[Federal Register Volume 78, Number 139 (Friday, July 19, 2013)]
[Proposed Rules]
[Pages 43534-43707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16555]



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Vol. 78

Friday,

No. 139

July 19, 2013

Part III





Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 410, 412, et al.





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Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment 
and Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Hospital Value-Based Purchasing Program; Organ Procurement 
Organizations; Quality Improvement Organizations; Electronic Health 
Records (EHR) Incentive Program; Provider Reimbursement Determinations 
and Appeals; Proposed Rule

  Federal Register / Vol. 78 , No. 139 / Friday, July 19, 2013 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 416, 419, 475, 476, 486, and 495

[CMS-1601-P]
RIN 0938-AR54


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Hospital Value-Based Purchasing Program; Organ 
Procurement Organizations; Quality Improvement Organizations; 
Electronic Health Records (EHR) Incentive Program; Provider 
Reimbursement Determinations and Appeals

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2014 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this proposed rule, we 
describe the proposed 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 proposed 
rule would update and refine the requirements for the Hospital 
Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting 
(ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program.
    We are proposing changes to the conditions for coverage (CfCs) for 
organ procurement organizations (OPOs); revisions to the Quality 
Improvement Organization (QIO) regulations; changes to the Medicare 
fee-for-service Electronic Health Record (EHR) Incentive Program; and 
changes relating to provider reimbursement determinations and appeals.

DATES: Comment Period: To be assured consideration, comments on all 
sections of this proposed rule must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on September 
6, 2013.

ADDRESSES: In commenting, please refer to file code CMS-1601-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1601-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1601-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    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 stereotactic 
radiosurgery services.
Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory 
Surgical Center Quality Reporting (ASCQR) Program--Program 
Administration and Reconsideration Issues.
Chuck Braver, (410) 786-9379, for issues related to the Advisory Panel 
on Hospital Outpatient Payment (HOP Panel).
Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, 
mean calculation, copayments, wage index, outlier payments, cost-to-
charge ratios (CCRs), and rural hospital payments.
Diane Corning, (410) 786-8486, for issues related to the Conditions for 
Coverage for Organ Procurement Organizations (OPOs).
Dexter Dickey, (410) 786-6856, or Dorothy Myrick, (410) 786-9671, for 
issues related to partial hospitalization and community mental health 
center (CMHC) issues.
Roxanne Dupert-Frank, (410) 786-4827, for issues related to the 
Hospital Value-Based Purchasing (VBP) Program.
Dan Duvall, (410) 786-4592, for issues related to comprehensive APCs.
Shaheen Halim (410) 786-0641, for issues related to the 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.
James Hart, (410) 786-9520, for issues related to the Medicare fee-for-
service Electronic Health Record (EHR) Incentive Program.
Jeneen Iwugo, (410) 786-1028, for issues related to the revisions of 
the Quality Improvement Organization (QIO) Regulations.
Twi Jackson, (410) 786-1159, for issues related to blood products, 
device-dependent APCs, extended assessment and management composite 
APCs, hospital outpatient visits, inpatient-only procedures, and no 
cost/full credit and partial credit devices.
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

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radiation therapy (IORT), brachytherapy composite APC, multiple imaging 
composite APCs, and cardiac electrophysiologic evaluation and ablation 
composite APC.
Ann Marshall, (410) 786-3059, for issues related to packaged items/
services, hospital outpatient supervision, proton beam therapy, therapy 
caps in CAHs, incident to physician or nonphysician practitioner 
services, and provider-based issues.
Danielle Moskos, (410) 786-8866, or Michael Zleit, (410) 786-2050, for 
issues related to Provider Reimbursement Determination Appeals.
James Poyer, (410) 786-2261, for issues related to the 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, new 
technology intraocular lenses (NTIOLs), 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.

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
CfC [Medicare] Condition for coverage
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
FFY Federal 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, Pub. L. 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
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
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

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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
PBD Provider-Based Department
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
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 Proposed Rule
    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 
Final Rule With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Proposed Use of Single and Multiple Procedure Claims
    c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Proposed Data Development Process and Calculation of 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. Proposed Calculation of Single Procedure APC Criteria-Based 
Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    e. Proposed Establishment of Comprehensive APCs
    (1) Definitions and General Principles
    (2) Comprehensive APCs for Device-Dependent Services
    f. Proposed 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)
    3. Proposed Changes to Packaged Services
    a. Background
    b. Basis for Proposed New Packaging Policies for CY 2014
    c. Proposed New Packaging Policies for CY 2014
    (1) Drugs, Biologicals, and Radiopharmaceuticals That Function 
as Supplies When Used in a Diagnostic Test or Procedure
    (2) Drugs and Biologicals That Function as Supplies or Devices 
When Used in a Surgical Procedure
    (3) Clinical Diagnostic Laboratory Tests
    (4) Procedures Described by Add-On Codes
    (5) Ancillary Services (Status Indicator ``X'')
    (6) Diagnostic Tests on the Bypass List
    (7) Device Removal Procedures
    d. Impact of the New Packaging Proposals
    e. Clarification Regarding Supplies That Are Packaged in the 
OPPS
    f. Proposed Revision and Clarification of the Regulations at 42 
CFR 419.2(b) and 42 CFR 419.22
    g. Comment Solicitation on Increased Packaging for Imaging 
Services
    h. Summary of CY 2014 Packaging Proposals
    4. Proposed Calculation of OPPS Scaled Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default CCRs
    E. Proposed Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    F. Proposed OPPS Payment to Certain Cancer Hospitals Described 
by Section 1886(d)(1)(B)(v) of the Act
    1. Background
    2. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2014
    G. Proposed Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
    1. Background
    2. Proposed OPPS Copayment Policy
    3. Proposed Calculation of an Adjusted Copayment Amount for an 
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT 
Codes Effective April 1, 2013 and July 1, 2013 for Which We Are 
Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed Rule
    2. Proposed Process for New Level II HCPCS Codes That Will Be 
Effective October 1, 2013 and New CPT and Level II HCPCS Codes That 
Will Be Effective January 1, 2014 for Which We Will Solicit Public 
Comments in the CY 2014 OPPS/ASC Final Rule With Comment Period
    B. Proposed OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Proposed Exceptions to the 2 Times Rule
    C. Proposed OPPS APC-Specific Policies
    1. Intraoperative Radiation Therapy (IORT) Related Services 
(APCs 0028 and 0065)
    2. Proton Beam Radiation Therapy (APCs 0664 and 0667)
    3. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0066 and 0067)
IV. Proposed OPPS Payment for Devices
    A. Proposed Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices

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    a. Background
    b. Proposed CY 2014 Policy
    2. Proposed Provisions for Reducing Transitional Pass-Through 
Payments To Offset Costs Packaged Into APC Groups
    a. Background
    b. Proposed CY 2014 Policy
    3. Proposed Changes to Device Pass-Through Criteria: Integral 
and Subordinate Criterion
    B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit 
and Partial Credit Devices
    1. Background
    2. Proposed Policy for CY 2014
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Proposed Drugs and Biologicals With Expiring Pass-Through 
Status in CY 2013
    3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With 
New or Continuing Pass-Through Status in CY 2014
    4. Proposed Provisions for Reducing Transitional Pass-Through 
Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; 
Drugs, Biologicals, and Radiopharmaceuticals That Function as 
Supplies When Used in a Diagnostic Test or Procedure; and Drugs and 
Biologicals That Function as Supplies or Devices When Used in a 
Surgical Procedure
    a. Background
    b. Proposed Payment Offset Policy for Diagnostic 
Radiopharmaceuticals
    c. Proposed Payment Offset Policy for Contrast Agents
    d. Proposed Payment Offset Policy for Products Packaged 
According to the Proposed Policy To Package Drugs, Biologicals, and 
Radiopharmaceuticals That Function as Supplies When Used in a 
Diagnostic Test or Procedure and Drugs and Biologicals That Function 
as Supplies or Devices When Used in a Surgical Procedure
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status
    1. Background
    2. Proposed Criteria for Packaging Payment for Drugs, 
Biologicals, and Radiopharmaceuticals
    a. Background
    b. Proposed Cost Threshold for Packaging of Payment for HCPCS 
Codes That Describe Certain Drugs, Certain Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Proposed Packaging Determination for HCPCS Codes That 
Describe the Same Drug or Biological But Different Dosages
    3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
    a. Proposed Payment for Specified Covered Outpatient Drugs 
(SCODs) and Other Separately Payable and Packaged Drugs and 
Biologicals
    b. Proposed CY 2014 Payment Policy
    4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    5. Proposed Payment for Blood Clotting Factors
    6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital 
Claims Data
    C. Nuclear Medicine Procedure to Radiolabeled Product Edits
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Proposed Payment for Hospital Outpatient Clinic and Emergency 
Department Visits
    C. Proposed Payment for Critical Care Services
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2014
    C. Discussion of Possible Future Initiatives and Request for 
Public Comments
    D. Proposed Separate Threshold for Outlier Payments to CMHCs
IX. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient List
X. Proposed Nonrecurring Policy Changes
    A. Supervision of Outpatient Therapeutic Services
    1. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
    2. Supervision Requirements for Observation Services
    B. Application of Therapy Caps in CAHs
    C. Requirements for Payment of Outpatient Therapeutic 
(``Incident to'') Hospital or CAH Services
    1. Overview
    2. Background
    3. Technical Correction
    D. Collecting Data on Services Furnished in Off-Campus Provider-
Based Departments
XI. Proposed CY 2014 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2014 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2014 Comment Indicator Definitions
XII. Proposed 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. Proposed Treatment of New Codes
    1. Proposed Process for Recognizing New Category I and Category 
III CPT Codes and Level II HCPCS Codes
    2. Proposed Treatment of New Level II HCPCS Codes and Category 
III CPT Codes Implemented in April 2013 and July 2013 for Which We 
Are Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed 
Rule
    3. Proposed Process for New Level II HCPCS Codes and Category I 
and Category III CPT Codes for Which We Will Solicit Public Comments 
in the CY 2014 OPPS/ASC Final Rule With Comment Period
    C. Proposed Update to the Lists of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Additions to the List of ASC Covered Surgical Procedures
    b. Proposed Covered Surgical Procedures Designated as Office-
Based
    (1) Background
    (2) Proposed Changes for CY 2014 to Covered Surgical Procedures 
Designated as Office-Based
    c. ASC Covered Surgical Procedures Proposed To Be Designated as 
Device-Intensive
    (1) Background
    (2) Proposed Changes to List of Covered ASC Surgical Procedures 
Designated as Device-Intensive for CY 2014
    d. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    e. Proposed ASC Treatment of Surgical Procedures Removed From 
the OPPS Inpatient List for CY 2014
    2. Covered Ancillary Services
    D. Proposed ASC Payment for Covered Surgical Procedures and 
Covered Ancillary Services
    1. Proposed Payment for Covered Surgical Procedures
    a. Background
    b. Proposed Update to ASC Covered Surgical Procedure Payment 
Rates for CY 2014
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Proposed Payment for Cardiac Resynchronization Therapy 
Services
    e. Proposed Payment for Low Dose Rate (LDR) Prostate 
Brachytherapy Composite
    2. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2014
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests To Establish New NTIOL Classes for CY 2014
    3. Payment Adjustment
    F. Proposed ASC Payment and Comment Indicators
    1. Background
    2. Proposed ASC Payment and Comment Indicators
    G. Calculation of the Proposed ASC Conversion Factor and the 
Proposed ASC Payment Rates
    1. Background

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    2. Proposed Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2014 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of Proposed CY 2014 ASC Payment Rates
XIII. 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. Proposed Removal of Two Chart-Abstracted Measure From the 
Hospital OQR Program
    a. Proposed Removal of OP-19: Transition Record With Specified 
Elements Received by Discharged ED Patients
    b. Proposed Removal of OP-24: Cardiac Rehabilitation Measure: 
Patient Referral From an Outpatient Setting
    D. Quality Measures Previously Adopted for the CY 2014 and CY 
2015 Payment Determinations and Subsequent Years
    E. Possible Quality Measures for the CY 2016 Payment 
Determination and Subsequent Years
    1. Influenza Vaccination Coverage Among Healthcare Personnel 
(NQF 0431)
    2. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures (NQF 0564)
    3. Endoscopy/Poly Surveillance: Appropriate Follow-Up Interval 
for Normal Colonoscopy in Average Risk Patients (NQF 0658)
    4. Endoscopy/Poly Surveillance: Colonoscopy Interval for 
Patients With a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    5. Cataracts--Improvement in Patient's Visual Function Within 90 
Days Following Cataract Surgery (NQF 1536)
    F. Possible Hospital OQR Program Measure Topics for Future 
Consideration
    G. Proposed Payment Reduction for Hospitals That Fail To Meet 
the Hospital OQR Program Requirements for the CY 2014 Payment Update
    1. Background
    2. Proposed Reporting Ratio Application and Associated 
Adjustment Policy for CY 2014
    H. Proposed Requirements for Reporting of Hospital OQR Data for 
the CY 2015 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    a. Background
    b. Effects of Proposed Changes on Data Submission for CY 2015 
and CY 2016 Payment Determinations and Subsequent Years
    c. General Requirements
    d. Proposed Chart-Abstracted Measure Requirements for CY 2015 
and CY 2016 Payment Determinations and Subsequent Years
    e. Proposed Claims-Based Measure Data Requirements for the CY 
2015 Payment Determinations and Subsequent Years
    f. Proposed Data Submission Requirements for Measure Data 
Submitted via Web-Based Tool for the CY 2016 Payment Determination 
and Subsequent Years
    g. Proposed Data Submission Requirements for a Measure Reported 
via NHSN for the CY 2016 Payment Determination and Subsequent Years
    h. Population and Sampling Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    3. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2015 
Payment Determination and Subsequent Years
    a. Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2015 Payment Determination and 
Subsequent Years
    b. Targeting Criteria for Data Validation Selection for CY 2015 
Payment Determination and for Subsequent Years
    c. Methodology for Encounter Selection for the CY 2015 Payment 
Determination and Subsequent Years
    d. Medical Record Documentation Requests for Validation and 
Validation Score Calculation for the CY 2015 Payment Determination 
and Subsequent Years
    I. Proposed Hospital OQR Reconsideration and Appeals Procedures 
for the CY 2015 Payment Determination and Subsequent Years
    J. Extraordinary Circumstances Extension or Waiver for the CY 
2014 Payment Determination and Subsequent Years
XIV. Hospital Value-Based Purchasing (VBP) Program Updates
    A. Background
    B. Proposal for Additional CMS Appeals Review Process
    1. Statutory Basis
    2. Independent CMS Review Proposal
    C. Proposed Performance and Baseline Periods for Certain Outcome 
Measures for the FY 2016 Hospital VBP Program
    XV. Proposed 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. Regulatory 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 Adopted in Previous Rulemaking
    3. Proposed Additional ASCQR Program Quality Measures for the CY 
2016 Payment Determination and Subsequent Years
    a. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures
    b. Endoscopy/Poly Surveillance: Appropriate Follow-Up for Normal 
Colonoscopy in Average Risk Patients (NQR 0658)
    c. Endoscopy/Poly Surveillance: Colonoscopy Interval for 
Patients With a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    d. Cataracts: Improvement in Patient's Visual Function Within 90 
Days Following Cataract Surgery (NQF 1536)
    4. ASCQR Program Measure Topics for Future Consideration
    5. Technical Specification Updates and Data Publication
    C. 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 2015 Payment Determination 
and Subsequent Years
    D. Administrative Requirements
    1. Proposed Requirements Regarding QualityNet Account and 
Security Administrator
    a. Background for the CY 2014 and CY 2015 Payment Determinations
    b. Proposed Requirements for the CY 2016 Payment Determination 
and Subsequent Years
    2. Proposed Requirements Regarding Participation Status
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Proposed Requirements for the CY 2016 Payment Determination 
and Subsequent Years
    3. Requirements Regarding Data Processing and Collection Periods 
for Claims-Based Measures for the CY 2014 Payment Determination and 
Subsequent Years
    4. Proposed Minimum Threshold, Minimum Case Volume, and Data 
Completeness for Claims-Based Measures Using QDCs
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Proposed Requirements for the CY 2016 Payment Determination 
and Subsequent Years
    5. Proposed Requirements for Data Submitted Via a CMS Online 
Data Submission Tool
    a. Background for the CY 2015 Payment Determination and 
Subsequent Years
    b. Proposed Requirements for the CY 2016 Payment Determination 
and Subsequent Years for Measures Currently Finalized
    c. Proposed Requirements for the CY 2016 Payment Determination 
and Subsequent Years for Proposed New Measures With Data Submission 
Via a CMS Web-Based Tool
    6. Proposed Data Submission Requirements for a Measure Reported 
Via the National

[[Page 43539]]

Healthcare Safety Network (NHSN) for the CY 2016 Payment 
Determination
    a. Background for the CY 2016 Payment Determination
    b. Proposed Requirements for the CY 2016 Payment Determination
    7. ASCQR Program Validation of Claims-Based and CMS Web-Based 
Measures
    8. Extraordinary Circumstances Extensions or Waivers for the CY 
2014 Payment Determination and Subsequent Years
    a. Background
    b. Proposal for CMS Granting of Extraordinary Circumstance 
Waiver or Extension for CY 2014
    9. ASCQR Program Reconsideration Procedures for the CY 2014 
Payment Determination and Subsequent Years
XVI. Proposed Changes to the Conditions for Coverage (CfCs) for 
Organ Procurement Organizations (OPOs)
    A. Background
    B. Proposed Policy Changes
XVII. Proposed Revisions to the Quality Improvement Organization 
(QIO) Regulations
    A. Legislative History
    B. Basis for Proposals
    C. Proposed Changes to the Nomenclature and Regulations Under 42 
CFR Parts 475 and 476
    1. Proposed Nomenclature Changes
    2. Proposals To Add and Revise Definitions
    3. Proposals Relating to Scope and Applicability of Subpart C of 
Part 475
    4. Proposals Relating to Eligibility Requirements for QIOs 
(Sec. Sec.  475.101 Through 475.106)
    a. Eligibility To Be Awarded a QIO Contract (Sec.  475.101)
    b. Eligibility Requirements for QIOs To Perform Case Reviews 
(Sec.  475.102)
    c. Eligibility Requirements for QIOs To Conduct Quality 
Improvement Initiatives (Sec.  475.103)
    d. Prohibitions on Eligibility as a QIO (Sec.  475.105)
    5. Proposals Relating to QIO Contract Awards (Sec.  475.107)
XVIII. Medicare Fee-for-Service Electronic Health Record (EHR) 
Incentive Program
    A. Incentive Payments for Eligible Professionals (EPs) 
Reassigning Benefits to Method II CAHs
    1. Background for Definition of EPs and EHR Incentive Payments 
to EPs
    2. Special Circumstances of EPs Reassigning Benefits to Method 
II CAHs
    B. Cost Reporting Periods for Interim and Final EHR Incentive 
Payments to Hospitals
    1. Background
    2. Special Circumstances
XIX. Medicare Program: Provider Reimbursement Determinations and 
Appeals
    A. Matters Not Subject to Administrative or Judicial Review 
(Sec.  405.1801)
    1. Background
    2. Proposed Technical Conforming Change
    B. Clarification of Reopening of Predicated Facts in 
Intermediary Determinations of Provider Reimbursement (Sec.  
405.1885)
XX. Files Available to the Public via the Internet
XXI. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. Proposed Changes to the Outcome Measure Requirement for OPOs
    2. Proposed Changes to the Medicare Fee-for-Service EHR 
Incentive Program
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    a. Hospital OQR Program Requirements for the CY 2015, CY 2016, 
and Subsequent Years Payment Determinations
    b. Hospital OQR Program Validation Requirements for the CY 2015 
and Subsequent Years Payment Determinations
    c. Hospital OQR Program Reconsideration and Appeals Procedures
    2. ASCQR Program Requirements
    a. Claims-Based Measures for the CY 2014 Payment Determination
    b. Claims-Based and Web-Based Measures for the CY 2015 and CY 
2016 Payment Determination
    c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension Requests; Reconsideration 
Requests
    3. Hospital VBP Program Requirements
XXII. Response to Comments
XXIII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for the Proposed OPPS and ASC Payment 
Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of Proposed OPPS Changes in This Proposed 
Rule
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed OPPS Changes on Hospitals
    (3) Estimated Effects of Proposed OPPS Changes on CMHCs
    (4) Estimated Effect of Proposed OPPS Changes on Beneficiaries
    (5) Estimated Effects of Proposed OPPS Changes on Other 
Providers
    (6) Estimated Effects of Proposed OPPS Changes on the Medicare 
and Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of ASC Payment System Proposed Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of ASC Payment System Proposed Policies on 
ASCs
    (3) Estimated Effects of ASC Payment System Proposed Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Proposed Requirements for the Hospital OQR Program
    e. Effects of Proposals for the ASCQR Program
    f. Effects of Proposed Changes to the CfCs for OPOs Relating to 
the Outcome Measure Requirement for Recertification
    g. Effects of Proposed Revisions of the QIO Regulations
    h. Effects of Proposed Changes to the Medicare Fee-for-Service 
EHR Incentive Program
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIV. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Proposed Rule

1. Purpose
    In this proposed rule, we are proposing to update the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments and Ambulatory 
Surgical Centers (ASCs) beginning January 1, 2014. 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 proposed rule. In 
addition, we are proposing to update and refine the requirements for 
the Hospital Outpatient Quality Reporting (OQR) Program, the ASC 
Quality Reporting (ASCQR) Program, and the Hospital Value-Based 
Purchasing (VBP) Program.
    We are proposing changes to the conditions for coverage (CfCs) for 
organ procurement organizations (OPOs); revisions to the Quality 
Improvement Organization (QIO) regulations; changes to the Medicare 
fee-for-service Electronic Health Record (EHR) Incentive Program; and 
changes relating to provider reimbursement determinations and appeals.
2. Summary of the Major Provisions
     OPPS Update: For CY 2013, we are proposing to increase the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.8 percent. This proposed increase is 
based on the proposed hospital inpatient market basket percentage 
increase of 2.5 percent for inpatient services paid under the hospital 
inpatient prospective payment system (IPPS), minus the proposed 
multifactor productivity (MFP) adjustment of 0.4 percentage points, and 
minus a 0.3 percentage point adjustment required by the Affordable Care 
Act. Under this proposed rule, we estimate that proposed total payments 
for CY 2014, including beneficiary cost-sharing, to the almost 4,000 
facilities paid under the OPPS (including general

[[Page 43540]]

acute care hospitals, children's hospitals, cancer hospitals, and 
community mental health centers (CMHCs)), will be approximately $50.4 
billion, an increase of approximately $4.4 billion compared to CY 2013 
payments, or $600 million excluding our estimated changes in 
enrollment, utilization, and case-mix
    We are proposing to continue 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.
     Rural Adjustment: We are proposing to continue 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 2014, we are 
proposing to continue 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 0.90 will be 
used to determine the proposed CY 2014 cancer hospital payment 
adjustment to be paid at cost report settlement. That is, the proposed 
payment amount associated with the cancer hospital payment adjustment 
will be the additional payment needed to result in a PCR equal to 0.90 
for each cancer hospital.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2014, proposed payment for the acquisition and pharmacy overhead 
costs of separately payable drugs and biologicals that do not have 
pass-through status would be set at the statutory default of average 
sales price (ASP) plus 6 percent.
     Packaging Proposals: The OPPS packages payment for 
multiple interrelated items and services into a single payment to 
create incentives for hospitals 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 2014, we are proposing to unconditionally package or conditionally 
package the following items and services and to add them to the list of 
OPPS packaged items and services in 42 CFR 419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies or devices in a 
surgical procedure;
    (3) Laboratory tests;
    (4) Procedures described by add-on codes;
    (5) Ancillary services (status indicator ``X'');
    (6) Diagnostic tests on the bypass list; and
    (7) Device removal procedures.
    We refer readers to section II.A.3. of this proposed rule for a 
complete description of our 2014 packaging proposals.
     Establishing Comprehensive APCs: In order to improve the 
accuracy and transparency of our payment for certain device-dependent 
services, for CY 2014, we are proposing to create 29 comprehensive APCs 
to prospectively pay for the most costly device-dependent services. We 
are proposing to define a comprehensive APC as a classification for the 
provision of a primary service and all adjunct services provided to 
support the delivery of the primary service. The comprehensive APC 
would treat all individually reported codes as representing components 
of the comprehensive service, resulting in a single prospective payment 
based on the cost of all individually reported codes that represent the 
delivery of a primary service as well as all adjunct services provided 
to support that delivery. We are proposing to make a single payment for 
the comprehensive service based on all charges on the claim, excluding 
only charges for services that cannot be covered by Medicare Part B or 
that are not payable under the OPPS.
     Payment of Hospital Outpatient Visits: For CY 2014 we are 
proposing to replace the current five levels of visit codes for each 
clinic, Type A ED, and Type B ED visits with three new alphanumeric 
Level II HCPCS codes representing a single level of payment for the 
three types of visits, respectively. We are proposing to assign the new 
alphanumeric Level II HCPCS to newly created APCs with CY 2014 OPPS 
payment rates based on the total mean costs of Level 1 through Level 5 
visit codes obtained from CY 2012 OPPS claims data for each visit type.
     Proposed OPPS Nonrecurring Policy Changes: We note in this 
proposed rule that we expect to allow the enforcement instruction for 
the supervision of outpatient therapeutic services furnished in CAHs 
and small rural hospitals to expire at the end of CY 2013. In addition, 
we are proposing to amend the conditions of payment for ``incident to'' 
hospital or CAH outpatient services (sometimes referred to as hospital 
or CAH ``therapeutic'' services) to require that individuals furnishing 
these services be in compliance with State law. We are soliciting 
public comments regarding a potential new claims or other data element 
that would indicate that the services were furnished in an off-campus 
provider-based department. Finally, we refer readers to the CY 2014 
Medicare Physician Fee Schedule (MPFS) proposed rule (CMS-1600-P) to 
review Medicare's proposal to apply the therapy caps and related 
provisions under section 1833(g) of the Act to physical therapy (PT), 
speech-language pathology (SLP) and occupational therapy (OT) 
(``therapy'') services that are furnished by a CAH, effective January 
1, 2014.
     Ambulatory Surgical Center Payment Update: For CY 2014, we 
are proposing to increase payment rates under the ASC payment system by 
0.9 percent. This proposed 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 0.5 
percent. Based on this proposed update, we estimate that total payments 
to ASCs (including beneficiary cost-sharing and estimated changes in 
enrollment, utilization, and case-mix), for CY 2014 would be 
approximately $3.980 billion, an increase of approximately $133 million 
compared to estimated CY 2013 payments.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are proposing five quality measures for 
the CY 2016 and subsequent years payment determinations: four where 
aggregate data (numerators, denominators, and exclusions) are collected 
and data submitted via an online Web-based tool located on a CMS Web 
page and one HAI measure submitted through the CDC's NHSN. We also are 
proposing to remove two measures and are proposing to codify 
administrative procedures.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are proposing four quality measures 
for the CY 2016 and subsequent years payment determinations where data 
collection would begin in CY 2014. We are proposing to collect 
aggregate data (numerators, denominators, and exclusions) on all ASC 
patients for these

[[Page 43541]]

four proposed chart-abstracted measures via an online Web-based tool 
located on a CMS Web page. We also are proposing, for the CY 2016 
payment determination and subsequent years' payment determinations, 
requirements for facility participation, data collection, and 
submission for claims-based, CMS Web-based, and NHSN measures.
     Proposed Revisions to the Quality Improvement 
Organizations Regulations. We are proposing to update the regulations 
at 42 CFR parts 475 and 476 based on the recently enacted Trade 
Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40, 
Section 261) where by Congress authorized numerous changes to the 
original legislation and included additional flexibility for the 
Secretary in the administration of the QIO program. Currently, 42 CFR 
Part 475 includes definitions and standards governing eligibility and 
the award of contracts to QIOs. In this proposed rule, we set forth 
proposals for the partial deletion and revision of the regulations 
under 42 CFR Parts 475 and 476, which relate to the QIO program, 
including the following: (1) Replace nomenclature in Part 475 and 476 
that has been amended by the TAAEA; (2) revise the existing definition 
for the term ``physician''; (3) add new definitions as necessary to 
support the new substantive provisions in Subpart C; and (4) replace 
some of the substantive provisions in Subpart C in their entirety to 
fully exercise the Secretary's authority for the program and update the 
contracting requirements to align with contemporary quality 
improvement.
     Proposed Changes to the Medicare Fee-for-Service 
Electronic Record (EHR) Incentive Program. We are proposing to the 
regulations to provide a special method for making hospital-based 
determinations for 2013 only in the cases of those eligible 
professionals (EPs) who reassign their benefits to Method II CAHs. We 
have been unable to make EHR payments to these EPs for their CAH II 
claims, or to take those claims into consideration in making hospital-
based determinations because of systems limitations. Adopting our 
proposed method for 2013 will allow us to begin making payments based 
on CAH II one year earlier than we would be able to do under current 
regulations. We also are proposing a minor clarification to the 
regulations concerning the cost reporting period to be used in 
determining final EHR payments for hospitals.
3. Summary of Costs and Benefits
    In sections XXIII. and XXIV. of this proposed rule, we set forth a 
detailed analysis of the regulatory and federalism impacts that the 
proposed changes would have on affected entities and beneficiaries. Key 
estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All Proposed OPPS Changes
    Table 39 in section XXIII. of this proposed rule displays the 
distributional impact all the proposed OPPS changes on various groups 
of hospitals and CMHCs for CY 2014 compared to all estimated OPPS 
payments in CY 2013. We estimate that the proposed policies in this 
proposed rule would result in a 1.8 percent overall increase in OPPS 
payments to providers. We estimate that the proposed increase in OPPS 
expenditures, including beneficiary cost-sharing, would 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 $4.372 billion in OPPS expenditures, 
including beneficiary cost-sharing, for CY 2014 compared to CY 2013 
OPPS expenditures. We estimate that proposed total OPPS payments, 
including beneficiary cost-sharing, would be $50.4 billion for CY 2014.
    We estimated the isolated impact of our proposed 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 3.8 percent decrease in CY 2014 
payments to CMHCs relative to their CY 2013 payments.
(2) Impacts of the Proposed Updated Wage Indices
    We estimate no significant impacts related to our proposal to 
update the wage indices and apply the frontier State wage index. 
Proposed adjustments to the wage indices other than the frontier State 
wage adjustment would not significantly affect most hospitals.
(3) Impacts of the Proposed Rural Adjustment and the Cancer Hospital 
Payment Adjustment
    There are no significant impacts of our proposed CY 2014 payment 
policies for hospitals that are eligible for the rural adjustment or 
for the cancer hospital payment adjustment. We are not proposing to 
make any change in policies for determining the rural and cancer 
hospital payment adjustments, and the proposed adjustment amounts do 
not significantly impact the budget neutrality adjustments for these 
proposed policies.
(4) Impacts of the Proposed OPD Fee Schedule Increase Factor
    We estimate that, for many hospitals, the application of the 
proposed OPD fee schedule increase factor of 1.8 percent to the 
conversion factor for CY 2014 would mitigate the small negative impacts 
of the budget neutrality adjustments. While most classes of hospitals 
would receive an increase that is in line with the proposed 1.8 percent 
overall increase after the update is applied to the budget neutrality 
adjustments, some hospitals would receive smaller but still generally 
positive overall increases.
b. Impacts of the Proposed 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 proposed percentage change in 
estimated total payments by specialty groups under the CY 2014 payment 
rates compared to estimated CY 2013 payment rates ranges between -12 
percent for ancillary items and services and 17 percent for hemic and 
lymphatic system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our proposed CY 2014 policies to significantly 
affect the number of hospitals that do not receive a full annual 
payment update.
d. Impacts of the ASCQR Program
    We do not expect our proposed CY 2014 proposed policies to 
significantly affect the number of ASCs that do not receive a full 
annual payment update beginning in CY 2015.
e. Impacts for the Proposed QIO Program Changes
    We estimate the effects of the proposed QIO Program changes to be 
consistent with the Congressional Budget Office's 2011 Cost Estimate of 
the Trade Bill (H.R. 2832) which included a reduction in spending of 
$330 million over the 2012-2021 period. According to the CBO Estimate 
the Act and subsequently the proposed regulatory changes ``would modify 
the provisions under which CMS contracts with independent entities 
called [``]Quality Improvement Organizations [(QIOs)''] in Medicare. 
QIOs, generally staffed by health care professionals, review medical 
care, help beneficiaries with complaints about the quality of

[[Page 43542]]

care, and implement care improvements. H.R. 2832 would make several 
changes to the composition and operation of QIOs, and would harmonize 
QIO contracts with requirements of the Federal Acquisition Regulation. 
Among those changes are a modification to expand the geographic scope 
of QIO contracts and a lengthening of the contract period. CBO 
estimates that those provisions would reduce spending by $330 million 
over the 2012-2021 period.''

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 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; and most 
recently the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), 
enacted January 2, 2013.
    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 proposed rule. Section 
1833(t)(1)(B) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by CMHCs), and 
certain inpatient hospital services that are paid under Part B.
    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 originally 
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 at the Clinical Laboratory Fee 
Schedule (CLFS) rates; services for beneficiaries with end-stage renal 
disease (ESRD) that are paid under the ESRD prospective payment system; 
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. 
This proposed rule includes proposals to modify 42 CFR 419.22 and 
include in the OPPS some of these currently excluded services.
    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

[[Page 43543]]

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 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). 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 March 11, 2013. 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.
    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 2013 Panel 
meeting. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
March 2013 Panel meeting 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 on the CY 2013 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 27 timely pieces of correspondence on the 
CY 2013 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 15, 2012 (77 FR 68210), some of which 
contained comments on the interim APC assignments and/or status 
indicators of HCPCS codes identified with comment indicator ``NI'' in 
Addenda B, AA, and BB to that final rule. Summaries of these public 
comments on topics that were open to comment and our responses to them 
will be set forth in various sections of the final rule with comment 
period under the appropriate subject-matter headings.

[[Page 43544]]

II. Proposed Updates Affecting OPPS Payments

A. Proposed 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.
    For the CY 2014 OPPS, we are proposing to recalibrate the APC 
relative payment weights for services furnished on or after January 1, 
2014, and before January 1, 2015 (CY 2014), using the same basic 
methodology that we described in the CY 2013 OPPS/ASC final rule with 
comment period. That is, we are proposing to recalibrate the relative 
payment weights for each APC based on claims and cost report data for 
hospital outpatient department (HOPD) services, using the most recent 
available data to construct a database for calculating APC group 
weights. Therefore, for the purpose of recalibrating the proposed APC 
relative payment weights for CY 2014, we used approximately 146 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, 2012, and before 
January 1, 2013. For exact counts of claims used, we refer readers to 
the claims accounting narrative under supporting documentation for this 
proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 146 million final action claims for services 
provided in hospital outpatient settings used to calculate the CY 2014 
OPPS payment rates for this proposed rule, approximately 117 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 117 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 112 million claims, we 
created approximately 82 million single records, of which approximately 
34 million were ``pseudo'' single or ``single session'' claims (created 
from approximately 19 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 82 million 
single bills for ratesetting. As described in section II.A.2. of this 
proposed rule, our data development process is designed with the goal 
of using appropriate cost information in setting the APC relative 
payment weights. The bypass process is described in section II.A.1.b. 
of this proposed rule. This section discusses how we develop ``pseudo'' 
single procedure claims (as defined below), with the intention of using 
more appropriate data from the available claims. In some cases, the 
bypass process allows us to use some portion of the submitted claim for 
cost estimation purposes, while the remaining information on the claim 
continues to be unusable. Consistent with the goal of using appropriate 
information in our data development process, we only use claims (or 
portions of each claim) that are appropriate for ratesetting purposes.
    The proposed APC relative weights and payments for CY 2014 in 
Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site) were calculated using claims from CY 2012 
that were processed through December 31, 2012. While prior to CY 2013 
we historically based the payments on median hospital costs for 
services in the APC groups, beginning with the CY 2013 OPPS, we 
established the cost-based relative payment weights for the OPPS using 
geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, 
we are proposing to use this same methodology, basing payments on 
geometric mean 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 2014 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2014, in general, we are proposing 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 
are proposing to continue to use date of service stratification and a 
list of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
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 2013 OPPS/ASC final rule with comment period (77 FR 68227 
through 68229). In addition, for CY 2008 (72 FR 66614 through 66664), 
we increased packaging and created the first composite APCs, and 
continued those policies through CY 2013. 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

[[Page 43545]]

multiple imaging services through CY 2013, and are proposing to 
continue this policy for CY 2014. We also are proposing to further 
expand our packaging policies for CY 2014. We refer readers to section 
II.A.2.f. of this proposed rule for a discussion of the use of claims 
in modeling the costs for composite APCs and to section II.A.3. of this 
proposed rule for a discussion of our proposed packaging policies for 
CY 2014.
    We are proposing to continue to apply these processes to enable us 
to use as much claims data as possible for ratesetting for the CY 2014 
OPPS. This methodology enabled us to create, for this proposed rule, 
approximately 34 million ``pseudo'' single procedure claims, including 
multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.f.(5) of this proposed rule for further discussion), 
to add to the approximately 48 million ``natural'' single procedure 
claims.
    For CY 2014, we are proposing to bypass 179 HCPCS codes that are 
identified in Addendum N to this proposed rule (which is available via 
the Internet on the CMS Web site). Since the inception of the bypass 
list, which is the list of codes to be bypassed to convert multiple 
procedure claims to ``pseudo'' single procedure claims, we have 
calculated the percent of ``natural'' single bills that contained 
packaging for each HCPCS code and the amount of packaging on each 
``natural'' single bill for each code. Each year, we generally retain 
the codes on the previous year's bypass list and use the updated year's 
data (for CY 2014, data available for the March 11, 2013 meeting of the 
Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2012 
claims processed through September 30, 2012, and CY 2011 claims data 
processed through June 30, 2012, used to model the payment rates for CY 
2013) to determine whether it would be appropriate to add additional 
codes to the previous year's bypass list. For CY 2014, we are proposing 
to continue to bypass all of the HCPCS codes on the CY 2013 OPPS bypass 
list, with the exception of HCPCS codes that we are proposing to delete 
for CY 2014, which are listed in Table 1 of this proposed rule. We also 
are proposing to remove HCPCS codes that are not separately paid under 
the OPPS because the purpose of the bypass list is to obtain more data 
for those codes relevant to ratesetting. Some of the codes we are 
proposing to remove from the CY 2014 bypass list are affected by the CY 
2014 packaging proposal, discussed in section II.A.3. of this proposed 
rule. In addition, we are proposing to add to the bypass list for CY 
2014 HCPCS codes not on the CY 2013 bypass list that, using either the 
CY 2013 final rule data (CY 2011 claims) or the March 11, 2013 Panel 
data (first 9 months of CY 2012 claims), met the empirical criteria for 
the bypass list that are summarized below. Finally, to remain 
consistent with the CY 2014 proposal to continue to develop OPPS 
relative payment weights based on geometric mean costs, we also are 
proposing that the packaged cost criterion continue to be based on the 
geometric mean cost. The entire list proposed for CY 2014 (including 
the codes that remain on the bypass list from prior years) is open to 
public comment. Because we must make some assumptions about packaging 
in the multiple procedure claims in order to assess a HCPCS code for 
addition to the bypass list, we assumed that the representation of 
packaging on ``natural'' single procedure claims for any given code is 
comparable to packaging for that code in the multiple procedure claims. 
The proposed criteria for the bypass list are:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The 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, as we did for CY 2013, we are proposing to continue 
to establish the CY 2014 OPPS relative payment weights based on 
geometric mean costs. To remain consistent in the metric used for 
identifying cost patterns, we are proposing to use the geometric mean 
cost of packaging to identify potential codes to add to the bypass 
list.
    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 2013 OPPS/ASC 
final rule with comment period (77 FR 68221), we are proposing for CY 
2014 to continue to update the packaged cost threshold by the market 
basket increase. By applying the final CY 2013 market basket increase 
of 1.8 percent to the prior nonrounded dollar threshold of $53.76 (77 
FR 68221), we determined that the threshold would remain for CY 2014 at 
$55 ($54.73 rounded to $55, the nearest $5 increment). Therefore, we 
are proposing to set the geometric mean packaged cost threshold on the 
CY 2012 claims at $55 for a code to be considered for addition to the 
CY 2014 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 are proposing to continue to include on the bypass 
list HCPCS codes that CMS medical advisors believe have minimal 
associated packaging based on their clinical assessment of the complete 
CY 2014 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 are proposing 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

[[Page 43546]]

critical care service) to the bypass list (73 FR 68513).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of this proposed rule for further discussion of the treatment 
of ``overlap bypass codes.'') This process also created multiple 
imaging composite ``single session'' bills that could be used for 
calculating composite APC costs. ``Overlap bypass codes'' that are 
members of the proposed multiple imaging composite APCs are identified 
by asterisks (*) in Addendum N to this proposed rule (which is 
available via the Internet on the CMS Web site).
    Addendum N to this proposed rule includes the proposed list of 
bypass codes for CY 2014. The list of bypass codes contains codes that 
were reported on claims for services in CY 2012 and, therefore, 
includes codes that were in effect in 2012 and used for billing but 
were deleted for CY 2013. We retained these deleted bypass codes on the 
proposed CY 2014 bypass list because these codes existed in CY 2012 and 
were covered OPD services in that period, and CY 2012 claims data are 
used to calculate CY 2014 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 proposed rule. HCPCS codes that we are proposing to 
add for CY 2014 are identified by asterisks (*) in the fourth column of 
Addendum N.
    Table 1 below contains the list of codes that we are proposing to 
remove from the CY 2014 bypass list because these codes were either 
deleted from the HCPCS before CY 2012 (and therefore were not covered 
OPD services in CY 2012) or were not separately payable codes under the 
proposed CY 2014 OPPS because these codes are not used for ratesetting 
through the bypass process. The list of codes proposed for removal from 
the bypass list includes those that would be affected by the CY 2014 
OPPS proposed packaging policy described in section II.A.3. of this 
proposed rule.

Table 1--HCPCS Codes Proposed To Be Removed From the CY 2014 Bypass List
------------------------------------------------------------------------
            HCPCS Code                     HCPCS Short descriptor
------------------------------------------------------------------------
17003.............................  Destruct premalg les 2-14.
31231.............................  Nasal endoscopy dx.
31505.............................  Diagnostic laryngoscopy.
31579.............................  Diagnostic laryngoscopy.
51741.............................  Electro-uroflowmetry first.
51798.............................  Us urine capacity measure.
54240.............................  Penis study.
56820.............................  Exam of vulva w/scope.
57452.............................  Exam of cervix w/scope.
57454.............................  Bx/curett of cervix w/scope.
69210.............................  Remove impacted ear wax.
70030.............................  X-ray eye for foreign body.
70100.............................  X-ray exam of jaw <4 views.
70110.............................  X-ray exam of jaw 4/> views.
70120.............................  X-ray exam of mastoids.
70130.............................  X-ray exam of mastoids.
70140.............................  X-ray exam of facial bones.
70150.............................  X-ray exam of facial bones.
70160.............................  X-ray exam of nasal bones.
70200.............................  X-ray exam of eye sockets.
70210.............................  X-ray exam of sinuses.
70220.............................  X-ray exam of sinuses.
70240.............................  X-ray exam pituitary saddle.
70250.............................  X-ray exam of skull.
70260.............................  X-ray exam of skull.
70320.............................  Full mouth x-ray of teeth.
70328.............................  X-ray exam of jaw joint.
70330.............................  X-ray exam of jaw joints.
70355.............................  Panoramic x-ray of jaws.
70360.............................  X-ray exam of neck.
70370.............................  Throat x-ray & fluoroscopy.
70371.............................  Speech evaluation complex.
71021.............................  Chest x-ray frnt lat lordotc.
71022.............................  Chest x-ray frnt lat oblique.
71023.............................  Chest x-ray and fluoroscopy.
71030.............................  Chest x-ray 4/> views.
71034.............................  Chest x-ray&fluoro 4/> views.
71035.............................  Chest x-ray special views.
71100.............................  X-ray exam ribs uni 2 views.
71101.............................  X-ray exam unilat ribs/chest.
71110.............................  X-ray exam ribs bil 3 views.
71111.............................  X-ray exam ribs/chest 4/> vws.
71120.............................  X-ray exam breastbone 2/>vws.
71130.............................  X-ray strenoclavic jt 3/>vws.
72010.............................  X-ray exam spine ap&lat.
72020.............................  X-ray exam of spine 1 view.
72040.............................  X-ray exam neck spine 3/vws.
72069.............................  X-ray exam trunk spine stand.
72070.............................  X-ray exam thorac spine 2vws.
72072.............................  X-ray exam thorac spine 3vws.
72074.............................  X-ray exam thorac spine 4/>vw.
72080.............................  X-ray exam trunk spine 2 vws.
72090.............................  X-ray exam scloiosis erect.
72100.............................  X-ray exam l-s spine \2/3\ vws.
72110.............................  X-ray exam l-2 spine 4/>vws.
72114.............................  X-ray exam l-s spine bending.
72120.............................  X-ray bend only l-s spine.
72170.............................  X-ray exam of pelvis.
72190.............................  X-ray exam of pelvis.
72202.............................  X-ray exam si joints 3/> vws.
72220.............................  X-ray exam sacrum tailbone.
73000.............................  X-ray exam of collar bone.
73010.............................  X-ray exam of shoulder blade.
73020.............................  X-ray exam of shoulder.
73030.............................  X-ray exam of shoulder.
73050.............................  X-ray exam of shoulders.
73060.............................  X-ray exam of humerus.
73070.............................  X-ray exam of elbow.
73080.............................  X-ray exam of elbow.
73090.............................  X-ray exam of forearm.
73100.............................  X-ray exam of wrist.
73110.............................  X-ray exam of wrist.
73120.............................  X-ray exam of hand.
73130.............................  X-ray exam of hand.
73140.............................  X-ray exam of finger(s).
73510.............................  X-ray exam of hip.
73520.............................  X-ray exam of hips.
73540.............................  X-ray exam of pelvis & hips.
73550.............................  X-ray exam of thigh.
73560.............................  X-ray exam of knee 1 or 2.
73562.............................  X-ray exam of knee 3.
73564.............................  X-ray exam knee 4 or more.
73565.............................  X-ray exam of knees.
73590.............................  X-ray exam of lower leg.
73600.............................  X-ray exam of ankle.
73610.............................  X-ray exam of ankle.
73620.............................  X-ray exam of foot.
73630.............................  X-ray exam of foot.
73650.............................  X-ray exam of heel.
73660.............................  X-ray exam of toe(s).
74000.............................  X-ray exam of abdomen.
74010.............................  X-ray exam of abdomen.
74020.............................  X-ray exam of abdomen.
74022.............................  X-ray exam series abdomen.
74210.............................  Contrst x-ray exam of throat.
74220.............................  Contrast x-ray esophagus.
74230.............................  Cine/vid x-ray throat/esoph.
74246.............................  Contrst x-ray uppr gi tract.
74247.............................  Contrst x-ray uppr gi tract.
74249.............................  Contrst x-ray uppr gi tract.
76100.............................  X-ray exam of body section.
76510.............................  Ophth us b & quant a.
76511.............................  Ophth us quant a only.
76512.............................  Ophth us b w/non-quant a.
76513.............................  Echo exam of eye water bath.
76514.............................  Echo exam of eye thickness.
76516.............................  Echo exam of eye.
76519.............................  Echo exam of eye.
76536.............................  Us exam of head and neck.
76645.............................  Us exam breast(s).
76801.............................  Ob us < 14 wks single fetus.
76805.............................  Ob us >/= 14 wks sngl fetus.
76811.............................  Ob us detailed sngl fetus.
76816.............................  Ob us follow-up per fetus.
76817.............................  Transvaginal us obstetric.

[[Page 43547]]

 
76830.............................  Transvaginal us non-ob.
76881.............................  Us xtr non-vasc complete.
76882.............................  Us xtr non-vasc lmtd.
76970.............................  Ultrasound exam follow-up.
77072.............................  X-rays for bone age.
77073.............................  X-rays bone length studies.
77074.............................  X-rays bone survey limited.
77075.............................  X-rays bone survey complete.
77076.............................  X-rays bone survey infant.
77077.............................  Joint survey single view.
77082.............................  Dxa bone density vert fx.
77084.............................  Magnetic image bone marrow.
77300.............................  Radiation therapy dose plan.
77301.............................  Radiotherapy dose plan imrt.
77305.............................  Teletx isodose plan simple.
77310.............................  Teletx isodose plan intermed.
77315.............................  Teletx isodose plan complex.
77327.............................  Brachytx isodose calc interm.
77331.............................  Special radiation dosimetry.
77336.............................  Radiation physics consult.
77338.............................  Design mlc device for imrt.
77370.............................  Radiation physics consult.
80500.............................  Lab pathology consultation.
80502.............................  Lab pathology consultation.
85097.............................  Bone marrow interpretation.
86510.............................  Histoplasmosis skin test.
86850.............................  RBC antibody screen.
86870.............................  RBC antibody identification.
86880.............................  Coombs test direct.
86885.............................  Coombs test indirect qual.
86886.............................  Coombs test indirect titer.
86890.............................  Autologous blood process.
86900.............................  Blood typing abo.
86901.............................  Blood typing rh (d).
86904.............................  Blood typing patient serum.
86905.............................  Blood typing rbc antigens.
86906.............................  Blood typing rh phenotype.
86930.............................  Frozen blood prep.
86970.............................  Rbc pretx incubatj w/chemicl.
86977.............................  Rbc serum pretx incubj/inhib.
88104.............................  Cytopath fl nongyn smears.
88106.............................  Cytopath fl nongyn filter.
88108.............................  Cytopath concentrate tech.
88112.............................  Cytopath cell enhance tech.
88120.............................  Cytp urne 3-5 probes ea spec.
88160.............................  Cytopath smear other source.
88161.............................  Cytopath smear other source.
88162.............................  Cytopath smear other source.
88172.............................  Cytp dx eval fna 1st ea site.
88173.............................  Cytopath eval fna report.
88182.............................  Cell marker study.
88184.............................  Flowcytometry/tc 1 marker.
88185.............................  Flowcytometry/tc add-on.
88189.............................  Flowcytometry/read 16 & >.
88300.............................  Surgical path gross.
88302.............................  Tissue exam by pathologist.
88304.............................  Tissue exam by pathologist.
88305.............................  Tissue exam by pathologist.
88307.............................  Tissue exam by pathologist.
88311.............................  Decalcify tissue.
88312.............................  Special stains group 1.
88313.............................  Special stains group 2.
88314.............................  Histochemical stains add-on.
88321.............................  Microslide consultation.
88323.............................  Microslide consultation.
88325.............................  Comprehensive review of data.
88329.............................  Path consult introp.
88331.............................  Path consult intraop 1 bloc.
88342.............................  Immunohistochemistry.
88346.............................  Immunofluorescent study.
88347.............................  Immunofluorescent study.
88348.............................  Electron microscopy.
88358.............................  Analysis tumor.
88360.............................  Tumor immunohistochem/manual.
88361.............................  Tumor immunohistochem/comput.
88365.............................  Insitu hybridization (fish).
88368.............................  Insitu hybridization manual.
88385.............................  Eval molecul probes 51-250.
88386.............................  Eval molecul probes 251-500.
89049.............................  Chct for mal hyperthermia.
89220.............................  Sputum specimen collection.
89230.............................  Collect sweat for test.
89240.............................  Pathology lab procedure.
90472.............................  Immunization admin each add.
90474.............................  Immune admin oral/nasal addl.
92020.............................  Special eye evaluation.
92025.............................  Corneal topography.
92060.............................  Special eye evaluation.
92081.............................  Visual field examination(s).
92082.............................  Visual field examination(s).
92083.............................  Visual field examination(s).
92133.............................  Cmptr ophth img optic nerve.
92134.............................  Cptr ophth dx img post segmt.
92136.............................  Ophthalmic biometry.
92225.............................  Special eye exam initial.
92226.............................  Special eye exam subsequent.
92230.............................  Eye exam with photos.
92240.............................  Icg angiography.
92250.............................  Eye exam with photos.
92275.............................  Electroretinography.
92285.............................  Eye photography.
92286.............................  Internal eye photography.
92520.............................  Laryngeal function studies.
92541.............................  Spontaneous nystagmus test.
92542.............................  Positional nystagmus test.
92546.............................  Sinusoidal rotational test.
92548.............................  Posturography.
92550.............................  Tympanometry & reflex thresh.
92552.............................  Pure tone audiometry air.
92553.............................  Audiometry air & bone.
92555.............................  Speech threshold audiometry.
92556.............................  Speech audiometry complete.
92557.............................  Comprehensive hearing test.
92567.............................  Tympanometry.
92570.............................  Acoustic immitance testing.
92582.............................  Conditioning play audiometry.
92585.............................  Auditor evoke potent compre.
92603.............................  Cochlear implt f/up exam 7/>.
92604.............................  Reprogram cochlear implt 7/>.
92626.............................  Eval aud rehab status.
93005.............................  Electrocardiogram tracing.
93017.............................  Cardiovascular stress test.
93225.............................  Ecg monit/reprt up to 48 hrs.
93226.............................  Ecg monit/reprt up to 48 hrs.
93229.............................  Remote 30 day ecg tech supp.
93270.............................  Remote 30 day ecg rev/report.
93271.............................  Ecg/monitoring and analysis.
93278.............................  ECG/signal-averaged.
93290.............................  Icm device eval.
93306.............................  Tte w/doppler complete.
93701.............................  Bioimpedance cv analysis.
93786.............................  Ambulatory BP recording.
93788.............................  Ambulatory BP analysis.
93880.............................  Extracranial bilat study.
93882.............................  Extracranial uni/ltd study.
93886.............................  Intracranial complete study.
93888.............................  Intracranial limited study.
93922.............................  Upr/l xtremity art 2 levels.
93923.............................  Upr/lxtr art stdy 3+ lvls.
93924.............................  Lwr xtr vasc stdy bilat.
93925.............................  Lower extremity study.
93926.............................  Lower extremity study.
93930.............................  Upper extremity study.
93931.............................  Upper extremity study.
93965.............................  Extremity study.
93970.............................  Extremity study.
93971.............................  Extremity study.
93975.............................  Vascular study.
93976.............................  Vascular study.
93978.............................  Vascular study.
93979.............................  Vascular study.
93990.............................  Doppler flow testing.
94015.............................  Patient recorded spirometry.
94690.............................  Exhaled air analysis.
95250.............................  Glucose monitoring cont.
95800.............................  Slp stdy unattended.
95803.............................  Actigraphy testing.
95805.............................  Multiple sleep latency test.
95806.............................  Sleep study unatt&resp efft.
95807.............................  Sleep study attended.
95808.............................  Polysom any age 1-3> param.
95810.............................  Polysom 6/> yrs 4/> param.
95812.............................  Eeg 41-60 minutes.
95813.............................  Eeg over 1 hour.
95816.............................  Eeg awake and drowsy.
95819.............................  Eeg awake and asleep.
95822.............................  Eeg coma or sleep only.
95869.............................  Muscle test thor paraspinal.
95872.............................  Muscle test one fiber.
95900.............................  Motor nerve conduction test.
95921.............................  Autonomic nrv parasym inervj.
95925.............................  Somatosensory testing.
95926.............................  Somatosensory testing.
95930.............................  Visual evoked potential test.
95950.............................  Ambulatory eeg monitoring.
95953.............................  EEG monitoring/computer.
96000.............................  Motion analysis video/3d.
96361.............................  Hydrate iv infusion add-on.
96366.............................  Ther/proph/diag iv inf addon.
96367.............................  Tx/proph/dg addl seq iv inf.
96370.............................  Sc ther infusion addl hr.
96371.............................  Sc ther infusion reset pump.
96375.............................  Tx/pro/dx inj new drug addon.
96411.............................  Chemo iv push addl drug.
96415.............................  Chemo iv infusion addl hr.
96417.............................  Chemo iv infus each addl seq.
96423.............................  Chemo ia infuse each addl hr.
G0365.............................  Vessel mapping hemo access.
G0399.............................  Home sleep test/type 3 Porta.
G0416.............................  Sat biopsy 10-20.
------------------------------------------------------------------------

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2014, we are proposing 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 2014 APC payment rates are based, we calculated 
hospital-specific overall ancillary CCRs and hospital-specific 
departmental CCRs for each hospital for

[[Page 43548]]

which we had CY 2012 claims data from the most recent available 
hospital cost reports, in most cases, cost reports beginning in CY 
2011. For the CY 2014 OPPS proposed rates, we used the set of claims 
processed during CY 2012. 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 2012 
(the year of claims data we used to calculate the proposed CY 2014 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2012 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 proposed rule and which has been our 
standard policy since the CY 2005 OPPS.
    For the CCR calculation process, we used the same general approach 
that we used in developing the final APC rates for CY 2007 and 
thereafter, using the revised CCR calculation that excluded the costs 
of paramedical education programs and weighted the outpatient charges 
by the volume of outpatient services furnished by the hospital. We 
refer readers to the CY 2007 OPPS/ASC final rule with comment period 
for more information (71 FR 67983 through 67985). We first limited the 
population of cost reports to only those hospitals that filed 
outpatient claims in CY 2012 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 2011. For this proposed rule, we used the most recently 
submitted cost reports to calculate the CCRs to be used to calculate 
costs for the proposed CY 2014 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 are proposing to continue this longstanding 
methodology for the calculation of costs for CY 2014.
    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 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. In the CY 2013 OPPS/ASC final rule with comment period, we 
determined that a significant volume of hospitals were utilizing the 
``Implantable Devices Charged to Patients'' cost center. Because a 
sufficient amount of data from which to generate a meaningful analysis 
was available, we established in the CY 2013 OPPS/ASC final rule with 
comment period a policy to create a distinct CCR using the 
``Implantable Devices Charged to Patients'' cost center (77 FR 68225). 
For the CY 2014 OPPS, we are proposing to continue 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.
    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

[[Page 43549]]

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 were effective for cost report 
periods beginning on or after May 1, 2010, on the revised cost report 
Form CMS-2552-10.
    Using the December 2012 HCRIS update which we use to estimate costs 
in the CY 2014 OPPS ratesetting process, we were able to calculate a 
valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 
1,853 hospitals, a valid CT scan CCR for 1,956 hospitals, and a valid 
Cardiac Catheterization CCR for 1,367 hospitals. We believe that there 
is a sufficient amount of data in the Form CMS 2552-10 cost reports 
from which to generate a meaningful analysis of CCRs. Therefore, we are 
providing various data analyses below in Tables 2 and 3 demonstrating 
the changes as a result of including the new CCRs calculated from the 
new standard cost centers into the CY 2014 OPPS ratesetting process.

                    Table 2--Median CCRs Calculated Using Different Cost Report Distributions
----------------------------------------------------------------------------------------------------------------
                                                                                                    Using Form
                                                                     ``New''        Using Form      2552-96 and
                         Calculated CCR                           standard cost    2552-96 CCRs    Form 2552-10
                                                                      center           only            CCRs
----------------------------------------------------------------------------------------------------------------
Cardiology.....................................................  ...............          0.2915          0.5112
Cardiac Catheterization........................................               *           0.1685          0.1590
Radiology--Diagnostic..........................................  ...............          0.2025          0.2279
Magnetic Resonance Imaging (MRI)...............................               *           0.1074          0.0959
CT Scan........................................................               *           0.0568          0.0502
Medical Supplies Charged to Patient............................  ...............          0.3389          0.3315
Implantable Devices Charged to Patient.........................               *           0.4371          0.4190
----------------------------------------------------------------------------------------------------------------


       Table 3--Percentage Change in Estimated Cost for Those APCs
  Significantly Affected by Use of the New Standard Cost Center CCRs in
                    the CMS Form 2552-10 Cost Reports
------------------------------------------------------------------------
                                                              Percentage
                                                              change in
           APC                      APC Descriptor            estimated
                                                                 cost
                                                              (percent)
------------------------------------------------------------------------
0282.....................  Miscellaneous Computed Axial            -38.1
                            Tomography.
0332.....................  Computed Tomography without             -34.0
                            Contrast.
8005.....................  CT and CTA without Contrast             -33.9
                            Composite.
0331.....................  Combined Abdomen and Pelvis CT          -32.9
                            without Contrast.
8006.....................  CT and CTA with Contrast                -29.0
                            Composite.
0334.....................  Combined Abdomen and Pelvis CT          -28.8
                            with Contrast.
0662.....................  CT Angiography..................        -27.0
0283.....................  Computed Tomography with                -27.0
                            Contrast.
0333.....................  Computed Tomography without             -26.3
                            Contrast followed by Contrast.
0383.....................  Cardiac Computed Tomographic            -24.8
                            Imaging.
0336.....................  Magnetic Resonance Imaging and          -19.3
                            Magnetic Resonance Angiography
                            without Contrast.
8008.....................  MRI and MRA with Contrast               -18.9
                            Composite.
8007.....................  MRI and MRA without Contrast            -18.5
                            Composite.
0337.....................  Magnetic Resonance Imaging and          -18.2
                            Magnetic Resonance Angiography
                            without Contrast followed by
                            Contrast.
0284.....................  Magnetic Resonance Imaging and          -14.9
                            Magnetic Resonance Angiography
                            with Contrast.
0080.....................  Diagnostic Cardiac                       -8.7
                            Catheterization.
0276.....................  Level I Digestive Radiology.....         15.2
0378.....................  Level II Pulmonary Imaging......         15.2
0396.....................  Bone Imaging....................         15.5
0390.....................  Level I Endocrine Imaging.......         15.8
0395.....................  GI Tract Imaging................         16.2
0402.....................  Level II Nervous System Imaging.         16.2
0398.....................  Level I Cardiac Imaging.........         16.3
0262.....................  Plain Film of Teeth.............         16.9
0377.....................  Level II Cardiac Imaging........         17.0
0267.....................  Level III Diagnostic and                 17.2
                            Screening Ultrasound.
0406.....................  Level I Tumor/Infection Imaging.         17.4
0403.....................  Level I Nervous System Imaging..         18.9
0266.....................  Level II Diagnostic and                  25.1
                            Screening Ultrasound.
0265.....................  Level I Diagnostic and Screening         29.9
                            Ultrasound.
8004.....................  Ultrasound Composite............         30.2
------------------------------------------------------------------------

    We note that the estimated changes in geometric mean estimated APC 
cost of using data from the new standard cost centers cited above 
appear consistent with the expected results based on RTI's analysis of 
cost report and claims data in the July 2008 final report (pages 5 and 
6), which state ``in hospitals that aggregate data for CT scanning, 
MRI, or

[[Page 43550]]

nuclear medicine services with the standard line for Diagnostic 
Radiology, costs for these services all appear substantially 
overstated, while the costs for plain films, ultrasound and other 
imaging procedures are correspondingly understated.'' We also note that 
there are limited additional impacts in the implantable device related 
APCs due to using the new cost report form CMS 2552-10 because the 
standard cost center for implantable medical devices was previously 
incorporated into cost report form CMS 2552-96.
    As we have discussed in prior rulemaking (77 FR 68223 through 
68225), once we determined that cost report data were available for 
analysis, we would propose, if appropriate to use the distinct CCRs 
described above in the calculation of the OPPS relative payment 
weights. We believe that the analytic findings described above support 
the original decision to develop distinct standard cost centers for 
implantable devices, MRIs, CT scans, and cardiac catheterization, and 
we see no reason to further delay proposing to implement the CCRs of 
each of these cost centers. Therefore, beginning in CY 2014, we are 
proposing to calculate the OPPS relative payment weights using distinct 
CCRs for cardiac catheterization, CT scan, and MRI and to continue 
using a distinct CCR for implantable medical devices. Section XXIII. of 
this proposed rule includes the impacts of calculating the proposed CY 
2014 OPPS relative payment weights using these new standard cost 
centers.
2. Proposed Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2014. The Hospital 
OPPS page on the CMS Web site on which this proposed rule 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 proposed 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 2012 claims that were used to 
calculate the proposed payment rates for the CY 2014 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 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 the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68259 through 68271), we finalized the use of geometric 
mean costs to calculate the relative weights on which the CY 2013 OPPS 
payment rates were based. While this policy changed the cost metric on 
which the relative payments are based, the data process in general 
remained the same, under the methodologies that we used to obtain 
appropriate claims data and accurate cost information in determining 
estimated service cost. For CY 2014, we are proposing to continue to 
use geometric mean costs to calculate the relative weights on which the 
proposed CY 2014 OPPS payments rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.f. of this proposed rule to calculate the costs we used to 
establish the proposed relative weights used in calculating the 
proposed OPPS payment rates for CY 2014 shown in Addenda A and B to 
this proposed rule (which are available via the Internet on the CMS Web 
site). We refer readers to section II.A.4. of this proposed rule for a 
discussion of the conversion of APC costs to scaled payment weights.
a. Claims Preparation
    For this proposed rule, we used the CY 2012 hospital outpatient 
claims processed through December 31, 2012, to calculate the geometric 
mean costs of APCs that underpin the proposed relative payment weights 
for CY 2014. To begin the calculation of the proposed relative payment 
weights for CY 2014, we pulled all claims for outpatient services 
furnished in CY 2012 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 tests 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 116 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
therefore, these claims were not used to set OPPS payment.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC).
    To convert charges on the claims to estimated cost, we multiplied 
the charges on each claim by the appropriate hospital-specific CCR 
associated with the revenue code for the charge as discussed in section 
II.A.1.c. of this proposed rule. We then flagged and excluded CAH 
claims (which are not paid under the OPPS) and claims from hospitals 
with invalid CCRs. The latter included claims from hospitals without a 
CCR; those from hospitals paid an all-inclusive rate; those from 
hospitals with obviously erroneous CCRs (greater than 90 or less than 
0.0001); and those from hospitals with overall ancillary CCRs that were 
identified as outliers (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

[[Page 43551]]

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.
    Prior to CY 2013, our payment policy for nonpass-through separately 
paid drugs and biologicals was based on a redistribution methodology 
that accounted for pharmacy overhead by allocating cost from packaged 
drugs to separately paid drugs. This methodology 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, we 
paid 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. Under that policy, we did not 
redistribute the pharmacy overhead costs from packaged drugs to 
separately paid drugs. For the CY 2014 OPPS, we are proposing to 
continue the CY 2013 payment policy for separately payable drugs and 
biologicals. We refer readers to section V.B.3. of this proposed rule 
for a complete discussion of our CY 2014 proposed payment policy for 
separately paid drugs and biologicals.
    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,'' or ``V,'' 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 2013 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 2014, we are proposing to continue the policy we implemented 
for CY 2013 to exclude line-item data for pass-through drugs and 
biologicals (status indicator ``G'' for CY 2012) and nonpass-through 
drugs and biologicals (status indicator ``K'' for CY 2012) 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 2013 OPPS/ASC final rule with comment period (77 
FR 68226) of line-items with a status indicator of ``S,'' ``T,'' ``V,'' 
or ``X,'' we believe that unpaid line-items represent services that are 
invalidly reported and, therefore, should not be used for ratesetting. 
We believe that removing lines with valid status indicators that were 
edited and not paid during claims processing increases the accuracy of 
the data used for ratesetting purposes.
    For the CY 2014 OPPS, as part of the proposal to package clinical 
diagnostic laboratory tests, we also are proposing to apply the line 
item trim to these services if they did not receive payment in the 
claims year. Removing these lines ensures that, in establishing the CY 
2014 OPPS relative payments weights, we appropriately allocate the 
costs associated with packaging these services. For a more detailed 
discussion of the proposal to package clinical diagnostic laboratory 
tests, we refer readers to section II.A.3.b.(3) of this proposed rule.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2014 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.) We note that, under the proposed CY 2014 OPPS packaging policy, 
we are proposing to delete status indicator ``X'' and revise the title 
and description of status indicator ``Q1'' to reflect that deletion, as 
discussed in sections II.A.3. and XI. of this proposed rule. For CY 
2014, we are proposing to define major procedures as any HCPCS code 
having a status indicator of ``S,'' ``T,'' or ``V''; to define minor 
procedures as any code

[[Page 43552]]

having a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N''; and to classify ``other'' procedures as any code 
having a status indicator other than one that we have classified as 
major or minor. For CY 2014, we are proposing to continue to assign 
status indicator ``R'' to blood and blood products; status indicator 
``U'' to brachytherapy sources; status indicator ``Q1'' to all ``STV-
packaged codes''; status indicator ``Q2'' to all ``T-packaged codes''; 
and status indicator ``Q3'' to all codes that may be paid through a 
composite APC based on composite-specific criteria or paid separately 
through single code APCs when the criteria are not met.
    As discussed in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and 
``Q3'' to facilitate identification of the different categories of 
codes. We are proposing to treat these codes in the same manner for 
data purposes for CY 2014 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.f. 
of this proposed rule.
    Specifically, we are proposing to divide 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,'' or ``V'' 
which includes codes with status indicator ``Q3''); claims with one 
unit of a status indicator ``Q1'' code (``STV-packaged'') where there 
was no code with status indicator ``S,'' ``T,'' or ``V'' 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,'' 
or ``V,'' 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 '' or ``V''). 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'' (``STV-
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'' (``STV-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' or ``V'' 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, 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'' 
(``STV-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 proposed 
rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for this proposed 
rule, we examined both the multiple procedure major claims and the 
multiple procedure minor claims. We first examined the multiple major 
procedure claims for dates of service to determine if we could break 
them into ``pseudo'' single procedure claims using the dates of service 
for all lines on the claim. If we could create claims with single major 
procedures by using dates of service, we created a single procedure 
claim record for each separately payable procedure on a different date 
of service (that is, a ``pseudo'' single procedure claim).
    We also are proposing to use the bypass codes listed in Addendum N 
to this proposed rule (which is available via the Internet on our Web 
site) and discussed in section II.A.1.b. of this proposed rule to 
remove separately payable procedures which we determined contained 
limited or no packaged costs or that were otherwise suitable for 
inclusion on the bypass list from a multiple procedure bill. As 
discussed above, we ignore the ``overlap bypass codes,'' that is, those 
HCPCS codes that are both on the bypass list and are members of the 
multiple imaging composite APCs, in this initial assessment for 
``pseudo'' single procedure claims. The proposed CY 2014 ``overlap 
bypass codes'' are listed in Addendum N to this proposed rule (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

[[Page 43553]]

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 proposed criteria 
for the multiple imaging composite APCs, discussed in section 
II.A.2.f.(5) of this proposed rule, 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 proposed CY 2014 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.
    We also are proposing to 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'' (``STV-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 2013 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 2013 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 2013 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 2013 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 2013 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 2013 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'' 
(``STV-packaged''), we selected the T-packaged status indicator ``Q2'' 
HCPCS code that had the highest relative payment weight for CY 2013 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 2013 relative payment weight; 
other codes with status indicator ``Q2''; codes with status indicator 
``Q1'' (``STV-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 
2013 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2013 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 proposed 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 XI.A. of this proposed 
rule.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral modifier (Modifier 50 
(Bilateral procedure)) because the line-item cost for the code 
represented the cost of two units of the procedure, notwithstanding 
that hospitals billed the code with a unit of one.
    We are proposing to continue to apply the methodology described 
above for the purpose of creating ``pseudo'' single procedure claims 
for the CY 2014 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 proposed rule 
(which is available via the Internet on the CMS Web site) and the costs 
of those

[[Page 43554]]

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 4 below that appeared on the claim 
without a HCPCS code into the cost of the single major procedure 
remaining on the claim. For a more complete discussion of our proposed 
CY 2014 OPPS packaging policy, we refer readers to section II.A.3. of 
this proposed rule.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we are proposing to 
continue to compare the final list of packaged revenue codes that we 
adopt for CY 2014 to the revenue codes that the I/OCE will package for 
CY 2014 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 2014, as we did for CY 2013, we reviewed the changes to 
revenue codes that were effective during CY 2012 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we would propose to package for CY 2014. We believe that the 
charges reported under the revenue codes listed in Table 4 below 
continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2014, 
we are proposing to continue to package the costs that we derive from 
the charges reported without HCPCS codes under the revenue codes 
displayed in Table 4 below for purposes of calculating the geometric 
mean costs on which the proposed CY 2014 OPPS/ASC payment rates are 
based.

            Table 4--Proposed CY 2014 Packaged Revenue Codes
------------------------------------------------------------------------
     Revenue code                         Description
------------------------------------------------------------------------
0250.................  Pharmacy; General Classification.
0251.................  Pharmacy; Generic Drugs.
0252.................  Pharmacy; Non-Generic Drugs.
0254.................  Pharmacy; Drugs Incident to Other Diagnostic
                        Services.
0255.................  Pharmacy; Drugs Incident to Radiology.
0257.................  Pharmacy; Non-Prescription.
0258.................  Pharmacy; IV Solutions.
0259.................  Pharmacy; Other Pharmacy.
0260.................  IV Therapy; General Classification.
0261.................  IV Therapy; Infusion Pump.
0262.................  IV Therapy; IV Therapy/Pharmacy Svcs.
0263.................  IV Therapy; IV Therapy/Drug/Supply Delivery.
0264.................  IV Therapy; IV Therapy/Supplies.
0269.................  IV Therapy; Other IV Therapy.
0270.................  Medical/Surgical Supplies and Devices; General
                        Classification.
0271.................  Medical/Surgical Supplies and Devices; Non-
                        sterile Supply.
0272.................  Medical/Surgical Supplies and Devices; Sterile
                        Supply.
0275.................  Medical/Surgical Supplies and Devices; Pacemaker.
0276.................  Medical/Surgical Supplies and Devices;
                        Intraocular Lens.
0278.................  Medical/Surgical Supplies and Devices; Other
                        Implants.
0279.................  Medical/Surgical Supplies and Devices; Other
                        Supplies/Devices.
0280.................  Oncology; General Classification.
0289.................  Oncology; Other Oncology.
0343.................  Nuclear Medicine; Diagnostic
                        Radiopharmaceuticals.
0344.................  Nuclear Medicine; Therapeutic
                        Radiopharmaceuticals.
0370.................  Anesthesia; General Classification.
0371.................  Anesthesia; Anesthesia Incident to Radiology.
0372.................  Anesthesia; Anesthesia Incident to Other DX
                        Services.
0379.................  Anesthesia; Other Anesthesia.
0390.................  Administration, Processing and Storage for Blood
                        and Blood Components; General Classification.
0392.................  Administration, Processing and Storage for Blood
                        and Blood Components; Processing and Storage.
0399.................  Administration, Processing and Storage for Blood
                        and Blood Components; Other Blood Handling.
0621.................  Medical Surgical Supplies--Extension of 027X;
                        Supplies Incident to Radiology.
0622.................  Medical Surgical Supplies--Extension of 027X;
                        Supplies Incident to Other DX Services.
0623.................  Medical Supplies--Extension of 027X, Surgical
                        Dressings.
0624.................  Medical Surgical Supplies--Extension of 027X; FDA
                        Investigational Devices.
0630.................  Pharmacy--Extension of 025X; Reserved.
0631.................  Pharmacy--Extension of 025X; Single Source Drug.
0632.................  Pharmacy--Extension of 025X; Multiple Source
                        Drug.
0633.................  Pharmacy--Extension of 025X; Restrictive
                        Prescription.
0681.................  Trauma Response; Level I Trauma.
0682.................  Trauma Response; Level II Trauma.
0683.................  Trauma Response; Level III Trauma.
0684.................  Trauma Response; Level IV Trauma.
0689.................  Trauma Response; Other.

[[Page 43555]]

 
0700.................  Cast Room; General Classification.
0710.................  Recovery Room; General Classification.
0720.................  Labor Room/Delivery; General Classification.
0721.................  Labor Room/Delivery; Labor.
0732.................  EKG/ECG (Electrocardiogram); Telemetry.
0762.................  Specialty services; Observation Hours.
0801.................  Inpatient Renal Dialysis; Inpatient Hemodialysis.
0802.................  Inpatient Renal Dialysis; Inpatient Peritoneal
                        Dialysis (Non-CAPD).
0803.................  Inpatient Renal Dialysis; Inpatient Continuous
                        Ambulatory Peritoneal Dialysis (CAPD).
0804.................  Inpatient Renal Dialysis; Inpatient Continuous
                        Cycling Peritoneal Dialysis (CCPD).
0809.................  Inpatient Renal Dialysis; Other Inpatient
                        Dialysis.
0810.................  Acquisition of Body Components; General
                        Classification.
0819.................  Acquisition of Body Components; Other Donor.
0821.................  Hemodialysis-Outpatient or Home; Hemodialysis
                        Composite or Other Rate.
0824.................  Hemodialysis-Outpatient or Home; Maintenance--
                        100%.
0825.................  Hemodialysis-Outpatient or Home; Support
                        Services.
0829.................  Hemodialysis-Outpatient or Home; Other OP
                        Hemodialysis.
0942.................  Other Therapeutic Services (also see 095X, an
                        extension of 094x); Education/Training.
0943.................  Other Therapeutic Services (also see 095X, an
                        extension of 094X), Cardiac Rehabilitation.
0948.................  Other Therapeutic Services (also see 095X, an
                        extension of 094X), Pulmonary Rehabilitation.
------------------------------------------------------------------------

    In accordance with our longstanding policy, we are proposing to 
continue to exclude: (1) Claims that had zero costs after summing all 
costs on the claim; and (2) claims containing packaging flag number 3. 
Effective for services furnished on or after July 1, 2004, the I/OCE 
assigned packaging flag number 3 to claims on which hospitals submitted 
token charges less than $1.01 for a service with status indicator ``S'' 
or ``T'' (a major separately payable service under the OPPS) for which 
the fiscal intermediary or Medicare administrative contractor (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 are proposing to continue these processes for the CY 2014 
OPPS.
    For the remaining claims, we are proposing to then standardize 60 
percent of the costs of the claim (which we have previously determined 
to be the labor-related portion) for geographic differences in labor 
input costs. We made this adjustment by determining the wage index that 
applied to the hospital that furnished the service and dividing the 
cost for the separately paid HCPCS code furnished by the hospital by 
that wage index. The claims accounting that we provide for the proposed 
and final rule contains the formula we use to standardize the total 
cost for the effects of the wage index. As has been our policy since 
the inception of the OPPS, we are proposing to use the pre-reclassified 
wage indices for standardization because we believe that they better 
reflect the true costs of items and services in the area in which the 
hospital is located than the post-reclassification wage indices and, 
therefore, would result in the most accurate unadjusted geometric mean 
costs.
    In accordance with our longstanding practice, we also are proposing 
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 112 million 
claims were left. Using these approximately 112 million claims, we 
created approximately 82 million single and ``pseudo'' single procedure 
claims, of which we used slightly more than 82 million single bills 
(after trimming out approximately 1 million claims as discussed in 
section II.A.1.a. of this proposed rule) in the CY 2014 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 calculated the APC relative payment 
weights using geometric mean costs, and are proposing to do the same 
for CY 2014. 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 2014 OPPS/ASC policy to 
calculate relative payment weights based on geometric means, we refer 
readers to section II.A.2.f. of this proposed rule.
    We are proposing to use these claims to calculate the CY 2014 
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, in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS 
relative payment weights based on geometric mean costs, we also applied

[[Page 43556]]

the 2 times rule based on geometric mean costs. For the CY 2014 OPPS, 
we are proposing to continue to develop the APC relative payment 
weights based on geometric mean costs.
    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 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 82 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 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 proposed CY 2014 policy to continue 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 are proposing to pay 
separately under this proposed rule, and we reassigned HCPCS codes to 
different APCs where it was necessary to ensure clinical and resource 
homogeneity within the APCs. 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.
    As we discuss in sections II.A.2.d. and II.A.2.f. and in section 
VIII.B. of this proposed rule, in some cases, APC geometric mean costs 
are calculated using variations of the process outlined above. 
Specifically, section II.A.2.d. of this proposed rule addresses the 
proposed calculation of single APC criteria-based geometric mean costs. 
Section II.A.2.f. of this proposed rule discusses the proposed 
calculation of composite APC criteria-based geometric mean costs. 
Section VIII.B. of this proposed rule addresses the methodology for 
calculating the proposed geometric mean costs for partial 
hospitalization services.
(2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    At the March 11, 2013 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 final rule costs based on CY 2011 claims 
processed through June 30, 2012, to those based on CY 2012 OPPS/ASC 
final rule data (CY 2011 claims processed through June 30, 2011). The 
Data Subcommittee reviewed the fluctuations in the APC costs and their 
respective weights.
    At the March 2013 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 recommended that CMS provide data on the 
impact of the CY 2013 method of using geometric mean costs rather than 
median costs to establish relative APC weights.
    CMS Response: We are accepting this recommendation and will provide 
the data at a future meeting.
d. Proposed Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
    Historically, 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. The standard methodology for calculating 
device-dependent APC costs utilizes claims data that generally reflect 
the full cost of the required device by using only the subset of single 
procedure claims that pass the procedure-to-device and device-to-
procedure edits; do not contain token charges (less than $1.01) for 
devices; do not contain the ``FB'' modifier signifying that the device 
was furnished without cost to the provider, or where a full credit was 
received; and do not contain the ``FC'' modifier signifying that the 
hospital received partial credit for the device. For a full history of 
how we have calculated payment rates for device-dependent APCs in 
previous years and a detailed discussion of how we developed the 
standard device-dependent APC ratesetting methodology, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 
through 66742). Overviews of the procedure-to-device edits and device-
to-procedure edits used in ratesetting for device-dependent APCs are 
available in the CY 2005 OPPS final rule with comment period (69 FR 
65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68070 through 68071).
    For CY 2014, we are proposing in section II.A.2.e. of this proposed 
rule to define 29 device-dependent APCs as single complete services and 
to assign them to comprehensive APCs that would provide all-inclusive 
payments for those services. As we explain in that section, we are 
proposing this as a further step to improve the accuracy and 
transparency of our payments for these services where the cost of the 
device is large compared to the other costs that contribute to the cost 
of the service. Table 5 below provides a list of the 39 APCs currently 
recognized as device-dependent APCs and identifies those 29 APCs that 
we are proposing to include in the comprehensive APCs proposal. We are 
proposing to treat the remaining 10 device-dependent APCs by applying 
our standard APC ratesetting methodology to calculate their CY 2014 
payment rates. We initially adopted a specific device-dependent APC 
ratesetting methodology because commenters had previously expressed 
concerns that the costs associated with certain high-cost devices were 
not always being accurately reported and included in the calculation of 
relative payment weights for the associated procedures. In this 
proposed rule, we do not believe that it is necessary to continue to 
apply the more specific device-dependent APC ratesetting methodology to 
ensure accurate ratesetting for the 10 APCs that are not included in 
the comprehensive APCs proposal because hospitals now have had several 
years of experience reporting procedures involving implantable devices 
and have grown accustomed to ensuring that they code and report charges 
so that their claims fully and appropriately reflect the costs of those 
devices. Therefore, we believe that it is possible to calculate the 
payment rates for these APCs using our standard APC ratesetting 
methodology.

[[Page 43557]]

    Beginning in CY 2014, we also are proposing to no longer implement 
procedure-to-device edits and device-to-procedure edits for any APCs. 
Under this proposal, hospitals would still be expected to adhere to the 
guidelines of correct coding and append the correct device code to the 
claim when applicable. However, claims would no longer be returned to 
providers when specific procedure and device code pairings do not 
appear on a claim. We believe that this is appropriate because of the 
experience hospitals now have had in coding and reporting these claims 
fully and because, for the more costly devices, the proposed 
comprehensive APCs would reliably reflect the cost of the device if it 
is included anywhere on the claim. Therefore, we do not believe that 
the burden on hospitals of adhering to the procedure-to-device edits 
and device-to-procedure edits, and the burden on the Medicare program 
of maintaining those edits, continue to be warranted. As with all other 
items and services recognized under the OPPS, we expect hospitals to 
code and report their costs appropriately, regardless of whether there 
are claims processing edits in place.

       Table 5--APCs Currently Recognized as Device-Dependent APCs
------------------------------------------------------------------------
             APC                               APC Title
------------------------------------------------------------------------
0039*........................  Level I Implantation of Neurostimulator
                                Generator.
0040*........................  Level I Implantation/Revision/Replacement
                                of Neurostimulator Electrodes.
0061*........................  Level II Implantation/Revision/
                                Replacement of Neurostimulator
                                Electrodes.
0082*........................  Coronary or Non-Coronary Atherectomy.
0083*........................  Coronary Angioplasty, Valvuloplasty, and
                                Level I Endovascular Revascularization.
0084.........................  Level I Electrophysiologic Procedures.
0085*........................  Level II Electrophysiologic Procedures.
0086.........................  Level III Electrophysiologic Procedures.
0089*........................  Insertion/Replacement of Permanent
                                Pacemaker and Electrodes.
0090*........................  Level I Insertion/Replacement of
                                Permanent Pacemaker.
0104*........................  Transcatheter Placement of Intracoronary
                                Stents.
0106*........................  Insertion/Replacement of Pacemaker Leads
                                and/or Electrodes.
0107*........................  Level I Implantation of Cardioverter-
                                Defibrillators (ICDs).
0108*........................  Level II Implantation of Cardioverter-
                                Defibrillators (ICDs).
0115.........................  Cannula/Access Device Procedures.
0202*........................  Level VII Female Reproductive Procedures.
0227*........................  Implantation of Drug Infusion Device.
0229*........................  Level II Endovascular Revascularization
                                of the Lower Extremity.
0259*........................  Level VII ENT Procedures.
0293*........................  Level VI Anterior Segment Eye Procedures.
0315*........................  Level II Implantation of Neurostimulator
                                Generator.
0318*........................  Implantation of Neurostimulator Pulse
                                Generator and Electrode.
0319*........................  Level III Endovascular Revascularization
                                of the Lower Extremity.
0384.........................  GI Procedures with Stents.
0385*........................  Level I Prosthetic Urological Procedures.
0386*........................  Level II Prosthetic Urological
                                Procedures.
0425*........................  Level II Arthroplasty or Implantation
                                with Prosthesis.
0427.........................  Level II Tube or Catheter Changes or
                                Repositioning.
0622.........................  Level II Vascular Access Procedures.
0623.........................  Level III Vascular Access Procedures.
0648*........................  Level IV Breast Surgery.
0652.........................  Insertion of Intraperitoneal and Pleural
                                Catheters.
0653.........................  Vascular Reconstruction/Fistula Repair
                                with Device.
0654*........................  Level II Insertion/Replacement of
                                Permanent Pacemaker.
0655*........................  Insertion/Replacement/Conversion of a
                                Permanent Dual Chamber Pacemaker or
                                Pacing.
0656*........................  Transcatheter Placement of Intracoronary
                                Drug-Eluting Stents.
0674*........................  Prostate Cryoablation.
0680*........................  Insertion of Patient Activated Event
                                Recorders.
0687.........................  Revision/Removal of Neurostimulator
                                Electrodes.
------------------------------------------------------------------------
*Denotes proposed comprehensive APC.

(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For CY 2014, we are proposing to continue to establish payment 
rates for blood and blood products using our blood-specific CCR 
methodology, which utilizes actual or simulated CCRs from the most 
recently available hospital cost reports to convert hospital charges 
for blood and blood products to costs. This methodology has been our 
standard ratesetting methodology for blood and blood products since CY 
2005. It was developed in response to data analysis indicating that 
there was a significant difference in CCRs for those hospitals with and 
without blood-specific cost centers, and past public comments 
indicating that the former OPPS policy of defaulting to the overall 
hospital CCR for hospitals not reporting a blood-specific cost center 
often resulted in an underestimation of the true hospital costs for 
blood and blood products. Specifically, in order to address the 
differences in CCRs and to better reflect hospitals' costs, we are 
proposing to continue to simulate blood CCRs for each hospital that 
does not report a blood cost center by calculating the ratio

[[Page 43558]]

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 2014 payment rates 
for blood and blood products are based using the actual blood-specific 
CCR for hospitals that reported costs and charges for a blood cost 
center and a hospital-specific simulated blood-specific CCR for 
hospitals that did not report costs and charges for a blood cost 
center.
    We continue to believe the hospital-specific, blood-specific CCR 
methodology best responds to the absence of a blood-specific CCR for a 
hospital than alternative methodologies, such as defaulting to the 
overall hospital CCR or applying an average blood-specific CCR across 
hospitals. Because this methodology takes into account the unique 
charging and cost accounting structure of each hospital, we believe 
that it yields more accurate estimated costs for these products. We 
continue to believe that this methodology in CY 2014 would 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 note that, as discussed in section II.A.2.e. of this proposed 
rule, we are proposing comprehensive APCs that would provide all-
inclusive payments for certain device-dependent procedures. Under this 
proposal, we would include the costs of blood and blood products when 
calculating the overall costs of these comprehensive APCs. We note that 
we would continue to apply the blood-specific CCR methodology described 
in this section when calculating the costs of the blood and blood 
products that appear on claims with services assigned to the 
comprehensive APCs. Because the costs of blood and blood products would 
be reflected in the overall costs of the comprehensive APCs (and, as a 
result, in the payment rates of the comprehensive APCs), we would not 
make separate payments for blood and blood products when they appear on 
the same claims as services assigned to the comprehensive APCs.
    We refer readers to Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site) for the proposed CY 
2014 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).
e. Proposed Establishment of Comprehensive APCs
(1) Definition and General Principles
    During the initial development of a proposal for an outpatient 
prospective payment system in 1998 (63 FR 47552 through 48036), we 
considered developing the payment system based on a comprehensive 
outpatient bundle, as opposed to on a HCPCS component level. In 2000, 
we implemented an OPPS based generally on making payments at the HCPCS 
level (65 FR 18434 through 18820). Since then, however, we have been 
steadily moving the OPPS towards a more comprehensive approach that 
increases flexibility and opportunity for efficiencies in a prospective 
system.
    For CY 2014, we are proposing to create 29 comprehensive APCs to 
replace 29 existing device-dependent APCs. We are proposing to define a 
comprehensive APC as a classification for the provision of a primary 
service and all adjunctive services provided to support the delivery of 
the primary service. Because a comprehensive APC would treat all 
individually reported codes as representing components of the 
comprehensive service, our proposal is to make a single prospective 
payment based on the cost of all individually reported codes that 
represent the provision of a primary service and all adjunctive 
services provided to support that delivery of the primary service. 
Specifically, we are proposing to create comprehensive APCs for the 29 
most costly device-dependent services, where the cost of the device is 
large compared to the other costs that contribute to the cost of 
delivering the primary service.
    We believe that, under the authority of sections 1833(t)(1) and 
(t)(2) of the Act, the Secretary has the discretion to establish 
comprehensive APCs as part of developing the OPPS classification 
system, and that this proposal furthers our ongoing efforts to move the 
OPPS towards a more comprehensive payment system in support of our 
objectives to increase flexibility and efficiencies.
    The OPPS data we have accumulated over the past decade have enabled 
us to continue to address several longstanding goals, including: 
Continuing to improve the validity of our payments to most accurately 
reflect costs; improving transparency and reducing complexity and 
administrative burden whenever possible; and increasing flexibility for 
hospitals to develop increased efficiencies in the delivery of quality 
care.
    We believe this proposal to establish comprehensive APCs will 
improve our ability to accurately set payment rates. In the normal 
process of setting payment rates, costs in certain cost centers 
(``uncoded costs'') are added to the costs of services reported with 
specific HCPCS codes only when they can be reliably assigned to a 
single service. Under the proposal, the entire claim would be 
associated with a single comprehensive service so all costs reported on 
the claim may be reliably assigned to that service. This increases the 
accuracy of the payment for the comprehensive service and also 
increases the stability of the payment from year to year. As an 
example, room and board revenue center charges are not included in OPPS 
rate setting calculations because room and board is typically not 
separately charged for outpatient services. In the case of these 29 
device-dependent procedures, the patient typically stays overnight to 
recover from the procedure. Thus, for these 29 comprehensive services, 
the cost of the room, nutrition (board) and nursing care that is 
required to sustain the patient while the comprehensive device-
dependent service is delivered will be associated with the service even 
if the hospital reports the costs in room and board revenue codes that 
are not usually used to report outpatient procedure costs.
    We also believe our proposal will enhance beneficiary understanding 
and transparency. Typically beneficiaries understand the primary 
procedure to be the OPPS service they receive, and do not generally 
consider that the other HCPCS codes are separate services. For example, 
beneficiaries think of a single service such as ``getting my gall 
bladder removed'' or ``getting a pacemaker.'' We believe that defining 
certain services within the OPPS in terms of a single comprehensive 
service delivered to the beneficiary improves transparency for the 
beneficiary, for physicians, and for hospitals by creating a common 
reference point with a similar meaning for all three groups and using 
the comprehensive service concept that already identifies these same 
services when they are performed in an inpatient environment.
    Finally, we believe that larger bundles that contain a wider mix of 
related services in the prospectively paid bundles increase the 
opportunities for

[[Page 43559]]

providers to tailor services to the specific needs of individual 
beneficiaries, thereby increasing the opportunities for efficiencies 
and improving the delivery of medical care.
(2) Comprehensive APCs for Device-Dependent Services
(a) Identification of High-Cost Device-Dependent Procedures
    In order to identify those services for which comprehensive 
packaging would have the greatest impact on cost validity, payment 
accuracy, beneficiary transparency, and hospital efficiency, we ranked 
all APCs by CY 2012 costs and then identified 29 device-dependent APCs 
where we believe that the device-dependent APC is characterized by a 
costly primary service with relatively small cost contributions from 
adjunctive services.
(b) Proposal To Create Comprehensive APCs for Certain Device-Dependent 
Procedures
    For CY 2014, we are proposing to create 29 comprehensive APCs to 
prospectively pay for device-dependent services associated with 136 
HCPCS codes. We are proposing to base the single all-inclusive 
comprehensive APC payment on all charges on the claim, excluding only 
charges that cannot be covered by Medicare Part B or that are not 
payable under the OPPS. This comprehensive APC payment would include, 
for example, payment for the following types of services.
 Inclusion of Otherwise Packaged Services and Supplies
    As part of the comprehensive APC, we are proposing to package all 
services that are packaged in CY 2013, and all services proposed for 
unconditional or conditional packaging for CY 2014.
 Inclusion of Adjunctive Services
    We have previously noted in section II.A.3.a. of this proposed rule 
that it has been a goal of the OPPS to package services that are 
typically integral, ancillary, supportive, dependent, or adjunctive to 
a primary service. We are proposing to package into the comprehensive 
APCs all these integral, ancillary, supportive, dependent, and 
adjunctive services, hereinafter collectively referred to as 
``adjunctive services,'' provided during the delivery of the 
comprehensive service. This includes the diagnostic procedures, 
laboratory tests and other diagnostic tests, and treatments that assist 
in the delivery of the primary procedure; visits and evaluations 
performed in association with the procedure; uncoded services and 
supplies used during the service; outpatient department services 
delivered by therapists as part of the comprehensive service; durable 
medical equipment as well as prosthetic and orthotic items and supplies 
when provided as part of the outpatient service; and any other 
components reported by HCPCS codes that are provided during the 
comprehensive service, except for mammography services and ambulance 
services, which are never payable as OPD services in accordance with 
section 1833(t)(1)(B)(iv) of the Act.
 Inclusion of Devices, Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS)
    As part of the comprehensive service packaging proposal described 
above, we are proposing to package all devices; implantable durable 
medical equipment (DME); implantable prosthetics; DME, prosthetics, and 
orthotics when used as supplies in the delivery of the comprehensive 
service; and supplies used in support of these items when these items 
or supplies are provided as part of the delivery of a comprehensive 
service. We have a longstanding policy of providing payment under the 
OPPS for implantable DME, implantable prosthetics, and medical and 
surgical supplies, as provided at sections 1833(t)(1)(B)(i) and(iii) of 
the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). Under this 
proposal, DME, prosthetics, and orthotics, when used as supplies in the 
delivery of the comprehensive service, would be covered OPD services as 
provided under section 1833(t)(1)(B)(i) of the Act and 42 CFR 
419.2(b)(4). Under this proposal, we believe that when such items and 
services are provided as adjunctive components in the delivery of a 
comprehensive service, such items are appropriate for coverage under 
the OPPS as covered OPD services, and for payment under the OPPS. We 
note that, at other times, such items when not provided as adjunctive 
components in the delivery of a comprehensive service would not 
constitute covered OPD services, and such items would be appropriately 
provided by suppliers and paid for under the DMEPOS benefit. More 
specifically, we do not believe that this proposed policy limits a 
hospital's ability to function as a DMEPOS supplier and bill DMEPOS 
items to the DME-MAC when those items are unrelated to the outpatient 
procedure and provided outside of the delivery of the comprehensive 
service.
    In summary, we are proposing to consider all DMEPOS items to be 
covered OPD services and to be adjunctive to the primary service when 
they are delivered during the comprehensive service, as described 
above, and, therefore, are proposing to package such items into the 
applicable comprehensive service. This proposal includes any items 
described by codes that are otherwise covered and paid separately in 
accordance with the payment rules for DMEPOS items and services, and 
applies to those items when they are provided as part of the delivery 
of the comprehensive service. Under this proposal, when such items are 
provided during the delivery of a comprehensive service, we are 
proposing that they are covered OPD services as provided under sections 
1833(t)(1)(B)(i) and (iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), 
and (b)(11), and payable under the OPPS, as described above.
 Inclusion of OPD Services Reported by Therapy Codes
    Generally, section 1833(t)(1)(B)(4) of the Act excludes therapy 
services from the OPPS. We have previously noted that therapy services 
are those provided by therapists under a plan of care, and are paid 
under section 1834(k) of the Act subject to an annual therapy cap, when 
applied. However, certain other activities similar to therapy services 
are considered and paid as outpatient services. Although some 
adjunctive services may be provided by therapists and reported with 
therapy codes, we do not believe they always constitute therapy 
services. In the case of adjunctive components of a comprehensive 
service that are described by codes that would, under other 
circumstances, be indicative of therapy services, we note that there 
are a number of factors that would more appropriately identify them as 
OPD services. They are not independent services but are delivered as an 
integral part of the OPD service on the order of the physician who is 
providing the service; they are not typically provided under an 
established plan of care but on a direct physician order; they may be 
performed by nontherapists; and they frequently do not contribute to a 
rehabilitative process. For example, we note that therapists might be 
asked to provide a detailed documentation of patient weaknesses to be 
used by the physician to help identify or quantify a possible 
procedure-associated stroke or help with the mobilization of the 
patient after surgery in order to prevent blood clots. We note that 
these nontherapy services furnished by a therapist are limited to the 
immediate perioperative period, consistent with their inclusion as part 
of the larger service to deliver the device, and are distinct from

[[Page 43560]]

subsequent therapy services furnished under a therapy plan of care 
which serve to establish rehabilitative needs and begin the process of 
rehabilitation.
    For that reason, when provided within this very limited context of 
a comprehensive service such as the implantation of an expensive 
device, we are proposing that services reported by therapy HCPCS codes, 
including costs associated with revenue codes 042X, 043X and 044X, 
would be considered to be adjunctive OPD services in support of the 
primary service when those services occur within the peri-operative 
period; that is, during the delivery of this comprehensive service that 
is bracketed by the OPD registration to initiate the service and the 
OPD discharge at the conclusion of the service. They do not constitute 
therapy services provided under a plan of care, are not subject to a 
therapy cap, if applied, and are not paid separately as therapy 
services.
 Inclusion of Additional Hospital Room and Board Revenue 
Centers in the Calculation of Covered Costs
    We believe that the cost of the bed and room occupied by the 
patient, the cost of nursing services, and the cost of any necessary 
fluid and nutrition (board) are considered covered costs when incurred 
during the provision of an OPD service, that is, during the provision 
of the comprehensive service. Because we are able to assign all costs 
on the claim to the comprehensive service, we believe we have an 
opportunity to better capture costs by including these costs in our 
calculations even when they appear in certain revenue centers not 
usually used to report OPPS costs. Specifically, we are including costs 
reported with room, board, and nursing revenue codes 012X, 013x, 015X, 
0160, 0169, 0200 through 0204, 0206 through 0209, 0210 through 0212, 
0214, 0219, 0230 through 0234, 0239, 0240 through 0243, and 0249, as we 
believe these revenue centers are sometimes associated with the costs 
of room, nutrition, and nursing care provided during these 
comprehensive services.
 Inclusion of Hospital-Administered Drugs
    We also are proposing to package all drugs provided to the 
beneficiary as part of the delivery of the comprehensive service except 
for those drugs separately paid through a transitional pass through 
payment. Intravenous drugs, for example, are OPPS services that are 
considered adjunctive to the primary procedure because the correct 
administration of the drug either promotes a beneficial outcome, such 
as the use of intravenous pain medications, or prevents possible 
complications, such as the use of intravenous blood pressure 
medications to temporarily replace oral blood pressure medications and 
reduce the risk of a sudden rise in blood pressure when a normal daily 
medication is stopped. We note that, in defining these packaged drugs, 
we are applying both our existing definitions of self-administered 
drugs (SADs) and our existing definition of drugs as supplies to the 
situation where the OPD service is a comprehensive service.
    We are proposing that all medications provided by the hospital for 
delivery during a comprehensive service pursuant to a physician order, 
regardless of the route of administration, would be considered to be 
adjunctive supplies and therefore packaged as part of the comprehensive 
APC. We believe that the physician order demonstrates that the delivery 
of the medication by the hospital is necessary to avoid possible 
complications during the delivery of the comprehensive service, to 
ensure patient safety, and to ensure that the comprehensive service 
delivery is not compromised, and therefore the medication should be 
considered an adjunctive supply.
    Therefore, we are proposing to consider all medications to be 
supplies that are adjunctive to the primary service if the medicines 
are ordered by the physician and supplied and delivered by the hospital 
for administration during the comprehensive service.
(c) Methodology
    We calculated the proposed relative payment weights for these 
device-dependent comprehensive APCs by using relative costs derived 
from our standard process as described earlier in section II.A. of this 
proposed rule. Specifically, after converting charges to costs on the 
claims, we identified all claims containing one of the 136 HCPCS-
defined procedures specified as constituting a comprehensive service. 
These claims were, by definition, classified as single major procedure 
claims. Any claims that contained more than one of these procedures 
were identified but were included in calculating the cost of the 
procedure that had the greatest cost when traditional HCPCS level 
accounting was applied. All other costs were summed to calculate the 
total cost of the comprehensive service, and statistics for those 
services were calculated in the usual manner. Claims with extreme costs 
were excluded in accordance with our usual process.
(d) Payments
    We used the proposed relative payment weights of these device-
dependent comprehensive services to calculate proposed payments 
following our standard methodology. The proposed payments for the HCPCS 
codes assigned to these proposed comprehensive APCs are included in 
Addendum B of this proposed rule (which is available via the Internet 
on the CMS Web site). We are proposing to assign a new status 
indicator, ``J1'' (OPD services paid through a comprehensive APC), to 
these device-dependent procedures. The claims processing system would 
be configured to make a single payment for the device-dependent 
comprehensive service whenever a HCPCS for one of these primary 
procedures appears on the claim. From a processing system perspective, 
all other adjunctive services except mammography, ambulance, and pass-
through services would be conditionally packaged when a comprehensive 
service is identified on a claim. From our data, we have determined 
that multiple primary HCPCS codes occur together in 24 percent of these 
device-dependent claims but only rarely represent unrelated services. 
Having determined that having multiple unrelated device-dependent 
services is an uncommon event, we are proposing to pay only the largest 
comprehensive payment associated with a claim. However, the costs of 
all of these more extensive or additional services are included in the 
calculations of the relative payment weights for the comprehensive 
service, so the prospective payment includes payment for these 
occurrences.
(e) Impact of Proposed Comprehensive APCs for Device-Dependent 
Procedures
 Impact on Medicare Payments
    Because these proposed device-dependent comprehensive APCs are 
entirely derived from existing services currently reported in Medicare 
claims, the proposed policy is effectively budget neutral in its impact 
on Medicare payments. We note that room, board, and nursing services 
have been covered costs in the delivery of outpatient services that 
require the patient to receive nursing services, occupy a bed for 
outpatient care, and maintain a controlled metabolic intake during a 
prolonged outpatient stay. Although we are including new revenue center 
costs for room and board when reported on these claims, we are 
including them to increase the accuracy of reporting not because they 
represent a new cost.

[[Page 43561]]

 Impact on APCs
    Impact on Composite APCs. There is currently one device-dependent 
composite service in the OPPS, Cardiac Resynchronization Therapy, 
assigned to APC 0108. Because a comprehensive APC would treat all 
individually reported codes as representing components of the 
comprehensive service, all of the elements of the composite service are 
included in the proposed new comprehensive service. Therefore, Cardiac 
Resynchronization Therapy would no longer be identified as a composite 
service but would be identified as a comprehensive service. All 
services currently assigned to APC 0108, including Cardiac 
Resynchronization Therapy, would be assigned to the proposed new 
comprehensive APC, with the proposed payment for CY 2014 identified in 
Addendum B of this proposed rule (which is available via the Internet 
on the CMS Web site).
    Impact on Claims Used to Calculate Other APCs. Some costs reported 
on claims for device-dependent procedures may no longer be available to 
contribute to the calculations for other services through the pseudo-
single process, described in section II.A. of this proposed rule. 
However, the loss of usable cost data for these services would be small 
because most of these services currently cannot be isolated as the 
``single services'' that can be used in the cost calculation process. 
The exceptions are services such as EKGs and chest x-rays that occur in 
very high frequency across all types of encounters, and laboratory 
services and drugs, neither of which are calculated based on average 
cost. Finally, it is important to note that any loss is a small impact 
when compared against the 400,000 new claims that could now be used 
because of the establishment of the proposed comprehensive APC.
    Impact on Device-Dependent APCs. The impact on current device-
dependent APCs is described above in section II.A.2.d.(1) of this 
proposed rule. Comprehensive APC costs exceed the device-dependent 
procedure costs by an average of 11 percent, less than $1,000 per 
claim. The direct cost contribution of other OPPS services accounts for 
most of this increase, with laboratory tests contributing approximately 
$18 per claim (a 0.1 percent increase) and other non-OPPS payments 
contributing an additional $18 per claim. There is significant 
variation across comprehensive APCs, however, not only because the 
distribution of supporting services varies but also because the larger 
bundle allows a more complete incorporation of uncoded costs. Finally, 
the use of comprehensive APCs would allow the number of claims used to 
estimate costs for these services to almost triple from 233,000 to 
649,000, increasing the accuracy of our cost estimates.
 Impact on Beneficiary Payments
    Under the proposed comprehensive service APCs, instead of paying 
copayments for a number of separate services that are generally, 
individually subject to the copayment liability cap at section 
1833(t)(8)(C)(i) of the Act, beneficiaries could expect to pay only a 
single copayment that is subject to the cap. This would likely reduce 
beneficiary overall liability for most of these claims.
(f) Summary of Proposal To Create Comprehensive APCs for High-Cost 
Device-Dependent Procedures
    For CY 2014, we are proposing to create 29 comprehensive APCs to 
prospectively pay for device-dependent services associated with 136 
HCPCS codes. We are proposing to treat all individually reported codes 
as representing components of the comprehensive service, making a 
single payment for the comprehensive service based on all charges on 
the claim, excluding only charges for services that cannot be covered 
by Medicare Part B or that are not payable under the OPPS. This would 
create a single all-inclusive payment for the claim that is subject to 
a single beneficiary copayment, up to the cap set at the level of the 
inpatient hospital deductible, as provided at section 1833(t)(8)(C)(i) 
of the Act.
    As part of the proposed comprehensive APC, we are proposing to--
     Continue to package all services that were packaged in CY 
2013.
     Unconditionally package all services elsewhere proposed 
for unconditional or conditional packaging for CY 2014.
     Package all adjunctive services provided during the 
delivery of the comprehensive service.
     Package room, board, and nursing costs necessary to 
deliver the outpatient service, regardless of whether or not the stay 
extends beyond a single calendar day.
     Package all hospital-administered drugs pursuant to a 
physician order, excluding pass-through drugs that are required to be 
separately paid by statute.
     Pay separately for mammography services and ambulance 
services as non-OPPS services, regardless of whether they are reported 
as part of a comprehensive service.
    We are inviting public comment on this proposal.
f. Proposed 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.
    For CY 2014, we are proposing to continue our composite policies 
for extended assessment and management services, LDR prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation 
services, mental health services, and multiple imaging services, as 
discussed below. We are proposing to discontinue and supersede the 
cardiac resynchronization therapy composite APC by our proposed 
comprehensive APC 0108, as discussed in section II.A.2.e of this 
proposed rule.

[[Page 43562]]

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
(a) Background
    Beginning in CY 2008, we included composite APC 8002 (Level I 
Extended Assessment and Management Composite) and composite APC 8003 
(Level II Extended Assessment and Management Composite) in the OPPS to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur (an extended visit). In 
most of these circumstances, observation services are supportive and 
ancillary to the other services provided to a patient. From CY 2008 
through CY 2013, in the circumstances when observation care is provided 
in conjunction with a high level visit, critical care, 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 and prior 
years.
    For CY 2014, we are proposing to modify our longstanding policy to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur. Primarily, we are 
proposing to allow any visit furnished by a hospital in conjunction 
with observation services of substantial duration to qualify for 
payment through the Extended Assessment and Management (EAM) Composite 
APC. Also, rather than recognizing two levels of EAM Composite APCs, we 
are proposing to create a new composite APC entitled, ``Extended 
Assessment and Management (EAM) Composite,'' (APC 8009) to provide 
payment for all qualifying extended assessment and management 
encounters. These proposals are discussed in greater detail below.
(b) Proposed Payment for Extended Assessment and Management Services
    As discussed in section VII. of this proposed rule, we are 
proposing to no longer recognize five distinct visit levels for clinic 
visits and emergency department visits based on the existing HCPCS E/M 
codes, and instead recognize three new alphanumeric HCPCS codes for 
each visit type. Currently, the payment criteria for the EAM composite 
APCs 8002 and 8003 include a high level visit represented by HCPCS code 
99205, 99215, 99284, 99285, or G0304; critical care represented by CPT 
code 99281; or direct referral represented by HCPCS code G0379 provided 
in conjunction with observation care represented by HCPCS code G0378. 
In light of the proposal to no longer differentiate visit payment 
levels, and the fact that the current high level visit codes (HCPCS 
codes 99205, 99215, 99284, 99285 and G0304) would no longer be 
recognized under the OPPS, it would no longer be feasible to continue 
with our current payment criteria for the EAM composite APCs 8002 and 
8003 for CY 2014. Therefore, to ensure that we continue to provide 
payment to hospitals in certain circumstances when extended assessment 
and management of a patient occur, for CY 2014, we are proposing to 
provide payment for the entire care encounter through proposed new EAM 
Composite APC 8009 when observation care is provided in conjunction 
with a visit, critical care, or direct referral and is an integral part 
of a patient's extended encounter of care. Specifically, for CY 2014, 
we are proposing to provide EAM composite APC payment, through a newly 
created composite APC in circumstances when a clinic or ED visit, 
identified by one of the three new alphanumeric HCPCS codes proposed in 
section VII. of this proposed rule, is accompanied by observation care 
of substantial duration on a claim. We would no longer recognize APC 
8002 or APC 8003. The specific criteria we are proposing to be met for 
the proposed new EAM composite APC to be paid is provided below in the 
description of the claims that we are proposing to select for the 
calculation of the proposed CY 2016 mean costs for this composite APC.
    We are proposing to calculate the mean costs for the proposed new 
EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and 
``pseudo'' single procedure claims that meet each of the following 
criteria:
     The claim does not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we assured that they would not contain a code for a service 
with status indicator ``T'' on the same date of service.);
     The claim contains 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claim contains one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as G0378; or CPT code 99201 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 1)); CPT code 99202 (Office or other outpatient visit for the 
evaluation and management of a new patient (Level 2)); CPT code 99203 
(Office or other outpatient visit for the evaluation and management of 
a new patient (Level 3)); CPT code 99204 (Office or other outpatient 
visit for the evaluation and management of a new patient (Level 4)); 
CPT code 99205 (Office or other outpatient visit for the evaluation and 
management of a new patient (Level 5)); CPT code 99211 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 1)); CPT code 99212 (Office or other outpatient visit 
for the evaluation and management of an established patient (Level 2)); 
CPT code 99213 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 3)); CPT code 99214 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 4)); CPT code 99215 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 5)); CPT code 99281 (Emergency department visit for the 
evaluation and management of a patient (Level 1)); CPT code 99282 
(Emergency department visit for the evaluation and management of a 
patient (Level 2)); CPT code 99283 (Emergency department visit for the 
evaluation and management of a patient (Level 3)); CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); or HCPCS code G0380 
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B 
emergency department visit (Level 2)); HCPCS code G0382 (Type B 
emergency department visit (Level 3)); HCPCS code G0383 (Type B 
emergency department visit (Level 4)); HCPCS code G0384 (Type B 
emergency department visit (Level 5)); or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
    The proposed CY 2014 cost resulting from this methodology for the 
proposed new EAM composite APC (APC 8009) is approximately $1,357, 
which was calculated from 318,265 single and ``pseudo'' single claims 
that met the required criteria.
    When hospital claims data for the CY 2014 proposed clinic and ED 
visit codes becomes available, we are proposing to

[[Page 43563]]

calculate the mean costs for the proposed new EAM composite APC (APC 
8009) for CY 2016 using CY 2014 single and ``pseudo'' single procedure 
claims that meet each of the following criteria:
     The claims do not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we ensure that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
     The claims contain 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claims contain one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as G0378; or CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes); or newly proposed alphanumeric Level II 
HCPCS code GXXXA (Type A ED visit); newly proposed alphanumeric Level 
II HCPCS code GXXXB (Type B ED visit); or newly proposed alphanumeric 
Level II HCPCS code GXXXC (Clinic visit) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
(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.
    For CY 2014, we are proposing to continue to pay for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 through CY 2013. That is, we are proposing to 
use CY 2012 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 
2013 practice, we are proposing not to use the claims that meet 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 are proposing 
to continue to calculate the costs for APCs 0163 and 0651 using single 
and ``pseudo'' single procedure claims. We believe that this composite 
APC contributes to our goal of creating hospital incentives for 
efficiency and cost containment, while providing hospitals with the 
most flexibility to manage their resources. We also continue to believe 
that data from claims reporting both services required for LDR prostate 
brachytherapy provide the most accurate cost upon which to base the 
composite APC payment rate.
    Using a partial year of CY 2012 claims data available for this CY 
2014 OPPS/ASC proposed rule, we were able to use 1,487 claims that 
contained both CPT codes 55875 and 77778 to calculate the cost upon 
which the proposed CY 2014 payment for composite APC 8001 is based. The 
proposed cost for composite APC 8001 for CY 2014 is approximately 
$4,340.
(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 
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.
    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, 
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

[[Page 43564]]

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.
    As we described in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68425), 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 assigned 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 
assigned them interim status indicator ``Q3'' (Codes that may be paid 
through a composite APC) in Addendum B to the CY 2013 OPPS/ASC final 
rule with comment period. To facilitate implementing this policy, we 
assigned CPT codes 93653, 93654, and 93656 to a new Group C, which is 
paid at the composite APC 8000 payment rate. (We noted 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 believed that packaging CPT codes 93655 and 93657 
with the primary procedures is appropriate, and we assigned them 
interim status indicator ``N.'' Because the CPT Editorial Panel deleted 
CPT codes 93651 and 93652, effective January 1, 2013, we deleted them 
from the Group B code list, leaving only CPT code 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.
    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 was open to public comment for a period 
of 60 days following the publication of the CY 2013 OPPS/ASC final rule 
with comment period.
    For CY 2014, we are proposing to continue to pay for cardiac 
electrophysiologic evaluation and ablation services using the composite 
APC methodology proposed and implemented for CY 2008 through CY 2013. 
We also are proposing to continue the new Group C methodology we first 
established for CY 2013, described above, in response to the CPT 
Editorial Panel's creation of primary CPT codes 93653, 93654, and 
93656. We continue to believe that the cost for cardiac 
electrophysiologic evaluation and ablation services calculated from a 
high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for these 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 are proposing not to use the claims that met 
the composite payment criteria in the calculation of the costs for APC 
0085, to which the CPT codes in both Groups A and B for composite APC 
8000 are otherwise assigned. We are proposing that the costs for APC 
0085 would continue to be calculated using single procedure claims. For 
CY 2014, using a partial year of CY 2012 claims data available for this 
CY 2014 OPPS/ASC proposed rule, we were able to use 15,817 claims 
containing a combination of Group A and Group B CPT codes (Group C was 
not effective until January 1, 2013) to calculate a proposed cost of 
approximately $13,402 for composite APC 8000.
    Table 6 below lists the proposed groups of procedures upon which we 
would base composite APC 8000 for CY 2014.

[[Page 43565]]



  Table 6--Proposed Groups of Cardiac Electrophysiologic Evaluation and
       Ablation Procedures Upon Which Composite APC 8000 Is Based
------------------------------------------------------------------------
  Codes Used in Combinations: At
 least one in Group A and one in   CY 2014 CPT    Proposed   Proposed CY
Group B, or at least one in Group      Code     single code    2014 SI
                C                               CY 2014 APC  (composite)
------------------------------------------------------------------------
                                Group A
------------------------------------------------------------------------
Comprehensive electrophysiologic         93619         0085           Q3
 evaluation with right atrial
 pacing and recording, right
 ventricular pacing and
 recording, His bundle recording,
 including insertion and
 repositioning of multiple
 electrode catheters, without
 induction or attempted induction
 of arrhythmia...................
Comprehensive electrophysiologic         93620         0085           Q3
 evaluation including insertion
 and repositioning of multiple
 electrode catheters with
 induction or attempted induction
 of arrhythmia; with right atrial
 pacing and recording, right
 ventricular pacing and
 recording, His bundle recording.
------------------------------------------------------------------------
                                Group B
------------------------------------------------------------------------
Intracardiac catheter ablation of        93650         0085           Q3
 atrioventricular node function,
 atrioventricular conduction for
 creation of complete heart
 block, with or without temporary
 pacemaker placement.............
------------------------------------------------------------------------
                                Group C
------------------------------------------------------------------------
Comprehensive electrophysiologic         93653         8000           Q3
 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.................
Comprehensive electrophysiologic         93654         8000           Q3
 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.......
Comprehensive electrophysiologic         93656         8000           Q3
 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.......................
------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
    For CY 2104, we are proposing to continue our longstanding policy 
of limiting the aggregate payment for specified less resource-intensive 
mental health services furnished on the same date to the payment for a 
day of partial hospitalization services provided by a hospital, which 
we consider to be the most resource-intensive of all outpatient mental 
health treatments. 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.
    We are proposing 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 payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services would be assigned to APC 0034 (Mental 
Health Services Composite). Specifically, we are proposing to continue 
to set the payment rate for APC 0034 at the same payment rate that we 
are proposing to establish for APC 0176 (Level II Partial 
Hospitalization (4 or more services) for hospital-based PHPs), which is 
the maximum partial hospitalization per diem payment rate for a 
hospital and proposing 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 to make a single payment at the same payment rate 
established for APC 0176 for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program represent the most resource-intensive 
of all outpatient mental health treatments. Therefore, we do not 
believe that we should pay more for mental health services under the 
OPPS than the highest partial hospitalization per diem payment rate for 
hospitals.
(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 6 of the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68253 through 68257).

[[Page 43566]]

    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).
    For CY 2014, we are proposing to continue 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 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 2014 
payment rates for the five multiple imaging composite APCs (APC 8004, 
APC 8005, APC 8006, APC 8007, and APC 8008) are based on costs 
calculated from a partial year of CY 2012 claims available for this CY 
2014 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 and CY 2013 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 referred to as ``overlap bypass 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), are identified by asterisks in 
Addendum N to this proposed rule (which is available via the Internet 
on the CMS Web site) and are discussed in more detail in section 
II.A.1.b. of this proposed rule.
    We were able to identify approximately 0.8 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 2014 costs for the multiple 
imaging composite APCs.
    Table 7 below lists the proposed HCPCS codes that would be subject 
to the multiple imaging composite policy and their respective families 
and approximate composite APC costs for CY 2014. We note that the 
proposed costs calculated for many imaging APCs, including the multiple 
imaging composite APCs, have changed significantly from the costs 
calculated for the CY 2013 OPPS/ASC final rule with comment period for 
these APCs as a result of the proposed adoption of the new MRI and CT 
cost centers, as discussed in section II.A.1.c. of this proposed rule.

 Table 7--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed CY 2014 APC 8004       Proposed CY 2014 approximate APC cost =
(ultrasound composite)                            $322
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76604........................  Us exam, chest.
76700........................  Us exam, abdom, complete.
76705........................  Echo exam of abdomen.
76770........................  Us exam abdo back wall, comp.
76775........................  Us exam abdo back wall, lim.
76776........................  Us exam k transpl w/Doppler.
76831........................  Echo exam, uterus.
76856........................  Us exam, pelvic, complete.
76870........................  Us exam, scrotum.
76857........................  Us exam, pelvic, limited.
------------------------------------------------------------------------
Proposed CY 2014 APC 8005       Proposed CY 2014 approximate APC cost =
(CT and CTA without contrast                      $304
 composite) *
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------
70450........................  Ct head/brain w/o dye.
70480........................  Ct orbit/ear/fossa w/o dye.
70486........................  Ct maxillofacial w/o dye.
70490........................  Ct soft tissue neck w/o dye.
71250........................  Ct thorax w/o dye.
72125........................  Ct neck spine w/o dye.
72128........................  Ct chest spine w/o dye.
72131........................  Ct lumbar spine w/o dye.
72192........................  Ct pelvis w/o dye.

[[Page 43567]]

 
73200........................  Ct upper extremity w/o dye.
73700........................  Ct lower extremity w/o dye.
74150........................  Ct abdomen w/o dye.
74261........................  Ct colonography, w/o dye.
74176........................  Ct angio abd & pelvis.
------------------------------------------------------------------------
Proposed CY 2014 APC 8007       Proposed CY 2014 approximate APC cost =
(CT and CTA with Contrast                         $522
 composite)
------------------------------------------------------------------------
70487........................  Ct maxillofacial w/dye.
70460........................  Ct head/brain w/dye.
70470........................  Ct head/brain w/o & w/dye.
70481........................  Ct orbit/ear/fossa w/dye.
70482........................  Ct orbit/ear/fossa w/o&w/dye.
70488........................  Ct maxillofacial w/o & w/dye.
70491........................  Ct soft tissue neck w/dye.
70492........................  Ct sft tsue nck w/o & w/dye.
70496........................  Ct angiography, head.
70498........................  Ct angiography, neck.
71260........................  Ct thorax w/dye.
71270........................  Ct thorax w/o & w/dye.
71275........................  Ct angiography, chest.
72126........................  Ct neck spine w/dye.
72127........................  Ct neck spine w/o & w/dye.
72129........................  Ct chest spine w/dye.
72130........................  Ct chest spine w/o & w/dye.
72132........................  Ct lumbar spine w/dye.
72133........................  Ct lumbar spine w/o & w/dye.
72191........................  Ct angiograph pelv w/o&w/dye.
72193........................  Ct pelvis w/dye.
72194........................  Ct pelvis w/o & w/dye.
73201........................  Ct upper extremity w/dye.
73202........................  Ct uppr extremity w/o&w/dye.
73206........................  Ct angio upr extrm w/o&w/dye.
73701........................  Ct lower extremity w/dye.
73702........................  Ct lwr extremity w/o&w/dye.
73706........................  Ct angio lwr extr w/o&w/dye.
74160........................  Ct abdomen w/dye.
74170........................  Ct abdomen w/o & w/dye.
74175........................  Ct angio abdom w/o & w/dye.
74262........................  Ct colonography, w/dye.
75635........................  Ct angio abdominal arteries.
74177........................  Ct angio abd&pelv w/contrast.
74178........................  Ct angio abd & pelv 1+ regns.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the
 same session as a ``with contrast'' CT or CTA procedure, the I/OCE will
 assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
Proposed CY 2014 APC 8007       Proposed CY 2014 approximate APC cost =
(MRI and MRA without Contrast                     $612
 composite) *
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
70336........................  Magnetic image, jaw joint.
70540........................  Mri orbit/face/neck w/o dye.
70544........................  Mr angiography head w/o dye.
70547........................  Mr angiography neck w/o dye.
70551........................  Mri brain w/o dye.
70554........................  Fmri brain by tech.
71550........................  Mri chest w/o dye.
72141........................  Mri neck spine w/o dye.
72146........................  Mri chest spine w/o dye.
72148........................  Mri lumbar spine w/o dye.
72195........................  Mri pelvis w/o dye.
73218........................  Mri upper extremity w/o dye.
73221........................  Mri joint upr extrem w/o dye.
73718........................  Mri lower extremity w/o dye.
73721........................  Mri jnt of lwr extre w/o dye.
74181........................  Mri abdomen w/o dye.
75557........................  Cardiac mri for morph.
75559........................  Cardiac mri w/stress img.
C8901........................  MRA w/o cont, abd.
C8904........................  MRI w/o cont, breast, uni.
C8907........................  MRI w/o cont, breast, bi.
C8910........................  MRA w/o cont, chest.

[[Page 43568]]

 
C8913........................  MRA w/o cont, lwr ext.
C8919........................  MRA w/o cont, pelvis.
C8932........................  MRA, w/o dye, spinal canal.
C8935........................  MRA, w/o dye, upper extr.
------------------------------------------------------------------------
Proposed CY 2014 APC 8008       Proposed CY 2014 approximate APC cost =
(MRI and MRA with contrast                        $908
 composite)
------------------------------------------------------------------------
70549........................  Mr angiograph neck w/o&w/dye.
70542........................  Mri orbit/face/neck w/dye.
70543........................  Mri orbt/fac/nck w/o & w/dye.
70545........................  Mr angiography head w/dye.
70546........................  Mr angiograph head w/o&w/dye.
70547........................  Mr angiography neck w/o dye.
70548........................  Mr angiography neck w/dye.
70552........................  Mri brain w/dye.
70553........................  Mri brain w/o & w/dye.
71551........................  Mri chest w/dye.
71552........................  Mri chest w/o & w/dye.
72142........................  Mri neck spine w/dye.
72147........................  Mri chest spine w/dye.
72149........................  Mri lumbar spine w/dye.
72156........................  Mri neck spine w/o & w/dye.
72157........................  Mri chest spine w/o & w/dye.
72158........................  Mri lumbar spine w/o & w/dye.
72196........................  Mri pelvis w/dye.
72197........................  Mri pelvis w/o & w/dye.
73219........................  Mri upper extremity w/dye.
73220........................  Mri uppr extremity w/o&w/dye.
73222........................  Mri joint upr extrem w/dye.
73223........................  Mri joint upr extr w/o&w/dye.
73719........................  Mri lower extremity w/dye.
73720........................  Mri lwr extremity w/o&w/dye.
73722........................  Mri joint of lwr extr w/dye.
73723........................  Mri joint lwr extr w/o&w/dye.
74182........................  Mri abdomen w/dye.
74183........................  Mri abdomen w/o & w/dye.
75561........................  Cardiac mri for morph w/dye.
75563........................  Card mri w/stress img & dye.
C8900........................  MRA w/cont, abd.
C8902........................  MRA w/o fol w/cont, abd.
C8903........................  MRI w/cont, breast, uni.
C8905........................  MRI w/o fol w/cont, brst, un.
C8906........................  MRI w/cont, breast, bi.
C8908........................  MRI w/o fol w/cont, breast,.
C8909........................  MRA w/cont, chest.
C8911........................  MRA w/o fol w/cont, chest.
C8912........................  MRA w/cont, lwr ext.
C8914........................  MRA w/o fol w/cont, lwr ext.
C8918........................  MRA w/cont, pelvis.
C8920........................  MRA w/o fol w/cont, pelvis.
C8931........................  MRA, w/dye, spinal canal.
C8933........................  MRA, w/o&w/dye, spinal canal.
C8934........................  MRA, w/dye, upper extremity.
C8936........................  MRA, w/o&w/dye, upper extr.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
  same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
  will assign APC 8008 rather than APC 8007.

3. Proposed Changes to Packaged Items and 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 
items and services into a single payment to create incentives for 
hospitals to furnish services in the most efficient way by enabling 
hospitals to manage their resources with maximum flexibility, thereby 
encouraging long-term cost containment. Our packaging policies support 
our strategic goal of using larger payment bundles to maximize 
hospitals' incentives to provide care in the most efficient matter. In 
addition, the OPPS packages payment for multiple interrelated items and 
services into a single payment, regardless of whether dedicated CPT or 
HCPCS codes describe the services or the cost of the individual items 
and services. For example, where there are a variety of devices, drugs, 
items, supplies, etc. that could be used to furnish a service, some of 
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

[[Page 43569]]

use a more expensive item, which often results if separate payment is 
provided for the items. This encourages hospitals that are spending 
more per case than the payment they received to review their service 
patterns to ensure that they furnish services as efficiently as 
possible. Similarly, we believe that separate payment for items and 
services heightens the hospital's focus on the payment for individual 
services, rather than the efficient delivery of those services.
    Packaging also encourages hospitals to effectively 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 delivery. 
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 items and services and 
lower cost cases requiring fewer ancillary items and services. Because 
packaging encourages efficiency and is an essential component of a 
prospective payment system, packaging payment for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been a fundamental part of the OPPS 
since its implementation in August 2000. Most, but not necessarily all, 
items and services currently packaged in the OPPS are listed in 42 CFR 
419.2(b). For an extensive discussion of the history and background of 
the OPPS packaging policy, we refer readers to the CY 2008 OPPS/ASC 
proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66580).
    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 ``primary 
service'' to refer to the HCPCS codes that represent the primary 
therapeutic or diagnostic modality into which we package payment for 
the dependent service. Over the last decade, we have refined our 
understanding and implementation of the OPPS and have packaged numerous 
services that we originally paid as primary services, and as we 
consider the development of larger payment groups that more broadly 
reflect services provided in an encounter or episode of care, we may 
propose to expand these packaging policies as they apply to services 
that we may currently pay as primary services.
    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. The following description of the conditional packaging status 
indicators reflects our proposal to discontinue the use of status 
indicator ``X,'' which we discuss below. We assign status indicator 
``Q1'' (STV-Packaged Codes), ``Q2'' (T-Packaged Codes), or ``Q3'' 
(Codes that may be paid through a composite APC) to each conditionally 
packaged HCPCS code. An STV-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,'' or ``V'' 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'' that are provided during 
the hospital outpatient encounter. STV-packaged codes and T-packaged 
codes are paid separately in those uncommon cases when they do not meet 
their respective criteria for packaged payment. STV-packaged codes and 
T-packaged codes are conditionally packaged. We refer readers to the 
discussion of proposed CY 2014 OPPS payment status and comment 
indicators in section XI. of this proposed rule and Addendum D1, which 
is available via the Internet on the CMS Web site, 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 specific 
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. In addition, in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68634), we packaged 
products described as implantable biologicals. As discussed below, we 
are proposing to add each of these categories of packaged items and 
services that were packaged beginning in CYs 2008 and 2009, along with 
newly proposed packaged items and services for CY 2014 as described 
below to the OPPS packaging regulation at Sec.  419.2(b). Packaging 
under the OPPS also includes composite APCs, which are described in 
section II.A.2.f. of this proposed rule.
b. Basis for Proposed New Packaging Policies for CY 2014
    As discussed above, the OPPS is a prospective payment system. It is 
not intended to be a fee schedule, in which separate payment is made 
for each coded line item. However, the OPPS is currently a prospective 
payment system that packages some items and services but not others. 
Payment for some items and services in the OPPS is according to the 
principles of a prospective payment system, while the payment for other 
items and services is more like that of a fee schedule. Our overarching 
goal is to make OPPS payments for all services paid under the OPPS more 
consistent with those of a prospective payment system and less like 
those of a per service fee schedule, which pays separately for each 
coded item. As a part of this effort, we have continued to examine the 
payment for items and services provided in the OPPS to determine which 
OPPS services can be packaged to achieve the objective of

[[Page 43570]]

advancing the OPPS as a prospective payment system.
    Therefore, as we did in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66610 through 66659), we have examined the items 
and services currently provided under the OPPS, reviewing categories of 
integral, ancillary, supportive, dependent, or adjunctive items and 
services for which we believe payment would be appropriately packaged 
into payment of the primary service they support. Specifically, we 
examined the HCPCS code definitions (including CPT code descriptors) to 
see whether there were categories of codes for which packaging would be 
appropriate according to existing OPPS packaging policies or a logical 
expansion of those existing OPPS packaging policies. In general, we are 
proposing to package the costs of selected HCPCS codes into payment for 
services reported with other HCPCS codes where we believe that one code 
reported an item or service that was integral, ancillary, supportive, 
dependent, or adjunctive to the provision of care that was reported by 
another HCPCS code. Below we discuss categories and classes of items 
and services that we are proposing to package beginning in CY 2014. In 
several cases, we are proposing that services be conditionally packaged 
so that if they are provided without other services, there will be a 
separate payment for the service. The proposed policies detailed below 
are not exhaustive, and we expect to continue to review the OPPS and 
consider additional packaging policies in the future.
c. Proposed New Packaging Policies for CY 2014
(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as 
Supplies When Used in a Diagnostic Test or Procedure
    In the OPPS, we currently unconditionally package the following six 
categories of drugs, biologicals, and radiopharmaceuticals (unless 
temporary pass-through status applies): (1) Those with per day costs at 
or below the packaging threshold (discussed further in section V.B.2. 
of this proposed rule); (2) diagnostic radiopharmaceuticals; (3) 
contrast agents; (4) anesthesia drugs; (5) drugs used as supplies 
according to Sec.  419.2(b)(4)); and (6) implantable biologicals. For 
CY 2014, we reviewed all of the drugs, biologicals, and 
radiopharmaceuticals administered in the hospital outpatient setting to 
identify categories or classes of drugs, biologicals, and 
radiopharmaceuticals that either should be packaged according to 
existing packaging policies or should be packaged as a logical 
expansion of existing OPPS packaging policies for drugs, biologicals, 
and radiopharmaceuticals.
    Currently, two of the categories of drugs, biologicals, and 
radiopharmaceuticals that are packaged in the OPPS (contrast agents and 
diagnostic radiopharmaceuticals) have a common characteristic--they 
both describe products that function as supplies that are used in a 
diagnostic test or procedure. Although in the past we identified these 
specific categories of drugs, biologicals, and radiopharmaceuticals as 
packaged after the expiration of pass-through status, we recognize that 
they actually represent subcategories of a broader category of drugs, 
biologicals, and radiopharmaceuticals that should be packaged in the 
OPPS according to OPPS packaging principles: drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. In particular, we are referring to drugs, 
biologicals, and radiopharmaceuticals that function as supplies as a 
part of a larger, more encompassing service or procedure, namely, the 
diagnostic test or procedure in which the drug, biological, or 
radiopharmaceutical is employed. Because diagnostic 
radiopharmaceuticals and contrast agents represent specific examples of 
a broader category of drugs, biologicals, or radiopharmaceuticals that 
may function as a supply that is integral and supportive to a 
diagnostic test or procedure, we are proposing to unconditionally 
package drugs, biologicals, and radiopharmaceuticals that function as a 
supply when used in a diagnostic test or procedure, except when the 
drug, biological, or radiopharmaceutical has pass-through status.
    A diagnostic test or procedure is defined as any kind of test or 
procedure performed to aid in the diagnosis, detection, monitoring, or 
evaluation of a disease or condition. A diagnostic test or procedure 
also includes tests or procedures performed to determine which 
treatment option is optimal. A diagnostic test or procedure can have 
multiple purposes, but at least one purpose must be diagnostic. We are 
proposing to revise the regulations at Sec.  419.2(b) to specify that 
any drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in diagnostic tests or procedures will be packaged 
as supplies in the OPPS, except when pass-through status applies. This 
proposed broader category of packaged drugs, biologicals, and 
radiopharmaceuticals includes the currently packaged categories of 
contrast agents and diagnostic radiopharmaceuticals when used in a 
diagnostic test or procedure. We have identified specific drugs that 
function as supplies when used in a diagnostic test or procedure that 
fall under this proposed packaging policy, and discuss these drugs 
below.
(a) Stress Agents
    Our review of OPPS drugs identified pharmacologic stress agents 
(``stress agents'') as a class of drugs that is described by the 
proposed packaged category of drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. Stress agents are a class of drugs that 
are used in diagnostic tests to evaluate certain aspects of cardiac 
function. In many cases, these agents are used in patients who are 
unable to perform an exercise stress test, which typically precedes 
additional diagnostic testing. The primary diagnostic test in which 
these agents are used is myocardial perfusion imaging (MPI), which is 
the highest cost nuclear medicine procedure in the OPPS, with OPPS 
payments exceeding $800 million in CY 2012. Approximately 96 percent of 
MPI is billed with CPT code 78452. Stress agents include the following 
drugs described by these HCPCS codes: HCPCS codes J0152 (Injection, 
adenosine for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, 
per 10 mg); J1250 (Injection, dobutamine hydrochloride, per 250 mg); 
and J2785 (Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes 
J1245 and J1250 are packaged in the OPPS, and J0152 and J2785 are 
separately paid. OPPS payments for the two separately payable stress 
agents totaled approximately $111 million in CY 2012.
    Beginning in CY 2014, we are proposing to package all stress agents 
that function as supplies into the diagnostic tests or procedures in 
which they are employed, consistent with the policy proposed above. The 
primary service in which stress agents are employed is MPI. MPI with 
stress encompasses the imaging service, the stress test, and either 
exercise to induce stress or the administration of a pharmacologic 
stress agent. The various combinations of items and services that 
constitute MPI with stress are depicted in the table below, which 
includes the CY 2013 separate payment rates versus the proposed CY 2014 
packaged payment rate for MPI.

[[Page 43571]]



               Table 8--CY 2013 Separate Payment Versus CY 2014 Proposed Packaged Payment for MPI
----------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2014
                                         CY 2013         CY 2013         CY 2013         CY 2013       Proposed
         Service or supply              Separate        Separate        Separate        Separate       packaged
                                       payment for     payment for     payment for     payment for   payment for
                                     MPI components  MPI components  MPI components  MPI components      MPI
----------------------------------------------------------------------------------------------------------------
78452..............................            $672            $672            $672            $672       $1,235
93017..............................            $178            $178            $178            $178    P [euroi]
Exercise or Stress Agent [yen].....     Exercise-$0         J1245-P      J2785-$215    * J0152-$219            P
Radiopharmaceutical................               P               P               P               P            P
                                    ----------------------------------------------------------------------------
    Total..........................            $850            $850          $1,065          $1,069       $1,235
----------------------------------------------------------------------------------------------------------------
P = Packaged.
[euroi] The stress test described by CPT code 93017 is proposed to be conditionally packaged as a result of the
  proposal described below to conditionally package ancillary services.
[yen] April 2013 ASP Drug Pricing File.
* 70 kg patient.

    The proposed CY 2014 payment rate for MPI with the stress test, 
stress agent, and diagnostic radiopharmaceutical packaged into MPI is 
14 percent higher than the sum of the CY 2013 payments for separately 
paid MPI, a separately paid stress test, and either of the two 
separately paid stress agents.
(b) Hexaminolevulinate Hydrochloride (Cysview[supreg])--HCPCS Code 
C9275
    Cysview is a drug for which pass-through status expired on December 
31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in 
the OPPS as a contrast agent (77 FR 68364). The indications and usage 
of Cysview as listed in the FDA-approved label are as follows: 
``Cysview is an optical imaging agent indicated for use in the 
cystoscopic detection of non-muscle invasive papillary cancer of the 
bladder among patients suspected or known to have lesion(s) on the 
basis of a prior cystoscopy. Cysview is used with the Karl Storz D-
Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with 
the blue light setting (Mode 2) as an adjunct to the white light 
setting (Mode 1).''
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
42672), we described contrast agents as follows: ``Contrast agents are 
generally considered to be those substances introduced into or around a 
structure that, because of the differential absorption of x-rays, 
alteration of magnetic fields, or other effects of the contrast medium 
in comparison with surrounding tissues, permit visualization of the 
structure through an imaging modality. The use of certain contrast 
agents is generally associated with specific imaging modalities, 
including x-ray, computed tomography (CT), ultrasound, and magnetic 
resonance imaging (MRI), for purposes of diagnostic testing or 
treatment.''
    Upon reexamining this description of contrast agents and 
considering our prior application of this description to specific 
compounds, we believe that contrast agents should include those 
compounds that are used with the imaging modalities x-ray, computed 
tomography (CT), ultrasound, magnetic resonance imaging (MRI), and 
other related modalities that could represent advancements of these 
modalities. Based on the indications and usage described above for 
Cysview, we do not believe that Cysview is best described as a contrast 
agent. Rather, we believe Cysview is more appropriately described as a 
drug used in a procedure to diagnose bladder cancer.
    As discussed above, we are proposing a new policy to package all 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure. Cysview is a drug that 
functions as a supply when used in a diagnostic test or procedure for 
the purpose of the ``detection of non-muscle invasive papillary cancer 
of the bladder.'' Therefore, as a drug that functions as a supply when 
used in a diagnostic test or procedure, we are proposing to package 
Cysview for CY 2014 under the OPPS. Cysview is currently assigned to 
status indicator ``N'' for CY 2013, and under this proposal, the status 
indicator assignment of ``N'' would continue for CY 2014.
(2) Drugs and Biologicals That Function as Supplies or Devices When 
Used in a Surgical Procedure
    Since the inception of the OPPS we have packaged medical devices, 
medical and surgical supplies, and surgical dressings into the related 
procedure under Sec.  419.2(b)(4). Medical and surgical supplies are a 
broad category of items used in the hospital outpatient setting. 
Supplies is a large category of items that typically are either for 
single patient use or have a shorter life span in use than equipment. 
Supplies include not only minor, inexpensive, or commodity-type items 
but also include a wide range of products used in the hospital 
outpatient setting, including certain implantable medical devices. We 
consider implantable medical devices to be integral to, dependent on, 
and supportive to a surgical implantation procedure. For further 
discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 
18443 through 18444). Packaged supplies can include certain drugs, 
biologicals, and radiopharmaceuticals. Packaged supplies in the OPPS 
also include implantable biologicals, which are packaged because they 
function as implantable devices which, as noted above, are considered 
to be a type of supply in the OPPS. We refer readers to the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68634) for a more 
detailed discussion. We believe that the existing packaging policy for 
implantable biologicals represents an example of a broader category of 
drugs and biologicals that should be packaged in the OPPS according to 
longstanding regulations and existing policies: drugs and biologicals 
that function as supplies or devices in a surgical procedure. 
Therefore, beginning in the CY 2014 OPPS, we are proposing to 
unconditionally package all drugs and biologicals that function as 
supplies or devices in a surgical procedure, following the current 
policy that is applied to implantable biologicals.
    A class of products that we treat as biologicals in the OPPS that 
is described by the proposed packaging category of drugs and 
biologicals that function as supplies or devices in a surgical 
procedure is skin substitutes. The term ``skin substitutes'' refers to 
a category of products that are most commonly used in outpatient 
settings for the treatment

[[Page 43572]]

of diabetic foot ulcers and venous leg ulcers. Although the term ``skin 
substitute'' has been adopted to refer to this category of products in 
certain contexts, these products do not actually function like human 
skin that is grafted onto a wound; they are not a substitute for a skin 
graft. Instead, these products are various types of wound dressings 
that, through various mechanisms of action, stimulate the host to 
regenerate lost tissue and replace the wound with functional skin. We 
refer readers to the ``Skin Substitutes for Treating Chronic Wounds 
Technology Assessment Report at ES-2'' which is available on the AHRQ 
Web site at: http://www.ahrq.gov/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. Currently, available skin substitutes 
are regulated by the FDA as either medical devices (and classified as 
wound dressings) or as human cell, tissue, and cellular and tissue-
based products (HCT/Ps) under section 361 of the Public Health Service 
Act. The different skin substitutes are applied to a wound during a 
surgical procedure described by CPT codes in the range 15271 through 
15278. To be properly performed, every surgical procedure in this CPT 
code range requires the use of at least one skin substitute product. 
These surgical procedures include preparation of the wound and 
application of the skin substitute product through suturing or various 
other techniques. Currently skin substitutes are separately paid in the 
OPPS as if they are biologicals according to the ASP methodology and 
are subject to the drug and biological packaging threshold.
    Because a skin substitute must be used to perform any of the 
procedures described by a CPT code in the range 15271 through 15278, 
and conversely because it is the surgical procedure of treating the 
wound and applying a covering to the wound that is the independent 
service, skin substitute products serve as a necessary supply for these 
surgical repair procedures. In addition, many skin substitutes are 
classified by the FDA as wound dressings, which make them the same or 
similar to surgical dressings that are packaged under Sec.  
419.2(b)(4). Finally, implantable biological products are very similar 
to (and in some instances the same as) skin substitute products, except 
that the clinical applications for implantable biologicals are 
typically an internal surgery versus the application to a wound for a 
skin substitute. Some products had or have dual uses as both skin 
substitutes and implantable biologicals, which underscores the 
similarity of these sometimes overlapping classes of products. 
Implantable biologicals and skin substitutes both function as supplies 
or devices that are used in surgical procedures and, therefore, should 
be packaged with the surgical procedure in which the products are used. 
Since CY 2009, we have packaged implantable biologicals and we are 
proposing to package skin substitutes with their associated surgeries 
beginning in CY 2014. We see no reason to distinguish skin substitutes 
from implantable biologicals for OPPS packaging purposes based on the 
clinical application of individual products. Therefore, we are 
proposing to unconditionally package skin substitutes into their 
associated surgical procedures. Packaging payment for these skin 
substitutes into the APC payment for the related surgical procedures 
also would result in a total prospective payment that is more 
reflective of the average resource costs of the procedures because 
prices for these products vary significantly from product to product. 
Packaging these products also would promote more efficient resource use 
by hospitals and would be more consistent with the treatment of similar 
products under the OPPS. We are proposing to revise the regulations at 
Sec.  419.2(b)(4) to include skin substitutes as an example of a 
packaged surgical supply. Pass-through status would still be available 
to new skin substitutes that meet the pass-through criteria. The skin 
substitute products that would be unconditionally packaged under this 
proposal and assigned to status indicator ``N'' for CY 2014 are listed 
in Addendum P of this CY 2014 OPPS/ASC proposed rule. The proposed 
payment for CPT codes 15271 through 15278, including the cost of the 
packaged skin substitutes, for CY 2014 are listed in Addendum B of this 
proposed rule. These addenda are available on the CMS Web site at: 
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
(3) Clinical Diagnostic Laboratory Tests
    Since the beginning of the OPPS, clinical diagnostic laboratory 
tests (laboratory tests) provided in the hospital outpatient setting 
have been separately paid to hospitals at Clinical Laboratory Fee 
Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the 
Act authorizes the Secretary to designate the hospital outpatient 
services that are paid under the OPPS. Under this authority, the 
Secretary excluded from the OPPS those services that are paid under fee 
schedules or other payment systems. As stated in the April 17, 2000 
OPPS final rule with comment period: ``Rather than duplicate existing 
payment systems that are effectively achieving consistency of payments 
across different service delivery sites, we proposed to exclude from 
the outpatient PPS those services furnished in a hospital outpatient 
setting that were already subject to an existing fee schedule or other 
prospectively determined payment rate'' (65 FR 18442). Because payment 
rates for laboratory tests were based on the CLFS, laboratory tests are 
among the services excluded from the OPPS. We codified this policy at 
42 CFR 419.22(l).
    As discussed above, it is our intent to make the OPPS a more 
complete prospective payment system, and less of a fee schedule-type 
payment system that makes separate payment for each separately coded 
item. We have examined the services performed in the hospital 
outpatient setting to determine those services that we believe should 
be packaged in order to make the OPPS a more complete and robust 
prospective payment system. We were guided by our longstanding OPPS 
packaging principle of packaging the payment of items or services when 
they are provided along with primary services they support. Based on 
this approach, we believe that laboratory tests (other than molecular 
pathology tests, as discussed below) that are integral, ancillary, 
supportive, dependent, or adjunctive to the primary services provided 
in the hospital outpatient setting are services that should be 
packaged. Laboratory tests and their results support clinical 
decisionmaking for a broad spectrum of primary services provided in the 
hospital outpatient setting, including surgery and diagnostic 
evaluations. Therefore, except as discussed below for molecular 
pathology tests, we are proposing to package laboratory tests when they 
are integral, ancillary, supportive, dependent, or adjunctive to a 
primary service or services provided in the hospital outpatient 
setting. We are proposing that laboratory tests would be integral, 
ancillary, supportive, dependent, or adjunctive to a primary service or 
services provided in the hospital outpatient setting when they are 
provided on the same date of service as the primary service and when 
they are ordered by the same practitioner who ordered the primary 
service. We would consider a laboratory test to be unrelated to a 
primary service and, thus, not part of this packaging policy when the 
laboratory test is the only service provided on that date of service or 
when the laboratory test is provided on the

[[Page 43573]]

same date of service as the primary service but is ordered for a 
different purpose than the primary service by a practitioner different 
than the practitioner who ordered the primary service provided in the 
hospital outpatient setting. The laboratory tests not included in the 
packaging proposal would continue to be paid separately at CLFS rates 
when billed on a 14X bill type.
    We are proposing an exception for molecular pathology tests 
described by CPT codes in the ranges of 81200 through 81383, 81400 
through 81408, and 81479 from this proposed packaging policy. We are 
not proposing that these services be packaged because we believe that 
these relatively new tests have a different pattern of clinical use, 
which may make them generally less tied to a primary service in the 
hospital outpatient setting than the more common and routine laboratory 
tests that we are proposing to package. As we gain more experience with 
these molecular pathology tests, we will consider if packaging in the 
OPPS would be appropriate for these types of tests.
    In addition to the laboratory packaging policy proposals described 
above, we considered proposing an alternative laboratory packaging 
policy that would package those laboratory tests meeting the proposed 
policies above, but also include a dollar threshold policy similar to 
the approach we use for separately paid drugs and biologicals in the 
OPPS so that only laboratory tests (meeting the proposed standards 
above) with CLFS payment rates below a certain dollar threshold amount 
would be packaged. Under this alternative policy, tests meeting the 
proposed standards above, but for which the CLFS payment rates are 
above the threshold amount, would continue to be separately paid. We 
decided not to propose this alternative policy because, as discussed 
above in the background section, our packaging policies generally do 
not consider the cost of the individual items and services that are 
packaged, meaning that we package both inexpensive and expensive items 
according to OPPS packaging principles.
    We recognize that the Medicare Part B deductible and coinsurance 
generally do not apply for laboratory tests paid to hospitals at CLFS 
rates, but that the deductible and coinsurance would apply to 
laboratory tests packaged into other services in the OPPS. The purpose 
of the laboratory packaging proposal is not to shift program costs onto 
beneficiaries, but to encourage greater efficiency by hospitals and the 
most economical delivery of medically necessary laboratory tests. We 
estimate that the combination of packaging laboratory tests into a wide 
array of primary services provided in the hospital outpatient setting 
combined with our long-standing methodology to adjust the copayment 
percentages to 20 percent as provided in section 1833(t)(3)(B)(ii) of 
the Act and as discussed in section II.I. of this proposed rule, and 
the limitation on the copayment amount for a procedure to the inpatient 
hospital deductible as set forth at section 1833(t)(8)(C)(i) of the Act 
would fully offset the financial impact on Medicare beneficiaries 
receiving laboratory tests that would be subject to the proposed 
packaging policy. Further, we believe that creating these larger 
bundles will result in a more efficient use of laboratory services when 
they are adjunctive to an outpatient service. In addition, to the 
extent that the coinsurance and deductible do not apply under the CLFS, 
they would continue not to apply for tests that are ordered, provided, 
and billed independently from a primary service as discussed above, or 
for molecular pathology tests. We are inviting public comments on the 
effect of packaging laboratory tests on beneficiary coinsurance.
    The laboratory test codes that we are proposing to be packaged and 
assigned status indicator ``N'' for CY 2014 are listed in Addendum P of 
this proposed rule (which is available via the Internet on the CMS Web 
site. We are proposing to revise the regulation text at Sec.  419.2(b) 
and Sec.  419.22(l) to reflect this laboratory test packaging proposal.
(4) Procedures Described By Add-On Codes
    Add-on codes describe procedures that are always performed in 
addition to a primary procedure. Add-on codes can be either CPT codes 
or Level II HCPCS codes. For example, the procedure described by CPT 
code 11001 is ``Debridement of extensive eczematous or infected skin; 
each additional 10% of the body surface, or part thereof (list 
separately in addition to code for primary procedure).'' This code is 
used for additional debridement beyond that described by the primary 
procedure code. Currently, add-on codes are treated like other codes in 
the OPPS. Add-on codes typically received separate payment based on an 
APC assignment, and are typically assigned status indicator ``T.''
    Procedures described by add-on codes represent an extension or 
continuation of a primary procedure, which means that they are 
typically supportive, dependent, or adjunctive to a primary surgical 
procedure. The parent code defines the purpose of the patient encounter 
and the add-on code typically describes additional incremental work, 
when the extent of the procedure encompasses a range rather than a 
single defined endpoint applicable to all patients. For example, add-on 
CPT code 11001 is used for each additional 10 percent of debridement. 
Therefore, according to longstanding OPPS packaging principles 
described above and the dependent nature and adjunctive characteristics 
of procedures described by add-on codes, we believe that such 
procedures should be packaged with the primary procedure. For CY 2014, 
we are proposing to unconditionally package all procedures described by 
add-on codes in the OPPS.
    There is an additional benefit to packaging add-on codes--more 
accurate OPPS payment for procedures described by add-on codes. 
Currently, calculating mean costs for procedures described by add-on 
codes is problematic in the OPPS because we cannot determine which 
costs on a claim are attributable to the primary procedure and which 
costs are attributable to the add-on procedure. Furthermore, because we 
use single claims and ``pseudo'' single procedure claims for 
ratesetting, we generally must rely on incorrectly coded claims 
containing only the add-on code to calculate payment rates for add-on 
procedures. Claims containing only an add-on code are incorrectly coded 
because they should be reported with (or ``added-on'') a primary 
procedure. Packaging the line item costs associated with an add-on code 
into the cost of the primary procedure will help address this 
ratesetting concern because the costs of the add-on code would be 
packaged into the primary procedure, and we would no longer have to 
calculate costs for add-on codes based on miscoded claims. In addition, 
packaging add-on codes would increase the number of single bills 
available for ratesetting for the primary procedures.
    We are revising the regulations at Sec.  419.2(b) to include the 
packaging of add-on codes. The specific add-on codes that we are 
proposing to be unconditionally packaged and assigned status indicator 
``N'' for CY 2014 are listed in Addendum P of this proposed rule, which 
is available via the Internet on the CMS Web site.
(5) Ancillary Services (Status Indicator ``X'')
    Under the OPPS, we currently pay separately for certain ancillary 
services that are assigned to status indicator ``X,'' defined as 
``ancillary services.'' Some

[[Page 43574]]

other services that are ancillary to other services are currently 
packaged in the OPPS. Those ancillary services assigned status 
indicator ``X'' in the OPPS and paid separately are, by definition, 
ancillary relative to primary services provided in the OPPS and include 
many minor diagnostic tests that are typically performed with a primary 
service, although there are instances where such services are not 
always performed with a primary service and may be performed alone.
    As mentioned above, our intent is that the OPPS be more of a 
prospective payment system through expanding packaging. Given that the 
longstanding OPPS policy is to package items and services that are 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service, we believe that these ancillary services, which are assigned 
status indicator ``X,'' should be packaged when they are performed with 
another service, but should continue to be separately paid when 
performed alone. This packaging approach is most consistent with a 
prospective payment system and the regulations at Sec.  419.2(b) that 
packages ancillary services into primary services while preserving 
separate payment for those instances in which one of these services is 
provided alone (not with a separate primary service) to a hospital 
outpatient.
    In summary, we are proposing to conditionally package all ancillary 
services that were previously assigned a status indicator of ``X'' and 
assign these services to status indicator ``Q1'' (packaged when 
provided with a service assigned a status indicator of ``S,'' ``T,'' or 
``V''). Status indicator ``X'' would be discontinued. To encourage 
maximum flexibility to beneficiaries across different sites of service, 
we are not proposing to conditionally package preventive services 
assigned to status indicator ``X'' and instead are proposing to change 
the status indicator for preventive services from the currently 
assigned status indicator ``X'' to status indicator ``S.'' The specific 
codes for procedures assigned to status indicator ``X'' that are 
proposed to be conditionally packaged and assigned to status indicator 
``Q1'' for CY 2014 are listed in Addendum P of this proposed rule, 
which is available via the Internet on the CMS Web site.
(6) Diagnostic Tests on the Bypass List
    For the CY 2013 OPPS, we implemented a bypass list to convert lines 
from multiple procedure claims into ``pseudo'' single procedure claims. 
We are proposing to continue developing ``pseudo'' single procedure 
claims using a bypass list for the CY 2014 OPPS, as discussed in 
section II.A.1.b. of this proposed rule. The bypass list of separately 
paid services is used to convert claims with multiple separately 
payable procedures, which are generally not used for ratesetting 
purposes, into claims with a single separately paid procedure that can 
be used for ratesetting. Services on the bypass list have limited 
associated packaged costs so they can be bypassed when assigning 
packaged costs on a claim to a separately paid procedure on the same 
claim.
    As noted above, beginning in CY 2008, we packaged several 
diagnostic items and services including guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, and contrast 
agents. In this proposed rule, we also are proposing to conditionally 
package several diagnostic items and services, including drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure, ancillary services (many of 
which are diagnostic tests), and laboratory tests. We believe that the 
diagnostic tests on the bypass list share many of the characteristics 
with these other conditionally or unconditionally packaged or proposed 
packaged categories of items and services in that they are diagnostic 
and are integral, ancillary, supportive, dependent, or adjunctive to a 
primary service. Examples include a barium swallow test (CPT code 
74220) and a visual field examination (CPT code 92081). Given the 
nature of these services, we are proposing to conditionally package 
these procedures. We recognize that some of these services are 
sometimes provided without other services and, therefore, they will 
continue to be separately paid in those circumstances.
    We are proposing that these codes be assigned status indicator 
``Q1'' beginning in the CY 2014 OPPS. Some of these diagnostic tests on 
the bypass list are currently assigned to status indicator ``X'' and, 
therefore, would be conditionally packaged under the proposed policy to 
conditionally package ancillary services currently assigned status 
indicator ``X.'' The only diagnostic codes on the bypass list affected 
by this proposal are currently assigned to status indicator ``S.'' The 
specific codes for the diagnostic tests on the bypass list that we are 
proposing to be conditionally packaged and assigned to status indicator 
``Q1'' for CY 2014 are listed in Addendum P of this proposed rule, 
which is available via the Internet on the CMS Web site. Similar to our 
conditional packaging proposal for services previously assigned to 
status indicator ``X,'' we are not proposing to conditionally package 
preventive services that are diagnostic tests on the bypass list.
(7) Device Removal Procedures
    Implantable devices frequently require removal or replacement due 
to wear, failure, recall, and infection, among others. Since the 
beginning of the OPPS, implantable devices have been packaged (either 
as supplies, implantable prosthetics, or implantable DME) into their 
associated procedures. Device removal is sometimes described by a code 
that may include repair or replacement. In other cases, device removal 
is described by a separate code that only describes removal of a 
device. Device removal procedures are frequently performed with 
procedures to repair or replace devices, although it is possible that 
device removal may occur without repair or replacement if the clinical 
indication for the device that was removed no longer exists. When a 
separately coded device removal procedure is performed with a 
separately coded device repair or replacement procedure, the device 
removal procedure actually represents a part of an overall procedure 
that is removal with repair or replacement of the device.
    Given that a separately coded device removal that accompanies a 
device repair or replacement procedure represents a service that is 
integral and supportive to a primary service, we are proposing to 
conditionally package device removal codes when they are billed with 
other surgical procedures involving repair or replacement. We believe 
that this conditional packaging policy is appropriate under 
longstanding OPPS packaging principles because these device removal 
procedures are an integral and supportive step in a more comprehensive 
overall procedure. Furthermore, conditionally packaging these device 
removal procedures with the replacement or revision codes would be 
consistent with our packaging policies for other dependent services. 
The specific codes for the device removal procedures that we are 
proposing to be conditionally packaged and assigned to status indicator 
``Q2'' for CY 2014 are listed in Addendum P of this proposed rule, 
which is available via the Internet on the CMS Web site.
d. Impact of the New Packaging Proposals
    We have examined the proposed aggregate impact of making these 
proposed changes to packaging for CY

[[Page 43575]]

2014. Because the OPPS is a budget neutral payment system in which the 
amount of the relative payment weight in the system is annually 
adjusted for changes in expenditures created by changes in APC weights 
and codes (but is not currently adjusted based on estimated growth in 
service volume), the effects of the packaging changes that we are 
proposing would result in changes to scaled weights and, therefore, to 
the payment rates for all separately paid procedures. These proposed 
changes would result from shifts in mean costs as a result of increased 
packaging, changes in multiple procedure discounting patterns, and a 
higher weight scaler that is applied to all unscaled APC weights. 
Further, to properly budget neutralize the money that would previously 
have been paid through other payment systems, we have included those 
payments when performing OPPS budget neutrality calculations. We refer 
readers to section II.A.4. of this proposed rule for an explanation of 
the weight scaler for OPPS budget neutrality. In a budget neutral 
system, the monies previously paid for services that are now proposed 
to be packaged are not lost, but are redistributed to all other 
services. A higher weight scaler would increase payment rates relative 
to observed mean costs for independent services by redistributing the 
lost weight of packaged items that historically have been paid 
separately and the lost weight when the mean costs of independent 
services do not completely reflect the full incremental cost of the 
packaged services. The impact of this proposed change on proposed CY 
2014 OPPS payments is discussed in section XXIII.A. of this proposed 
rule, and the impact on various classifications of hospitals is shown 
in Column 5 in Table 39 in that section.
    We estimate that our CY 2014 packaging proposal would redistribute 
approximately 4 percent of the estimated CY 2013 base year expenditures 
under the OPPS. If the relative payment weight for a particular APC 
decreases as a result of the proposed packaging approach, the increased 
weight scaler may or may not result in a relative payment weight that 
is equal to or greater than the relative weight that would occur 
without the proposed packaging approach. In general, the packaging 
policies that we are proposing would have more effect on payment for 
some services than on payment for others because the dependent items 
and services that we are proposing for packaging are furnished more 
often with some independent services than with others. However, because 
of the amount of relative payment weight that would be redistributed by 
this proposal, there would be some impact on payments for all OPPS 
services whose rates are set based on relative payment weights, and the 
impact on any given hospital would vary based on the mix of services 
furnished by the hospital.
e. Clarification Regarding Supplies That Are Packaged in the OPPS
    Under the regulations at Sec.  419.2(b)(4), medical and surgical 
supplies and equipment are packaged in the OPPS. Supplies is a large 
category of items that typically are either for single patient use or 
have a shorter life span in use than equipment. Packaged supplies can 
include certain drugs, biologicals, and radiopharmaceuticals. The only 
supplies that are sometimes paid separately in the OPPS are prosthetic 
supplies under Sec.  419.22(j), and if paid separately, they are paid 
according to the DMEPOS fee schedule. All other supplies are 
unconditionally packaged in the OPPS.
    In our annual review of the OPPS for CY 2014, we discovered many 
supplies that should be packaged in the OPPS according to Sec.  
419.2(b)(4), but that are currently assigned to status indicator ``A'' 
and are separately paid in the hospital outpatient setting according to 
the DMEPOS fee schedule. For CY 2014, we are proposing to revise the 
status indicator for all supplies described by Level II HCPCS A-codes 
(except for prosthetic supplies) from status indicator ``A'' to ``N,'' 
so that these supplies would be unconditionally packaged as required by 
Sec.  419.2(b)(4). The specific Level II HCPCS A-codes whose status 
indicator will be revised from ``A'' to ``N'' are listed in Addendum P 
of this CY 2014 OPPS/ASC proposed rule, which is available via the 
Internet on the CMS Web site.
f. Proposed Revision and Clarification of the Regulations at 42 CFR 
419.2(b) and 42 CFR 419.22
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68272), after consideration of public comments we received on the 
proposed rule, we clarified the regulatory language at Sec.  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. 
In this proposed rule, we are proposing to further revise this 
regulation to add the packaging categories that were adopted in CYs 
2008 and 2009 in addition to the new proposed policies described above. 
We also are proposing to make some further minor revisions and 
editorial clarifications to the existing language of Sec.  419.2(b) to 
make it more clearly reflect current packaging policy. Finally, we are 
proposing to revise the list of services excluded from the OPPS at 
Sec.  419.22.
g. Comment Solicitation on Increased Packaging for Imaging Services
    We currently package several kinds of imaging services in the OPPS, 
including image guidance services, image processing services, 
intraoperative imaging, and imaging supervision and interpretation 
services. In addition, some imaging services are included in this 
year's proposal to conditionally package ancillary services and 
diagnostic tests on the bypass list. In addition to these imaging 
services that are either packaged or proposed to be packaged, we are 
contemplating a proposal for CY 2015 that would conditionally package 
all imaging services with any associated surgical procedures. Imaging 
services not provided with a surgical procedure would continue to 
either be separately paid according to a standard clinical APC or a 
composite APC. We are requesting public comments on this potential CY 
2015 proposal.
h. Summary of CY 2014 Packaging Proposals
    Beginning in CY 2014, we are proposing to unconditionally package 
or conditionally package the following items and services and to add 
them to the list of OPPS packaged items and services in Sec.  419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies or devices when 
used in a surgical procedure;
    (3) Clinical diagnostic laboratory tests;
    (4) Procedures described by add-on codes;
    (5) Ancillary services (status indicator ``X'');
    (6) Diagnostic tests on the bypass list; and
    (7) Device removal procedures.
    We believe that each of the above proposed unconditionally or 
conditionally packaged categories of items or services is appropriate 
according to existing packaging policies or expansions of existing 
packaging policies. However, we recognize that

[[Page 43576]]

decisions about packaging payment involve a balance between ensuring 
that payment is adequate to enable the hospital to provide quality care 
while establishing incentives for efficiency through larger units of 
payment. Therefore, we are inviting public comments regarding our 
packaging proposals for the CY 2014 OPPS.
    The HCPCS codes that we are proposing to be packaged either 
unconditionally (for which we are proposing to assign status indicator 
``N''), or conditionally (for which we are proposing to assign status 
indicator ``Q1'' or ``Q2''), for CY 2014 are displayed in both Addendum 
P and Addendum B of this proposed rule. The supporting documents for 
this proposed rule, including but not limited to the Addenda, are 
available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
4. Proposed Calculation of OPPS Scaled Payment Weights
    For CY 2014, we are proposing to calculate the relative payment 
weights for each APC for CY 2014 shown in Addenda A and B to this 
proposed rule (which are available via the Internet on the CMS Web 
site) using the APC costs discussed in sections II.A.1. and II.A.2. of 
this 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 the CY 2013 OPPS (77 FR 68283), we established a policy of 
using geometric mean-based APC costs to calculate relative payment 
weights. For the CY 2014 OPPS, we are proposing to continue basing the 
relative payment weights on which OPPS payments will be made by using 
geometric mean costs. As we discuss in section VII. of this proposed 
rule, we are proposing to reconfigure the CY 2014 visit APCs so that 
they would include a single level for each visit type. However, in an 
effort to maintain consistency in calculating unscaled weights that 
represent the cost of some of the most frequently provided services, we 
are proposing to use the cost of the clinic visit APC in calculating 
unscaled weights, which for CY 2014 is proposed APC 0634. While we have 
previously used APC 0606 as the base from which to develop the OPPS 
budget neutral weight scaler, under our proposal to reconfigure the 
visit APCs, we would have a single APC for each visit type. The 
proposal to reconfigure the visit APCs is discussed in more detail in 
section VII. of this proposed rule. Following our general methodology 
for establishing relative payment weights derived from APC costs, but 
using the proposed CY 2014 geometric mean cost for APC 0634, for CY 
2014, we are proposing to assign APC 0634 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 0634 to derive the proposed unscaled 
relative payment weight for each APC. 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 2014 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare the estimated 
aggregate weight using the CY 2013 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2014 unscaled 
relative payment weights.
    For CY 2013, we multiplied the CY 2013 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2012 claims to calculate the total relative 
payment weight for each service. We then added together the total 
relative payment weight for each of these services in order to 
calculate an estimated aggregate weight for the year. For CY 2014, we 
are proposing the same process using the proposed CY 2014 unscaled 
relative payment weights rather than scaled relative payment weights. 
We are proposing to calculate the weight scaler by dividing the CY 2013 
estimated aggregate weight by the proposed CY 2014 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. We note that, as a 
result of the CY 2014 proposed OPPS packaging policy for laboratory 
tests described in section II.A.3.b.(3) of this proposed rule, we would 
need to incorporate the estimated relative payment weights from those 
services. Therefore, the CY 2013 estimated OPPS aggregate weight would 
include payments for outpatient laboratory tests paid at the CLFS 
rates.
    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.
    We are proposing to include estimated payments to CMHCs in our 
comparison of the estimated unscaled relative payment weights in CY 
2014 to the estimated total relative payment weights in CY 2013 using 
CY 2012 claims data, holding all other components of the payment system 
constant to isolate changes in total weight. Based on this comparison, 
we adjusted the proposed CY 2014 unscaled relative payment weights for 
purposes of budget neutrality. The proposed CY 2014 unscaled relative 
payment weights were adjusted by multiplying them by a proposed weight 
scaler of 1.2143 to ensure that the proposed CY 2014 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 proposed rule) 
is included in the proposed budget neutrality calculations for the CY 
2014 OPPS.
    The proposed CY 2014 unscaled relative payment weights listed in 
Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site) incorporate the proposed recalibration 
adjustments discussed in sections II.A.1. and II.A.2. of this proposed 
rule.

[[Page 43577]]

B. Proposed 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 2014 IPPS/LTCH PPS 
proposed rule (78 FR 27572), consistent with current law, based on IHS 
Global Insight, Inc.'s first quarter 2013 forecast of the FY 2014 
market basket increase, the proposed FY 2014 IPPS market basket update 
is 2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) 
of the Act, as added by section 3401(i) of the Patient Protection and 
Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 
10319(g) of that law and further amended by section 1105(e) of the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), 
provide adjustments to the OPD fee schedule increase factor for CY 
2014.
    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 2014 IPPS/LTCH PPS proposed rule 
(78 FR 27572), we discussed the calculation of the proposed MFP 
adjustment for FY 2014, which is 0.4 percentage point.
    We are proposing that if more recent data become subsequently 
available after the publication of this 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 2014 market basket update and the MFP adjustment, components in 
calculating the OPD fee schedule increase factor under sections 
1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2014 OPPS/ASC 
final rule with comment period.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that for 
each of years 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 2014, section 
1833(t)(3)(G)(iii) of the Act provides a 0.3 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)(iii) of the Act, we are proposing to apply a 0.3 
percentage point reduction to the OPD fee schedule increase factor for 
CY 2014.
    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, we are proposing to apply an OPD fee 
schedule increase factor of 1.8 percent for the CY 2014 OPPS (which is 
2.5 percent, the proposed estimate of the hospital inpatient market 
basket percentage increase, less the proposed 0.4 percentage point MFP 
adjustment, and less the 0.3 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, those hospitals failing to meet the Hospital OQR 
Program reporting requirements would receive an OPD fee schedule 
increase factor of -0.2 percent (which is 2.5 percent, the proposed 
estimate of the hospital inpatient market basket percentage increase, 
less the proposed 0.4 percentage point MFP adjustment, less the 0.3 
percentage point additional adjustment, and less 2.0 percentage points 
for the Hospital OQR Program reduction). For further discussion of the 
Hospital OQR Program, we refer readers to section XIII. of this 
proposed rule.
    In this proposed rule, we are proposing to amend 42 CFR 
419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2014, 
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)(iii) 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 0.3 percentage point for CY 2014.
    To set the OPPS conversion factor for CY 2014, we are proposing to 
increase the CY 2013 conversion factor of $71.313 by 1.8 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we are proposing to 
further adjust the conversion factor for CY 2014 to ensure that any 
revisions made to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis. We are proposing to 
calculate an overall proposed budget neutrality factor of 1.004 for 
wage index changes by comparing proposed total estimated payments from 
our simulation model using the proposed FY 2014 IPPS wage indices to 
those payments using the current (FY 2013) IPPS wage indices, as 
adopted on a calendar year basis for the OPPS.
    For CY 2014, we are not proposing to make a change to our rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment is 1.0000.
    For CY 2014, we are proposing 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 proposed rule. We are proposing to calculate a CY 2014 
budget neutrality adjustment factor for the cancer hospital payment 
adjustment by comparing the estimated total CY 2014 payments under 
section 1833(t) of the Act, including the proposed CY 2014 cancer 
hospital payment adjustment, to the estimated CY 2014 total payments 
using the CY 2013 final cancer hospital payment adjustment as required 
under section 1833(t)(18)(B) of the Act. The difference in the CY 2014 
estimated payments as a result of applying the proposed CY 2014 cancer 
hospital payment adjustment relative to the CY 2013 final cancer 
hospital payment adjustment has a limited impact on the budget 
neutrality calculation. Therefore, we are proposing to apply a proposed 
budget neutrality adjustment factor of 1.0001 to the conversion factor 
to ensure that the cancer hospital payment adjustment is budget 
neutral.
    For this proposed rule, we estimate that pass-through spending for 
both drugs and biologicals and devices for CY 2014 would equal 
approximately $12 million, which represents 0.02

[[Page 43578]]

percent of total projected CY 2014 OPPS spending. Therefore, the 
proposed conversion factor also would be adjusted by the difference 
between the 0.15 percent estimate of pass-through spending for CY 2013 
and the 0.02 percent estimate of CY 2014 pass-through spending, 
resulting in a proposed adjustment for CY 2014 of 0.13 percent. 
Finally, estimated payments for outliers would remain at 1.0 percent of 
total OPPS payments for CY 2014.
    The proposed OPD fee schedule increase factor of 1.8 percent for CY 
2014 (that is, the estimate of the hospital inpatient market basket 
percentage increase of 2.5 percent less the proposed 0.4 percentage 
point MFP adjustment and less the 0.3 percentage point required under 
section 1833(t)(3)(F) of the Act), the required proposed wage index 
budget neutrality adjustment of approximately 1.0004, the proposed 
cancer hospital payment adjustment of 1.0001, and the proposed 
adjustment of 0.13 percent of projected OPPS spending for the 
difference in the pass-through spending result in a proposed conversion 
factor for CY 2014 of $72.728.
    Hospitals that fail to meet the reporting requirements of the 
Hospital OQR Program would 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 XIII.G. of this proposed rule. To calculate the proposed CY 
2014 reduced market basket conversion factor for those hospitals that 
fail to meet the requirements of the Hospital OQR Program for the full 
CY 2014 payment update, we are proposing to make all other adjustments 
discussed above, but using a proposed reduced OPD fee schedule update 
factor of -0.2 percent (that is, the proposed 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 proposed reduced 
conversion factor for CY 2014 of $71.273 for those hospitals that fail 
to meet the Hospital OQR requirements (a difference of -$1.455 in the 
conversion factor relative to those hospitals that met the Hospital OQR 
requirements).
    In summary, for CY 2014, we are proposing to use a conversion 
factor of $72.728 in the calculation of the national unadjusted payment 
rates for those items and services for which payment rates are 
calculated using geometric mean costs. We are proposing to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2014 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(iii) of the Act. We also are proposing to 
use a reduced conversion factor of $71.273 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. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
``determine a wage adjustment factor to adjust the portion of payment 
and coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner'' (codified at 42 CFR 419.43(a)). This 
portion of the OPPS payment rate is called the OPPS labor-related 
share. Budget neutrality is discussed in section II.B. of this proposed 
rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). Therefore, we are not proposing to revise 
this policy for the CY 2014 OPPS. We refer readers to section II.H. of 
this proposed rule 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 proposed rule, for 
estimating APC costs, we standardize 60 percent of estimated claims 
costs for geographic area wage variation using the same proposed FY 
2014 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.
    Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original 
OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 
18545)), the OPPS 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 added 
section 1886(d)(3)(E)(iii)(II) to the Act, which defines ``frontier 
State,'' and amended section 1833(t) of the Act to add new paragraph 
(19), which requires a ``frontier State'' wage index floor of 1.00 in 
certain cases, and states that the frontier State floor shall not be 
applied in a budget neutral manner. We codified these requirements in 
Sec.  419.43(c)(2) and (c)(3) of our regulations. For the CY 2014 OPPS, 
we will implement this provision in the same manner as we did since CY 
2011. That is, frontier State hospitals would receive a wage index of 
1.00 if the otherwise applicable wage index (including 
reclassification, rural and imputed 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 would 
receive a wage index based on the geographic location of the specific 
inpatient hospital with which it is associated. Therefore, if the 
associated hospital is located in a frontier State, the wage index 
adjustment applicable for the hospital would also apply for the 
affiliated HOPD. We refer readers to the FY 2011, FY 2012, and FY 2013 
IPPS/LTCH PPS final rules (75 FR 50160 through 50161, 76 FR 51793, 
51795, and 51825, and 77 FR 53369 through 53370, respectively) and the 
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556 through 27557) for 
discussions

[[Page 43579]]

regarding this provision, including our methodology for identifying 
which areas meet the definition of frontier States as provided for in 
section 1886(d)(3)(E)(iii)(II) of the Act.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2014 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 and imputed 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 2014 IPPS/LTCH PPS proposed rule (78 FR 27552 
through 27561) for a detailed discussion of all proposed changes to the 
FY 2014 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.
    For purposes of the OPPS, we are proposing to continue our policy 
for CY 2014 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) 
(Pub. L. 108-173)). We note that, because non-IPPS hospitals cannot 
reclassify, they are eligible for the out-migration wage adjustment. 
Table 4J listed in the FY 2014 IPPS/LTCH PPS proposed 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 would receive the adjustment for FY 2014. We also 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 2014 IPPS/LTCH 
PPS proposed rule as Addendum L to this proposed rule with the addition 
of non-IPPS hospitals that would receive the section 505 out-migration 
adjustment under the CY 2014 OPPS. Addendum L is available via the 
Internet on the CMS Web site.
    As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27552 through 27553), the Office of Management and Budget (OMB) issued 
revisions to the current geographic area designations on February 28, 
2013, that included a number of significant changes such as new CBSAs, 
urban counties that become rural, rural counties that become urban, and 
splitting existing CBSAs (OMB Bulletin 13-01. This bulletin can be 
found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. All of these designations have corresponding effects 
on the wage index system and its adjustments. In order to allow for 
sufficient time to assess the new revisions and their ramifications, we 
intend to propose changes to the IPPS wage index based on the newest 
CBSA designations in the FY 2015 IPPS/LTCH PPS proposed rule. 
Similarly, in the OPPS, which uses the IPPS wage index, we intend to 
propose changes based on the new OMB revisions in the CY 2015 OPPS/ASC 
proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH 
PPS proposed rule.
    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 not 
proposing to change our current regulations which require that we use 
the FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014. 
With the exception of the proposed out-migration wage adjustment table 
(Addendum L to this proposed rule, which is available via the Internet 
on the CMS Web site), which includes non-IPPS hospitals paid under the 
OPPS, we are not reprinting the proposed FY 2014 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 proposed FY 2014 IPPS wage index 
tables.

D. Proposed Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. 
Medicare contractors cannot calculate a CCR for some hospitals because 
there is no cost report available. For these hospitals, CMS uses the 
statewide average default CCRs to determine the payments mentioned 
above until a hospital's Medicare contractor is able to calculate the 
hospital's actual CCR from its most recently submitted Medicare cost 
report. These hospitals include, but are not limited to, hospitals that 
are new, have not accepted assignment of an existing hospital's 
provider agreement, and have not yet submitted a cost report. CMS also 
uses the statewide average default CCRs to determine payments for 
hospitals that appear to have a biased CCR (that is, the CCR falls 
outside the predetermined ceiling threshold for a valid CCR) or for 
hospitals in which the most recent cost report reflects an all-
inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), 
Chapter 4, Section 10.11). In this proposed rule, we are proposing to 
update the default ratios for CY 2014 using the most recent cost report 
data. We discuss our policy for using default CCRs, including setting 
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599) in the context of 
our adoption of an outlier reconciliation policy for cost reports 
beginning on or after January 1, 2009.
    For CY 2014, we are proposing to continue to use our standard 
methodology of calculating the statewide average default CCRs using the 
same hospital overall CCRs that we use to adjust charges to costs on 
claims data for setting the proposed CY 2014 OPPS relative payment 
weights. Table 9 below lists the proposed CY 2014 default urban and 
rural CCRs by State and compares them to last year's default CCRs. 
These proposed CCRs represent the ratio of total costs to total charges 
for those cost centers relevant to outpatient services from each 
hospital's most recently submitted cost report, weighted by Medicare 
Part B charges. We also are proposing to adjust ratios from submitted 
cost reports to reflect 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 are

[[Page 43580]]

proposing 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.
    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 2013 and CY 2014 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 9 below lists the proposed statewide average default CCRs for 
OPPS services furnished on or after January 1, 2014.

                                Table 9--Proposed CY 2014 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Previous
                                                                                    Proposed CY     default CCR
                     State                                 Urban/rural             2014 default    (CY 2013 OPPS
                                                                                        CCR         final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA........................................  RURAL...........................           0.472           0.489
ALASKA........................................  URBAN...........................           0.296           0.307
ALABAMA.......................................  RURAL...........................           0.223           0.209
ALABAMA.......................................  URBAN...........................           0.198           0.193
ARKANSAS......................................  RURAL...........................           0.227           0.219
ARKANSAS......................................  URBAN...........................           0.230           0.234
ARIZONA.......................................  RURAL...........................           0.223           0.238
ARIZONA.......................................  URBAN...........................           0.188           0.190
CALIFORNIA....................................  RURAL...........................           0.210           0.192
CALIFORNIA....................................  URBAN...........................           0.210           0.202
COLORADO......................................  RURAL...........................           0.396           0.331
COLORADO......................................  URBAN...........................           0.222           0.226
CONNECTICUT...................................  RURAL...........................           0.359           0.364
CONNECTICUT...................................  URBAN...........................           0.285           0.287
DISTRICT OF COLUMBIA..........................  URBAN...........................           0.282           0.302
DELAWARE......................................  RURAL...........................           0.278           0.282
DELAWARE......................................  URBAN...........................           0.331           0.353
FLORIDA.......................................  RURAL...........................           0.172           0.182
FLORIDA.......................................  URBAN...........................           0.166           0.167
GEORGIA.......................................  RURAL...........................           0.271           0.237
GEORGIA.......................................  URBAN...........................           0.209           0.214
HAWAII........................................  RURAL...........................           0.350           0.323
HAWAII........................................  URBAN...........................           0.311           0.306
IOWA..........................................  RURAL...........................           0.312           0.296
IOWA..........................................  URBAN...........................           0.284           0.269
IDAHO.........................................  RURAL...........................           0.333           0.417
IDAHO.........................................  URBAN...........................           0.491           0.357
ILLINOIS......................................  RURAL...........................           0.258           0.240
ILLINOIS......................................  URBAN...........................           0.235           0.230
INDIANA.......................................  RURAL...........................           0.358           0.285
INDIANA.......................................  URBAN...........................           0.288           0.256
KANSAS........................................  RURAL...........................           0.298           0.290
KANSAS........................................  URBAN...........................           0.245           0.210
KENTUCKY......................................  RURAL...........................           0.226           0.217
KENTUCKY......................................  URBAN...........................           0.232           0.241
LOUISIANA.....................................  RURAL...........................           0.258           0.242
LOUISIANA.....................................  URBAN...........................           0.229           0.225
MASSACHUSETTS.................................  RURAL...........................           0.436           0.427
MASSACHUSETTS.................................  URBAN...........................           0.330           0.323
MAINE.........................................  RURAL...........................           0.443           0.445
MAINE.........................................  URBAN...........................           0.455           0.449
MARYLAND......................................  RURAL...........................           0.286           0.275
MARYLAND......................................  URBAN...........................           0.251           0.246
MICHIGAN......................................  RURAL...........................           0.353           0.303
MICHIGAN......................................  URBAN...........................           0.316           0.303
MINNESOTA.....................................  RURAL...........................           0.462           0.469
MINNESOTA.....................................  URBAN...........................           0.339           0.321
MISSOURI......................................  RURAL...........................           0.282           0.241
MISSOURI......................................  URBAN...........................           0.287           0.262
MISSISSIPPI...................................  RURAL...........................           0.228           0.226
MISSISSIPPI...................................  URBAN...........................           0.187           0.182
MONTANA.......................................  RURAL...........................           0.486           0.431

[[Page 43581]]

 
MONTANA.......................................  URBAN...........................           0.407           0.384
NORTH CAROLINA................................  RURAL...........................           0.251           0.253
NORTH CAROLINA................................  URBAN...........................           0.255           0.254
NORTH DAKOTA..................................  RURAL...........................           0.667           0.322
NORTH DAKOTA..................................  URBAN...........................           0.376           0.414
NEBRASKA......................................  RURAL...........................           0.333           0.318
NEBRASKA......................................  URBAN...........................           0.251           0.254
NEW HAMPSHIRE.................................  RURAL...........................           0.325           0.317
NEW HAMPSHIRE.................................  URBAN...........................           0.300           0.292
NEW JERSEY....................................  URBAN...........................           0.212           0.207
NEW MEXICO....................................  RURAL...........................           0.294           0.256
NEW MEXICO....................................  URBAN...........................           0.307           0.279
NEVADA........................................  RURAL...........................           0.234           0.234
NEVADA........................................  URBAN...........................           0.159           0.162
NEW YORK......................................  RURAL...........................           0.347           0.420
NEW YORK......................................  URBAN...........................           0.347           0.369
OHIO..........................................  RURAL...........................           0.337           0.321
OHIO..........................................  URBAN...........................           0.237           0.237
OKLAHOMA......................................  RURAL...........................           0.253           0.239
OKLAHOMA......................................  URBAN...........................           0.210           0.212
OREGON........................................  RURAL...........................           0.332           0.314
OREGON........................................  URBAN...........................           0.352           0.335
PENNSYLVANIA..................................  RURAL...........................           0.270           0.267
PENNSYLVANIA..................................  URBAN...........................           0.199           0.200
PUERTO RICO...................................  URBAN...........................           0.600           0.504
RHODE ISLAND..................................  URBAN...........................           0.310           0.264
SOUTH CAROLINA................................  RURAL...........................           0.196           0.211
SOUTH CAROLINA................................  URBAN...........................           0.210           0.214
SOUTH DAKOTA..................................  RURAL...........................           0.309           0.307
SOUTH DAKOTA..................................  URBAN...........................           0.208           0.218
TENNESSEE.....................................  RURAL...........................           0.212           0.209
TENNESSEE.....................................  URBAN...........................           0.200           0.195
TEXAS.........................................  RURAL...........................           0.233           0.235
TEXAS.........................................  URBAN...........................           0.203           0.206
UTAH..........................................  RURAL...........................           0.343           0.374
UTAH..........................................  URBAN...........................           0.338           0.359
VIRGINIA......................................  RURAL...........................           0.223           0.227
VIRGINIA......................................  URBAN...........................           0.243           0.237
VERMONT.......................................  RURAL...........................           0.429           0.408
VERMONT.......................................  URBAN...........................           0.395           0.384
WASHINGTON....................................  RURAL...........................           0.315           0.366
WASHINGTON....................................  URBAN...........................           0.322           0.301
WISCONSIN.....................................  RURAL...........................           0.347           0.345
WISCONSIN.....................................  URBAN...........................           0.308           0.307
WEST VIRGINIA.................................  RURAL...........................           0.294           0.277
WEST VIRGINIA.................................  URBAN...........................           0.327           0.338
WYOMING.......................................  RURAL...........................           0.444           0.379
WYOMING.......................................  URBAN...........................           0.279           0.301
ALASKA........................................  RURAL...........................           0.472           0.489
ALASKA........................................  URBAN...........................           0.296           0.307
----------------------------------------------------------------------------------------------------------------

E. Proposed Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). 
Section 1833(t)(13) of the Act provided 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/

[[Page 43582]]

ASC final rule with comment period (71 FR 68010 and 68227), for 
purposes of receiving this rural adjustment, we revised Sec.  419.43(g) 
of the regulations to clarify that EACHs also are 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 2013. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    For the CY 2014 OPPS, we are proposing to continue our policy of a 
7.1 percent payment adjustment that is done in a budget neutral manner 
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.

F. Proposed 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) (Pub. L. 105-33), Medicare has paid 
cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act 
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 that are exempted from payment under the 
IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement 
Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) 
of the Act, ``Transitional Adjustment to Limit Decline in Payment,'' to 
hold harmless cancer hospitals and children's hospitals based on their 
pre-BBA amount under the OPPS. As required under section 
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full 
amount of the difference between payments for covered outpatient 
services under the OPPS and a ``pre-BBA amount.'' That is, cancer 
hospitals are permanently held harmless to their ``pre-BBA amount,'' 
and they receive transitional outpatient payments (TOPS) or hold 
harmless payments 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 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 defined in section 1833(t)(7)(F)(ii) of the Act. 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 of 2010 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 1833(t)(18)(A) of the 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 
1833(t)(18)(B) of the Act provides that if the Secretary determines 
that costs by these cancer hospitals 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 1833(t)(18)(A) of the Act, we determined in 2011 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 CYs 2012 and 2013, the target PCR for 
purposes of the cancer hospital payment adjustment was 0.91.
2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2014
    For CY 2014, we are proposing 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 are available at the time of the development of 
this proposed rule. To calculate the proposed CY 2014 target PCR, we 
used the same extract of cost report data from HCRIS, as discussed in 
section II.A. of this proposed rule, used to estimate costs for the CY 
2014 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

[[Page 43583]]

with CY 2012 claims data that we used to model the impact of the 
proposed CY 2014 APC relative weights (3,951 hospitals) because it is 
appropriate to use the same set of hospitals that we are using to 
calibrate the modeled CY 2014 OPPS. The cost report data for the 
hospitals in this dataset were from cost report periods with fiscal 
year ends ranging from 2011 to 2012. We then removed the cost report 
data of the 45 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 118 hospitals because the cost report 
data 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 a proposed analytic file of 3,788 
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 90 percent of reasonable cost (a 
weighted average PCR of 0.90). Based on these data, we are proposing a 
target PCR of 0.90 to determine the CY 2014 cancer hospital payment 
adjustment to be paid at cost report settlement. Therefore, we are 
proposing 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 0.90 for each cancer hospital.
    Table 10 below indicates the estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2014 due to the cancer hospital 
payment adjustment policy. The actual amount of the CY 2014 cancer 
hospital payment adjustment for each cancer hospital will be determined 
at cost report settlement and will depend on each hospital's CY 2014 
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.

  Table 10--Estimated CY 2014 Hospital-Specific Payment Adjustment for
        Cancer Hospitals to be Provided at Cost Report Settlement
------------------------------------------------------------------------
                                                             Estimated
                                                            percentage
                                                            increase in
          Provider No.                Hospital name        OPPS payments
                                                            for CY 2014
                                                             (percent)
------------------------------------------------------------------------
050146.........................  City of Hope Helford               15.0
                                  Clinical Research
                                  Hospital.
050660.........................  USC Kenneth Norris Jr.             28.9
                                  Cancer Hospital.
100079.........................  University of Miami                16.7
                                  Hospital & Clinic.
100271.........................  H. Lee Moffitt Cancer              23.7
                                  Center & Research
                                  Institute.
220162.........................  Dana-Farber Cancer                 48.2
                                  Institute.
330154.........................  Memorial Hospital for              41.4
                                  Cancer and Allied
                                  Diseases.
330354.........................  Roswell Park Cancer                35.2
                                  Institute.
360242.........................  James Cancer Hospital &            35.6
                                  Solove Research
                                  Institute.
390196.........................  Hospital of the Fox                16.7
                                  Chase Cancer Center.
450076.........................  University of Texas M.             58.9
                                  D. Anderson Cancer
                                  Center.
500138.........................  Seattle Cancer Care                55.1
                                  Alliance.
------------------------------------------------------------------------

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2012, 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 2012 OPPS payment, 
using available CY 2012 claims and the revised OPPS expenditure 
estimate for the 2013 Trustee's Report, is approximately 1.1 percent of 
the total aggregated OPPS payments. Therefore, for CY 2012, we estimate 
that we paid 0.1 percent above the CY 2012 outlier target of 1.0 
percent of total aggregated OPPS payments.
    As explained in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68295 through 68297), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2013. The outlier thresholds were set so 
that estimated CY 2013 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2012 claims data and CY 2013 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2013 will be approximately 
1.2 percent of the total CY 2013 OPPS payments. The difference between 
1.2 percent and 1.0 percent is reflected in the regulatory impact 
analysis in section

[[Page 43584]]

XXIII. of this proposed rule. We note that we provide estimated CY 2014 
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
    For CY 2014, we are proposing to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS for outlier payments. We are proposing that a 
portion of that 1.0 percent, an amount equal to 0.18 percent of outlier 
payments (or 0.0018 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 
threshold as a proportion of total estimated OPPS outlier payments. As 
discussed in section VIII.D. of this proposed rule, for CMHCs, we are 
proposing to continue our longstanding policy that if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 (Level I 
Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II 
Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 
times the payment 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.D. of this proposed rule.
    To ensure that the estimated CY 2014 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we are proposing that the hospital outlier threshold be set so 
that outlier payments would be triggered when the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,775 fixed-dollar 
threshold.
    We calculated the proposed fixed-dollar threshold using largely the 
standard methodology, most recently used for CY 2013 (77 FR 68295 
through 68297). For purposes of estimating outlier payments for this 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2013 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 2014 hospital outlier payments for this 
proposed rule, we inflated the charges on the CY 2012 claims using the 
same inflation factor of 1.0993 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2014 IPPS/LTCH PPS proposed 
rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate 
CY 2013 charges from the CY 2012 charges reported on CY 2012 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). 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, for this CY 2014 OPPS/ASC proposed rule, 
we are proposing to apply the same CCR inflation adjustment factor that 
we are proposing to apply for the FY 2014 IPPS outlier calculation to 
the CCRs used to simulate the proposed CY 2014 OPPS outlier payments to 
determine the fixed-dollar threshold. Specifically, for CY 2014, we are 
proposing to apply an adjustment factor of 0.9732 to the CCRs that were 
in the April 2013 OPSF to trend them forward from CY 2013 to CY 2014. 
The methodology for calculating this proposed adjustment was discussed 
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27766 through 27768).
    Therefore, to model hospital outlier payments for this proposed 
rule, we applied the overall CCRs from the April 2013 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that 
were adjusted (using the proposed charge inflation factor of 1.0993 to 
approximate CY 2014 charges). We simulated aggregated CY 2014 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 2014 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $2,775, combined 
with the proposed multiple threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. We are proposing to continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the proposed fixed-dollar 
threshold of $2,775 are met. For CMHCs, we are proposing that, if a 
CMHC's cost for partial hospitalization services, paid under either APC 
0172 or APC 0173, exceeds 3.40 times the payment 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 are proposing 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 XIII. of this 
proposed rule.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR Part 419, Subparts C and D. For this CY

[[Page 43585]]

2014 OPPS/ASC proposed rule, 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 proposed rule and the relative payment weight determined under 
section II.A. of this proposed rule. Therefore, the proposed national 
unadjusted payment rate for most APCs contained in Addendum A to this 
proposed rule (which is available via the Internet on the CMS Web site 
and for most HCPCS codes to which separate payment under the OPPS has 
been assigned in Addendum B to this proposed rule (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
proposed CY 2014 scaled weight for the APC by the proposed CY 2014 
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 XIII. of this proposed rule.
    We demonstrate in the steps below how to determine the APC payments 
that will be made in a calendar year under the OPPS to a hospital that 
fulfills the Hospital OQR Program requirements and to a hospital that 
fails to meet the Hospital OQR Program requirements for a service that 
has any of the following status indicator assignments: ``J1,'' ``P,'' 
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' or ``V'' (as 
defined in Addendum D1 to this proposed rule), in a circumstance in 
which the multiple procedure discount does not apply, the procedure is 
not bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements. We note that we are also proposing 
to create status indicator ``J1'' to reflect the proposed comprehensive 
APCs discussed in section II.A.2.e. of this proposed rule.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this proposed 
rule (which are available via the Internet on the CMS Web site) should 
follow the formulas presented in the following steps. For purposes of 
the payment calculations below, we refer to the proposed national 
unadjusted payment rate for hospitals that meet the requirements of the 
Hospital OQR Program as the ``full'' national unadjusted payment rate. 
We refer to the national unadjusted payment rate for hospitals that 
fail to meet the requirements of the Hospital OQR Program as the 
``reduced'' national unadjusted payment rate. The reduced national 
unadjusted payment rate is calculated by multiplying the proposed 
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 proposed CY 2014 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. During our regression analysis for the payment adjustment 
for rural hospitals in the CY 2006 OPPS final rule with comment period 
(70 FR 68553), we confirmed that this labor-related share for hospital 
outpatient services is appropriate.
    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 2014 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. (For further 
discussion of the proposed changes to the FY 2014 IPPS wage indices, as 
applied to the CY 2014 OPPS, we refer readers to section II.C. of this 
proposed rule.) We are proposing to continue to apply a wage index 
floor of 1.00 to frontier States, in accordance with section 10324 of 
the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule (which is available via the 
Internet on the CMS Web site) contains the qualifying counties and the 
associated proposed wage index increase developed for the FY 2014 IPPS 
and listed as Table 4J in the FY 2014 IPPS/LTCH PPS proposed 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).

Xa = .60 * (national unadjusted payment rate) * applicable wage 
index.

    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted

[[Page 43586]]

payment rate for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.

Y = .40 * (national unadjusted payment rate)

Adjusted Medicare Payment = Y + Xa

    Step 6. If a provider is 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 proposed rural adjustment for rural SCHs.

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

    We have provided examples below of the calculation of both the 
proposed full and reduced national unadjusted payment rates that would 
apply to certain outpatient items and services performed by hospitals 
that meet and that fail to meet the Hospital OQR Program requirements, 
using the steps outlined above. For purposes of this example, we 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 
(Level I Excision/Biopsy). The proposed CY 2014 full national 
unadjusted payment rate for APC 0019 is approximately $345.75. The 
proposed reduced national unadjusted payment rate for APC 0019 for a 
hospital that fails to meet the Hospital OQR Program requirements is 
approximately $338.84. This proposed reduced rate is calculated by 
multiplying the reporting ratio of 0.980 by the full unadjusted payment 
rate for APC 0019. The proposed FY 2014 wage index for a provider 
located in CBSA 35644 in New York is 1.3158. The proposed labor-related 
portion of the full national unadjusted payment is approximately 
$272.96 (.60 * $345.75 * 1.3158). The labor-related portion of the 
proposed reduced national unadjusted payment is approximately $267.51 
(.60 * $338.84 * 1.3158). The proposed nonlabor-related portion of the 
full national unadjusted payment is approximately $138.30 (.40 * 
$345.75). The nonlabor-related portion of the proposed reduced national 
unadjusted payment is approximately $135.54 (.40 * $338.84). The sum of 
the labor-related and nonlabor-related portions of the proposed full 
national adjusted payment is approximately $411.26 ($272.96 + $138.30). 
The sum of the reduced national adjusted payment is approximately 
$403.05 ($267.51 + $135.54).

I. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, 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 
for a procedure performed in a year to the amount of the inpatient 
hospital deductible for that year.
    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 colonoscopies, 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. Proposed OPPS Copayment Policy
    For CY 2014, we are proposing to determine copayment amounts for 
new and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458).) In addition, we are 
proposing to use the same standard rounding principles that we have 
historically used in instances where the application of our standard 
copayment methodology would result in a copayment amount that is less 
than 20 percent and cannot be rounded, under standard rounding 
principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66687) in which we discuss our 
rationale for applying these rounding principles.) The proposed 
national unadjusted copayment amounts for services payable under the 
OPPS that would be effective January 1, 2014, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). As discussed in section XIII.G. of this proposed 
rule, for CY 2014, the proposed Medicare beneficiary's minimum 
unadjusted copayment and national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies will equal the 
product of the reporting ratio and the national unadjusted copayment, 
or the product of the reporting ratio and the minimum unadjusted 
copayment, respectively, for the service.
    We 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. 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).
3. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 0019, approximately $69.15 is 20 percent of the 
proposed full national unadjusted payment rate of approximately 
$345.75.

[[Page 43587]]

For APCs with only a minimum unadjusted copayment in Addenda A and B to 
this proposed rule (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 the national copayment as a percentage of national payment 
for a given service.
    B is the beneficiary payment percentage.

B = National unadjusted copayment for APC/national unadjusted 
payment rate for APC

    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this proposed rule. Calculate the rural 
adjustment for eligible providers as indicated in Step 6 under section 
II.H. of this proposed rule.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary payment percentage to the adjusted payment rate 
for a service calculated under section II.H. of this proposed rule, 
with and without the rural adjustment, to calculate the adjusted 
beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment 
* B
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 
Medicare Payment * 1.071) * B
    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
proposed reporting ratio of 0.980.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2014, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). We note that the proposed national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
proposed rule reflect the proposed full CY 2014 OPD fee schedule 
increase factor discussed in section II.B. of this proposed rule.
    In addition, as noted above, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

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

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     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 (the 
AMA) and 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 through OPPS quarterly 
update CRs. This quarterly update 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. In Table 11 below, we summarize our proposed 
process for updating codes through our OPPS quarterly update CRs, 
seeking public comments, and finalizing their treatment under the 
hospital OPPS. We note that because the payment rates associated with 
codes effective July 1 are not available to us in time for 
incorporation into the Addenda of this proposed rule, the Level II 
HCPCS codes and the Category III CPT codes implemented through the July 
2013 OPPS quarterly update CR could not be included in Addendum B to 
this proposed rule (which is available via the Internet on the CMS Web 
site), while those codes based upon the April 2013 OPPS quarterly 
update CR are included in Addendum B. Nevertheless, we are requesting 
public comments on the codes included in the July 2013 OPPS quarterly 
update CR and including these codes in the preamble of this proposed 
rule (we refer readers to Tables 13 and 14 for the July 2013 CPT and 
Level II HCPCS codes).

                           Table 11--Comment Timeframe for new or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS Quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2013...................  Level II HCPCS      April 1, 2013.....  CY 2014 OPPS/ASC    CY 2014 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2013....................  Level II HCPCS      July 1, 2013......  CY 2014 OPPS/ASC    CY 2014 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2013......  CY 2014 OPPS/ASC    CY 2014 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2013.................  Level II HCPCS      October 1, 2013...  CY 2014 OPPS/ASC    CY 2015 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2014.................  Level II HCPCS      January 1, 2014...  CY 2014 OPPS/ASC    CY 2015 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.

[[Page 43588]]

 
                                  Category I and III  January 1, 2014...  CY 2014 OPPS/ASC    CY 2015 OPPS/ASC
                                   CPT Codes.                              final rule with     final rule with
                                                                           comment period.     comment period.
----------------------------------------------------------------------------------------------------------------

    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we are soliciting public 
comments in this CY 2014 OPPS/ASC proposed rule or whether we will be 
soliciting public comments in the CY 2014 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2013 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2013. We also sought public 
comments in the CY 2013 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes that were effective October 1, 2012. These new 
codes, with an effective date of October 1, 2012, or January 1, 2013, 
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 2013 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 2013 OPPS/ASC 
final rule with comment period. We will respond to public comments and 
finalize our interim OPPS treatment of these codes in the CY 2014 OPPS/
ASC final rule with comment period.
1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT Codes 
Effective April 1, 2013 and July 1, 2013 for Which We Are Soliciting 
Public Comments in This CY 2014 OPPS/ASC Proposed Rule
    Through the April 2013 OPPS quarterly update CR (Transmittal 2664, 
Change Request 8228, dated March 1, 2013), and the July 2013 OPPS 
quarterly update CR (Transmittal 2718, Change Request 8338, dated June 
7, 2013), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2013, we made 
effective 18 new Level II HCPCS codes and 6 Category III CPT codes. 
Specifically, 8 new Level II HCPCS codes were effective for the April 
2013 quarterly update and another 10 new Level II HCPCS codes were 
effective for the July 2013 quarterly update for a total of 18. In 
addition, six new Category III CPT codes were effective for the July 
2013 quarterly update. Of the 24 new HCPCS codes, we recognized for 
separate payment under the OPPS 14 new codes from the April and July 
2013 OPPS quarterly updates.
    Through the April 2013 OPPS quarterly update CR, we allowed 
separate payment for five new Level II HCPCS codes. Specifically, as 
displayed in Table 12 below, we provided separate payment for HCPCS 
codes C9130, C9297, C9298, C9734, and C9735. HCPCS codes Q0507, Q0508, 
and Q0509 were assigned to OPPS status indicator ``A'' to indicate that 
they are paid through another Medicare payment system other than the 
OPPS. Although HCPCS codes Q0507, Q0508, and Q0509 were effective April 
1, 2013, they were previously described by HCPCS code Q0505, which was 
deleted on March 31, 2013.

      Table 12--New Level II HCPCS Codes Implemented in April 2013
------------------------------------------------------------------------
                                              Proposed CY
   CY 2013 HCPCS code       CY 2013 Long      2014 status    Proposed CY
                             descriptor        indicator       2014 APC
------------------------------------------------------------------------
C9130*.................  Injection, immune  G                       9130
                          globulin
                          (Bivigam), 500
                          mg.
C9297*.................  Injection,         G                       9297
                          omacetaxine
                          mepesuccinate,
                          0.01 mg.
C9298*.................  Injection,         G                       9298
                          ocriplasmin,
                          0.125 mg.
C9734 #................  Focused            S                       0065
                          ultrasound
                          ablation/
                          therapeutic
                          intervention,
                          other than
                          uterine
                          leiomyomata,
                          with or without
                          magnetic
                          resonance (MR)
                          guidance.
C9735..................  Anoscopy; with     T                       0150
                          directed
                          submucosal
                          injection(s),
                          any substance.
Q0507..................  Miscellaneous      A                        N/A
                          supply or
                          accessory for
                          use with an
                          external
                          ventricular
                          assist device.
Q0508..................  Miscellaneous      A                        N/A
                          supply or
                          accessory for
                          use with an
                          implanted
                          ventricular
                          assist device.
Q0509..................  Miscellaneous      A                        N/A
                          supply or
                          accessory for
                          use with any
                          implanted
                          ventricular
                          assist device
                          for which
                          payment was not
                          made under
                          Medicare Part A.
------------------------------------------------------------------------
* The proposed payment rate for HCPCS codes C9130, C9297, and C9298 are
  based on ASP+6 percent.
# HCPCS code C9734 has been revised to delete the words ``or without''
  from the long descriptor effective July 1, 2013.

    In this CY 2014 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed status indicators and APC assignments, where 
applicable, for the Level II HCPCS codes listed in Table 12 of this 
proposed rule. The proposed payment rates for these codes, where 
applicable, can be found in Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site).
    Through the July 2013 OPPS quarterly update CR, we allowed separate 
payment under the OPPS for 5 of the 10 new Level II HCPCS codes 
effective July 1, 2013. Specifically, as displayed in Table 13 below, 
we allowed separate payment for HCPCS codes C9131, C9736, G0460, Q2050, 
and Q2051. We note that two of the Level II HCPCS Q-codes that were 
made effective July 1, 2013, were previously described by HCPCS J-codes 
that were separately payable under the hospital OPPS. First, the HCPCS 
Workgroup replaced HCPCS code J9002 (Injection, doxorubicin 
hydrochloride, liposomal, Doxil, 10mg) with new HCPCS code Q2050, 
effective July 1, 2013, to appropriately identify and pay for both the 
brand and generic

[[Page 43589]]

forms of doxorubicin hydrochloride liposome. Consequently, the status 
indicator for HCPCS code J9002 was changed to ``E'' (Not Payable by 
Medicare), effective July 1, 2013. Because HCPCS code Q2050 describes 
the same product as HCPCS code J9002, we continued its separate payment 
status and assigned HCPCS code Q2050 to status indicator ``K'' 
(Nonpass-through drugs and nonimplantable biological, including 
therapeutic radiopharmaceuticals; paid under OPPS; separate APC 
payment). We also continued to assign HCPCS code Q2050 to the same APC 
as HCPCS code J9002, specifically APC 7046 (Doxil injection), effective 
July 1, 2013.
    Secondly, the HCPCS Workgroup replaced HCPCS codes J3487 
(Injection, zoledronic acid (Zometa), 1 mg) and J3488 (Injection, 
zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically 
Q2051, effective July 1, 2013, to appropriately identify and pay for 
both the brand and generic forms of zoledronic acid. Consequently, the 
status indicators for both HCPCS code J3487 and J3488 were changed to 
``E,'' effective July 1, 2013, to indicate that these codes are not 
separately payable by Medicare. Because HCPCS code Q2051 describes the 
same product as HCPCS codes J3487 and J3488, we assigned HCPCS code 
Q2051 to separate payment status indicator ``K,'' effective July 1, 
2013. Because HCPCS codes J3487 and J3488, which were assigned to two 
separate APCs, were replaced with only one code, we assigned HCPCS code 
Q2051 to a new APC to maintain data consistency for future rulemaking. 
Specifically, HCPCS code Q2051 is assigned to APC 1356 (Zoldedronic 
acid 1mg), effective July 1, 2013.
    Of the 10 Level II HCPCS codes that were made effective July 1, 
2013, we did not recognize for separate payment under the hospital OPPS 
five HCPCS codes. Specifically, HCPCS codes K0008, K0013, and K0900 are 
assigned to status indicator ``Y'' (Non-implantable durable medical 
equipment; not paid under OPPS); HCPCS code Q2033 is assigned to status 
indicator ``L'' (Not paid under OPPS; paid at reasonable cost); and 
HCPCS code Q0090 is assigned to status indicator ``E'' (Not payable/
Non-covered by Medicare; not paid under OPPS).
    Table 13 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2013. As stated above, the codes 
effective July 1, 2013, do not appear in Addendum B of this proposed 
rule, and, as a result, their proposed payment rates along with their 
proposed status indicators and proposed APC assignments, where 
applicable, for CY 2014 are provided in Table 13.

       Table 13--New Level II HCPCS Codes Implemented in July 2013
------------------------------------------------------------------------
                                                             Proposed CY
 CY 2013 HCPCS    CY 2013 Long    Proposed CY   Proposed CY      2014
     code          descriptor     2014 status     2014 APC     payment
                                   indicator                     rate
------------------------------------------------------------------------
C9131*........  Injection, ado-  G                     9131       $29.40
                 trastuzumab
                 emtansine, 1
                 mg.
C9736.........  Laparoscopy,     T                     0131     3,765.67
                 surgical,
                 radiofrequency
                 ablation of
                 uterine
                 fibroid(s),
                 including
                 intraoperative
                 guidance and
                 monitoring,
                 when performed.
G0460.........  Autologous       T                     0013        83.85
                 platelet rich
                 plasma for
                 chronic wounds/
                 ulcers,
                 including
                 phlebotomy,
                 centrifugation
                 , and all
                 other
                 preparatory
                 procedures,
                 administration
                 and dressings,
                 per treatment.
K0008.........  Custom Manual    Y                      N/A          N/A
                 Wheelchair
                 Base.
K0013.........  Custom           Y                      N/A          N/A
                 Motorized/
                 Power
                 Wheelchair
                 Base.
K0900.........  Customized       Y                      N/A          N/A
                 Durable
                 Medical
                 Equipment,
                 Other Than
                 Wheelchair.
Q0090.........  Levonorgestrel-  E                      N/A          N/A
                 Releasing
                 Intrauterine
                 Contraceptive
                 System
                 (SKYLA), 13.5
                 mg.
Q2033.........  Influenza        L                      N/A          N/A
                 Vaccine,
                 Recombinant
                 Hemagglutinin
                 Antigens, For
                 Intramuscular
                 Use (Flublok).
Q2050**.......  Injection,       K                     7046       545.44
                 Doxorubicin
                 Hydrochloride,
                 Liposomal, Not
                 Otherwise
                 Specified,
                 10mg.
Q2051***......  Injection,       K                     1356       196.42
                 Zoledronic
                 Acid, Not
                 Otherwise
                 Specified, 1mg.
------------------------------------------------------------------------
*The proposed payment rate for HCPCS code C9131 is based on ASP+6
  percent.
**HCPCS code Q2050 replaced HCPCS code J9002, effective July 1, 2013.
  The status indicator for HCPCS code J9002 was changed to ``E'' (Not
  Payable by Medicare), effective July 1, 2013. The proposed payment
  rate for HCPCS code Q2050 is based on ASP+6 percent.
***HCPCS code Q2051 replaced HCPCS codes J3487 and J3488 effective July
  1, 2013. The status indicator for HCPCS codes J3487 and J3488 was
  changed to ``E'' (Not Payable by Medicare), effective July 1, 2013.
  The proposed payment rate for HCPCS code Q2051 is based on ASP+6
  percent.

    For CY 2014, we are proposing to continue our established policy of 
recognizing Category I CPT vaccine codes for which FDA approval is 
imminent and Category III CPT codes that the AMA releases in January of 
each year for implementation in July through the OPPS quarterly update 
process. Under the OPPS, Category I 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 OPPS quarterly 
update CR, consistent with the AMA's implementation date for the codes. 
For the July 2013 quarterly update, there were no new Category I CPT 
vaccine codes. However, we note that Level II HCPCS code Q2033, which 
is listed in Table 13, describes a flu vaccine that was effective July 
1, 2013, and is separately payable by Medicare at reasonable cost.
    Through the July 2013 OPPS quarterly update CR (Transmittal 2718, 
Change Request 8338, dated June 7, 2013), we allowed separate payment 
for four of the six new Category III CPT codes effective July 1, 2013. 
Specifically, as displayed in Table 14 below, we allowed separate 
payment for Category III CPT codes 0330T, 0331T, 0332T, and 0334T. We 
did not recognize for separate payment Category III CPT code 0329T 
because the device associated with this procedure has not received FDA 
approval. In addition, we did not recognize for separate payment 
Category III CPT code 0333T because this procedure is not covered by 
Medicare. As listed in Table 14, both CPT codes 0329T and 0333T are 
assigned to status indicator ``E'' (Not payable/Non-covered by 
Medicare; not paid under OPPS).
    Table 14 below lists the Category III CPT codes that were 
implemented in July 2013, along with their proposed status indicators, 
proposed APC assignments, and proposed payment rates, where applicable, 
for CY 2014.

[[Page 43590]]



      Table 14--New Category III CPT Codes Implemented in July 2013
------------------------------------------------------------------------
                                                             Proposed CY
 CY 2013 CPT     CY 2013 Long     Proposed CY   Proposed CY      2014
     code         descriptor      2014 status     2014 APC     payment
                                   indicator                     rate
------------------------------------------------------------------------
0329T........  Monitoring of     E                      N/A          N/A
                intraocular
                pressure for 24
                hours or
                longer,
                unilateral or
                bilateral, with
                interpretation
                and report.
0330T........  Tear film         S                     0230       $51.83
                imaging,
                unilateral or
                bilateral, with
                interpretation
                and report.
0331T........  Myocardial        S                     0398       397.32
                sympathetic
                innervation
                imaging, planar
                qualitative and
                quantitative
                assessment;.
0332T........  Myocardial        S                     0398       397.32
                sympathetic
                innervation
                imaging, planar
                qualitative and
                quantitative
                assessment;
                with
                tomographic
                SPECT.
0333T........  Visual evoked     E                      N/A          N/A
                potential,
                screening of
                visual acuity,
                automated.
0334T........  Sacroiliac joint  T                     0208     4,171.56
                stabilization
                for
                arthrodesis,
                percutaneous or
                minimally
                invasive
                (indirect
                visualization),
                includes
                obtaining and
                applying
                autograft or
                allograft
                (structural or
                morselized),
                when performed,
                includes image
                guidance when
                performed (eg,
                CT or
                fluoroscopic).
------------------------------------------------------------------------

    We are soliciting public comments on the CY 2014 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, 2013, and July 1, 2013. These codes are listed in Tables 12, 
13, and 14 of this proposed rule. We are proposing to finalize their 
status indicators and their APC assignments and payment rates, if 
applicable, in the CY 2014 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, 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 are listed in Tables 13 and 14, 
respectively, of this proposed rule. We are proposing to incorporate 
these codes into Addendum B to the CY 2014 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 2013 
OPPS quarterly update CR and displayed in Table 12 are included in 
Addendum B to this proposed rule (which is available via the Internet 
on the CMS Web site), where their proposed CY 2014 payment rates are 
also shown.
2. Proposed Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2014 for Which We Will Be Soliciting Public 
Comments in the CY 2014 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 through the CMS HCPCS Workgroup (for Level II HCPCS codes) and 
the AMA's 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 2014, these codes will be 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, 2014, will be flagged with 
comment indicator ``NI'' in Addendum B to the OPPS/ASC final rule with 
comment period. Specifically, the interim status indicator and the APC 
assignment and payment rate, if applicable, for all such codes flagged 
with comment indicator ``NI'' are open to public comment in the final 
rule with comment period, and we respond to these comments in the OPPS/
ASC final rule with comment period for the next calendar year's OPPS/
ASC update. We are proposing to continue this process for CY 2014. 
Specifically, for CY 2014, we are proposing to include in Addendum B to 
the CY 2014 OPPS/ASC final rule with comment period the following new 
HCPCS codes:
     New Level II HCPCS codes effective October 1, 2013 that 
would be incorporated in the October 2013 OPPS quarterly update CR;
     New Category I and III CPT codes effective January 1, 2014 
that would be incorporated in the January 2014 OPPS quarterly update 
CR; and
     New Level II HCPCS codes effective January 1, 2014 that 
would be incorporated in the January 2014 OPPS quarterly update CR.
    As stated above, the October 1, 2013 and January 1, 2014 codes 
would be flagged with comment indicator ``NI'' in Addendum B to the CY 
2014 OPPS/ASC final rule with comment period to indicate that we have 
assigned them an interim OPPS payment status for CY 2014. We are 
proposing that their status indicators and their APC assignments and 
payment rates, if applicable, would be open to public comment and would 
be finalized in the CY 2015 OPPS/ASC final rule with comment period.

B. Proposed OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in

[[Page 43591]]

Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
codes to identify and group the services within each APC. The APCs are 
organized such that each group is homogeneous both clinically and in 
terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these packaged items or services. In general, 
according to the regulations at Sec.  419.2(b), packaged items and 
services include, but are not limited to:
    (1) Use of an operating suite, procedure room, or treatment room;
    (2) Use of recovery room;
    (3) Use of an observation bed;
    (4) Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations;
    (5) Supplies and equipment for administering and monitoring 
anesthesia or sedation;
    (6) Intraocular lenses (IOLs);
    (7) Incidental services such as venipuncture;
    (8) Capital-related costs;
    (9) Implantable items used in connection with diagnostic X-ray 
tests, diagnostic laboratory tests, and other diagnostic tests;
    (10) Durable medical equipment that is implantable;
    (11) Implantable prosthetic devices (other than dental) which 
replace all or part of an internal body organ (including colostomy bags 
and supplies directly related to colostomy care), including replacement 
of these devices;
    (12) Costs incurred to procure donor tissue other than corneal 
tissue.
    Significant revisions to the regulations at Sec.  419.2(b) are 
being proposed. Further discussion of our packaging proposals is 
included in section II.A.3. of this proposed rule.
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are typically performed together 
during a single clinical encounter and that result in the provision of 
a complete service (72 FR 66650 through 66652). Under the CY 2013 OPPS 
(77 FR 68243 through 68258), we provided composite APC payments for 10 
categories of services:
    (1) Mental Health Services (APC 0034);
    (2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000);
    (3) Low Dose Rate (LDR) Prostate Brachytherapy (APC 8001);
    (4) Level I Extended Assessment & Management Composite (APC 8002);
    (5) Level II Extended Assessment & Management Composite (APC 8003);
    (6) Ultrasound (APC 8004);
    (7) CT and CTA without Contrast (APC 8005);
    (8) CT and CTA with Contrast (APC 8006);
    (9) MRI and MRA without Contrast Composite (APC 8007); and
    (10) MRI and MRA with Contrast Composite (APC 8008)
    Further discussion of composite APCs is included in section 
II.A.2.f. of this proposed rule.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC relative payment weight represents the hospital cost of the 
services included in that APC, relative to the hospital cost of the 
services included in new proposed APC 0634 (Hospital Clinic Visits). 
The APC relative payment weights are scaled to new proposed APC 0634 
because it is the hospital clinic visit APC and because clinic visits 
are among the most frequently furnished services in the hospital 
outpatient setting. We refer readers to section VII. (Proposed OPPS 
Payment for Hospital Outpatient Visits) of this proposed rule for 
further discussion of the establishment of new proposed APC 0634.
    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 2014 OPPS and our 
responses to them are discussed in the relevant specific sections 
throughout this proposed rule).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest 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''). 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 this proposed rule, we are proposing to make 
exceptions to this limit on the variation of costs within each APC 
group in unusual cases, such as low-volume items and services, for CY 
2014.
    We have identified APCs with 2 times rule violations for which we 
are proposing changes to their HCPCS

[[Page 43592]]

codes' APC assignments in Addendum B to this proposed rule. We note 
that Addendum B does not appear in the printed version of the Federal 
Register as part of the CY 2014 OPPS/ASC proposed rule. Rather, it is 
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 are proposing to reassign the codes to APCs that contain services 
that are similar with regard to both their clinical and resource 
characteristics. In many cases, the proposed HCPCS code reassignments 
and associated APC reconfigurations for CY 2014 included in this 
proposed rule are related to changes in costs of services that were 
observed in the CY 2012 claims data newly available for CY 2014 
ratesetting. We also are proposing changes to the status indicators for 
some codes that are not specifically and separately discussed in this 
proposed rule. In these cases, we are proposing to change the status 
indicators for some codes because we believe that another status 
indicator would more accurately describe their payment status from an 
OPPS perspective based on the policies that we are proposing for CY 
2014. In addition, we are proposing to rename existing APCs or create 
new clinical APCs to complement proposed HCPCS code reassignments. 
Addendum B of this CY 2014 OPPS/ASC proposed rule identifies with a 
comment indicator ``CH'' those HCPCS codes for which we are proposing a 
change to the APC assignment or status indicator, or both, that were 
initially assigned in the April 2013 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).
3. Proposed Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we are proposing for CY 2014, 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;
     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).
    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.
    Table 15 of this proposed rule lists 10 APCs that we are proposing 
to exempt from the 2 times rule for CY 2014 based on the criteria cited 
above and based on claims data processed from January 1, 2012, through 
December 31, 2012. For the final rule with comment period, we plan to 
use claims data for dates of service between January 1, 2012, and 
December 31, 2012, that were processed on or before June 30, 2013, and 
updated CCRs, if available. Based on the CY 2012 claims data, we found 
10 APCs with 2 times rule violations. We applied the criteria as 
described earlier to identify the APCs that we are proposing as 
exceptions to the 2 times rule for CY 2014, and identified 10 APCs that 
meet the criteria for exception to the 2 times rule for this proposed 
rule. 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 APCs, 
including those with criteria-based costs, those APCs listed under 
section II.A.2.f. of this proposed rule, with 2 times rule violations. 
These proposed APC exceptions are listed in Table 15 below.

    Table 15--Proposed APC Exceptions to the 2 Times Rule for CY 2014
------------------------------------------------------------------------
         APC                              Description
------------------------------------------------------------------------
0057.................  Bunion Procedures.
0060.................  Manipulation Therapy.
0075.................  Level V Endoscopy Upper Airway.
0105.................  Repair/Revision/Removal of Pacemakers, AICDs, or
                        Vascular Devices.
0148.................  Level I Anal/Rectal Procedures.
0272.................  Fluoroscopy.
0278.................  Diagnostic Urography.
0330.................  Dental Procedures.
0402.................  Level II Nervous System Imaging.
0690.................  Level I Electronic Analysis of Devices.
------------------------------------------------------------------------

    The proposed costs for hospital outpatient services for these and 
all other APCs that were used in the development of this proposed rule 
can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

C. Proposed OPPS APC-Specific Policies

1. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 
and 0065)
    HCPCS code C9726 (Placement and removal (if performed) of 
applicator into breast for radiation therapy) was created effective 
January 1, 2006 to describe the service of placing and removing (if 
performed) an applicator into the breast for radiation therapy. The 
service was brought to our attention by means of a New Technology APC 
application, and we created HCPCS code C9726 because there were no 
HCPCS codes that described this service. HCPCS code C9726 is assigned 
to APC 0028, which has a CY 2013 payment rate of $1,862.77. Based on 
our CY 2014 proposed rule claims data, APC 0028 has a geometric mean 
cost of approximately $2,147, and HCPCS code C9726 has a geometric mean 
cost of

[[Page 43593]]

approximately $2,165 based upon 8 single claims.
    The AMA's CPT Editorial Panel created two new Category I CPT codes 
for intraoperative radiation therapy (IORT) treatment delivery, 
effective January 1, 2012: CPT codes 77424 (Intraoperative radiation 
treatment delivery, x-ray, single treatment session) and 77425 
(Intraoperative radiation treatment delivery, electrons, single 
treatment session). For CY 2013, we finalized a policy to assign these 
CPT codes to APC 0065 (IORT, MRgFUS, and MEG), with a CY 2013 payment 
rate of $978.25 because we believed these IORT service codes were 
similar to services assigned to APC 0065 in terms of clinical 
characteristics, and the range of estimated costs for IORT services (77 
FR 68345).
    CPT codes 77424 and 77425 describe the placement and removal (if 
performed) of an applicator into the breast for radiation therapy, as 
well as the delivery of radiation therapy when performed 
intraoperatively, and HCPCS code C9726 is no longer required to report 
the placement and removal of the applicator. Therefore, we are 
proposing to delete HCPCS code C9726, effective January 1, 2014. Under 
this proposal, hospitals would report the costs of the service to place 
and remove (if performed) an applicator into the breast for radiation 
therapy, as well as the delivery of radiation therapy when performed 
intraoperatively, with CPT codes 77424 and 77425, which we are 
proposing to maintain assignment to APC 0065. We are inviting public 
comments on this proposal.
2. Proton Beam Radiation 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) with an estimated cost of approximately $417 (based on 
217 single claims of 218 total claims submitted for CY 2012), and CPT 
code 77522 (Proton treatment delivery; simple, with compensation) with 
an estimated cost of approximately $883 (based on 10,629 single claims 
of 11,260 total claims submitted for CY 2012). APC 0667 (Level II 
Proton Beam Radiation Therapy) also includes two procedures: CPT code 
77523 (Proton treatment delivery, intermediate), with an estimated cost 
of approximately $687 (based on 6,707 single claims of 7,104 total 
claims submitted for CY 2012); and CPT code 77525 (Proton treatment 
delivery, complex), with an estimated cost of approximately $1,044 
(based on 438 single claims of 547 total claims submitted for CY 2012). 
Based on these CY 2012 claims data, the estimated cost of APC 0664 is 
approximately $870, and the estimated cost of APC 0667 is approximately 
$705.
    The payment rates for proton beam radiation therapy services are 
set annually based on claims data according to the standard OPPS 
ratesetting methodology. Based on our updated data for CY 2014, we 
noted a violation of the 2 times rule in APC 0664. As we discuss in 
section III.B. of this proposed rule, a 2 times violation occurs when 
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 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. If neither of these claims thresholds are met, 
there is not a 2 times violation even if the highest cost item or 
service is more than 2 times greater than the cost of the lowest cost 
item or service in the APC. In prior years, even though the cost of CPT 
code 77522 was more than 2 times the cost of CPT code 77520, there was 
no 2 times violation in APC 0664 because the claims volume for CPT code 
77520 did not meet either of the claims volume tests discussed above 
(72 FR 66719; 75 FR 71901; and 77 FR 68341). However, for CY 2014, the 
claims volume for CPT code 77520 increased such that there is a 2 times 
violation within APC 0664, with the single claims for CPT code 77520 
greater than 99 and contributing 2 percent of the single claims used to 
establish the cost of APC 0664.
    To resolve the 2 times violation, we are proposing to reassign CPT 
codes 77520 and 77522 from APC 0664 to APC 0667, and to revise the 
title of APC 0667 to ``Proton Beam Radiation Therapy,'' which would now 
include all proton beam radiation therapy services. We also are 
proposing to delete APC 0664. The estimated cost of the new APC 0667 is 
approximately $998, which would be the payment rate for each of the 
four proton beam radiation therapy services. We are inviting public 
comments on this proposal.
3. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
    Since 2001, we have distinguished the various methods of delivery 
of stereotactic radiosurgery (SRS) with HCPCS G-codes. SRS includes two 
different source types, specifically, Cobalt-60 and linear accelerator 
(linac). Among the linac-based SRS devices, the HCPCS G-codes 
distinguish between robotic and nonrobotic (66 FR 59865). In 2007 new 
CPT codes were established for SRS, and at that time, we recognized one 
of the three new CPT codes for SRS for separate payment under the OPPS, 
but we did not replace all of the HCPCS G-codes for SRS with the new 
CPT codes because we believed that the distinctions reflected in the 
HCPCS G-codes should be maintained for APC assignment purposes. 
Specifically, in 2007 we replaced HCPCS code G0243 (Multi-source photon 
stereotactic radiosurgery, delivery including collimator changes and 
custom plugging, complete course of treatment, all lesions) with CPT 
code 77371 because this CPT code corresponded directly to procedures 
for HCPCS code G0243. We refer readers to the CY 2007 OPPS final rule 
(71 FR 68023 through 68026) for a detailed discussion of the history of 
the SRS codes.
    Since 2007, HCPCS G-codes G0173, G0251, G0339, G0340, and CPT code 
77371 have been the codes used in the OPPS to describe SRS treatment 
delivery procedures. However, SRS techniques and equipment have evolved 
and advanced over time. In light of these considerations, we have 
reexamined the HCPCS G-codes and CPT codes for SRS with the intent of 
identifying the codes that would best capture the significant 
differences between the various procedures while eliminating 
unnecessary complexity, redundancy, and outdated distinctions that no 
longer represent meaningful distinctions, given current technology and 
clinical practice. Based on our review of the current SRS technology, 
it is our understanding that most current linac-based SRS technology 
incorporates some type of robotic feature. Therefore, we believe that 
it is no longer necessary to continue to distinguish robotic versus 
nonrobotic linac-based SRS through the HCPCS G-codes. For CY 2014, we 
are proposing to replace the existing four SRS HCPCS G-codes G0173, 
G0251, G0339, and G0340, with the SRS CPT codes 77372 and 77373. We 
believe that utilizing all of the CPT codes for SRS (77371, 77372, and 
77373) will more accurately capture the most significant distinctions 
between the various SRS procedures that are currently used today, 
namely: (1) Cobalt-60 versus linac; and (2) single session cranial 
treatment versus fractionated treatments.
    Table 16 below shows the complete list of HCPCS G-codes and CPT 
codes for SRS, along with their long descriptors. The table also shows 
the proposed CPT codes and their

[[Page 43594]]

associated status indicators and APC assignments for the current HCPCS 
G-codes for SRS that we are proposing to replace. We are proposing to 
assign CPT code 77373 as the only code assigned to APC 0066, which we 
are proposing to rename ``Level I Stereotactic Radiosurgery.'' We are 
proposing to assign both of the single session cranial treatment codes 
(CPT codes 77371 and 77372) as the only two codes assigned to APC 0067, 
which we are proposing to rename ``Level II Stereotactic 
Radiosurgery.'' We believe that the high degree of clinical similarity 
of CPT codes 77371 and 77372 supports the proposed grouping of these 
procedures together in the proposed renamed APC 0067 (Level II 
Stereotactic Radiosurgery). The CY 2014 APC proposed payment rates for 
the CPT codes for SRS can be found in Addendum B to this proposed rule 
(which is available via the Internet on the CMS Web site). We are 
proposing to finalize their status indicators and their APC assignments 
and payment rates in the CY 2014 OPPS/ASC final rule with comment 
period.
    In addition, although the SRS HCPCS G-codes will no longer be 
separately payable under the OPPS, the codes will remain active in the 
MPFS for CY 2014. Consequently, we are proposing to reassign the HCPCS 
G-codes for SRS to OPPS status indicator ``B'' (Alternative code may be 
available under the OPPS) for CY 2014.

           Table 16--Proposed Separately Payable Stereotactic Radiosurgery (SRS) Services for CY 2014
----------------------------------------------------------------------------------------------------------------
                                               CY 2014                                                  CY 2014
  CY 2013 CPT code       Long descriptor      CPT code       Long descriptor          CY 2014 SI          APC
----------------------------------------------------------------------------------------------------------------
77371..............  Radiation treatment          77371  Radiation treatment     S                          0067
                      delivery,                           delivery,
                      stereotactic                        stereotactic
                      radiosurgery (SRS),                 radiosurgery (SRS),
                      complete course of                  complete course of
                      treatment of cranial                treatment of cranial
                      lesion(s) consisting                lesion(s) consisting
                      of 1 session; multi-                of 1 session; multi-
                      source Cobalt 60                    source Cobalt 60
                      based.                              based.
G0173..............  Linear accelerator           77372  Radiation treatment     S                          0067
                      based stereotactic                  delivery,
                      radiosurgery,                       stereotactic
                      complete course of                  radiosurgery (SRS),
                      therapy in one                      complete course of
                      session.                            treatment of cranial
                                                          lesion(s) consisting
                                                          of 1 session; linear
                                                          accelerator based.
G0251..............  Linear accelerator           77373  Stereotactic body       S                          0066
                      based stereotactic                  radiation therapy,
                      radiosurgery,                       treatment delivery,
                      delivery including                  per fraction to 1 or
                      collimator changes                  more lesions,
                      and custom plugging,                including image
                      fractionated                        guidance, entire
                      treatment, all                      course not to exceed
                      lesions, per session,               5 fractions.
                      maximum five sessions
                      per course of
                      treatment.
G0339 *............  Image-guided robotic
                      linear accelerator-
                      based stereotactic
                      radiosurgery,
                      complete course of
                      therapy in one
                      session or first
                      session of
                      fractionated
                      treatment.
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.
----------------------------------------------------------------------------------------------------------------
*Although not reflected in the above table (in order to avoid confusion), single session cranial cases currently
  billed with HCPCS code G0339 would be billed with CPT code 77372 beginning in CY 2014. Any other reporting of
  HCPCS code G0339 (other than single session cranial cases) would be reported beginning in CY 2014 with CPT
  code 77373.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    Section 1833(t)(6)(B)(iii) of the Act requires that, under the 
OPPS, a category of devices be eligible for transitional pass-through 
payments for at least 2, but not more than 3 years. This pass-through 
payment eligibility period begins with the first date on which 
transitional pass-through payments may be made for any medical device 
that is described by the category. We may establish a new device 
category for pass-through payment in any quarter. Under our established 
policy, we base the pass-through status expiration date for a device 
category on the date on which pass-through payment is effective for the 
category, 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 three device categories eligible for pass-
through payment. These device categories are described by HCPCS codes 
C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular 
(telescopic)), which we made effective for pass-through payment as of 
October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue 
ablation, any modality (insertable)), which we made effective for pass-
through payment as of January 1, 2012. Recognizing that these three 
device categories were eligible for at least 2, but not more than 3, 
years of pass-through status, in the CY 2013 OPPS/ASC final rule with 
comment period, we finalized the expiration of pass-through payment for 
all three of these HCPCS codes, which will expire after December 31, 
2013 (77 FR 68352). Therefore, in accordance with our established 
policy, after December 31, 2013, we will

[[Page 43595]]

package the respective costs of the HCPCS codes C1830, C1840, and C1886 
devices into the costs of the procedures with which the devices are 
reported in the hospital claims data used in OPPS ratesetting.
b. Proposed CY 2014 Policy
    As previously stated, we 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). In the case of device category C1840, we are proposing that the 
device costs be packaged only when billed with CPT code 0308T 
(Insertion of ocular telescope prosthesis including removal of 
crystalline lens), which became effective on July 1, 2012. We announced 
the policy that device category C1840 must be billed with CPT code 
0308T, effective July 1, 2012, in Transmittal 2483, dated June 8, 2012. 
CPT code 0308T is currently assigned to APC 0234 (Level IV Anterior 
Segment Eye Procedures), which has a proposed geometric mean cost of 
approximately $1,794. When the CPT code C1840 device costs are packaged 
into the cost of CPT code 0308T (and the equivalent procedure described 
by HCPCS code C9732 for the first half of 2012), the proposed mean cost 
of the procedure is approximately $15,249. Based on this mean cost for 
CPT code 0308T, we are proposing to create new APC 0351 (Level VII 
Anterior Segment Eye Procedures), and to assign CPT code 0308T to this 
APC, which has a proposed mean cost of approximately $15,249. The mean 
cost for CY 2014 that will be reported in the final rule for this new 
APC will depend on the mean cost of CPT code 0308T (including the cost 
of HCPCS code C1840) as calculated using claims data available for the 
final rule.
    With the expiration of these three device categories at the end of 
CY 2013, there are no currently active categories for which we would 
propose expiration of pass-through status in CY 2014. If we create new 
device categories for pass-through payment status during the remainder 
of CY 2013 or during CY 2014, we will propose future expiration dates 
in accordance with the statutory requirement that they be eligible for 
pass-through payments for at least 2, but not more than 3, years from 
the date on which pass-through payment for any medical device described 
by the category may first be made.
2. Proposed 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 (the cost of the 
device) exceeds the portion of the otherwise applicable Medicare 
outpatient department fee schedule amount (the 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 
pass-through devices. 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 used 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.
    Currently, we have published a list of all procedural APCs with the 
CY 2013 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. Proposed CY 2014 Policy
    We are proposing to continue, for CY 2014, 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 
payment rates. We are proposing to continue our policy, for CY 2014, 
that the pass-through evaluation process and pass-through payment 
methodology for implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) and that 
are newly approved for pass-through status beginning on or after 
January 1, 2010, be the device pass-through process and payment 
methodology only. The rationale for this policy is provided in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60471 through 
60477). We also are proposing to continue our established policies for 
calculating and setting the device APC offset amounts for each device 
category eligible for pass-through payment. In addition, we are 
proposing to continue to review each new device category on a case-by-
case basis to determine whether device costs associated with the new 
category are already packaged into the existing APC structure. If 
device costs packaged into the existing APC structure are associated 
with the new category, we are proposing 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 2014, we also are proposing to continue our policy 
established in CY 2010 to include implantable biologicals in our 
calculation of the device APC offset amounts. In addition, we are

[[Page 43596]]

proposing to continue to calculate and set any device APC offset amount 
for any new device pass-through category that includes a newly eligible 
implantable biological beginning in CY 2014 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 are proposing to update the list of all procedural 
APCs with the final CY 2014 portions 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 so that this information is available 
for use by the public in developing potential CY 2014 device pass-
through payment applications and by CMS in reviewing those 
applications.
3. Proposed Changes to Device Pass-Through Criteria: Integral and 
Subordinate Criterion
    We established a number of specific criteria that new medical 
devices must meet to be considered eligible for pass-through payments 
under section 1833(t)(6) of the Act (42 CFR 419.66; 65 FR 18480 and 65 
FR 47672 through 47674). In this proposed rule, we are proposing to 
change one of these criteria for device pass-through payment, described 
at Sec.  419.66(b)(3), which requires that a device ``is an integral 
and subordinate part of the service furnished, is used for one patient 
only, comes in contact with human tissue, and is surgically implanted 
or inserted whether or not it remains with the patient when the patient 
is released from the hospital'' (65 FR 47674).
    Regarding the existing regulation at Sec.  419.66(b)(3), applicants 
for device pass-through status have continued to ask what is meant by 
the phrase ``integral and subordinate part of the service furnished,'' 
and more specifically, what the terms ``integral'' and ``subordinate'' 
mean. These terms have not been specifically defined or described in 
prior regulatory language, preamble, or guidance. In an effort to 
reduce further confusion and ensure all applicants understand the 
intent of the existing regulation, we are proposing to provide guidance 
on the meaning of the term ``integral'' and delete the term 
``subordinate'' from the existing regulation in this proposed rule. We 
have interpreted the term ``integral'' to mean that the device is 
necessary to furnish or deliver the primary procedure with which it is 
used. For example, a pacemaker is integral to the procedure of 
implantation of a pacemaker. We have interpreted the accompanying term 
``subordinate'' in conjunction with the term ``integral,'' in that a 
``subordinate'' device is dependent upon the overall procedure of 
implanting the device, and we have not interpreted the term separately, 
or applied the term ``subordinate'' as a separate criterion. Because of 
confusion among pass-through status applicants regarding the use of 
both terms ``integral'' and ``subordinate,'' and because we do not 
believe it is necessary that the regulation specifically state that a 
device must be subordinate to the procedure, in addition to the 
requirement that a device be integral to the procedure, and have not 
treated ``subordinate'' as a separate criterion, as previously 
explained, we are proposing to delete the term ``subordinate'' from 
this criterion's regulatory text under existing Sec.  419.66(b)(3). The 
proposed revised Sec.  419.66(b)(3) regulatory language reads: ``The 
device is an integral part of the service furnished, is used for one 
patient only, comes in contact with human tissue, and is surgically 
implanted or inserted, whether or not it remains with the patient when 
the patient is released from the hospital.''

B. Proposed 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. Proposed Policy for CY 2014
    Beginning in CY 2014, we are proposing to modify our existing 
policy of reducing OPPS payment for specified APCs when a hospital 
furnishes a specified device without cost or with a full or partial 
credit. For CY 2013 and prior years, our policy has been to reduce OPPS 
payment 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. For CY 2014, we are proposing to reduce OPPS payment, 
for the applicable APCs listed below in Table 17, by the full or 
partial credit a provider receives for a replaced device. Specifically, 
under this proposed policy for CY 2014, hospitals would be required to 
report the amount of the credit in the amount portion for value code 
``FD'' (Credit Received from the Manufacturer for a Replaced Medical 
Device) when the hospital receives a credit for a replaced device 
listed in Table 18 that is 50 percent or greater than the cost of the 
device. Under this proposal, hospitals would no longer be required to 
append the ``FB'' or ``FC'' modifier when receiving a device at no cost 
or with a full or partial credit.
    For CY 2014, we are proposing to continue using the three criteria 
established in the CY 2007 OPPS/ASC final rule with comment period for 
determining the APCs to which our modified CY 2014 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

[[Page 43597]]

temporarily); and (3) the device offset amount must be significant, 
which, for purposes of this policy, is defined as exceeding 40 percent 
of the APC cost. We also are proposing to continue to restrict the 
devices to which the APC payment adjustment would apply to a specific 
set of costly devices to ensure that the adjustment would not be 
triggered by the implantation of an inexpensive device whose cost would 
not constitute a significant proportion of the total payment rate for 
an APC. We continue to believe these criteria are appropriate because 
no cost devices and device credits are likely to be associated with 
particular cases only when the device must be reported on the claim and 
is of a type that is implanted and remains in the body when the 
beneficiary leaves the hospital. We believe that the reduction in 
payment is appropriate only when the cost of the device is a 
significant part of the total cost of the APC into which the device 
cost is packaged, and that the 40-percent threshold is a reasonable 
definition of a significant cost.
    We examined the offset amounts calculated from the CY 2014 proposed 
rule data and the clinical characteristics of the proposed CY 2014 APCs 
to determine which APCs would meet the criteria for CY 2014. Based on 
the CY 2012 claims data available for this proposed rule, we are not 
proposing any changes to the APCs and devices to which this proposed 
modified policy would apply.
    Table 17 below lists the proposed APCs to which the proposed 
modified payment adjustment policy for no cost/full credit and partial 
credit devices would apply in CY 2014.
    Table 18 below lists the proposed devices to which the proposed 
modified payment adjustment policy for no cost/full credit and partial 
credit devices would apply in CY 2014. We are proposing to update the 
lists of APCs and devices to which the proposed modified no cost/full 
credit and partial credit device adjustment policy would apply for CY 
2014, consistent with the three criteria discussed earlier in this 
section, based on the final CY 2012 claims data available for the CY 
2014 OPPS/ASC final rule with comment period.

   Table 17--Proposed APCs to Which the Proposed Modified No Cost/Full
 Credit and Partial Credit Device Payment Adjustment Policy Would Apply
                               in CY 2014
------------------------------------------------------------------------
 Proposed CY 2014 APC              Proposed CY 2014 APC title
------------------------------------------------------------------------
0039.................  Level I Implantation of Neurostimulator
                        Generator.
0040.................  Level I Implantation/Revision/Replacement of
                        Neurostimulator Electrodes.
0061.................  Level II Implantation/Revision/Replacement of
                        Neurostimulator Electrodes.
0082.................  Coronary or Non-Coronary Atherectomy.
0083.................  Coronary Angioplasty, Valvuloplasty, and Level I
                        Endovascular Revascularization.
0085.................  Level II Electrophysiologic Procedures.
0086.................  Level III Electrophysiologic Procedures.
0089.................  Insertion/Replacement of Permanent Pacemaker and
                        Electrodes.
0090.................  Level I Insertion/Replacement of Permanent
                        Pacemaker.
0104.................  Transcatheter Placement of Intracoronary Stents.
0106.................  Insertion/Replacement of Pacemaker Leads and/or
                        Electrodes.
0107.................  Level I Implantation of Cardioverter-
                        Defibrillators (ICDs).
0108.................  Level II Implantation of Cardioverter-
                        Defibrillators (ICDs).
0227.................  Implantation of Drug Infusion Device.
0229.................  Level II Endovascular Revascularization of the
                        Lower Extremity.
0259.................  Level VII ENT Procedures.
0293.................  Level VI Anterior Segment Eye Procedures.
0315.................  Level II Implantation of Neurostimulator
                        Generator.
0318.................  Implantation of Neurostimulator Pulse Generator
                        and Electrode.
0319.................  Level III Endovascular Revascularization of the
                        Lower Extremity.
0385.................  Level I Prosthetic Urological Procedures.
0386.................  Level II Prosthetic Urological Procedures.
0425.................  Level II Arthroplasty or Implantation with
                        Prosthesis.
0648.................  Level IV Breast Surgery.
0654.................  Level II Insertion/Replacement of Permanent
                        Pacemaker.
0655.................  Insertion/Replacement/Conversion of a Permanent
                        Dual Chamber Pacemaker or Pacing.
0656.................  Transcatheter Placement of Intracoronary Drug-
                        Eluting Stents.
0674.................  Prostate Cryoablation.
0680.................  Insertion of Patient Activated Event Recorders.
------------------------------------------------------------------------


 Table 18--Proposed Devices to Which the Proposed Modified No Cost/Full
 Credit and Partial Credit Device Payment Adjustment Policy Would Apply
                               in CY 2014
------------------------------------------------------------------------
     CY 2014 Device HCPCS code            CY 2014 Short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.

[[Page 43598]]

 
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1777.............................  Lead, AICD, endo single coil.
C1778.............................  Lead, neurostimulator.
C1779.............................  Lead, pmkr, transvenous VDD.
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1789.............................  Prosthesis, breast, imp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1895.............................  Lead, AICD, endo dual coil.
C1896.............................  Lead, AICD, non sing/dual.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1899.............................  Lead, pmkr/AICD combination.
C1900.............................  Lead coronary venous.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
------------------------------------------------------------------------

V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals (also referred to as biologics). As enacted by the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 
(BBRA) (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 in cancer therapy; and current radiopharmaceutical drugs 
and biologicals. ``Current'' refers to drugs or biologicals that are 
outpatient hospital services under Part B for which payment was made on 
the first date the hospital OPPS was implemented.
    Transitional pass-through payments are also 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.'' As required 
by 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 
payment was first made for the product as a hospital outpatient service 
under Medicare Part B. Proposed CY 2014 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G'' in Addenda A and B to this proposed rule, which are 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 2014.
    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 proposed rule, 
the term ``ASP methodology'' and ``ASP-based'' are inclusive of all 
data sources and methodologies described therein. Additional 
information on the ASP methodology can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    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/HospitalOutpatientPPS/passthrough_payment.html.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in 
CY 2013
    We are proposing that the pass-through status of 15 drugs and 
biologicals would expire on December 31, 2013, as listed in Table 19 
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by 
December 31, 2013. These drugs and biologicals were approved for pass-
through status on or before January 1, 2012. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status, specifically diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and our new 
proposed groups of policy packaged products described in section 
II.A.3. of this proposed rule, namely drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies or devices when used in a surgical procedure, our standard 
methodology for providing payment for drugs and biologicals with 
expiring pass-through status in an upcoming calendar year is to 
determine the product's estimated per day cost and compare it with the 
OPPS drug packaging threshold for that calendar year (which is proposed 
at $90 for CY 2014), as discussed further in section V.B.2. of this 
proposed rule. If the estimated per day cost for the drug or biological 
is less than or equal to the applicable OPPS drug packaging threshold, 
we would package payment for the drug or biological into the payment 
for the associated procedure in the upcoming calendar year. If the 
estimated per day cost of the drug or biological is greater than the 
OPPS drug packaging threshold, we would provide separate payment at the 
applicable relative ASP-based payment amount (which is proposed at 
ASP+6 percent for

[[Page 43599]]

CY 2014, as discussed further in section V.B.3. of this proposed rule).

 Table 19--Proposed Drugs and Biologicals for Which Pass-Through Status
                      Will Expire December 31, 2013
------------------------------------------------------------------------
                                                               Proposed
 Proposed CY 2014   Proposed CY 2014 long   Proposed CY 2014    CY 2014
    HCPCS code            descriptor               SI             APC
------------------------------------------------------------------------
A9584.............  Iodine I-123           N                         N/A
                     ioflupane,
                     diagnostic, per
                     study dose, up to 5
                     millicuries.
C9285.............  Lidocaine 70 mg/       N                        9285
                     tetracaine 70 mg,
                     per patch.
J0131.............  Injection,             N                        9283
                     acetaminophen, 10 mg.
J0485.............  Injection,             K                        9286
                     belatacept, 1 mg.
J0490.............  Injection, belimumab,  K                        1353
                     10 mg.
J0638.............  Injection,             K                        1311
                     canakinumab, 1mg.
J0712.............  Injection,             N                        9282
                     ceftaroline fosamil,
                     10 mg.
J1572.............  Injection, immune      K                        0947
                     globulin,
                     (flebogamma/
                     flebogamma dif),
                     intravenous, non-
                     lyophilized (e.g.,
                     liquid), 500 mg.
J2507.............  Injection,             K                        9281
                     pegloticase, 1 mg.
J7180.............  Injection, factor      K                        1416
                     xiii (antihemophilic
                     factor, human), 1
                     i.u.
J9042.............  Injection,             K                        9287
                     brentuximab vedotin,
                     1 mg.
J9179.............  Injection, eribulin    K                        1426
                     mesylate, 0.1 mg.
J9228.............  Injection,             K                        9284
                     ipilimumab, 10 mg.
Q4124.............  Oasis Ultra Tri-Layer  N                        9365
                     matrix, per square
                     centimeter.
Q4131.............  EpiFix, per square     N                        9366
                     centimeter.
------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2014
    We are proposing to continue pass-through status in CY 2014 for 18 
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, 2013. These drugs and biologicals, which 
were approved for pass-through status between April 1, 2012 and July 1, 
2013, are listed in Table 20 below. The APCs and HCPCS codes for these 
drugs and biologicals approved for pass-through status through April 1, 
2013 are assigned status indicator ``G'' in Addenda A and B of this 
proposed rule. Addenda A and B of this proposed rule are 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 to propose to continue to provide payment for drugs and 
biologicals with pass-through status at a rate of ASP+6 percent in CY 
2014, the amount that drugs and biologicals receive under section 
1842(o) of the Act.
    Therefore, for CY 2014, we are proposing to pay for pass-through 
drugs and biologicals at ASP+6 percent, equivalent to the rate these 
drugs and biologicals would receive in the physician's office setting 
in CY 2014. We are proposing that a $0.00 pass-through payment amount 
would be paid for most pass-through drugs and biologicals under the CY 
2014 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 for policy packaged drugs (which 
include contrast agents, diagnostic radiopharmaceuticals, anesthesia 
drugs, and our new proposed groups of policy packaged products 
described in section II.A.3. of this proposed rule, namely drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure and drugs and biologicals that 
function as supplies or devices when used in a surgical procedure), we 
are proposing that their pass-through payment amount would be equal to 
ASP+6 percent for CY 2014 because, if not on pass-through status, 
payment for these products would be packaged into the associated 
procedure.
    In addition, we are proposing to continue to update pass-through 
payment rates on a quarterly basis on the CMS Web site during CY 2014 
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).
    In CY 2014, as is consistent with our CY 2013 policy for diagnostic 
and therapeutic radiopharmaceuticals, we are proposing to provide 
payment for both diagnostic and therapeutic radiopharmaceuticals that 
are granted pass-through status based on the ASP methodology. As stated 
above, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2014, we are proposing to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is ASP+6 percent. If 
ASP data are not available for a radiopharmaceutical, we are proposing 
to provide pass-through payment at WAC+6 percent, the equivalent 
payment provided to pass-through drugs and biologicals without ASP 
information. If WAC information is also not available, we are proposing 
to provide payment for the pass-through radiopharmaceutical at 95 
percent of its most recent AWP.
    As discussed in more detail in section II.A.3. of this proposed 
rule, over the last 6 years, we implemented a policy whereby payment 
for all nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and anesthesia drugs is packaged into payment for the 
associated procedure.

[[Page 43600]]

We are proposing to continue the packaging of these items and also are 
proposing new groups of policy packaged products described in section 
II.A.3. of this proposed rule, namely drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies or devices when used in a surgical procedure, regardless of 
their per day cost, in CY 2014. 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 policy packaged 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 proposed 
calculation of the policy packaged drug APC offset amounts is described 
in more detail in section IV.A.2. of this proposed rule. It follows 
that the copayment for the nonpass-through payment portion (the 
otherwise applicable fee schedule amount that we would also offset from 
payment for the drug or biological if a payment offset applies) of the 
total OPPS payment for those drugs and biologicals would, therefore, be 
accounted for in the copayment for the associated clinical APC in which 
the drug or biological is used.
    According to section 1833(t)(8)(E) of the Act, the amount of 
copayment associated with pass-through items is equal to the amount of 
copayment that would be applicable if the pass-through adjustment was 
not applied. Therefore, as we did in CY 2013, we are proposing to 
continue to set the associated copayment amount to zero for CY 2014 for 
pass-through diagnostic radiopharmaceuticals, contrast agents, and 
anesthesia drugs that would otherwise be packaged if the item did not 
have pass-through status. We also are proposing to set the associated 
copayment amount to zero for the additional categories of policy-
packaged products proposed for CY 2014 described in section II.A.3. of 
this proposed rule.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, anesthesia drug, and 
the additional categories of policy-packaged products proposed for CY 
2014 is not subject to a copayment according to the statute. Therefore, 
we are proposing to not publish a copayment amount for these items in 
Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site).
    For CY 2013, we estimated the OPPS pass-through payment for drugs 
and biologicals to be $22 million. Our proposed OPPS pass-through 
payment estimate for drugs and biologicals in CY 2014 is $1 million, 
which is discussed in section VI.B. of this proposed rule. The 18 drugs 
and biologicals that we are proposing to continue on pass-through 
status for CY 2014 or have been granted pass-through status as of July 
2013 are displayed in Table 20 below.

 Table 20--Proposed Drugs and Biologicals With Pass-Through Status in CY
                                  2014
------------------------------------------------------------------------
                                                               Proposed
 Proposed CY 2014        CY 2014 Long       Proposed CY 2014    CY 2014
    HCPCS code            descriptor               SI             APC
------------------------------------------------------------------------
C9130.............  Injection, immune      G                        9130
                     globulin (Bivigam),
                     500 mg.
C9131*............  Injection, ado-        G                        9131
                     trastuzumab
                     emtansine, 1 mg.
C9290.............  Injection,             G                        9290
                     bupivicaine
                     liposome, 1 mg.
C9292.............  Injection,             G                        9292
                     pertuzumab, 10 mg.
C9293.............  Injection,             G                        9293
                     glucarpidase, 10
                     units.
C9294.............  Injection,             G                        9294
                     taliglucerase alfa,
                     10 units.
C9295.............  Injection,             G                        9295
                     carfilzomib, 1 mg.
C9296.............  Injection, ziv-        G                        9296
                     aflibercept, 1 mg.
C9297.............  Injection,             G                        9297
                     omacetaxine
                     mepesuccinate, 0.01
                     mg.
C9298.............  Injection,             G                        9298
                     ocriplasmin, 0.125
                     mg.
J0178.............  Injection,             G                        1420
                     aflibercept, 1 mg
                     vial.
J0716.............  Injection,             G                        1431
                     centruroides
                     (scorpion) immune
                     f(ab)2, up to 120
                     milligrams.
J7315.............  Mitomycin,             G                        1448
                     ophthalmic, 0.2 mg.
J9019.............  Injection,             G                        9289
                     asparaginase
                     (erwinaze), 1,000 iu.
Q4122*............  Dermacell, per square  G                        1419
                     centimeter.
Q4127.............  Talymed, per square    G                        1449
                     centimeter.
Q4132.............  Grafix core, per       G                        9368
                     square centimeter.
Q4133.............  Grafix prime, per      G                        9369
                     square centimeter.
------------------------------------------------------------------------
* Because the payment rates associated with these codes effective July
  1, 2013 are not available to us in time for incorporation into the
  Addenda of this proposed rule, the Level II HCPCS codes and the
  Category III CPT codes implemented through the July 2013 OPPS
  quarterly update CR could not be included in Addendum B to this
  proposed rule.


[[Page 43601]]

4. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, 
Biologicals, and Radiopharmaceuticals That Function as Supplies When 
Used in a Diagnostic Test or Procedure; and Drugs and Biologicals That 
Function as Supplies or Devices When Used in a Surgical Procedure 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 2014, we are proposing to 
continue to package payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and anesthesia drugs and to 
begin packaging all nonpass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies or devices when used in a surgical procedure, as discussed in 
section II.A.3. of this proposed rule.
b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
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 are proposing that its pass-
through status would expire on December 31, 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 proposed rule, we are proposing that new pass-through 
diagnostic radiopharmaceuticals would be paid at ASP+6 percent, while 
those new pass-through diagnostic radiopharmaceuticals 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 and to report a token charge of less than 
$1.01 in cases in which the diagnostic radiopharmaceutical is received 
without cost or with full credit. Beginning in CY 2014, we are 
proposing to no longer require hospitals to append modifier ``FB'' to 
specified nuclear medicine procedures or to report a token charge of 
less than $1.01 in cases in which the diagnostic radiopharmaceutical is 
received at no cost/full credit. Under this proposed policy, the OPPS 
payment amount for nuclear medicine procedures would not be reduced 
when a diagnostic radiopharmaceutical is received at no cost or full 
credit. Based on claims data, it appears that hospitals rarely receive 
diagnostic radiopharmaceuticals at no cost or full credit and, 
therefore, we do not believe that the burden on hospitals of adhering 
to the nuclear medicine ``FB'' modifier policy continues to be 
warranted.
    For CY 2013, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2014, we 
are proposing to continue to apply the diagnostic radiopharmaceutical 
offset policy to payment for pass-through diagnostic 
radiopharmaceuticals.
    Table 21 below displays the proposed APCs to which nuclear medicine 
procedures would be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.

[[Page 43602]]



  Table 21--Proposed APCs To Which Nuclear Medicine Procedures Would Be
                          Assigned for CY 2014
------------------------------------------------------------------------
       Proposed CY 2014 APC              Proposed CY 2014 APC title
------------------------------------------------------------------------
0308..............................  Positron Emission Tomography (PET)
                                     Imaging.
0377..............................  Level II Cardiac Imaging.
0378..............................  Level II Pulmonary Imaging.
0389..............................  Level I Non-imaging Nuclear
                                     Medicine.
0390..............................  Level I Endocrine Imaging.
0391..............................  Level II Endocrine Imaging.
0392..............................  Level II Non-imaging Nuclear
                                     Medicine.
0393..............................  Hematologic Processing & Studies.
0394..............................  Hepatobiliary Imaging.
0395..............................  GI Tract Imaging.
0396..............................  Bone Imaging.
0397..............................  Vascular Imaging.
0398..............................  Level I Cardiac Imaging.
0400..............................  Hematopoietic Imaging.
0401..............................  Level I Pulmonary Imaging.
0402..............................  Level II Nervous System Imaging.
0403..............................  Level I Nervous System Imaging.
0404..............................  Renal and Genitourinary Studies.
0406..............................  Level I Tumor/Infection Imaging.
0408..............................  Level III Tumor/Infection Imaging.
0414..............................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
    Section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
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 this proposed rule, we are proposing 
that new pass-through contrast agents would be paid at ASP+6 percent, 
while those new pass-through contrast agents 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 currently 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 2014 
in order to provide an appropriate transitional pass-through payment 
for new contrast agents because all of these items are packaged when 
they do not have pass-through status. In accordance with our standard 
offset methodology, we are proposing for CY 2014 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 2014, 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 2014, as we 
did in CY 2013, we are proposing to continue to apply this same policy 
to contrast agents. Specifically, we are proposing to utilize the 
policy packaged drug offset fraction for procedural APCs, 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. To determine the actual APC 
offset amount for pass-through contrast agents that takes into 
consideration the otherwise applicable OPPS payment amount, we are 
proposing to multiply the policy packaged drug offset fraction by the 
APC payment amount for the procedure with which the pass-through 
contrast agent is used and, accordingly, reduce the separate OPPS 
payment for the pass-through contrast agent by this amount. We are 
proposing to continue to apply this methodology for CY 2014 to 
recognize that when a contrast agent with pass-through status is billed 
with any procedural APC listed in Table 22 of this proposed rule, a 
specific offset based on the procedural APC would be applied to the 
payment for the contrast agent to ensure that duplicate payment is not 
made for the contrast agent.
    Proposed procedural APCs for which we expect a contrast offset 
could be applicable in the case of a pass-through contrast agent have 
been identified as any procedural APC with a policy packaged drug 
amount greater than $20 that is not a nuclear medicine APC identified 
in Table 21 above, and these APCs are displayed in Table 22 below. The 
methodology used to determine a proposed threshold cost for application 
of a contrast agent offset policy is described in detail in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60483 through 60484). 
For CY 2014, we are proposing to continue to recognize that when a 
contrast agent with pass-through status is billed with any procedural 
APC listed in Table 22, a specific offset based on the procedural APC 
would be applied to the payment for the contrast agent to ensure that 
duplicate payment is not made for the contrast agent.

     Table 22--Proposed APCs To Which a Contrast Agent Offset May Be
                         Applicable for CY 2014
------------------------------------------------------------------------
 Proposed CY 2014 APC              Proposed CY 2014 APC title
------------------------------------------------------------------------
0080.................  Diagnostic Cardiac Catheterization.
0082.................  Coronary or Non-Coronary Atherectomy.
0083.................  Coronary Angioplasty, Valvuloplasty, and Level I
                        Endovascular Revascularization.
0093.................  Vascular Reconstruction/Fistula Repair without
                        Device.
0104.................  Transcathether Placement of Intracoronary Stents.
0152.................  Level I Percutaneous Abdominal and Biliary
                        Procedures.
0177.................  Level I Echocardiogram With Contrast.
0178.................  Level II Echocardiogram With Contrast.
0229.................  Level II Endovascular Revascularization of the
                        Lower Extremity.
0278.................  Diagnostic Urography.
0279.................  Level II Angiography and Venography.
0280.................  Level III Angiography and Venography.
0283.................  Computed Tomography with Contrast.
0284.................  Magnetic Resonance Imaging and Magnetic Resonance
                        Angiography with Contrast.
0333.................  Computed Tomography without Contrast followed by
                        Contrast.
0334.................  Combined Abdomen and Pelvis CT with Contrast.
0337.................  Magnetic Resonance Imaging and Magnetic Resonance
                        Angiography without Contrast followed by
                        Contrast.

[[Page 43603]]

 
0375.................  Ancillary Outpatient Services When Patient
                        Expires.
0383.................  Cardiac Computed Tomographic Imaging.
0388.................  Discography.
0442.................  Dosimetric Drug Administration.
0653.................  Vascular Reconstruction/Fistula Repair with
                        Device.
0656.................  Transcatheter Placement of Intracoronary Drug-
                        Eluting Stents.
0662.................  CT Angiography.
0668.................  Level I Angiography and Venography.
8006.................  CT and CTA with Contrast Composite.
8008.................  MRI and MRA with Contrast Composite.
------------------------------------------------------------------------

d. Proposed Payment Offset Policy for Products Packaged According to 
the Proposed Policy to Package Drugs, Biologicals, and 
Radiopharmaceuticals That Function as Supplies When Used in a 
Diagnostic Test or Procedure and Drugs and Biologicals That Function as 
Supplies or Devices When Used in a Surgical Procedure
    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. As discussed in 
section II.A.3. of this proposed rule, as a part of our proposed policy 
to package drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure and drugs and 
biologicals that function as supplies or devices when used in a 
surgical procedure, we are specifically proposing that skin substitutes 
and stress agents used in myocardial perfusion imaging (MPI) be policy 
packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, 
contrast agents, and anesthesia drugs. We believe that a payment 
offset, similar to the offset currently in place for pass-through 
devices, diagnostic radiopharmaceuticals, and contrast agents, is 
necessary in order to provide an appropriate transitional pass-through 
payment for drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure and drugs and 
biologicals that function as supplies or devices when used in a 
surgical procedure because all of these are packaged, or proposed to be 
packaged, when they do not have pass-through status. In accordance with 
our standard offset methodology, we are proposing for CY 2014 to deduct 
from the payment for pass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies or devices when used in a surgical procedure an amount that 
reflects the portion of the APC payment associated with predecessor 
products in order to ensure no duplicate payment is made.
    In CY 2009, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor diagnostic radiopharmaceuticals when considering a new 
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 
through 68641). For CY 2014, we are proposing to apply this same policy 
to drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure and drugs and 
biologicals that function as supplies or devices when used in a 
surgical procedure. Specifically, in the case of pass-through skin 
substitutes, we are proposing to utilize the policy packaged drug 
offset fraction for skin substitute procedural APCs, 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. Because policy packaged 
radiopharmaceuticals also would be included in the drug offset fraction 
for the APC to which MPI procedures are assigned, in the case of pass-
through stress agents, we are proposing to utilize the policy packaged 
drug offset fraction for the procedural APC, calculated as 1 minus the 
following: the cost from single procedure claims in the APC after 
removing the cost for policy packaged drugs excluding policy packaged 
diagnostic radiopharmaceuticals divided by the cost from single 
procedure claims in the APC. To determine the actual APC offset amount 
for pass-through skin substitutes and pass-through stress agents that 
takes into consideration the otherwise applicable OPPS payment amount, 
we are proposing to multiply the policy-packaged drug offset fraction 
by the APC payment amount for the procedure with which the pass-through 
skin substitute or pass-through stress agent is used and, accordingly, 
reduce the separate OPPS payment for the pass-through skin substitute 
or pass-through stress agent by this amount.
    Table 23 below displays the proposed APCs to which skin substitute 
procedures would be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of skin substitutes with 
pass-through status.
    Table 24 below displays the proposed APC to which MPI procedures 
would be assigned in CY 2014 and for which we expect that an APC offset 
could be applicable in the case of a stress agent with pass-through 
status.
    We are proposing to 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 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.

[[Page 43604]]



  Table 23--Proposed APCs To Which Skin Substitute Procedures Would Be
                          Assigned for CY 2014
------------------------------------------------------------------------
       Proposed CY 2014 APC              Proposed CY 2014 APC title
------------------------------------------------------------------------
0135..............................  Level III Skin Repair.
0136..............................  Level IV Skin Repair.
------------------------------------------------------------------------


Table 24--Proposed APCs To Which MPI Procedures Would Be Assigned for CY
                                  2014
------------------------------------------------------------------------
       Proposed CY 2014 APC              Proposed CY 2014 APC title
------------------------------------------------------------------------
0100..............................  Cardiac Stress Tests.
0377..............................  Level II Cardiac Imaging.
------------------------------------------------------------------------

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

1. Background
    Under the CY 2013 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: As a packaged payment included in the payment for the 
associated service, or as a separate payment (individual APCs). We 
explained in the April 7, 2000 OPPS final rule with comment period (65 
FR 18450) that we generally package the cost of drugs and 
radiopharmaceuticals into the APC payment rate for the procedure or 
treatment with which the products are usually furnished. Hospitals do 
not receive separate payment for packaged items and supplies, and 
hospitals may not bill beneficiaries separately for any packaged items 
and supplies whose costs are recognized and paid within the national 
OPPS payment rate for the associated procedure or service. (Transmittal 
A-01-133, issued on November 20, 2001, explains in greater detail the 
rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this proposed rule, in accordance 
with section 1833(t)(16)(B) of the Act, the threshold for establishing 
separate APCs for payment of drugs and biologicals was set to $50 per 
administration during CYs 2005 and 2006. In CY 2007, we used the four 
quarter moving average Producer Price Index (PPI) levels for 
Pharmaceutical Preparations (Prescription) to trend the $50 threshold 
forward from the third quarter of CY 2005 (when the Pub. L. 108-173 
mandated threshold became effective) to the third quarter of CY 2007. 
We then rounded the resulting dollar amount to the nearest $5 increment 
in order to determine the CY 2007 threshold amount of $55. Using the 
same methodology as that used in CY 2007 (which is discussed in more 
detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68085 through 68086)), we set the packaging threshold for establishing 
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009. 
For CY 2010, we set the packaging threshold at $65; for CY 2011, we set 
the packaging threshold at $70; for CY 2012, we set the packaging 
threshold at $75; and for CY 2013, we set the packaging threshold at 
$80.
    Following the CY 2007 methodology, for this CY 2014 OPPS/ASC 
proposed rule, we used the most recently available four quarter moving 
average PPI levels to trend the $50 threshold forward from the third 
quarter of CY 2005 to the third quarter of CY 2014 and rounded the 
resulting dollar amount ($87.70) to the nearest $5 increment, which 
yielded a figure of $90. In performing this calculation, we used the 
most recent forecast of the quarterly index levels for the PPI for 
Pharmaceuticals for Human Use (Prescription) (Bureau of Labor 
Statistics (BLS) series code WPUSI07003) from CMS' Office of the 
Actuary (OACT). (We note that we are not proposing a change to the PPI 
that is used to calculate the threshold for CY 2014; 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 the PPI for Prescription Drugs as it reflects price 
changes associated with the average mix of all pharmaceuticals in the 
overall economy. In addition, we chose this price series because it is 
publicly available and regularly published, improving public access and 
transparency. Forecasts of the PPI for Prescription Drugs are developed 
by IHS Global Insight, Inc., a nationally recognized economic and 
financial forecasting firm. As actual inflation for past quarters 
replaced forecasted amounts, the PPI estimates for prior quarters have 
been revised (compared with those used in the CY 2007 OPPS/ASC final 
rule with comment period) and have been incorporated into our 
calculation. Based on the calculations described above, we are 
proposing a packaging threshold for CY 2014 of $90. (For a more 
detailed discussion of the OPPS drug packaging threshold and the use of 
the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes 
That Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    To determine the proposed CY 2014 packaging status for all nonpass-
through drugs and biologicals that are not policy packaged for this 
proposed rule, we calculated, on a HCPCS code-specific basis, the per 
day cost of all drugs, biologicals, and therapeutic 
radiopharmaceuticals (collectively called ``threshold-packaged'' drugs) 
that had a HCPCS code in CY 2012 and were paid (via packaged or 
separate payment) under the OPPS. We used data from CY 2012 claims 
processed before January 1, 2013 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 proposed rule, or for diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and 
implantable biologicals that we are proposing to continue to package in 
CY 2014, or for the new categories of policy-packaged products proposed 
for CY 2014, as discussed in section II.A.3. of this proposed rule.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2014, 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 biological HCPCS code, we 
used an estimated payment rate of ASP+6 percent (which is the payment 
rate we are proposing for separately

[[Page 43605]]

payable drugs and biologicals for CY 2014, as discussed in more detail 
in section V.B.3.b. of this proposed rule) to calculate the CY 2014 
proposed rule per day costs. We used the manufacturer submitted ASP 
data from the fourth quarter of CY 2012 (data that were used for 
payment purposes in the physician's office setting, effective April 1, 
2013) to determine the proposed rule per day cost.
    As is our standard methodology, for CY 2014, we are proposing to 
use payment rates based on the ASP data from the fourth quarter of CY 
2012 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the Internet on the CMS Web site) because 
these are the most recent data available for use at the time of 
development of this proposed rule. These data also were the basis for 
drug payments in the physician's office setting, effective April 1, 
2013. 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 2012 hospital claims data to determine their per 
day cost.
    We are proposing to package items with a per day cost less than or 
equal to $90, and identify items with a per day cost greater than $90 
as separately payable. Consistent with our past practice, we 
crosswalked historical OPPS claims data from the CY 2012 HCPCS codes 
that were reported to the CY 2013 HCPCS codes that we display in 
Addendum B of this proposed rule (which is available via the Internet 
on the CMS Web site) for payment in CY 2014.
    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, 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 
will be subject to quarterly updates. For our calculation of per day 
costs of HCPCS codes for drugs and biologicals in the CY 2014 OPPS/ASC 
final rule with comment period, we are proposing to use ASP data from 
the first quarter of CY 2013, 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, 2013, along with 
updated hospital claims data from CY 2012. We note that we also are 
proposing to use these data for budget neutrality estimates and impact 
analyses for the CY 2014 OPPS/ASC final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B to the final rule with comment 
period will be based on ASP data from the second quarter of CY 2013. 
These data will be the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2013. These physician's office 
payment rates would then be updated in the January 2014 OPPS update, 
based on the most recent ASP data to be used for physician's office and 
OPPS payment as of January 1, 2014. For items that do not currently 
have an ASP-based payment rate, we are proposing to recalculate their 
mean unit cost from all of the CY 2012 claims data and updated cost 
report information available for the CY 2014 final rule with comment 
period to determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this CY 2014 OPPS/
ASC proposed rule may be different from the same drug HCPCS code's 
packaging status determined based on the data used for the CY 2014 
OPPS/ASC final rule with comment period. Under such circumstances, we 
are proposing to continue to follow the established policies initially 
adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably 
pay for those drugs whose cost fluctuates relative to the proposed CY 
2014 OPPS drug packaging threshold and the drug's payment status 
(packaged or separately payable) in CY 2013. Specifically, for CY 2014, 
consistent with our historical practice, we are proposing to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2013 and that are proposed for separate payment in CY 
2014, and that then have per day costs equal to or less than the CY 
2014 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2014 final rule, would continue to 
receive separate payment in CY 2014.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2013 and that are proposed for separate payment in CY 2014, and 
that then have per day costs equal to or less than the CY 2014 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2014 final rule, would remain packaged in 
CY 2014.
     HCPCS codes for drugs and biologicals for which we are 
proposing packaged payment in CY 2014 but then have per day costs 
greater than the CY 2014 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2014 final 
rule, would receive separate payment in CY 2014.
c. Proposed Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the packaged or separately payable status of the 
new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490

[[Page 43606]]

through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages. We analyzed 
CY 2008 claims data for the HCPCS codes describing different dosages of 
the same drug or biological that were newly recognized in CY 2008 and 
found that our claims data would result in several different packaging 
determinations for different codes describing the same drug or 
biological. Furthermore, we found that our claims data included few 
units and days for a number of newly recognized HCPCS codes, resulting 
in our concern that these data reflected claims from only a small 
number of hospitals, even though the drug or biological itself may be 
reported by many other hospitals under the most common HCPCS code. 
Based on these findings from our first available claims data for the 
newly recognized HCPCS codes, we believed that adopting our standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes 
instead of others, particularly because we do not currently require 
hospitals to report all drug and biological HCPCS codes under the OPPS 
in consideration of our previous policy that generally recognized only 
the lowest dosage HCPCS code for a drug or biological for OPPS payment.
    For CY 2014, we continue to believe that adopting the standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes for 
drugs instead of others. Making packaging determinations on a drug-
specific basis eliminates these incentives and allows hospitals 
flexibility in choosing to report all HCPCS codes for different dosages 
of the same drug or only the lowest dosage HCPCS code. Therefore, we 
are proposing to continue our policy to make packaging determinations 
on a 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 2014.
    For CY 2014, 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 2012 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. 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 $90 (so that all HCPCS codes for 
the same drug or biological would be packaged) or greater than $90 (so 
that all HCPCS codes for the same drug or biological would be 
separately payable). The following drugs did not have pricing 
information available for the ASP methodology for this CY 2014 OPPS/ASC 
proposed 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 2012 claims data to make the packaging 
determinations for these drugs: HCPCS codes J3471 (Injection, 
hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp 
units)); 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). The proposed packaging status of each drug and 
biological HCPCS code to which this methodology would apply is 
displayed in Table 25 below.

    Table 25--Proposed HCPCS Codes To Which The CY 2014 Drug-Specific
             Packaging Determination Methodology Would Apply
------------------------------------------------------------------------
  Proposed CY 2014        Proposed CY 2014 long
     HCPCS code                descriptor            Proposed CY 2014 SI
------------------------------------------------------------------------
C9257...............  Injection, bevacizumab, 0.25  K
                       mg.
J9035...............  Injection, bevacizumab, 10    K
                       mg.
J1020...............  Injection,                    N
                       methylprednisolone acetate,
                       20 mg.
J1030...............  Injection,                    N
                       methylprednisolone acetate,
                       40 mg.
J1040...............  Injection,                    N
                       methylprednisolone acetate,
                       80 mg.
J1070...............  Injection, testosterone       N
                       cypionate, up to 100 mg.
J1080...............  Injection, testosterone       N
                       cypionate, 1 cc, 200 mg.
J1440...............  Injection, filgrastim (g-     K
                       csf), 300 mcg.
J1441...............  Injection, filgrastim (g-     K
                       csf), 480 mcg.
J1460...............  Injection, gamma globulin,    N
                       intramuscular, 1 cc.
J1560...............  Injection, gamma globulin,    N
                       intramuscular over 10 cc.
J1642...............  Injection, heparin sodium,    N
                       (heparin lock flush), per
                       10 units.
J1644...............  Injection, heparin sodium,    N
                       per 1000 units.
J1850...............  Injection, kanamycin          N
                       sulfate, up to 75 mg.
J1840...............  Injection, kanamycin          N
                       sulfate, up to 500 mg.

[[Page 43607]]

 
J2270...............  Injection, morphine sulfate,  N
                       up to 10 mg.
J2271...............  Injection, morphine sulfate,  N
                       100 mg.
J2788...............  Injection, rho d immune       K
                       globulin, human, minidose,
                       50 micrograms (250 i.u.).
J2790...............  Injection, rho d immune       K
                       globulin, human, full dose,
                       300 micrograms (1500 i.u.).
J2920...............  Injection,                    N
                       methylprednisolone sodium
                       succinate, up to 40 mg.
J2930...............  Injection,                    N
                       methylprednisolone sodium
                       succinate, up to 125 mg.
J3120...............  Injection, testosterone       N
                       enanthate, up to 100 mg.
J3130...............  Injection, testosterone       N
                       enanthate, up to 200 mg.
J3471...............  Injection, hyaluronidase,     N
                       ovine, preservative free,
                       per 1 usp unit (up to 999
                       usp units).
J3472...............  Injection, hyaluronidase,     N
                       ovine, preservative free,
                       per 1000 usp units.
J7050...............  Infusion, normal saline       N
                       solution , 250 cc.
J7040...............  Infusion, normal saline       N
                       solution, sterile (500 ml =
                       1 unit).
J7030...............  Infusion, normal saline       N
                       solution , 1000 cc.
J7515...............  Cyclosporine, oral, 25 mg...  N
J7502...............  Cyclosporine, oral, 100 mg..  N
J8520...............  Capecitabine, oral, 150 mg..  K
J8521...............  Capecitabine, oral, 500 mg..  K
J9250...............  Methotrexate sodium, 5 mg...  N
J9260...............  Methotrexate sodium, 50 mg..  N
Q0164...............  Prochlorperazine maleate, 5   N
                       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.
Q0165...............  Prochlorperazine maleate, 10  N
                       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.
Q0167...............  Dronabinol, 2.5 mg, oral,     N
                       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.
Q0168...............  Dronabinol, 5 mg, oral, FDA   N
                       approved prescription anti-
                       emetic, for use as a
                       complete therapeutic
                       substitute for an IV anti-
                       emetic at the time of
                       chemotherapy treatment, not
                       to exceed a 48-hour dosage
                       regimen.
Q0169...............  Promethazine hydrochloride,   N
                       12.5 mg, oral, FDA approved
                       prescription anti-emetic,
                       for use as a complete
                       therapeutic substitute for
                       an IV antiemetic at the
                       time of chemotherapy
                       treatment, not to exceed a
                       48-hour dosage regimen.
Q0170...............  Promethazine hydrochloride,   N
                       25 mg, oral, FDA approved
                       prescription anti-emetic,
                       for use as a complete
                       therapeutic substitute for
                       an IV antiemetic at the
                       time of chemotherapy
                       treatment, not to exceed a
                       48-hour dosage regimen.
Q0171...............  Chlorpromazine                N
                       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                N
                       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,     N
                       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,     N
                       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,   N
                       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.
Q0178...............  Hydroxyzine pamoate, 50 mg,   N
                       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.
------------------------------------------------------------------------

3. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as 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 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.

[[Page 43608]]

Most physician Part B drugs are paid at ASP+6 percent pursuant to 
section 1842(o) and section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account 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) 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 
determination rather than a statutory requirement. In this CY 2014 
OPPS/ASC proposed rule, we are proposing to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    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 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). We 
referred 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 to keep 
the redistribution ratio constant between the proposed rule and the 
final rule. For a detailed discussion of our OPPS drug payment policies 
from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68383 through 68385).
    We noted in the CY 2013 OPPS/ASC final rule with comment period (77 
FR 68386) that 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 stated 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 
indicated our concern that the continued use of the 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.
    In that final rule with comment period, we discussed that 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. In the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68386), we noted that 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, 
Part B drugs are paid at ASP+6 percent when furnished in physicians' 
offices. We indicated that we believe that establishing the payment 
rates based on the statutory default of ASP+6 percent is appropriate as 
it yields increased predictability in payment for separately payable 
drugs and biologicals under the OPPS. We also noted 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. Therefore, 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 final 
rule with comment period (77 FR 68389), we finalized our proposal 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, referred 
to as the statutory default. We also finalized our proposal 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 and 
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 
biological for CY 2013 (77 FR 68389).
b. Proposed CY 2014 Payment Policy
    For CY 2014, we are proposing to continue our CY 2013 policy and 
pay

[[Page 43609]]

for separately payable drugs and biologicals at ASP+6 percent based on 
section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the 
statutory default. We are proposing 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. We also are proposing 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.
4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 2013, we established a 
policy to pay for separately paid therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. If ASP information is unavailable for a therapeutic 
radiopharmaceutical, 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 2014. Therefore, we are 
proposing for CY 2014 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. For a full discussion of ASP-based payment for therapeutic 
radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60520 through 60521). We also are 
proposing to rely on CY 2012 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).
    The proposed CY 2014 payment rates for nonpass-through separately 
payable therapeutic radiopharmaceuticals are included in Addenda A and 
B to this proposed rule (which are available via the Internet on the 
CMS Web site).
5. Proposed Payment for Blood Clotting Factors
    For CY 2013, 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 2013, we provided payment for blood 
clotting factors under the OPPS at ASP+6 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 2013 updated furnishing fee was $0.188 per unit.
    For CY 2014, we are proposing 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 is 
based on the percentage increase in the Consumer Price Index (CPI) for 
medical care for the 12-month period ending with June of the previous 
year. Because the Bureau of Labor Statistics releases the applicable 
CPI data after the MPFS and OPPS/ASC proposed rules are published, we 
are not able to include the actual updated furnishing fee in the 
proposed rules. Therefore, in accordance with our policy, as finalized 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), 
we are proposing 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.
6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 
and subsequent years 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 was no statutory provision that dictated payment for such drugs, 
biologicals, and radiopharmaceuticals in CY 2005, and because we had no 
hospital claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals) and biologicals (excluding implantable 
biologicals for CY 2009) with HCPCS codes, but which did not have pass-
through status and were without OPPS hospital claims data, at ASP+5 
percent and ASP+4 percent, respectively, consistent with the final OPPS 
payment methodology for other separately payable drugs and biologicals. 
New therapeutic radiopharmaceuticals were paid at charges adjusted to 
cost based on the statutory requirement for CY 2008 and CY 2009 and 
payment for new diagnostic radiopharmaceuticals was packaged in both 
years.
    For CY 2010, we continued to provide payment for new drugs 
(excluding contrast agents) and biologicals with

[[Page 43610]]

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 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 CYs 2011, 2012, and 2013, paying for new drugs, biologicals, and 
radiopharmaceuticals that do not have pass-through status, and are 
without OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and 
ASP+6 percent, respectively, consistent with the final OPPS payment 
methodology for other separately payable drugs and biological during 
those payment years.
    For CY 2014, we are proposing to provide payment for new drugs, 
biologicals, and therapeutic radiopharmaceuticals that do not have 
pass-through status at ASP+6 percent, consistent with the proposed CY 
2014 payment methodology for other separately payable nonpass-through 
drugs, 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, biologicals and 
therapeutic radiopharmaceuticals would be treated like other drugs, 
biologicals, and therapeutic radiopharmaceuticals under the OPPS.
    For CY 2014, we also are proposing to package payment for all new 
nonpass-through diagnostic radiopharmaceuticals, contrast agents, 
anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure, and 
drugs and biologicals that function as supplies or devices when used in 
a surgical procedure, with HCPCS codes but without claims data (those 
new CY 2014 HCPCS codes that do not crosswalk to predecessor HCPCS 
codes). This is consistent with the proposed policy packaging all 
existing nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure, 
and drugs and biologicals that function as supplies or devices when 
used in a surgical procedure, as discussed in more detail in section 
II.A.3. of this proposed rule.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2014, we are proposing to continue the policy we 
implemented beginning in CY 2005 of using the WAC for the product to 
establish the initial payment rate for new nonpass-through drugs and 
biologicals with HCPCS codes, but which are without OPPS claims data 
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 are 
proposing to assign status indicator ``K'' (for separately paid 
nonpass-through drugs and biologicals, including therapeutic 
radiopharmaceuticals) to HCPCS codes for new drugs and biologicals 
without OPPS claims data and for which we have not granted pass-through 
status. With respect to new, nonpass-through drugs, biologicals, and 
therapeutic radiopharmaceuticals for which we do not have ASP data, we 
are proposing that once their ASP data become available in later 
quarterly submissions, their payment rates under the OPPS would be 
adjusted so that the rates would be based on the ASP methodology and 
set to the finalized ASP-based amount (proposed for CY 2014 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, 
biologicals, and therapeutic radiopharmaceuticals would be treated like 
other drugs, biologicals, and therapeutic radiopharmaceuticals under 
the OPPS, unless they are granted pass-through status.
    Similarly, we are proposing 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 are proposing 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 are proposing with new drugs and 
biologicals, we are proposing to continue our policy of assigning 
status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, for CY 2014 we are 
proposing to announce any changes to the payment amounts for new drugs 
and biologicals in the CY 2014 OPPS/ASC final rule with comment period 
and also on a quarterly basis on the CMS Web site during CY 2014 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 
also would be changed accordingly based on later quarter ASP 
submissions. We note that the new CY 2014 HCPCS codes for drugs, 
biologicals and therapeutic radiopharmaceuticals are not available at 
the time of development of this proposed rule. However, these agents 
will be included in Addendum B to the CY 2014 OPPS/ASC final rule with 
comment period (which will be available via the Internet on the CMS Web 
site), where they will be assigned comment indicator ``NI.'' This 
comment indicator reflects that their interim final OPPS treatment is 
open to public comment in the CY 2014 OPPS/ASC final rule with comment 
period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2012 and/or CY 2013 for which we did not have CY 2012 
hospital claims data available for this proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. We note that there are currently no therapeutic 
radiopharmaceuticals in this category. In order to determine the 
packaging status of these products for CY 2014, 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 are proposing to package items for which we estimated the per 
day administration cost to be less than or equal to $90, which is the 
general

[[Page 43611]]

packaging threshold that we are proposing for drugs, biologicals, and 
therapeutic radiopharmaceuticals in CY 2014. We are proposing to pay 
separately for items with an estimated per day cost greater than $90 
(with the exception of diagnostic radiopharmaceuticals, contrast 
agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure, 
and drugs and biologicals that function as supplies or devices when 
used in a surgical procedure, which we are proposing to package 
regardless of cost, as discussed in more detail in section II.A.3. of 
this proposed rule) in CY 2014. We are proposing that the CY 2014 
payment for separately payable items without CY 2012 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 are proposing to use the WAC for the product to 
establish the initial payment rate. However, we note that if the WAC is 
also unavailable, we would make payment at 95 percent of the most 
recent AWP available.
    The proposed estimated units per day and status indicators for 
these items are displayed in Table 26 below.

                           Table 26--Drugs and Biologicals Without CY 2012 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated
                                                                      average                          Proposed
         CY 2014 HCPCS code              CY 2014 Long descriptor     number of   Proposed CY 2014 SI    CY 2014
                                                                     units per                            APC
                                                                        day
----------------------------------------------------------------------------------------------------------------
90581...............................  Anthrax vaccine, for                   1  K                           1422
                                       subcutaneous or
                                       intramuscular use.
J0205...............................  Injection, alglucerase, per          420  K                           0900
                                       10 units.
J0215...............................  Injection, alefacept, 0. 5            29  K                           1633
                                       mg.
J0220...............................  Injection, alglucosidase             150  K                           9234
                                       alfa, 10 mg, not otherwise
                                       specified.
J0364...............................  Injection, apomorphine                 1  N                            N/A
                                       hydrochloride, 1 mg.
J0395...............................  Injection, arbutamine hcl, 1          20  K                           1432
                                       mg.
J0725...............................  Injection, chorionic                   1  N                            N/A
                                       gonadotropin, per 1,000 usp
                                       units.
J1324...............................  Injection, enfuvirtide, 1 mg         216  K                           1361
J1435...............................  Injection, estrone, per 1 mg         150  K                           1435
J1620...............................  Injection, gonadorelin                11  N                            N/A
                                       hydrochloride, per 100 mcg.
J1730...............................  Injection, diazoxide, up to            1  N                            N/A
                                       300 mg.
J1835...............................  Injection, itraconazole, 50           80  N                            N/A
                                       mg.
J2724...............................  Injection, protein c                1540  K                           1139
                                       concentrate, intravenous,
                                       human, 10 iu.
J2725...............................  Injection, protirelin, per             4  K                           1357
                                       250 mcg.
J3355...............................  Injection, urofollitropin,             2  K                           1741
                                       75 iu.
J7196...............................  Injection, antithrombin              268  K                           1332
                                       recombinant, 50 i. U..
J7513...............................  Daclizumab, parenteral, 25             2  K                           1612
                                       mg.
J8562...............................  Fludarabine phosphate, oral,           1  N                            N/A
                                       10 mg.
J8650...............................  Nabilone, oral, 1 mg........           4  K                           1424
J9216...............................  Injection, interferon, gamma           1  K                           0838
                                       1-b, 3 million units.
J9226...............................  Histrelin implant (supprelin           1  K                           1142
                                       la), 50 mg.
J9300...............................  Injection, gemtuzumab                  1  K                           9004
                                       ozogamicin, 5 mg.
Q0515...............................  Injection, sermorelin                 70  K                           3050
                                       acetate, 1 microgram.
----------------------------------------------------------------------------------------------------------------

    Finally, there were 11 drugs and biologicals, shown in Table 27, 
that were payable in CY 2012 but for which we lacked CY 2012 claims 
data and any other pricing information for the ASP methodology for this 
CY 2014 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 CYs 2011, 
2012, and 2013 (75 FR 71973, 76 FR 74334, and 77 FR 68396, 
respectively).
    For CY 2014, we are proposing to continue to assign status 
indicator ``E'' to drugs and biologicals that lack CY 2012 claims data 
and pricing information for the ASP methodology. All drugs and 
biologicals without CY 2012 hospital claims data and data based on the 
ASP methodology that are assigned status indicator ``E'' on this basis 
at the time of this proposed rule for CY 2014 are displayed in Table 27 
below. If pricing information becomes available, we are proposing to 
assign the products status indicator ``K'' and pay for them separately 
for the remainder of CY 2014.

[[Page 43612]]



 Table 27--Drugs and Biologicals Without CY 2012 Claims Data and Without
               Pricing Information for the ASP Methodology
------------------------------------------------------------------------
                                                            Proposed CY
       CY 2014 HCPCS code        CY 2014 Long descriptor      2014 SI
------------------------------------------------------------------------
90393..........................  Vaccina immune           E
                                  globulin, human, for
                                  intramuscular use.
90644..........................  Meningococcal conjugate  E
                                  vaccine, serogroups c
                                  & y and hemophilus
                                  influenza b vaccine
                                  (hib-mency), 4 dose
                                  schedule, when
                                  administered to
                                  children 2-15 months
                                  of age, for
                                  intramuscular use.
90727..........................  Plague vaccine, for      E
                                  intramuscular use.
J0190..........................  Injection, biperiden     E
                                  lactate, per 5 mg.
J0350..........................  Injection,               E
                                  anistreplase, per 30
                                  units.
J1180..........................  Injection, dyphylline,   E
                                  up to 500 mg.
J2460..........................  Injection,               E
                                  oxytetracycline hcl,
                                  up to 50 mg.
J2940..........................  Injection, somatrem, 1   E
                                  mg.
J7191..........................  Factor viii              E
                                  (antihemophilic factor
                                  (porcine)), per i. U..
J9165..........................  Injection,               E
                                  diethylstilbestrol
                                  diphosphate, 250 mg.
J9215..........................  Injection, interferon,   E
                                  alfa-n3, (human
                                  leukocyte derived),
                                  250,000 iu.
------------------------------------------------------------------------

C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits

    Beginning January 1, 2008, CMS implemented OPPS edits that require 
hospitals to include a HCPCS code for a radiolabeled product when a 
separately payable nuclear medicine procedure is present on a claim. 
For CY 2014, we are proposing to no longer require the nuclear medicine 
procedure-to-radiolabeled product edits. Under this proposal, hospitals 
would still be expected to adhere to the guidelines of correct coding 
and append the correct radiolabeled product code to the claim when 
applicable. However, claims would no longer be returned to providers 
when HCPCS codes for radiolabeled products do not appear on claims with 
nuclear medicine procedures. We believe that this is appropriate 
because hospitals have now had several years of experience reporting 
procedures involving radiolabeled products and have grown accustomed to 
ensuring that they code and report charges so that their claims fully 
and appropriately reflect the costs of those radiolabeled products. 
Therefore, we do not believe that the burden on hospitals of adhering 
to the nuclear medicine procedure-to-radiolabeled product edits 
continues to be warranted. As with all other items and services 
recognized under the OPPS, we expect hospitals to code and report their 
costs appropriately, regardless of whether there are claims processing 
edits in place.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently 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 prorata 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 
2014 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 2014. 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 2013 or beginning in CY 2014. 
The sum of the CY 2014 pass-through estimates for these two groups of 
device categories would equal the total CY 2014 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 2013 OPPS/ASC 
final rule with comment period (77 FR 68397). 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 include an 
estimate of any implantable biologicals eligible for pass-through 
payment in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. We note that the Part B drug CAP program has been postponed 
since CY 2009, and such a program has

[[Page 43613]]

not been proposed to be reinstated for CY 2014. Because we are 
proposing to pay for most nonpass-through separately payable drugs and 
biologicals under the CY 2014 OPPS at ASP+6 percent, as we discussed in 
section V.B.3. of this proposed rule, which represents the otherwise 
applicable fee schedule amount associated with most pass-through drugs 
and biologicals, and because we are proposing to pay for CY 2014 pass-
through drugs and biologicals at ASP+6 percent, as we discussed in 
section V.A. of this proposed rule, our estimate of drug and biological 
pass-through payment for CY 2014 for this group of items is $0, as 
discussed below.
    Payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, without pass-through status 
will always be packaged into payment for the associated procedures and 
these products would not be separately paid. In addition, we are 
proposing to policy-package all nonpass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies or devices when used in a surgical procedure for CY 2014, as 
discussed in section II.A.3. of this proposed rule. All of these 
policy-packaged drugs and biologicals with pass-through status would be 
paid at ASP+6 percent like other pass-through drugs and biologicals for 
CY 2014. Therefore, our estimate of pass-through payment for policy-
packaged drugs and biologicals with pass-through status approved prior 
to CY 2014 is not $0. In section V.A.4. of this proposed rule, we 
discuss our proposed policy to determine if the costs of certain 
policy-packaged drugs or biologicals are already packaged into the 
existing APC structure. If we determine that a policy-packaged drug or 
biological approved for pass-through payment resembles predecessor 
drugs or biologicals already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment, we are 
proposing to offset the amount of pass-through payment for the policy-
packaged drug or biological. For these drugs or biologicals, the APC 
offset amount is the portion of the APC payment for the specific 
procedure performed with the pass-through drug or biological which we 
refer to as the policy-packaged drug APC offset amount. If we determine 
that an offset is appropriate for a specific policy-packaged drug or 
biological receiving pass-through payment, we are proposing to reduce 
our estimate of pass-through payments for these drugs or biologicals by 
this amount.
    Similar to pass-through estimates for devices, the first group of 
drugs and biologicals requiring a pass-through payment estimate 
consists of those products that were recently made eligible for pass-
through payment and that would continue to be eligible for pass-through 
payment in CY 2014. The second group contains drugs and biologicals 
that we know are newly eligible, or project will be newly eligible, in 
the remaining quarters of CY 2013 or beginning in CY 2014. The sum of 
the proposed CY 2014 pass-through estimates for these two groups of 
drugs and biologicals equals the proposed total CY 2014 pass-through 
spending estimate for drugs and biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2014, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, 
and our OPPS policy from CY 2004 through CY 2013 (77 FR 68398).
    For the first group of devices for pass-through payment estimation 
purposes, there currently are no device categories receiving pass-
through payment in CY 2013 that would continue to be eligible for pass-
through payment for CY 2014. As discussed in section IV.A. of this 
proposed rule, we finalized in the CY 2013 OPPS/ASC final rule with 
comment period the expiration of pass-through payment for three device 
categories after the end of CY 2013. Therefore, we estimate that CY 
2014 pass-through expenditures for the first group of pass-through 
device categories to be $0. In estimating our CY 2014 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 2014 (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, 2014; and contingent 
projections for new device categories established in the second through 
fourth quarters of CY 2014. We are proposing to use the general 
methodology described in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66778), while also taking into account recent OPPS 
experience in approving new pass-through device categories. For this 
proposed rule, the estimate of CY 2014 pass-through spending for this 
second group of device categories is $10 million. Using our established 
methodology, we are proposing that the total estimated pass-through 
spending for device categories for CY 2014 (spending for the first 
group of device categories ($0) plus spending for the second group of 
device categories ($10 million)) would be $10 million.
    To estimate CY 2014 pass-through spending for drugs and biologicals 
in the first group, specifically those drugs and biologicals recently 
made eligible for pass-through payment and continuing on pass-through 
status for CY 2014, we are proposing to utilize the most recent 
Medicare physician's office data regarding their utilization, 
information provided in the respective pass-through applications, 
historical hospital claims data, pharmaceutical industry information, 
and clinical information regarding those drugs or biologicals to 
project the CY 2014 OPPS utilization of the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals. contrast agents, drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies or devices when used in a surgical procedure) that will be 
continuing on pass-through status in CY 2014, we estimate the pass-
through payment amount as the difference between ASP+6 percent and the 
payment rate for nonpass-through drugs and biologicals that will be 
separately paid at ASP+6 percent, which is zero for this group of 
drugs. Because payment for policy-packaged drugs and biologicals is 
proposed to be packaged if the product was not paid separately due to 
its pass-through status, we are proposing to include in the CY 2014 
pass-through estimate the difference between payment for the policy-
packaged 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 
policy-packaged drug or biological approved for pass-through payment 
resembles predecessor drugs or biologicals already included in the 
costs of the APCs that are associated with the drug receiving pass-
through payment. For this proposed rule, using the proposed methodology 
described above, we calculated a CY 2014 proposed spending estimate for 
this first group of drugs and biologicals of approximately $0.962 
million.
    To estimate proposed CY 2014 pass-through spending for drugs and 
biologicals in the second group (that is,

[[Page 43614]]

drugs and biologicals that we knew at the time of development of the 
proposed rule are newly eligible for pass-through payment in CY 2014, 
additional drugs and biologicals that we estimate could be approved for 
pass-through status subsequent to the development of the proposed rule 
and before January 1, 2014, and projections for new drugs and 
biologicals that could be initially eligible for pass-through payment 
in the second through fourth quarters of CY 2014), we are proposing to 
use utilization estimates from pass-through applicants, pharmaceutical 
industry data, clinical information, recent trends in the per unit ASPs 
of hospital outpatient drugs, and projected annual changes in service 
volume and intensity as our basis for making the CY 2014 pass-through 
payment estimate. We also are proposing to consider the most recent 
OPPS experience in approving new pass-through drugs and biologicals. 
Using our proposed methodology for estimating CY 2014 pass-through 
payments for this second group of drugs, we calculated a proposed 
spending estimate for this second group of drugs and biologicals of 
approximately $0.165 million.
    As discussed in section V.A. of this proposed rule, 
radiopharmaceuticals are considered drugs for pass-through purposes. 
Therefore, we include radiopharmaceuticals in our proposed CY 2014 
pass-through spending estimate for drugs and biologicals. Our proposed 
CY 2014 estimate for total pass-through spending for drugs and 
biologicals (spending for the first group of drugs and biologicals 
($0.962 million) plus spending for the second group of drugs and 
biologicals ($0.165 million)) equals $1.127 million.
    In summary, in accordance with the methodology described above in 
this section, for this proposed rule, we estimate that total pass-
through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2014 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2014 would be 
approximately $11 million (approximately $10 million for device 
categories and approximately $1 million for drugs and biologicals), 
which represents 0.02 percent of total projected OPPS payments for CY 
2014. We estimate that pass-through spending in CY 2014 would not 
amount to 2.0 percent of total projected OPPS CY 2014 program spending.

VII. Proposed 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 (ED) 
visits, and critical care services, including trauma team activation. 
Historically, we have recognized the CPT and HCPCS codes describing 
clinic visits, Type A and Type B (ED) visits, and critical care 
services, which are listed below in Table 28. 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 policy on OPPS payment for hospital 
outpatient visits for CY 2013 and prior years.

  Table 28--HCPCS Codes Used To Report Clinic and Emergency Department
                    Visits and Critical Care Services
------------------------------------------------------------------------
      CY 2013 HCPCS code                   CY 2013 descriptor
------------------------------------------------------------------------
                        Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 1).
99202........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 2).
99203........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 3).
99204........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 4).
99205........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 5).
99211........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 1).
99212........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 2).
99213........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 3).
99214........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 4).
99215........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 5).
------------------------------------------------------------------------
                 Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 1).
99282........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 2).
99283........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 3).
99284........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 4).
99285........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 5).
G0380........................  Type B emergency department visit (Level
                                1).
G0381........................  Type B emergency department visit (Level
                                2).
G0382........................  Type B emergency department visit (Level
                                3).
G0383........................  Type B emergency department visit (Level
                                4).
G0384........................  Type B emergency department visit (Level
                                5).
------------------------------------------------------------------------
                   Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; first 30-74 minutes.
99292........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; each additional 30
                                minutes.
G0390........................  Trauma response associated with hospital
                                critical care service.
------------------------------------------------------------------------


[[Page 43615]]

B. Proposed Payment for Hospital Outpatient Clinic and Emergency 
Department Visits

    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and ED hospital outpatient visits using 
the CPT E/M codes and to develop internal hospital guidelines for 
reporting the appropriate visit level (65 FR 18451). Because a national 
set of hospital-specific codes and guidelines do not currently exist, 
we have advised hospitals that each hospital's internal guidelines that 
determine the levels of clinic and ED visits to be reported should 
follow the intent of the CPT code descriptors, in that the guidelines 
should be designed to reasonably relate the intensity of hospital 
resources to the different levels of effort represented by the codes.
    While many hospitals have advocated for hospital-specific national 
guidelines for visit billing since the OPPS started in 2000, and we 
have signaled through rulemaking our intent to develop guidelines, this 
complex undertaking has proven challenging. Our work with interested 
stakeholders, such as hospital associations, along with a contractor, 
has confirmed that no single approach could consistently and accurately 
capture hospitals' relative costs. Public comments received on this 
issue, as well as our own knowledge of how clinics operate, have led us 
to conclude that it is not feasible to adopt a set of national 
guidelines for reporting hospital clinic visits that can accommodate 
the enormous variety of patient populations and service-mix provided by 
hospitals of all types and sizes throughout the country. Moreover, no 
single approach appears to be broadly endorsed by the stakeholder 
community.
    For CY 2014, we are proposing to modify our longstanding policies 
related to hospital outpatient clinic and ED visits. Rather than 
recognizing five levels of clinic and ED visits respectively, we are 
proposing to create three new alphanumeric Level II HCPCS codes to 
describe all levels of each type of clinic and ED visit, as discussed 
in greater detail below. We believe a policy that recognizes a single 
visit level for clinic visits, Type A ED visits, and Type B ED visits 
for payment under the OPPS is appropriate for several reasons. First, 
the proposal is in line with our strategic goal of using larger payment 
bundles to maximize hospitals' incentives to provide care in the most 
efficient matter as stated in section II.A.3. of this proposed rule. We 
believe this proposal will remove any incentives hospitals may have to 
provide medically unnecessary services or expend additional, 
unnecessary resources to achieve a higher level of visit payment under 
the OPPS. Second, we believe that it is important to consider ways in 
which we can reduce the administrative burden that Medicare payment 
policies place on hospitals, while maintaining our ability to calculate 
accurate payment rates under the OPPS. We believe that replacing the 20 
HCPCS codes currently recognized for clinic visits and ED visits with 
three new alphanumeric Level II HCPCS codes would reduce administrative 
burden and would be easily adopted by hospitals, because the three new 
codes would require hospitals to distinguish only among clinic visits, 
Type A ED visits, and Type B ED visits. Discontinuing the use of the 
five levels of HCPCS visit codes for clinic and Type A and Type B ED 
visits would reduce hospitals' administrative burden by eliminating the 
need for them to develop and apply their own internal guidelines to 
differentiate among five levels of resource use for every clinic visit 
and ED visit they provide, and by eliminating the need to distinguish 
between new and established patients. Third, our proposal allows a 
large universe of claims to be utilized for ratesetting for each of the 
three newly proposed alphanumeric Level II HCPCS visit codes. We 
believe this large volume of claims available for ratesetting for each 
of the newly proposed alphanumeric Level II HCPCS visit codes will 
allow us to capture a very broad spectrum of cases ranging from 
extremely low complexity cases to extremely high complexity cases. We 
believe this large and diverse spectrum of clinical complexity and 
resource variation within the claims as well as the very high volume of 
claims that we propose to use for ratesetting for the newly proposed 
alphanumeric Level II HCPCS visit new codes will allow us to have very 
accurate data upon which to develop accurate and appropriate payments. 
Lastly, we also believe that removing the differentiation among five 
levels of intensity for each visit will eliminate any incentive for 
hospitals to ``upcode'' patients whose visits do not fall clearly into 
one category or another.
    For these reasons, for CY 2014, we are proposing to discontinue our 
longstanding policy of recognizing five distinct visit levels for 
clinic visits and ED visits based on the existing HCPCS E/M codes, and 
instead recognize three new alphanumeric HCPCS codes for each visit 
type. Specifically, we are proposing to create a new alphanumeric HCPCS 
code (GXXXC) for hospital use only representing any clinic visit under 
the OPPS and to assign the newly created alphanumeric clinic visit 
HCPCS code (GXXXC) to its own newly created APC 0634. Using CY 2012 
claims data, we are proposing to develop CY 2014 OPPS payment rates for 
the new HCPCS code GXXXC based on the total mean cost of the levels one 
through five CPT E/M codes for clinic visits currently recognized under 
the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). While 
we would use data for CPT codes 99201 through 99205 and 99211 through 
99215 from claims billed in CY 2012 to calculate the mean cost for new 
APC 0634, we would no longer recognize those CPT codes when they appear 
on hospital claims effective January 1, 2014. We also are proposing to 
no longer recognize a distinction between new and established patient 
clinic visits. Under this proposal, all clinic visits would be reported 
using new HCPCS code GXXXC, regardless of whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the 3 years prior to a visit.
    In addition, we are proposing to discontinue our longstanding 
policy of recognizing five distinct visit levels for Type A ED visits 
and instead are proposing to create a new alphanumeric HCPCS code 
(GXXXA) for hospital use only representing any Type A ED visit under 
the OPPS. We are proposing to assign the newly created alphanumeric 
Type A ED visit HCPCS code (GXXXA) to its own newly created APC 0635. 
Using CY 2012 claims data, we are proposing to develop CY 2014 OPPS 
payment rates for new HCPCS code GXXXA based on the total mean cost of 
the levels 1 through 5 CPT E/M codes for Type A ED visits currently 
recognized under the OPPS (CPT codes 99281 through 99285). While we 
would use data for CPT codes 99281 through 99285 from claims billed in 
CY 2012 to calculate the mean cost for new APC 0635, we would no longer 
recognize those CPT codes when they appear on hospital claims effective 
January 1, 2014. Similarly, we also are proposing to discontinue our 
longstanding policy of recognizing five distinct visit levels for Type 
B ED visits and instead are proposing to create a new alphanumeric 
HCPCS code (GXXXB) representing all Type B ED visits under the OPPS. We 
are proposing to assign the newly created alphanumeric Type B ED visit 
HCPCS code (GXXXB) to its own newly created APC 0636. Using CY 2012 
claims data, we are proposing to develop CY 2014 OPPS payment rates

[[Page 43616]]

for new HCPCS code GXXXB based on the total mean cost of the levels 1 
through 5 HCPCS codes for Type B ED visits currently recognized under 
the OPPS (HCPCS codes G0380 through G0384). While we would use data for 
HCPCS codes G0380 through G0384 from claims billed in CY 2012 to 
calculate the mean cost for new APC 0636, we would no longer recognize 
those HCPCS codes for Type B ED visits when they appear on hospital 
claims effective January 1, 2014.
    We note that we would use the hospital claims data for new HCPCS 
codes GXXXA, GXXXB, and GXXXC when available for future ratesetting. 
The proposed changes to the visit coding and payment structure are 
summarized below in Table 29. We welcome public comments on our CY 2014 
proposal to recognize a single visit level for clinic, Type A ED, and 
Type B ED visits for payment under the OPPS. We believe this proposal 
will allow us to make accurate payments for visits broad-scale because 
we will be using data from the universe of hospital outpatient visits, 
for which we have an extremely high volume of claims representing the 
entire spectrum of costs incurred by hospitals. Nonetheless, we are 
interested in hearing from stakeholders regarding whether a different 
approach may be preferable to capture the resource utilization for 
extremely low complexity cases as well as extremely high complexity 
cases or to otherwise recognize a difference among visit levels. While 
we do not believe, based on our current assessment, that it is 
necessary to provide additional payment levels or carve out these cases 
to make accurate and appropriate payments for visits, we are interested 
in hearing from hospitals whether there are certain cases that would 
not be best accommodated by a single level of payment. If such cases 
exist, we welcome stakeholder input into whether and how this proposal 
could be changed in the final rule to either make exceptions for or 
accommodate these special cases. If commenters provide compelling 
comments describing such special cases or the need for additional 
payment levels, should they exist, and if there are alternative 
policies that would more accurately and appropriately pay for visits, 
we would consider implementing a different policy in the final rule. We 
note that, to the extent that commenters recommend that additional 
levels of payment or special high complexity or low complexity cases be 
recognized, we also would be interested in how we should define and 
differentiate those levels or cases.

 Table 29--CY 2013 Clinic and Emergency Department Visit HCPCS Codes and APC Assignments Compared to Proposed CY
                   2014 Clinic and Emergency Department Visit HCPCS Codes and APC Assignments
----------------------------------------------------------------------------------------------------------------
                                                       CY 2013                      Proposed CY 2014
                  Visit type                  ------------------------------------------------------------------
                                               HCPCS code      APC               HCPCS code               APC
----------------------------------------------------------------------------------------------------------------
CLINIC VISIT.................................       99201        0604  GXXXC                                0634
                                                    99202        0605
                                                    99203        0606
                                                    99204        0607
                                                    99205        0608
                                                    99211        0604
                                                    99212        0605
                                                    99213        0605
                                                    99214        0606
                                                    99215        0607
TYPE A ED VISIT..............................       99281        0609  GXXXA                                0635
                                                    99282        0613
                                                    99283        0614
                                                    99284        0615
                                                    99285        0616
TYPE B ED VISIT..............................       G0380        0626  GXXXB                                0636
                                                    G0381        0627
                                                    G0382        0628
                                                    G0383        0629
                                                    G0384        0630
----------------------------------------------------------------------------------------------------------------

C. Proposed Payment for Critical Care Services

    We are proposing 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

[[Page 43617]]

that, for hospital reporting purposes, critical care codes do not 
include the specified ancillary services. Beginning in CY 2011, 
hospitals that report in accordance with the CPT guidelines should 
report all of the ancillary services and their associated charges 
separately when they are provided in conjunction with critical care. 
Because the CY 2011 payment rate for critical care services 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 reflected 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 final rule with comment 
period, 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 (77 FR 68402). Because our policy to 
establish relative payment weights based on geometric mean cost data 
for CY 2013 represented 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 CY 2013 OPPS/ASC final rule with comment period and determined 
that the data showed 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, we 
noted that 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 were 
presented on the same claims as critical care services, and also showed 
continued low volumes of many ancillary services. We stated in the CY 
2013 OPPS/ASC final rule with comment period 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 suggested 
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 CY 2013 OPPS/ASC final 
rule with comment period that we continued 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 continued 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 
continued to implement claims processing edits that conditionally 
packaged payment for the ancillary services that were reported on the 
same date of service as critical care services in order to avoid 
overpayment. We stated that we would 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.
    When compared to CY 2011 hospital claims data used for the CY 2013 
OPPS ratesetting, CY 2012 hospital claims data used for the CY 2014 
OPPS ratesetting show increases in the mean line- item costs as well as 
the mean line-item charges for CPT code 99291, which continue to 
suggest that 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 continue to 
believe that it is inappropriate to pay separately in CY 2014 for the 
ancillary services that hospitals may now report in addition to 
critical care services. Therefore, for CY 2014, we are proposing to 
continue our CY 2011, CY 2012, and CY 2013 policy to recognize the 
existing CPT codes for critical care services and establish a payment 
rate based on historical claims data. We also are proposing to continue 
to implement claims processing edits that conditionally package payment 
for the ancillary services that are reported on the same date of 
service as critical care services in order to avoid overpayment. 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.

[[Page 43618]]

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. 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 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 a community mental health center for 
purposes of this benefit.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, under 
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 PHP 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 finalized in the CY 2008 OPPS/ASC final rule with 
comment period (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 under 
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 
under 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

[[Page 43619]]

I and Level II services), based on each provider's own unique data. 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 the CY 2009 
policies. CMHCs have a lower cost structure than hospital-based PHP 
providers, in part, because the data showed that CMHCs generally 
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 
because hospital-based PHPs are located throughout the country and, 
therefore, offer the widest access to PHP services. In contrast, CMHC-
based PHPs are largely concentrated in certain geographical areas with 
particular prevalence in Florida, Texas, and Louisiana. 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 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 PHP APCs 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 median costs 
and the CY 2011 final CMHC median and then adding that number to the CY 
2011 final CMHC median. 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, 
based on these analyses, we might 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 a 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 PHP APCs, as set forth in Sec.  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

[[Page 43620]]

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.'' We used 1996 data (in 
addition to 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.''
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized our proposal to base the relative payment weights that 
underpin the OPPS APCs, including the four PHP APCs, on geometric means 
rather than on the medians. For CY 2013, we established 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. We 
refer readers to the CY 2013 OPPS/ASC final rule with comment period 
for a more detailed discussion (77 FR 68406 through 68412).

B. Proposed PHP APC Update for CY 2014

    For CY 2014, we are proposing to apply our established policies to 
calculate the four PHP APC per diem payment rates based on geometric 
mean per diem costs using the most recent claims data for each provider 
type. 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) PHP services using only CY 2012 CMHC claims data, and proposed 
hospital-based PHP APC geometric mean per diem costs for Level I and 
Level II PHP services using only CY 2012 hospital-based PHP claims 
data. These proposed geometric mean per diem costs are shown in Table 
30 below.

  Table 30--Proposed CY 2014 Geometric Mean Per Diem Costs for CMHC and
        Hospital-Based PHP Services, Based on CY 2012 Claims Data
------------------------------------------------------------------------
                                                               Proposed
                                                              geometric
           APC                        Group title              mean per
                                                              diem costs
------------------------------------------------------------------------
0172.....................  Level I Partial Hospitalization        $94.51
                            (3 services) for CMHCs.
0173.....................  Level II Partial Hospitalization       106.20
                            (4 or more services) for CMHCs.
0175.....................  Level I Partial Hospitalization        212.85
                            (3 services) for hospital-based
                            PHPs.
0176.....................  Level II Partial Hospitalization       215.13
                            (4 or more services) for
                            hospital-based PHPs.
------------------------------------------------------------------------

    For CY 2014, the proposed geometric mean per diem costs for days 
with 3 services (Level I) is approximately $94.51 for CMHCs and 
approximately $212.85 for hospital-based PHPs. The proposed geometric 
mean per diem costs for days with 4 or more services (Level II) is 
approximately $106.20 for CMHCs and approximately $215.13 for hospital-
based PHPs. Therefore, the proposed geometric mean per diem costs for 
CMHCs continue to be substantially lower than the proposed geometric 
mean per diem costs for hospital-based PHPs for the same level of 
service provided, which indicates that there continues to be 
fundamental differences between the cost structures of CMHCs and 
hospital-based PHPs.
    The CY 2014 proposed geometric mean per diem costs for CMHCs 
calculated under the proposed CY 2014 methodology using CY 2012 claims 
data have remained relatively constant when compared to the CY 2013 
final geometric mean per diem costs for CMHCs established in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68412), with 
proposed geometric mean per diem costs for Level I PHP services 
increasing from approximately $87 to approximately $95 for CY 2014, and 
proposed geometric mean per diem costs for Level II PHP services 
decreasing from approximately $113 to approximately $106 for CY 2014.
    The CY 2014 proposed geometric mean per diem costs for hospital-
based PHPs calculated under the proposed CY 2014 methodology using CY 
2012 claims data show more variation when compared to the CY 2013 final 
geometric mean per diem costs for hospital-based PHPs, with proposed 
geometric mean per diem costs for Level I PHP services increasing from 
approximately $186 to approximately $213 for CY 2014, and proposed 
geometric mean per diem costs for Level II PHP services decreasing from 
approximately $235 to approximately $215 for CY 2014.
    In summary, the proposed CY 2014 geometric mean per diem costs for 
the PHP APCs are shown in Tables 31 and 32 below. We are inviting 
public comments on these proposals.

  Table 31--Proposed CY 2014 Geometric Mean per Diem Costs for CMHC PHP
                                Services
------------------------------------------------------------------------
                                                               Proposed
                                                              geometric
           APC                        Group title              mean per
                                                              diem costs
------------------------------------------------------------------------
0172.....................  Level I Partial Hospitalization        $94.51
                            (3 services) for CMHCs.
0173.....................  Level II Partial Hospitalization       106.20
                            (4 or more services) for CMHCs.
------------------------------------------------------------------------


[[Page 43621]]


 Table 32--Proposed CY 2014 Geometric Mean per Diem Costs for Hospital-
                           Based PHP Services
------------------------------------------------------------------------
                                                               Proposed
                                                              geometric
           APC                        Group title              mean per
                                                              diem costs
------------------------------------------------------------------------
0175.....................  Level I Partial Hospitalization       $212.85
                            (3 services) for Hospital-based
                            PHPs.
0176.....................  Level II Partial Hospitalization       215.13
                            (4 or more services) for
                            Hospital-based PHPs.
------------------------------------------------------------------------

C. Discussion of Possible Future Initiatives and Request for Public 
Comments

    We are considering a number of possible future initiatives that may 
help to ensure the long-term stability of PHPs and further improve the 
accuracy of payment for PHP services. Along with our broad, ongoing 
objectives of ensuring stability of the PHP benefit and promoting 
payment accuracy for PHPs, we want to ensure that PHPs are used by 
individuals who are specifically in need of such services. The PHP 
benefit was designed to assist individuals with an acute exacerbation 
of a psychiatric illness to manage debilitating symptoms and prevent 
the need for admission and readmission into hospitals. Accordingly, we 
are considering a number of possible future modifications to certain 
aspects of the PHP benefit. We are not proposing new Medicare policy in 
this discussion of possible future modifications. Instead, we are 
requesting public comments on possible future initiatives.
    Under the current methodology, we use the most recent claims data 
to compute geometric mean per diem costs for Level I (3 services per 
day) and Level II (4 or more services per day) PHP services for CMHCs 
and for hospital-based PHPs. We are interested in examining the payment 
structure for PHP services to determine alternative methodologies to 
pay for PHP services that would reduce unnecessary care while 
maintaining or increasing the quality of care. We are inviting public 
comments on alternative payment methodologies.
    One of the areas on which we would like to receive public comments 
is whether payment based on an episode of care, or a per diem similar 
to the inpatient psychiatric facility (IPF) PPS, would result in more 
appropriate payment for PHP services than the current payment 
structure. The IPF PPS is a per diem prospective payment system for 
inpatient psychiatric hospital services furnished in psychiatric 
hospitals, and psychiatric units in acute care hospitals and critical 
access hospitals. The IPF PPS base rate is adjusted to account for 
patient and facility characteristics that contribute to higher costs 
per day, including age, diagnosis-related group assignment, 
comorbidities, days of the stay, geographic wage area, rural location, 
teaching status, cost of living for IPFs located in Alaska and Hawaii, 
and the presence of a qualifying emergency department. The IPF PPS 
methodology includes a payment provision for interrupted stays, 
additional payment for outlier cases, and a per treatment payment for 
electroconvulsive therapy (ECT) treatments. For detailed information 
regarding the implementation of the IPF PPS, we refer readers to the FY 
2005 IPF PPS final rule published in the Federal Register on November 
15, 2004 (69 FR 66922). To find additional information about the IPF 
PPS, we refer readers to the CMS Web site at: http://www.cms.hhs.gov/inpatientpsychfacilpps.
    Another area on which we would like to receive public comments is 
on physician certification/recertification that the individual would 
require inpatient psychiatric care in the absence of PHP services. In 
order for a hospital or CMHC to be paid for partial hospitalization 
services on behalf of a Medicare beneficiary, a physician must certify 
(and recertify when such services are furnished over a period of time), 
among other things, that the individual would require inpatient 
psychiatric care in the absence of such services. In addition, an 
individualized written plan of treatment for furnishing such services 
must be established and reviewed periodically by a physician, and such 
services must be furnished while the individual is under the care of a 
physician (We refer readers to 42 CFR 424.24(e)).
    Currently, the recertification requirements specify that the 
physician recertification must be signed by a physician who is treating 
the patient and has knowledge of the patient's response to treatment. 
The recertification is required as of the 18th day of partial 
hospitalization services. Subsequent recertifications are required at 
intervals established by the provider, but no less frequently than 
every 30 days. We are inviting public comments on whether the current 
requirement under Sec.  424.24(e)(3)(ii) of the regulations, which 
requires the first recertification by the physician to be as of the 
18th day of partial hospitalization services, reflects current PHP 
treatment practices. Specifically, we are interested in whether the 
first recertification date should be changed to some other standard 
that accords with best practices and why.
    With respect to the individualized written plan of treatment for 
furnishing partial hospitalization services, as discussed above, a 
physician must establish and periodically review the written plan of 
treatment. The written plan of treatment sets forth the physician's 
diagnosis, the type, amount, duration, and frequency of the services, 
and the treatment goals under the written plan. The physician 
determines the frequency and duration of the PHP services taking into 
account accepted norms of medical practice and a reasonable expectation 
of improvement in the patient's condition. (We refer readers to Sec.  
424.24(e)(2) of the regulations.) We are interested in what 
requirements should be included in the written plan of treatment to 
better direct PHP resources toward appropriate discharge and follow-up 
with appropriate support services. Specifically, we are inviting public 
comments on two issues: (1) The best way that discharge from a PHP be 
expedited for those individuals no longer at risk of inpatient 
psychiatric hospitalization; and (2) whether the written plan of 
treatment requirements under Sec.  424.24(e)(2)(i)(C), which require 
that the written plan of treatment set forth the treatment goals, 
should be revised to require that specific actions be taken by the 
physician and/or staff to assist a beneficiary in transitioning from a 
PHP to a lower level of care. For example, we are interested in whether 
the written plan of treatment should require that, upon discharge, 
patients have written instructions that include:
     A full list of their medications, dosages and any 
necessary prescriptions;
     Their next scheduled appointment with a psychiatrist or 
qualified practitioner who may bill for his or her professional 
services under Medicare Part B, including the phone number,

[[Page 43622]]

address, and appointment date and time;
     Confirmed place to live in a stable environment with 
support services; and
     Other care coordination information.
    We also are interested in receiving public feedback about quality 
measures for a PHP. Quality health care is a high priority for CMS. We 
implement quality initiatives to ensure quality health care for 
Medicare beneficiaries through accountability and public disclosure. We 
use quality measures under various quality initiatives, which utilize 
pay-for-reporting and public reporting mechanisms. We are requesting 
public comments on quality measures for PHP services for future 
consideration. Specifically, if we were to establish quality measures 
for PHP services and require quality data reporting, what should be 
included in those measures? In addition, should the quality measures be 
similar or identical to those measures established for IPFs under the 
IPF Quality Reporting (IPFQR) Program?
    We would appreciate feedback on all of these areas for future 
consideration. Therefore, we are inviting public comments on these 
issues.

D. Proposed Separate Threshold for Outlier Payments to CMHCs

    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), after examining the costs, charges, and 
outlier payments for CMHCs, we believed that establishing a separate 
OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific 
outlier policy would direct OPPS outlier payments towards genuine cost 
of outlier cases, and address situations where charges were being 
artificially increased to enhance outlier payments. We created a 
separate outlier policy that would be specific to the estimated costs 
and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/
ASC final rule with comment period, we established an outlier 
reconciliation policy to comprehensively address charging aberrations 
related to OPPS outlier payments (73 FR 68594 through 68599). 
Therefore, beginning for CY 2004, 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, and established a separate outlier 
threshold for CMHCs.
    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 that this 
difference in outlier payments indicates that the separate outlier 
threshold for CMHCs has been successful in keeping outlier payments to 
CMHCs in line with the percentage of OPPS payments made to CMHCs.
    In this CY 2014 OPPS/ASC proposed rule, we are proposing to 
continue designating a portion of the estimated 1.0 percent outlier 
target amount specifically for CMHCs, consistent with the percentage of 
projected payments to CMHCs under the OPPS in CY 2014, excluding 
outlier payments. CMHCs are projected to receive 0.18 percent of total 
OPPS payments in CY 2014, excluding outlier payments. Therefore, we are 
proposing to designate 0.0018 percent of the estimated 1.0 percent 
outlier target amount for CMHCs, and establish a threshold to achieve 
that level of outlier payments. Based on our simulations of CMHC 
payments for CY 2014, we are proposing to continue to set the threshold 
for CY 2014 at 3.40 times the highest CMHC PHP APC payment rate (that 
is, APC 0173 (Level II Partial Hospitalization)). We continue to 
believe that this approach would neutralize the impact of inflated CMHC 
charges on outlier payments and better target outlier payments to those 
truly exceptionally high-cost cases that might otherwise limit 
beneficiary access. In addition, we are proposing to continue to apply 
the same outlier payment percentage that applies to hospitals. 
Therefore, for CY 2014, we are proposing to continue to pay 50 percent 
of CMHC per diem costs over the threshold. In section II.G. of this 
proposed rule, for the hospital outpatient outlier payment policy, we 
are proposing to set a dollar threshold in addition to an APC 
multiplier threshold. Because the PHP APCs are the only APCs for which 
CMHCs may receive payment under the OPPS, we would not expect to 
redirect outlier payments by imposing a dollar threshold. Therefore, we 
are not proposing to set a dollar threshold for CMHC outlier payments.
    In summary, we are proposing to establish that if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 or APC 
0173, exceeds 3.40 times the payment 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. We are inviting 
public comments on these proposals.

IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

    We refer readers to the CY 2012 OPPS/ASC 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. Proposed Changes to the Inpatient List

    For the CY 2014 OPPS, we are proposing 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 identify any procedures that 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 did not identify any procedures that 
potentially could be removed from the inpatient list for CY 2014. 
Therefore, we are proposing to not remove any procedures from the 
inpatient list for CY 2014.
    The complete list of codes that we are proposing to be paid by 
Medicare in CY 2014 only as inpatient procedures is included as 
Addendum E to this proposed rule (which is available via the Internet 
on the CMS Web site).

[[Page 43623]]

X. Proposed Nonrecurring Policy Changes

A. Supervision of Hospital Outpatient Therapeutic Services

1. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we clarified that direct supervision is required for 
hospital outpatient therapeutic services covered and paid by Medicare 
in hospitals as well as in provider-based departments of hospitals, as 
set forth in the CY 2000 OPPS final rule with comment period (65 FR 
18525). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60575 through 60591), we finalized a technical correction to the title 
and text of the applicable regulations at 42 CFR 410.27 to clarify that 
this standard applies in CAHs as well as hospitals. In response to 
concerns expressed by the hospital community, in particular CAHs and 
small rural hospitals, that they would have difficulty meeting this 
standard, on March 15, 2010, we instructed all Medicare contractors not 
to evaluate or enforce the supervision requirements for therapeutic 
services provided to outpatients in CAHs from January 1, 2010 through 
December 31, 2010, while the agency revisited the supervision policy 
during the CY 2011 OPPS/ASC rulemaking cycle.
    Due to continued concerns expressed by CAHs and small rural 
hospitals, we extended this notice of nonenforcement (``enforcement 
instruction'') as an interim measure for CY 2011, and expanded it to 
apply to small rural hospitals having 100 or fewer beds (75 FR 72007). 
We continued to consider the issue further in our annual OPPS notice-
and-comment rulemaking, and implemented an independent review process 
to obtain advice from the Hospital Outpatient Payment Panel (the Panel) 
on this matter (76 FR 74360 through 74371). Under this process used 
since CY 2012, the Panel considers and advises CMS regarding 
stakeholder requests for changes in the required level of supervision 
of individual hospital outpatient therapeutic services. We extended the 
enforcement instruction the past 2 years (through CY 2012 and CY 2013) 
to provide hospitals with adequate opportunity to become familiar with 
the new independent review process and submit evaluation requests, and 
to meet the required supervision levels for all hospital outpatient 
therapeutic services (we refer readers to 76 FR 74371 and 77 FR 68425). 
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426), 
we stated that we expect CY 2013 to be the final year that the 
enforcement instruction would be in effect, as during this year there 
would be 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 current enforcement instruction is 
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.
    In CY 2012 and CY 2013, the Panel met and considered several 
requests from CAHs and other stakeholders for changes in the required 
level of supervision for observation and other services. Based on the 
Panel's recommendations, we modified our supervision requirements to 
provide that most of the services considered may be furnished under 
general supervision, in accordance with applicable Medicare regulations 
and policies. These decisions are posted on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf. We 
did not receive any requests from stakeholders for evaluation of the 
supervision levels of any other hospital outpatient therapeutic 
services at the March 2013 Panel meeting. We continue to believe that 
direct supervision is the most appropriate level of supervision for 
most hospital outpatient therapeutic services under the ``incident to'' 
provisions of section 1861(s)(2)(B) of the Act, as we discussed in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72006). We 
believe the independent Panel review advisory process has proved an 
effective means for the hospital community to identify hospital 
outpatient therapeutic services that can safely be furnished under 
general supervision, where the supervising practitioner does not have 
to be immediately available in person to provide assistance and 
direction. We encourage hospitals to continue using the Panel process 
for bringing services to CMS' attention that may not require the 
immediate availability of a supervising practitioner, especially where 
it is possible to reduce the burden on the workforce available to small 
rural hospitals and CAHs while ensuring the quality and safety of 
patient care. We encourage hospitals and CAHs to continue using the 
established Panel process to request changes they believe would be 
appropriate in supervision levels for individual hospital outpatient 
therapeutic services. Instructions for submitting evaluation requests 
are available on the Panel Web site at http://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html).
    We believe it is appropriate to allow the enforcement instruction 
to expire at the end of CY 2013, to ensure the quality and safety of 
hospital and CAH outpatient therapeutic services paid by Medicare. For 
CY 2014, we anticipate allowing the enforcement instruction to expire, 
such that all outpatient therapeutic services furnished in hospitals 
and CAHs would require a minimum of direct supervision unless the 
service is on the list of services that may be furnished under general 
supervision or is designated as a nonsurgical extended duration 
therapeutic service (the list of services is available on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf). 
We are interested in receiving public comments on any potential impacts 
on access to care and quality of care for specific services that may 
result from allowing the enforcement instruction to expire at the end 
of CY 2013. We are requesting public comments on specific services for 
which CAHs and small rural hospitals anticipate difficulty furnishing 
the required direct supervision, including specific factors that may 
contribute to the lack of available staff.
2. Supervision Requirements for Observation Services
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71999 
through 72013), we revised the supervision requirements for observation 
services furnished in the hospital by designating observation services 
(HCPCS codes G0378 (Hospital observation services, per hour) and G0379 
(Direct admission of patient for observation care)) as nonsurgical 
extended duration therapeutic services (``extended duration 
services''). As we provided in the CY 2011 OPPS/ASC final rule with 
comment period and 42 CFR 410.27(a)(1)(iv)(E), extended duration 
services require direct supervision at the initiation of the service, 
which may be followed by general supervision for the remainder of

[[Page 43624]]

the service at the discretion of the supervising physician or 
appropriate nonphysician practitioner, once that practitioner has 
determined that the patient is stable. The determination by the 
supervising physician or appropriate nonphysician practitioner that the 
beneficiary is stable and may be transitioned to general supervision 
must be documented in progress notes or in the medical record (75 FR 
72011).
    Since we designated observation services as extended duration 
services, we have received several inquiries from stakeholders 
regarding whether Medicare requires multiple evaluations of the 
beneficiary during the provision of observation services. Specifically, 
stakeholders asked whether, once the supervising physician or 
appropriate nonphysician practitioner transitions the beneficiary to 
general supervision and documents the transition in the medical record, 
Medicare require further assessment of the beneficiary either per hour 
(because observation services are billed per hour) or at some other 
point during provision of the service. We are clarifying that, for 
observation services, if the supervising physician or appropriate 
nonphysician practitioner determines and documents in the medical 
record that the beneficiary is stable and may be transitioned to 
general supervision, general supervision may be furnished for the 
duration of the service. Medicare does not require an additional 
initiation period(s) of direct supervision during the service. We 
believe that this clarification will assist hospitals in furnishing the 
required supervision of observation services without undue burden on 
their staff.

B. Application of Therapy Caps in CAHs

    For outpatient physical therapy (PT), occupational therapy (OT), 
and speech-language pathology (SLP) (collectively, ``outpatient 
therapy'') services covered under Medicare Part B, section 1833(g) of 
the Act applies annual, per beneficiary limitations on incurred 
expenses, commonly referred to as ``therapy caps.'' There is one 
therapy cap for OT services and another separate therapy cap for PT and 
SLP services combined. In the CY 2014 Medicare Physician Fee Schedule 
(MPFS) proposed rule, we are proposing to subject outpatient therapy 
services that are furnished by a CAH to the therapy caps, the 
exceptions process, and the manual medical review process beginning on 
January 1, 2014. The American Taxpayer Relief Act of 2012 (Pub. L. 112-
240) required that therapy services furnished by a CAH during 2013 are 
counted toward the therapy caps using the MPFS rate, and we are 
proposing to continue this methodology for 2014 and subsequent years. 
CAHs would still be paid for therapy services under the reasonable cost 
methodology for CAH outpatient services described at section 1834(g) of 
the Act. We refer readers to the CY 2014 MPFS proposed rule for 
detailed information about the proposed application of the therapy caps 
and related provisions to CAHs. We are including in this CY 2014 OPPS/
ASC proposed rule a reference to this proposal as an additional means 
to direct CAHs' attention to our proposal in the CY 2014 MPFS proposed 
rule. We refer readers to the CY 2014 MPFS proposed rule for 
instructions for submitting public comments related to this proposal to 
apply the therapy cap to services furnished by CAHs. We look forward to 
reviewing the comments on this proposal.

C. Requirements for Payment of Outpatient Therapeutic (``Incident To'') 
Hospital or CAH Services

1. Overview
    In this section, we are proposing to amend the Medicare conditions 
of payment for therapeutic outpatient hospital or CAH services and 
supplies furnished ``incident to'' a physician's or nonphysician 
practitioner's service (which we refer to as hospital or CAH outpatient 
therapeutic services) to require that individuals furnishing these 
services do so in compliance with applicable State law. Under current 
policy, we generally defer to hospitals to ensure that State scope of 
practice and other State rules relating to health care delivery are 
followed, such that these services are performed only by qualified 
personnel in accordance with all applicable laws and regulations. We 
are proposing to revise the existing regulations to explicitly require 
that individuals who perform hospital or CAH outpatient therapeutic 
services must do so in compliance with applicable State laws and 
regulations as a condition of payment under Medicare Part B. In this 
section of this proposed rule, we are using the term ``hospital'' to 
include a CAH unless otherwise specified. Although the term 
``hospital'' does not generally include a CAH, section 1861(e) of the 
Act provides that the term ``hospital'' includes a CAH if the context 
otherwise requires. We believe it would be appropriate to apply our 
proposed policy regarding compliance with applicable State law, as we 
do for other conditions of payment for hospital outpatient therapeutic 
services, to CAHs as well as other hospitals.
2. Background
    Section 1861(s)(2)(B) of the Act establishes the benefit category 
for hospital ``incident to'' medical and other health services, which 
are paid under Medicare Part B. The statute specifies that ``incident 
to'' services are ``hospital services (including drugs and biological 
which are not usually self-administered by the patient) incident to 
physicians' services rendered to outpatients and partial 
hospitalization services incident to such services.'' In the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74369 through 74370), we 
clarified that Medicare defines these services as hospital outpatient 
therapeutic services, which are, according to our policy, furnished 
``incident to'' a physician's service even when described by benefit 
categories other than the specific ``incident to'' provision in section 
1861(s)(2)(B) of the Act (for example, radiation therapy services 
described under section 1861(s)(4) of the Act). Because hospital 
outpatient therapeutic services are furnished ``incident to'' a 
physician's professional service, we believe the conditions of payment 
that derive from the ``incident to'' nature of the services paid under 
section 1861(s)(2)(B) of the Act apply to all hospital outpatient 
therapeutic services, including those described under benefit 
categories other the specific ``incident to'' provision in section 
1861(s)(2)(B) of the Act.
    In addition to the requirements of the statute, the regulation at 
42 CFR 410.27 sets forth specific requirements that must be met in 
order for hospital to be paid under Medicare Part B for therapeutic 
hospital or CAH services and supplies furnished incident to a 
physician's or nonphysician practitioner's service (hospital or CAH 
outpatient therapeutic services). Section 410.27 describes hospital or 
CAH services and supplies furnished incident to a physician's or 
nonphysician practitioner's services as therapeutic services and 
provides the conditions of payment. Specifically, Sec.  410.27(a) 
provides that Medicare Part B pays for therapeutic hospital or CAH 
services and supplies furnished incident to a physician's or 
nonphysician practitioner's service. These are defined, in part, as all 
services and supplies furnished to hospital or CAH outpatients that are 
not diagnostic services and that aid the physician or nonphysician 
practitioner in the treatment of the patient, including drugs and 
biologicals that cannot be self-administered, if they are furnished--
     By or under arrangements made by the participating 
hospital or CAH,

[[Page 43625]]

except in the case of a SNF resident as provided in 42 CFR 411.15(p);
     As an integral although incidental part of a physician's 
or nonphysician practitioner's services;
     In the hospital or CAH or in a department of the hospital 
or CAH, as defined in 42 CFR 413.65 [a provider-based department]; and
     Under the direct supervision (or other level of 
supervision as specified by CMS for the particular service) of a 
physician or a nonphysician practitioner. For purposes of this section, 
``nonphysician practitioner,'' as defined in Sec.  410.27(g), means a 
clinical psychologist, licensed clinical social worker, physician 
assistant, nurse practitioner, clinical nurse specialist, or certified 
nurse-midwife.
    Sections 410.27(b) through (f) provide additional conditions of 
payment for partial hospitalization services, drugs and biologicals, 
emergency services, and services furnished by an entity other than the 
hospital (or CAH). We commonly refer to the services described in Sec.  
410.27 as ``incident to'' services.
    In recent years, we have discussed and refined the supervision 
regulations under Sec.  410.27, which are conditions of Medicare Part B 
payment for hospital outpatient ``incident to'' (``therapeutic'') 
services. For example, we have discussed our belief that direct 
supervision is the most appropriate level of supervision for most of 
these services, unless personal supervision or personal performance of 
the services by the physician or nonphysician practitioner is more 
appropriate, given the incident to nature of the services as an 
integral although incidental part of a physician's or nonphysician 
practitioner's services (74 FR 60584, 75 FR 72006, and 76 FR 42281). We 
have stated our historical interpretation of section 1861(s)(2)(B) of 
the Act, specifically, that ``incident to'' services are furnished 
under the order of a physician (or nonphysician practitioner), the 
physician is involved in the management of the patient, and the 
physician supervises the provision of those services when he or she 
does not provide them directly (75 FR 72006). This is reflected in our 
requirement for a minimum of direct supervision, except for a limited 
set of services that may be furnished under general supervision or are 
designated as nonsurgical extended duration therapeutic services which 
require direct supervision initially with potential transition to 
general supervision (we refer readers to the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf).
    In 42 CFR 410.27(a)(1)(iv), we regulate the qualifications of 
physicians and nonphysician practitioners supervising other personnel 
that are personally performing a service, or part of a service: ``(C) 
Nonphysician practitioners may provide the required supervision of 
services that they may personally furnish in accordance with State law 
and all additional requirements, including those specified in 
Sec. Sec.  410.71, 410.73, 410.74, 410.75, 410.76, and 410.77'' and 
``(D) For pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services, direct supervision must be 
furnished by a doctor of medicine or a doctor of osteopathy, as 
specified in Sec. Sec.  410.47 and 410.49, respectively.''
    Similarly, we provide in the Medicare Benefit Policy Manual (MBPM, 
Pub. 100-02) that hospital outpatient therapeutic services and supplies 
must be furnished under the order of a physician or other practitioner 
practicing within the extent of the Act, the Code of Federal 
Regulations, and State law (Chapter 6, Section 20.5.2 of the MBPM). 
Section 20.5.2 of the MBPM specifies that the services must be 
furnished by hospital personnel under the appropriate supervision of a 
physician or nonphysician practitioner in accordance with 42 CFR 410.27 
and 482.12. This does not mean that each occasion of service by a 
nonphysician need also be the occasion of the actual rendition of a 
personal professional service by the physician responsible for care of 
the patient. However, during any course of treatment rendered by 
auxiliary personnel, the physician must personally see the patient 
periodically and sufficiently often to assess the course of treatment 
and the patient's progress and, when necessary, to change the treatment 
regimen. A hospital service or supply would not be considered incident 
to a physician's service if the attending physician merely wrote an 
order for the services or supplies and referred the patient to the 
hospital without being involved in the management of that course of 
treatment.
    Central to the issue of services that hospitals may bill to 
Medicare that are not performed personally by the physician is the 
assessment of the qualifications of the individuals to whom the 
services are delegated. As medical practice has evolved over time, the 
services performed in the hospital outpatient setting have expanded to 
include more complicated services such as advanced surgery and a 
complex variety of radiation therapy. In addition, the types of 
services that can be furnished ``incident to'' a physician's or 
nonphysician practitioner's services have increased. Under current 
Medicare Part B payment policy, we generally defer to hospitals to 
ensure that State scope of practice laws are followed and that the 
personnel who furnish hospital outpatient therapeutic (``incident to'') 
services are licensed and are otherwise qualified to do so. 
Specifically, we have stated that, considering that hospitals furnish a 
wide array of complex outpatient services and procedures, including 
surgical procedures, we would expect that hospitals have the 
credentialing procedures, bylaws, and other policies in place to ensure 
that hospital outpatient services furnished to Medicare beneficiaries 
are being provided only by qualified practitioners in accordance with 
all applicable laws and regulations (74 FR 60584; Chapter 6, Section 
20.5.4 of the MBPM). However, our payment regulations do not contain 
restrictions on the types of auxiliary personnel that can perform 
hospital outpatient therapeutic (``incident to'') services, other than 
rules relating to supervision by a physician or qualified nonphysician 
practitioner, and do not specifically require that performance of these 
services be in compliance with applicable State law. Over the past 
years, several situations have come to our attention where Medicare was 
billed for ``incident to'' services that were performed by an 
individual who did not meet the State standards for those services in 
the State in which services were performed. The physician or 
nonphysician practitioner billing for the services would have been 
permitted under State law to personally furnish the services, but the 
services were actually provided by other individuals who were not in 
compliance with State law in providing the particular services (or 
aspect of the services).
    Although we would expect that all hospital services for which 
Medicare payment is made would be furnished in accordance with State 
law, the Medicare requirements for hospital outpatient therapeutic 
services and supplies incident to a physician's services (Sec.  410.27, 
discussed above) do not specifically make compliance with State law a 
condition of payment for services (or aspects of services) and supplies 
furnished and billed as ``incident to'' services. Nor do any of the 
regulations regarding hospital outpatient therapeutic services and 
supplies incident to the services of nonphysician practitioners contain 
this requirement.

[[Page 43626]]

Thus, Medicare has had limited recourse when hospital outpatient 
therapeutic (``incident to'') services are not furnished in compliance 
with State law.
    In 2009, the Office of the Inspector General (OIG) issued a report 
entitled ``Prevalence and Qualifications of Nonphysicians Who Performed 
Medicare Physician Services'' (OEI-09-06-00430) that considered, in 
part, the qualifications of auxiliary personnel providing ``incident 
to'' physician services. After finding that services were being 
provided and billed to Medicare by auxiliary personnel ``. . . who did 
not possess the required licenses or certifications according to State 
laws, regulations, and/or Medicare rules,'' the OIG recommended that we 
revise the ``incident to'' rules to, among other things, ``require that 
physicians who do not personally perform the services they bill to 
Medicare ensure that no persons except . . . nonphysicians who have the 
necessary training, certification, and/or licensure pursuant to State 
laws, State regulations, and Medicare regulations personally perform 
the services under the direct supervision of a licensed physician.'' We 
are proposing amendments to our regulations in order to address this 
recommendation.
    To ensure that the practitioners and other personnel providing 
hospital outpatient therapeutic services to Medicare beneficiaries 
incident to a physician's or nonphysician practitioner's service do so 
in accordance with the requirements of the State in which the services 
are furnished, and to ensure that Medicare payments can be recovered 
when such services are not furnished in compliance with the State law, 
we are proposing to add a new condition of payment to the ``incident 
to'' regulations at Sec.  410.27, Therapeutic outpatient hospital or 
CAH services and supplies incident to a physician's or nonphysician 
practitioner's service: Conditions. Specifically, we are proposing to 
add a provision under a new paragraph (a)(1)(vi) under Sec.  410.27 to 
provide that ``Medicare Part B pays for therapeutic hospital or CAH 
services and supplies furnished incident to a physician's or 
nonphysician practitioner's service . . . if they are furnished ``In 
accordance with applicable State law.'' The proposed policy would 
recognize the role of States in establishing the licensure and other 
qualifications of physicians and other health care professionals for 
the delivery of hospital (or CAH) outpatient therapeutic services.
    This proposal is consistent with other areas of the Medicare 
program where CMS defers to State rules regarding the delivery of 
hospital services. For example, the hospital conditions of 
participation (CoPs) at 42 CFR 482.12(c)(2) defer to State law in 
determining who can admit patients as inpatients of a hospital: 
``Patients are admitted to the hospital only on the recommendation of a 
licensed practitioner permitted by the State to admit patients to a 
hospital.'' The CoP also provides that, ``If a Medicare patient is 
admitted by a practitioner not specified in paragraph (c)(1) of this 
section (that lists practitioners that must care for Medicare 
patients), that patient is under the care of a doctor of medicine or 
osteopathy.'' Thus, in determining who may admit inpatients to a 
hospital, Medicare defers to State law rules. Also, as we stated in a 
recent rule addressing credentialing and privileging and telemedicine 
services under the CoPs (77 FR 29047): ``CMS recognizes that 
practitioner licensure laws and regulations have traditionally been, 
and continue to be, the provenance of individual States, and we are not 
seeking to preempt State authority in this matter.'' We believe it is 
appropriate to similarly require that all hospital outpatient services 
furnished incident to a physician's or nonphysician practitioner's 
services be furnished in accordance with State law requirements. As 
evidenced by these examples, throughout the Medicare program the 
qualifications required for the delivery of health care services are 
generally determined with reference to State law. In addition to the 
health and safety benefits we believe would accrue to the Medicare 
patient population, this approach would assure that Federal dollars are 
not expended for services that do not meet the standards of the States 
in which they are being furnished, and provides the ability for the 
Federal government to recover funds paid where services and supplies 
are not furnished in accordance with State law.
    This proposal would not impose any new requirements on hospitals 
billing the Medicare program because practitioners and other personnel 
furnishing services in a given State would already be required to 
comply with the laws of that State. This regulatory change would simply 
adopt the existing requirements as a condition of payment under 
Medicare. Codifying this requirement would provide the Federal 
government with a clear basis to deny a claim for Medicare payment when 
services are not furnished in accordance with applicable State law, and 
the ability to recover funds, as well as assure that Medicare pays for 
services furnished to beneficiaries only when the services meet the 
requirements imposed by the States to regulate health care delivery for 
the health and safety of their citizens. We welcome public comments on 
this proposal.
3. Technical Correction
    In our review of Sec.  410.27, we noted that paragraph (a) defines 
therapeutic hospital or CAH services and supplies furnished incident to 
a physician's or nonphysician practitioner's service as ``all services 
and supplies furnished to hospital or CAH outpatients that are not 
diagnostic services and that aid the physician or nonphysician 
practitioner in the treatment of the patient, including drugs and 
biologicals that cannot be self-administered.'' Section 1861(s)(2)(B) 
of the Act describes these services as ``hospital services (including 
drugs and biologicals which are not usually self-administered by the 
patient) incident to physicians' services rendered to outpatients and 
partial hospitalization services incident to such services.'' The 
statute includes in this benefit category ``drugs and biologicals which 
are not usually self-administered by the patient.'' We are proposing to 
make a technical correction that would amend the description of these 
drugs and biologicals at Sec.  410.27(a) to more appropriately reflect 
the statutory language. Specifically, we are proposing to delete the 
phrase ``drugs and biologicals that cannot be self-administered'' and 
replace it with the phrase ``drugs and biologicals which are not 
usually self-administered.'' Under this proposed technical correction, 
the language of Sec.  410.27(a) would read, ``Medicare Part B pays for 
therapeutic hospital or CAH services and supplies furnished incident to 
a physician's or nonphysician practitioner's service, which are defined 
as all services and supplies furnished to hopital or CAH outpatients 
that are not diagnostic services and that aid the physician or 
nonphysician practitioner in the treatment of the patient, including 
drugs and biologicals which are not usually self-administered. . . .''

D. Collecting Data on Services Furnished in Off-Campus Provider-Based 
Departments

    In recent years, the research literature and popular press have 
documented the increased trend toward hospital acquisition of physician 
practices, integration of those practices as a department of the 
hospital, and the resultant increase in the delivery of physicians' 
services in a hospital setting (for example, we refer readers to

[[Page 43627]]

Ostrom, Carol M., ``Why you might pay twice for one visit to a 
doctor,'' Seattle Times, November 3, 2012, and O'Malley, Ann, Amelia M. 
Bond, and Robert Berenson, Rising hospital employment of physicians: 
better quality, higher costs? Issue Brief No. 136, Center for Studying 
Health System Change, August 2011). When a Medicare beneficiary 
receives outpatient services in a hospital, the total payment amount 
for outpatient services made by Medicare is generally higher than the 
total payment amount made by Medicare when a physician furnishes those 
same services in a freestanding clinic or in a physician office. As 
more physician practices become hospital-based, news articles have 
highlighted beneficiary liability for an additional ``facility fee,'' 
which is the payment Medicare makes when services are furnished in a 
hospital in addition to the payment to the physician. MedPAC has 
questioned the appropriateness of increased Medicare payment and 
beneficiary cost-sharing when physicians' offices become hospital 
outpatient departments and has recommended that Medicare pay selected 
hospital outpatient services at the Medicare Physician Fee Schedule 
(MPFS) rates (MedPAC March 2012 Report to Congress; ``Addressing 
Medicare Payment Differences across Settings,'' presentation to the 
Commission on March 7, 2013).
    The total payment (including both Medicare program payment and 
beneficiary cost-sharing) generally is higher when outpatient services 
are furnished in the hospital outpatient setting rather than a 
freestanding clinic or a physician office. Both the OPPS and the MPFS 
establish payment based on the relative resources involved in 
furnishing a service. In general, we expect hospitals to have overall 
higher resource requirements than physician offices because hospitals 
are required to meet the conditions of participation, to maintain 
standby capacity for emergency situations, and to be available to 
address a wide variety of complex medical needs in a community. When 
services are furnished in the hospital setting such as in off-campus 
provider-based departments, Medicare pays the physician a lower 
facility payment under the MPFS, but then also pays the hospital under 
the OPPS. The beneficiary pays coinsurance for both the physician 
payment and the hospital outpatient payment. The term ``facility fee'' 
refers to this additional hospital outpatient payment.
    Upon acquisition of a physician practice, hospitals frequently 
treat the practice locations as off-campus provider-based departments 
of the hospital and bill Medicare for services furnished at those 
locations under the OPPS. (For further information on the provider-
based regulations at Sec.  413.65, we refer readers to http://www.gpo.gov/fdsys/pkg/CFR-2010-title42-vol2/pdf/CFR-2010-title42-vol2-sec413-65.pdf. Since October 1, 2002, we have not required hospitals to 
seek from CMS a determination of provider-based status for a facility 
that is located off campus. We also do not have a formal process for 
gathering information on the frequency, type, and payment for services 
furnished in off-campus provider-based departments of the hospital.
    In order to better understand the growing trend toward hospital 
acquisition of physician offices and subsequent treatment of those 
locations as off-campus provider-based outpatient departments, we are 
considering collecting information that would allow us to analyze the 
frequency, type, and payment for services furnished in off-campus 
provider-based hospital departments. We have considered several 
potential methods. Claims-based approaches could include creating a 
HCPCS modifier that could be reported with every code for services 
furnished in an off-campus provider-based department of a hospital on 
the CMS-1500 claim form for physician services and the UB-04 (CMS form 
1450) for hospital outpatient claims. In addition, we have considered 
asking hospitals to break out the costs and charges for their provider-
based departments as outpatient service cost centers on the Medicare 
hospital cost report, form 2552-10. We note that some hospitals already 
break out these costs voluntarily or because of cost reporting 
requirements for the 340B Drug Discount Program but this practice is 
not consistent or standardized. We are inviting public comments on the 
best means for collecting information on the frequency, type, and 
payment for services furnished in off-campus provider-based departments 
of hospitals.

XI. Proposed CY 2014 OPPS Payment Status and Comment Indicators

A. Proposed CY 2014 OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs serve 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 complete list of the 
proposed CY 2014 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. The 
proposed CY 2014 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. The proposed changes to CY 2014 
status indicators and their definitions are discussed in detail below.
    For CY 2014, we are proposing to create a new status indicator 
``J1'' to identify HCPCS codes that are paid under a comprehensive APC. 
A claim with the new proposed status indicator ``J1'' will trigger a 
comprehensive APC payment for the claim. The comprehensive APCs that we 
are proposing to establish are described in detail in section II.A.2.e. 
of this proposed rule.
    For CY 2014, we are proposing to delete status indicator ``X'' and 
assign ancillary services that are currently assigned status indicator 
``X'' to either status indicator ``Q1'' or ``S''. First, services that 
are proposed to be assigned status indicator ``Q1'' include many minor 
diagnostic tests that are generally ancillary to and performed with 
another service. However, services that are proposed to be assigned to 
status indicator ``Q1'' also may be performed alone. Given the nature 
of these services and their role in hospital outpatient care, we 
believe that when these services are performed with another service 
they should be packaged, but that they should be separately paid when 
performed alone. Therefore, we believe it is appropriate to 
conditionally package all ancillary services that are currently 
assigned to status indicator ``X,'' and are proposing to assign them to 
status indicator ``Q1.'' We also are proposing that preventive services 
currently assigned status indicator ``X'' continue to receive separate 
payment in all cases and be assigned status indicator ``S'' for CY 
2014. These proposed changes are discussed in greater detail in section 
II.A.3. of this proposed rule. In addition, we are proposing to revise 
the definition of status indicator ``Q1'' by removing status indicator 
``X'' from the packaging criteria, so that codes assigned status 
indicator ``Q1'' are STV-packaged, rather than STVX-packaged, because 
status indicator ``X'' is proposed for deletion.

[[Page 43628]]

    For CY 2014, we are proposing to revise the definitions of status 
indicators ``S'' and ``T'' to remove the word ``significant'' from 
these definitions. It is no longer necessary to distinguish significant 
procedures from ancillary services because we are proposing to delete 
the status indicator that describes ancillary services. We also are 
proposing to add the word ``service'' to the definitions of status 
indicators ``S'' and ``T'' to indicate ``procedure or service; not 
discounted when multiple,'' as applicable to status indicator ``S'' and 
``procedure or service; multiple reduction applies,'' as applicable to 
status indicator ``T.''
    In addition, we are proposing to update the definition of status 
indicator ``A'' for CY 2014. We are proposing to remove ``Routine 
Dialysis Services for ESRD Patients Provided in a Certified Dialysis 
Unit of a Hospital'' from the list of items and services applicable for 
the definition of status indicator ``A'' because these services are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type and are instead assigned to status indicator ``B.''

B. Proposed CY 2014 Comment Indicator Definitions

    For the CY 2014 OPPS, we are proposing to use the same two comment 
indicators that are in effect for the CY 2013 OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
    We are proposing to use the ``CH'' comment indicator in this CY 
2014 OPPS/ASC proposed rule to indicate HCPCS codes for which the 
status indicator or APC assignment, or both, are proposed for change in 
CY 2014 compared to their assignment as of June 30, 2013. We believe 
that using the ``CH'' indicator in this proposed rule would facilitate 
the public's review of the changes that we are proposing for CY 2014. 
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 2014 OPPS/ASC final rule with comment period.
    We are proposing to use the ``CH'' comment indicator in the CY 2014 
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 2014 compared to their assignment as of December 31, 2013.
    In addition, we are proposing that any existing HCPCS codes with 
substantial revisions to the code descriptors for CY 2014 compared to 
the CY 2013 descriptors will be labeled with comment indicator ``NI'' 
in Addendum B to the CY 2014 OPPS/ASC final rule with comment period. 
However, in order to receive the comment indicator ``NI,'' the CY 2014 
revision to the code descriptor (compared to the CY 2013 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 will be 
open for comment as part of the CY 2014 OPPS/ASC final rule with 
comment period. Like all codes labeled with comment indicator ``NI,'' 
we will respond to public comments and finalize their OPPS treatment in 
the CY 2015 OPPS/ASC final rule with comment period.
    In accordance with our usual practice, we are proposing that CPT 
and Level II HCPCS codes that are new for CY 2014 also will be labeled 
with comment indicator ``NI'' in Addendum B to the CY 2014 OPPS/ASC 
final rule with comment period.
    Only HCPCS codes with comment indicator ``NI'' in the CY 2014 OPPS/
ASC final rule with comment period will be subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in the CY 2014 
OPPS/ASC final rule with comment period will not be open to public 
comment, unless we specifically request additional comments elsewhere 
in the final rule with comment period.
    We believe that the CY 2013 definitions of the OPPS status 
indicators continue to be appropriate for CY 2014. Therefore, we are 
proposing to continue to use those definitions without modification for 
CY 2014. The proposed 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.

XII. Proposed 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) and the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68434 through 68467).
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 in an ASC 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 
to be furnished to 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

[[Page 43629]]

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 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 ASCs 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 XII.B. of this proposed rule, because we 
base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, we also provide quarterly 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, 
these quarterly 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 ASC covered surgical procedures and covered ancillary 
services, as well as their payment rates, in association with the 
annual OPPS rulemaking cycle is particularly important because the OPPS 
relative payment weights and, in some cases, payment rates, are used as 
the basis for the payment of covered surgical procedures and covered 
ancillary services under the revised ASC payment system. This joint 
update process ensures that the ASC updates occur in a regular, 
predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    Category I CPT, Category III 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 are proposing to solicit public comments in this CY 2014 
OPPS/ASC proposed rule (and respond to those comments in the CY 2014 
OPPS/ASC final rule with comment period) or whether we will be 
soliciting public comments in the CY 2014 OPPS/ASC final rule with 
comment period (and responding to those comments in the CY 2015 OPPS/
ASC final rule with comment period).
    We note that we sought public comment in the CY 2013 OPPS/ASC final 
rule with comment period on the new Category I and III CPT and Level II 
HCPCS codes that were effective January 1, 2013. We also sought public 
comment in the CY 2013 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2012. These new codes, 
with an effective date of October 1, 2012, or January 1, 2013, were 
flagged with comment indicator ``NI'' in Addenda AA and BB to the CY 
2013 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 2013 OPPS/ASC final rule with comment period. We will respond 
to public comments and finalize the treatment of these codes under the 
ASC payment system in the CY 2014 OPPS/ASC final rule with comment 
period.
2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April 2013 and July 2013 for Which We Are 
Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed Rule
    In the April 2013 and July 2013 CRs, we made effective for April 1, 
2013 and July 1, 2013, respectively, a total of nine new Level II HCPCS 
codes and two new Category III CPT codes that describe covered ASC 
services that were not addressed in the CY 2013 OPPS/ASC final rule 
with comment period. In the April 2013 ASC quarterly update 
(Transmittal 2662, CR 8237, dated March 1, 2013), we added one new 
surgical Level II HCPCS code and three new drug and biological Level II 
HCPCS codes to the list of covered surgical procedures and covered 
ancillary services, respectively. Table 33 below lists the new Level II 
HCPCS codes that were implemented April 1 2013, along with their 
proposed payment indicators for CY 2014.
    In the July 2013 quarterly update (Transmittal 2717, Change Request 
8328, dated May 31, 2013), we added one new surgical Level II HCPCS 
code to the list of covered surgical procedures and, one new vaccine 
Level II HCPCS code, and three new drug and biological Level II HCPCS 
codes to the list of covered ancillary services. Table 34 below lists 
the new Level II HCPCS codes that were implemented July 1, 2013, along 
with their proposed payment indicators and proposed ASC payment rates 
for CY 2014.
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical

[[Page 43630]]

procedure on the ASC list; payment based on OPPS rate) to the six new 
drug and biological 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) to the new vaccine Level II HCPCS code and payment 
indicator ``G2'' (Non office-based surgical procedure added in CY 2008 
or later; payment based on OPPS relative payment weight) to the two new 
surgical Level II HCPCS codes.
    We are soliciting public comment on the proposed CY 2014 ASC 
payment indicators and payment rates for the covered surgical 
procedures and covered ancillary services listed in Tables 33 and 34 
below. Those HCPCS codes became payable in ASCs, beginning April 1, or 
July 1, 2013, 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 33 are included in Addenda AA or BB 
to this proposed rule (which is available via the Internet on the CMS 
Web site). We note 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 July 1, 2013 (listed 
in Table 34 of this proposed rule) are not available to us in time for 
incorporation into the Addenda to this OPPS/ASC proposed rule, our 
policy is to include these HCPCS codes and their proposed payment 
indicators and payment rates in the preamble to the proposed rule but 
not in the Addenda to the proposed rule. These codes and their final 
payment indicators and rates will be included in the appropriate 
Addendum to the CY 2014 OPPS/ASC final rule with comment period. Thus, 
the codes implemented by the July 2013 ASC quarterly update CR and 
their proposed CY 2014 payment rates (based on July 2013 ASP data) that 
are displayed in Table 34 are not included in Addenda AA or BB to this 
proposed rule (which is available via the Internet on the CMS Web 
site). The final list of ASC covered surgical procedures and covered 
ancillary services and the associated payment weights and payment 
indicators will be included in Addenda AA or BB to the CY 2014 OPPS/ASC 
final rule with comment period, consistent with our annual update 
policy.
    We are soliciting 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 surgical procedures or 
covered ancillary services in April 2013 and July 2013 through the 
quarterly update CRs, as listed in Tables 33 and 34 below. We are 
proposing to finalize their payment indicators and their payment rates 
in the CY 2014 OPPS/ASC final rule with comment period.

  Table 33--New Level II HCPCS Codes for Covered Surgical Procedures or
          Covered Ancillary Services Implemented in April 2013
------------------------------------------------------------------------
                                                             Proposed CY
                                                                 2014
    CY 2013 HCPCS Code          CY 2013 Long descriptor        payment
                                                              indicator
------------------------------------------------------------------------
C9130....................  Injection, immune globulin                 K2
                            (Bivigam), 500 mg.
C9297....................  Injection, omacetaxine                     K2
                            mepesuccinate, 0.01 mg.
C9298....................  Injection, ocriplasmin, 0.125 mg           K2
C9735....................  Anoscopy; with directed                    G2
                            submucosal injection(s), any
                            substance.
------------------------------------------------------------------------


 Table 34--New Level II HCPCS Codes for Covered Surgical Procedures or Covered Ancillary Services Implemented in
                                                    July 2013
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed CY
                                                                           Proposed CY 2014 payment      2014
           CY 2013 HCPCS Code                 CY 2013 Long descriptor              indicator           payment
                                                                                                         rate
----------------------------------------------------------------------------------------------------------------
C9131...................................  Injection, ado-trastuzumab       K2                             $29.40
                                           emtansine, 1 mg.
C9736...................................  Laparoscopy, surgical,           G2                           2,010.00
                                           radiofrequency ablation of
                                           uterine fibroid(s), including
                                           intraoperative guidance and
                                           monitoring, when performed.
Q2033...................................  Influenza Vaccine, Recombinant   L1                                N/A
                                           Himagglutinin Antigens, for
                                           Intramuscular Use (Flublok).
Q2050*..................................  Injection, Doxorubicin           K2                             545.44
                                           Hydrochloride, Liposomal, Not
                                           Otherwise Specified, 10 mg.
Q2051*..................................  Injection, Zoledronic Acid, Not  K2                             196.42
                                           Otherwise Specified, 1 mg.
----------------------------------------------------------------------------------------------------------------
*Note: HCPCS code Q2050 replaced code J9002 and HCPCS code Q2051 replaced HCPCS codes J3487 and J3488 beginning
  July 1, 2013.

    Through the July 2013 quarterly update CR, we also implemented ASC 
payment for two new Category III CPT codes as ASC covered ancillary 
services, effective July 1, 2013. These codes are listed in Table 35 
below, along with their proposed payment indicators and proposed 
payment rates for CY 2014. Because the payment rates associated with 
the new Category III CPT codes that became effective for July are not 
available to us in time for incorporation into the Addenda to this 
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 35 of this proposed rule and their final payment 
indicators and rates will be included in Addendum BB to the CY 2014 
OPPS/ASC final rule with comment period.
    We are proposing to assign payment indicator ``Z2'' (Radiology 
service paid separately when provided integral to a surgical procedure 
on ASC list; payment based on OPPS relative payment weight) to the two 
new Category III CPT codes implemented in July 2013. ASC covered 
ancillary services are certain items and services that are integrally 
related to the provision of ASC covered surgical procedures that are 
paid separately under the OPPS. We are soliciting

[[Page 43631]]

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 ancillary services in July 2013 through the quarterly 
update CR, as listed in Table 35 below. We are proposing to finalize 
their payment indicators and their payment rates in the CY 2014 OPPS/
ASC final rule with comment period.

  Table 35--New Category III CPT Codes Implemented in July 2013 as ASC
                       Covered Ancillary Services
------------------------------------------------------------------------
                                                             Proposed CY
                                           Proposed CY 2014      2014
CY 2013 CPT Code  CY 2013 Long descriptor       payment        payment
                                               indicator         rate
------------------------------------------------------------------------
0331T...........  Myocardial sympathetic   Z2                    $212.08
                   innervation imaging,
                   planar qualitative and
                   quantitative
                   assessment.
0332T...........  Myocardial sympathetic   Z2                     212.08
                   innervation imaging,
                   planar qualitative and
                   quantitative
                   assessment; with
                   tomographic SPECT.
------------------------------------------------------------------------

3. Proposed Process for New Level II HCPCS Codes and Category I and III 
CPT Codes for Which We Will Be Soliciting Public Comments in the CY 
2014 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and Category III CPT codes and new Level II HCPCS codes that 
are effective January 1 in the final rule with comment period updating 
the ASC payment system for the following calendar year. These codes are 
released to the public via the CMS HCPCS (for Level II HCPCS codes) and 
AMA Web sites (for CPT codes), and also through the January ASC 
quarterly update CRs. In the past, we also have released new Level II 
HCPCS codes that are effective October 1 through the October ASC 
quarterly update CRs and incorporated these new codes in the final rule 
with comment period updating the ASC payment system for the following 
calendar year. All of these codes are flagged with comment indicator 
``NI'' in Addenda AA and BB to the OPPS/ASC final rule with comment 
period to indicate that we are assigning them an interim payment status 
which is subject to public comment. The payment indicator and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the OPPS/ASC final rule with 
comment period, and we respond to these comments in the final rule with 
comment period for the next calendar year's OPPS/ASC update.
    We are proposing to continue this process for CY 2014. 
Specifically, for CY 2014, we are proposing to include in Addenda AA 
and BB to the CY 2014 OPPS/ASC final rule with comment period the new 
Category I and III CPT codes effective January 1, 2014, that would be 
incorporated in the January 2014 ASC quarterly update CR and the new 
Level II HCPCS codes, effective October 1, 2013 or January 1, 2014, 
that would be released by CMS in its October 2013 and January 2014 ASC 
quarterly update CRs. These codes would be flagged with comment 
indicator ``NI'' in Addenda AA and BB to the CY 2014 OPPS/ASC final 
rule with comment period to indicate that we have assigned them an 
interim payment status. Their payment indicators and payment rates, if 
applicable, would be open to public comment in the CY 2014 OPPS/ASC 
final rule with comment period and would be finalized in the CY 2015 
OPPS/ASC final rule with comment period.

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

1. Covered Surgical Procedures
a. 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 affected the clinical appropriateness of these procedures for 
the ASC setting. Upon review, we did not identify any procedures that 
are currently excluded from the ASC list of procedures that met the 
definition of a covered surgical procedure based on our expectation 
that they would not pose a significant safety risk to Medicare 
beneficiaries or would require an overnight stay if performed in ASCs. 
Therefore, we are not proposing additions to the list of ASC covered 
surgical procedures for CY 2014.
b. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS 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) Proposed Changes for CY 2014 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this proposed rule, we followed our policy to 
annually review and update the surgical procedures for which ASC 
payment is made and to identify new procedures that may be

[[Page 43632]]

appropriate for ASC payment, including their potential designation as 
office-based. We reviewed CY 2012 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 
2013, as well as for those procedures assigned one of the temporary 
office-based payment indicators, specifically ``P2*,'' ``P3*,'' or 
``R2*'' in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68444 through 68448).
    Our review of the CY 2012 volume and utilization data resulted in 
our identification of three covered surgical procedures that we believe 
meet the criteria for designation as office-based. The data indicate 
that the procedures are performed more than 50 percent of the time in 
physicians' offices, and our medical advisors believe the services are 
of a level of complexity consistent with other procedures performed 
routinely in physicians' offices. The three CPT codes we are proposing 
to permanently designate as office-based are listed in Table 36 below.

Table 36--ASC Covered Surgical Procedures Proposed for Permanent Office-
                      Based Designation for CY 2014
------------------------------------------------------------------------
                                                           Proposed CY
 CY 2013  CPT        CY 2013 Long         CY 2013 ASC        2014 ASC
     Code             descriptor            Payment          payment
                                           indicator        indicator*
------------------------------------------------------------------------
26341.........  Manipulation, palmar    G2               P3
                 fascial cord (ie,
                 dupuytren's cord),
                 post enzyme injection
                 (eg, collagenase),
                 single cord.
37761.........  Ligation of perforator  G2               R2
                 vein(s), subfascial,
                 open, including
                 ultrasound guidance,
                 when performed, 1 leg.
36595.........  Mechanical removal of   G2               P3
                 pericatheter
                 obstructive material
                 (eg, fibrin sheath)
                 from central venous
                 device via separate
                 venous access.
------------------------------------------------------------------------
*Proposed payment indicators are based on a comparison of the proposed
  rates according to the ASC standard ratesetting methodology and the
  MPFS proposed rates. According to the statutory formula, current law
  requires a negative update to the MPFS payment rates for CY 2014. For
  a discussion of those rates, we refer readers to the CY 2014 MPFS
  proposed rule.

    We invite public comment on this proposal.
    We also reviewed CY 2012 volume and utilization data and other 
information for the eight procedures finalized for temporary office-
based status in Table 51 and Table 53 in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68442, 68446 through 68448). Among 
these eight procedures, there were very few claims data for four 
procedures: CPT code 0099T (Implantation of intrastromal corneal ring 
segments); CPT code 0124T (Conjunctival incision with posterior 
extrascleral placement of pharmacological agent (does not include 
supply of medication)); CPT code 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 (e.g., retinopathy of 
prematurity), photocoagulation or cryotherapy). Consequently, we are 
proposing to maintain their temporary office-based designations for CY 
2014.
    The volume and utilization data for one procedure that has a 
temporary office-based designation for CY 2013, CPT code 0227T 
(Anoscopy, high resolution (HRA) (with magnification and chemical agent 
enhancement); with biopsy(ies)), is sufficient to indicate that this 
procedure is not performed predominantly in physicians' offices and, 
therefore, should not be assigned an office-based payment indicator in 
CY 2014. Consequently, we are proposing to assign payment indicator 
``G2'' to this covered surgical procedure code in CY 2014.
    The three remaining procedures that have temporary office-based 
designations for CY 2013 are proposed to be packaged under the OPPS for 
CY 2014 as discussed in section II.A.3. of this proposed rule. 
Consequently, we are proposing the assign payment indicator ``N1'' to 
the following three covered surgical procedure codes in CY 2014:
     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 0299T (Extracorporeal shock wave for 
integumentary wound healing, high energy, including topical application 
and dressing care; initial wound); and
     CPT code 0300T (Extracorporeal shock wave for 
integumentary wound healing, high energy, including topical application 
and dressing care; each additional wound (list separately in addition 
to code for primary procedure)).
    The proposed CY 2014 payment indicator designations for the eight 
procedures that were temporarily designated as office-based in CY 2013 
are displayed in Table 37 below. The procedures for which the proposed 
office-based designations for CY 2014 are temporary also are indicated 
by asterisks in Addendum AA to this proposed rule (which is available 
via the Internet on the CMS Web site).

 Table 37--Proposed CY 2014 Payment Indicators for ASC Covered Surgical
 Procedures Designated as Temporarily Office-Based in the CY 2013 OPPS/
                   ASC Final Rule With Comment Period
------------------------------------------------------------------------
                                                           Proposed CY
  CY 2013 CPT        CY 2013 Long         CY 2013 ASC        2014 ASC
     Code             descriptor            payment          payment
                                           indicator       indicator**
------------------------------------------------------------------------
0099T.........  Implantation of         R2*              R2*
                 intrastromal corneal
                 ring segments.

[[Page 43633]]

 
0124T.........  Conjunctival incision   R2*              R2*
                 with posterior
                 extrascleral
                 placement of
                 pharmacological agent
                 (does not include
                 supply of medication).
0226T.........  Anoscopy, high          R2*              N1
                 resolution (HRA)
                 (with magnification
                 and chemical agent
                 enhancement);
                 diagnostic, including
                 collection of
                 specimen(s) by
                 brushing or washing
                 when performed.
0227T.........  Anoscopy, high          R2*              G2
                 resolution (HRA)
                 (with magnification
                 and chemical agent
                 enhancement); with
                 biopsy(ies).
0299T.........  Extracorporeal shock    R2*              N1
                 wave for
                 integumentary wound
                 healing, high energy,
                 including topical
                 application and
                 dressing care;
                 initial wound.
0300T.........  Extracorporeal shock    R2*              N1
                 wave for
                 integumentary wound
                 healing, high energy,
                 including topical
                 application and
                 dressing care; each
                 additional wound
                 (list separately in
                 addition to code for
                 primary procedure).
C9800.........  Dermal injection        R2*              R2*
                 procedure(s) for
                 facial lipodystrophy
                 syndrome (LDS) and
                 provision of Radiesse
                 or Sculptra dermal
                 filler, including all
                 items and supplies.
67229.........  Treatment of extensive  R2*              R2*
                 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.
------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison of the proposed
  rates according to the ASC standard ratesetting methodology and the
  MPFS proposed rates. According to the statutory formula, current law
  requires a negative update to the MPFS payment rates for CY 2014. For
  a discussion of those rates, we refer readers to the CY 2014 MPFS
  proposed rule.

    We invite public comment on this proposal.
c. ASC Covered Surgical Procedures Proposed to be Designated as Device-
Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent of the APC cost under the OPPS, in 
order to ensure that payment for the procedure is adequate to provide 
packaged payment for the high-cost implantable devices used in those 
procedures.
(2) Proposed Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2014
    As discussed in section II.A.2.e of this proposed rule, for CY 
2014, we are proposing to create 29 comprehensive APCs to replace 29 of 
the most costly device-dependent APCs under the OPPS. We are proposing 
to define a comprehensive APC as a classification for the provision of 
a primary service and all adjunctive services provided to support the 
delivery of the primary service. Because a comprehensive APC would 
treat all individually reported codes as representing components of the 
comprehensive service, our OPPS proposal is to make a single 
prospective payment based on the cost of all individually reported 
codes that represent the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. We are proposing to apply our standard APC ratesetting 
methodology to the remaining 10 device-dependent APCs to calculate 
their CY 2014 OPPS payment rates.
    Unlike the OPPS claims processing system that can be configured to 
make a single payment for the encounter-based comprehensive service 
whenever a HCPCS code that is assigned to a comprehensive APC appears 
on the claim, the ASC claims processing system does not allow for this 
type of conditional packaging. Therefore, we are proposing that all 
separately paid ancillary services that are provided integral to 
surgical procedures that map to comprehensive APCs would continue to be 
separately paid under the ASC payment system instead of being packaged 
into the payment for the comprehensive APC as under the OPPS. In 
addition, to avoid duplicate payment for separately paid ancillary 
services provided integral to the surgical procedure because the OPPS 
relative weights for comprehensive APCs include costs for ancillary 
services, we are proposing that the ASC payment rates and device offset 
amounts for comprehensive APCs would be based on the CY 2014 OPPS 
relative payments weights that have been calculated using the standard 
APC ratesetting methodology instead of the relative payment weights 
that are based on the comprehensive service.
    Payment rates for ASC device-intensive procedures are based on a 
modified payment methodology to ensure that payment for the procedure 
is adequate to provide packaged payment for the high-cost implantable 
devices used in those procedures. Device-intensive procedures are 
currently defined as those procedures that are assigned to device-
dependent APCs with a device offset percentage greater than 50 percent 
of the APC cost under the OPPS. Because we are proposing to create 
comprehensive APCs to replace 29 of the 39 device-dependent APCs under 
the OPPS, we are proposing to define ASC device-intensive procedures as 
those procedures that are assigned to any APC with a device offset 
percentage greater than 50 percent based on the standard OPPS APC 
ratesetting methodology. We are proposing changes to Sec.  
416.171(b)(2) to reflect this proposal.
    We also are proposing to update the ASC list of covered surgical 
procedures that are eligible for payment according to our device-
intensive procedure payment methodology, consistent with this modified 
definition of device-intensive procedures, reflecting the proposed APC 
assignments of procedures and APC device offset percentages based on 
the CY 2012 OPPS claims and cost report data available for the proposed 
rule.
    The ASC covered surgical procedures that we are proposing to 
designate as device-intensive and that would be subject to the device-
intensive procedure payment methodology for CY 2014 are listed in Table 
38 below. The CPT code, the CPT code short descriptor, the proposed CY 
2014 ASC

[[Page 43634]]

payment indicator (PI), the proposed CY 2014 OPPS APC assignment, the 
proposed CY 2014 OPPS APC device offset percentage, and an indication 
if the full credit/partial credit (FB/FC) device adjustment policy 
would apply are also listed in Table 38 below. All of these procedures 
are included in Addendum AA to this proposed rule (which is available 
via the Internet on the CMS Web site).
    We invite public comment on this proposal.
d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost/full credit or partial credit as set forth in Sec.  
416.179 is consistent with the current OPPS policy. 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).
    As discussed in section IV.B. of this proposed rule, we are 
proposing to modify our existing policy of reducing OPPS payment for 
specified APCs when a hospital furnishes a specified device without 
cost or with a full or partial credit. Currently under the OPPS, our 
policy is to reduce OPPS payment 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. For CY 2014, we are 
proposing to reduce OPPS payment for applicable APCs by the full or 
partial credit a provider receives for a replaced device.
    Although we are proposing to modify the policy of reducing payments 
when a hospital furnishes a specified device without cost or with full 
or partial credit under the OPPS, we are proposing to maintain our 
current ASC policy for reducing payments to ASCs for specified device-
intensive procedures when the ASC furnishes a device without cost or 
with full or partial credit. Unlike the OPPS, there is currently no 
mechanism within the ASC claims processing system for ASCs to submit to 
CMS the actual amount received when furnishing a specified device at 
full or partial credit. Therefore, under the ASC payment system, we are 
proposing to continue to reduce ASC payments by 100 percent or 50 
percent of the device offset amount when an ASC furnishes a device 
without cost or with full or partial credit, respectively. We also are 
proposing to update the list of ASC covered device-intensive procedures 
that would be subject to the no cost/full credit and partial credit 
device adjustment policy for CY 2014. Table 38 below displays the ASC 
covered device-intensive procedures that we are proposing would be 
subject to the no cost/full credit or partial credit device adjustment 
policy for CY 2014. Specifically, when a procedure that is listed in 
Table 38 is subject to the no cost/full credit or partial credit device 
adjustment policy and is performed to implant a device that 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 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 are proposing to reduce the payment for 
implantation procedures listed in Table 38 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 38 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. In order to 
report that they received a partial credit of 50 percent or more of the 
cost of a new device, ASCs would have the option of either: (1) 
Submitting the claim for the device replacement procedure to their 
Medicare contractor after the procedure's performance but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount.

 Table 38--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2014, Including ASC
     Covered Surgical Procedures for Which We Propose That the No Cost/Full Credit or Partial Credit Device
                                          Adjustment Policy Would Apply
----------------------------------------------------------------------------------------------------------------
                                                                                Proposed CY
                                                                   Proposed CY  2014 device-  Proposing that FB/
      CPT Code          Short descriptor     Proposed CY 2014 ASC   2014 OPPS     dependent     FC policy will
                                                      PI               APC       APC offset         apply
                                                                                  percent
----------------------------------------------------------------------------------------------------------------
24361..............  Reconstruct elbow       J8                           0425           59  Yes.
                      joint.
24363..............  Replace elbow joint...  J8                           0425           59  Yes.
24366..............  Reconstruct head of     J8                           0425           59  Yes.
                      radius.
24370..............  Revise reconst elbow    J8                           0425           59  Yes.
                      joint.
24371..............  Revise reconst elbow    J8                           0425           59  Yes.
                      joint.
25441..............  Reconstruct wrist       J8                           0425           59  Yes.
                      joint.
25442..............  Reconstruct wrist       J8                           0425           59  Yes.
                      joint.
25446..............  Wrist replacement.....  J8                           0425           59  Yes.

[[Page 43635]]

 
27446..............  Revision of knee joint  J8                           0425           59  Yes.
33206..............  Insert heart pm atrial  J8                           0089           68  Yes.
33207..............  Insert heart pm         J8                           0089           68  Yes.
                      ventricular.
33208..............  Insrt heart pm atrial   J8                           0655           72  Yes.
                      & vent.
33212..............  Insert pulse gen sngl   J8                           0090           67  Yes.
                      lead.
33213..............  Insert pulse gen dual   J8                           0654           69  Yes.
                      leads.
33214..............  Upgrade of pacemaker    J8                           0655           72  Yes.
                      system.
33221..............  Insert pulse gen mult   J8                           0654           69  Yes.
                      leads.
33224..............  Insert pacing lead &    J8                           0655           72  Yes.
                      connect.
33227..............  Remove&replace pm gen   J8                           0090           67  Yes.
                      singl.
33228..............  Remv&replc pm gen dual  J8                           0654           69  Yes.
                      lead.
33229..............  Remv&replc pm gen mult  J8                           0654           69  Yes.
                      leads.
33230..............  Insrt pulse gen w/dual  J8                           0107           80  Yes.
                      leads.
33231..............  Insrt pulse gen w/mult  J8                           0107           80  Yes.
                      leads.
33240..............  Insrt pulse gen w/      J8                           0107           80  Yes.
                      singl lead.
33249..............  Nsert pace-defib w/     J8                           0108           82  Yes.
                      lead.
33262..............  Remv&replc cvd gen      J8                           0107           80  Yes.
                      sing lead.
33263..............  Remv&replc cvd gen      J8                           0107           80  Yes.
                      dual lead.
33264..............  Remv&replc cvd gen      J8                           0107           80  Yes.
                      mult lead.
33282..............  Implant pat-active ht   J8                           0680           74  Yes.
                      record.
37227..............  Fem/popl revasc stnt &  J8                           0319           52  No
                      ather.
37231..............  Tib/per revasc stent &  J8                           0319           52  No
                      ather.
53440..............  Male sling procedure..  J8                           0385           63  Yes.
53444..............  Insert tandem cuff....  J8                           0385           63  Yes.
53445..............  Insert uro/ves nck      J8                           0386           70  Yes.
                      sphincter.
53447..............  Remove/replace ur       J8                           0386           70  Yes.
                      sphincter.
54400..............  Insert semi-rigid       J8                           0385           63  Yes.
                      prosthesis.
54401..............  Insert self-contd       J8                           0386           70  Yes.
                      prosthesis.
54405..............  Insert multi-comp       J8                           0386           70  Yes.
                      penis pros.
54410..............  Remove/replace penis    J8                           0386           70  Yes.
                      prosth.
54416..............  Remv/repl penis         J8                           0386           70  Yes.
                      contain pros.
55873..............  Cryoablate prostate...  J8                           0674           55  No
61885..............  Insrt/redo neurostim 1  J8                           0039           86  Yes.
                      array.
61886..............  Implant neurostim       J8                           0315           88  Yes.
                      arrays.
62361..............  Implant spine infusion  J8                           0227           81  Yes.
                      pump.
62362..............  Implant spine infusion  J8                           0227           81  Yes.
                      pump.
63650..............  Implant                 J8                           0040           54  Yes.
                      neuroelectrodes.
63655..............  Implant                 J8                           0061           65  Yes.
                      neuroelectrodes.
63663..............  Revise spine eltrd      J8                           0040           54  Yes.
                      perq aray.
63664..............  Revise spine eltrd      J8                           0040           54  Yes.
                      plate.
63685..............  Insrt/redo spine n      J8                           0039           86  Yes.
                      generator.
64553..............  Implant                 J8                           0040           54  Yes.
                      neuroelectrodes.
64555..............  Implant                 J8                           0040           54  Yes.
                      neuroelectrodes.
64561..............  Implant                 J8                           0040           54  Yes.
                      neuroelectrodes.
64565..............  Implant                 J8                           0040           54  Yes.
                      neuroelectrodes.
64568..............  Inc for vagus n elect   J8                           0318           87  Yes.
                      impl.
64569..............  Revise/repl vagus n     J8                           0040           54  Yes.
                      eltrd.
64575..............  Implant                 J8                           0061           65  Yes.
                      neuroelectrodes.
64580..............  Implant                 J8                           0061           65  Yes.
                      neuroelectrodes.
64581..............  Implant                 J8                           0061           65  Yes.
                      neuroelectrodes.
64590..............  Insrt/redo pn/gastr     J8                           0039           86  Yes.
                      stimul.
65770..............  Revise cornea with      J8                           0293           64  No
                      implant.
69714..............  Implant temple bone w/  J8                           0425           59  Yes.
                      stimul.
69715..............  Temple bne implnt w/    J8                           0425           59  Yes.
                      stimulat.
69717..............  Temple bone implant     J8                           0425           59  Yes.
                      revision.
69718..............  Revise temple bone      J8                           0425           59  Yes.
                      implant.
69930..............  Implant cochlear        J8                           0259           84  Yes.
                      device.
0282T..............  Periph field stimul     J8                           0040           54  Yes.
                      trial.
0283T..............  Periph field stimul     J8                           0318           87  Yes.
                      perm.
0308T..............  Insj ocular telescope   J8                           0351           85  Yes.
                      prosth.
0316T..............  Replc vagus nerve pls   J8                           0039           86  Yes.
                      gen.
0319T..............  Insert subq defib w/    J8                           0107           80  Yes.
                      eltrd.
0321T..............  Insert subq defib pls   J8                           0107           80  Yes.
                      gen.
----------------------------------------------------------------------------------------------------------------


[[Page 43636]]

    We invite public comment on these proposals.
e. ASC Treatment of Surgical Procedures Proposed for Removal From the 
OPPS Inpatient List for CY 2014
    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. There are no procedures proposed for removal from 
the OPPS inpatient list for CY 2014, so we are not proposing any 
procedures for possible inclusion on the ASC list of covered surgical 
procedures under this section.
2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, we are 
proposing to update the ASC list of covered ancillary services to 
reflect the proposed payment status for the services under the CY 2014 
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 2014. For example, a covered ancillary service that was separately 
paid under the revised ASC payment system in CY 2013 may be proposed 
for packaged status under the CY 2014 OPPS and, therefore, also under 
the ASC payment system for CY 2014. More specifically, as discussed in 
section II.A.3 of this proposed rule, we are proposing to package the 
following categories of ancillary or adjunctive services under the OPPS 
for CY 2014: drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure; drugs and 
biologicals that function as supplies or devices when used in a 
surgical procedure; clinical diagnostic laboratory tests; procedures 
described by add-on codes; ancillary services (status indicator ``X''); 
diagnostic tests on the bypass list; and device removal procedures.
    To maintain consistency with the OPPS, we are proposing that these 
services would be also packaged under the ASC payment system for CY 
2014. Comment indicator ``CH,'' discussed in section XII.F. of the this 
proposed rule, is used in Addendum BB to this proposed rule (which is 
available via the Internet on the CMS Web site) to indicate covered 
ancillary services for which we are proposing a change in the ASC 
payment indicator to reflect a proposed change in the OPPS treatment of 
the service for CY 2014.
    Except for the Level II HCPCS codes and Level III CPT codes listed 
in Table 34 and Table 35 of this proposed rule, all ASC covered 
ancillary services and their proposed payment indicators for CY 2014 
are included in Addendum BB to this proposed rule.
    We invite public comment on this proposal.

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

1. Proposed ASC 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 2013 OPPS/ASC final rule with comment period (77 
FR 68434 through 68467), we updated the CY 2012 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' and ``J8'' using CY 2011 data, consistent with the CY 2013 OPPS 
update. Payment rates for device-intensive procedures also were updated 
to incorporate the CY 2013 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 2014 MPFS proposed rule) 
or the amount calculated using the ASC standard ratesetting methodology 
for the procedure. In the CY 2013 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 2013 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 2013 payment rate for the procedure according to the final policy of 
the revised ASC payment system (Sec.  416.171(d)).
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 
CY 2014
    We are proposing to update ASC payment rates for CY 2014 using the 
established rate calculation methodologies under Sec.  416.171 and 
using our proposed modified definition for device-intensive procedures 
as discussed above. Because the proposed OPPS relative payment weights 
are based on geometric mean costs for CY 2014, the ASC system will use 
geometric means to determine proposed relative payment weights under 
the ASC standard methodology. We are proposing to continue to use the 
amount calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicators ``A2'' and ``G2.''
    We are proposing 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 are proposing to update the 
payment amounts for device-intensive procedures, using our proposed 
modified definition of device intensive procedures, based on the CY 
2014 OPPS device offset percentages that have been calculated using the 
standard APC ratesetting methodology, and to make payment for office-
based procedures at the lesser of the proposed CY 2014 MPFS nonfacility 
PE RVU-based amount or the proposed CY 2014 ASC payment amount 
calculated according to the standard ratesetting methodology.

[[Page 43637]]

    We invite public comment on these proposals.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
    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 
categories of services, we refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72047 through 72049). We are not 
proposing any changes to our policies or the categories of services for 
CY 2014. We identify the specific services with a double asterisk in 
Addenda AA and BB to this proposed rule.
d. Proposed Payment for Cardiac Resynchronization Therapy Services
    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 
(Insertion of pacing electrode, cardiac venous system, for left 
ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (eg, for upgrade to dual 
chamber system) (list separately in addition to code for primary 
procedure)) and 33249 (Insertion or replacement of permanent pacing 
cardioverter-defibrillator system with transvenous lead(s), single or 
dual chamber) 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 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). For CY 2014, CPT code 33249, the primary code for 
CRT-D services, is proposed for continued assignment to APC 0108 but 
CPT code 33225 is proposed to be packaged under the OPPS.
    Consequently, we are proposing that CPT code 33225 would also be 
packaged under the ASC payment system for CY 2014. Because CPT code 
33225 is proposed to be packaged under the ASC payment system and, 
therefore, would not receive separate payment, it would no longer be 
necessary that ASCs use the HCPCS Level II G-code (G0448) for proper 
reporting when the procedures described by CPT codes 33225 and 33249 
are performed on the same date of service. Therefore, we are proposing 
that the ASC payment rate for CRT-D services (procedures described by 
CPT codes 33249 and 33225) would be based on the OPPS relative payment 
weight for APC 0108 for CY 2014 and that ASCs would no longer be 
required to assign HCPCS code G0448 when the procedures described by 
CPT codes 33225 and 33249 are performed on the same date of service.
    We invite public comment on these proposals.
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 service to the Medicare 
beneficiary being treated with LDR brachytherapy for prostate cancer.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized our proposal 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 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. For a complete discussion of our policy regarding 
payment for LDR prostate brachytherapy services in ASCs, we refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68457). We are not proposing any changes to our current policy 
regarding ASC payment for LDR prostate brachytherapy services for CY 
2014.
2. Proposed Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged or 
conditionally packaged (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

[[Page 43638]]

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 generally 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. 
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 (42 CFR 416.171(d)(1)). 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 (42 CFR 416.171(d)(2)).
    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 three devices that are eligible for pass-through payment 
in the OPPS are described by 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 C1830, C1840, and C1886 
under the ASC payment system are contractor priced. In the CY 2013 
OPPS/ASC final rule with comment period, we finalized the expiration of 
pass-through payment for HCPCS codes C1830, C1840, and C1886, which 
will expire after December 31, 2013 (77 FR 68353). Therefore, after 
December 31, 2013, the costs for devices described by HCPCS codes 
C1830, C1840, and C1886, 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 2014.
b. Proposed Payment for Covered Ancillary Services for CY 2014
    For CY 2014, we are proposing to update the ASC payment rates and 
make changes to ASC payment indicators as necessary to maintain 
consistency between the OPPS and ASC payment system regarding the 
packaged or separately payable status of services and the proposed CY 
2014 OPPS and ASC payment rates. The proposed CY 2014 OPPS payment 
methodologies for brachytherapy sources and separately payable drugs 
and biologicals are discussed in section II.A. and section V.B. of this 
proposed rule, respectively, and we are proposing to set the CY 2014 
ASC payment rates for those services equal to the proposed CY 2014 OPPS 
rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2014 payment for separately payable covered radiology 
services is based on a comparison of the CY 2014 proposed MPFS 
nonfacility PE RVU-based amounts (we refer readers to the CY 2014 MPFS 
proposed rule) and the proposed CY 2014 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 this proposed rule indicate whether the 
proposed payment rates for radiology services are based on the MPFS 
nonfacility PE RVU-based amount or the ASC standard ratesetting 
methodology, or whether payment for a radiology service is packaged 
into the payment for the covered surgical procedure (payment indicator 
``N1''). Radiology services that we are proposing to pay based on the 
ASC standard ratesetting methodology are assigned payment indicator 
``Z2'' (Radiology service paid separately when provided integral to a 
surgical procedure on ASC list; payment based on OPPS relative payment 
weight) and those for which the proposed payment is based on the MPFS 
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

[[Page 43639]]

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 for these procedures will be based on the OPPS relative 
payment weight (rather than the MPFS nonfacility PE RVU-based amount, 
regardless of which is lower) and, therefore, will include the cost for 
the diagnostic radiopharmaceutical. We are proposing to continue this 
modification to the payment methodology in CY 2014 and, therefore, set 
the payment indicator to ``Z2'' for nuclear medicine procedures.
    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. We are 
proposing to continue this modification to the payment methodology in 
CY 2014 and, therefore, set the payment indicator to ``Z2'' for 
radiology services that use contrast agents.
    Most covered ancillary services and their proposed payment 
indicators are listed in Addendum BB to this proposed rule (which is 
available via the Internet on the CMS Web site). We invite public 
comment on these proposals.

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
new technology intraocular lenses (NTIOLs) is as follows:
     Applicants submit their NTIOL requests for review to CMS 
by the deadline. 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 Lenses (NTIOLs) 
or Inclusion of an IOL in an existing NTIOL Class'' posted on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually in the proposed rule updating the ASC 
and OPPS payment rates for the following calendar year, a list of all 
requests to establish new NTIOL classes accepted for review during the 
calendar year in which the proposal is published. In accordance with 
section 141(b)(3) of Public Law 103-432 and our regulations at Sec.  
416.185(b), the deadline for receipt of public comments is 30 days 
following publication of the list of requests in the proposed rule.
     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    [cir] Provide a list of determinations made as a result of our 
review of all new NTIOL class requests and public comments;
    [cir] When a new NTIOL class is created, we identify the 
predominant characteristic of NTIOLs in that class that sets them apart 
from other IOLs (including those previously approved as members of 
other expired or active NTIOL classes) and that is associated with an 
improved clinical outcome.
    [cir] 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.
    [cir] Announce the deadline for submitting requests for review of 
an application for a new NTIOL class for the following calendar year.
2. Requests To Establish New NTIOL Classes for CY 2014
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2014 by the March 1, 2013, the due date published in the 
CY 2013 OPPS/ASC final rule with comment period (77 FR 68461).
3. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2014.

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy 
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC list of 
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new codes for the next calendar 
year for which the interim payment indicator assigned is subject to 
comment. The comment indicator ``NI'' is also assigned to existing 
codes with substantial revisions to their descriptors such that we 
consider them to be describing new services, as discussed in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60622). In the CY 
2014 OPPS/ASC final rule with comment period, we will respond to public 
comments and finalize the ASC treatment of all codes that are labeled 
with comment indicator ``NI'' in Addenda AA and BB to the CY 2013 OPPS/
ASC final rule with comment period.
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
proposed rule (which are available via the Internet on the CMS Web 
site) to indicate that the payment indicator assignment has changed for 
an active HCPCS code in current year and next calendar year; 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.

[[Page 43640]]

2. Proposed ASC Payment and Comment Indicators
    We are not proposing any changes to the definitions of the ASC 
payment and comment indicators for CY 2014. We refer readers to Addenda 
DD1 and DD2 to this proposed rule (which are available via the Internet 
on the CMS Web site) for the complete list of ASC payment and comment 
indicators proposed for the CY 2014 update.

G. Calculation of the Proposed ASC Conversion Factor and the Proposed 
ASC Payment Rates

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and 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 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 XII.D.2.b. of this proposed rule), 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 based on a GAO report of ASC costs 
using 2004 survey data. 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).
    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.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2014 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). Consistent with our established 
policy, we are proposing to scale the CY 2014 relative payment weights 
for ASCs according to the following method. Holding ASC utilization and 
the mix of services constant from CY 2012, we are

[[Page 43641]]

proposing to compare the total payment using the CY 2013 ASC relative 
payment weights with the total payment using the CY 2014 relative 
payment weights to take into account the changes in the OPPS relative 
payment weights between CY 2013 and CY 2014. We are proposing to use 
the ratio of CY 2013 to CY 2014 total payment (the weight scaler) to 
scale the ASC relative payment weights for CY 2014. The proposed CY 
2014 ASC scaler is 0.8961 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. We currently have available 98 percent of CY 2012 ASC 
claims data.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2012 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2012 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.
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 2014 ASC payment system, we 
are proposing 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 2014, we calculated this proposed adjustment for the ASC 
payment system by using the most recent CY 2012 claims data available 
and estimating the difference in total payment that would be created by 
introducing the proposed CY 2014 pre-floor and pre-reclassified 
hospital wage indices. Specifically, holding CY 2012 ASC utilization 
and service-mix and the proposed CY 2014 national payment rates after 
application of the weight scaler constant, we calculated the total 
adjusted payment using the CY 2013 pre-floor and pre-reclassified 
hospital wage indices and the total adjusted payment using the proposed 
CY 2014 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 2013 pre-floor and pre-reclassified hospital wage indices 
to the total adjusted payment calculated with the proposed CY 2014 pre-
floor and pre-reclassified hospital wage indices and applied the 
resulting ratio of 1.0004 (the proposed CY 2014 ASC wage index budget 
neutrality adjustment) to the CY 2013 ASC conversion factor to 
calculate the proposed CY 2014 ASC conversion factor. We note that, on 
February 28, 2013, OMB issued OMB Bulletin No. 13-01 announcing 
revisions to the delineation of Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas. The 
proposed pre-floor and pre-reclassified hospital wage indices for FY 
2014 do not reflect OMB's new area delineations. Because the ASC wage 
indices are the pre-floor and pre-reclassified hospital wage indices, 
the FY 2014 ASC wage indices will not reflect the OMB changes.
    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).
    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. In the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we 
finalized a methodology 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 for the CY 2014 payment determination and subsequent 
years.

[[Page 43642]]

The 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 amended Sec. Sec.  
416.160(a)(1) and 416.171 to reflect these policies.
    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 percentage. 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 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 to the annual update factor after application of any 
quality reporting reduction may result in the update being less than 
zero for a year. 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).
    For this proposed rule, based on IHS Global Insight (IGI) 2013 
first quarter forecast with historical data through 2012 fourth 
quarter, for the 12-month period ending with the midpoint of CY 2014, 
the CPI-U update is projected to be 1.4 percent. Also based on IGI's 
2013 first quarter forecast, the MFP adjustment for the period ending 
with the midpoint of CY 2014 is projected to be 0.5 percent. IGI is a 
nationally recognized economic and financial forecasting firm that 
contracts with CMS to forecast the components of CMS' market baskets as 
well as the CPI-U and MFP. The methodology for calculating the MFP 
adjustment was 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). Because the ASCQR 
Program affects payment rates beginning in CY 2014, there would be a 
2.0 percentage point reduction to the CPI-U for ASCs that fail to meet 
the ASCQR Program requirements.
    We are proposing to reduce the CPI-U update of 1.4 percent by the 
MFP adjustment of 0.5 percentage point, resulting in an MFP-adjusted 
CPI-U update factor of 0.9 percent for ASCs meeting the quality 
reporting requirements. Therefore, we are proposing to apply a 0.9 
percent MFP-adjusted CPI-U update factor to the CY 2013 ASC conversion 
factor for ASCs meeting the quality reporting requirements. We are 
proposing to reduce the CPI-U update of 1.4 percent by 2.0 percentage 
points for ASCs that do not meet the quality reporting requirements and 
then apply the 0.5 percentage point MFP reduction. Therefore, we are 
proposing to apply a -1.1 percent quality reporting/MFP-adjusted CPI-U 
update factor to the CY 2013 ASC conversion factor for ASCs not meeting 
the quality reporting requirements. We also are proposing that if more 
recent data are subsequently available (for example, a more recent 
estimate of the CY 2014 CPI-U update and MFP adjustment), we would use 
such data, if appropriate, to determine the CY 2014 ASC update for the 
final rule with comment period.
    For CY 2014, we also are proposing to adjust the CY 2013 ASC 
conversion factor ($42.917) by the wage adjustment for budget 
neutrality of 1.0004 in addition to the MFP-adjusted update factor of 
0.9 percent discussed above, which results in a proposed CY 2014 ASC 
conversion factor of $43.321 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we are proposing to adjust the CY 2013 ASC conversion factor ($42.917) 
by the wage adjustment for budget neutrality of 1.0004 in addition to 
the quality reporting/MFP-adjusted update factor of -1.1 percent 
discussed above, which results in a proposed CY 2014 ASC conversion 
factor of $42.462.
    We invite public comment on these proposals.
3. Display of Proposed CY 2014 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available via 
the Internet on the CMS Web site) display the proposed updated ASC 
payment rates for CY 2014 for covered surgical procedures and covered 
ancillary services, respectively. These addenda contain several types 
of information related to the proposed CY 2014 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``Subject to 
Multiple Procedure Discounting'' indicates that the surgical procedure 
will be subject to the multiple procedure payment reduction policy. As 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66829 through 66830), most covered surgical procedures are subject to a 
50-percent reduction in the ASC payment for the lower-paying procedure 
when more than one procedure is performed in a single operative 
session. Display of the comment indicator ``CH'' in the column titled 
``Comment Indicator'' indicates a change in payment policy for the item 
or service, including identifying discontinued HCPCS codes, designating 
items or services newly payable under the ASC payment system, and 
identifying items or services with changes in the ASC payment indicator 
for CY 2014. 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 the final rule with 
comment period.
    The values displayed in the column titled ``CY 2014 Payment 
Weight'' are the proposed relative payment weights for each of the 
listed services for CY 2014. 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 proposed CY 2014 payment rate displayed in the ``CY 
2014 Payment'' column, each ASC payment weight in the ``CY 2014 Payment 
Weight'' column was multiplied by the proposed CY 2014 conversion 
factor of $43.321. 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

[[Page 43643]]

discussed in section XII.H.2.b. of this proposed rule).
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2014 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2014 Payment'' column displays the 
proposed CY 2014 national unadjusted ASC payment rates for all items 
and services. The proposed CY 2014 ASC payment rates listed in Addendum 
BB for separately payable drugs and biologicals are based on ASP data 
used for payment in physicians' offices in April 2013.

XIII. 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 measure reporting programs for 
other settings of care and for certain professionals, including:
     Care furnished by physicians and other eligible 
professionals, under the Physician Quality Reporting System (PQRS, 
formerly referred to as the Physician Quality Reporting Program 
Initiative (PQRI));
     Inpatient rehabilitation facilities, under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Long-term care hospitals, under the Long-Term Care 
Hospital Quality Reporting (LTCHQR) Program;
     PPS-exempt cancer hospitals, under the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program;
     Ambulatory surgical centers, under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient psychiatric facilities, under the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program;
     Home health agencies, under the Home Health Quality 
Reporting Program (HH QRP); and
     Hospices, under the Hospice Quality Reporting Program.
    Finally, CMS has implemented a Hospital Value-Based Purchasing 
Program and an end-stage renal disease (ESRD) Quality Incentive Program 
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. 
To the extent possible under various authorizing statutes, 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 
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 that relate to the specific 
characteristics of each program:
     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 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 structural, 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

[[Page 43644]]

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 multi-stakeholder 
groups. Section 3014 of the Affordable Care Act added section 1890A of 
the Act, establishing a pre-rulemaking process, which, among other 
steps, requires the Secretary to take into consideration input from 
multi-stakeholder groups in selecting certain categories of quality and 
efficiency measures described in section 1890(b)(7)(B) of the Act. As 
part of the pre-rulemaking process, the consensus-based entity that CMS 
must contract with under section 1890 of the Act (currently the 
National Quality Forum (NQF)), convened the multi-stakeholder groups 
referred to as the Measure Applications Partnership (MAP). The MAP is a 
public-private partnership created for the primary purpose of providing 
input to HHS on the selection of the categories of measures in section 
1890(B)(7)(B) of the Act, which include measures for use in certain 
specific Medicare programs, measures for use in reporting performance 
information to the public, and measures for use in health care programs 
other than for use under the Act. 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 strives to ensure that quality measures for the 
Medicare, Medicaid, and the Children's Health Insurance Programs are 
aligned with priority quality goals, that measure specifications are 
aligned across settings, that outcome measures are used, and that 
quality measures are collected from EHRs as appropriate. Quality goals 
are embedded in the CMS Strategy.
    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 final rulemaking (77 FR 68467 
through 68469), with a few minor differences, we generally applied the 
same principles for our considerations for future measures.
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. We believe that a measure can be updated through this 
subregulatory process provided it is a nonsubstantive change. We expect 
to make the determination of what constitutes a substantive versus a 
nonsubstantive change on a case-by-case basis.
    Examples of nonsubstantive changes to measures might include 
updated diagnosis or procedure codes, medication updates for categories 
of medications, broadening of age ranges, and exclusions for a measure 
(such as the addition of a hospice exclusion to the 30-day mortality 
measures). We believe that non-substantive changes may include updates 
to NQF-endorsed measures based upon changes to guidelines upon which 
the measures are based. We will revise the Specifications Manual so 
that it clearly identifies the updates and provide links to where 
additional information on the updates can be found. As stated in CY 
2009 OPPS/ASC, we also will post the updates on the QualityNet Web site 
at https://www.QualityNet.org. We will provide sufficient lead time for 
facilities to implement the changes where changes to the data 
collection systems would be necessary. 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.
    We will continue to use rulemaking to adopt substantive updates 
made by the NQF to the endorsed measures we have adopted for the OQR 
Program. Examples of changes that we might 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, procedure/process, or test 
administration). Another example of a substantive change would be where 
the NQF has extended its endorsement of a previously endorsed measure 
to a new setting, such as extending a measure from the inpatient 
setting to hospice.

[[Page 43645]]

    We believe that the policy finalized in the CY 2009 OPPS/ASC final 
rule adequately balances our need to incorporate non-substantive NQF 
updates to NQF-endorsed Hospital OQR Program measures in the most 
expeditious manner possible, while preserving the public's ability to 
comment on updates that so fundamentally change an endorsed measure 
that it is no longer the same measure that we originally adopted. We 
also note that the NQF process incorporates an opportunity for public 
comment and engagement in the measure maintenance process. These 
policies regarding what is considered substantive versus non-
substantive apply to all measures in the Hospital OQR Program.
b. Publication of Hospital OQR Program Data
    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under 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 are usually 
displayed on our Hospital Compare Web site, http://www.hospitalcompare.medicare.gov, following the preview period, 
although we might use other Web sites, as discussed below. 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 measures, outcome of care 
measures, outpatient imaging efficiency measures and HCAHPS data.
    In general, we strive to display hospital quality measure data on 
the Hospital Compare Web site as soon as possible after measure data 
have been submitted to CMS. However, if there are unresolved display 
issues or pending design considerations, we may make the data available 
on other CMS Web sites such as: http://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov/. Publicly reporting 
the information in this manner, although not on the Hospital Compare 
Web site, allows us to meet the requirement under section 
1833(t)(17)(E) of the Act for establishing procedures to make quality 
data submitted available to the public following a preview period. When 
we display hospital quality information on non-interactive CMS Web 
sites, affected parties will be notified via CMS listservs, CMS email 
blasts, 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 an online 
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.

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

    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68471), for the purpose of streamlining the rulemaking process, we 
finalized a policy that, beginning with the CY 2013 rulemaking, 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 years payment determinations unless we 
propose to remove, suspend, or replace the measures.

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 final rule (77 FR 53506 through 53507) 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 final rule with comment period (77 FR 68472 
through 68473), we adopted 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

[[Page 43646]]

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 final rule with comment period (77 FR 68472 through 
68473), we finalized our proposal to apply these measure removal 
criteria in the Hospital OQR Program as well.
    In addition to these criteria, we take into account the views of 
the MAP in the evaluation of measure removal. Furthermore, for 
efficiency and streamlining purposes, we strive to eliminate redundancy 
of similar measures.
2. Proposed Removal of Two Chart-Abstracted Measures From the Hospital 
OQR Program
    In this rulemaking, we are proposing to remove two measures from 
the Hospital OQR Program for the CY 2016 payment determination and 
subsequent years: (1) OP-19: Transition Record with Specified Elements 
Received by Discharged ED Patients and (2) OP-24: Cardiac 
Rehabilitation Measure: Patient Referral from an Outpatient Setting. 
The rationales for these proposals are discussed below.
a. Proposed Removal of OP-19: Transition Record With Specified Elements 
Received by Discharged ED Patients
    We previously adopted measure OP-19 for the Hospital OQR Program 
for the CY 2013 payment determination with data collection beginning 
with January 1, 2012 encounters in the CY 2011 OPPS/ASC final rule with 
comment period. Shortly after data collection for this measure began in 
January 2012, hospitals raised concerns about the measure 
specifications, including potential privacy issues related to releasing 
certain elements of the transition record to either the patient being 
discharged from an emergency department or the patient's caregiver. 
Some examples provided by hospitals are 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 order to address the safety concerns related to confidentiality 
as raised by the industry in the above discussion, in April 2012, we 
took immediate action to suspend OP-19. On April 12, 2012, we released 
a Memorandum entitled SDPS 12-100-OD, ``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 data validation. This 
memorandum can be located at http://qualitynet.org) under the option 
``Email Notifications'' within the ``Hospitals--Outpatient'' drop down 
menu found at the top of the page.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68474 
through 68476) for the CY 2014 payment determination and subsequent 
years, we confirmed that we suspended the collection of data for the 
measure OP-19: Transition Record with Specified Elements Received by 
Discharged ED Patients, which specified that either patients or their 
caregivers (emphasis added) receive a transition record at the time of 
ED discharge.
    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, the American Medical Association Physician Consortium for 
Performance Improvement (AMA-PCPI), believed that the measure could be 
quickly re-specified in a manner that would mitigate the concerns 
raised by hospitals and stakeholders. In the CY 2013 OPPS/ASC final 
rule with comment period, we noted that the measure steward was working 
to revise the measure specifications to address the concerns raised by 
affected parties. We also noted that the measure was scheduled for NQF 
maintenance review in 2013. We stated that after completion of the NQF 
maintenance process, we anticipated that normal program operations for 
this measure could resume once we updated the Hospital OQR 
Specifications Manual and made any necessary changes to our data 
collection infrastructure. In addition, we stated that we would notify 
hospitals of changes in the suspension status of the measure for the 
Hospital OQR Program via email blast. However, we indicated that if we 
determined that these concerns cannot be adequately addressed by 
measure specifications, we would propose to remove this measure in a 
future OPPS/ASC rule.
    We have determined that the measure cannot be implemented with the 
degree of specificity that would be needed to fully address the 
concerns of stakeholders without being overly burdensome. The measure 
steward resolved the safety issue by refining the measure, but the 
refinement has made data abstraction more subjective because individual 
hospitals can determine which information should be included in the 
transition record in order to comply with this measure. In the absence 
of standardized data elements, we were not able to resolve this issue 
of data abstraction for common data elements, and therefore, could not 
ensure consistency of data submission and accuracy of measure results.
    We also learned that all aspects for this transition record measure 
are currently required to meet the Medicare EHR Incentive Program's 
meaningful use (MU) core objective for eligible hospitals and critical 
access hospitals (CAHs) to provide patients the ability to view online, 
download, and transmit information about a hospital admission. This MU 
core objective provides patients discharged from the inpatient 
department or Emergency Department (ED) online access to their visit 
data. These ED visit data are the specified data elements included in 
the OP-19 Transition Record measure. This means that if we were to keep 
this measure, hospitals would need to submit this data for both the 
Hospital OQR Program using chart-abstraction and via attestation for 
the MU core objective. Therefore, to reduce duplicative requirements 
among programs and measurement burden, we are proposing to remove this 
measure from the Hospital OQR Program. We invite public comment on the 
proposed removal of this measure from the Hospital OQR Program.
b. Proposed Removal of OP-24: Cardiac Rehabilitation Measure: Patient 
Referral From an Outpatient Setting
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68476), we deferred data collection for this measure to January 1, 2014 
encounters. This was due to the unavailability of detailed abstraction 
instructions for data collection in time for the July 2012 release of 
the Hospital OQR Specifications Manual which was needed for chart-
abstraction beginning on January 1, 2013. We also indicated that this 
measure would be applied to the CY 2015 payment determination.
    We are proposing to remove this measure from the Hospital OQR 
Program due to continued difficulties with defining the measure care 
setting.

[[Page 43647]]

The measure specifications provided by the measure steward, the 
American College of Cardiology (ACC), identify the applicable care 
setting as a `Clinician Office/Clinic' and not as a hospital outpatient 
setting. In developing the specifications for this measure for a 
hospital outpatient setting, several issues arose. First, it is 
difficult to accurately identify the purpose of hospital outpatient 
visits, such as for evaluation and management purposes, using solely 
HOPD claims data. Second, it is difficult for hospitals to determine 
which particular clinic visit resulted in a cardiac rehabilitation 
referral for any given patient. Therefore, given the difficulties in 
accurately applying the measure to the hospital outpatient setting, we 
are proposing to remove OP-24 from the Hospital OQR Program. We invite 
public comment on this proposal to remove this measure from the 
Hospital OQR Program.

  Proposed Hospital OQR Program Measures To Be Removed for the CY 2016
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
       NQF No.                              Measure
------------------------------------------------------------------------
0649.................  OP-19: Transition Record with Specified Elements
                        Received by Discharged ED Patients.
0643.................  OP-24: Cardiac Rehabilitation Measure: Patient
                        Referral from an Outpatient Setting.
------------------------------------------------------------------------

D. Quality Measures Previously Adopted for the CY 2014 and CY 2015 
Payment Determinations and Subsequent Years

    The table below lists 25 measures that we previously adopted and 
retained for the CY 2014 and CY 2015 payment determinations and 
subsequent years under the Hospital OQR Program. This list includes 
measures we are proposing to remove in this proposed rule.

    Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment
                   Determinations and Subsequent Years
------------------------------------------------------------------------
       NQF No.                            Measure name
------------------------------------------------------------------------
0287.................  OP-1: Median Time to Fibrinolysis.
0288.................  OP-2: Fibrinolytic Therapy Received Within 30
                        Minutes.
0290.................  OP-3: Median Time to Transfer to Another Facility
                        for Acute Coronary Intervention.
0286.................  OP-4: Aspirin at Arrival.
0289.................  OP-5: Median Time to ECG.
0270.................  OP-6: Timing of Antibiotic Prophylaxis.
0268.................  OP-7: Prophylactic Antibiotic Selection for
                        Surgical Patients.
0514.................  OP-8: MRI Lumbar Spine for Low Back Pain.
                       OP-9: Mammography Follow-up Rates.
                       OP-10: Abdomen CT--Use of Contrast Material.
0513.................  OP-11: Thorax CT--Use of Contrast Material.
0489.................  OP-12: The Ability for Providers with HIT to
                        Receive Laboratory Data Electronically Directly
                        into their ONC-Certified EHR System as Discrete
                        Searchable Data.
0669.................  OP-13: Cardiac Imaging for Preoperative Risk
                        Assessment for Non Cardiac Low Risk Surgery.
                       OP-14: Simultaneous Use of Brain Computed
                        Tomography (CT) and Sinus Computed Tomography
                        (CT).
                       OP-15: Use of Brain Computed Tomography (CT) in
                        the Emergency Department for Atraumatic
                        Headache. *
0491.................  OP-17: Tracking Clinical Results between Visits.
0496.................  OP-18: Median Time from ED Arrival to ED
                        Departure for Discharged ED Patients.
0649.................  OP-19: Transition Record with Specified Elements
                        Received by Discharged ED Patients.
                       OP-20: Door to Diagnostic Evaluation by a
                        Qualified Medical Professional.
0662.................  OP-21: Median Time to Pain Management for Long
                        Bone Fracture.
                       OP-22: ED--Patient Left Without Being Seen.
0661.................  OP-23: ED--Head CT or MRI Scan Results for Acute
                        Ischemic Stroke or Hemorrhagic Stroke who
                        Received Head CT or MRI Scan Interpretation
                        Within 45 minutes of Arrival.
0643.................  OP-24: Cardiac Rehabilitation Patient Referral
                        From an Outpatient Setting.
                       OP-25: Safe Surgery Checklist Use.
                       OP-26: Hospital Outpatient Volume on Selected
                        Outpatient Surgical Procedures. **
------------------------------------------------------------------------
* Public reporting for OP-15 continues to be deferred at the time of
  this CY 2014 OPPS/ASC proposed rule.
** OP-26 Procedure categories and corresponding HCPCS codes are located
  at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata&blobtable=MungoBlobs.

E. Proposed Quality Measures for the CY 2016 Payment Determination and 
Subsequent Years

    In this rulemaking, we are proposing to adopt five new measures for 
the Hospital OQR Program for the CY 2016 payment determination and 
subsequent years. These measures include one HAI measure--Influenza 
Vaccination Coverage among Healthcare Personnel (NQF 0431), 
currently collected by the Centers for Disease Control and Prevention 
(CDC) via the National Healthcare Safety Network (NHSN)--and four 
chart-abstracted measures. The chart-abstracted measures are: (1) 
Complications within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures (NQF 0564), (2) Endoscopy/Poly 
Surveillance: Appropriate follow-up interval for normal colonoscopy in 
average risk patients (NQF 0658), (3) Endoscopy/Poly 
surveillance: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use (NQF

[[Page 43648]]

0659), and (4) Cataracts: Improvement in Patient's Visional 
Function within 90 Days Following Cataract Surgery (NQF 1536).
    The proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2012'' on the NQF Web site at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx in 
compliance with section 1890A(a)(2) of the Act. They were reviewed by 
the MAP in its ``MAP Pre-Rulemaking Report: 2013 Recommendations on 
Measures Under Consideration by HHS,'' which has been made available on 
the NQF Web site at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. We considered the 
input and recommendations provided by the MAP in selecting measures to 
propose for the Hospital OQR Program.
    All five of the proposed measures are NQF-endorsed, and therefore 
meet the requirements that measures selected for the program ``reflect 
consensus among affected parties and, to the extent feasible and 
practicable, that these measures include measures set forth by one or 
more national consensus building entities'' under section 
1833(t)(17)(C)(i) of the Act. Furthermore, the services targeted in the 
proposed measures are services commonly provided to patients who visit 
hospital outpatient departments and, for this reason, we believe that 
these proposed measures are appropriate for the measurement of quality 
of care furnished by hospitals in outpatient settings as required under 
section 1833(t)(17)(C)(i) of the Act.
    We are proposing to collect aggregate data (numerators, 
denominators, exclusions) for the four chart-abstracted measures via an 
online, Web-based tool that will be made available to HOPDs via the 
QualityNet Web site, just as we do for OP-22. This Web-based tool is 
currently in use in the Hospital OQR Program to collect structural 
measure information.
    More information regarding this proposed method of collection is 
provided in section XIII.H.2. of this proposed rule.
    To enhance our efforts to collect high quality data for the 
Hospital OQR measures while minimizing burden for HOPDs, we also seek 
public comment on whether we should collect patient-level data via 
certified EHR technology on the four proposed measures excluding the 
Influenza Vaccination Coverage among Healthcare Personnel measure, and 
the potential timing for doing so. Collecting patient-level data, as we 
do for other Hospital OQR Program measures such as OP-1 through OP-7, 
would allow CMS to validate the accuracy of the data and also link data 
for patients over time to assess patient outcomes of care related to 
treatment.
    The proposed measures are described in greater detail below.
1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
0431)
    This proposed measure assesses the percentage of healthcare 
personnel (HCP) who have been immunized for influenza. Rates of serious 
illness and death resulting from influenza and its complications are 
increased in high-risk populations such as persons over 50 years or 
under four years of age, and persons of any age who have underlying 
conditions that put them at an increased risk. HCP can acquire 
influenza from patients and can transmit influenza to patients and 
other HCP. Many HCP provide care for, or are in frequent contact with, 
patients with influenza or patients at high risk for complications of 
influenza. The involvement of HCP in influenza transmission has been a 
long-standing concern.1 2 3
---------------------------------------------------------------------------

    \1\ Maltezou, H.C., Drancourt, M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
    \2\ Hurley, J.C., Flockhart, S.: An influenza outbreak in a 
regional residential facility. Journal of Infection Prevention 2010; 
11:58-61.
    \3\ Salgado, C.D, Farr, B.M., Hall, K.K., Hayden, F.G.: 
Influenza in the acute hospital setting. The Lancet Infectious 
Diseases 2002; 2:145-155.
---------------------------------------------------------------------------

    Vaccination is an effective preventive measure against influenza, 
and can prevent many illnesses, deaths, and losses in productivity.\4\ 
HCP are considered a high priority for expanding influenza vaccine use. 
Achieving and sustaining high influenza vaccination coverage among HCP 
is intended to help protect HCP and their patients and reduce disease 
burden and healthcare costs. Due to the significant impact of HCP 
influenza vaccination on patient outcomes, we believe this measure is 
appropriate for measuring the quality of care in hospital outpatient 
departments.
---------------------------------------------------------------------------

    \4\ Wilde, M.A., McMillan, J.A., Serwint, J., Butta, J., 
O'Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine 
in health care professionals; a randomized trial. The Journal of the 
American Medical Association 1999;281:908-913.
---------------------------------------------------------------------------

    We are proposing to adopt this process measure for the CY 2016 
payment determination and subsequent years. We are also proposing that 
Hospital OPDs use the NHSN infrastructure and protocol to report the 
measure for Hospital OQR program purposes. The measure numerator is: 
HCP in the denominator population who during the time from October 1 
(or when the vaccine became available) through March 31 of the 
following year: (a) Received an influenza vaccination administered at 
the healthcare facility, or reported in writing (paper or electronic) 
or provided documentation that influenza vaccination was received 
elsewhere; (b) were determined to have a medical contraindication/
condition of severe allergic reaction to eggs or to other component(s) 
of the vaccine, or history of Guillain-Barre Syndrome within 6 weeks 
after a previous influenza vaccination; (c) declined; or (d) persons 
with unknown vaccination status or who do not otherwise meet any of the 
definitions of the above-mentioned numerator categories. The measure 
denominator is: the number of HCP who are working in the healthcare 
facility for at least 1 working day between October 1 and March 31 of 
the influenza season, regardless of clinical responsibility or patient 
contact. The specifications for this measure are available at http://www.qualityforum.org/QPS/QPSTool.aspx?Exact=false&Keyword=0431.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported inclusion of this measure in the Hospital 
OQR Program and noted that the measure would address a measure type 
that is not adequately represented in the program measure set. 
Furthermore, the adoption of this measure will align with both the 
Hospital IQR Program, which adopted the measure for the FY 2015 payment 
determination and subsequent years, and the ASCQR Program, which 
adopted the measure for the CY 2016 payment determination and 
subsequent years.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42323 through 42324), 
we proposed this measure for the CY 2015 payment determination. 
However, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74470 through 74472), we decided not to finalize the measure (76 FR 
74472) and, instead, decided to propose it in future rulemaking for the 
CY 2016 payment determination and subsequent years in order to address 
measure refinements in the denominator and operational issues. We 
believe that these refinements have been made and that the operational 
issues have been resolved.
    We have learned that many States are proactively aligning their 
reporting requirements for this measure to mirror

[[Page 43649]]

the federal requirements in an effort to reduce burden on providers and 
suppliers. We also recently learned that the measure may soon be 
undergoing some minor updates and review by NQF. Consistent with our 
policy to use a subregulatory process to adopt nonsubstantive changes 
to measures arising out of the NQF process (73 FR 68766 through 68767), 
we would use this process to adopt the upcoming NQF revisions for this 
measure, if the revisions are nonsubstantive.
    We refer readers to section XIII.H.2. of this proposed rule for a 
detailed discussion of data collection. We invite public comment on 
this proposal.
2. Complications Within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures (NQF 0564)
    This proposed measure assesses the percentage of patients aged 18 
years and older with a diagnosis of uncomplicated cataract who had 
cataract surgery and had any of a specified list of surgical procedures 
in the 30 days following cataract surgery which would indicate the 
occurrence of any of the following major complications: Retained 
nuclear fragments, endophthalmitis, dislocated or wrong power 
intraocular lens (IOL), retinal detachment, or wound dehiscence.
    Although complications that may result in a permanent loss of 
vision following cataract surgery are uncommon, this outcome measure 
seeks to identify those complications from surgery that can reasonably 
be attributed to the surgery. It focuses on patient safety and 
monitoring for events that, while uncommon, can signify important 
issues in the care being provided. Advances in technology and surgical 
skills over the last 30 years have rendered cataract surgery safer and 
more effective. An analysis of Managed Care Organization data 
demonstrated that the rate of complications for this measure were 1 to 
2 percent. However, with an annual volume of 2.8 million cataract 
surgeries in the United States, many of which are performed in hospital 
surgical outpatient departments, a 2-percent rate is a significant 
number of surgeries associated with complications.\5\
---------------------------------------------------------------------------

    \5\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
---------------------------------------------------------------------------

    The measure numerator is: Patients who had one or more specified 
operative procedures for any of the following major complications 
within 30 days following cataract surgery: retained nuclear fragments, 
endophthalmitis, dislocated or wrong power IOL, retinal detachment, or 
wound dehiscence. The measure denominator is: All patients aged 18 
years and older who had cataract surgery and no significant pre-
operative ocular conditions impacting the surgical complication rate. 
This measure excludes patients with certain comorbid conditions 
impacting the surgical complication rate. The specifications for this 
measure are available at http://www.qualityforum.org/QPS/0564.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported this measure and noted that the measure 
addresses a high impact condition that is not adequately addressed in 
the Hospital OQR measure set. Currently the NQF endorsement is time-
limited.
    We refer readers to section XIII.H.2. of this proposed rule for a 
detailed discussion of data collection. We invite public comment on 
this proposal.
3. Endoscopy/Poly Surveillance: Appropriate Follow-Up Interval for 
Normal Colonoscopy in Average Risk Patients (NQF 0658)
    This proposed measure assesses the percentage of patients aged 50 
years and older receiving screening colonoscopy without biopsy or 
polypectomy who had a recommended follow-up interval of at least 10 
years for repeat colonoscopy documented in their colonoscopy report.
    In the average-risk population, colonoscopy screening is 
recommended in current guidelines at 10-year intervals.\6\ Our analysis 
indicated that about 25 percent of surgeries/procedures performed in 
HOPDs and ASCs are colonoscopies. Performing colonoscopy too frequently 
increases patients' exposure to procedural harm. This measure aims to 
assess whether average risk patients with normal colonoscopies receive 
a recommendation to receive a repeat colonoscopy in an interval that is 
less than the recommended amount of 10 years.
---------------------------------------------------------------------------

    \6\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    The measure numerator is: Patients who had a recommended follow-up 
interval of at least 10 years for repeat colonoscopy documented in 
their colonoscopy report. The measure denominator is: all patients aged 
50 years and older receiving screening colonoscopy without biopsy or 
polypectomy. This measure excludes patients with documentation of 
medical reason(s) for recommending a follow-up interval of less than 10 
years (for example, an above-average risk patient or inadequate prep). 
The specifications for this measure are available at: http://www.qualityforum.org/QPS/0658.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the direction of the measure. Currently 
the NQF endorsement is time-limited.
    We refer readers to section XIII.H.2. of this proposed rule for a 
detailed discussion of data collection. We invite public comment on 
this proposal.
4. Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients With 
a History of Adenomatous Polyps--Avoidance of Inappropriate Use (NQF 
0659)
    The proposed Endoscopy/Poly Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use measure assesses the percentage of patients aged 18 
years and older receiving a surveillance colonoscopy, with a history of 
a prior colonic polyp in previous colonoscopy findings who had a 
follow-up interval of 3 or more years since their last colonoscopy 
documented in the colonoscopy report.
    Colonoscopy is the recommended method of surveillance after the 
removal of adenomatous polyps, because it has been shown to 
significantly reduce subsequent colorectal cancer incidence. The timing 
of follow-up colonoscopy should be tailored to the number, size, and 
pathologic findings of the adenomatous polyps removed. A randomized 
trial of 699 patients showed that after newly diagnosed adenomatous 
polyps have been removed by colonoscopy, follow-up colonoscopy at 3 
years detects important colonic lesions as effectively as follow-up 
colonoscopy at both 1 and 3 years.7 8
---------------------------------------------------------------------------

    \7\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
    \8\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.

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

[[Page 43650]]

    The measure numerator for this proposed measure is: Patients who 
had an interval of 3 or more years since their last colonoscopy. The 
measure denominator is: all patients aged 18 years and older receiving 
a surveillance colonoscopy with a history of a prior colonic polyp in a 
previous colonoscopy. This measure excludes patients with: (1) 
Documentation of medical reason(s) for an interval of less than 3 years 
since the last colonoscopy (for example, last colonoscopy incomplete, 
last colonoscopy had inadequate prep, piecemeal removal of adenomas, or 
last colonoscopy found greater than 10 adenomas); or (2) documentation 
of a system reason(s) for an interval of less than 3 years since the 
last colonoscopy (for example, unable to locate previous colonoscopy 
report, previous colonoscopy report was incomplete). The specifications 
for this measure are available at http://www.qualityforum.org/QPS/0659.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the direction of the measure. Currently 
the NQF endorsement is time-limited.
    We refer readers to section XIII.H.2. of this proposed rule for a 
detailed discussion of data collection. We invite public comment on 
this proposal.
5. Cataracts--Improvement in Patient's Visual Function Within 90 Days 
Following Cataract Surgery (NQF 1536)
    This proposed measure assesses the percentage of patients aged 18 
years and older who had cataract surgery and had improvement in visual 
function achieved within 90 days following the cataract surgery.
    Cataract surgery is performed to improve a patient's vision and 
associated functioning. This outcome is achieved consistently through 
careful attention to the accurate measurement of axial length and 
corneal power and the appropriate selection of an IOL. Failure to 
achieve improved visual functioning after surgery in eyes without 
comorbid ocular conditions that could impact the success of the surgery 
would reflect care that should be assessed for opportunities for 
improvement. Evidence suggests that visual improvement occurs in about 
86--98 percent of surgeries in eyes without comorbid conditions. 
However, with an annual volume of 2.8 million cataract surgeries in the 
United States, many of which are performed in hospital outpatient 
surgical departments, the impact could affect a significant number of 
patients per year.\9\
---------------------------------------------------------------------------

    \9\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
---------------------------------------------------------------------------

    We are proposing to adopt this measure for the CY 2016 payment 
determination and subsequent years. The measure numerator is: Patients 
18 years and older (with a diagnosis of uncomplicated cataract) in a 
sample who had improvement in visual function achieved within 90 days 
following cataract surgery, based on completing a pre-operative and 
post-operative visual function instrument. The measure denominator is: 
All patients aged 18 years and older in sample who had cataract 
surgery. There are no exclusions.
    The specifications for this measure are available at http://www.qualityforum.org/QPS/1536. Additional information for the measure 
specifications can be found in the NQF Measure Evaluation available at 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=68317.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the inclusion of the measure in the 
Hospital OQR Program and noted that the measure addresses a high impact 
condition not adequately addressed in the program measure set. The MAP 
added that this measure, which addresses outcomes, falls under a 
category of measures inadequately represented in the program measure 
set. Currently the NQF endorsement is time-limited.
    We refer readers to section XIII.H.2. of this proposed rule for a 
detailed discussion of data collection. We invite public comment on 
this proposal.
    The proposed measure set for the Hospital OQR Program for the CY 
2016 payment determination and subsequent years is listed in the table 
below.

    Proposed Hospital OQR Program Measure set for the CY 2016 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
     NQF                         Measure name
------------------------------------------------------------------------
0287.................  OP-1: Median Time to Fibrinolysis.
0288.................  OP-2: Fibrinolytic Therapy Received Within 30
                        Minutes.
0290.................  OP-3: Median Time to Transfer to Another Facility
                        for Acute Coronary Intervention.
0286.................  OP-4: Aspirin at Arrival.
0289.................  OP-5: Median Time to ECG.
0270.................  OP-6: Timing of Antibiotic Prophylaxis.
0268.................  OP-7: Prophylactic Antibiotic Selection for
                        Surgical Patients.
0514.................  OP-8: MRI Lumbar Spine for Low Back Pain.
                       OP-9: Mammography Follow-up Rates.
                       OP-10: Abdomen CT--Use of Contrast Material.
0513.................  OP-11: Thorax CT--Use of Contrast Material.
0489.................  OP-12: The Ability for Providers with HIT to
                        Receive Laboratory Data Electronically Directly
                        into their ONC-Certified EHR System as Discrete
                        Searchable Data.
0669.................  OP-13: Cardiac Imaging for Preoperative Risk
                        Assessment for Non Cardiac Low Risk Surgery.
                       OP-14: Simultaneous Use of Brain Computed
                        Tomography (CT) and Sinus Computed Tomography
                        (CT).
                       OP-15: Use of Brain Computed Tomography (CT) in
                        the Emergency Department for Atraumatic
                        Headache*.
0491.................  OP-17: Tracking Clinical Results between Visits.
0496.................  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.
0662.................  OP-21: Median Time to Pain Management for Long
                        Bone Fracture.

[[Page 43651]]

 
                       OP-22: ED- Patient Left Without Being Seen.
0661.................  OP-23: ED- Head CT or MRI Scan Results for Acute
                        Ischemic Stroke or Hemorrhagic Stroke who
                        Received Head CT or MRI Scan Interpretation
                        Within 45 minutes of Arrival.
                       OP-25: Safe Surgery Checklist Use.
                       OP-26: Hospital Outpatient Volume on Selected
                        Outpatient Surgical Procedures.**
0431.................  OP-27: Influenza Vaccination Coverage among
                        Healthcare Personnel.***
0564.................  OP-28: Complications within 30 days Following
                        Cataract Surgery Requiring Additional Surgical
                        Procedures.***
0658.................  OP-29: Endoscopy/Poly Surveillance: Appropriate
                        follow-up interval for normal colonoscopy in
                        average risk patients.***
0659.................  OP-30: Endoscopy/Poly Surveillance: Colonoscopy
                        Interval for Patients with a History of
                        Adenomatous Polyps--Avoidance of Inappropriate
                        Use***.
1536.................  OP-31: Cataracts--Improvement in Patient's Visual
                        Function within 90 Days Following Cataract
                        Surgery.***
------------------------------------------------------------------------
* Public reporting for OP-15 continues to be deferred at the time of
  this CY 2014 OPPS/ASC proposed rule.
** OP-26: Procedure categories and corresponding HCPCS codes are located
  at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata&blobtable=MungoBlobs.
*** New measures proposed for the CY 2016 payment determination and
  subsequent years.

F. Possible Hospital OQR Program Measure Topics for Future 
Consideration

    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 are working diligently 
toward this goal. We believe that this progress, at a near future date, 
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, including partial hospitalization programs (PHPs) 
that are part of HOPDs.
    We are considering the following measure domains for future 
measures: 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 programs such as the Hospital IQR Program and the 
ASCQR Program.
    We invite public comment on this approach and on our suggestions 
and rationale for possible measure topics for future consideration in 
the Hospital OQR Program.
    In addition, we are soliciting comments on the following potential 
quality measure topics for PHPs in HOPDs: Poly-therapy with 
antipsychotic medications; Post-discharge of continuity of care; 
Alcohol screening; Alcohol and drug use; Tobacco use assessment; and 
Follow-up after hospitalization for mental illness. These topics would 
align measurement of PHPs in HOPDs with that of the IPFQR Program.

XIII. Hospital Outpatient Quality Reporting Program Updates

G. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2014 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.
    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 in order to receive the full 
payment update factor 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. For a more detailed discussion of how the payment reduction 
for failure to meet the administrative, data collection, and data 
submission requirements of the Hospital OQR Program was initially 
implemented, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68769 through 68772).
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor, which is updated annually by the OPD fee schedule 
increase factor, is used to calculate the OPPS payment rate for 
services with the following status indicators (listed in Addendum B to 
this proposed rule with comment period, which is available via the 
Internet on

[[Page 43652]]

the CMS Web site): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' 
``V,'' or ``U.'' We note that we are proposing to delete status 
indicator ``X'' as described in sections II.A.3. and XI. of this 
proposed rule. We also note that we are proposing to develop status 
indicator ``J1'' as part of the proposed comprehensive APC discussed in 
section II.A.2.e. of this proposed rule. Payment for all services 
assigned to these status indicators will 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''. We refer readers to the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68770) for a discussion of 
this policy.
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
implement the requirement to reduce the OPD fee schedule increase 
factor for hospitals that fail to meet reporting requirements, we 
calculate two conversion factors--a full market basket conversion 
factor (that is, the full conversion factor), and a reduced market 
basket conversion factor (that is, the reduced conversion factor). We 
then calculate a reduction ratio by dividing the reduced conversion 
factor by the full conversion factor. We refer to this reduction ratio 
as the ``reporting ratio'' to indicate that it 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 multiplied 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 established this policy in the OPPS 
beginning in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60642). For a complete discussion of the OPPS outlier calculation and 
eligibility criteria, we refer readers to section II.G. of this 
proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2014
    We are proposing 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 2014 annual payment update factor. 
For the CY 2014 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of $71.273 by the 
proposed full conversion factor of $72.728. We are proposing to 
continue to apply the reporting ratio to all services calculated using 
the OPPS conversion factor. For the CY 2014 OPPS, we are proposing to 
apply the reporting ratio, when applicable, to all HCPCS codes to which 
we have assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``V,'' and ``U'' (other than new technology APCs 
to which we have assigned status indicators ``S'' and ``T''). We note 
that we are proposing to delete status indicator ``X'' as described in 
sections II.A.3. and XI. of this proposed rule. We also note that we 
are proposing to develop status indicator ``J1'' as part of the 
proposed comprehensive APC discussed in section II.A.2.e. of this 
proposed rule and to apply the reporting ratio to the comprehensive 
APCs. We are proposing to continue to exclude services paid under New 
Technology APCs. We are proposing to continue to apply the reporting 
ratio to the national unadjusted payment rates and the minimum 
unadjusted and national unadjusted copayment rates of all applicable 
services for those hospitals that fail to meet the Hospital OQR Program 
reporting requirements. We also are proposing to continue to apply all 
other applicable standard adjustments to the OPPS national unadjusted 
payment rates for hospitals that fail to meet the requirements of the 
Hospital OQR Program. Similarly, we are proposing to continue to 
calculate OPPS outlier eligibility and outlier payment based on the 
reduced payment rates for those hospitals that fail to meet the 
reporting requirements.
    We invite public comment on these proposals.

H. Proposed Requirements for Reporting of Hospital OQR Data for the CY 
2015 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2015 Payment Determination 
and Subsequent Years
    To participate successfully 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 43653]]

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 payment update and 
subsequent years in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74479 through 74487). In the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68480 through 68481), we modified these 
requirements by extending the deadline for certain hospitals to submit 
a participation form. For the CY 2014 payment determination and 
subsequent years, we modified the deadline for hospitals that are not 
currently participating in the Hospital OQR Program and wish to 
participate, provided they have 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, and we are referring to an acceptance date before 
January 1, 2013. The hospitals must submit a participation form by July 
31 rather than March 31 of the year prior to the affected annual 
payment update in order to participate in the Hospital OQR Program for 
purposes of the CY 2014 payment update. In the example, the deadline 
would be July 31, 2013.
    The Hospital OQR Program procedural requirements are unchanged from 
those adopted in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68480 through 68481). We are proposing to codify these 
procedural requirements at Sec.  419.46(a). To participate in the 
Hospital OQR Program, a hospital--as defined in section 1886(d)(1)(B) 
of the Act and that is reimbursed under the OPPS--must:
     Register with QualityNet before beginning to report data.
     Identify and register a QualityNet security administrator 
as part of the registration process located on the QualityNet Web site 
(http://www.QualityNet.org);
     Complete and submit an online participation form available 
at the QualityNet Web site if this form has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CMS Certification Number (CCN). For Hospital OQR Program 
purposes, hospitals that share the same CCN are required to complete a 
single online participation form. Once a hospital has submitted a 
participation form, it is considered to be an active Hospital OQR 
Program participant until such time as it submits a withdrawal form to 
CMS or no longer has an effective Medicare provider agreement.
    Deadlines to submit the notice of participation form are based on 
the date identified as a hospital's Medicare acceptance date:
     If a hospital has a Medicare acceptance date before 
January 1 of the year prior to the affected annual payment update, the 
hospital must complete and submit to CMS a completed Hospital OQR 
Notice of Participation Form by July 31 of the calendar year prior to 
the affected annual payment update.
     If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit a completed participation form no later than 180 
days from the date identified as its Medicare acceptance date.
    Hospitals may withdraw from participating in the Hospital OQR 
Program and the procedural requirements for this are unchanged from 
those adopted in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 77480). We are proposing to codify these procedural requirements 
at Sec.  419.46(b). Under these procedures, a participating hospital 
may withdraw from the Hospital OQR Program by submitting to CMS a 
withdrawal form that can be found in the secure portion of the 
QualityNet Web site. The hospital may withdraw any time from January 1 
to November 1 of the year prior to the affected annual payment update. 
A withdrawn hospital will not be able to later sign up to participate 
in that payment update, is subject to a reduced annual payment update 
as specified under Sec.  419.43(h), and is required to submit a new 
participation form in order to participate in any future year of the 
Hospital OQR Program.
    We invite public comment on this proposal.
2. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program
a. Background
    We refer readers to the following OPPS/ASC final rules with comment 
period 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); 26 
measures finalized for the CY 2014 and CY 2015 payment determination 
(76 FR 74469 and 74473) and no additional measures finalized for the CY 
2015 payment determination (77 FR 68476 through 68478). In the CY 2013 
OPPS/ASC final rule with comment period, we confirmed the removal of 
one measure for the CY 2013 payment determination and subsequent years 
(77 FR 68473 through 68474), confirmed the suspension of one measure 
for the CY 2014 payment determination (77 FR 68474 through 68476), and 
finalized the deferred data collection for one measure (77 FR 68476).
b. Effects of Proposed Changes on Data Submission for CY 2015 and CY 
2016 Payment Determinations and Subsequent Years
    For the CY 2015 payment determination and subsequent years, we are 
proposing to remove OP-19 as discussed in section XIII.C.2.a. of this 
proposed rule. Effective with January 1, 2013 encounters, we previously 
suspended OP-19 and have not used OP-19 data to meet requirements for 
any payment determination under the Hospital OQR Program or in public 
reporting. Therefore, our proposal to remove OP-19 from the Hospital 
OQR Program would not require a participating hospital to take any new 
action.
    For the CY 2015 payment determination and subsequent years, we are 
proposing to remove OP-24 from the Hospital OQR program, as discussed 
in section XIII.C.2.b. of this proposed rule. To date, we have not 
required hospitals to submit data for OP-24. Based on this proposal, 
hospitals would not be required to take any new action; that is, they 
would continue having no requirement to abstract or submit data for OP-
24.
    For the CY 2016 payment determination and subsequent years, in 
section XIII.E. of this proposed rule we are proposing to add five 
additional measures to the program.
    We would require hospitals to submit data for these measures 
annually via an online tool located on either the NHSN Web site or the 
QualityNet Web site depending on the measure. We discuss proposed data 
collection for each of these new measures by mode of data submission in 
the following sections of this proposed rule.
    The proposed new measures are:
     OP-27: Influenza Vaccination Coverage among Healthcare 
Personnel;
     OP-28: Complications within 30 Days Following Cataract 
Surgery

[[Page 43654]]

Requiring Additional Surgical Procedures;
     OP-29: Endoscopy/Poly Surveillance: Appropriate follow-up 
interval for normal colonoscopy in average risk patients;
     OP-30: Endoscopy/Poly Surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use; and
     OP-31: Cataracts--Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery.
c. General Requirements
    The proposed Hospital OQR Program procedural requirements are 
unchanged from those discussed and adopted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74480 through 74482). We are 
proposing to codify the policy that, to be eligible to receive the full 
OPD fee schedule increase factor for any payment determination, 
hospitals that participate in the Hospital OQR Program must submit to 
CMS data on measures selected under section 1833(17)(C) of the Act in a 
form and manner, and at a time specified by CMS. This means that 
hospitals must comply with our submission requirements for chart-
abstracted data, population and sampling data, claims-based measure 
data, and Web-based quality measure data. We are proposing to codify 
these general submission requirements at Sec.  419.46(c).
    Submission deadlines by measure and data type are posted on the 
QualityNet Web site. In general, deadlines for patient-level data 
submitted directly to CMS would be approximately 4 months after the 
last day of each calendar quarter. For example, the submission deadline 
for data for services furnished during the first quarter of CY 2014 
(January-March 2014) would be on or around August 1, 2014. We are 
proposing to codify language at Sec.  419.46(c)(2) stating our practice 
of posting actual submission deadlines by measure and by data type on 
the QualityNet Web site (http://www.QualityNet.org).
    We are proposing to codify our policies for initial data collection 
periods and submission deadlines for a hospital that did not 
participate in the previous year's Hospital OQR Program in Sec.  
419.46(c)(3) of our regulations. We refer readers to our previously 
finalized policy in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68481) to establish data collection and submission requirements 
for the CY 2014 payment determination and subsequent years. To 
determine when a hospital that did not participate in a previous year's 
payment determination must begin collecting and submitting data to meet 
Hospital OQR Program requirements for a full annual payment update, we 
continue to use the January 1 Medicare acceptance date. If a hospital 
has a Medicare acceptance date before January 1 of the year prior to 
the affected annual payment update, the hospital must collect data 
beginning with encounters occurring during the first calendar quarter 
of the year prior to the affected annual payment update, in addition to 
submitting a completed Hospital OQR Notice of Participation Form. If a 
hospital has a Medicare acceptance date on or after January 1 of the 
year prior to the affected annual payment update, the hospital must 
collect data for encounters beginning with the first full quarter 
following submission of the completed Hospital OQR Notice of 
Participation Form. Hospitals with a Medicare acceptance date before or 
after January 1 of the year prior to an affected annual payment update 
must follow data submission deadlines as specified on the QualityNet 
Web site.
    We invite public comment on these proposals.
d. Proposed Chart-Abstracted Measure Requirements for the CY 2015 and 
CY 2016 Payment Determinations and Subsequent Years
    The following chart-abstracted measures in the Hospital OQR Program 
require data submission for the CY 2015 payment determination and 
subsequent years:
     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; and
     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.
    The form and manner for submission of one of these measures, OP-22: 
ED Patient Left Without Being Seen, is unique, and is detailed in 
section XV.G.2.f. of the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68484). As discussed above, we are not proposing any new 
chart-abstracted measures where patient-level data is submitted 
directly to CMS in this proposed rule.
e. Proposed Claims-Based Measure Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    The table in section XIII.D. of this proposed rule includes 
measures that the Hospital OQR Program collects by accessing electronic 
Medicare claims data submitted by hospitals for reimbursement.
    We are not proposing new claims-based measures in this proposed 
rule. Therefore, the following 6 claims-based measures will be included 
for the CY 2015 payment determination and subsequent years:
     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; and
     OP-14: Simultaneous Use of Brain Computed Tomography (CT) 
and Sinus Computed Tomography (CT).
    We deferred the public reporting of OP-15, a claims-based measure 
(76 FR 74456). We are not proposing any change to this policy. Public 
reporting for OP-15 continues to be deferred, and this deferral has no 
effect on any payment determinations at this time.
    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 2014 payment update, we 
will use paid Medicare FFS claims for services furnished from January 
1, 2011 to December 31, 2011.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68482 
through 68485), for the CY 2015 payment determination, we finalized our 
proposal 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. This is a departure from the traditional 12 
month

[[Page 43655]]

calendar year period we have used for these measures. As stated in that 
final rule with comment period, we adopted 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 claims-based measures on the Web site. 
Under our policy prior to the CY 2013 final rule, the time period would 
have been January 1, 2011 to December 31, 2011, whereas, under the 
policy finalized in that final rule with comment period, the time 
period is July 1, 2012 to June 30, 2013.
    For the CY 2016 payment determination and subsequent years, we are 
proposing to continue this approach and to use paid Medicare FFS claims 
for services from a 12 month period from July three years before the 
payment determination through June of the next year. For CY 2016, this 
12 month period would be from July 1, 2013 through June 30, 2014 for 
the calculation of the claims-based measures. We invite public comment 
on this proposal.
f. Proposed Data Submission Requirements for Measure Data Submitted via 
Web-Based Tool for the CY 2016 Payment Determination and Subsequent 
Years
    In previous rulemaking, we have referred to measures where data are 
submitted via a Web-based tool on a CMS Web site under our quality data 
reporting programs as structural measures (measures concerned with 
attributes of where care occurs, such as material resources, human 
resources, and organizational structure.\10\ For example, the Hospital 
OQR Measure OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their ONC-Certified EHR 
System as Discrete Searchable Data is a structural measure. However, 
because measures where data is submitted in this manner may or may not 
be structural, for example, the Hospital IQR chart-abstracted, process 
of care measure PC-01: Elective Delivery Prior to 39 Completed Weeks 
Gestation, we have refined our terminology and now refer to the mode of 
data submission as Web-based.
---------------------------------------------------------------------------

    \10\ Maintz, J. Defining and Classifying Clinical Indicators for 
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530).
---------------------------------------------------------------------------

    Thus, the previously finalized Web-based measures where data is 
entered on a CMS Web site that we require for the CY 2015 payment 
determination and subsequent years are listed 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-22: ED Patient Left Without Being Seen;
     OP 25: Safe Surgery Check List Use; and
     OP 26: Hospital Outpatient Volume on Selected Outpatient 
Surgical Procedures.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68483 
through 68484), we finalized that, for the CY 2014 payment 
determination, hospitals are required to submit data on all Web-based 
measures between July 1, 2013 and November 1, 2013 with respect to the 
time period from January 1, 2012 to December 31, 2012. This schedule 
also applies to the encounter periods and deadlines to submit data for 
OP-22: ED Patient Left Without Being Seen. While patient-level data for 
this measure is collected via chart-abstraction, aggregate data is 
submitted using an online tool.
    We also finalized in the CY 2013 OPPS/ASC final rule with comment 
period for the CY 2015 payment determination, that hospitals are 
required to submit data on all Web-based measure data between July 1, 
2014 and November 1, 2014 with respect to the time period from January 
1, 2013 to December 31, 2013.
    We are proposing to apply a similar schedule for the CY 2016 
payment determination and subsequent years. For the CY 2016 payment 
determination and subsequent years, we are proposing that hospitals 
would be required to submit data between July 1 and November 1 of the 
year prior to a payment determination with respect to the time period 
of January 1 to December 31 of two years prior to a payment 
determination year. Thus, for example, for the CY 2016 payment 
determination, hospitals would be required to submit data between July 
1, 2015 and November 1, 2015 with respect to the time period of January 
1, 2014 to December 31, 2014.
    We are also proposing to apply the same mode of data collection and 
deadlines to the following proposed measures:
     OP-28: Complications within 30 days Following Cataract 
Surgery Requiring Additional Surgical Procedures;
     OP-29: Endoscopy/Poly Surveillance: Appropriate follow-up 
interval for normal colonoscopy in average risk patients;
     OP-30: Endoscopy/Poly Surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use; and
     OP-31: Cataracts--Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery.
    Specifically, for data collection, we are proposing that hospitals 
submit aggregate-level data through the CMS Web-based tool (the 
QualityNet Web site). As with OP-22, hospitals would submit all the 
data required for a particular program year once annually during the 
data submission window we are proposing above, and would do so via the 
Outpatient section on the QualityNet secure Web site. While we are 
proposing submission deadlines with an annual frequency, the data input 
forms on the QualityNet Web site for such submission will require 
hospitals to submit aggregate data represented by each separate 
quarter. We are proposing to both use the Web-based collection tool and 
collect aggregate-level data because we believe these options are less 
burdensome to hospitals than patient-level reporting.
    While this proposal applies to the CY 2016 payment determination 
and subsequent years, we summarize below, for chart-abstracted measures 
collected via the Web-based tool, the proposed and finalized measures, 
data collection periods, and deadlines for just the CY 2016 payment 
determination.

[[Page 43656]]



    Proposed and Finalized Chart-Abstracted Measures With Data Collection by Web-Based Tool: CY 2016 Payment
                                                  Determination
----------------------------------------------------------------------------------------------------------------
                                         Hospital OQR program                                Data submission
               Measure                          status              Encounter dates             timeframe
----------------------------------------------------------------------------------------------------------------
OP-22: ED Patient Left Without Being   Finalized..............  January 1, 2014-         July 1, 2015-November
 Seen.                                                           December 31, 2014.       1, 2015.
OP-28: Complications within 30 days    Proposed...............  January 1, 2014-         July 1, 2015-November
 Following Cataract Surgery Requiring                            December 31, 2014.       1, 2015.
 Additional Surgical Procedures.
OP-29: Endoscopy/poly Surveillance:    Proposed...............  January 1, 2014-         July 1, 2015-November
 Appropriate follow-up interval for                              December 31, 2014.       1, 2015.
 normal colonoscopy in average risk
 patients.
OP-30: Endoscopy/poly surveillance:    Proposed...............  January 1, 2014-         July 1, 2015-November
 Colonoscopy Interval for Patients                               December 31, 2014.       1, 2015.
 with a History of Adenomatous
 Polyps--Avoidance of Inappropriate
 Use.
OP-31: Cataracts--Improvement in       Proposed...............  January 1, 2014-         July 1, 2015-November
 Patient's Visual Function within 90                             December 31, 2014.       1, 2015.
 Days Following Cataract Surgery.
----------------------------------------------------------------------------------------------------------------

    We recognize that aggregate-level reporting has the potential to 
result in less accurate measure rates than patient-level reporting. 
However, to reduce burden for hospitals, we believe that an aggregate 
data submission approach is the preferable approach at this time.
    We invite public comment on these proposals.
g. Proposed Data Submission Requirements for a Measure Reported via 
NHSN for the CY 2016 Payment Determination and Subsequent Years
    As discussed above, we are proposing to add the measure OP-27: 
Influenza Vaccination Coverage among Healthcare Personnel to the 
Hospital OQR Program measure set. We are also proposing to use the data 
submission and reporting standard procedures set forth by CDC for NHSN 
participation in general and for submission of this measure to NHSN. We 
refer readers to the CDC's NHSN Web site (http://www.cdc.gov/nhsn) for 
detailed data submission and reporting procedures. We believe that 
these procedures are feasible because they are already widely used by 
over 4,000 hospitals reporting HAI data using NHSN. Our proposal seeks 
to reduce hospital burden by aligning our data submission and reporting 
procedures with NHSN procedures currently used by hospitals who 
participate in the reporting requirements for the Hospital IQR Program 
as well as hospitals in the 30 States and the District of Columbia that 
mandate HAI reporting via NHSN.
    We are proposing to adopt the NHSN HAI measure data collection 
timeframe of October 1 through March 31st, as previously finalized in 
the Hospital IQR Program (76 FR 51631 through 51633), which links data 
collection to the time period in which influenza vaccinations are 
administered during the influenza season. Because data for this measure 
would be collected seasonally, we are proposing that hospitals submit 
their data for this measure to NHSN for purposes of the Hospital OQR 
Program by May 15th of the calendar year in which the vaccination 
season has ended. For example, for vaccinations given from October 1, 
2014 (or when the vaccine becomes available) to March 31, 2015, the 
submission deadline would be May 15, 2015. This data submission 
deadline for this measure corresponds to that proposed by the Hospital 
IQR Program (78 FR 27700).
    We invite public comment on these proposals.
h. Population and Sampling Data Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68484), for the CY 2014 payment determination and subsequent years, we 
continued 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 are not proposing any changes to this policy.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS for the CY 2015 Payment 
Determination and Subsequent Years
a. Selection of Hospitals for Data Validation of Chart-Abstracted 
Measures for the CY 2015 Payment Determination and Subsequent Years
    We refer readers to the CY 2012 and CY 2013 OPPS/ASC final rules 
with comment period (76 FR 74484 through 74487 and 77 FR 68484 through 
68487) for a discussion of finalized policies regarding our sampling 
methodology, including sample size, eligibility for validation 
selection, and encounter minimums for patient-level data for measures 
where data is obtained from chart abstraction and submitted directly to 
CMS from selected hospitals. We are not proposing any changes to these 
policies.
    We are, however, proposing to codify at Sec.  419.46(e) of our 
regulations the existing policy that we may validate one or more 
measures selected under section 1833(17)(C) of the Act by reviewing 
documentation of patient encounters submitted by selected participating 
hospitals. Upon written request, a hospital must submit to CMS or its 
contractor supporting medical record documentation that the hospital 
used for purposes of data submission under the program. The specific 
sample that a hospital must submit will be identified in the written 
request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request. A hospital meets the validation requirement with 
respect to a fiscal year if it achieves at least a 75-percent 
reliability score, as determined by CMS.

[[Page 43657]]

    We invite public comment on our proposal to codify these 
requirements.
b. Targeting Criteria for Data Validation Selection for the CY 2015 
Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68485 through 68486) for a discussion of our targeting 
criteria. We are not proposing any changes to this policy.
c. Methodology for Encounter Selection for the CY 2015 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68486) for a discussion of our methodology for encounter 
selection. We are not proposing any changes to this policy.
d. Medical Record Documentation Requests for Validation and Validation 
Score Calculation for the CY 2015 Payment Determination and Subsequent 
Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68486 through 68487) for a discussion of our procedures 
for requesting medical record documentation for validation and 
validation score calculation. We are not proposing any changes to our 
procedures regarding medical record requests.
    However, we are proposing to codify these procedures at Sec.  
419.46(e)(1) and (e)(2) as summarized below:
     CMS may validate one or more measures selected under 
section 1833(17)(C) of the Act by reviewing documentation of patient 
encounters submitted by selected participating hospitals.
     Upon written request by CMS or its contractor, a hospital 
must submit to CMS supporting medical record documentation that the 
hospital used for purposes of data submission under the program. The 
specific sample that a hospital must submit will be identified in the 
written request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request.
     A hospital meets the validation requirement with respect 
to a fiscal year if it achieves at least a 75-percent reliability 
score, as determined by CMS.
    We invite public comment on our proposal to codify these 
procedures.

I. Proposed Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2015 Payment Determination and Subsequent Years

    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487) for a discussion of our reconsideration and 
appeals procedures. We are proposing one change to the reconsideration 
request procedures to ensure our deadline for reconsideration requests 
will always fall on a business day. We also are proposing to codify the 
process, including our proposal to change the deadline by which 
participating hospitals may submit requests for reconsideration at 
Sec.  419.46(f) of our regulations.
    Under the proposed change to our procedures, a hospital seeking 
reconsideration would submit to CMS, via the QualityNet Web site, a 
Reconsideration Request form that will be made available on the 
QualityNet Web site. Where we have required that this form must be 
submitted by February 3 of the affected payment year (for example, for 
the CY 2014 payment determination, the request was required to be 
submitted by February 3, 2014), we are proposing to modify this 
requirement so that the Reconsideration Request form would be required 
to be submitted on the first business day in February of the affected 
payment year. If this proposal is finalized, the Reconsideration 
Request form for the CY 2014 payment determination would be required on 
February 3, 2014, which is a Monday, and the form for the CY 2015 
payment determination would be required on February 2, 2015, which is 
also a Monday. We note that while we use the CY 2014 and 2015 payment 
determinations as examples, we are proposing this policy for the CY 
2014 payment determination and subsequent years. The other requirements 
of the form would remain unchanged. We request public comment on this 
proposal.
    We also are proposing to codify this process by which participating 
hospitals may submit requests for reconsideration including our 
proposal to change the reconsideration request deadline at Sec.  
419.46(f). Under these proposed procedures, the hospital must submit to 
CMS via QualityNet, a reconsideration request via the QualityNet Web 
site, no later than the first business day of the month of February of 
the affected year containing the following information:
     The hospital's CMS Certification Number (CCN);
     The name of the hospital;
     The 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;
     The hospital's basis for requesting reconsideration. The 
hospital must identify its specific reason(s) for believing it should 
not be subject to the reduced annual payment update;
     The hospital-designated personnel contact information, 
including name, email address, telephone number, and mailing address 
(must include physical address, not just a post office box).
     The hospital-designated personnel's signature;
     A copy of all materials that the hospital submitted to 
comply with the requirements of the affected Hospital OQR Program 
payment determination year; and
     If the hospital is requesting reconsideration on the basis 
that CMS has determined it did not meet an affected payment 
determination year's validation requirement set forth in paragraph 
(e)(1) of this section, 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 are eligible to be reconsidered.
    We also are proposing to codify language at Sec.  419.46(f)(3) 
stating that a hospital that is dissatisfied with a decision made by 
CMS on its reconsideration request may file an appeal with the Provider 
Reimbursement Review Board.
    While we are not proposing to codify the following process, we note 
that, after receiving 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 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

[[Page 43658]]

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 will 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 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 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 
30 calendar day timeframe, our review is initially limited to 
determining whether the CMS contractor received the requested medical 
record documentation within 30 calendar days, and whether the hospital 
received the initial medical record request and reminder notice. If we 
determine that the CMS contractor timely received copies of the 
requested medical record documentation, we abstract data elements from 
the medical record documentation submitted by the hospital and compute 
a validation score for the hospital. If we determine that the hospital 
received two letters requesting medical documentation but did not 
submit the requested documentation within the 30 calendar day period, 
we 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 invite public comment on these proposals.

J. Extraordinary Circumstances Extension or Waiver for the CY 2014 
Payment Determination and Subsequent Years

    In our experience, there have been times when facilities have been 
unable to submit information to meet program requirements due to 
extraordinary circumstances that are not within their control. It is 
our goal to not penalize such entities for such circumstances and we do 
not want to unduly increase their burden during these times. We refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68489) for a complete discussion of our extraordinary circumstances 
extension or waiver process under the Hospital OQR Program.
    We are proposing one change to our 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. Specifically, we are 
proposing that we may grant a waiver or extension to hospitals if we 
determine that a systemic problem with one of our data collection 
systems directly or indirectly affected the ability of hospitals to 
submit data. Because we do not anticipate that such systemic errors 
will happen often, we do not anticipate granting a waiver or extension 
on this basis frequently.
    We also are proposing to codify language for the general 
requirements for our extension or waiver process including the proposal 
for systemic errors at Sec.  419.46(d) as described below:
    CMS may grant an extension or waiver of one or more data submission 
deadlines and requirements in the event of extraordinary circumstances 
beyond the control of the hospital such as when an act of nature 
affects an entire region or locale or a systemic problem with one of 
CMS' data collection systems directly or indirectly affects data 
submission. CMS may grant an extension or waiver as follows:
     Upon request by the hospital. Specific requirements for 
submission of a request for an extension or waiver are available on the 
QualityNet Web site.
     At the discretion of CMS. CMS may grant waivers or 
extensions to hospitals that have not requested them when CMS 
determines that an extraordinary circumstance has occurred.
    For the hospital to request 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 follow 
specific requirements for submission of a request available on 
QualityNet. While we are not proposing to codify the following process, 
we note that, the following information must appear on the request 
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 believes it would again be able 
to submit Hospital OQR data and/or medical record documentation, and a 
justification for the proposed date.
    The request form must be signed by the hospital's designated 
contact, whether or not that individual is the CEO. A request form is 
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 and communicate our response within 90 days 
following our receipt of such a request.
    We can also grant waivers or extensions to hospitals that have not 
requested them when we determine that an extraordinary circumstance, 
such as when an act of nature (for example, hurricane) affects an 
entire region or locale or a systemic problem with one of our data 
collection systems directly or indirectly affects data submission. 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 invite public comment on these proposals.

[[Page 43659]]

XIV. Hospital Value-Based Purchasing (VBP) Program Updates

A. Background

    Section 1886(o) of the Act, as added by section 3001(a)(1) of the 
Affordable Care Act, requires the Secretary to establish a hospital 
value-based purchasing program (the Hospital Value-Based Purchasing 
(VBP) Program) under which value-based incentive payments are made in a 
fiscal year to hospitals that meet performance standards established 
for a performance period for such fiscal year. Both the performance 
standards and the performance period for a fiscal year are to be 
established by the Secretary.

B. Proposal for Additional CMS Appeals Review Process

1. Statutory Basis
    Section 1886(o)(11)(A) of the Act requires the Secretary to 
establish a process by which hospitals may appeal the calculation of a 
hospital's performance assessment with respect to the performance 
standards (section 1886(o)(3)(A) of the Act) and the hospital 
performance score (section 1886(o)(5) of the Act).
    Under section 1886(o)(11)(B) of the Act, there is no administrative 
or judicial review under section 1869 of the Act, section 1878 of the 
Act, or otherwise of the following: (1) The methodology used to 
determine the amount of the value-based incentive payment under section 
1886(o)(6) of the Act and the determination of such amount; (2) the 
determination of the amount of funding available for the value-based 
incentive payments under section 1886(o)(7)(A) of the Act and the 
payment reduction under section 1886(o)(7)(B)(i) of the Act; (3) the 
establishment of the performance standards under section 1886(o)(3) of 
the Act and the performance period under section 1886(o)(4) of the Act; 
(4) the measures specified under section 1886(b)(3)(B)(viii) of the Act 
and the measures selected under section 1886(o)(2) of the Act; (5) the 
methodology developed under section 1886(o)(5) of the Act that is used 
to calculate hospital performance scores and the calculation of such 
scores; or (6) the validation methodology specified in section 
1886(b)(3)(B)(XI) of the Act.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53581), we finalized 
an administrative appeals process and codified that process at 42 CFR 
412.167.
2. Independent CMS Review Proposal
    In this proposed rule, for the Hospital VBP Program, we are 
proposing to implement an independent CMS review that will be an 
additional appeal process available to the hospitals, beyond the 
existing review and corrections process (77 FR 53578 through 53581 and 
76 FR 74544 through 74547) and appeal process codified at 42 CFR 
412.167. We are proposing that a hospital would be able to request this 
additional independent CMS review only if it first completes the appeal 
process at 42 CFR 412.167(b) and is dissatisfied with the result. We 
believe that our proposal to require hospitals to complete the existing 
appeal process at 42 CFR 412.167(b) before they can request an 
additional independent CMS review will facilitate the efficient 
resolution of many disputed issues, thus decreasing the number of 
independent CMS reviews that are requested. We intend to provide 
hospitals with our independent review decision within 90 calendar days 
following the receipt of a hospital's independent review request. We 
also are proposing to codify this policy in our regulations at 42 CFR 
412.167 by redesignating the existing paragraph (c) as paragraph (d), 
and inserting a new paragraph (c). We are inviting public comments on 
these proposals.

C. Proposed Performance and Baseline Periods for Certain Outcome 
Measures for the FY 2016 Hospital VBP Program

    As described in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27610 through 27611), we have proposed to adopt CLABSI, CAUTI, and SSI, 
which are measures reported to CDC's National Healthcare Safety Network 
(NHSN), for the FY 2016 Hospital VBP Program. However, when we 
published that proposed rule, we inadvertently did not make FY 2016 
performance and baseline period proposals for these proposed measures. 
We are proposing to adopt FY 2016 performance and baseline periods for 
these measures in this proposed rule so that we have enough time to 
consider and respond to public comments before the proposed start of 
the performance periods.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53597 through 
53598), we finalized an 11-month performance period for the CLABSI 
measure for the FY 2015 Hospital VBP Program (February 1, 2013 through 
December 31, 2013), with a corresponding baseline period of January 1, 
2011 through December 31, 2011. While we adopted an 11-month 
performance period for the CLABSI measure for FY 2015 based on its 
posting date on the Hospital Compare Web site, beginning with FY 2016, 
we are proposing to align the NHSN measures' performance and baseline 
periods with other domains' performance and baseline periods, where 
possible, and with the calendar year. As we have stated with regard to 
other domains, a 12-month performance period provides us more data on 
which to score hospital performance, which is an important goal both 
for CMS and for stakeholders.
    Therefore, we are proposing to adopt CY 2014 (January 1, 2014 
through December 31, 2014) as the performance period for the CLABSI, 
CAUTI, and SSI measures for the FY 2016 Hospital VBP Program, with CY 
2012 (January 1, 2012 through December 31, 2012) as the baseline 
period. We are inviting public comments on these proposals.
    The proposed performance and baseline periods for the CAUTI, 
CLABSI, and SSI measures for the FY 2016 Hospital VBP Program appear in 
the following table.

Proposed Performance and Baseline Periods for CAUTI/CLABSI/SSI Under the
                       FY 2016 Hospital VBP Progra
------------------------------------------------------------------------
           Domain                Baseline period     Performance period
------------------------------------------------------------------------
Outcome
     CAUTI/CLABSI/     January 1,    January 1,
     SSI.                      2012-December 31,     2014-December 31,
                               2012.                 2014.
------------------------------------------------------------------------


[[Page 43660]]

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

A. Background

1. Overview
    We refer readers to section XIII.A.1. of this proposed rule 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. Regulatory 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 comment on 10 
measures.
    In addition to CMS 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, and submitted a report to Congress entitled ``Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan'' 
that details this plan. The plan and the report to Congress were 
required under section 3006(f) of the Affordable Care Act as added by 
section 10301(a) of the Affordable Care Act. The 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.
    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 
determinations and subsequent 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 the 
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 was 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.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68492 
through 68500), we issued final policies regarding our approach to 
selecting quality measures, reporting requirements, and payment 
reductions for ASCs that fail to meet the ASCQR Program requirements.

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68493 through 68494) for a detailed discussion of the 
considerations we use for the selection of ASCQR Program quality 
measures.
2. ASCQR Program Quality Measures Adopted in Previous 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 and adopted 
measures for the CY 2014, CY 2015, and CY 2016 payment determinations. 
In an effort to streamline the rulemaking process, we also finalized 
our policy that, when we adopt measures for the ASCQR Program, these 
measures are automatically adopted for all subsequent years payment 
determinations unless we propose to remove, suspend, or replace the 
measures (76 FR 74494, 74504, 74509, and 74510).
    The quality measures that we have previously adopted are listed 
below.

       ASC Program Measurement Set Adopted in Previous Rulemaking
------------------------------------------------------------------------
       ASC Program Measurement Set Adopted in Previous Rulemaking
-------------------------------------------------------------------------
ASC-1: Patient Burn.*
ASC-2: Patient Fall.*
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
 Implant.*
ASC-4: Hospital Transfer/Admission.*
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.*
ASC-6: Safe Surgery Checklist Use.**
ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures.**
Procedure categories and corresponding HCPCS codes are located at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 475754
ASC-8: Influenza Vaccination Coverage among Healthcare Personnel***
------------------------------------------------------------------------
*New measure for the CY 2014 payment determination.
**New measure for the CY 2015 payment determination.
***New measure for the CY 2016 payment determination.


[[Page 43661]]

3. Proposed Additional ASCQR Program Quality Measures for the CY 2016 
Payment Determination and Subsequent Years
    We are proposing quality measures for the CY 2016 payment 
determination and subsequent years based on our approach for future 
measure selection and development finalized in the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68493 through 68494), which 
includes, among other considerations, aligning the ASCQR Program 
measures with our efforts in other clinical care settings and taking 
into account the views of the MAP.
    We believe that ASCs and HOPDs are similar in their delivery of 
surgical and related nonsurgical services. Therefore, we seek to 
propose quality measures that can be applied to both HOPDs and ASCs to 
the extent possible because many of the same surgical procedures are 
performed in both of these settings. Measure harmonization assures that 
quality of care for similar services is measured in a comparable manner 
across settings. This approach would provide meaningful information for 
Medicare beneficiaries to make informed decisions.
    Section 3014 of the Affordable Care Act added section 1890A of the 
Act establishing a pre-rulemaking process, which, among other steps, 
requires the Secretary to take into consideration the input from multi-
stakeholder groups in selecting certain categories of quality and 
efficiency measures described in section 1890(b)(7)(B) of the Act. As 
part of the pre-rulemaking process, the consensus-based entity that CMS 
must contract with under section 1890 of the Act (currently NQF), 
convened the multi-stakeholder groups, referred to as the MAP. The MAP 
is a public-private partnership created for the primary purpose of 
providing input to HHS on the selection of the categories of measures 
in section 1890(b)(7)(B), which includes measures for use in certain 
specific Medicare programs, measures for use in reporting performance 
information to the public, and measures for use in health care programs 
other than for use under the Act.
    After we selected quality measures that we might propose for the 
ASCQR Program based on our established policies regarding the approach 
to selecting quality measures in CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68493 through 68494), we included the measures in 
a publicly available document entitled ``List of Measures Under 
Consideration for December 1, 2012'' in compliance with section 
1890A(a)(2) of the Act, and they were reviewed by the MAP in its ``MAP 
Pre-Rulemaking Report: 2013 Recommendations on Measures Under 
Consideration by HHS,'' which has been made available on the NQF Web 
site at: http://www.qualityforum.org/Publications/2013/02/MAP_Pre-
Rulemaking_Report__-February_2013.aspx. We considered the input and 
recommendations provided by the MAP in selecting measures to propose 
for the ASCQR Program.
    In addition, in its 2013 Pre-Rulemaking Report, the MAP also 
supports: (1) HHS' efforts to move toward greater alignment across the 
Hospital OQR and ASCQR Programs; and (2) the inclusion of ASCs within a 
broader approach to measuring performance and improving care that is 
aligned across health care settings (page 35, MAP Pre-Rulemaking 
Report: 2013 Recommendations on Measures Under Consideration by HHS).
    For the CY 2016 payment determination and subsequent years, we are 
proposing to adopt four measures for the ASCQR Program, all of which 
were reviewed by the MAP and three of which are NQF-endorsed for the 
ASC setting: (a) Complications within 30 Days following Cataract 
Surgery Requiring Additional Surgical Procedures; (b) Endoscopy/Poly 
Surveillance: Appropriate follow-up interval for normal colonoscopy in 
average risk patients (NQF 0658); (c) Endoscopy/Poly 
Surveillance: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use (NQF 0659); 
and (d) Cataracts: Improvement in Patient's Visual Function within 90 
Days Following Cataract Surgery (NQF 1536).
    For purposes of the ASCQR Program, sections 1833(i)(7)(B) and 
1833(t)(17)(C)(i) of the Act, read together, require the Secretary, 
except as the Secretary may otherwise provide, to develop measures 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by ASCs, that reflect consensus among 
affected parties and, to the extent feasible and practicable, that 
include measures set forth by one or more national consensus building 
entities. As stated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74465 and 74505), we believe that consensus among 
affected parties can be reflected through means other than NQF 
endorsement, including consensus achieved during the measure 
development process; consensus shown through broad acceptance and use 
of measures; and consensus through public comment. The proposed 
measures are described in greater detail below.
    We are proposing that data collection for these four measures would 
begin in CY 2014. We refer readers to section XV.D. of this proposed 
rule for detailed discussion of data collection and submission time 
frames. We are proposing to collect aggregate data (numerators, 
denominators, and exclusions) on all ASC patients for these four 
proposed chart-abstracted measures via an online Web-based tool that 
would be made available to ASCs via the QualityNet Web site. This 
online Web-based tool is currently in use in the ASCQR Program to 
collect measure information for ASC-6 (Safe Surgery Checklist Use) and 
ASC-7 (ASC Facility Volume Data on Selected ASC Surgical Procedures). 
We invite public comment on these proposals. More information regarding 
this proposed method of collection is provided in section XV.D.5.c. of 
this proposed rule.
    To advance our efforts to collect high quality data on all ASC 
patients for the ASCQR measures while minimizing burden for ASCs, we 
also seek public comment on alternative data collection strategies for 
these four proposed measures. In particular, we seek comment on 
collection of patient-level data through registries or other third 
party data aggregators, and via certified EHR technology, along with 
the potential timing for doing so.
a. Complications Within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures
    It is uncommon to have complications that may result in a permanent 
loss of vision following cataract surgery. Cataract surgery has become 
safer and more effective due to advances in technology and surgical 
skills over the last 30 years. Based on an analysis of Managed Care 
Organization data, it is estimated that the annual volume for cataract 
surgeries is 2.8 million in the U.S. with the rate of cataract surgery 
complications being 1 to 2 percent. However, with an annual volume of 
2.8 million cataract surgeries in the United States, a 2 percent rate 
is significant and translates to over 36,000 surgeries associated with 
complications.\11\
---------------------------------------------------------------------------

    \11\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
---------------------------------------------------------------------------

    Thus, for the CY 2016 payment determination and subsequent years, 
we are proposing to adopt the Complications within 30 Days Following 
Cataract Surgery Requiring Additional Surgical Procedures

[[Page 43662]]

measure, which assesses the ``[p]ercentage of patients aged 18 years 
and older with a diagnosis of uncomplicated cataract who had cataract 
surgery and had any of a specified list of surgical procedures in the 
30 days following cataract surgery which would indicate the occurrence 
of any of the following major complications: retained nuclear 
fragments, endophthalmitis, dislocated or wrong power IOL retinal 
detachment, or wound dehiscence.'' This outcome measure seeks to 
identify those complications from surgery that can reasonably be 
attributed to the surgery. It focuses on patient safety and monitoring 
for events that, while uncommon, can signify important issues in the 
care being provided. The numerator for this measure is the number of 
``[p]atients who had one or more specified operative procedures for any 
of the following major complications within 30 days following cataract 
surgery: retained nuclear fragments, endophthalmitis, dislocated or 
wrong power IOL, retinal detachment, or wound dehiscence.'' The 
denominator for this measure is the total number of ``[p]atients aged 
18 years and older who had cataract surgery and no significant pre-
operative ocular conditions impacting the surgical complication rate.'' 
This measure excludes ``[p]atients with certain comorbid conditions 
impacting the surgical complication rate.'' The measure specifications 
can be found at: http://www.qualityforum.org/QPS/0564. This measure has 
been endorsed by NQF for the ``Ambulatory Care: Clinic'' setting (NQF 
0564) but, currently, is not NQF-endorsed for the ASC setting.
    We believe this measure meets the statutory requirements discussed 
above. This measure is not NQF-endorsed in the ASC setting and we could 
not find any other comparable measure that is specifically endorsed for 
the ASC setting. However, we believe that this measure is appropriate 
for the measurement of quality of care furnished by ASCs because this 
procedure is commonly performed in ASCs and, as discussed above, can 
signify important issues in the care being provided in ASCs. Further, 
this measure reflects consensus among affected parties as it has been 
endorsed by NQF for the ``Ambulatory Care: Clinic'' setting. We believe 
that this consensus also applies to the same surgeries that are 
performed in other ambulatory settings, such as ASCs and HOPDs. Given 
the high volume of cataract surgeries performed in ambulatory care 
settings and the potential 2 percent complication rate, we believe it 
is important for us to include this measure in the ASCQR Program 
measure set, and that this is an appropriate application of NQF 
0564 to the ASC setting.
    We note that section 1833(t)(17) of the Act does not require that 
each measure we adopt be endorsed by a national consensus building 
entity. Further, section 1833(i)(7)(B) of the Act states that section 
1833(t)(17) of the Act applies to the ASCQR program, except as the 
Secretary may otherwise provide. Under this provision, the Secretary 
has further authority to adopt non-endorsed measures. In its 2013 Pre-
Rulemaking Report, the MAP supported inclusion of this measure in the 
ASCQR Program and noted that this measure ``[a]ddresses a high impact 
condition not adequately addressed in the program measure set.'' 
Currently, the NQF endorsement for this measure is time-limited.
    We invite public comment on this proposal.
b. Endoscopy/Poly Surveillance: Appropriate Follow-Up Interval for 
Normal Colonoscopy in Average Risk Patients (NQF 0658)
    The American Cancer Society's current guidelines recommend 
colonoscopy screening at 10-year intervals \12\ for the average risk 
population (http://www.cancer.org/cancer/colonandrectumcancer/moreinformation/colonandrectumcancerearlydetection/colorectal-cancer-early-detection-acs-recommendations).
---------------------------------------------------------------------------

    \12\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    For the CY 2016 payment and subsequent years, we are proposing to 
adopt the Endoscopy/Poly Surveillance: Appropriate follow-up interval 
for normal colonoscopy in average risk patients measure, which assesses 
the ``[p]ercentage of patients aged 50 years and older receiving 
screening colonoscopy without biopsy or polypectomy who had a 
recommended follow-up interval of at least 10 years for repeat 
colonoscopy documented in their colonoscopy report.'' Performing 
colonoscopy too frequently increases a patients' exposure to procedural 
harm. This measure aims to assess whether average risk patients with 
normal colonoscopies receive a recommendation to receive a repeat 
colonoscopy in an interval that is less than the recommended amount of 
10 years. This measure is NQF-endorsed for the ASC setting. The 
numerator for this measure is the number of ``[p]atients who had a 
recommended follow-up interval of at least 10 years for repeat 
colonoscopy documented in their colonoscopy report.'' The denominator 
for this measure is the total number of ``[p]atients aged 50 years and 
older receiving screening colonoscopy without biopsy or polypectomy.'' 
The measure excludes patients whose medical records contain reason(s) 
for recommending a follow up interval of less than 10 years. The 
specifications for this measure can be found at: http://www.qualityforum.org/QPS/0658.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because colonoscopy screening is commonly 
performed in ASCs and this measure was developed to specifically 
measure quality of care furnished by ASCs. We also believe it meets the 
consensus requirement and the requirement that it be set forth by a 
national consensus building entity because it is NQF-endorsed for the 
ASC setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the direction 
of this measure. Currently, the NQF endorsement for this measure is 
time-limited.
    We invite public comment on this proposal.
c. Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients With 
a History of Adenomatous Polyps--Avoidance of Inappropriate Use (NQF 
0659)
    According to the American Cancer Society, in patients with 
increased or high risk of colorectal cancer, colonoscopy screening is 
recommended based on risk factors. One such factor is a history of 
adenomatous polyps. The frequency of colonoscopy screening varies 
depending on the size and amount of polyps found; however, the general 
recommendation is a 3 year follow-up (http://www.cancer.org/cancer/colonandrectumcancer/moreinformation/colonandrectumcancerearlydetection/colorectal-cancer-early-detection-acs-recommendations). A randomized trial of 699 patients showed that 
after newly diagnosed adenomatous polyps have been removed by 
colonoscopy, follow-up colonoscopy at 3 years detects important colonic

[[Page 43663]]

lesions as effectively as follow-up colonoscopy at both 1 and 3 
years.\13\
---------------------------------------------------------------------------

    \13\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    For the CY 2016 payment determination and subsequent years, we are 
proposing to adopt the Endoscopy/Poly Surveillance: Colonoscopy 
Interval for Patients with a History of Adenomatous Polyps--Avoidance 
of Inappropriate Use measure, which assesses the ``[p]ercentage of 
patients aged 18 years and older receiving a surveillance colonoscopy, 
with a history of a prior colonic polyp in previous colonoscopy 
findings who had a follow-up interval of 3 or more years since their 
last colonoscopy documented in the colonoscopy report'' This measure is 
NQF-endorsed for the ASC setting. The numerator for this measure is the 
number of ``[p]atients who had an interval of 3 or more years since 
their last colonoscopy.'' The denominator for this measure is the total 
number of ``[p]atients aged 18 years and older receiving a surveillance 
colonoscopy with a history of a prior colonic polyp in a previous 
colonoscopy.'' This measure excludes patients with: (1) Documentation 
of medical reason(s) for an interval of less than 3 years since the 
last colonoscopy (for example, last colonoscopy incomplete, last 
colonoscopy had inadequate prep, piecemeal removal of adenomas, or last 
colonoscopy found greater than 10 adenomas); or (2) documentation of a 
system reason(s) for an interval of less than 3 years since the last 
colonoscopy (for example, unable to locate previous colonoscopy report, 
previous colonoscopy report was incomplete). The specifications for 
this measure can be found at: http://www.qualityforum.org/QPS/0659.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because colonoscopy is commonly performed in 
ASCs and this measure was developed to specifically measure quality of 
care furnished by ASCs. We also believe it meets the consensus 
requirement and the requirement that it be set forth by a national 
consensus building entity because it is NQF-endorsed for the ASC 
setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the direction 
of this measure. Currently, the NQF endorsement for this measure is 
time-limited.
    We invite public comment on this proposal.
d. Cataracts: Improvement in Patient's Visual Function Within 90 Days 
Following Cataract Surgery (NQF 1536)
    Cataract surgery is performed to improve a patient's vision and 
associated functioning. This outcome is achieved consistently with 
careful attention to the accurate measurement of axial length and 
corneal power and the appropriate selection of an IOL lens. Failure to 
achieve improved visual functioning after surgery in eyes without 
comorbid ocular conditions that could impact the success of the surgery 
would reflect care that should be assessed for opportunities for 
improvement. Evidence suggests that visual improvement occurs in about 
86 to 98 percent of surgeries in eyes without comorbid conditions. 
However, with an annual volume of 2.8 million cataract surgeries in the 
U.S., an improvement rate from 86 to 98 percent could impact a 
significant number of patients per year.\14\
---------------------------------------------------------------------------

    \14\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
---------------------------------------------------------------------------

    For the CY 2016 payment determination and subsequent years, we are 
proposing to adopt the Cataracts: Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery measure, which 
assesses the ``[p]ercentage of patients aged 18 years and older who had 
cataract surgery and had improvement in visual function achieved within 
90 days following the cataract surgery.'' This measure is NQF-endorsed 
for the ASC setting. The measure numerator is the number of 
``[p]atients 18 years and older in sample who had improvement in visual 
function achieved within 90 days following cataract surgery, based on 
completing a pre-operative and post-operative visual function 
instrument.'' The measure denominator is the total number of 
``[p]atients aged 18 years and older in sample who had cataract 
surgery.'' There are no exclusions. The specifications for this measure 
are available at: http://www.qualityforum.org/QPS/1536. Additional 
information for the measure specifications can be found in the NQF 
Measure Evaluation available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=68317.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because cataract surgery is commonly performed 
in ASCs and this measure was developed to specifically measure quality 
of care furnished by ASCs.'' We believe it also meets the consensus 
requirement and the requirement that it be set forth by a national 
consensus building entity because it is NQF-endorsed for the ASC 
setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the inclusion 
of this measure in the ASCQR Program and noted that this measure 
``[a]ddresses a high-impact condition not adequately addressed in the 
program measure set.''
    We invite public comment on this proposal.
    In summary, we are proposing to adopt four new measures for the 
ASCQR Program for the CY 2016 payment determination and subsequent 
years, with data collection beginning in CY 2014, as discussed in 
section XV.D.7.of this proposed rule. We are proposing to collect 
aggregate data (numerators, denominators, and exclusions) on all ASC 
patients for these four proposed chart-abstracted measures via an 
online Web-based tool that will be made available to ASCs via the 
QualityNet Web site. The proposed new measures for the CY 2016 payment 
determination and subsequent years for the ASCQR Program are listed in 
the table below.

      Proposed New ASC Program Measure Set for the CY 2016 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
       NQF No.                            Measure name
------------------------------------------------------------------------
0564*................  Complications within 30 Days following Cataract
                        Surgery Requiring Additional Surgical
                        Procedures.
0658.................  Endoscopy/Poly Surveillance: Appropriate follow-
                        up interval for normal colonoscopy in average
                        risk patients.
0659.................  Endoscopy/Poly Surveillance: Colonoscopy Interval
                        for Patients with a History of Adenomatous
                        Polyps--Avoidance of Inappropriate Use.

[[Page 43664]]

 
1536.................  Cataracts: Improvement in Patient's Visual
                        Function within 90 Days Following Cataract
                        Surgery.
------------------------------------------------------------------------
* This measure has not been NQF endorsed for the ASC setting.

4. ASCQR Program 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. Through future rulemaking, we intend to 
propose new measures that address clinical quality of care, patient 
safety, care coordination, patient experience of care, surgical 
outcomes, surgical complications, complications of anesthesia, and 
patient reported outcomes of care. We invite public comment on these 
measurement topics.
5. Technical Specification Updates and Data Publication
    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 
measures (76 FR 74513 through 74514). 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. We believe that a measure 
can be updated through this subregulatory process provided it is a 
nonsubstantive change. We expect to make the determination of what 
constitutes a substantive versus a nonsubstantive change on a case-by-
case basis.
    Examples of nonsubstantive changes to measures might include 
updated diagnosis or procedure codes, medication updates for categories 
of medications, broadening of age ranges, and exclusions for a measure 
(such as the addition of a hospice exclusion to the 30-day mortality 
measures). We believe that non-substantive changes may include updates 
to NQF-endorsed measures based upon changes to guidelines upon which 
the measures are based. We will revise the Specifications Manual so 
that it clearly identifies the updates and provide links to where 
additional information on the updates can be found. As stated in CY 
2009 OPPS/ASC final rule with comment period, we also will post the 
updates on the QualityNet Web site at: https://www.QualityNet.org. We 
will provide sufficient lead time for facilities to implement the 
changes where changes to the data collection systems would be 
necessary. 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.
    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 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, procedure/process, or test 
administration). Another example of a substantive change would be where 
the NQF has extended its endorsement of a previously endorsed measure 
to a new setting, such as extending a measure from the inpatient 
setting to hospice.
    We believe that the policy finalized in the CY 2009 OPPS/ASC final 
rule with comment period adequately balances our need to incorporate 
non-substantive NQF updates to NQF-endorsed Hospital OQR Program 
measures in the most expeditious manner possible, while preserving the 
public's ability to comment on updates that so fundamentally change an 
endorsed measure that it is no longer the same measure that we 
originally adopted. We also note that the NQF endorsement process 
incorporates an opportunity for public comment and engagement in the 
measure maintenance process. These policies regarding what is 
considered substantive versus non-substantive apply to all measures in 
the Hospital OQR Program.
    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 
measures (76 FR 74513 through 74514) and, in the CY 2013 OPPS/ASC final 
rule with comment period, we provided additional clarification 
regarding the ASCQR Program policy in the context of the previously 
finalized Hospital OQR program policy. We refer readers to the CY 2013 
OPPS/ASC final rule with comment period for a discussion of the process 
for updating the ASCQR Program quality measures (77 FR 68496 through 
68497).
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 
through 74515), we also finalized a policy to make data that an ASC 
submitted for the ASCQR program publicly available on a CMS Web site 
after providing an ASC an opportunity to review the data to be made 
public. These data will be displayed at the CCN level.
    We are not proposing any changes to these policies.

C. 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

[[Page 43665]]

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 2015 Payment Determination and 
Subsequent 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, 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 XII.G. of this proposed rule.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 
through 68500), in order to implement the requirement to reduce the 
annual update for ASCs that fail to meet the ASCQR Program 
requirements, we finalized our proposal that we would calculate two 
conversion factors: a full update conversion factor and an ASCQR 
Program reduced update conversion factor. We finalized our proposal 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 finalized our proposal 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 proposed rule, 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 finalized our proposal 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 
finalized our proposal 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 XII.C.1.b. of this proposed rule) are paid at the 
lesser of the MPFS non-facility PE RVU-based amounts and the standard 
ASC ratesetting methodology. We finalized our proposal 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 finalized our proposal in the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68500) 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 finalized our proposal 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 are not proposing any changes to these policies.

D. Administrative Requirements

1. Proposed Requirements Regarding QualityNet Account and Security 
Administrator
a. Background for the CY 2014 and CY 2015 Payment Determinations
    A QualityNet account is required to submit quality measure data to 
the QualityNet Web site via a Web-based tool and, in accordance with 
CMS policy, a QualityNet security administrator is necessary to set-up 
such an account for the purpose of submitting this information to the 
QualityNet Web site. In previous rulemaking, we referred to this role 
as the QualityNet administrator; we are referring to this role in this 
rulemaking as the QualityNet security administrator, which emphasizes 
its security function and aligns terminology for the ASCQR Program with 
the

[[Page 43666]]

Hospital IQR and OQR Programs. While the main purpose of a QualityNet 
security administrator is to serve as a point of contact for security 
purposes for quality reporting programs, we believe from our experience 
that a QualityNet security administrator typically fulfills a variety 
of tasks related to quality reporting, such as creating, approving, 
editing, and terminating QualityNet user accounts within an 
organization, and monitoring QualityNet usage to maintain proper 
security and confidentiality measures. Thus, we highly recommend that 
ASCs have and maintain a QualityNet security administrator.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53638 through 
53639), we did not require that ASCs do so for the CY 2014 payment 
determination because ASCs are not required to submit data directly to 
the quality data warehouse for the CY 2014 payment determination (76 FR 
74504) and we do not want to unduly burden ASCs by requiring ASCs to 
have a QualityNet security administrator. We note that a QualityNet 
account is not necessary to access information that is posted to the 
QualityNet Web site, such as specifications manuals and educational 
materials.
    As finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74504 through 74509), for the CY 2015 payment determination, we 
require ASCs to submit some quality measure data via an online tool 
located on the QualityNet Web page. As set forth in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53638 through 53639), to enter these data 
into our data system, we require that ASCs identify and register a 
QualityNet security administrator who follows the registration process 
located on the QualityNet Web site and submits the information as 
specified on this site. Because submission of these data is not 
required until the July 1, 2013 to August 15, 2013 time period, we 
require that ASCs have a QualityNet security administrator at the time 
ASCs submit Web-based measure data in 2013 for the CY 2015 payment 
determination, which is no later than August 15, 2013. ASCs may have a 
QualityNet security administrator prior to this date, but we do not 
require that ASCs do so.
    We noted that there are necessary mailing and processing procedures 
that must be completed in order to have a QualityNet security 
administrator which are separate from completion of the forms by the 
ASC that can require significant time to complete. We strongly 
cautioned ASCs to not wait until the deadline to apply; instead, we 
recommended allowing a minimum of 2 weeks, and strongly suggested 
allowing additional time prior to the deadline to submit required 
documentation in case of unforeseen issues. Because ASCs will need a 
QualityNet security administrator only to have the ability to set up a 
user account for the purpose of submitting such measure data once a 
year, we do not require that ASCs maintain a QualityNet security 
administrator after the entry of their data via an online tool located 
on the QualityNet Web site in 2013 for the CY 2015 payment 
determination.
    We also note that QualityNet users must complete a user enrollment 
process, which is part of the registration process, to ensure access to 
the Secure QualityNet Portal beginning July 1, 2013. Portal access will 
be required for ASCs submitting data under the ASCQR Program using an 
online tool located on the QualityNet Web site.
b. Proposed Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    For the CY 2016 payment determination and subsequent years, we are 
proposing that, similar to the requirement for the CY 2015 payment 
determination, ASCs would be required to have a QualityNet security 
administrator for the purposes of setting up a QualityNet account for 
the purpose of entering data via an online tool located on the 
QualityNet Web site if this had not been completed previously or no 
current user accounts were available. If an ASC does not already have a 
QualityNet account, the facility would need to identify and register a 
QualityNet security administrator who follows the registration process 
located on the QualityNet Web site and submits the information as 
specified on this site. A QualityNet security administrator is not 
required for submitting data, a QualityNet security administrator is 
required to set up user accounts and for security purposes; a current 
user account is required for submitting data. Thus, an ASC would need 
to acquire a QualityNet security administrator only if no current 
QualityNet account existed for the ASC. An ASC would be required to 
have an active account by any specified data entry deadline. For 
example, the deadline would be August 15, 2014 for the CY 2016 payment 
determination. Although we highly recommend that ASCs have and maintain 
a QualityNet security administrator, we believe that requiring an ASC 
to maintain a QualityNet administrator throughout the year would 
unnecessarily increase burden on ASCs.
    As noted previously, there are necessary mailing and processing 
procedures for having a QualityNet security administrator assigned by 
CMS separate from completion of the forms by the ASC that can require 
significant time to complete and we strongly caution ASCs to not wait 
until any data entry deadline to apply. While we previously recommended 
allowing a minimum of 2 weeks, based upon recent experience, we 
strongly suggest allowing 4 to 6 weeks prior to any data submission 
deadline to submit required documentation for processing and in case of 
unforeseen issues. Also, QualityNet users must complete a user 
enrollment process, which is part of the registration process, to 
ensure access to the Secure QualityNet Portal. Portal access will be 
required for ASCs submitting data under the ASCQR Program to meet CMS 
IT security requirements. The legislative source for this requirement 
originates in the Federal Information Security Management Act of 2002 
which was amended by the Cybersecurity Act of 2012. The Document 
Library on the http://www.idmanagement.gov Web site contains 
documentation related to identity management including the Federal 
Identity, Credential and Access Management (FICAM) Roadmap and 
Implementation Guidance (version 2, 12/08/2011).
    We invite public comment on these proposals.
2. Proposed Requirements Regarding Participation Status
a. Background for the CY 2014 Payment Determination and Subsequent 
Years
    We finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74516) a policy to consider an ASC as participating in the ASCQR 
Program for the CY 2014 payment determination if the ASC includes 
Quality Data Codes (QDCs) specified for the ASCQR Program on their CY 
2012 claims relating to the finalized measures.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through 
53640), we stated that once an ASC submits any quality measure data, it 
would be considered to be participating in the ASCQR Program. Further, 
once an ASC submits any quality measure data and is considered to be 
participating in the ASCQR Program, an ASC would continue to be 
considered participating in the ASCQR Program, regardless of whether 
the ASC continues to submit quality measure data, unless the ASC 
withdraws from the Program by indicating on a participation form that 
it is withdrawing, as discussed below.

[[Page 43667]]

For example, if an ASC includes any QDCs on its claims for the CY 2014 
payment determination, it would be considered participating in the 
ASCQR Program for the CY 2014 payment determination and for each 
subsequent year's payment determination unless the ASC withdraws.
    Likewise, if an ASC did not submit any QDCs for the CY 2014 payment 
determination, but submitted quality measure data for the CY 2015 
payment determination, the ASC would be considered participating in the 
ASCQR Program starting with the CY 2015 payment determination and 
continuing for each subsequent year's payment determination unless the 
ASC withdraws from the ASCQR Program.
    We considered whether to require that an ASC complete and submit a 
notice of participation form for each year's payment determination to 
indicate that the ASC is participating in the ASCQR Program as we 
require for hospitals, but decided against this approach because we 
were concerned about the burden on ASCs. We believe these requirements 
will reduce burden on ASCs while accomplishing the purpose of notifying 
us of an ASC's participation in the ASCQR Program.
    We stated that any and all quality measure data submitted by the 
ASC while participating in the ASCQR Program could be made publicly 
available. This policy allows us to provide information on the quality 
of care provided to Medicare beneficiaries which promotes transparency.
    Once an ASC submits quality measure data indicating its 
participation in the ASCQR Program, an ASC must complete and submit an 
online form indicating withdrawal in order to withdraw from the ASCQR 
Program. This form will be located on the QualityNet Web site starting 
in July 2013. We also require that an ASC indicate on the form the 
initial payment determination year to which the withdrawal applies. We 
established a different process for ASCs to withdraw from participation 
than the process we established for an ASC to participate in the ASCQR 
Program because of the payment implications of withdrawal. We stated 
that, in withdrawing from the ASCQR Program, the ASC would incur a 2.0 
percentage point reduction in its annual payment update for that 
payment determination year and any subsequent payment determinations in 
which it is withdrawn.
    We stated that we will not make quality measure data publicly 
available for that payment determination year and any subsequent 
payment determinations for which the ASC is withdrawn from the ASCQR 
Program.
    We established that an ASC would continue to be deemed withdrawn 
unless the ASC starts submitting quality measure data again. Once an 
ASC starts submitting quality measure data, the ASC would be considered 
participating unless the ASC withdraws, as discussed above. We believe 
that these policies reduce the burden on ASCs by not having to notify 
us as to when they are participating.
    We established that an ASC can withdraw from the ASCQR Program at 
any time up to August 31, 2013 for the CY 2014 payment determination. 
We anticipated that this will be the latest date possible to allow an 
ASC to withdraw before payment determinations affecting CY 2014 payment 
are made. We established that an ASC can withdraw from the ASCQR 
Program at any time up to August 31, 2014 for the CY 2015 payment 
determination. We clarify here that these deadlines include August 31st 
for each respective year.
    We stated that these program requirements would apply to all ASCs 
designated as open in the CASPER system before January 1, 2012 for the 
CY 2014 payment determination. Because ASCs were not required to 
include QDCs on claims until October 2012 for the CY 2014 payment 
determination, an ASC designated as open in the CASPER system before 
January 1, 2012 was operating for at least 10 months before having to 
report any data. We believe this is a sufficient amount of time for 
ASCs to be established to report quality data for the CY 2014 payment 
determination.
    For the CY 2015 payment determination, we established that program 
requirements would apply to all ASCs designated as open in the CASPER 
system for at least 4 months prior to January 1, 2013. We believe that 
this date and length of operations experience would provide new ASCs 
sufficient time before having to meet quality data reporting 
requirements after the ASCQR Program's initial implementation year.
b. Proposed Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    For the CY 2016 payment determination and subsequent years, we are 
proposing that an ASC can withdraw from the ASCQR Program at any time 
up to and including August 31 of the year preceding a payment 
determination. We anticipate that this will be the latest date possible 
to allow an ASC to withdraw before payment determinations affecting the 
next calendar year's payment are made. Thus, for example, for the CY 
2016 payment determination, an ASC would be able to withdraw from the 
ASCQR Program at any time up to and including August 31, 2015. Once an 
ASC has withdrawn for any payment determination year, it would have a 
2.0 percentage point reduction in their annual payment update and it 
would not be possible to reinstate participation status for that year.
    For the CY 2016 payment determination and subsequent years, we are 
proposing that all program requirements would apply to all ASCs 
designated as open in the CASPER system at least 4 months prior to the 
beginning of data collection for a payment determination. Thus, for the 
CY 2016 payment determination, data collection begins with January 1, 
2014 services; these program requirements would apply to all ASCs 
designated as open in the CASPER system for at least 4 months prior to 
January 1, 2014 (that is, an open date of September 1, 2013 or 
earlier). We believe that this date and length of operations experience 
would provide any new ASCs sufficient time before having to meet 
quality data reporting requirements.
    We invite public comment on these proposals.
3. Requirements Regarding Data Processing and Collection Periods for 
Claims-Based Measures for the CY 2014 Payment Determination and 
Subsequent Years
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 
through 74511), we adopted five claims-based measures for the CY 2014, 
CY 2015, and CY 2016 payment determinations and subsequent years. We 
also finalized that, to be eligible for the full CY 2014 ASC annual 
payment update, for the claims-based measures, 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). Further, we 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. ASCs will add the 
appropriate QDCs on their Medicare Part B claims, using the Form CMS-
1500 or associated electronic data set 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

[[Page 43668]]

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).
    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 administrative 
contractor by April 30, 2013 to be included in the data used for the CY 
2014 payment determination. We believe that this claim paid date allows 
ASCs sufficient time to submit claims while allowing sufficient time 
for CMS to complete required data analysis and processing to make 
payment determinations and to supply this information to administrative 
contractors.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68497 
through 68498), we finalized a data collection and processing period 
for the CY 2015 payment determination and subsequent years. For the CY 
2015 payment determination and subsequent 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. The data collection period for such claims-
based quality measures is the calendar year 2 years prior to a payment 
determination year. The claims for services furnished in each calendar 
year have to be paid by the administrative contractor 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 year. Thus, for 
example, for the CY 2015 payment determination, the data collection 
period is claims for services furnished in CY 2013 (January 1, 2013 
through December 31, 2013) which are paid by the administrative 
contractor by April 30, 2014.
    We are not proposing any changes to these policies.
4. Proposed Minimum Threshold, Minimum Case Volume, and Data 
Completeness for Claims-Based Measures Using QDCs
a. Background for the CY 2014 Payment Determination and Subsequent 
Years
    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 for the 
initial implementation years of the ASCQR Program because ASCs are not 
familiar with how to report quality data under the ASCQR Program and 
because many ASCs are relatively small and may need more time to set up 
reporting systems. We stated in that final rule that we intend to 
propose to increase this percentage for subsequent years' payment 
determinations as ASCs become more familiar with reporting requirements 
for the ASCQR Program.
    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 also finalized our proposal in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68498 through 68499) that data completeness 
for claims-based quality measures for the CY 2015 payment determination 
and subsequent years will 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 years. We made this change based 
on the fact that private payers had QDCs in their required HCPCS data 
files beginning January 1, 2013.
b. Proposed Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    For the CY 2016 payment determination and subsequent years, we are 
proposing to continue our policy 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 for the initial implementation years of 
the ASCQR Program. Because ASCs cannot re-submit claims for the sole 
purpose of adding QDCs (such claims are rejected by administrative 
contractors as duplicate claims), we believe maintaining this minimum 
as the program matures is reasonable. We intend to propose to increase 
this percentage for future payment determinations as ASCs, 
administrative contractors, and billing clearing houses become more 
familiar with reporting requirements for the ASCQR Program and the 
program itself becomes more established.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule, data 
completeness for claims-based quality measures will 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 years.
    In our initial implementation of claims-based measures, we 
determined that some ASCs have relatively small numbers of Medicare 
claims. Thus, for the CY 2016 payment determination and subsequent 
years, we are proposing a minimum case volume of 240 Medicare claims 
(primary plus secondary payer) per year (which is an average of 60 per 
quarter). ASCs that have fewer than 240 Medicare claims per year during 
a reporting period for a payment determination year would not be 
required to participate in the ASCQR Program for the subsequent 
reporting period for that subsequent payment determination year. For 
example, if an ASC had 200 Medicare claims during the calendar year of 
January 1, 2013 to December 31, 2013 (data submitted on claims during 
this year would be applied to CY 2015 payment determinations), the ASC 
would not be

[[Page 43669]]

required to participate in the ASCQR Program for the CY 2016 payment 
determination (which would use data submitted on claims during the 
January 1, 2014 to December 31, 2014 calendar year). We are proposing a 
minimum case threshold to exempt smaller facilities where program 
implementation can be overly burdensome. We have selected 240 Medicare 
claims per year because 10 percent of ASCs have less than 240 Medicare 
claims per year so this policy would exempt only those ASCs with the 
fewest number of Medicare claims. If an ASC exceeds this 240 Medicare 
claim threshold in any given calendar year, the ASC would be required 
to participate in the ASCQR Program the subsequent calendar year and 
would be subject to all program requirements.
    We invite public comment on this proposal.
5. Proposed Requirements for Data Submitted Via a CMS Online Data 
Submission Tool
a. Background for the CY 2015 Payment Determination and Subsequent 
Years
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized two measures with data submission required using an online 
measure submission Web page available at http://www.qualitynet.org 
beginning with the CY 2015 payment determination: Safe Surgery 
Checklist Use and ASC Facility Volume Data on Selected ASC Surgical 
Procedures (76 FR 74509). In that final rule with comment period, we 
finalized that, for the CY 2015 payment determination, ASCs would 
report data for these two measures between July 1, 2013 and August 15, 
2013 for services furnished between January 1, 2012 and December 31, 
2012.
b. Proposed Requirements for the CY 2016 Payment Determination and 
Subsequent Years for Measures Currently Finalized
    For the CY 2016 payment determination and subsequent years, we are 
proposing for the Safe Surgery Checklist Use and ASC Facility Volume 
Data on Selected ASC Surgical Procedures for which data will be 
submitted via a using an online data submission tool available on 
http://www.qualitynet.org, that the data collection time periods would 
be for services furnished during the calendar year two years prior to 
the payment determination year and that data would be submitted during 
the January 1 to August 15 time period in the year prior to the payment 
determination. Thus, for the CY 2016 payment determination, the data 
collection time period for these measures would be calendar year 2014 
(January 1, 2014 to December 31, 2014) and the data submission time 
period would be January 1, 2015 to August 15, 2015. We are proposing 
these changes to increase the timeframe for allowing data submission 
for these measures and to align the data collection time periods for 
the claims-based and Web-based measures. This alignment has the 
additional benefit of providing more current data for these Web-based 
measures for a payment determination and would prevent the need for 
retrospective data collection by ASCs which can be burdensome.
    Under this proposal, no data would be collected for calendar year 
2013 (January 1, 2013 to December 31, 2013) for the Safe Surgery 
Checklist Use and ASC Facility Volume Data on Selected ASC Surgical 
Procedures because the CY 2015 payment determination will use data from 
services performed in the January 1, 2012 to December 31, 2012 time 
period and, under our proposal, the CY 2016 payment determination would 
use data from services performed in January 1, 2014 to December 1, 
2014.
    We invite public comment on these proposals.
c. Proposed Requirements for the CY 2016 Payment Determination and 
Subsequent Years for Proposed New Measures With Data Submission Via a 
CMS Web-Based Tool
    We are proposing to adopt four additional chart-abstracted measures 
for the ASCQR Program and proposing that aggregate data (numerators, 
denominators, and exclusions) on all ASC patients would be collected 
via an online Web-based tool that would be made available to ASCs via 
the QualityNet Web site.
    These measures are: (1) Complications within 30 Days following 
Cataract Surgery Requiring Additional Surgical Procedures; (2) 
Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal 
colonoscopy in average risk patients; (3) Endoscopy/Poly Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous 
Polyps--Avoidance of Inappropriate Use; and (4) Cataracts: Improvement 
in Patient's Visual Function within 90 Days Following Cataract Surgery. 
We describe our timeframes and process for measure specifications in 
section XV.B.5. of this proposed rule.
    We wish to clarify that, while we have referred to measures where 
data are submitted via a Web-based tool on a CMS Web site under our 
quality data reporting programs by the type of measure, that is, 
structural measures (measures concerned with attributes of where care 
occurs, such as material resources, human resources, and organizational 
structure \15\), not all quality measures where data are submitted via 
a Web-based tool on a CMS Web site are structural measures. For 
example, the four proposed new measures proposed are not structural 
measures. Thus, we have refined our terminology and now refer to the 
mode of data submission, Web-based, rather than the type of measure.
---------------------------------------------------------------------------

    \15\ Maintz, J. Defining and Classifying Clinical Indicators for 
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530.
---------------------------------------------------------------------------

    We are proposing that data collection and reporting for these 
measures would begin with the CY 2016 payment determination.
    Additionally, we are proposing for these measures, and any future 
measures for the ASCQR Program where data is submitted via a using an 
online measure submission Web page available on http://
www.qualitynet.org, that beginning with the CY 2016 payment 
determination:
     The data collection time period would be the calendar year 
(January 1 to December 31) 2 years prior to the affected payment 
determination year, and;
     Data collected would be submitted during the time period 
of January 1 to August 15 in the year prior to the affected payment 
determination year.
    Thus, for the CY 2016 payment determination, the data collection 
time period would be January 1, 2014 to December 31, 2014 and the data 
submission time period for the collected data would be January 1, 2015 
to August 15, 2015. These proposals are in alignment with proposals in 
section XV.D.5. of this proposed rule regarding data collection and 
submission time frames for measures already adopted for the ASCQR 
Program where data is submitted via an online data submission tool 
available on http://www.qualitynet.org.
    We invite public comment on these proposals.
6. Proposed Data Submission Requirements for a Measure Reported Via the 
National Healthcare Safety Network (NHSN) for the CY 2016 Payment 
Determination
a. Background for the CY 2016 Payment Determination
    For the CY 2016 payment determination, we finalized the adoption of 
the Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431), a process of care,

[[Page 43670]]

healthcare-associated infection (HAI) measure, in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74510). We specified that data 
collection for the influenza vaccination measure would be via the NHSN 
from October 1, 2014 to March 31, 2015 and that details for data 
submission would be made in future rulemaking.
b. Proposed Requirements for the CY 2016 Payment Determination
    We are proposing to use the data submission and reporting standard 
procedures that have been set forth by CDC for NHSN participation in 
general and for submission of this measure to NHSN. We refer readers to 
the CDC's NHSN Web site (for detailed enrollment (http://www.cdc.gov/nhsn/ambulatory-surgery/enroll.html), set-up (http://www.cdc.gov/nhsn/ambulatory-surgery/setup.html), and reporting (https://sdn.cdc.gov; 
data certificate required for this site) procedures. We believe that 
ASCs would know and be comfortable with these procedures because these 
procedures are already used by many ASCs to fulfill State-mandated 
reporting of HAI data through the NHSN in at least 17 States.
    We are proposing that ASCs would have until August 15, 2015 to 
submit their 2014-2015 influenza season data to NHSN. We are proposing 
an August 15, 2015 deadline because this date is the latest date 
possible for data entry that will provide sufficient time for CMS to 
make the CY 2016 payment determinations. Further, this date aligns the 
data entry deadline with the deadline for the measures entered via the 
CMS online tool. We believe this data submission deadline allows ASCs 
to have sufficient time to collect and compile the necessary data while 
taking into account ASCQR Program considerations.
    We invite public comment on these proposals.
7. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641 through 
53642), consistent with other CMS quality reporting programs, we did 
not require validation of claims-based measures (beyond the usual 
claims validation activities conducted by our administrative 
contractors) or structural (Web-based) measures for the ASCQR Program. 
We also do not require validation of claims-based or Web-based measures 
under the Hospital IQR and OQR Programs.
    We noted that with regard to the current ASCQR Program claims-based 
measures, the number of events expected to be reported is small because 
most of the measures are for adverse or rare events. In this situation, 
any random selection of cases would require a burdensome sample size. 
Further, we expect the accuracy for reported adverse events to be high. 
We stated that, because we do not believe at this time that any results 
that could be obtained justify the burden associated with a data 
validation process which would necessitate an independent validation 
effort, we also are not requiring a data validation process for our 
current claims-based measures, and we continue to believe so.
    We stated that as we gain more experience with the ASCQR Program, 
we will reassess whether a data validation process for claims-based and 
measures where aggregate data is reported via an online tool is needed. 
At this time, we believe that it would be overly burdensome to validate 
the reported data given the inexperience that ASCs have with reporting 
quality data to CMS coupled with the low incidence of cases for the 
claims-based measures.
8. Extraordinary Circumstances Extensions or Waivers for the CY 2014 
Payment Determination and Subsequent Years
a. Background
    In our experience, there have been times when facilities have been 
unable to submit information to meet program requirements due to 
extraordinary circumstances that are not within their control. It is 
our goal to not penalize such entities for such circumstances and we do 
not want to unduly increase their burden during these times. Therefore, 
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53642 through 53643), we 
established procedures for extraordinary circumstance extension or 
waiver requests for the submission of information required under the 
ASCQR Program. We refer readers to that rule for a complete discussion 
of the process.
b. Proposed Additional Criterion for Extraordinary Circumstance Waivers 
or Extensions for CY 2014
    We are proposing that starting in CY 2014 we may grant a waiver or 
extension to ASCs for data submission requirements if we determine that 
a systematic problem with one of our data collection systems directly 
or indirectly affected the ability of ASCs to submit data. Because we 
do not anticipate that such systematic errors will happen often, we do 
not anticipate granting a waiver or extension on this basis frequently. 
If we make the determination to grant a waiver or extension, we are 
proposing to communicate this decision through listserv notice and 
posting via our QualityNet Web site (https://www.qualitynet.org) as we 
have done in the past with CMS-issued waivers where a geographic 
location was affected by adverse weather.
    We invite public comment on this proposal.
9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment 
Determination and Subsequent Years
    We have established similar processes by which participating 
hospitals can submit requests for reconsideration of quality reporting 
program payment determinations for the Hospital IQR Program and the 
Hospital OQR Program. We believe these reconsideration processes have 
been effective in the hospital quality reporting programs and such a 
process would be effective for ASC quality reporting. Therefore, in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 through 56344), we 
adopted an informal reconsideration process for the ASCQR Program for 
the CY 2014 payment determination and subsequent years modeled after 
the reconsideration processes we implemented for the Hospital IQR and 
Hospital OQR Programs. We refer readers to that rule for a complete 
discussion of our procedures.
    We are not proposing any changes to this informal reconsideration 
process. However, we want to clarify some aspects of the informal 
reconsideration review process that we established in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53643 to 53644). As we stated in that rule, 
we intend to complete any reconsideration reviews and communicate the 
results of these determinations within 90 days following the deadline 
for submitting requests for reconsideration. For those ASCs that submit 
a reconsideration request, the reconsideration determination would be 
the final ASCQR Program payment determination. For those ASCs that do 
not submit a reconsideration request or do not submit a reconsideration 
request as specified in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53643 through 53644), for example, the request was not submitted by the 
deadline, the CMS determination would be the final payment 
determination. There would be no appeal of any final ASCQR Program 
payment determination.

[[Page 43671]]

XVI. Proposed Changes to the Conditions for Coverage (CfCs) for Organ 
Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)

A. Background

    The Organ Procurement Organization Certification Act of 2000 
(section 701 of Pub. L. 106-505) amended section 371(b)(1) of the 
Public Health Service Act (42 U.S.C. 273(b)(1)) and directed the 
Secretary to establish regulations governing the certification and/or 
recertification of Organ Procurement Organizations (OPOs). Among other 
things, section 371(b)(1)(D)(ii) of the Public Health Service Act, as 
amended by section 701 of Public Law 106-505, requires that regulations 
be established for the certification and/or recertification process, 
which (1) ``rely on outcome and process performance measures that are 
based on empirical evidence obtained through reasonable efforts, of 
organ donor potential and other related factors in each service area of 
qualified organ procurement organizations,'' and (2) ``use multiple 
outcome measures as part of the certification process.'' Payment under 
the Medicare and Medicaid programs for organ procurement costs may only 
be made if, among other requirements, the OPO is certified or 
recertified as meeting the standards to be a qualified OPO under 
section 371(b) of the Public Health Service Act and meets the 
performance-related standards prescribed by the Secretary, as provided 
for in section 1138(b) of the Social Security Act.
    The final rules implementing these statutory requirements and 
setting out the Conditions for Coverage (CfCs) for OPOs (OPO CfCs) were 
published in the Federal Register on May 31, 2006 (71 FR 30982). The 
OPO CfCs are codified at 42 CFR Part 486 and set forth the 
certification and recertification processes for OPOs. OPOs are required 
to meet their CfCs, which include both outcome and process performance 
measures. We refer readers to 42 CFR 486.316 for the compliance 
requirements for recertification and 42 CFR 486.318 for the three 
outcome measures.
    In general, with the exception of OPOs operating exclusively in 
noncontiguous States, Commonwealths, Territories, or possessions, the 
three outcome measures are: (1) A donation rate of eligible donors as a 
percentage of eligible deaths; (2) an observed donation rate as 
compared to the expected donation rate; and (3) a yield measure, which 
requires that two of the following three outcome measures be met: (i) 
The number of organs transplanted per standard criteria donor, (ii) the 
number of organs transplanted per expanded criteria donors, and (iii) 
the number of organs used for research per donor. For OPOs that operate 
exclusively in noncontiguous States, Commonwealths, Territories, and 
possessions, the three outcome measures are: (1) A donation rate of 
eligible donors as a percentage of eligible deaths; (2) an observed 
donation rate as compared to the expected donation rate; and (3) a 
yield measure, which requires that two of the following three outcome 
measures be met: (i) The number of kidneys transplanted per standard 
criteria donor; (ii) the number of kidneys transplanted per expanded 
criteria donors; and (iii) the number of organs used for research per 
donor. All of the yield measures include pancreata used for islet cell 
transplantation as required by section 371(c) of the Public Health 
Service Act (42 U.S.C. 273(c)). The first and third outcome measures 
are compared to a national mean. The second outcome measure is 
calculated by the Scientific Registry of Transplant Recipients (SRTR).

B. Proposed Regulatory Changes

    We are proposing to modify the requirements in Sec.  486.316(a)(1) 
and (b) and the introductory text of Sec.  486.318(a) and (b) of the 
regulations so that all of the OPOs must meet two out of the three 
outcome measures to be recertified. We have become concerned about the 
requirement to automatically decertify OPOs if they fail to meet all 
three of the outcome measures. We now believe that the requirement that 
each OPO meet all three outcome measures as set forth in Sec.  486.318 
is unnecessarily stringent. For that reason, we are proposing to modify 
the outcome measure requirement so that OPOs would be required to meet 
two of the three outcome measures.
    The majority of all of the OPOs are meeting all three of the 
outcome measures. From our experience with OPOs, we have observed that 
many of the OPOs that are failing to meet all three outcome measures 
are meeting two of the three measures and are in compliance with all of 
the other requirements in the OPO CfCs; that is, the process 
performance measures set forth at Sec. Sec.  486.320 through 486.348. 
We believe these OPOs are performing satisfactorily and should not be 
decertified based solely on their failure to meet one outcome measure. 
This belief is based not only on our observation and monitoring of 
these OPOs' performance, but also on some concerns with the outcome 
measures.
    From the feedback we have received from the OPO community, there 
may be some variance in how OPOs are determining the ``eligible 
deaths'' in their donation service area (DSA), which is the denominator 
in the first outcome measure. Various members of the OPO community have 
indicated that the same donor could be counted as an eligible donor by 
one OPO, but not another OPO. This is apparently due to differences in 
how the definition of ``eligible death'' is being clinically 
interpreted and implemented. Another reason for this variance could be 
how the determination is made. One member of the OPO community stated 
that, in one OPO, that determination may be made by a group of clinical 
staff, while in another, it is made by the data entry person. 
Therefore, we are concerned that this apparent variance may be 
adversely affecting the performance of some OPOs on the outcome 
measures.
    We also are concerned that the current measures may not be 
accurately allowing for adjustment of various factors. OPOs' DSAs vary 
substantially in their demographics. For example, the first of the 
possible three yield outcome measures involves standard criteria 
donors. However, many individuals in the OPO community have indicated 
that there is a considerable difference between standard criteria 
donors (SCDs) around the country and that this could explain at least 
some of the differences in some of the OPOs' yield measures. Because a 
SCD is anyone who meets the eligibility criteria for an eligible donor 
and does not meet the criteria to be an expanded criteria donor or a 
donor after cardiac death, the demographics of an OPO's DSA could have 
a significant impact on the organ yield that could reasonably be 
expected in that DSA. For example, if a particular DSA has an older 
potential donor population or one that is typically not as healthy, 
this could significantly impact the organ yield in that DSA as compared 
to a DSA with a population of generally more healthy individuals.
    We also have received anecdotal reports that OPOs may be making 
clinical decisions based on their assessment of their own performance 
on the outcome measures. In particular, there may have been cases when 
OPOs did not pursue certain potential donors with multiple 
comorbidities because they believed that they would only be able to 
procure one or two organs from that potential donor. If an OPO is 
concerned about its performance on the yield measures specified under 
Sec.  486.318(a)(3) and (b)(3), it may be advantageous to its 
performance on the yield measures to forgo a potential donor rather 
than procure only one organ and worsen its performance on the yield 
measures. This would result in

[[Page 43672]]

not only one potentially transplantable organ being averted, but 
consequently a potential transplant recipient not receiving a 
transplant. This could have a significant impact on the potential 
transplant recipient waiting for transplants nationwide. This is 
especially problematic in the case of extra-renal organs for which 
there is no viable alternative to an organ transplant.
    We are proposing to hold the OPOs accountable for meeting two out 
of three current outcome measures. We believe this will avoid the 
automatic decertification of OPOs that are performing satisfactorily. 
Therefore, we are proposing to revise paragraphs (a)(1) and (b) of 
Sec.  486.316 and the introductory text of paragraphs (a) and (b) of 
Sec.  486.318 of the regulations to require that OPOs meet at least two 
out of the three outcome measures instead of the requirement to meet 
all three outcome measures.
    In addition to soliciting public comments on the proposals we 
discuss above, we are soliciting public comments on the current outcome 
measures in the OPO CfCs, as well as public comments on any other 
potential empirically based outcome measures for OPOs that might be 
used in the future. We would especially appreciate public comments on 
the new yield measure that is produced by the SRTR and is being used by 
the Organ Procurement and Transplantation Network (OPTN). The OPTN 
recently adopted this new yield measure that calculates the expected 
number of organs transplanted for each donor based on multiple donor 
risk factors. The measure uses more extensive risk factors that 
mitigate the differences in the donor pool of the each DSA. This allows 
an OPO's performance to be measured in terms of the expected outcomes 
for the DSA based upon the expected outcomes for individual donors 
within the DSA and not against a national average.
    When comparing OPOs currently identified to be below expected 
performance levels by the OPTN matrix and the OPOs identified as below 
expected performance levels by the CMS measures, we have noted that the 
lists are not the same. If the new OPTN measure is a more accurate 
reflection of performance as measured by the organs transplanted for 
each donor in each individual DSA (as is accepted by the HRSA and the 
OPO community), this could mean that we may take inappropriate 
enforcement action when using the current yield measure. Therefore, we 
are specifically soliciting public comments on this new OPTN yield 
measure. Specific details on the risk adjustment models used for this 
measure are located on the SRTR Web site at: http://www.srtr.org/csr/current/Tech_notes.aspx.
    In summary, we are proposing to revise Sec. Sec.  486.316 and 
486.318 of our regulations by modifying the current outcome measures 
requirement to require that OPOs must meet two out of the three outcome 
measures instead of all three outcome measures.

XVII. Proposed Revisions of the Quality Improvement Organization (QIO) 
Regulations

A. Legislative History

    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 ``Peer 
Review Organizations.'' In a final rule with comment period published 
in the Federal Register on May 24, 2002 (67 FR 36539), we revised the 
regulatory references to these organizations to ``Quality Improvement 
Organizations'' (QIOs)--without changing the definition or functions of 
the QIOs--to reflect the program's shift from a compliance-oriented 
focus to one emphasizing quality improvement. There have been a number 
of amendments to the QIO statute over the years, but they have not 
resulted in any substantial changes in how the program operates. 
However, in section 261 of the recently enacted Trade Adjustment 
Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40), Congress 
authorized numerous changes to the original legislation to modernize 
and improve the QIO Program and included additional flexibility for the 
Secretary in the administration of the QIO Program. This legislation 
also updated the nomenclature from the Peer Review Organization Program 
to the QIO Program and included amendments to update the terminology of 
the program (replacing ``peer review organization'' and ``utilization 
and quality control peer review organization'' with ``quality 
improvement organization'' in relevant provisions of the Act.)
    Specifically, section 261 of the TAAEA increased the flexibility 
available to the Secretary by updating the statutory definition of the 
organizations that can contract with CMS as QIOs (as described in 
section 1152 of the Act), changing certain contract terms and processes 
by which the Secretary contracts with QIOs (as described in section 
1153 of the Act), and broadening the Secretary's authority to delineate 
the scope of work for QIOs (as described in section 1154 of the Act).
    The regulations that implement sections 1152 and 1153 of the Act 
are codified at 42 CFR Part 475; Subpart C of Part 475 includes 
provisions that specifically govern the types of organizations eligible 
to become QIOs. The regulations that implement section 1154 of the Act 
and much of the work performed by QIOs are codified at 42 CFR Part 476. 
Section 1154 of the Act states that much of the work QIOs will perform 
is subject to the terms of their contracts with CMS. We note that, 
consistent with this provision, the contracts and requests for 
proposals used to contract with QIOs include significant detail on the 
work performed by the QIOs.

B. Basis for Proposals

    Section 261 of the TAAEA eliminated certain limitations specified 
in sections 1152 and 1153 of the Act that appear in several existing 
provisions in Part 475. In order to eliminate these limitations in the 
regulations and fully utilize the flexibility provided as a result of 
the statutory changes, we are proposing regulatory changes to implement 
the statutory amendments. These changes involve, among other things, 
changing the eligibility standards for an entity to be awarded a QIO 
contract and defining specific terms that will be used to describe QIOs 
and their quality improvement work. We are proposing to change the 
terminology related to the geographic area in which a QIO must perform 
its different functions. As the statute authorizes, the QIO area can 
now be any geographic area CMS believes will be most effective in 
accomplishing its goals for the QIO contract. We also are proposing to 
revise provisions regarding the eligibility of a health care facility 
association to be a QIO and to eliminate an obsolete provision at Sec.  
475.106 regarding the eligibility of payor organizations to be QIOs. 
The statutory amendments also include a change in the contract period 
for a QIO, extending it from 3 to 5 years. Although we did not 
previously update this regulation with a prior statutory change in the 
QIO contract term from 2 years to 3 years, we are now including the 5-
year time period in the proposed rule as a technical correction in 
order to bring the regulations up to date with the amended statutory 
timeframe. We believe that these changes would be instrumental in 
improving aspects of the QIO's review activities and would enable us to 
improve the program by ensuring that QIOs are better able to meet the 
needs of Medicare beneficiaries. The specific proposed

[[Page 43673]]

changes and corrections are explained in more detail in the following 
sections.
    QIOs work at the grassroots level of American health care delivery 
systems in all 50 States, the District of Columbia, and most U.S. 
Territories in order to improve care for Medicare beneficiaries. QIOs 
originally reviewed Medicare services to determine whether they were 
reasonable and medically necessary, met professionally recognized 
standards of care, and were provided in the appropriate setting. 
However, the QIO contract has evolved over the course of the years as 
the literature supports the concept that defects in the health care 
process are rarely related to the performance of one individual but to 
a system of care with multiple opportunities for failure. Attempts to 
improve quality through inspection methods, that is, by performing one 
chart review at a time, are less likely to yield the systemic 
improvements in care for Medicare beneficiaries that can come from 
analyzing data in order to identify problems, developing a plan of 
action, monitoring the result through data driven processes, and making 
changes as needed based on those results.
    The qualifications and expertise required to execute these quality 
improvement initiatives have evolved to now include expertise from 
disciplines such as physicians, nurses, other clinicians, health care 
leaders, experts in statistics and health care system reengineering, 
and many other kinds of professionals. We intend to interpret our 
proposed regulation so as not to prohibit the use of professionals in 
the health care industry that are not licensed physicians or certified 
practitioners. We recognize/anticipate that these other professionals 
may offer valuable insight to QIOs on ways to enhance the performance 
of their QIO functions, as well as provide services designed to help 
QIOs maximize their impact. We propose to adopt this approach to 
further our goal that the regulations under 42 CFR Part 475 reflect a 
multidisciplinary approach to the performance of QIOs. Therefore, the 
proposed standards here would not be a barrier to the inclusion of any 
other nonphysician or nonpractitioner professional that CMS or the QIO 
deems appropriate for the successful performance of QIO functions. 
Patients and their families also play a critical role in the success of 
quality improvement initiatives. Amendments to the Act made by the 
TAAEA would accommodate the evolution of quality improvement and would 
allow CMS the flexibility to expand the types of organizations eligible 
to provide multi-disciplinary support in quality improvement. We seek 
with this proposal to ensure that the regulations governing QIO 
eligibility reflect the increased flexibility afforded by the TAAEA. 
This will help us ensure that we can administer the QIO Program in a 
manner that reflects contemporary practices and allows us to include 
the appropriate individuals and entities in working toward improving 
care processes.
    As described in section 1154 of the Act, QIOs perform many specific 
review functions that are necessary to ensure the quality of care 
provided to Medicare beneficiaries. The addition to section 1154 of 
subparagraph (a)(18) by the TAAEA explicitly provides the Secretary 
with the broad authority to require that QIOs perform any additional 
activities the Secretary determines may be necessary for the purposes 
of improving the quality of Medicare services. Based on this authority, 
QIOs will, as a general matter, be required to represent CMS as 
``change agents'' that work at local levels in their individual QIO 
geographic areas. Through the contracting process, different QIOs might 
now be required to work on one or more different tasks; that is, all 
QIOs might no longer be required to handle the complete and broad range 
of QIO activities within their geographic areas but to focus on 
particular tasks of QIO work. For example, QIOs might be required to 
offer to a variety of stakeholders the knowledge and resources for 
improving health quality, efficiency, and value designed to improve the 
care provided to Medicare beneficiaries. Stakeholders might include 
providers, practitioners, patients, and others who are interested in 
improving care.
    As under the current program, QIOs will be required to base their 
work on clinical evidence and some may be required to generate reliable 
data about clinical performance. QIOs may also serve as independent, 
objective, and collaborative partners that support CMS' mission to 
improve health care quality in the Medicare program (which, in turn, 
has the potential to greatly benefit the broader health care community) 
by leveraging the best efforts of all health care stakeholders, 
including patients and their families. While the goal of the QIOs is to 
benefit Medicare beneficiaries, the work of the QIOs may also, as a 
secondary matter, benefit other patients and residents who receive 
medical care. In this context, we are seeking to ensure that the 
regulations governing QIO eligibility reflect contemporary practices 
and include those that can help to improve care processes for Medicare 
beneficiaries. We are proposing to do so by removing restrictions that 
are no longer statutorily mandated and including requirements that 
reflect the current goals of the QIO program.
    One such contemporary practice is the inclusion of patients and 
families in health care quality improvement. As a result, we have added 
to the QIO requirements a new focus on patient and family engagement 
and patient and family inclusion in quality improvement initiatives.
    We believe that the TAAEA legislation allows us a great deal of 
flexibility in how we restructure the work that QIOs perform and the 
types of organizations qualified to perform that work. We intend to 
continually examine methods for providing care to beneficiaries in a 
way that maximizes efficiency, eliminates waste, decreases harm, lowers 
costs through improvement, and engages patients more effectively. One 
way to continue improving the quality, efficacy, and efficiency of care 
in the Medicare program is to reconsider how QIOs provide services to 
determine whether the current longstanding contract structure and 
eligibility requirements best fit the continually evolving science 
related to driving quality improvement. The changes we are proposing 
are intended to ensure that we have the flexibility we need to 
reconsider certain aspects of the QIO program structure in response to 
experience and changes in research findings and the health care 
community's approach to quality improvement.
    The regulatory proposals here focus on the primary functional 
responsibilities of a QIO as a basis for determining eligibility. These 
are case review (which includes the statutory minimum standards) and 
quality improvement initiatives. We believe that the proposed 
eligibility and contracting standards for QIOs focus on the necessary 
minimum requirements for successful operation of the QIO Program.

C. Proposed Changes to the Nomenclature and Regulations Under 42 CFR 
Parts 475 and 476

    In this proposed rule, we set forth proposals for updating the 
nomenclature and the definition of physician in both 42 CFR Parts 475 
and 476 and for the partial deletion and revision of the regulations 
under 42 CFR Parts 475. Currently, Part 475 includes definitions and 
standards governing eligibility and the award of contracts to QIOs. We 
are proposing to replace nomenclature that has been amended by

[[Page 43674]]

the TAAEA, revise the existing definition in Part 475, Subpart A and 
Part 476, Subpart A of the term ``physician'', add new definitions to 
Part 475, Subpart A as necessary to support proposed new substantive 
provisions in Part 475, Subpart C, and revise, add, and replace some 
substantive provisions in Part 475, Subpart C.
1. Proposed Nomenclature Changes
    In order to conform the regulations to the nomenclature changes 
made by section 261 of the TAAEA, we are proposing nomenclature changes 
where necessary in 42 CFR Part 475. We are, for example, proposing to 
revise the heading of Subpart C of Part 475 to read ``Subpart C--
Quality Improvement Organizations'' and to replace the term ``peer 
review'' with ``quality improvement.'' In each proposed provision in 
Part 475, Subpart C, we use the new nomenclature where appropriate.
    In addition, Part 476 is currently entitled ``Utilization and 
Quality Control Review,'' and Subpart C of Part 476 is entitled 
``Review Responsibilities of Utilization and Quality Control Quality 
Improvement Organizations (QIOs),'' both of which reflect the 
terminology used before enactment of the TAAEA. In order to reflect the 
nomenclature changes made by the TAAEA, we are proposing to revise the 
title of Part 476 to read: ``Part 476--Quality Improvement Organization 
Review'' and the title of Subpart C of Part 476 to read: ``Subpart C--
Review Responsibilities of Quality Improvement Organizations (QIOs).''
2. Proposals To Add and Revise Definitions
    We are proposing changes to Sec. Sec.  475.101 through 475.107 to 
reflect new eligibility standards for an entity to be awarded a QIO 
contract and to use specific terms that will be used to describe QIOs 
and their quality improvement work. In connection with these changes, 
we are proposing to add definitions of ``case review'', and ``QIO 
area,'' add cross-references to definitions in Sec.  476.1 of 
``practitioner'' and ``quality improvement initiative,'' and revise the 
definition of ``physician'' under Sec.  475.1 and Sec.  476.1, as 
discussed below. We are soliciting public comments on our proposed 
definitions.
    We are proposing to define ``case reviews'' to mean ``the different 
types of reviews that QIOs are authorized to perform. Such reviews 
include, but are not limited to: (1) Beneficiary complaint reviews; (2) 
general quality of care reviews; (3) Emergency Medical Treatment and 
Labor Act (EMTALA) reviews; (4) medical necessity reviews, including 
appeals and DRG validation reviews; and (5) admission and discharge 
reviews.'' We are providing this list to illustrate the range and scope 
of case reviews but note that the Act and other provisions in Chapter 
IV of Title 42 of the Code of Federal Regulations require additional 
reviews and that the Secretary, pursuant to section 1154(a)(18) of the 
Act, may require additional reviews under the contracts awarded to 
QIOs.
    We are proposing to expand the definition of ``physician'' beyond 
its existing definition under Sec.  475.1 and Sec.  476.1 to reflect 
the definition in section 1861(r) of the Act, as well as to cover 
several additional characteristics that are unique to the QIO Program. 
We are proposing the following definition of physician for both Parts 
475 and 476: A physician is ``(1) A doctor of medicine or osteopathy, a 
doctor of dental surgery or dental medicine, a doctor of podiatry, a 
doctor of optometry, or a chiropractor as described in section 1861(r) 
of the Act; (2) An intern, resident, or Federal Government employee 
authorized under State or Federal law to practice as a doctor as 
described in paragraph (1) above; and (3) An individual licensed to 
practice as a doctor as described in paragraph (1) above in any 
Territory or Commonwealth of the United States of America.'' We believe 
these revisions are necessary to eliminate references in paragraphs (1) 
and (2) of the definition in Sec.  475.1 to physicians licensed in the 
State in which the QIO is located, in order to reflect the fact that a 
QIO's contract area may no longer be limited to one State. In addition, 
we are proposing to amend paragraph (3) of the definition in Sec.  
475.1 so that it no longer applies to just American Samoa, the Northern 
Mariana Islands, and the Trust Territory of the Pacific Islands. We are 
proposing to enlarge this part of the definition to apply to physicians 
licensed to practice in all U.S. Territories and Commonwealths to more 
closely align with the Secretary's flexibility in awarding QIO 
contracts granted by the TAAEA. We are soliciting public comments on 
whether our proposed definition is sufficiently inclusive and 
appropriate to achieve these goals. We also are proposing to define the 
term ``practitioner'' and ``quality improvement initiative'' for 
purposes of Part 475 by cross-referencing the existing definitions at 
42 CFR 476.1.
    In connection with our proposal to revise the requirements that an 
entity must meet to serve as a QIO, we also are proposing to define, in 
Sec.  475.1, the terminology related to the geographic area in which a 
QIO must perform its different functions. Currently, the regulations in 
Part 475 do not define this area, but do refer to a QIO's ``review 
area'' in a number of places in existing text at Sec. Sec.  475.102 and 
475.103 and ``QIO area'' in Sec. Sec.  475.1, 475.105(a), and 
475.107(a) and (d). The term ``review area'' was used to refer to the 
geographic area in which each QIO performs its review functions under 
its contract with CMS while the term ``QIO area'' was used to refer to 
the geographic area covered by the contract. We are proposing to define 
and use the term ``QIO area'' to mean ``the defined geographic area, 
such as the State(s), region(s), or community(ties), in which the CMS 
contract directs the QIO to perform.'' Our addition of this proposed 
definition is meant to reflect the flexibility afforded to us by the 
TAAEA to establish a QIO area as the geographic area we believe will be 
most effective in accomplishing the goals of a particular QIO contract. 
In addition, the change in terminology from ``QIO review area'' to 
``QIO area'' is intended to emphasize that the term can encompass more 
than just ``review'' functions. With this change, we intend to not only 
broaden the scope for choosing an appropriately sized geographic area, 
but also to identify capability and functionality as the primary way to 
identify the appropriate organization to perform specific QIO contract 
functions.
3. Proposals Relating To Scope and Applicability of Subpart C of Part 
475
    We believe that the scope and applicability provision for 42 CFR 
Part 475, Subpart C should reflect that the statutory authority for the 
QIO program was amended by the TAAEA, in particular the definition of a 
QIO and the eligibility and contracting standards. We are proposing to 
replace the regulatory language in Sec.  475.100 with new language that 
explicitly acknowledges that the regulations in Subpart C implement 
sections 1152 and 1153(b) and (c) of the Act as amended by section 261 
of the TAAEA. In addition, we are proposing to include the reference to 
section 1153(c) of the Act to reflect our proposal, in Sec.  
475.107(c), to include the 5-year contract term that now appears in 
amended section 1153(c)(3) of the Act. The proposed revisions to 
Sec. Sec.  475.101 through 475.107 are intended to allow organizations 
that currently perform QIO work to compete for new QIO contracts, while 
expanding eligibility to additional entities under the new authority 
granted by the TAAEA. As the program evolves, we will focus contract 
determinations on the ability of

[[Page 43675]]

organizations to perform QIO functions as stated in the Request for 
Proposal (RPF). We are soliciting public comments on whether our 
proposed regulation text for Subpart C of Part 475 sufficiently meets 
this goal as well as our explained goal to implement the flexibility 
provided by Congress in the TAAEA amendments.
4. Proposals Relating to Eligibility Requirements for QIOs (Sec. Sec.  
475.101 through 475.106)
    Prior to the TAAEA amendments, section 1152 of the Act defined a 
QIO as an entity that: (1) Is composed of a substantial number of 
licensed doctors of medicine and osteopathy engaged in the practice of 
medicine or surgery in the area where the QIO will perform or has 
available the services of a sufficient number of licensed doctors of 
medicine or osteopathy engaged in the area where the QIO will perform 
to assure adequate review of the services provided by various medical 
specialties and subspecialties; (2) is able, in the judgment of the 
Secretary, to perform review functions in a manner consistent with the 
efficient and effective administration of the QIO statute and to 
perform reviews of the pattern of quality of care in an area of medical 
practice where actual performance is measured against objective 
criteria which define acceptable and adequate practice; and (3) has at 
least one individual who is a representative of consumers on its 
governing body. In section 261 of the TAAEA, Congress replaced the 
first two of these requirements with requirements that a QIO: (1) Be 
able, as determined by the Secretary, to perform QIO functions in a 
manner consistent with the efficient and effective administration of 
Part B of Title XI and Title XVIII of the Act; and (2) have at least 
one individual who is a representative of health care providers on its 
governing body. Congress left unchanged the third requirement in 
section 1152(3) of the Act that a QIO have at least one individual 
representing consumers on its governing body. We have interpreted and 
the regulations in Part 475 implement the statutory definition in 
section 1152 of the Act as setting minimum eligibility requirements for 
an entity to hold a QIO contract. Our regulatory proposal in this 
proposed rule would implement the changes in the QIO eligibility 
standards made by the TAAEA.
    We recognize the vital role of physicians in the work of the QIOs 
and also believe that some of the functions of the QIOs necessitate a 
multidisciplinary approach to quality improvement, inclusive of 
expertise from a wide breadth of disciplines. With the elimination of 
the requirement that a QIO be sponsored by or have access to physicians 
in a specific organization structure, we are proposing to delete the 
eligibility requirements in Sec. Sec.  475.101 through 476.104 related 
to the concepts of ``physician-sponsored organization'' and 
``physician-access organization.'' In light of the current 
multidisciplinary approach to QIO activities, we believe that expanding 
the existing eligibility requirements beyond ``physician-sponsored 
organizations'' and ``physician-access organizations'' will both better 
reflect the flexibility Congress provided in the TAAEA amendments to 
section 1152 of the Act and be inclusive of the multidisciplinary 
approach that currently exists in contemporary quality improvement.
    In addition, to implement the language added by section 261 that a 
QIO must be able, as determined by the Secretary, to perform the 
functions under the Act consistent with the purposes of the QIO program 
and the Medicare program, we are proposing language in Sec. Sec.  
475.101 through 475.103 to distinguish the requirements for QIOs to be 
able to perform case reviews from the requirements for QIOs to be able 
to perform quality improvement initiatives. We are soliciting public 
comments on our focus on these primary QIO functions and how this 
functional approach will ensure that QIOs are appropriately selected 
for contract award. We are proposing to vacate and reserve existing 
Sec. Sec.  475.104 and 475.106.
a. Eligibility To Be Awarded a QIO Contract (Sec.  475.101)
    As proposed here, revised Sec.  475.101 would no longer reference 
``physician-sponsored organizations'' and ``physician-access 
organizations,'' would retain the requirement that the governing body 
of the QIO include at least one consumer representative, and would 
include new eligibility standards for an organization to be awarded a 
QIO contract based on the TAAEA amendments to section 1152 of the Act. 
First, in paragraph (a), we are proposing that a QIO must have a 
governing body that includes at least one representative of health care 
providers and one representative of consumers as required by section 
1152(2) and (3) of the Act as amended by the TAAEA. Second, in 
paragraph (b), we are proposing to interpret and implement the amended 
language in section 1152(1) of the Act that an organization awarded a 
QIO contract must be able, as determined by the Secretary, to perform 
the functions under the Act consistent with the purposes of the QIO 
program and the Medicare program by requiring that an organization 
demonstrate the ability to meet eligibility requirements and perform 
the functions of a QIO. Our proposal characterizes the functions of a 
QIO as the contractual requirements for QIOs to perform activities that 
are built into the request for proposals used to award QIO contracts 
and the ability to perform case reviews and/or quality improvement 
initiatives as described in these regulations. In our view, these broad 
categories encompass the work QIOs are required to perform under 
section 1154 of the Act. Our proposal reflects a different approach to 
structuring the QIO requirements than the current rule; we are 
proposing to focus on the functions the organization performs under the 
QIO contract instead of the structure of the organization itself. As 
discussed in more detail below in connection with proposed Sec. Sec.  
475.102 and 475.103, this function-focused approach also reflects both 
the important role of physicians and a multidisciplinary approach for 
the two primary functions of the QIO contracts: (1) Case reviews and 
(2) quality improvement initiatives. These two primary functions are 
based on the statutory requirements for the functions QIOs must perform 
and our current approach of using quality improvement initiatives to 
improve the quality of care provided to Medicare beneficiaries. By 
referencing the contractual requirements set forth in the requests for 
proposals, we are proposing to incorporate the flexibility provided in 
section 1154(a) to require a QIO to perform one or more of the listed 
QIO functions and section 1154(a)(18) of the Act for the inclusion of 
additional activities for QIOs to perform when we determine that they 
are necessary to improve the quality of care for Medicare 
beneficiaries.
    Finally, in paragraph (c), we are proposing that a QIO must 
demonstration the ability to actively engage beneficiaries, families, 
and consumers, as applicable, in case reviews and quality improvement 
initiatives. Although this is not a specifically required qualification 
for a QIO under sections 1152 and 1153 of the Act, we are proposing 
this requirement because it reflects the multidisciplinary and 
multistakeholder approach to QIO functions that we intend to establish. 
Health care costs have doubled as a share of the economy over the past 
three decades, causing stress on beneficiaries, families, employers, 
and government budgets. We believe that motivating beneficiaries to

[[Page 43676]]

become involved in their own health care may reduce waste and 
ultimately improve the quality and efficiency of health care. One 
important way to accomplish this is by educating beneficiaries, their 
families, providers, and the public about the importance of identifying 
and pursuing value in health care. Value represents the best possible 
quality of health care at the most reasonable cost. A major component 
of a successful value initiative depends on a QIO's understanding of 
patient and family goals, expectations, motivations, and aspirations. 
Our inclusion of the requirement that a QIO have the ability to 
understand the needs of beneficiaries, families, and consumers and 
actively engage them in health care decisions emphasizes our commitment 
to patient and family engagement as an essential component of the QIO 
program.
    We are soliciting public comments on whether our proposal 
sufficiently incorporates the statutory flexibility, identifies the 
goals of the QIO eligibility requirements, and provides guidance on how 
organizations will be determined eligible for QIO contracts.
b. Eligibility Requirements for QIOs to Perform Case Reviews (Sec.  
475.102)
    In this proposed rule, we are proposing to list the type of factors 
CMS will use to determine that an organization has demonstrated its 
ability to perform case reviews. We do not consider this list to be 
comprehensive, but an indication of what we intend to focus on. The 
list of factors emphasizes the importance of QIOs having access to 
qualified physicians and practitioners for this purpose. In paragraph 
(a) of Sec.  475.102, we are proposing that CMS will determine that an 
organization has demonstrated the ability to perform case reviews based 
on factors related to how the QIO work will be performed and the 
underlying capabilities necessary for performing well. Under our 
proposal, CMS will consider such factors as (1) the organization's 
proposed processes, capabilities, quantitative and/or qualitative 
performance objectives, and case review methodology; (2) the 
organization's proposed involvement of and access to physicians and 
practitioners in the QIO area with appropriate expertise and 
specialization in the areas of health care related to case reviews; (3) 
the organization's ability to take into consideration urban versus 
rural and regional characteristics in the health care setting where the 
care under review was provided; (4) the organization's ability to take 
into consideration evidence-based national clinical guidelines and 
professionally recognized standards of care; and (5) the organization's 
access to qualified information technology (IT) expertise. In this 
paragraph, we intend to propose these general factors and standards CMS 
may use to establish the minimum level of resources and skills the 
organization must have in order to demonstrate that its processes and 
capabilities are satisfactory and meet the purposes of the QIO program.
    In paragraph (b) of Sec.  475.102, we are proposing that CMS may 
consider characteristics such as the geographic location, size and 
prior experience of an organization in order to determine whether the 
organization has the capability to perform case reviews. In terms of 
prior experience, we are proposing that CMS will gauge the significance 
of an organization's experience based on how relevant it is to the 
tasks that CMS intends to include in the QIO contract and the goals CMS 
intends to accomplish. While we intend to emphasize the importance of 
prior experience, we do not intend to limit the evidence an 
organization may present to us to demonstrate its capability to perform 
case reviews. Therefore, we have included language in proposed Sec.  
475.102(b) to indicate that CMS can consider a variety of factors, as 
indicated in section 1153(b)(4) of the Act.
    Finally, we are proposing to include in paragraph (c) of Sec.  
475.102 clarifications to the text that reflect the existing regulatory 
text at Sec.  475.104(d), with some minor modifications. The existing 
provision states that a State government that operates a Medicaid 
program will be considered incapable of performing utilization and 
quality review functions in an effective manner, unless the State 
demonstrates to CMS' satisfaction that it will act with complete 
independence and objectivity. As proposed, the provision at Sec.  
475.102(c) maintains the substance of the existing rule while making it 
clear that the scope of its review will be limited to case reviews. In 
order to do this, we have proposed to replace the term ``utilization 
and quality review functions'' with the term ``case reviews.'' In 
addition, we are proposing to revise the language to clarify that the 
objectivity and independence mentioned in the existing regulation 
relate to objectivity and independence from the Medicaid program, as we 
believe there is an inherent conflict of interest that arises from the 
State's financial interest in the administration of that program.
    Our proposal at Sec.  475.102 implements the statutory 
responsibility for the Secretary to determine whether an organization 
can perform the QIO function of case reviews in a manner that is 
consistent with the efficient and effective operation of the QIO 
Program and the Medicare Program. We are soliciting public comments on 
whether the regulation text should incorporate the standards for QIOs 
that we propose to use and the factors we intend to consider when 
determining whether those standards have been met.
    We are proposing to delete and reserve all of Sec.  475.104 in 
light of our proposed changes to Sec.  475.102. We believe that aspects 
of Sec.  475.104 that we have not proposed to incorporate into Sec.  
475.102 are obsolete due to the revisions in the TAAEA legislation.
c. Eligibility Requirements for QIOs to Conduct Quality Improvement 
Initiatives (Sec.  475.103)
    Case reviews are concerned with care that was provided, or should 
be provided, based on the facts of a particular case, concerning a 
particular episode of care or concerning a particular beneficiary, or 
both. By contrast, the vast majority of quality improvement initiatives 
are not initiated in the same manner as case reviews. Rather, quality 
improvement initiatives are based on patterns of care that reveal 
problems that are more systematic in nature, such as those that result 
in inefficiency, waste, or high cost, or that could potentially harm 
beneficiaries. These patterns of care can reflect problems that might 
impact large segments of the population, or single episodes of care 
where the impact might affect fewer people, but the QIO is concerned 
about the health and safety of the public due to the severity of the 
quality of care issue. We are proposing under revised Sec.  475.103(a) 
that CMS will determine if an organization is capable of performing 
quality improvement initiatives using factors similar to those listed 
for QIOs that will perform case reviews. In paragraph (a), we are 
proposing a list of the type of factors CMS will use to determine that 
an organization has demonstrated its ability to perform quality 
improvement initiatives. We do not consider this list to be 
comprehensive, but an indication of what we intend to focus on. 
Specifically, in revised paragraph Sec.  475.103(a), we are proposing 
that CMS will determine that an organization has demonstrated the 
ability to perform quality improvement initiatives based on factors 
tied to how the QIO work will be performed and the underlying 
capabilities necessary for performing well. Under our proposal, CMS 
will consider such factors as (1) The organization's proposed 
processes,

[[Page 43677]]

capabilities, quantitative and/or qualitative performance objectives, 
and methodology to perform quality improvement initiatives; (2) the 
organization's proposed involvement of and access to physicians and 
practitioners in the QIO area with appropriate expertise and 
specialization in the areas of health care concerning the quality 
improvement initiative; and (3) the organization's access to 
professionals with requisite knowledge of quality improvement 
methodologies and practices as well as qualified information technology 
and technical expertise. We plan to use these factors, and others as 
necessary, to determine if an organization has satisfactory 
capabilities and sufficient resources to initiate, follow up on, and 
follow through to completion quality improvement initiatives that it 
agrees to undertake. We consider appropriate quality improvement 
resources to include a multidisciplinary team that is comprised of 
appropriate health care professionals to perform quality improvement 
initiatives as well as the administrative, IT and technical staff 
necessary to accomplish the quality improvement initiatives.
    In paragraph (b), we are proposing that CMS may consider 
characteristics such as the geographic location, size, and prior 
experience of an organization in order to determine whether the 
organization has the capability to perform quality improvement 
initiatives. In terms of prior experience, we are proposing that CMS 
will gauge the significance of an organization's experience based on 
how relevant it is to the tasks that CMS intends to include in the QIO 
contract and the goals CMS intends to accomplish. While we intend to 
emphasize the importance of prior experience, we do not intend to limit 
the evidence an organization may present to us to demonstrate its 
capability to perform quality improvement initiatives. We are proposing 
to include language in proposed Sec.  475.103(b) to indicate that CMS 
can also consider a variety of other factors, as indicated in section 
1153(b)(4) of the Act.
    Finally, we are proposing to include in paragraph (c) 
clarifications to the text that reflect the existing regulatory text at 
Sec.  475.104(d), with some minor modifications. The current provision 
states that a State government that operates a Medicaid program will be 
considered incapable of performing utilization and quality review 
functions in an effective manner, unless the State demonstrates to CMS' 
satisfaction that it will act with complete independence and 
objectivity. As proposed, the provision at Sec.  475.103(c) maintains 
the substance of the existing rule while making it clear that the scope 
of its review will be limited to quality improvement initiatives. In 
order to do this, we have proposed to replace the term ``utilization 
and quality review functions'' with the term ``quality improvement 
initiatives.'' In addition, we are proposing to revise the language to 
clarify that the objectivity and independence mentioned in the existing 
regulation relate to objectivity and independence from the Medicaid 
program, as we believe there is an inherent conflict of interest that 
arises from the State's financial interest in the administration of 
that program.
    Our proposal at Sec.  475.103 implements the statutory 
responsibility for the Secretary to determine whether an organization 
can perform the QIO function of quality improvement initiatives in a 
manner that is consistent with the efficient and effective operation of 
the QIO Program and the Medicare Program. We solicit comment on whether 
the regulation text should incorporate the standards for QIOs that we 
propose to use and the factors we intend to consider when determining 
whether those standards have been met.
d. Prohibitions on Eligibility as a QIO (Sec.  475.105)
    We are proposing revisions to Sec.  475.105(a)(2) to eliminate the 
prohibition against an association of health care facilities being 
awarded a QIO contract, to reflect a TAAEA amendment deleting this 
restriction from section 1153(b)(3) of the Act. We also are proposing 
to move the existing provision covering the exclusion of health care 
facility affiliates in paragraph (a)(3) to paragraph (a)(2), and to 
create a revised paragraph (a)(3) that would include payor 
organizations as excluded entities unless they meet certain exception 
requirements identified in section 1153(b)(2)(B) of the Act. Prior to 
the TAAEA amendment, the statute imposed two prohibitions on CMS 
contracting with a payor organization to perform QIO functions: A 
prohibition applicable before November 15, 1984 and a prohibition with 
exceptions for periods of time after November 15, 1984. After November 
15, 1984, a payor organization could perform as a QIO if the Secretary 
determined that there were no other entities available for a QIO area. 
These restrictions were implemented in the existing regulations 
codified at Sec. Sec.  475.105(b) and 475.106. The TAAEA amendments 
left unchanged the prohibition in effect for the period of time before 
November 15, 1984, but revised section 1153(b)(2)(B) of the Act to add 
exceptions to the prohibition applicable after November 15, 1984. 
Section 1153(b)(2)(B) of the Act, as amended, permits the award of a 
QIO contract to a payor organizations not only when the Secretary 
determines that there is no other entity available for an area, but 
also when the Secretary determines that there is a more qualified 
entity to perform one or more of the functions in section 1154(a) of 
the Act, if the entity meets all other requirements and standards in 
the QIO statute. We read this provision to mean that when the Secretary 
determines that a payor organization is more qualified than a nonpayor 
organization in the QIO area to perform one or more of the functions in 
section 1154(a) of the Act, that payor entity can qualify as a QIO so 
long as all other eligibility criteria are met. We have reflected this 
interpretation in the proposed rule as Sec.  475.105(a)(3).
    The existing paragraph (b) prohibits payor organizations from being 
QIOs prior to November 15, 1984. Since that date has long passed, we 
believe this paragraph should be eliminated. We are proposing to delete 
and reserve paragraph (b) of Sec.  475.105 in its entirety. Paragraph 
(c) would remain largely unchanged except for a minor terminology 
update to clarify in the regulation text that the term ``facility'' is 
meant to refer to a ``health care facility'' and to change the term 
``conduct any review activities'' to ``perform any case review 
activities'' to indicate our separation of case review functions from 
quality improvement initiatives. We do not believe that these changes 
affect the underlying prohibitions.
    As noted above, we are proposing to delete and reserve all of Sec.  
475.106 in light of our proposed changes to Sec.  475.105. We believe 
that aspects of Sec.  475.106 that we have not proposed to incorporate 
into Sec.  475.105 are obsolete due to the passage of time.
5. Proposals Relating to QIO Contract Awards (Sec.  475.107)
    The existing regulations at 42 CFR Part 475 also include 
requirements related to the establishment of QIO contracts and the 
assignment of bonus points. We are proposing to delete the portions of 
existing Sec.  475.107(c) pertaining to the assignment of up to 10 
percent of available bonus points to physician-sponsored organizations, 
and the assignment of points in connection with the structure of the 
organization as ``physician-sponsored'' or ``physician-access.'' These 
provisions are obsolete in light of the changes to section 1152(1) of 
the Act and our proposals above

[[Page 43678]]

relating to the eligibility standards for an organization awarded a QIO 
contract. We also are proposing to use cross-references in Sec.  
475.107(a) and (b) to the revised standards we are proposing in 
Sec. Sec.  475.101 through 475.103. We are proposing to retain the 
regulatory language that requires CMS to identify proposals that meet 
the requirements of Sec.  475.101 (proposed Sec.  475.107(a)) and to 
identify those proposals that set forth minimally acceptable plans in 
accordance with the requirements of Sec.  475.102 or Sec.  475.103, or 
both as applicable (proposed Sec.  475.107(b)).
    The existing Sec.  475.107(d) states that the contract for a given 
QIO area to the selected organization cannot exceed 2 years, which is 
inconsistent with the current statutory provision at section 1153(c)(3) 
of the Act. We are proposing here to redesignate this provision as 
paragraph (c) and to provide for a 5-year contract term as required by 
section 1153(c)(3) of the Act, as amended by section 261 of the TAAEA.

XVIII. Medicare Fee-for-Service Electronic Health Record (EHR) 
Incentive Program

A. Incentive Payments for Eligible Professionals (EPs) Reassigning 
Benefits to Method II CAHs

    Section 1848(o)(1)(A) of the Act, as amended by section 4101(a) of 
the HITECH Act, establishes the Medicare EHR Incentive Program, which 
provides for incentive payments to eligible professionals (EPs) who are 
meaningful users of certified EHR technology during the relevant EHR 
reporting periods. Section 1848(o)(1)(A)(i) of the Act provides that 
EPs who are meaningful EHR users during the relevant EHR reporting 
period are entitled to an incentive payment amount, subject to an 
annual limit, equal to 75 percent of the Secretary's estimate of the 
Medicare allowed charges for covered professional services furnished by 
the EP during the relevant payment year. Under section 
1848(o)(1)(B)(ii) of the Act, an EP is entitled to an incentive payment 
for up to 5 years. In addition, in accordance with section 
1848(o)(1)(A)(ii) of the Act, there shall be no incentive payments made 
with respect to a year after 2016.
1. Background for Definition of EPs and EHR Incentive Payments to EPs
    In accordance with section 1848(o)(5)(C) of the Act, in the final 
rule for Stage 1 of the EHR Incentive Program (75 FR 44442), we 
established a definition of the term ``eligible professional'' in the 
regulations at 42 CFR 495.100 to mean a physician as defined under 
section 1861(r) of the Act. Section 1861(r) of the Act defines the term 
``physician'' to mean the following five types of professionals, each 
of which must be legally authorized to practice their profession under 
State law: A doctor of medicine or osteopathy; a doctor of dental 
surgery or dental medicine; a doctor of podiatric medicine; a doctor of 
optometry; or a chiropractor. As also discussed in that final rule (75 
FR 44439), in accordance with section 1848(o)(1)(C) of the Act, 
hospital-based EPs are not eligible for an EHR incentive payment. The 
term ``hospital-based EP'' is defined in Sec.  495.4 of the regulations 
as ``Unless it meets the requirements of Sec.  495.5 of this part, a 
hospital-based EP means an EP who furnishes 90 percent or more of his 
or her covered professional services in sites of service identified by 
the codes used in the HIPAA standard transaction as an inpatient 
hospital or emergency room setting in the year preceding the payment 
year, or in the case of a payment adjustment year, in either of the 2 
years before such payment adjustment year.'' Paragraphs (1)(i) and 
(1)(ii) of the definition specify how the percentage of covered 
professional services is calculated for Medicare for purposes of the 
payment years and payment adjustment years, respectively. We note a 
discrepancy between the regulation text for this definition and the 
final policy we established in the preamble of the EHR Incentive 
Program Stage 2 final rule (77 FR 54102). Under the policy we finalized 
in that rule, we determine whether an EP is hospital-based for a 
payment adjustment year using either of the following Federal fiscal 
year's (FY) data: (1) The fiscal year before the year that is 1 year 
prior to the payment adjustment year (for example, FY 2013 data for 
payment adjustment year 2015); or (2) the fiscal year before the year 
that is 2 years prior to the payment adjustment year (for example, FY 
2012 data for payment adjustment year 2015). If the data from either 
year result in a hospital-based determination, the EP would not be 
subject to the payment adjustments for the relevant year. In the 
definition under Sec.  495.4 of the regulations, however, paragraph 
(1)(ii) incorrectly refers to the fiscal year preceding the payment 
adjustment year and the fiscal year 2 years before the payment 
adjustment year. The introductory text of the definition also 
incorrectly references either of the 2 years before such payment 
adjustment year. We are taking this opportunity to make a technical 
correction to paragraph (1)(ii) and the introductory text of the 
definition of ``hospital-based EP'' at Sec.  495.4 to conform to the 
policy stated in the preamble of the EHR Incentive Program Stage 2 
final rule (77 FR 54102). We are proposing to revise paragraph 
(1)(ii)(A) of the definition to read ``The Federal fiscal year 2 years 
before the payment adjustment year; or'' and paragraph (1)(ii)(B) of 
the definition to read ``The Federal fiscal year 3 years before the 
payment adjustment year.'' We also are proposing to revise the 
introductory text of the definition to reference, in the case of a 
payment adjustment year, either of the 2 years before the year 
preceding such payment adjustment year. Section 1848(o)(5)(A) of the 
Act defines covered professional services as having the same meaning as 
in section 1848(k)(3) of the Act; that is, services furnished by an 
eligible professional for which payment is made under, or is based on, 
the Medicare Physician Fee Schedule (MPFS). In accordance with section 
1848(a)(1) of the Act, the Medicare allowed charge for covered 
professional services is the lesser of the actual charge or the MPFS 
amount established in section 1848 the Act. As specified under section 
1848(o)(1)(A)(i) of the Act, the Secretary's estimate of allowed 
charges for EHR incentive payments is based on claims submitted to 
Medicare no later than 2 months following the end of the relevant 
payment year.
    Section 1848(o)(1)(B)(i) of the Act sets forth the annual limits on 
the EHR incentive payments to EPs. Specifically, section 1848(o)(1)(B) 
of the Act provides that the incentive payment for an EP for a given 
payment year shall not exceed the following amounts:
     For the EP's first payment year, for such professional, 
$15,000 (or $18,000, if the EP's first payment year is 2011 or 2012);
     For the EP's second payment year, $12,000;
     For the EP's third payment year, $8,000;
     For the EP's fourth payment year, $4,000;
     For the EP's fifth payment year, $2,000; and
     For any succeeding year, $0.
    Under section 1848(o)(1)(B)(iv) of the Act, for EPs who 
predominantly furnish services in a geographic HPSA (as designated by 
the Secretary under section 332(a)(1)(A) of the Public Health Service 
Act), the incentive payment limitation amounts for each payment year 
are increased by 10 percent. Section 1848(o)(1)(B)(iii) of the Act also 
provides for a phased reduction in payment limits for EPs who first 
demonstrate meaningful use of certified EHR technology after 2013. 
Section 1848(o)(1)(D)(i) of the Act, as amended

[[Page 43679]]

by section 4101(a) of the HITECH Act, provides that the incentive 
payments may be disbursed as a single consolidated payment or in 
periodic installments as the Secretary may specify. We make a single, 
consolidated, annual incentive payment to EPs. Payments are made on a 
rolling basis, as soon as we ascertain that an EP has demonstrated 
meaningful use for the applicable reporting period (that is, 90 days 
for the first year or a calendar year for subsequent years), and 
reached the threshold for maximum payment.
    Section 1848(o)(1)(A) of the Act provides that ``with respect to 
covered professional services provided by an eligible professional,'' 
the incentive payment ``shall be paid to the eligible professional (or 
to an employer or facility in the cases described in clause (A) of 
section 1842(b)(6)).'' Section 1842(b)(6)(A) of the Act allows for 
reassignment of payments to an employer or entity with which the 
physician has a valid contractual arrangement allowing the entity to 
bill for the physician's services. Therefore, we provided that EPs 
would be allowed to reassign their incentive payments to their employer 
or an entity that they have a valid employment agreement or contract 
providing for such reassignment, consistent with all rules governing 
reassignments (75 FR 44445). Section 495.10(f) of the regulations 
permits EPs to reassign their incentive payments to an employer or to 
an entity with which they have a contractual arrangement, consistent 
with all rules governing reassignments, including 42 CFR Part 424, 
Subpart F. Section 495.10(f) also precludes an EP from reassigning the 
incentive payment to more than one employer or entity. To implement 
this requirement, we use the EP's Medicare enrollment information to 
determine whether an EP belongs to more than one practice (that is, 
whether the EP's National Provider Identifier (NPI) is associated with 
more than one practice). In cases where an EP is associated with more 
than one practice, the EP would select one tax identification number to 
receive any applicable EHR incentive payment.
2. Special Circumstances of EPs Reassigning Benefits to Method II CAHs
    Since we implemented the EHR Incentive Program, we have received 
many requests from CAHs billing under Method II (Method II CAHs), 
members of Congress, and hospital associations requesting that we make 
it possible for EPs who assign their reimbursement and billing to a 
Method II CAH to participate in the program. Under section 1834(g)(2) 
of the Act, a CAH may elect to receive a cost-based payment for the 
facility costs of providing outpatient services, plus 115 percent of 
the fee schedule amount for professional services included within 
outpatient CAH services. CAHs that elect to receive both a facility 
payment and a professional payment for outpatient services are commonly 
referred to as Method II CAHs. The statute also provides that, as a 
condition for applying this provision, the Secretary may not require 
that each physician or other practitioner providing professional 
services in a CAH must assign billing rights for such services to the 
CAH. Physicians and other practitioners who do not assign such rights 
to their Method II CAH continue to receive payment for their 
professional services directly under the appropriate professional fee 
schedule.
    Since the inception of the EHR Incentive Program, we have been 
unable to account for the services furnished by EPs in Method II CAH 
outpatient departments (including emergency departments) due to 
limitations in our information systems. Specifically, our information 
systems have not been capable of receiving and storing line-level 
rendering EP identifying information for these Method II CAH claims for 
services furnished by EPs in outpatient departments. These claims are 
billed by the CAH on behalf of the EPs furnishing the services using 
the institutional claim form UB-04 or its electronic counterpart, the 
X12 837I format. Until a recent information systems change was 
implemented, we were unable to identify the NPI of the EP furnishing 
the service at the service line-level on the claim. While the 
information systems received and stored NPIs from each claim, the NPIs 
were not tied to the specific services furnished on the claim. This 
limitation made it impossible to take into account the services 
furnished by EPs in Method II CAH outpatient settings when we annually 
determined the hospital-based status of each EP for each payment year 
for purposes of the EHR Incentive Program. In addition, for those EPs 
who were determined to be not hospital-based and who successfully 
demonstrated meaningful use, we were unable to take into account such 
services in calculating the amount of an EP's EHR incentive payment for 
a payment year. Because the limitations in our information systems 
prevented us from identifying the NPIs of the EPs who furnished the 
services on the Method II CAH claims, we were unable to include those 
claims for purposes of the hospital-based determinations and EHR 
incentive payment calculations. However, it is important to note that 
these EPs could still participate in the EHR Incentive Program and 
qualify for an incentive payment based on their non-Method II CAH 
claims.
    We began soon after the implementation of the EHR Incentive Program 
to develop the requisite changes so that our information systems would 
be able to receive and store line-level rendering EP identifying 
information for these Method II CAH claims. We were able to implement 
these information systems changes effective for claims submitted on or 
after October 1, 2012 (in other words, on or after the start of FY 
2013). Under the existing regulations at Sec.  495.4, we determine an 
EP's hospital-based status for a payment year based on claims data from 
the fiscal year preceding the payment year. Thus, for purposes of the 
2013 payment year, we determine whether an EP is hospital-based using 
claims data from FY 2012. However, as noted above, we are unable to 
take into account Method II CAH claims prior to the start of FY 2013. 
As a result, under the existing regulations, the hospital-based 
determinations for EPs for the 2013 payment year are based on FY 2012 
claims data that do not include Method II CAH claims. The earliest that 
we would be able to include such claims under the existing regulations 
would be for the hospital-based determinations for the 2014 payment 
year, which are based on FY 2013 claims data.
    We want to avoid further delay in taking into account the services 
furnished by EPs in Method II CAH outpatient settings. Therefore, we 
are proposing to add a provision to the definition of ``hospital-based 
EP'' at Sec.  495.4 under new paragraph (3) to provide a special 
methodology for making hospital-based determinations for the 2013 
payment year for EPs with services billed by Method II CAHs. We are 
making this proposal solely in order to take into account the special 
circumstances of those EPs as described above. Under this proposal, we 
would be able to take into account Method II CAH claims when making 
hospital-based determinations for payment year 2013, one year before we 
would be able to do so under the existing regulations. Specifically, we 
are proposing that, for payment year 2013 only, we would use a two-step 
process to make hospital-based determinations for EPs who furnish 
covered professional services billed by Method II CAHs. First, after we 
have accumulated the Method II CAH claims with the line-level 
furnishing EP identifying information for FY 2013

[[Page 43680]]

(October 1, 2012 through September 30, 2013), we would use that data to 
identify which EPs had Method II CAH service billings during that year, 
and we would make a special hospital-based determination for that 
subset of EPs for payment year 2013. Any EP determined to be 
nonhospital-based on the basis of FY 2013 claims data would be eligible 
to demonstrate meaningful use for the relevant EHR reporting period and 
potentially qualify for an EHR incentive payment for payment year 2013. 
An EP who believes that he or she would be determined to be 
nonhospital-based under this proposed provision and wishes to qualify 
for the EHR incentive payment for payment year 2013 should not wait for 
the determination to implement Certified EHR Technology and begin 
meaningful use for an EHR reporting period in 2013. To qualify for an 
EHR incentive payment for payment year 2013, an EP will need to 
demonstrate meaningful use of Certified EHR Technology for an EHR 
reporting period in 2013. As is the case with other EPs that reassign 
their EHR incentive payments to another entity, these EPs may reassign 
their EHR incentive payments to the Method II CAH that bills on their 
behalf if the CAH is an employer or they have a contractual 
arrangement, consistent with the rules governing reassignments. Second, 
in the case of an EP determined to be hospital-based on the basis of FY 
2013 claims data, we would check the hospital-based determination we 
have already for that EP under the existing regulation using the FY 
2012 file. Any EP found to be nonhospital-based on the basis of the FY 
2012 claims data (which do not include Method II CAH claims) would be 
held harmless to the determination made on the basis of FY 2013 claims 
data and considered nonhospital-based for payment year 2013. We believe 
that this second step of the proposed methodology is important to 
protect EPs who were initially determined nonhospital-based at the 
beginning of payment year 2013 under the existing regulation. We do not 
believe those EPs who were determined nonhospital-based under the 
existing regulation should have those determinations reversed by later 
(although more complete) FY 2013 claims data. This hold-harmless 
provision would preserve the prospectivity of nonhospital-based 
determinations for payment year 2013 that were made under the existing 
regulation and maintain the eligibility of those EPs to receive EHR 
incentive payments for payment year 2013. At the same time, the first 
step of our proposal would provide an opportunity for EPs who were 
determined to be hospital-based for payment year 2013 on the basis of 
FY 2012 data, which did not include the Method II CAH claims for their 
services, to establish their nonhospital-based status on the basis of 
the more complete FY 2013 data. It is important to note that, due to 
the systems limitations described above, we are unable to propose any 
special method for making EHR incentive payments and hospital-based 
determinations for the payment years prior to payment year 2013. We 
lack the ability to retrieve line-level furnishing EP identifying 
information for Method II CAH claims during the years prior to FY 2013. 
We are inviting public comments on this proposal.

B. Cost Reporting Periods for Interim and Final EHR Incentive Payments 
to Eligible Hospitals

1. Background
    In the July 28, 2010 final rule for Stage 1 of the EHR Incentive 
Program, we established the cost report periods from which we would 
draw the requisite data (for example, hospital acute care inpatient 
discharges and Medicare Part A acute care inpatient days) for 
determining interim and final EHR incentive payments to eligible 
hospitals (75 FR 44450). We specified in Sec.  495.104(c)(2) of the 
regulations that we would use discharge and other relevant data from 
the hospital's most recently submitted 12-month cost report in order to 
determine preliminary hospital EHR incentive payments. Similarly, we 
specified in Sec.  495.104(c)(2) that we would make final EHR incentive 
payments to hospitals based on discharge and other relevant data from 
the hospital's first 12-month cost reporting period that begins on or 
after the first day of the payment year. (For purposes of EHR incentive 
payments for eligible hospitals, a payment year is a Federal fiscal 
year.) As we noted in the final rule (75 FR 44450 through 44451), 
section 1886(n)(2)(C) of the Act requires that a ``12-month period 
selected by the Secretary'' be employed for purposes of determining the 
discharge related amount. As we also stated in that final rule (77 FR 
44452), we believe that the requirement for using 12-month cost 
reporting periods for purposes of determining preliminary and final 
payments is important to avoid the use of nonstandard cost reporting 
periods, which are often quite short (for example, 3 months) and 
therefore are ``not likely to be truly representative of a hospital's 
experience, even if methods were to be adopted for extrapolating data 
over a full cost reporting period.''
2. Special Circumstances
    Since the publication of the EHR Incentive Program final rule for 
Stage 1, we have become aware of circumstances in which the only cost 
reporting period for an eligible hospital that begins on or after the 
first day of a payment year is a nonstandard cost reporting period. For 
example, a hospital may be merging with another hospital under an 
arrangement in which its CCN, and therefore its existence as an 
identifiable hospital for Medicare EHR Incentive Program purposes, will 
not survive the merger. In such circumstances, the last cost reporting 
period for the hospital after its final payment year and prior to its 
merger into the surviving hospital may be a short period. In order to 
accommodate these situations, we are proposing to revise Sec.  
495.104(c)(2) of the regulations to provide that, in cases where there 
is no 12-month cost reporting period that begins on or after the 
beginning of a payment year, we will use the most recent 12-month cost 
reporting period available at the time of final settlement in order to 
determine final EHR incentive payments for the hospital. We understand 
that, under this proposal, the last available cost reporting period 
that we would use for the final determination of EHR incentive payments 
may be the same 12-month cost reporting period that had been used for 
purposes of determining the hospital's interim EHR incentive payments. 
We believe that this result is preferable to resorting to a nonstandard 
cost reporting period because a 12-month period is required by the 
statute to determine the discharge related amount and such periods 
tend, for reasons discussed in the EHR Incentive Program Stage 1 final 
rule, to be unrepresentative of the hospital's experience. We are 
inviting public comments on this proposal.

XIX. Medicare Program: Provider Reimbursement Determinations and 
Appeals

A. Matters Not Subject to Administrative or Judicial Review (Sec.  
405.1804)

1. Background
    Section 1878(a) of the Act addresses appeals of certain Medicare 
payment determinations to the Provider Reimbursement Review Board (the 
``Board''). Below we briefly discuss the prospective payment system 
(PPS) under which payments for certain Medicare inpatient hospital 
services are made.
    The Social Security Amendments of 1983 (Pub. L. 98-21) added 
section

[[Page 43681]]

1886(d) to the Act, which changed the method of payment for inpatient 
hospital services under Medicare Part A for short-term acute care 
hospitals. The method of payment for these hospitals was changed from a 
cost-based retrospective reimbursement system to a system based on 
prospectively set payment rates; that is, a PPS. Under Medicare's 
hospital inpatient prospective payment system (the hospital IPPS), 
payment is made at a predetermined rate for each hospital discharge.
    The Social Security Amendments of 1983 also added section 
1886(e)(1) to the Act, which required that, for cost reporting periods 
beginning in FYs 1984 and 1985, the IPPS result in aggregate program 
reimbursement equal to ``what would have been payable'' under the 
reasonable cost-based reimbursement provisions of prior law; that was, 
for FYs 1984 and 1985, the IPPS would be ``budget neutral.'' Section 
1886(e)(1)(A) of the Act required that the projected aggregate payments 
for the hospital-specific portion should equal the comparable share of 
estimated reimbursement under prior law. Section 1886(e)(1)(B) of the 
Act required that projected aggregate reimbursement for the Federal 
portion of the prospective payment rates equal the corresponding share 
of estimated amounts payable prior to the passage of Public Law 98-21. 
In the 1983 IPPS interim final rule published in the Federal Register 
on September 1, 1983, we explained how the adjustment of the Federal 
portion of the prospective payment rate was determined, as well as the 
resulting adjustment factors for FY 1984 (48 FR 39887).
    Under section 1878 of the Act and the regulations at Subpart R of 
42 CFR Part 405, the Board has the authority to adjudicate certain 
reimbursement appeals by providers. The Board's decisions are subject 
to review by the Administrator of CMS under section 1878(f)(1) of the 
Act, as implemented by Sec.  405.1875 of the regulations. A final 
decision of the Board, or any reversal, affirmance, or modification of 
a final Board decision by the Administrator, may be subject to review 
by a United States District Court.
2. Proposed Technical Conforming Change
    Certain matters affecting payment to hospitals under the IPPS are 
not subject to administrative or judicial review. For example, section 
1886(d)(7) of the Act precludes administrative and judicial review of 
the budget neutrality adjustment effected pursuant to section 
1886(e)(1) of the Act. This preclusion of review is also reflected in 
section 1878(g)(2) of the Act (which states that ``determinations and 
other decisions described in section 1886(d)(7) shall not be reviewed 
by the Board or any other court . . . .''). The existing regulatory 
text at Sec.  405.1804(a) provides that there is no administrative or 
judicial review of ``any budget neutrality adjustment in the 
prospective payment rates.''
    The language of Sec.  405.1804(a) was promulgated as part of the 
implementing regulations (48 FR 39785 and 39835) for the hospital IPPS. 
Section 405.1804(a) was codified pursuant to section 1886(d)(7) of the 
Act. At the time of promulgation, section 1886(d)(7) of the Act 
specified only the budget neutrality adjustment in section 1886(e)(1) 
of the Act. Additional budget neutrality adjustments under the IPPS 
were added by law and were not precluded from administrative or 
judicial review. For example, section 4410 of the Balanced Budget Act 
of 1997 (the BBA), Public Law 105-33, established the rural floor wage 
index budget neutrality adjustment, and did not preclude administrative 
or judicial review in the statute for this adjustment.
    We recognize that the language of the regulation at Sec.  
405.1804(a) is overly broad because it states that there is no 
administrative or judicial review of ``any'' budget neutrality 
adjustment in the prospective payment rates, and its terms are not 
limited to the budget neutrality adjustment specified in section 
1886(e)(1) of the Act. We understand that the Board has relied on Sec.  
405.1804(a) to deny jurisdiction in appeals relating to budget 
neutrality adjustments other than the adjustment in section 1886(e)(1) 
of the Act. To the extent that the existing Sec.  405.1804(a) refers to 
``any'' budget neutrality adjustment, we believe that this regulatory 
text is not consistent with the current statute. Therefore, we are 
proposing to make a technical conforming change to Sec.  405.1804(a) to 
conform the regulation to the current statute. This proposed technical 
conforming change would clarify that there is no administrative or 
judicial review with respect to the budget neutrality adjustments 
enumerated in section 1886(e)(1) of the Act, and this preclusion of 
review does not apply to other budget neutrality adjustments under the 
IPPS.

B. Clarification of Reopening of Predicate Facts in Intermediary 
Determinations of Provider Reimbursement (Sec.  405.1885)

    A provider must submit an annual cost report to a fiscal 
intermediary (currently referred to as a Medicare Administrative 
Contractor (MAC)), as specified in regulations at Sec. Sec.  413.20(b) 
and 413.24(f). Through its review and settlement process, the 
intermediary determines the total amount of reimbursement due a 
provider for its cost reporting period. This constitutes an 
``intermediary determination,'' as defined in Sec.  405.1801(a). In 
accordance with Sec.  405.1803, an intermediary determination is set 
forth in a notice of program reimbursement (NPR), which explains the 
intermediary's final determination of the total amount of program 
reimbursement due the provider for the cost reporting period in 
question.
    Section 405.1803(b) requires that the NPR explain any differences 
between the intermediary determination and the amount of program 
reimbursement claimed by the provider. Such differences may be 
attributable to specific provisions of the Medicare statute, 
regulations, CMS rulings, or program instructions. In addition, the 
intermediary determination may reflect specific findings of fact by the 
intermediary that differ from the provider's understanding of the 
facts.
    The factual underpinnings of a specific determination of the amount 
of reimbursement due a provider sometimes first arise in, or are 
determined for, the same fiscal period as the cost reporting period 
under review. For example, the determination of whether a hospital 
subject to the inpatient prospective payment system (IPPS) should 
receive a payment adjustment for serving a significantly 
disproportionate share of low income patients under section 
1886(d)(5)(F) of the Act and Sec.  412.106 of the regulations in a 
given fiscal period depends on the number of the hospital's patient 
days for the same period.
    However, the factual underpinnings of a specific determination of 
the amount of reimbursement due a provider may first arise in, or be 
determined for, a different fiscal period than the cost reporting 
period under review. We refer to these factual determinations as 
``predicate facts.'' For example, the determination of an IPPS-exempt 
hospital's target amount (that is, per-discharge (case) limitation) or 
rate-of-increase ceiling under section 1886(b) of the Act and 
regulations at Sec.  413.40 depends on: (1) The hospital's allowable 
net inpatient operating costs for a base period of at least 12 months 
before the first cost reporting period subject to the rate-of-increase 
ceiling; or (2) for later cost reporting periods, the target amount for 
the preceding 12-month cost reporting period. The hospital's allowable 
costs for its base period are

[[Page 43682]]

``predicate facts'' with respect to the first cost reporting period 
that is subject to the target amount because such base period costs 
figure in the determination of the hospital's first target amount. The 
target amount for each cost reporting period after the base period then 
becomes a ``predicate fact'' for the next cost reporting period. We 
refer readers to section 1886(b)(3)(A) of the Act (for the first 
period, the target amount is calculated using ``allowable operating 
costs of inpatient hospital services for the preceding 12-month cost 
reporting period;'' the target amount for later cost reporting periods 
is calculated using the target amount for the preceding 12-month cost 
reporting period, increased by an applicable update factor).
    A provider may challenge an intermediary determination by filing an 
appeal within 180 days of the NPR to the Board (under section 1878(a) 
of the Act and regulations at Sec.  405.1835) or, if the amount in 
controversy is at least $1,000 but less than $10,000, to the 
intermediary hearing officer(s) (under Sec.  405.1811). Alternatively, 
in accordance with Sec.  405.1885, the provider may request that the 
intermediary reopen its NPR. In addition, the intermediary may reopen 
the NPR on its own motion. Under Sec.  405.1885(b), reopening must be 
requested by the provider, or initiated on the intermediary's own 
motion, within 3 years of the NPR, although there is no time limit for 
the reopening of an intermediary determination that was procured by 
fraud or similar fault of a party to such determination.
    Appeal and reopening of an intermediary determination are both 
``issue-specific.'' In order to meet the jurisdictional requirements 
for appeal to the Board or to the intermediary hearing officer(s), the 
provider must establish its dissatisfaction with each specific matter 
at issue in the intermediary determination. We refer readers to section 
1878(a) of the Act and regulations at Sec.  405.1835(a)(1) and (b) 
(Board appeals) and Sec.  405.1811(a)(1) and (b) (intermediary hearing 
officer appeals). Similarly, Sec.  405.1885(a)(1) provides that the 
intermediary determination may be reopened ``for findings on matters at 
issue in a determination.'' We also refer readers to Sec.  405.1887, 
which provides that a notice of reopening and any revised intermediary 
determination must specify the findings on matters at issue to be 
reopened and the particular findings to be revised through reopening, 
respectively, and Sec.  405.1889(b), which specifies that a provider's 
appeal rights after reopening are limited to the specific matters 
altered in the revised intermediary determination.
    In many instances, a factual matter arises in, or is determined 
for, the same fiscal period as the cost reporting period at issue, and 
such a factual determination may be appealed or reopened as part of 
that period's intermediary determination. For example, if an IPPS 
hospital challenges the patient day count used to determine its DSH 
payment adjustment for its 2010 cost reporting period, the hospital 
must appeal its DSH patient day count within 180 days of the NPR for 
the 2010 cost reporting period (and meet the other jurisdictional 
requirements for appeal to the Board or to the intermediary hearing 
officer(s), as applicable). Similarly, the hospital would have to 
request, or the intermediary would have to initiate on its own motion, 
the reopening of the hospital's 2010 DSH patient day count within 3 
years of the NPR for the 2010 cost reporting period.
    When the specific matter at issue is a predicate fact that first 
arose in, or was determined for, a different fiscal period than the 
cost reporting period in question, our longstanding interpretation and 
practice is that the pertinent provisions of the statute and 
regulations provide for review and potential redetermination of such 
predicate fact only by a timely appeal or reopening of the NPR for the 
cost reporting period in which the predicate fact first arose or the 
NPR for the period for which such predicate fact was first determined 
by the fiscal intermediary. For example, assuming base period costs 
calculated for the period consisting of the 12 months prior to the 
hospital's 2002 cost reporting period, if an IPPS-exempt hospital 
challenges the determination of its 2008 cost reporting period target 
amount, the hospital could not appeal the determination of the base 
period predicate facts unless it was within 180 days of the NPR for the 
base period. Similarly, the hospital would have to request, or the 
intermediary would have to initiate on its own motion, the reopening of 
the determination of the hospital's base period costs within 3 years of 
the NPR for the base year cost reporting period. In addition, the 
hospital could appeal the determination of the 2008 cost reporting 
period target rate within 180 days of the NPR for the 2008 cost 
reporting period and, similarly, could request the reopening of the 
determination of its 2008 cost reporting period target amount within 3 
years of the NPR for the 2008 cost reporting period. There are no 
additional periods subject to appeal and reopening of such predicate 
fact unless the predicate facts are redetermined at a later time 
through an appeal or reopening. Thus, if the same hospital's allowable 
base period costs or 2008 cost reporting period's target amount was 
redetermined on appeal or reopening, the hospital could appeal such 
redetermination within 180 days of the revised NPR for the 
redetermination of its base period costs or the revised NPR for the 
redetermination of the 2008 cost reporting period's target amount, 
respectively. The reopening of such a redetermination (in this example, 
of the hospital's base period costs or its 2008 cost reporting period's 
target amount) also could be available within 3 years of the revised 
NPR for the base period or the 2008 cost reporting period, 
respectively.
    Many reimbursement formulas require the use of predicate facts, 
where the factual underpinnings of a specific determination of the 
amount of provider reimbursement first arise in, or are determined for, 
a different fiscal period than the cost reporting period under review. 
As discussed above, we believe that predicate facts should be subject 
to change only through a timely appeal or reopening for the fiscal 
period in which the predicate fact first arose or the fiscal period in 
which such fact was first determined by the intermediary. In some 
instances, a predicate fact from a prior fiscal period is used in a 
later period with additional information, which is not found in the 
original cost report or NPR. We believe this kind of determination may 
be reviewed and redetermined through a timely appeal or reopening of 
the NPR for the cost reporting period in which the predicate fact was 
first used (or applied) by the intermediary to determine the provider's 
reimbursement. However, we recognize exceptions when a particular legal 
provision (of the Medicare statute, regulations, or CMS rulings) 
authorizes, as part of a specific reimbursement rule, the review and 
revision of a predicate fact after the expiration of the 3-year 
reopening period. For example, the reaudit regulation in Sec.  
413.77(a), promulgated to implement section 1886(h)(2) of the Act 
(which is related to the determination of the average per-resident 
amount used to calculate reimbursement for graduate medical education 
(GME) costs), authorizes intermediaries to modify base-period costs 
solely for purposes of computing the per-resident amount after the 
hospital's base-period cost report is no longer subject to reopening 
under Sec.  405.1885. We refer readers to the decision in Regions 
Hospital v. Shalala, 522 U.S. 448 (1998), which sustained

[[Page 43683]]

the lawfulness of the reaudit regulation (then designated as Sec.  
413.86(e)(1)).
    We believe that the above-described interpretation of our rules 
regarding the appeal or reopening of predicate facts furthers the 
interests of both providers and the agency in maintaining the finality 
of intermediary determinations. The alternative, of allowing appeal and 
reopening of a predicate fact after the expiration of the 3-year 
reopening period, may result in inconsistent intermediary 
determinations on a reimbursement matter recurring in different fiscal 
periods for the same provider. An alternative approach of allowing 
appeal and reopening of a predicate fact beyond the 3-year reopening 
period could also result in intermediary determinations that are 
contrary to Medicare law and policy regarding a specific reimbursement 
matter. As with the target amount example discussed above, 
reimbursement for various items is premised on a base period cost 
determination that could affect reimbursement for a given item for many 
cost reporting periods thereafter. If a provider disputes such a base 
period cost determination, it can appeal or request reopening of the 
NPR for the base period. However, unless such an appeal or reopening 
results in a different finding as to the predicate fact in question, 
reimbursement for a given provider cost should not be based on one 
finding about a predicate fact in the base period and a different 
finding about the same predicate fact for purposes of determining 
reimbursement in later fiscal periods.
    Under our longstanding interpretation and practice, once the 3-year 
reopening period has expired, neither the provider nor the intermediary 
is allowed to revisit a predicate fact that was not changed through the 
appeal or reopening of the cost report for the fiscal period where such 
predicate fact first arose or for the fiscal period for which such fact 
was first determined by the intermediary. Further, the application of 
such facts is subject to change only through a timely appeal or 
reopening of the cost report for the fiscal period where the predicate 
fact was first used (or applied) by the intermediary to determine the 
reimbursement for the provider cost in question. Accordingly, we are 
proposing to revise Sec.  405.1885 to clarify that, absent a specific 
statute, regulation, or other legal provision permitting reauditing, 
revising, or similar actions changing, predicate facts: (1) A predicate 
fact is subject to change only through a timely appeal or reopening for 
the fiscal period in which the predicate fact first arose or the fiscal 
period for which such fact was first determined by the intermediary; 
and (2) the application of the predicate fact is subject to change only 
through a timely appeal or reopening of the cost report for the fiscal 
period in which it was first used (or applied) by the intermediary to 
determine the provider's reimbursement.
    We note that a recent court decision conflicts with our settled 
interpretation of the regulations for provider appeals and cost report 
reopening. In Kaiser Foundation Hospitals v. Sebelius, 708 F.3d 226 
(D.C. Cir. 2013), the court held that providers could appeal predicate 
facts used to determine their reimbursement in later fiscal periods 
even though such predicate facts were not timely appealed or reopened 
for the periods when they first arose or were determined by the 
intermediary nor was the application of those facts to the periods when 
those facts were first used by the intermediary to determine the 
providers' reimbursement. The predicate facts at issue in this case 
were the teaching hospitals' resident full-time equivalent (FTE) counts 
for their 1996 cost reporting periods, which, as required by section 
1886(h)(4)(F)(i) of the Act, were used to calculate the statutory cap 
on residents for GME cost reimbursement for the first time in the 
hospitals' 1998 cost reporting periods. The providers could have 
challenged their resident FTE counts through timely appeals or 
reopening of their 1996 fiscal period NPRs, and they could have 
challenged the calculation of their resident caps through timely 
appeals or reopening of their 1998 fiscal period NPRs, the first time 
the caps were applied. Instead, the hospitals appealed their resident 
caps as applied to later cost reporting periods. The court held that 
the definition of ``intermediary determination'' under Sec.  
405.1801(a)(1), which is incorporated in the reopening rules at Sec.  
405.1885(a)(1), did not include factual findings, standing alone, where 
the providers made no attempt to challenge their GME cost reimbursement 
for their 1996 or 1998 fiscal periods due to the expiration of the 180-
day appeal period and the 3-year period for reopening. Because the 
providers were not challenging the total amount of program 
reimbursement paid for their 1996 or 1998 fiscal periods, the court 
concluded that the intermediary determinations for those periods were 
not at issue and thus the 3-year limitation on reopening was not 
applicable.
    We disagree with the court's decision, which we believe is contrary 
to our reopening regulations at Sec.  405.1885(a), and the 
corresponding appeals regulations (discussed above), and which 
necessitates our proposed clarification of the regulations. As noted 
above, we are proposing to revise Sec.  405.1885 to clarify that the 
specific ``matters at issue in a determination'' that are subject to 
the reopening rules include factual findings for one fiscal period that 
are predicate facts for later fiscal periods. The general 3-year 
reopening period applies to findings about such predicate facts and the 
reopening period is calculated separately for each finding about a 
predicate fact. We note that this proposed revision of Sec.  405.1885 
would apply to all Medicare reimbursement determinations, and not only 
to GME payment, which was the particular issue in Kaiser Foundation 
Hospitals v. Sebelius. Because this proposed revision clarifies 
longstanding agency policy, we are proposing that it be effective for 
any intermediary determination issued on or after the effective date of 
the final rule, and for any appeals or reopenings (or requests for 
reopening) that are pending on or after the effective date of the final 
rule, even if the intermediary determination (at issue in such an 
appeal or reopening) preceded the effective date of the final rule. We 
believe the proposed revision is not impermissibly retroactive in 
effect because the proposal simply clarifies longstanding agency policy 
and practice, and is procedural in nature. We refer readers, for 
example, to Heimmermann v. First Union Mortgage Corp., 305 F.3d 1257, 
1260-61 (11th Cir. 2002) (a rule clarifying the law, especially in an 
unsettled or confusing area of the law, is not a substantive change in 
the law, and thus the rule may apply to matters that preceded issuance 
of the rule). However, if the proposed revision to Sec.  405.1885 were 
deemed a retroactive application of a substantive change to a 
regulation, section 1871(e)(1)(A) of the Act permits retroactive 
application of a substantive change to a regulation if the Secretary 
determines that such retroactive application is necessary to comply 
with statutory requirements or that failure to apply the change 
retroactively would be contrary to the public interest. We have 
determined that retroactive application of the proposed revision to 
Sec.  405.1885 is necessary to ensure compliance with the 3-year limit 
on reopening and with various statutory payment provisions such as the 
target amount (under section 1886(b) of the Act) and the cap on 
residents for GME cost reimbursement (under section 1886(h)(4)(F)(i) of 
the Act). We have further determined that it would be in the public 
interest to apply

[[Page 43684]]

the proposed revision to intermediary determinations, appeals, and 
reopenings (including requests for reopening) that are pending on or 
after the effective date of the final rule. Not applying the proposed 
revisions to pending intermediary determinations, appeals, and 
reopenings would undermine the 3-year limit on reopening and the 
interests of both the Medicare program and Medicare providers in the 
finality of reimbursement determinations, and would be inconsistent 
with the statutory scheme.
    Finally, although we have provided proposed revisions only to Sec.  
405.1885, in order to clarify our regulations in accordance with this 
proposal, we are considering making similar changes regarding predicate 
facts to the regulations governing intermediary appeals at Sec.  
405.1811 and appeals to the Board at Sec.  405.1835. We are requesting 
public comments with respect to amending the language of these 
additional regulations for appeals before the intermediary and the 
Board.

XX. Files Available to the Public via the Internet

    We are proposing to create new Addendum P--Proposed OPPS Items and 
Services That Will be Packaged for CY 2014.
    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 proposed rule pertaining to the 
proposed CY 2014 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 ``1601-P'' from the list of regulations. All Addenda for 
this proposed rule are contained in the zipped folder entitled ``2014 
OPPS 1601-P Addenda'' at the bottom of the page.
    To view the Addenda of this proposed rule pertaining to the 
proposed CY 2014 payments under the ASC payment system, go to the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html and select ``1601-
P'' from the list of regulations. All Addenda for this proposed rule 
are contained in the zipped folder entitled ``Addendum AA, BB, DD1 and 
DD2,'' and ``Addendum EE'' at the bottom of the page.

XXI. 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 estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comments on each of 
the issues outlined above for the information collection requirements 
discussed below.

B. Requirements in Regulation Text

1. Proposed Changes to the Outcome Measure Requirement for OPOs
    In section XVI. Of this proposed rule, we discussed our proposal to 
modify the outcome measures requirement for OPOs set forth at Sec.  
486.318. Currently, OPOs are required to meet all three outcome 
measures in that section or they are automatically decertified. We are 
proposing to modify that requirement so that OPOs will meet the outcome 
measures requirement if they meet two out of the three outcome 
measures.
    Based on our experience with OPOs and historical data concerning 
how many OPOs typically fail to meet one of the outcome measures, we 
believe that there would be about five OPOs that would fail to meet one 
of the outcome measures. Our proposal would result in those five OPOs 
meeting the outcome measures requirement and not being automatically 
de-certified. Therefore, these five OPOs would not have to perform the 
ICRs under this section, which would be the time and resources needed 
to go through the appeals process in an attempt to secure a reversal of 
the decertification.
    The ICRs that an OPO would be required to expend would depend upon 
how it chose to handle the decertification. An OPO may choose to not 
engage in the appeals process and merge with another OPO prior to the 
effective date of the decertification. Other OPOs would likely choose 
to take advantage of the appeals process, which would begin with 
reconsideration at the regional administrator level. It is likely that 
an OPO would expend considerable resources during the reconsideration 
and, if that was unsuccessful, a hearing before a CMS hearing officer. 
We believe both would require considerable time and other resources 
from the OPO's senior staff and legal counsel. We also believe that 
those OPOs that went onto a hearing would expend considerably more 
resources than those that received a reversal of their decertification 
at the reconsideration. While we do not have a reliable estimate on how 
much these OPOs would save due to the numerous unknown variables, we 
are confident that these OPOs would sustain a significantly positive 
effect from not being automatically de-certified as is currently 
required under the OPO CfCs. In addition, under 5 CFR 1320.3(c), a 
``collection of information''' does not include requirements imposed on 
fewer than 10 entities. Therefore, the requirements of this section are 
not subject to the PRA.
2. Proposed Changes to the Medicare Fee-for-Service EHR Incentive 
Program
    In section XVIII. of this proposed rule, we are proposing to revise 
42 CFR 495.4 to provide a special method for making hospital-based 
determinations for 2103 only in the cases of those EPs who reassign 
their benefits to Method II CAHs. We also are proposing a minor 
clarification to the regulations at Sec.  495.104(c)(2) concerning the 
cost reporting period to be used in determining final EHR payments for 
hospitals. We refer readers to the Stage 1 (75 FR 44536 ff) and Stage 2 
(77 FR 54126 ff) final rules for the Medicare EHR Incentive Program for 
the discussions of the burden of the information collection 
requirements of the Medicare Fee-for-Service EHR Incentive Program. Our 
proposals in this rule do not modify or increase the information 
collection requirements of the program in any way.

C. Associated Information Collections Not Specified in Regulatory Text

    In this proposed rule, we make reference to proposed associated 
information collection requirements that are not discussed in the 
regulation text contained in this proposed rule. The following is a 
discussion of those requirements.

[[Page 43685]]

1. Hospital OQR Program
    As we 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 72111 through 72114), the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74549 through 74554) and the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68527 through 68532) for 
detailed discussions of the Hospital OQR Program information collection 
requirements we have previously finalized.
a. Hospital OQR Program Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68531) for a discussion on the burden of the information 
collection requirements of the previously adopted Hospital OQR Program 
measures for the CY 2015 payment determination. We are not proposing to 
add any additional measures for the CY 2015 payment determination and 
subsequent years, so there will be no change in our previous burden 
estimate.
    We note that we had previously suspended data collection for the 
OP-19 measure and deferred data collection for the OP-24 measure.
    In addition, we are proposing to codify existing policies related 
to program participation and withdrawal, data submission, program 
waivers, data validation, and the reconsideration process. Because we 
are only codifying existing policies, we do not anticipate any 
additional burden to hospitals based on this proposal affecting the CY 
2015 payment determination or subsequent years.
b. Web-Based Measures for the CY 2016 Payment Determination and 
Subsequent Years
    For the CY 2016 payment determination and subsequent years, we are 
proposing to add five measures to the program with data collection 
beginning during CY 2014. We are soliciting public comment on the 
impact of adding these measures and requiring data submission of 
aggregate data via a Web-based tool for four chart-abstracted measures. 
Hospitals will vary greatly as to the number of cases per HOPD due to 
specialization. However, we estimate based on our past experiences with 
chart-abstracted measures that each participating hospital will spend 
35 minutes per case to collect and submit the data, and that the 
estimated burden associated with there being one case per hospital 
would be 1,924 hours (3,300 hospitals x 0.583 hours per hospital).
    In addition, HOPDs will incur a financial burden associated with 
chart abstraction and data submission for these four proposed measures. 
We estimate the burden associated with there being one case per 
hospital would be $57,717 (3,300 hospitals x $30.00 per hour x 0.583 
hours).
    For the CY 2016 payment determination, the burden associated with 
Hospital OQR Program procedures is the time and effort associated with 
collecting and submitting the data on the measures. For the chart-
abstracted measures where patient-level data is submitted directly to 
CMS, we estimate that there will be approximately 3,300 respondents per 
year. For hospitals to collect and submit this information, we estimate 
it will take 35 minutes per submitted case. Based upon the data 
submitted for the CY 2012 and CY 2013 payment determinations, we 
estimate there will be a total of 1,679,700 cases per year, 
approximately 509 cases per year per hospital. Therefore, the estimated 
annual hourly burden associated with the aforementioned data submission 
requirements for the chart-abstracted data is 979,265 hours (1,679,700 
cases per year x 0.583 hours per case).
    In addition, HOPDs will incur a financial burden associated with 
chart abstraction and data submission where patient-level data are 
submitted directly to CMS. We estimate the burden associated with these 
measures is $29,377,953 (1,679,700 cases per year x $30.00 per hour x 
0.583 hours per case).
    For the measures where data is submitted to CMS via a Web-based 
online tool (OP-12, 17, 22, 25, 26, 28, 29, 30, 31) located on a CMS 
Web site, we estimate that each participating hospital would spend 10 
minutes per year to collect and submit the data, making the estimated 
annual burden associated with these measures 4,960 hours (3,300 
hospitals x 0.167 hours per measure x 9 measures per hospital) in CY 
2015.
    In addition, HOPDs will incur a financial burden associated with 
chart abstraction and data submission for these 9 measures. We estimate 
that the financial burden associated with these measures would be 
$148,797 (3,300 hospitals x $30.00 per hour x 0.167 hours per measure x 
9 measures).
    For the NHSN HAI measure: Influenza Vaccination Coverage among 
Healthcare Personnel, we estimate that the total annual burden 
associated with this measure for an HOPD for data submission would be 
27,555 hours (3,300 hospitals x 0.167 hour per response for 50 workers 
per hospital).
    In addition, HOPDs will incur a financial burden associated with 
data submission for this measure. We estimate that the financial burden 
associated with these measures would be $826,650 ($30.00 per hour x 
27,555 hours).
    We invite public comment on the burden associated with these 
information collection requirements.
c. Hospital OQR Program Validation Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    We are not proposing to make any changes to our validation 
procedures. As a result, the burden associated with the validation 
procedures for the CY 2015 payment determination as proposed is the 
same as previously finalized for CY 2014 in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68531) and is the time and effort 
necessary to submit validation data to a CMS contractor. We estimate 
that it would take each of the sampled hospitals approximately 12 hours 
to comply with these data submission requirements. To comply with the 
requirements, we estimate each hospital would 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 (500 selected 
hospitals x 48 cases per hospital). The estimated annual burden 
associated with the data validation process for the CY 2015 payment 
determination is approximately 6,000 hours.
    In addition, HOPDs will incur a financial burden associated with 
the required data abstraction and data submission for this measure. We 
estimate that the financial burden associated with this measure would 
be $180,000 ($30.00 per hour x 6,000 hours).
    These requirements are currently approved under OCN: 0938-1109. 
This approval expires on October 31, 2013.
    We invite public comment on the burden associated with data 
validation information collection procedures.
d. Hospital OQR Program Reconsideration and Appeals Procedures
    In section XIII.I. of this proposed rule, for the CY 2015 payment 
determination and subsequent years, we are proposing a minor change to 
the reconsideration request process to ensure our deadline

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for these requests will always fall on a business day. We also are 
proposing to codify our reconsideration request process at 42 CFR 
419.46(h).
    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.
2. ASCQR Program Requirements
a. Claims-Based Measures for the CY 2014 Payment Determination
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68532), we discussed the information collection requirements for the 
five claims-based measures (four outcome measures and one process 
measure) to be used for the CY 2014 payment determination. The five 
measures are: (1) Patient Burn (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). We collected quality measure 
data for the five claims-based measures using QDCs placed on submitted 
claims for services furnished from October 1, 2012 through December 31, 
2012 that were paid by the contractor by April 30, 2013.
    Approximately 71 percent of ASCs participated in Medical Event 
Reporting, which included reporting on the first four claims-based 
measures, which are outcome measures. 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 Surgical Center Environmental Scan (July 2008) 
(Contract No. GS-10F-0096T)). We estimated the burden to report QDCs 
for these 4 claims-based outcome measures to be nominal due to the 
small number of cases. Based on the data above, extrapolating from 71 
percent to 100 percent of ASCs reporting, there would be an average of 
11.8 events per year or less than 1 case per month per ASC.
    For the claims-based process measure, Prophylactic IV Antibiotic 
Timing, we also estimated the burden associated with submitting QDCs to 
be nominal because few procedures performed by ASCs will require 
prophylactic antibiotic administration.
    We invite public comment on the burden associated with these 
information collection requirements.
b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 
Payment Determinations
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68532), we discussed the information collection requirements for the 
measures to be used 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, Web-based, measures: Safe Surgery Checklist 
Use and ASC Facility Volume Data on Selected ASC Surgical Procedures 
(76 FR 74504 through 74509). 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).
    Based on our data for CY 2014 payment determinations above for 
claims-based measures, 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 outcome measures to be nominal due to the small 
number of cases (approximately one case per month per ASC) for the CY 
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 Web-based 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 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 878 
hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 2015 
payment determination, we estimate that, for the ASC Facility Volume 
Data on Selected ASC Surgical Procedures measure, each participating 
ASC would spend 10 minutes per year to collect and submit the required 
data, making the estimated annual burden associated with this measure 
878 hours (5,260 ASCs x 1 measure 0.167 hours per ASC).
    For the CY 2016 payment determination, in this proposed rule we are 
proposing that ASCs would report data for the Safe Surgery Checklist 
measure and the ASC Volume Data on Selected ASC Surgical Procedures 
measure between January 1, 2015 and August 15, 2015 for services 
furnished between January 1, 2014 and December 31, 2014. For the Safe 
Surgery Checklist measure for the CY 2016 payment determination, we 
estimate that each participating ASC would spend 10 minutes per year to 
collect and submit the required data, making the estimated annual 
burden associated with this measure 878 hours (5,260 ASCs x 1 measure x 
0.167 hours per ASC). For the CY 2016 payment determination, for the 
ASC Volume Data on Selected ASC Surgical Procedures measure, we 
estimate that each participating ASC would spend 10 minutes per year to 
collect and submit the required data, making the estimated annual 
burden associated with this measure 878 hours (5,260 ASCs x 1 measure x 
0.167 hours per ASC).
    For the CY 2016 payment determination, for the NHSN HAI measure: 
Influenza Vaccination Coverage among Healthcare Personnel, we estimate 
that the total annual burden associated with this measure for ASCs, 
including NHSN registration (5,260 ASCs x 0.083 hour per facility = 437 
hours) and data submission (5,260 ASCs x 0.167 hour per response for 20 
workers per facility = 17,568), will be 18,005 hours. This estimate is 
based upon burden estimates from the CDC (OMB No. 0920-0666) and 
reported numbers for the average number of workers per ASC.
    For the CY 2016 payment determination, in this proposed rule, we 
are proposing to add four measures to the program with data collection 
to begin during CY 2014 and submission to be via a Web-based tool. As 
chart-abstracted measures, we estimate that each participating ASC 
would spend 35 minutes per case to collect and submit the data, making 
the total estimated burden for ASCs with a single case per ASC would be 
3,067 hours (5,260 ASCs x 0.583 hours per case per ASC). We expect that 
ASCs would vary greatly as to the number of cases per ASC due to ASC 
specialization.
    In addition, ASCs would incur a financial burden associated with 
chart abstraction and data submission for these four proposed measures. 
We estimate that, for a per chart abstracted case, an ASC would incur a 
cost of $91,997 (5,260 ASCs x $30.00 per hour x 0.583 hours). We are 
soliciting public comment on the impact of adding these measures and 
requiring data submission.
    We invite public comment on the burden associated with these 
information collection requirements.

[[Page 43687]]

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 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 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 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 (77 FR 53638 through 
53639), 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 52,600 
hours (10 hours x 5,260 ASCs). The financial burden associated with 
these requirements is estimated to be $1,578,000 ($30.00 per hour x 
52,600 hours).
    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 ASCs that have submitted a 
request for an extension or waiver from the ASCQR Program over the past 
year, we estimate that 200 ASCs 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 400 hours per year. This estimate takes into account 
continued billing and claims processing issues.
    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 invite public comment on the burden associated with these 
information collection requirements.
3. Hospital VBP Program Requirements
    In section XIV. of this proposed rule, for the Hospital VBP 
Program, we are proposing to allow hospitals to request an independent 
CMS review that would be an additional appeal process beyond the 
existing review and corrections process (77 FR 53578 through 53581 and 
76 FR 74544 through 74547) and appeal process codified at 42 CFR 
412.167.
    While there is burden associated with a hospital requesting an 
independent CMS review, the regulations at 5 CFR 1320.4 for the 
Paperwork Reduction Act of 1995 exclude collection activities during 
the conduct of administrative actions such as redeterminations, 
reconsiderations, or appeals or all of these actions.
    We invite public comment on the burden associated with these 
information collection requirements.
    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-1601-P; Fax: (202) 395-6974; or Email: 
[email protected]

XXII. Response to Comments

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

XXIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Contract with America Advancement 
Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). This section of the 
proposed rule contains the impact and other economic analyses for the 
provisions that we are proposing.
    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 proposed 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 proposed 
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 proposed rule. In this proposed 
rule, we

[[Page 43688]]

are soliciting public comments on the regulatory impact analysis 
provided.
2. Statement of Need
    This proposed rule is necessary to update the Medicare hospital 
OPPS rates. It is necessary to propose to make changes to the payment 
policies and rates for outpatient services furnished by hospitals and 
CMHCs in CY 2014. 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 are proposing to revise the APC relative payment 
weights using claims data for services furnished on and after January 
1, 2012, through and including December 31, 2012, and updated cost 
report information.
    For CY 2014, we are proposing to continue 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 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 proposed rule, we are proposing to implement these payment 
provisions. Also, we list the 15 drugs and biologicals in Table 19 that 
we are proposing to remove from pass-through payment status for CY 
2014.
    This proposed rule is also necessary to update the ASC payment 
rates for CY 2014, 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 2014. 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 2014, we discuss the impacts 
associated with this payment reduction in section XV.C. of this 
proposed rule.
3. Overall Impacts for the Proposed OPPS and ASC Payment Provisions
    We estimate that the effects of the proposed OPPS payment 
provisions would result in expenditures exceeding $100 million in any 1 
year. We estimate that the total increase from the proposed changes in 
this proposed rule in Federal government expenditures under the OPPS 
for CY 2014 compared to CY 2013 would be approximately $600 million. 
Taking into account our estimated changes in enrollment, utilization, 
and case-mix, we estimate that the proposed OPPS expenditures for CY 
2014 would be approximately $4.372 billion higher, relative to 
expenditures in CY 2013. Because this proposed rule 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 39 displays the 
redistributional impact of the proposed CY 2014 changes in OPPS payment 
to various groups of hospitals and for CMHCs.
    We estimate that the proposed 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 2014) would increase total OPPS payments by 1.8 
percent in CY 2014. The proposed changes to the APC weights, the 
proposed changes to the wage indices, the proposed continuation of a 
payment adjustment for rural SCHs, including EACHs, and the proposed 
payment adjustment for cancer hospitals would not increase OPPS 
payments because these proposed changes to the OPPS would be budget 
neutral. However, these proposed updates would change the distribution 
of payments within the budget neutral system. We estimate that the 
proposed total change in payments between CY 2013 and CY 2014, 
considering all proposed payments, including proposed changes in 
estimated total outlier payments, pass-through payments, and the 
application of the frontier State wage adjustment outside of budget 
neutrality, in addition to the application of the proposed OPD fee 
schedule increase factor after all adjustments required by sections 
1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act, would increase 
total estimated OPPS payments by 1.8 percent.
    We estimate the total increase (from proposed changes to the ASC 
provisions in this proposed rule as well as from enrollment, 
utilization, and case-mix changes) in expenditures under the ASC 
payment system for CY 2014 compared to CY 2013 to be approximately $133 
million. Because the provisions for the ASC payment system are part of 
a proposed rule that is ``economically significant'' as measured by the 
$100 million threshold, we have prepared a regulatory impact analysis 
of the proposed changes to the ASC payment system that, to the best of 
our ability, presents the costs and benefits of this portion of the 
proposed rule. Tables 40 and Table 41 of this proposed rule display the 
redistributional impact of the proposed CY 2014 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 Proposed OPPS Changes in This Proposed Rule
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2014 policy changes on various hospital groups. We 
post on the CMS Web site our proposed hospital-specific estimated 
payments for CY 2014 with the other supporting documentation for this 
proposed rule. To view the hospital-specific estimates, we refer 
readers to the CMS Web site at: http://www.cms.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-1601-P'' from the list of regulations and 
notices. The hospital-specific file layout and the hospital-specific 
file are listed with the other supporting documentation for this 
proposed rule. We show hospital-specific data only for hospitals whose 
claims were used for modeling the impacts shown in Table 39 below. We 
do not show hospital-specific impacts for hospitals whose claims we 
were unable to use. We refer readers to section II.A. of this proposed 
rule for a discussion of the hospitals whose

[[Page 43689]]

claims we do not use for ratesetting and impact purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our proposed 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 this 
proposed rule, we are soliciting public comment and information about 
the anticipated effects of our proposed changes on providers and our 
methodology for estimating them. Any public comments that we receive 
will be addressed in the applicable sections of the final rule with 
comment period that discuss the specific policies.
(2) Estimated Effects of Proposed OPPS Changes on Hospitals
    Table 39 below shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all facilities, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA amount. We also include CMHCs in the first line that 
includes all providers because we include CMHCs in our weight scaler 
estimate. We now include a second line for all hospitals, excluding 
permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 39 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 2013, 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). We display separately the impact of 
our proposed updates 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 proposed rule. 
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 proposed IPPS 
market basket percentage increase for FY 2014 is 2.5 percent (78 FR 
27497). Section 1833(t)(3)(F)(i) of the Act reduces that 2.5 percent by 
the multifactor productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is proposed to be 0.4 
percentage points for FY 2014 (which is also the proposed MFP 
adjustment for FY 2014 in the FY 2014 IPPS/LTCH PPS proposed rule (78 
FR 27786); and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the 
Act further reduce the market basket percentage increase by 0.3 
percentage points, resulting in the proposed OPD fee schedule increase 
factor of 1.8 percent, which we are proposing to use in the calculation 
of the proposed CY 2014 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 2014 estimates in Table 39.
    To illustrate the impact of the proposed CY 2014 changes, our 
analysis begins with a baseline simulation model that uses the CY 2013 
relative payment weights, the FY 2013 final IPPS wage indices that 
include reclassifications, and the final CY 2013 conversion factor. 
Table 39 shows the estimated redistribution of the proposed increase in 
payments for CY 2014 over CY 2013 payments to hospitals and CMHCs as a 
result of the following factors: APC reconfiguration and recalibration 
for CY 2014 compared to CY 2013 payments (Column 2); the marginal 
impact of our packaging proposals other than packaging for clinical 
laboratory tests (Column 3); the marginal impact of our proposal to 
package clinical laboratory services (Column 4); the combined impact of 
all of our packaging proposals and proposed APC reconfiguration and 
recalibration for CY 2014, compared to CY 2013 payments (Column 5: the 
combined effect of columns 2, 3 and 4); the proposed wage indices and 
the rural adjustment (Column 6); the combined impact of proposed APC 
recalibration, the proposed wage indices and rural adjustment, and the 
proposed OPD fee schedule increase factor update to the conversion 
factor (Column 7); the combined impact of proposed APC recalibration, 
the proposed wage indices and rural adjustment, the proposed conversion 
factor update, and the proposed CY 2014 frontier State wage index 
adjustment (Column 8); and the estimated impact taking into account all 
proposed payments for CY 2014 relative to all payments for CY 2013 
(Column 9), including the impact of proposed changes in estimated 
outlier payments and proposed changes to the pass-through payment 
estimate.
    We did not model an explicit budget neutrality adjustment for the 
rural adjustment for SCHs because we are not proposing to make any 
changes to the policy for CY 2014. 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 2014 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 proposed rule would 
redistribute money during implementation also would depend on changes 
in volume, practice patterns, and the mix of services billed between CY 
2013 and CY 2014 by various groups of hospitals, which CMS cannot 
forecast.
    Overall, we estimate that the proposed OPPS rates for CY 2014 would 
have a positive effect for providers paid under the OPPS, resulting in 
a 1.8 percent estimated increase in Medicare payments. Removing 
payments to cancer and children's hospitals because their payments are 
held harmless to the pre-OPPS ratio between payment and cost and 
removing payments to CMHCs suggest that these proposed changes would 
result in a 1.8 percent estimated increase in Medicare payments to all 
other hospitals. Those estimated payments would not significantly 
impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 39 shows the total number of 
facilities (3,953), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2012

[[Page 43690]]

hospital outpatient and CMHC claims data to model CY 2013 and CY 2014 
payments, by classes of hospitals, for CMHCs and for dedicated cancer 
hospitals. We excluded all hospitals and CMHCs for which we could not 
plausibly estimate CY 2013 or CY 2014 payment and entities that are not 
paid under the OPPS. The latter entities include CAHs, all-inclusive 
hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
proposed rule. At this time, we are unable to calculate a 
disproportionate share (DSH) variable for hospitals not participating 
in the IPPS. Hospitals for which we do not have a DSH variable are 
grouped separately and generally include freestanding psychiatric 
hospitals, rehabilitation hospitals, and long-term care hospitals. We 
show the total number (3,791) 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 100 CMHCs 
at the bottom of the impact table and discuss that impact separately 
below.
Column 2: APC Recalibration
    Column 2 shows the estimated effect of the reconfiguration and 
recalibration of the APCs from CY 2013 to CY 2014 excluding the CY 2014 
OPPS packaging proposals. Outpatient laboratory services paid at CLFS 
rates are included on both sides of the comparison. We estimate that 
most hospitals would not experience significant changes in payment 
rates from the APC recalibration alone, though we estimate that Puerto 
Rico would experience a 4.3 percent increase in payments and that low 
volume rural hospitals (measured by lines of services) would experience 
a 1.8 percent payment decrease.
Column 3: APC Recalibration With CY 2014 Packaging Proposals Other than 
Outpatient Laboratory Services
    Column 3 shows the estimated impact of the APC recalibration from 
CY 2013-2014 with our proposed packaging policies other than packaging 
for outpatient laboratory services currently paid at CLFS rates. 
Outpatient laboratory services paid at CLFS rates are included on both 
sides of the comparison. Hospitals that specialize in a limited set of 
services would experience the most significant changes in payment. 
Urban hospitals with less than 21,000 service lines would experience 
estimated payment decreases ranging from 0.4 to 1.9 percent. Hospitals 
where DSH data are not available (specialized hospitals not paid under 
the IPPS) would experience estimated payment decreases of 1.4 percent.
Column 4: APC Recalibration With CY 2014 Outpatient Laboratory Services 
Packaging Proposal
    Column 4 shows the estimated effect of APC recalibration plus our 
proposed policy for packaging outpatient laboratory services paid at 
CLFS rates. Outpatient laboratory services paid at CLFS rates are 
included in the comparison. It does not include estimated effects for 
other packaging proposals. We estimate that smaller rural hospitals, 
particularly in the mid-Atlantic region, would experience the most 
significant payment changes related to the laboratory packaging policy 
proposal, as they likely furnish more ancillary laboratory services 
relative to other services than larger hospitals. We estimate that 
rural hospitals overall would experience a 1.3 percent decrease in 
payment, and rural hospitals with 100 or fewer beds would experience 
payment decreases between 1.9 and 3.5 percent. Urban hospitals overall 
would experience limited estimated payment increases ranging from 0.1 
to 0.3 percent.
Column 5: APC Recalibration With All Proposed Changes
    Column 5 shows the combined effects of the proposed 
reconfiguration, recalibration, and other policies (such as proposing 
to set payment for separately payable drugs and biologicals at the 
statutory default of ASP+6), plus our proposals to package outpatient 
laboratory services and other services for CY 2014. We modeled the 
effect of the APC recalibration changes by varying only the relative 
payment weights (the final CY 2013 relative weights versus the proposed 
CY 2014 relative weights calculated using the service-mix and volume in 
the CY 2012 claims used for this proposed rule) and calculating the 
percent difference in the relative weight. Column 5 also reflects any 
proposed changes in multiple procedure discount patterns or conditional 
packaging that occur as a result of the proposed changes in the 
relative magnitude of payment weights.
    Overall, we estimate that proposed changes in APC reassignment and 
recalibration across all services paid under the OPPS, together with 
our proposed packaging policies, would slightly increase payments to 
urban hospitals by 0.1 percent. We estimate that rural hospitals would 
experience a decrease in payments of 0.7 percent.
    Classifying hospitals according to teaching status, we estimate 
that the APC recalibration together with our proposed packaging 
policies would lead to a payment increase of 1.2 percent for major 
teaching hospitals. We estimate that nonteaching hospitals would 
experience a decrease of 0.6 percent. Classifying hospitals by type of 
ownership suggests that voluntary, proprietary, and governmental 
hospitals would experience changes ranging from a decrease of 0.6 
percent to an increase of 0.2 percent as a result of the APC 
recalibration and proposed packaging policies.
Column 6: New Wage Indices and the Effect of the Rural and Cancer 
Hospital Adjustments
    Column 6 demonstrates the combined budget neutral impact of 
proposed APC recalibration; the proposed wage index update; the 
proposed rural adjustment; and the proposed cancer hospital payment 
adjustment. We modeled the independent effect of the proposed budget 
neutrality adjustments and the proposed OPD fee schedule increase 
factor by using the relative payment weights and wage indices for each 
year, and using a CY 2013 conversion factor that included the OPD fee 
schedule increase and a budget neutrality adjustment for differences in 
wage indices.
    Column 6 reflects the independent effects of the proposed 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 proposed frontier State wage index adjustment, which is 
not budget neutral and is included in Column 8. We did not model a 
budget neutrality adjustment for the rural adjustment for SCHs because 
we are not proposing to make any changes to the policy for CY 2014. The 
differential impact between the CY 2013 cancer hospital payment 
adjustment and the proposed CY 2014 cancer hospital payment adjustment 
would have a minimal 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 proposed CY 2014 scaled weights and a

[[Page 43691]]

CY 2013 conversion factor that included a budget neutrality adjustment 
for the effect of changing the wage indices between CY 2013 and CY 
2014. This column estimates the impact of applying the proposed FY 2014 
IPPS wage indices for the proposed CY 2014 OPPS without the influence 
of the frontier State wage index adjustment, which is not budget 
neutral. The proposed frontier State wage index adjustment is reflected 
in the combined impact shown in Column 8. We are proposing to continue 
the rural payment adjustment of 7.1 percent to rural SCHs for CY 2014, 
as described in section II.E. of this proposed rule. We estimate that 
the combination of updated wage data and nationwide application of 
rural floor budget neutrality would redistribute payment among regions. 
We also are proposing to update the list of counties qualifying for the 
section 505 out-migration adjustments.
    Overall, we estimate that as a result of the proposed updated wage 
indices and the proposed rural adjustment, urban hospitals would 
experience no change from CY 2013 to CY 2014. However, rural hospitals 
would experience an estimated decrease of 0.3 percent. Urban hospitals 
in the New England, Mid Atlantic, and Pacific regions and in Puerto 
Rico would experience the most significant payment changes of 0.6 to 
0.7 percent increases. Regionally, the proposed changes would range 
from a decrease of 0.6 in the rural East South Central region to an 
increase of 0.7 percent in the rural Pacific region.
Column 7: All Proposed Budget Neutrality Changes Combined With the 
Proposed OPD Fee Schedule Increase
    Column 7 demonstrates the cumulative impact of the proposed budget 
neutral adjustments from Columns 5 and 6 and the proposed OPD fee 
schedule increase factor of 1.8 percent. We estimate that, for some 
hospitals, the addition of the proposed OPD fee schedule increase 
factor of 1.8 percent would mitigate the impacts created by the 
proposed budget neutrality adjustments made in Columns 5 and 6.
    Most classes of hospitals would receive an increase that is in line 
with the proposed 1.8 percent overall increase after the update is 
applied to the budget neutrality adjustments. The largest rural 
hospitals by number of beds (200+ beds) would experience payment 
increases of 1.4 percent. Proprietary, voluntary, and government 
hospitals would experience payment increases ranging from 1.0 to 2.0 
percent. Hospitals in Puerto Rico would receive an estimated payment 
increase of 6.3 percent. The rural Mid-Atlantic region would experience 
a 0.4 percent payment decrease, while the urban Mid-Atlantic region 
would experience a 2.8 percent payment increase. Classified by teaching 
status, nonteaching hospitals would experience a small payment increase 
of 1.1 percent, with minor and major teaching hospitals experiencing 
increases ranging from 1.8 to 3.2 percent, respectively.
Column 8: All Proposed Adjustments With the Proposed Frontier State 
Wage Index Adjustment
    This column shows the impact of all proposed budget neutrality 
adjustments, application of the proposed 1.8 percent OPD fee schedule 
increase factor, and the nonbudget neutral impact of applying the 
proposed frontier State wage adjustment (that is, the proposed frontier 
State wage index change in addition to all proposed changes reflected 
in Column 7). This column differs from Column 7 solely based on 
application of the proposed nonbudget neutral frontier State wage index 
adjustment.
    In general, we estimate that all facilities and all hospitals would 
experience a combined increase of 1.9 percent due to the proposed 
nonbudget neutral frontier State wage index adjustment. The index would 
only affect urban hospitals in the West North Central and Mountain 
regions. Urban hospital in those regions would experience estimated 
increases of 4.5 percent (West North Central) and 2.3 percent 
(Mountain) that are attributable to the proposed frontier State wage 
index and the OPD fee schedule increase factor, and rural hospitals 
would experience estimated increases of 3.5 percent (West North 
Central) and 3.4 percent (Mountain) that are attributable to the 
proposed frontier State wage index and the OPD fee schedule increase 
factor.
Column 9: All Proposed Changes for CY 2014
    Column 9 depicts the full impact of the proposed CY 2014 policies 
on each hospital group by including the effect of all of the proposed 
changes for CY 2014 and comparing them to all estimated payments in CY 
2013. Column 9 shows the combined budget neutral effects of Column 5 
and 6; the proposed OPD fee schedule increase; the impact of the 
proposed frontier State wage index adjustment; the impact of estimated 
OPPS outlier payments as discussed in section II.G. of this proposed 
rule; the proposed 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 XIII. of this 
proposed rule); and the impact of decreasing the estimate of the 
percentage of total OPPS payments dedicated to transitional pass-
through payments. Of those hospitals that failed to meet the Hospital 
OQR Program reporting requirements for the full CY 2013 update (and 
assumed, for modeling purposes, to be the same number for CY 2014), we 
included 34 hospitals in our model because they had both CY 2012 claims 
data and recent cost report data. We estimate that the cumulative 
effect of all proposed changes for CY 2014 would increase payments to 
all providers by 1.8 percent for CY 2014. We modeled the independent 
effect of all proposed changes in Column 9 using the final relative 
payment weights for CY 2013 and the proposed relative payment weights 
for CY 2014. We used the final conversion factor for CY 2013 of $71.313 
and the proposed CY 2014 conversion factor of $72.728 discussed in 
section II.B. of this proposed rule.
    Column 9 contains simulated outlier payments for each year. We used 
the one year proposed charge inflation factor used in the proposed FY 
2014 IPPS/LTCH PPS proposed rule (78 FR 27767) of 4.85 percent (1.0485) 
to increase individual costs on the CY 2012 claims, and we used the 
most recent overall CCR in the April 2013 Outpatient Provider-Specific 
File (OPSF) to estimate outlier payments for CY 2013. Using the CY 2012 
claims and a 4.85 percent charge inflation factor, we currently 
estimate that outlier payments for CY 2013, using a multiple threshold 
of 1.75 and a proposed fixed-dollar threshold of $2,025 should be 
approximately 1.2 percent of total payments. The estimated current 
outlier payments of 1.2 percent are incorporated in the comparison in 
Column 9. We used the same set of claims and a proposed charge 
inflation factor of 9.93 percent (1.0993) and the CCRs in the April 
2013 OPSF, with an adjustment of 0.9732, to reflect relative changes in 
cost and charge inflation between CY 2012 and CY 2014, to model the 
proposed CY 2014 outliers at 1.0 percent of estimated total payments 
using a multiple threshold of 1.75 and a proposed fixed-dollar 
threshold of $2,775.
    We estimate that the anticipated change in payment between CY 2013 
and CY 2014 for the hospitals failing to meet the Hospital OQR Program 
requirements would be negligible. Overall, we estimate that facilities 
would experience an increase of 1.8 percent under this proposed rule in 
CY

[[Page 43692]]

2014 relative to total spending in CY 2013. This projected increase 
(shown in Column 9) of Table 39 reflects the proposed 1.8 percent OPD 
fee schedule increase factor, with 0.13 percent for the proposed change 
in the pass-through estimate between CY 2013 and CY 2014, less 0.2 
percent for the difference in estimated outlier payments between CY 
2013 (1.2 percent) and CY 2014 (1.0 percent), less 0.1 percent due to 
the frontier adjustment in CY 2013, plus 0.1 percent due to the 
proposed frontier State wage index adjustment in CY 2014. When we 
exclude cancer and children's hospitals (which are held harmless to 
their pre-BBA amount) and CMHCs, the estimated update increases to 1.8 
percent after rounding. We estimate that the combined effect of all 
proposed changes for CY 2014 would increase payments to urban hospitals 
by 2.0 percent.
    Overall, we estimate that rural hospitals would experience a 0.9 
percent increase as a result of the combined effects of all proposed 
changes for CY 2014. We estimate that rural hospitals that bill less 
than 5,000 lines of OPPS services would experience an increase of 2.2 
percent and rural hospitals that bill 5,000 or more lines of OPPS 
services would experience increases ranging from 0.9 to 2.4 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all proposed changes would include an 
increase of 3.1 percent for major teaching hospitals and 1.2 percent 
for nonteaching hospitals. Minor teaching hospitals would experience an 
estimated increase of 1.8 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would experience an increase of 2.1 percent, proprietary hospitals 
would experience an increase of 1.3 percent, and governmental hospitals 
would experience an increase of 1.0 percent.

                   Table 39--Estimated Impact of the Proposed CY 2014 Changes for the Hospital Outpatient Prospective Payments System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Impact of
                                                              packaging    Impact of                                              Column 7
                                                   APC        proposals    outpatient       APC         New wage     Combined       with
                                  Number of   Recalibration   other than   laboratory  Recalibration   index and    cols 5, 6     frontier       All
                                  hospitals     (CY 2013-     outpatient    services   (all changes)    provider   with market   wage index    proposed
                                                2014) (%)     laboratory   packaging        (%)       adjustments     basket     adjustment  changes (%)
                                                               services     proposal                      (%)       update (%)      (%)
                                                                 (%)          (%)
                                         (1)           (2)           (3)          (4)           (5)           (6)          (7)          (8)          (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *...............        3,953           0.0           0.0          0.0           0.0           0.0          1.8          1.9          1.8
ALL HOSPITALS..................        3,791           0.1          -0.1          0.0           0.0           0.0          1.8          1.9          1.8
(excludes hospitals permanently
 held harmless and CMHCs)
URBAN HOSPITALS................        2,859           0.1          -0.2          0.2           0.1           0.0          1.9          2.0          2.0
    LARGE URBAN................        1,566           0.1           0.0          0.3           0.4           0.2          2.3          2.3          2.3
    (GT 1 MILL.)...............
    OTHER URBAN................        1,293           0.0          -0.3          0.1          -0.2          -0.1          1.5          1.7          1.5
    (LE 1 MILL.)...............
RURAL HOSPITALS................          932           0.0           0.6         -1.3          -0.7          -0.3          0.9          1.1          0.9
    SOLE COMMUNITY.............          389           0.1           0.8         -1.0          -0.1          -0.3          1.4          1.8          1.5
OTHER RURAL....................          543           0.0           0.4         -1.6          -1.2          -0.2          0.3          0.4          0.4
BEDS (URBAN)
    0-99 BEDS..................          959           0.0          -0.3          0.3           0.0           0.1          1.8          2.0          1.9
    100-199 BEDS...............          831           0.1          -0.3         -0.2          -0.4          -0.1          1.3          1.4          1.4
    200-299 BEDS...............          454           0.1          -0.6          0.1          -0.4           0.0          1.4          1.6          1.4
    300-499 BEDS...............          407           0.3          -0.4          0.5           0.3           0.0          2.1          2.2          2.1
    500 + BEDS.................          208          -0.1           0.6          0.2           0.7           0.2          2.6          2.6          2.6
BEDS (RURAL)
    0-49 BEDS..................          352           0.7           1.3         -3.5          -1.5          -0.6         -0.3         -0.1         -0.3
    50-100 BEDS................          342           0.2           1.5         -1.9          -0.3          -0.1          1.4          1.6          1.4
    101-149 BEDS...............          133          -0.3           0.1         -0.6          -0.8          -0.5          0.5          0.7          0.6
    150-199 BEDS...............           61          -0.5           0.2         -0.8          -1.1          -0.1          0.5          1.0          0.5
    200 + BEDS.................           44           0.1          -0.6          0.3          -0.2          -0.2          1.4          1.4          1.6
VOLUME (URBAN)
    LT 5,000 Lines.............          485          -1.4          -0.4          2.4           0.5           0.2          2.5          2.7          2.6
    5,000--10,999 Lines........          109          -1.4          -0.5          3.2           1.3          -0.1          3.0          3.5          2.4
    11,000-20,999 Lines........          132           0.1          -1.9          2.4           0.6           0.0          2.5          2.6          2.5
    21,000-42,999 Lines........          262           0.4          -1.8          1.2          -0.2          -0.2          1.4          1.4          1.4
    42,999--89,999 Lines.......          517           0.2          -0.9          0.7          -0.1           0.1          1.8          1.8          1.8
    GT 89,999 Lines............        1,354           0.1           0.0          0.1           0.1           0.0          2.0          2.1          2.0
VOLUME (RURAL)
    LT 5,000 Lines.............           31          -1.8           0.3          2.2           0.6          -0.4          2.1          6.7          2.2
    5,000-10,999 Lines.........           34           5.8          -0.1         -4.4           1.0          -0.5          2.3          2.3          2.4
    11,000-20,999 Lines........           67           3.0           0.2         -2.6           0.5          -0.7          1.6          1.7          1.5
    21,000-42,999 Lines........          182           1.0           1.2         -2.4          -0.3          -0.3          1.2          1.8          1.1
    GT 42,999 Lines............          618          -0.1           0.6         -1.2          -0.7          -0.2          0.8          1.0          0.9
REGION (URBAN)
    NEW ENGLAND................          150           0.0           2.2         -1.4           0.7           0.6          3.1          3.1          3.0
    MIDDLE ATLANTIC............          342           0.0           0.8         -0.5           0.3           0.7          2.8          2.8          2.8
    SOUTH ATLANTIC.............          432          -0.3          -0.6          0.5          -0.4          -0.3          1.1          1.1          1.2
    EAST NORTH CENT............          459           0.2           0.1         -0.3           0.0          -0.2          1.5          1.5          1.6
    EAST SOUTH CENT............          172          -0.2          -0.8          0.9          -0.1          -0.3          1.4          1.4          1.5
    WEST NORTH CENT............          193           0.0           0.5          1.5           2.0          -0.3          3.5          4.5          3.5
    WEST SOUTH CENT............          487           0.7          -2.1          0.5          -0.9          -0.2          0.8          0.8          0.9
    MOUNTAIN...................          194          -0.6           0.4          0.8           0.5          -0.3          2.0          2.3          2.0
    PACIFIC....................          385           0.5          -0.9          0.6           0.2           0.6          2.6          2.6          2.5
    PUERTO RICO................           45           4.3          -0.5          0.0           3.9           0.6          6.3          6.3          6.6
REGION (RURAL)
    NEW ENGLAND................           25          -0.3           3.5         -1.6           1.6           0.6          3.9          3.9          3.8

[[Page 43693]]

 
    MIDDLE ATLANTIC............           68           0.3           1.7         -3.9          -2.0          -0.3         -0.4         -0.4         -0.4
    SOUTH ATLANTIC.............          158          -0.3          -0.2         -0.9          -1.4          -0.4          0.0          0.0          0.1
    EAST NORTH CENT............          124           0.0           0.8         -1.8          -1.1          -0.4          0.4          0.4          0.4
    EAST SOUTH CENT............          170           0.0          -0.3         -0.8          -1.1          -0.6          0.1          0.1          0.2
    WEST NORTH CENT............           99          -0.1           0.8          0.0           0.7          -0.1          2.3          3.5          2.5
    WEST SOUTH CENT............          196           0.6          -0.4         -1.3          -1.1          -0.4          0.3          0.3          0.4
    MOUNTAIN...................           63          -0.1           1.6         -1.6          -0.2           0.2          1.9          3.4          1.4
    PACIFIC....................           29           0.2           1.9         -0.2           1.8           0.7          4.3          4.3          4.3
TEACHING STATUS
    NON-TEACHING...............        2,792           0.0          -0.4         -0.2          -0.6          -0.1          1.1          1.2          1.2
    MINOR......................          686           0.0          -0.5          0.5           0.0           0.0          1.8          2.0          1.8
    MAJOR......................          313           0.2           1.2         -0.2           1.2           0.2          3.2          3.2          3.1
DSH PATIENT PERCENT
    0..........................           12           1.8          -5.4          3.5          -0.3          -0.1          1.5          1.5          1.4
    GT 0-0.10..................          349          -0.4           0.2          0.6           0.4           0.1          2.3          2.4          2.3
    0.10-0.16..................          334          -0.2           0.3          0.1           0.2           0.1          2.1          2.2          2.2
    0.16-0.23..................          680          -0.1           0.3         -0.2           0.1           0.0          1.8          2.0          1.9
    0.23-0.35..................        1,045          -0.2           0.1          0.1           0.0           0.0          1.7          1.9          1.8
    GE 0.35....................          831           0.7          -0.8         -0.2          -0.3           0.0          1.5          1.5          1.5
    DSH NOT AVAILABLE **.......          540           2.3          -1.4          1.6           2.4           0.0          4.2          4.2          3.9
URBAN TEACHING/DSH
    TEACHING & DSH.............          909           0.1           0.2          0.2           0.5           0.1          2.4          2.5          2.4
    NO TEACHING/DSH............        1,429           0.0          -0.8          0.2          -0.5           0.0          1.2          1.3          1.3
    NO TEACHING/NO DSH.........           12           1.8          -5.4          3.5          -0.3          -0.1          1.5          1.5          1.4
    DSH NOT AVAILABLE**........          509           2.0          -1.2          1.5           2.3           0.1          4.2          4.2          3.9
TYPE OF OWNERSHIP
    VOLUNTARY..................        2,004           0.0           0.2          0.0           0.2           0.1          2.0          2.2          2.1
    PROPRIETARY................        1,250           0.3          -1.5          0.9          -0.4          -0.1          1.3          1.4          1.3
    GOVERNMENT.................          537           0.3           0.1         -1.0          -0.6          -0.2          1.0          1.0          1.0
CMHCs..........................          100          -5.4          -3.6          3.5          -5.7          -0.2         -4.1         -4.1         -3.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups and the proposed recalibration of APC weights
  based on CY 2012 hospital claims data. Changes in this column do not include reconfigurations and data changes from the 2014 packaging proposal.
Column (3) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result
  of including the 2014 OPPS packaging proposal (but excluding the proposed packaging of outpatient laboratory services currently paid at CLFS rates).
Column (4) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result
  of including the 2014 OPPS proposal to package outpatient laboratory services currently paid at CLFS rates.
Column (5) includes all CY 2014 OPPS proposals and compares those to the CY 2013 OPPS (which includes outpatient laboratory services previously paid at
  CLFS rates).
Column (6) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The proposed rural
  adjustment continues our current policy of 7.1 percent so the budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital
  payments for the proposed adjustment is minimal and thus results in a budget neutrality factor of 1.0001.
Column (7) shows the impact of all budget neutrality adjustments and the proposed addition of the 1.8 percent OPD fee schedule update factor (2.5
  percent reduced by 0.4 percentage points for the proposed productivity adjustment and further reduced by 0.3 percentage point in order to satisfy
  statutory requirements set forth in the Affordable Care Act).
Column (8) shows the non-budget neutral impact of applying the frontier State wage adjustment.
Column (9) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier
  payments, and applying payment wage indexes.
* These 3,953 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Payments for laboratory services
  at CLFS rates, which we are proposing to package in the CY 2014 OPPS, are included in the columns where appropriate.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
  hospitals.

(3) Estimated Effects of Proposed OPPS Changes on CMHCs
    The last line of Table 39 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization (PHP) services under 
the OPPS. In CY 2013, 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 use our standard 
rate-setting methodology to derive the 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. For CY 2014, we are proposing to 
continue the provider-specific APC structure that we adopted in CY 
2011. We modeled the impact of this proposed 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 2012 claims data used for this proposed. 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 proposed relative payment weights for 
APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs) decline in CY 2014, we estimate that there would be an overall 
3.8 percent decrease in payments to CMHCs (shown in Column 9).
    Column 6 shows that the estimated impact of adopting the proposed 
FY 2014 wage index values would result in

[[Page 43694]]

a small decrease of 0.2 percent to CMHCs. We note that all providers 
paid under the OPPS, including CMHCs, would receive a 1.8 percent OPD 
fee schedule increase factor. Column 7 shows that combining this 
proposed OPD fee schedule increase factor, along with proposed changes 
in APC policy for CY 2014 and the proposed FY 2014 wage index updates, 
would result in an estimated decrease of 4.1 percent. Column 8 shows 
that adding the proposed frontier State wage adjustment would result in 
no change to the cumulative 4.1 percent decrease. Column 9 shows that 
adding the proposed changes in outlier and pass-though payments would 
result in a 3.8 percent decrease in payment for CMHCs. This reflects 
all proposed changes to CMHCs for CY 2014.
(4) Estimated Effect of Proposed 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 would 
increase for services for which the OPPS payments will rise and would 
decrease for services for which the OPPS payments will fall. For 
further discussion on the calculation of the national unadjusted 
copayments and minimum unadjusted copayments, we refer readers to 
section II.I. of this proposed rule. In all cases, the statute limits 
beneficiary liability for copayment for a procedure to the hospital 
inpatient deductible for the applicable year. The CY 2013 hospital 
inpatient deductible is $1,184. The amount of the CY 2014 hospital 
inpatient deductible is not available at the time of publication of 
this proposed rule.
    In order to better understand the impact of proposed changes in 
copayment on beneficiaries, we modeled the percent change in total 
copayment liability using CY 2012 claims. We estimate, using the claims 
of the 3,791 hospitals and CMHCs on which our modeling is based, that 
total beneficiary liability for copayments would remain approximately 
the same as an overall percentage of total payments, being 20.4 percent 
in CY 2013 and 20.2 percent in CY 2014.
(5) Estimated Effects of Proposed 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 XII. 
of this proposed rule. No types of providers or suppliers other than 
hospitals, CMHCs and ASCs would be affected by the proposed changes in 
this proposed rule.
(6) Estimated Effects of Proposed 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 2014. 
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 XXIII.A. of this 
proposed rule.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are proposing to make and the 
reasons for our selected alternatives are discussed throughout this 
proposed rule. In this section, we discuss some of the major issues and 
the alternatives considered.
     Alternatives Considered for the Establishment of 
Comprehensive APCs
    We are proposing in section II.A.2.e. of this proposed rule to 
create 29 comprehensive APCs for CY 2014 to prospectively pay for 
device-dependent services associated with 121 HCPCS codes. We are 
proposing to define a comprehensive APC as a classification for the 
provision of a primary service and all adjunct services provided to 
support the delivery of the primary service. The comprehensive APC 
would treat all individually reported codes as representing components 
of the comprehensive service, resulting in a single prospective payment 
based on the cost of all individually reported codes that represent the 
provision of a primary service as well as all adjunct services provided 
to support that delivery of the primary service. For these APCs, we are 
proposing to treat all previously individually reported codes as 
representing components of the comprehensive service, making a single 
payment for the comprehensive service based on all charges on the 
claim, excluding only charges for services that cannot be covered by 
Medicare Part B or that are not payable under the OPPS. This would 
create a single all-inclusive payment for the claim that is subject to 
a single beneficiary copayment, up to the cap set at the level of the 
inpatient hospital deductible.
    We are proposing this as a step that we believe will further 
improve the accuracy of our payments for these services where there is 
a substantial cost for a device that is large compared to the other 
costs that contribute to the cost of the procedure, and where the cost 
of the procedure is large compared to the adjunctive and supportive 
services delivered along with that procedure. We also believe our 
proposal will enhance beneficiary understanding and transparency for 
the beneficiary, for physicians, and for hospitals by creating a common 
reference point with a similar meaning for all three groups by using 
the comprehensive service concept that already identifies these same 
services when they are performed in an inpatient environment.
    In proposing to package into the comprehensive APCs all other 
services and supplies, we are including the diagnostic procedures, 
tests and treatments that assist in the delivery of the primary 
procedure, visits and evaluations performed in association with the 
procedure, uncoded services and supplies used during the service, 
outpatient department services delivered by therapists as part of the 
comprehensive service, durable medical equipment as well as the 
supplies to support that equipment, and any other components reported 
by HCPCS codes that are provided during the comprehensive service, 
except for mammography services and ambulance services, which are never 
payable as OPD services in accordance with section 1833(t)(1)(B)(iv) of 
the Act.
    We also considered several ranges of alternatives. First, we 
considered but are not proposing a limitation of the services that we 
considered to be ancillary and supportive to the primary service. We 
did not propose to limit the comprehensive APCs to only HCPCS codes 
that are currently paid using OPPS payment calculations because we 
could not identify a unique clinical characteristic that set these 
services apart from other services reported on the claim. We determined 
that services currently excluded by the Secretary from OPPS 
calculations, including, for example, such services as laboratory tests 
and certain orthotics and supplies, were adjunctive and supportive to 
the primary procedure in the same manner as the other services 
currently paid using our OPPS methodology were adjunctive and 
supportive. We also noted that these services that are currently priced 
using other payment systems represented a very small fraction of the 
costs reported on these device dependent claims, typically on the order 
of 1 percent of the total reported costs. This was consistent with our 
determination that these services were adjunctive and supportive and 
should be included in our definition of a comprehensive APC.
    Second, we considered but did not propose creating comprehensive 
APCs

[[Page 43695]]

for a different cohort of device dependent procedures. We did not 
propose a more limited list because we determined that the 29 APCs we 
proposed all consistently identified truly device dependent services 
where the other services that are currently assigned to the other 
device dependent APCs that are not being proposed as comprehensive APCs 
were clearly provided in support of a primary procedure. We considered 
limiting our proposal to the five or ten procedures with the most 
expensive devices but believed that such a division would be arbitrary 
and would ignore the natural division that occurred when the costs and 
clinical characteristics of these services were compared to similar 
procedures delivered as comprehensive services to inpatients. 
Alternatively, we considered limiting the proposal to those 
comprehensive services where the procedure itself, without 
consideration of the device, was responsible for the most significant 
portion of the cost and was also responsible for the need to deliver 
the majority of the additional services provided during the encounter. 
However, although we considered that this last consideration did in 
fact identify services that were consistent with our proposal to define 
comprehensive services, we did not propose this alternative as we 
believe our proposal to create comprehensive APCs for only the 29 most 
costly device dependent APCs is most consistent with our past practices 
of iteratively improving the OPPS in small and well-defined increments.
    Third, we considered proposing payment adjustments for instances 
when multiple procedures assigned to comprehensive APCs were reported 
on the same claim. However, we did not propose this. In examining our 
claims data, we determined that multiple procedures assigned to 
comprehensive APCs were reported in only 25 percent of the claims, and 
that these multiple procedures were almost always reporting components 
of the same service, such as cardiac stenting, and were assigned to the 
same APC. In our claims data it was very uncommon to find multiple 
unrelated device dependent procedures being delivered at the same time. 
Therefore, we decided to propose that the primary procedure would 
determine the comprehensive APC and that, in the rare event that 
procedures were reported that mapped to two different comprehensive 
APCs on the same claim, the most expensive procedure according to our 
traditional OPPS accounting methodology would determine the 
comprehensive APC assignment. We believe that this is consistent with 
the methodology for assigning payments for those inpatient claims that 
represent the same or similar comprehensive procedures and that it most 
accurately reflects the comprehensive service on those occasions in 
which two or more device dependent HCPCS codes are used to report the 
single comprehensive service.
    Finally, we considered retaining the device-to-procedure edits and 
procedure-to-device edits that were characteristic of our device-
dependent APCs but we instead proposed the elimination of the edits 
along with the elimination of the status of device dependent APC. We 
noted that the device-dependent APC was created in response to concerns 
that hospitals were not coding for the device and that our relative 
cost estimations were consequently incorrect. In the intervening years 
we have noticed a significant improvement and stabilization in the 
reporting of costs, to the extent that we believe that hospitals are 
now fully accustomed to appropriate cost reporting under the OPPS such 
that special billing constraints are unnecessary. We further believe 
that, under our proposal to create comprehensive APCs, there would now 
be an additional mechanism to ensure accurate cost estimation for the 
most expensive devices for which an inadvertent omission of costs would 
be most significant. In the calculations of relative cost for the 
comprehensive APCs, costs for the device would be correctly assigned to 
the procedure as long as the hospital reports covered costs anywhere on 
the claim. Specific device reporting would still be expected and 
required, but variations in accounting practices would be less likely 
to influence the final cost accounting.
    In summary, we determined to propose to make an all-inclusive 
comprehensive payment for the procedures in the 29 most costly device 
dependent APCs because we believe that this identified a consistent set 
of procedures that were typically provided as a primary procedure 
supported by a set of adjunctive services, and that this set of 
services represented an incremental improvement in our prospective 
payments similar to other prior incremental improvements through which 
we have established our approach to updating and improving the OPPS.
     Alternatives Considered for Payment of Hospital Outpatient 
Visits
    As described in section VII. of this proposed rule, we are 
proposing to replace the current five levels of visit codes for each 
clinic, Type A ED, and Type B ED visits with three new alphanumeric 
Level II HCPCS codes representing a single level of payment for the 
three types of visits, respectively. We are proposing to assign the new 
alphanumeric Level II HCPCS to newly created APCs with CY 2014 OPPS 
payment rates based on the total mean costs of Level 1 through Level 5 
visit codes obtained from CY 2012 OPPS claims data for each visit type.
    In developing this policy, we considered another alternative, which 
was to replace the current five levels of visit codes for each clinic, 
Type A ED, and Type B ED visit with 6 new alphanumeric Level II HCPCS 
codes representing two levels (lower level and higher level) of payment 
for each of the three types of visits. The lower-level alphanumeric 
codes for clinic, Type A ED, and Type B ED visits would replace the 
current Level 1 and Level 2 visit codes, respectively, and would be 
assigned to newly created or reconfigured APCs with CY 2014 OPPS 
payment rates based on the total mean costs of Level 1 and 2 visit 
codes obtained from CY 2012 OPPS claims data for each visit type. The 
higher-level alphanumeric codes for clinic, Type A ED, and Type B ED 
visits would replace the current Level 3 through Level 5 visit codes, 
respectively, and would be assigned to newly created or reconfigured 
APCs with CY 2014 OPPS payment rates based on the total mean costs of 
Level 3 through Level 5 visit codes obtained from CY 2012 OPPS claims 
data for each visit type.
    While we believe that this alternative could offer advantages over 
the current CY 2013 OPPS visit payment policy, we did not choose this 
alternative because as we describe in section VII. of this proposed 
rule we believed that a single level of payment for each type of clinic 
and ED visit was the best policy option as this proposal would be 
easily implemented by hospitals; reduces administrative burden relative 
to the existing five-level visit payment structure; and maximizes 
hospitals' incentives to provide care in the most efficient manner as 
there would be no incentive to provide unnecessary care to achieve a 
higher level visit threshold. A two-level visit payment structure would 
not be as easily implemented by hospitals as a single-level visit 
payment structure, and the need for hospitals to develop and implement 
guidelines to differentiate the levels of service would continue to 
exist. Also, while the two-level visit payment structure may provide 
incentives for hospitals to be efficient, the incentives may not be so 
great as under a single-level visit

[[Page 43696]]

payment structure. Therefore, we are proposing to create three new 
alphanumeric Level II HCPCS codes to describe all levels of each type 
of clinic and ED visit rather than continue to recognize five levels 
each of clinic and ED visits.
b. Estimated Effects of ASC Payment System Proposed Policies
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XII. of this proposed rule, we are proposing to set the CY 2014 
ASC relative payment weights by scaling the proposed CY 2014 OPPS 
relative payment weights by the proposed ASC scaler of 0.8961. The 
estimated effects of the proposed updated relative payment weights on 
payment rates are varied and are reflected in the estimated payments 
displayed in Tables 40 and 41 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). For ASCs that fail to 
meet their quality reporting requirements, the CY 2014 payment 
determinations will be based on the application of a 2.0 percentage 
point reduction to the annual update factor, which currently is the 
CPI-U. We calculated the proposed CY 2014 ASC conversion factor by 
adjusting the CY 2013 ASC conversion factor by 1.0004 to account for 
changes in the pre-floor and pre-reclassified hospital wage indices 
between CY 2013 and CY 2014 and by applying the proposed CY 2014 MFP-
adjusted CPI-U update factor of 0.9 percent (projected CPI-U update of 
1.4 percent minus a projected productivity adjustment of 0.5. percent). 
The proposed CY 2014 ASC conversion factor is $43.321.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2014 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2012 and CY 2014 with precision. We believe that the net effect on 
Medicare expenditures resulting from the proposed CY 2014 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 Proposed 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 proposed update to the CY 2014 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2014 updates to the ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2012 claims data. Table 40 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2013 payments to 
estimated CY 2014 payments, and Table 41 shows a comparison of 
estimated CY 2013 payments to estimated CY 2014 payments for procedures 
that we estimate would receive the most Medicare payment in CY 2014.
    Table 40 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 40.
     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 2013 ASC Payments were calculated 
using CY 2012 ASC utilization (the most recent full year of ASC 
utilization) and CY 2013 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2013 ASC payments.
     Column 3--Estimated CY 2014 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 proposed updates to ASC payment 
rates for CY 2014 compared to CY 2013.
    As seen in Table 40, we estimate that the proposed update to ASC 
rates for CY 2014 would result in a 3 percent decrease in aggregate 
payment amounts for eye and ocular adnexa procedures, an 8 percent 
increase in aggregate payment amounts for digestive system procedures, 
and a 1 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 proposed CY 2014 update are variable. For instance, we estimate 
that, in the aggregate, payment for musculoskeletal system procedures 
would decrease by 1 percent, whereas payment for genitourinary system 
procedures, integumentary system procedures and respiratory system 
procedures would increase by 5 to 7 percent under the proposed CY 2014 
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 
2014 for digestive system procedures is likely due to an increase in 
the ASC payment weight for some of the high volume procedures, such as 
CPT code 43239 (Upper GI endoscopy biopsy) where estimated payment 
would increase by 13 percent for CY 2014.

[[Page 43697]]

    Also displayed in Table 40 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 decrease by 
12 percent for CY 2014.

  Table 40--Estimated Impact of the Proposed CY 2014 Update of the ASC
    Payment System on Aggregate CY 2014 Medicare Program Payments by
        Surgical Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
                                           Estimated CY
                                             2013 ASC      Estimated CY
        Surgical specialty group           Payments (in    2014 percent
                                             millions)        change
(1)                                                  (2)             (3)
------------------------------------------------------------------------
Total...................................          $3,625               1
Eye and ocular adnexa...................           1,496              -3
Digestive system........................             743               8
Nervous system..........................             540               1
Musculoskeletal system..................             441              -1
Genitourinary system....................             159               5
Integumentary system....................             130               7
Respiratory system......................              46               7
Cardiovascular system...................              32              -2
Ancillary items and services............              20             -12
Auditory system.........................              12               4
Hematologic & lymphatic systems.........               5              17
------------------------------------------------------------------------

    Table 41 below shows the estimated impact of the proposed updates 
to the revised ASC payment system on aggregate ASC payments for 
selected surgical procedures during CY 2014. The table displays 30 of 
the procedures receiving the greatest estimated CY 2014 aggregate 
Medicare payments to ASCs. The HCPCS codes are sorted in descending 
order by estimated CY 2014 program payment.
     Column 1-CPT/HCPCS code.
     Column 2-Short Descriptor of the HCPCS code.
     Column 3-Estimated CY 2013 ASC Payments were calculated 
using CY 2012 ASC utilization (the most recent full year of ASC 
utilization) and the proposed CY 2014 ASC payment rates. The estimated 
CY 2014 payments are expressed in millions of dollars.
     Column 4-Estimated CY 2014 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2013 and 
the estimated payment for CY 2014 based on the proposed update.

  Table 41--Estimated Impact of the Proposed CY 2014 Update to the ASC
      Payment System on Aggregate Payments for Selected Procedures
------------------------------------------------------------------------
                                           Estimated CY
                                             2013 ASC      Estimated CY
  CPT/HCPCS code*     Short descriptor     payments (in    2014 percent
                                             millions)        change
(1)                 (2).................             (3)             (4)
------------------------------------------------------------------------
66984.............  Cataract surg w/iol,          $1,107              -3
                     1 stage.
43239.............  Upper GI endoscopy,              163              13
                     biopsy.
45380.............  Colonoscopy and                  154               7
                     biopsy.
45385.............  Lesion removal                    98               7
                     colonoscopy.
66982.............  Cataract surgery,                 89              -3
                     complex.
45378.............  Diagnostic                        80               7
                     colonoscopy.
64483.............  Inj foramen epidural              79              14
                     l/s.
62311.............  Inject spine l/s                  71              14
                     (cd).
66821.............  After cataract laser              59              -1
                     surgery.
G0105.............  Colorectal scrn; hi               42               0
                     risk ind.
15823.............  Revision of upper                 40               2
                     eyelid.
64493.............  Inj paravert f jnt l/             40              14
                     s 1 lev.
63650.............  Implant                           39               4
                     neuroelectrodes.
G0121.............  Colon ca scrn not hi              36               0
                     rsk ind.
29827.............  Arthroscop rotator                34               5
                     cuff repr.
64590.............  Insrt/redo pn/gastr               33               6
                     stimul.
64721.............  Carpal tunnel                     31              -1
                     surgery.
63685.............  Insrt/redo spine n                31               6
                     generator.
64636**...........  Destroy l/s facet                 31            -100
                     jnt addl.
29881.............  Knee arthroscopy/                 30              -3
                     surgery.
64635.............  Destroy lumb/sac                  26              73
                     facet jnt.
29880.............  Knee arthroscopy/                 25              -3
                     surgery.
43235.............  Uppr gi endoscopy                 23              13
                     diagnosis.
45384.............  Lesion remove                     22               7
                     colonoscopy.
52000.............  Cystoscopy..........              21               5
62310.............  Inject spine c/t....              20              14

[[Page 43698]]

 
29823.............  Shoulder arthroscopy/             19               5
                     surgery.
67042.............  Vit for macular hole              19               0
28285.............  Repair of hammertoe.              18               5
50590.............  Fragmenting of                    18               2
                     kidney stone.
------------------------------------------------------------------------
*Note that HCPCS codes we are proposing to delete for CY 2014 are not
  displayed in this table.
** The 100 percent decrease in estimated payment reflects our CY 2014
  proposal to package the payment for CPT code 64636.

(3) Estimated Effects of ASC Payment System Proposed Policies on 
Beneficiaries
    We estimate that the proposed CY 2014 update to the ASC payment 
system would be generally positive for beneficiaries with respect to 
the new procedures that we are proposing to add to the ASC list of 
covered surgical procedures and for those that we are proposing to 
designate as office-based for CY 2014. 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.) Beneficiary coinsurance for services migrating from 
physicians' offices to ASCs may decrease or increase under the revised 
ASC payment system, depending on the particular service and the 
relative payment amounts for that service in the physician's office 
compared to the ASC. However, for those additional procedures that we 
are proposing to designate as office-based in CY 2014, 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 minor changes that we are proposing to make to 
the ASC payment system and the reasons that we have chosen specific 
options are discussed throughout this proposed rule. There are no 
proposed major changes to ASC policies for CY 2014.
c. 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 two accounting statements to illustrate the impacts of this 
proposed rule. The first accounting statement, Table 42 (below) 
illustrates the classification of expenditures for the CY 2014 
estimated hospital OPPS incurred benefit impacts associated with the 
proposed CY 2014 OPD fee schedule increase, based on the 2013 Trustee's 
Report. The second accounting statement, Table 43 (below) illustrates 
the classification of expenditures associated with the proposed 0.9 
percent CY 2014 update to the ASC payment system, based on the 
provisions of this proposed rule and the baseline spending estimates 
for ASCs in the 2013 Trustee's Report. The third accounting statement, 
Table 44 (below), illustrates the classification of expenditures 
associated with the proposed revision to the definition of hospital-
based EP in payment year 2013 for EPs reassigning benefits to Method II 
CAHs. Lastly, the tables classify most estimated impacts as transfers.

     Table 42--Accounting Statement: CY 2014 EStimated Hospital OPPS
 Transfers From CY 2013 to CY 2014 Associated With the Proposed CY 2014
              Hospital Outpatient OPD Fee Schedule Increase
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $600 million.
From Whom to Whom.................  Federal Government to outpatient
                                     hospitals and other providers who
                                     receive payment under the hospital
                                     OPPS.
                                   -------------------------------------
    Total.........................  $600 million.
------------------------------------------------------------------------


  Table 43--Accounting Statement: Classification of Estimated Transfers
  From CY 2013 to CY 2014 as a Result of the Proposed CY 2014 Update to
                     the Revised ASC Payment System
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $27 million.
From Whom to Whom.................  Federal Government to Medicare
                                     Providers and Suppliers.
                                   -------------------------------------

[[Page 43699]]

 
    Total.........................  $27 million.
------------------------------------------------------------------------


  Table 44--Accounting Statement: Classification of Estimated Transfers
  From CY 2013 to CY 2014 as a Result of the Proposed Revisions to the
     Definition of Provider-Based EP Under the EHR Incentive Program
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $17,985,000 to $35,970,000.
From Whom to Whom.................  Federal Government to Medicare
                                     Providers.
                                   -------------------------------------
    Total.........................  $17,985,000 to $35,970,000.
------------------------------------------------------------------------

d. Effects of Proposed Requirements for the Hospital OQR Program
    In section XIII. of this proposed rule, we are proposing to adopt 
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 2013. 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 and that 106 hospitals may not receive the 
full OPD fee schedule increase factor in CY 2015. 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 2016.
    In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60647 through 60650), for the CY 2011 payment 
update, as part of the validation process, we required hospitals to 
submit paper copies of requested medical records to a designated 
contractor within the required timeframe. Failure to submit requested 
documentation could result in a 2.0 percentage point reduction to a 
hospital's CY 2011 OPD fee schedule increase factor, but the failure to 
attain a validation score threshold would not.
    In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with 
comment period, we finalized our proposal to validate data submitted by 
800 hospitals of the approximately 3,200 participating hospitals for 
purposes of the CY 2012 Hospital OQR Program payment determination. We 
stated our belief that 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 IQR 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 the CY 2013 OPPS/ASC final rule with comment period, for the CY 
2014 payment determination and subsequent years, we made 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 
did not make any modifications to our validation requirements. We 
expect these policies to have minimal impact on the program.
    In this proposed rule, for CY 2016 payment determination and 
subsequent years, we are proposing to add five quality measures with 
data collection to begin in CY 2014. For four of these measures, data 
would be submitted via an online tool located on a CMS Web site and one 
would be submitted via CDC's NHSN. We are proposing to remove two 
measures from the Hospital OQR 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 
2016. We also are unable to estimate the number of hospitals that would 
fail the validation documentation submission requirement for the CY 
2016 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 6,000 total 
cases per quarter for up to 500 hospitals for CY 2014 represents a 
minimal burden to Hospital OQR Program participating hospitals.
e. Effects of Proposals for the ASCQR Program
    In section XV. of this proposed rule, for the ASCQR Program, we are 
proposing four additional quality

[[Page 43700]]

measures for the CY 2016 payment determination and subsequent years. 
Data collection for these proposed measures would begin in CY 2014. We 
are proposing to collect aggregate data (numerators, denominators, and 
exclusions) on all ASC patients for these four proposed chart-
abstracted measures via an online Web-based tool located on a CMS Web 
page. We are also proposing for the CY 2016 payment determination and 
subsequent years requirements for facility participation, data 
collection, and submission for claims-based, CMS Web-based, and NHSN 
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 expect our new policies to significantly affect 
the number of ASCs that do not receive a full annual payment update in 
CY 2016, though we are not able to estimate the level of this impact at 
this time.
f. Effects of Proposed Changes to the CfCs for OPOs Relating to the 
Outcome Measures Requirement for Recertification
    In section XVI. of this proposed rule, we discussed our proposal to 
modify the current outcome measures requirement that OPOs meet all 
three outcome measures set forth in Sec.  486.318 to a requirement that 
they meet two out of the three outcome measures. Our proposal would 
result in those OPOs that fail only one outcome measures avoiding 
automatic decertification based upon the current outcome measures 
requirement.
    While we are confident that our proposal would have a significantly 
positive effect on the OPOs that avoided automatic decertification, it 
is very difficult to quantify the impact of this change. As discussed 
under section XXI.C. of this proposed rule relating to the ICR 
requirements, we anticipate that most OPOs that are decertified would 
engage in the appeals process as set forth in Sec.  486.314. However, 
we have no reliable way of estimating how many OPOs would likely obtain 
reversals of their decertifications during reconsideration or how many 
continue on to a hearing before a CMS hearing officer. Therefore, 
although we believe there would be a considerably large positive effect 
as a result of our proposed change to the outcome measures requirement, 
we are unable to provide a specific estimate of that cost savings.
g. Effects of Proposed Revisions of the QIO Regulations
    In section XVII. of this proposed rule, we are proposing to update 
the regulations at 42 CFR parts 475 and 476 based on the recently 
enacted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. 
L. 112-40, Section 261) whereby Congress authorized numerous changes to 
the original legislation and included additional flexibility for the 
Secretary in the administration of the QIO program. Currently, 42 CFR 
Part 475 includes definitions and standards governing eligibility and 
the award of contracts to QIOs. In this proposed rule, we set forth 
proposals for the partial deletion and revision of the regulations 
under 42 CFR Parts 475 and 476, which relate to the QIO program, 
including the following: (1) Replace nomenclature that has been amended 
by the TAAEA; (2) revise the existing definition for the term 
``physician'' in Parts 475 and 476; (3) add new definitions as 
necessary to support the new substantive provisions in Subpart C; and 
(4) revise, add, and replace some of the substantive provisions in 
Subpart C to fully exercise the Secretary's authority for the program 
and update the contracting requirements to align with contemporary 
quality improvement.
    We estimate the effects of the proposed QIO Program changes to be 
consistent with the Congressional Budget Office's 2011 Cost Estimate of 
the Trade Bill (H.R. 2832) which included a reduction in spending of 
$330 million over the 2012-2021 period. According to the CBO Estimate, 
the Act and subsequently the proposed regulatory changes ``would modify 
the provisions under which CMS contracts with independent entities 
called [``]Quality Improvement Organizations [(QIOs)''] in Medicare. 
QIOs, generally staffed by health care professionals, review medical 
care, help beneficiaries with complaints about the quality of care, and 
implement care improvements. H.R. 2832 would make several changes to 
the composition and operation of QIOs, and would harmonize QIO 
contracts with requirements of the Federal Acquisition Regulation. 
Among those changes are a modification to expand the geographic scope 
of QIO contracts and a lengthening of the contract period. CBO 
estimates that those provisions would reduce spending by $330 million 
over the 2012-2021 period.''
h. Effects of Proposals Regarding Medicare-Fee-for-Service EHR 
Incentive Program
(1) Incentive Payments for Eligible Professionals (EPs) Reassigning 
Benefits to Method II CAHs
    As discussed in section XVIII.A. of this proposed rule, we are 
proposing to revise the regulations to provide, during payment year 
2013 alone, a special method for determining the hospital-based status 
of EPs who reassign their benefits to Method II CAHs. It is difficult 
to determine with precision the cost impact of this proposal. We lack 
specific information on key factors affecting this impact, including 
the number of EPs who reassign their benefits to Method II CAHs, the 
proportion of those EPs who would be determined to be nonhospital-based 
for 2013 under our proposal, the proportion of those EPs who will 
qualify for Medicaid incentive payments and choose to accept those 
payments because they are higher, and the proportion of the remaining 
EPs who will successfully demonstrate meaningful use in order to 
qualify for Medicare incentive payments. It is therefore necessary to 
rely on estimates for each of these factors. As much as possible we 
will employ the methods of cost estimation that we used to determine 
the estimated costs of the Medicare incentives for EPs in our Stage 1 
final rule (75 FR 44549) and Stage 2 final rule (77 FR 54139) for the 
Medicare Electronic Health Record Incentive Program, as well as the 
estimates that we have previously employed for specific factors.
    Of the approximately 1,200 CAHs, about three-quarters, or 900, 
elect under section 1834(g)(2) of the Act to receive a cost-based 
payment for the facility costs of providing outpatient services, plus 
115 percent of the fee schedule amount for professional services 
included within outpatient CAH services. As we have indicated, we lack 
specific information on the numbers of EPs who reassign their benefits 
to these Method II CAHs. While CAHs are relatively small inpatient 
facilities, we understand that many of them have fairly substantial 
outpatient clinics. At the same time, we have also been informed that 
they rely largely on nonphysician practitioners (nurses and nurse 
practitioners) to staff these outpatient clinics. Therefore, we will 
assume that the typical outpatient department in a Method II CAH has a 
relatively small number of physicians, between 5 and 10, on staff and 
billing for professional services that are reassigned to the CAH. We 
will also use

[[Page 43701]]

this estimate of 5 to 10 physicians per Method II CAH to establish an 
upper and lower range to our impact estimate. The number of EPs 
reassigning benefits for outpatient services to Method II CAHs is 
therefore between 4,500 and 9,000.
    In our Stage 2 final rule (77 FR 54139) for the Medicare Electronic 
Health Record Incentive Program, we determined that about 14 percent of 
EPs with Medicare claims were hospital-based, and thus ineligible to 
receive Medicare EHR incentive payments. For purposes of this impact 
statement, we will assume that 10 percent of EPs reassigning benefits 
to Method II CAHs are hospital-based. Because CAHs have relatively 
small inpatient hospital facilities, we believe that the physicians 
practicing in these facilities will bill for somewhat fewer inpatient 
services than EPs generally. Using this assumption, the estimate of 
nonhospital-based EPs reassigning benefits to Method II CAHs is 
therefore between 4,050 and 8,100. Of these nonhospital-based EPs 
reassigning benefits to Method II CAHs, some proportion will qualify 
for Medicaid incentive payments and will choose to receive payments 
under that program because the payments are higher. For these purposes 
we will employ the same estimate (20 percent) that we have employed for 
developing cost estimate in our Stage 2 final rule (77 FR 54140). Thus, 
we estimate that between 3,240 and 6,480 non-hospital-based EPs 
reassigning benefits to Method II CAHs do not choose to receive 
Medicaid incentive payments.
    As we have discussed in prior rules (77 FR 54140) our estimates for 
the number of EPs that will successfully demonstrate meaningful use of 
CEHRT are uncertain. The percentage of Medicare EPs who will satisfy 
the criteria for demonstrating meaningful use of CEHRT and will qualify 
for incentive payments is a key, but highly uncertain factor in 
developing cost estimates for the EHR incentive program in general and 
for the present purposes in particular. Consistent with the estimates 
that we have employed for EPs generally in developing cost estimates in 
the Stage II final rule, we will assume that 37 percent of the 
nonhospital-based EPs reassigning benefits to Method II CAHs will 
satisfy the criteria for demonstrating meaningful use of CEHRT and will 
qualify for incentive payments in payment years 2013. Thus, we estimate 
that between 1,199 and 2,398 EPs reassigning benefits to Method II CAHs 
will actually qualify to receive Medicare EHR incentive payments in 
2013. As we have previously discussed, section 1848(o)(1)(B) of the Act 
provides that the incentive payment for an EP for a given payment year 
shall not exceed the following amounts:
     For the EP's first payment year, for such professional, 
$15,000 (or $18,000, if the EP's first payment year is 2011 or 2012);
     For the EP's second payment year, $12,000;
     For the EP's third payment year, $8,000;
     For the EP's fourth payment year, $4,000;
     For the EP's fifth payment year, $2,000; and
     For any succeeding year, $0.
    We lack any information on how many of the EPs reassigning benefits 
to Method II CAHs will qualify for incentive payments for the first 
time in 2013. However, if we assume for purposes of setting upper 
limits on our estimates, that all of the 1,199 to 2,398 EPs we have 
estimated will receive qualify for the first time and receive the 
maximum incentive payment, our proposal will cost between $17,985,000 
and $35,970,000 in payments that we have not previously been making in 
2013. Despite the uncertainties of the assumptions that we have 
employed in developing these estimates, we can state with reasonable 
confidence that our proposal will result in considerably less than 
$50,000,000 in payments over and above the payments we would make in 
the absence of this proposal for 2013.
(2) Cost Reporting Periods for Interim and Final EHR Incentive Payments 
to Eligible Hospitals
    As we discussed in section XVIII.B. of this proposed rule, we are 
proposing to revise the regulations to provide that, in cases where 
there is no 12-month cost reporting period that begins on or after the 
beginning of a payment year, we will use the most recent 12-month cost 
reporting period available at the time of final settlement in order to 
determine final EHR incentive payments for the hospital. We are making 
this proposal solely to address situations in which hospitals have been 
receiving interim EHR payments but the contractors have not been able 
to make a determination of final payments because there is no hospital 
cost report that meets the existing requirements of the regulations. 
Therefore, we do not expect this to have any financial impact. This 
proposal would merely allow us to make final settlements in cases that 
the current regulations do not cover.

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 $35.5 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 proposed rule may have a significant impact on approximately 
2,004 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 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this 
proposed rule may have a significant impact on approximately 694 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 $141 million. This proposed rule does 
not mandate any requirements for State, local, or tribal governments, 
or for the private sector.

D. Conclusion

    The changes we are proposing to make in this proposed rule would 
affect all classes of hospitals paid under the OPPS and will affect 
both CMHCs and

[[Page 43702]]

ASCs. We estimate that most classes of hospitals paid under the OPPS 
would experience a modest increase or a minimal decrease in payment for 
services furnished under the OPPS in CY 2013. Table 39 demonstrates the 
estimated distributional impact of the OPPS budget neutrality 
requirements that would result in a 1.8 percent increase in payments 
for all services paid under the OPPS in CY 2014, after considering all 
of the proposed changes to APC reconfiguration and recalibration, as 
well as the proposed OPD fee schedule increase factor, proposed wage 
index changes, including the proposed frontier State wage index 
adjustment, estimated payment for outliers, and proposed changes to the 
pass-through payment estimate. However, some classes of providers that 
are paid under the OPPS would experience more significant gains and 
others would experience modest losses in OPPS payments in CY 2014. We 
estimate that rural hospitals with 100 or fewer beds would experience a 
decrease of 3.9 percent. CMHCs would see an overall decrease in payment 
of 7.7 percent as a result of a decrease in their estimated costs. 
However, urban hospitals in Puerto Rico would experience an estimated 
7.9 percent increase in payment, and non-teaching hospitals for whom 
DSH data are not available (non-IPPS hospitals) would experience a 5.3 
percent increase in payment.
    The proposed updates to the ASC payment system for CY 2014 would 
affect each of the approximately 5,300 ASCs currently approved for 
participation in the Medicare program. The effect on an individual ASC 
would depend on its mix of patients, the proportion of the ASC's 
patients who are Medicare beneficiaries, the degree to which the 
payments for the procedures offered by the ASC are proposed to be 
changed under the ASC payment system, and the extent to which the ASC 
provides a different set of procedures in the coming year. Table 40 
demonstrates the estimated distributional impact among ASC surgical 
specialties of the proposed MFP-adjusted CPI-U update factor of 0.9 
percent for CY 2014.

XXIIV. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications. We have examined the OPPS and ASC provisions included in 
this proposed rule in accordance with Executive Order 13132, 
Federalism, and have determined that they 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 39 of 
this proposed rule, we estimate that OPPS payments to governmental 
hospitals (including State and local governmental hospitals) would 
increase by 0.5 percent under this proposed rule. 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 
proposed rule, in conjunction with the remainder of this document, 
demonstrate that this proposed rule is consistent with the regulatory 
philosophy and principles identified in Executive Order 12866, the RFA, 
and section 1102(b) of the Act.
    This proposed rule would affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals, CMHCs, and ASCs, and some effects may be 
significant.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping, 
Rural areas, X-rays.

42 CFR Part 410

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

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 475

    Grant programs-health, Health care, Health professions, Quality 
Improvement Organization (QIO)

42 CFR Part 476

    Health care, Health professional, Health record, Quality 
Improvement Organization (QIO), Penalties, Privacy, Reporting and 
recordkeeping requirements.

42 CFR Part 486

    Grant programs-health, Health facilities, Medicare, Reporting and 
recordkeeping requirements, X-rays.

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 proposing to amend 42 CFR Chapter 
IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405, Subpart R continues to read as 
follows:

    Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 
405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 
1395oo, and 1395ww).

0
2. Section 405.1804 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.1804  Matters not subject to administrative and judicial 
review under prospective payment system.

* * * * *
    (a) The determination of the requirement, or the proportional 
amount, of the budget neutrality adjustment in the prospective payment 
rates required under section 1886(e)(1) of the Social Security Act.
* * * * *
0
3. Section 405.1885 is amended by revising paragraph (a)(1) and adding 
paragraph (b)(2)(iv) to read as follows:


Sec.  405.1885  Reopening an intermediary determination or reviewing 
entity decision.

    (a) * * *
    (1) A Secretary determination, an intermediary determination, or a 
decision by a reviewing entity (as described in Sec.  405.1801(a)) may 
be reopened, with respect to specific findings on matters at issue in a 
determination or decision, by CMS (with respect to Secretary 
determinations), by the intermediary (with respect to intermediary 
determinations), or by the reviewing entity that made the decision (as 
described in paragraph (c) of this section).

[[Page 43703]]

    (i) A specific finding on a matter at issue may be legal or factual 
in nature or a mixed matter of both law and fact.
    (ii) A specific finding on a matter at issue may include a factual 
matter that arose in or was determined for the same cost reporting 
period as the period at issue in an appeal filed, or a reopening 
requested by a provider or initiated by an intermediary, under this 
subpart.
    (iii) A specific finding on a matter at issue may include a 
predicate fact, which is a factual matter that arose in or was 
determined for a cost reporting period that predates the period at 
issue (in an appeal filed, or a reopening requested by a provider or 
initiated by an intermediary, under this subpart), and such factual 
matter was used in determining an aspect of the provider's 
reimbursement for a later cost reporting period.
    (iv) A specific finding on a matter at issue may not be reopened, 
and if reopened, revised, except as provided for by this section, Sec.  
405.1887, and Sec.  405.1889.
* * * * *
    (b) * * *
    (2) * * *
    (iv) The 3-year period described in paragraphs (b)(2)(i) through 
(b)(2)(iii) of this section applies to, and is calculated separately 
for, each specific finding on a matter at issue (as described in 
paragraphs (a)(1)(i) through (iv) of this section.
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

0
5. Section 410.27 is amended by--
0
a. Revising paragraph (a) introductory text.
0
b. Removing the word ``and'' at the end of paragraph (a)(1)(iii).
0
c. Removing the period at the end of paragraph (a)(1)(iv)(E) and adding 
in its place ``; and''.
0
d. Adding paragraph (a)(1)(v).
    The revisions and addition read as follows:


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

    (a) Medicare Part B pays for therapeutic hospital or CAH services 
and supplies furnished incident to a physician's or nonphysician 
practitioner's service, which are defined as all services and supplies 
furnished to hospital or CAH outpatients that are not diagnostic 
services and that aid the physician or nonphysician practitioner in the 
treatment of the patient, including drugs and biologicals which are not 
usually self-administered, if--
    (1) * * *
    (v) In accordance with applicable State law.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
6. The authority citation for part 412 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh) and sec. 124 of Public Law 106-113 (113 
Stat. 1501A-332).

0
7. Section 412.167 is amended by redesignating paragraph (c) as 
paragraph (d) and adding a new paragraph (c) to read as follows:


Sec.  412.167  Appeals under the Hospital Value-Based Purchasing (VBP) 
Program.

* * * * *
    (c) If a hospital is dissatisfied with CMS' decision on an appeal 
request submitted under paragraph (b) of this section, the hospital may 
request an independent CMS review of that decision.
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

0
8. The authority citation for part 416 continues to read as follows:

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

0
9. Section 416.171 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  416.171  Determination of payment rates for ASC services.

* * * * *
    (b) * * *
    (2) Device-intensive procedures assigned to any APC under the OPPS 
with device costs greater than 50 percent of the APC costs based on the 
standard OPPS APC ratesetting methodology.
* * * * *

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

0
10. 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
11. Section 419.2 is amended by revising paragraphs (b) introductory 
text, (b)(3), (b)(4), (b)(7), (b)(11), and (b)(12) and adding 
paragraphs (b)(13) through (17) 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 integral, 
ancillary, supportive, dependent, or adjunctive to performing a 
procedure or furnishing a service on an outpatient basis. In general, 
these packaged costs may include, but are not limited to, the following 
items and services, the payment for which are packaged or conditionally 
packaged into the payment for the related procedures or services.
* * * * *
    (3) Observation services;
    (4) Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies (including, for example, 
but not limited to, implantable or certain nonimplantable medical 
devices, certain drugs and biologicals, implantable biologicals, and 
skin substitutes or similar wound treatment products) and equipment; 
surgical dressings; and devices used for external reduction of 
fractures and dislocations;
* * * * *
    (7) Ancillary services;
* * * * *
    (11) Implantable and insertable medical items and devices, 
including, but not limited to, prosthetic devices (other than dental) 
which replace all or part of an internal body organ (including 
colostomy bags and supplies directly related to colostomy care), 
including replacement of these devices;
    (12) Costs incurred to procure donor tissue other than corneal 
tissue;
    (13) Image guidance, processing, supervision, and interpretation 
services;
    (14) Intraoperative items and services;
    (15) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure (including but not 
limited to, diagnostic radiopharmaceuticals, contrast agents, and 
pharmacologic stress agents;
    (16) Certain clinical diagnostic laboratory tests; and

[[Page 43704]]

    (17) Procedures described by add-on codes.
* * * * *
0
12. Section 419.22 is amended by revising the introductory text and 
paragraphs (j) and (1) to read as follows:


Sec.  419.22  Hospital outpatient services excluded from payment under 
the hospital outpatient prospective payment system.

    The following services are not paid for under the hospital 
outpatient prospective payment system (except when packaged as a part 
of a bundled payment):
* * * * *
    (j) Except as provided in Sec.  419.2(b)(4) and (11), prosthetic 
devices,-prosthetic supplies, and orthotic devices.
* * * * *
    (l) Except as provided in Sec.  419.2(b)(16), clinical diagnostic 
laboratory tests.
* * * * *
0
13. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)(5) to 
read as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (iv) * * *
    (B) * * *
    (5) For calendar year 2014, a multifactor productivity adjustment 
(as determined by CMS) and 0.3 percentage point.
* * * * *
0
14. Section 419.46 is added to Subpart D to read as follows:


Sec.  419.46  Participation, data submission, and validation 
requirements under the Hospital Outpatient Quality Reporting (OQR) 
Program.

    (a) Participation in the Hospital OQR Program. To participate in 
the Hospital OQR Program, a hospital as defined in section 
1886(d)(1)(B) of the Act and is paid under the OPPS must--
    (1) Register on the QualityNet Web site before beginning to report 
data;
    (2) Identify and register a QualityNet security administrator as 
part of the registration process under paragraph (a)(1) of this 
section; and
    (3) Complete and submit an online participation form available at 
the QualityNet.org Web site if this form has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CMS Certification Number (CCN). For Hospital OQR Program 
purposes, hospitals that share the same CCN are required to complete a 
single online participation form. Once a hospital has submitted a 
participation form, it is considered to be an active Hospital OQR 
Program participant until such time as it submits a withdrawal form to 
CMS or no longer has an effective Medicare provider agreement. 
Deadlines for the participation form are described in paragraphs 
(a)(3)(i) and (ii) of this section, and are based on the date 
identified as a hospital's Medicare acceptance date.
    (i) If a hospital has a Medicare acceptance date before January 1 
of the year prior to the affected annual payment update, the hospital 
must complete and submit to CMS a completed Hospital OQR Notice of 
Participation Form by July 31 of the calendar year prior to the 
affected annual payment update.
    (ii) If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit a completed participation form no later than 180 
days from the date identified as its Medicare acceptance date.
    (b) Withdrawal from the Hospital OQR Program. A participating 
hospital may withdraw from the Hospital OQR Program by submitting to 
CMS a withdrawal form that can be found in the secure portion of the 
QualityNet Web site. The hospital may withdraw any time from January 1 
to November 1 of the year prior to the affected annual payment updates. 
A withdrawn hospital will not be able to later sign up to participate 
in that payment update, is subject to a reduced annual payment update 
as specified under Sec.  419.43(h), and is required to submit a new 
participation form in order to participate in any future year of the 
Hospital OQR Program.
    (c) Submission of Hospital OQR Program data--(1) General rule. 
Except as provided in paragraph (d) of this section, hospitals that 
participate in the Hospital OQR Program must submit to CMS data on 
measures selected under section 1833(17)(C) of the Act in a form and 
manner, and at a time, specified by CMS.
    (2) Submission deadlines. Submission deadlines by measure and by 
data type are posted on the QualityNet Web site.
    (3) Initial submission deadlines for a hospital that did not 
participate in the previous year's Hospital OQR Program. (i) If a 
hospital has a Medicare acceptance date before January 1 of the year 
prior to the affected annual payment update, the hospital must submit 
data beginning with encounters occurring during the first calendar 
quarter of the year prior to the affected annual payment update, in 
addition to submitting a completed Hospital OQR Notice of Participation 
Form under paragraph (a)(3)(i) of this section.
    (ii) If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit data for encounters beginning with the first full 
quarter following submission of the completed Hospital OQR Notice of 
Participation Form under paragraph (a)(3)(ii) of this section.
    (iii) Hospitals with a Medicare acceptance date before or after 
January 1 of the year prior to an affected annual payment update must 
follow data submission deadlines as specified in paragraph (c)(2) of 
this section.
    (d) Exception. CMS may grant an extension or waiver of one or more 
data submission deadlines and requirements in the event of 
extraordinary circumstances beyond the control of the hospital, such as 
when an act of nature affects an entire region or locale or a systemic 
problem with one of CMS' data collection systems directly or indirectly 
affects data submission. CMS may grant an extension or waiver as 
follows:
    (1) Upon request by the hospital. Specific requirements for 
submission of a request for an extension or waiver are available on the 
QualityNet Web site.
    (2) At the discretion of CMS. CMS may grant waivers or extensions 
to hospitals that have not requested them when CMS determines that an 
extraordinary circumstance has occurred.
    (e) Validation of Hospital OQR Program data. CMS may validate one 
or more measures selected under section 1833(17)(C) of the Act by 
reviewing documentation of patient encounters submitted by selected 
participating hospitals.
    (1) Upon written request by CMS or its contractor, a hospital must 
submit to CMS supporting medical record documentation that the hospital 
used for purposes of data submission under the program. The specific 
sample that a hospital must submit will be identified in the written 
request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request.
    (2) A hospital meets the validation requirement with respect to a 
fiscal year if it achieves at least a 75-percent reliability score, as 
determined by CMS.
    (f) Reconsiderations and appeals of Hospital OQR Program decisions. 
(1) A hospital may request reconsideration of a decision by CMS that 
the hospital has not met the requirements of the Hospital

[[Page 43705]]

OQR Program for a particular fiscal year. Except as provided in 
paragraph (d) of this section, a hospital must submit a reconsideration 
request to CMS via the QualityNet Web site, no later than the first 
business day of the month of February of the affected payment year.
    (2) A reconsideration request must contain the following 
information:
    (i) The hospital's CMS Certification Number (CCN);
    (ii) The name of the hospital;
    (iii) The 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;
    (iv) The hospital's basis for requesting reconsideration. The 
hospital must identify its specific reason(s) for believing it should 
not be subject to the reduced annual payment update;
    (v) The hospital-designated personnel contact information, 
including name, email address, telephone number, and mailing address 
(must include physical mailing address, not just a post office box);
    (vi) The hospital-designated personnel's signature;
    (vii) A copy of all materials that the hospital submitted to comply 
with the requirements of the affected Hospital OQR Program payment 
determination year; and
    (viii) If the hospital is requesting reconsideration on the basis 
that CMS determined it did not meet the affected payment determination 
year's validation requirement set forth in paragraph (e)(1) of this 
section, 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 
are eligible to be reconsidered.
    (3) A hospital that is dissatisfied with a decision made by CMS on 
its reconsideration request may file an appeal with the Provider 
Reimbursement Review Board under part 405, subpart R, of this chapter.
0
15. Section 419.66 is amended by revising paragraph (b)(3) to read as 
follows:


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

* * * * *
    (b) * * *
    (3) The device is an integral part of the service furnished, is 
used for one patient only, comes in contact with human tissue, and is 
surgically implanted or inserted, whether or not is remains with the 
patient when the patient is released from the hospital.
* * * * *

PART 475--QUALITY IMPROVEMENT ORGANIZATIONS

0
16. The authority citation for part 475 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).
0
17. Section 475.1 is amended by--
0
a. Redesignating paragraphs (a) through (d) in the definition of ``Five 
percent or more owner'' as paragraphs (1) through (4).
0
b. Adding, in alphabetical order, the definitions of ``Case reviews'', 
``Practitioner'', ``QIO area'', and Quality improvement initiative''.
0
c. Revising the definition of ``Physician''.
    The additions and revision read as follows:


Sec.  475.1  Definitions.

* * * * *
    Case reviews means the different types of reviews that QIOs are 
authorized to perform. Such reviews include, but are not limited to--
    (1) Beneficiary complaint reviews;
    (2) General quality of care reviews;
    (3) Emergency Medical Treatment and Labor Act (EMTALA) reviews;
    (4) Medical necessity reviews, including appeals and DRG validation 
reviews; and
    (5) Admission and discharge reviews.
* * * * *
    Physician means:
    (1) A doctor of medicine or osteopathy, a doctor of dental surgery 
or dental medicine, a doctor of podiatry, a doctor of optometry, or a 
chiropractor as described in section 1861(r) of the Act;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice as a doctor as described in 
paragraph (1) of this definition; and
    (3) An individual licensed to practice as a doctor as described in 
paragraph (1) of this definition in any Territory or Commonwealth of 
the United States of America.
    Practitioner has the same meaning as provided in Sec.  476.1 of 
this chapter.
    QIO area means the defined geographic area, such as the State(s), 
region(s), or community(ies), in which the CMS contract directs the QIO 
to perform.
    Quality improvement initiative has the same meaning as provided in 
Sec.  476.1 of this chapter.
0
18. Subpart C is revised to read as follows:
Subpart C--Quality Improvement Organizations
Sec.
475.100 Scope and applicability.
475.101 Eligibility requirements for QIO contracts.
475.102 Requirements for performing case reviews.
475.103 Requirements for performing quality improvement initiatives.
475.104 [Reserved]
475.105 Prohibition against contracting with health care facilities, 
affiliates, and payor organizations.
475.106 [Reserved]
475.107 QIO contract awards.

Subpart C--Quality Improvement Organizations


Sec.  475.100  Scope and applicability.

    This subpart implements sections 1152 and 1153(b) and (c) of the 
Social Security Act as amended by section 261 of the Trade Adjustment 
Assistance Extension Act of 2011. This subpart defines the types of 
organizations that are eligible to become Quality Improvement 
Organizations (QIOs) and describes certain steps CMS will take in 
selecting QIOs.


Sec.  475.101  Eligibility requirements for QIO contracts.

    In order to be eligible for a QIO contract, an organization must 
meet the following requirements:
    (a) Have a governing body that includes at least one individual who 
is a representative of health care providers and at least one 
individual who is a representative of consumers.
    (b) Demonstrate the ability to perform the functions of a QIO, 
including--
    (1) The ability to meet the eligibility requirements and perform 
activities as set forth in the QIO Request for Proposal; and
    (2) The ability to--
    (i) Perform case reviews as described in Sec.  475.102; and/or
    (ii) Perform quality improvement initiatives as set forth in Sec.  
475.103.
    (c) Demonstrate the ability to actively engage beneficiaries, 
families, and consumers, as applicable, in case reviews as set forth in 
Sec.  475.102, or quality improvement initiatives as set forth in Sec.  
475.103.


Sec.  475.102  Requirements for performing case reviews.

    (a) In determining whether or not an organization has demonstrated 
the ability to perform case review, CMS will take into consideration 
factors such as:
    (1) The organization's proposed processes, capabilities, 
quantitative, and/or qualitative performance objectives and methodology 
to perform case reviews;
    (2) The organization's proposed involvement of and access to 
physicians and practitioners in the QIO area with

[[Page 43706]]

the appropriate expertise and specialization in the areas of health 
care related to case reviews;
    (3) The organization's ability to take into consideration urban 
versus rural, and regional characteristics in the health care setting 
where the care under review was provided;
    (4) The organization's ability to take into consideration evidence-
based national clinical guidelines and professionally recognized 
standards of care; and
    (5) The organization's access to qualified information technology 
(IT) expertise.
    (b) In making determinations under this section, CMS may consider 
characteristics such as the organization's geographic location and 
size. CMS may also consider prior experience in health care quality 
improvement that CMS considers relevant to performing case reviews; 
such prior experience may include prior similar case review experience.
    (c) A State government that administers a Medicaid program will be 
considered incapable of performing case review in an effective manner, 
unless the State demonstrates to the satisfaction of CMS that the State 
agency performing the case review will act with complete objectivity 
and independence from the Medicaid program.


Sec.  475.103  Requirements for performing quality improvement 
initiatives.

    (a) In determining whether or not an organization has demonstrated 
the ability to perform quality improvement initiatives, CMS will take 
into consideration factors such as:
    (1) The organization's proposed processes, capabilities, 
quantitative, and/or qualitative performance objectives, and 
methodology to perform quality improvement initiatives;
    (2) The organization's proposed involvement of and access to 
physicians and practitioners in the QIO area that have the requisite 
expertise and specialization in the areas of health care concerning the 
quality improvement initiative; and
    (3) The organization's access to professionals with requisite 
knowledge of quality improvement methodologies and practices, as well 
as qualified information technology and technical expertise.
    (b) In making determinations under this section, CMS may consider 
characteristics such as the organization's geographic location and 
size. CMS may also consider prior experience in health care quality 
improvement that CMS considers relevant to performing quality 
improvement initiatives; such prior experience may include prior 
similar quality improvement initiative experience.
    (c) A State government that administers a Medicaid program will be 
considered incapable of performing quality improvement initiative 
functions in an effective manner, unless the State demonstrates to the 
satisfaction of CMS that the State agency performing the quality 
improvement initiatives will act with complete objectivity and 
independence from the Medicaid program.


Sec.  475.104  [Reserved]


Sec.  475.105  Prohibition against contracting with health care 
facilities, affiliates, and payor organizations.

    (a) Basic rule. Except as permitted under paragraph (a)(3) of this 
section, the following are not eligible for QIO contracts:
    (1) A health care facility in the QIO area.
    (2) A health care facility affiliate; that is, an organization in 
which more than 20 percent of the members of the governing body are 
also either a governing body member, officer, partner, five percent or 
more owner, or managing employee in a health care facility in the QIO 
area.
    (3) A payor organization, unless the Secretary determines that 
there is no other entity available for an area with which the Secretary 
can enter into a contract under this part or the Secretary determines 
that a payor organization is a more qualified entity to perform one or 
more of the functions of a QIO described in Sec.  475.101(b) and this 
more qualified entity meets all other requirements and standards of 
this part.
    (b) [Reserved]
    (c) Subcontracting. A QIO must not subcontract with a health care 
facility to perform any case review activities except for the review of 
the quality of care.


Sec.  475.106  [Reserved]


Sec.  475.107  QIO contract awards.

    Subject to the provisions of Sec.  475.105, CMS will take the 
following actions in awarding QIO contracts:
    (a) Identify, from among all proposals submitted in response to a 
Request for Proposal, all proposals submitted by organizations that 
meet the requirements of Sec.  475.101;
    (b) Identify, from among all proposals identified in paragraph (a) 
of this section, all proposals that set forth minimally acceptable 
plans in accordance with the requirements of Sec.  475.102 or Sec.  
475.103, as applicable; and
    (c) Award the contract to the selected organization for a specific 
QIO area for a period of 5 years.

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
19. 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
20. The heading of part 476 is revised to read as set forth above.
0
21. In Sec.  461.1, paragraphs (a) through (d) in the definition of 
``Five percent or more owner'' are redesignated as paragraphs (1) 
though (4) and the definition of ``Physician'' is revised to read as 
follows:


Sec.  476.1  Definitions.

* * * * *
    Physician means:
    (1) A doctor of medicine or osteopathy, a doctor of dental surgery 
or dental medicine, a doctor of podiatry, a doctor of optometry, or a 
chiropractor, as described in section 1861(r) of the Act;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice as a doctor as described in 
paragraph (1) of this definition; and
    (3) An individual licensed to practice as a doctor as described in 
paragraph (1) of this definition in any Territory or Commonwealth of 
the United States of America.
0
22. The heading of Subpart C is revised to read as follows:

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

PART 486--CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED 
BY SUPPLIERS

0
23. The authority citation of part 486 continues to read as follows:

    Authority:  Secs. 1102, 1138, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1302b-8, and 1395hh) and section 371 of the 
Public Health Service Act (42 U.S.C. 273).

0
24. Section 486.316 is amended by revising paragraphs (a)(1) and (b) to 
read as follows:


Sec.  486.316  Re-certification and competition processes.

    (a) * * *
    (1) Meets two out of the three outcome measures requirements at 
Sec.  486.318; and * * *
    (b) Decertification and competition. If an OPO does not meet two 
out of the

[[Page 43707]]

three outcome measures as described in paragraph (a)(1) of this section 
or the requirements described in paragraph (a)(2) of this section, the 
OPO is decertified. If the OPO does not appeal or the OPO appeals and 
the reconsideration official and CMS hearing officer uphold the 
decertification, the OPO's service area is opened for competition from 
other OPOs. The decertified OPO is not permitted to compete for its 
open area or any other open area. An OPO competing for an open service 
area must submit information and data that describe the barriers in its 
service area, how they affected organ donation, what steps the OPO took 
to overcome them, and the results.
* * * * *
0
25. Section 486.318 is amended by revising paragraph (a) introductory 
text and paragraph (b) introductory text to read as follows:


Sec.  486.318  Condition: Outcome measures.

    (a) With the exception of OPOs operating exclusively in 
noncontiguous States, Commonwealths, Territories, or possessions, an 
OPO must meet two out of the three following outcome measures:
* * * * *
    (b) For OPOs operating exclusively in noncontiguous States, 
Commonwealths, Territories, and possessions, an OPO must meet two out 
of the three following outcome measures:
* * * * *

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

0
26. 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
27. Section 495.4 is amended by revising the definition of ``Hospital-
based EP'' to read as follows:


Sec.  495.4  Definitions.

* * * * *
    Hospital-based EP. Unless it meets the requirements of Sec.  495.5, 
a hospital-based EP means an EP who furnishes 90 percent or more of his 
or her covered professional services in sites of service identified by 
the codes used in the HIPAA standard transaction as an inpatient 
hospital or emergency room setting in the year preceding the payment 
year, or in the case of a payment adjustment year, in either of the 2 
years before the year preceding such payment adjustment year.
    (1) For Medicare, this is calculated based on--
    (i) The Federal fiscal year preceding the payment year; and
    (ii) For the payment adjustments, based on--
    (A) The Federal fiscal year 2 years before the payment adjustment 
year; or
    (B) The Federal fiscal year 3 years before the payment adjustment 
year.
    (2) For Medicaid, it is at the State's discretion if the data are 
gathered on the Federal fiscal year or calendar year preceding the 
payment year.
    (3) For the CY 2013 payment year only, an EP who furnishes services 
billed by a CAH receiving payment under Method II (as described in 
Sec.  413.70(b)(3) of this chapter) is considered to be hospital-based 
if 90 percent or more of his or her covered professional services are 
furnished in sites of service identified by the codes used in the HIPPA 
standard transaction as an inpatient hospital or emergency room setting 
in each of the Federal fiscal years 2012 and 2013.
* * * * *
0
28. Section 495.104 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  495.104  Incentive payments to eligible hospitals.

* * * * *
    (c) * * *
    (2) Interim and final payments. CMS uses data on hospital acute 
care inpatient discharges, Medicare Part A acute care inpatient bed-
days, Medicare Part C acute care inpatient bed-days, and total acute 
care inpatient bed-days from the latest submitted 12-month hospital 
cost report as the basis for making preliminary incentive payments. 
Final payments are determined at the time of settling the first 12-
month hospital cost report for the hospital fiscal year that begins on 
or after the first day of the payment year, and settled on the basis of 
data from that cost reporting period. In cases where there is no 12-
month hospital cost report period beginning on or after the first day 
of the payment year, final payments may be determined and settled on 
the basis of data from the most recently submitted 12-month hospital 
cost report.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778 
(Medical Assistance)

    Dated: June 18, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 26, 2013.
Kathleen Sebelius,
Secretary.
[FR Doc. 2013-16555 Filed 7-8-13; 4:15 pm]
BILLING CODE 4120-01-P