of the immediate advocacy proceedings by 
specifically referencing the redisclosure restrictions under Sec.  
480.107. We proposed to make a corresponding change to Sec.  480.107 by 
adding new paragraph (l), to specify that the redisclosure of 
confidential information related to immediate advocacy proceedings can 
occur when there is consent by all parties. Under proposed Sec.  
476.110(d), we proposed to include procedures that QIOs would follow in 
those instances where a party fails to participate or otherwise comply 
with the immediate advocacy procedures. This includes making a 
beneficiary aware of his or her right to submit a written complaint.
    We believe that the use of the immediate advocacy process will 
greatly reduce the burden on practitioners and providers by avoiding 
the formality of the traditional peer review process in appropriate 
situations and quickly identifying resolutions and improvements in the 
provision of health care. In fact, the immediate advocacy process has 
already been introduced through the recently completed manual 
instructions, and preliminary feedback indicates that it is being 
received positively by providers, practitioners, and Medicare 
beneficiaries. Medicare beneficiaries have indicated their appreciation 
of the quicker and more appropriate resolution of their concerns. Many 
times, Medicare beneficiaries would wait months for the resolution of a 
formal written complaint, only to be disappointed in what the QIO 
actually found or frustrated that the concern initially raised was 
rendered obsolete by more recent events. Under the immediate advocacy 
process, the QIO has a mechanism to resolve beneficiaries' concerns, 
sometimes the same day the beneficiary calls. Moreover, providers and 
practitioners have responded positively to being given the opportunity 
to immediately address beneficiary's concerns and improve care, 
particularly where communication is one of the beneficiary's primary 
concerns. In addition, the provider's or practitioner's ability to 
avoid receiving and processing a formal complaint letter from the QIO 
and the related time and costs related to forwarding medical records 
and engaging in the lengthy review process also have been positively 
received. The decreased burden on Medicare beneficiaries, providers, 
and practitioners and the time and cost savings are cornerstones of 
alternative dispute resolution processes. We are confident the positive 
responses to this new option will continue.
    Comment: Commenters supported the establishment of the immediate 
advocacy process. The commenters noted the efficiencies of immediate 
advocacy and the ability to identify and achieve quality improvements 
much more quickly in a less formal environment. Many commenters noted 
that immediate advocacy will enable providers and practitioners to 
avoid the costly and time-consuming written beneficiary complaint 
process and, thus, dedicate already scarce resources to delivering 
high-quality care. Some commenters noted that swift and effective 
resolutions should be the goal, whether the complaint is oral or 
written, and that immediate advocacy is best for nonsignificant 
concerns related to the experience of care or issues that stem from a 
breakdown in communication that likely would not be documented in a 
medical record. One commenter suggested that CMS ensure the general 
public is aware of the availability of immediate advocacy.
    Some commenters suggested that immediate advocacy be used for all 
complaints unrelated to quality of care or patient safety issues, and 
that the formal beneficiary complaint process be restricted to 
complaints involving patient safety issues or quality of care issues. 
One commenter asked whether immediate advocacy could tie up hospital 
and QIO resources in the long run, leading to slower response times and 
more administrative burden and whether it could increase ``busy work'' 
for providers. The same commenter then suggested that immediate 
advocacy be used only on a trial basis until the benefits are clear. 
Another commenter was similarly concerned that the immediate advocacy 
process would place a greater burden on the providers

[[Page 68512]]

and practitioners because the QIOs would be contacting them directly.
    Other commenters indicated that CMS should consider not 
implementing immediate advocacy because other avenues already exist for 
addressing complaints about the quality of care, such as reporting the 
concerns directly to the provider or to State-based agencies, and that 
having multiple complaint processes impacts the resources of providers 
because they are sometimes forced to respond multiple times to the same 
issues. One commenter suggested that, because the QIOs would be 
documenting the complaint in its own words and it does not require a 
proper investigation of the patient's experience and the staff's 
actions, the QIO will lose neutrality and thus become an agent of the 
patient.
    Response: We appreciate the commenters' support of the use of 
immediate advocacy, and we have already taken steps to ensure that 
beneficiaries, providers, and practitioners are aware that this new 
alternative dispute resolution process is available. We acknowledge the 
commenters' suggestion that the division of precise categories or types 
of concerns for which immediate advocacy should be used be distinct 
from those covered by the formal beneficiary complaint process. 
However, we believe that the proposed structure, which considers the 
severity of the concern and not the type of concern, represents the 
best approach to the design of both the immediate advocacy process and 
the beneficiary complaint review process. This approach gives 
beneficiaries as well as providers and practitioners options in 
achieving resolutions of complaints. Moreover, the immediate advocacy 
process is designed using the principles of the well-established 
alternative dispute resolution process, which focuses on achieving 
results in less time with lower costs. This is certainly true when 
compared to the traditional beneficiary complaint review process, which 
can take months and necessitates multiple reviews by physician 
reviewers, along with ongoing repetitive involvement of the pertinent 
practitioners and/or providers. While we appreciate the suggestion that 
immediate advocacy only be used on a trial basis, we indicated in the 
proposed rule that immediate advocacy is already being used and that 
initial results are positive in that there is improved satisfaction 
with results, with less time and resources being expended to achieve 
the results. This initial feedback from practitioners and providers 
indicates that the process is, in fact, less burdensome and directly 
attributable to the complaint being resolved within hours or a couple 
of days versus several months, the avoidance of responding to a request 
for medical records, and a provider's and/or practitioner's limited 
involvement in the immediate advocacy process compared to the repeated 
back and forth communication necessitated throughout the lengthy formal 
beneficiary complaint review process. However, if any provider or 
practitioner believes that immediate advocacy is more burdensome and 
costly in any given situation, the provider or practitioner has the 
option to decline to participate in the immediate advocacy process. 
Although reference was made to the impact on providers and 
practitioners resulting from the availability of multiple options for 
filing a complaint, Federal law has specifically provided Medicare 
beneficiaries with the right to file written complaints with the QIOs. 
Thus, QIOs are obligated to appropriately review these complaints. We 
believe that the QIOs' substantial experience in resolving beneficiary 
complaints will enable them to determine what is necessary to conduct 
an appropriate review of a patient's experiences and staff reactions. 
Moreover, because immediate advocacy will only be used for less severe 
quality of care concerns, we believe the QIOs are well equipped to 
determine the appropriate and necessary level of their review efforts. 
We also believe the QIOs' substantial experience in resolving 
complaints will enable them to effectively fulfill their roles in 
immediate advocacy without becoming agents of the beneficiaries, 
providers, or practitioners.
    Comment: Numerous commenters opposed the expansion of immediate 
advocacy for use with significant quality of care concerns. Many 
commenters indicated that the immediate advocacy approach is not 
appropriate for these significant concerns because the roots of these 
concerns do not lend themselves to rapid resolution, and there is a 
risk that the cursory analysis may not sufficiently address the 
concerns in light of the short timeframe (8 hours to 2 days) within 
which immediate advocacy is intended to be completed. These commenters 
believed that this could ultimately be a disservice to beneficiaries 
and that, for these significant concerns, the medical record should be 
reviewed. Some commenters suggested that the review of medical records 
offers the best protection for providers, practitioners, and 
beneficiaries. Others commenters stated that the use of oral consent is 
not sufficient if significant quality of care concerns are present.
    Response: We appreciate the commenters' responses on this issue. In 
light of these comments, we are not expanding the use of immediate 
advocacy for significant quality of care concerns at this time. As the 
QIOs continue to use immediate advocacy, we will continue to evaluate 
its use to determine if the future expansion to include significant 
quality of care concerns is warranted.
    Comment: Several commenters agreed with the proposed 6 month 
timeframe regarding complaints that are eligible for immediate advocacy 
because they believed that this time seemed reasonable. Others 
commenters stated that, while the 6 month timeframe is reasonable, 
exceptions should be granted for extenuating circumstances. However, 
other commenters believed that 6 months is too long because frequently 
these cases involve issues happening at the time of the call and, as 
such, 3 months is more appropriate. They believed that the shorter 
timeframe also would facilitate using these issues as ``teaching 
tools'' for practitioners and providers.
    Commenters noted that the longer window could result in staff 
involved in the complaint no longer being with the provider, which is 
significant because the medical record is not being reviewed. Other 
commenters believed that immediate advocacy could be effective for 
complaints received up to a year after the date of care.
    Response: In considering the exact period of time applicable to the 
use of immediate advocacy, we believe we must balance the cost-saving 
aspects, the desire to timely resolve the complaints, and the level of 
involvement required by practitioner and provider staff. We continue to 
believe that 6 months represents the best balance of these factors. We 
appreciate the comments provided and will consider making additional 
adjustments as the QIOs gain experience in using immediate advocacy.
    While we believe that the immediate advocacy process represents a 
significant step forward in ensuring the timely, appropriate, and cost-
efficient resolution of Medicare beneficiaries' concerns, we recognize 
that additional changes are needed to improve the QIOs' review process 
in general. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45198 through 45202), we proposed regulations governing written 
beneficiary complaint reviews as well as general quality of care 
reviews. We proposed to add a new Sec.  476.120 that would govern a 
Medicare

[[Page 68513]]

beneficiary's submission of a written complaint and proposed, under 
proposed Sec.  476.120(a), language limiting the time period for 
submitting a written complaint to 3 years from the date on which the 
care giving rise to the complaint occurred. We believe this is 
necessary because the ability of a QIO to thoroughly review a complaint 
becomes more problematic the longer the period of time is between the 
circumstances giving rise to a complaint and the actual filing of the 
complaint. An individual's memory can fade, and we are aware of some 
instances where Medicare beneficiaries have submitted complaints about 
issues that have occurred decades ago. In these situations, the QIOs' 
ability to obtain the necessary information, let alone render a valid 
decision, has been severely compromised. As such, we believe that a 3-
year look back period should be sufficient to ensure that a QIO can 
effectively complete its review.
    Under proposed Sec.  476.120(a)(1), we proposed that a complaint 
submitted electronically to the QIO would meet the requirement for the 
submission of a written complaint. We proposed, under proposed Sec.  
476.120(a)(2), that if a beneficiary contacts a QIO about a potential 
complaint but decides not to submit it in writing (and the QIO did not 
believe it was appropriate to offer immediate advocacy), the QIO may 
use its authority under section 1154(a)(1)(B) of the Act to complete a 
general quality of care review in accordance with new proposed 
procedures at proposed Sec.  476.160. We noted that, in these 
situations, the beneficiary would not receive any results of the QIO's 
review. We also proposed to limit the QIO's authority to conduct a 
general quality of care review in response to an oral complaint to 
those situations where the QIO makes a preliminary determination that 
the complaint contains a potential gross and flagrant, substantial, or 
significant quality of care concern.
    Under proposed Sec.  476.120(b), we proposed instructions for QIOs 
when a beneficiary submits additional concerns after the initial 
submission of a written complaint. We believe that the focus on an 
episode of care, which we proposed in Sec.  476.130(a)(1), gives the 
QIO adequate flexibility to consider all related concerns surrounding a 
complaint, but for those rare instances where a beneficiary does convey 
a new concern, the QIO would now have specific instructions regarding 
the right to consider the additional concerns either during the same 
complaint review or as a separate complaint.
    Under proposed Sec.  476.130(a), we proposed to convey the QIO's 
obligation to consider any information submitted by the beneficiary or 
his/her representative and by the provider and/or practitioner, along 
with the QIO's obligation to maintain the information received as 
confidential information, if that information falls within the 
definition of ``confidential information'' under existing Sec.  
480.101. Moreover, proposed Sec.  476.130(a)(1) also would convey that 
the focus of the QIO's review will be on the episode of care from which 
the complaint arose and that in completing its review, the QIO will 
respond to the specific concerns raised by the beneficiary along with 
any additional concerns the QIO identifies while processing the 
complaint. We believe that the focus on the episode of care could 
potentially reduce the burden on providers and practitioners and reduce 
timeframes for completing individual reviews. Historically, QIOs would 
closely track the complaint as originally conveyed by a Medicare 
beneficiary. However, often Medicare beneficiaries would become 
dissatisfied with the focus and/or results of the QIO's review, and the 
QIO would be forced to reexamine the same complaint in light of these 
entirely new issues, either in addition to or replacing the original 
issues. On occasion, this could result in the beneficiary raising 
concerns that should have been filed as an entirely new complaint, 
based on issues that might be related to, but were not reviewed as part 
of, the original complaint. This situation could slow the progress of 
the complaint indefinitely because there were no limits on what 
beneficiaries could add to existing complaints and the time span in 
which they could do this. These situations also could add to the burden 
on providers and practitioners because they would be required to 
participate in the review of the additional concerns and even provide 
additional medical documentation related to a complaint that might have 
changed course multiple times.
    In conjunction with limiting complaints to an episode of care, we 
proposed, under proposed Sec.  476.130(a)(1), to specify the details of 
the QIO's authority to separate a beneficiary's concerns into separate 
complaints if the QIO determines that the concerns relate to different 
episodes of care. We believe that focusing on the episode of care will 
put QIOs in a better position to identify all potential concerns at the 
onset and help alleviate any potential back and forth based on the 
specter of new or different concerns arising after the review has 
begun.
    Under proposed Sec.  476.130(a)(2), we proposed to set forth the 
QIO's use of evidence-based standards of care to the maximum extent 
practicable, and specify the method that the QIO must use to establish 
standards if no standard exists. Moreover, this paragraph (a)(2) also 
conveys the finality of a QIO's determination regarding the standard to 
be used for a particular concern, in that the QIO's determination 
regarding the standard used is not subject to appeal. We believe that 
the focus on evidence-based standards of care is vital to the 
improvement of health care nationally.
    Under proposed Sec.  476.130(b), we proposed to specify the 
timeframes that practitioners and providers must follow when a QIO 
requests medical information in response to a written beneficiary 
complaint. We proposed a 10 calendar day timeframe for responding to 
these requests and believed providers and practitioners would also 
benefit from the faster resolution of complaints. We also noted that 
QIOs have historically employed a different, shorter timeframe for 
reviews where a Medicare beneficiary is still receiving care 
(concurrent review), compared to those situations where a Medicare 
beneficiary has already been discharged (retrospective review). For 
concurrent reviews, QIOs request that medical information be received 
within 1 calendar day, and typically this timeframe has been adhered to 
by providers and practitioners. Although we did not propose the 
continued use of the concurrent and retrospective review framework for 
responding to written complaints, we recognize that there could be 
circumstances in which an even shorter timeframe for receiving medical 
information is warranted, and we proposed to include language detailing 
a QIO's right to earlier receipt of medical information. We proposed 
that this right to earlier receipt of medical information be related to 
potential gross and flagrant or substantial quality of care concerns. 
However, we requested public comments on whether there are other 
circumstances, involving less serious kinds of concerns, for which this 
authority to employ a shorter timeframe should be used.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53664 through 
53665), we finalized proposed changes to Sec.  476.78 to add references 
to ``practitioners'' in parts of this section, which referred only to 
``providers,'' in order to equalize the 30-day and 21-day timeframes 
for submitting records. In that final rule, we also made changes to 
Sec.  476.90 to equalize the ramifications for not submitting records 
on time, including denying payment, because we saw no reason to 
differentiate between a

[[Page 68514]]

provider's and a practitioner's records. We note that these changes had 
not been finalized when we issued the CY 2013 OPPS/ASC proposed rule, 
and in anticipation of the changes proposed in the FY 2013 IPPS/LTCH 
PPS proposed rule (77 FR 28119 through 28120), we requested public 
comment in the CY 2013 OPPS/ASC proposed rule on whether changes 
similar to those we proposed for beneficiary complaints, including 
shortening of the 30-day and 21-day timeframes, should be incorporated 
into Sec.  476.78(b) for requests for medical information in general, 
for any kind of QIO reviews, including nonquality related reviews. In 
the CY 2013 OPPS/ASC proposed rule, we also proposed to apply a shorter 
timeframe for all of a QIO's requests for records, without limiting 
this application to quality reviews in just one instance: Where secure 
transmissions of electronic versions of medical information are 
available, we proposed a shorter timeframe. Our proposal regarding 
secure transmissions of electronic versions of medical information is 
discussed more fully later in this section.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45200), under proposed 
Sec.  476.130(c), we proposed to include a requirement for beneficiary 
complaints that the QIO issue its interim initial determination within 
7 calendar days after receiving all medical information. We stated that 
we believe that this timeframe is sufficient to evaluate a complaint 
and identify the key aspects of the care provided. Under proposed Sec.  
476.130(c)(1), we proposed to specify the provider's and/or 
practitioner's right to discuss the QIO's determination before it is 
finalized, and to specify that the QIO's initial notification will be 
made by telephone. We proposed a 7-calendar day timeframe for 
completion of the discussion. In addition, we proposed that the QIO's 
interim initial determination would become the QIO's final 
determination if the discussion is not completed timely because the 
provider and/or practitioner has failed to respond (proposed Sec.  
476.130(c)(2)). Again, our focus is on obtaining resolutions to 
complaints within reasonable timeframes, and the completion of the 
discussion is an area where improved instructions may benefit the 
timeliness of complaint processing because we have experienced 
significant delays in completing this particular step. The term ``final 
initial determination'' should not be confused with the term used in 42 
CFR Part 405, because Part 405 relates to whether a beneficiary is 
entitled to services or the amount of those services, while this 
regulation covers only the quality of services as specified in the QIO 
statute. At the same time, we proposed, under proposed Sec.  
476.130(c)(3), the provider's or practitioner's right to submit a 
written statement in lieu of a discussion, with the requirement that 
the written statement be received within the same 7-calendar day 
timeframe from the date of the initial offer. We believed that allowing 
the submission of a written statement would benefit practitioners or 
providers that may have trouble being available at a specific time 
within the 7-calendar day timeframe. Moreover, under proposed Sec.  
476.130(c)(4), we proposed to include the QIO's right to extend the 
timeframe for holding the discussion or submission of a written 
statement in lieu of a discussion in those rare instances where a 
practitioner or provider is unavailable, whether because of military 
tours of duty, travel or other unforeseen circumstances.
    In addition, we noted in the CY 2013 OPPS/ASC proposed rule that we 
were considering restricting a provider's or practitioner's right to 
submit new or additional medical evidence in the form of test results, 
X-rays, and other evidence, as part of this discussion. We stated that 
we believe that doing so would emphasize the need for providers and 
practitioners to supply all relevant evidence when first requested by 
the QIO and also would maintain the focus on the discussion a physician 
or provider is due in accordance with section 1154(a)(14) of the Act. 
Allowing the submission of additional or new evidence could also 
substantially raise the possibility that the discussion will become, in 
effect, an entirely new review by the QIO. Moreover, providers and 
practitioners will still be able to submit information as part of a 
request for a reconsideration review. We requested public comments on 
whether providers and/or practitioners should be prohibited from 
submitting new or additional medical evidence in response to the offer 
of a discussion.
    Under proposed Sec.  476.130(d), we proposed to specify the QIO's 
obligation to issue a written final initial determination, regardless 
of whether care did or did not meet standards for all concerns, and 
that this determination must be issued within 72 hours after completion 
of the QIO's review or, in cases where the standard was not met, the 
QIO's discussion or receipt of the provider's and/or practitioner's 
written statement. In addition, we proposed, under proposed Sec.  
476.130(d)(1), to specify that the notice of the final initial 
determination will be forwarded to all parties, and paragraph (d)(2) 
lists the actual content of the notice. We also proposed to specify 
that the QIO would not forward the notice if either party requests a 
reconsideration of the final initial determination.
    These proposed changes represent significant departures from the 
process QIOs have historically used when resolving beneficiary 
complaints and are necessary to improve the fairness of the review 
process and increase the transparency of the QIO review process. When 
the process was originally established, CMS determined that physicians, 
providers, or Medicare beneficiaries would not be afforded the right to 
request a reconsideration of these determinations under section 1155 of 
the Act. However, providers and practitioners were afforded an 
administratively created option, referred to as a ``re-review,'' if the 
provider or practitioner disagreed with the QIO's initial decision. 
Medicare beneficiaries were not provided this re-review opportunity 
and, in fact, were not given any response until after completion of the 
re-review. Moreover, the actual information a beneficiary received in 
response to the submission of a complaint was further limited by 
certain provisions in the existing regulations. Section 480.132 covers 
the general requirements that a QIO must meet in disclosing information 
to a beneficiary when that beneficiary has requested information about 
him or herself. Section 480.132(a)(1)(iii) states that this information 
cannot include any practitioner-specific information. We have read this 
provision in conjunction with Sec.  480.133(a)(2)(iii), which 
authorizes a QIO to disclose practitioner-specific information when the 
practitioner has consented to the disclosure. In the past, we have 
interpreted these provisions as applying in the context of beneficiary 
complaints. This limitation greatly reduced a beneficiary's access to 
information related to the QIO's specific findings. In fact, Sec.  
480.132 also gave attending practitioners the authority to direct that 
a QIO not provide results directly to a Medicare beneficiary should 
that practitioner determine that the released information could ``harm 
the patient.'' This same provision gave QIOs a full 30 calendar days 
before they had to respond to a beneficiary's request for information, 
which would apply even in the context of a complaint. Thus, the QIO was 
required to obtain a practitioner's consent to disclose information 
within this 30-calendar day timeframe before the QIO could disclose

[[Page 68515]]

the specific results of its complaint review to the beneficiary.
    As a result of the provisions in the existing regulation, the QIO 
was often delayed in its ability to respond to the beneficiary, and was 
sometimes forced to identify a representative and then give the results 
to the representative even if the Medicare beneficiary believed he or 
she was able to represent himself or herself and legally had not been 
deemed otherwise. This scenario has frustrated Medicare beneficiaries 
over time and placed QIOs in difficult situations. Furthermore, if a 
practitioner did not consent to any disclosures or to limited 
disclosures of information that would identify the practitioner, a 
QIO's decision typically contained a conclusory statement about the 
results of the QIO's review but no information about the standards of 
care the QIO used, the evidence the QIO considered, or the rationale 
for how the QIO arrived at its conclusion. The limitations on what 
information Medicare beneficiaries received and broad authority given 
to attending practitioners have been particularly troubling in those 
instances in which the beneficiary's complaint relates to care that the 
attending physician provided. In fact, the lack of information given to 
Medicare beneficiaries in response to a complaint was the precise issue 
addressed in the Public Citizen decision.
    We stated in the proposed rule that we believe that the proposed 
changes to Sec.  476.130(d), including paragraphs (d)(1) and (d)(2), 
are necessary to ensure beneficiaries are given the same information 
and rights as practitioners and providers. The proposed changes make 
clear that the timeframe given to QIOs for issuing the final initial 
determination in response to a complaint is separate and distinct from 
the timeframe given to QIOs when responding to a beneficiary's request 
for information. Any requests for information, including requests for 
information pertaining to beneficiary complaint reviews that are 
unrelated to a QIO's issuance of its final initial determination, would 
continue to be governed by Sec.  480.132. Moreover, while the proposed 
72-hour timeframe in Sec.  476.130 appears short in comparison to the 
30-calendar day timeframe in Sec.  480.132 that has historically been 
used, we believe that the 72-hour timeframe represents a more 
appropriate and reasonable period of time in which to issue these 
decisions. In most cases, the QIO's final initial determination may not 
change significantly from the interim initial determination. Thus, QIOs 
would be able to rely heavily upon the interim initial determination in 
most instances, with only minor adjustments being made in light of 
information received in response to the opportunity for discussion. In 
addition, in paragraph (d)(2), we proposed the content of the written 
decision to be given to the beneficiary, provider, and/or practitioner. 
We proposed that the content include a statement for each concern that 
the care did or did not meet the standard of care, the standard 
identified by the QIO for each of the concerns, and a summary of the 
specific facts that the QIO determines are pertinent to its findings. 
This list makes clear that Sec.  480.132 will no longer govern what 
information a QIO may provide to a beneficiary in resolving a 
complaint. We believe this approach more fully supports the court's 
decision in the Public Citizen case.
    In addition, we believe that the language under section 1155 of the 
Act supports the decision to give all parties the right to request that 
the QIO reconsider its initial decision, and we proposed to offer 
providers, practitioners, and beneficiaries the right to request a 
reconsideration in proposed Sec.  476.140(a) for complaints filed after 
July 31, 2014. This includes proposed specific requirements regarding 
the manner in which these requests are to be submitted and the 
obligations of beneficiaries, providers, and practitioners to 
participate in the reconsideration process in proposed Sec.  
476.140(a)(1) through (a)(3). We proposed to delay implementation of 
this new proposed right to ensure all processing requirements are fully 
developed for QIOs to follow in reviewing these reconsideration 
requests.
    In addition to the proposed specific content of the notice at 
proposed Sec.  476.130(d)(2) when a final initial determination is 
issued and under proposed Sec.  476.140(b) when a reconsideration final 
decision is issued, we proposed to make corresponding changes to 
existing Sec. Sec.  480.132(a) and (b) and 480.133(a) (proposed new 
paragraph (a)(2)(iv)). In order to make clear that Sec.  480.132 
relates solely to a beneficiary's request for information, but not to a 
beneficiary's receipt of information from a QIO in resolution of a 
complaint review, we proposed the inclusion of a cross-reference to 
Sec. Sec.  476.130(d) and 476.140(b) in paragraph (a). Similarly, we 
proposed to include language in Sec.  480.132(a)(1)(iii) to denote that 
the removal of all other patient and practitioner identifiers does not 
apply to disclosures described in Sec.  480.132(b). We also proposed 
clarifications to Sec.  480.132(b) to improve the link between 
paragraph (b) and the provisions of Sec.  478.24 regarding requests for 
information relied upon in rendering initial denial determinations, 
which are cross-referenced in paragraph (b). We note that Sec.  478.24 
does not require seeking the advice or consent of the practitioner that 
treated the patient, nor does it prohibit the QIO from disclosing 
practitioner identifiers. We have made this clear by the proposed 
deletion of paragraph (b)(1)(i) and added language to the end of 
current paragraph (b)(1)(ii) to indicate that the information provided 
under Sec.  478.24 includes relevant practitioner identifiers. With the 
deletion of paragraph (b)(1)(i), there is no longer a need for multiple 
paragraphs in (b)(1). Therefore, we proposed to eliminate the current 
designation for paragraph (b)(1)(ii), with the provision being included 
as part of paragraph (b)(1). We also proposed a corresponding change to 
Sec.  480.133(a)(2)(iv) that makes clear a practitioner's or provider's 
consent is not required prior to releasing information to a beneficiary 
in connection with an initial denial determination or in providing a 
beneficiary with the results of the QIO's findings related to a 
beneficiary complaint review as described in Sec. Sec.  476.130(d) and 
476.140(b).
    We also proposed to remove from existing Sec.  480.132(a)(2) and 
(c)(1) the right of an attending practitioner to direct a QIO to 
withhold information based on a ``harm'' determination. This included 
the proposed removal of the requirement from existing Sec.  
480.132(c)(2) that a QIO release results to a beneficiary's 
representative if a ``harm'' determination has been made by the 
attending practitioner. This also included our proposed decrease in the 
timeframe that QIOs must follow in responding to a beneficiary's 
request for information (in any situation, as well as in the context of 
a beneficiary complaint) in Sec.  480.132(a)(2) from 30 calendar days 
to 14 calendar days. This timeframe is strictly related to those 
situations where a beneficiary is making a request for information and 
will no longer be associated with obtaining responses to beneficiary 
complaints in the form of the QIO's final initial determination and the 
QIO's issuance of a final decision after a reconsideration, which are 
detailed in proposed Sec. Sec.  476.130(d) and 476.140(b). We believe 
the decrease from 30 calendar days to 14 calendar days is warranted in 
light of the improved ability to maintain data, including in electronic 
formats, so that less time is needed when responding to requests. The 
proposed changes would ensure that Medicare

[[Page 68516]]

beneficiaries have more control over the designation of their 
representatives and also give a QIO more appropriate steps to follow in 
identifying a representative when one is actually needed. As an 
example, the existing regulations at Sec.  480.132(c)(3) direct a QIO 
to ``first'' look to the medical record to identify a representative 
but then direct the QIO to ``rely on the attending practitioner'' if no 
information is contained in the medical record. The changes we proposed 
to Sec.  480.132(c) place more emphasis on the obligation of the QIO to 
follow the requirements under State law regarding the designation of 
health care representatives or agents, rather than focusing on 
``where'' the information might be contained.
    Lastly, under proposed Sec.  476.140(b), we proposed to specify 
that the QIO must notify the beneficiary and the practitioner and/or 
provider of its final, reconsidered, decision within 72 hours after 
receipt of the request for a reconsideration or, if later, 72 hours 
after receipt of any medical or other records needed for such a 
reconsideration. The QIO may do so orally, by telephone, in order to 
meet this timeframe. Proposed Sec.  476.140(b)(1) also would specify 
that a written notice must be mailed by noon of the next calendar day 
and specifies the content of the notice. In addition, under proposed 
Sec.  476.140(b)(2), we proposed to describe the QIO's authority to 
provide information in its final decision to beneficiaries, providers 
and/or practitioners regarding improvement opportunities. The 
information QIOs provide regarding potential improvements could include 
specific opportunities related to the practitioner's or the provider's 
delivery of care and/or even broader improvements focusing on the 
community served by the practitioners and/or the providers. Some QIOs 
have, in fact, been providing this information to beneficiaries since 
it can offer the beneficiaries assurance that their complaints and any 
underlying problems are being addressed.
    We proposed to include, under proposed new Sec.  476.150, specific 
requirements for QIOs to follow in response to abandoned complaints. We 
believe that these instructions are necessary in light of a QIO's 
experience when handling complaints where a Medicare beneficiary 
initially submits a complaint but then all attempts by the QIO to 
contact the beneficiary are unsuccessful. Historically, QIOs have been 
responsible for continual follow-up with beneficiaries, even if months 
later the beneficiary still had not responded. We believe that giving 
QIOs the discretion to close these cases will eliminate this 
unnecessary follow-up and reduce costs. Moreover, it will alleviate 
provider's and/or practitioner's concerns in those situations where the 
QIO may have already reached out to them about a potential complaint. 
We also proposed to add, under proposed Sec.  476.150(b), instructions 
for QIOs to follow in those situations, which we believe will be rare, 
where a QIO must reopen a beneficiary complaint review. We would have 
QIOs apply the same procedures that appear in the already existing 
regulations at Sec.  476.96 for the reopening of cases involving 
initial denial determinations and changes as a result of DRG 
validation, simply using those same procedures for a different purpose. 
We proposed to do this by placing a reference in Sec.  476.150(b) to 
the procedures in Sec.  476.96.
    Comment: Numerous commenters supported the establishment of 
regulatory provisions addressing beneficiary complaint reviews, 
including the streamlining of the overall process. Several commenters 
supported a beneficiary's right to submit additional concerns after the 
initial submission of a written complaint, a QIO's right to determine 
whether concerns should be processed as a single complaint or separated 
into multiple complaints, as well as the procedures for handling 
abandoned complaints. In addition, one commenter supported the 
provision allowing payment denials for practitioners and providers.
    However, several commenters noted that a strong operational 
infrastructure must be developed to ensure the stricter timeframes in 
the beneficiary complaint review process can be effectively 
implemented, particularly in light of the QIO's budget limits and the 
aggressive system-wide changes being attempted. Other commenters 
supported the provision allowing the submission of complaints 
electronically, although one commenter stated that CMS does not allow 
QIOs to accept electronic beneficiary complaints. One commenter also 
suggested that QIOs should not be communicating directly with 
physicians in resolving beneficiary complaints since this undercuts 
quality management of physician practices and instead the QIOs should 
communicate directly with the quality offices of the practices' system 
so that more orderly systematic approach to quality control can be 
maintained. Another commenter recommended that all communications 
exchanged between QIOs and beneficiaries be written at a 6th grade 
level and that, due to disabilities, visual impairments and non-English 
speaking Medicare beneficiaries, communications must be available in 
alternative formats.
    Response: We appreciate the support for these regulatory 
provisions. With regard to the need for a strong operational 
infrastructure, the QIOs have been performing beneficiary complaint 
reviews for over 25 years and already have a strong operational 
infrastructure in place. While some adjustments could be necessary to 
the content of letters, any changes to the infrastructure will most 
likely be related to the new reconsideration right to be given to 
beneficiaries. In recognition of this, we proposed delaying the 
implementation of this new right until August 2014. In addition, we 
appreciate the commenters' support for the submission of complaints 
electronically. However, we are concerned by the comment that QIOs have 
been advised by CMS that complaints cannot be accepted electronically. 
This is incorrect, and we have communicated this to QIOs on several 
occasions. As these regulations will make clear, beneficiaries have the 
right to submit complaints electronically, including by email, if they 
desire. Although we appreciate the concern that QIOs communicate with 
the provider's system quality office in resolving beneficiary 
complaints, we believe that communication must ensure the involved 
practitioner is also involved and nothing in these regulations limit 
the QIOs' ability to communicate directly with the provider's quality 
improvement staff. We appreciate the recommendations regarding the QIOs 
communications and availability of alternative formats and have already 
taken steps to ensure that communications are written in plain language 
and offered in other languages so that the needs of Medicare 
beneficiaries are met.
    Comment: Some commenters suggested that CMS also require that, when 
QIOs investigate a complaint, all parties are informed as to who else 
has received the complaint, such as State survey agencies and the Joint 
Commission. Commenters suggested that this level of coordination is 
necessary because resources are being expended by all of the various 
entities, including the involved providers and/or practitioners, and 
coordinating the initial investigation or interview would be a cost-
effective method that could also lead to an earlier resolution of the 
complaint. Moreover, the commenters believed that this would also 
ensure that information is better shared between oversight entities. 
They believed that doing so could alleviate duplicative efforts.

[[Page 68517]]

    Response: While we recognize that, at times, several agencies could 
be investigating the same or similar concerns, our concern at this time 
is ensuring that beneficiaries, providers, practitioners, and QIOs have 
clear instructions regarding the processing of beneficiary complaints. 
As such, we are not recommending specific changes designed to improve 
the coordination among various entities as a direct result of these 
regulations.
    Comment: Several commenters expressed concern regarding the impact 
of the proposed regulations on the recently effectuated manual 
instructions included in Transmittal 17 (issued on April 6, 2012, CMS 
Manual System, Pub. 100-10 Medicare Quality Improvement Organizations, 
Chapter 5, Quality of Care Review). Specifically, commenters raised 
concerns regarding the extent to which beneficiaries can rely on the 
additional protections included in Transmittal 17 because the notice-
and-comment rulemaking process may take a different and conflicting 
turn, leaving the beneficiary who relied on the transmittal in an 
insecure and vulnerable position.
    Response: While we recognize that the timing of Transmittal 17 
could cause confusion in light of the proposed regulations, this rule 
does not remove any of the additional protections conveyed through 
Transmittal 17. Rather, the regulatory provisions are designed to bring 
about additional changes that will improve the processing of 
beneficiary complaint reviews for all parties and provide beneficiaries 
with even more access to information. We anticipate making additional 
changes to the manual instructions to comply with the new regulatory 
provisions once the regulations are in effect.
    Comment: Many commenters supported the 3-year period for submitting 
beneficiary complaints, while other commenters believed that 3 years is 
too long. Many commenters urged CMS to consider a 1- or 2-year 
timeframe, with the potential to allow for additional time in rare 
circumstances. Many of the commenters' concerns about the 3-year time 
period were based on the ability of providers to reasonably defend 
against allegations of inappropriate care after three years, since 
memories fade. Moreover, the commenters believed that the time lapse 
could result in the standards of care being different in light of 
clinical advances that have occurred. Other commenters believed that 
the timeframe should be shortened because the proposed time 
practitioners and/or providers are being given to provide medical 
evidence is much shorter.
    Response: While we recognize that a variety of factors could impact 
the success of the QIO's review process, we believe that because these 
reviews are primarily conducted by reviewing medical information 
supplied by the practitioner and/or provider, the longer time period is 
appropriate. Moreover, QIOs are experienced at identifying the 
appropriate standard of care, including any changes or updates to the 
standard of care since the time the actual care was provided. 
Therefore, we believe that 3 years represents a reasonable period of 
time for submitting complaints.
    Comment: Numerous commenters opposed giving QIOs the authority to 
identify the standard of care, including the right to determine a 
standard of care where a clear standard does not exist. Commenters 
noted that standards of care are complex and can be reliably developed 
only with clinical experts assessing the available medical information, 
and there is no reason to believe that QIOs will have more relevant 
medical expertise available to make such determinations for all medical 
care issues. Some commenters also noted that there are numerous areas 
of medical practice for which insufficient evidence exists to guide the 
conclusion of what should be the standard of practice and that the QIOs 
should not be expected to make up a standard where evidence to support 
it does not exist. One commenter noted that allowing QIOs to determine 
the standards of care will actually create more variation in the 
standards. In addition, some commenters believed that it was cause for 
concern that the QIO would make a determination as to whether the care 
provided met professionally recognized standards of care but the 
provider's/practitioner's perspective, including the provider's/
practitioner's intimate knowledge of the patient's care, was secondary. 
Many commenters were troubled that a QIO's decision regarding the 
standard of care is not subject to appeal and believed that an 
independent third party entity should be established to review QIOs' 
decisions regarding the standard of care. One commenter also suggested 
that giving beneficiaries results of reviews could be more problematic 
in light of these concerns over the standards of care.
    Response: QIOs were specifically established to make available a 
cadre of peer reviewers, including both physician and nonphysician 
practitioners, with expertise who could review complaints and other 
quality of care concerns in order to make determinations as to whether 
the care provided met professionally recognized standards of care. As 
part of this process, QIOs take care in matching the clinical 
background of their peer reviewers with the specific care at issue in 
the complaint and ensure that the peer reviewer's knowledge of existing 
practices in the relevant health care setting and the particular 
geographic area is current. Moreover, the identification of the 
standard of care is based on a robust review of current literature and 
available evidence pertaining to the standard in addition to the peer 
reviewer's own clinical judgment. QIOs have been reviewing quality of 
care concerns and making decisions regarding the standards of care to 
be used when conducting these reviews for over 30 years. The 
regulations merely continue a process that has been in place since the 
program was initially established, and we see no reason to change the 
process at this time. In particular, we believe the suggestion that a 
third party be created to review the QIOs' decisions is unnecessarily 
duplicative because this is the precise reason QIOs were created, and a 
QIO is specifically tasked with applying the standards of care as 
described in section 1154(a)(6)(A) of the Act based on its evaluation 
of the typical patterns of practice within the geographic area it 
serves. This responsibility is also detailed in 42 CFR 476.100.
    Comment: Numerous commenters supported the regulatory changes 
giving beneficiaries more detailed results of review findings, the 
removal of a physician's right to consent to the release of specific 
findings, and the provision of information to beneficiaries regarding 
quality improvement activities in the final decision letters. Many 
commenters believed that it is imperative that beneficiaries have the 
same access to information about complaints as practitioners and 
providers and that this right should not be defeated by the objection 
of a practitioner or provider. Many commenters also agreed that the 
elimination of the consent requirement would improve beneficiary 
satisfaction and that it aligns with the value of patient centered care 
in addition to reducing the processing timeframe by 30 days.
    Other commenters supported the providing of information regarding 
quality improvement activities, but believed that the QIOs will need to 
take care that the information is presented in an easily understandable 
manner because it can be difficult at times for

[[Page 68518]]

a beneficiary to discern how particular quality improvement activities 
relate to the quality of care the beneficiary received. One commenter 
supported the proposal to reduce the time that a QIO is given in 
responding to requests for information from beneficiaries from 30 to 14 
calendar days. However, another commenter noted that giving 
beneficiaries more information could be contrary to State law, and 
provided an example that, under Florida law, psychiatrists may redact 
notes or provide a summary statement to patients in lieu of providing 
them clinical notes, which may be harmful to the patient. Another 
commenter suggested that the failure to obtain a practitioner's consent 
could expose the QIO to legal activity, which would result in the need 
for increased liability insurance, additional costs for the QIO and for 
CMS and potentially peer reviewers refusing to participate in the 
process because of concerns over potential litigation.
    Response: We regard the provision of more detailed information to 
beneficiaries to be a direct, logical, and reasonable outgrowth of the 
Public Citizen decision and recognize the benefits of providing this 
more detailed information to beneficiaries. We appreciate the support 
for providing this information and agree that quality improvement 
activities must be conveyed in an easy and understandable way to 
beneficiaries. We believe that the QIOs are already well-equipped to 
effectively communicate this information. With regard to the provision 
being contrary to State law, we do not agree that this provision will 
place a QIO in jeopardy of violating State law requirements. QIOs would 
be effectuating the procedures of a Federal program that is mandated by 
a Federal statute and interpreted under Federal regulations. As such, a 
QIO's obligations to provide information under a Federal statute and 
regulations would preempt any State law requirements that conflict with 
the QIO's obligations. The information conveyed by the QIO will be 
limited because it will be specific to the care a beneficiary has 
received, and relate only to the facts that are essential to 
determining whether a provider or practitioner met professionally 
recognized standards of care. Lastly, with regard to a QIO or a peer 
reviewer being exposed to legal action, the liability protections 
afforded under section 1157 of the Act would apply to the QIO and its 
staff. Section 1157(b) of the Act states that any QIO or person 
employed by or who provides professional services to the QIO, or who 
has a fiduciary relationship with a QIO, cannot be held to have 
violated any criminal law or to be civilly liable under any Federal or 
State law as a result of his or her performance of any duties, 
functions, or activities required under or authorized by the QIO 
statute or under the QIO's contract with CMS.
    Comment: Several commenters supported the reduction in timeframes 
related to requests for medical information. One commenter noted that, 
because providers have already demonstrated the ability to respond to 
requests for medical information related to expedited appeals within 4 
hours, 10 days should be ample time. One commenter also supported the 
removal of the retrospective and concurrent distinction in processing 
complaints, as well as the authority to request medical information in 
less time when circumstances warranted. Other commenters believed that 
the shorter timeframes were necessary in order to give beneficiaries 
results in a reasonable period of time in response to a complaint.
    Some commenters supported the efforts to shorten the timeframes 
associated with completing quality of care reviews, but believed that 
the 10-day timeframe was insufficient because navigating a hospital's 
complex medical records system is time-consuming. Moreover, some 
commenters expressed concerns that the shorter timeframes would disrupt 
the providers' and practitioners' daily work in order to comply with 
the decreased timeframe and will ultimately lead to additional costs, 
including for providers and/or practitioners using vendors. Other 
commenters noted that a 10-day timeframe could not be met until 
providers and practitioners have established electronic health record 
systems that would easily facilitate the collection of medical 
information and that the current 21-day and 30-day timeframes should be 
maintained. Many of these commenters noted that a significant number of 
providers and practitioners either still rely entirely on paper records 
or are in a hybrid state with some paper records and some electronic 
records. Several commenters suggested that the 3-year ``look back'' 
period for complaints affected the ability to comply with this 
requirement because the providers and practitioners may have to 
retrieve medical information from offsite facilities. Other commenters 
noted that providers and practitioners receive numerous requests for 
medical information from various entities and that frequently the 
timeframes for responding are different for each entity, and these 
issues impact the ability of providers and practitioners to respond in 
a timely fashion. Several commenters also questioned whether the 
shorter timeframes will have any material benefit for beneficiaries 
that have submitted complaints. One commenter noted that, for one QIO, 
approximately 75 percent of providers are already complying with the 
10-day timeframe, and that the other 25 percent are taking up to 25 
days to respond, with the non-hospital providers and practitioners 
taking the longest to respond.
    In addition, many commenters supported a similar shortening of the 
timeframes for replying to requests for medical information in response 
to other review activities. However, several commenters believed that 
the 21-day and 30-day timeframes should be maintained for other review 
activities for the same reasons they supported maintaining the current 
timeframes associated with completing quality of care reviews.
    Response: In determining the precise number of days for responding 
to requests for medical information, we must consider the impact on the 
QIOs' ability to make timely decisions, the beneficiaries' right to 
have complaints or other review activities decided in a timely fashion, 
as well as the burden on practitioners and providers in responding to 
medical record requests. While we recognize that the shorter timeframes 
could cause concerns for some practitioners and providers, particularly 
nonhospital providers, we also considered the additional flexibilities 
we have proposed regarding the ability to securely transmit electronic 
versions of medical information.
    In light of the concerns raised, we are modifying the proposed 
regulations to require that medical information be obtained within 14 
calendar days when requested in response to a quality of care review. 
In addition, we are adopting this same 14 calendar day timeframe for 
all QIO review activities. We believe that having a single timeframe 
will facilitate provider's and practitioner's response times. This same 
timeframe will be applicable whether the provider or practitioner is 
forwarding paper copies of medical records or electronic versions. We 
believe that the ability to timely comply with these requests will be 
further enhanced by additional infrastructure changes we are working 
towards implementing in the near future, including electronic facsimile 
capabilities and secure file-sharing capabilities. We will continue 
evaluating additional changes to this

[[Page 68519]]

timeframe as providers and practitioners increasingly move towards 
electronic health records. However, we are finalizing the proposed 
regulatory language that gives QIOs authority to request medical 
information in less time if circumstances warrant the earlier receipt.
    Comment: Several commenters supported the proposed decrease in 
timeframes for completing various steps of the review process, and 
several commenters commended CMS for streamlining the process. Some 
commenters noted that the prior lengthy timeframes were not patient-
centered and have historically been a point of beneficiary 
dissatisfaction. Other commenters believed that the reduced timeframes 
were necessary so that providers and practitioners obtain results more 
quickly, and this is particularly helpful where the concerns are 
unfounded.
    However, numerous commenters expressed concerns regarding the 
decreased timeframes. In particular, commenters raised concerns 
regarding the ability to meet the 7-day timeframe for completing the 
interim initial determinations and that, in order to do so, the more 
aggressive process improvements for expedited appeals would need to be 
adopted. Some commenters alleged that CMS is attempting to make the 
beneficiary complaint process similar to the expedited appeals process, 
and that this is not appropriate because these are not payment 
determinations in need of rapid resolution. Some commenters mentioned 
that the need of a QIO to complete a Quality Review Decision form for 
each concern and need to identify evidence-based standards of care will 
impact the ability of QIOs to meet the reduced timeframes for making 
the interim initial determination.
    Some commenters also noted that the 72-hour timeframe for rendering 
the final initial determination and the 72-hour timeframe for rendering 
the reconsideration decision are too short in consideration of the 
scope of the review necessary and need to thoroughly evaluate the 
medical information. Other commenters also believed that the 
requirement that reconsideration requests be submitted by noon the day 
after the notification of the final initial determination is too short 
because the beneficiary and the providers and/or practitioners need 
adequate time to consider the essence of the QIO's decision. Moreover, 
the commenters stated that the fact that the interim and final initial 
determinations are conveyed orally could impact the ability to fully 
evaluate whether a reconsideration request should be filed and may even 
violate confidentiality and privacy rights of the individual. Some 
commenters alleged that the provider, practitioner, or beneficiary 
could question the identity of the caller. Still other commenters noted 
that it is critical not to rush the QIOs' investigations of these 
issues, particularly because, when final, the determinations could be 
used by plaintiffs' attorneys to pursue additional actions against 
providers and practitioners. Another commenter noted that shortening 
the timeframes too extensively could have unintentional negative 
consequences resulting in the value of the review process being 
compromised for the beneficiaries who would prefer that their concerns 
are properly addressed. One commenter noted that there are already 
shorter processing timeframes currently in place through the concurrent 
review process and, thus, it is not clear why there is a need for 
decreased timeframes when responding to retrospective reviews. Another 
commenter expressed concern regarding the sequence of the 
reconsideration right, for example, should the review of a 
beneficiary's reconsideration request occur before or after the 
practitioner's or provider's request, and believed that a beneficiary 
could be upset should a concern be confirmed at the conclusion of the 
final initial determination only to have it overturned as a result of a 
practitioner's or provider's reconsideration request. Other commenters 
believed that the shorter timeframes would increase costs, including 
the compensation costs for physician reviewers. Several commenters 
noted that the new Chapter 5 instructions already include shorter 
timeframes for completing various steps of the review process and that 
these timeframes should be maintained until medical information can be 
received electronically from providers and practitioners and also 
conveyed electronically to peer reviewers. Some commenters questioned 
why a beneficiary's right to request a reconsideration cannot be 
implemented sooner than August 2014.
    Response: In considering the reduced timeframes for various steps, 
we attempted to identify timeframes that would balance the interests of 
beneficiaries, providers, and practitioners in obtaining timely 
resolution of complaints with the time necessary for the QIOs to 
effectively and thoroughly complete the various tasks involved in the 
review process. We have routinely heard from beneficiaries that the 
time necessary to complete reviews is a point of dissatisfaction, and 
clearly a process that requires more than 150 days to complete a review 
can be frustrating to all involved. Moreover, we disagree with the 
suggestion that our goal is to make the beneficiary complaint review 
process similar to the expedited appeals process. Because the expedited 
appeal decisions are typically made within 24 to 48 hours of the filing 
of the appeal, the expedited appeal process is quite different from the 
proposed complaint process, which allows 7 days to make the interim 
initial determination, offers providers and practitioners the 
opportunity to discuss the results, and then permits several more days 
before the final initial determination is made.
    We are concerned by the statement of the commenter who noted the 
need to create a Quality Review Decision form for each concern 
identified during the review. That is inaccurate. Only one Quality 
Review Decision form needs to be created to track the QIO's review of a 
beneficiary complaint or completion of a general quality of care 
review. Moreover, with regard to the comment that these shorter 
timeframes appear unnecessary in light of the already existing 
authority to conduct concurrent beneficiary complaint reviews, we 
advised in the proposed rule that the retrospective and concurrent 
distinction in reviews would no longer be used. Our goal is to move 
away from having a distinction in processing requirements that is 
determined by the beneficiary's inpatient (concurrent) or discharge 
(retrospective) status and instead consider the severity of the issues 
in order to determine how quickly to process the complaints. We have 
already addressed that QIOs have the authority to request medical 
information within shorter periods of time if circumstances warranted. 
Moreover, the timeframes for completing the interim initial 
determination and final initial determination convey that the QIO must 
complete its review ``within'' the prescribed period of time. We 
believe that our timeframe should be sufficient, even for complaints 
that are unexpectedly complex, and that QIOs have the flexibility to 
use the full time allotted for the interim and final initial 
determinations or to complete these steps in less time if circumstances 
warrant it, such as when circumstances surrounding the complaint have a 
severe impact on the quality of care received.
    With regard to the sequence, all parties will be offered the right 
to request a reconsideration at the same time, and each party must 
understand that the review will be an independent

[[Page 68520]]

review that could result in the final initial determination being 
overturned. In addition, while it is accurate that the new Chapter 5 
manual instructions contain processing timeframes that are shorter than 
those historically used, we undertook the task of writing these new 
regulatory provisions because we believed that additional improvements, 
including the potential incorporation of even shorter timeframes, could 
be made and that any additional and more comprehensive timeframes 
should be accomplished through notice-and-comment rulemaking.
    However, we recognize that some of the timeframes are considerably 
more aggressive than those followed by the QIOs as recently as 6 months 
ago. After considering the public comments we received, we have decided 
to extend the timeframe for the QIO to make the interim initial 
determination from 7 calendar days to 10 calendar days. Although we do 
not agree that QIOs will be unable to meet the proposed 7-day timeframe 
based on the need to identify evidence-based standards of care because 
QIOs have always been responsible for identifying standards of care and 
will have a readily available repository of up-to-date standards of 
care for most concerns, we nonetheless choose to extend the timeframe 
to 10 days based on the concerns that peer reviewers be given adequate 
time to review the medical information, particularly if the medical 
information is somewhat voluminous.
    In addition, in this final rule with comment period, we have 
modified the timeframe for making the final initial determination from 
72 hours to 3 business days. We also have extended the timeframe for 
filing reconsideration requests from noon the calendar day following 
the initial notification to 3 calendar days. In addition, to ensure 
that all parties can properly evaluate the need to file a 
reconsideration request, we have modified the regulatory requirements 
to require that QIOs issue the final initial determination in writing. 
Lastly, we have extended the timeframe for QIOs to render the 
reconsideration decision from 72 hours to 5 calendar days. Although it 
was suggested that the right to request reconsiderations could be 
implemented sooner than August 2014, we continue to believe that this 
period of time is necessary to ensure all process and system 
requirements can be effectively implemented. This includes ensuring 
that beneficiaries, providers, and practitioners are aware of this new 
right.
    Comment: Several commenters believed that the reduction of time for 
completing the opportunity for discussion could impact the accuracy and 
thoroughness of the review process and that because the results of the 
interim initial determination and right to an opportunity for 
discussion are initially conveyed orally, this will require a physician 
with quality improvement experience to ensure that the issues are 
accurately conveyed to the practitioner or provider and to ensure that 
any response from the practitioner is correctly transcribed. Several 
commenters believed that it would be better for the response to be in 
writing in all circumstances. Other commenters believed that the 
timeframe for completing the opportunity should be extended to 10 days 
with exceptions built in for certain events. One commenter noted that 
more time was necessary because it is hard to reach practitioners and/
or providers and leaving messages is not appropriate. The commenter 
believed that this timeframe is even more problematic where multiple 
practitioners and/or providers are involved in a single complaint and 
that should the practitioners and providers be reached on different 
days, the QIOs would be forced to separately track the response time 
period applicable to each practitioner and/or provider.
    Several commenters suggested that practitioners and providers be 
allowed to submit new or additional medical information during the 
opportunity for discussion. Some commenters suggested that refusing to 
allow the submission of additional medical information is grossly 
unfair if the amount of time provided for submitting medical 
information is reduced. Moreover, commenters noted that providers and 
practitioners could find additional medical documentation in 
researching the results of the interim initial determination. Other 
commenters believed that not allowing the submission of additional 
evidence during the opportunity for discussion would result in the 
unnecessary filing of additional reconsideration requests. In addition, 
commenters noted that, frequently, when a physician or provider 
receives a call regarding the opportunity to discuss the QIOs findings, 
this is the first time the provider and/or practitioner learns that a 
complaint has been filed. Thus, the commenters added, the discussion 
can be helpful to explain the content of the discussion, particularly 
because the content of the medical information may not be readily 
available.
    Response: While we recognize that any shortening of timeframes 
creates concerns, our objective is to identify a period of time that 
ensures beneficiaries obtain resolution of complaints in a timely 
fashion, while also giving a practitioner or provider an adequate 
period of time to discuss the QIO's initial findings. In considering 
the comments, we noted that, while some concerns were related to the 
ability to reach the physician and/or provider, the primary concerns 
related to the impact on the QIO's initial decision and request for 
medical information and not the discussion itself. In fact, QIOs have 
noted that, rather than focus being given to the discussion of a QIO's 
findings, the ``discussion'' instead frequently becomes an additional 
period of time during which the provider or practitioner attempts to 
convey additional medical information that was not provided when the 
request was first made. In shortening the timeframe and restricting the 
submission of additional medical information, we intend that more focus 
be given to the discussion with emphasis on improving the quality of 
care provided. Moreover, many QIOs already conduct the opportunity for 
discussion based solely on oral communications with the providers and/
or practitioners, and we see no need to restrict the process to written 
exchanges of information in light of the QIOs' historical experience in 
effectively completing the discussions orally. At the time of the 
discussion, the QIO has made its interim initial determination, with 
the specific problematic care and pertinent standard of care being 
identified. Thus, the discussions can be narrowly focused to the QIO's 
findings. As such, in considering the public comments provided 
regarding the opportunity for discussion, we have determined that the 
7-day time period is an appropriate period of time to complete this 
step. However, we recognized that the offer of the opportunity to 
discuss the QIO's interim initial determination findings can be the 
first time the provider and/or practitioner is made aware that a 
complaint has been filed. Therefore, we have modified the regulations 
at Sec.  476.130(b) to add new language at paragraph (2) that when 
requesting medical information in response to a complaint, the QIO must 
advise that the information is being requested as the result of a 
complaint and convey to the provider and/or practitioner that they will 
be given the right to discuss the QIO's interim initial determination. 
The QIO also must request, at that time, a contact name to ensure the 
opportunity for discussion can be completed in a timely fashion.
    We are not persuaded that an opportunity to submit additional

[[Page 68521]]

medical information is necessary as part of the opportunity for a 
discussion. While we appreciate the fact that the ability to submit 
additional medical information could facilitate the resolution of 
concerns and avoid the submission of reconsideration requests, we 
believe that there is sufficient time to ensure QIOs receive the 
correct medical information to resolve the complaint correctly the 
first time such that the discussion does not routinely result in the 
QIO learning that its review was completed without all the medical 
information. Making providers and practitioners aware that the initial 
request for medical information is the result of a beneficiary 
complaint will facilitate the QIOs' receipt of thorough and complete 
medical information. This will also ensure that the discussions are 
focused more on ways to improve the quality of care rather than the 
continued pursuit of obtaining all pertinent medical records.
    After consideration of the public comments we received, we are 
adopting our proposals regarding the beneficiary complaint review 
process, except for those modifications to the proposed timeframes 
related to the issuance of the interim initial determination, the 
issuance of the final initial determination, the time period provided 
for requesting a reconsideration, the time given to QIOs for issuing 
the reconsideration decision, the new notification requirement for 
medical information requests in response to beneficiary complaints, and 
the change requiring that written notice of the final initial 
determination be forwarded in all situations.
2. Completion of General Quality of Care Reviews
    As we noted in the proposed rule, although the QIO's responsibility 
for completing quality of care reviews is already set forth in the QIO 
program regulations at existing Sec.  476.71(a)(2), the procedures that 
QIOs use in completing these reviews are not. As we previously noted, 
many process improvements were incorporated into the new manual 
instructions mentioned previously (Transmittal 17, April 6, 2012, CMS 
Manual System, Pub. 100-10 Medicare Quality Improvement Organizations, 
Chapter 5, Quality of Care Review) (available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R17QIO.pdf). 
These new instructions were effective May 7, 2012. However, we believe 
that it was also necessary to propose these regulations to attain 
additional improvements and to ensure transparency of the QIO program 
operations.
    First, in the CY 2013 OPPS/ASC proposed rule (77 FR 45202), under 
new Sec.  476.160(a)(1), we proposed to specify those circumstances in 
which a QIO may conduct a general quality of care review. These 
circumstances would include those situations where a potential quality 
of care issue is referred to the QIO by another source, such as by 
another CMS contractor, an individual submitting a request anonymously, 
or another Federal or State entity. In addition, we recognize that more 
frequently the QIOs are working to use the substantial data available 
to them to identify potential areas where improvements in the quality 
of health care could be attained, and we believe these instances should 
be accounted for as we move forward. We also are aware that QIOs 
frequently identify potential quality of care issues when conducting 
other case review activities, including medical necessity reviews, 
expedited discharge appeals, among others; therefore, we have included 
this as an instance where a general quality of care review can be 
initiated.
    Under proposed new Sec.  476.160(a)(2), we proposed to specify that 
the QIO's review will focus on all concerns raised by the source of a 
referral or report and/or identified by the QIO. While the episode of 
care should still be considered, it may be less significant for these 
reviews than those in response to a complaint submitted by a 
beneficiary, because the main goal of complaint reviews is to address a 
beneficiary's particular experiences with receiving certain services at 
a particular time. However, we again proposed under proposed Sec.  
476.160(a)(3) that the QIO will use evidence-based standards of care to 
the maximum extent practicable in completing these reviews, and that 
the QIO's determination regarding the standard used in completing the 
review is not subject to appeal.
    Under proposed new Sec.  476.160(b), we proposed to specify the 
responsibility of providers and practitioners to supply requested 
medical information. This language is identical to the language in 
proposed new Sec.  476.130(b) applicable to written beneficiary 
complaints, including the proposed 10-calendar day timeframe for 
practitioners and providers to respond to requests for medical 
information and the QIO's right to request even earlier receipt when 
the QIO preliminarily determines that a concern may be serious enough 
to qualify as a gross and flagrant or substantial quality of care 
concern. Although the decreased timeframe is not related to the goal of 
providing beneficiaries with more timely resolution of their complaints 
(because beneficiaries will not be getting results of these reviews), 
we still believe there is ample justification to warrant the reduced 
timeframe. Providers and practitioners will benefit from the faster 
resolution of these reviews and the increased focus on identifying and 
resolving impediments to improved health care (particularly in cases 
involving potential serious concerns). These improvements will 
ultimately benefit patients. Additionally, as with written beneficiary 
complaints, the timeframes are comparable to models typically used by 
vendors. We also considered that, as with written beneficiary 
complaints, the QIOs currently use shorter timeframes where the 
beneficiaries impacted by the general quality of care review are still 
receiving care (concurrent review), compared to those situations where 
a beneficiary has already been discharged (retrospective review). 
Again, while we did not propose the continued use of the concurrent and 
retrospective designations, we recognize that there are circumstances, 
even with general quality of care reviews, where even shorter 
timeframes may be warranted.
    As mentioned previously, in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53664 through 53665), we finalized proposed changes to Sec.  
476.78 to add references to ``practitioners'' in parts of this section, 
which previously referred only to ``providers,'' in order to equalize 
the 30-day and 21-day timeframes for submitting records. We also made 
changes to Sec.  476.90 to equalize the ramifications for not 
submitting records on time because we see no reason to differentiate 
between a provider's and a practitioner's records. While these changes 
in the FY 2013 IPPS/LTCH PPS final rule had not been finalized when we 
issued the CY 2013 OPPS/ASC proposed rule, in the CY 2013 OPPS/ASC 
proposed rule, we proposed to modify the current general 30-day and 21-
day timeframes in Sec.  476.78(b) to reflect the new timeframes in 
Sec. Sec.  476.130(b) and 476.160(b), which apply only to records 
submitted for purposes of beneficiary complaint and general quality 
reviews. We also requested public comment on whether changes similar to 
those we proposed for beneficiary complaints and general quality of 
care reviews, including shortening of the 30-day and 21-day timeframes, 
should be incorporated more broadly into Sec.  476.78(b) for requests 
for medical information in general, for any kind of QIO reviews,

[[Page 68522]]

including nonquality-related reviews. We proposed to apply a shorter 
timeframe for all of a QIO's requests for records, without limiting 
this application to beneficiary complaints or general quality reviews 
in just one instance; where secure transmissions of electronic versions 
of medical information are available, we proposed a shorter timeframe. 
Our proposal regarding secure transmissions of electronic versions of 
medical information is discussed more fully later in this section.
    We also proposed new Sec.  476.160(c), which would specify that the 
QIO peer reviewer will render the initial determination within 7 
calendar days of the receipt of all medical information; this paragraph 
is substantially different from the proposed beneficiary complaint 
review procedures in proposed new Sec.  476.130 in two areas. First, 
beneficiaries would not be provided any information regarding these 
reviews. Although we recognize that, at times, potential quality 
concerns a QIO identifies could impact a specific beneficiary, we 
believe that this type of review does not warrant any communication 
directly to the beneficiary. In fact, we believe that giving feedback 
of potentially poor care to an unknowing beneficiary could cause more 
anxiety than is warranted by the circumstances, and that is not our 
goal. We also recognize that, in many situations, the reviews could 
relate to or involve numerous beneficiaries. However, those 
beneficiaries may only be a sample of the beneficiaries potentially 
impacted. This is particularly true in those circumstances where the 
QIO is reviewing system-related aspects of care, and it will be 
incumbent upon the QIO to determine what medical information--and by 
extension the sample of beneficiaries receiving care--to be analyzed in 
completing these reviews.
    Second, we proposed that practitioners and providers not be given 
an opportunity to discuss the QIO's initial determination before it 
becomes final. We believe that giving such an opportunity is not 
necessary, particularly because these discussions frequently become, in 
effect, an entirely new review by the QIO and not merely a discussion, 
and because we already proposed at proposed new Sec.  476.170(a) that 
the practitioner and/or provider be given the right to request a 
reconsideration of the QIO's initial determination. As with beneficiary 
complaint reviews, we proposed that this right not be available until 
after July 31, 2014, to give us time to fully establish the process 
requirements and ensure that this right is meaningful for providers and 
practitioners, although they continue to have the right to request a 
re-review.
    In addition, under proposed new Sec.  476.170(a)(1) through (a)(3), 
we proposed requirements similar to those in Sec.  476.140 regarding 
the timeframe for submitting a request for a reconsideration (by noon 
of the calendar day following initial notification), the obligation of 
a practitioner and/or provider to be available to answer questions or 
supply information, as well as the QIO's obligation to offer the 
provider the opportunity to provide information as part of the 
reconsideration request. We also proposed provisions under proposed new 
Sec.  476.170(b) concerning the QIO's issuance of its final decision. 
This includes the requirement that the QIO's decision be issued within 
72 hours after receipt of the request for a reconsideration, or, if 
later, 72 hours after receiving any medical information or other 
records needed for such a reconsideration, the specific content of the 
final decision, and the right of the QIO to provide information to the 
provider or practitioner regarding opportunities for improving care 
given to beneficiaries based on the specific findings of its review. 
The information QIOs provide regarding potential improvements could 
include specific opportunities related to the practitioner's or 
provider's delivery of care and/or even broader improvements focusing 
on the community served by the practitioners and/or providers.
    Comment: Commenters conveyed the same concerns regarding several 
aspects of general quality of care reviews as were raised with 
beneficiary complaint reviews, including the authority to establish the 
standards of care and lack of an appeal mechanism for these standards, 
shorter timeframes for medical information requests, decreased 
timeframes for various steps, including the timeframe for rendering the 
initial determination, the time given to submit reconsideration 
requests, and the timeframe given to QIOs to render reconsideration 
decisions.
    Response: For the same reasons we discussed regarding beneficiary 
complaint reviews, we are not making any changes to the proposed 
regulations regarding the QIOs' authority to establish standards of 
care, but we are modifying several key timeframes as discussed below. 
As previously mentioned, we are extending the time period for 
responding to medical record requests from 10 calendar days to 14 
calendar days for all review types, including general quality of care 
reviews. We are extending the period of time given to the QIO peer 
reviewer in rendering the initial determination from 7 calendar days to 
10 calendar days, and we believe this additional time is warranted to 
ensure the peer reviewer has adequate time to render a thorough 
decision. In addition, as with reconsideration requests submitted in 
response to beneficiary complaints, we are increasing the time to file 
a reconsideration request from noon of the calendar day following the 
initial notification to 3 calendar days. We also are increasing the 
time given to a QIO to complete the reconsideration decision from 72 
hours to 5 calendar days. Moreover, we are modifying Sec.  476.160(c) 
to make clear that the initial determination must be issued in writing 
and also are adding a corresponding change to Sec.  476.170(a) denoting 
that a reconsideration request be received within 3 calendar days of 
the receipt of the written determination.
    Comment: Some commenters expressed support for the QIOs' authority 
to pursue quality of care concerns when a beneficiary decides not to 
file a complaint. However, some commenters noted that using the 
``imminent danger'' criterion embedded within the definition of ``gross 
and flagrant'' violations was too limiting and QIOs should have more 
authority to pursue these issues. One commenter questioned why CMS was 
creating this ``new authority''--and a second oversight body--when 
States already have oversight over hospital quality. This commenter 
also suggested that the QIOs' efforts are duplicative and thus the 
overlap of State efforts is problematic.
    Response: We appreciate the commenters' support and agree that 
having QIOs pursue certain quality of care issues, even when a 
beneficiary chooses not to file a complaint, can be helpful in 
identifying improvements to the quality of care. However, we believe 
that some limits should be placed on the type or severity of concerns 
that QIOs should pursue in order to maximize the use of QIO resources. 
Thus, we are maintaining the limit on the QIOs' authority to pursue 
these as conveyed in the proposed regulation.
    With regard to the concern that we are creating a ``new 
authority,'' this is inaccurate. QIOs have actually had and used this 
authority for more than 30 years, although this is the first time the 
process requirements have been detailed in regulations. We are 
obligated to ensure the effective implementation of the QIO program in 
light of the statutory authority granted the QIOs, regardless of 
whether certain State programs have

[[Page 68523]]

been established to address similar issues.
    Comment: Several commenters expressed concern regarding the 
proposed removal of the right to request an opportunity for discussion. 
The commenters expressed concern that the QIO could make decisions on 
these concerns without an opportunity for a counter argument from the 
involved practitioner and/or provider. Several commenters suggested 
that the change would merely result in the receipt of more 
reconsideration requests being filed based on initial determinations 
being made without input from the involved practitioner and/or provider 
or the ability to obtain additional medical information. Other 
commenters suggested that providers and practitioners should have the 
same rights to due process here as with beneficiary complaint reviews 
and that the discussion can often clarify the concerns so that the 
provider or practitioner is better able to respond. Some commenters 
suggested that the opportunity for discussion was necessary because, in 
comparison to beneficiary complaints, these concerns are often the most 
serious cases because they include issues identified by the QIO through 
evaluation of other QIO review activities or from referrals from other 
agencies.
    Response: Although we appreciate the concerns raised regarding the 
removal of this step, we believe that it is not necessary for purposes 
of general quality of care reviews because, as many commenters 
acknowledged, the discussion has become little more than an opportunity 
to convey additional medical information to the QIO with no actual 
discussion occurring about ways to improve the quality of care. We 
believe that there are modifications that can be made to the manner in 
which medical information is initially requested by the QIO to ensure 
that all medical information is obtained prior to the QIO's review, and 
we will work to ensure that these modifications are incorporated into 
the QIO's processing requirements. This will then eliminate what many 
commenters suggested was the primary purpose of the opportunity for 
discussion.
    Moreover, there is a statutory distinction between situations in 
which discussions have been specifically required and those in which 
they are not. In those circumstances where Congress believed that such 
an opportunity to discuss a particular type of issue was warranted, the 
right was specifically added to the statute, as in section 
1154(a)(3)(B)(ii) of the Act regarding those situations where an item 
or service furnished or to be furnished is disapproved and section 
1154(a)(14) of the Act regarding written beneficiary complaints.
    In terms of the commenters' other concerns--that providers and 
practitioners will not have an opportunity to make counter arguments, 
that decisions would be made without input from the involved 
practitioners or providers, that providers and practitioners will not 
have the same rights to due process as in beneficiary complaint 
reviews, and that providers' and practitioners' concerns in general 
quality reviews often involve the most serious cases--we would note 
that these parties continue to have the opportunity to make counter 
arguments and give input on the QIO's decisions by requesting a re-
review until the reconsideration right becomes available. A provider's 
or practitioner's right to request a re-review is, in fact, a due 
process right that beneficiaries are not given. Providers and 
practitioners also will have an opportunity to present their point of 
view in the context of a reconsideration when that right is 
implemented, and beneficiaries will be afforded the same right.
    After consideration of the public comments we received, we are 
adopting as final our proposals regarding general quality of care 
reviews, except that we have extended the timeframes for submitting 
medical records to 14 calendar days, rendering the initial 
determination to 10 calendar days, filing a reconsideration request to 
3 calendar days, and issuing the reconsideration decision to 5 calendar 
days.

C. Use of Confidential Information That Explicitly or Implicitly 
Identifies Patients

    The QIO regulations at Sec.  480.101(b) define any information that 
explicitly or implicitly identifies an individual patient as 
confidential information. Although provisions are included in 42 CFR 
part 480 governing a practitioner's and/or provider's right to allow a 
QIO to use or disclose confidential information about the named 
practitioner or provider (Sec. Sec.  480.105(b), 480.133(a)(2)(iii), 
and 480.140(d)), a similar right is not conveyed for beneficiaries. 
Thus, QIOs are prohibited from obtaining a beneficiary's authorization 
to use or disclose the beneficiary's confidential information, even in 
situations where a use or disclosure could be helpful to the 
beneficiary and his or her health care or even where the beneficiary 
specifically asks the QIO to disclose the information.
    One of the key challenges for the QIOs is identifying improvements 
in health care delivery systems. In fact, the ``patient-centeredness'' 
aim of the QIO's current scope of work requires more patient 
involvement, and the goal of many patient and family engagement efforts 
is to incorporate a ``real-world person's'' experiences to demonstrate 
the compelling and urgent need for healthcare delivery reform. 
Additionally, beneficiaries have asked to participate in the QIO's work 
in a meaningful way. Unfortunately, we are often unable to accommodate 
these requests in light of the current regulatory restriction. We 
believe that this restriction, which was developed may years ago, is 
outdated, and that beneficiaries should be given the right to make 
choices regarding the use and disclosure of their confidential 
information.
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45204), we 
proposed new Sec.  480.145 that will govern a beneficiary's right to 
authorize a QIO's use or disclosure of the beneficiary's confidential 
information. Under proposed Sec.  480.145(a), we proposed that, except 
as otherwise authorized by the QIO confidentiality regulations, a QIO 
may not use or disclose a beneficiary's confidential information 
without an authorization from the beneficiary and that the QIO's use or 
disclosure must be consistent with the authorization. Under proposed 
Sec.  480.145(b)(1) through (b)(6), we listed those aspects of an 
authorization necessary to make the authorization valid. This includes 
the requirements that a specific and meaningful description of the 
confidential information be included, and that the authorization also 
include the name(s) of the QIO(s) and QIO point(s) of contact making 
the request to use or disclose the information, the name or other 
specific identification of the person, or class of persons to whom the 
QIO may allow the requested use or make the requested disclosure, a 
description of the purpose(s) of the use or disclosure, the date or 
event upon which the authorization will expire, and the signature and 
date of the beneficiary authorizing the use and/or disclosure of the 
information. We also proposed under Sec.  480.145(c)(1) and (c)(2) that 
the authorization must contain a statement that the beneficiary 
maintains the right to revoke his or her authorization in writing and 
that the QIO must specify any exceptions to the right to revoke, as 
well as the process a beneficiary must use to revoke the authorization. 
In addition, under Sec.  480.145(c)(3), we

[[Page 68524]]

proposed the requirement that the QIO convey to the beneficiary its 
inability to condition the review or other activities it is responsible 
for (such as beneficiary complaint reviews, medical necessity of a 
beneficiary's services, or discharge appeals) on whether or not the 
beneficiary provides authorization. We also proposed under Sec.  
480.145(c)(4) to make clear the consequences of authorizing the use or 
disclosure of information, and the fact that the QIO may be unable to 
protect the information from redisclosure. Under Sec.  480.145(d), we 
proposed that an authorization must be written in plain language, and 
under Sec.  480.145(e) that a QIO must provide the beneficiary with a 
copy of the signed authorization. Lastly, although we make reference to 
a beneficiary's right to revoke authorization under proposed Sec.  
480.145(c)(1), in paragraph (f) we proposed a specific provision that 
will make clear that a beneficiary may revoke, in writing, an 
authorization at any time, except when the QIO has taken action in 
reliance upon the authorization.
    We believe that these proposed changes appropriately relax some of 
the historical restraints on the QIO's use of a beneficiary's 
confidential information, enable QIOs to better meet the needs of 
Medicare beneficiaries, and give beneficiaries the opportunity to 
participate in efforts to improve the quality of their health care.
    Comment: Several commenters supported this new authority. One 
commenter requested that the regulations should also be changed to 
allow for the use of video as well as social media, while another 
commenter requested that whatever authorization form CMS develops 
should be in plain, understandable language and as short as possible.
    Response: We appreciate the support for this new regulatory 
authority. We believe that the regulatory provisions as proposed 
already give the flexibility to use video and social media. The 
proposed regulations specify the beneficiary's right to authorize the 
use of his or her confidential information and the mechanism through 
which QIO's can obtain this authorization. However, the provisions do 
not, in any way, restrict the use of the confidential information to 
one specific mechanism, such as print advertisements. In terms of the 
development of an authorization form, at this time we do not intend to 
develop such a form. Each QIO will be responsible for developing an 
authorization form that meets the requirements of the new regulatory 
provisions.
    After consideration of the public comments we received, we are 
adopting, without modification, our proposals regarding the use of 
confidential information that implicitly or explicitly identifies 
patients.

D. Secure Transmissions of Electronic Versions of Medical Information

    When the QIO program regulations were first written in 1985, 
computers, along with digitally or electronically stored information, 
were still in their infancy. Thus, the QIO program regulations were 
written based on the perspective that most information sharing would be 
through the exchange of paper copies of medical records and other 
information. Since that time, we have seen great advances in the 
ability to electronically share data, whether through the use of mass 
storage devices (flash drives), the sending and receipt of electronic 
facsimiles, and even the use of email. At the same time, several laws, 
including HIPAA and the Federal Information Security and Management Act 
(FISMA), have been established to protect sensitive information. 
However, because the QIO program regulations have not undergone 
significant modification since they were originally adopted, the 
regulations do not account for electronic sharing of information and 
the QIOs' work is carried out within the context of exchanging paper 
copies of documents and information. At times, this creates additional 
work and costs because those providers and practitioners who have the 
ability to securely share electronic versions of medical records must 
actually print out the records and pay to have the paper copies mailed 
to the QIOs.
    To address these issues, in the CY 2013 OPPS/ASC proposed rule (77 
FR 45204) we proposed to revise existing Sec.  476.78(b)(2) to add a 
new paragraph (iii) to make clear the QIOs' right to exchange secure 
transmissions of electronic versions of medical information, subject to 
a QIO's ability to support the exchange of the electronic version. We 
believe that this proposal would enable QIOs to receive and send 
medical information in a variety of formats, including through secure 
electronic faxes, and would reduce costs for providers and 
practitioners because they would no longer have to print and mail paper 
copies. In addition, to fully take advantage of the ability to receive 
and send electronic versions of medical information, we believe that a 
reduced timeframe is warranted for those instances where electronic 
versions are to be forwarded in response to requests from a QIO. 
Therefore, we proposed under proposed Sec.  476.78 (b)(2)(iii) to 
require providers and practitioners to deliver electronic versions of 
medical information within 10 calendar days of the request from the 
QIO. As we noted previously, changes to existing Sec.  476.78(b) have 
already been adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53664 through 53665). As discussed earlier in this preamble, we 
proposed in the CY 2013 OPPS/ASC proposed rule additional changes to 
Sec.  476.78 to take into account the different, more expedited 
timeframes we proposed for medical records related to beneficiary 
complaint and general quality of care reviews. In the CY 2013 OPPS/ASC 
proposed rule (77 FR 45204), we also requested public comments on 
whether additional changes should be made to Sec.  476.78(b) to expand 
the different timeframes to cover medical records for all kinds of 
reviews. We also requested public comments on whether any modifications 
should be made to the reimbursement methodologies for paper copies 
described in Sec.  476.78(c). We note that we carried forth in the 
proposed rule the proposed change to the section heading for Sec.  
476.78 that was included in the FY 2013 IPPS/LTCH PPS proposed rule, 
that is, the proposed change from ``Responsibilities of health care 
facilities'' to ``Responsibilities of providers and practitioners'' 
(which has now been finalized).
    Comment: Several commenters supported the proposed regulation that 
would enable QIOs to securely transmit electronic versions of medical 
information. Some commenters noted that the ability to transmit 
information electronically is a long overdue process change and the 
QIOs have been ``severely hampered'' by not being allowed to 
incorporate more electronic exchanges of information into their 
activities. These commenters also urged CMS to consider how QIOs can 
more effectively accept electronic records. Other commenters, while 
supportive of the proposal to allow QIOs to securely transmit 
electronic versions of medical information, cautioned CMS that QIOs 
will need instructions, equipment and electronic exchange 
infrastructure to be in place before these changes are implemented. 
Some commenters noted that ensuring remote access to CMS information 
systems for QIO staff and access to medical information is necessary to 
achieve the full benefits of this proposed regulation because peer 
reviewers frequently are not located onsite at the QIOs' place of 
business. Some commenters noted that the ability to securely transmit 
electronic versions of information is particularly significant in light 
of the proposed tighter

[[Page 68525]]

timeframes for completing review activities, while other commenters 
expressed concerns surrounding the ability to correctly track the 
differences in timeframes for responding to different types of 
requests. In addition, some commenters suggested that the proposed 
provision could help reduce costs related to the shipping of paper 
copies of medical information from providers and practitioners to the 
QIO, as well as from the QIOs to their physician reviewers and then 
back to the QIOs.
    Response: We appreciate the commenters' support and agree that 
instructions, equipment, and electronic exchange infrastructure must be 
put in place in order to take full advantage of this new flexibility. 
We are currently initiating efforts to allow QIOs to receive electronic 
versions of medical information in multiple ways, as well as exchange 
these electronic versions with staff, including peer reviewers, 
remotely. We agree that this new flexibility can only facilitate 
providers' and practitioners' ability to comply with requests for 
medical information and also anticipate that the opportunity to use 
electronic exchanges will enable QIOs to complete their activities more 
quickly at reduced costs compared to the use of paper copies of medical 
records. Moreover, we appreciate that providers and practitioners 
receive a variety of requests for medical records and that these 
requests are not just from QIOs. Thus, tracking the different 
timeframes can be problematic. As we previously noted, we are adopting 
a uniform 14 calendar day timeframe for responding to requests for 
medical information for all requests, except that QIOs will maintain 
the authority to request medical information more quickly if 
circumstances warrant earlier receipt.
    Comment: Some commenters stated that the amounts of reimbursement 
for photocopies do not adequately cover the cost of what it takes to 
generate the requested records and that the methodology for determining 
reimbursement rates needs to be routinely updated to keep pace with 
inflation.
    Response: We thank the commenters for their input. At this time we 
are continuing to examine ways to possibly accommodate changes in 
reimbursement rates. We plan to consider various factors, such as how 
the new flexibility to securely transmit electronic versions of medical 
information might affect the payments we will be able to make for the 
submission of paper records. We are not making specific changes at this 
time, but will consider the commenters' input as we pursue possible 
changes to these regulations in future rulemaking.
    After consideration of the public comments we received, we are 
adopting, as final, our proposals regarding secure transmissions of 
electronic versions of medical information, except that we are 
extending the timeframe for submission of medical information to 14 
calendar days.

E. Active Staff Privileges

    In our efforts to ensure the QIO program is able to meet the needs 
of Medicare beneficiaries and improve the quality of health care moving 
forward, we have identified an aspect of the QIO program regulations 
that has become increasingly problematic for the QIOs. Under existing 
Sec.  476.98(a)(1), QIOs are required to use an individual with 
``active staff privileges in one or more hospitals'' in making initial 
denial determinations. However, there is an accelerating trend toward 
primary care physicians (family physicians/internists) who provide care 
solely in the outpatient care settings and a corresponding decline in 
the number of family practice physicians who provide any care in 
hospitals. In fact, many of these individuals do not provide any 
inpatient care and either have no hospital privileges or only 
``courtesy'' privileges, which do not meet the definition in existing 
Sec.  476.1 of ``active staff privileges.'' While we believe that the 
continued use of peer reviewers is necessary and vital to the success 
of the QIO program, the need to use physicians with ``active staff 
privileges'' is not. We believe that the proposed removal of this 
requirement would increase the number of peer reviewers available for 
use by the QIOs, which, at times, has become particularly problematic 
for the QIOs. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45204 through 45205), we proposed to remove the definition of ``active 
staff privileges'' under Sec.  476.1 and to remove the phrase referring 
to using individuals ``with active staff privileges in one or more 
hospitals in the QIO area'' in making initial denial determinations 
under Sec.  476.98(a)(1).
    Comment: Several commenters opposed the proposal to remove ``active 
staff privileges'' as a requirement for peer reviewers making an 
initial denial determination and indicated that having active staff 
privileges is necessary because there is a need to ensure peer 
reviewers are cognizant of ``emerging clinical evidence and 
practices,'' particularly because clinical practice can change so 
rapidly. Others commenters noted that CMS should at least require 
active staff privileges in the State where the care was provided, while 
some commenters may have misunderstood the terminology and believed 
that the change would enable QIOs to use physicians who are not 
actively practicing. Some commenters also noted that requiring QIOs to 
use physicians with active staff privileges made assessing the care 
provided by potential reviewers easier because it supplemented the 
information QIOs could glean from State licensure, National 
Practitioner Data Bank, and self-reported information, and that the use 
of physicians with active staff privileges added to the credibility of 
the QIOs' peer review activities in the medical community.
    Several commenters supported the removal of this requirement and 
believed it would allow for the inclusion of more specialized physician 
reviewers, provide more flexibility to QIOs in hiring peer reviewers by 
increasing the pool of eligible reviewers, and more closely mirror the 
current practicing medical environment. In particular, one commenter 
noted that, by removing this language, QIOs would be able to rely more 
on ``setting-based'' expertise (such as a nursing home or clinic), than 
is currently allowed by the more narrow active staff privilege 
requirement. Another commenter supported the change but not the removal 
of the phrase ``in the QIO area'' because of a concern that it could be 
interpreted to mean that a physician from outside the QIO's review area 
could conduct the review.
    Response: We appreciate the comments and agree that having 
physicians with current, relevant knowledge of medical care is 
imperative to the operations of the QIOs and its cadre of physician 
reviewers. However, it appears that some commenters erroneously equated 
the removal of the active staff privileges requirement to the QIOs' use 
of physicians who were not actively practicing medicine. This is 
inaccurate and QIOs are obligated to use physicians who are actively 
practicing. Other commenters believed that physicians with active staff 
privileges would be those with the most current and relevant knowledge 
of medical care that is the subject of the QIO's review. However, we 
are unaware of any studies or research supporting this claim. In 
identifying physicians for use as reviewers, the QIOs would still be 
able to procure the services of actively practicing physicians with 
knowledge of the most current, relevant medical care. We believe that 
the removal of the active staff privileges requirement, however, would 
enable QIOs to better

[[Page 68526]]

match and utilize the expertise of physicians to the actual settings in 
which the care in question is provided. That is because, historically, 
the requirement to use a physician with active staff privileges could 
prevent the use of a physician who practiced in, and was more 
intimately familiar with, the care provided in a particular setting 
(for example, a nursing home setting) if that physician lacked active 
staff privileges in a hospital.
    While it is possible that the removal of this requirement might 
result in a QIO being obligated to take some additional steps in 
evaluating the performance or effectiveness of a potential peer 
reviewer, we see no reason why having QIOs assume these extra steps 
should amount to a significant addition to their workload. We regard 
these steps as an essential part of the process a QIO should follow in 
finding the best match, including by specialty and setting, for any 
particular review activity. Lastly, while we appreciate the concern 
that removal of the language ``in the QIO area'' could cause confusion 
surrounding the QIO's obligation to use a physician within the QIO's 
area, we note that, in fact, this obligation continues to be clearly 
laid out in provisions of the statute, including in section 1154(a)(7) 
of the Act, and in other references within the regulations at 42 CFR 
Part 476. However, in order to minimize any possible confusion, we are 
modifying the proposal to maintain the ``in the QIO area'' language 
within Sec.  476.98(a)(1).
    After consideration of the public comments we received, we are 
adopting as final our proposal to remove the language regarding active 
staff privileges, except that we are maintaining the language ``in the 
QIO area.''

F. Technical Corrections

    In addition to the proposed changes discussed above, in the CY 2013 
OPPS/ASC proposed rule (77 FR 45205), we proposed to make the following 
technical corrections to the QIO regulations:
     In 1989, several sections in 42 CFR part 405 were 
redesignated to 42 CFR part 411 (54 FR 41746), but the cross-references 
to these sections in the QIO regulations was never made. Therefore, we 
proposed to make the following reference changes:
     Changing the reference ``Sec.  405.330(b)'' in 
existing Sec.  476.71(b) to ``Sec.  411.400(b)'';
     Changing the reference ``Sec.  405.332'' in Sec.  
476.74 to ``Sec.  411.402'';
    + Changing the references ``Sec.  405.310(g) or Sec.  405.310(k)'' 
in Sec.  476.86 to ``Sec.  411.15(g) or Sec.  411.15(k)''.
     In 1999, 42 CFR parts 466, 473, and 476 were redesignated 
as 42 CFR parts 476, 478, and 480, respectively (64 FR 66236). 
Therefore, we proposed to make changes to correct several cross-
references to sections in these Parts:
    + Changing the reference ``Sec.  466.73(b)(3)'' in Sec.  476.73 to 
``Sec.  476.78(b)(3)''.
    + Changing the reference ``part 473'' in Sec.  476.78(f) to ``part 
478''.
    + Changing the reference ``part 473'' in Sec.  476.94(c)(3) to 
``part 478''.
    + Changing the reference ``Sec.  473.24'' in Sec. Sec.  480.132 and 
480.133 to ``Sec.  478.24''.
    + Changing the reference ``Sec.  466.98'' in Sec.  478.28 to 
``Sec.  476.98''.
    + Changing the reference to ``Part 478'' in Sec. Sec.  478.15, 
478.16, 478.20, 478.38, 478.42, and 478.48 to ``Part 473''.
    + Changing the reference ``Sec.  473.24'' in Sec.  480.132 to 
``Sec.  478.24''.
    + Changing the references ``Part 466'' and ``Sec.  473.24'' in 
Sec.  480.133(b) to ``Part 476'' and ``Sec.  478.24'', respectively.
     We proposed the deletion of several provisions in Part 476 
regarding risk-basis contracts because risk-basis contracts previously 
under section 1876 of the Act no longer exist. As such, these 
provisions are obsolete and no longer used under the QIO program. 
Specifically, we are deleting the following sentence from Sec.  
476.70(a): ``Section 1154(a)(4) of the Act requires QIOs, or, in 
certain circumstances, non-QIO entities, to perform quality of care 
reviews of services furnished under risk-basis contracts by health 
maintenance organizations (HMOs) and competitive medical plans (CMPs) 
that are covered under subpart C of part 417 of this chapter.'' We 
proposed to delete the following sentence from Sec.  476.70(b): 
``Section 466.72 of this part also applies, for purposes of quality of 
care review under section 1154(a)(4) of the Act, to non-QIO entities 
that enter into contracts to perform reviews of services furnished 
under risk basis contracts by HMOs and CMPs under subpart C of part 417 
of this chapter.'' We proposed to delete Sec.  476.72--Review of the 
quality of care of risk-basis health maintenance organizations and 
competitive medical plans, in its entirety for the same reason.
     In Sec.  476.70(a), we proposed to change the word 
``basis'' to ``bases'' to match the title of this section and to 
correctly denote that there is more than one statutory basis described 
in paragraph (a).
     We proposed technical corrections to sections in Part 476 
and 480 to accurately reflect the transition to Medicare administrative 
contractors (MACs) to process Medicare claims and conduct other 
actions. This transition is ongoing, and fiscal intermediaries and 
carriers still exist. However, we believe that the presence of MACs 
should be accounted for to accurately reflect current contractual 
relationships. As such, we proposed to incorporate references to 
``Medicare administrator contractors'' in the following sections, where 
appropriate:
    + Sec.  476.1, in the definition of ``Preadmission Certification'';
    + Sec.  476.71(c)(1);
    + Sec.  476.73(a);
    + Sec.  476.74(b) and (c)(1);
    + Sec.  476.80 section heading, and Sec. Sec.  476.80(a), (a)(1), 
(a)(2), (b)(1), (c), (c)(3)(ii), (d)(1), (d)(2), (e) paragraph heading, 
(e)(1), and (e)(2);
    + Sec.  476.86(a)(2), (c) introductory text, (c)(1), and (d);
    + Sec.  476.94(a)(1)(iv) and (d);
    + Sec.  476.104(a); and
    + Sec.  480.105(a).
     We proposed a technical correction to Sec.  480.139 by 
adding a paragraph ``(a)'' in front of ``(1)'' to the beginning of the 
text of the section to correct a recent inadvertent coding error which 
had removed the ``(a)''.
     We proposed to correct the statutory citation in Sec.  
480.132(b) by changing ``section 1154(a)(3)'' to ``section 
1154(a)(2)''.
    Comment: Commenters agreed with the proposed technical changes.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
adopting, without modification, our proposals regarding the technical 
changes.

XIX. Files Available to the Public via the Internet

    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. To view the Addenda of this final rule with comment period 
pertaining to the CY 2013 payments under the OPPS, go to the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html 
and select ``1589-FC'' from the list of regulations. All Addenda for 
this final rule with comment period are contained in the zipped folder 
entitled ``2013 OPPS 1589-FC Addenda'' at the bottom of the page.
    To view the Addenda of this final rule with comment period 
pertaining to the CY 2013 payments under the ASC payment system, go to 
the CMS Web site

[[Page 68527]]

at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html and select ``1589-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.

XX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-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 estimated 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 2013 OPPS/ASC proposed rule (77 FR 45206), we solicited 
public comments on each of the issues outlined above as discussed below 
that contained information collection requirements.

B. Requirements in Regulation Text

1. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 
Hospitals and CAHs (Sec.  495.8)
    Under the definition of ``meaningful EHR user'' in 42 CFR 495.4, we 
require eligible hospitals and CAHs participating in the Medicare EHR 
Incentive Program (which would include those participating in the 2013 
Medicare EHR Incentive Program Electronic Reporting Pilot) to 
successfully report the hospital clinical quality measures (CQMs) 
selected by CMS to CMS in the form and manner specified by CMS. 
Although eligible hospitals and CAHs may continue to report CQM results 
as calculated by certified EHR technology by attestation for 2013, they 
also may choose to participate in the 2013 Medicare EHR Incentive 
Program Electronic Reporting Pilot for Hospitals and CAHs. Eligible 
hospitals and CAHs participating in the 2013 Medicare EHR Incentive 
Program Electronic Reporting Pilot must submit CQM data on all 15 CQMs 
(listed in Table 10 of the Stage 1 final rule (75 FR 44418 through 
44420) for the Medicare and Medicaid EHR Incentive Program) to CMS, via 
a secure transmission based on data obtained from the eligible hospital 
or CAH's certified EHR technology.
    Eligible hospitals and CAHs are required to report on core and menu 
set criteria for Stage 1 of meaningful use. We estimated that it would 
take an eligible hospital or CAH 0.5 hour to submit the required CQM 
information via the proposed 2013 Medicare EHR Incentive Program 
Electronic Reporting Pilot. Therefore, the estimated total burden for 
all 4,922 Medicare eligible hospitals and CAHs participating in the 
Pilot (3,620 acute care hospitals and 1,302 CAHs) is 2,461 hours.
    We believe that an eligible hospital or CAH might assign a computer 
and information systems manager to submit the CQM information on its 
behalf. We estimated the cost burden for an eligible hospital or CAH to 
submit the CQMs and hospital quality requirements is $30.21 (0.5 hour x 
$60.41 (mean hourly rate for a computer and information systems manager 
based on the 2011 Bureau of Labor Statistics)) and the total estimated 
annual cost burden for all eligible hospitals and CAHs to submit the 
required CQMs is $148,694 ($30.21 x 4,922 hospitals and CAHs). We 
solicited public comments on the estimated numbers of eligible 
hospitals and CAHs that may register for the Medicare EHR Incentive 
Program Electronic Reporting Pilot that would submit the CQM 
information via the proposed Electronic Reporting Pilot in 2013. We 
also invited 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 public comments on these information 
collection requirements. Therefore, we are finalizing the proposed 
burden estimates.

C. Associated Information Collections Not Specified in Regulatory Text

    In the CY 2013 OPPS/ASC proposed rule, we made reference to 
proposed associated information collection requirements that are not 
discussed in the regulation text contained in the proposed rule. The 
following is a discussion of those requirements.
1. Hospital OQR Program
    As previously stated in section XIV. of the CY 2012 OPPS/ASC 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) and 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74549 
through 74554) for detailed discussions of the 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 had to 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. 
This approval expires on 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 laboratory 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

[[Page 68528]]

for the CY 2012 payment determination. We also adopted 1 structural HIT 
measure assessing the ability to track clinical results between visits, 
6 new chart-abstracted measures on the topics of HOPD care transitions 
and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we 
proposed for the CY 2012 payment determination but which we decided to 
finalize for the CY 2013 payment determination. These actions bring the 
total number of quality measures for the CY 2013 payment determination 
for which hospitals must submit data to 23 measures.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 
through 72094), for the CY 2014 payment determination, we retained the 
CY 2013 payment determination measures, but did not adopt any 
additional measures. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72112 through 72113), we discussed the burden associated 
with these information collection requirements.
b. Hospital OQR Program Measures for the CY 2014 Payment Determination
    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 the CY 
2012 OPPS/ASC final rule with comment period, we added, for the CY 2014 
payment determination, 1 chart-abstracted measure and 2 structural 
measures (including hospital outpatient volume data for selected 
outpatient surgical procedures). However, as discussed in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74456), we did not 
implement public reporting of the claims-based OP: 15 Use of Brain 
Computed Tomography (CT) in the ED for Atraumatic Headache. Because 
this is a claims-based measure, hospitals continue to submit relevant 
claims to be paid, but these administrative data and any measure 
calculations from them are not being made publicly available as 
specified for required hospital outpatient hospital quality of care 
measure data under section 1833(t)(17)(E) of the Act.
    In addition, in section XV.C. of the proposed rule, we stated that 
we were confirming that, using a subregulatory process, we have 
suspended indefinitely data collection for one measure, OP-19: 
Transition Record with Specified Elements Received by Discharged 
Patients, and have deferred data collection for another measure, OP-24: 
Cardiac Rehabilitation Patient Referral From an Outpatient Setting. (We 
note that, in this final rule with comment period, we are confirming 
the removal of the measure, 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, and we will cease data collection in the system for this 
measure effective January 1, 2013.) Thus, for the CY 2014 and 
subsequent years payment determinations, as proposed, we are finalizing 
in this final rule with comment period a total of 25 measures (rather 
than 26 measures as we indicated in the proposed rule (77 FR 45207), 
with hospitals reporting data on only 22 of them (rather than 23 
measures as we indicated in the proposed rule (77 FR 45207)). The 
required measure set for the CY 2014 and subsequent years' payment 
determinations includes the measures shown below; all measures were 
previously adopted.
BILLING CODE 4120-01-P

[[Page 68529]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.089


[[Page 68530]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.090

BILLING CODE 4120-01-C
    We will calculate the six claims-based measures (rather than seven 
claims-based measures as indicated in the proposed rule (77 FR 45207) 
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 data for 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 is the time and effort associated with completing 
the notice of participation form, and collecting and submitting the 
data on the required measures. For the chart-abstracted measures 
(including those measures for which data are 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 estimated that 
there will be approximately 3,200 respondents per year. For hospitals 
to collect and submit the information on the chart-abstracted measures 
(excluding the chart-abstracted OP-22 measure), we estimated it will 
take 35 minutes per sampled case. Based upon the data submitted for the 
CY 2011 and CY 2012 payment determinations, we estimated there will be 
a total of 1,628,800 cases per year, approximately 509 cases per year 
per respondent. The estimated annual burden associated with the 
submission requirements for these chart-abstracted measures is 949,590 
hours (1,628,800 cases per year x 0.583 hours per case).
    For the chart-abstracted OP-22 measure plus the 3 structural 
measures (excluding the all-patient volume for selected surgical 
procedures measure), we estimated 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 2,138 
hours (3,200 hospitals x 0.167 hours per hospital x 4 measures per 
hospital). For the proposed rule (77 FR 45208), we inadvertently stated 
the burden to be 1,603 hours because we excluded the OP-22 measure in 
our burden computation.
    For the collection of all-patient volume for selected outpatient 
surgical procedures (OP-26: Hospital Outpatient Volume Data on 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 requirement is the reporting of the data using the Web-based tool. 
We estimated that each participating hospital will spend 10 minutes per 
year to collect and submit the data, making the estimated annual burden 
associated with this measure 534 hours (3,200 hospitals x 0.167 hours 
per measure x 1 all-patient volume measure per hospital). We note that 
we inadvertently indicated that the total of this computation was 53 
hours in the proposed rule (77 FR 45208).
    We did not receive any public comments on these information 
collection requirements and, therefore, are finalizing our proposed 
burden

[[Page 68531]]

estimates with the modifications we have described above.
c. Hospital OQR Program Measures for CY 2015
    In the CY 2012 OPPS/ASC final rule with comment period, for the CY 
2015 payment determination, we retained the requirement that hospitals 
must complete and submit a notice of participation form in order to 
participate in the Hospital OQR Program. For the CY 2015 payment 
determination, we also retained the measures used for CY 2014 payment 
determination (including the measures adopted in the CY 2012 final rule 
with comment period) and did not add any additional measures.
    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 measures, and collecting and submitting all-patient volume data for 
selected outpatient surgical procedures. For the chart-abstracted 
measures, we estimated 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 are submitted 
directly to CMS (excluding the chart-abstracted OP-22 measure), we 
estimated it will take 35 minutes per sampled case. Based upon the data 
submitted for the CY 2011 and CY 2012 payment determinations, we 
estimated there will be a total of 1,628,800 cases per year, 
approximately 509 cases per year per respondent. The estimated annual 
burden associated with the aforementioned submission requirements for 
the chart-abstracted data is 949,590 hours (1,628,800 cases per year x 
0.583 hours per case).
    For the chart-abstracted OP-22 measure plus the 3 structural 
measures (excluding the all-patient volume for selected surgical 
procedures measure), we estimated 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 2,138 hours 
(3,200 hospitals x 0.167 hours per hospital x 4 measures per hospital). 
In the proposed rule (77 FR 45208), we inadvertently excluded the OP-22 
measure in our burden computation.
    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 estimated that each participating hospital will spend 10 minutes per 
year to collect and submit the data, making the estimated annual burden 
associated with this measure 534 hours (3,200 hospitals x 0.167 hours 
per hospital). We note that we inadvertently indicated that the total 
of this computation was 53 hours in the proposed rule (77 FR 45208).
    We invited public comment on the burden associated with the 
information collection requirements.
    We did not receive any public comments on these information 
collection requirements and, therefore, are finalizing our proposed 
burden estimates with the modifications we have described above.
3. Hospital OQR Program Validation Requirements for CY 2014
    In the CY 2013 OPPS/ASC proposed rule, we proposed to retain the 
requirements related to data validation for CY 2014 that we adopted in 
the CY 2011 OPPS/ASC final rule with comment period (76 FR 74486) for 
CY 2013, and that we revised in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74553). While these requirements are subject to 
the PRA, they are currently approved under OCN: 0938-1109. This 
approval expires on October 31, 2013.
    Similar to our approach for the CY 2013 Hospital OQR Program 
payment determination (76 FR 74484 through 74485), we proposed to 
continue to validate data from randomly selected hospitals for the CY 
2014 payment determination, selecting 450 hospitals. 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 75 FR 72106, respectively), we discussed 
additional data validation conditions under consideration for CY 2013 
and subsequent years. In the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74485 and 76 FR 74553), we finalized a policy under which 
we will select for validation up to 50 additional hospitals based upon 
targeting criteria.
    For each selected hospital (random or targeted), generally we will 
randomly select up to 48 patient encounters 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 2014 requirement is the time and 
effort necessary to submit validation data to a CMS contractor. We 
estimated 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 estimated each 
hospital must submit up to 48 cases for the affected year for review. 
All selected hospitals must comply with these requirements each 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 2014 is approximately 6,000 hours.
    We proposed to maintain 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 did not receive any public comments on these information 
collection requirements. Therefore, we are finalizing our burden 
estimates as proposed.
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 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. In the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74487 and 74488 and 76 FR 74553 and 74554), we specified that we 
were continuing this process for the CY 2013 and subsequent years' 
payment determinations.
    In this CY 2013 OPPS/ASC final rule with comment period, we are 
making one change to this process--to modify a requirement that the CEO 
must sign the

[[Page 68532]]

reconsideration request to allow the CEO or other designated personnel 
to sign the required form.
    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, or 
appeals or all of these actions.
    We did not receive any public comments on our proposed burden 
statement and therefore are finalizing it with modification in this 
final rule with comment period.
5. ASCQR Program Requirements
a. Claims-Based Outcome Measures for the CY 2014 Payment Determination
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 
through 74504), we adopted five claims-based measures (four outcome and 
one process) to be used for the CY 2014 payment determination. We will 
collect quality measure data for the five claims-based measures by 
using QDCs placed on submitted claims beginning with services furnished 
from October 1, 2012 through December 31, 2012. The five outcome 
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)
    The first four measures listed above are outcome measures and the 
fifth measure is a process measure.
    Approximately 71 percent of ASCs participate in Medical Event 
Reporting, which includes reporting on the first four 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 estimated 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, 
or about 11.8 events per year).
    For the remaining claims-based measure, Prophylactic IV Antibiotic 
Timing, we estimated the burden associated with submitting QDCs to be 
nominal, as few procedures performed by ASCs will require prophylactic 
antibiotic administration.
b. Claims-Based Process, Structural, and Volume Measures for the CY 
2015 and CY 2016 Payment Determinations
    For the CY 2015 payment determination, we finalized the retention 
of the five measures we adopted for the CY 2014 payment determination, 
and we added two structural measures: Safe Surgery Checklist Use and 
ASC Facility Volume Data on Selected ASC Surgical Procedures (76 FR 
74504 through 74509). For the CY 2015 payment determination, we 
proposed (and are finalizing in this final rule with comment period) 
that the data collection period for claims-based measures would be for 
services furnished from January 1, 2013, through December 31, 2013, 
that are paid by the administrative contractor by April 30, 2014.
    For the CY 2016 payment determination, we finalized the retention 
of the seven measures for the CY 2015 payment determination and added 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431) (76 FR 74509). For the CY 2016 payment determination, we 
proposed (and are finalizing in this final rule with comment period) 
that the data collection period for claims-based measures would be for 
services furnished from January 1, 2014, through December 31, 2014, 
that are paid by the administrative contractor by April 30, 2015.
    Based on our data for CY 2014 payment determinations above, 
extrapolating to 100 percent of ASCs reporting, there would be an 
average of 11.8 events per year. Thus, we estimated 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 
(approximately one case per month per ASC) for the CYs 2015 and CY 2016 
payment determinations. We estimated the burden associated with 
submitting QDCs for the fifth measure to be nominal as well, as 
discussed above.
    For the CY 2015 payment determination, 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 estimated 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 estimated 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).
    We have not yet proposed reporting requirements for the Safe 
Surgery Checklist or the ASC Volume Data on Selected ASC Surgical 
Procedures nor have we proposed details on submission of the NHSN HAI 
measure: Influenza Vaccination Coverage Among Healthcare Personnel for 
the CY 2016 payment determination.
    Public comments in reference to the use of the term ``claims-
based'' on these information collection requirements are discussed in 
section XVI.C.1.b. of this final rule with comment period. We did not 
receive any other public comments on these information collection 
requirements and, therefore, are finalizing our burden estimates as 
proposed.
c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension Requests; Reconsideration 
Requests
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized our proposal to consider an ASC to be 
participating in the ASCQR Program for the CY 2014 payment 
determination if the ASC includes QDCs specified for the program on 
their CY 2012 claims relating to the finalized measures.
    In the FY 2013 IPPS/LTCH PPS final rule, we finalized, for the CY 
2015 payment determination and subsequent payment determination years, 
that once an ASC submits any quality measure data, it would be 
considered to be participating in the ASCQR Program. Once an ASC 
submits quality measure data indicating its participation in the ASCQR 
Program, in order to withdraw, an ASC must complete and submit an 
online form indicating that it is withdrawing from the program.
    For the CY 2015 payment determination and subsequent payment 
determination years, if the ASC submits quality measure data, there is 
no additional action required by the ASC to indicate participation in 
the program. The burden associated with the requirements to withdraw 
from the program is the time and effort associated with accessing, 
completing, and submitting the online form. Based on the number of 
hospitals that have withdrawn from the Hospital OQR

[[Page 68533]]

Program over the past 4 years, we estimated that 2 ASCs would withdraw 
per year and that an ASC would expend 30 minutes to access and complete 
the form, for a total burden of 1 hour per year.
    In the FY 2013 IPPS/LTCH PPS final rule, we finalized for the CY 
2015 payment determination the requirement that ASCs to identify and 
register a QualityNet administrator in order to set up accounts 
necessary to enter structural measure data. We estimated that, based 
upon previous experience with the Hospital OQR Program, it would take 
an ASC 10 hours to obtain, complete, and submit an application for a 
QualityNet administrator and then set up the necessary accounts for 
structural measure data entry. We estimated the total burden to meet 
these requirements to be 51,750 hours (10 hours x 5,175 ASCs).
    In the FY 2013 IPPS/LTCH PPS final rule, we adopted a process for 
an extension or waiver for submitting information required under the 
program due to extraordinary circumstances that are not within the 
ASC's control. We are requiring that an ASC would complete a request 
form that would be available on the QualityNet Web site, supply 
requested information, and submit the request. The burden associated 
with these requirements is the time and effort associated with 
gathering required information as well as accessing, completing, and 
submitting the form. Based on the number of hospitals that have 
submitted a request for an extension or waiver from the Hospital OQR 
Program over the past 4 years, we estimated that 1 ASC per year would 
request an extension or waiver and that an ASC would expend 2 hours to 
gather required information as well as access, complete, and submit the 
form, for a total burden of 2 hours per year.
    We also adopted a reconsideration process that would apply to the 
CY 2014 payment determination and subsequent payment determination 
years under the ASCQR Program. While there is burden associated with an 
ASC filing a reconsideration request, the regulations at 5 CFR 1320.4 
for the Paperwork Reduction Act of 1995 exclude data collection 
activities during the conduct of administrative actions such as 
redeterminations, reconsiderations, or appeals or all of these actions.
    We did not receive any public comments on our burden discussion in 
the proposed rule.
6. IRF QRP
    In the FY 2012 IRF PPS final rule (76 FR 47873 through 47883), we 
finalized the initial reporting requirements of the IRF QRP, including 
two quality measures for CY 2012 reporting. These two quality measures 
are: (1) Percent of Residents with Pressure Ulcers that are New or 
Worsened (NQF 0678); and (2) Urinary Catheter Associated 
Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter days, 
for Intensive Care Unit (ICU) Patients (NQF 0138).
    We also established reporting mechanisms for these two measures in 
the FY 2012 IRF PPS final rule. IRFs were instructed to use the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-
PAI) (approved under OCN: 0938-0842) to collect pressure ulcer measure 
data on Medicare Part A, Part B, and Medicare Advantage beneficiaries, 
and they were to collect CAUTI measure data on all patients and report 
that data to CDC's National Healthcare Safety Network (NHSN). The 
burden associated with this collection of information for IRFs was 
included in the FY 2012 IRF PPS final rule (76 FR 47884 through 47885).
    In section XVII. of the proposed rule, we proposed to adopt three 
proposals for the IRF QRP, which are: (1) A proposal to implement 
updates made by the NQF to the CAUTI measure which will affect the 
annual payment update in FY 2014; (2) a proposal that any measure 
selected for use in the IRF QRP would remain in effect until actively 
removed, suspended, or replaced; and (3) a proposal to implement 
policies regarding when rulemaking will be used to update existing IRF 
QRP measures.
    We stated that the first proposal would allow us to incorporate 
recent updates that were made to the CAUTI measure (NQF0138) 
by the NQF. However, we stated that these changes would not affect the 
type or amount of data that IRFs will be required to collect and 
submit.
    The second proposal involves the implementation of a policy that 
IRF quality measures will remain in effect until a measure is actively 
removed, suspended, or replaced. We stated that this policy would not 
add any additional information collection requirements for CY 2013 and 
beyond as discussed below.
    The third proposal involves implementing a policy regarding when 
rulemaking would be used to update existing IRF QRP measures that have 
been updated by the NQF. We stated that this proposal would likewise 
not create any increased information collection burden on IRFs.
a. Pressure Ulcer Measure
    In the CY 2013 OPPS/ASC proposed rule, we did not propose to make 
any changes in the way the pressure ulcer data are to be collected and 
submitted to CMS using the current version of the IRF-PAI. As discussed 
in section XVII.D.2. of this final rule with comment period, we have 
decided to adopt a nonrisk-adjusted version of the NQF 0678 
pressure ulcer measure. We will collect pressure ulcer data using the 
current version of the IRF-PAI, which became effective on October 1, 
2012.
    We have decided to use a nonrisk-adjusted application of the NQF 
0678 pressure ulcer measure as opposed to the NQF-endorsed 
version of this measure. However, this change in the nature of the 
measure will not change the information collection burden that IRFs 
will incur for the reporting of pressure ulcer data. Nor will the 
burden differ from that which was stated in the FY 2012 IRF PPS final 
rule (76 FR 47884 through 47885). Likewise, the information collection 
burden will not differ from the burden estimated that is currently 
approved for the IRF-PAI under OCN: 0938-0842. It is important to note 
that, while the FY 2012 IRF PPS final rule mainly discusses the 
reporting requirement that will be incurred by IRFs for the FY 2014 
payment determination, we do not anticipate that the policies we are 
finalizing in this final rule with comment will create an increase in 
the information collection burden for subsequent fiscal years.
b. CAUTI Measure
    As discussed above, the FY 2012 IRF PPS final rule adopted the 
``Urinary Catheter Associated Urinary Tract Infection (CAUTI) rate per 
1,000 urinary catheter days, for Intensive Care Unit (ICU) Patients'' 
(NQF 0138) measure for the IRF QRP. However, subsequent to the 
publication of the FY 2012 IRF PPS final rule, this measure was 
expanded to several non-ICU settings, including IRFs. The CDC also 
changed the way the CAUTI measure is calculated from an infection rate 
per 1,000 days to a standardized infection ratio (``SIR''). The SIR 
calculation is comprised of the actual rate of infection over the 
expected rate of infection.
    These changes will not impact the type or amount of data that IRFs 
will be required to collect and submit. Therefore, the information 
collection estimates that are stated in the FY 2012 IRF PPS final rule 
(76 FR 47884 through 47885) for reporting CAUTI data remain unchanged 
for the FY 2014 payment determination as well as for subsequent years 
payment determinations.
    Summaries of the public comments we received on the proposed 
policies and the burden associated with these proposed information 
collection requirements and our responses are

[[Page 68534]]

discussed in section XVII. of this final rule with comment period.
    If you comment on these information collection and recordkeeping 
requirements, please submit your comments to the Office of Information 
and Regulatory Affairs, Office of Management and Budget, Attention: CMS 
Desk Officer, CMS-1589-FC; Fax: (202) 395-6974; or Email: 
[email protected].

XXI. Waiver of Proposed Rulemaking and Response to Comments

A. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and substance 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    We utilize HCPCS codes for Medicare payment purposes. The HCPCS is 
a national coding system comprised of Level I codes (CPT codes) and 
Level II codes that are intended to provide uniformity to coding 
procedures, services, and supplies across all types of medical 
providers and suppliers. CPT codes are copyrighted by the AMA and 
consist of several categories, including Category I codes which are 5-
digit numeric codes, and Category III codes which are temporary codes 
to track emerging technology, services, and procedures. The AMA issues 
an annual update of the CPT code set each Fall, with January 1 as the 
effective date for implementing the updated CPT codes. The HCPCS, 
including both CPT codes and Level II codes, is similarly updated 
annually on a calendar year basis. Annual coding changes are not 
available to the public until the Fall immediately preceding the annual 
January update of the OPPS and the ASC payment system. Because of the 
timing of the release of these new codes, it is impracticable for us to 
provide prior notice and solicit comment on these codes and the 
payments assigned to them in advance of publication of the final rule 
that implements the OPPS and the ASC payment system. However, it is 
imperative that these coding changes be accounted for and recognized 
timely under the OPPS and the ASC payment system for payment because 
services represented by these codes will be provided to Medicare 
beneficiaries in hospital outpatient departments and ASCs during the 
calendar year in which they become effective. Moreover, regulations 
implementing HIPAA (42 CFR Parts 160 and 162) require that the HCPCS be 
used to report health care services, including services paid under the 
OPPS and the ASC payment system. We assign interim payment amounts and 
status indicators to any new codes according to our assessment of the 
most appropriate APC based on clinical and resource homogeneity with 
other procedures and services in the APC. If we did not assign payment 
amounts to new codes on an interim basis, the alternative would be to 
not pay for these services during the initial calendar year in which 
the codes become effective. We believe it would be contrary to the 
public interest to delay establishment of payment amounts for these 
codes.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking for the establishment of payment amounts for selected HCPCS 
codes identified with comment indicator ``NI'' in Addendum B and 
Addendum BB to this final rule with comment period. We are providing a 
60-day public comment period.

B. 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.

XXII. 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)). This section of the 
final rule with comment period contains the impact and other economic 
analyses for the provisions that we are finalizing.
    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 
(77 FR 45210), 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 OPPS rates. It is necessary to make changes to the 
payment policies and rates for outpatient services furnished by 
hospitals and CMHCs in CY 2013. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion 
factor used to determine the payment rates for APCs. 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. We must review the clinical integrity of payment 
groups and relative payment weights at least annually. We revised the 
APC relative payment weights using claims data for services furnished 
on and after January 1, 2011, through and including December 31, 2011, 
and updated cost report information.
    For CY 2013, we are continuing the current payment adjustment for 
rural SCHs, including EACHs. In addition, section 10324 of the 
Affordable Care Act, as amended by HCERA, authorizes a wage index of 
1.00 for certain frontier States. Section 1833(t)(17) of the Act 
requires that subsection (d) hospitals

[[Page 68535]]

that fail to meet quality reporting requirements under the Hospital OQR 
Program incur a reduction of 2.0 percentage points to their OPD fee 
schedule increase factor. In this final rule with comment period, we 
are implementing these payment provisions. Also, we list the 23 drugs 
and biologicals in Table 32 that we are removing from pass-through 
payment status for CY 2013.
    This final rule with comment period is also necessary to update the 
ASC payment rates for CY 2013, enabling CMS to make changes to payment 
policies and payment rates for covered surgical procedures and covered 
ancillary services that are performed in an ASC in CY 2013. Because the 
ASC payment rates are based on the OPPS relative payment 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 
payment weights. In addition, because the services provided in ASCs are 
identified by HCPCS codes that are reviewed and revised either 
quarterly or annually, depending on the type of code, 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. Sections 
1833(i)(2)(D)(iv) and 1833(i)(7) of the Act authorize the Secretary to 
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 ASCs that fail to meet the 
quality reporting requirements. For CY 2013, there will be no impacts 
associated with this payment reduction because it will not be applied 
until CY 2014.
3. Overall Impacts for OPPS and ASC Payment Provisions
    We estimate that the effects of the OPPS payment provisions will 
result in expenditures exceeding $100 million in any 1 year. We 
estimate that the total increase from the changes in this final rule 
with comment period in expenditures under the OPPS for CY 2013 compared 
to CY 2012 will be approximately $600 million. Taking into account our 
estimated changes in enrollment, utilization, and case-mix, we estimate 
that the OPPS expenditures for CY 2013 will be approximately $4.571 
billion higher, relative to expenditures in CY 2012. Because this final 
rule with comment period is ``economically significant'' as measured by 
the $100 million threshold, we have prepared this regulatory impact 
analysis that, to the best of our ability, presents its costs and 
benefits. Table 57 displays the redistributional impact of the CY 2013 
changes in OPPS payment to various groups of hospitals and for CMHCs.
    We estimate that the update to the conversion factor and other 
adjustments (not including the effects of outlier payments, the pass-
through estimates, and the application of the frontier State wage 
adjustment for CY 2013) will increase total OPPS payments by 1.8 
percent in CY 2013. 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 will be 
budget neutral. However, these updates will change the distribution of 
payments within the budget neutral system. We estimate that the total 
change in payments between CY 2012 and CY 2013, 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), 1833(t)(3)(G) and 1833(t)(17) of the Act, 
will increase total estimated OPPS payments by 1.9 percent.
    We estimate that the effects of the ASC provisions in this final 
rule with comment period for the ASC payment system would result in 
expenditures exceeding $100 million in any 1 year. We estimate the 
total increase (from changes in this final rule with comment period as 
well as enrollment, utilization, and case-mix changes) in expenditures 
under the ASC payment system for CY 2013 compared to CY 2012 to be 
approximately $189 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 the changes to the ASC payment system that, to the best of 
our ability, presents the costs and benefits of this final rule with 
comment period. Tables 58 and Table 59 of this final rule with comment 
period display the redistributional impact of the CY 2013 changes on 
ASC payment, grouped by specialty area and then grouped by procedures 
with the greatest ASC expenditures, respectively.
4. Detailed Economic Analyses
a. Estimated Effects of OPPS Changes in This Final Rule With Comment 
Period
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2013 policy changes on various hospital groups. We post on 
the CMS Web site our hospital-specific estimated payments for CY 2013 
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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the Web 
site, select ``regulations and notices'' from the left side of the page 
and then select ``CMS-1589-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 57 below. We do not show hospital-specific impacts for hospitals 
whose claims we were unable to use. We refer readers to section II.A. 
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, we 
solicited public comment and information about the anticipated effects 
of our changes on providers and our methodology for estimating them. 
Any public comments that we receive are addressed in the applicable 
sections of this final rule with comment period that discuss the 
specific policies.
(2) Estimated Effects of OPPS Changes on Hospitals
    Table 57 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the change in payments to all 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. We now include a second line

[[Page 68536]]

for all hospitals, excluding permanently held harmless hospitals and 
CMHCs.
    We present separate impacts for CMHCs in Table 57 and we discuss 
them separately below, because CMHCs are paid only for partial 
hospitalization services under the OPPS and are a different provider 
type from hospitals. In CY 2012, 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 2013, we are finalizing our 
proposal to continue this APC payment structure and are basing payment 
fully on the geometric mean costs calculated using data for the type of 
provider for which rates are being set, that is, hospital or CMHC. We 
display separately the impact of this policy on CMHCs, and we discuss 
its impact on hospitals as part of our discussion of the hospital 
impacts.
    The estimated increase in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor under the 
statutory methodology. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
conversion factor is updated annually by the OPD fee schedule increase 
factor as discussed in detail in section II.B of this final rule with 
comment period. Section 1833(t)(3)(C)(iv) of the Act provides that 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, which we refer to as the IPPS market basket percentage increase. 
The IPPS market basket percentage increase for FY 2013 is 2.6 percent 
(77 FR 53258). Section 1833(t)(3)(F)(i) of the Act reduces that 2.6 
percent by the multifactor productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is 0.7 percentage points (which 
is also the MFP adjustment for FY 2013 in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53258); 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 1.8 percent, which we are using in the 
calculation of the CY 2013 OPPS conversion factor. 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 less than 1.00. The amounts 
attributable to this frontier State wage index adjustment are 
incorporated in the CY 2013 estimates in Table 57.
    To illustrate the impact of the CY 2013 changes, our analysis 
begins with a baseline simulation model that uses the CY 2012 relative 
payment weights, the FY 2012 final IPPS wage indices that include 
reclassifications, and the final CY 2012 conversion factor. Table 57 
shows the estimated redistribution of the increase in payments for CY 
2013 over CY 2012 payments to hospitals and CMHCs as a result of the 
following factors: APC reconfiguration and recalibration based on our 
historical methodology using median costs (Column 2); the marginal 
impact of basing the APC relative payment weights on geometric mean 
costs over basing them on median costs (Column 3); APC recalibration 
based on geometric mean costs (Column 4, the combined effect of Columns 
2 and 3); the wage indices and the rural adjustment (Column 5); the 
combined impact of APC recalibration based on geometric mean costs, the 
wage indices and rural adjustment, and the OPD fee schedule increase 
factor update to the conversion factor (Column 6); the combined impact 
of APC recalibration based on geometric mean costs, the wage indices 
and rural adjustment, the conversion factor update, and the CY 2013 
frontier State wage index adjustment (Column 7); and the estimated 
impact taking into account all payments for CY 2013 relative to all 
payments for CY 2012 (Column 8), 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 did not make any changes to the 
policy for CY 2013. Because the updates to the conversion factor 
(including the update of the OPD fee schedule increase factor), the 
estimated cost of the rural adjustment, and 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 will change), and the impact of the wage index changes on the 
hospital. However, total payments made under this system and the extent 
to which this final rule with comment period will redistribute money 
during implementation also will depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2012 and CY 2013 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the OPPS rates for CY 2013 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 still result in a 1.9 
percent estimated increase in Medicare payments to all other hospitals. 
Those estimated payments will not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 57 shows the total number of 
facilities (4,127), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2011 hospital 
outpatient and CMHC claims data to model CY 2012 and CY 2013 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 2012 or CY 2013 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 (3,905) 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 
159 CMHCs at the bottom of

[[Page 68537]]

the impact table and discuss that impact separately below.
Columns 2, 3, and 4: APC Recalibration
    These columns show the combined effects of the reconfiguration, 
recalibration, and other policies (such as setting payment for 
separately payable drugs and biologicals at ASP+6 under our CY 2013 
decision to apply the statutory default). Column 2 shows the 
reclassification effects if we were to base the relative payment 
weights on the median costs of services. Column 3 shows the marginal 
effects of using the geometric mean costs compared to the effects if we 
were to base the relative payment weights on the median costs of 
services, in other words the effects of our policy change from medians 
to geometric means. We are providing this column comparing the 
additional impact of developing the CY 2013 OPPS relative payment 
weights using geometric mean costs only in the CY 2013 OPPS/ASC 
proposed and final rules because the CY 2013 OPPS will establish 
geometric mean costs as a baseline configuration for the OPPS. Column 4 
shows the combined effect of Columns 2 and 3, in other words the effect 
of our decision to base the relative payment weights on geometric mean 
costs. It reflects the impacts of the reclassification of services 
among APC groups and the recalibration of APC relative payment weights, 
based on 12 months of CY 2011 OPPS hospital claims data and the most 
recent cost report data, and determining relative payment weights using 
the geometric mean costs of services. We modeled the effect of the APC 
recalibration changes by varying only the relative payment weights (the 
final CY 2012 relative weights versus the CY 2013 relative weights 
calculated using the service-mix and volume in the CY 2011 claims used 
for this final rule with comment period) and calculating the percent 
difference in the relative weight. Column 4 also reflects 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.
    Overall, we estimate that changes in APC reassignment and 
recalibration across all services paid under the OPPS will slightly 
decrease payments to urban hospitals by 0.1 percent. However, the 
smallest urban hospitals will receive slight payment increases of 0.6 
percent (hospitals with 0-99 beds), attributable to increased payments 
for partial hospitalization, group psychotherapy and cardiac 
rehabilitation monitoring services furnished in the hospital. Due to 
recalibration, we estimate that low volume urban hospitals billing 
fewer than 21,000 lines for OPPS services will experience increases 
ranging from 1.0 percent to 4.9 percent. The increase of 4.9 percent 
for urban hospitals billing fewer than 5,000 lines per year is 
similarly attributable to an increase in payment for partial 
hospitalization and group psychotherapy services furnished in the 
hospital.
    Overall, we estimate that rural hospitals will experience a small 
increase of 0.5 percent as a result of changes to the APC structure, 
with the largest increases going to the smallest hospitals both by 
number of beds (1.2 percent to those with less than 50 beds) and volume 
(3.1 percent to those with fewer than 5,000 lines). As a result of the 
recalibration, we estimate that rural hospitals that report 5,000 or 
more lines for OPPS services will experience payment increases ranging 
from 0.3 percent to 1.5 percent.
    Classifying hospitals according to teaching status, we estimate 
that the APC recalibration will lead to small payment decreases of 0.1 
to 0.2 percent for major and minor teaching hospitals, respectively. We 
estimate that nonteaching hospitals will experience an increase of 0.2 
percent. Classifying hospitals by type of ownership suggests that 
voluntary, proprietary, and governmental hospitals will experience 
changes ranging from a decrease of 0.1 percent to an increase of 0.3 
percent as a result of the APC recalibration.
    For most hospitals, we estimate insignificant impacts of our final 
policy of using geometric mean-based relative payment weights. Most 
hospitals will receive small increases in payments of up to 6.5 
percent. We estimate that hospitals for which DSH payments are not 
available (mostly urban hospitals) will experience an increase of 6.5 
percent. Hospitals for which DSH data are not available (non-IPPS 
hospitals) furnish a large number of psychiatric services and we 
believe that the increase in payment is due to increased payment for 
partial hospitalization and group psychotherapy services, as well as 
for hemodialysis services furnished in the hospital.
Column 5: New Wage Indices and the Effect of the Rural and Cancer 
Hospital Adjustments
    Column 5 demonstrates the combined budget neutral impact of APC 
recalibration using geometric means; the wage index update; the rural 
adjustment; and the cancer hospital adjustment. We modeled the 
independent effect of the budget neutrality adjustments and the OPD fee 
schedule increase factor by using the relative payment weights and wage 
indices for each year, and using a CY 2012 conversion factor that 
included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indices.
    Column 5 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 7. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs because we did not make 
any changes to the policy for CY 2013. Similarly, the differential 
impact between the CY 2012 cancer hospital payment adjustment and the 
CY 2013 cancer hospital payment adjustment had no effect on the budget 
neutral adjustment to the conversion factor. We modeled the independent 
effect of updating the wage indices by varying only the wage indices, 
holding APC relative payment weights, service-mix, and the rural 
adjustment constant and using the CY 2013 scaled weights and a CY 2012 
conversion factor that included a budget neutrality adjustment for the 
effect of changing the wage indices between CY 2012 and CY 2013. This 
column estimates the impact of applying the FY 2013 IPPS wage indices 
for the CY 2013 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 Column 7. 
We are continuing the rural payment adjustment of 7.1 percent to rural 
SCHs for CY 2013, 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 as a result of the updated wage indices 
and the rural adjustment, urban hospitals will experience no change 
from CY 2012 to CY 2013. Rural sole community hospitals will not be 
affected, but other rural hospitals will experience decreases of 0.4 
percent. Urban hospitals in the East South Central and Pacific regions 
will experience the most significant payment changes with a decrease of 
0.7 percent in the East South Central region and an increase of 1.4 
percent in the Pacific region. Overall, we estimate that rural 
hospitals will

[[Page 68538]]

experience a decrease of 0.2 percent as a result of changes to the wage 
index for CY 2013. Regionally, the changes will range from a decrease 
of 0.9 percent in the rural Pacific region to an increase of 0.7 
percent in the rural Mountain region.
Column 6: All Budget Neutrality Changes Combined With the OPD Fee 
Schedule Increase
    Column 6 demonstrates the cumulative impact of the budget neutral 
adjustments from Column 5 and the OPD fee schedule increase factor of 
1.8 percent. We estimate that for most hospitals, the addition of the 
OPD fee schedule increase factor of 1.8 percent will mitigate the 
negative impacts created by the budget neutrality adjustments made in 
Column 5.
    While most classes of hospitals will receive an increase that is 
more in line with the 1.8 percent overall increase after the update is 
applied to the budget neutrality adjustments, urban hospitals that bill 
fewer than 5,000 lines, rural hospitals that bill fewer than 5,000 
lines, and hospitals for which DSH information is not available will 
experience larger increases ranging from 4.5 percent to 8.2 percent. In 
particular, urban hospitals that report fewer than 5,000 lines will 
experience a cumulative increase, after application of the OPD fee 
schedule increase factor and the budget neutrality adjustments, of 6.7 
percent, largely as a result of increases in payments to partial 
hospitalization and group psychotherapy services furnished in the 
hospital. Similarly, urban hospitals for which DSH data are not 
available will experience an increase of 8.0 percent, also largely as a 
result of increases in payment for partial hospitalization, group 
psychotherapy and hemodialysis services furnished in hospitals.
    Overall, we estimate that these changes will increase payments to 
urban hospitals by 1.8 percent. We estimate that large urban hospitals 
and ``other'' urban hospitals will also experience increases of 1.9 and 
1.6 percent, respectively. Urban hospitals in the Pacific region will 
experience an increase of 3.3 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 2.1 percent increase as 
a result of the OPD fee schedule increase factor and other budget 
neutrality adjustments.
    Classifying hospitals by teaching status suggests that the OPD fee 
schedule increase factor and the budget neutrality adjustments will 
result in an increase of 1.7 percent for major teaching hospitals, 1.5 
percent for minor teaching hospitals and 2.0 percent for nonteaching 
hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals will experience an estimated increase of 2.3 
percent, while voluntary hospitals will experience an estimated 
increase of 2.0 percent and government hospitals will experience an 
estimated increase of 1.8 percent.
Column 7: All Adjustments With the Frontier State Wage Index Adjustment
    This column shows the impact of all budget neutrality adjustments, 
application of the 1.8 percent OPD fee schedule increase factor, and 
the nonbudget 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 6). This column differs from Column 
6 solely based on application of the non-budget neutral frontier State 
wage index adjustment.
    In general, we estimate that all facilities and all hospitals will 
experience a combined increase of 0.1 percent due to the nonbudget 
neutral frontier State wage index adjustment. The index will only 
affect urban hospitals in the West North Central and Mountain regions. 
Urban hospital in those regions will experience increases of 1.0 
percent (West North Central) and 0.4 percent (Mountain) that are 
attributable to the frontier State wage index, and rural hospitals will 
experience increases of 1.2 percent (West North Central) and 2.1 
percent (Mountain) that are attributable to the frontier State wage 
index.
Column 8: All Changes for CY 2013
    Column 8 depicts the full impact of the CY 2013 policies on each 
hospital group by including the effect of all the changes for CY 2013 
and comparing them to all estimated payments in CY 2012. Column 8 shows 
the combined budget neutral effects of Columns 2 through 5; the OPD fee 
schedule increase; the impact of the frontier State wage index 
adjustment; the impact of estimated OPPS outlier payments 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 XV. 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 101 hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2012 update (and assumed, for 
modeling purposes, to be the same number for CY 2013), we included 30 
hospitals in our model because they had both CY 2011 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
changes for CY 2013 will increase payments to all providers by 1.9 
percent for CY 2013. We modeled the independent effect of all changes 
in Column 8 using the final relative payment weights for CY 2012 and 
the relative payment weights for CY 2013. We used the final conversion 
factor for CY 2012 of $70.016 and the CY 2013 conversion factor of 
$71.313 discussed in section II.B. of this final rule with comment 
period.
    Column 8 contains simulated outlier payments for each year. We used 
the one year charge inflation factor used in the FY 2013 IPPS/LTCH PPS 
final rule of 4.24 percent (1.0424) to increase individual costs on the 
CY 2011 claims, and we used the most recent overall CCR in the July 
2012 Outpatient Provider-Specific File (OPSF) to estimate outlier 
payments for CY 2012. Using the CY 2011 claims and a 4.24 percent 
charge inflation factor, we currently estimate that outlier payments 
for CY 2012, using a multiple threshold of 1.75 and a fixed-dollar 
threshold of $2,025 should be approximately 0.9 percent of total 
payments. The estimated current outlier payments of 0.9 percent are 
incorporated in the CY 2013 comparison in Column 8. We used the same 
set of claims and a charge inflation factor of 8.66 percent (1.0866) 
and the CCRs in the July 2012 OPSF, with an adjustment of 0.9880, to 
reflect relative changes in cost and charge inflation between CY 2011 
and CY 2013, to model the CY 2013 outliers at 1.0 percent of estimated 
total payments using a multiple threshold of 1.75 and a fixed-dollar 
threshold of $2,025.
    We estimate that the anticipated change in payment between CY 2012 
and CY 2013 for the hospitals failing to meet the Hospital OQR Program 
requirements will be negligible. Overall, we estimate that facilities 
will experience an increase of 1.9 percent under this final rule with 
comment period in CY 2013 relative to total spending in CY 2012. This 
projected increase (shown in Column 8) of Table 57 reflects the 1.8 
percent OPD fee schedule increase factor, with 0.07 percent for the 
change in the pass-through estimate between CY 2012 and CY 2013, with 
an additional 0.1 percent for the difference in estimated outlier 
payments between CY 2012 (0.9 percent) and CY 2013 (1.0 percent), less 
0.04 percent due to the expiration of the

[[Page 68539]]

section 508 wage adjustment, less 0.1 percent due to the frontier 
adjustment in CY 2012, plus 0.1 percent due to the frontier State wage 
index adjustment in CY 2013. When we exclude cancer and children's 
hospitals (which are held harmless to their pre-BBA amount) and CMHCs, 
the estimated increase continues to be 1.9 percent after rounding. We 
estimate that the combined effect of all changes for CY 2013 will 
increase payments to urban hospitals by 1.9 percent, with large urban 
hospitals experiencing an estimated 2.0 percent increase and ``other'' 
urban hospitals experiencing an estimated 1.7 percent increase. We 
estimate that urban hospitals that bill less than 5,000 lines of OPPS 
services will experience an increase of 6.8 percent, largely 
attributable to the increase in payment for partial hospitalization and 
group psychotherapy services furnished in the hospital. We estimate 
that urban hospitals that bill 11,000 or more lines of OPPS services 
will experience increases between 1.8 percent and 3.1 percent, while 
urban hospitals that report between 5,000 and 10,999 lines will 
experience an increase of 4.4 percent.
    Overall, we estimate that rural hospitals will experience a 2.2 
percent increase as a result of the combined effects of all changes for 
CY 2013. We estimate that rural hospitals that bill less than 5,000 
lines of OPPS services will experience an increase of 4.6 percent and 
that rural hospitals that bill 5,000 or more lines of OPPS services 
will experience increases ranging from 2.1 to 2.8 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all changes will include an increase of 
1.8 percent for major teaching hospitals and 2.1 percent for 
nonteaching hospitals. Minor teaching hospitals will experience an 
increase of 1.7 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience an increase of 1.9 percent, proprietary hospitals will 
experience an increase of 2.2 percent, and governmental hospitals will 
experience an increase of 1.9 percent.
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(3) Estimated Effects of OPPS Changes on CMHCs
    The last line of Table 57 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization (PHP) services under 
the OPPS. In CY 2012, CMHCs are paid under two APCs for these services: 
APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and 
APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs). In contrast, hospitals are paid 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). We first implemented 
these four APCs for CY 2011 and 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 but provided a transition to 
CMHC rates based solely on CMHC data for the two CMHC PHP per diem 
rates. For CY 2013, we are continuing the provider-specific APC 
structure that we adopted for CY 2011 and are basing payment fully on 
the 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 2011 claims 
data used for this 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 0173 
(Level II Partial Hospitalization (4 or more services) for CMHCs) 
decline in CY 2013 using geometric mean-based relative payment weights 
as opposed to median-based relative payment weights (shown in Columns 3 
and 4), we estimate that there will be an overall 4.4 percent decrease 
in payments to CMHCs (shown in Column 8).
    Column 5 shows that the estimated impact of adopting the CY 2013 
wage index values will result in a small decrease of 0.6 percent to 
CMHCs. We note that all providers paid under the OPPS, including CMHCs, 
will receive a 1.8 percent OPD fee schedule increase factor. Column 6 
shows that combining this OPD fee schedule increase factor, along with 
changes in APC policy for CY 2013 and the CY 2013 wage index updates, 
results in an estimated decrease of 4.5 percent. Column 7 shows that 
adding the frontier State wage adjustment will result in no change to 
the cumulative 4.5 percent decrease. Column 8 shows that adding the 
changes in outlier and pass-though payments will result in a 0.1 
percent decrease in payment for CMHCs. This reflects all changes to 
CMHCs for CY 2013.
(4) Estimated Effect of OPPS Changes 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 2012 OPPS, the national 
unadjusted copayment is $227.35, and the minimum unadjusted copayment 
is $215.00, 20 percent of the national unadjusted payment rate of 
$1,074.99. For CY 2013, the national unadjusted copayment for APC 0037 
is $227.35, the same amount as the national unadjusted copayment in 
effect for CY 2012. The minimum unadjusted copayment for APC 0037 is 
$223.71 or 20 percent of the CY 2013 national unadjusted payment rate 
for APC 0037 of $1,118.54. The minimum unadjusted copayment will 
increase for CY 2013 compared to CY 2012 because the payment rate for 
APC 0037 will increase for CY 2013. For further discussion on the 
calculation of the national unadjusted copayments and minimum 
unadjusted copayments, we refer readers to section II.H. 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 2012 hospital inpatient 
deductible is $1,156. The amount of the CY 2013 hospital inpatient 
deductible is not available at the time of publication of this final 
rule with comment period.
    In order to better understand the impact of changes in copayment on 
beneficiaries, we modeled the percent change in total copayment 
liability using CY 2011 claims. We estimate, using the claims of the 
4,127 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 2012 to 21.5 
percent in CY 2013 due largely to changes in service-mix.
(5) Estimated Effects of OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs as discussed in section XIV. 
of this final rule with comment period. No types of providers or 
suppliers other than hospitals, CMHCs and ASCs will be affected by the 
changes in this final rule with comment period.
(6) Estimated Effects of OPPS Changes 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 2013. 
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 in section XXII.A. of this 
final rule with comment period.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are making and the reasons for 
our selected alternatives are discussed throughout this final rule with 
comment period. In this section, we discuss some of the major issues 
and the alternatives considered.
     Alternatives Considered for Basing the APC Relative 
Payment Weights on Geometric Mean Costs Rather than Median Costs
    As described in section II.A.2.f. of this final rule with comment 
period, we are basing the CY 2013 relative payment weights on which 
OPPS payments are calculated using geometric mean costs rather than 
median costs. We established this policy based on stakeholder public 
comments, the improvements we have made to the data process to obtain 
more data and additional accuracy in estimating cost, and the other 
reasons described in the geometric mean based relative payment weights 
section.
    In developing this policy, we considered another alternative, which 
was to continue basing the relative payment weights based on median 
costs. As discussed in the geometric mean based weights section, 
medians have historically served as a good measure of central tendency 
and continue to do so. In the initial establishment of the OPPS, we 
selected medians as the measure of central tendency on which to base 
the weights for a number of reasons. Those included statistical bases 
such as medians' resistance to outlier observations and their impact as 
well as reasons surrounding the practical implementation of the OPPS as 
a new payment system. While some of those

[[Page 68548]]

reasons for selecting medians continue to apply, others are now less 
relevant because of changes we have made in our data process, or no 
longer apply because of factors such as actual development of a working 
payment system. We have made a number of changes to the OPPS to address 
some of the challenges in arriving at better estimates of service cost, 
including trims, more specific application of cost to charge ratios in 
estimating cost, modeling changes to better simulate payment 
mechanisms, and methods of obtaining additional claims data through 
what is already available such as the bypass list.
    We believe that those changes have helped to improve the relative 
costs on which the payment system is based. We also believe that 
geometric mean costs better incorporate the range of costs associated 
with providing a service, and thus will represent one such additional 
improvement. Therefore, in order to improve the accuracy at which we 
arrive at service costs used to set relative payment weights, to be 
responsive to stakeholder concerns regarding the degree to which OPPS 
payment appropriately reflects service cost, and the other reasons 
described in section II.A.2.f. of this final rule with comment period, 
we will establish the CY 2013 OPPS relative payment weights based on 
geometric means rather than continuing our historical practice of 
modeling costs using median costs.
     Alternatives Considered for Payment of Drugs and 
Biologicals That Do Not Have Pass-Through Status
    We are paying for separately payable drugs and biologicals at ASP+6 
percent, based on section 1833(t)(14)(A)(iii)(II) of the Act, also 
referred to as the statutory default. As detailed in greater depth in 
section V.B.3 of this final rule with comment period, this payment will 
represent the combined payment for both the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals.
    We considered three alternatives for payment for drugs and 
biologicals that do not have pass-through status for CY 2013 
(separately payable drugs and biologicals). The first alternative we 
considered was to propose to use the standard methodology, as described 
in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68642). 
We compared 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, but without redistribution of estimated pharmacy overhead 
costs. Under this methodology, without a redistribution of overhead 
costs from packaged drugs to separately payable drugs, using April 2012 
ASP information and costs derived from CY 2011 OPPS claims data, we 
estimated the combined acquisition and overhead costs of separately 
payable drugs and biologicals to be ASP+0 percent. We also determined 
that the combined acquisition and overhead costs of packaged drugs are 
311 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 was to propose to continue our 
overhead adjustment methodology for CY 2013 and redistribute $270 
million in overhead costs from packaged coded and uncoded drugs and 
biologicals to separately payable drugs and biologicals. Using this 
approach, we adjusted the CY 2011 pharmacy overhead redistribution 
amount of $200 million using the PPI for Pharmaceuticals for Human Use, 
resulting in a redistribution amount of $270 million and a payment rate 
for separately payable drugs of ASP+6 percent. We did not choose this 
alternative because of the reasons discussed below and in further 
detail in section V.B.3 of this final rule with comment period.
    The third option that we considered, and the one that we are 
adopting for CY 2013, is to pay for separately payable drugs and 
biologicals administered in the hospital outpatient department, at 
ASP+6 percent based on the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act, which requires an alternative 
methodology for determining payment rates for SCODs wherein, if 
hospital acquisition cost data are not available, payment shall be 
equal (subject to any adjustment for overhead costs) 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. We determined that this ASP+6 percent payment 
amount for separately payable drugs and biologicals represents the 
combined acquisition and pharmacy overhead payment for drugs and 
biologicals for CY 2013.
    As described in further detail in section V.B.3 of this final rule 
with comment period, we chose this alternative because we are uncertain 
about the full cost of pharmacy overhead and acquisition cost, due to 
the limitations of the submitted hospital charge and claims data for 
drugs. We believe that the continued use of our current drug payment 
methodologies may not appropriately account for average acquisition and 
pharmacy overhead cost and therefore could result in future payment 
rates that are not appropriate.
    Therefore, we finalized our proposal to pay for separately payable 
drugs and biologicals based on the statutory default at the physician's 
office Part B payment rates, as established in sections 1842(o) and 
1847A of the Act, at ASP+6 percent. We believe that paying for 
separately payable drugs and biologicals at ASP+6 percent based on the 
statutory default is appropriate at this time as it yields increased 
predictability in payment for drugs and biologicals under the OPPS 
while appropriately paying for drugs at a level consistent with payment 
amounts yielded by our methodology of the past 7 years.
b. Estimated Effects of ASC Payment System Final Policies
    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Pub. L. 108-173; established that the OPPS 
relative payment weights would be the basis for payment and that we 
would update the system annually as part of the OPPS rulemaking cycle; 
and provided that the revised ASC payment rates would be phased in over 
4 years.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor

[[Page 68549]]

by the ASC relative payment weight. As discussed fully in section XIV. 
of this final rule with comment period, we set the CY 2013 ASC relative 
payment weights by scaling the CY 2013 OPPS relative payment weights by 
the ASC scaler of 0.9324. The estimated effects of the updated relative 
payment weights on payment rates are varied and are reflected in the 
estimated payments displayed in Tables 58 and 59 below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system (which 
currently is the CPI-U) after application of any quality reporting 
reduction be reduced by a productivity adjustment. The Affordable Care 
Act defines the productivity adjustment to be equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business 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). Because the ASCQR 
Program will not affect payment rates until CY 2014, there will be no 
reduction to the CPI-U for failure to meet the requirements of the 
ASCQR Program for CY 2013. We calculated the CY 2013 ASC conversion 
factor by adjusting the CY 2012 ASC conversion factor by 1.0008 to 
account for changes in the pre-floor and pre-reclassified hospital wage 
indices between CY 2012 and CY 2013 and by applying the CY 2013 MFP-
adjusted CPI-U update factor of 0.6 percent (projected CPI-U update of 
1.4 percent minus a projected productivity adjustment of 0.8 percent). 
The CY 2013 ASC conversion factor is $42.917.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the changes for CY 2013 
on Medicare payment to ASCs. A key limitation of our analysis is our 
inability to predict changes in ASC service-mix between CY 2011 and CY 
2013 with precision. We believe that the net effect on Medicare 
expenditures resulting from the CY 2013 changes would be small in the 
aggregate for all ASCs. However, such changes may have differential 
effects across surgical specialty groups as ASCs continue to adjust to 
the payment rates based on the policies of the revised ASC payment 
system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of ASC Payment System Final Policies on 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 2013 payments would depend on a number of 
factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the CY 2013 updates to the ASC payment system on Medicare 
payments to ASCs, assuming the same mix of services as reflected in our 
CY 2011 claims data. Table 58 depicts the estimated aggregate percent 
change in payment by surgical specialty or ancillary items and services 
group by comparing estimated CY 2012 payments to estimated CY 2013 
payments, and Table 59 shows a comparison of estimated CY 2012 payments 
to estimated CY 2013 payments for procedures that we estimate would 
receive the most Medicare payment in CY 2012.
    Table 58 shows the estimated effects on aggregate Medicare payments 
under the 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 58.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and 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 2012 ASC Payments were calculated 
using CY 2011 ASC utilization (the most recent full year of ASC 
utilization) and CY 2012 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2012 ASC payments.
     Column 3--Estimated CY 2013 Percent Change is the 
aggregate percentage increase or decrease in Medicare program payment 
to ASCs for each surgical specialty or ancillary items and services 
group that would be attributable to updates to ASC payment rates for CY 
2013 compared to CY 2012.
    As seen in Table 58, we estimate that the update to ASC rates for 
CY 2013 would result in a zero percent change in aggregate payment 
amounts for eye and ocular adnexa procedures, a 2-percent increase in 
aggregate payment amounts for digestive system procedures, and a 3-
percent increase in aggregate payment amounts for nervous system 
procedures.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, we estimate that the payment effects of 
the CY 2013 update are variable. For instance, we estimate that, in the 
aggregate, payment for integumentary system procedures, respiratory 
system procedures, and cardiovascular systems procedures would decrease 
by 3 percent, whereas auditory system procedures would increase by 1 
percent under the CY 2013 rates.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group would experience 
increased payment rates. For example, the estimated increase for CY 
2013 for nervous system procedures is likely due to an increase in the 
ASC payment weight for some of the high volume procedures, such as CPT 
code 63685 (Insrt/redo spine n generator) where estimated payment would 
increase by 8 percent for CY 2013.
    Also displayed in Table 58 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. We estimate 
that aggregate payments for these items and services would remain 
unchanged for CY 2013.

[[Page 68550]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.098

    Table 59 below shows the estimated impact of the updates to the 
revised ASC payment system on aggregate ASC payments for selected 
surgical procedures during CY 2013. The table displays 30 of the 
procedures receiving the greatest estimated CY 2012 aggregate Medicare 
payments to ASCs. The HCPCS codes are sorted in descending order by 
estimated CY 2012 program payment.
     Column 1-CPT/HCPCS code.
     Column 2-Short Descriptor of the HCPCS code.
     Column 3-Estimated CY 2012 ASC Payments were calculated 
using CY 2011 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2012 ASC payment rates. The estimated CY 2012 
payments are expressed in millions of dollars.
     Column 4-Estimated CY 2013 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2012 and 
the estimated payment for CY 2013 based on the update.
BILLING CODE 4120-01-P

[[Page 68551]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.099

BILLING CODE-4120-01-C

[[Page 68552]]

(3) Estimated Effects of ASC Payment System Final Policies on 
Beneficiaries
    We estimate that the CY 2013 update to the ASC payment system would 
be generally positive for beneficiaries with respect to the new 
procedures that we are adding to the ASC list of covered surgical 
procedures and for those that we are designating as office-based for CY 
2013. 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 ASC payment system are lower than payment 
rates for the same procedures under the OPPS. Therefore, the 
beneficiary coinsurance amount under the ASC payment system will almost 
always 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 2013, 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 (except for certain 
preventive services where the coinsurance is waived in both settings).
(4) Alternative ASC Payment Policies Considered
    Alternatives to the changes we are making to the ASC payment system 
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 the Annual Update to ASC 
Payments for Inflation
    Section 1833(i)(2)(C)(i) of the Act requires that, ``if the 
Secretary has not updated amounts established'' under the revised ASC 
payment system 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.'' The statute, therefore, does not mandate the adoption of 
any particular update mechanism, but it requires the payment amounts to 
be increased by the CPI-U in the absence of any update. Because the 
Secretary updates the ASC payment amounts annually under the revised 
payment system, we are not compelled to increase the ASC payment 
amounts by the CPI-U. Nonetheless, 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. While 
we believe the CPI-U is appropriate to apply to update the ASC payment 
system, we are aware that the CPI-U is highly weighted for housing and 
transportation and may not best reflect inflation in the cost of 
providing ASC services. Therefore, as alternatives to using the CPI-U 
to update ASC payment rates for inflation, in developing this final 
rule with comment period, we considered using: (1) the hospital market 
basket, which is used to update OPPS rates for inflation; (2) the PE 
component of the MEI update, which is used to update the MPFS payment 
rates for inflation; or (3) the average of the hospital market basket 
update and the PE component of the MEI update.
    However, until we have more information regarding the cost inputs 
of ASCs, we are not confident that any of the alternatives are a better 
proxy for ASC cost inputs than the CPI-U. Therefore, we proposed and 
are finalizing our established policy to continue to base the ASC 
update on the CPI-U.
     Alternatives Considered for Office-Based Procedures
    According to our existing policy for the ASC payment system, we 
designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are predominantly performed in physicians' offices based 
on consideration of the most recent available volume and utilization 
data for each individual procedure HCPCS code and/or, if appropriate, 
the clinical characteristics, utilization, and volume of related HCPCS 
codes. We establish payment for procedures designated as office-based 
at the lesser of the MPFS nonfacility practice expense payment amount 
or the ASC rate developed according to the standard methodology of the 
ASC payment system.
    In developing this final rule with comment period, we reviewed CY 
2011 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 2012 OPPS/ASC final rule with comment period (76 FR 74406 through 
74408). Based on that review and as discussed in section XIV.C.1.b. of 
this final rule with comment period, we are newly designating 6 
surgical procedures as permanently office-based, are making temporary 
office-based designations for 6 procedures in CY 2013 of the 8 
procedures that were designated as temporarily office-based for CY 
2012, and are making temporary office-based designations for 2 
procedures that are new ASC covered surgical procedures for CY 2013. We 
considered two alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would pay for 
the 6 procedures we 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 ASC payment system. We did not select 
this alternative because our analysis of the data and our clinical 
review indicated that all 6 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 6 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

[[Page 68553]]

determinations about procedures with temporary office-based 
designations, maintaining the temporary designation is no longer 
appropriate.
    The second alternative we considered and the one we selected for CY 
2013 is to designate 6 additional procedures as permanently office-
based for CY 2013 and to designate 8 procedures as temporarily office-
based in CY 2013. We chose this alternative because our claims data and 
clinical review indicate that these procedures would be considered to 
be predominantly performed in physicians' offices. We believe that 
designating these procedures as office-based, which results in the CY 
2013 ASC payment rate for these procedures potentially being capped at 
the CY 2013 physicians' office rate (that is, the MPFS nonfacility 
practice expense payment amount), if applicable, is an appropriate step 
to ensure that Medicare payment policy does not create financial 
incentives for such procedures to shift unnecessarily from physicians' 
offices to ASCs, consistent with our final policy adopted in the August 
2, 2007 final rule.
c. Effects of the Revisions to the QIO Regulations
    In section XVIII. of this final rule with comment period, we 
discuss our changes to the QIO program regulations, including: adding 
provisions for processing beneficiary complaints that will give 
beneficiaries more information about the QIO's review process, which 
includes a new alternative dispute resolution option (immediate 
advocacy); giving QIOs the authority to send and receive secure 
transmissions of electronic versions of health information; conveying 
beneficiaries the right to authorize the QIOs' use and disclosure of 
confidential information; and removing outdated regulatory provisions 
that will enable QIOs to give more information regarding the results of 
reviews. We believe the changes will improve the QIO program, give 
beneficiaries better information regarding review activities and reduce 
burden for both providers and practitioners.
    The QIO program requests approximately 62,400 medical records each 
year for the Hospital IQR and Hospital OQR Programs combined (38,400 
for inpatient and 24,000 for outpatient). For the Hospital IQR Program, 
the average number of pages per medical record is 289 pages, and for 
the Hospital OQR Program, the average number of pages is 74. 
Reimbursement is made at a rate of $0.12 per page for PPS hospitals, 
which includes the costs of toner, paper, and labor associated with the 
copying of paper medical records. We also note that the labor 
associated with copying the medical records can be considerable. In 
fact, many providers and practitioners store health information 
electronically, and these same providers and practitioners are forced 
to print hard copies of the information for shipment to the QIOs. 
Sometimes this may entail using the ``print screen'' function to create 
the record to be shipped. On average, the cost of shipping the records 
is approximately $32.35 per shipment, with approximately 5,200 
shipments being made. The shipping amount takes into consideration 
that, for some QIO review activities, multiple records are shipped at 
one time, which can involve the use of several boxes.
    Under our proposal, by example, assuming all hospitals operate 
under a PPS, should all hospitals transfer health information on a 
digital versatile device (DVD), the costs associated with the toner and 
paper would be replaced by the costs of a DVD. In fact, numerous 
medical records could be copied to a single DVD. Moreover, the labor in 
copying the records would be substantially reduced because, for 
example, rather than copying the average 289 pages related to a 
Hospital IQR Program review, the file could be electronically 
transferred to a DVD for shipping. We estimate that the $0.12 per page 
rate could be reduced by as much as $0.07 per page. Based on the 
overall average number of pages for the Hospital IQR Program and 
Hospital OQR Program, respectively, reducing the per page rate to $0.05 
per page would save $901,152 ((11,097,600 pages x $0.12 = $1,331,712) + 
(1,776,000 pages x $0.12 = $213,120) - (11,097,600 pages x $0.05 = 
$554,880) - (1,776,000 pages x $0.05 = $88,800)).
    The changes also would reduce the costs associated with mailing the 
records. For the Hospital IQR Program, hospitals sometimes need to ship 
as many as four or five large boxes of medical records. By comparison, 
a single DVD can house multiple medical records and even if multiple 
DVDs were required, all the DVDs could be mailed in a single envelope 
at a significantly lower cost. Potentially, the per envelope mailing 
cost could be as low as $5 compared to the per shipment average cost of 
$32.35. Thus, if all records were shipped on DVDs, the program would 
save $142,220 ($168,220 - $26,000).
    The changes allowing the sending and receiving of electronic 
versions of health information also would reduce costs for other QIO 
review activities. QIOs request approximately 100,000 medical records 
in completing other review activities, including but not limited to 
requests related to the processing of general quality of care reviews, 
written beneficiary complaint reviews, medical necessity reviews, and 
expedited discharge appeal reviews. The average number of pages 
associated with each of these reviews varies greatly, and we have 
estimated an overall average of approximately 175 pages per request. 
The reimbursement rate for requests associated with these activities is 
$0.12 per page for PPS providers and $0.15 per page for practitioners 
and non-PPS providers. Assuming an overall average number of 175 pages 
for each record, we estimate that the total number of pages requested 
is approximately 17,500,000. Assuming that approximately 75 percent 
(13,125,000) of the pages are from practitioners and non-PPS providers, 
with the remaining 25 percent (4,375,000) from PPS providers, based on 
the $0.12 or $0.15 per page reimbursement rate, we estimate that the 
total costs would be approximately $1,968,750 and $525,000, 
respectively. If all these requests were fulfilled using a DVD or other 
electronic means, we estimate that the cost per page could be reduced 
to approximately $0.05 per page for PPS providers and $0.06 per page 
for practitioners and non-PPS providers. Thus, the estimated savings 
related to PPS providers would be approximately $306,250 ($525,000 - 
$218,750) and the estimated savings related to practitioners and non-
PPS providers would be approximately $1,181,250 ($1,968,750 - 
$787,500).
    With regard to mailing, we also believe the changes would 
significantly reduce the costs for other QIO review activities. 
Moreover, unlike the Hospital IQR and Hospital OQR Programs, the number 
of medical records requested for these other QIO review activities more 
closely mirrors the actual number of shipments made. For example, on 
average, the QIOs request 100,000 medical records related to these 
other activities, and we estimate that this equates to approximately 
82,000 shipments. We estimate that there is a corresponding decrease in 
the cost per shipment ($7 per shipment compared to $32.35 per shipment 
for the Hospital IQR and OQR Programs). If DVDs were used instead of 
paper copies of the medical records, we estimate saving of $164,000 
(82,000 x $7 - 82,000 x $5).
    Beginning with the QIOs' most recent scope of work, which began 
August 1, 2011, QIOs began offering immediate advocacy to Medicare 
beneficiaries for the resolution of certain types of oral complaints. 
We believe that cost savings will be realized as a result. In 
developing this new process, we had

[[Page 68554]]

several goals. One of these goals was to create a way for Medicare 
beneficiaries to obtain resolutions of complaints much faster than the 
traditional peer review process, which usually take over 158 days to 
complete because, inevitably, various timeframes throughout the review 
process are not met (for example, providers and practitioners sometimes 
take more time that allowed to respond to medical record requests or 
the opportunity for discussion). By comparison, we believe that 
immediate advocacy normally can be completed within 2 calendar days. 
However, this process could result in reductions of more than merely a 
reduction in days. Because immediate advocacy is completed without 
reviewing a beneficiary's medical record, QIOs would save the costs 
associated with requesting the records, which includes the labor, 
supplies (toner and paper), and mailing of the records. Moreover, 
although there may be some variation among QIOs, immediate advocacy 
would typically be carried out by a nurse or social worker, and, thus, 
the QIO can avoid the more expensive costs associated with the use of a 
physician reviewer.
    In addition, for a traditional complaint review, the QIO's peer 
reviewer completes three separate and distinct reviews (the interim 
initial determination, the final initial determination, and the 
reconsideration determination), each time reviewing the medical 
information and providing his/her conclusion about the quality of care 
provided. Moreover, the provider and/or practitioner who is the subject 
of the complaint will be brought into the complaint process each time 
to respond to the conclusions. With immediate advocacy, the nurse or 
social work would be involved once, early in the process, with the 
primary role being to listen to the beneficiary's concerns and then 
coordinate a resolution with the provider or practitioner, instead of 
merely reviewing information contained in the beneficiary's medical 
information. Not only would this process enable beneficiaries to obtain 
resolution of complaints quicker, but it would decrease the amount of 
time and energy practitioners and providers would devote to responding 
to the complaints. This is especially true for certain types of 
complaints where the issues involved are not even documented in the 
medical information the physician reviewers would review in the 
traditional complaint process. Typically, we have estimated a total 
cost per case of $960 for each case processed using the traditional 
peer review process. We estimate that, for those instances where 
immediate advocacy is used, the average cost per case would be 
approximately $87. On average, QIOs complete approximately 3,500 
complaint reviews each year, and we estimate that approximately 10 
percent of these reviews (350) would be resolved using immediate 
advocacy instead of the traditional peer review process. This would 
result in savings of $305,550 each year (($960 x 350 = $336,000)-($87 x 
350 = $30,450)).
    Comment: One commenter stated that the estimate of $87 for 
immediate advocacy ``seems unreasonably low for the actual staff time 
involved in these cases.''
    Response: We appreciate the comment. However, our ability to 
evaluate the substance of the comment is limited because the commenter 
did not give any specific information regarding why the commenter 
believes the estimated amount is unreasonably low. In identifying the 
estimated amount, we considered the significantly reduced time frame 
within which these cases are resolved, the fact that the types of 
complaints are less severe than what can be handled through the 
traditional complaint process, and the fact that QIOs will be able to 
use review analysts in completing these reviews compared to other more 
costly peer reviewers used as many as three times as part of the 
traditional complaint review process. While we recognize that the time 
needed to achieve an actual resolution may be longer, we estimated 
that, on average, the actual amount of time spent working on these 
cases to be approximately 70 minutes, and using an hourly rate of 
approximately $43.17 and adding in other costs, such as leave and other 
indirect costs, we believe $87 is appropriate. In light of the above, 
we see no need to adjust the estimated cost.
    The technical changes to the QIO regulations under section XVIII.F. 
of this final rule with comment period that we are making to improve 
the regulations reflect CMS' commitment to the principles of the 
President's Executive Order on Regulatory Reform, Executive Order 13563 
(January 18, 2011).
    Below is a table summarizing the savings associated with both of 
these provisions.
[GRAPHIC] [TIFF OMITTED] TR15NO12.100

d. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf, we have 
prepared three accounting statements to illustrate the impacts of this 
final rule with comment period. The first accounting statement, Table 
60 below, illustrates the classification of expenditures for the CY 
2013 estimated hospital OPPS incurred benefit impacts associated with 
the CY

[[Page 68555]]

2013 OPD fee schedule increase, based on the FY 2013 President's 
Budget. The second accounting statement, Table 61 below, illustrates 
the classification of expenditures associated with the 0.6 percent CY 
2013 update to the ASC payment system, based on the provisions of this 
final rule with comment period and the baseline spending estimates for 
ASCs in the FY 2013 President's Budget. The third accounting statement, 
Table 62 below, illustrates the estimated impact based on the 
provisions allowing QIOs to securely send and receive electronic 
versions of health information as well as the use of alternative 
dispute resolution process called immediate advocacy. Lastly, the three 
tables classify most estimated impacts as transfers.
[GRAPHIC] [TIFF OMITTED] TR15NO12.101

e. Effects of Requirements for the Hospital 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), section 
XVI. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72064 through 72110), and section XVI. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74451 through 74492), we discussed the 
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 CYs 2012 through 2014, 
respectively. In section XV. of this final rule with comment period, we 
adopted additional policies affecting the Hospital OQR Program.
    We determined that 114 hospitals did not meet the requirements to 
receive the full OPD fee schedule increase factor for CY 2012. Most of 
these hospitals (106 of the 114) received little or no OPPS payment on 
an annual basis and did not participate in the Hospital OQR Program. We 
estimate that 106 hospitals may not receive the full OPD fee schedule 
increase factor in CY 2014. 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 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

[[Page 68556]]

hospital's CY 2011 OPD fee schedule increase factor, but the failure to 
attain a validation score threshold would not.
    In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with 
comment period, we finalized our proposal to validate data submitted by 
800 hospitals of the approximately 3,200 participating hospitals for 
purposes of the CY 2012 Hospital OQR Program payment determination. We 
stated our belief that this approach was suitable for the CY 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 the CY 2012 OPPS/ASC final rule with comment period, we 
finalized 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 CY 
2011, CY 2012, and 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.
    In this final rule with comment period, for CY 2014 and subsequent 
years payment determinations, we are making some modifications to 
administrative requirements in extending a deadline to submit a Notice 
of Participation as well as to extraordinary circumstance waiver or 
extension and reconsideration processes to broaden the scope of 
personnel who can sign these requests. However, we are not making any 
modifications to our validation requirements. We expect these policies 
to have minimal impact on the program.
    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 
2015. We also are unable to estimate the number of hospitals that would 
fail the validation documentation submission requirement for the CY 
2015 payment update.
    The validation requirements for CY 2014 would result in medical 
record documentation for approximately 6,000 cases per quarter for CY 
2014, 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 CY 2014, we estimate that we 
will have expenditures of approximately $13,200 per quarter for CY 
2014. Because we will pay for the data collection effort, we believe 
that a requirement for medical record documentation for 7,300 total 
cases for up to 500 hospitals for CY 2014 represents a minimal burden 
to Hospital OQR Program participating hospitals.
    We are maintaining a 45-day timeframe for hospitals to submit 
requested medical record documentation to meet our validation 
requirement. 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.
f. Effects of the EHR Electronic Reporting Pilot
    Under section XV.K. of this final rule with comment period, we are 
allowing eligible hospitals and CAHs that are participating in the EHR 
Incentive Program to meet the CQM reporting requirement of the program 
in FY 2013 by participating in the Medicare EHR Incentive Program 
Electronic Reporting Pilot. This will facilitate the use of an 
electronic infrastructure that supports the use of EHRs by eligible 
hospitals and CAHs to meet the requirements in various CMS programs and 
reduce reporting burden simultaneously. Through this pilot, we have 
encouraged 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 to send, and for CMS, in the future, to receive, quality 
measures via hospital EHRs for the Hospital IQR Program's measures. 
Hospitals that choose to participate in the EHR Incentive Program by 
means of this pilot for the purpose of meeting the CQM reporting 
requirement of meaningful use will be taking those first steps toward 
reporting clinical quality data in such a way.
    There are no changes to the costs or impact in the 2012 OPPS/ASC 
final rule for the 2013 Medicare EHR Incentive Program Electronic 
Reporting Pilot for Eligible Hospitals and CAHs.
g. Effects of Proposals for the ASCQR Program
    In section XVI. of this final rule with comment period, for the 
ASCQR Program, we discuss public comment on our approach for future 
measures selection and development as well as on certain measures for 
potential future inclusion in the ASCQR Program measure set. We are 
finalizing our approach to future measure selection and development for 
the ASCQR Program. For the CY 2015 payment determination and subsequent 
calendar year payment determinations, we are adopting requirements for 
claims-based measures regarding the dates for submission and payment 
and data completeness. We also are finalizing our policy regarding how 
the payment rates will be reduced in CY 2014 and in subsequent calendar 
years for ASCs that fail to meet program requirements, and we are 
clarifying our policy on updating measures.
    We are unable at this time to estimate the number of ASCs that may 
not receive the full ASC annual payment update in CYs 2014, 2015, and 
2016. However, we do not expect our new policies to significantly 
affect the number of ASCs that do not receive a full annual payment 
update.
h. Effects of Updates to the IRF QRP
    In section XVII. of this final rule with comment period, we discuss 
our policy that, once we initially adopt a measure for the IRF QRP for 
a payment determination, that measure will be automatically adopted for 
all subsequent fiscal years' payment determinations or until such time 
as we might propose and finalize the measure's removal, suspension, or 
replacement.
    We also discuss how we will use the CAUTI measure previously 
finalized. We will use the CAUTI measure that was previously finalized 
in the FY 2012 IRF PPS final rule (76 FR 24214) with revisions which 
were made by the NQF after publication of the FY 2012 IRF PPS final 
rule. We will apply the revised

[[Page 68557]]

CAUTI measure for the FY 2014 reporting period, which affects the FY 
2012 APU, and each subsequent reporting period thereafter. We also are 
finalizing the use of a nonrisk-adjusted version of the NQF-endorsed 
pressure ulcer measure, which does not include public reporting of any 
nonrisk-adjusted pressure ulcer measure data.
    There are no changes to the costs or impact as stated in FY 2012 
IRF PPS final rule (76 FR 24214). IRFs will be required to submit CAUTI 
data on all patients that are admitted to their facility and pressure 
ulcer data only on those patients for which they are required to submit 
the IRF-PAI. This policy has not changed. Further, we do not expect our 
new policies to significantly affect the number of IRFs that do not 
receive a full annual payment update.

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. We estimate 
that this final rule with comment period may have a significant impact 
on approximately 2,053 hospitals with voluntary ownership. 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 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 604 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 100 or fewer beds. We estimate that this final 
rule with comment period may have a significant impact on approximately 
708 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 $139 million. This final rule with 
comment period does not mandate any requirements for State, local, or 
tribal governments, or for the private sector.

D. Conclusion

    The changes we are making in this final rule with comment period 
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 2013. 
Table 57 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 2013, 
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, 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 more significant gains and others will experience modest 
losses in OPPS payments in CY 2013. We estimate that hospitals for whom 
DSH data are not available (non-IPPS, largely urban hospitals) will 
experience an increase of 8.3 percent due to increased payments for 
partial hospitalization, group psychotherapy and hemodialysis services. 
CMHCs will see an overall decrease in payment of 4.4 percent as a 
result of a decrease in their estimated costs.
    The updates to the ASC payment system for CY 2013 will affect each 
of the approximately 5,300 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 who are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the ASC payment system, 
and the extent to which the ASC provides a different set of procedures 
in the coming year. Table 58 demonstrates the estimated distributional 
impact among ASC surgical specialties of the MFP-adjusted CPI-U update 
factor of 0.6 percent for CY 2013.

XXIII. 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 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 57 of this final rule with comment period, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) will increase by 1.9 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. The analyses we have provided in this section of this final rule 
with comment period, in conjunction with the remainder of this 
document, demonstrate 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 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 476

    Health care, Health professional, Health record, Peer Review 
Organization (PRO), Penalties, Privacy, Reporting and recordkeeping 
requirements.

42 CFR Part 478

    Administrative practice and procedure, Health care, Health

[[Page 68558]]

professions, Peer Review Organizations (PRO), Reporting and 
recordkeeping requirements.

42 CFR Part 480

    Health care, Health professions, Health records, Peer Review 
Organizations (PRO), Privacy, 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 416--AMBULATORY SURGICAL SERVICES

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

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


0
2. Section 416.160 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  416.160  Basis and scope.

    (a) * * *
    (1) Section 1833(i)(2)(D) of the Act requires the Secretary to 
implement a revised payment system for payment of surgical services 
furnished in ASCs. The statute requires that, in the year such system 
is implemented, the system shall be designed to result in the same 
amount of aggregate expenditures for such services as would be made if 
there was no requirement for a revised payment system. The revised 
payment system shall be implemented no earlier than January 1, 2006, 
and no later than January 1, 2008. The statute provides that the 
Secretary may implement a reduction in any annual update for failure to 
report on quality measures as specified by the Secretary. The statute 
also requires that, for CY 2011 and each subsequent year, any annual 
update to the ASC payment system, after application of any reduction in 
the annual update for failure to report on quality measures as 
specified by the Secretary, be reduced by a productivity adjustment. 
There shall be no administrative or judicial review under section 1869 
of the Act, section 1878 of the Act, or otherwise of the classification 
system, the relative weights, payment amounts, and the geographic 
adjustment factor, if any, of the revised payment system.
* * * * *

0
3. Section 416.171 is amended by--
0
a. Redesignating paragraph (a)(2)(iii) as paragraph (a)(2)(iv) and 
revising it.
0
b. Adding new paragraph (a)(2)(iii).
    The revision and addition read as follows:


Sec.  416.171  Determination of payment rates for ASC services.

    (a) * * *
    (2) * * *
    (iii) For CY 2014 and subsequent calendar years, the Consumer Price 
Index for All Urban Consumers update determined under paragraph 
(a)(2)(ii) of this section is reduced by 2.0 percentage points for an 
ASC that fails to meet the standards for reporting of ASC quality 
measures as established by the Secretary for the corresponding calendar 
year.
    (iv) Productivity adjustment. (A) For calendar year 2011 and 
subsequent years, the Consumer Price Index for All Urban Consumers 
determined under paragraph (a)(2)(ii) of this section, after 
application of any reduction under paragraph (a)(2)(iii) of this 
section, is reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    (B) The application of the provisions of paragraph (a)(2)(iv)(A) of 
this section may result in the update being less than zero percent for 
a year, and may result in payment rates for a year being less than the 
payment rates for the preceding year.
* * * * *

0
4. Section 416.195 is amended by revising paragraphs (a)(2) and (a)(4) 
introductory text to read as follows:


Sec.  416.195  Determination of membership in new classes of new 
technology IOLs.

    (a) * * *
    (2) The IOL shall have a new lens characteristic in comparison to 
currently available IOLs. The labeling, which must be approved by FDA, 
shall contain a claim of a specific clinical benefit imparted by the 
new lens characteristic.
* * * * *
    (4) Any specific clinical benefit referred to in paragraph (a)(2) 
of this section must be supported by evidence that demonstrates that 
the IOL results in a measurable, clinically meaningful, improved 
outcome. Improved outcomes include:
* * * * *

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

0
5. 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
6. Section 419.2 is amended by revising paragraph (b) introductory text 
to read as follows:


Sec.  419.2  Basis of payment.

* * * * *
    (b) Determination of hospital outpatient prospective payment rates: 
Packaged costs. The prospective payment system establishes a national 
payment rate, standardized for geographic wage differences, 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. In general, these costs include, but are not limited 
to, the following items and services, the payments for which are 
packaged into the payments for the related procedures or services.
* * * * *

0
7. Section 419.31 is amended by revising paragraphs (a)(1), (b), and 
(c)(2) to read as follows:


Sec.  419.31  Ambulatory payment classification (APC) system and 
payment weights.

    (a) * * *
    (1) CMS classifies outpatient services and procedures that are 
comparable clinically and in terms of resource use into APC groups. 
Except as specified in paragraph (a)(2) of this section, items and 
services within a group are not comparable with respect to the use of 
resources if the highest geometric mean cost for an item or service 
within the group is more than 2 times greater than the lowest geometric 
mean cost for an item or service within the group.
* * * * *
    (b) APC weighting factors. (1) Using hospital outpatient claims 
data from calendar year 1996 and data from the most recent available 
hospital cost reports, CMS determines the geometric mean costs for the 
services and procedures within each APC group.
    (2) CMS assigns to each APC group an appropriate weighting factor 
to reflect the relative geometric mean costs for the services within 
the APC group compared to the geometric mean costs for the services in 
all APC groups.
    (c) * * *
    (2) CMS standardizes the geometric mean costs determined in 
paragraph

[[Page 68559]]

(b)(1) of this section by adjusting for variations in hospital labor 
costs across geographic areas.

0
8. Section 419.32 is amended by revising paragraph (b)(1)(iv)(A) and 
adding paragraph (b)(1)(iv)(B)(4) to 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 OPD fee 
schedule increase factor, which, subject to the adjustments specified 
in paragraph (b)(1)(iv)(B) of this section, is the hospital inpatient 
market basket percentage increase applicable under section 
1886(b)(3)(B)(iii) of the Act.
    (B) * * *
    (4) For calendar year 2013, a multifactor productivity adjustment 
(as determined by CMS) and 0.1 percentage point.
* * * * *

0
9. Section 419.70 is amended by revising paragraph (d)(2) introductory 
text and adding paragraph (d)(7) to read as follows:


Sec.  419.70  Transitional adjustments to limit decline in payments.

* * * * *
    (d) * * *
    (2) Temporary treatment for small rural hospitals on or after 
January 1, 2006. For covered hospital outpatient services furnished in 
a calendar year from January 1, 2006 through December 31, 2012, 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, 2011, and 2012 if the hospital--
* * * * *
    (7) Temporary treatment of small sole community hospitals on or 
after January 1, 2012 through December 31, 2012. (i) For covered 
hospital outpatient services furnished on or after January 1, 2012 
through December 31, 2012, 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--
    (A) 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; and
    (B) Has 100 or fewer beds as defined in Sec.  412.105(b) of this 
chapter, except as provided in paragraph (d)(7)(ii) of this section.
    (ii) For covered hospital outpatient services furnished on or after 
January 1, 2012 through February 29, 2012, the bed size limitation 
under paragraph (d)(7)(i)(B) of this section does not apply.
* * * * *

PART 476--UTILIZATION AND QUALITY CONTROL REVIEW

0
10. The authority for Part 476 continues to read as follows:

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


0
11. Section 476.1 is amended by--
0
a. Removing the definition of ``Active staff privileges''.
0
b. Adding definitions of ``Appointed representative'', ``Authorized 
representative'', ``Beneficiary complaint'', ``Beneficiary complaint 
review'', ``Beneficiary representative'', ``General quality of care 
reviews'', ``Gross and flagrant violation'', ``Immediate advocacy'', 
``Quality improvement initiative'', ``Quality of care concern'', 
``Quality of care review'', ``Significant quality of care concern'', 
and ``Substantial violation in a substantial number of cases''.
0
c. Revising the definition of ``Preadmission certification''.
    The additions and revisions read as follows:


Sec.  476.1  Definitions.

* * * * *
    Appointed representative means an individual appointed by a 
Medicare beneficiary to represent the beneficiary in the beneficiary 
complaint review process.
    Authorized representative means an individual authorized, under 
State or other applicable law, to act on behalf of a Medicare 
beneficiary. An authorized representative has all of the rights and 
responsibilities of a Medicare beneficiary throughout the processing of 
a beneficiary complaint.
    Beneficiary complaint means a complaint by a Medicare beneficiary 
or a Medicare beneficiary's representative alleging that the quality of 
Medicare covered services received by the beneficiary did not meet 
professionally recognized standards of care. A complaint may consist of 
one or more quality of care concerns.
    Beneficiary complaint review means a review conducted by a QIO in 
response to the receipt of a written beneficiary complaint to determine 
whether the quality of Medicare covered services provided to the 
beneficiary was consistent with professionally recognized standards of 
health care.
    Beneficiary representative means an individual identified as an 
authorized or appointed representative of a Medicare beneficiary.
* * * * *
    General quality of care review means a review conducted by a QIO to 
determine whether the quality of Medicare covered services provided to 
a Medicare beneficiary was consistent with professionally recognized 
standards of health care. A general quality of care review may be 
carried out as a result of a referral to the QIO or a QIO's 
identification of a potential concern during the course of another 
review activity or through the analysis of data.
    Gross and flagrant violation means a violation of an obligation 
resulting from inappropriate or unnecessary services, services that do 
not meet recognized professional standards of care, or services that 
are not supported by evidence of medical necessity or quality as 
required by the QIO. The violation must have occurred in one or more 
instances that present an imminent danger to the health, safety, or 
well-being of a program patient or places the program patient 
unnecessarily in high-risk situations.
* * * * *
    Immediate advocacy means an informal alternative dispute resolution 
process used to quickly resolve an oral complaint a Medicare 
beneficiary or his or her representation has regarding the quality of 
Medicare covered health care received. This process involves a QIO 
representative's direct contact with the provider and/or practitioner.
* * * * *
    Preadmission certification means a favorable determination, 
transmitted to the hospital and the fiscal intermediary or the Medicare 
administrative contractor, approving the patient's admission for 
payment purposes.
* * * * *
    Quality improvement initiative means any formal activity designed 
to serve as a catalyst and support for quality improvement that uses 
proven methodologies to achieve these improvements. The improvements 
may relate to safety, health care, health and value and involve 
providers, practitioners, beneficiaries, and/or communities.
    Quality of care concern means a concern that care provided did not 
meet

[[Page 68560]]

a professionally recognized standard of health care. A general quality 
of care review or a beneficiary complaint review may cover a single or 
multiple concerns.
    Quality of care review means a review conducted by a QIO to 
determine whether the quality of Medicare covered services provided to 
beneficiaries was consistent with professionally recognized standards 
of health care. A quality of care review can either be a beneficiary 
complaint review or a general quality of care review.
* * * * *
    Significant quality of care concern means a determination by the 
QIO that the quality of care provided to a Medicare beneficiary did not 
meet the standard of care and, while not a gross and flagrant or 
substantial violation of the standard, represents a noticeable 
departure from the standard that could reasonably be expected to have a 
negative impact on the health of a beneficiary.
    Substantial violation in a substantial number of cases means a 
pattern of providing care that is inappropriate, unnecessary, or does 
not meet recognized professional standards of care, or is not supported 
by the necessary documentation of care as required by the QIO.
* * * * *
0
12. Section 476.70 is revised to read as follows:


Sec.  476.70  Statutory bases and applicability.

    (a) Statutory bases. Sections 1154, 1866(a)(1)(F), and 1886(f)(2) 
of the Act require that a QIO review those services furnished by 
physicians, other health care professionals, providers and suppliers as 
specified in its contract with the Secretary.
    (b) Applicability. The regulations in this subpart apply to review 
conducted by a QIO and its subcontractors.

0
13. Section 476.71 is amended by--
0
a. Revising paragraph (a)(2).
0
b. In paragraph (b), removing the reference ``Sec.  405.330(b)'' and 
adding in its place the reference ``Sec.  411.400(b) of this chapter''.
0
c. Revising paragraph (c)(1).
    The revisions read as follows:


Sec.  476.71  QIO review requirements.

    (a) * * *
    (2) Whether the quality of the services meets professionally 
recognized standards of health care, as determined through the 
resolution of oral beneficiary complaints as specified in Sec.  
476.110, written beneficiary complaints as specified in Sec.  476.120, 
or the completion of general quality of care reviews as specified in 
Sec.  476.160.
* * * * *
    (c) * * *
    (1) The QIO must review at least a random sample of hospital 
discharges each quarter and submit new diagnostic and procedural 
information to the Medicare administrative contractor, fiscal 
intermediary, or carrier if it determines that the information 
submitted by the hospital was incorrect.
* * * * *


Sec.  476.72  [Removed]

0
14. Section 476.72 is removed.


Sec.  476.73  [Amended]

0
15. In Sec.  476.73--
0
a. In paragraph (a), first sentence, the phrase ``and Medicare fiscal 
intermediaries and carriers.'' is removed and the phrase ``Medicare 
administrative contractors, fiscal intermediaries, and carriers.'' is 
added in its place.
0
b. In paragraph (b)(1), the reference ``Sec.  466.78(b)(3)'' is removed 
and the reference ``Sec.  476.78(b)(3)'' is added in its place.


Sec.  476.74  [Amended]

0
16. In Sec.  476.74--
0
a. In paragraph (b), the phrase ``appropriate Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``appropriate 
Medicare administrative contractor, fiscal intermediary, or carrier'' 
is added in its place.
0
b. In paragraph (c)(1), the phrase ``Medicare fiscal intermediaries and 
carriers'' is removed, and the phrase ``Medicare administrative 
contractors, fiscal intermediaries, and carriers'' is added in its 
place.
0
c. In paragraph (e), the reference ``Sec.  405.332'' is removed and the 
reference ``Sec.  411.402'' is added in its place.

0
17. Section 476.78 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraphs (b)(2)(i) and (ii).
    The revisions read as follows:


Sec.  476.78  Responsibilities of providers and practitioners.

* * * * *
    (b) * * *
    (2) * * *
    (i) Except as provided under Sec. Sec.  476.130(b) and 476.160(b), 
relating to beneficiary complaint reviews and general quality of care 
reviews, photocopy and deliver to the QIO all required information 
within 14 calendar days of a request. A QIO is authorized to require 
the receipt of the medical information earlier than the 14-day 
timeframe if the QIO makes a preliminary determination that the review 
involves a potential gross and flagrant or substantial violation as 
specified in Part 1004 of this title and circumstances warrant earlier 
receipt of the medical information. A practitioner's or provider's 
failure to comply with the request for medical information within the 
established timeframe may result in the QIO taking action in accordance 
with Sec.  476.90.
    (ii) Send secure transmission of an electronic version of medical 
information, if available, subject to the QIO's ability to support 
receipt and transmission of the electronic version. Providers and 
practitioners must deliver electronic versions of medical information 
within 14 calendar days of the request. A QIO is authorized to require 
the receipt of the medical information earlier than the 14-day 
timeframe if the QIO makes a preliminary determination that the review 
involves a potential gross and flagrant or substantial violation as 
specified in Part 1004 of this title and circumstances warrant earlier 
receipt of the medical information. A practitioner's or provider's 
failure to comply with the request for medical information within the 
established timeframe may result in the QIO taking action in accordance 
with Sec.  476.90.
* * * * *


Sec.  476.80  [Amended]

0
18. In Sec.  476.80--
0
a. In the section heading and paragraphs (b)(1) introductory text and 
(c)(1) (two places), the phrase ``Medicare fiscal intermediaries and 
carriers'' is removed and the phrase ``Medicare administrative 
contractors, fiscal intermediaries, and carries'' is added in its 
place.
0
b. In paragraph (a) introductory text, the phrase ``Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``Medicare 
administrative contractor, fiscal intermediary, or carrier'' is added 
in its place.
0
c. In paragraphs (a)(1), (a)(2) introductory text (two places), 
(c)(3)(ii), (d)(1), and (d)(2), the phrase ``fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
0
d. In paragraph (e), in the paragraph heading and in paragraphs (e)(1) 
and (e)(2), the phrase ``fiscal intermediary'' is removed and the 
phrase ``Medicare administrative contractor or fiscal intermediary'' is 
added in its place.

[[Page 68561]]

Sec.  476.86  [Amended]

0
19. In Sec.  476.86--
0
a. In paragraph (a)(1)(iii), the reference ``Sec.  405.310(g) or Sec.  
405.310(k)'' is removed and the reference ``Sec.  411.15(g) or Sec.  
411.15(k)'' is added in its place.
0
b. In paragraph (a)(2) and (d), the phrase ``Medicare fiscal 
intermediaries and carriers'' is removed and the phrase ``Medicare 
administrative contractors, fiscal intermediaries, and carriers'' is 
added in its place.
0
c. In paragraph (c) introductory text, the phrase ``Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``Medicare 
administrative contractor, fiscal intermediary, or carrier'' is added 
in its place.
0
d. In paragraph (c)(1), the phrase ``fiscal intermediary or carrier'' 
is removed and the phrase ``Medicare administrative contractor, fiscal 
intermediary, or carrier'' is added in its place.
0
e. In paragraph (e), the phrase ``intermediaries and carriers'' is 
removed and the phrase ``Medicare administrative contractors, fiscal 
intermediaries, and carriers'' is added in its place.
0
f. In paragraph (f), the reference ``part 473'' is removed and the 
reference ``part 478'' is added in its place.


Sec.  476.94  [Amended]

0
20. In Sec.  476.94--
0
a. In paragraph (a)(1)(iv), the phrase ``fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
0
b. In paragraph (d), the phrase ``Medicare fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
0
c. In paragraph (c)(3), the reference ``part 473'' is removed and the 
reference ``part 478'' is added in its place.


Sec.  476.98  [Amended]

0
21. In Sec.  476.98, in paragraph (a)(1), the phrase ``with active 
staff privileges in one or more hospitals'' is removed.

0
22. Section 476.104 is amended by revising paragraph (a) to read as 
follows:


Sec.  476.104  Coordination of activities.

* * * * *
    (a) Medicare administrative contractors, fiscal intermediaries, and 
carriers.
* * * * *

0
23. Sections 476.110, 476.120, 476.130, 476.140, 476.150, 476.160, 
476.170 are added to subpart C to read as follows:

Subpart C--Review Responsibilities of Utilization and Quality 
Control Quality Improvement Organizations (QIOs)

Sec.
* * * * *
476.110 Use of immediate advocacy to resolve oral beneficiary 
complaints.
476.120 Submission of written beneficiary complaints.
476.130 Beneficiary complaint review procedures.
476.140 Beneficiary complaint reconsideration procedures.
476.150 Abandoned complaints and reopening rights.
476.160 General quality of care review procedures.
476.170 General quality of care reconsideration procedures.
* * * * *


Sec.  476.110  Use of immediate advocacy to resolve oral beneficiary 
complaints.

    (a) Immediate advocacy. A QIO may offer the option of resolving an 
oral complaint through the use of immediate advocacy if:
    (1) The complaint is received not later than 6 months from the date 
on which the care giving rise to the complaint occurred.
    (2) After initial screening of the complaint, the QIO makes a 
preliminary determination that--
    (i) The complaint is unrelated to the clinical quality of health 
care itself but relates to items or services that accompany or are 
incidental to the medical care and are provided by a practitioner and/
or provider; or
    (ii) The complaint, while related to the clinical quality of health 
care received by the beneficiary, does not rise to the level of being a 
gross and flagrant, substantial, or significant quality of care 
concern.
    (3) The beneficiary agrees to the disclosure of his or her name to 
the involved provider and/or practitioner.
    (4) All parties orally consent to the use of immediate advocacy.
    (5) All parties agree to the limitations on redisclosure set forth 
in Sec.  480.107 of this subchapter.
    (b) Discontinuation of immediate advocacy. The QIO or either party 
may discontinue participation in immediate advocacy at any time.
    (1) The QIO must inform the parties that immediate advocacy will be 
discontinued; and
    (2) The beneficiary must be informed of his or her right to submit 
a written complaint in accordance with the procedures in Sec.  476.120.
    (c) Confidentiality requirements. All communications, written and 
oral, exchanged during the immediate advocacy process must not be 
redisclosed without the written consent of all parties.
    (d) Abandoned complaints. If any party fails to participate or 
otherwise comply with the requirements of the immediate advocacy 
process, the QIO may determine that the complaint has been abandoned 
and--
    (1) Inform the parties that immediate advocacy will be 
discontinued; and
    (2) Inform the Medicare beneficiary of his or her right to submit a 
written complaint in accordance with the procedures in Sec.  476.120.


Sec.  476.120  Submission of written beneficiary complaints.

    (a) Timeframe for submission of written complaints. A QIO shall be 
responsible for conducting a review of any written complaint received 
from a Medicare beneficiary or a Medicare beneficiary's representative 
about the quality of health care if the complaint is received not later 
than 3 years from the date on which the care giving rise to the 
complaint occurred.
    (1) A written complaint includes a complaint submitted 
electronically to the QIO.
    (2) In those instances where a Medicare beneficiary contacts the 
QIO regarding a complaint but declines to submit the complaint in 
writing and immediate advocacy has not been offered, the QIO may 
complete a general quality of care review in accordance with Sec.  
476.160 if the QIO makes a preliminary determination that the complaint 
involves a potential gross and flagrant, substantial or significant 
quality of care concern.
    (b) New concerns raised by a Medicare beneficiary. If a Medicare 
beneficiary raises new concerns relating to the same complaint after 
the completion of the interim initial determination in Sec.  
476.130(c), the concerns will be processed as a new complaint. The QIO 
may process new concerns raised after the receipt of the written 
complaint as part of the same complaint, provided they are received 
prior to the completion of the interim initial determination. Even if a 
concern is received before the interim initial determination, the QIO 
can address it as a separate complaint if the QIO determines that this 
is warranted by the circumstances.


Sec.  476.130  Beneficiary complaint review procedures.

    (a) Scope of the QIO review. In completing its review, the QIO 
shall consider any information and materials submitted by the Medicare 
beneficiary or his or her representative and any information submitted 
by the provider

[[Page 68562]]

and/or practitioner. All information obtained by the QIO that fits 
within the definition of ``confidential information'' under Sec.  
480.101, will be held by the QIO as confidential.
    (1) The QIO's review will focus on the episode of care from which 
the complaint arose and address the specific concerns identified by the 
beneficiary and any additional concerns identified by the QIO. The QIO 
may separate concerns into different complaints if the QIO determine 
that the concerns relate to different episodes of care.
    (2) The QIO will use evidence-based standards of care to the 
maximum extent practicable. If no standard of care exists, the QIO will 
use available norms, best practices and established guidelines to 
establish the standard that will be used in completing the review. The 
QIO's determination regarding the standard used is not subject to 
appeal.
    (b) Medical information requests. (1) Upon request by the QIO, a 
provider or practitioner must deliver all medical information requested 
in response to a Medicare beneficiary complaint within 14 calendar days 
of the request. A QIO is authorized to require the receipt of the 
medical information sooner if the QIO make a preliminary determination 
that the complaint involves a potential gross and flagrant or 
substantial quality of care concern as specified in Part 1004 of this 
title and circumstances warrant earlier receipt of the medical 
information. A practitioner's or provider's failure to comply with the 
request for medical information within the established timeframe may 
result in the QIO taking action in accordance with Sec.  476.90.
    (2) In requesting medical information in response to a Medicare 
beneficiary complaint, the QIO must notify the practitioner and/or 
provider that the medical record is being requested in response to a 
beneficiary complaint, explain the practitioner's and/or provider's 
right to discuss the QIO's interim initial determination, and request 
the name of a contact person in order to ensure timely completion of 
the discussion.
    (c) Interim initial determination. The QIO peer reviewer will 
complete the review and the practitioner and/or provider will be 
notified of the interim initial determination within 10 calendar days 
of the receipt of all medical information.
    (1) A practitioner and provider will be notified by telephone of 
the opportunity to discuss the QIO's interim initial determination with 
the QIO in those situations where the peer reviewer determines that the 
quality of services does not meet professionally recognized standards 
of care for any concern in the complaint. The discussion must be held 
no later than 7 calendar days from the date of the initial offer.
    (2) The interim initial determination becomes the final initial 
determination if the discussion is not completed timely as a result of 
the practitioner's and/or provider's failure to respond.
    (3) Written statements in lieu of a discussion must be received no 
later than 7 calendar days from the date of the initial offer.
    (4) In rare circumstances, the QIO may grant additional time to 
complete the discussion or submission of a written statement in lieu of 
a discussion.
    (d) Final initial determination. The QIO must issue written 
notification of its final initial determination in those cases in which 
the QIO has determined that care met professionally recognized 
standards, as well as in those cases in which the QIO determined that 
standards were not met and the opportunity for discussion has been 
completed.
    (1) No later than 3 business days after completion of its review, 
or for cases in which the standard was not met, no later than 3 
business days after the discussion or receipt of the provider's and/or 
practitioner's written statement, the QIO will notify (by telephone) 
the beneficiary and the provider/practitioner of its final initial 
determination and of the right to request a reconsideration of the 
QIO's final initial determination.
    (2) Written notice of the QIO's final initial determination will be 
forwarded to all parties within 5 calendar days after completion of its 
review, and must include:
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns; 
and
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings, including references to medical information 
and, if held, the discussion with the involved practitioner and/or 
provider.


Sec.  476.140  Beneficiary complaint reconsideration procedures.

    (a) Right to request a reconsideration. Beginning with complaints 
filed after July 31, 2014, a Medicare beneficiary, a provider, or a 
practitioner who is dissatisfied with a QIO's final initial 
determination may request a reconsideration by the QIO.
    (1) The reconsideration request must be received by the QIO, in 
writing or by telephone, no later than 3 calendar days following 
initial notification of the QIO's determination. If the QIO is unable 
to accept a request, the request must be submitted by noon of the next 
day the QIO is available to accept a request.
    (2) The Medicare beneficiary, or his or her representative, and the 
practitioner and/or provider must be available to answer any questions 
or supply any information that the QIO requests in order to conduct its 
reconsideration.
    (3) The QIO must offer the Medicare beneficiary and the 
practitioner and/or provider an opportunity to provide further 
information. A Medicare beneficiary, a practitioner, and a provider 
may, but are not required to, submit evidence to be considered by the 
QIO in making its reconsideration decision.
    (b) Issuance of the QIO's final decision. No later than 5 calendar 
days after receipt of the request for a reconsideration, or, if later, 
5 calendar days after receiving any medical or other records needed for 
such reconsideration, the QIO must complete the review and notify the 
beneficiary and the practitioner/provider of its decision.
    (1) The QIO's initial notification may be done by telephone, 
followed by the mailing of a written notice by noon of the next 
calendar day that includes--
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns;
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings; and
    (iv) A statement that the letter represents the QIO's final 
determination and that there is no right to further appeal.
    (2) The QIO may provide information to the beneficiary, 
practitioner, and provider regarding opportunities for improving the 
care given to patients based on the specific findings of its review and 
the development of quality improvement initiatives.


Sec.  476.150  Abandoned complaints and reopening rights.

    (a) Abandoned complaints. If a Medicare beneficiary fails to 
participate or otherwise comply with the requirements of the 
beneficiary complaint review process and the QIO does not have 
sufficient information to complete its review, the QIO may determine 
that the complaint has been abandoned and--
    (1) Inform the parties that its complaint review will be 
discontinued; and

[[Page 68563]]

    (2) Inform the beneficiary of his or her right to resubmit a 
written complaint in accordance with the procedures in Sec.  476.120.
    (b) Reopening complaint reviews. A QIO may reopen a Medicare 
beneficiary complaint review using the same procedures that the QIO 
would use for reopening initial denial determinations and changes as a 
result of DRG validation, as described in Sec.  476.96.


Sec.  476.160  General quality of care review procedures.

    (a) Scope of the QIO review. A QIO may conduct a general quality of 
care review in accordance with section 1154(a)(1)(B) of the Act.
    (1) A QIO may conduct general quality of care reviews based on--
    (i) Concerns identified during the course of other QIO review 
activities;
    (ii) Referrals from other sources, including but not limited to 
individuals, contractors, other Federal or State agencies; or
    (iii) Analysis of data.
    (2) The QIO's review will focus on all concerns identified by the 
QIO and/or identified by those who have referred or reported the 
concerns, with consideration being given to the episode of care related 
to the concerns.
    (3) The QIO will use evidence-based standards of care to the 
maximum extent practicable. If no standard of care exists, the QIO must 
use available norms, best practices, and established guidelines to 
establish the standard that will be used in completing the review. The 
QIO's determination regarding the standard used is not subject to 
appeal.
    (b) Medical information requests. Upon request by the QIO, a 
provider or practitioner must deliver all medical information requested 
within 14 calendar days of the request. A QIO is authorized to require 
the receipt of the medical information sooner if the QIO makes a 
preliminary determination that the review involves a potential gross 
and flagrant or substantial quality of care concern and circumstances 
warrant earlier receipt of the medical information. A practitioner's or 
provider's failure to comply with the request for medical information 
within the established timeframe may result in the QIO taking action in 
accordance with Sec.  476.90.
    (c) Initial determination. The QIO peer reviewer will complete the 
review and the practitioner and/or provider will be notified of the 
initial determination in writing within 10 calendar days of the receipt 
of all medical information.


Sec.  476.170  General quality of care reconsideration procedures.

    (a) Right to request a reconsideration. Beginning with reviews 
initiated after July 31, 2014, a provider or practitioner who is 
dissatisfied with a QIO's initial determination may request a 
reconsideration by the QIO.
    (1) The reconsideration request must be received by the QIO, in 
writing or by telephone, by no later than 3 calendar days following 
receipt of the QIO's initial determination. If the QIO is unable to 
accept the request, the request must be submitted by noon of the next 
day the QIO is available to accept a request.
    (2) The practitioner or provider must be available to answer any 
questions or supply any information that the QIO requests in order to 
conduct its reconsideration.
    (3) The QIO must offer the practitioner or provider an opportunity 
to provide further information. A practitioner or provider may, but is 
not required to, submit evidence to be considered by the QIO in making 
its reconsideration decision.
    (b) Issuance of the QIO's final decision. No later than 5 calendar 
days after receipt of the request for a reconsideration, or, if later, 
5 calendar days after receiving any medical or other records needed for 
such reconsideration, the QIO must complete the review and notify the 
practitioner or provider of its decision.
    (1) The QIO's initial notification may be done by telephone, 
followed by the mailing of a written notice by noon the next calendar 
day that includes:
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns;
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings; and
    (iv) A statement that the letter represents the QIO's final 
determination and that there is no right to further appeal.
    (2) The QIO may provide information regarding opportunities for 
improving the care given to patients based on the specific findings of 
its review.

PART 478--RECONSIDERATIONS AND APPEALS

0
24. The authority citation for Part 478 continues to read as follows:

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


Sec.  478.15  [Amended]

0
25. In Sec.  478.15(b), the reference ``Sec. Sec.  473.18 through 
473.36, and 473.48(a) and (c)'' is removed and the reference 
``Sec. Sec.  478.18 through 478.36 and 478.48(a) and (c)'' is added in 
its place.


Sec.  478.16  [Amended]

0
26. In Sec.  478.16, the reference ``Sec.  473.14(a)'' is removed and 
the reference ``Sec.  478.14'' is added in its place.


Sec.  478.20  [Amended]

0
27. In Sec.  478.20--
0
a. In paragraph (a)(1), the reference ``Sec.  473.22'' is removed and 
the reference ``Sec.  478.22'' is added in its place.
0
b. In paragraph (b), the reference ``Sec.  473.22'' is removed and the 
reference ``Sec.  478.22'' is added in its place.
0
c. In paragraph (c), the reference ``Sec.  473.18(c)'' is removed and 
the reference ``Sec.  478.18(c)'' is added in its place.


Sec.  478.28  [Amended]

0
28. In Sec.  478.28(a), the reference ``Sec.  466.98'' is removed and 
the reference ``Sec.  476.98'' is added in its place.


Sec.  478.38  [Amended]

0
29. In Sec.  478.38--
0
a. In paragraph (a), the reference ``Sec.  473.40'' is removed and the 
reference ``Sec.  478.40'' is added in its place.
0
b. In paragraph (b), the reference ``Sec.  473.48'' is removed and the 
reference ``Sec.  478.48'' is added in its place.


Sec.  478.42  [Amended]

0
30. In Sec.  478.42--
0
a. In paragraph (a) introductory text, the reference ``Sec.  473.40'' 
is removed and the reference ``Sec.  478.40'' is added in its place.
0
b. In paragraph (b), the reference ``Sec.  473.22'' is removed and the 
reference ``Sec.  478.22'' is added in its place.


Sec.  478.48  [Amended]

0
31. In Sec.  478.48--
0
a. In paragraph (a)(1), the reference ``Sec.  473.15'' is removed and 
the reference ``Sec.  478.15'' is added in its place.
0
b. In paragraph (a)(2) introductory text, the reference ``Sec.  
473.15'' is removed and the reference ``Sec.  478.15'' is added in its 
place.

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE QUALITY 
IMPROVEMENT ORGANIZATION REVIEW INFORMATION

0
32. The authority citation for Part 480 continues to read as follows:


[[Page 68564]]


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


Sec.  480.105  [Amended]

0
33. In Sec.  480.105(a), the phrase ``Medicare fiscal intermediaries'' 
is removed and the phrase ``Medicare administrative contractors or 
fiscal intermediaries'' is added in its place.

0
34. Section 480.107 is amended by adding paragraph (l) to read as 
follows:


Sec.  480.107  Limitations on redisclosure.

* * * * *
    (l) Redisclosures of information that is confidential because it 
identifies the parties involved in immediate advocacy may occur if all 
parties have consented to the redisclosure, as provided for under Sec.  
476.110(c) of this chapter.

0
35. Section 480.132 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(1)(iii), and (a)(2).
0
b. Revising paragraph (b)(1).
0
c. Revising paragraph (c).
0
d. Removing the undesignated text following paragraph (c)(3).
    The revisions read as follows.


Sec.  480.132  Disclosure of information about patients.

    (a) General requirements for disclosure. Except as specified in 
Sec. Sec.  476.130(d) and 476.140(b) of this chapter and paragraph (b) 
of this section, a QIO must--
    (1) * * *
    (iii) Except as provided under paragraph (b) of this section, all 
other patient and practitioner identifiers have been removed.
    (2) Make disclosure to the patient or the patient's representative 
within 14 calendar days of receipt of the request.
    (b) * * *
    (1) If a request for information is in connection with an initial 
denial determination under section 1154(a)(2) of the Act, the QIO must 
provide only the information used to support that determination in 
accordance with the procedures for disclosure of information related to 
determinations under Sec.  478.24, including relevant practitioner 
identifiers.
* * * * *
    (c) Manner of disclosure. (1) The QIO must disclose the patient 
information directly to the patient or the patient's representative 
when the representative has been authorized or appointed to receive 
that information.
    (2) In identifying a representative, the QIO must follow pertinent 
State law requirements regarding the designation of health care 
representatives and agents. If the patient is unable to designate a 
representative and the identity of the representative is not already 
dictated by State law, the QIO must disclose the information to a 
person whom the QIO determines is responsible for the patient.
* * * * *

0
36. Section 480.133 is amended by--
0
a. Adding paragraph (a)(2)(iv).
0
b. In paragraph (b)(1), removing the reference to ``Part 466'' and 
adding the reference ``Part 476'' in its place; and removing the 
reference ``Sec.  473.24'' and adding the reference ``Sec.  478.24 of 
this subchapter'' is its place.
    The addition reads as follows:


Sec.  480.133  Disclosure of information about practitioners, 
reviewers, and institutions.

    (a) * * *
    (2) * * *
    (iv) A QIO is not required to obtain the consent of a practitioner 
or provider prior to the release of information to a beneficiary in 
connection with an initial denial determination or in providing a 
beneficiary with the QIO's findings in response to a beneficiary 
complaint. Information that must be specified in a QIO's final decision 
in a complaint review is specified in Sec. Sec.  476.130(d) and 
476.140(b) of this subchapter.
* * * * *


Sec.  480.139  [Amended]

0
37. Section 480.139 is amended by redesignating the existing paragraph 
(1) as paragraph (a)(1).

0
38. Section 480.145 is added to read as follows:


Sec.  480.145  Beneficiary authorization of use of confidential 
information.

    (a) Except as otherwise provided under this Part, a QIO may not use 
or disclose a beneficiary's confidential information without an 
authorization from the beneficiary. The QIO's use or disclosure must be 
consistent with the authorization.
    (b) A valid authorization is a document that contains the 
following:
    (1) A description of the information to be used or disclosed that 
identifies the information in a specific and meaningful fashion.
    (2) The name or other specific identification of the QIO(s) and QIO 
point(s) of contact making the request to use or disclose the 
information.
    (3) The name or other specific identification of the person(s), or 
class of persons, to whom the QIO(s) may disclose the information or 
allow the requested use.
    (4) A description of each purpose of the requested use or 
disclosure. The statement ``at the request of the individual'' is a 
sufficient description of the purpose when an individual initiates the 
authorization and does not, or elects not to, provide a statement of 
purpose.
    (5) An expiration date or an expiration event that relates to the 
beneficiary or the purpose of the use or disclosure. The statement 
``end of the QIO research study,'' ``none,'' or similar language is 
sufficient if the authorization is for a use or disclosure of 
confidential information for QIO research, including for the creation 
and maintenance of a research database or research repository.
    (6) Signature of the individual and date. If the authorization is 
signed by a beneficiary's representative, a description of such 
representative's authority to act for the beneficiary must also be 
provided.
    (c) In addition to those items contained in paragraph (b) of this 
section, the authorization must contain statements adequate to place 
the individual on notice of all of the following:
    (1) The individual's right to revoke the authorization in writing; 
and
    (2) Any exceptions to the right to revoke and a description of how 
the individual may revoke the authorization;
    (3) The ability or inability of the QIO to condition its review 
activities on the authorization, by stating either:
    (i) That the QIO may not condition the review of complaints, 
appeals, or payment determinations, or any other QIO reviews or other 
tasks within the QIO's responsibility on whether the individual signs 
the authorization;
    (ii) The consequences to the individual of a refusal to sign the 
authorization when the refusal will render the QIO unable to carry out 
an activity.
    (4) The potential for information disclosed pursuant to the 
authorization to be subject to either appropriate or inappropriate 
redisclosure by a recipient, after which the information would no 
longer be protected by this subpart.
    (d) The authorization must be written in plain language.
    (e) If a QIO seeks an authorization from a beneficiary for a use or 
disclosure of confidential information, the QIO must provide the 
beneficiary with a copy of the signed authorization.
    (f) A beneficiary may revoke an authorization provided under this 
section at any time, provided the revocation is in writing, except to 
the extent that the QIO has taken action in reliance upon the 
authorization.

[[Page 68565]]

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

0
45. 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
46. Section 495.8 is amended by revising paragraph (b)(2)(vi) to read 
as follows:


Sec.  495.8  Demonstration of meaningful use criteria.

* * * * *
    (b) * * *
    (2) * * *
    (vi) Exception for Medicare eligible hospitals and CAHs for FY 2012 
and 2013--Participation in the Medicare EHR Incentive Program 
Electronic Reporting Pilot. In order to satisfy the clinical quality 
measure reporting requirements of meaningful use, 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 24, 2012.
Marilyn Tavenner
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 30, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012-26902 Filed 11-1-12; 4:15 pm]
BILLING CODE 4120-01-P