Federal Register, Volume 78 Issue 237 (Tuesday, December 10, 2013)

[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Rules and Regulations]
[Pages 74826-75200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28737]

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Vol. 78

Tuesday,

No. 237

December 10, 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.

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; Final Rule

Federal Register / Vol. 78 , No. 237 / Tuesday, December 10, 2013 /
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1601-FC]
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: Final rule with comment period and final rules.

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SUMMARY: This final rule with comment period revises the Medicare
hospital outpatient prospective payment system (OPPS) and the Medicare
ambulatory surgical center (ASC) payment system for CY 2014 to
implement applicable statutory requirements and changes arising from
our continuing experience with these systems. In this final rule with
comment period, we describe the changes to the amounts and factors used
to determine the payment rates for Medicare services paid under the
OPPS and those paid under the ASC payment system. In addition, this
final rule with comment period updates and refines the requirements for
the Hospital Outpatient Quality Reporting (OQR) Program, the ASC
Quality Reporting (ASCQR) Program, and the Hospital Value-Based
Purchasing (VBP) Program.
In the final rules in this document, we are finalizing 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: Effective Dates: The final rule with comment period and final
rules in this document are effective on January 1, 2014, with the
exception of 42 CFR 412.167; 42 CFR 486.316 and 486.318; 42 CFR 475.1
and 475.100 through 475.107; and 42 CFR 495.4 and 495.104, which are
effective on January 27, 2014.
Implementation Date: The implementation date for the policies
specified under section II.A.2.e. of the final rule with comment period
relating to comprehensive Ambulatory Payment Classification (APC)
groups is January 1, 2015.
Comment Period: We will consider comments on the payment
classification assigned to HCPCS codes identified in Addenda B, AA, and
BB of this final rule with comment period with the ``NI'' comment
indicator, and on other areas specified throughout this rule, received
at one of the addresses provided in the ADDRESSES section no later than
5 p.m. EST on January 27, 2014.
Application Deadline--New Class of New Technology Intraocular
Lenses: Request for review of applications for a new class of new
technology intraocular lenses must be received by 5 p.m. EST on March
3, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1601-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to http://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address only: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1601-FC, P.O. Box 8013,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1601-FC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-7195 in advance to schedule
your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.
Applications for a new class of new technology intraocular lenses:
Requests for review of applications for a new class of new technology
intraocular lenses must be sent by regular mail to: ASC/NTIOL, Division
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid
Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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, platelet rich plasma, 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.

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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 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 are 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, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L.
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAP Competitive Acquisition Program
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, Pub. L. 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, Pub. L. 92-463
FDA ood 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, Pub. L.
111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium

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HIPAA Health Insurance Portability and Accountability Act of 1996,
Pub. L. 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 the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L.
110-173
MPFS Medicare Physician Fee Schedule
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, Pub. L. 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
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], Pub. L. 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 Document
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 2014 OPPS/ASC
Proposed Rule
G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule
with Comment Period
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative Payment Weights
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
2. Data Development Process and Calculation of Costs Used for
Ratesetting
a. Claims Preparation
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure
Claims
(1) Splitting Claims
(2) Creation of ``Pseudo'' Single Procedure Claims
c. Completion of Claim Records and Geometric Mean Cost
Calculations
(1) General Process
(2) Recommendations of the Panel Regarding Data Development
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Brachytherapy Source Payment
e. Establishment of Comprehensive APCs
(1) Definitions and General Principles
(2) Comprehensive APCs for Device-Dependent Services
f. Calculation of Composite APC Criteria-Based Costs
(1) Extended Assessment and Management Composite APCs (APCs 8002
and 8003)
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(APC 8001)
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite
APC (APC 8000)
(4) Mental Health Services Composite APC (APC 0034)
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006,
8007, and 8008)
(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
3. Changes to Packaged Items and Services
a. Summary of CY 2014 Final Packaging Policies
b. Background
c. Basis for New Packaging Policies for CY 2014
d. 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 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
e. Clarification Regarding Supplies That Are Packaged in the
OPPS
f. 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
4. Calculation of OPPS Scaled Payment Weights
B. Conversion Factor Update
C. Wage Index Changes
D. Statewide Average Default CCRs
E. Adjustment for Rural SCHs and EACHs under Section
1833(t)(13)(B) of the Act
F. OPPS Payment to Certain Cancer Hospitals Described by Section
1886(d)(1)(B)(v) of the Act
1. Background
2. Payment Adjustment for Certain Cancer Hospitals for CY 2014
G. Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Final Outlier Calculation
H. Calculation of an Adjusted Medicare Payment from the National
Unadjusted Medicare Payment
I. Beneficiary Copayments
1. Background
2. OPPS Copayment Policy
3. Calculation of an Adjusted Copayment Amount for an APC Group

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III. OPPS Ambulatory Payment Classification (APC) Group Policies
A. OPPS Treatment of New CPT and Level II HCPCS Codes
1. Treatment of New CY 2013 Level II HCPCS and CPT Codes
Effective April 1, 2013 and July 1, 2013 for Which We Solicited
Public Comments in the CY 2014 OPPS/ASC Proposed Rule
2. 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 Are Soliciting Public
Comments in this CY 2014 OPPS/ASC Final Rule with Comment Period
B. OPPS Changes--Variations within APCs
1. Background
2. Application of the 2 Times Rule
3. Exceptions to the 2 Times Rule
C. OPPS APC-Specific Policies
1. Cardiovascular and Vascular Services
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
b. Subcutaneous Defibrillator (APC 0107)
c. Thrombolytic Therapy (APC 0621)
d. Vascular Ligation (APCs 0091 and 0092)
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation (APC 0340)
b. Transoral Incisionless Fundoplication (APC 0422)
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC 0423)
b. Anoscopy with Directed Submucosal Injection (APC 0150)
4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
b. Joint Stabilization (APC 0052)
5. Nervous System Services
a. Chemodenervation (APCs 0161 and 0204)
b. Nerve Conduction Studies (APCs 0216 and 0218)
c. Parasympathetic Function and Sympathetic Function (APC 0215)
d. Epidural Lysis (APCs 0203 and 0207)
e. Cerebrospinal Shunt Reprogramming (APC 0692)
6. Ocular Services
a. Retinal Prosthesis (APC 0672)
b. Tear Film (APC 0230)
7. Imaging
a. Myocardial Sympathetic Innervation Imaging (APC 0398)
b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
8. Radiology Oncology
a. Intraoperative Radiation Therapy (IORT) Related Services
(APCs 0028 and 0065)
b. Proton Beam Therapy (APCs 0664 and 0667)
c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
b. Direct Laryngoscopy (APC 0074)
c. Pulmonary Rehabilitation Services (APC 0077)
10. Other Services
a. Balloon Sinus Dilation (APCs 0074 and 0075)
b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
d. Flow Cytometry (APC 0443)
e. Hormone Pellet Implant (APC 0420)
f. Peyronie Disease Injection Procedure (APC 0164)
g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
h. Platelet Rich Plasma (PRP) (APC 0186)
i. Payment for Radioisotopes Derived From Non-Highly Enriched
Uranium (HEU) Sources (APC 1442)
IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
a. Background
b. CY 2014 Policy
2. Provisions for Reducing Transitional Pass-Through Payments to
Offset Costs Packaged into APC Groups
a. Background
b. CY 2014 Policy
3. Changes to Device Pass-Through Criteria: Integral and
Subordinate Criterion
B. Adjustment to OPPS Payment for No Cost/Full Credit and
Partial Credit Devices
1. Background
2. Policy for CY 2014
V. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. OPPS Transitional Pass-Through Payment for Additional Costs
of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Drugs and Biologicals with Expiring Pass-Through Status in CY
2013
3. Drugs, Biologicals, and Radiopharmaceuticals with New or
Continuing Pass-Through Status in CY 2014
4. 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 When Used in a Surgical Procedure to
Offset Costs Packaged into APC Groups
a. Background
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
c. Payment Offset Policy for Contrast Agents
d. Payment Offset Policy for Products Packaged According to the
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 When Used in a
Surgical Procedure
B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
without Pass-Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
b. Cost Threshold for Packaging of Payment for HCPCS Codes That
Describe Certain Drugs, Certain Biologicals, and Therapeutic
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. Packaging Determination for HCPCS Codes That Describe the
Same Drug or Biological But Different Dosages
3. Payment for Drugs and Biologicals without Pass-Through Status
That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable and Packaged Drugs and Biologicals
b. CY 2014 Payment Policy
4. Payment Policy for Therapeutic Radiopharmaceuticals
5. Payment for Blood Clotting Factors
6. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital
Claims Data
C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
A. Background
B. Payment for Hospital Outpatient Clinic and Emergency
Department Visits
C. Payment for Critical Care Services
VIII. Payment for Partial Hospitalization Services
A. Background
B. PHP APC Update for CY 2014
C. Discussion of Possible Future Initiatives, Request for Public
Comments, and Summary of Public Comments Received
D. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Changes to the Inpatient List
X. 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
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. Proposed and Final Policy
4. Technical Correction
D. Collecting Data on Services Furnished in Off-Campus Provider-
Based Departments
XI. CY 2014 OPPS Payment Status and Comment Indicators
A. CY 2014 OPPS Payment Status Indicator Definitions
B. CY 2014 Comment Indicator Definitions
XII. 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

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Covered Surgical Procedures and Covered Ancillary Services
B. Treatment of New Codes
1. Process for Recognizing New Category I and Category III CPT
Codes and Level II HCPCS Codes
2. Treatment of New Level II HCPCS Codes and Category III CPT
Codes Implemented in April 2013 and July 2013 for Which We Solicited
Public Comments in the CY 2014 OPPS/ASC Proposed Rule
3. Process for New Level II HCPCS Codes and Category I and
Category III CPT Codes for Which We Are Soliciting Public Comments
in This CY 2014 OPPS/ASC Final Rule with Comment Period
C. Update to the Lists of ASC Covered Surgical Procedures and
Covered Ancillary Services
1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
b. Covered Surgical Procedures Designated as Office-Based
(1) Background
(2) Changes for CY 2014 to Covered Surgical Procedures
Designated as Office-Based
c. ASC Covered Surgical Procedures Designated as Device-
Intensive
(1) Background
(2) Changes to List of Covered ASC Surgical Procedures
Designated as Device-Intensive for CY 2014
d. Adjustment to ASC Payments for No Cost/Full Credit and
Partial Credit Devices
e. ASC Treatment of Surgical Procedures Removed from the OPPS
Inpatient List for CY 2014
2. Covered Ancillary Services
D. ASC Payment for Covered Surgical Procedures and Covered
Ancillary Services
1. ASC Payment for Covered Surgical Procedures
a. Background
b. Update to ASC Covered Surgical Procedure Payment Rates for CY
2014
c. Waiver of Coinsurance and Deductible for Certain Preventive
Services
d. Payment for Cardiac Resynchronization Therapy Services
e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy
Composite
2. Payment for Covered Ancillary Services
a. Background
b. Payment for Covered Ancillary Services for CY 2014
E. New Technology Intraocular Lenses (NTIOLs)
1. NTIOL Application Cycle
2. Requests to Establish New NTIOL Classes for CY 2015
3. Payment Adjustment
4. Announcement of CY 2014 Deadline for Submitting Requests for
CMS Review of Applications for a New Class of NTIOLs
F. ASC Payment and Comment Indicators
1. Background
2. ASC Payment and Comment Indicators
G. Calculation of the ASC Conversion Factor and the ASC Payment
Rates
1. Background
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2014 and
Future Years
b. Updating the ASC Conversion Factor
3. Display of 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. Removal of Two Chart-Abstracted Measures from the Hospital
OQR Program
a. Removal of OP-19: Transition Record with Specified Elements
Received by Discharged ED Patients
b. 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. 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/Polyp Surveillance: Appropriate Follow-up Interval
for Normal Colonoscopy in Average Risk Patients (NQF 0658)
4. Endoscopy/Polyp 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. Payment Reduction for Hospitals That Fail to Meet the
Hospital OQR Program Requirements for the CY 2014 Payment Update
1. Background
2. Reporting Ratio Application and Associated Adjustment Policy
for CY 2014
H. 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 Changes on Data Submission for CY 2015 and CY 2016
Payment Determinations and Subsequent Years
c. General Requirements
d. Chart-Abstracted Measure Requirements for the CY 2015 Payment
Determination and Subsequent Years
e. Claims-Based Measure Data Requirements for the CY 2015
Payment Determination and Subsequent Years
f. Data Submission Requirements for Measure Data Submitted via
Web-Based Tool for the CY 2016 Payment Determination and Subsequent
Years
g. 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 the CY
2015 Payment Determination and 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. 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. Additional CMS Appeals Review Process
1. Statutory Basis
2. Independent CMS Review
C. Performance and Baseline Periods for Certain Outcome Measures
for the FY 2016 Hospital VBP Program
XV. 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. Additional ASCQR Program Quality Measures for the CY 2016
Payment Determination and Subsequent Years

[[Page 74831]]

a. Complications Within 30 Days Following Cataract Surgery
Requiring Additional Surgical Procedures
b. Endoscopy/Polyp Surveillance: Appropriate Follow-Up for
Normal Colonoscopy in Average Risk Patients (NQR 0658)
c. Endoscopy/Polyp 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 Each Payment Determination Year
D. Administrative Requirements
1. Requirements Regarding QualityNet Account and Security
Administrator
a. Background for the CY 2014 and CY 2015 Payment Determinations
b. Requirements for the CY 2016 Payment Determination and
Subsequent Years
2. Requirements Regarding Participation Status
a. Background for the CY 2014 Payment Determination and
Subsequent Years
b. 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. 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. Requirements for the CY 2016 Payment Determination and
Subsequent Years
5. Requirements for Data Submitted Via a CMS Online Data
Submission Tool
a. Background for the CY 2015 Payment Determination and
Subsequent Years
b. Requirements for the CY 2016 Payment Determination and
Subsequent Years for Measures Currently Finalized
c. Requirements for the CY 2016 Payment Determination and
Subsequent Years for New Measures with Data Submission Via a CMS
Web-Based Tool
6. 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
b. 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. Additional Criterion for Extraordinary Circumstance Waiver or
Extension for CY 2014 and Subsequent Years
9. ASCQR Program Reconsideration Procedures for the CY 2014
Payment Determination and Subsequent Years
XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for
Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)
A. Background
B. Regulatory Changes
XVII. Final Rule: Revisions of the Quality Improvement Organization
(QIO) Regulations
A. Legislative History
B. Basis for Proposals and Finalized Policies
C. Changes to the Nomenclature and Regulations under 42 CFR
Parts 475 and 476
1. Nomenclature Changes
2. Addition and Revision of Definitions
3. Scope and Applicability of Subpart C of Part 475
4. 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 and
Quality Improvement Initiatives (Sec. 475.102 and Sec. 475.103)
c. Prohibitions on Eligibility as a QIO (Sec. Sec. 475.105 and
475.106)
5. QIO Contract Awards (Sec. 475.107)
XVIII. Final Rule: 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: Final Rule
A. Matters Not Subject to Administrative or Judicial Review
(Sec. 405.1804)
1. Background
2. Technical Conforming Change
B. Clarification of Reopening of Predicate 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. Changes to the Outcome Measure Requirement for OPOs
2. 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 Payment
Determinations and subsequent Years
b. Chart-Abstracted Measures for the CY 2016 Payment
Determination and Subsequent Years
c. Web-Based Measures Submitted Directly to CMS for the CY 2016
Payment Determination and Subsequent Years
d. NHSN HAI Measure for the CY 2016 Payment Determination and
Subsequent Years
e. Hospital OQR Program Validation Requirements for the CY 2015
Payment Determination and Subsequent Years
f. 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 Determinations
c. Program Administrative Requirements and QualityNet Accounts;
Extraordinary Circumstance and Extension or Waiver 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 OPPS and ASC Payment Provisions
4. Detailed Economic Analyses
a. Estimated Effects of Final OPPS Changes in This Final Rule
With Comment Period
(1) Limitations of Our Analysis
(2) Estimated Effects of OPPS Changes on Hospitals
(3) Estimated Effects of OPPS Changes on CMHCs
(4) Estimated Effect of OPPS Changes on Beneficiaries
(5) Estimated Effects of OPPS Changes on Other Providers
(6) Estimated Effects of OPPS Changes on the Medicare and
Medicaid Programs
(7) Alternative OPPS Policies Considered
b. Estimated Effects of CY2014 ASC Payment System Final Policies
(1) Limitations of Our Analysis
(2) Estimated Effects of CY2014ASC Payment System Final Policies
on ASCs
(3) Estimated Effects of ASC Payment System Final Policies on
Beneficiaries
(4) Alternative ASC Payment Policies Considered
c. Accounting Statements and Tables
d. Effects of Requirements for the Hospital OQR Program
e. Effects of CY2014 Policies for the ASCQR Program
f. Effects of Changes to the CfCs for OPOs Relating to the
Outcome Measure Requirement for Recertification
g. Effects of Revisions of the QIO Regulations
h. Effects of Revised Policies Regarding Medicare Fee-for-
Service EHR Incentive Program
B. Regulatory Flexibility Act (RFA) Analysis
C. Unfunded Mandates Reform Act Analysis
D. Conclusion
XXIV. Federalism Analysis
XXV. Waiver of 60-Day Delay of Effective Date

[[Page 74832]]

Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
In the final rule with comment period of this document, we are
updating the payment policies and payment rates for services furnished
to Medicare beneficiaries in hospital outpatient departments and
Ambulatory Surgical Centers (ASCs) beginning January 1, 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 final rule with
comment period. In addition, the final rule with comment period updates
and refines the requirements for the Hospital Outpatient Quality
Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and
the Hospital Value-Based Purchasing (VBP) Program.
In the final rules in this document, we are finalizing 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.
After publication of our annual proposed rule for CY 2014, we
discovered that in applying our established and proposed methodologies
to develop the CY 2014 proposed OPPS and ASC payment rates, specific
cost estimation errors occurred in the OPPS modeling process. The
errors resulting from the cost modeling used to develop the CY 2014
proposed OPPS payment rates were isolated to a few specific ambulatory
payment classifications (APCs). However, because the OPPS is a budget
neutral payment system, there was a resulting impact on other proposed
OPPS payment rates. In addition, because the ASC payment rates are
based on the OPPS relative payment weights for the majority of items
and services that are provided at ASCs, corrections to the proposed CY
2014 OPPS relative payment weights also had an impact on the proposed
CY 2014 ASC relative payment weights and ASC payment rates. Therefore,
we released corrected data files on August 28, 2013, and extended the
comment period to September 16, 2013, on the technical corrections
noted in the correcting document published in the Federal Register on
September 6, 2013 (78 FR 54842). This final rule with comment period
refers to the corrected OPPS and ASC information.
2. Summary of the Major Provisions
OPPS Update: For CY 2014, we are increasing the
payment rates under the OPPS by an Outpatient Department (OPD) fee
schedule increase factor of 1.7 percent. This increase is based on the
final hospital inpatient market basket percentage increase of 2.5
percent for inpatient services paid under the hospital inpatient
prospective payment system (IPPS), minus the multifactor productivity
(MFP) adjustment of 0.5 percentage points, and minus a 0.3 percentage
point adjustment required by the Affordable Care Act. Under this final
rule with comment period, we estimate that total payments for CY 2014,
including beneficiary cost-sharing, to the approximately 4,100
facilities paid under the OPPS (including general acute care hospitals,
children's hospitals, cancer hospitals, and community mental health
centers (CMHCs)), will be approximately $50.4 billion, an increase of
approximately $4.372 billion compared to CY 2013 payments, or $600
million excluding our estimated changes in enrollment, utilization, and
case-mix.
We are continuing to implement the statutory 2.0 percentage point
reduction in payments for hospitals failing to meet the hospital
outpatient quality reporting requirements, by applying a reporting
factor of 0.980 to the OPPS payments and copayments for all applicable
services.
Rural Adjustment: We are continuing the adjustment of 7.1
percent to the OPPS payments to certain rural sole community hospitals
(SCHs), including essential access community hospitals (EACHs). This
adjustment will apply to all services paid under the OPPS, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to cost.
Cancer Hospital Payment Adjustment: For CY 2014, we are
continuing our policy to provide additional payments to cancer
hospitals so that the hospital's payment-to-cost ratio (PCR) with the
payment adjustment is equal to the weighted average PCR for the other
OPPS hospitals using the most recent submitted or settled cost report
data. Based on those data, a target PCR of 0.89 will be used to
determine the CY 2014 cancer hospital payment adjustment to be paid at
cost report settlement. That is, the payment amount associated with the
cancer hospital payment adjustment will be the additional payment
needed to result in a PCR equal to 0.89 for each cancer hospital.
Payment of Drugs, Biologicals, and Radiopharmaceuticals:
For CY 2014, payment for the acquisition and pharmacy overhead costs of
separately payable drugs and biologicals that do not have pass-through
status will be set at the statutory default of average sales price
(ASP) plus 6 percent.
Packaging Policies: Beginning in CY 2014, we are
unconditionally or conditionally packaging the following five
categories of items and services and adding them to the list of OPPS
packaged items and services in 42 CFR 419.2(b):
(1) Drugs, biologicals, and radiopharmaceuticals used in a
diagnostic test or procedure;
(2) Drugs and biologicals when used as supplies in a surgical
procedure;
(3) Certain clinical diagnostic laboratory tests;
(4) Procedures described by add-on codes; and
(5) Device removal procedures.
Further details are provided in section II.A.3. of this document.
Establishing Comprehensive APCs: In order to improve the
accuracy and transparency of our payment for certain device-dependent
services, we are finalizing our policy to establish 29 comprehensive
APCs to prospectively pay for the most costly hospital outpatient
device-dependent services, but we are delaying implementation of this
policy until CY 2015. We have defined 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. For
services that trigger a comprehensive APC payment, the comprehensive
APC will treat all individually reported codes on the claim as
representing components of the comprehensive service, resulting in a
single prospective payment based on the cost of all individually
reported codes on the claim. We will 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. We also have modified our methodology
to make larger payments for many complex and costly multiple device
procedures. Due to our decision to delay

[[Page 74833]]

implementation until CY 2015 for operational reasons, we are inviting
comment on this section of the final rule. We have published tables in
the rule to demonstrate how this policy would have been implemented in
CY 2014, and we will be considering comments as we update the policy
for CY 2015 to account for changes that may occur in the CY 2013 claims
data.
Payment of Hospital Outpatient Visits: For CY 2014, we are
finalizing our proposal to replace the current five levels of visit
codes for each clinic visit with a new alphanumeric Level II HCPCS code
representing a single level of payment for clinic visits. We are
finalizing our proposal to assign the new alphanumeric Level II HCPCS
to newly created APC 0634 with CY 2014 OPPS payment rates based on the
total mean costs of Level 1 through Level 5 clinic visit codes obtained
from CY 2012 OPPS claims data. For CY 2014, we are not finalizing our
proposal to replace the current five levels of visit codes for each
Type A ED, and Type B ED visits with two new alphanumeric Level II
HCPCS codes representing a single level of payment for two types of ED
visits, respectively.
OPPS Nonrecurring Policy Changes: The enforcement
instruction for the supervision of outpatient therapeutic services
furnished in CAHs and small rural hospitals will expire at the end of
CY 2013. In addition, we are amending the conditions of payment for
``incident to'' hospital or CAH outpatient services (sometimes referred
to as hospital or CAH ``therapeutic'' services) to explicitly require
that individuals furnishing these services be in compliance with State
law. In the CY 2014 OPPS/ASC proposed rule, we solicited 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, which we discuss in this final rule with
comment period. Finally, we refer readers to the CY 2014 Medicare
Physician Fee Schedule (MPFS) final rule (CMS-1600-F) to review
Medicare's policies on application of 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 increasing payment rates under the ASC payment system by 1.2
percent. This increase is based on a projected CPI-U update of 1.7
percent minus a multifactor productivity adjustment required by the
Affordable Care Act that is projected to be 0.5 percent. Based on this
update, we estimate that total payments to ASCs (including beneficiary
cost-sharing and estimated changes in enrollment, utilization, and
case-mix) for CY 2014 will be approximately $3.992 billion, an increase
of approximately $143 million compared to estimated CY 2013 payments.
Hospital Outpatient Quality Reporting (OQR) Program: For
the Hospital OQR Program, we are adopting four new quality measures for
the CY 2016 payment determination and subsequent years: Three 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
removing two measures and are codifying administrative procedures.
Ambulatory Surgical Center Quality Reporting (ASCQR)
Program: For the ASCQR Program, we are adopting three new quality
measures for the CY 2016 payment determination and subsequent years
where data collection will begin in CY 2014. We are collecting
aggregate data (numerators, denominators, and exclusions) on all ASC
patients for these four chart-abstracted measures via an online Web-
based tool located on a CMS Web page. We also are adopting, for the CY
2016 payment determination and subsequent years' payment
determinations, requirements for a QualityNet account and security
administrator, facility participation, a minimum threshold and minimum
volume for claims-based measures, and data collection and submission
for new measures and for certain previously finalized measures.
Changes to Organ Procurement Organization (OPO)
Regulations. In section XVI. of this document, we are finalizing our
proposals to modify the current requirement that OPOs meet all three
outcome measures set forth in 42 CFR 486.318. Specifically, the final
rule provides that an OPO must meet two out of the three outcome
measures. This change to the outcome measures requirement will allow
those OPOs that fail only one outcome measure to avoid automatic
decertification in the 2014 recertification cycle.
Revisions to the Quality Improvement Organizations
Regulations. We are updating 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. The existing regulations at 42 CFR Part 475 include
definitions and standards governing eligibility and the award of
contracts to QIOs. In this final rule with comment period, we are
finalizing 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 Parts 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.
Changes to the Medicare Fee-for-Service Electronic Health
Record (EHR) Incentive Program. We are revising the regulations to
provide a special method for making hospital-based determinations for
2014 only in the cases of those eligible professionals (EPs) who
reassign their benefits to Method II CAHs. Previously, 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. Finalizing the adoption
of our method for 2014 will allow us to begin making payments based on
CAH II one year earlier than we would be able to do under existing
regulations. We also are adopting 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 final rule with comment
period, we set forth a detailed analysis of the regulatory and
federalism impacts that the changes will have on affected entities and
beneficiaries. Key estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
Table 55 in section XXIII. of this final rule with comment period
displays the distributional impact of all the OPPS changes on various
groups of hospitals and CMHCs for CY 2014 compared to all

[[Page 74834]]

estimated OPPS payments in CY 2013. We estimate that the policies in
this final rule will result in a 1.8 percent overall increase in OPPS
payments to providers. We estimate that the increase in OPPS
expenditures, including beneficiary cost-sharing, will be approximately
$600 million, not taking into account potential changes in enrollment,
utilization, and case-mix. Taking into account estimated spending
changes that are attributable to these factors, we estimate an increase
of approximately $4.372 billion in OPPS expenditures, including
beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS
expenditures. We estimate that total OPPS payments, including
beneficiary cost-sharing, will be $50.4 billion for CY 2014.
We estimated the isolated impact of our OPPS policies on CMHCs
because CMHCs are only paid for partial hospitalization services under
the OPPS. Continuing the provider-specific structure that we adopted
beginning in CY 2011 and basing payment fully on the type of provider
furnishing the service, we estimate a 1.8 percent increase in CY 2014
payments to CMHCs relative to their CY 2013 payments.
(2) Impacts of Policies Other Than Outpatient Laboratory Test Packaging
We estimate that our final policies other than packaging outpatient
laboratory tests will have a less significant impact than we proposed
for CY 2014, as several proposed policies were not finalized. These
final policies include packaging drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure (stress agents and Cysview), drugs and
biologicals that function as supplies when used in a surgical procedure
(skin substitutes), certain procedures described by add-on codes, and
device removal procedures; new cost report data for estimating CT and
MRI relative weights; and revisions to coding and APC structure for
stereotactic radiosurgery.
(3) Impacts of Packaging Outpatient Laboratory Tests
Packaging laboratory services modestly reduces payment to rural and
major teaching hospitals, as they will no longer receive separate
payment for common laboratory tests.
(4) Impacts of the Updated Wage Indices
Adjustments to the wage indices other than the frontier State wage
adjustment will not significantly affect most hospitals and CMHCs. The
nonbudget neutral frontier wage index adjustment will result in payment
increases to rural and urban hospitals in West North Central and
Mountain States.
(5) Impacts of the Rural Adjustment and the Cancer Hospital Payment
Adjustment
There are no significant impacts of our CY 2014 payment policies
for hospitals that are eligible for the rural adjustment or for the
cancer hospital payment adjustment. We are not making any change in
policies for determining the rural and cancer hospital payment
adjustments, and the adjustment amounts do not significantly impact the
budget neutrality adjustments for these policies.
(6) Impacts of the OPD Fee Schedule Increase Factor
We estimate that, for many hospitals, the application of the OPD
fee schedule increase factor of 1.7 percent to the conversion factor
for CY 2014 will mitigate the small negative impacts of the budget
neutrality adjustments. While most classes of hospitals will receive an
increase that is in line with the 1.7 percent overall increase after
the update is applied to the budget neutrality adjustments, some
hospitals will receive smaller but still generally positive overall
increases.
b. Impacts of the ASC Payment Update
For impact purposes, the procedures on the ASC list of covered
surgical procedures are aggregated into surgical specialty groups using
CPT and HCPCS code range definitions. The percentage change in
estimated total payments by specialty groups under the CY 2014 payment
rates compared to estimated CY 2013 payment rates ranges between -11
percent for ancillary items and services and 14 percent for respiratory
system procedures.
c. Impacts of the Hospital OQR Program
We do not expect our CY 2014 final 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 CY 2014 final 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 QIO Program Changes
We estimate the effects of the 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 and
subsequently the 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.''

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

[[Page 74835]]

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; the Middle Class Tax Relief and Job Creation Act of 2012
(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and 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 final rule with comment
period. Section 1833(t)(1)(B) of the Act provides for payment under the
OPPS for hospital outpatient services designated by the Secretary
(which includes partial hospitalization services furnished by CMHCs),
and certain inpatient hospital services 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 under the Clinical Laboratory
Fee Schedule (CLFS); 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 final rule with comment period modifies 42 CFR 419.22 and includes
in the OPPS some of these previously 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 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
Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 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

[[Page 74836]]

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 meetings taking
place on March 11, 2013 and August 26-27, 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 at the August 2013 meeting that the subcommittees continue.
We accepted this recommendation.
Discussions of the other recommendations made by the Panel at the
March 2013 and August 2013 Panel meetings are included in the sections
of this final rule that are specific to each recommendation. For
discussions of earlier Panel meetings and recommendations, we refer
readers to previously published OPPS/ASC proposed and final rules, the
CMS Web site mentioned earlier in this section, and the FACA database
at: http://fido.gov/facadatabase/public.asp.

F. Public Comments Received in Response to the CY 2014 OPPS/ASC
Proposed Rule

We received approximately 2,677 timely pieces of correspondence on
the CY 2014 OPPS/ASC proposed rule that appeared in the Federal
Register on July 19, 2013 (78 FR 43534) and the correcting document
published in the Federal Register on September 6, 2013 (78 FR 54842).
This final rule with comment period refers to the corrected information
wherever applicable. We note that we received some public comments that
were outside the scope of the proposed rule and that are not addressed
in this final rule with comment period. Summaries of the public
comments to the proposed rule and the correcting document that are
within the scope of the proposed rule and our responses are set forth
in the various sections of this final rule with comment period under
the appropriate subject-matter headings.

G. Public Comments Received on the CY 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
are set forth in various sections of this final rule with comment
period under the appropriate subject-matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
not less often than annually and revise the relative payment weights
for APCs. In the April 7, 2000 OPPS final rule with comment period (65
FR 18482), we explained in detail how we calculated the relative
payment weights that were implemented on August 1, 2000 for each APC
group.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43544), for the CY
2014 OPPS, we proposed 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
proposed to recalibrate the relative payment weights for each APC based
on claims and cost report data for hospital outpatient department
(HOPD) services, using the most recent available data to

[[Page 74837]]

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
this final rule with comment period, for the purpose of recalibrating
the final APC relative payment weights for CY 2014, we used
approximately 158 million final action claims (claims for which all
disputes and adjustments have been resolved and payment has been made)
for HOPD services furnished on or after January 1, 2012, and before
January 1, 2013. For exact counts of claims used, we refer readers to
the claims accounting narrative under supporting documentation for the
CY 2014 OPPS/ASC proposed rule and this final rule with comment period
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
Of the approximately 158 million final action claims for services
provided in hospital outpatient settings used to calculate the CY 2014
OPPS payment rates for this final rule with comment period,
approximately 125 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 125 million claims, approximately 6 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 119 million claims, we created approximately 125 million
single records, of which approximately 80 million were ``pseudo''
single or ``single session'' claims (created from approximately 31
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 124 million single bills for ratesetting. As
described in section II.A.2. of this final rule with comment period,
our data development process is designed with the goal of using
appropriate cost information in setting the APC relative payment
weights. The bypass process is described in section II.A.1.b. of this
final rule with comment period. This section discusses how we develop
``pseudo'' single procedure claims (as defined below), with the
intention of using more appropriate data from the available claims. In
some cases, the bypass process allows us to use some portion of the
submitted claim for cost estimation purposes, while the remaining
information on the claim continues to be unusable. Consistent with the
goal of using appropriate information in our data development process,
we only use claims (or portions of each claim) that are appropriate for
ratesetting purposes.
The final APC relative weights and payments for CY 2014 in Addenda
A and B to this final rule with comment period (which are available via
the Internet on the CMS Web site) were calculated using claims from CY
2012 that were processed through June 30, 2013. While prior to CY 2013
we had 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 proposed and are using 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. Use of Single and Multiple Procedure Claims
For CY 2014, in general, as we proposed, we are continuing 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 continuing 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 multiple imaging services through CY 2013, and
as we proposed, we are continuing this policy for CY 2014. In addition,
as we proposed, we are further expanding our packaging policies for CY
2014. We refer readers to section II.A.2.f. of this final rule with
comment period for a discussion of the use of claims in modeling the
costs for composite APCs and to section II.A.3. of this final rule with
comment period for a discussion of our packaging policies for CY 2014.
As we proposed, we are continuing 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 final
rule with comment period, approximately 80 million ``pseudo'' single
procedure claims, including

[[Page 74838]]

multiple imaging composite ``single session'' bills (we refer readers
to section II.A.2.f.(5) of this final rule with comment period for
further discussion), to add to the approximately 43 million ``natural''
single procedure claims.
For CY 2014, we proposed to bypass 179 HCPCS codes that were
identified in Addendum N to the CY 2014 OPPS/ASC 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
proposed to continue to bypass all of the HCPCS codes on the CY 2013
OPPS bypass list, with the exception of HCPCS codes that we proposed to
delete for CY 2014, which were listed in Table 1 of the proposed rule
(78 FR 43546). We also proposed to remove HCPCS codes that are not
separately paid under the OPPS because the purpose of the bypass list
is to obtain more data for those codes relevant to ratesetting. Some of
the codes we proposed to remove from the CY 2014 bypass list are
affected by the CY 2014 packaging final policy, discussed in section
II.A.3. of this final rule with comment period. In addition, we
proposed 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 final
policy to continue to develop OPPS relative payment weights based on
geometric mean costs, we also proposed 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) was open to public comment in the CY 2014 OPPS/
ASC proposed rule. Because we must make some assumptions about
packaging in the multiple procedure claims in order to assess a HCPCS
code for addition to the bypass list, we assumed that the
representation of packaging on ``natural'' single procedure claims for
any given code is comparable to packaging for that code in the multiple
procedure claims. As we proposed, the criteria for the bypass list are:
There are 100 or more ``natural'' single procedure claims
for the code. This number of single procedure claims ensures that
observed outcomes are sufficiently representative of packaging that
might occur in the multiple claims.
Five percent or fewer of the ``natural'' single procedure
claims for the code have packaged costs on that single procedure claim
for the code. This criterion results in limiting the amount of
packaging being redistributed to the separately payable procedures
remaining on the claim after the bypass code is removed and ensures
that the costs associated with the bypass code represent the cost of
the bypassed service.
The geometric mean cost of packaging observed in the
``natural'' single procedure claims is equal to or less than $55. This
criterion also limits the amount of error in redistributed costs.
During the assessment of claims against the bypass criteria, we do not
know the dollar value of the packaged cost that should be appropriately
attributed to the other procedures on the claim. Therefore, ensuring
that redistributed costs associated with a bypass code are small in
amount and volume protects the validity of cost estimates for low cost
services billed with the bypassed service.
We note that, as we did for CY 2013, we proposed 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 proposed 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 proposed 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 remains for CY 2014 at $55
($54.73 rounded to $55, the nearest $5 increment). Therefore, we
proposed 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 proposed to continue to include on the bypass list
HCPCS codes that CMS medical advisors believe have minimal associated
packaging based on their clinical assessment of the complete CY 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 proposed to continue to include certain HCPCS codes
on the bypass list in order to purposefully direct the assignment of
packaged costs to a companion code where services always appear
together and where there would otherwise be few single procedure claims
available for ratesetting. For example, we have previously discussed
our reasoning for adding HCPCS code G0390 (Trauma response team
associated with hospital critical care service) 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

[[Page 74839]]

imaging family, thus suppressing the initial use of these codes as
bypass codes. However, these ``overlap bypass codes'' were retained on
the bypass list because, at the end of the ``pseudo'' single processing
logic, we reassessed the claims without suppression of the ``overlap
bypass codes'' under our longstanding ``pseudo'' single process to
determine whether we could convert additional claims to ``pseudo''
single procedure claims. (We refer readers to section II.A.2.b. of this
final rule with comment period for further discussion of the treatment
of ``overlap bypass codes.'') This process also created multiple
imaging composite ``single session'' bills that could be used for
calculating composite APC costs. ``Overlap bypass codes'' that are
members of the multiple imaging composite APCs are identified by
asterisks (*) in Addendum N to this final rule with comment period
(which is available via the Internet on the CMS Web site).
Comment: One commenter supported the CY 2014 proposal to remove
certain codes from the bypass list, in particular for the anatomic
pathology procedures, suggesting that the bypass list undervalues
codes, and artificially lowers their estimated costs, as evidenced by
the estimated increase in payment for some of those services in the
proposed CY 2014 OPPS.
Response: We appreciate the commenter's support. The bypass list
process is used to extract more data from claims that would otherwise
be unusable. We use a variety of information in identifying codes that
could be potentially added to the bypass list each year, including
codes selected based on the empirical criteria, CMS medical advisor
recommendations, and commenter requests. In doing so, we attempt to
ensure that the amount of packaged cost being redistributed as a result
of the process is limited.
As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43545
through 43546), we proposed to remove the bypass codes listed in Table
1 of the proposed rule, several of which were affected by the CY 2014
proposed packaging policy. Codes that would not be separately paid in
the prospective year, whether because of prospective packaging policies
or deletions prior to the claims year, would not be appropriately
applied to the bypass process. Bypassing packaged codes would
potentially remove costs that would otherwise be used in calculating
payment weights for other separately payable procedures, which would be
inappropriate. We note that OPPS payment rates may fluctuate from year
to year based on a variety of other factors, including updated data,
APC recalibration, and increased packaging.
Comment: Several commenters believed that an inconsistency existed
in the application of the bypass policy and the E&M codes. They noted
that visit codes 99211 and 99215 were not included on the proposed CY
2014 OPPS bypass list, and that because those codes were part of the
proposed new visit APC 0634 (Hospital Clinic Visits), which also would
be used in calculating the OPPS relative payment weights, an error had
occurred.
Response: We acknowledge that the proposed CY 2014 OPPS bypass list
did not include several of the E&M codes. With the exception of CPT
code 99205, which we proposed to add to the CY 2014 OPPS bypass list,
the other visit codes already had been on the bypass list in prior
years based on the empirical criteria previously described. Applying
those empirical criteria would continue to exclude the remaining E&M
codes from the bypass list. Therefore, we do not believe that those
exclusions are an error. While we recognize that there are interactions
between the visits policy discussed in section VII. of this final rule
with comment period and the bypass process to derive more information,
those interactions allow for policy interpretations based on the
individual rules and goals being applied. In developing the proposed CY
2014 OPPS bypass list, we tried to retain the principles and guidelines
we have used in the past while accommodating other proposals where they
might interact, such as with the CY 2014 OPPS proposed packaging
policy. We appreciate the meaningful policy comments that stakeholders
provide, especially where these policy intersections occur. We will
continue to review the codes on the bypass list and their
appropriateness, especially in the context of the packaging policies
described in section II.A.3. of this final rule with comment period.
We note that while we proposed that the new CY 2014 visit APC 0634
would be the new base APC on which the scaled weights would be
calculated, it was selected as a baseline because clinic visits are one
of the most frequently performed services in the hospital outpatient
setting, similar to APCs 0606 and 0601 in prior years. However, 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
the weights are scaled for budget neutrality. Therefore, any potential
miscalculations or policy issues related to an APC would generally be
concentrated in those APCs because, for scaling purposes, it would be
similar to selecting any number as a baseline, which would later be
budget neutralized through a weight scaler. The CY 2014 OPPS weight
scaler is discussed in section II.A.4. of this final rule with comment
period.
Comment: One commenter noted that many of the codes on the bypass
list may no longer be appropriate because the proposed CY 2014
packaging policy would potentially cause many of the natural single
major claims, to which CMS applies the empirical criteria, to exceed
the packaged cost thresholds.
Response: We appreciate the issue that the commenter has raised
regarding the application of the bypass list and its interaction with
our proposed CY 2014 policies. In prior years, we generally continued
bypassing codes that were on the previous year's bypass list under the
assumption that packaging, billing, and clinical patterns would
generally remain similar from year to year. As the commenter noted,
under the proposed CY 2014 OPPS packaging policies, the data on which
we identify codes potentially added to the bypass list may change. We
will continue to examine the cost patterns for codes which may be
appropriately added or removed from the bypass list.
After consideration of the public comments we received, we are
adopting as final the proposed ``pseudo'' single claims process. As
discussed earlier in this section, there are interactions between the
application of a bypass list and various other OPPS payment policies.
As a result of modifications to the packaging policies described in
section III. of this final rule with comment period, we are adding
codes that we had originally proposed to remove from the CY 2014 bypass
list back on the CY 2014 final OPPS bypass list. Addendum N to this
final rule with comment period (which is available via the Internet on
the CMS Web site) includes the 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 CY 2012 and used for billing but were deleted for CY 2013.
We retained these deleted bypass codes on the 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

[[Page 74840]]

codes'' that were members of the multiple imaging composite APCs are
identified by asterisks (*) in the third column of Addendum N to this
final rule with comment period. HCPCS codes that we are adding for CY
2014 are identified by asterisks (*) in the fourth column of Addendum
N.
Table 1 of the proposed rule contained the list of codes that we
proposed to remove from the CY 2014 bypass list for CY 2014 (78 FR
43546). Table 1 below contains the list of codes that we are removing
from the final 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
CY 2014 OPPS because these codes are not used for ratesetting through
the bypass process. The list of codes for removal from the bypass list
includes those that will be affected by the CY 2014 OPPS packaging
policy described in section II.A.3. of this final rule with comment
period.
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c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
In the CY 2014 OPPS/ASC proposed rule (78 FR 43547), we proposed to
continue to use the hospital-specific overall ancillary and
departmental cost-to-charge ratios (CCRs) to convert charges to
estimated costs through application of a revenue code-to-cost center
crosswalk. To calculate the APC costs on which the proposed CY 2014 APC
payment rates were based, we calculated hospital-specific overall
ancillary CCRs and hospital-specific departmental CCRs for each
hospital for which we had CY 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 final rule with comment period and which
has been our standard policy since the CY 2005 OPPS.
For the CCR calculation process, we used the same general approach
that we used in developing the final APC rates for CY 2007 and
thereafter, using the revised CCR calculation that excluded the costs
of paramedical education programs and weighted the outpatient charges
by the volume of outpatient services furnished by the hospital. We
refer readers to the CY 2007 OPPS/ASC final rule with comment period
for more information (71 FR 67983 through 67985). We first limited the
population of cost reports to only those hospitals that filed
outpatient claims in CY 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, which, in most cases, were from cost reports with cost
reporting periods beginning in CY 2011. For the proposed rule, we used
the most recently submitted cost reports to calculate the CCRs to be
used to calculate costs for the proposed CY 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 proposed to continue this

[[Page 74841]]

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 the 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,'' a summary of public comments received, and our responses
to those public comments, 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, as we proposed, we are continuing 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 these new cost centers
on the revised Medicare cost report Form CMS 2552-10. As we discussed
in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI
also found that the costs and charges of CT scans, MRIs, and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
concluded that both the IPPS and the OPPS relative payment weights
would better estimate the costs of those services if CMS were to add
standard costs centers for CT scans, MRIs, and cardiac catheterization
in order for hospitals to report separately the costs and charges for
those services and in order for CMS to calculate unique CCRs to
estimate the cost from charges on claims data. We refer readers to the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more
detailed discussion on the reasons for the creation of standard cost
centers for CT scans, MRIs, and cardiac catheterization. The new
standard cost centers for CT scans, MRIs, and cardiac catheterization
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 used to estimate
costs in the CY 2014 OPPS ratesetting process, as discussed in the CY
2014 OPPS/ASC proposed rule (78 FR 43549), 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 believed that there
was a sufficient amount of data in the Form CMS 2552-10 cost reports
from which to generate a meaningful analysis of the impact on CCRs
associated with using the new MRI, CT, and cardiac catheterization cost
centers. We provided the data analyses in Tables 2 and 3 of the
proposed rule (and are republishing them below) demonstrating the
changes as a result of including the distinct CCRs calculated from the
new standard cost centers into the CY 2014 OPPS ratesetting process.
BILLING CODE 4120-01-P

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[[Page 74843]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.263

BILLING CODE 4120-01-C
In our CY 2014 OPPS/ASC proposed rule discussion, we noted that the
estimated changes in geometric mean estimated APC cost of using data
from the new standard cost centers for CT scans and MRIs appeared
consistent with RTI's analysis of cost report and claims data in the
July 2008 final report (pages 5 and 6). RTI concludes that ``in
hospitals that aggregate data for CT scanning, MRI, or 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 noted that there were limited
additional impacts in the implantable device-related APCs from adopting
the new cost report form CMS 2552-10 because we had used data from the
standard cost center for implantable medical devices in CY 2013 OPPS
ratesetting, as discussed above.
As we have indicated in prior rulemaking (77 FR 68223 through
68225), once we have determined that cost report data for the new
standard cost centers were sufficiently available, we would analyze
that data and, if appropriate, we would propose to use the distinct
CCRs for new standard cost centers described above in the calculation
of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC
proposed rule (78 FR 43550), we have conducted our analysis and
concluded that we should develop distinct CCRs for each of the new cost
centers and use them in ratesetting. Therefore, beginning in the CY
2014 OPPS, we proposed 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 final rule with comment period includes the
impacts of calculating the CY 2014 OPPS relative payment weights using
these new standard cost centers.
Comment: Commenters generally supported the proposals to implement
the standard cost center CCRs for implantable devices and cardiac
catheterization. However, many commenters requested that CMS reconsider
the impact of distinct CCRs for MRI and CT scan cost centers before
adopting them. Various commenters opposed the implementation of
distinct MRI and CT scan CCRs, expressing concern that doing so would
result in very low CCRs for these services because of gross hospital
cost reporting practices that allocate capital costs for MRIs and CT
scans across the entire hospital, rather than to the appropriate CT
scan and MRI cost centers. Specifically, commenters reported that some
hospitals currently use an imprecise ``square feet'' allocation
methodology for the costs of large moveable equipment like CT scan and
MRI machines. They indicated that while CMS recommends using two
alternative allocation methods, ``direct assignment'' or ``dollar
value,'' as a more accurate methodology for directly assigning
equipment costs, industry analysis suggests that approximately only
half of the reported cost centers for CT scans and MRIs rely on these
preferred methodologies. The commenters expressed concern that ``square
feet'' allocation results in CCRs that lack face validity because the
proposed CCRs for CT scans and MRIs are less than the proposed CCR for
general diagnostic radiology, inaccurately reflecting the higher
resources used for MRIs and CT scans relative to the less expensive
plain film x-rays. These commenters also noted that, under the CY 2014
OPPS proposed policy of using standard CT and MRI cost center data from
the Medicare cost report Form CMS 2552-10, payment for certain x-rays
would be similar to that

[[Page 74844]]

of CT imaging services, despite their belief that CT services would
cost significantly more to perform. Other commenters suggested that if
CMS were to finalize the new CCRs, CMS should only use cost report data
that meet minimum data quality standards, such as only including: (1)
Cost report data based on dollar value or direct assignment cost
allocation methods; (2) ``plausible'' costs for CT and MRI cost
centers; and (3) data when there is evidence of reclassified costs from
diagnostic radiology to standard CT and MRI cost centers. Commenters
also raised concerns with CMS' analysis and indicated that similarity
of the APC payment impacts in the CY 2014 OPPS proposed rule and those
in the RTI report did not confirm the validity of the proposed CCRs.
Commenters asserted that more time is needed by hospitals to modify
their cost reporting practices, while other commenters suggested that
it was unrealistic to expect hospitals to adopt cost allocation methods
that would improve the accuracy of the cost data at all, due to the
significant expenses involved and the limited benefit to each
individual hospital.
Commenters also noted that the Deficit Reduction Act (DRA) of 2005
sets the technical component (TC) of advanced imaging services under
the Medicare Physician Fee Schedule (MPFS) to the lesser of: (1) The
payment under the MPFS; or (2) the payment under the OPPS. The
commenters stated that, as proposed, the separate cost centers for MRI
and CT scans would result in significant cuts to the MPFS technical
component payments and that such payment cuts could affect beneficiary
access to care. The commenters urged CMS not to use the proposed CCRs
for MRIs and CT scans until the payment effects have been thoroughly
analyzed.
Response: We appreciate the comments regarding the use of standard
cost center CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. We appreciate the support for our proposal to use
distinct CCRs for implantable devices and cardiac catheterization. We
have reviewed the comments objecting to implementation of distinct CCRs
for MRIs and CT scans. We note that the new standard cost centers for
CT scans, MRIs, and cardiac catheterization have been in effect since
cost reporting periods beginning on or after May 1, 2010, on the
revised Medicare cost report Form CMS-2552-10. Therefore, the cost
reports that we are using to develop the CY 2014 OPPS relative payment
weights were either the first or the second opportunity for hospitals
to submit cost reports with the new CT scan and MRI cost centers (lines
57 and 58 of Worksheets A and C, Part I of the Form CMS-2552-10),
depending on the hospital's cost reporting period. Simultaneous with
implementing the new CT scan and MRI cost centers, in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50077) and the CY 2011 OPPS/ASC final rule
(75 FR 71824), we also notified hospitals of the need and importance of
properly reporting the capital costs of moveable equipment on the
Medicare cost report.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained
that, in accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT
scans and MRIs are major moveable equipment, and the costs should be
reported together with the rest of the hospital's major moveable
equipment cost in the Capital-Related Costs--Moveable Equipment cost
centers on Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line
2 on the Form CMS-2552-10). The costs in these cost centers are
allocated to all the hospital's cost centers that use major moveable
equipment (including CT and MRI), using ``dollar value'' (which is the
``recommended'' or default statistical basis, in accordance with the
cost reporting instructions contained in Section 4095 of CMS Pub. 15-2,
for the Form CMS-2552-10). Alternatively, the hospital may have
obtained the contractor's approval under Section 2313 of CMS Pub. 15-1
to use the simplified cost allocation methodology known as ``square
feet.'' However, a hospital that historically has been using ``square
feet'' and is concerned that this method of allocation may result in
inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and
other ancillary cost centers may request contractor approval in
accordance with Section 2307 of the CMS Pub. 15-1 to use the ``direct
assignment'' allocation method, and directly assign the cost of
moveable equipment to all of the hospital's cost centers that use
moveable equipment, including CT scans and MRIs, using the provider's
routine accounting process. This would ensure that the cost of the CT
scanning and MRI equipment would be reflected in the CCR that would be
calculated for those departments and that would be used to estimate the
cost of CT scan and MRI services. In any case, hospitals should correct
their cost reporting practices to come into compliance with CMS'
longstanding policy regarding the ``Capital-Related Costs--Moveable
Equipment'' cost center, by either using the recommended statistical
allocation method of ``dollar value'' for costs in Worksheet A, Column
2 for Capital- Related Costs--Moveable Equipment or by requesting
contractor approval in accordance with Section 2307 of CMS Pub. 15-1 to
use the ``direct assignment'' allocation method. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53283), we reiterated this policy, and added
that ``Hospitals that still need to correct their cost reporting
practices in this regard should do so soon'' so that distinct CT and
MRI cost center CCRs would accurately reflect the costs associated with
providing those services.
In the CY 2014 OPPS/ASC proposed rule, we provided information
about the CT and MRI cost center CCRs and the estimated effects on APC
payment of adopting those cost centers. We noted the similarities
between our estimations and the RTI report results not only to
demonstrate that they were generally consistent with each other, but to
again note that any concerns and criticisms of the data and its
corresponding impact on the payment rates would be the same as were
expected when the report was initially published in July 2008, absent
any improvements in cost reporting practice. We further note that some
of the concerns that commenters described related to differentials in
payment for plain film x-rays based on proposed CY 2014 OPPS payment
rates being similar to those of the CT and MRI services have abated
because the ancillary services and diagnostic tests on the bypass list
packaging proposals are not being finalized for CY 2014. Various
packaged items and services under those proposals may have created some
of the estimated increase in service cost for plain film x-rays.
While some commenters believe that it is unrealistic for hospitals
to adopt cost allocation methods that improve data and payment
accuracy, we believe that those recommended changes are critical in the
shared goal of developing OPPS relative payment weights that accurately
reflect service costs. We also believe that because approximately half
of hospitals reporting either the new CT scan or MRI standard cost
center thus far have adopted one of the more accurate cost allocation
methods, other hospitals also should be able to do so. Of the 1,961
hospitals reporting a new CT scan standard cost center, 1,055 hospitals
reported using either ``direct assignment'' or ``dollar value'' as the
cost allocation method. Similarly, of the 1,871 hospitals reporting a
new MRI standard cost center, approximately 985 hospitals report using
either ``direct assignment'' or ``dollar value'' as the

[[Page 74845]]

cost allocation method. Commenters have previously recognized the
significant impact that the CT scan and MRI standard cost center data
would have on multiple payment systems, and we believe that the
significant effects of these data on payment should inherently
encourage more accurate cost reporting (75 FR 71824). Standard cost
centers for CT and MRI services were developed in the revised Medicare
cost report Form CMS-2552-10 to more accurately capture the costs
associated with providing these important services. Not including the
cost report data derived from these cost centers in ratesetting with no
future indication of improvement would be contrary to their purpose and
our goal to develop OPPS relative payment weights that accurately
reflect service costs.
We have considered the public comments recommending that if CMS
does finalize distinct CCRs for CT scans and MRIs for the OPPS relative
payment weights, CMS adopt certain minimum quality standards, such as
using only cost report data of hospitals that use either direct
assignment or the dollar value statistical allocation method, have at
least $250,000 of cost in the CT scan or MRI cost center, and have
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers. We appreciate the commenters'
shared concern surrounding the goal of using the best available
information to estimated costs associated with these new standard cost
centers.
For the FY 2014 IPPS/LTCH PPS final rule, we did not agree with the
adoption of commenters' suggested minimum data standards because doing
so would have ignored the fact that many hospitals have chosen (at
least up to this point) to employ the square feet statistical
allocation methodology, perhaps for reasons unrelated to the costs of
MRIs and CT scans, and, therefore, those data reflect, in large part,
the best available data that we have. It also is not administratively
feasible for CMS to determine, using HCRIS data, whether hospitals have
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers. However, in the FY 2014 IPPS/
LTCH PPS final rule, we recognized that while only a fraction of the
negative impact would be manifested in the IPPS MS-DRGs, the OPPS
relative payment weights would be more significantly affected by the
adoption of the new standard cost center CCRs (78 FR 50521).
We took note of the many comments regarding the ramifications of
developing distinct CT scan and MRI CCRs on beneficiary access to care
and other payment systems. We understand that any such change could
have significant payment impacts under the MPFS where the TC payment
for many imaging services is capped at the OPPS payment. These
significant payment effects based on adoption of the new CT scan and
MRI standard cost center CCRs further underscore the need for accurate
cost reporting for ratesetting purposes. Although these payment effects
are significant, we do not believe that they would likely significantly
affect beneficiary access to imaging because imaging is readily
available at different sites of service and the magnitude of the
payment effects are not so drastic that providers and suppliers of
imaging would likely discontinue offering CT and MRI services.
We appreciate the concerns expressed by the commenters related to
payment changes of implementing these cost center CCRs, and the
importance of not providing an incentive for hospitals to furnish, or
not furnish, certain services. However, we are not convinced that
further delay or further trimming of CCR values is necessary in order
to implement all of the proposed CCRs. Although hospitals have been
permitted to use the alternative basis cost allocation (that is,
``square feet'') under Section 2313 of CMS Pub. 15-1, this methodology
does not ensure precise CCRs for CT scans and MRIs. Therefore, we
encouraged hospitals over the past several years to use the most
precise cost reporting methods in response to the new cost report
lines. Specifically, the longstanding cost report instructions
contained in Section 4020 (previously Section 3617) of CMS Pub. 15-2
state that ``The statistical basis shown at the top of each column on
Worksheet B-1 is the recommended basis of allocation of the cost center
indicated which must be used by all providers completing this form
(Form CMS-2552-10), even if a basis of allocation other than the
recommended basis of allocation was used in the previous iteration of
the cost report (Form CMS-2552-96).'' Under Table 1 of the Medicare
cost report, which lists the Record Specifications for the cost centers
on Worksheet B-1, ``dollar value'' is specified as the recommended
statistical allocation method for Column 2, Capital-Related Costs--
Moveable Equipment. While the ``dollar value'' statistical allocation
method is more precise than ``square feet,'' to ensure even more
precise CCRs for CT scans and MRIs, 90 days prior to the beginning of
their next cost reporting period, hospitals may request permission from
their Medicare contractors in accordance with Section 2307 of CMS Pub.
15-1 to use the ``direct assignment'' allocation method on Worksheet B,
Part II, Column 0. Although ``direct assignment'' is the preferred and
most precise allocation method, hospitals that do not have the
resources to directly assign the costs of every cost center are
strongly encouraged to instead use the ``dollar value'' statistical
allocation method. (We note that, under Section 2313 of CMS Pub. 15-1,
hospitals not currently using ``dollar value'' should notify their
contractor of their intention to switch their statistical allocation
basis to ``dollar value'' at least 90 days prior to the end of a cost
reporting period.) We also intend to communicate with the Medicare
contractors to facilitate approval of hospitals' requests to switch
from the square feet statistical allocation method to the ``direct
assignment'' or ``dollar value'' allocation method for the costs of
major moveable equipment. We believe that, by adopting more refined
CCRs, we are fostering more careful cost reporting. Therefore, we
generally do not believe that the concerns expressed by the commenters
warrant further delay in implementing the proposed CCRs for CT scans
and MRIs for use in OPPS ratesetting.
However, we recognize the commenters' concerns with regard to the
application of the new CT and MRI standard cost center CCRs and their
use in OPPS ratesetting. As compared to the IPPS, there is increased
sensitivity to the cost allocation method being used on the cost report
forms for these new standard imaging cost centers under the OPPS due to
the limited size of the OPPS payment bundles and because the OPPS
applies the CCRs at the departmental level for cost estimation
purposes. As a means of addressing the commenters' concerns related to
the new CT and MRI standard cost centers, when calculating the CT and
MRI cost center CCRs used to estimate costs for the CT and MRI APCs
listed in Table 4 below, we removed all claims from providers that use
``square feet'' as a cost allocation method. We identified providers
using ``square feet'' as the cost allocation method by extracting HCRIS
data on Worksheet B-1. Table 4 displays information about the relative
effect on CT and MRI APC payments after removing cost data for
providers that report CT and MRI standard cost centers using ``square
feet'' as the cost allocation method. Table 5 below provides
statistical values based on the CT and MRI standard cost center CCRs

[[Page 74846]]

using the different cost allocation methods.
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As we have stated in prior rulemaking (77 FR 53281 through 53283
and 77 FR 68224), once we determined that a sufficient amount of cost
report data were available from which to generate a meaningful
analysis, we would propose, and finalize if appropriate, the use of the
distinct CCRs described above in the calculation of the OPPS relative
payment weights. We believe that the analytic findings described in the
proposed rule, and the volume of hospitals that have ``valid'' CCRs
described above, computed using the July 2013 HCRIS update, support our
original decision to create new cost centers and distinct CCRs for
implantable devices, MRIs, CT scans,

[[Page 74847]]

and cardiac catheterization, and we see no reason to further delay
implementation of the CCRs of each of these cost centers for the OPPS.
Therefore, we are finalizing a policy for the CY 2014 OPPS to remove
claims from providers that use a cost allocation method of ``square
feet'' to calculate CCRs used to estimate costs associated with the CT
and MRI APCs identified in Table 4. This change allows hospitals
additional time to use one of the more accurate cost allocation
methods, and thereby improve the accuracy of the CCRs on which the OPPS
relative payment weights are developed. As part of this transitional
policy to estimate the CT and MRI APC relative payment weights using
only cost data from providers that do not use ``square feet'' as the
cost allocation statistic, we will sunset this policy in 4 years once
the updated cost report data become available for ratesetting purposes.
We believe that 4 years is sufficient time for hospitals that have not
done so to transition to a more accurate cost allocation method and for
the related data to be available for ratesetting purposes. Therefore,
in CY 2018, we will estimate the CT and MRI APC relative payment
weights using cost data from all providers, regardless of the cost
allocation statistic employed.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to use data from the
``Implantable Devices Charged to Patients'' and ``Cardiac
Catheterization'' cost centers to create distinct CCRs for use in
calculating the OPPS relative payment weights for CY 2014. For the
``Magnetic Resonance Imaging (MRI)'' and ``Computed Tomography (CT)
Scan'' APCs identified in Table 4 earlier in this section, we are
modifying our proposal so that the final policy will remove claims from
cost modeling for those providers using ``square feet'' as the cost
allocation statistic.
2. Data Development Process and Calculation of Costs Used for
Ratesetting
In this section of this final rule with comment period, we discuss
the use of claims to calculate the OPPS payment rates for CY 2014. The
Hospital OPPS page on the CMS Web site on which this final rule with
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an
accounting of claims used in the development of the final payment
rates. That accounting provides additional detail regarding the number
of claims derived at each stage of the process. In addition, below in
this section we discuss the file of claims that comprises the data set
that is available for purchase under a CMS data use agreement. The CMS
Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing
the ``OPPS Limited Data Set,'' which now includes the additional
variables previously available only in the OPPS Identifiable Data Set,
including ICD-9-CM diagnosis codes and revenue code payment amounts.
This file is derived from the CY 2012 claims that were used to
calculate the final 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, as we proposed, we are continuing
to use geometric mean costs to calculate the relative weights on which
the 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 final rule with comment period to calculate the costs
we used to establish the relative weights used in calculating the OPPS
payment rates for CY 2014 shown in Addenda A and B to this final rule
with comment period (which are available via the Internet on the CMS
Web site). We refer readers to section II.A.4. of this final rule with
comment period for a discussion of the conversion of APC costs to
scaled payment weights.
Comment: Commenters expressed concern with respect to the
volatility of the OPPS payment rates from year to year. One commenter
suggested a ``dampening policy'' that would limit declines in payment
service from year to year.
Response: As previously discussed in the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68225), there are a number of factors
that contribute to cost fluctuations from one year to the next,
including (but not limited to) hospital behavior in adjusting mix of
services, changes in hospital costs and charges each year resulting in
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS
payment policy (for example, changes to packaging policies), and
implementation of composite APCs. We cannot stabilize hospital-driven
fundamental inputs to the calculation of OPPS payment rates. However,
we have strived to resolve some of the other potential reasons for
instability from year to year. Specifically, we continue to seek ways
to use more claims data so that we have fewer APCs for which there are
small numbers of single bills used to set the APC costs. Moreover, we
have tried to eliminate APCs with very small numbers of single bills
where we could do so. We recognize that changes to payment policies,
such as the packaging of payment for ancillary and supportive services
and the implementation of composite APCs, may contribute to volatility
in payment rates in the short term. However, we believe that larger
payment packages and bundles should help to stabilize payments in the
long term by enabling us to use more claims data and by establishing
payments for larger groups of services. Further, in seeking to mitigate
fluctuations in the OPPS, we believe that implementing the policy
suggested by the commenters would make payments less reflective of the
true service costs. Limiting decreases to payments across all APCs in a
budget neutral payment system could unfairly reduce the payments for
other services due to the effects of the scaling that is necessary to
maintain budget neutrality and would distort the relativity of payment
that is based on the cost of all services.
a. Claims Preparation
For this final rule with comment period, we used the CY 2012
hospital outpatient claims processed through June 30, 2013, to
calculate the geometric mean costs of APCs that underpin the relative
payment weights for CY 2014. (For the proposed rule, we used CY 2012
hospital outpatient claims processed through December 31, 2012.) To
begin the calculation of the 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).

[[Page 74848]]

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 125 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X (Hospital Inpatient
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community
Mental Health Center). Other bill types are not paid under the OPPS;
therefore, these claims were not used to set OPPS payment.
2. Claims that were bill types 12X, 13X or 14X. Claims with bill
types 12X and 13X are hospital outpatient claims. Claims with bill type
14X are laboratory specimen claims, of which we use a subset for the
limited number of services in these claims that are paid under the
OPPS.
3. Claims that were bill type 76X (CMHC).
To convert charges on the claims to estimated cost, we multiplied
the charges on each claim by the appropriate hospital-specific CCR
associated with the revenue code for the charge as discussed in section
II.A.1.c. of this final rule with comment period. We then flagged and
excluded CAH claims (which are not paid under the OPPS) and claims from
hospitals with invalid CCRs. The latter included claims from hospitals
without a CCR; those from hospitals paid an all-inclusive rate; those
from hospitals with obviously erroneous CCRs (greater than 90 or less
than 0.0001); and those from hospitals with overall ancillary CCRs that
were identified as outliers (that exceeded +/-3 standard deviations
from the geometric mean after removing error CCRs). In addition, we
trimmed the CCRs at the cost center (that is, departmental) level by
removing the CCRs for each cost center as outliers if they exceeded +/-
3 standard deviations from the geometric mean. We used a four-tiered
hierarchy of cost center CCRs, which is the revenue code-to-cost center
crosswalk, to match a cost center to every possible revenue code
appearing in the outpatient claims that is relevant to OPPS services,
with the top tier being the most common cost center and the last tier
being the default CCR. If a hospital's cost center CCR was deleted by
trimming, we set the CCR for that cost center to ``missing'' so that
another cost center CCR in the revenue center hierarchy could apply. If
no other cost center CCR could apply to the revenue code on the claim,
we used the hospital's overall ancillary CCR for the revenue code in
question as the default CCR. For example, if a visit was reported under
the clinic revenue code but the hospital did not have a clinic cost
center, we mapped the hospital-specific overall ancillary CCR to the
clinic revenue code. The revenue code-to-cost center crosswalk is
available for inspection 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, as we proposed, we are
continuing the CY 2013 payment policy for separately payable drugs and
biologicals. We refer readers to section V.B.3. of this final rule with
comment period for a complete discussion of our CY 2014 final 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,'' ``V,'' or ``X,'' in the prospective
year's payment system. This logic preserves charges for services that
would not have been paid in the claim year but for which some estimate
of cost is needed for the prospective year, such as services newly
removed from the inpatient list for CY 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, as we proposed, we are continuing the policy we
implemented for CY 2013 to exclude line-item data for pass-through
drugs and biologicals

[[Page 74849]]

(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 our packaging of certain clinical
diagnostic laboratory tests, we also 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 final
policy to package certain clinical diagnostic laboratory tests, we
refer readers to section II.A.3.b.(3) of this final rule with comment
period.
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 final CY 2014 OPPS packaging policy, we
are not deleting status indicator ``X'' and not revising the title and
description of status indicator ``Q1'' to reflect that deletion, as
discussed in sections II.A.3. and XI. of this final rule with comment
period. For CY 2014, as we proposed, we are continuing our current
policy of defining major procedures as any HCPCS code having a status
indicator of ``S,'' ``T,'' or ``V''; defining minor procedures as any
code having a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,''
``R,'' ``U,'' or ``N''; and classifying ``other'' procedures as any
code having a status indicator other than one that we have classified
as major or minor. For CY 2014, we had originally proposed to delete
status indicator ``X'' as part of our proposal to package ancillary
services under that status indicator. However, as discussed in section
II.A.3. of this final rule with comment period, we are not establishing
that policy in CY 2014 and may reexamine that policy in the future.
Therefore, for CY 2014, we are defining HCPCS codes having a status
indicator of ``X'' as major procedure, due to the retention of the
status indicator. For CY 2014, we are continuing to assign status
indicator ``R'' to blood and blood products; status indicator ``U'' to
brachytherapy sources; status indicator ``Q1'' to all ``STVX-packaged
codes''; status indicator ``Q2'' to all ``T-packaged codes''; and
status indicator ``Q3'' to all codes that may be paid through a
composite APC based on composite-specific criteria or paid separately
through single code APCs when the criteria are not met.
As discussed in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and
``Q3'' to facilitate identification of the different categories of
codes. As we proposed, we are treating these codes in the same manner
for data purposes for CY 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 final rule with comment period.
Specifically, we divided the remaining claims into the following
five groups:
1. Single Procedure Major Claims: Claims with a single separately
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or
``X'' which includes codes with status indicator ``Q3''); claims with
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X''
on the same claim on the same date; or claims with one unit of a status
indicator ``Q2'' code (``T-packaged'') where there was no code with a
status indicator ``T'' on the same claim on the same date.
2. Multiple Procedure Major Claims: Claims with more than one
separately payable procedure (that is, status indicator ``S,'' ``T,''
``V,'' or ``X'' which includes codes with status indicator ``Q3''), or
multiple units of one payable procedure. These claims include those
codes with a status indicator ``Q2'' code (``T-packaged'') where there
was no procedure with a status indicator ``T'' on the same claim on the
same date of service but where there was another separately paid
procedure on the same claim with the same date of service (that is,
another code with status indicator ``S,'' ``V,'' or ``X''). We also
include in this set claims that contained one unit of one code when the
bilateral modifier was appended to the code and the code was
conditionally or independently bilateral. In these cases, the claims
represented more than one unit of the service described by the code,
notwithstanding that only one unit was billed.
3. Single Procedure Minor Claims: Claims with a single HCPCS code
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,''
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
4. Multiple Procedure Minor Claims: Claims with multiple HCPCS
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,''
``L,'' ``R,'' ``U,'' or ``N''; claims that contain more than one code
with status indicator ``Q1'' (``STVX-packaged'') or more than one unit
of a code with status indicator ``Q1'' but no codes with status
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with
status indicator ``Q2'' but no code with status indicator ``T'' on the
same date of service.

[[Page 74850]]

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''
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for
the single major file, the multiple major file, and the multiple minor
file used for ratesetting. Claims that contain codes to which we have
assigned status indicator ``Q3'' (composite APC members) appear in both
the data of the single and multiple major files used in this final rule
with comment period, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Procedure Claims
To develop ``pseudo'' single procedure claims for this final rule
with comment period, we examined both the multiple procedure major
claims and the multiple procedure minor claims. We first examined the
multiple major procedure claims for dates of service to determine if we
could break them into ``pseudo'' single procedure claims using the
dates of service for all lines on the claim. If we could create claims
with single major procedures by using dates of service, we created a
single procedure claim record for each separately payable procedure on
a different date of service (that is, a ``pseudo'' single procedure
claim).
As proposed, we also use the bypass codes listed in Addendum N to
this final rule with comment period (which is available via the
Internet on our Web site) and discussed in section II.A.1.b. of this
final rule with comment period to remove separately payable procedures
which we determined contained limited or no packaged costs or that were
otherwise suitable for inclusion on the bypass list from a multiple
procedure bill. As discussed above, we ignore the ``overlap bypass
codes,'' that is, those HCPCS codes that are both on the bypass list
and are members of the multiple imaging composite APCs, in this initial
assessment for ``pseudo'' single procedure claims. The final CY 2014
``overlap bypass codes'' are listed in Addendum N to this final rule
with comment period (which is available via the Internet on the CMS Web
site). When one of the two separately payable procedures on a multiple
procedure claim was on the bypass list, we split the claim into two
``pseudo'' single procedure claim records. The single procedure claim
record that contained the bypass code did not retain packaged services.
The single procedure claim record that contained the other separately
payable procedure (but no bypass code) retained the packaged revenue
code charges and the packaged HCPCS code charges. We also removed lines
that contained multiple units of codes on the bypass list and treated
them as ``pseudo'' single procedure claims by dividing the cost for the
multiple units by the number of units on the line. If one unit of a
single, separately payable procedure code remained on the claim after
removal of the multiple units of the bypass code, we created a
``pseudo'' single procedure claim from that residual claim record,
which retained the costs of packaged revenue codes and packaged HCPCS
codes. This enabled us to use claims that would otherwise be multiple
procedure claims and could not be used.
We then assessed the claims to determine if the criteria for the
multiple imaging composite APCs, discussed in section II.A.2.f.(5) of
this final rule with comment period, were met. If the criteria for the
imaging composite APCs were met, we created a ``single session'' claim
for the applicable imaging composite service and determined whether we
could use the claim in ratesetting. For HCPCS codes that are both
conditionally packaged and are members of a multiple imaging composite
APC, we first assessed whether the code would be packaged and, if so,
the code ceased to be available for further assessment as part of the
composite APC. Because the packaged code would not be a separately
payable procedure, we considered it to be unavailable for use in
setting the composite APC costs on which the CY 2014 OPPS relative
payment weights are based. Having identified ``single session'' claims
for the imaging composite APCs, we reassessed the claim to determine
if, after removal of all lines for bypass codes, including the
``overlap bypass codes,'' a single unit of a single separately payable
code remained on the claim. If so, we attributed the packaged costs on
the claim to the single unit of the single remaining separately payable
code other than the bypass code to create a ``pseudo'' single procedure
claim. We also identified line-items of overlap bypass codes as a
``pseudo'' single procedure claim. This allowed us to use more claims
data for ratesetting purposes.
As we proposed, we also examined the multiple procedure minor
claims to determine whether we could create ``pseudo'' single procedure
claims. Specifically, where the claim contained multiple codes with
status indicator ``Q1'' (``STVX-packaged'') on the same date of service
or contained multiple units of a single code with status indicator
``Q1,'' we selected the status indicator ``Q1'' HCPCS code that had the
highest CY 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 ``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

[[Page 74851]]

code costs. We changed the status indicator for the selected code from
a data status indicator of ``N'' to the status indicator of the APC to
which the selected code was assigned, and we considered this claim as a
major procedure claim.
If a multiple procedure minor claim contained multiple codes with
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1''
(``STVX-packaged''), we selected the T-packaged status indicator ``Q2''
HCPCS code that had the highest relative payment weight for CY 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'' (``STVX-packaged''); and other packaged HCPCS codes and packaged
revenue code costs. We selected status indicator ``Q2'' HCPCS codes
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY
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 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 final
rule with comment period.
Lastly, we excluded those claims that we were not able to convert
to single procedure claims even after applying all of the techniques
for creation of ``pseudo'' single procedure claims to multiple
procedure major claims and to 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 proposed to continue to apply the methodology described above
for the purpose of creating ``pseudo'' single procedure claims for the
CY 2014 OPPS.
We did not receive any public comments on this proposal, and
therefore are finalizing our proposal 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 final rule with
comment period (which is available via the Internet on the CMS Web
site) and the costs of those lines for codes with status indicator
``Q1'' or ``Q2'' when they are not separately paid), and the costs of
the services reported under packaged revenue codes in Table 6 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 final CY 2014 OPPS packaging policy, we refer readers
to section II.A.3. of this final rule with comment period.
As noted in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation
that CMS should review the final list of packaged revenue codes for
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, and as we proposed, we
are continuing to compare the final list of packaged revenue codes that
we 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 proposed to package for CY 2014. We believe that the
charges reported under the revenue codes listed in Table 6 below
continue to reflect ancillary and supportive services for which
hospitals report charges without HCPCS codes. Therefore, for CY 2014,
we proposed to continue to package the costs that we derive from the
charges reported without HCPCS codes under the revenue codes displayed
in Table 6 below for purposes of calculating the geometric mean costs
on which the final CY 2014 OPPS/ASC payment rates are based.
Comment: One commenter recommended that CMS consider examining
revenue codes not currently on the list of CY 2014 packaged revenue
codes for potential addition to the list of packaged revenue codes. The
commenter stated that with increased packaging of ancillary and
adjunctive services, it becomes more important to ensure that all OPPS
service costs are packaged into the pertinent OPPS furnished service.
Response: In the CY 2010 OPPS/ASC proposed rule and the final rule
with comment period, we reviewed the revenue code-to-cost center
crosswalk and the revenue codes which are considered for use in OPPS
ratesetting. Although there was an extensive discussion in the CY 2010
OPPS/ASC final rule with comment period about the use of revenue codes
in OPPS ratesetting, we did not receive any public comments regarding
additions or removals of revenue codes from the packaged revenue code
list (78 FR 43554). Similarly, commenters' specific concerns have
typically been isolated to the adoption of the new standard cost center
CCRs in the Medicare cost report Form CMS-2552-10. However, we
recognize the commenter's concern and believe that an examination of
both the current packaged revenue code list and potential addition or
removal of revenue codes in the future may be worth performing.
After consideration of the public comments we received, we are
finalizing the proposed packaged revenue codes for CY 2014, which are
identified in Table 6 below, without

[[Page 74852]]

modification. We note that these revenue codes include only revenue
codes that were in effect in CY 2012, the year of the claims data on
which the final CY 2014 OPPS payment rates are based.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
In accordance with our longstanding policy, we proposed to continue
to exclude: (1) Claims that had zero costs after summing all costs on
the claim; and (2) claims containing packaging flag number 3. Effective
for services furnished on or after July 1, 2004, the I/OCE assigned
packaging flag number 3 to claims on which hospitals submitted token
charges less than $1.01 for a service with status indicator ``S'' or
``T'' (a major separately payable service under the OPPS) for which the
fiscal intermediary or 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 proposed to continue these processes for the CY 2014 OPPS.
For the remaining claims, we proposed 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

[[Page 74855]]

formula we use to standardize the total cost for the effects of the
wage index. As has been our policy since the inception of the OPPS, we
proposed to use the pre-reclassified wage indices for standardization
because we believe that they better reflect the true costs of items and
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most
accurate unadjusted geometric mean costs.
In accordance with our longstanding practice, we also proposed to
exclude single and ``pseudo'' single procedure claims for which the
total cost on the claim was outside 3 standard deviations from the
geometric mean of units for each HCPCS code on the bypass list
(because, as discussed above, we used claims that contain multiple
units of the bypass codes).
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, approximately 119 million
claims were left. Using these approximately 119 million claims, we
created approximately 125 million single and ``pseudo'' single
procedure claims, of which we used approximately 124 million single
bills (after trimming out approximately 1 million claims as discussed
in section II.A.1.a. of this final rule with comment period) in the CY
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 we 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 final rule with comment period.
We proposed 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
the 2 times rule based on geometric mean costs. For the CY 2014 OPPS,
we are continuing 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 124 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 pay separately under
this final rule with comment period, and we reassigned HCPCS codes to
different APCs where it was necessary to ensure clinical and resource
homogeneity within the APCs. The APC geometric means were recalculated
after we reassigned the affected HCPCS codes. Both the HCPCS code-
specific geometric means and the APC geometric means were weighted to
account for the inclusion of multiple units of the bypass codes in the
creation of ``pseudo'' single procedure claims.
Comment: Several commenters remarked on the quality of the data and
the degree to which technical errors caused modeling problems
throughout the rest of the system. These commenters believed that CMS
did not provide adequate data to allow hospitals to assess the impact
of the major revisions. Commenters also commented on the complexity
inherently in the payment system and increased by the many interactions
between various proposed and existing policies. These commenters
remarked that CMS had not fully explained the impacts of each proposal
in a manner that would allow stakeholders to provide meaningful input.
Based on the assertions about a lack of transparency, impact analysis,
guidance on how rates were developed, policy details, technical errors,
etc., commenters suggested that those proposals be delayed until more
accurate and detailed information was available. Other commenters
stated that CMS had ignored previous HOP Panel suggestions on analyzing
the impact of expanded packaging policies, and believed that the
potential for unintended downstream consequences existed.
Response: We appreciate the commenters' concerns with regards to
the complexity of modeling the OPPS. There are many interactions
between the various goals and pieces of the payment system. For
example, as discussed in section II.A.1.b. of this final rule with
comment period, the goal of extracting more data from the available
claims through the bypass list process is also balanced by the impact
of any packaged costs that may be redistributed as a result of that
data process. In developing the CY 2014 OPPS/ASC proposed rule, we
strived to provide as accurate information as possible with regard to
the calculated rates. We discovered that, in the process of applying
established and proposed methodologies to develop the CY 2014 proposed
OPPS and ASC payment rates, specific cost estimation errors occurred in
the OPPS modeling process. We released corrected data files on August
28, 2013, and extended the comment period to September 16, 2013, on the
technical corrections noted in the correcting document published in the
Federal Register on September 6, 2013 (78 FR 54842). While, in a budget
neutral system, changes to any OPPS

[[Page 74856]]

relative payment weights have redistributional effects throughout the
system, any policy change or data update has the potential to do the
same. Therefore, the technical corrections described in the correcting
document were made to address issues where the calculated payment rates
were not appropriately reflective of the proposed policies. While, as
discussed in the correcting document to the CY 2014 OPPS/ASC proposed
rule, new proposed visit APC 0634 contained a technical error that
excluded certain packaged costs from the APC, the fact that we proposed
to use APC 0634 as the baseline APC for scaling the aggregate CY 2014
OPPS weight for budget neutrality, did not distort the relativity of
the OPPS payment weights. As discussed in section II.A.4. of this final
rule with comment period, the selection of the base APC or any other
number, from which to establish the relative payment weights, does not
have an impact because OPPS weights are scaled for budget neutrality.
With regard to the adequacy of available data, each year, CMS makes
available an extensive amount of OPPS data that can be used for any
data analysis an interested party would care to perform. Specifically,
we make available a considerable amount of data for public analysis
each year through the supporting data files that are posted on the CMS
Web site in association with the display of the proposed and final
rules. In addition, we make available the public use files of claims,
including, for CY 2008 and later, supplemental line item cost data for
every HCPCS code under the OPPS and a detailed narrative description of
our data process for the annual OPPS/ASC proposed and final rules that
the public can use to perform any desired analyses. Therefore, we
believe commenters are able to examine and analyze these data to
develop specific information to assess the impact and effect of
packaging for the services of interest to them. This information is
available to support their requests for changes to payments under the
OPPS, whether with regard to separate payment for a packaged service or
other issues. We understand that the OPPS is a complex payment system
and that it may be difficult to determine the quantitative amount of
packaged cost included in the geometric mean cost for every independent
service. However, commenters routinely provide us with meaningful
analyses at a very detailed and service-specific level based on the
claims data we make available. We routinely receive complex and
detailed public comments, including extensive code-specific data
analysis on packaged and separately paid codes using the data from this
and prior proposed and final rules. Among the public comments received
in response to the CY 2014 OPPS/ASC proposed rule, we received many
detailed public comments that included data analysis.
We disagree that the CY 2014 OPPS policy proposals should be
delayed as a result of the data concerns that commenters have raised.
While we are sympathetic to the challenges that have been described, we
develop policy and model the OPPS payment rates under those same
constraints. In general, we have tried to limit the changes beyond the
current year OPPS with regards to data modeling, so that little
additional logic changes would be necessary and would instead be built
off existing processes. While we continuously examine ways in which the
data process could be simplified or made clearer, we also welcome and
appreciate public comment with regards to potential improvements.
Similarly, we appreciate the meaningful comments that stakeholders
provide regarding ways that the cost modeling process could be more
accurate or methods to extract more appropriate data from the claims
available for OPPS cost modeling.
The technical errors described in the correcting document published
in the Federal Register on September 6, 2013 (78 FR 54842) were
generally isolated to specific policy areas and did not substantively
affect the proposed policies described in the CY 2014 OPPS/ASC proposed
rule. The correcting document merely corrected the underlying data
errors to conform to the proposed policies clearly intended in the
preamble of the proposed rule.
As commenters have described, modeling the OPPS payment rates can
sometimes be a complex undertaking. We have tried to alleviate some of
those concerns about the complexity and transparency of the OPPS cost
modeling process by having an extensive discussion of the data process
in the preamble discussion, through providing code lists, isolating the
impacts of certain proposals in the regulatory impact analysis, and
providing a claims accounting with documented claims volume throughout
each stage of the process. Commenters have stated that CMS has not
provided data regarding packaging policies to the Advisory Panel on
Hospital Outpatient Payment (referred to in this document as the
Panel). However, in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68573), the CY 2010 OPPS/ASC final rule with comment period (74
FR 60409 through 60412), the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71682 through 71868), the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74184 through 74185), and the CY 2013 OPPS/
ASC final rule final rule with comment period (77 FR 68273 through
68274), we describe various data analyses we have provided to the Panel
based on its recommendations.
After consideration of the public comments we received, we are
finalizing our proposed CY 2014 methodology for calculating the
geometric mean costs upon which the CY 2014 OPPS payment rates are
based.
As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this
final rule with comment period, in some cases, APC geometric mean costs
are calculated using variations of the process outlined above.
Specifically, section II.A.2.d. of this final rule with comment period
addresses the calculation of single APC criteria-based geometric mean
costs. Section II.A.2.f. of this final rule with comment period
discusses the calculation of composite APC criteria-based geometric
mean costs. Section VIII.B. of this final rule with comment period
addresses the methodology for calculating the geometric mean costs for
partial hospitalization services.
(2) Recommendations of the Panel Regarding Data Development
At the August 2013 meeting of the Panel, we discussed the claims
accounting process for the CY 2014 OPPS proposed rule, the proposed
adoption of the new standard cost centers for CT, MRI, and cardiac
catheterization in the new Medicare cost report Form CMS-2552-10, as
well as the CY 2014 OPPS policy of calculating OPPS relative payment
weights using geometric mean costs.
At the August 2013 Panel meeting, the Panel made a number of
recommendations related to the data process. The Panel's data-related
recommendations and our responses follow.
Recommendation: The Panel recommends that the work of the Data
Subcommittee continue.
CMS Response: We are accepting this recommendation.
Recommendation: The Panel recommends that John Marshall, C.R.A.,
R.C.C, R.T., serve as chair of the Data Subcommittee.
CMS Response: We are accepting this recommendation.
In addition, the Panel requested that CMS provide additional
information about the impacts of certain CY 2014 policy proposals at
the 2014 spring

[[Page 74857]]

meeting. Depending upon the CY 2014 final policy decisions, we will
consider providing additional relevant information to the Panel at the
Spring 2014 Panel meeting.
d. 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).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43558 through 43561),
for CY 2014, we proposed in section II.A.2.e. 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 explained in that section, we proposed this policy 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 of
the proposed rule provided a list of the 39 APCs currently recognized
as device-dependent APCs and identified those 29 APCs that we proposed
to include in the comprehensive APCs proposal (78 FR 43557). We
proposed 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. As we stated in
the 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 were 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 (78 FR 43556).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557),
beginning in CY 2014, we also proposed to no longer implement
procedure-to-device edits and device-to-procedure edits for any APCs.
We explained that, 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 stated that 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.
Comment: Commenters urged CMS not to finalize its proposal to
eliminate device-to-procedure edits and procedure-to-device edits in
order to ensure continued complete and accurate cost reporting by
hospitals. In addition, one commenter requested that CMS, if it elects
to delete these edits, commit to only using complete and correctly
coded claims from CY 2014 for the CY 2016 ratesetting process. Some
commenters, while supporting elimination of the contractor edits,
opposed dropping the use of the edit criteria when selecting the set of
claims to be used to calculate the geometric mean costs of services.
One commenter requested that CMS remove APC 0648 from the list of
device-dependent APCs.
Response: We continue to believe that the elimination of device-to-
procedure edits and procedure-to-device edits is appropriate due to the
experience hospitals now have 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. We remind commenters that, under our
proposed policy, hospitals would still be expected to adhere to the
guidelines of correct coding and append the correct device code to the
claim when applicable. 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. We expect the CY 2014 claims that we will use for the CY 2016
ratesetting to reflect this correct coding and cost reporting. While we
believe that device-to-procedure edits and procedure-to-device edits
are no longer necessary at this time, we are sensitive to the
commenters' concerns that all relevant costs for the 39 APCs currently
recognized as device-dependent APCs are appropriately included in the
claims that CMS will use for ratesetting. In light of those concerns,
we are further assessing whether we need to continue claims processing
edits requiring a device code to be on the claim under the
comprehensive APCs in CY 2015.
We believe that APC 0648 is appropriately included in the current
list of device-dependent APCs, as APC 0648 is populated by HCPCS codes
that usually, but not always, require that a device be implanted or
used to perform the procedure.
After consideration of the public comments we received, and in
conjunction with our finalized comprehensive APC policy, which is fully
discussed in section II.A.2.e. of this final rule with comment period,
we are finalizing our proposal to no longer apply the current device-
dependent APC ratesetting methodology to the 10 currently recognized
device-dependent APCs not included in the

[[Page 74858]]

comprehensive APC proposal and apply our standard APC ratesetting
methodology to calculate their payment rates, but delaying the
implementation of this finalized policy until CY 2015. For CY 2014, we
will continue to apply the current device-dependent APC ratesetting
methodology to the 39 currently recognized device-dependent APCs.
Table 7 below provides a list of the 39 APCs currently recognized
as device-dependent APCs for CY 2014 and identifies those 29 APCs that
we are including in the finalized comprehensive APCs policy for CY
2015.

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(2) Blood and Blood Products
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as well as for the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43557), for CY 2014,
we proposed to continue to establish payment rates for blood and blood
products using our blood-specific CCR methodology, which utilizes
actual or simulated CCRs from the most recently available hospital cost
reports to convert hospital charges for blood and blood products to
costs. This methodology has been our standard ratesetting methodology
for blood and blood products since CY 2005. It was developed in
response to data analysis indicating that there was a significant
difference in CCRs for those hospitals with and without blood-specific
cost centers, and past public comments indicating that the former OPPS
policy of defaulting to the overall hospital CCR for hospitals not
reporting a blood-specific cost center often resulted in an
underestimation of the true hospital costs for blood and blood
products. Specifically, in order to address the differences in CCRs and
to better reflect hospitals' costs, we proposed to continue to simulate
blood CCRs for each hospital that does not report a blood cost center
by calculating the ratio of the blood-specific CCRs to hospitals'
overall CCRs for those hospitals that do report costs and charges for
blood cost centers. We would then apply this mean ratio to the overall
CCRs of hospitals not reporting costs and charges for blood cost
centers on their cost reports in order to simulate blood-specific CCRs
for those hospitals. We stated that 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 did not receive any public comments on this proposal. Therefore,
we are finalizing our proposed policy, without modification, to
continue to establish payment rates for blood and blood products using
our blood-specific CCR methodology, which utilizes actual or simulated
CCRs from the most recently available hospital cost reports to convert
hospital charges for blood and blood products to costs, for CY 2014. We
continue to believe that this methodology in CY 2014 will result in
costs for blood and blood products that appropriately reflect the
relative estimated costs of these products for hospitals without blood
cost centers and, therefore, for these blood products in general.
We note that, as discussed in section II.A.2.e. of this final rule
with comment period, we are establishing comprehensive APCs that will
provide all-inclusive payments for certain device-dependent procedures.
Under this policy, we will include the costs of blood and blood
products when calculating the overall costs of these comprehensive
APCs. We note that we will 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 will be reflected in the overall costs of the comprehensive
APCs (and, as a result, in the payment rates of the comprehensive
APCs), we will 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 final rule with comment
period (which is available via the Internet on the CMS Web site) for
the 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).
(3) Brachytherapy Source Payment
Section 1833(t)(2)(H) of the Act provides that the Secretary shall
create additional groups of covered OPD services that classify devices
of brachytherapy consisting of a seed or seeds (or radioactive source)
(``brachytherapy sources'') separately from other services or groups of
services, in a manner that reflects the number, isotope, and
radioactive intensity of the brachytherapy sources furnished and must
include separate groups for palladium-103 and iodine-125 sources, and
for stranded and non-stranded devices furnished on or after July 1,
2007. In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60533 through 60537), we adopted for CY 2010 the general OPPS
prospective payment methodology for brachytherapy sources, consistent
with section 1833(t)(2)(C) of the Act, with payment rates based on
source-specific costs, which has been utilized for each year's
brachytherapy source payment since CY 2010 (74 FR 60537; 75 FR 71980;
76 FR 74162; 77 FR 68242). As we have previously stated, we believe
that adoption of the general OPPS prospective payment methodology for
brachytherapy sources is appropriate (77 FR 68240).
Comment: Commenters expressed concern regarding CMS' brachytherapy
source data and stated that there are longstanding problems with CMS'
OPPS data used to set brachytherapy source payment rates. Commenters
also stated that the brachytherapy source data continue to show huge
variation in per unit costs across hospitals. Commenters noted that
high dose rate (HDR) brachytherapy sources decay over a 90-day period
and are used to treat multiple patients. Therefore, the commenters
believed that the true cost of brachytherapy sources per use depends on
the number of patients treated during the 90-day period, which makes it
difficult to establish fair and adequate payment rates. Commenters also
believed that CMS' claims data contain rank order anomalies between the
high-activity palladium-103 source (HCPCS code C2635) and the low-
activity palladium-103 sources (HCPCS codes C2640 and C2641), and
stated that the high-activity palladium-103 source always costs more
than low-activity palladium-103 sources.
Response: We believe that the claims data used for brachytherapy
ratesetting

[[Page 74861]]

are adequate to ensure accurate payment for these services. Also, as we
have stated in previous OPPS/ASC proposed and final rules, we believe
that our per-source payment methodology specific to each source's
radioisotope, radioactive intensity, and stranded or non-stranded
configuration, supplemented by payment based on the number of sources
used in a specific clinical case, adequately accounts for the major
expected sources of variability across treatments (72 FR 66782; 74 FR
60534; 75 FR 71979; 76 FR 74161; and 77 FR 68241). We have also
explained in previous OPPS/ASC proposed and final rules that a
prospective payment system such as the OPPS relies on the concept of
averaging, where the payment may be more or less than the estimated
cost of providing a service for a particular patient, and with the
exception of outlier cases, the prospective payment is adequate to
ensure access to appropriate care (72 FR 66782; 74 FR 60535; 75 FR
71979; and 77 FR 68241). In the case of brachytherapy sources for which
the law requires separate payment groups, without packaging, the costs
of these individual items could be expected to show greater variation
than some other APCs under the OPPS because higher variability in costs
for some component items and services is not balanced with lower
variability in costs for other component items and services. In
addition, relative payment weights are typically estimated using a
smaller set of claims.
As we have stated in previous OPPS/ASC proposed and final rules, we
agree that HDR brachytherapy sources such as HDR irirdium-192 have a
fixed active life and must be replaced every 90 days (75 FR 71980; 76
FR 74162; and 77 FR 68242). As a result, hospitals' per-treatment cost
for the source would be dependent on the number of treatments furnished
per source. The source cost must be amortized over the life of the
source. Therefore, when establishing their charges for HDR iridium-192,
we expect hospitals to project the number of treatments that would be
provided over the life of the source and establish their charges for
the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR
74162; and 77 FR 68242). For most of these OPPS services, our practice
is to establish prospective payment rates based on the costs determined
from hospitals' claims data to provide incentives for efficient and
cost effective delivery of these services.
In the case of high-activity and low-activity iodine-125 sources,
our CY 2012 claims data show that the hospitals' relative costs for the
high-activity source as reported on hospital claims and in cost report
data are greater than the costs of the low-activity sources, as we have
noticed in the past. However, this relationship is reversed for
palladium-103 sources, as a few commenters pointed out. As we have
stated in the past, we do not have any information about the expected
cost differential between high-activity and low-activity sources of
various isotopes other than what is available in our claims and
hospital cost report data (75 FR 71979; 76 FR 74162; and 77 FR 68242).
For the high-activity palladium-103 source, only 7 hospitals reported
this service in CY 2012, compared to 118 and 171 hospitals for the low-
activity palladium-103 sources described by HCPCS codes C2640 and
C2641, respectively. As we stated regarding this issue in the CYs 2010,
2011, 2012, and 2013 OPPS/ASC final rules with comment period, it is
clear that fewer hospitals furnished the high-activity palladium-103
source than the low-activity palladium-103 sources, and we expect that
the hospital cost distribution for those hospitals could be different
than the cost distribution of the large number of hospitals reporting
the low-activity palladium-103 sources (74 FR 60535; 75 FR 71979; 76 FR
74162; and 77 FR 68242).
After consideration of the public comments we received, we are
finalizing our proposal to continue to set the payment rates for
brachytherapy sources using our established prospective payment
methodology, which is based on geometric mean costs. The CY 2014 final
payment rates for brachytherapy sources are found in Addendum B to this
final rule with comment period.
e. 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014,
we proposed to create 29 comprehensive APCs to replace 29 existing
device-dependent APCs. We proposed 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 was 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 proposed to create
comprehensive APCs for the 29 most costly device-dependent services,
where the cost of the device is more expensive than the other costs
that contribute to the cost of delivering the primary service.
We stated in the proposed rule that 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 stated that we believe that 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.
We also stated that we believe that our policy 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

[[Page 74862]]

codes are separate services. For example, beneficiaries believe that a
single service includes procedures 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 providers to tailor services to the specific needs of
individual beneficiaries, thereby increasing the opportunities for
efficiencies and improving the delivery of medical care.
Comment: Overall, commenters were generally supportive of the
concept of creating larger payment bundles, but were uncertain that
they fully understood the specifics of the proposed comprehensive APC
payment policy. Commenters acknowledged many potential advantages for
hospitals, and possibly also for beneficiaries in terms of lower
coinsurance payments and increased transparency, as well as for
increased physician flexibility.
A few commenters fully endorsed the proposal for CY 2014. For
example, MedPAC stated that it has long supported CMS' efforts to
expand the size of payment units in the OPPS and supported this
proposal, as well as other packaging proposals in this final rule with
comment period. MedPAC stated that the comprehensive APC groups have
similarities to the diagnosis related groups (DRGs) used in the
inpatient prospective payment system (IPPS) and that this payment
structure encourages hospitals to identify the most efficient and
efficacious methods to provide care for each patient, which will help
contain Medicare spending. Another commenter believed that the proposed
device-dependent APCs were particularly appropriate for comprehensive
APCs because the independent services that require these devices are
generally clearly defined and the other services furnished during the
encounter are generally furnished in order to facilitate the
independent service. The commenter supported the ability of this
proposal to use all claims data in establishing a payment rate for the
comprehensive APC.
Several commenters recommended a more expansive policy. One
commenter recommended that CMS identify other procedures that would be
suitable for the creation of comprehensive APCs. Other commenters
suggested that CMS require hospitals to report charges for all items
and services for which comprehensive APC payment is being made as
covered charges and specify that hospitals may not charge beneficiaries
for these items and services (because the copayment for the APC
constitutes the only beneficiary cost sharing for the package of
services). Commenters also suggested that CMS limit the national
unadjusted payment for each comprehensive APC under the OPPS to no more
than the standardized DRG amount that would be paid for the same
service provided to an inpatient without complications or
comorbidities.
Response: We appreciate the support of the commenters for our
proposal to create comprehensive packages. We agree with the commenters
that this would improve our ability to more accurately establish
payment rates for these services by enabling us to use all claims for
the primary service in a comprehensive APC when establishing payment
for that APC. We appreciate the commenters' interest in identifying
other services that would be suitable for the creation of comprehensive
APCs, as well as ways to consider setting payment relative to the IPPS.
We agree with the commenters that hospitals should report charges for
all items and services for which a comprehensive APC payment is being
made, and note that it has been a longstanding requirement as stated in
the Claims Processing Manual IOM 100-4, Chapter 4, Section. 10.4.A that
hospitals must report all services that were furnished on an outpatient
claim regardless of whether or not those services are separately paid,
and that Medicare providers may not separately bill beneficiaries for
services that are covered under Medicare.
Comment: The majority of commenters recommended that CMS delay
implementation of the comprehensive APCs until CY 2015 or later. While
they generally supported the idea of larger payment bundles, commenters
were concerned that they could not verify the accuracy of the proposed
payments and urged CMS not to implement these policies until the agency
has verified that its calculations are accurate. Commenters asserted
that it has become increasingly difficult for stakeholders to verify
OPPS payment rates because the complexity of the modeling logic is far
beyond other payment systems that CMS administers, such as the IPPS.
Some commenters were concerned that they were not able to replicate
CMS' calculations, preventing independent analyses and affecting their
ability to develop comments and alternative proposals. Some commenters
requested that CMS provide stakeholders with additional information
about how estimated costs for these APCs are being calculated for CY
2014, and give stakeholders an opportunity to comment on the additional
information provided.
Some commenters requested that CMS provide individual impacts of
each proposed policy when proposing several policies that have an
interactive effect. Several commenters stated that CMS' packaging
proposals discussed in section II.A.3. of the proposed rule, combined
with this proposal to create 29 new comprehensive APCs, created a
complicated ``layering'' effect that made their understanding of how
final estimated costs for proposed comprehensive APCs would be
calculated a much more involved process.
Finally, commenters recommended a delayed implementation to allow
hospitals more time to assess the impact of such a new payment approach
on their particular institution and to consider how they may need to
adjust organizational processes. Commenters also suggested that we
might need more time to implement revisions to our claims processing
systems.
Response: We agree with the commenters that we should delay
implementation of the proposed comprehensive APCs. As we discuss later
in this section, we are finalizing our proposal to create 29
comprehensive APCs with modification, but we are delaying
implementation and final configuration of those comprehensive APCs
until CY 2015. We acknowledge commenters' concerns that this is a
complex proposal for a new payment structure under the OPPS. We agree
that hospitals should have time to prepare for a comprehensive payment
structure, and we also agree with the commenters that a delay in
implementation will allow us more time to operationalize changes
necessary to process comprehensive payments.
In response to public commenters' requesting additional detail on
our calculation of the comprehensive APC relative payment weights, we
provide a granular discussion of our methodology for constructing the
comprehensive APC payment rates later in this section, as well as the
specific APC configurations we would implement for CY 2014 if we had
not delayed implementation until CY 2015. We also believe that the
delay

[[Page 74863]]

in implementation will give hospitals more time to study the final
methodology for calculating APC relative payment weights that we
discuss in this section for the modification that recognizes resource
differences in complex and simple versions of the same primary service.
We are taking advantage of the delay in implementation and requesting
additional public comments on this methodology.
With regard to the commenters' concern that they could not fully
model the proposal, we provide all of the information we would have
used to create APC relative payment weights for CY 2014 using the CY
2012 claims data to illustrate the final methodology below. We believe
that this will assist interested parties in replicating our
methodology. We will recalibrate all of the comprehensive APC relative
payment weights for CY 2015 using CY 2013 claims data consistent with
our annual recalibration of APC relative payment weights to reflect the
most recently available claims and cost report information in next
year's rulemaking cycle. We discuss the limited methodological errors
that we discovered in the proposed rule and subsequent correcting
document in section II.A.3. of this final rule with comment period.
With regard to the availability of detailed impacts, we believe
that a delay in implementation until CY 2015 along with the
illustrations of the methodology included in this section will give
stakeholders the requested time to model this final policy and assess
the impact on their organization. We will incorporate the proposed
payment rates for CY 2015 comprehensive APCs in our CY 2015 impact
analysis in the CY 2015 OPPS/ASC proposed rule.
Comment: Commenters were also concerned that this proposal would
impose a significant administrative burden on providers and that there
is not sufficient time for information system technology vendors and
operational processes to adjust to the new regulations or to allow
hospitals enough time to fully understand how the proposals would
affect their outpatient finances, making hospital budgeting for the
upcoming year nearly impossible. Moreover, several commenters were
concerned that neither CMS nor its Medicare Administrative Contractors
(MACs) would be prepared to implement the proposed changes for CY 2014.
Other commenters believed that providers are likely to have
increased costs and challenges in their efforts to accurately separate
claims for unrelated services. One commenter recommended that CMS make
the necessary operational changes to billing instructions before moving
forward with its proposal, and implement the proposed comprehensive
APCs only after the agency has used the new billing instructions long
enough to have claims data that identify related services for the
purpose of defining a comprehensive APC.
Response: This proposal does not require any changes in provider
coding and billing practices, nor would we expect providers to change
their billing and coding practices in response to a change in payments.
We do expect providers to assess their delivery of these comprehensive
services in light of internal organizational processes. As previously
stated, we are finalizing the comprehensive APC proposal with
modification in this final rule with comment period, but we are
delaying implementation of the finalized policy until CY 2015. This
will allow us sufficient time to develop appropriate claims processing
systems protocols for comprehensive APCs and to test those new
protocols prior to implementation.
Comment: Many commenters were concerned that a comprehensive DRG-
like payment would provide a single payment for a wide range of cases
characterized by widely varying complexity and widely varying costs.
Such a system could potentially disadvantage hospitals willing to take
on the treatment of sicker, more complex and costly cases while
rewarding those that handle less complex and less costly cases. One
commenter was specifically concerned that the level of payment was not
sufficient to support the higher level of diagnostic testing and
ancillary services that occur at academic medical centers. Another
commenter stated that the costs of these cases are relatively fixed
when they are dependent on one or more expensive devices and hospitals
can either perform these complex procedures at a loss or cease
performing them altogether, which has implications for beneficiary
access to care. One commenter stated that hospitals have only limited
ability to reduce costs for complex procedures and recommended that CMS
incorporate a ``severity level'' APC similar to the Medicare Severity
Diagnosis Related Group (MS-DRG) system where there is a base DRG, a
complication or comorbidity DRG (CC DRG), and a major complication or
comorbitity DRG (MCC DRG). In adapting the concept to the APC
classification system, the commenter recommended that complexity could
be based on the included components, for example, an ICD insertion
comprehensive APC and another higher-weighted comprehensive APC for ICD
insertion with removal of previously implanted device.
A few commenters believed that the comprehensive payment may have
unintended consequences that could include quality consequences, cost
consequences, and payment consequences. Several commenters were
concerned that the quality of care could suffer because the commenters
believed that there are currently no outcome programs or measures in
place, similar to inpatient quality measures, readmission reduction
programs and value based purchasing incentives, to monitor the quality
of care provided under an encounter-based payment that creates an
incentive for hospitals to improve delivery efficiency. The commenters
believed that inappropriate attempts to garner additional profit could
lead to reduced access and lower quality of health care services
provided in the hospital outpatient setting. Several commenters were
concerned that there might be unintended Medicare cost consequences if
hospitals split services and delayed ancillary procedures until a
subsequent encounter. Some of these commenters believed that the
proposal should be tested or evaluated through a demonstration project
or some other appropriate mechanism before broader introduction, while
one commenter objected to the CY 2014 implementation because CMS had
not proposed mechanisms to retrospectively assess the ramifications of
these proposed policy changes on patients. Finally, one commenter
opined that the proposal does not conform the requirement under section
1833(t)(2) of the Act that items and services shall not be treated as
comparable with respect to the use of resources if the highest mean
cost for an item or service is more than 2 times greater than the
lowest mean cost.
Response: We agree with the commenters that there is wide spread
variation in the comprehensive costs of individual claims within each
primary procedure, and we further agree with the commenters that we do
not want to financially disadvantage hospitals that treat beneficiaries
who require more complex and costly procedures. We also understand that
complex beneficiaries may require more diagnostic tests. We agree with
the commenters that there are constraints on individual hospitals'
ability to reduce costs associated with complex procedures, and we
agree with the commenters who recommended recognizing the level of
resources

[[Page 74864]]

associated with more complex forms of a procedure not unlike the
severity levels used in the IPPS. Therefore, we are modifying our
proposed policy for creating comprehensive APCs to recognize variation
in the complexity of services that will be paid through comprehensive
APCs for CY 2015.
We do not believe that there is any issue with 2 times rule
violations in the proposed rule or in this final rule with comment
period. The statute directs the Secretary to establish groups of
covered OPD services that are comparable both clinically and with
respect to use of resources. In doing so, the statute requires the
Secretary to compare the mean cost of items and services within a group
and ensure that the highest mean cost item or service is no more than 2
times greater than the lowest mean cost item or service within a group
(2 times rule). With respect to each proposed comprehensive APC, no 2
times rule violations were observed. However, as noted above, we do
observe widespread variation within the comprehensive costs of primary
services. As we discuss below in more detail, our final policy
recognizes differences in complexity and resource costs of complex
forms of the primary service to address variation within the
comprehensive costs of individual primary procedures.
Commenters raised concerns about quality decreases because of
economic pressures, and access issues because of a reluctance of
facilities to provide these device-intensive procedures to certain
beneficiaries if the expected costs for complex cases would greatly
exceed the comprehensive APC payment. We note that these same concerns
were raised with the introduction of both the IPPS and the OPPS, but
that claims data continue to show that hospitals continue to provide
complex services to beneficiaries. We believe that hospitals understand
that there will be considerable variation in the costs of providing a
comprehensive primary service to individual beneficiaries relative to
the comprehensive payment amount.
We disagree with the commenters on the need for greater outcomes
measures prior to implementation of the comprehensive APC payment
policy. As noted, in this final rule with comment period, we are
recognizing the resource differential for complex forms of primary
procedures. Further, we believe that outpatient procedures, such as
these device-intensive procedures, that are also performed on an
inpatient basis benefit from hospital protocols established for
inpatient hospital quality programs such as quality measures,
readmission reduction programs, and value-based purchasing incentives.
Therefore, we do not agree with the commenters who were concerned that
patient care might suffer or that quality measures need to be
strengthened before implementation of the comprehensive APC policy.
We are concerned by some of the comments that imply that some
providers might change their practice of providing a comprehensive
service and instead perform split or staged procedures in order to
maximize payment. Although we do not believe that practitioners or
facilities would voluntarily expose beneficiaries to an increased risk
of additional surgery and anesthesia, we recognize that payment can
influence behavior. When we implement the finalized comprehensive APC
policy in CY 2015, we will closely monitor billing patterns for split
or staged procedures and consider claims processing edits or other
approaches to ensure that our prospective payments uniformly apply to
complete services, if necessary.
With regard to the commenters' request for evaluation under a
demonstration project before full implementation, we do not believe
that comprehensive APCs are sufficiently different from our historical
hospital payment practices to warrant a demonstration project. Further,
we are adopting the proposed policy with modification and are delaying
implementation of the comprehensive APC policy until CY 2015 in this
final rule with comment period to the public to allow us and the public
time to transition to this new payment approach.
(2) Comprehensive APCs for Device-Dependent Services
(a) Identification of High-Cost Device-Dependent Procedures
As we discussed in the CY 2014 OPPS/ASC proposed rule, 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.
Comment: Several commenters asked for additional information on the
criteria utilized by CMS to create the comprehensive APCs and how CMS
would evaluate services and procedures to qualify for comprehensive
APCs going forward. One commenter asked why the other 10 device-
dependent APCs were not included, and why no other nondevice-dependent
APCs were classified as a comprehensive APC. Another commenter
recommended that CMS consider the comprehensive approach for a smaller
number of APCs (four or five), while other commenters recommended that
additional APCs be paid as comprehensive APCs, including
recommendations for a broader application of the comprehensive APC
criteria to all claims dominated by a single procedure and specifically
recommended procedures such as those assigned to APC 0067 (Stereotactic
Radiosurgery).
Response: As we stated in the proposed rule, we initially proposed
a subset of device-dependent APCs for conversion to comprehensive APCs
because we believed that these procedures represented a cohesive
subgroup with which to introduce a broader packaging initiative. We
stated that comprehensive APCs are appropriate when they reflect a
single global service that the beneficiary would be receiving from the
hospital. In this case, we have identified procedures where the
beneficiary would reasonably consider the encounter to be for the
implantation of a device, and we limited our proposal to the most
costly procedures where the geometric mean cost of the comprehensive
procedure was approximately five times the current beneficiary
inpatient deductible or greater. This created a consistent group of
services with similar clinical and resource characteristics, which were
archetypal for our definition of a comprehensive service.
However, we agree with the commenters that there is no reason that
comprehensive payments could not be extended in future years to other
procedures. In addition, we do not agree with the commenters that we
should limit the comprehensive APCs to a small trial of four or five
APCs. We are adopting the proposed policy with modification and are
delaying implementation of the comprehensive APC policy until CY 2015
in this final rule with comment period to the public to allow us and
the public time to transition to this new payment approach. We believe
that the identified subgroup of device-related APCs is clinically
cohesive and similar in resource construction. We will consider
possibly adding a comprehensive APC for single session cranial
stereotactic radiosurgery (procedures assigned to APC 0067) in CY 2015.

[[Page 74865]]

(b) Creation of Comprehensive APCs for Certain Device-Dependent
Procedures
In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014,
we proposed to create 29 comprehensive APCs to prospectively pay for
device-dependent services associated with 136 HCPCS codes. We proposed
to base the single all-inclusive comprehensive APC payment on all
outpatient charges reported 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: (1) packaged
payment for all packaged services and supplies in CY 2014 and as
discussed in section II.A.3. of this final rule with comment period;
and (2) packaged payment for all adjunctive services, which are those
services and supplies that typically would receive separate payment
when appearing on any claim that does not contain a HCPCS code reported
as a primary service assigned to a comprehensive APC, including certain
items and services currently paid through other fee schedules. We
present these two categories for ease of presentation, but generally
consider both sets of services to be ``adjunctive'' in that they are
integral and ancillary to, supportive of, and dependent on the primary
procedure. Therefore, we consider all outpatient services on a
comprehensive APC claim to be adjunctive to the primary service with a
few exceptions, such as mammography services and ambulance services,
which are never payable as hospital outpatient services in accordance
with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which
must receive separate payment under section 1833(t)(2)(H) of the Act;
and pass-through drugs and devices, which also require separate payment
under section 1833(t)(6) of the Act.
(3) Inclusion of Otherwise Packaged Services and Supplies
As part of the comprehensive APCs, we proposed to package all
services that are packaged in CY 2013, and all services proposed for
unconditional or conditional packaging for CY 2014.
We did not receive any separate public comments on this proposal
outside of the public comments we received on our proposal to create
comprehensive APCs for CY 2014 (which final policy with modification,
we are delaying implementation until CY 2015) discussed in section
II.A.3. of this final rule with comment period.
(4) Inclusion of Adjunctive Services
We previously noted in section II.A.3.a. of the 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 proposed to package into the comprehensive APCs all of
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.
Comment: Several commenters expressed concerns regarding the
packaging of unrelated services reported on the claim. Given that a
single claim can span multiple days, a few commenters believed that
under current billing instructions this proposal would arbitrarily
package all services occurring within a 30-day or 60-day period.
Currently, there is no means on outpatient claims to differentiate
between adjunct services that are related to the primary procedure and
other services that are ordered by other physicians and/or are
unrelated to the primary procedure. These commenters were concerned
that if CMS assumed that all services reported on the claim are
related, it could lead to incorrect ratesetting. Alternatively, these
commenters reasoned that if CMS revised billing instructions to allow
all unrelated services (not merely labs) to be billed on separate
claims, hospitals would need to change their billing systems to bill
separately for unrelated services and would experience significant
administrative burden separating unrelated from related items and
services.
Response: We do not agree with the commenters' assertions that a
significant amount of unrelated services would be billed on the claim
for the primary service. We note that most commenters were concerned
about unrelated services reported on claims spanning 30 days. We remind
hospitals that we have previously issued manual guidance in the
Internet Only Manual at 100-4, Chapter 1, Section 50.2.2 that only
recurring services should be billed monthly. Moreover, we have further
specified that in the event that a recurring service occurs on the same
day as an acute service that falls within the span of the recurring
service claim, hospitals should bill separately for recurring services
on a monthly claim (repetitive billing) and submit a separate claim for
the acute service. We also do not expect that these claims for
comprehensive services in the outpatient setting would extend beyond a
few days.
Additionally, we have noted that occasionally beneficiaries may,
for reasons of convenience or coincidence, receive laboratory services
at the hospital that are unrelated to the primary service. When
beneficiaries are at the hospital for the non-trivial procedures in
comprehensive APCs, we do not expect that unrelated laboratory services
would be a common occurrence, but we have nonetheless instructed
hospitals that laboratory tests ordered by unrelated providers for
unrelated medical conditions may be billed on a 14X bill-type. We refer
readers to section II.A.3.c.(3) of this final rule with comment period
for more discussion of this final policy.
Beyond these two sets of circumstances, we believe that other
services performed at the time of these major procedures can reasonably
be considered to be related to the primary service or procedure. We
proposed that we would consider all services reported on the claim to
be related to the primary service. Under such a presumption, all
services delivered to a beneficiary during an encounter for a
comprehensive procedure would be included in establishing the payment
rate for the comprehensive APC. As we are including all adjunctive
services in the comprehensive APC calculation, hospitals would not need
to look for unrelated services. We considered all covered costs when
calculating the comprehensive APC payment as is done with IPPS DRGs. As
previously noted, hospitals would continue to code and bill for these
services in the same way that they currently code and bill.
Comment: One commenter asked that CMS modify the proposal by
specifically excluding clinical diagnostic laboratory tests and the

[[Page 74866]]

facility component of anatomic pathology procedures from comprehensive
APC payment for the same reasons that other commenters believed that
these services should not be packaged as part of our general packaging
proposals.
Response: We do not agree with this commenter that laboratory and
the facility component of anatomic pathology procedures should be
excluded from the comprehensive APC payment. We are finalizing our
other proposed policy to package laboratory tests, as described in
section II.A.3.c.(3) of this final rule with comment period. We note
that laboratory and anatomic pathology tests are almost always
performed as part of the provision of the primary service in the case
of these comprehensive services and are, therefore, appropriately
considered ancillary and supportive. In summary, we believe that these
device-dependent procedures represent archetypal cases of a single
comprehensive service and that laboratory and anatomic pathology
services are classic examples of adjunctive services that are
supportive of the primary procedure.
(5) Inclusion of Devices, Durable Medical Equipment, Prosthetics,
Orthotics and Supplies (DMEPOS)
As part of the comprehensive service packaging policy described
above, we proposed 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
(t)(1)(B)(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
Sec. 419.2(b)(4) of the regulations. 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 noted 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 proposed to consider all DMEPOS items to be covered
hospital outpatient department services and to be adjunctive to the
primary service when they are delivered during the comprehensive
service, as described above and, therefore, proposed to package such
items into the applicable comprehensive service. This policy 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 proposed that they are covered OPD services as provided under
sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and Sec. Sec.
419.2(b)(4), (b)(10), and (b)(11) of the regulations, and payable under
the OPPS, as described above.
We did not receive any public comments on our proposal to include
these DMEPOS items in the comprehensive APC payment. We did receive
public comments on the impact of these new items on budget neutrality,
which we discuss below, and comments on how DMEPOS items impact APC
0227 (Implantation of Drug Infusion Device), which we discuss in
greater detail later in this section.
(6) 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 that these services 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. These services 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 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we
proposed 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 perioperative 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. These services 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.
Comment: Physical therapy stakeholders commented that they were
concerned about the effect this proposal may have on necessary physical
therapy services that are provided in conjunction with these proposed
29 APCs and any comprehensive APCs that may be added in the future. The
commenter stated that, generally, section 1833(t)(1)(B)(4) of the Act
excludes therapy services from the OPPS. The commenter further stated
that, instead, the majority of therapy services in the hospital setting
are

[[Page 74867]]

provided by therapists under a plan of care, and are paid under the
physician fee schedule (we refer readers to section 1834(k) of the
Act). However, the commenter acknowledged that there is a subset of
services designated as ``sometimes therapy'' services that are paid
under the OPPS when they are not furnished as therapy under a certified
plan of care in an outpatient hospital or critical access hospital
(CAH).
The commenter stated that physical therapy should not be considered
to be an adjunctive service because physical therapists are
consultative members of the health care team, physical therapy is a
separate benefit, and some services provided during the perioperative
period, such as a physical therapy evaluation to establish a plan of
care, could still be considered to be therapy services. The commenter
was also concerned that the comprehensive APC payment would not be
adequate to cover the services provided by therapists during this
perioperative period, that rehabilitation could be prolonged if the
therapist is unable to intervene ``to increase the patient's mobility,
function and endurance prior to surgery,'' and that it could be
difficult to reliably and reproducibly differentiate those
perioperative services that are not therapy from those that could be
separately billed as therapy services. Another commenter asked if
functional reporting requirements would apply in these cases of
adjunctive services reported with therapy codes.
Response: We agree with the commenter that physical therapy is a
separate benefit that is not part of an OPPS service. However, after
consideration of the public comments we received, we continue to
believe that services provided during the perioperative period are
adjunctive services and not therapy services as described in section
1834(k) of the Act regardless of whether the services are delivered by
therapists or other nontherapist health care workers. We note that
adjunctive services are those services provided in support of another
service, that is, they are typically performed to facilitate the
primary service and are unnecessary or serve a different function if
the primary service is not provided. Adjunctive services may be
provided by consultative members of the healthcare team. For example,
an add-on procedure performed by a cardiac surgeon is nonetheless
adjunctive to the primary procedure, as an add-on procedure by
definition cannot exist in the absence of the procedure to which it is
added.
We have previously noted that therapy services are those provided
by therapists under a plan of care in accordance with section
1835(a)(2)(C) and section 1835(a)(2)(D) of the Act 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. Specifically, we have
said in the Claims Processing Manual IOM 100-4, Chapter 5, Section 20.1
that some services, described as ``sometimes therapy services,'' may at
times be considered therapy, but at other times may be consider to be
outpatient department services, such as when those services are
provided by non-therapists or provided in the absence of a plan of
care. We stated in the proposed rule that we believe services reported
with therapy codes, but that are provided as part of a comprehensive
service are similar to ``sometimes therapy'' services in that these
services are not properly considered to be therapy services even though
they may be reported with therapy HCPCS codes (78 FR 43559 through
43560).
Considering the services that commenters believed should be therapy
services, we note that these are outpatient procedures; therefore, the
comprehensive procedure includes only the perioperative period, a brief
period of time immediately before and immediately following the
procedure. We would not expect that an evaluation performed immediately
following the surgery would establish the beneficiary's needs for
rehabilitation because the beneficiary is still under the influence of
the completed primary surgical procedure. Rather, services reported
with therapy codes during that brief time period may represent
interventions to promote breathing and ambulation, traditional post-
operative nursing services, or may represent assessments to provide the
surgeon with specific clinical information relative to the immediate
effects of the surgery. We would not expect therapy assessments or
rehabilitative therapy until after the patient has recovered from the
immediate effects of the procedure and associated anesthesia. With
respect to the statement that it may be beneficial to increase the
beneficiary's endurance prior to surgery, we agree with the commenter
that this can be a desirable and necessary service, but we would not
expect that therapists are routinely increasing ``mobility, function
and endurance'' in the hour or two immediately before the surgery.
Therefore, we do not expect that providers and reviewers would struggle
to differentiate separately paid therapy services from appropriately
packaged nontherapy services. We believe that therapy services would be
separated in time from the comprehensive services, and would not be
provided during the span of the comprehensive service, from OPD
registration to discharge, because we do not expect that the
comprehensive service would extend beyond the immediate perioperative
period. We also believe that, for a beneficiary who is already
receiving therapy on an ongoing basis, it is very unlikely that a
therapist would deliver that service during a comprehensive service.
There are rare exceptions, for example, in the case of a beneficiary
receiving therapy for a burn or contracture. In that case, we have
previously published guidance stating that recurring services may be
separated from acute services and billed on a separate claim.
We have stated that the relative cost of these comprehensive
services includes all of the estimated costs reported on the claims for
these services. Therefore, the total payment for the comprehensive
service includes a payment for the services reported with therapy codes
that is proportional to the frequency with which these codes are
reported on the claims. As the comprehensive payment now reflects
costs, we believe that the aggregate comprehensive payment will
continue to be adequate to cover the cost of the service provided, and
we do not expect that these services would be discontinued when they
are medically necessary. We also note that there is no provision in
this final rule with comment period that prohibits a hospital from
providing any medically necessary service as part of a comprehensive
service, regardless of the code with which it is otherwise commonly
reported.
With respect to functional reporting, we note that these services
reported with therapy codes are outpatient department services not
therapy services and, therefore, the requirement for functional
reporting does not apply. These changes will be implemented in the
claims processing systems prior to the start of CY 2015.
(7) Inclusion of Additional Hospital Room and Board Revenue Cost
Centers in the Calculation of Covered Costs
In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we stated that
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,

[[Page 74868]]

that is, during the provision of the comprehensive service. Because we
are able to assign all costs reported on the claim to the comprehensive
service, we believe that we have an opportunity to better capture costs
by including these costs in our calculations even when they appear in
certain revenue cost centers not usually used to report OPPS costs.
Specifically, we proposed to include 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 because we believe these
revenue cost centers are sometimes associated with the costs of room,
nutrition, and nursing care provided during these comprehensive
services.
Comment: One commenter supported the specific inclusion of room and
board revenue cost centers on outpatient claims, but another commenter
believed that reporting may be difficult for hospitals and hospital
systems. Commenters were concerned that CMS did not discuss how those
charges would be included in the cost calculation for the comprehensive
APCs or provide a cost center source for converting those charges to
costs in the CY 2014 OPPS Revenue Code to Cost Center Crosswalk
released with the proposed rule. Another commenter was concerned that
additional funds were not moved into the OPPS system to account for
these ``new'' costs.
Response: We appreciate the commenter's support for our decision to
specifically identify the costs of room and board as being covered
costs in certain outpatient stays. We understand the other commenters'
confusion as to why room and board revenue codes would appear on an
outpatient claim because our claims processing instructions do not
allow payment for these revenue codes on Part B claims as they are
reserved exclusively for inpatient use. (For example, we refer readers
to our recent contractor instructions under Change Request (CR) 8185,
``CMS Administrator's Ruling: Part A to Part B Rebilling of Denied
Hospital Inpatient Claims'', which excludes these revenue codes on
rebilled Part B inpatient claims because room and board services are
not covered under Medicare Part B). For this reason, we have not
included these revenue codes on our revenue code to cost center
crosswalk. Although we proposed to include costs estimated from charges
for these revenue codes in our estimate of comprehensive APC costs, we
did not include any of these costs. We failed to modify our revenue
code-to-cost center crosswalk that we use to estimate costs from
charges on claims to include room and board revenue codes. Without
revenue codes and associated CCRs from identified cost centers, our
model ignored those revenue codes and did not estimate a cost for the
room and board revenue codes. We did not include any additional
estimated costs in our proposed comprehensive APC payment calculation.
We discuss the role of the revenue code-to-cost center crosswalk in
section II.A.1.c. of this final rule with comment period.
We now believe that the appearance of these revenue codes on
hospital outpatient claims would be improper billing. Charges on
ancillary revenue codes for recovery room and observation, for example,
should reflect the complete costs of furnishing those services,
including the capital cost of the room and nursing labor costs.
Further, we would expect that hospitals would allocate these costs, and
if appropriate, board costs for services furnished to outpatients, to
ancillary cost centers on their Medicare hospital cost report
consistent with the matching principles of cost accounting principles.
We believe that, as calculated, our estimated costs for comprehensive
APCs appropriately includes all costs and charges associated with
staying in a room for the duration of the comprehensive service as an
outpatient, and we are not finalizing our proposal to include the costs
reported with certain inpatient room, board, and nursing revenue codes.
(8) Inclusion of Hospital-Administered Drugs
In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we also
proposed 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
noted that, in defining these packaged drugs, we were 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 proposed 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 payment. We stated that 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 proposed 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.
Comment: Commenters generally supported the inclusion of drugs as
supplies in the comprehensive APC payment. For example, one commenter
stated that this proposal would be extremely helpful to beneficiaries
by reducing their financial burden and would greatly reduce the
processing burden on the hospital. Several commenters stated that CMS'
reasoning was sound and the concept should be expanded to all self-
administered drugs incident to practitioners' therapeutic services, not
just in comprehensive APCs because the commenters believed that the
concept that drugs are integral and adjunctive to the furnishing of a
therapeutic service applies to observation and other procedures. For
example, one commenter stated that self-administered drugs provided
during an ED visit are directly related to the necessary care. The
commenter suggested that a requirement to bill for self-administered
drugs be established so that these costs could be identified for
inclusion in ratesetting.
However, one commenter was concerned that including all hospital-
administered drugs, regardless of the route of administration, in the
cost calculations of the comprehensive APCs will not accurately account
for the significant cost variation in required drugs from beneficiary
to beneficiary based on individual beneficiary requirements and that,
as a result, the payment rate for a comprehensive APC might not provide
adequate payment for the specific drugs and biologicals an individual
beneficiary needs, and that

[[Page 74869]]

hospitals would be discouraged from providing appropriate drugs during
a comprehensive service.
Response: We appreciate the commenters' support for our proposal to
consider drugs, regardless of their route of administration, to be
adjunctive supplies used in support of the primary comprehensive
service when ordered by a physician and delivered during the
administration of a comprehensive service.
Self-administered drugs are a special issue because they are
excluded from Medicare Part B coverage by section 1861(s)(2)(B) of the
Act as implemented in the regulations at 42 CFR 410.27. However, as we
have stated in the Benefit Policy Manual IOM 100-2, Chapter 15, Section
50.2, drugs that are integral to a procedure are considered to be
supplies used in the delivery of covered hospital outpatient services,
and not part of the Part B drug benefit as described under section
1861(s)(2)(B) of the Act and 42 CFR 410.27. We do not view this
proposal to include all medications provided by the hospital for
delivery during a comprehensive service pursuant to a physician order,
regardless of the route of administration, as adjunctive supplies to be
an exception to the benefit category exclusion for self-administered
drugs, but rather that covered outpatient services include supplies and
other ancillary items needed to deliver these comprehensive services.
As stated in our discussion above, we have historically instructed
hospitals to include charges for self-administered drugs as supplies on
submitted claims, and we, therefore, include them in our calculation of
APC payments. We also do not view this proposal as an expansion of
coverage, but rather as the application of an existing policy to a
broader payment bundle.
Although some cost of drugs that are used as supplies have been
included in APC payments, we recognize that there are some drugs that
previously may not have been considered as supplies because previously
they were provided outside of the defined service. We generally address
public comments about how costs for newly included adjunctive items
will be considered under budget neutrality below.
We do not believe that including these drugs and biologicals in the
comprehensive APC payment greatly increases a hospital's financial risk
for providing a comprehensive service. Further, we expect that a
payment based on geometric mean estimated cost would reflect the
relative resources of drugs used as supplies included on comprehensive
service claims, along with all other ancillary supplies and services,
and that while the cost of any given case will vary, the hospital would
receive a payment based on average estimated cost for all cases. We do
not believe that comprehensive APC payments that include physician-
ordered, hospital-administered drugs delivered during the comprehensive
service would be inadequate to cover the cost of providing the service,
and we do not believe that the comprehensive APC payment would
discourage hospitals from providing appropriate drugs during delivery
of these comprehensive services.
Finally, we agree with the commenters that all covered costs
related to a service should be included on the claim per our manual
instruction in the Claims Processing Manual IOM 100-4, Chapter 4,
Section 10.4.A and as discussed in section II.3.a. (Packaging) of this
final rule with comment period and that those costs should be reported
as precisely as possible using HCPCS codes when available or uncoded
revenue cost centers when HCPCS codes do not exist. Overall, we believe
that drug costs, regardless of the route of administration, are
accurately accounted for in the APC relative payment weight. We believe
that overall payment for the comprehensive service is adequate and will
permit access to the specific drugs and biologicals required for an
individual beneficiary.
After consideration of all of the public comments we received, we
are finalizing our proposal to package all outpatient services,
including 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; coded and 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 outpatient components reported by
HCPCS codes that are provided during the comprehensive service, except
for certain services including mammography services, ambulance
services, brachytherapy seeds, and pass-through drugs and devices. When
billed on a claim in conjunction with a primary procedure assigned to
status indicator ``J1'' in CY 2015, we will pay for these services
through the OPPS comprehensive APC payment. We are not finalizing our
proposal to include 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.
The APCs for which we are finalizing this proposal for CY 2015 are
identified below in Table 8.

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(c) Methodology
As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534),
we calculated the proposed relative payment weights for these device-
dependent comprehensive APCs by using relative costs derived from our
standard process as described in section II.A. of the proposed rule and
this final rule with comment period. Specifically, after converting
charges to costs on the claims, we identified all claims containing 1
of the 136 HCPCS codes that define 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 HCPCS codes were identified, but were not 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.
Comprehensive claims for each primary service reported by a HCPCS code
were excluded when their comprehensive claim cost exceeded +/- 3
standard deviations from the geometric mean comprehensive cost of the
primary service HCPCS code.
(d) Payments
As we further stated in the CY 2014 OPPS/ASC proposed rule (78 FR
43534), we used the proposed APC relative payment weights for each 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 were
included in Addendum B of the proposed rule (which is available via the
Internet on the CMS Web site). We proposed 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 code reporting 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 determined that multiple primary HCPCS codes are reported together
in 24 percent of these device-dependent claims, but rarely represent
unrelated services. Having determined that having multiple unrelated
device-dependent services reported on a claim is an uncommon event, we
proposed to only pay 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.
Comment: Some commenters suggested that errors and lack of clarity
pertaining to some HCPCS codes proposed for comprehensive payment in
the proposed rule prevented the public from being able to respond
informatively to the comprehensive APC proposal. One commenter was
concerned that CMS stated in the preamble text that there are 136 HCPCS
codes that define the device-dependent services to be included in the
proposed comprehensive APCs whereas, in Addendum B to the proposed
rule, there are 148 HCPCS codes listed. Other commenters identified
occasional instances in the proposed rule APC cost statistics data
files where the number of single procedures was reported as more than
the number of total procedures, and they also identified several
inconsistencies in Addendum B where the HCPCS code's status indicator
was listed as ``Q2'' (conditionally packaged), yet the APC assignment
was associated with status indicator ``J1'' (comprehensive APC, all
other items on the claim are packaged).
Response: We discussed 136 primary procedure codes in our proposal
for comprehensive APCs (78 FR 43534). Commenters are correct that we
also identified 148 primary procedure codes in Addendum B to the
proposed rule as corrected (which is available on the CMS Web site at:
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). As we discussed in our September 6,
2013 correcting document, we revised the status indicators of several
HCPCS codes that appeared in Addendum B from ``Q2'' to ``J1'' to
reflect their status as a primary procedure code in a comprehensive
APC. The remaining difference in these two numbers is that 136
represents the number of CY 2012

[[Page 74872]]

device-dependent HCPCS codes reported on the CY 2012 claims that we are
using to model CY 2014 geometric mean costs to illustrate the
comprehensive APC methodology. We generally discuss our modeling of the
CY 2012 claims data to establish CY 2014 payment rates in section
II.A.1.c. of this final rule with comment period. However, considering
the revisions to specific procedure codes used to report certain
procedures, such as the new percutaneous coronary intervention
procedure codes (CPT codes 92920 through 92943) beginning in CY 2013,
the number of CY 2013 device-dependent HCPCS codes appropriately
assigned to comprehensive APCs increased to 148. Upon adoption of the
new coding scheme for CY 2014, the number of HCPCS codes assigned to a
comprehensive APC for payment in this final rule with comment period as
it would have been implemented for CY 2014 is 167. All of these
comprehensive HCPCS codes for each year (CY 2012 through 2014) appear
below in Table 9. Before we implement this policy in CY 2015, we will
assess all active codes for CY 2015 and assign the procedure to status
indicator ``J1,'' as appropriate.
We believe that the corrections to the status indicators assigned
to the device-dependent procedure codes that appeared in Addendum B to
our correcting document (http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) were minor and
did not compromise the ability of commenters to analyze and respond to
our comprehensive APC proposal. We note that some commenters were able
to correctly identify the claims that we used to model the proposed CY
2014 payment rates for comprehensive APCs by identifying the device-
related HCPCS codes associated with the 29 comprehensive APCs for CY
2012. Some commenters also were able to correctly identify the HCPCS
codes that we proposed would trigger a comprehensive payment in CY 2014
based on our identification of HCPCS codes in Addendum B. The
commenters were able to model relative payments based on our
identification of the inclusion of all services reported on the claim
except mammography, ambulance, and pass-through services, and were able
to determine the impact of the proposal based on our publication of
proposed payment rates for those 29 comprehensive APCs. Our proposed
payment rate for these comprehensive APCs did not change appreciably
with the correcting document. In addition, we are delaying
implementation of the finalized comprehensive APC policy until CY 2015,
and we are providing a detailed discussion of our final methodology for
establishing comprehensive APC relative payment weights through this
final rule with comment period.

BILLING CODE 4120-01-P

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Comment: Commenters stated that they had difficulty understanding
the APC assignment of a specific claim when two or more procedure codes
assigned to status indicator ``J1'' appear on a single claim and
indicated that they could not independently replicate the proposed
comprehensive APC methodology. Commenters believed that there was
ambiguity in whether the primary HCPCS code assignment was based on CY
2012 Medicare payment for the primary procedure or CY 2012 claims cost
as determined by reported charges converted to costs in the CY 2012
claims data set using CMS' methodology outlined in section II.A.1.c. of
the proposed rule and this final rule with comment period. One
commenter believed that using a ranking based on CY 2012 payments would
be inconsistent with setting a prospective payment rate for CY 2014
because prioritizing by payment was potentially more reflective of
historical costs than CY 2102 costs and also reflected units in a way
that assigned some procedures reporting claims with single units to one
APC and other procedures reporting claims with multiple units to a
different APC. This latter issue was particularly concerning to
commenters because the commenters believed that some claims contributed
to the cost of one APC, yet would actually be paid through a different
APC.
Response: We disagree with the commenters that we proposed
different criteria to assign procedures to comprehensive APCs for
modeling payments and to assign procedures to comprehensive APCs for
payment in the claims processing system. However, we recognize that the
wording of our proposed methodology for assigning procedures to
comprehensive APCs could be interpreted in several ways, and we are
receptive to commenters concerns that they better understand the
proposed comprehensive APC payment methodology for the treatment of
claims reporting multiple device-related procedures. While we are
finalizing a comprehensive APC policy, we are delaying the effective
date of this policy until CY 2015, and we invite comment on the final
methodology discussed in this section.

[[Page 74884]]

We stated in the proposed rule that, ``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.'' Using this
methodology, we proposed to identify a primary service on claims
reporting multiple HCPCS codes assigned to status indicator ``J1'' by
identifying the HCPCS code assigned to status indicator ``J1'' on the
claim that had the highest device-dependent APC geometric mean cost.
The primary service is not only the most costly service but also
typically represents the most significant or core service that is being
provided to the beneficiary. To facilitate claims processing and to
ensure that we identified the most costly device-related procedure on
each claim, including those billed with multiple units, we envisioned
using the CY 2014 device-dependent APC payment amount that would have
been made for the service in the absence of a proposal for
comprehensive APCs to identify the most costly procedure described by a
HCPCS code assigned to status indicator ``J1'' on the claim. We
proposed to assign the procedure described by a HCPCS code assigned to
status indicator ``J1'' with the highest device-dependent APC line-item
payment, considering the entire payment when multiple units are billed,
as the primary procedure and to make payment for the claim through the
associated comprehensive APC. We note that the device-dependent APC
payment rates have the same relativity as device-dependent geometric
mean costs, as those costs underpin final budget neutral payment rates.
We agree with the commenters that the methodology by which a claim
that has at least one procedure described by a HCPCS code that is
assigned to status indicator ``J1'' is assigned to a comprehensive APC
is fundamental to understanding final payment under the comprehensive
APC policy. If there is only one procedure described by a HCPCS code
assigned to status indicator ``J1'' reported on the claim, the
comprehensive APC assignment is straightforward; the claim is paid
through the comprehensive APC associated with that procedure. This is
true under the proposed methodology as well as under the revised
methodology we are finalizing in this final rule with comment period.
In the event that more than one procedure described by a HCPCS code
assigned to status indicator ``J1'' was present on the claim, an
important goal of our proposed methodology was to ensure that the
costliest procedure, including increased cost due to multiple units,
would be identified as the primary procedure on the claim so that the
claim would be paid through the most costly potential comprehensive APC
and ultimately garner the highest potential comprehensive APC payment.
After review of the public comments we received, we are modifying our
proposed methodology for assigning a primary procedure described by a
HCPCS code assigned to status indicator ``J1'' reported on a claim to
an appropriate comprehensive APC when more than one procedure described
by a HCPCS code assigned to status indicator ``J1'' is reported. First,
we will only use current ratesetting estimated cost information and not
device-dependent APC payment rates to identify the primary procedure
described by the HCPCS code assigned to status indicator ``J1'' on the
claim and the subsequent comprehensive APC through which payment for
the service would be made. For CY 2015, we will use estimated costs on
CY 2013 claims to calibrate comprehensive APC payment amounts.
Second, we will recognize the greater resources attributable to
more complex cases. Commenters suggested addressing variations in cost
of comprehensive APCs by recognizing the greater resources attributable
to more complex cases with multiple device-dependent procedures in some
manner similar to the severity adjustment incorporated into the IPPS
MS-DRG system. We agree with the commenters that instituting a higher
comprehensive payment for complex cases would both allow us to continue
a comprehensive payment methodology where the most costly service
reported with status indicator ``J1'' on the claim determines the
comprehensive APC assignment and also recognize relative resource
differences associated with multiple device-dependent procedures. In
this response, we discuss the first step in this process of identifying
a primary HCPCS service assigned to status indicator of ``J1'' for each
claim. We present the methodology for identifying complex subsets of
primary services and reassigning claims to higher-level APCs in the
following comment and response.
To address concerns presented by some of the commenters that they
could not fully model the proposal, we provide all of the information
we used to create relative payment weights for CY 2014 using the CY
2012 claims data to illustrate the final methodology below. We believe
that this will assist interested parties in replicating our
methodology. We will recalibrate all of the comprehensive APC relative
payment weights for CY 2015 using CY 2013 claims data, consistent with
our annual recalibration of APC relative payment weights, to reflect
the most recently available claims and cost information.
To arrive at the illustrative CY 2014 comprehensive geometric mean
cost for the comprehensive APCs in Table 8, we began by first
identifying all claims reporting a single procedure described by a
HCPCS code with status indicator ``J1.'' As noted earlier, this is
approximately 75 percent of claims with any procedure described by a
HCPCS code reported with status indicator ``J1.'' On claims reporting a
single procedure described by a HCPCS code with status indicator
``J1,'' we considered that procedure to be the primary service that
determines the comprehensive APC assignment. We then used these single
``J1'' claims to calculate a comprehensive APC single ``J1'' procedure
claim geometric mean cost for all comprehensive APCs using the total
cost on each claim. These comprehensive APC single ``J1'' procedure
claim geometric mean costs appear in Table 9.
We then began the process of identifying a ``primary HCPCS code''
that represents the ``primary service'' or ``primary procedure'' on a
claim reporting multiple procedures described by HCPCS codes with
status indicator ``J1.'' We used the APC geometric mean comprehensive
cost based on claims reporting a single ``J1'' procedure described by a
HCPCS code with status indicator ``J1'' (Table 9) to identify the most
costly procedure reported on each claim. Specifically, we selected the
primary HCPCS code by determining the comprehensive procedure that is
assigned to the APC with the highest geometric mean comprehensive cost
based on claims with a single service with status indicator ``J1.'' We
undertook a second step when a comprehensive service claim contained
two or more procedures described by a HCPCS code with status indicator
``J1'' that are assigned to the same APC. Of those procedures described
by a HCPCS code with status indicator ``J1'' that are also assigned to
the same APC with the highest comprehensive APC cost from Table 9, we
identified the service described by a HCPCS code reported with status
indicator ``J1'' with the highest HCPCS-level geometric mean cost, also
derived from the comprehensive cost of claims that contain a single
procedure with status indicator ``J1,'' to be the primary HCPCS code on
the claim.

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In the event that a HCPCS-level geometric mean comprehensive cost
cannot be determined for a particular HCPCS code from the claims data,
such as new HCPCS codes that are not represented in the claims data or
an add-on code for which there are no claims with only that procedure,
we will model a HCPCS-level comprehensive geometric mean cost that we
will only use to identify a primary procedure. For procedure codes with
missing data, we will include an estimated comprehensive HCPCS code
geometric mean cost in each proposed or final rule, as appropriate,
using the best information we have available about each code. However,
we will not use modeled HCPCS-level comprehensive geometric mean costs
to set comprehensive APC payment rates. We will only use modeled HCPCS-
level comprehensive geometric mean costs in our claims processing
systems to identify a primary HCPCS code reported on a claim with
multiple procedures described by HCPCS codes assigned to status
indicator ``J1'' in the same comprehensive APC. Our goal in modeling
such a HCPCS-specific geometric mean cost is to identify a primary
HCPCS code on a claim with multiple procedures in the same
comprehensive APC with sufficient accuracy for a few years until actual
claims data become available. This modeled geometric mean cost is not
intended in any way to presuppose the actual cost of the service for
future ratesetting.
Table 9 contains a list of all HCPCS codes assigned to status
indicator ``J1'' that are assigned to APCs, which are associated with a
comprehensive payment. Deleted codes are those codes that were used to
estimate geometric mean costs, but are not valid codes for CY 2104
while new codes are those codes that will be valid for payment in CY
2014, but were not present in the CY 2012 claims data. The
comprehensive APC assignment that we proposed for each HCPCS code
assigned to status indicator ``J1'' in the proposed rule is shown in
Column 3, and the illustrative final CY 2014 comprehensive APC
assignment that we would have been established based on public comment
on the CY 2014 proposed rule and using CY 2012 claims data is shown in
Column 4. Column 7 shows the APC geometric mean cost and Column 8 shows
the HCPCS code geometric mean cost; together these two columns allow
the determination of the primary service HCPCS code and initial APC
assignment for any claims with a combination of HCPCS codes reported
with status indicator ``J1.'' We have not provided any modeled HCPCS
geometric mean costs for CY 2013 or CY 2014 ``J1'' HCPCS codes for
which we do not have claims data as we are finalizing this policy with
modification, but delaying implementation until CY 2015. We will make
those modeled geometric mean costs available in next year's proposed
rule.
Comment: Commenters expressed concern that CMS' proposal for a
single, comprehensive APC payment would not adequately cover the higher
cost of cases where multiple expensive devices are used. Commenters
also raised several concerns with paying claims with multiple primary
procedures under a single APC payment. The commenters noted that, under
comprehensive APCs, hospitals would find simple claims with a single
comprehensive HCPCS code and few services to be more profitable on a
case basis than complex claims with a greater number of comprehensive
HCPCS codes and more ancillary services. Commenters believed that this
could be a significant issue for many of the comprehensive APCs because
only one primary service is paid and one quarter of all claims have
multiple procedures. Many commenters believed that a single,
comprehensive APC payment for single and multiple device insertion
procedures would create an incentive to not perform complex and
multiple procedures where the cost materially exceeds payment and that
it also could create an incentive for hospitals to use inappropriately
less expensive devices, services, and supplies to offset the financial
threat of reduced ``packaged'' payments, including cases where those
substitutions could increase program costs as a whole and carry greater
risk for beneficiaries.
Commenters argued that hospitals systematically performing more
multiple device insertion procedures may face severe financial hardship
because they would not have enough simple, single primary procedure
cases to cover the cost of their many multiple device insertion
procedures, which may limit their ability to provide these services as
they have in the past. While we stated that we believed that the
comprehensive APC proposal would encourage hospitals to negotiate
better rates on supplies and increase the efficiency of individual
procedures, commenters stated that the added cost of additional
expensive devices cannot be routinely reduced to approximate the cost
of a single device procedure.
Response: We agree with the commenters that there is wide spread
variation in the comprehensive costs of individual claims within each
primary procedure, and we further agree with the commenters that we do
not want to financially disadvantage hospitals that treat sicker
beneficiaries that require more complex and costly procedures. We also
agree with the commenters that the presence of certain device-related
procedures reported together on a claim can, but does not always,
constitute a more complex and resource-intensive subset of a
comprehensive procedure.
In calculating the proposed payment rates for comprehensive APCs,
we proposed to allocate the costs of all ancillary and adjunctive
services to the primary procedure assigned to status indicator ``J1,''
including the costs of additional procedures identified with status
indicator ``J1.'' A comprehensive approach increases opportunities for
hospitals to garner efficiencies in the delivery of these services, but
also increases the variation in estimated total claim costs
contributing to the comprehensive APC relative payment weight
calculation. We agree with the commenters that, in certain instances,
cost variation could be too large and could potentially create undue
financial risk for hospitals that treat complex patients. We also agree
with the commenters that there are some limitations on individual
hospitals' ability to reduce costs associated with complex procedures,
especially in the short term. Cost reductions may involve changing
suppliers or renegotiating contracts for expensive devices. Further, it
may be difficult for hospitals to immediately analyze the effects of
changing payment models and rapidly implement the practices that they
use to handle cost variations within inpatient DRGs.
Given our interest in establishing a comprehensive APC payment
under the OPPS that is comparable to a severity level DRG payment
adjustment, we agree with the commenters who recommended assigning
combinations of procedures that are reported together which indicate a
more complex and resource-intensive version of the primary procedure to
higher level comprehensive APCs, not unlike the IPPS policy of
assigning procedures with certain conditions to higher paying MS-DRGs.
After reviewing significant public comments pointing out common
clinical scenarios for combinations of device insertion procedures
assigned to status indicator ``J1,'' we decided to recognize complexity
in these device-dependent procedures by reassigning claims for certain
forms of the primary procedures to higher level comprehensive APCs as a
modification to our proposal. We welcome public

[[Page 74886]]

comments on recognizing the cost of more complex forms of primary
procedures through our final policy to reassign claims for complex
forms of the primary procedures discussed below. We identify the
complex forms of primary procedures that we would reassign for CY 2014
using CY 2012 claims data if we were implementing the comprehensive APC
policy in CY 2014 in Table 10. We discuss our consideration of code-
specific comments by clinical family later in this section.
We took several steps to moderate resource cost variation in
comprehensive APC payments. First, we undertook a standard APC
recalibration. We specifically evaluated the APC assignment of some
primary procedures and moved those procedures from one APC to another
to better align resource and clinical homogeneity. In considering the
APC assignment of these procedures, we looked at the traditional
parameters of geometric mean cost for the primary service and clinical
characteristics of the APC. We created, consolidated, or redefined the
primary procedures in the comprehensive APCs as necessary to better
group services with clinical and resource homogeneity. Second, we
identified complex subsets of primary procedures, which consist of the
primary HCPCS code reported in combination with other HCPCS codes that
together describe a more complex form of the primary service. We
reassigned many claims with complex subsets of primary procedures to a
higher level comprehensive APC in the same clinical family through this
methodology. We define a clinical family of comprehensive APCs to be a
set of clinically related comprehensive APCs that represent different
resource levels of clinically comparable services.
Reassignment of claims with complex subsets of the primary
procedures does not change the primary service identified on a claim.
We continue to consider all services reported on the claim, even the
additional ``J1'' HCPCS codes identifying a claim as complex, to be
adjunctive and packaged into the primary service. We make a distinction
here between the idea of a primary service under comprehensive APCs and
the concept of a composite service as discussed in section II.A.2.f. of
this final rule with comment period. Both methodologies foster more
accurate ratesetting by allowing us to use additional information
reported on a claim to establish a geometric mean cost and accompanying
relative payment weight. However, under a composite payment approach,
we identify certain procedures that are frequently performed together
during a single clinical encounter as a single service and identify
that set of services as a complete service. For comprehensive APCs, we
assess many combinations of procedure codes for purposes of determining
complex forms of a primary service, but the combination of codes is not
considered to be separate and distinct service. For comprehensive APCs,
the primary service continues to represent the complete furnished
service.
For the purpose of evaluating HCPCS code combinations for
reassignment to a higher level comprehensive APC after identifying one
of the procedures described by a HCPCS code assigned to status
indicator ``J1''reported on the claim as being the primary service, we
recognized a combination of procedure codes as complex and
appropriately reassigned to a higher level APC in the same clinical
family of services if the complex combination of procedures met all of
the following criteria.
The comprehensive geometric mean cost of the claims with
the combination of procedures was more than two times the comprehensive
geometric mean cost of claims reporting only a single comprehensive
procedure described by a HCPCS code assigned to status indicator
``J1.''
There were greater than 100 claims with the specific
combination of procedure codes.
The number of claims reporting the specific combination of
procedure codes exceeded 5 percent of the total volume of claims
reporting that procedure as the primary service described by a HCPCS
code assigned to status indicator ``J1'', and we did not determine that
the combination of procedure codes represented an uncommon clinical or
resource extreme value within the entire family of services.
In reviewing the CY 2012 claims data for purposes of illustrating
this final methodology, we addressed all of the combinations of
procedures reported on claims that met all of these criteria, but also
addressed other combinations of procedures reported on claims that did
not meet all of these criteria if clinical consistency suggested that
additional reassignment was necessary.
Once we determined that a particular procedure code combination for
a primary service was complex because it represented a sufficiently
costly case and frequent subset within the primary procedure overall,
we evaluated alternate APC assignments for those claims reporting a
combination of procedure codes. We assessed resource variation for
reassigned claims within the receiving APC using the geometric mean
cost for all reassigned claims for the primary service relative to
other services assigned to that APC using the 2 times rule criteria. We
maintained clinical homogeneity by reassigning claims within the same
clinical family of comprehensive APCs. Any combinations of multiple
comprehensive HCPCS codes that were not sufficiently frequent or which
did not represent sufficiently costly cases relative to the cost of the
primary procedure established with simple, single procedure claims were
not identified as complex subsets of the primary procedures and were
not reassigned. We repeated this process for each APC for which
commenters expressed concerns regarding complexity of cases
contributing to wide variation in costs. After both reassigning some
procedure codes to different comprehensive APCs and reassigning claims
for complex cases of primary services, we then calculated the final
comprehensive geometric mean cost for the comprehensive APCs. The
illustrative comprehensive geometric mean costs that we would have
calculated for the comprehensive APCs for CY 2014 appear in Table 8.
Infrequently, we will not have claims data for some procedures
described by HCPCS codes that are assigned to status indicator ``J1''
and, therefore, no claims cost information upon which to base an
assessment of volume or costliness. In this case, we will use the best
information available to us to prospectively identify a complex version
of the primary service, which is indicated by the combination of
procedure codes reported on a claim and assign those complex cases to a
higher level comprehensive APC. We will reassess the appropriateness of
identifying certain combinations of procedure codes as complex subsets
of a primary service once cost information becomes available. This is
comparable to our policy for assigning new codes or codes without
claims data to an APC based on the best information we have available
at the time of assignment and reassessing that resource homogeneity of
that APC assignment when claims data become available.
Table 10 shows the combinations of procedure codes that we
identified within the 136 primary procedure codes assigned to status
indicator ``J1'' in the CY 2012 claims data that we used in our
illustration of CY 2014 modeling and the APC to which those
combinations of procedures would be reassigned, as well as combinations
of CY 2013 and CY 2014 procedure codes that are not represented in our
modeling dataset for

[[Page 74887]]

which we identified a clinical similarity to existing services and
would have identified for reassignment as a complex subset of the
primary service for CY 2014. We intend to reassess both procedure code
assignments in the comprehensive APCs and our identification and
reassignment of complex cases represented by combinations of procedure
codes using updated claims and cost report data as we establish
relative payment weights each year. We note that we will have CY 2013
claims data for some of the procedure codes listed in Table 10 and we
will reassess our identification of combinations of procedures as
complex for CY 2015 in light of data and in response to comments
received on this final rule with comment period in our CY 2015 OPPS/ASC
proposed rule.
In summary, after consideration of the public comments we received,
we are finalizing the following methodology for establishing an APC
relative payment weight for the comprehensive APC policy, which is our
proposed policy with a modification. During ratesetting, single claims
reporting a single procedure described by a HCPCS code assigned to
status indicator ``J1'' are used to establish an initial APC assignment
for each procedure described by that HCPCS code. The geometric mean of
the total estimated costs on each claim is used to establish resource
similarity for each procedure code's APC assignment and is evaluated
within the context of clinical similarity, with assignment starting
from the APC assignments in effect for the current payment year. Claims
reporting multiple procedures described by HCPCS codes assigned to
status indicator ``J1'' are identified and the procedures are then
assigned to a comprehensive APC, based on the primary HCPCS code, that
has the highest geometric mean estimated cost. This ensures that
multiple procedures described by HCPCS codes assigned to status
indicator ``J1'' reported on claims are always paid through and
assigned to the comprehensive APC that would generate the highest APC
payment. If multiple procedures described by HCPCS codes assigned to
status indicator ``J1'' that are reported on the same claim have the
same APC geometric mean estimated cost, as would be the case when two
different procedures described by HCPCS codes assigned to status
indicator ``J1'' are assigned to the same APC, identification of the
primary HCPCS code is then based on the procedure described by the
HCPCS code assigned to status indicator ``J1'' with the highest HCPCS-
level geometric mean cost based on claims with a single HCPCS code
assigned to status indicator ``J1.'' Where we have no claims data upon
which to establish a HCPCS-level comprehensive geometric mean cost, we
will model a HCPCS-level geometric mean cost for the sole purpose of
appropriately assigning the primary HCPCS code reported on a claim. The
comprehensive APC assignment of each procedure described by HCPCS codes
assigned to status indicator ``J1'' is then confirmed by verifying that
the APC assignment remains appropriate when considering the clinical
similarity, as well as the estimated cost of all claims reporting each
procedure described by HCPCS codes assigned to status indicator ``J1,''
including simple and complex claims, with multiple device-related
procedures.
We are providing in Table 9 the APC assignments for each procedure
described by HCPCS codes assigned to status indicator ``J1,'' the APC
geometric mean estimated cost based on claims reporting single
procedures, and the HCPCS geometric mean estimated cost based on the
claims reporting single procedures that we used to identify primary
HCPCS codes and to assign the procedure to an appropriate comprehensive
APC. If we were implementing this policy in CY 2014, Table 9 would
contain the same information as the claims processing system and could,
therefore, be used to determine the initial APC assignment and APC
geometric mean estimated cost for any procedure described by HCPCS
codes assigned to status indicator ``J1'' reported on claims prior to
any reassignment of certain costly claims for a primary service that
represent a complex form of the primary service to higher level APCs.
Table 9 is configured for CY 2104 and will be updated for
implementation in CY 2015.
We then considered reassigning complex subsets of claims for each
primary service HCPCS code. All claims reporting more than one
procedure described by HCPCS codes assigned to status indicator ``J1''
are evaluated for the existence of commonly occurring combinations of
procedure codes reported on claims that exhibit a materially greater
comprehensive geometric mean cost relative to the geometric mean cost
of the claims reporting that primary HCPCS code. This indicates that
the subset of procedures identified by the secondary HCPCS code has
increased resource requirements relative to less complex subsets of
that procedure. If a combination of procedure codes reported on claims
is identified that meets these requirements, that is, commonly
occurring and exhibiting materially greater resource requirements, it
is further evaluated to confirm clinical validity as a complex subset
of the primary procedure and the combination of procedure codes is then
identified as complex, and primary service claims with that combination
of procedure codes are subsequently reassigned as appropriate. If a
combination of procedure codes does not meet the requirement for a
materially different cost or does not occur commonly, it is not
considered to be a complex, and primary service claims with that
combination of procedure codes are not reassigned. All combinations of
procedures described by HCPCS codes assigned to status indicator ``J1''
for each primary HCPCS code are similarly evaluated.
Once all combinations of procedures described by HCPCS codes
assigned to status indicator ``J1'' have been evaluated, all claims
identified for reassignment for each primary service are combined and
the group is assigned to a higher level comprehensive APC within a
clinical family of comprehensive APCs, that is, an APC with greater
estimated resource requirements than the initially assigned
comprehensive APC and with appropriate clinical homogeneity. We
assessed resource variation for reassigned claims within the receiving
APC using the geometric mean cost for all reassigned claims for the
primary service relative to other services assigned to that APC using
the 2 times rule criteria.
For new HCPCS codes and codes without data, we will use the best
data available to us to identify combinations of procedures that
represent a more complex form of the primary procedure and warrant
reassignment to a higher level APC. We will reevaluate our APC
assignments, and identification and APC placement of complex claims
once claims data become available. We then recalculate all APC
comprehensive geometric mean costs and ensure clinical and resource
homogeneity.
We have provided in Table 10 the combinations of procedures
described by HCPCS codes assigned to status indicator ``J1'' that we
used to set payment rates and the additional combinations of procedures
described by new HCPCS codes assigned to status indicator ``J1'' that
would be identified for reassignment as a complex form of the primary
procedure in CY 2014. If we were implementing this policy in CY 2014,
Table 10 would contain the same information as the claims processing
system and could, therefore, be used to

[[Page 74888]]

determine the final comprehensive APC assignment and comprehensive APC
geometric mean estimated cost for any procedure described by HCPCS
codes assigned to status indicator ``J1'' reported on an individual
claims. Table 10 is configured for CY 2104. We will update this table
for implementation in CY 2015.

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
(e) Impact of Proposed Comprehensive APCs for Device-Dependent
Procedures
Impact on Medicare Payments
In our proposed rule, we stated that because these device-dependent
comprehensive APCs are entirely derived from existing services
currently reported on Medicare claims, the policy is effectively budget
neutral in its impact on Medicare payments. We noted 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
proposed to include new revenue center costs for room and board when
reported on these claims, we emphasized that we were proposing to
include them to increase the accuracy of reporting and not because they
represent a new cost.
Comment: One commenter opined that CMS is correct to include the
costs of all component services and supplies that would be packaged
under the proposal for CY 2014; all adjunctive services, including
laboratory tests, diagnostic tests and evaluation and management
services; DMEPOS for which payment would be made under the OPPS;
services reported by therapy codes that would be payable under the
OPPS; room and board as reported in room and board revenue cost
centers; and cost of hospital-administered drugs (regardless of the
route of administration) to ensure that the geometric mean cost upon
which the payment for these comprehensive APCs would be based would
include all necessary costs of the services. However, several
commenters were concerned that CMS did not account for the payments for
services proposed to contribute to the comprehensive APC geometric mean
costs into the CY 2013 current year payment estimates in budget
neutrality calculations, but included these costs in the CY 2014 OPPS
payment rate calculations. The commenters pointed out that CMS proposed
to include the CLFS payments for laboratory services proposed for
packaging in the OPPS current year (CY 2013) total payment amount when
calculating budget neutrality adjustments for the prospective payment
year (CY 2014), but that CMS apparently did not add payments to the
OPPS current year total payment estimate for the adjunctive items and
services that would be newly paid under the OPPS through the 29
comprehensive APCs. In short, payment for newly added services should
be added to the total CY 2013 payment level against which CY 2014
payments would be held budget neutral. These commenters defined the
additional services that would be newly paid under the OPPS to include
durable medical equipment, therapy services, inpatient nursing
services, and inpatient room and board for overnight outpatient stays.
The commenters further stated that the proposed rule provides no
information concerning how this calculation was made and data was not
provided to allow the public to review and validate the determination
of budget neutrality.
Response: We appreciate the acknowledgement that we correctly
identified and included the costs of adjunctive services contributing
to these comprehensive OPD services, with the exception of charges on
inpatient revenue codes, including room and board revenue codes. We
agree with the commenters that we should have included payments for
adjunctive services proposed for payment through the OPPS for the first
time in the current year budget neutrality calculations as well as in
the relative payment weights for the proposed year calculation. In
calculating budget neutrality adjustments for CY 2015 we will
incorporate modeled payments for services that will be newly included
in the comprehensive APCs on both sides of the budget neutrality
calculation as we did for those laboratory services that we are
packaging for CY 2014.
Comment: Several commenters stated that, although they recognized
that changes in assignments in a prospective (average) payment system
cause some payments to increase and others to decrease, the commenters
were concerned that payment amounts have not been set to appropriately
encompass the additional services that will be packaged. Another
commenter noted that the shift from limited to comprehensive APCs would
be accompanied by wide shifts in payment and questioned whether the
changes with the expanded bundles, including occasional decreases,
accurately reflected the costs of the additional packaged services.
They requested that CMS delay proposed payments for the comprehensive
APCs to ensure payment amounts have been set appropriately to include
the additional packaged services.
Response: We agree with commenters that, for some services, there
was considerable variation in the payment change from an isolated
payment for the primary service, a device-related procedure, to a
comprehensive payment for the complete service. There were a number of
reasons for this variation. First, services varied considerably with
respect to the number and estimated cost of adjunctive services that
were typically provided during the same encounter. Some services were
almost completely described by the primary HCPCS code with status
indicator ``J1'' with few additional adjunctive services reported in
the claims data. Proposed comprehensive payment for these services did
not change significantly. Other services, however, appear with many
adjunctive services reported in the claims data that became packaged
into the comprehensive payment, so the comprehensive payment for those
primary HCPCS codes was considerably greater than the payment for the
primary service alone.
Second, comprehensive payments allow us to use almost all of the
claims for the primary service, rather than using a smaller subset of
claims that have a single major procedure and no other significant
procedures. We believe that this methodology provides much more
accurate cost estimates for these comprehensive services, including
incorporating the cost of all adjunctive services proportional to their
presence on claims reporting comprehensive services into our final APC
relative payment weight calculation. Our adoption of the geometric
mean-based methodology rather than the median-based methodology to
establish relative payment weights finalized in the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68229 through 68233) ensures that
the final APC relative payment weight captures the complete spectrum of
estimated geometric mean costs of procedures reported on claims and
assigned to that APC. We recognize that the magnitude and direction of
the change in payment from current OPPS payment structure for more
granular payment for individual services to the proposed single
comprehensive APC payment for the primary service and its adjunctive
services varied from primary service to primary service. In a few
instances, the relative geometric mean cost of the entire comprehensive
service was less than the geometric mean cost of the primary service
alone. We believe that this is largely attributable to the improved
accuracy of our ratesetting process. Under our traditional ratesetting
methodology, we attempt to identify a cost for each separately payable
service from our claims data. We use many strategies to use as much
claims data as possible, but we cannot use all claims to estimate the
APC

[[Page 74902]]

geometric mean cost underpinning the relative payment weight.
Comprehensive APCs allow us to use almost all of the claims for the
primary service to calculate the geometric mean cost and the
comprehensive APC to which the primary service is assigned.
Finally, we note that we reassigned some procedures described by
HCPCS codes assigned to status indicator ``J1'' to different
comprehensive APCs based on public comments that we received. Also in
response to public comments that we received, we are finalizing a
methodology for identifying complex subsets of the procedures reported
in combination with the primary service that contain multiple device-
dependent procedures and require greater resources, and we are
reassigning these complex cases to a higher level comprehensive APC. We
believe that reassigning claims for complex forms of the primary
procedure to a higher level APC within the same clinical family
directly addresses commenters' concerns regarding recognizing the
additional cost of ancillary services in complex procedures and
improves the relative accuracy of the final OPPS payment for the
primary service.
Comment: Several commenters questioned whether outlier payments
would be adequate under the OPPS as the new comprehensive APCs are
formed and packaging is expanded. The commenters noted that under the
IPPS outlier payments are set at 5.1 percent of total payments,
compared to 1 percent under the OPPS, and costs reported above the
outlier threshold under the IPPS are paid at 80 percent compared to 50
percent under the OPPS. One commenter suggested that CMS increase
outlier payments for comprehensive APCs, while another commenter
suggested that outlier payments are an issue that CMS should examine
and perhaps should have examined prior to advancing new packaging
policies.
Response: Although we did not propose a change in outlier payments,
we will consider whether we should expand our current outlier payment
policy. Section 1833(t)(5)(C) of the Act specifies that the estimated
total of additional payments for outliers cannot exceed 3 percent of
estimated total program payments in that year. Currently, we allocate 1
percent of total program payments to outlier payments each year.
Overall, we believe that the current structure of the OPPS, which
continues to make separate payment for most services, does not create
the same financial risk for individually costly cases as IPPS payment
through MS-DRGs, for example. Further, we are not sure an expansion to
our outlier payment policy is necessary because we believe that our
final policy to reassign claims for complex forms of primary services
to higher level APCs reduces financial risk associated with
comprehensive APC payment.
Impact on APCs
Impact on Composite APCs. There is currently one device-dependent
composite service under the OPPS, cardiac resynchronization therapy,
which is assigned to APC 0108. Because a comprehensive APC will treat
all individually reported codes as representing components of the
comprehensive service, all of the elements of the composite service are
included in the new comprehensive service. Therefore, cardiac
resynchronization therapy will no longer be identified as a composite
service, but will be identified as a comprehensive service. All
services currently assigned to APC 0108, including cardiac
resynchronization therapy services, were assigned to the new
comprehensive APC in our CY 2014 proposal.
Comment: Several commenters noted that, whereas we proposed making
APC 0085 (Level II Electrophysiologic Procedures) a comprehensive APC,
we did not discuss composite APC 8000 (Cardiac Electrophysiologic
Evaluation and Ablation Composite), which also would be absorbed by the
new comprehensive APC policy. The commenters also noted that they
believed that CMS calculated an APC geometric mean cost and payment
rate based on the same set of claims for both APCs.
Response: We stated that cardiac resynchronization therapy services
(assigned to APC 0108 Cardiac Resychronization Therapy) would no longer
be identified as a composite service because it would be incorporated
into a comprehensive service. However, we did not state in the proposed
rule that the same situation existed in terms of APC 8000. Commenters
are correct that the same principle applies. Because one of the
components of the composite service is assigned a procedure assigned to
status indicator ``J1,'' all of those claims reporting these services
would trigger the comprehensive payment policy that we are finalizing
with modification in this final rule with comment period. Commenters
also are correct that in the proposed rule, we incorrectly assigned
procedures to both APCs and calculated geometric mean costs and
relative payment weights based on the same set of claims. We will
reassign the previous status indicators for procedures assigned to APC
8000 from ``S'' and ``T'' to status indicator ``J1'' for CY 2015, and
we will make a comprehensive APC payment for cardiac electrophysiologic
evaluation and ablation services.
Impact on Claims Used to Calculate Other APCs. Some of the 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 final rule
with comment period. However, the loss of usable cost data for these
services will not create a significant impact on other APCs 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 also important to note that the impact associated
with the loss in usable claims data is lessened when assessing the
benefit of more accurate cost calculations and ratesetting that will be
achieved from the use of 400,000 new claims that can now be used for
these purposes because of the establishment of the comprehensive APCs.
Impact on Device-Dependent APCs. The impact on current device-
dependent APCs is described above in section II.A.2.d.(1) of this final
rule with comment period. Comprehensive APC geometric mean costs
generally exceed the device-dependent procedure geometric mean costs by
an average of 11 percent, less than $1,000 per claim. The direct cost
contribution of other adjunctive OPPS services accounts for most of
this increase, with laboratory tests contributing approximately $18 per
claim (a 0.1 percent increase) and other adjunctive covered outpatient
services (not currently paid under the OPPS) contributing an additional
$18 per claim. There is significant variation across comprehensive
APCs, however, not only because the distribution of adjunctive services
varies, but also because the larger bundles allow a more complete
incorporation of packaged 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 relative cost estimates.
Comment: Several commenters were concerned about hospitals'
willingness to consider new technologies, which can be costly. The
commenters

[[Page 74903]]

expressed concern that this proposal would impact device pass-through
payment, New Technology APC provisions, and payments for device-
dependent APCs. The commenters also were concerned that packaging is
likely to limit the data available for future OPPS updates because the
commenters believed that hospital reporting would be less accurate if
there were no payment consequences for omitting a device on the claim
and that the sunset of device edits would reduce the reliability of the
data provided for payment calculations for the same reason. The
commenters also were concerned that future potential pass-through
device categories may be disadvantaged because pass-through eligibility
includes demonstrating costliness relative to several thresholds based
on APC payment. Specifically, the commenters were concerned that fewer
device categories would be eligible for pass-though payment because
fewer device categories would exceed a new higher threshold as a
percent of the APC payment amount as payment increases with expanded
packaging. Some commenters requested that CMS continue to apply the
procedure-to-device and device-to-procedure edits. One commenter
asserted that hospitals do not find these edits to be burdensome, that
the edits are a useful flag for accurate charging and that, if it is
eliminated, providers could fail to report device charges completely.
Response: We do not agree with commenters that comprehensive APC
payment will inhibit adoption of new technology. We have not proposed
any changes to the New Technology APCs or device pass-through payment
provisions and we discuss these payment policies in sections
II.A.2.d.(1) and I.B. of this final rule with comment period. These
processes for supporting new technologies will continue. New Technology
APCs are reserved for new services that are not eligible for
transitional pass-through payments for a device, drug, or biological,
and for which we lack sufficient clinical information and cost data to
appropriately assign them to a clinical APC group. Our proposed policy
does not impact our New Technology APC policy, and our determination of
new technology eligibility is not dependent on a particular cost
threshold.
With regard to pass-through payment eligibility, we agree with the
commenters that comprehensive APCs will create expanded bundles and
generally higher payment from which the dollar value of the various
cost thresholds that are part of the pass-through eligibility process
will be determined. The specific cost thresholds used in determining
eligibility of a new device pass-through category are listed in 42 CFR
419.66(d). For CY 2015, payment for device-dependent procedures through
comprehensive APC payment will create a higher costliness threshold
against which new device categories interested in pass-through status
must demonstrate costliness. We believe that the statutory construction
of the OPPS envisions the relative cost of services to vary over time
as services are redefined, recoded, and reassigned among APCs, and as
new claims and cost report data become available, which would raise or
lower the cost threshold for pass-through payment eligibility under
section 1833(t)(6)(A)(iv)(II) of the Act. We estimate that, for CY
2014, the inclusion of additional adjunctive packaged services, in
aggregate, account for approximately 11 percent of the cost of these
device-intensive services. Relative payment weights for device-related
procedures can change by this amount each year due to annual
recalibration. As we implement the comprehensive APC payment policy in
CY 2015, we will monitor the impact of eligibility for device pass-
through payments for a change in the percent of potential device
categories failing to clear the current cost threshold criteria.
We also believe that that expanded payment bundles encourage
adoption of new technologies by giving hospitals more flexibility over
how they deliver a particular service and creating more opportunities
for hospitals to make tradeoffs to absorb the cost of improved devices.
As we discuss in section II.A.2.d.(1) of this final rule with comment
period, we plan to continue our historical device editing in CY 2014.
Also as indicated in that section, we are further assessing whether we
need to continue claims processing edits requiring a device HCPCS code
to be reported on the claim when we implement the comprehensive APCs
policy in CY 2015.
Impact on Beneficiary Payments
Under the 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 can expect to only pay a single copayment that
is subject to the cap. This will likely reduce beneficiary overall
liability for most of these claims.
Comment: Several commenters agreed with CMS that, due to the
inpatient deductible cap on beneficiary copayments, net beneficiary
coinsurance would decrease under the proposed change. One commenter was
concerned that beneficiary out-of-pocket costs may still be higher for
any individual beneficiary. The commenter was particularly concerned
that new cost-sharing with beneficiaries for laboratory services would
be contrary to statue and congressional intent. The commenter objected
to a proposal that would impose new beneficiary cost-sharing
requirements in order to cut total projected Medicare spending for
outpatient services.
Response: We believe that this proposal decreases the liability for
almost all beneficiaries receiving primary procedures assigned to
comprehensive APCs in CY 2015 because the inpatient deductible cap,
mandated by statute to apply to single services, will now apply to the
entire hospital claim, as it is now considered a single service or
procedure. We agree with the commenters that there may be some isolated
beneficiaries who may have a higher beneficiary liability than they
would have had we not proposed comprehensive APCs. In many instances,
and for these device-related procedures in particular, beneficiaries
will no longer make copayments for individual ancillary services.
Because the device insertion procedures that we have proposed as
comprehensive services are universally very expensive, the cap will
apply to the majority of claims reporting services assigned to
comprehensive APC. We received many public comments on our proposal to
package laboratory services and address those comments and concerns in
our discussion of that final policy in section II.A.3.c.(3) of this
final rule with comment period.
Impact on Specific APCs
In conjunction with our proposed rule, we published Addendum B,
which identified specific proposed comprehensive payments associated
with HCPCS codes proposed for assignment to status indicator ``J1''
under the proposed comprehensive APC payment policy. We identified the
29 device-dependent APCs proposed for comprehensive APCs and assigned
HCPCS codes based on their prior APC assignment. Most of the public
comments that we received were specific to certain HCPCS codes, certain
APCs, or certain families of services.
Although we are not implementing this final comprehensive APC
payment policy until CY 2015, to address concerns by some commenters
that they could not fully model the proposal, we provide all of the
information we would use to create a relative payment weight

[[Page 74904]]

for CY 2014 using the CY 2012 claims data in order to illustrate the
final comprehensive APC methodology. We summarize and respond to the
public comments on individual services in this section, as if we were
implementing this policy for CY 2014, grouped by those families of
services below. We will recalibrate all of the comprehensive APC
relative payment weights for CY 2015 using CY 2013 claims data,
consistent with our annual recalibration of APC relative payment
weights, to reflect the most recently available claims and cost
information in next year's rulemaking cycle.
Comment: With reference to the neurostimulator family of APCs, APCs
0039, 0041, 0061, and 0318, one commenter was concerned that the CY
2014 proposal would broadly decrease payments for neurostimulator
insertions. Other commenters believed that total payments would remain
approximately the same, but also believed that the spread of costs
within a given APC was too great when certain combinations of devices
were used. Commenters argued that there is a vast difference in supply
(device) costs between a battery or generator replacement and a paddle
lead implant or even a percutaneous lead implant. Commenters argued
that bundling all of the different variations of neurostimulator
implants into one comprehensive payment could create an unintended
incentive to use less effective single leads and to increase the number
of device replacements and revisions, which could potentially limit the
therapeutic effectiveness for patients with complex pain syndromes.
With respect to leads, commenters stated that payment for dual lead
trials would be decreased by nearly 40 percent, while single lead
trials would be increased by 25 percent, encouraging single lead
trials. Similarly, the payment for the initial dual lead implant would
decrease by 16 percent. The commenter asserted that this policy may
reverse the common clinical practice of dual lead trials for the
majority of patients and create a financial incentive to reduce the
number of leads used for permanent implants, increasing the need for
additional lead placements at a later time, which would result in an
increase in readmissions and possible increase in adverse events and
complications.
Additionally, commenters believed that this proposal could create
incentives to use shorter life devices such as non-rechargeable
devices, requiring more frequent replacement procedures in future
years. The commenters stated that on the one hand, providers would have
a financial incentive to use less expensive devices initially. However,
the commenter further stated that on the other hand because CMS is
proposing to increase the generator replacement payment rate by 29
percent, providers could be encouraged to use shorter life devices that
may require more frequent replacements with a consequent increase in
Medicare spending and beneficiary cost sharing.
Commenters proposed a number of modifications to address these
issues, including the creation of composite APCs to pay appropriately
for the combination of devices provided to an individual patient. The
commenters recommended that CMS retain the existing single component
APCs for use when only one component (that is, a generator or an array)
is implanted or replaced, and create two new composite APCs that
reflect different combinations of components--pulse generator and one
array and pulse generator and two or more arrays. Alternatively, the
commenters recommended Comprehensive APC 0318 (Implantation of
Neurostimulator Pulse Generator and Electrode) as the appropriate
assignment for most complete neurostimulator systems procedures because
it is already used to describe complete cranial nerve and vagus nerve
systems procedures. Several commenters recommended maintaining a
differentiation between laminectomy lead implants and percutaneous
implants, and between spinal systems and sacral systems.
Response: We do not agree with the commenters who are concerned
that we are underestimating payments for neurostimulators. We believe
that by using all claims for these services, instead of the much
smaller subsets of single claims that we used for our device-dependent
methodology, any adjustments in the payments for specific services
represent a more accurate estimation of relative resources required for
the primary service than past estimates. We also note that by
estimating the total cost of the procedure by packaging all charges
reported on the claim, we ensure that all of the estimated costs of all
of these services contribute to the cost estimation for the
neurostimulator procedure. Our methodology for identifying single
claims, which is designed to isolate the unique costs associated with a
specific service, makes some assumptions about assigning packaged costs
to individual services. However, we agree with the commenters who were
concerned that complex procedures such as those characterized by
multiple units and multiple comprehensive components have a wide
variation in comprehensive costs and that the geometric mean cost of
these subsets is often materially greater than the geometric mean cost
of all claims that include both simple and complex versions of the
procedure. We agree with the commenters that delivery of these complex
services could potentially be impacted under our proposed comprehensive
APC payment policy.
Specifically, we agree with the commenters that procedures that
implant individual elements of device systems, such as a generator
without leads, may have significantly different costs than procedures
that implant entire systems. We also agree with the commenters that
there may be significant resource differences between individual
elements of neurostimulator systems, such as transcutaneous leads and
implanted paddles, and between different systems, such as epidural
systems and sacral systems. These differences may then be reflected in
the variation in the estimated geometric mean costs of the
comprehensive service due to different combinations of component
services. Therefore, we are accepting the commenters' suggestions and
we would reconfigure these APCs to better separate procedures for
individual elements of neurostimulator systems from procedures in which
the entire system is implanted, and to more closely align relative
resource requirements of complex subsets of the service with the
corresponding payment for that subset if we were implementing this
comprehensive APC policy in CY 2014.
Once we reassign complex claims for a primary service to a higher
level APC, as we discuss below, we believe that many of the concerns
raised by the commenters would be directly addressed, and therefore, we
do not believe that we should not consider these procedures for a
comprehensive APC assignment in CY 2015. We believe that hospitals
understand that under a prospective payment system the cost of
providing care to individual patients may vary relative to the payment
amount, which is one hallmark of a prospective payment system. We are
comfortable implementing comprehensive APCs for neurostimulators in CY
2015 with variance in the geometric mean costs of individual services
that are comparable to the variance we see in estimated hospital costs
for traditional, discrete, noncomprehensive services.
To implement the commenters' suggestions we would use the four
techniques described above to reassign claims for complex forms of the
primary

[[Page 74905]]

service to higher level APCs. We have analyzed the claims in which
multiple units or multiple HCPCS codes assigned to status indicator
``J1''are present and have divided individual services into simple and
complex services, with complex services characterized by complete
systems, multiple components or other associations that correlate with
high resource requirements (high cost). We are adopting the basic
suggestion of differentiating between partial systems and complete
systems, and we plan to use the claims data to group clinically
similar, high-volume, complex procedures into APCs with similar costs
in CY 2015. In this final rule with comment period, we invite
commenters to apply the analysis, methodology, and the payment
estimation techniques presented here to specific neurostimulator
services and to provide comment on these illustrative CY 2014
reassignments of complex neurostimulator claims.
Changes to implement the commenters' suggestions and concerns for
CY 2014, if we were implementing this policy for CY 2014, for this
neurostimulator family of APCs are as follows:
APC Redesignations: We would eliminate APC 0315, and we
would rename APC 0039 and APC 0318.
APC Reassignments: We would reassign CPT codes 43647 and
63655 from APC 0061 to APC 0039; CPT code 0268T from APC 0039 to APC
0040; CPT codes 63664 and 64553 from APC 0040 to APC 0061; and CPT code
61886 from APC 0315 to APC 0318.
Complexity Reassignment: We would reassign certain HCPCS
code combinations that occur with CPT codes 0282T, 61885, 63650, 63663,
63685, 64555, and 64590 as complex forms of the primary service. We
summarize all of the codes that we would reassign as complex forms of
their primary procedure in Table 10 as if we were implementing this
policy in CY 2014.
We request comment on these specific HCPCS code movements and
complex claim reassignments. We will reassess the application of this
policy to this neurostimulator family of APCs with CY 2013 claims data
for CY 2015 implementation, and we will update them based on new claim
and cost report data and any relevant new CY 2015 codes through next
year's rulemaking cycle.
Comment: With reference to the endovascular family of APCs, APCs
0082, 0083, 0104, 0229, 0319, and 0656, one commenter was supportive of
the approach to further integrate the payment methodologies for the
inpatient and outpatient systems in this case and agreed that patients
who receive the major services contained within the 29 comprehensive
APCs are unlikely to be receiving unrelated services on the same day.
The commenter urged CMS to monitor the effects of this new system to
ensure that patients continue to receive access to the most appropriate
care. Other commenters were generally supportive of the approach, but
believed that there were specific reasons for not applying
comprehensive status to the endovascular family APCs, for delaying the
implementation for these comprehensive APCs, or for modifying payments
within the family. One commenter specifically was concerned about a
substantial decline in payment for APC 0083 (Coronary Angioplasty,
Valvuloplasty, and Level I Endovascular Revascularization of the Lower
Extremity).
Commenters noted that for CY 2011, 16 new HCPCS codes were
implemented to create comprehensive codes for endovascular treatment in
the lower extremity arterial territories; for CY 2013, new base and
add-on codes were created for coronary artery interventions; and four
new comprehensive endovascular codes will be added for CY 2014. Several
commenters objected to the creation of any comprehensive APCs using any
CPT codes that are less than 3 years old, as they believe the data is
not yet reliable.
Several commenters noted that the existing OPPS payment structure
for coronary and peripheral revascularization procedures (angioplasty
and stent placement) is component-based, providing separate but often
reduced APC payments for each clinical aspect of the revascularization
service, which are frequently assigned a status indicator of ``T''
(multiple reduction applies). Commenters argued that the clinical
scenarios for revascularization procedures are based on each
beneficiary's unique clinical needs, making them incredibly complex
with required resources varying significantly from patient to patient.
Given this complexity, one commenter opined that coronary and
peripheral revascularization procedures are ill-suited for
comprehensive APCs because this type of payment structure is unable to
capture the differences in hospital resources associated with the
differences in revascularization services offered to patients. A few
commenters believed that the proposal will inevitably give hospitals an
incentive to use less expensive items and less extensive procedures
even if those items will increase program costs as a whole and carry
greater risk for beneficiaries. In a specific example, one commenter
was concerned that all cardiac magnetic resonance imaging and other
imaging studies within a 30-day period would be bundled into payment
for the comprehensive APC, discourage the use of appropriate imaging
modalities, and result in cost as the driving factor in patient access
to needed medical imaging services.
Finally, another commenter believed that comprehensive APCs for
stent placement procedures would allow a few patients receiving all the
possible components of the bundle to experience a lesser hospital
outpatient copayment amount, but would cause many beneficiaries to pay
for services that they have not received and do not need.
Response: We appreciate the commenters' support for our conclusion
that beneficiaries receiving these major services are unlikely to be
receiving unrelated services on the same day, and we appreciate
commenters who were generally supportive of our intent to create
comprehensive packages. We recognize that there has been recent change
in the coding and billing of many of these endovascular procedures, but
we believe that hospitals prepare to adopt new codes each year and
establish a charge relative to the best cost information available to
them. We use estimated costs from claims data as soon as it becomes
available to establish APC relative payment weights generally, and we
have no reason to believe that continuing that practice for
comprehensive APCs is not appropriate. With respect to the comments
concerning APC 0083, for example, we note that the estimated hospital
costs for the procedure alone did not change significantly between CY
2011 and CY 2012, and that the proposed comprehensive service geometric
mean cost was approximately 10 percent higher than the single procedure
geometric mean cost, a ratio that is comparable to the average
aggregate increase in cost for the additional ancillary services
observed across all proposed comprehensive services, indicating
continued stability in the relative cost estimations despite changes to
a methodology that now aggregates all estimated costs reported on each
claim before calculating a geometric mean cost.
However, we agree with the commenters that endovascular procedure
coding has historically been component based. In general, commenters
argued that multi-vessel endovascular procedures have different
resource requirements than single-vessel procedures. We agree with the

[[Page 74906]]

commenters that there is a correlation between the number of vessels
treated and hospital costs. However, we also observe that there are a
variety of endovascular procedures where the geometric mean costs of
some single-vessel procedures are similar to the geometric mean costs
of other multi vessel procedures. Nonetheless, we generally agree with
the commenters that the range of estimated costs for any individual
HCPCS code or HCPCS code combination is wide, with considerable overlap
occurring across primary service codes and code combinations. We agree
that, in general, payments for multiple vessel services should be
adjusted to account for higher complexity and resources when those
higher resources are reflected in our claims data.
To model commenters' suggestions for illustration purposes in CY
2014, we have used the techniques described above to reassign claims
for certain high-cost, complex versions of the primary service,
primarily multiple vessel endovascular procedures. We analyzed the
claims in which multiple units of a primary service or multiple HCPCS
codes assigned to status indicator ``J1,'' including the primary
service, are present. We divided individual services into simple and
complex services, with complex services characterized by multiple
components, multiple vessels, or other associations that correlate with
high resource requirements (high cost). For our CY 2014 illustration,
we are adopting the basic suggestion of differentiating between single
vessel and multiple vessel procedures, and we are using the claims data
to group clinically similar, high-volume, complex procedures into APCs
with similar costs. In this final rule with comment period, we invite
commenters to apply the analysis, methodology, and the payment
estimation techniques presented here to specific endovascular services
and to provide comment on these illustrative CY 2014 reassignments of
complex claims for endovascular services.
Changes to implement the commenters' suggestions and concerns for
CY 2014, if we were implementing this policy for CY 2014 for this
endovascular family of APCs are as follows:
APC Redesignations: We would delete APC 0082 and reassign
its services to other APCs. We would create a new APC, APC 0445 (Level
III Endovascular Procedures). We would rename APCs 0083, 0104, 0229,
0319, and 0656.
APC Reassignments: We would reassign CPT codes 37229,
37230 and 92995 from APC 0082 to APC 0445; CPT codes 92984, 92987,
92990, and 92997 from APC 0083 to APC 0104; and HCPCS code G0291 from
APC 0656 to APC 0319 (for the purpose of estimating geometric mean
costs from CY 2012 claims data used for CY 2014 ratesetting).
New HCPCS Codes: The comprehensive APC assignments that we
would make for new HCPCS codes for this family are listed in Table 9.
The new codes in this family would include CPT codes 37236, 37237,
37238, 37239, 37241, 37242, 37243, 37244, 92920, 92921, 92924, 92925,
92928, 92933, 92934, 92937, 92938, 92941, 92943, 92944, and HCPCS codes
C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608.
Complexity Reassignments: We would reassign certain HCPCS
code combinations that occur with HCPCS and CPT codes 0238T, 35471,
35475,35476, 37204, 37205, 37220, 37221, 37224, 37225, 92920, 92928,
92933, 92941, 92943, 92980, 92981, 92982, 92995, C9600, C9602, C9604,
C9606, C9608, G0290, and G0291. We summarize all of the codes that we
would reassign as complex forms of their primary service in Table 10 as
if we were implementing this policy in CY 2014.
We request comment on these specific HCPCS movements and complex
claim reassignments. We will reassess the application of this policy to
this endovascular services family of APCs with CY 2013 claims data for
CY 2015 implementation, and we will update them based on new claims
data and any relevant new CY 2015 codes through next year's rulemaking
cycle.
Comment: Commenters generally did not object to the creation of
comprehensive APCs for cardiac electrophysiology (EP) studies and one
commenter specifically supported the proposal. However, commenters were
confused and concerned about the impact of comprehensive APCs on
payment for certain ablation procedures when performed in conjunction
with EP studies. In the proposed rule, we discussed the creation of
comprehensive APCs for EP studies, applying our proposed methodology in
which all adjunctive services, with a few exceptions already discussed,
reported on the claim are packaged into the payment for the primary
service, which is based on the average comprehensive cost of those
claims. However, we also inadvertently included a discussion of the
continued existence of composite APC 8000 (Cardiac Electrophysiologic
Evaluation and Ablation), a composite payment based on the performance
of an ablation procedure with an EP service. Claims containing HCPCS
codes for both an ablation and an EP study would, therefore, meet the
criteria for the composite, but would also meet the criteria for
comprehensive APC 0085 (Level II Electrophysiologic Procedures),
understandably generating reader confusion and causing commenters to
ask how any services would be paid as composite APC 8000 services when
they would all be subsumed under comprehensive APC 0085. We also
believe that we added to this confusion by initially including some
claims and estimated costs in the cost calculation of both APC 8000 and
APC 0085, duplicating the reporting of composite APC 8000 claims and
causing some statistics for the two APCs to be incorrect. Moreover, we
also were not consistent in our application of status indicators or in
our treatment of EP-ablation composites that for CY 2013 were reported
with new CPT codes.
Commenters proposed several alternatives to our proposed treatment
of EP studies and ablations but all of the alternatives involved
differentially paying for ablation procedures when those procedures
were performed in conjunction with EP procedures. One commenter
recommended retaining one of the remaining ablation codes, CPT code
93650 (Ablate heart dysrhythm focus), as a status indicator ``Q3''
codes that may be paid through a composite APC when not conditionally
packaged. Noting that a status indicator of ``Q3'' would have the same
packaging effect as including it in the comprehensive package as
proposed, we believe this commenter intended to recommend a higher
payment for EP procedures performed with an ablation, such as would
occur when the two codes would determine a composite APC assignment.
Another commenter expressed concerns that CPT code 93620
(Electrophysiology evaluation) was also listed with a status indicator
of ``Q3'' but assigned to comprehensive APC 0085. Commenters requested
that we clarify the intended treatment of EP and ablation services,
differentially pay for the lower costs of EP studies performed alone
relative to the higher costs of EP-ablation procedures, and create a
consistent treatment of services within these sets of codes.
Response: We agree with the commenters that our proposed rule
provisions were not consistent in regard to our treatment of the
electrophysiology-ablation procedures as composite services and as
comprehensive services. We also agree with the commenters that there
are significant differences between

[[Page 74907]]

estimated costs of EP studies and estimated costs of EP-ablation
procedures, and that the costs of services reported with EP-ablation
combination codes are similar to the costs of single EP-ablation
services assigned to composite APC 8000. For CY 2015, we intend to
modify our proposal to create a separate comprehensive APC for new CY
2013 HCPCS codes that represent an EP study procedure with ablation,
and we also intend to identify combined EP-ablation services reported
with multiple HCPCS codes as a complex form of EP services and reassign
them to a higher level APC. Finally, we also intend to delete composite
APC 8000 as we move payment for these services under the comprehensive
APC payment policy. In this final rule with comment period, we invite
commenters to apply the analysis, methodology, and the payment
estimation techniques presented here to specific EP services and to
provide comment on these illustrative CY 2014 reassignments of complex
claims for EP services.
Changes to implement the commenters' suggestions and concerns for
CY 2014, as if we were implementing this policy for CY 2014, for this
set of electrophysiologic evaluation and ablation APCs are as follows:
APC Redesignations: We would redesignate composite APC
8000 as comprehensive APC 0444 (Level III Electrophysiologic
Procedures).
New codes: We would reassign CPT codes 93653, 93654 and
93656 from APC 8000 to APC 0444.
Complexity Reassignments: We would reassign HCPCS codes
93619 and 93620, in combination with CPT code 93650, as complex forms
of the primary EP service, and we would reassign those claims to APC
0444. For purposes of modeling the policy for CY 2014, we treated
claims previously assigned to composite APC 8000 as complex forms of
the primary service. We summarize all of the codes that we would
reassign as complex forms of their primary procedures in Table 10 as if
we were implementing this policy in CY 2014.
We request public comment on these specific HCPCS movements and
complex claim reassignments. We will reassess the application of this
policy to this set of electrophysiologic evaluation and ablation APCs
with CY 2013 claims data for CY 2015 implementation, and we will update
them based on new claims data and any relevant new CY 2015 codes
through next year's rulemaking cycle.
Comment: In addition to the general comment that CMS should ensure
that complex (multiple device) procedures are not inappropriately
grouped with single device insertions, there were several public
comments regarding the pacemaker-defibrillator family of services, APCs
0089, 0090, 0106, 0107, 0108, 0654, 0655, and 0674. With the exception
of public comments on cardiac resynchronization therapy (CRT), these
comments dealt with general issues such as the difficulty in modeling
the impacts of payment changes based on the information provided in the
proposed rule and are discussed elsewhere in this final rule with
comment period. Currently, we pay for CRT services through composite
APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs))
based on the geometric mean costs of procedures reported on claims with
a specific set of codes describing the parts of this composite service
(77 FR 68258). Our proposal for comprehensive payment would have
subsumed the need for a composite APC in CY 2014. One commenter
requested that CRT services continue to be paid based on the geometric
mean cost of the composite service rather than based on the geometric
mean cost of all services furnished with multiple lead pacemakers or
defibrillators that would occur with both our proposal to package
procedures described by add-on codes and the comprehensive APC policy.
Response: We agree with the commenters that complex forms of
certain services, generally characterized by combinations of codes in
which components were separately reported in order to describe the
delivery of an entire pacemaker or defibrillator system, have different
resource profiles from simple procedures that implant system components
or certain simple devices. We agree that CRT services are one of the
most costly subsets of pacemaker implantation services but that other
complex combinations of codes also exist. However, as part of the
process of converting these APCs to comprehensive APCs, we noted that
the comprehensive geometric mean cost of these services differed
considerably, in some cases, from our estimates of the primary service
calculated through our traditional single bill methodology and these
new cost estimates suggested reassigning codes among the family of
pacemaker APCs in order to increase resource homogeneity. These
reassignments also suggested renaming or restructuring APCs as
necessary. We found these reassignments would reduce much of the cost
to payment variance.
Therefore, in response to public comments we received, we would
modify our proposal to establish comprehensive payments for pacemaker
related services. We would realign the APCs by moving primary services
subject to our standard 2 times rule methodology. In addition, we have
identified a number of HCPCS combinations that represent high volume,
high cost, more complex subsets of the primary service, and we would
reassign those claims to a higher level APC. We note that our decision
to finalize this proposed comprehensive APC policy with modification in
this final rule with comment period, but to delay implementation of the
policy until CY 2015 creates the opportunity for the public to further
review the illustrative reconfigurations of comprehensive APCs that we
would make in response to comment. In this final rule with comment
period, we invite commenters to apply the analysis, methodology, and
the payment estimation techniques presented here to specific pacemaker
services and to provide comment on these illustrative CY 2014 APC
configurations, APC assignments, and complexity reassignments.
Changes to implement commenters' suggestions and concerns for CY
2014, if we were implementing this policy for CY 2014, for this
pacemaker-defibrillator family of APCs are as follows:
APC Redesignations: We would rename APC 0089 ``Level III
Insertion/Replacement of Permanent Pacemaker,'' and we would rename APC
0106 ``Insertion/Replacement of Pacemaker Components.''
APC Reassignments: We would reassign CPT code 33217 from
APC 0106 to APC 0090; CPT code 33229 from APC 0645 to APC 0655; CPT
code 33231 from APC 0107 to APC 0108; CPT codes 33208, 33214, and 33224
from APC 0655 to APC 0089; and CPT code 33221 from APC 0654 to APC
0089.
Complexity Reassignments: We would reassign certain
combinations of the following CPT codes 33206, 33207, 33208, 33210,
33212, 33213, 33216, 33224, 33227, 33228, 33230, 33240, 33263, and
33264 as complex forms of the primary pacemaker-defibrillator service.
We summarize all of the codes that we would reassign as complex forms
of their primary procedures in Table 10 as if we were implementing this
policy in CY 2014.
We request comment on these specific HCPCS movements and complex
claim reassignments. We will reassess the application of this policy to
this pacemaker-defibrillator family of APCs with CY 2013 claims data
for CY 2015 implementation, and we will update them based on new claims
data and any

[[Page 74908]]

relevant new CY 2015 codes through next year's rulemaking cycle.
Comment: Several commenters requested that CMS not designate APC
0202 (Level VII Female Reproductive Procedures) as a comprehensive APC.
The commenters opined that, as opposed to the stated description of
comprehensive APCs, APC 0202 does not contain a single major procedure
with relatively small cost contributions from adjunctive services but
contains independent services that are frequently performed in
combination with each other. Commenters also noted that CMS is
currently achieving payment efficiencies for these concomitant
procedures by reducing the payment for any second procedure to 50
percent even when that second procedure contains an additional medical
device. The commenters stated that when multiple services are performed
together under a comprehensive payment, the averaged payment assigned
to the APC may be significantly less than the cost of the individual
services performed. The commenters believed that this may encourage
some hospitals to delay or stage procedures inappropriately, increasing
overall Medicare costs and potentially threatening patient access to
certain devices.
One commenter believed that APCs 0385 (Level I Prosthetic
Urological Procedures) and 0386 (Level II Prosthetic Urological
Procedures) similarly would have sizable reductions in Medicare
payments that could create significant disincentives for hospitals to
perform certain procedures that utilize medical devices. Another
commenter believed that this result also applied to APC 0674 (Prostate
Cryoablation).
Response: We do not agree with the commenters that these APCs
represent a different class of services. All of the services described
by the HCPCS codes in these APCs represent major surgical procedures
where the encounter can be viewed as a single primary service and where
a beneficiary would view the encounter globally. What commenters are
describing as unrelated procedures are individual components of a
single surgical procedure, which is, in turn, the primary reason for
the encounter. CPT codes are designed by physicians to facilitate
reporting of variation in physician work and, as a result, often
describe individual components of services that can be grouped in
various ways. However, from a hospital payment perspective, many of
those component codes are ancillary to or supportive of a primary
service. For example, during a procedure to repair the urogenital tract
the surgeon may report CPT code 57265 (Extensive repair of vagina)
along with CPT code 57288 (Repair bladder defect), but these individual
physician services are both part of the comprehensive surgical repair
procedure. In the proposed rule, we proposed defining the most costly
component of a comprehensive service as the primary service that
determines the APC assignment and final payment of the service, and we
believe that this methodology remains appropriate for these services.
We agree with the commenters generally and that, with respect to
these reproductive surgery APCs specifically, there are some instances
of commonly performed clinically coherent combinations of HCPCS codes
assigned to status indicator ``J1'' that are associated with high
estimated cost and sufficient volume, and we would designate these
procedures as complex subsets of these primary services eligible for
reassignment to a higher level APC if we were implementing this policy
in CY 2014. We would have applied this methodology along with other
techniques described above for CY 2014 in order to facilitate the
transition from discrete incremental payments to a single comprehensive
payment for the entire service. For APCs 0385, 0386, and 0674, as well
as APC 0202, we also identified several combinations of HCPCS codes
that represented common, costly subsets of services and we would
reassign several HCPCS codes to different APCs to reduce the variance
between the geometric mean estimated cost of the complex services and
geometric mean cost of the APC to which the services would be assigned.
In this final rule with comment period, we are inviting commenters to
apply the analysis, methodology, and the payment estimation techniques
presented here to specific reproductive services and to provide comment
on these illustrative CY 2014 reassignment of complex reproductive
services claims.
Changes to implement the commenters' suggestions and concerns for
CY 2014, if we were implementing the policy for CY 2014, for this
urogenital procedures family of APCs are as follows:
APC Redesignations: We would rename APC 0385 ``Level I
Urogenital Procedures''; APC 0386 ``Level II Urogenital Procedures'';
and APC 0674 ``Level III Urogenital Procedures''.
APC Reassignments: We would reassign CPT code 53445 from
APC 0386 to APC 0674; CPT code 55873 from APC 0674 to APC 0385; and CPT
code 57423 from APC 0202 to APC 0385.
Complexity Reassignments: We would reassign certain
combinations of CPT codes 54405, 57265, 57282, and 57285 as complex
forms of the primary service. We summarize all of the codes that we
would reassign as complex forms of their primary procedures in Table 10
as if we were implementing this policy in CY 2014.
We request comment on these specific HCPCS movements and complex
claim reassignments. We will reassess the application of this policy to
this urogenital procedures family of APCs with CY 2013 claims data for
CY 2015 implementation, and we will update them based on new claims
data and any relevant new CY 2015 codes through next year's rulemaking
cycle.
Comment: One commenter noted that APC 0082, a cardiovascular APC,
includes CPT code 37204 (Transcatheter occlusion), which is
occasionally used to report brachytherapy for liver therapy. The
commenter believed that packaging yttrium in the cost of APC 0082 would
be in conflict with section 1833(t)(2)(H) of the Act, which requires
separate payment for brachytherapy.
Response: We agree with the commenters that the statute specifies
that brachytherapy devices (seeds) shall be classified separately under
the OPPS from other services. Because brachytherapy devices could be
used during some encounters to deliver comprehensive services, we will
modify our proposal to state that brachytherapy devices, like
mammography and ambulance services, will not be included in the
comprehensive payments beginning in CY 2015 and will continue to
receive separate payment.
Comment: One commenter stated that CMS should not consider APC 0227
(Implantation of Drug Infusion Device) to be a comprehensive APC
because the drug that is used to fill the reservoir is not part of the
comprehensive service. The commenter stated that the drug that is used
to fill the pump should not be considered adjunctive because the drug
itself is therapeutic and separate and apart from the implantation of
the primary (pump) service. This commenter believed that therapeutic
drugs in general should be excluded from a comprehensive APC payment
and expressed concern that packaging may decrease hospital use of
costly drugs, such as PRIALT, which is a non-narcotic alternative.
Another commenter stated that CMS should provide greater data
transparency if it decides to move ahead with the inclusion of DME
items within a comprehensive APC. The commenter was concerned that
there will be a decrease in the payment rate for APC 0227 relative to
the CY 2013 payment rate, which will render the

[[Page 74909]]

payment inadequate to cover the cost of the services in question.
Response: We do not agree with the commenters that drugs being
supplied to the patient to fill the reservoir of a pump at the time of
pump implantation should be excluded from the comprehensive APC
payment. Drugs supplied to fill the pump during implantation of the
pump are adjunctive to the procedure. As we have noted above, costs of
costly adjunctive services are included proportionally into the cost
estimation for the primary services through our ability to use almost
all claims for a service and adoption of the geometric mean cost upon
which to establish relative payment weights. Certainly, the greater the
cost variance of a particular component and the less frequently that
exceptional component is used, the less the relative payment weight,
based on a geometric mean of estimated cost, will reflect those less
frequent, costly cases. Hospitals are also aware that the costs of
extremely costly cases are partially mitigated by outlier payments,
which would continue to apply in this case upon implementation of the
comprehensive APC policy in CY 2015. Finally, with respect to APC 0227,
we note that the comprehensive estimated geometric mean costs are in
fact approximately 10 percent higher than the individual procedure
estimated geometric mean costs, consistent with the relative
contribution of adjunctive services across all comprehensive APCs.
Therefore, we are confirming that drugs used to fill in pumps at
the time of a comprehensive pump insertion procedure are considered to
be ancillary and supportive to the primary procedure and packaged as
part of the comprehensive APC payment regardless of whether the drug
was previously packaged within the OPPS payment, was previously
separately paid under the OPPS, or was previously paid according to a
DMEPOS fee schedule.
(f) Summary of Creation of Comprehensive APCs for High-Cost Device
Dependent Procedures for Implementation in CY 2015
In summary, in response to public comments we received, we have
decided to finalize the comprehensive APCs with modification and to
delay the implementation or effective date of the policy until CY 2015.
We acknowledge commenters' concerns that this is a complex new payment
structure under the OPPS. We agree that hospitals should have time to
prepare for this comprehensive payment structure, and we also agree
with the commenters that a delay in implementation will allow us (and
them) more time to operationalize changes necessary to process
comprehensive payments.
In response to public commenters' request for additional detail on
our calculation of the comprehensive APC relative payment weights, we
have provided a granular discussion of our methodology for constructing
the comprehensive APC payment rates as well as the specific APC
configurations we would implement for CY 2014 if we were not delaying
implementation to CY 2015. We also believe that the delay in
implementation will give hospitals more time to study the final
methodology for calculating relative payment weights that we discuss in
this section, and specifically how the methodology recognizes resource
differences in complex and simple versions of the same primary service.
We are taking advantage of the delay in implementation and requesting
additional comment on this methodology.
For CY 2015, we will recalibrate comprehensive APCs and final
reassignment of complex claims in light of any comments on the
illustrative CY 2014 assignments that we present and updated CY 2013
claims and cost report data next year. For CY 2014, we will continue
our payment for device-dependent APCs and composite payment for both
CRT and cardiac electrophysiologic evaluation and ablation as discussed
elsewhere in this final rule with comment period.
Effective for CY 2015, we will include all integral, ancillary,
supportive, dependent, and adjunctive outpatient services into the
comprehensive APC payment, excluding certain services such as ambulance
services; mammography services; brachytherapy sources; and drugs,
biologicals, and devices receiving pass-through payment. We will not
include charges reported with inpatient room and board revenue codes as
we do not believe outpatient costs are correctly reported in those
revenue codes. Adjunctive items and services that will be
unconditionally packaged into the comprehensive APC payment for CY 2015
include the following.
All packaged services that were packaged in CY 2013.
All services finalized for unconditional or conditional
packaging for CY 2014.
All adjunctive services and supplies provided during the
delivery of the comprehensive service, which includes all other cover
OPPS items and services appearing on a claim, including those with a
HCPCS with status indicator ``J1''; implantable DMEPOS supplies
provided during the comprehensive OPPS service; services performed by
therapists provided during the OPPS service; and all other covered
outpatient items and services appearing on the claim.
All packaged hospital-administered drugs pursuant to a
physician order, excluding pass-through drugs that are required to be
separately paid by statute.
We are finalizing a modification to our proposed methodology for
identifying a primary service, assigned to status indicator ``J1'' on a
claim reporting multiple procedures described by HCPCS codes assigned
to status indicator ``J1'' in order to effectuate an appropriate
comprehensive APC payment. We are finalizing a multiple step process to
include an evaluation of costliness based on the comprehensive
geometric mean cost of single procedures assigned to status indicator
``J1'' reported on claims. We also have determined that there are
certain subsets of outpatient cases for a primary service that should
be more appropriately paid when stratified according to the complexity
of the service. Therefore, we have identified a number of complexity
reassignments for certain high-volume, costly, complex versions of a
primary service, and we have reassigned these subsets of procedures
representing a complex version of the primary service to higher-level
APCs in the same clinical family.
In response to public comments we received, we discuss how we would
have revised some comprehensive APC definitions and reassigned HCPCS
codes to specific APCs in order to better align the comprehensive
geometric mean cost of primary services with APCs that better capture
the resource and clinical aspects of the service if we were
implementing this policy for CY 2014. We discuss the methodology that
we followed for all of those modifications to our proposal in detail
earlier in this section. We display the final APC revisions that we
would make and final comprehensive geometric mean cost for those APCs,
if we were implementing this policy for CY 2014 in Table 8. We display
final HCPCS assignments in Table 9 and complexity reassignments in
Table 10 that we would make if we were implementing this policy for CY
2014.
We have reconciled the inconsistency in our proposal to pay for
cardiac electrophysiology-ablation procedures under both composite and
comprehensive methodologies. For CY 2015, we are reassigning the codes
assigned to composite APC 8000 into a new composite APC 0444, along
with complex services from APC 0085 that

[[Page 74910]]

are characterized by composite EP-ablation procedures described by
HCPCS code combinations.
Therefore, for CY 2015, we are creating 29 comprehensive APCs to
prospectively pay for services associated with 167 CY 2014 HCPCS codes,
which is the most recent code set available. We note that the list of
HCPCS codes represent the procedures that would be assigned to a
comprehensive APC if we implemented this policy for CY 2014. We will
update this list as indicated in our proposed and final OPPS rules for
CY 2015.
For CY 2015, we are treating all individually reported procedures
that are assigned to status indicator ``J1,'' which will appear in the
CY 2015 Addendum B to the proposed rule, as representing components of
a comprehensive service characterized by a primary service, and we will
make a single payment for the comprehensive service. We will be making
a single all-inclusive payment for each comprehensive service reported
on a claim with that payment 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.
f. 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 as
efficiently as possible. For CY 2008, we developed composite APCs to
provide a single payment for groups of services that are typically
performed together during a single clinical encounter and that result
in the provision of a complete service. Combining payment for multiple,
independent services into a single OPPS payment in this way enables
hospitals to manage their resources with maximum flexibility by
monitoring and adjusting the volume and efficiency of services
themselves. An additional advantage to the composite APC model is that
we can use data from correctly coded multiple procedure claims to
calculate payment rates for the specified combinations of services,
rather than relying upon single procedure claims which may be low in
volume and/or incorrectly coded. Under the OPPS, we currently have
composite policies for extended assessment and management services, low
dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic
evaluation and ablation services, mental health services, multiple
imaging services, and cardiac resynchronization therapy services. We
refer readers to the CY 2008 OPPS/ASC final rule with comment period
for a full discussion of the development of the composite APC
methodology (72 FR 66611 through 66614 and 66650 through 66652) and the
CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more
recent background.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43561), for CY 2014,
we proposed to continue our composite policies for extended assessment
and management services, LDR prostate brachytherapy services, cardiac
electrophysiologic evaluation and ablation services, mental health
services, and multiple imaging services, as discussed below. We
proposed to discontinue and supersede the cardiac resynchronization
therapy composite APC with our proposed comprehensive APC 0108, as
discussed in section II.A.2.e. of the proposed rule (78 FR 43561).
Comments on cardiac resynchronization therapy relating to comprehensive
APCs are discussed in section II.A.2.e. of this final rule with comment
period.
(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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43562 through 43563),
for CY 2014, we proposed to modify our longstanding policy to provide
payment to hospitals in certain circumstances when extended assessment
and management of a patient occur. We proposed to create one new
composite APC, entitled ``Extended Assessment and Management (EAM)
Composite'' (APC 8009), to provide payment for all qualifying extended
assessment and management encounters rather than recognize two levels
of EAM composite APCs. We proposed to allow any visit furnished by a
hospital in conjunction with observation services of substantial
duration to qualify for payment through EAM composite APC 8009. These
policies are discussed in greater detail below.
(b) Payment for Extended Assessment and Management Services
As we discussed in section VII. of the CY 2014 OPPS/ASC proposed
rule (78 FR 43614 through 43617), we proposed 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. We stated that 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 proposed 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 proposed 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 the proposed rule, is accompanied by observation care
of substantial duration on a claim. We would no longer recognize
composite APC 8002 or APC

[[Page 74911]]

8003. The specific criteria we proposed to be met for the proposed new
EAM composite APC to be paid is provided below in the description of
the claims that we proposed to select for the calculation of the
proposed CY 2016 geometric mean costs for this composite APC.
We proposed to calculate the geometric 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 geometric means cost resulting from this
methodology for the proposed new EAM composite APC (APC 8009) was
approximately $1,357, which was calculated from 318,265 single and
``pseudo'' single claims that met the required criteria.
We stated in the proposed rule that when hospital claims data for
the CY 2014 proposed clinic and ED visit codes becomes available, we
proposed to calculate the geometric mean cost 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 HCPCS code 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.
Comment: One commenter supported CMS' proposal to delete composite
APCs 8002 and 8003 and to pay for extended assessment and management
services through newly created composite APC 8009. Another commenter,
who did not support the proposal, stated that the proposed policy did
not accurately account for the cost of providing an extended assessment
and management service and urged CMS to carefully assess the potential
impact of this proposal upon different types of facilities and patients
before moving forward.
Response: We appreciate the commenter's support of our proposal. We
disagree with the one commenter's argument that our proposal does not
accurately account for the cost of providing an extended assessment and
management service. We believe that this proposal accurately accounts
for the cost of providing an extended assessment and management service
and that this proposal does not have any substantial impact on any
particular type of facility or patient type.
After consideration of the public comments we received, we are
finalizing our proposal 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 rather than recognizing two levels of EAM Composite APCs. In
light of our CY 2014 final visit payment policy, which is discussed in
detail in section VII. of this final rule with comment period, we are
modifying our proposal to allow any clinic and certain high level ED
visits furnished by a hospital in conjunction with observation services
of substantial duration to qualify for payment through the newly
created Extended Assessment and Management (EAM) Composite APC (APC
8009). Specifically, we are allowing a clinic visit (for CY 2014, there
will be one code to describe all clinic visits), a Level 4 or Level 5
Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital
in conjunction with observation services of substantial duration to
qualify for payment through composite APC 8009. This modification of
the proposed EAM composite APC criteria is due to our decision not to
finalize any changes to the Type A or Type B ED visit codes for CY
2014. Because we are not changing the ED visit codes for CY 2014, we
also are not changing for CY 2014 the particular ED visit codes that
qualify for the EAM composite APC.

[[Page 74912]]

We also are modifying our proposal to calculate the payment rate
for the new EAM composite APC (APC 8009). Specifically, we calculated
the geometric mean cost for procedures assigned to APC 8009 for CY 2014
using CY 2012 single and ``pseudo'' single procedure claims that met
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 HCPCS code 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 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 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 final CY 2014 payment rate for composite APC 8009 is
approximately $1,199.
(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 geometric mean 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 services
and a detailed description of how we developed the LDR prostate
brachytherapy composite APC.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43563), for CY 2014,
we proposed 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 proposed 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 proposed
not to use the claims that meet these criteria in the calculation of
the geometric mean costs of procedures or services assigned to APC 0163
(Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC
0651 (Complex Interstitial Radiation Source Application), the APCs to
which CPT codes 55875 and 77778 are assigned, respectively. We proposed
to continue to calculate the geometric mean costs of procedures or
services assigned to APCs 0163 and 0651 using single and ``pseudo''
single procedure claims. We stated that we believe that this composite
APC contributes to our goal of creating hospital incentives for
efficiency and cost containment, while providing hospitals with the
most flexibility to manage their resources. We also continue to believe
that data from claims reporting both services required for LDR prostate
brachytherapy provide the most accurate geometric mean cost upon which
to base the composite APC payment rate.
Using a partial year of CY 2012 claims data available for the 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 geometric
mean cost of these procedures upon which the proposed CY 2014 payment
rate for composite APC 8001 was based. The proposed payment rate for
composite APC 8001 for CY 2014 was approximately $4,340.
Comment: A few commenters asserted that the existing methodology to
create ``pseudo'' single claims from multiple procedure claims is not
yielding a significant number of claims to be used to calculate
adequate payment rates for APC 8001, APC 0312 (Radioelement
Applications), and APC 0313 (Brachytherapy). The commenters believed
that use of this methodology and its insignificant results is a
continuing trend.
Response: For CY 2014, we have 591 final rule claims available for
APC 8001 geometric mean cost calculation, while for CY 2013 we were
able to use 677 claims that contained both CPT codes 55875 and 77778 to
calculate the geometric mean cost of these procedures upon which the
final CY 2013 payment rate for composite APC 8001 was based. For CY
2014, we have 52 single claims available for geometric mean cost
calculation for APC 0312, compared to 74 claims available for CY 2013.
For APC 0313, we have 17,810 single claims available for CY 2014 for
geometric mean cost calculation compared to 17,743 single claims
available for CY

[[Page 74913]]

2013. Therefore, there is approximately the same number of ``pseudo''
single claims available for APCs 8001 and 0313 geometric mean cost
calculation compared to CY 2013. With regard to APC 0312 geometric mean
cost calculation, the number of single claims available for ratesetting
for CY 2014 compared to CY 2013 is somewhat low for both years. We
agree with the commenter that it would be preferable if we had a larger
volume of single claims on which to base the payment rate for APC 0312.
We will continue to evaluate additional refinements and improvements to
our ratesetting methodologies in order to maximize our use of claims
data. In addition, we will continue to study means by which we can use
a larger volume of claims data to establish the payment rate for APC
0312 specifically.
Comment: One commenter supported CMS' proposal to continue paying
for LDR prostate brachytherapy services using composite APC 8001 and
noted recognition of the proposed increase in payment.
Response: We appreciate the commenter's support for this proposal.
After consideration of the public comments we received, we are
finalizing our policy to continue paying for LDR prostate brachytherapy
services using composite APC 8001 for CY 2014, with a final CY 2014
geometric mean cost for APC 8001 of approximately $3,858.
(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
geometric mean costs for these services, and advanced our stated goal
of promoting hospital efficiency through larger payment bundles. In
order to calculate the geometric mean 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 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'' (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 geometric mean costs upon which
the payment rate for APC 8000 will be based in future ratesetting.)
Because CPT codes 93655 and 93657 are

[[Page 74914]]

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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43564), for CY 2014,
we proposed to continue to pay for cardiac electrophysiologic
evaluation and ablation services using the composite APC methodology
proposed and implemented for CY 2008 through CY 2013. We also proposed
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 stated that
we continue to believe that the geometric mean 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 proposed not to use the claims that met the
composite payment criteria in the calculation of the geometric mean
costs for APC 0085, to which the CPT codes in both Groups A and B for
composite APC 8000 are otherwise assigned. We proposed that the
geometric mean 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 the 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 geometric mean cost of approximately $13,402 for
composite APC 8000.
Table 6 of the proposed rule listed the groups of procedures upon
which we proposed to base composite APC 8000 for CY 2014 (78 FR 43565).
Comment: One commenter on the CY 2013 OPPS/ASC final rule with
comment period expressed concern with CMS' treatment of CPT codes
93653, 93654, and 93656, which are assigned to new Group C and paid at
the composite APC 8000 payment rate. Specifically, the commenter stated
that CMS considers CPT code 93462 (Left heart catheterization by
transseptal puncture through intact septum or by transapical puncture
(List separately in addition to code for primary procedure)) as
separately payable. However, the commenter believed that when CPT code
93462 appears on the claim in combination with CPT code 93656 CMS
should treat the claims as single procedures for building composite APC
8000 in regard to cases where CPT code 93462 was used to describe
services to treat atrial fibrillation (AF). The commenter contended
that CMS did not do so for CY 2013, which resulted in an underpayment
for cases assigned to composite APC 8000. The commenter noted that when
the CPT Editorial Panel created CPT code 93656, it specifically listed
CPT code 93462 as one of the codes that should not be reported in
combination with CPT code 93656. The commenter asserted that CMS'
treatment of CPT code 93462 had several ratesetting consequences.
According to the commenter, when CPT code 93462 appeared on any
electrophysiology (EP) claim, it prevented that claim from becoming a
``single procedure'' claim for composite APC 8000 ratesetting purposes.
Because CPT code 93462 occurs most frequently for EP treatment of AF,
preventing EP claims with CPT code 93462 from becoming ``single
procedure'' claims disproportionately excludes AF claims from composite
APC 8000 cost calculation. In addition, the commenter stated, because
those claims are more expensive than the average EP claim, this result
also reduces both the frequency and average cost of claims used to
calculate the geometric mean cost of composite APC 8000. The commenter
stated that separate payment of CPT code 93462 prevents packaging CPT
code 93462 costs on claims for EP involved with AF, which is contrary
to the CPT instructions regarding CPT code 93656.
In response to the CY 2014 OPPS/ASC proposed rule, this same
commenter and one other commenter expressed appreciation for CMS'
proposal to package the cost of CPT code 93462 within the APC payment
rates of other services, and recommended that CMS finalize the proposed
method of calculating the cost of APC 8000 for CY 2014.
Response: We assigned CPT code 93462 to APC 0080 for CY 2013, with
a payment rate of $2,649.52. CPT code 93462 is an add-on code. For CY
2014, we proposed to package most add-on codes, including CPT code
93462. As a result of our packaging proposal, the geometric mean cost
and frequency for composite APC 8000 have increased. Based on CY 2014
final cost data, the geometric mean cost of composite APC 8000 is
approximately $13,161 based on 16,937 claims available for cost
calculation of composite APC 8000. We believe that packaging the cost
of CPT code 93462 within the APC payment rates of other services as a
result of the add-on code packaging policy addresses the commenters'
concerns.
Comment: One commenter who agreed with CMS' proposed methodology
not to use claims that meet the composite APC 8000 criteria for
geometric mean cost calculation purposes for APC 0085, expressed
concern regarding the proposed payment rate for APC 0085. The commenter
noted that the proposed payment rate for APC 0085 for CY 2014 is
$11,517 (the corrected proposed rate included in the September 6, 2013
OPPS Addendum B, which was posted on the CMS Web site is approximately
$11,345), which is significantly higher than the CY 2013 payment rate
of $4,035. However, the commenter believed that this variation is a
result of unintended reuse of claims used to calculate the composite
APC 8000 payment rate. The commenter further believed that excluding
the composite APC 8000 claims from APC 0085 cost calculation will lower
the geometric mean cost of APC 0085 significantly, and urged CMS to
correct this error.
Response: We acknowledge that the proposed payment rate for APC
0085 was incorrectly initially published as approximately $11,517, as
well as the corrected payment rate (which was posted on the CMS Web
site) of $11,345. The proposed rule payment rate for APC 0085 was based
on our comprehensive APC methodology, which packaged the cost of
ancillary and other services. However, our comprehensive APC
methodology will not be effective until CY 2015. The final geometric
mean cost for APC 0085 is approximately $4,248, based on 6,362 claims
available for ratesetting.
After consideration of the public comments we received, we are
finalizing our proposal to continue

[[Page 74915]]

payment for composite APC 8000 for CY 2014. Based on a full year of CY
2012 claims data, the final geometric mean cost of composite APC 8000
is approximately $13,162, based on 16,935 claims available for
ratesetting. We also are finalizing the payment for APC 0085, based on
a geometric mean cost of approximately $4,248.
Table 11 below lists the groups of procedures upon which we based
composite APC 8000 for CY 2014
BILLING CODE 4120-01-P

[[Page 74916]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.294

[[Page 74917]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.295

BILLING CODE 4120-01-C
(4) Mental Health Services Composite APC (APC 0034)
In the CY 2014 OPPS/ASC proposed rule (78 FR 43565), for CY 2104,
we proposed to continue our longstanding policy of limiting the
aggregate payment for specified less resource-intensive mental health
services furnished on the same date to the payment for a day of partial
hospitalization 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 through 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 proposed that when the aggregate payment for specified mental
health services provided by one hospital to a single beneficiary on one
date of service based on the payment rates associated with the APCs for
the individual services exceeds the maximum per diem payment rate for
partial hospitalization

[[Page 74918]]

services provided by a hospital, those specified mental health services
would be assigned to APC 0034 (Mental Health Services Composite).
Specifically, we proposed to continue to set the payment rate for APC
0034 at the same payment rate that we proposed 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 proposed 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 stated that we continue to believe that the costs
associated with administering a partial hospitalization program at a
hospital 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.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our CY 2014 proposal, without modification, to
continue our longstanding policy of limiting the aggregate payment for
specified less resource-intensive mental health services furnished on
the same date by a hospital to the payment for APC 0176, which is the
maximum partial hospitalization per diem payment for a hospital for CY
2014.
(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).
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement under section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included in the policy do not involve contrast, both CT/CTA
and MRI/MRA scans can be provided either with or without contrast. The
five multiple imaging composite APCs established in CY 2009 are:
APC 8004 (Ultrasound Composite);
APC 8005 (CT and CTA without Contrast Composite);
APC 8006 (CT and CTA with Contrast Composite);
APC 8007 (MRI and MRA without Contrast Composite); and
APC 8008 (MRI and MRA with Contrast Composite).
We define the single imaging session for the ``with contrast''
composite APCs as having at least one or more imaging procedures from
the same family performed with contrast on the same date of service.
For example, if the hospital performs an MRI without contrast during
the same session as at least one other MRI with contrast, the hospital
will receive payment for APC 8008, the ``with contrast'' composite APC.
We make a single payment for those imaging procedures that qualify
for composite APC payment, as well as any packaged services furnished
on the same date of service. The standard (noncomposite) APC
assignments continue to apply for single imaging procedures and
multiple imaging procedures performed across families. For a full
discussion of the development of the multiple imaging composite APC
methodology, we refer readers to the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68559 through 68569).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43566), for CY 2014,
we proposed 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) were based on geometric mean costs calculated from
a partial year of CY 2012 claims available for the 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
geometric mean costs, we used the same methodology that we used to
calculate the final CY 2012 and CY 2013 geometric mean 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
geometric mean costs, pursuant to our established methodology (76 FR
74169), were identified by asterisks in Addendum N to the proposed rule
(which is available via the Internet on the CMS Web site) and were
discussed in more detail in section II.A.1.b. of the proposed rule.
For the CY 2014 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 geometric mean costs for the multiple imaging composite APCs.
Table 7 of the proposed rule listed the proposed HCPCS codes that
would be subject to the multiple imaging composite policy and their
respective families and approximate composite APC geometric mean costs
for CY 2014 (78 FR 43567). We noted that the proposed geometric mean
costs calculated for many imaging APCs, including the multiple imaging
composite APCs, have changed significantly from the geometric mean
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 the
proposed rule.
Comment: Some commenters supported CMS' decision not to propose any
new multiple imaging composite APCs. Other commenters urged CMS to
restore separate payment for each imaging procedure, regardless of the
date of service because of the decreases in payment for imaging
services over several years, which according to the commenters may
create disincentives to performing multiple imaging services on the
same date. Some commenters stated

[[Page 74919]]

that other CMS proposals such as the CY 2014 proposed new CCRs for CT
and MRI services have further decreased payment rates for imaging
services for CY 2014, and the use of the new cost centers is directly
responsible for the substantial decreases in payment for multiple
imaging APCs, including composite APCs. Some commenters suggested that
CMS provide an analysis of the impacts from decreases in payments for
imaging services.
Response: As explained earlier in this section, we continue to
believe that our multiple imaging composite policies reflect and
promote the efficiencies hospitals can achieve when performing multiple
imaging procedures during a single session. We have a total of 1.6
million composite cases in our claims data for CY 2014 ratesetting,
which we believe is a sufficiently robust number of multiple imaging
cases performed for ratesetting purposes. We address the concern that
the new cost centers may be responsible for substantial decreases in
payment for multiple imaging APCs in section II.A.1.c. of this final
rule with comment period.
After consideration of the public comments we received, for this CY
2014 final rule with comment period, we were able to identify
approximately 0.7 million ``single session'' claims out of an estimated
1.6 million potential composite cases from our ratesetting claims data,
approximately 45 percent of all eligible claims, to calculate the final
CY 2014 geometric mean costs for the multiple imaging composite APCs.
Table 12 below lists the HCPCS codes that will be subject to the
multiple imaging composite policy and their respective families and
approximate composite APC geometric mean costs for CY 2014.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
Cardiac resynchronization therapy (CRT) uses electronic devices to
sequentially pace both sides of the heart to improve its output. CRT
utilizing a pacing electrode implanted in combination with an
implantable cardioverter defibrillator (ICD) is known as CRT-D.
Hospitals commonly report the implantation of a CRT-D system using CPT
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 (including upgrade to dual
chamber system) (List separately in addition to code for primary
procedure)) and 33249 (Insertion or repositioning of electrode lead(s)
for single or dual chamber pacing cardioverter-defibrillator and
insertion of pulse generator). As described in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74176), over the past several
years, stakeholders have pointed out significant fluctuations in the
payment rate for CPT code 33225 and that, because the definition of CPT
code 33225 specifies that the pacing electrode is inserted at the same
time as an ICD or pacemaker, CMS would not have many valid claims upon
which to calculate an accurate cost. In response to these concerns, we
established a policy beginning in CY 2012 to recognize CPT codes 33225
and 33249 as a single, composite service when the procedures are
performed on the same day and to assign them to APC 0108 (Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes)
when they appear together on a claim with the same date of service. We
refer readers to the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74176 through 74182) for a full description of how we developed
this policy.
As described in the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74182), hospitals continue to use the same CPT codes to report
CRT-D implantation services, and the I/OCE will identify when the
combination of CPT codes 33225 and 33249 on the same day qualify for
composite service payment. We make a single composite payment for such
cases. When not performed on the same day as the procedure described by
CPT code 33225, the procedure described by CPT code 33249 is also
assigned to APC 0108. When not performed on the same day as the
procedure described by CPT code 33249, the procedure described by CPT
code 33225 is assigned to APC 0655 (Insertion/Replacement/Conversion of
a Permanent Dual Chamber Pacemaker).
In order to ensure that hospitals correctly code for CRT services,
we also finalized a policy in the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74182) to implement claims processing edits that
will return to providers incorrectly coded claims on which a pacing
electrode insertion (the procedure described by CPT code 33225) is
billed without one of the following procedures to insert an ICD or
pacemaker, as specified by the AMA in the CPT codebook:
33206 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); atrial);
33207 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); ventricular);
33208 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); atrial and ventricular);
33212 (Insertion or replacement of pacemaker pulse
generator only; single chamber, atrial or ventricular);
33213 (Insertion or replacement of pacemaker pulse
generator only; dual chamber, atrial or ventricular);
33214 (Upgrade of implanted pacemaker system, conversion
of single chamber system to dual chamber system (includes removal of
previously placed pulse generator, testing of existing lead, insertion
of new lead, insertion of new pulse generator));
33216 (Insertion of a single transvenous electrode,
permanent pacemaker or cardioverter-defibrillator);
33217 (Insertion of 2 transvenous electrodes, permanent
pacemaker or cardioverter-defibrillator);
33222 (Revision or relocation of skin pocket for
pacemaker);
33233 (Removal of permanent pacemaker pulse generator);
33234 (Removal of transvenous pacemaker electrode(s);
single lead system, atrial or ventricular);
33235 (Removal of transvenous pacemaker electrode(s); dual
lead system, atrial or ventricular);
33240 (Insertion of single or dual chamber pacing
cardioverter-defibrillator pulse generator); or
33249 (Insertion or repositioning of electrode lead(s) for
single or dual chamber pacing cardioverter-defibrillator and insertion
of pulse generator).
We continued for CY 2013 to recognize CRT-D as a single, composite
service as described above and finalized in the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68259). By continuing to recognize
these procedures as a single, composite service, we are able to use a
higher volume of correctly coded claims for CPT code 33225, which,
because of its add-on code status, is always performed in conjunction
with another procedure. We also noted that this policy is consistent
with the principles of a prospective payment system, specifically to
place similar services that

[[Page 74925]]

utilize technologies with varying costs in the same APC in order to
promote efficiency and decision-making based on individual patient's
clinical needs rather than financial considerations. Because CPT codes
33225 and 33249 may be treated as a composite service for payment
purposes, we continued to assign them status indicator ``Q3'' (Codes
that may be paid through a composite APC) in Addendum B to the proposed
rule (which is available via the Internet on the CMS Web site). The
assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a
composite service was also reflected in Addendum M to the proposed rule
(which is available via the Internet on the CMS Web site).
In addition, for CY 2013, we revised the claims processing edits in
place for CPT code 33225 due to revised guidance from the AMA in the
CPT codebook specifying the codes that should be used in conjunction
with CPT code 33225. Specifically, on February 27, 2012, the AMA posted
a correction as errata to the CY 2012 CPT codebook on the AMA Web site
at: http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This
correction removed CPT code 33222 (Revision or relocation of skin
pocket for pacemaker) as a service that should be provided in
conjunction with CPT code 33225, and added CPT codes 33228 (Removal of
permanent pacemaker pulse generator with replacement of pacemaker pulse
generator; dual lead system), 33229 (Removal of permanent pacemaker
pulse generator with replacement of pacemaker pulse generator; multiple
lead system), 33263 (Removal of pacing cardioverter-defibrillator pulse
generator with replacement of pacing cardioverter-defibrillator pulse
generator; dual lead system), and 33264 (Removal of pacing
cardioverter-defibrillator pulse generator with replacement of pacing
cardioverter-defibrillator pulse generator; multiple lead system). In
accordance with this revised guidance, we deleted CPT code 33222 as a
code that can satisfy the claims processing edit for CPT code 33225,
and added CPT codes 33228, 33229, 33263, and 33264 as codes that can
satisfy this edit beginning in CY 2012 (77 FR 68259).
For CY 2014, we proposed to discontinue and supersede the cardiac
resynchronization therapy composite APC with our proposed comprehensive
APC 0108, as discussed in section II.A.2.e. of the proposed rule (78 FR
43561). The public comments that we received on cardiac
resynchronization therapy that relate to proposed comprehensive APCs
are discussed in section II.A.2.e. of this final rule with comment
period.
As discussed in section II.A.2.e. of this final rule with comment
period, comprehensive APCs will not be effective until CY 2015.
Therefore, for CY 2014, we are finalizing the continuation of our
current CRT-D composite policy, without modification and finalizing
payment for CRT services using the composite APC 0108 payment
methodology that we used for CYs 2012 and 2013, as discussed above.
That is, for CY 2014, CRT-D will be recognized as a single, composite
service as described above and finalized in the CY 2012 and CY 2013
OPPS/ASC final rules with comment period. In calculating the costs upon
which the final payment rate for APC 0108 is based for CY 2014, for
this final rule with comment period, we included single procedure
claims for the individual services assigned to APC 0108, as well as
single procedure claims that contain the composite CRT-D service,
defined as the combination of CPT codes 33225 and 33249 with the same
date of service. We were able to use 15,454 single bills from the CY
2014 final rule claims data to calculate a final geometric mean cost of
approximately $32,257 for APC 0108. Because CPT codes 33225 and 33249
may be treated as a composite service for payment purposes, we are
continuing to assign them status indicator ``Q3'' (Codes that may be
paid through a composite APC) in Addendum B to this final rule with
comment period.
3. Changes to Packaged Items and Services
a. Summary of CY 2014 Final Packaging Policies
Beginning in CY 2014, we are unconditionally or conditionally
packaging the following items and services and adding 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 when used in a diagnostic test or procedure;
(2) Drugs and biologicals that function as supplies when used in a
surgical procedure;
(3) Certain clinical diagnostic laboratory tests;
(4) Certain procedures described by add-on codes; and
(5) Device removal procedures.
The HCPCS codes that we are packaging for CY 2014 are displayed in
both Addendum P and Addendum B of this final rule with comment period.
The supporting documents for this final rule with comment period,
including but not limited to these Addenda, are available at the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Further details including
comments and responses on the particular packaging proposals are
discussed below.
b. Background
Like other prospective payment systems, the OPPS relies on the
concept of averaging to establish a payment rate for services. 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. The OPPS packages payment for multiple interrelated items and
services into a single payment to create incentives for hospitals to
furnish services most efficiently and to manage their resources with
maximum flexibility. Our packaging policies support our strategic goal
of using larger payment bundles to maximize hospitals' incentives to
provide care in the most efficient manner. 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 use a more
expensive item, which often results if separate payment is provided for
the items.
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

[[Page 74926]]

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 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66580).
Over the last 15 years, we have refined our understanding and
implementation of the OPPS and have packaged numerous services that we
originally paid as primary services. As we continue to 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 currently
separately pay as primary services. 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 a dependent
service.
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 for the
combination of the separately payable services and any associated
packaged services. We emphasize that hospitals should report all HCPCS
codes for provided services, including those for packaged services,
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, in
the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed 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 42 CFR 419.2(b). Composite APCs under the OPPS,
which are described in section II.A.2.f. of this final rule with
comment period, and comprehensive APCs, which are described in section
II.A.2.e. of this final rule with comment period, also include
packaging.
c. Basis for 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 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, in the
CY 2014 OPPS/ASC proposed rule, we proposed 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 proposed
to package beginning in CY 2014. In several cases, we proposed 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.
d. New Packaging Policies for CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43570 through 43575),
we proposed to package the following categories of items and services
beginning in 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 when used in a
surgical procedure;
(3) Certain 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.
Category (2) listed above was described in the proposed rule as
``drugs and biologicals that function as supplies or devices when used
in a surgical procedure.'' In this final rule with comment period, we
are deleting the words ``or devices'' from the name of this category
because the words are redundant of ``supplies.'' In this context,
devices are a type of supply (78 FR 43571), so it is not necessary to
include the words ``or devices'' after supplies in the name of this
category of packaged items.
Comment: Many commenters requested that CMS postpone finalizing all
of the packaging proposals because of the commenters' inability to
replicate

[[Page 74927]]

the CY 2014 proposed OPPS payment rates, which the commenters asserted
limited their ability to fully evaluate and, therefore, meaningfully
comment on the packaging proposals. Many commenters also stated that,
given the significance and scope of the proposals, CMS should delay
implementation of these policies to allow stakeholders more time to
evaluate these packaging proposals. In addition, the Advisory Panel on
Hospital Outpatient Payment recommended that CMS delay implementation
of the CY 2014 packaging proposals until data can be reviewed by the
Panel at its spring 2014 meeting regarding interactions between the
proposals and their potential cumulative impact.
Response: We appreciate that it requires time and effort to examine
proposed policies. We discovered some limited methodological errors
concentrated in a handful of APCs during the comment period. In
response, we issued corrected data files on August 28, 2013, and
published a correcting document in the Federal Register on September 6,
2013 (78 FR 54842) to address these technical errors. We also afforded
the public a 10-day extension of the comment period on those topics
affected by the corrected proposed rates. We believe that our standard
60-day comment period afforded commenters an adequate amount of time to
meaningfully comment on the proposed policies. While we acknowledge
that the OPPS is one of the more complicated Medicare payment systems
to simulate, we make extensive data files and descriptions publicly
available, in addition to proposed payment rates, in an effort to
assist commenters in their review. Furthermore, the isolated technical
errors that were corrected in the correcting document had limited
interaction with the packaging proposals, and we believe the relativity
(the relative magnitude of the difference between payment rates for
different procedures) of the proposed payment rates for almost all APCs
was sufficient for meaningful comment. Finally, we received numerous
substantive, thoughtful, and helpful comments on our packaging
proposals, which suggested that the public had sufficient time to
meaningfully comment on the seven CY 2014 proposed packaging policies,
and therefore, we do not believe a delay in implementation is
necessary. We will review additional information regarding the impacts
of the packaging policies with the Panel at future Panel meetings.
Below we discuss our proposals and summarize and respond to the
numerous substantive public comments we received on each packaging
proposal.
(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic Test or Procedure
As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR
43570), 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 the proposed rule and this final rule with comment period); (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 when used in a
diagnostic test or procedure. Although in the past we identified these
specific categories of drugs, biologicals, and radiopharmaceuticals as
packaged unless pass-through status applied, 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
function as supplies that are integral and supportive to a diagnostic
test or procedure, we proposed to unconditionally package drugs,
biologicals, and radiopharmaceuticals that function as supplies when
used in a diagnostic test or procedure, except when the drug,
biological, or radiopharmaceutical has pass-through payment 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
proposed to revise the regulations at 42 CFR 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.
In the proposed rule, we identified one new class of drugs (stress
agents) and one specific drug (Cysview) that we believe also fit within
this new category of packaged items, that is, drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure. We discuss the application of this policy
to these specific drugs and the associated comments 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 imaging. The primary diagnostic test in which
these agents are used is myocardial perfusion imaging (MPI), which is
primarily reported with CPT code 78452 and is the highest cost nuclear
medicine procedure in the OPPS, with total payments exceeding $800
million in CY 2012. In the

[[Page 74928]]

proposed rule, we reported that 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we proposed 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. In the proposed rule, we included
Table 8 which showed the CY 2013 separate payment versus the proposed
CY 2014 packaged payment for MPI (78 FR 43571). We note that some of
the payment rates for MPI in Table 8 were corrected in the correcting
document published in the Federal Register on September 6, 2013 (78 FR
54842).
Comment: Some commenters supported packaging stress agents into MPI
because they believed that it supports CMS' goal to make OPPS payments
more consistent with those of a prospective payment system.
Response: We appreciate the commenters' support.
Comment: Several commenters objected to this proposal. Some
commenters stated that CMS should not expand packaging to any new
categories of drugs, biologicals, and radiopharmaceuticals, including
stress agents. One commenter objected to the proposed policy for the
following reasons and suggested changes or alternatives to the proposed
policy:
Packaging stress agents into MPI could adversely affect
patient access to stress agents;
Because a stress agent is not used with 100 percent of MPI
tests, CMS should only package drugs that are used at least 80 percent
of the time with the primary procedure, to ensure that the packaged
payment reflects the full cost of the packaged drug;
Hospitals would have a financial incentive not to use a
stress agent with MPI, because stress can be induced with exercise
instead of a stress agent;
To avoid incurring the cost of a stress agent, hospitals
will encourage patients to exercise, and this could be dangerous for
the patient;
As a consequence of packaging stress agents, hospitals may
perform inadequate MPI tests (without proper stress), resulting is
misdiagnoses;
CMS should require hospitals to code stress agents on MPI
claims to ensure that costs are adequately captured; and
CMS should create separate APCs for MPI with and without
use of a stress agent.
Response: We disagree with the commenter that packaging stress
agents will limit beneficiary access to MPI tests with a stress agent
when it is not clinically appropriate for the patient to induce stress
through exercise. Rather, as we discuss below, we believe that a single
payment for MPI establishes better incentives to ensure clinically
appropriate patient care.
We are not adopting the commenter's recommendation that we adopt a
minimum utilization requirement of 80 percent for drug packaging. We
package services that are typically integral, ancillary, supportive,
dependent, or adjunctive to a primary service, irrespective of the
frequency with which this packaged service is used in any given primary
procedure. This policy has been a fundamental part of the OPPS since
its implementation in August 2000. In some cases, a packaged item may
be associated with a primary service 100 percent of the time and in
other cases a packaged item may be rarely used with the procedure or
service with which it is packaged. Using the geometric mean cost for an
APC ensures that minor changes in the total for items and services from
low volume packaged services will impact the APC payment rate.
Receiving some incremental amount for packaged items allows the
hospital to best determine the most efficient and clinically
appropriate delivery of a service. An 80 percent utilization threshold
for packaging is more reflective of a fee schedule than a prospective
payment system, creating payment for a single service of MPI and stress
agent that would not encourage the efficient delivery of MPI. We
believe a minimum utilization threshold would be unduly restrictive in
the context of a prospective payment system because such a threshold
would exclude services or items from packaging that are typically
integral, ancillary, supportive, dependent, or adjunctive to a primary
service.
Regarding the commenter's concern that hospitals will have a
financial incentive not to use a stress agent with MPI, again we note
that the established payment rate is based on the geometric mean cost
of claims with and without a stress agent and that hospitals will now
receive incrementally more payment for each MPI, proportional to
included costs for stress agents on the claims, even when they do not
use a stress agent. We believe that knowing the full amount of payment
for the MPI, with or without the stress agent, will allow the hospital
to make the most efficient decision that is clinically appropriate. As
we state above, 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. Finally, the recent
availability of certain generic stress agents should further mitigate
any financial incentive not to use a stress agent with MPI.
With regard to clinical concerns that hospitals may encourage
physicians to order exercise rather than an MPI with stress agent, we
disagree that hospitals and physicians are likely to settle for
inadequate stress-MPI tests rather than incur the cost of the stress
agent because a truly inadequate stress test would not provide the
physician with sufficient information to arrive at a diagnosis and
would require repeat testing. We believe that hospitals and physicians
choose the most clinically appropriate diagnostic testing approach for
their patients and that they will use a stress agent when necessary.
With regard to the suggestion that we require hospitals to code
stress agents in MPI claims, we have repeatedly stated that hospitals
should report all codes and associated charges on the claim for the
item and services provided to the patient, so that we will be able to
monitor trends in stress agent utilization over time.
Finally, we are not accepting the suggestion that we assign MPI
tests with and without the use of a stress agent to different APCs. As
with the minimum utilization threshold, we believe that establishing
separate APCs would result in unnecessary differentiation between
stress MPI with stress induced through exercise and stress MPI with
stress induced through a stress agent, and that such a difference could
discourage the efficient delivery of MPI. Further, the MPI CPT code
descriptors include stress or rest, and stress can be induced either
through exercise or use of a stress agent.
After consideration of the public comments we received, we are

[[Page 74929]]

finalizing our proposed policy to package stress agents under our
policy that packages all drugs, biologicals, and radiopharmaceuticals
that function as supplies when used in a diagnostic test or procedure.
We are assigning HCPCS codes J0151 (which replaces HCPCS code J0152 in
CY 2014) and J2785 the status indicator of ``N,'' indicating
unconditional packaging in the OPPS for CY 2014.
(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, in the CY 2014 OPPS/ASC proposed rule, we
proposed 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 proposed to package Cysview for CY
2014 under the OPPS (78 FR 43571). 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.
Comment: Many of the commenters on CMS' proposal to package Cysview
were urologists who consider Cysview to be valuable in the care of
bladder cancer patients and who expressed concern that CMS' proposed
packaging policy will restrict access to blue light cystoscopy, which
is the service in which Cysview is employed. One commenter stated that:
Packaging Cysview limits patient access to the drug;
Cystoscopy procedures that employ Cysview are not
clinically comparable to other procedures assigned to the same APCs;
CMS does not have the authority to package drugs,
biologicals, and radiopharmaceuticals used in a diagnostic test or
procedure;
Packaging Cysview results in an inequitable payment for
Cysview;
Cysview does not function as a supply and therefore should
not be packaged;
Cysview is a treatment and is not used in a diagnostic
test and therefore should not be packaged under the policy that
packages drugs, biologicals, and radiopharmaceuticals used as a supply
in a diagnostic test or procedure.
CMS must create a separate APC for Cysview as it has done
for procedures that use contrast agents.
Response: We disagree with the commenters that packaging will limit
patient access to Cysview. As we state above, 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. There are many items and services in the OPPS in which use of
the item or service may increase the cost per case above that of the
average or typical case, and there are cases where no additional items
or services are necessary and the cost of a typical case is much less
than the average. This is a fundamental aspect of a prospective payment
system. Overall, we believe that OPPS payments reflect average
estimated costs for both situations and encourage the hospital to
assess the appropriate use of those additional items and services in
diagnosing bladder cancer and other diseases.
Cysview is used in blue light cystoscopy, which is an optional
adjunct to white light cystoscopy. The various CPT codes for cystoscopy
include white light cystoscopy with or without blue light cystoscopy.
Cysview is packaged into the cystoscopy procedures. We believe that the
current structure of the APCs that include the various cystoscopy
procedures sufficiently reflects clinical and resource homogeneity as
required by section 1833(t)(2)(B) of the Act because most of the codes
in these APCs are cystoscopy procedures or other urological endoscopy
procedures that, like cystoscopy, employ an endoscope. We also do not
believe that packaging Cysview in the OPPS is inequitable. We package
all drugs that function as supplies when used in a diagnostic test or
procedure, and we will continue to review drugs used in the OPPS to
assess whether they function as supplies or are otherwise integral,
ancillary, and supportive to a diagnostic test or procedure, and
therefore appropriately packaged into the procedure.
We disagree with the commenters who suggested that we do not have
the authority to package drugs, biologicals, and radiopharmaceuticals
that function as supplies when used in a diagnostic test or procedure.
We discussed our authority to package drugs, biologicals, and
radiopharmaceuticals extensively in 2008, when we packaged diagnostic
radiopharmaceuticals and contrast agents, and refer readers to that
discussion in the CY 2008 OPPS final rule (72 FR 66610).
We disagree with the commenter's view that Cysview should not be
packaged because it does not function as a supply when used in a
diagnostic test. We believe that the commenter misunderstands the term
``supply'' as it is used in the OPPS. Supply is a very broad term that
describes many types of products in the OPPS. As discussed elsewhere in
this section and in the CY 2014 OPPS/ASC proposed rule (78 FR 43571
through 43575), 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. A supply in the OPPS can be anything

[[Page 74930]]

that is not equipment, and supplies can be either expensive or
inexpensive and either commonly or uncommonly used. According to OPPS
policy, drugs, biologicals, radiopharmaceuticals, medical devices, and
other items and products that are not equipment can be supplies in the
OPPS (78 FR 43571 and 43575). Since the inception of the OPPS,
implantable medical devices have been considered supplies in the OPPS
(65 FR 18443). Many implantable medical devices are very
technologically sophisticated, costly, and tailored to specific medical
needs but they are nonetheless supplies in the OPPS. Cysview
facilitates diagnosis through blue light cystoscopy, and therefore we
consider it to be a drug that functions as a supply in a diagnostic
test in the OPPS.
We do not believe that Cysview and blue light cystoscopy are
therapeutic. The FDA-approved label for Cysview states that Cysview is
used for ``cystoscopic detection of non-muscle invasive papillary
cancer of the bladder,'' which is a diagnostic purpose according to our
definition of a diagnostic test described above and in the proposed
rule (78 FR 43570). Also, Cysview itself does not eliminate bladder
cancer cells. It enables better localization of the bladder cancer
cells as compared to white light cystoscopy alone, which then requires
a therapeutic procedure such as resection.
Finally, we disagree with the commenter's suggestion that we must
create a separate APC according to section 1833(t)(2)(G) of the Act for
procedures that use Cysview. Cysview is not being packaged as a
contrast agent. Instead, it is being packaged into the service in which
it is used under the policy of packaging drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure, which also currently includes diagnostic
radiopharmaceuticals, contrast agents, and stress agents.
Comment: One commenter requested clarification regarding CMS'
definition of the term ``contrast agent,'' and requested that CMS
recognize these products as drugs and that CMS refrain from calling
these products supplies.
Response: The purpose of the clarification of the term ``contrast
agent'' in the proposed rule (78 FR 43571), which is repeated above,
was to explain that we believe that contrast agents are products used
in certain types of imaging techniques (or advancements of those
techniques), namely x-ray, computed tomography (CT), ultrasound, and
magnetic resonance imaging (MRI). Contrast agents are typically drugs
and are eligible for pass-through as drugs in the OPPS. However, as
mentioned above, drugs can also function as supplies, and be paid as
such, when used in a diagnostic test or procedure in the OPPS. Contrast
agents function as supplies when used in an imaging test and are
packaged in the OPPS, unless pass-through status applies. This is a
well-established OPPS packaging policy, and this policy makes no
fundamental changes to the policy of unconditionally packaging contrast
agents. We consider packaging of contrast agents under the more general
packaging category of drugs, biologicals, and radiopharmaceuticals that
function as supplies when used in a diagnostic test or procedure, and
this packaging category is being codified at 42 CFR 419.2(b)(15).
After consideration of the public comments we received, we are
finalizing our proposed policy to package Cysview as a drug under our
policy that packages drugs, biologicals, and radiopharmaceuticals that
function as supplies when used in a diagnostic test or procedure.
Therefore, HCPCS code C9275 (Cysview) will be assigned status indicator
``N'' (unconditionally packaged) in CY 2014.
Comment: One commenter requested that radiopharmaceuticals used for
dosimetry not be considered diagnostic radiopharmaceuticals but instead
be treated as therapeutic radiopharmaceuticals.
Response: Radiopharmaceuticals used for dosimetry are packaged
supplies in the OPPS according to established OPPS policy (68 FR
63443). In addition, the purpose of dosimetry is to establish the
treatment dose or the optimal treatment for the patient. As stated in
the proposed rule (78 FR 43570) and again above, diagnostic items
``include tests or procedures performed to determine which treatment
option is optimal.'' Therefore, because dosimetry is performed to
determine the optimal treatment dose of a therapeutic
radiopharmaceutical, we believe, according to our definition of a
diagnostic item, test, or procedure, that it is diagnostic and not
therapeutic. Therefore, radiopharmaceuticals used for dosimetry are
packaged in the OPPS.
(2) Drugs and Biologicals That Function As Supplies 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). 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
of implantable biologicals. 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 when used in a surgical
procedure. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR
43571), beginning in the CY 2014 OPPS, we proposed to unconditionally
package all drugs and biologicals that function as supplies in a
surgical procedure, following the current packaging policy for
implantable biologicals.
Skin substitutes are a class of products that we treat as
biologicals that fit within the proposed packaging category of drugs
and biologicals that function as supplies in a surgical procedure. The
term ``skin substitutes'' refers to a category of products that are
most commonly used in outpatient settings for the treatment 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 applied to wounds to aid wound
healing and through various mechanisms of action they stimulate the
host to regenerate lost tissue. 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:

[[Page 74931]]

http://www.ahrq.gov/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. 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. Most of the various skin substitutes are
applied to a wound during a surgical procedure described by CPT codes
under the heading in the 2013 CPT codebook ``Skin Replacement Surgery''
and the subheading ``Skin Substitute Grafts'' in the CPT code 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, the FDA classifies many skin
substitutes as wound dressings, which make them in many cases 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 that are used as skin substitutes have dual
uses as both skin substitutes and implantable biologicals, which
underscores the similarity of these overlapping classes of products.
Some products that function as skin substitutes can also function as
implantable biologicals. Implantable biologicals and skin substitutes
both function as supplies that are used in surgical procedures and,
therefore, we believe that they should be packaged with the surgical
procedure in which the products are used. Since CY 2009, we have
packaged implantable biologicals. We see no reason to distinguish skin
substitutes from implantable biologicals for OPPS packaging purposes
based on the clinical application of individual products. Therefore, in
the CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed 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 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.
Pass-through payment status would still be available to new skin
substitutes that meet the pass-through payment criteria.
Comment: Many commenters supported CMS' proposal to package skin
substitutes, and believed that packaging will result in greater access
to the full range of skin substitute products, that patients will
benefit, and that Medicare will also benefit through cost savings from
this proposed change in payment policy.
Response: We appreciate the commenters' support.
Comment: Many commenters opposed CMS' proposal to package skin
substitutes and argued that because all skin substitutes or two skin
substitutes in particular, Apligraf and Dermagraft, are specified
covered outpatient drugs (SCODs) under section 1833(t)(14)(B) of the
Act, CMS cannot package these products and instead must pay separately
for them in the OPPS.
Response: We disagree with the commenters' assertion that skin
substitutes generally or Apligraf and Dermagraft specifically are
SCODs. Section 1833(t)(14)(B) of the Act defines a SCOD as a ``covered
outpatient drug (as defined in section 1927(k)(2)) . . . .'' Covered
outpatient drugs under section 1927(k)(2) of the Act are generally
limited to products approved as drugs by the FDA, biologicals licensed
under section 351 of the Public Health Service Act, and insulin. Skin
substitutes, including Apligraf and Dermagraft, are not within any of
these categories of products because they were approved by the FDA as
either medical devices or as human cell, tissue, and cellular and
tissue-based products (HCT/Ps) under section 361 of the Public Health
Service Act. Therefore, none of these products are covered outpatient
drugs under section 1927(k)(2) of the Act, and therefore no skin
substitutes are SCODs according to section 1833(t)(14)(B) of the Act.
Furthermore, we explained in finalizing our policies of packaging
diagnostic radiopharmaceuticals and contrast agents in the CY 2008 OPPS
final rule (72 FR 66766) that CMS has the authority to package the
payment of SCODs in the OPPS and that we may consider additional
packaging options for SCODs and other separately payable drugs in the
future.
Comment: Many commenters believed that skin substitutes should
continue to be separately paid and not packaged because, according to
these commenters, they are neither supplies, nor comparable to
implantable biologicals, nor wound dressings, and because they have a
therapeutic purpose. Some commenters requested that CMS begin referring
to these products as ``cellular and/or tissue based products for wounds
(CTPs)'' instead of using the term ``skin substitutes'' to describe the
products that are applied in the procedures described by the CPT codes
15271 through 15278. Commenters also expressed concern about CMS' use
of the term ``wound dressing'' to describe skin substitutes.
Response: We disagree with the commenters that we should not
describe skin substitutes as a type of supply used in a surgical
procedure. As explained in the proposed rule (78 FR 43571 and 43575)
and elsewhere in this final rule with comment period, supplies are a
large category of items that typically are either for single patient
use or have a shorter life span in use than equipment. Supplies can be
anything that is not equipment and 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, which we have considered supplies since the inception
of the OPPS (65 FR 18443). Supplies can also be drugs, biologicals, or
radiopharmaceuticals. We consider implantable medical devices to be
integral to, dependent on, and supportive to a surgical implantation
procedure. We consider implantable biologicals to be supplies used in a
surgical procedure because, as a part of a surgical procedure, they
reinforce and aid the healing of various internal structures, which
makes them integral to, dependent on, and supportive to a surgical
procedure. Similarly, we believe that skin substitutes are supplies
used in a surgical procedure because, as a part of a surgical repair
procedure, they reinforce and aid the healing of tissue like
implantable biologicals, but with skin substitutes, the tissue is skin
instead of internal connective tissues.

[[Page 74932]]

Like implantable biologicals, skin substitutes are integral to,
dependent on, and supportive to the surgical procedures in which they
are used. Therefore, we believe it is appropriate to describe skin
substitutes as supplies, and it is consistent with OPPS policy to
consider skin substitutes as a type of supply (like an implantable
biological or medical device) used in a surgical repair procedure.
We disagree with the commenters who stated that skin substitutes
are unlike packaged implantable biologicals and therefore should not be
packaged. Our proposal to package skin substitutes relies on our
determination that these products act as supplies that are integral to,
dependent on, and supportive to a surgical procedure. We also believe
that a reasonable analogy can be made that skin substitutes are similar
to and operate as implantable biologicals in terms of composition,
clinical use, role in hospital outpatient care, and product function in
healing and repair such that packaging skin substitutes represents a
logical expansion of our current packaging policy that packages
implantable biologicals as surgical supplies. For example, implantable
biologicals are used in internal surgeries for healing and to improve
the structural integrity of joints, soft tissues and nerves, among
others, and skin substitutes do the same for external surgical repairs
of the integumentary system. In fact, several of the skin substitute
products that are described by HCPCS Q-codes in the Q4100 series are
used both as implantable biologicals and skin substitutes.
With regard to the comments relating to our use of the term ``wound
dressing'' to describe skin substitutes, we discussed surgical
dressings in the proposed rule as an example of packaged surgical
supplies that have some similarities to skin substitutes, many of which
FDA classifies as ``wound dressings.'' We believe that commenters may
have misunderstood our description of skin substitutes in the proposed
rule as wound dressings and assumed that we were conflating skin
substitutes with products in the Medicare benefit category of surgical
dressings described in section 1861(s)(5) of the Act. We are not
conflating these two product categories. We note that the FDA uses the
term ``wound dressing'' to classify many of the skin substitutes. For
example, the skin substitutes Apligraf and Dermagraft are classified by
the FDA as ``dressing, wound and burn, interactive,'' and the skin
substitute Oasis is classified by the FDA as ``dressing, wound,
collagen.'' Further, we assign HCPCS A-codes to surgical dressings;
HCPCS Q-codes are typically assigned to drugs and biologicals and are
used to describe skin substitutes, unless a HCPCS C-code has been
assigned to a skin substitute with pass-through payment status.
Regarding the comment that skin substitutes should not be packaged
because they have a therapeutic purpose, we proposed for CY 2014 the
packaging of drugs and biologicals that function as supplies when used
in a surgical procedure, and surgical procedures typically have a
therapeutic purpose. This CY 2014 packaging proposal for drugs and
biologicals that function as supplies does not exclude items with a
therapeutic purpose.
We use the term ``skin substitute'' to describe the products that
are used in the surgical procedures described by CPT codes 15271
through 15278 because the CPT code descriptors for these codes include
the term ``skin substitute graft'' for the products that are applied in
these procedures. For example, the descriptor for CPT code 15271 is
``Application of skin substitute graft to trunk, arms, legs, total
wound surface area up to 100 sq cm; first 25 sq cm or less wound
surface area.'' While we acknowledge that the term ``skin substitutes''
may be more or less appropriate for specific products, we believe that
this term is currently the best term for these products in order to
avoid ambiguity. The term ``skin substitutes'' is conventional in the
medical vernacular for these products and it is also used in the CPT
code descriptor for the surgical procedures that apply these products.
In addition, we do not believe that we should adopt the term ``cellular
and/or tissue based products for wounds (CTPs) to describe skin
substitutes,'' because ``CTP'' is too close to the abbreviation HCT/P
that the FDA uses to refer to human cell, tissue, and cellular and
tissue-based products (HCT/Ps) under section 361 of the Public Health
Service Act, which is the regulatory pathway for only some skin
substitutes.
We acknowledge that there are differences in composition among the
various skin substitute products and that is why each is assigned a
distinct HCPCS Q-code (or HCPCS C-code in some cases). If all of the
products were identical, we would only need one code to describe all of
them. Skin substitutes are those products that are used in wound
healing procedures and that are typically assigned a HCPCS Q-code in
the Q4100 series (or assigned a HCPCS C-code if OPPS pass-through
payment status applies). We understand that some of the products
described by HCPCS Q-codes in the HCPCS code Q4100 series function both
as skin substitutes and implantable biologicals.
Comment: Many commenters opposed packaging skin substitutes, but
also requested that, if CMS does package skin substitutes, CMS exclude
from the packaging policy any products that are approved by the FDA
through the premarket approval (PMA) process, the biologic license
application (BLA) process, or the new drug application (NDA) process.
Some commenters believed that products that achieve marketability
through one of these processes are clinically superior to the other
skin substitutes that are regulated by FDA as either 510(k) medical
devices or as HCT/Ps because the PMA, NDA, or BLA-approval routes are
more rigorous. As a consequence, they believe that PMA, NDA, or BLA-
approved products deserve special recognition under the OPPS versus
other skin substitutes that are regulated by FDA through another
process. However, other commenters stated that the FDA regulatory
pathway does not necessarily establish the clinical utility of the
product. Other commenters argued that the various skin substitutes
should not be packaged because they are different products each with
different characteristics; for example, some skin substitutes are
constructed of living cells while others are not.
Commenters also stated that among the range of skin substitutes,
some products, including those approved through the PMA process, have
higher costs than other skin substitutes that are used in the skin
substitute surgical procedures. They argued that surgical procedures
using these higher cost skin substitutes should not receive the same
payment rate as those surgical procedures using less costly skin
substitutes. These commenters were concerned that hospitals would have
a financial incentive to use the least expensive skin substitute. Other
commenters suggested different approaches to payment based on
differential skin substitute cost or other skin substitute properties.
Response: Payment under the OPPS is established based on an
assessment of resource and clinical homogeneity. We disagree that
certain products with FDA regulatory approval should be exempt from
packaging. With notable regulatory and statutory exceptions, clinical
superiority, utility, and efficacy are not aspects of a service or
product that we consider in developing a payment rate under the OPPS.
However, we are persuaded by numerous public comments that there is a
significant difference in resource costs among the numerous skin
substitute products and

[[Page 74933]]

that multiple codes based on resource differences may be more
appropriate.
We do not believe that the FDA approval process should exempt
products from this packaging proposal or factor into the level of
Medicare payment. While some skin substitutes have been approved by FDA
as medical devices through the PMA process, including Apligraf,
Dermagraft, and the Integra skin substitutes, all of the other current
skin substitutes are regulated as either 510(k) medical devices or HCT/
Ps under section 361 of the Public Health Service Act. Proponents of
some of the products approved through the PMA process request that we
make an exception to packaging for these products (or any products
approved through a PMA, NDA, or BLA). We believe that this request is
based on the presumption that, because these FDA approval routes
typically require clinical trials, these products have stronger
evidence that supports their clinical performance as compared to the
non-PMA approved products, and therefore PMA approval can be used as a
proxy for evidence of clinical superiority relative to non-PMA-approved
skin substitutes. However, we consider factors such as clinical and
resource homogeneity for OPPS payment. As previously stated in regard
to implantable biologicals, ``We do not believe that it is necessary to
make our OPPS payment policies regarding implantable biologicals
dependent on categories of FDA approval, the intent of which is to
ensure safety and efficacy . . .'' (74 FR 60476), but rather according
to our established criteria of clinical and resource homogeneity.
Therefore, as in the case of implantable biologicals, we also believe
that the FDA regulatory pathway should not determine OPPS skin
substitute payment policy. Generally, once a service is covered,
clinical and resource homogeneity, as well as other considerations,
determines APC placement and packaging status. Determinations related
to the clinical merits of a product are outside the scope of this rule.
We proposed to apply the packaging policy to all skin substitutes
recognized by CMS, regardless of the FDA regulatory pathway.
However, we agree with commenters that, among the range of skin
substitutes, there is sufficient resource heterogeneity such that all
of the skin substitutes should not be packaged into the same
application procedures and placed in the same APC. As noted above,
factors in APC assignment in the OPPS include clinical homogeneity and
resource homogeneity. While the procedures described by CPT codes 15271
through 15278 are clearly clinically homogeneous, there is significant
resource heterogeneity in the payment amount for the various skin
substitutes from approximately $6.95 per sq cm for the least expensive
to approximately $200 per sq cm for the most expensive. In order to
ensure adequate resource homogeneity among APC assignments, in this
final rule with comment period, we are dividing the skin substitutes
into two groups for packaging purposes: high cost skin substitutes and
low cost skin substitutes. Assignments to the high cost or low cost
groups depended upon a comparison of the July 2013 payment amount for
the skin substitute in OPPS Addendum B to the weighted average payment
per unit of all skin substitutes using the skin substitute utilization
from the CY 2012 claims data and the July 2013 payment amounts in OPPS
Addendum B; this weighted average is $32 per sq cm. Skin substitutes
with a payment amount above $32 per sq cm are classified in the high
cost group and those at or below $32 are classified in the low cost
group. Table 13 below lists the skin substitutes and their assignment
as either a high cost or low cost skin substitute. We also note that a
few skin substitute products are applied as either liquids or powders
per milliliter or per milligram and are employed in procedures outside
of CPT codes 15271 through 15278. These products will not be classified
as either high cost or low cost but will be packaged into the surgical
procedure in which they are used. These products are not listed below
in Table 13 but appear in Addendum B to this final rule with comment
period (which is available via Internet on the CMS Web site).
BILLING CODE 4120-01-P

[[Page 74934]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.301

[[Page 74935]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.302

BILLING CODE 4120-01-C
We will update the groupings of high cost and low cost skin
substitutes annually through rulemaking for existing skin substitutes
according to the current skin substitute prices. We also will initially
assign new skin substitutes that do not qualify for pass-through
payment status to either the high cost or low cost category on a
quarterly basis using the weighted average per square centimeter number
defining high and low cost identified in each final rule. For any new
skin substitute products approved for payment during CY 2014, we will
use $32 per square centimeter to determine mapping to the high or low
cost skin substitute category. We expect manufacturers to continue
reporting ASP to facilitate cost category assignment. Any new skin
substitutes without pricing information will be assigned to the low
cost category until pricing information is available.
High cost skin substitutes will continue to be billed using the
existing skin substitute application CPT codes 15271 through 15278. We
are creating a new set of HCPCS C-codes that parallel the current set
of skin substitute application CPT codes (15271 through 15278) for
application of low cost skin substitutes beginning in CY 2014 (HCPCS
codes C5271, C5272, C5273, C5274, C5275, C5276, C5277, and C5278). We
are establishing code edits in our claims processing system that
require that the high cost skin substitutes be reported with the CPT
codes and the low cost skin substitutes be reported with the new HCPCS
C-codes. Geometric mean costs for the various procedures were
calculated using only claims for the skin substitutes that are assigned
to each class; that is, claims for services described by CPT codes
15271, 15273, 15275, and 15277, including only high cost skin
substitutes, were used to calculate the geometric mean costs for these
procedures and claims for HCPCS codes C5271, C5273, C5275, and C5277,
including only low cost skin substitutes, were used to calculate the
geometric mean costs for these procedures. The add-on CPT skin
substitute application codes (CPT codes 15272, 15274, 15276, and 15278)
and the add-on HCPCS C-codes for skin substitute application (HCPCS
codes C5272, C5274, C5276, and C5278) are packaged in the OPPS under
the add-on code packaging policy described in section II.B.3.d.(4) of
this final rule with comment period. CPT codes 15271, 15273, 15275, and
15277 and HCPCS C-codes C5271, C5273, C5275, and C5277 were assigned to
one of the following four skin repair APCs according to the geometric
mean cost for the code: APC 0326 (Level I Skin Repair); APC 0327 (Level
II Skin Repair); APC 0328 (Level III Skin Repair); and APC 0329 (Level
IV Skin Repair). These procedure codes and the CY 2014 APC assignments
and status indicator for each of the procedure codes are listed in the
Table 14 below.

BILLING CODE 4120-01-P

[[Page 74936]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.303

[[Page 74937]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.304

BILLING CODE 4120-01-C
Skin substitutes with pass-through payment status should be
reported with CPT codes 15271 through 15278. We will apply an offset to
the payment for pass-through skin substitutes according to the offset
policy described in section V.A.4.d of this final rule with comment
period.
Comment: A few commenters stated that CMS should not package skin
substitutes because the claims data used for modeling the cost does not
accurately represent the actual cost of the skin substitutes used in
the HOPD. They suggested that inaccurate coding and reporting by
hospitals, and charge compression, result in packaged costs that are
lower than the actual costs of the skin substitutes used in the
surgical procedures in which skin substitutes are employed.
Response: It is our longstanding policy to use the claims and cost
report data available to us, without significant editing or
modification, to model the prospective payment year OPPS payment rates.
We have stated previously that: ``[b]eyond our standard OPPS trimming
methodology . . . that we apply to those claims that have passed
various types of claims processing edits, it is not our general policy
to judge the accuracy of hospital coding and charging for purposes of
ratesetting'' (75 FR 71838). We do not believe that a problem exists
with skin substitute reporting or with the associated data used in
modeling the packaged payments for the procedures that includes the
cost of the skin substitute. Currently, there is an incentive to code
properly for skin substitute application services as the significant
majority of the overall payment for these services stems from the
separately paid and reported skin substitute, which we believe provides
sufficient motivation for the hospitals to

[[Page 74938]]

accurately report the amount of skin substitute used. We do not have
any evidence of systemic underreporting of these products. We have
estimated costs for skin substitutes as we have for all other services
in our claims data using our standard methodology outlined in section
II.A.2.c. of this final rule with comment period, and we believe these
costs to be sufficient for establishing payment for skin substitute
application procedures as they are for all other services paid under
the OPPS and ASC payment systems. Regarding charge compression, we have
addressed charge compression in the OPPS through new cost centers. We
refer readers to section II.A.1.c. of this final rule with comment
period for a discussion of this topic.
Comment: A few commenters requested that CMS not package
implantable biologicals that are used for various surgical procedures
in which the implantable biological product is implanted into the body
as a part of surgical procedure.
Response: Implantable biologicals have been packaged in the OPPS
since 2009. We did not propose to reconsider this packaging policy for
CY 2014. In fact, part of the rationale for extending packaging in the
OPPS to include skin substitutes that function as surgical supplies is
that we already package several products that are the same as or
similar to skin substitutes in the OPPS that are described by the term
``implantable biological'' due to their particular clinical use.
Several of the products in the HCPCS code Q4100 series are dual use or
multi-use products in that they serve as both skin substitutes and
implantable biologicals. We believe that both implantable biologicals
and skin substitutes should be packaged into the surgical procedures
that employ these products when they function as supplies.
Comment: Some commenters expressed concern that packaging skin
substitutes in the OPPS will inhibit the development of biotechnology
products and that this proposed policy will result in less investment
in such technology.
Response: We do not believe that this policy will result in less
investment in biotechnology. New skin substitutes remain eligible for
pass-through payment status for at least 2 years, but not more than 3
years. Pass-through payments are intended to facilitate the adoption of
certain new products. In addition, we believe that the packaged
payments for the associated surgical procedures, including payment for
the skin substitute are adequate and will not discourage use of the
skin substitute products used in these procedures. Furthermore, the
final policy that distinguishes high cost from low cost skin
substitutes addresses the issue of differential cost among the range of
skin substitute products. Finally, this packaging policy applies to
skin substitutes and other drugs and biologicals used in surgical
procedures. It does not apply broadly to all biotechnology.
Comment: Some commenters mentioned that the skin substitute
packaging policy will result in a site-of-service shift to the
physician office setting where separate payment for skin substitutes
will be made in CY 2014.
Response: The physician, in consultation with his or her patient,
decides the site of service for treatment and many factors are
considered as a part of that decision. We believe that we have
adequately addressed concerns about heterogeneous resource costs
resulting in payment inadequacy and that these procedures will continue
to be performed in the HOPD.
We received a few additional public comments regarding a single
product that we also proposed to package because it is a drug that
functions as a supply in a surgical procedure. We summarize and respond
to these comments below.
Comment: A few commenters objected to the packaging of the drug
Mitosol (HCPCS code J7315) when used as a supply in a surgical
procedure, which was the interim assignment for new HCPCS code J7315 in
the CY 2013 OPPS/ASC final rule with comment period. We refer readers
to Addendum B.--Final OPPS Payment by HCPCS Code for CY 2013 available
on the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1589-FC.html?DLPage=1&DLSort=2&DLSortDir=descending. One commenter in
particular complained that, although Mitosol is indicated as ``an
adjunct for ab externo glaucoma surgery,'' OPPS packaging requires that
an item be integral to the procedure. The commenter stated that because
the use of Mitosol is optional in some cases of glaucoma surgery, it
should not be packaged in the OPPS. The commenter stated that ``up to
20% of glaucoma surgeries do not include an anti-fibrotic [including
Mitosol].'' The commenter further stated that Mitosol serves a separate
clinical purpose from glaucoma surgery. The commenter emphasized CMS'
threshold packaging policy for drugs, biologicals, and
radiopharmaceuticals, and suggested that drugs with per day costs above
the threshold should not be packaged. Finally, the commenter stated
that the clinical benefits and orphan drug designation are reasons to
not package Mitosol.
Response: Mitosol is an anti-fibrotic drug (meaning that it
inhibits wound healing) that is used in glaucoma surgery. Since this
comment was filed, we granted Mitosol pass-through payment status. We
address the commenter's specific points as follows. First, we want to
dispel the notion that packaged drugs must be used in the associated
procedure 100 percent of the time that the procedure is performed. That
is not our OPPS packaging policy. As stated above and throughout the
proposed rule, we believe packaging is appropriate for items and
services that are integral or ancillary or supportive or dependent or
adjunctive to the primary procedure. Therefore, items and services that
fall within any of these categories may be properly packaged in the
OPPS. Mitosol, as an adjunct to trabeculectomy, would therefore be
appropriately packaged as a surgical supply if pass-through payment
status were not in effect because it functions as a supply in a
surgical procedure, and supplies are integral to, dependent on, and
supportive of a primary service, as noted above.
We also disagree with the commenter's assertion that Mitosol serves
a different clinical purpose than trabeculectomy, which is to create a
functioning filtering bleb for control of intraocular pressure. Mitosol
prevents the bleb from scarring, which helps to maintain a functioning
filtering bleb, which is the purpose of the glaucoma surgery.
Determinations related to the clinical merit of a product are outside
the scope of this rule. As noted above, relative clinical value or
effectiveness was not proposed as a criterion for OPPS packaging
determinations. Finally, while FDA orphan drug designation results in
additional exclusivity according to the Federal Food Drug, and Cosmetic
Act, it does not exempt a drug from packaging in the OPPS. Upon
expiration of pass-through payment status for Mitosol, it is our intent
to package it as a supply with glaucoma surgery in the OPPS.
After consideration of the public comments we received, we are
packaging all skin substitutes according to the scheme described above,
which assigns skin substitutes to either the high cost category or the
low cost category unless pass-through payment status applies. Skin
substitutes assigned to the high cost category will be reported with
CPT codes 15271 through 15278 and the applicable skin substitute HCPCS
Q-code, while skin substitutes assigned to the low cost category will
be

[[Page 74939]]

reported with HCPCS codes C5271 through C5278 and the applicable skin
substitute HCPCS Q-code. In addition, the few skin substitute products
that are applied as either liquids or powders per milliliter or per
milligram and are currently employed in procedures outside of the CPT
code range of 15271 through 15278 will not be classified as either high
cost or low cost, but will be packaged into the surgical procedure in
which they are used.
The skin substitute products that are unconditionally packaged
under this final policy and assigned to status indicator ``N'' for CY
2014 are listed in Addendum P to this CY 2014 OPPS/ASC final rule with
comment period. The payment for CPT codes 15271 through 15278 for
surgical application of high cost skin substitutes (payment rate per
square centimeter over $32 for CY 2014) and HCPCS codes C5271 through
C5278 for surgical application of low cost skin substitutes (payment
rate per square centimeter $32 and under for CY 2014), including the
cost of the packaged skin substitutes, for CY 2014, are listed in
Addendum B to this final rule with comment period. The OPPS 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 revise the structure of the
OPPS to adopt greater aspects of a prospective payment system and
retain less of a fee schedule structure, which 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 decision making 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, in the CY 2014 OPPS/ASC proposed rule (78 FR
43572), we proposed 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. Specifically, we
proposed that laboratory tests would be integral, ancillary,
supportive, dependent, or adjunctive to a primary service or services
provided in the hospital outpatient setting and appropriate for
packaging into the payment of the primary service 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 stated that the laboratory test codes that we were
proposing to be packaged and assigned status indicator ``N'' for CY
2014 were listed in Addendum P to the proposed rule (which is available
via the Internet on the CMS Web site). We also proposed to revise the
regulation text at Sec. 419.2(b) and Sec. 419.22(l) to reflect this
laboratory test packaging proposal.
We stated that we would consider a laboratory test to be unrelated
to a primary service and, therefore, not part of the proposed packaging
policy when the laboratory test is the only service provided on a date
of service or when the laboratory test is provided on the 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. We stated that 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 note that hospitals already use the
14X bill type to bill for referred specimens or any situation where the
beneficiary receives laboratory tests but is not a registered
outpatient of the hospital.
We also proposed an exception to our proposal to package laboratory
tests for molecular pathology tests described by CPT codes in the
ranges of 81200 through 81383, 81400 through 81408, and 81479. We did
not propose that these services be packaged because we believe that
these relatively new tests may 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 proposed to package. As we gain more
experience with molecular pathology tests, we stated that we will
consider if packaging them in the OPPS in the future would be
appropriate. These services would continue to be billed on a 13x claim
and be assigned status indicator ``A.''
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 exclude laboratory tests with costs greater than
some dollar threshold 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 and that the deductible and coinsurance would apply to laboratory
tests packaged into other services in the OPPS. The purpose

[[Page 74940]]

of the laboratory packaging proposal was not to shift program costs
onto beneficiaries. It is to encourage greater efficiency by hospitals
and the most economical delivery of medically necessary laboratory
tests which would contain unnecessary growth in hospital outpatient
spending over the long run, which benefits all stakeholders. We stated
that 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 longstanding 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 the
proposed rule (78 FR 43586 through 43587), 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 stated that we believe that creating these larger
bundles will result in a more efficient use of laboratory tests 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 invited public comments on the effect
of packaging laboratory tests on beneficiary coinsurance.
Comment: Some commenters supported the proposal to package
laboratory tests because they believed that packaging laboratory tests
is consistent with CMS' goal to move the structure of the OPPS closer
to a prospective payment system and away from a fee schedule
construction.
Response: We appreciate the commenters' support.
Comment: A few commenters opposed the proposal to package
laboratory tests because they believed that it could harm beneficiary
access to these laboratory tests.
Response: We disagree. We believe that beneficiaries will continue
to receive laboratory tests that are medically necessary. We are
continuing to pay for these laboratory tests and have included the cost
of the associated laboratory tests with the estimated cost of primary
hospital outpatient services when establishing payment for these
services. We believe that packaged payment will allow hospitals to
better assess when and which laboratory tests are appropriate and
provide these services more efficiently, but that this policy will not
affect beneficiaries' access to reasonable and appropriate care.
Comment: A few commenters opposed the proposal to package
laboratory tests because they believed that it would not achieve CMS'
objective of greater cost efficiency in hospitals.
Response: We disagree. 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.
We believe that packaging encourages hospitals to furnish services in
the most efficient way by enabling hospitals to manage their resources
with the maximum flexibility, thereby encouraging long-term cost
containment. Therefore, our packaging policies support our strategic
goal of incentivizing hospitals to provide appropriate care in the most
efficient manner.
Comment: One commenter suggested that CMS does not have the
legislative authority to package laboratory tests in the OPPS. The
commenter states that section 1833(h)(1)(A) of the Act requires that
CMS pay for laboratory tests (except inpatient laboratory tests) in all
settings according to the CLFS.
Response: We disagree. Although section 1833(h)(1)(A) of the Act
established the CLFS, it does not prohibit outpatient laboratory tests
from being paid either separately or as part of a packaged payment
under the OPPS. Section 1833(t) of the Act gives the Secretary
discretion to designate which services are covered OPD services, with
the exception of those listed in section 1833(t)(1)(B)(iv) of the Act,
and laboratory tests are not among the services listed in section
1833(t)(1)(B)(iv) of the Act. Laboratory tests provided in the hospital
outpatient department have always been considered hospital outpatient
services. However, until this proposal, we have since the inception of
the OPPS elected to separately pay for laboratory tests in the hospital
outpatient setting at the CLFS payment rates. For CY 2014, we proposed
to include certain laboratory tests as covered OPD services under the
OPPS, and we proposed to package payment for certain tests, similar to
other covered outpatient services that are typically integral,
ancillary, supportive, dependent, or adjunctive to a primary hospital
outpatient services under the OPPS.
Comment: A few commenters expressed concern about increased
beneficiary liability associated with laboratory tests being paid under
the OPPS, which has a coinsurance obligation, unlike payment for
laboratory tests under the CLFS, which does not have an associated
coinsurance obligation by statute. One commenter also requested that,
if CMS does finalize the laboratory test packaging policy for CY 2014,
it exclude laboratory tests from the services into which they are
packaged for the purpose of determining the coinsurance amount.
Response: We appreciate the commenters' concern about the welfare
of Medicare beneficiaries. We assessed the financial impact of
packaging laboratory tests on beneficiaries for the proposed rule and
reassessed the impact for this final rule with comment period. We
estimated in the proposed rule that the combination of packaging
laboratory tests into a wide array of primary services provided in the
hospital outpatient setting combined with our longstanding 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 the proposed rule (78 FR 43573, 43586 through 43587), 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 offset the financial impact on Medicare beneficiaries
receiving laboratory tests that will be subject to the finalized
packaging policy.
In this final rule with comment period, we are not finalizing our
proposed policy to package ancillary services with a CY 2013 status
indicator of ``X'' and diagnostic tests on the bypass list in response
to public comments. We estimate that, in aggregate, the percentage of
beneficiary liability for OPPS payments for CY 2014, including payment
for certain clinical diagnostic laboratory tests, will be 21.7 percent
in CY 2014, consistent with aggregate beneficiary liability under the
OPPS in recent years. We believe that our final policy to create 29
comprehensive APCs for CY 2015 will reduce the aggregate beneficiary
liability in CY 2015.
In addition, we believe that creating larger payment bundles will
result in a more efficient use of clinical diagnostic laboratory tests
when they are integral or supportive of an outpatient service.
Furthermore, to the extent that the coinsurance and deductible do not
apply under the CLFS, they would

[[Page 74941]]

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, which will continue to be paid under the
CLFS.
Regarding the commenter's request that CMS exclude laboratory tests
from the services into which they are packaged for the purpose of
determining the coinsurance amount, we do not have the authority under
section 1833(t)(8) of the Act to exclude laboratory tests from the
services into which they are packaged for the purpose of determining
the coinsurance amount.
Comment: Some commenters expressed concern about CMS' proposed
exception to packaging for laboratory tests provided on the same date
of service as another hospital outpatient service or services, but that
are ordered by a different practitioner than the practitioner who
ordered the primary hospital outpatient service or services and where
the ordered laboratory test also is for a different purpose than the
primary service. Commenters were concerned about hospitals'
administrative burden associated with billing for separately paid
laboratory tests. Commenters suggested that CMS implement claims
processing changes and instructions in advance of adopting the
laboratory packaging policy to ease hospitals' transition to this
policy and the exceptions to this policy.
Response: We believe that these commenters may have misunderstood
the nature of the proposed laboratory packaging policy. We proposed 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; that is, 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. One exception
to our proposal to package laboratory tests is to exempt molecular
pathology tests, which would continue to be separately paid when billed
on a 13x claim.
A laboratory test can be separately paid when (1) the laboratory
test is the only service provided to that beneficiary on that date of
service; or (2) the laboratory test is on the 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. When a laboratory test is the only service
provided to a beneficiary at the hospital, the hospital can receive
separate payment for those laboratory tests by billing for these
services on a 14x claim; we would pay hospitals for these laboratory
tests based on the CLFS payment rate. To illustrate the second
scenario, a beneficiary has eye surgery scheduled with physician A, an
ophthalmologist, but also has an order from physician B, a
cardiologist, for unrelated laboratory tests. The beneficiary goes to
the hospital for the eye procedure and decides to have the laboratory
tests that have been ordered by physician B for a different purpose
than the eye procedure on the same date of service. While the
laboratory test is on the same date of service as the eye procedure,
the laboratory tests are ordered for a different purpose than the
primary service by a practitioner different than the practitioner who
ordered the eye procedure. In this situation, the hospital can bill
Medicare for the unrelated laboratory tests on a 14x claim and receive
separate payment under the CLFS, similar to when the laboratory tests
are the only service performed in the hospital outpatient department on
a given date of service. However, if, in this example, physician A also
ordered some laboratory tests as a part of a preoperative evaluation
for the eye procedure and the beneficiary had the tests on the same
date of service as the eye procedure, then the hospital would report
those laboratory tests on a 13x claim along with the eye surgery.
Payment for those preoperative laboratory tests would be packaged into
the payment for the surgery, which is the primary procedure that would
be paid separately. It will be the hospital's responsibility to
determine when to separately bill laboratory tests on the 14x claim
according to this description of these limited exceptions. We plan to
issue revised contractor instructions for billing for these laboratory
tests on a 14x bill type in January 2014, and we also will install
claims processing edits.
Comment: A few commenters suggested that CMS adopt the alternative
laboratory packaging policy discussed briefly above and in the proposed
rule (78 FR 43573) to package only those laboratory tests with payment
rates below some dollar threshold, similar to the approach that CMS
uses for most drugs, biologicals, and therapeutic radiopharmaceuticals
in the OPPS. Commenters stated that such a policy would enable hospital
specialty clinics to perform more complex, expensive, and esoteric
laboratory tests.
Response: We appreciate the commenters' thoughts on this
alternative. We continue to believe that a dollar packaging threshold
is not appropriate for laboratory tests because almost all laboratory
tests are inexpensive (97 percent of all laboratory tests have CLFS
national limitation amounts of less than $100) relative to other
services that are provided in the hospital outpatient department. This
is unlike many of the drugs and biologicals that are used in the
hospital outpatient department that not uncommonly cost thousands of
dollars per dose. Therefore, we continue to believe that it is not
necessary to adopt a payment threshold policy for packaging laboratory
tests similar to the threshold policy for packaging drugs and
biologicals.
Comment: A few commenters requested additional exceptions to the
proposal to package specific laboratory tests, including, for example,
tests for in situ hybridization and cardiovascular screening. These
commenters stated that, like molecular pathology tests for which CMS
proposed an exception to the proposal to conditionally package
laboratory tests, these tests have a different pattern of clinical use
than most other laboratory tests and, therefore, should continue to be
separately paid in the hospital outpatient setting.
Response: After considering the various requests for exceptions for
specific laboratory tests that we received, we do not believe that
additional exceptions to the laboratory packaging policy are necessary.
We understand that there are laboratory tests that are less common and
frequent than a standard panel, such as new tests. We do not believe
that the tests described by the commenters or other laboratory tests
that were proposed to be packaged are similar to the tests in the
molecular pathology test series such that additional exceptions are
warranted. We proposed to exclude the molecular pathology tests from
our packaging proposal because, as a class of laboratory tests, their
overall pattern of clinical use has not yet developed and we believe
that these tests are less tied to a primary service than other
laboratory tests. Once their pattern of use develops, we will assess
whether we believe these laboratory tests also should be conditionally
packaged. We do not believe that in situ hybridization and
cardiovascular screening or other types of laboratory tests are a
developing class of laboratory tests for which we do not know the
pattern of use. For example, in situ hybridization may be a part of a
comprehensive evaluation for a suspected malignancy. In response to
commenter requests for additional exceptions, we also reviewed all of
the laboratory tests listed in Addendum P to the proposed rule and do
not believe that further exceptions to

[[Page 74942]]

our proposal to conditionally package laboratory tests are necessary.
After consideration of the public comments we received, for CY
2014, we are finalizing our proposal without modification to package
laboratory tests in the OPPS when they are integral, ancillary,
supportive, dependent, or adjunctive to a primary service or services
provided in the hospital outpatient setting; that is, 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. This means that a laboratory test will not be packaged when
(1) a laboratory test is the only service provided to that beneficiary
on that date of service; or (2) a laboratory test is conducted on the
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. We also are
finalizing our proposal without modification to except molecular
pathology tests described by CPT codes in the ranges of 81200 through
81383, 81400 through 81408, and 81479 from this packaging proposal. In
addition, we are finalizing our proposal without modification to revise
the regulation text at Sec. 419.2(b) and Sec. 419.22(l) to reflect
this conditional laboratory test packaging policy.
The laboratory test codes subject to this packaging policy will be
assigned status indicator ``N'' because any laboratory tests reported
on a 13x bill type will be packaged for CY 2014. These codes are listed
in Addendum P to this final rule with comment period (which is
available via the Internet on the CMS Web site).
(4) Procedures Described by Add-On Codes
Add-on codes describe procedures that are always performed in
addition to a primary procedure. CPT defines add-on codes as codes that
describe ``procedures [that] are commonly carried out in addition to
the primary procedure performed,'' and also states that ``[a]dd-on
codes are always performed in addition to the primary service or
procedure and must never be reported as a stand-alone code'' (2013 CPT
Codebook Professional Edition, page xi). CPT add-on codes are listed in
Appendix D of the CPT codebook. Add-on codes can also be 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.
Historically, the OPPS has generally paid separately for add-on codes
based on an APC assignment with status indicator ``T'' indicating that
the multiple procedure payment reduction for surgeries applies.
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 service,
which is usually a surgical procedure. The primary code defines the
purpose and typical scope of the patient encounter and the add-on code
describes incremental work, when the extent of the procedure
encompasses a range rather than a single defined endpoint applicable to
all patients. The CPT codebook states that an add-on code describes
``additional intra-service work associated with the primary procedure''
(2013 CPT Codebook Professional Edition, page xi). For example, add-on
CPT code 11001 is used for each additional 10 percent of debridement
beyond that described by the primary code. Given the dependent nature
and adjunctive characteristics of procedures described by add-on codes
and in light of longstanding OPPS packaging principles described above,
we believe add-on procedures should be packaged with the primary
procedure. In the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we
proposed to unconditionally package all procedures described by add-on
codes in the OPPS.
Aside from advancing the OPPS as a prospective payment system by
packaging add-on codes, an additional benefit to packaging add-on codes
is more accurate OPPS payment for procedures described by add-on codes.
Currently, calculating geometric mean costs for procedures described by
add-on codes is problematic in the OPPS because, as with many claims
with multiple procedures, 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 determine 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'' to) 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
problem because the costs of the add-on code would be packaged into the
primary procedure, and we would no longer have to use miscoded claims
to calculate estimated costs for add-on codes. Packaging add-on codes
also would increase the number of single bills available for
ratesetting for the primary procedures. We discuss how we model claims
to establish relative payment weights, including definitions of
multiple, single, and pseudo single claims in section II.A.2. of this
final rule with comment period.
We proposed to revise the regulations at Sec. 419.2(b) to include
the packaging of add-on codes. The specific add-on codes that we
proposed to be unconditionally packaged and assigned status indicator
``N'' for CY 2014 are listed in Addendum P to the proposed rule, which
is available via the Internet on the CMS Web site.
Comment: Some commenters supported the proposal to package add-on
codes, and agreed with CMS that packaging add-on codes is consistent
with a prospective payment system and will improve OPPS ratesetting.
Response: We appreciate the commenters' support.
Comment: Several commenters objected to the proposal to package
add-on codes for the following reasons:
According to the commenters, procedures described by add-
on codes are not necessarily integral, ancillary, supportive,
dependent, or adjunctive to the primary service into which they would
be packaged.
Some procedures described by add-on codes include
expensive implantable medical devices, and although they are integral
to the primary procedure, commenters note that packaging these
procedures into the primary procedure risks significant underpayment
for the overall procedure that includes additional medical devices,
which could negatively affect patient access to these devices.
Add-on code packaging should not apply to infrequently
performed add-on codes as the cost of these infrequent services will
not be sufficiently reflected in the payment for the primary procedure.
Some add-on codes are not related to the primary procedure
but represent incremental additional physician work, and for this
reason should not be packaged.
To insure continued patient access to these procedures, commenters
requested that CMS establish exceptions to its proposal to package add-
on codes for specific services that commenters believed would be
underpaid under the policy, including, but not limited to,

[[Page 74943]]

kyphoplasty add-on procedure, endoscopic retrograde
cholangiopancreatography add-on procedure, pelvic reconstruction add-on
procedures, neurolysis, and pathology services.
Response: We disagree with commenters that add-on services are not
integral, ancillary, supportive, dependent, or adjunctive to the
primary service. The fundamental nature of an add-on code procedure is
that it typically describes some form of a related extension of or
addition to the primary procedure or service described by the primary
procedure. The very definition of an add-on code is that it is an
extension of a primary, base service. CPT states that ``add-on codes
describe additional intra-service work associated with the primary
procedure'' (emphasis added) (2013 CPT Codebook Professional Edition,
page xi). Therefore, we believe that add-on code procedures are related
extensions, supportive, integral, or adjunctive of the primary
procedure and, therefore, it is appropriate to package the cost of the
add-on codes into the payment calculation for the primary procedure.
For the same reasons, we also do not agree with commenters that some
add-on codes are not related to the primary procedure but represent a
separate procedure that should be paid separately from the primary
procedure.
Regarding the packaging of add-on procedures that use expensive
medical devices, we note that the most expensive medical devices used
in procedures to insert or implant devices in the outpatient setting
are included in procedures we proposed to be assigned to comprehensive
APCs. In section II.A.2.e. of this final rule with comment period, we
discuss this policy, which we are adopting, but delaying the
implementation until CY 2015. We will continue to separately pay for
procedures described by add-on codes that are currently assigned to
device-dependent APCs. We note that almost all such codes will be
included in a comprehensive APC for CY 2015. Therefore, until the
comprehensive APC policy is implemented, we will continue to pay
separately for procedures described by add-on codes that are assigned
to device-dependent APCs. The device-dependent add-on codes that will
continue to be separately paid in CY 2014 are listed below in Table 15.

BILLING CODE 4120-01-P

[[Page 74944]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.306

BILLING CODE 4120-01-C
However, in general the cost of all medical devices used along with
all of the other costs associated with the add-on code procedures are a
part of the costs used to calculate the payment for a primary procedure
when add-on codes are packaged. Most important, a prospective payment
system pays an average amount for a unit of service, which may be more
or less costly on a case-by-case basis. Unless an ancillary service is
always performed with a primary procedure or service, a prospective
payment will not reflect the full estimated cost of the packaged
procedure or service. Payment for the primary procedure rather would
reflect

[[Page 74945]]

some payment for the ancillary procedure, but each time the primary
procedure is performed, the hospital receives additional payment, even
when the ancillary service is not provided. Unless an add-on code is
always performed with a primary procedure, we would not expect the
relative payment weight to reflect the full costs associated with
performing the primary procedure and certain add-on procedures,
especially if the add-on procedures are performed relatively
infrequently as compared to the primary procedure. Our experience with
packaging services under the OPPS, where we continue to see packaged
services furnished with the primary procedure, leads us to believe that
hospitals will continue to provide the full range of medically
necessary care to beneficiaries under overall prospective payment for
the primary procedure and any add-on procedures. Therefore, we do not
believe that it is necessary to create additional exceptions to the
add-on code policy for select infrequently performed services that may
cost more (in addition to the cost of the primary procedure) to pay
more than the prospective payment for the primary service with add-on
code procedures packaged into them.
However, we acknowledge that, under certain circumstances, certain
primary code and add-on code combinations could be more likely to
result in a relatively highly costly case as compared to the packaged
payment for the primary code. Therefore, in light of this new policy to
unconditionally package most add-on codes, we will examine our
estimated OPPS outlier percentage in light of all final packaging
policies contained in this final rule with comment period and consider
increasing it in the future to accommodate greater potential risk from
high cost outlier cases that would result from packaging of certain
add-on codes. An increase in the outlier percentage would accommodate
more relatively high cost cases.
Comment: Some commenters objected to packaging drug administration
add-on codes, which typically describe each additional hour of infusion
or each additional intravenous push, etc. in addition to the initial
drug administration service. The commenters believed that such a policy
could disadvantage providers of longer drug administration services,
which are often protocol driven and are not necessarily dictated by the
hospital but by the characteristics of the specific drug or biological
being administered to the patient.
Response: We believe that, given the frequency of drug
administration services in the hospital outpatient department and their
use in such a wide variety of different drug treatment protocols for
various diseases in all types of hospitals, further study of the
payment methodology for these services is warranted at this time.
Therefore, we are not finalizing our proposal to package the drug
administration add-on codes in CY 2014. However, we may continue to
explore other payment options, including packaging and variations on
packaging, in future years.
After consideration of the public comments we received, we are
finalizing our proposal to unconditionally package procedures described
by add-on codes, with the exception of add-on codes for drug
administration services and for CY 2014 add-on codes assigned to
device-dependent APCs. In addition, for CY 2014 only, we will continue
to separately pay for procedures described by add-on codes that are
currently assigned to device-dependent APCs. We also are revising Sec.
419.2(b) to include add-on code procedures among the services that are
packaged in the OPPS. The specific add-on codes that we are
unconditionally packaging and assigning status indicator ``N'' for CY
2014 are listed in Addendum P and Addendum B to this final rule with
comment period (which are 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.'' Those ancillary services assigned status
indicator ``X'' in the OPPS and paid separately are, by definition,
ancillary to primary services provided in the OPPS and include many
minor diagnostic tests and procedures that are typically performed with
a primary service, although there are instances where hospitals provide
such services alone and without another primary service on the same
date.
As mentioned above, our intent is that the OPPS be more of a
prospective payment system through expanded 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 stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43573)
that 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. We indicated that this packaging approach is most
consistent with a prospective payment system and the regulation 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, in the proposed rule, we proposed 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 did not propose to conditionally package
preventive services assigned to status indicator ``X'' and instead
proposed 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 were proposed to be conditionally packaged and assigned to
status indicator ``Q1'' for CY 2014 were listed in Addendum P to the
proposed rule (which is available via the Internet on the CMS Web
site).
Comment: A few commenters agreed with CMS' proposal to package
services assigned the status indictor ``X'' (ancillary services)
because they believed that this proposal was consistent with CMS'
policy of packaging services that are typically integral, ancillary,
supportive, dependent, or adjunctive to a primary HOPD service.
Response: We appreciate the commenters' support.
Comment: Many commenters opposed the proposal to conditionally
package services currently assigned status indicator ``X.'' These
commenters stated that this category of services is too varied and that
the services in this category are not always ancillary to the services
into which they would be packaged. The commenters specifically
mentioned radiation oncology planning services and pathology services
as examples of services that, under the proposal, could be packaged
into a visit but would not be ancillary to that visit. They also
objected because, in some cases, relatively costly services could be
packaged into services with a low payment, especially a visit code
because there is so much volume in visit codes that high cost, low
volume ancillary

[[Page 74946]]

services would not measurably impact visit payments.
Response: We believe that the commenters have raised some valid
points regarding whether all of the services currently assigned status
indicator ``X'' are in all cases ancillary to the services into which
their payment would be packaged. We believe that a reexamination of
this group of services is warranted to determine which services are
best described as ancillary services and packaged on that basis and
which services should either be packaged under a different policy or
separately paid in the OPPS.
However, we will finalize the conditional packaging of one
ancillary service described by CPT code 93017 (Cardiovascular stress
test using maximal or submaximal treadmill or bicycle exercise,
continuous electrocardiographic monitoring, and/or pharmacological
stress; tracing only, without interpretation and report). Stress
testing is often performed as a part of myocardial perfusion imaging
(MPI). MPI is most commonly reported with CPT code 78452 (Myocardial
perfusion imaging, tomographic (SPECT) (including attenuation
correction, qualitative or quantitative wall motion, ejection fraction,
by first pass or gated technique, additional quantification, when
performed); multiple studies, at rest and/or stress (exercise or
pharmacologic) and/or redistribution and/or rest reinjection). As
indicated by the code descriptor, MPI includes stress testing as
described by CPT code 93017, and approximately 96 percent of MPI is
performed under stress. Therefore, we believe that, because stress
testing is both integral and ancillary to MPI, it should be packaged
into MPI when a stress test accompanies MPI.
After consideration of the public comments we received, we are not
finalizing our proposal to conditionally package codes currently
assigned the ancillary service status indicator ``X'' for CY 2014 when
performed with another service, with the exception that CPT code 93017
will be conditionally packaged. We may review the services assigned
status indicator ``X'' (ancillary services) to determine which may be
appropriate for packaging as ancillary services in the OPPS in future
years.
(6) Diagnostic Tests on the Bypass List
For the CY 2013 OPPS, we continued our policy to use a bypass list
to convert lines from multiple procedure claims into ``pseudo'' single
procedure claims. In the CY 2014 OPPS/ASC proposed rule (78 FR 43574),
we proposed 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 the 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 the isolated costs of 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we also
proposed 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 certain
clinical laboratory tests. We stated that 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 proposed 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 proposed to conditionally package codes on the bypass list and
to assign them the appropriate 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 proposed to be
conditionally packaged and assigned to status indicator ``Q1'' for CY
2014 were listed in Addendum P to the 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 did not propose to conditionally package preventive services
that are diagnostic tests on the bypass list.
Comment: Some commenters supported CMS' proposal to package
diagnostic codes on the bypass list because they believed that they are
generally ancillary and supportive to other HOPD services.
Response: We appreciate the commenters' support.
Comment: Some commenters opposed packaging diagnostic tests on the
bypass list for the following reasons:
Some of the tests, for example, echocardiography, included
in this category are not typically integral, ancillary, supportive,
dependent, or adjunctive to the service into which they would be
packaged.
Some of the procedures on the bypass list would be
packaged into significantly lower paying procedures, including visits.
The interaction between conditional packaging of these
diagnostic tests and other status indicator logic sometimes produces
anomalous payments.
Hospitals have an incentive to schedule procedures on
different days to avoid packaging.
Access to some of these tests may be negatively impacted
by packaging.
Response: We believe that the commenters have raised some valid
points regarding whether all of the services included in the category
``diagnostic codes on the bypass list'' are integral, ancillary,
supportive, dependent, or adjunctive to the service into which their
payment is packaged. We believe that a reexamination of this group of
services is warranted to determine which services are best described as
integral, ancillary, supportive, dependent, or adjunctive services to
the service into which it would be packaged to determine which services
should either be packaged under a different policy or separately paid
in the OPPS.
Therefore, after consideration of the public comments we received,
we are not finalizing our proposal to conditionally package diagnostic
tests on the bypass list for CY 2014, or our proposal to assign these
codes a status indicator of ``Q1.'' We will review the services
currently listed in Addendum P under ``diagnostic tests on the bypass
list'' to determine which tests may be

[[Page 74947]]

appropriate for packaging in the OPPS in future years. Codes that would
have been affected by the CY 2014 packaging proposal for this category
of services will remain on the bypasss list for the CY 2014 OPPS, as
discussed in section II.A.1.b. of this final rule with comment period.
(7) Device Removal Procedures
Implantable devices frequently require a procedure to remove or
replace the device due to wear, failure, recall, and infection, among
other reasons. Since the beginning of the OPPS, implantable devices
have been packaged (either as supplies, implantable prosthetics, or
implantable DME) into their associated procedures. A device removal
procedure is sometimes described by a code that may include repair or
replacement. In other cases, a device removal procedure is described by
a separate code that only describes the surgical procedure to remove a
device. Device removal procedures are frequently performed with
procedures to repair or replace devices, although it is possible that a
device removal procedure 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 should be considered as one part of an overall
procedure for removing a device with repair or replacement of the
device.
Given that a separately coded device removal procedure that
accompanies a device repair or replacement procedure represents a
service that is integral and supportive to a primary service, in the CY
2014 OPPS/ASC proposed rule (78 FR 73574), we proposed to conditionally
package device removal codes when they are billed with other surgical
procedures involving repair or replacement and assign a status
indicator of ``Q2.'' We stated that 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 proposed to be conditionally packaged
and assigned to status indicator ``Q2'' for CY 2014 were listed in
Addendum P to the proposed rule (which is available via the Internet on
the CMS Web site).
Comment: Some commenters agreed with CMS' proposal to conditionally
package device removal procedures in the OPPS because they are often
part of a larger procedure to revise or replace a device.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our policy to conditionally package device removal
procedures in the OPPS when performed together with a repair or
replacement of a device and to assign a status indicator of ``Q2.'' The
specific device removal procedure codes that we are conditionally
packaging and assigning to status indicator ``Q2'' for CY 2014 are
listed in Addendum P to this final rule with comment period (which is
available via the Internet on the CMS Web site).
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 unconditionally packaged in the OPPS and
have been since the beginning of the payment system. 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 hospital outpatient setting are prosthetic supplies
under Sec. 419.22(j), and if paid separately, they are paid according
to the DMEPOS fee schedule. As we discussed in the CY 2014 OPPS/ASC
proposed rule (78 FR 43575), 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 proposed 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).
Comment: A few commenters supported CMS' proposed change in the
status indicators for these supplies from ``A'' to ``N.'' One commenter
urged CMS not to finalize this proposal because the commenter believed
that hospitals should be separately paid for supplies given to the
patient to take home.
Response: Our longstanding regulations at Sec. 419.2(b)(4) require
that we package all supplies in the OPPS except prosthetic supplies.
After consideration of the public comments we received, we are
updating the status indicators for all supplies (except prosthetic
supplies) to ``N.'' The specific Level II HCPCS A-codes whose status
indicator are revised from ``A'' to ``N'' are listed in Addendum P to
this CY 2014 OPPS/ASC final rule with comment period (which is
available via the Internet on the CMS Web site).
f. 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed 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 proposed 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 proposed to revise the list of services excluded
from the OPPS at Sec. 419.22.
Comment: Some commenters urged CMS not to revise the regulations at
42 CFR 419.2(b) as a part of their request that CMS not adopt any of
the packaging proposals.
Response: We believe that codifying the new policies will promote
clarity regarding OPPS packaging policy, and therefore we are
finalizing our revision of the regulations.
After consideration of the public comments received, we are
finalizing our revision of the regulations at 42 CFR 419.2(b) and
419.22 to reflect the new packaging policies.
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 to

[[Page 74948]]

these imaging services that are either packaged or proposed to be
packaged, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43575)
that we are considering a proposal for CY 2015 that would conditionally
package all imaging services with any associated surgical procedures.
We stated that 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 requested public comments on this
potential CY 2015 proposal.
Comment: Some commenters objected to this potential future proposal
on the grounds that such a packaging policy could result in less access
to imaging in the HOPD. One commenter asked about the claims logic
hierarchy for packaging imaging into surgery as it relates to the
imaging composites.
Response: We appreciate these thoughtful comments, and we will
consider them as we further consider packaging imaging services in the
OPPS.
4. Calculation of OPPS Scaled Payment Weights
In the CY 2014 OPPS/ASC proposed rule (78 FR 43576), for CY 2014,
we proposed to calculate the relative payment weights for each APC for
CY 2014 shown in Addenda A and B to the 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 the proposed rule. For
this CY 2014 final rule with comment period, we are continuing to use
this methodology to calculate the relative payment weights for each APC
for CY 2014. 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 proposed to continue basing the
relative payment weights on which OPPS payments will be made by using
geometric mean costs (78 FR 43576). As we discuss in section VII. of
the proposed rule and this final rule with comment period, we proposed
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 proposed to use the
cost of the clinic visit APC in calculating unscaled weights, which for
CY 2014 was 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 proposed
to have a single APC for each visit type. The proposal to reconfigure
the visit APCs is discussed in more detail in section VII. of the
proposed rule and this final rule with comment period. 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 proposed 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, as we proposed, we compare the estimated
aggregate weight using the CY 2013 scaled relative payment weights to
the estimated aggregate weight using the 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 applying the same process using the CY 2014 unscaled relative
payment weights rather than scaled relative payment weights. We
calculate the weight scaler by dividing the CY 2013 estimated aggregate
weight by the 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 OPPS packaging
policy for laboratory tests described in section II.A.3.b.(3) of this
final rule with comment period, we need to incorporate the estimated
relative payment weights from those services. Therefore, the CY 2013
estimated OPPS aggregate weight 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 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 CY
2014 unscaled relative payment weights for purposes of budget
neutrality. The CY 2014 unscaled relative payment weights were adjusted
by multiplying them by a weight scaler of 1.2732 to ensure that the 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 final rule with
comment period) is included in the budget neutrality calculations for
the CY 2014 OPPS.
Comment: One commenter expressed the concern that CMS may have
underfunded the OPPS in developing the budget neutral weight scaler for
the additional costs associated with laboratory tests for CY 2014.

[[Page 74949]]

Response: We appreciate the commenter's concern. We discussed the
calculation of the proposed CY 2014 budget neutral weight scaler in the
CY 2014 OPPS/ASC proposed rule (78 FR 43576) as well as the claims
accounting narrative that we make available via the Internet on the CMS
Web site. In calculating the CY 2014 OPPS budget neutral weight scaler,
we calculated the CY 2013 aggregate payment weight associated with the
laboratory tests paid at CLFS rates by applying the CY 2013 CLFS
payment rates to the laboratory tests performed in the hospital
setting. We note that this is the standard process we use to develop
relative payment weights for budget neutrality for items and services
that have predetermined payment rates, such as separately paid OPPS
drugs and New Technology APCs. We note that we released corrected data
files on August 28, 2013, and extended the comment period to September
16, 2013, on the technical corrections noted in the correcting document
published in the Federal Register on September 6, 2013 (78 FR 54842).
However, there were no corrections associated with the amount of the
estimated payment weight being budget neutralized from these clinical
diagnostic laboratory tests.
After consideration of the public comments we received, we are
finalizing our proposed methodology for calculating the OPPS scaled
relative payment weights without modification, including updating of
the budget neutrality scaler for this final rule with comment period.
Under this methodology, the final unscaled relative payment weights
were adjusted by a weight scaler of 1.2732 for this final rule with
comment period. The CY 2014 unscaled relative payment weights listed in
Addenda A and B to this final rule with comment period (which are
available via the Internet on the CMS Web site) incorporate the
recalibration adjustments discussed in sections II.A.1. and II.A.2. of
this final rule with comment period.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to
update the conversion factor used to determine the payment rates under
the OPPS on an annual basis by applying the OPD fee schedule increase
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee
schedule increase factor is equal to the hospital inpatient market
basket percentage increase applicable to hospital discharges under
section 1886(b)(3)(B)(iii) of the Act. In the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50607), consistent with current law, based on IHS
Global Insight, Inc.'s second quarter 2013 forecast of the FY 2014
market basket increase, the final 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 was 0.4 percentage point.
We proposed that if more recent data became subsequently available
after the publication of the proposed rule (for example, a more recent
estimate of the market basket increase and the MFP adjustment), we
would use such data, if appropriate, to determine the CY 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 this CY 2014 OPPS/ASC final rule with
comment period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607),
we discussed the calculation of the final MFP adjustment for FY 2014,
which is 0.5 percentage point.
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, in the CY 2014
OPPS/ASC proposed rule (78 FR 43577), we proposed 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, using the final methodology and more
recent data results in an OPD fee schedule increase factor of 1.7
percent for the CY 2014 OPPS (which is 2.5 percent, the final estimate
of the hospital inpatient market basket percentage increase, less the
final 0.5 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, using the final methodology and more recent data,
those hospitals failing to meet the Hospital OQR Program reporting
requirements will receive an OPD fee schedule increase factor of -0.3
percent (which is 2.5 percent, the final estimate of the hospital
inpatient market basket percentage increase, less the final 0.5
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 final rule with
comment period.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed 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.

[[Page 74950]]

We did not receive any public comments on our proposed adjustments
to the OPD fee schedule increase factor or on the proposed changes to
Sec. 419.32(b)(1)(iv)(B) to add a new paragraph (5). For the reasons
discussed above, we are adjusting the OPD fee schedule increase factor
and adopting, as final, the amendment to Sec. 419.32(b)(1)(iv)(B), as
proposed.
We did not receive any public comments on our proposed methodology
for calculating the CY 2014 conversion factor. Therefore, we are
finalizing our proposed methodology for calculating the budget
neutrality adjustment factors, as described in the following
discussion.
As we proposed, to set the OPPS conversion factor for CY 2014, we
are increasing the CY 2013 conversion factor of $71.313 by 1.7 percent.
In accordance with section 1833(t)(9)(B) of the Act, we are further
adjusting 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 calculating an
overall budget neutrality factor of 1.0002 for wage index changes by
comparing total estimated payments from our simulation model using the
final FY 2014 IPPS wage indices to those payments using the FY 2013
IPPS wage indices, as adopted on a calendar year basis for the OPPS.
For CY 2014, we did not propose to make a change to our rural
adjustment policy, and as discussed in section II.E. of this final rule
with comment period, we are not making any changes to the rural
adjustment policy. Therefore, the budget neutrality factor for the
rural adjustment is 1.0000.
For CY 2014, we are finalizing our proposal to continue previously
established policies for implementing the cancer hospital payment
adjustment described in section 1833(t)(18) of the Act, as discussed in
section II.F. of this final rule with comment period. We are
calculating a CY 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 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 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 applying a budget neutrality
adjustment factor of 1.0005 to the conversion factor to ensure that the
cancer hospital payment adjustment is budget neutral.
For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2014
will equal approximately $12.3 million, which represents 0.02 percent
of total projected CY 2014 OPPS spending. Therefore, the conversion
factor is also 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 an adjustment
for CY 2014 of 0.13 percent. Finally, estimated payments for outliers
remain at 1.0 percent of total OPPS payments for CY 2014.
The final OPD fee schedule increase factor of 1.7 percent for CY
2014 (that is, the estimate of the hospital inpatient market basket
percentage increase of 2.5 percent less the final 0.5 percentage point
MFP adjustment and less the 0.3 percentage point required under section
1833(t)(3)(F)(ii) of the Act), the required wage index budget
neutrality adjustment of approximately 1.0002, the cancer hospital
payment adjustment of 1.0005, and the adjustment of 0.13 percent of
projected OPPS spending for the difference in the pass-through spending
result in a conversion factor for CY 2014 of $72.672.
As we stated in the proposed rule (78 FR 43578), hospitals that
fail to meet the reporting requirements of the Hospital OQR Program
will continue to be subject to a further reduction of 2.0 percentage
points to the OPD fee schedule increase factor adjustment to the
conversion factor that would be used to calculate the OPPS payment
rates made for their services as required by section 1833(t)(17) of the
Act. For a complete discussion of the Hospital OQR Program requirements
and the payment reduction for hospitals that fail to meet those
requirements, we refer readers to section XIII.G. of this final rule
with comment period. To calculate the 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 making all other adjustments discussed above, but using
a reduced OPD fee schedule update factor of -0.3 percent (that is, the
OPD fee schedule increase factor of 1.7 percent further reduced by 2.0
percentage points as required by section 1833(t)(17)(A)(i) of the Act
for failure to comply with the Hospital OQR requirements). This results
in a reduced conversion factor for CY 2014 of $71.219 for those
hospitals that fail to meet the Hospital OQR requirements (a difference
of -$1.453 in the conversion factor relative to those hospitals that
met the Hospital OQR requirements).
In summary, for CY 2014, we are using a final conversion factor of
$72.672 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 finalizing our proposed amendment to 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 using a
reduced conversion factor of $71.219 in the calculation of payments for
hospitals that fail to comply with the Hospital OQR Program
requirements to reflect the reduction to the OPD fee schedule increase
factor that is required by section 1833(t)(17) of the Act.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to
``determine a wage adjustment factor to 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 final
rule with comment period.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that, for all hospitals, approximately 60 percent of
the costs of services paid under the OPPS were attributable to wage
costs. We confirmed that this labor-related share for outpatient
services is appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). Therefore, we did not propose to revise
this policy for the CY 2014 OPPS. We refer readers to section II.H. of
this final rule with comment period for a description and example of
how the wage index for a particular hospital is used to determine the
payment for the hospital.
As discussed in section II.A.2.c. of this final rule with comment
period, for estimating APC costs, we standardize 60 percent of
estimated claims costs for geographic area wage variation using the

[[Page 74951]]

same 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. In the CY 2014 OPPS/
ASC proposed rule, we stated that, for the CY 2014 OPPS, we will
implement this provision in the same manner as we have since CY 2011.
That is, frontier State hospitals will 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 will receive a wage index based
on the geographic location of the specific inpatient hospital with
which it is associated. Therefore, if the associated hospital is
located in a frontier State, the wage index adjustment applicable for
the hospital will also apply for the affiliated HOPD. We refer readers
to the following sections in the FY 2011 through FY 2014 IPPS/LTCH PPS
final rules for discussions 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: FY
2011 (75 FR 50160 through 50161), FY 2012 (76 FR 51793, 51795, and
51825), FY 2013 (77 FR 53369 through 53370), and FY 2014 (78 FR 50590
through 50591).
In addition to the changes required by the Affordable Care Act, we
note that the final 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 final rule (78 FR 50585
through 50596) for a detailed discussion of all 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 proposed 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
noted that, because non-IPPS hospitals cannot reclassify, they are
eligible for the out-migration wage adjustment. Table 4J from the FY
2014 IPPS/LTCH PPS final rule as corrected (available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties
eligible for the out-migration adjustment and hospitals that will
receive the adjustment for FY 2014. We also noted 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 2014 IPPS/LTCH PPS final rule
(78 FR 50592) 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 final
rule as corrected as Addendum L to this final rule with comment period
with the addition of non-IPPS hospitals that will receive the section
505 out-migration adjustment under the CY 2014 OPPS. Addendum L is
available via the Internet on the CMS Web site.
As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586),
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 did not
propose to change our current regulations which require that we use the
FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014.
We did not receive any public comments on our proposals. Therefore,
we are finalizing our proposals without modification and are adopting
the FY 2014 IPPS wage index for the CY 2014 OPPS in its entirety,
including the rural floor, geographic reclassifications, and all other
wage index adjustments. As stated earlier in this section, we continue
to believe that using the IPPS wage index as the source of an
adjustment factor for the OPPS is reasonable and logical, given the
inseparable, subordinate status of the

[[Page 74952]]

HOPD within the hospital overall. Therefore, we are using the final FY
2014 IPPS wage indices for calculating OPPS payments in CY 2014. With
the exception of the out-migration wage adjustment table (Addendum L to
this final rule with comment period, which is available via the
Internet on the CMS Web site), which includes non-IPPS hospitals paid
under the OPPS, we are not reprinting the final FY 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 final FY 2014
IPPS wage index tables.

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses overall hospital-specific CCRs calculated
from the hospital's most recent cost report to determine outlier
payments, payments for pass-through devices, and monthly interim
transitional corridor payments under the OPPS during the PPS year.
Medicare contractors cannot calculate a CCR for some hospitals because
there is no cost report available. For these hospitals, CMS uses the
statewide average default CCRs to determine the payments mentioned
above until a hospital's Medicare contractor is able to calculate the
hospital's actual CCR from its most recently submitted Medicare cost
report. These hospitals include, but are not limited to, hospitals that
are new, have not accepted assignment of an existing hospital's
provider agreement, and have not yet submitted a cost report. CMS also
uses the statewide average default CCRs to determine payments for
hospitals that appear to have a biased CCR (that is, the CCR falls
outside the predetermined ceiling threshold for a valid CCR) or for
hospitals in which the most recent cost report reflects an all-
inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04),
Chapter 4, Section 10.11). In the CY 2014 OPPS/ASC proposed rule (78 FR
43579), we proposed 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 proposed to continue to use our standard
methodology of calculating the statewide average default CCRs using the
same hospital overall CCRs that we use to adjust charges to costs on
claims data for setting the proposed CY 2014 OPPS relative payment
weights. Table 9 published in the proposed rule (78 FR 43580 through
43581) listed the proposed CY 2014 default urban and rural CCRs by
State and compared them to last year's default CCRs. These proposed
CCRs represented the ratio of total costs to total charges for those
cost centers relevant to outpatient services from each hospital's most
recently submitted cost report, weighted by Medicare Part B charges. We
also proposed to adjust ratios from submitted cost reports to reflect
the final settled status by applying the differential between settled
to submitted overall CCRs for the cost centers relevant to outpatient
services from the most recent pair of final settled and submitted cost
reports. We then proposed to weight each hospital's CCR by the volume
of separately paid line-items on hospital claims corresponding to the
year of the majority of cost reports used to calculate the overall
CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66680 through 66682) and prior OPPS rules for a more
detailed discussion of our established methodology for calculating the
statewide average default CCRs, including the hospitals used in our
calculations and our trimming criteria.
We did not receive any public comments on our CY 2014 proposal. We
are finalizing our proposal to apply our standard methodology of
calculating the statewide average default CCRs using the same hospital
overall CCRs that we used to adjust charges to costs on claims data for
setting the CY 2014 OPPS relative payment weights. We used this
methodology to calculate the statewide average default CCRs listed in
Table 16 below.
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 16 below lists the finalized statewide average default CCRs
for OPPS services furnished on or after January 1, 2014.

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E. 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

[[Page 74956]]

under the OPPS, excluding separately payable drugs and biologicals,
brachytherapy sources, and devices paid under the pass-through payment
policy, in accordance with section 1833(t)(13)(B) of the Act.
In CY 2007, we became aware that we did not specifically address
whether the adjustment applies to EACHs, which are considered to be
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC
final rule with comment period (71 FR 68010 and 68227), for purposes of
receiving this rural adjustment, we revised Sec. 419.43(g) 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed 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.
Comment: Several commenters supported the proposed continuation of
the 7.1 percent rural SCH adjustment. One commenter also recommended
that CMS update the analysis in the near future to assess if the 7.1
percent payment adjustment remains a valid figure. One commenter
recommended that any potential future changes to the rural adjustment
be implemented 12 months after the changes are finalized, to address
concerns about budgeting.
Response: We appreciate the commenters' support. We agree that it
is appropriate to continue the 7.1 percent adjustment for rural SCHs
(including EACHs) as we proposed for CY 2014. As we indicated in the
proposed rule (78 FR 43582), we may reassess the 7.1 percent rural
adjustment in the near future by examining differences between urban
hospitals' costs and rural hospitals' costs using updated claims, cost
reports, and provider information. We recognize the concerns that
commenters present regarding budgeting concerns and will take into
consideration these concerns for any review and revision of the
adjustment in the future.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification, to apply the 7.1
percent payment adjustment to rural SCHs, including EACHs, for all
services and procedures paid under the OPPS in CY 2014, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs.

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

1. Background
Since the inception of the OPPS, which was authorized by the
Balanced Budget Act of 1997 (BBA) (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

[[Page 74957]]

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. Payment Adjustment for Certain Cancer Hospitals for CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to
continue our policy to provide additional payments to cancer hospitals
so that each cancer hospital's final PCR is equal to the weighted
average PCR (or ``target PCR'') for the other OPPS hospitals using the
most recent submitted or settled cost report data that were available
at the time of the development of the 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 the 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 estimated that, on average, the OPPS payments
to other hospitals furnishing services under the OPPS were
approximately 90 percent of reasonable cost (weighted average PCR of
0.90). Based on these data, we proposed a target PCR of 0.90 that would
be used to determine the CY 2014 cancer hospital payment adjustment
that would be paid at cost report settlement. Therefore, we proposed
that the payment amount associated with the cancer hospital payment
adjustment to be determined at cost report settlement would be the
additional payment needed to result in a proposed target PCR equal to
0.90 for each cancer hospital.
Comment: Similar to public comments received in response to the CY
2013 OPPS/ASC proposed rule that we addressed in the CY 2013 OPPS/ASC
final rule with comment period, commenters representing the cancer
hospitals again stated that the PCR is only one component of the
adjustment needed to account for the differences in providing cancer
care. The commenters suggested that CMS utilize a methodology that they
stated would ensure that the 11 cancer hospitals' losses (on a per unit
PCR basis) equal the losses (on a per unit PCR basis) of the other PPS
hospitals. The commenters provided details of this ``equivalent loss
per unit'' methodology which they indicated would result in a target
PCR equal to 0.94 for CY 2014.
Response: As we indicated in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68293), section 3138 of the Affordable Care Act
provides that if the Secretary determines under section 1833(t)(18)(A)
of the Act that costs incurred by cancer hospitals exceed those costs
of other hospitals furnishing services under section 1833(t) of the
Act, the Secretary shall provide for an appropriate adjustment under
section 1833(t)(2)(E) of the Act to reflect the higher costs. Because
the statute requires that we provide a cancer hospital payment
adjustment to reflect the higher costs, not losses, incurred at cancer
hospitals, we believe that it would be inappropriate to revise our
cancer hospital payment adjustment policy so that the target PCR is
calculated based on the cancer hospitals' losses per unit PCR compared
to the other OPPS hospitals' losses per unit PCR.
Comment: Commenters stated that CMS should not recalculate the
target PCR annually because the cancer hospitals require payment
stability and predictability in order to provide services to Medicare
beneficiaries.
Response: As we stated in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68294) in response to this same comment, we
believe that annual recalculation of the target PCR will provide a
timely assessment of the changes in OPPS payments relative to costs
and, therefore, will enable us to provide payment adjustments to cancer
hospitals that are accurate and equitable. In addition, because the
target PCR is set in advance of each calendar year, cancer hospitals
can easily predict the amount of their hospital-specific payment
adjustment associated with the target PCR for the following year and
budget accordingly.
After consideration of the public comments we received, we are
finalizing our proposal to continue our policy to provide additional
payments to cancer hospitals so that each cancer hospital's final PCR
is equal to the weighted average PCR for the other OPPS hospitals using
the most recent submitted or settled cost report data that were
available at the time of this final rule with comment period. To
calculate the final CY 2014 target PCR, we used the same extract of
cost report data from HCRIS, as discussed in section II.A. of this
final rule with comment period, used to estimate costs for the CY 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 with CY 2012 claims data that we used to model
the impact of the final CY 2014 APC relative payment weights (4,044
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 48 hospitals located in Puerto Rico
from our dataset because we do not believe that their cost structure
reflects the costs of most hospitals paid under the OPPS and,
therefore, their inclusion may bias the calculation of hospital-
weighted statistics. We also removed the cost report data of 116
hospitals because these hospitals had cost report data that were not
complete (missing aggregate OPPS payments, missing aggregate cost data,
or missing both), so that all cost reports in the study would have both
the payment and cost data necessary to calculate a PCR for each
hospital, leading to an analytic file of 3,880 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 89 percent of reasonable cost
(weighted average PCR of 0.89). Based on these data, we used a target
PCR of 0.89 to determine the CY 2014 cancer hospital payment adjustment
to be paid at cost report settlement. Therefore, the payment amount
associated with the cancer hospital payment adjustment to be determined
at cost report settlement will be the additional payment needed to
result in a PCR equal to 0.89 for each cancer hospital.

[[Page 74958]]

Table 17 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.

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G. 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 1.2 percent of
the total aggregated OPPS payments. Therefore, for CY 2012, we estimate
that we paid 0.2 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
1.1 percent of the total CY 2013 OPPS payments. The difference between
1.1 percent and 1.0 percent is reflected in

[[Page 74959]]

the regulatory impact analysis in section XXIII. of this final rule
with comment period. 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
In the CY 2014 OPPS/ASC proposed rule (78 FR 43584), we proposed to
continue our policy of estimating outlier payments to be 1.0 percent of
the estimated aggregate total payments under the OPPS for outlier
payments. We proposed that a portion of that 1.0 percent, 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 the CY 2014
OPPS/ASC proposed rule (78 FR 43622), for CMHCs, we proposed to
continue our longstanding policy that if a CMHC's cost for partial
hospitalization services, paid under either APC 0172 (Level I Partial
Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial
Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the
payment rate for APC 0173, the outlier payment would be calculated as
50 percent of the amount by which the cost exceeds 3.40 times the APC
0173 payment rate. For further discussion of CMHC outlier payments, we
refer readers to section VIII.D. of this final rule with comment
period.
To ensure that the estimated CY 2014 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we proposed that the hospital outlier threshold be set so that
outlier payments would be triggered when the cost of furnishing a
service or procedure by a hospital exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus a $2,775 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 the
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 the
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
well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). As we
stated in the CY 2005 OPPS final rule with comment period (69 FR
65845), we believe that the use of these charge inflation factors are
appropriate for the OPPS because, with the exception of the inpatient
routine service cost centers, hospitals use the same ancillary and
outpatient cost centers to capture costs and charges for inpatient and
outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we are concerned that we could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, in the CY 2014 OPPS/ASC proposed rule, we
proposed to apply the same CCR inflation adjustment factor that we
apply for the FY 2014 IPPS outlier calculation to the CCRs used to
simulate the CY 2014 OPPS outlier payments to determine the fixed-
dollar threshold. Specifically, for CY 2014, we proposed 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) as well as the FY
2014 IPPS/LTCH PPS final rule (78 FR 50978 through 50982).
Therefore, to model hospital outlier payments for the 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 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 proposed to continue to make an outlier payment
that equals 50 percent of the amount by which the cost of furnishing
the service exceeds 1.75 times the APC payment amount when both the
1.75 multiple threshold and the proposed fixed-dollar threshold of
$2,775 were met. For CMHCs, we proposed that, if a CMHC's cost for
partial hospitalization services, paid under either APC 0172 or APC
0173, exceeds 3.40 times the payment rate for APC 0173, the outlier
payment would be calculated as 50 percent of the amount by which the
cost exceeds 3.40 times the APC 0173 payment rate.
Section 1833(t)(17)(A) of the Act, which applies to hospitals as
defined under section 1886(d)(1)(B) of the Act, requires that hospitals
that fail to report data required for the quality measures selected by
the Secretary, in the form and manner required by the Secretary under
1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to
their OPD fee schedule increase factor, that is, the annual payment
update factor. The application of a reduced OPD fee schedule increase
factor results in reduced national unadjusted payment rates that will
apply to certain outpatient items and services furnished by hospitals
that are required to report outpatient quality data and that fail to
meet the Hospital OQR Program requirements. For hospitals that fail to
meet the Hospital OQR Program requirements, we proposed to continue the
policy that we implemented in CY 2010 that the hospitals' costs will be
compared to the reduced payments for purposes of outlier eligibility
and payment calculation. For more information on the Hospital OQR
Program, we refer readers to section XIII. of this final rule with
comment period.
Comment: Several commenters urged CMS to reconsider the increase in
the CY 2014 OPPS outlier threshold. The commenters believed that the
thresholds were being set higher than was

[[Page 74960]]

necessary to achieve the OPPS outlier spending target, based on their
analysis of the thresholds and aggregate outlier spending in prior
years. Commenters also desired transparency about why an outlier
threshold increase was necessary, when historical evidence suggested
that such a change is unwarranted. One commenter recommended that the
OPPS outlier percentage spending target be reduced to 0.5 percent of
the system because patients who develop complications requiring complex
care are highly likely to be admitted to inpatient care.
Response: Many of the commenters who recommended changes to the
OPPS fixed-dollar outlier threshold relied on direct comparisons
between aggregate spending and the OPPS outlier thresholds. As
discussed earlier in this section, OPPS outliers are paid and modeled
based on comparisons between APC payment and estimated cost. As a
result, changing the OPPS fixed-dollar outlier threshold by any
increment does not result in an evenly distributed change in OPPS
outlier spending as well as services that receive OPPS outlier
payments.
There are a variety of factors that may affect the OPPS fixed-
dollar outlier threshold, including data changes such as hospital
charging practices and fluctuations in the overall ancillary CCRs as
well as changes in OPPS payment policy such as those involving
packaging and compositing. Those changes can influence the individual
comparisons between APC service payment and estimated costs. While the
OPPS outlier threshold has been relatively stable in the past several
years, historically the OPPS fixed-dollar outlier threshold has
fluctuated from year to year as identified in the Annual Policy Files
which are available via the Internet on the CMS Web site. In the CY
2014 OPPS/ASC proposed rule, we proposed to update several OPPS
packaging policies which would have a corresponding effect on the OPPS
fixed-dollar outlier threshold by potentially increasing APC payment
for certain paid service lines while moving affected services from
previously being on the payment portion of the OPPS outlier payment
comparison into the cost portion. In particular, by conditionally
packaging certain clinical diagnostic laboratory tests previously paid
at CLFS rates, the CY 2014 fixed-dollar OPPS outlier threshold would
have to account for significant changes to both the APC payment and
estimated cost portions of the OPPS outlier payment comparison.
We appreciate the recommendation regarding revisiting the correct
OPPS outlier spending target and will continue to consider whether a
1.0 percent OPPS outlier percentage spending target continues to remain
appropriate.
3. Final Outlier Calculation
Consistent with historical practice, we use updated data for this
final rule with comment period for our outlier calculation. For CY
2014, we are applying the overall CCRs from the October 2013 OPSF with
a CCR adjustment factor of 0.9645 to approximate CY 2014 CCRs to
charges on the final CY 2012 claims that were adjusted to approximate
CY 2014 charges (using the final 2-year charge inflation factor of
1.0969). These are the same CCR adjustment and charge inflation factors
that were used to set the IPPS fixed dollar threshold for the FY 2014
IPPS/LTCH PPS final rule (78 FR 50982). 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 payment would continue to be made at 50
percent of the amount by which the cost of furnishing the service would
exceed 1.75 times the APC payment amount, until the total outlier
payments equaled 1.0 percent of aggregated estimated total CY 2014 OPPS
payments. We estimate that a fixed-dollar threshold of $2,900, combined
with the multiple threshold of 1.75 times the APC payment rate, will
allocate 1.0 percent of estimated aggregated total OPPS payments to
outlier payments.
In summary, for CY 2014, we will continue to make an outlier
payment that equals 50 percent of the amount by which the cost of
furnishing the service exceeds 1.75 times the APC payment amount when
both the 1.75 multiple threshold and the final fixed-dollar threshold
of $2,900 are met. For CMHCs, if a CMHC's cost for partial
hospitalization services, paid under either APC 0172 or APC 0173,
exceeds 3.40 times the payment rate for APC 0173, the outlier payment
is calculated as 50 percent of the amount by which the cost exceeds
3.40 times the APC 0173 payment rate. We estimate that this threshold
will allocate 0.16 percent of outlier payments to CMHCs for PHP outlier
payments.

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

The basic methodology for determining prospective payment rates for
HOPD services under the OPPS is set forth in existing regulations at 42
CFR Part 419, Subparts C and D. For this CY 2014 OPPS/ASC final rule
with comment period, the payment rate for most services and procedures
for which payment is made under the OPPS is the product of the
conversion factor calculated in accordance with section II.B. of this
final rule with comment period and the relative payment weight
determined under section II.A. of this final rule with comment period.
Therefore, the national unadjusted payment rate for most APCs contained
in Addendum A to this final rule with comment period (which is
available via the Internet on the CMS Web site) and for most HCPCS
codes to which separate payment under the OPPS has been assigned in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site) was calculated by multiplying the
CY 2014 scaled weight for the APC by the 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 final rule with
comment period.
We demonstrate in the steps below how to determine the APC payments
that will be made in a calendar year under the OPPS to a hospital that
fulfills the Hospital OQR Program requirements and to a hospital that
fails to meet the Hospital OQR Program requirements for a service that
has any of the following status indicator assignments: ``P,'' ``Q1,''
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined
in Addendum D1 to this final rule with comment period), in a
circumstance in which the multiple procedure discount does not apply,
the procedure is not bilateral, and conditionally packaged services
(status indicator of ``Q1'' and ``Q2'') qualify for separate payment.
We note that,

[[Page 74961]]

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
had proposed to create status indicator ``J1'' to reflect the
comprehensive APCs discussed in section II.A.2.e. of this final rule
with comment period. However, the comprehensive APCs will not be
implemented in the CY 2014 OPPS, and therefore status indicator ``J1''
will not apply. We also note that we had proposed to delete status
indicator ``X'' as part of the CY 2014 packaging proposal for ancillary
services, discussed in section II.A.4. of this final rule with comment
period. We are not finalizing the ancillary services packaging policy,
and therefore status indicator ``X'' will continue to be active in the
CY 2014 OPPS.
Individual providers interested in calculating the payment amount
that they will receive for a specific service from the national
unadjusted payment rates presented in Addenda A and B to this final
rule with comment period (which are available via the Internet on the
CMS Web site) should follow the formulas presented in the following
steps. For purposes of the payment calculations below, we refer to the
national unadjusted payment rate for hospitals that meet the
requirements of the Hospital OQR Program as the ``full'' national
unadjusted payment rate. We refer to the national unadjusted payment
rate for hospitals that fail to meet the requirements of the Hospital
OQR Program as the ``reduced'' national unadjusted payment rate. The
reduced national unadjusted payment rate is calculated by multiplying
the reporting ratio of 0.980 times the ``full'' national unadjusted
payment rate. The national unadjusted payment rate used in the
calculations below is either the full national unadjusted payment rate
or the reduced national unadjusted payment rate, depending on whether
the hospital met its Hospital OQR Program requirements in order to
receive the full CY 2014 OPPS fee schedule increase factor of 1.7
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 Pub. L. 98-21. (For further discussion
of the changes to the FY 2014 IPPS wage indices, as applied to the CY
2014 OPPS, we refer readers to section II.C. of this final rule with
comment period.) As we proposed, we are continuing to apply a wage
index floor of 1.00 to frontier States, in accordance with section
10324 of the Affordable Care Act 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 Pub. L.
108-173. Addendum L to this final rule with comment period (which is
available via the Internet on the CMS Web site) contains the qualifying
counties and the associated wage index increase developed for the FY
2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS final
rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the
hospital is not reclassified or redesignated under section 1886(d)(8)
or section 1886(d)(10) of the Act.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
The formula below is a mathematical representation of Step 4 and
adjusts the labor-related portion of the national unadjusted payment
rate for the specific service by the wage index.
Xa is the labor-related portion of the national unadjusted payment
rate (wage adjusted).
Xa = .60 * (national unadjusted payment rate) * applicable wage
index.
Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add that amount to the resulting
product of Step 4. The result is the wage index adjusted payment rate
for the relevant wage index area.
The formula below is a mathematical representation of Step 5 and
calculates the remaining portion of the national payment rate, the
amount not attributable to labor, and the adjusted payment for the
specific service.
Y is the nonlabor-related portion of the national unadjusted
payment rate.
Y = .40 * (national unadjusted payment rate).
Adjusted Medicare Payment = Y + Xa.
Step 6. If a provider is an SCH, set forth in the regulations at
Sec. 412.92, or an EACH, which is considered to be an SCH under
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural
area, as defined in Sec. 412.64(b), or is treated as being located in
a rural area under Sec. 412.103, multiply the wage index adjusted
payment rate by 1.071 to calculate the total payment.
The formula below is a mathematical representation of Step 6 and
applies the rural adjustment for rural SCHs.
Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment *
1.071.
We have provided examples below of the calculation of both the full
and reduced national unadjusted payment rates that will apply to
certain outpatient items and services performed by hospitals that meet
and that fail to meet the Hospital OQR Program requirements, using the
steps outlined above. For purposes of this example, we used a provider
that is located in Brooklyn, New York that is assigned to CBSA 35644.
This provider bills one service that is assigned to APC 0019 (Level I
Excision/Biopsy). The CY 2014 full national unadjusted payment rate for
APC 0019 is approximately $318.79. The reduced national unadjusted
payment rate for APC 0019 for a hospital that fails to meet the
Hospital OQR Program requirements is approximately $312.41. This
reduced rate is calculated by multiplying the reporting ratio of 0.980
by the full unadjusted payment rate for APC 0019.

[[Page 74962]]

The FY 2014 wage index for a provider located in CBSA 35644 in New
York is 1.3129. The labor-related portion of the full national
unadjusted payment is approximately $251.12 (.60 * $318.79 * 1.3129).
The labor-related portion of the reduced national unadjusted payment is
approximately $246.10 (.60 * $312.41 * 1.3129). The nonlabor-related
portion of the full national unadjusted payment is approximately
$127.52 (.40 * 318.79). The nonlabor-related portion of the reduced
national unadjusted payment is approximately $124.96 (.40 * $312.41).
The sum of the labor-related and nonlabor-related portions of the full
national adjusted payment is approximately $378.64 ($251.12 + $127.52).
The sum of the reduced national adjusted payment is approximately
$371.06 ($246.10 + $124.96).

I. Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted copayment amounts to be paid by
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of
the Act specifies that the Secretary must reduce the national
unadjusted copayment amount for a covered OPD service (or group of such
services) furnished in a year in a manner so that the effective
copayment rate (determined on a national unadjusted basis) for that
service in the year does not exceed a specified percentage. As
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective
copayment rate for a covered OPD service paid under the OPPS in CY
2006, and in calendar years thereafter, shall not exceed 40 percent of
the APC payment rate.
Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered
OPD service (or group of such services) furnished in a year, the
national unadjusted copayment amount cannot be less than 20 percent of
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the
Act limits the amount of beneficiary copayment that may be collected
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. OPPS Copayment Policy
In the CY 2014 OPPS/ASC proposed rule (78 FR 43586), for CY 2014,
we proposed to determine copayment amounts for new and revised APCs
using the same methodology that we implemented beginning in CY 2004.
(We refer readers to the November 7, 2003 OPPS final rule with comment
period (68 FR 63458).) In addition, we proposed to use the same
standard rounding principles that we have historically used in
instances where the application of our standard copayment methodology
would result in a copayment amount that is less than 20 percent and
cannot be rounded, under standard rounding principles, to 20 percent.
(We refer readers to the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66687) in which we discuss our rationale for applying
these rounding principles.) The proposed national unadjusted copayment
amounts for services payable under the OPPS that would be effective
January 1, 2014, were shown in Addenda A and B to the proposed rule
(which are available via the Internet on the CMS Web site). As
discussed in section XIII.G. of the 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 noted that OPPS 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).
We did not receive any public comments regarding the proposed
methodology for calculating copayments for CY 2014. Therefore, for the
reasons set forth in this final rule with comment period, we are
finalizing our CY 2014 copayment methodology without modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
Individuals interested in calculating the national copayment
liability for a Medicare beneficiary for a given service provided by a
hospital that met or failed to meet its Hospital OQR Program
requirements should follow the formulas presented in the following
steps.
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its payment rate.
For example, using APC 0019, approximately $63.76 is 20 percent of the
full national unadjusted payment rate of approximately $318.79. For
APCs with only a minimum unadjusted copayment in Addenda A and B to
this final rule with comment period (which are available via the
Internet on the CMS Web site), the beneficiary payment percentage is 20
percent.
The formula below is a mathematical representation of Step 1 and
calculates 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 final rule with comment period. Calculate
the rural adjustment for eligible providers as indicated in Step 6
under section II.H. of this final rule with comment period.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
The formula below is a mathematical representation of Step 3 and
applies the beneficiary payment percentage to the adjusted payment rate
for a service calculated under section II.H. of this final rule with
comment period, with 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

[[Page 74963]]

requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.980.
The unadjusted copayments for services payable under the OPPS that
will be effective January 1, 2014, are shown in Addenda A and B to this
final rule with comment period (which are available via the Internet on
the CMS Web site). We note that the national unadjusted payment rates
and copayment rates shown in Addenda A and B to this final rule with
comment period reflect the full CY 2014 OPD fee schedule increase
factor discussed in section II.B. of this final rule with comment
period.
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. OPPS Ambulatory Payment Classification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the hospital OPPS. Specifically,
CMS recognizes the following codes on OPPS claims:
Category I CPT codes, which describe surgical procedures
and medical services;
Category III CPT codes, which describe new and emerging
technologies, services, and procedures; and
Level II HCPCS codes, which are used primarily to identify
products, supplies, temporary procedures, and services not described by
CPT codes.
CPT codes are established by the American Medical Association (AMA)
and the Level II HCPCS codes are established by the CMS HCPCS
Workgroup. These codes are updated and changed throughout the year. CPT
and HCPCS code changes that affect the OPPS are published both through
the annual rulemaking cycle and through the OPPS quarterly update
Change Requests (CRs). CMS releases new Level II HCPCS codes to the
public or recognizes the release of new CPT codes by the AMA and makes
these codes effective (that is, the codes can be reported on Medicare
claims) outside of the formal rulemaking process via OPPS quarterly
update CRs. This quarterly process offers hospitals access to codes
that may more accurately describe items or services furnished and/or
provides payment or more accurate payment for these items or services
in a timelier manner than if CMS waited for the annual rulemaking
process. We solicit public comments on these new codes and finalize our
proposals related to these codes through our annual rulemaking process.
As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43587), in
Table 18 below (Table 11 of the proposed rule), we summarized our
process for updating codes through our OPPS quarterly update CRs,
seeking public comments, and finalizing their treatment under the OPPS.
We note that because the payment rates associated with codes effective
July 1 were not available to us in time for incorporation into the
Addenda of the proposed rule, the Level II HCPCS codes and the Category
III CPT codes implemented through the July 2013 OPPS quarterly update
CR were not included in Addendum B of the proposed rule (which is
available via the Internet on the CMS Web site), while those codes
based upon the April 2013 OPPS quarterly update were included in
Addendum B. Nevertheless, we requested public comments on the codes
included in the July 2013 OPPS quarterly update and included these
codes in the preamble of the proposed rule.

[[Page 74964]]

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This process is discussed in detail below. We have separated our
discussion into two sections based on whether we solicited public
comments in the CY 2014 OPPS/ASC proposed rule or whether we are
soliciting public comments in this 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 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 are responding to public comments
and finalizing our interim OPPS treatment of these codes in this CY
2014 OPPS/ASC final rule with comment period.
We received public comments on several new codes that were assigned
to comment indicator ``NI'' in Addendum B of the CY 2013 OPPS/ASC final
rule with comment period. We respond to those comments in sections
II.A.2., III.C., V.A., and V.B. of this CY 2014 OPPS/ASC final rule
with comment period. Table 19 below lists the long descriptors for the
CPT and Level II HCPCS codes that were assigned to comment indicator
``NI'' for which we received public comments on the CY 2013 OPPS/ASC
final rule with comment period and the specific sections where the
comments are addressed.

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[[Page 74966]]

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[[Page 74967]]

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[[Page 74968]]

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1. Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective
April 1, 2013 and July 1, 2013 for Which We Solicited Public Comments
in the 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 and CPT 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 of the proposed rule, 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.
[GRAPHIC] [TIFF OMITTED] TR10DE13.317

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588), we solicited
public comments on the proposed status indicators and APC assignments
for Level II HCPCS codes C9130, C9297, C9298, C9734, C9735, Q0507,
Q0508, and Q0509, which were listed in Table 12 of the proposed rule
(78 FR 43588) and now appear in Table 20 of this final rule with
comment period.
We did not receive any public comments on the proposed APC
assignments and status indicators for HCPCS codes C9130, C9297, C9298,
Q0507, Q0508, and Q0509. However, we

[[Page 74969]]

received several public comments on HCPCS codes C9734 and C9735, which
are addressed in sections III.C.10.c. and III.C.3.b., respectively, of
this final rule with comment period.
For CY 2014, the HCPCS Workgroup replaced HCPCS codes C9130, C9297,
and C9298 with permanent HCPCS J-codes. Table 21 below lists the
replacement HCPCS J-codes for the temporary HCPCS C-codes. Consistent
with our general policy of using permanent HCPCS codes rather than
using temporary HCPCS codes for the reporting of drugs under the OPPS
in order to streamline coding, we are showing the replacement HCPCS
codes for HCPCS codes C9130, C9297, and C9298, which are effective
January 1, 2014, in Table 21.
In this final rule with comment period, we are assigning the Level
II HCPCS codes listed in Table 21 below to the specified APCs and
status indicators for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.318

For CY 2014, we note that we are not making any changes to the
status indicator and APC assignment for HCPCS code C9735. Specifically,
HCPCS code C9735 will continue to be assigned to APC 0150 for CY 2014
with a status indicator of ``T.'' However, we are reassigning HCPCS
code C9734 from APC 0067 (Level II Stereotactic Radiosurgery) to APC
0065 (IORT, MRgFUS, and MEG), as discussed in section III.C.10.c. of
this final rule with comment period. In addition, we are reassigning
HCPCS codes Q0507, Q0508, and Q0509 from status indicator ``A'' to
``N'' to indicate that they are now packaged under the hospital OPPS,
consistent with our packaging guidelines, which are discussed in
section II.A.3. of this final rule with comment period.
Furthermore, because HCPCS codes J1556, J9262, and J7316 describe
the same drug and the same dosage currently described by HCPCS codes
C9130, C9297, and C9298, respectively, these drugs will continue their
pass-through status in CY 2014. Therefore, we are assigning HCPCS codes
J1556, J9262, and J7316 to the same APCs and the same status indicators
as their predecessor HCPCS codes, as shown in Table 21.
As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43589),
through the July 2013 OPPS quarterly update CR, which included HCPCS
codes that were made effective July 1, 2013, we allowed separate
payment for 5 of the 10 new Level II HCPCS codes. Specifically, as
displayed in Table 22 below (also Table 13 of the proposed rule), we
provided separate OPPS payment for HCPCS codes C9131, C9736, G0460,
Q2050, and Q2051.

[[Page 74970]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.319

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, 10 mg) with new HCPCS code Q2050,
effective July 1, 2013, to appropriately identify and pay for both the
brand and generic 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 biologicals,
including therapeutic radiopharmaceuticals; paid under OPPS; separate
APC payment). We also assigned 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 HCPCS codes J3487 and J3488 were changed to
``E,'' effective July 1, 2013, to indicate that the codes were not
separately payable by Medicare. Because HCPCS code Q2051 described 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 was

[[Page 74971]]

assigned to APC 1356 (Zoldedronic acid 1 mg), 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 the following 5 HCPCS
codes: HCPCS codes K0008, K0013, and K0900, which were assigned to
status indicator ``Y'' (Non-implantable durable medical equipment; not
paid under OPPS); HCPCS code Q2033, which was assigned to status
indicator ``L'' (Not paid under OPPS; paid at reasonable cost); and
HCPCS code Q0090, which was assigned to status indicator ``E'' (Not
payable/Non-covered by Medicare; not paid under OPPS).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we solicited
public comments on the proposed status indicators and APC assignments
for the HCPCS codes that were listed in Table 13 of the proposed rule
and now appear in Tables 22 and 23 of this final rule with comment
period.
We did not receive any public comments on the proposed APC
assignments and status indicators for HCPCS codes C9131, K0008, K0013,
K0900, Q0090, Q2033, Q2050, and Q2051. Therefore, we are adopting as
final, without modification, our proposal to assign these eight Level
II HCPCS codes to the APCs and status indicators as proposed for CY
2014.
We received several public comments on HCPCS codes C9736 and G0460,
which are addressed in section III.C. of this final rule with comment
period.
Table 23 below includes a complete list of the Level II HCPCS codes
that were made effective July 1, 2013, with their final status
indicators and APC assignments for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.320

[[Page 74972]]

We note that the HCPCS Workgroup replaced HCPCS codes C9131, Q0090,
and Q2051 with HCPCS codes J9354, J7301, and J3489, respectively,
effective January 1, 2014. Because HCPCS code J9354 describes the same
drug currently described by HCPCS code C9131, this drug will continue
its pass-through status in CY 2014. Therefore, we are assigning HCPCS
code J9354 to the same APC and status indicator as its predecessor
HCPCS code, which shares the same dosage descriptor, as shown in Table
23. We note that because HCPCS code Q2051 is assigned to status
indicator ``K'' (Nonpass-Through Drugs; Paid under OPPS; Separate APC
payment), its replacement HCPCS code J3489, which describes the same
item as its predecessor code, will also continue its nonpass-through
status and APC assignment in CY 2014. In addition, because HCPCS code
Q0090 is assigned to status indicator ``E'' to indicate that this drug
is not covered by Medicare, its replacement HCPCS code J7301 will also
continue its noncovered status in CY 2014. We note that two HCPCS
codes, specifically, HCPCS codes C9736 and Q2033, will be replaced with
CPT codes 0336T and 90673, respectively, effective January 1, 2014. As
noted in Table 23, CPT code 90673, which is the replacement code for
HCPCS code Q2033, will be assigned to status indicator ``L.'' However,
CPT code 0336T, which replaces HCPCS code C9736, will be assigned to
APC 0174. We refer readers to section III.C.10.b. of this final rule
with comment period for further discussion of the APC assignment of CPT
code 0336T, which replaced HCPCS code C9736.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we proposed to
continue our established policy of recognizing Category I CPT vaccine
codes for which FDA approval is imminent and Category III CPT codes
that the AMA releases in January of each year for implementation in
July through the OPPS quarterly update process. Under the OPPS,
Category I CPT vaccine codes and Category III CPT codes that are
released on the AMA Web site in January are made effective in July of
the same year through the July quarterly update CR, consistent with the
AMA's implementation date for the codes. For the July 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 Tables 22 and
23, 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 24 (also shown in Table 14 of the
CY 2014 OPPS/ASC proposed rule), 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 24, both CPT codes 0329T and 0333T were assigned to status
indicator ``E'' (Not payable/Non-covered by Medicare; not paid under
OPPS).
We received public comments on several of the Category III CPT
codes that were implemented in July 2013, specifically on CPT codes
0330T, 0331T, 0332T, and 0334T, which are addressed in section III.C.
of this final rule with comment period. Table 24 below lists the
Category III CPT codes that were implemented in July 2013, along with
their final status indicators, APC assignments, and payment rates for
CY 2014.

[[Page 74973]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.322

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590),
we proposed to continue our process of soliciting public comments on
our status indicators and APC assignments for the CPT/HCPCS codes
effective April 1 and July 1. For the CY 2014 update, we solicited
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, through the respective OPPS quarterly update CRs. These
codes were listed in Tables 12, 13, and 14 of the proposed rule. We
proposed to finalize their status indicators and their APC assignments
and payment rates, if applicable, in this 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 were listed in Tables 13 and 14,
respectively, of the proposed rule. We proposed to incorporate these
codes into Addendum B to this 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 update CR and displayed in Table 12 were included in Addendum B to
the proposed rule (which is available via the Internet on the CMS Web
site), where their proposed CY 2014 payment rates were also shown.
We did not receive any additional public comments on this process.
The final status indicators, APC assignments, and payment rates, if
applicable, for the Level II HCPCS codes and the Category III CPT codes
that were implemented or modified through the April 2013 or July 2013
OPPS update CR can be found in Tables 21, 23, and 24, or in Addendum B
to this final rule with comment period (which is available via the
Internet on the CMS Web site).
2. Process for New Level II HCPCS Codes That Were Effective October 1,
2013 and New CPT and Level II HCPCS Codes That Will Be Effective
January 1, 2014 for Which We Are Soliciting Public Comments in This 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 via the CMS HCPCS Workgroup Web site (for Level II HCPCS codes)
and the AMA Web site (for CPT codes), and also through the January OPPS
quarterly update CRs. In the past, we also have released new Level II

[[Page 74974]]

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 are flagged with comment indicator ``NI'' in
Addendum B to this 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, are flagged with comment indicator ``NI''
in Addendum B to this final rule with comment period. Specifically, the
status indicator and the APC assignment and payment rate, if
applicable, for all such codes flagged with comment indicator ``NI''
are open to public comment in the final rule with comment period, and
we respond to these comments in the final rule with comment period for
the next calendar year's OPPS/ASC update. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43590), we proposed to continue this process for
CY 2014. Specifically, for CY 2014, we proposed to include in Addendum
B to this CY 2014 OPPS/ASC final rule with comment period the new
Category I and III CPT codes effective January 1, 2014 (including the
Category III CPT codes that were released by the AMA in July 2013) that
would be incorporated in the January 2014 OPPS 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 OPPS quarterly update CRs. As proposed, in this final rule with
comment period, the October 1, 2013 and January 1, 2014 codes are
flagged with comment indicator ``NI'' in Addendum B to this CY 2014
OPPS/ASC final rule with comment period to indicate that we have
assigned them an interim OPPS payment status for CY 2014. As proposed,
in this final rule with comment period, their status indicators and
their APC assignments and payment rates, if applicable, are open to
public comment and will be finalized in the CY 2015 OPPS/ASC final rule
with comment period.
For the CY 2014 update, we are finalizing our proposal to flag new
Level II HCPCS codes that become effective October 1, 2013, and new CPT
and Level II HCPCS codes that become effective January 1, 2014 with
comment indicator ``NI'' in Addendum B to this CY 2014 OPPS/ASC final
rule with comment period to indicate that these codes have been
assigned an interim OPPS payment status for CY 2014. In addition,
because these codes have been assigned to comment indicator ``NI,''
their status indicators and their APC assignments and payment rates, if
applicable, are open to public comment and will be finalized in the CY
2015 OPPS/ASC final rule with comment period.

B. OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient department
services. Section 1833(t)(2)(B) of the Act provides that the Secretary
may establish groups of covered OPD services within this classification
system, so that services classified within each group are comparable
clinically and with respect to the use of resources. In accordance with
these provisions, we developed a grouping classification system,
referred to as Ambulatory Payment Classifications (APCs), as set forth
in Sec. 419.31 of the regulations. We use Level I and Level II HCPCS
codes to identify and group the services within each APC. The APCs are
organized such that each group is homogeneous both clinically and in
terms of resource use. Using this classification system, we have
established distinct groups of similar services. We 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 primary and complete 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) were
proposed. Further discussion of our packaging proposals was included in
section II.A.3. of the proposed rule (78 FR 43568 through 43575).
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 final rule with comment period.
Under the OPPS, we generally pay for hospital outpatient services
on a rate-per-service basis, where the service may be reported with one
or more HCPCS codes. Payment varies according to the APC group to which
the independent service or combination of services is assigned. Each
APC 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

[[Page 74975]]

new 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. of the
proposed rule and this final rule with comment period for further
discussion of the establishment of new 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 Panel
recommendations for specific services for the CY 2014 OPPS and our
responses to them are discussed in the relevant specific sections
throughout this final rule with comment period).
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest cost for an item or service in the group is more than 2 times
greater than the lowest cost for an item or service within the same
group (referred to as the ``2 times rule''). 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 of 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 criterion to determine
when a HCPCS code is significant for purposes of the 2 times rule was
established because we believe that a subset of 1,000 claims is
negligible within the set of approximately 100 million single procedure
or single session claims we use for establishing costs. Similarly, a
HCPCS code for which there are fewer than 99 single bills and which
comprises less than 2 percent of the single major claims within an APC
will have a negligible impact on the APC cost. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43592), we proposed to make exceptions to this
limit on the variation of costs within each APC group in unusual cases,
such as low-volume items and services, for CY 2014.
In the CY 2014 OPPS/ASC proposed rule, we identified APCs with 2
times rule violations, for which we proposed changes to their HCPCS
codes' APC assignments in Addendum B to the proposed rule. We note that
Addendum B did not appear in the printed version of the Federal
Register as part of the CY 2014 OPPS/ASC proposed rule. Rather, it was
published and made available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2
times rule violation or to improve clinical and resource homogeneity,
we proposed to reassign the HCPCS codes to APCs that contain services
that are similar with regard to both their clinical and resource
characteristics. We also proposed to rename existing APCs or create new
clinical APCs to accommodate proposed HCPCS code reassignments. In many
cases, the proposed HCPCS code reassignments and associated APC
reconfigurations for CY 2014 included in the 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 proposed
changes to the status indicators for some HCPCS codes that were not
specifically and separately discussed in the CY 2014 OPPS/ASC proposed
rule. In these cases, we proposed to change the status indicators for
some HCPCS codes because we believe that another status indicator would
more accurately describe their payment status from an OPPS perspective
based on the policies that we proposed for CY 2014. Addendum B to the
CY 2014 OPPS/ASC proposed rule identified with comment indicator ``CH''
those HCPCS codes for which we proposed 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). In contrast, Addendum B to this
final rule with comment period (available via the Internet on the CMS
Web site) identifies with the ``CH'' comment indicator the final CY
2014 changes compared to the HCPCS codes' status as reflected in the
October 2013 Addendum B update.
3. Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we proposed for CY 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).
For the CY 2014 OPPS/ASC proposed rule, the list of 10 APCs that
appeared in Table 15 of the CY 2014 OPPS/ASC proposed rule (78 FR
43592) that were excepted from the 2 times rule were based on claims
data for dates of service between January 1, 2012, and December 31,
2012, that were processed before January 1, 2013. For this final rule
with comment period, we used 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. Therefore, after
considering the public comments we received on the CY 2014 OPPS/ASC
proposed rule and making changes to APC assignments based on those
comments, we analyzed the CY 2012 claims data used for this final rule
with comment period to identify the APCs with 2 times rule violations.
Based on the final CY 2012 claims data, we found 10 APCs with 2 times
rule

[[Page 74976]]

violations, which is the same number of APCs that violated the 2 times
rule in the proposed rule. We applied the criteria as described earlier
to identify the APCs that are exceptions to the 2 times rule for CY
2014, and identified six new APCs that meet the criteria for exception
to the 2 times rule for this final rule with comment period, but that
did not meet the criteria using proposed rule claims data.
Specifically, we found that the following six new APCs violated the 2
times rule: APC 0066 (Level I Stereotactic Radiosurgery); APC 0067
(Level II Stereotactic Radiosurgery); APC 0193 (Level V Female
Reproductive Procedures); APC 0342 (Level I Pathology); APC 0370
(Multiple Allergy Tests); and APC 0634 (Hospital Clinic Visits).
After consideration of the public comments we received and our
review of the CY 2012 costs from hospital claims and cost report data
available for this final rule with comment period, we are finalizing
our proposals with some modifications. Specifically, we are finalizing
our proposal to except 4 of the proposed 10 original APCs from the 2
times rule for CY 2014, specifically, APCs 0057, 0272, 0330, and 0690.
In contrast, we are not finalizing our proposal to except 6 of the
proposed 10 original APCs from the 2 times rule, specifically, APCs
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), 0278 (Diagnostic
Urography), and 0402 (Level II Nervous System Imaging). Our data
analysis for this final rule with comment period revealed that these
six APCs no longer violate the 2 times rule. Table 25 below lists 10
APCs that we are excepting from the 2 times rule for CY 2014 based on
the criteria above and a review of updated claims data. 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. The geometric mean costs for hospital outpatient
services for these and all other APCs that were used in the development
of this final rule with comment period can be found on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
[GRAPHIC] [TIFF OMITTED] TR10DE13.323

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
We created HCPCS code C9733 (Non-ophthalmic fluorescent vascular
angiography (FVA)), effective April 1, 2012, for a service that became
known to us through the new technology APC application process. We
assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which had a
CY 2012 payment rate of $154.87 and a status indicator of ``Q2.'' The
``Q2'' status indicator shows that payment for the service will be
packaged in the APC payment if billed on the same date of service as a
HCPCS code assigned status indicator ``T''; and in all other
circumstances, a separate APC payment for the service will be made. We
maintained the assignment of HCPCS code C9733 to APC 0397 for CY 2013,
which has a payment rate of $330.97, and continued the assignment of
status indicator ``Q2.''
Comment: One commenter objected to the continued assignment of
status indicator ``Q2'' to the service described by HCPCS code C9733,
as well as packaging payment for the service as a result of the breast
reconstruction surgery primary code being included in a comprehensive
APC, because the commenter believed that both of these proposed
policies would result in packaging the payment for the service
described by HCPCS code C9733. The commenter stated that packaging
payment for a service or item is only appropriate when the cost of the
service or item can be taken into account in establishing the payment
rate for the separately paid services. The commenter pointed out that
there were no single claims reporting HCPCS code C9733 in the claims
data used for the proposed rule ratesetting, and asserted that, because
HCPCS code C9733 described a new service with no single claims, payment
should not be packaged until several years after the code's creation,
when there will be sufficient claims data. The commenter further
asserted that the proposed packaging payment for the service described
by HCPCS code C9733 with payment for CPT code 19357 (Breast
reconstruction, immediate or delayed, with tissue expander, including
subsequent expansion) does not comport with CMS'

[[Page 74977]]

principle that packaging payment for services should reflect how the
service is reported. The commenter stated that its disagreement with
the packaging proposals is supported by CMS' acknowledgement that none
of the 10 claims reporting HCPCS code C9733 were identified as single
claims and, according to an analysis that the commenter conducted,
HCPCS code C9733 was reported in combination with CPT code 19357
approximately 90 percent of the time. The commenter also believed that
packaging payment for HCPCS code C9733 contradicts the principle that
CMS should be able to map the costs of the packaged service to the
separately payable services with which it is performed.
Response: We disagree with the commenter that payment for the
service described by HCPCS code C9733 should not be packaged when it is
used intraoperatively on the same date of service as the primary
procedure. While it is true that HCPCS code C9733 is a relatively new
service, the commenter stated that its own data analysis shows that the
service is being reported in combination with CPT code 19357
approximately 90 percent of the time. Therefore, payment for the
service described by HCPCS code C9733 is being taken into account in
establishing the payment rate for the separately paid services with
which it is performed. In addition, we believe that packaging payment
for the service described by HCPCS code C9733 does reflect how the
service is furnished and how it is being reported on a claim in
combination with CPT code 19357. Although none of the 10 claims
available for the proposed rule ratesetting were single claims, the
services reported on the 10 claims appear to have been mapped to
appropriate separately paid procedures. The procedure described by
HCPCS code C9733 is often performed intraoperatively in combination
with a number of primary procedures, including facial reconstruction
and reanimation, muscle flaps, trauma reconstruction, and digital and
limb reattachment and, as the commenter stated, breast reconstruction,
which appears to be the focus of the commenter's concern. In other
words, there are a number of plastic and reconstructive surgical
procedures with which the imaging procedure described by HCPCS code
C9733 can be used, not just breast reconstruction surgery.
While we proposed to maintain the assignment of HCPCS code C9733 to
APC 0397, in this final rule with comment period, we are deleting APC
0397 because of multiple 2 times rule violations in APC 0397 based on
the final rule claims data. Once we removed the high-cost services from
APC 0397, only several low-volume services remained in this APC,
including HCPCS code C9733, which we reassigned to another APC. We have
reassigned HCPCS code C9733 to APC 0263 (Level I Miscellaneous
Radiology Procedures) for CY 2014, with a final rule geometric mean
cost of approximately $319.
After consideration of the public comment we received, we are
finalizing our proposal to maintain the assignment of ``Q2'' status
indicator to HCPCS code C9733. However, we are reassigning HCPCS code
C9733 to APC 0263 when the service described by HCPCS code C9733 is
performed and reported separately. Further discussion of comprehensive
APCs is included in section II.A.2.e. of this final rule with comment
period. However, we note that we are not implementing our comprehensive
APC policy until CY 2015.
b. Subcutaneous Defibrillator (APC 0107)
For CY 2014, we proposed to continue to assign CPT code 0319T
(Insertion or replacement of subcutaneous implantable defibrillator
system with subcutaneous electrode) to APC 0107 (Level I Implantation
of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014
geometric mean cost of approximately $25,447. (The proposed payment
rate reflects the corrected proposed rate included in the September 6,
2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment: Commenters objected to the proposed assignment of CPT code
0319T to APC 0107 and requested that CMS reassign CPT code 0319T to APC
0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), for
which we proposed a CY 2014 geometric mean cost of approximately
$31,911. The commenters believed that CPT code 0319T is similar in
clinical application and resource use to CPT code 33249 (Insertion or
replacement of permanent pacing cardioverter-defibrillator system with
transvenous lead(s), single or dual chamber), which is currently
assigned to APC 0108.
Response: We believe that the procedure described by CPT code 0319T
is sufficiently clinically similar to the other procedures assigned to
APC 0107. In addition, because we do not have CY 2012 claims data for
CPT code 0319T for the CY 2014 ratesetting cycle, we cannot determine
the resource costs for this procedure at this time. We expect to have
claims data for CPT code 0319T in preparation for the CY 2015
rulemaking cycle and will reevaluate the APC assignment of CPT code
0319T at that time.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification, to continue to
assign CPT code 0319T to APC 0107, which has a final CY 2014 APC
geometric mean cost of approximately $25,106.
c. Thrombolytic Therapy (APC 0621)
For CY 2014, we proposed to continue to assign CPT code 37211
(Transcatheter therapy, arterial infusion for thrombolysis other than
coronary, any method, including radiological supervision and
interpretation, initial treatment day) and CPT code 37212
(Transcatheter therapy, venous infusion for thrombolysis other than
coronary, any method, including radiological supervision and
interpretation, initial treatment day) to APC 0621 (Level I Vascular
Access Procedures), for which we proposed a CY 2014 geometric mean cost
of approximately $866. (The proposed payment rate reflects the
corrected proposed rate included in the September 6, 2013 OPPS Addendum
B, which was posted on the CMS Web site.)
Comment: One commenter objected to the proposed continued
assignment of CPT codes 37211 and 37212 to APC 0621. The commenter
stated that CPT codes 37211 and 37212, which both are assigned status
indicator ``T,'' are often times performed in conjunction with CPT code
75710 (Angiography, spinal selective, radiological supervision and
interpretation) which is assigned status indicator ``Q2'' and is
assigned to APC 0279 (Level II Angiography and Venography), for which
we proposed a CY 2014 geometric mean cost of approximately $2,700. The
commenter stated that, because CPT code 75710 is not separately paid
when it appears on a claim in combination with other services assigned
to status indicator ``T'' (such as CPT codes 37211 and 37212),
providers receive significantly lower payment for CPT code 75710 when
performed and reported in conjunction with CPT code 37211 or CPT code
37212, compared to payment for the services when performed and reported
separately, although significantly more resources are used. The
commenter stated that payment for CPT codes 37211 and 37212 should not
be packaged with payment for CPT code 75710 when the services described
by CPT codes 37211 and 37212 are performed on the same date as CPT code
75710.

[[Page 74978]]

Response: We believe that the procedure described by CPT codes
37211 and 37212 are sufficiently clinically similar to the other
procedures assigned to APC 0621. In addition, CPT codes 37211 and 37212
are new codes for CY 2013, and because we do not have claims data
available for these two new CPT codes for CY 2013 ratesetting, we do
not have a way to validate or substantiate the claims made by
commenters. We expect to have claims data for CPT codes 37211 and 37212
in preparation for the CY 2015 rulemaking cycle and will reevaluate the
APC assignment of CPT codes 37211 and 37212 at that time.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification, to continue to
assign CPT codes 37211 and 37212 to APC 0621, which has a final CY 2014
APC geometric mean cost of approximately $853.
d. Vascular Ligation (APCs 0091 and 0092)
For CY 2014, we proposed to continue to assign CPT codes 36475
(Endovenous ablation therapy of incompetent vein, extremity, inclusive
of all imaging guidance and monitoring, percutaneous, radiofrequency;
first vein treated) and 37191 (Insertion of intravascular vena cava
filter, endovascular approach including vascular access, vessel
selection, and radiological supervision and interpretation,
intraprocedural roadmapping, and imaging guidance (ultrasound and
fluoroscopy), when performed) to APC 0091 (Level II Vascular Ligation),
which had a proposed payment rate of approximately $2,882.
In addition, we proposed to continue to assign CPT code 36478
(Endovenous ablation therapy of incompetent vein, extremity, inclusive
of all imaging guidance and monitoring, percutaneous, laser; first vein
treated) to APC 0092 (Level I Vascular Ligation), which had a proposed
payment rate of approximately $2,047.
(The proposed payment rates reflect the corrected proposed rates
included in the September 6, 2013 OPPS Addendum B, which was posted on
the CMS Web site.)
Comment: One commenter stated that the CPT codes assigned to APCs
0091 and 0092 do not meet the CMS requirement of clinical and cost
homogeneity, and requested that CMS consider restructuring APCs 0091
and 0092. The commenter requested that CMS review the clinical and cost
characteristics of all the procedures assigned to these APCs and
consider either combining APCs 0091 and 0092 or reassigning specific
procedures to more appropriate APCs in order to establish clinical
homogeneity. In particular, the commenter requested that CMS review the
APC assignments for CPT codes 37191 and 36475 (assigned to APC 0091)
and CPT code 36478 (assigned to APC 0092). The commenter stated that
CPT code 37191 is not similar to the other procedures assigned to APC
0091 because it is not a ligation procedure, and is the only procedure
assigned to APC 0091 that requires an expensive implanted device. The
commenter further stated that the cost associated with CPT code 37191
is significantly higher than the cost of most of the other procedures
assigned to APC 0091. The commenter also recommended that CPT codes
36475 and 36478 be assigned to the same APC because they are nearly
identical procedures. The commenter stated that the CPT clinical
vignettes for CPT code 36475 (radiofrequency) and CPT code 36478
(laser) show similarities between these two procedures, which further
support the clinical homogeneity of these two procedures. The commenter
believed that assigning both of these procedures to two different APCs,
and maintaining a payment differential between CPT code 36475 and CPT
code 36478, incentivizes providers to choose radiofrequency instead of
laser, which is a clinically comparable procedure. The commenter
believed that assigning the two procedures to the same APC would
encourage providers to make treatment decisions based solely on
clinical characteristics.
Response: We appreciate the commenter's suggestions. We agree with
the commenter's recommendations for reassignment of CPT codes 36475,
36478, and 37191. With respect to CPT codes 36475 and 36478, we have
further analyzed updated hospital outpatient claims data and determined
that both procedures are comparable in terms of clinical homogeneity
and resource costs and should be assigned to the same APC. Analysis of
updated CY 2012 hospital outpatient claims data for the CY 2014 final
rule shows a geometric mean cost of approximately $1,966 for CPT code
36478, which is comparable to the geometric mean cost of approximately
$2,382 for CPT code 36475. We also agree with the commenter that CPT
code 37191 should be reassigned to another APC that is more appropriate
based on the nature of the procedure. Based on our review of the
existing vascular-related APCs and input from our medical advisors, we
believe that CPT code 37191 would be more appropriately reassigned to
APC 0093 (Vascular Reconstruction/Fistula Repair) because of the
clinical homogeneity and similar resource costs of other procedures
assigned to APC 0093.
By accepting the commenter's recommendation to reassign CPT code
37191 from APC 0091 to APC 0093, and after taking into consideration
all of the procedures in APCs 0091 and 0092, we have determined that
combining APCs 0091 and 0092 into one APC is appropriate. To accomplish
this reconfiguration, we are establishing new APC 0219 (Vascular
Ligation), which has a geometric mean cost of approximately $2,147. The
geometric mean cost of new APC 0219 is based on the costs of all of the
22 procedures assigned to APCs 0091 and 0092; the most significant cost
among these 22 procedures ranged between $1,455 (for CPT code 37765)
and $2,382 (for CPT code 36475). In addition, because of the
reassignment of CPT code 37191 to APC 0093, we are modifying the title
of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair'' to
appropriately describe all the procedures assigned to this APC.
After further consideration of the public comment that we received,
we are revising the APC assignment for CPT codes 36475, 36478, and
37191. Specifically, we are reassigning CPT codes 36475 and 36478 to
new APC 0219, reassigning CPT code 37191 to APC 0093, and modifying the
title of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair''.
The final CY 2014 geometric mean cost of APC 0219 is approximately
$2,147, and approximately $2,857 for APC 0093. The final CY 2014
payment rates for CPT codes 36475, 36478, and 37191 can be found in
Addendum B to this CY 2014 OPPS/ASC final rule with comment period
(which is available via the Internet on the CMS Web site).
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation (APC 0340)
For CY 2014, we proposed to continue to assign HCPCS code G0455
(Preparation with instillation of fecal microbiota by any method,
including assessment of donor specimen) to APC 0340 (Level I Minor
Procedures), which had a proposed payment rate of approximately $74.
Although the CPT Editorial Panel established CPT code 44705
(Preparation of fecal microbiota for instillation, including assessment
of donor specimen), effective January 1, 2013, to describe a fecal
microbiota procedure, we did not recognize the

[[Page 74979]]

CPT code for payment under the OPPS. As we stated in the CY 2013 MPFS
final rule with comment period (77 FR 69052), by policy, Medicare's
payment for the preparation of the donor specimen would only be made if
the specimen is ultimately used for the treatment of a beneficiary.
Because of this policy, we believe that it was appropriate to bundle
the preparation and instillation of fecal microbiota into one payable
HCPCS code. Consequently, we established HCPCS code G0455, effective
January 1, 2013, for Medicare reporting of the fecal microbiota
procedure.
Comment: One commenter stated that the CY 2013 payment rate of
approximately $50 for HCPCS code G0455 is insufficient. The commenter
further stated that this payment rate does not appear to recognize the
patient preparation for the implantation or the instillation of the
donor microbes, the supplies, or the overall work involved in providing
this procedure. The commenter stated that if the microbiota
instillation is performed via colonoscopy or esophagogastroduodenoscopy
(EGD), the CY 2013 payment rate for the procedure does not include the
cost of the endoscopic portion of the procedure. To pay appropriately
for this procedure, the commenter recommended that CMS delete existing
HCPCS code G0455 and replace it with three new HCPCS G-codes. The
commenter suggested that the three recommended HCPCS G-codes
differentiate the various preparation methods used in performing the
procedure and be assigned accordingly to appropriate APCs.
Specifically, the commenter recommended that one HCPCS G-code describe
instillation by oronasogastric tube or enema, the second HCPCS G-code
describe instillation by upper endoscopy, and the third HCPCS G-code
describe instillation by colonoscopy.
Response: We appreciate the commenter's suggestions. However, we
believe that the existing HCPCS code G0455 appropriately describes the
procedure for which Medicare should pay. Under Medicare, payment for
the preparation of the donor specimen would only be made if the
specimen is ultimately used for the treatment of a beneficiary because
Medicare is not authorized to pay for the costs of any services not
directly related to the diagnosis and treatment of a beneficiary.
Because of this policy, we believe that it is appropriate to bundle the
preparation and instillation of fecal microbiota under HCPCS code
G0455.
Based on our understanding of the procedure, we believe that HCPCS
code G0455 is appropriately assigned to APC 0340 for CY 2014. Because
this code was new for CY 2013, we expect to have claims data for HCPCS
code G0455 for the CY 2015 ratesetting process. As has been our
practice since the implementation of the OPPS, we annually review all
the items and services within an APC group to determine, with respect
to comparability of the use of resources, for any 2 times rule
violations. In making this determination, we review our claims data and
determine whether we need to make changes to the current APC
assignments for the following year. We will reevaluate the status
indicator and APC assignment for HCPCS code G0455 for the CY 2015 OPPS
rulemaking cycle.
After consideration of the public comment that we received, we are
finalizing our CY 2014 proposal, without modification, to continue to
assign HCPCS code G0455 to APC 0340. The final CY 2014 geometric mean
cost of HCPCS code G0455 is approximately $54. The final CY 2014
payment rate for HCPCS code G0455 can be found in Addendum B to this CY
2014 OPPS/ASC final rule with comment period (which is available via
the Internet on the CMS Web site).
b. Transoral Incisionless Fundoplication (APC 0422)
For CY 2014, we proposed to continue to assign CPT code C9724
(Endoscopic full-thickness plication of the stomach using endoscopic
plication system (eps); includes endoscopy) to APC 0422 (Level III
Upper GI Procedures), which had a proposed payment rate of
approximately $1,967. (The proposed payment rate reflects the corrected
proposed rate included in the September 6, 2013 OPPS Addendum B, which
was posted on the CMS Web site.)
HCPCS code C9724, which was established by CMS effective April 1,
2005, describes an endoscopic full-thickness plication procedure for
the treatment of gastroesophageal reflux disease (GERD). Since April
2005, HCPCS code C9724 has been assigned to APC 0422. Of the three
existing upper GI APCs, APC 0422 is the highest paying APC.
In the CY 2013 OPPS/ASC final rule with comment period (77 FR
68333), we stated that a presenter at the August 2012 HOP Panel meeting
requested that CMS either reassign HCPCS code C9724 from APC 0422 to
New Technology APC 1565 (New Technology--Level XXVIII ($5000-$5500)) or
create a new APC with a descriptor of ``Level IV Upper GI Procedures.''
We also stated that, based on the Panel's review and discussion of the
claims data, we accepted the Panel's recommendation to continue to
assign HCPCS code C9724 to APC 0422 for the CY 2013 update.
Furthermore, because of concerns related to the descriptor of HCPCS
code C9724, in that same final rule with comment period, we revised the
long descriptor of HCPCS code C9724 to read ``Endoscopic full-thickness
plication of the stomach using endoscopic plication system (eps);
includes endoscopy,'' effective January 1, 2013, to accurately describe
how the procedure is currently performed.
At the August 2013 HOP Panel meeting, the same presenter at the
August 2012 HOP Panel meeting requested that the Panel recommend that
CMS reassign HCPCS code C9724 from APC 0422 to a new APC with a
descriptor of ``Level IV Upper GI Procedures.'' The Panel did not make
this recommendation at the meeting.
Comment: Several commenters disagreed with the proposal to continue
to assign HCPCS code C9724 to APC 0422. The commenters stated that the
proposed payment rate for APC 0422 does not adequately pay for the cost
of performing the procedure. These commenters urged CMS to establish a
new APC with a descriptor of ``Level IV Upper GI Procedures'' or
``Level IV Upper GI Transoral Procedures,'' with a payment rate of
between $3,000 and $5,000, and reassign HCPCS code C9724 and CPT code
43257 to this newly created APC.
Response: Because HCPCS code C9724 became effective April 1, 2005,
we have several years of claims data. We examined the latest hospital
outpatient claims data for HCPCS code C9724, based on claims data for
dates of service between January 1, 2012, and December 31, 2012, that
were processed on or before June 30, 2013. Our analysis of these latest
claims data shows a geometric mean cost of approximately $6,801 based
on 12 single claims (out of 73 total claims) for HCPCS code C9724.
Overall, APC 0422 has a geometric mean cost of approximately $1,976,
which is based on the seven procedures assigned to this APC. Of the
seven procedures assigned to APC 0422, three procedures have geometric
mean cost ranging between approximately $1,431 (for CPT code 43830) and
approximately $2,042 (for CPT code 43228).
APC 0422 consists of other procedures that manipulate the natural
or an artificial entrance to the stomach, similar to the procedure
described by TIF. We believe that maintaining the assignment of HCPCS
code C9724 to

[[Page 74980]]

APC 0422 continues to be appropriate because several other procedures
assigned to this APC are highly clinically similar to the procedure
described by HCPCS code C9724 in that they are upper gastrointestinal
endoscopy procedures. In particular, CPT code 43257 describes an upper
gastrointestinal endoscopy procedure for the treatment of GERD, which
is also the method and purpose of HCPCS code C9724. Consistent with our
longstanding policy since the implementation of OPPS in 2000, we will
reevaluate the APC assignment for every code during our annual
rulemaking cycle.
After consideration of the public comments that we received, we are
finalizing our CY 2014 proposal, without modification, to maintain the
assignment of HCPCS code C9724 to APC 0422. The final CY 2014 geometric
mean costs for APC 0422 is approximately $1,976. The final CY 2014
payment rate for HCPCS code C9724 can be found in Addendum B to this CY
2014 OPPS/ASC final rule with comment period (which is available via
the Internet on the CMS Web site).
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC 0423)
For CY 2014, we proposed to continue to assign CPT code 50593
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with
a proposed payment rate of approximately $4,114. (The proposed payment
rate reflects the corrected proposed rate included in the September 6,
2013 OPPS Addendum B, which was posted on the CMS Web site.) CPT code
50593 became effective in CY 2008; however, the same service was
previously described by CPT code 0135T (Ablation renal tumor(s),
unilateral, percutaneous, cryotherapy). We note that, for CY 2007,
based upon the APC Panel's recommendation made at its March 2006
meeting, we reassigned CPT code 0135T (now CPT code 50593) from APC
0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) to
APC 0423, effective January 1, 2007.
Comment: One commenter expressed concern that the proposed payment
rate of approximately $4,114 for APC 0423, the APC to which CPT code
50593 is assigned, is inadequate because the proposed payment rate does
not accurately account for the costs incurred by hospitals in
performing the procedure described by CPT code 50593. Further, the
commenter indicated that hospitals are hesitant to perform this
procedure because of the inadequate APC payment rate assigned to the
procedure. The commenter asked CMS to designate CPT code 50593 as a
``device-dependent'' procedure and require hospitals to submit claims
with the appropriate device C-code, specifically, HCPCS code C2618
(Probe, cryoablation). The commenter believed that the inadequacy of
the proposed payment rate for APC 0423 is attributable to claims data
that do not accurately capture the full costs of the procedure
described by CPT code 50593. The commenter stated that approximately
half of the single claims reporting CPT code 50593 do not contain the
associated charge for the required device used in performing the
service, specifically HCPCS code C2618 (Probe, cryoablation). The
commenter stated that designating CPT code 50593 as a device-dependent
procedure would result in a more accurate payment for the procedure and
continued Medicare beneficiary access to percutaneous renal
cryoablation in the HOPD.
Response: We continue to believe that CPT code 50593 is
appropriately assigned to APC 0423 based on clinical and resource
similarities compared to other procedures also proposed for assignment
to APC 0423 for CY 2014. As we stated in the CY 2007 OPPS final rule
with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60444), and the CY 2011 OPPS/ASC
final rule with comment period (75 FR 71910), we initially revised the
APC assignment for the percutaneous renal cryoablation procedure from
APC 0163 to APC 0423 in CY 2007 based on the APC Panel's
recommendation. In addition, based on our CY 2012 claims data, the
resource use associated with CPT code 50593 is comparable to the other
procedures assigned to APC 0423. Specifically, our latest hospital
outpatient claims data shows that the geometric mean cost for CPT code
50593, based on 667 single claims (out of 1,357 total claims), is
approximately $5,047. Overall, APC 0423 has a geometric mean cost of
approximately $4,121, which is based on claims data for the eight
procedures assigned to this APC. Of the eight procedures, six
procedures have the most significant geometric mean cost, ranging
between approximately $3,117 (for CPT code 47511) and approximately
$5,047 (for CPT code 50593). Based on our latest claims data, and the
clinical homogeneity and resource similarity of the procedure described
by CPT code 50593 to the other procedures assigned to APC 0423, we
believe that CPT code 50593 is appropriately assigned to APC 0423.
Moreover, we disagree with the commenter's assertion that hospitals
are reluctant to perform this procedure because of the inadequate
payment rate. We believe that the payment rate for APC 0423, the APC to
which CPT code 50593 is assigned, is sufficient to ensure Medicare
beneficiary access to this service.
With regard to the commenter's request to designate CPT code 50593
as a device-dependent procedure in an APC, we do not agree that CPT
code 50593 should be designated as a device-dependent procedure. We do
not identify individual HCPCS codes as device-dependent HCPCS codes
under the OPPS. Rather, we first consider the clinical and resource
characteristics of a procedure and determine the most appropriate APC
assignment. When we determine that we should assign a procedure to an
APC that is device-dependent, based on whether that APC has been
historically identified under the OPPS as having very high device
costs, we then consider the implementation of device edits, as
appropriate. We again note that the identification of device-dependent
APCs was particularly important in the early years of the OPPS when
separate pass-through payment for many implantable devices expired. At
that time, a variety of methodologies to package the costs of those
devices into procedural APCs was utilized over several years to ensure
appropriate incorporation of the device costs into the procedure
payments. At this point in time, hospitals have significantly more
experience reporting HCPCS codes for packaged and separately payable
items and services under the OPPS and the payment groups are more
mature. We believe that our standard ratesetting methodology typically
results in appropriate payment rates for new procedures that utilize
devices, as well as those that do not use high-cost devices. In recent
years, we have not encountered circumstances whereby we have had to
establish new device-dependent APCs because we were not able to
accommodate the clinical and resource characteristics of a procedure by
assigning it to an existing APC (whether device-dependent or non-
device-dependent), and the procedure described by CPT code 50593 is no
exception.
While all of the procedures assigned to APC 0423 require the use of

[[Page 74981]]

implantable devices, for many of the procedures, there are no Level II
HCPCS codes that describe all of the technologies that may be used in
the procedures. Therefore, it would not be possible for us to develop
procedure-to-device edits for all of the CPT codes assigned to APC
0423. Under the OPPS, there are many other procedures that require the
use of implantable devices that, because they are assigned to OPPS APCs
that are not device-dependent, do not have procedure-to-device edits
applied, even if those claims processing edits would be feasible. We
continue to believe that our payments for procedures that utilize high-
cost devices are appropriate for those services, even when those
services are grouped with other procedures that either do not require
the use of implantable devices or which utilize devices that are not
described by specific Level II HCPCS codes. When reporting CPT code
50593, we expect hospitals to also report the device HCPCS code C2618,
which is associated with this procedure. We also remind hospitals that
they must report all of the HCPCS codes that appropriately describe the
items used to provide services, regardless of whether the HCPCS codes
are packaged or paid separately. If hospitals use more than one probe
in performing the procedure described by CPT code 50593, we expect
hospitals to report this information on the claim and adjust their
charges accordingly. Hospitals should report the number of cryoablation
probes used to perform the procedure described by CPT code 50593 as the
number of units of HCPCS code C2618, which describes these devices,
with their charges for the probes. Since CY 2005, we have required
hospitals to report device HCPCS codes for all devices used in
procedures if there are appropriate HCPCS codes available. In this way,
we can be confident that hospitals have included charges on their
claims for costly devices used in procedures when they submit claims
for those procedures. For further discussion of device-dependent edits,
we refer readers to section II.A.2.d. of this CY 2014 OPPS/ASC final
rule with comment period.
Comment: One commenter requested that CMS revise the code
descriptor for device HCPCS code C2618 consistent with how cryoablation
probes are now classified by the medical industry. The commenter stated
that since the implementation of the OPPS and the development of device
descriptions, cryoablation probes have improved and these devices are
now referred to as cryoablation needles. The commenter believed that
modifying the description of HCPCS code C2618 will enable hospitals to
appropriately report the use of the device when submitting claims to
CMS and other payers.
Response: Based on input from our medical advisors, we agree that a
change in the description of HCPCS code C2618 is appropriate.
Therefore, for the CY 2014 update, we are revising the description for
HCPCS code C2618 from ``Probe, cryoablation'' to ``Probe/needle,
cryoablation'' effective January 1, 2014.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification, to continue to
assign CPT code 50593 to APC 0423, which has a final CY 2014 geometric
mean cost of approximately $4,121. In addition, we are revising the
code descriptor for HCPCS code C2618 to read: ``Probe/needle,
cryoablation'' effective January 1, 2014. The final CY 2014 payment
rate for CPT code 50593 can be found in Addendum B to this CY 2014
OPPS/ASC final rule with comment period (which is available via the
Internet on the CMS Web site).
b. Anoscopy With Directed Submucosal Injection (APC 0150)
We created HCPCS code C9735 (Anoscopy; with directed submucosal
injection(s), any substance) effective April 1, 2013, and assigned the
code to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which
has a payment rate of $2,365.97. The procedure described by HCPCS code
C9735 involves injection of a bulking agent, L8605 (Injectable bulking
agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml,
includes shipping and necessary supplies). For CY 2014, we proposed to
maintain the assignment of HCPCS code C9735 to APC 0150, with a
proposed payment rate of approximately $2,520. (The proposed payment
rate reflects the corrected proposed rate included in the September 6,
2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment: One commenter believed that the proposed assignment of
HCPCS code C9735 to APC 0150 is inappropriate. The commenter stated
that the bulking agent used in the performance of the procedure
described by HCPCS code C9735 costs $4,900 for the 4 mL required for
the injections, and that the total cost of the procedure described by
HCPCS code C9735 is more than the proposed payment rate of
approximately $2,519 for APC 0150. The commenter recommended creating a
new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735,
and two other procedures, CPT code 46762 (Sphincteroplasty, anal, for
incontinence, adult; implantation artificial sphincter), and CPT code
0184T (Excision of rectal tumor, transanal endoscopic microsurgical
approach (ie, TEMS), including muscularis propria (ie, full
thickness)). The commenter stated that the procedure described by CPT
code 46762 is clinically similar to the procedure described by HCPCS
code C9735 because both procedures involve implantation of a product to
treat fecal incontinence, and that the procedure described by HCPCS
code C9735 is similar to the procedure described by CPT code 0184T
because both procedures involve new technology with significant
procedure costs.
Alternatively, the commenter recommended assigning HCPCS code C9735
to New Technology APC 1526, with a CY 2014 proposed payment rate of
approximately $4,250.
Response: HCPCS code C9735 was created effective April 1, 2013.
Therefore, we do not have claims data on this procedure at this time.
Our longstanding policy is to wait until claims data are available on a
new procedure before reassigning the procedure to another clinical APC.
We do not agree with the commenter that creating a Level V Anal/Rectal
Procedures APC is warranted at this time. The three codes recommended
for assignment to such an APC, all of which are currently assigned to
the Level IV Anal/Rectal Procedures APC, are low volume or no volume
services. According to our CY 2012 claims data, CPT code 0184T has 104
single frequency claims, CPT code 46762 has 8 single claims, and HCPCS
code C9735 has no claims volume. The low volume of claims for such an
APC would contribute to APC cost and payment volatility. Regarding the
commenter's recommendation to assign HCPCS code C9735 to a New
Technology APC, we believe that HCPCS code C9735 is clinically similar
to the other services assigned to APC 0150, which includes another
anoscopy service, and, therefore, APC 0150 is an appropriate APC
assignment for HCPCS code C9735. Based on our established OPPS
ratesetting methodology, we will review the APC assignment for HCPCS
code C9735 once we have OPPS claims data for this service during our
annual OPPS update process. Therefore, we are finalizing our proposal
to maintain the assignment of HCPCS code C9735 to APC 0150 for CY 2014.
The final CY 2014 geometric mean cost for APC 0150 is approximately
$2,510.

[[Page 74982]]

4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
APC 0425 (Level II Arthroplasty or Implantation with Prosthesis)
contains arthroplasty procedures as well as osseointegrated implant
procedures. For CY 2014, we proposed to convert APC 0425 to a
comprehensive APC, with a proposed geometric mean cost of approximate
$9,939. (The proposed payment rate reflects the corrected proposed rate
included in the September 6, 2013 OPPS Addendum B, which was posted on
the CMS Web site.)
Comment: One commenter requested that CMS review the current
composition of APC 0425 for clinical homogeneity and resource cost
cohesion, including the newly added adjunctive costs that would result
from converting APC 0425 to a comprehensive APC. The commenter
recommended that CMS remove the following osseointegrated implant
procedure codes from APC 0425 and assign them to a more clinically
appropriate APC: CPT code 69714 (Implantation, osseointegrated implant,
temporal bone, with percutaneous attachment to external speech
processor/cochlear stimulator; without mastoidectomy); CPT code 69715
(Implantation, osseointegrated implant, temporal bone, with
percutaneous attachment to external speech processor/cochlear
stimulator; with mastoidectomy); CPT code 69717 (Replacement (including
removal of existing device), osseointegrated implant, temporal bone,
with percutaneous attachment to external speech processor/cochlear
stimulator; without mastoidectomy); and CPT code 69718 (Replacement
(including removal of existing device), osseointegrated implant,
temporal bone, with percutaneous attachment to external speech
processor/cochlear stimulator; with mastoidectomy).
Response: In response to the commenter's request, we have again
reviewed the composition of APC 0425 for clinical and resource
homogeneity. Although we are not making comprehensive APCs effective
until CY 2015, the proposed procedural composition of APC 0425 is the
same whether this APC is a comprehensive APC or not. We found in our
review that the clinical and resource composition of proposed APC 0425
is appropriate because all of the procedures assigned to the APC
involve surgical procedures that use high-cost devices, including the
osseointegrated device procedures represented by CPT codes 69714,
69715, 69717, and 69718. Therefore, we do not believe that it is
necessary to reconfigure the proposed APC 0425.
After consideration of the public comment we received, we are
finalizing the proposed composition of APC 0425 for CY 2014 with the
modification that APC 0425 will not be made a comprehensive APC until
CY 2015. The final CY 2014 geometric mean cost of APC 0425 is
approximately $9,766.
b. Joint Stabilization (APC 0052)
The CPT Editorial Panel created CPT Code 0334T (Sacroiliac joint
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)), effective July 1,
2013. For CY 2013, we assigned CPT code 0334T to APC 0208 (Laminotomies
and Laminectomies) with a payment rate of $3,758.59. For CY 2014, we
proposed to maintain the assignment of CPT code 0334T to APC 0208, with
a proposed payment rate of approximately $4,109. (The proposed payment
rate reflects the corrected proposed rate included in the September 6,
2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment: A few commenters objected to our proposed assignment of
CPT code 0334T to APC 0208, and stated that APC 0208 is not an
appropriate assignment for CPT code 0334T either in terms of resources
or clinical homogeneity. The commenters stated that the proposed
payment rate for APC 0208 is insufficient to cover the approximately
$10,500 in implant costs. The commenters further stated that the other
procedures assigned to APC 0208 do not have appreciable device costs.
One commenter performed a cost analysis on claims reporting CPT code
27280 (Arthrodesis, sacroiliac joint (including obtaining graft)), the
CPT code that would have been used for minimally invasive Sacroiliac
(SI) fusion procedures in CY 2012, the year used for the CY 2014
ratesetting. Based on the commenter's analysis, 38 hospitals submitted
outpatient claims reporting CPT code 27280. However, no claims were
used for CY 2014 Medicare ratesetting because CPT code 27280 was
included on the OPPS inpatient only list for CY 2012 (and currently
remains on this list). The commenter calculated a geometric mean cost
of $14,733 based on these 38 claims. The commenter believed that these
38 claims represented migration of the procedure described by CPT code
27280, which uses minimally invasive techniques and implants, to the
hospital outpatient setting. Some commenters also stated that other
procedures assigned to APC 0208 are primarily used for decompressing
the disc and neural structures, which differ in location and purpose
from the procedure described by CPT code 0334T. The commenters
recommended that CMS consider assigning CPT code 0334T to a New
Technology APC with a payment rate range between $14,500 and $15,000,
based on the commenter's analysis of the claims reporting CPT code
27280; or creating a new clinical APC and assigning CPT code 0334T to
that APC based on the cost estimate for performing the procedure
described by CPT code 27280 because there are no other clinical APCs
that are appropriate to assign CPT code 0334T.
Response: We appreciate the commenters' suggestions. However, in
regard to the commenter's cost analysis performed using the 38 CY 2012
claims for CPT code 27280, we do not believe that these 38 claims
likely represent the cost of performing the procedure described by CPT
code 0334T. As the commenter stated, CPT code 27280 was listed as an
inpatient only service for CY 2012, currently remains on the inpatient
only list for CY 2013, and is proposed to remain on the inpatient only
list for CY 2014. CPT code 27280 is used primarily to report open
sacroiliac joint fusion procedures, rather than minimally invasive SI
joint fusion procedures. Therefore, while some of the 38 claims may
involve the minimally invasive techniques, we are not convinced that
these claims represent minimally invasive techniques, but consist
mainly of open SI joint fusion procedures, which are the primarily
reported procedures for this code. Regarding the commenters' suggested
option to create a new device pass-through category, we do not discuss
the merits of OPPS pass-through status applications in our proposed or
final rules. Regarding the commenters' recommended option to assign CPT
code 0334T to a New Technology APC or to create a new clinical APC for
CPT code 0334T, we agree with the commenters that there may be a more
appropriate APC to which we could assign CPT code 0334T based on
resource use and clinical homogeneity. However, we believe that CPT
code 0334T can be appropriately assigned to an existing clinical APC,
which is preferable because other clinically similar procedures
populate the APC. The final geometric mean cost of APC 0208 is
approximately $4,017. We agree that the resource use associated with
the

[[Page 74983]]

procedure described by CPT code 0334T is likely to be greater than the
resource use associated with the typical procedures assigned to APC
0208. Therefore, we believe that a more appropriate initial APC
assignment based on clinical and resource homogeneity for this new
procedure is APC 0052 (Level IV Musculoskeletal Procedures Except Hand
and Foot). APC 0052 includes several orthopedic fusion procedures that
are clinically similar to the procedure described by CPT code 0334T,
and we believe that it is appropriate clinically to assign CPT code
0344T to APC 0052, which has a final geometric mean cost of
approximately $6,530. In accordance with our longstanding policy, we
will review the assignment of CPT code 0334T in a future annual OPPS
update, when we have available claims data for ratesetting.
After consideration of the public comments we received, we are not
finalizing our CY 2014 proposal to maintain the assignment of CPT code
0334T to APC 0208. Rather, for CY 2014, we are assigning CPT code 0334T
to APC 0052, which has a final geometric mean cost of approximately
$6,530.
5. Nervous System Services
a. Chemodenervation (APCs 0161 and 0204)
CPT codes 64615 (Chemodenervation of muscle(s); muscle(s)
innervated by facial, trigeminal, cervical spinal and accessory nerves,
bilateral (e.g., for chronic migraine)) and 52287 (Cystourethroscopy,
with injection(s) for chemodenervation of the bladder) both became
effective January 1, 2013. For CY 2014, we proposed to continue to
assign CPT code 52287 to APC 0161 (Level II Cystourethroscopy and Other
Genitourinary Procedures), with a proposed payment rate of
approximately $1,201. In addition, we proposed to continue to assign
CPT code 64615 to APC 0204 (Level I Nerve Injections), with a proposed
payment rate of approximately $214. (The proposed payment rates reflect
the corrected proposed rates included in the September 6, 2013 OPPS
Addendum B, which was posted on the CMS Web site.)
Comment: One commenter requested that CMS reassign CPT code 64615
from APC 0204 to APC 0206 (Level II Nerve Injections) because of the
clinical similarity to the procedure described by CPT code 64613
(Chemodenervation of muscle(s); neck muscle(s) (eg, for spasmodic
torticollis, spasmodic dysphonia)), which is assigned to APC 0206. This
commenter stated that the payment rate for APC 0204 does not adequately
pay for the cost of providing the procedure. The commenter submitted
this same request in response to the CY 2013 OPPS/ASC final rule with
comment period.
Response: We disagree with the commenter's assertion that the
procedure described by CPT code 64615 is more similar to the procedure
described by CPT code 64613. Based on the description of the procedure,
the procedure described by CPT code 64615 is most similar to the
procedure described by CPT code 64612 (Chemodenervation of muscle(s);
muscle(s) innervated by facial nerve, unilateral (eg, for
blepharospasm, hemifacial spasm)), which is assigned to APC 0204. The
procedures described by CPT codes 64612 and 64615 both involve facial
nerve muscles, whereas the procedure described by CPT code 64613
involves the neck muscles. Consequently, we believe that CPT code 64615
is appropriately assigned to APC 0204 based on its clinical homogeneity
to CPT code 64612.
We note that, in addition to the payment for the procedure,
hospitals would receive separate payment for the drug
onabotulinumtoxina, which is described by HCPCS code J0585 (Injection,
onabotulinumtoxina, 1 unit), when the drug is administered during the
procedure.
Consistent with CMS' longstanding policy since the implementation
of the OPPS in 2000, we evaluate, on an annual basis, all of the APC
assignments for appropriateness. We note that because CPT code 64615 is
a new code that became effective for CY 2013, we will have a full year
of claims data available next year, and as with every HCPCS code or CPT
code, we will reevaluate its APC assignment during the annual
rulemaking cycle.
Comment: One commenter requested that CMS reassign CPT code 52287
from APC 0161 to APC 0162 (Level III Cystourethroscopy and Other
Genitourinary Procedures). The commenter stated that the proposed APC
assignment for CPT code 52287 is economically and clinically
inappropriate. The commenter further stated that the procedure
described by CPT code 52287 is more clinically similar to the procedure
described by CPT code 52283 (Cystourethroscopy, with steroid injection
into stricture), which is assigned to APC 0162. The commenter submitted
this same request in response to the CY 2013 OPPS/ASC final rule with
comment period.
Response: APC 0161 consists of a variety of procedures, some of
which describe cystourethroscopic procedures of the urethra and
bladder. We believe that the procedure described by CPT code 52287 is
more clinically similar to the other cystourethroscopic procedures
assigned to APC 0161, such as the procedure described by CPT code
52281, than to procedures assigned to APC 0162, such as the procedure
described by CPT code 52287 as mentioned by the commenter. We also note
that in addition to a payment for the procedure at the payment rate for
APC 0161, hospitals also receive separate payment for the
chemodenervation drug. For the CY 2014 update, the payment rate for APC
0161 is approximately $1,205. As has been our practice since the
implementation of the OPPS, we annually review all of the items and
services within an APC group to determine, with respect to
comparability of the use of resources, any 2 times rule violations. In
making this determination, we review all claims data and determine
whether we need to make changes to the current APC assignments for the
following year. We will reevaluate the status indicator and APC
assignment for CPT code 52287 for the CY 2015 OPPS rulemaking cycle.
After consideration of the public comments received, we are
finalizing our CY 2014 proposals, without modification, to continue to
assign CPT code 64615 to APC 0204, and to continue to assign CPT code
52287 to APC 0161. The final CY 2014 geometric mean costs for APCs 0204
and 0161 are approximately $203 and $1,209, respectively.
b. Nerve Conduction Studies (APCs 0216 and 0218)
For CY 2013, the AMA's CPT Editorial Panel established seven new
CPT codes to describe nerve conduction tests, which were effective
January 1, 2013. For CY 2014, we proposed to continue to assign CPT
codes 95907, 95908, 95909, and 95910 to APC 0215 (Level I Nerve and
Muscle Services), with a proposed payment rate of approximately $67. In
addition, we proposed to reassign CPT codes 95911, 95912, and 95913
from APC 0218 (Level II Nerve and Muscle Services) to APC 0215. The
descriptors for these seven CPT codes and our proposed APC assignments
are listed in Table 26 below.
Comment: Some commenters expressed concern with the proposed APC
assignments of CPT codes that describe the nerve conduction tests. The
commenters stated that the proposed payment of $67 for APC 0215 is
inadequate because it does not cover the

[[Page 74984]]

expenses associated with providing these services. The commenters urged
CMS to reconsider the proposed APC assignments for CPT codes 95907
through 95913, and suggested specific alternative APC assignments for
these specific codes. Specifically, the commenters recommended the
reassignment of CPT code 95907 from APC 0215 to APC 0218, the
reassignment of CPT codes 95908, 95909, and 95910 from APC 0215 to APC
0216 (Level III Nerve and Muscle Services), and the reassignment of CPT
codes 95911, 95912, and 95913 from APC 0218 to APC 0216.
We also received a comment in response to the CY 2013 OPPS/ASC
final rule with comment period relating to these codes. The commenter
stated that the CY 2013 OPPS payment rates for these new codes were
significantly lower for these services when they were performed in the
hospital outpatient setting compared to when they were performed in the
physician office setting, and suggested that the lower payment rates
would negatively impact beneficiary access to neurologic care.
Response: After further consultation with our medical advisors, we
agree with the commenters that a revision to the APC assignments for
CPT codes 95907 through 95913 is necessary. Based on the nature of the
procedures described by these codes and the additional information
submitted to us by the commenters on the CY 2013 OPPS/ASC final rule
with comment period and the CY 2014 OPPS/ASC proposed rule, we believe
that the nerve conduction tests described by CPT codes 95908, 95909,
95910, 95911, 95912, and 95913 would be more appropriately assigned to
APC 0216. In addition, we believe that the nerve conduction test
described by CPT code 95907 would be more appropriately assigned to APC
0218.
Therefore, after consideration of the public comments we received,
we are revising our CY 2014 proposed APC reassignment of CPT codes
95908, 95909, 95910, 95911, 95912, and 95913 from APC 0215 to APC 0216.
In addition, we are revising our CY 2014 proposed APC reassignment of
CPT code 95907 from APC 0215 to APC 0218. The final APC assignments for
these codes, along with the final status indicators are listed in Table
26 below. The final CY 2014 payment rates for CPT codes 95907 through
95913 are included in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
We remind hospitals that, consistent with our longstanding policy
since the implementation of OPPS in 2000, we will reevaluate the APC
assignments for these codes in next year's rulemaking cycle. As has
been our practice, we annually review all the items and services within
an APC group to determine, with respect to comparability of the use of
resources, if the geometric mean cost of the highest cost item or
service within an APC group is more than 2 times greater than the
geometric mean cost of the lowest cost item or service within that same
group. In making this determination, we review our claims data and
determine whether we need to make changes to the current APC
assignments for the following year. We note that, because CPT codes
95907 through 95913 became effective for CY 2013, we will not have
applicable claims data available for these services for ratesetting
until the CY 2015 rulemaking cycle.
[GRAPHIC] [TIFF OMITTED] TR10DE13.324

c. Parasympathetic Function and Sympathetic Function (APC 0215)
In CY 2013, the AMA's Editorial Panel created two new codes to
describe testing of parasympathetic and sympathetic functions of the
autonomic nervous system at the same time, with and without use of
passive tilt: CPT code 95943 (Simultaneous, independent, quantitative
measures of both parasympathetic function and sympathetic function) and
CPT code

[[Page 74985]]

95924 (Testing of autonomic nervous system function; combined
parasympathetic and sympathetic adrenergic function testing with at
least 5 minutes of passive tilt). For CY 2013, we assigned CPT code
95943 to APC 0215 (Level I Nerve and Muscle Tests), which has a CY 2013
payment rate of approximately $43. We also assigned comment indicator
``NI'' to CPT code 95943 to indicate that the code was new for CY 2013
with an interim APC assignment that was subject to public comment
following the publication of the CY 2013 final rule with comment
period. We assigned CPT code 95924 (Testing of autonomic nervous system
function; combined parasympathetic and sympathetic adrenergic function
testing with at least 5 minutes of passive tilt) to APC 0218 (Level II
Nerve and Muscle Tests), which has a CY 2013 payment rate of
approximately $80.
Comment: One commenter who addressed the interim APC assignment of
CPT code 95943 believed that the test described by CPT code 95943 is
more similar in terms of clinical homogeneity and resource use to the
services assigned to APC 0218, and requested that CMS reassign CPT code
95943 to APC 0218 for CY 2014, which has a final rule geometric mean
cost of approximately $128. APC 0215 has a final rule geometric mean
cost of approximately $50. The commenter noted that the predecessor
codes for CPT code 95943, CPT code 95921 (Testing of autonomic nervous
system function; cardiovagal innervation (parasympathetic function))
and CPT code 95922 (Testing of autonomic nervous system function;
vasomotor adrenergic innervation (sympathetic adrenergic function)),
were assigned to APC 0218. In addition, the commenter stated that the
test described by CPT code 95943 is almost identical to the test
described by CPT code 95924, which is assigned to APC 0218. The
commenter stated that, although the test described by CPT code 95924 is
the only test that uses a tilt table, the monitor used to perform the
test described by CPT code 95943 is more expensive than the monitor
used to perform the test described by CPT code 95924.
Response: We agree with the commenter that the service described by
CPT code 95943 is clinically similar to the other services assigned to
APC 0218, including its predecessor codes, CPT codes 95921 and 95922.
Therefore, for CY 2014, we are reassigning CPT code 95943 from APC 0215
to APC 0218.
We will reconsider the APC assignments for this code once claims
data are available, as part of our usual ratesetting methodology for CY
2015.
d. Epidural Lysis (APCs 0203 and 0207)
For CY 2013, CPT code 62263 (Epidural lysis, multiple sessions) and
CPT code 62264 (Epidural lysis on single day) are assigned to APC 0203
(Level IV Nerve Injections), with a payment rate of approximately $857.
For CY 2014, we proposed to reassign CPT code 62264, which had a
proposed rule geometric mean cost of approximately $874 from APC 0203
(which had a proposed rule geometric mean cost of approximately $1,574)
to APC 0207 (Level III Nerve Injections), which had a proposed rule
geometric mean cost of approximately $687.
Comment: One commenter objected to the reassignment of CPT code
62264 from APC 0203 to APC 0207 asserting that the resources used to
perform the procedures described by CPT codes 62263 and 62264 are the
same and that CPT code 62263 is rarely used.
Response: The geometric mean costs for performing the procedures
described by CPT codes 62263 and 62264 were not the same for CY 2013:
CPT code 62263 had a CY 2013 final rule geometric mean cost of
approximately $1,406, and CPT code 62264 had a CY 2013 final rule
geometric mean cost of approximately $876. The geometric mean costs of
the procedures described by CPT codes 62263 and 62264 continued to
differ by a similar magnitude for CY 2014: the CY 2014 proposed rule
geometric mean cost of the procedure described by CPT code 62263 was
approximately $1,492, while the CY 2014 proposed rule geometric mean
cost of CPT code 62264 was approximately $874. However, for CY 2014, we
determined that continuing to assign CPT code 62264 to APC 0203 would
create a 2 times rule violation because the geometric mean cost of the
APC increased from approximately $881 in CY 2013 to approximately
$1,550 for CY 2014. To correct the 2 times rule violation, we proposed
to reassign CPT code 62264 from APC 0203 to APC 0207, which has a final
rule geometric mean cost of approximately $672.
Based on updated claims data, the resources required to furnish the
procedure described by CPT code 62264 (which has a final rule geometric
mean cost of approximately $883) continue to be more similar to the
resources required for services assigned to APC 0207 (which has a final
rule geometric mean cost of approximately $672) than for services
assigned to APC 0203 (which has a final rule geometric mean cost of
approximately $1,550). Therefore, after consideration of the public
comment we received, we are finalizing our proposal to reassign CPT
code 62264 from APC 0203 to APC 0207 for CY 2014.
e. Cerebrospinal Shunt Reprogramming (APC 0692)
For CY 2014, we proposed to reassign CPT code 62252 (Reprogramming
of programmable cerebrospinal shunt), which had a proposed rule
geometric mean cost of approximately $155, from APC 0691 (Level III
Electronic Analysis of Devices), which had a proposed payment rate of
approximately $274, to APC 0692 (Level II Electronic Analysis of
Devices), which had a proposed payment rate of approximately $139.
(These proposed rates reflect the corrected proposed rates included in
the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web
site.)
Comment: One commenter asked CMS to explain the rationale for the
proposed reassignment of CPT code 62252 from APC 0691 to APC 0692.
Response: We proposed to reassign CPT code 62252 from APC 0691 to
APC 0692 because it would violate the 2 times rule if we continued to
assign it to APC 0691.
After consideration of the public comment we received, we are
finalizing our proposal to reassign CPT code 62252 from APC 0691 to APC
0692, which has a final rule geometric mean cost of approximately $116.
In addition, based on our review of the configuration of APCs 0691 and
0692, we determined that we need to improve the clinical and resource
homogeneity of these two APCs. In order to avoid several 2 times rule
violations in these APCs, we are reassigning CPT code 95971 (Simple
neurostimulator analysis), which has a final rule geometric mean cost
of approximately $113 and CPT code 95972 (Complex neurostimulator
analysis), which has a final rule geometric mean cost of approximately
$145 from the higher Level III APC 0691 (which has a final rule
geometric mean cost of approximately $277) to the lower Level II APC
0692 (which has a final rule geometric mean cost of approximately
$116). In addition, to avoid 2 times rule violations we are reassigning
CPT code 62367 (Analysis of spinal fusion pump), which has a final rule
geometric mean cost of approximately $202, CPT code 62368 (Analysis
with reprogramming), which has a final rule geometric mean cost of
approximately $216, CPT code 62369 (Analysis with reprogramming and
fill), which has a final rule geometric mean cost of approximately
$339, and CPT code 62370 (Analysis with reprogramming and fill
requiring the skill of a physician or other qualified

[[Page 74986]]

health care professional), which has a final rule geometric mean cost
of approximately $286, from the lower Level II APC 0692 to the higher
Level III APC 0691, which has a final rule geometric mean cost of
approximately $277.
6. Ocular Services
a. Retinal Prosthesis (APC 0672)
For CY 2014, we proposed to continue to assign the category III CPT
code 0100T (Placement of a subconjunctival retinal prosthesis receiver
and pulse generator, and implantation of intra-ocular retinal electrode
array, with vitrectomy), to APC 0672 (Level III Posterior Segment Eye
Procedures), based on the similarity of the procedure to the other
services currently assigned to APC 0672. The device implanted during
this procedure (HCPCS code C1841 (Retinal prosthesis)) includes all
internal and external components, and was granted pass-through status
beginning October 1, 2013.
Comment: One commenter requested that CMS reassign CPT code 0100T
to a new APC with a payment rate of approximately $6,500, which the
commenter estimated by combining the costs of procedures that the
commenter believed to be components of CPT code 0100T. The commenter
also asserted that the procedure described by CPT code 0100T is more
complex than the other procedures assigned to APC 0672.
Response: There are no claims data available for the procedure
described by CPT code 0100T at this time. We estimate that more than 95
percent of the overall cost of the procedure is associated with the
device, which is paid separately as a pass-through payment device.
Because the device used in the procedure described by CPT code 0100T is
in pass-through payment status, we do not believe that it is
appropriate to create and assign CPT code 0100T to a new APC at this
time. We also believe that the procedure described by CPT code 0100T is
similar to the other procedures assigned to APC 0672. While we
acknowledge that the procedure described by CPT code 0100T is complex,
the other services assigned to APC 0672, for example the procedure
described by CPT code 67113 (Repair of complex retinal detachment), are
also complex and involve many different techniques and require
extensive resources.
b. Tear Film (APC 0230)
For CY 2014, we proposed to assign the new Category III CPT code
0330T (Tear film imaging, unilateral or bilateral, with interpretation
and report), effective July 1, 2013, to APC 0230 (Level I Eye Tests and
Treatments) based on the similarity of the service to the other
services currently assigned to APC 0230.
Comment: One commenter requested that CMS reassign CPT code 0330T
to APC 0698 (Level II Eye Tests and Treatments). The commenter believed
that the clinical and resource similarities of the service described by
CPT code 0330T to the services currently assigned to APC 0698 warrant
reassignment.
Response: We believe that the service described by CPT code 0330T
is most similar to the other imaging services assigned to APC 0230,
such as corneal topography or eye photography. We currently have no
claims data for this service for ratesetting purposes because CPT code
0330T became effective July l, 2013, and is considered new. Once we
have claims data for CPT code 0330T, we will reevaluate the APC
assignment of CPT code 0330T in future years through our standard
review process.
After consideration of the public comment we received, we are
finalizing our CY 2014 proposal to assign CPT code 0330T to APC 0230.
7. Imaging
a. Myocardial Sympathetic Innervation Imaging (APC 0398)
Effective July 1, 2013, the AMA's CPT Editorial Panel created CPT
code 0331T (Myocardial sympathetic innervation imaging, planar
qualitative and quantitative assessment) and CPT code 0332T (Myocardial
sympathetic innervation imaging, planar qualitative and quantitative
assessment; with tomographic SPECT). For CY 2014, we proposed to assign
CPT codes 0331T and 0332T to APC 0398 (Level I Cardiac Imaging), which
had a proposed payment rate of approximately $397. (The proposed
payment rate reflects the corrected proposed rate in the September 6,
2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment: Several commenters disagreed with the proposed assignment
of CPT codes 0331T and 0332T to APC 0398. The commenters stated that
the proposed payment rate for APC 0398 would not cover the cost of
performing the new procedures. Some of these commenters emphasized that
the proposed payment rate for APC 0398 is substantially lower than the
cost of the radiopharmaceutical alone used in these procedures. The
commenters believed that the assignment of CPT codes 0331T and 0332T to
APC 0398 would impede Medicare beneficiaries' access to these new
services. Some commenters suggested that CPT codes 0331T and 0332T be
assigned to a New Technology APC with a payment rate that would better
reflect the estimated costs for these procedures. Other commenters
indicated that these new procedures are more comparable to the
procedures assigned to APC 0377 (Level II Cardiac Imaging) in terms of
clinical and resource similarities.
Response: We do not agree with the commenters that CPT codes 0331T
and 0332T should be assigned to a New Technology APC for CY 2014
because we believe that these procedures are clinically similar to the
other services assigned to either APC 0398 (Level I Cardiac Imaging) or
APC 0377 (Level II Cardiac Imaging). However, because the estimated
cost of the diagnostic radiopharmaceutical that is used in performing
the procedures described by CPT codes 0331T and 0332T (HCPCS code
A9582) is approximately $1,320 based on the drug cost statistics file
for the proposed rule, we agree with the commenters that it is more
appropriate in terms of resource similarity to assign CPT codes 0331T
and 0332T to APC 0377 and, therefore, are modifying the codes' APC
assignment for CT 2014.
After consideration of the public comments we received, for CY
2014, we are assigning CPT codes 0331T and 0332T to APC 0377, which has
a final geometric mean cost of approximately $1,158.
b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
The pass-through payment status of HCPCS code A9584 (Iodine I-123
ioflupane, diagnostic, per study dose up to 5 millicuries) expires on
December 31, 2013. For CY 2014, payment for this radiopharmaceutical,
typically referred to as DaTscan, will be packaged with payment for CPT
code 78607 (Brain imaging; tomographic (SPECT)), which had a CY 2014
proposed rule geometric cost of approximately $1,179). The procedure
described by CPT code 78607 is used to assist in the evaluation of
adult patients with suspected Parkinson's disease. For CY 2014, we
proposed to continue to assign CPT code 78607 to APC 0402 (Level II
Nervous System Imaging), which had a proposed payment rate of
approximately $1,009. (The proposed payment rate reflects the corrected
proposed rate in the September 6, 2013 OPPS Addendum B, which was
posted on the CMS Web site.) We proposed to maintain the assignment of
CPT code 78607 to APC 0402 for CY 2014, providing an exception to a 2
times rule violation involving the cost of CPT code 78645 as

[[Page 74987]]

compared to the cost of CPT code 78607 (78 FR 43592).
For CY 2014, we proposed to reassign CPT code 78647 (Cerebrospinal
fluid flow, imaging (not including introduction of material);
tomographic (SPECT)), which had a proposed rule geometric mean cost of
approximately $467 from APC 0402 (Level II Nervous System Imaging),
which had a proposed rule geometric mean cost of approximately $1,009)
to APC 0403 (Level I Nervous System Imaging), which had a proposed rule
geometric mean cost of approximately $179.
For CY 2014, we proposed to reassign CPT code 78605 (Brain imaging,
4 or more static views), which had a CY 2014 proposed rule geometric
mean cost of approximately $835 from APC 0403 (Level I Nervous System
Imaging), which has a CY 2013 payment rate of approximately $264, to
APC 0402 (Level II Nervous System Imaging) which had a CY 2014 proposed
payment rate of approximately $1,009.
For CY 2014, we also proposed to reassign CPT code 78801
(Radiopharmaceutical localization of tumor or distribution of
radiopharmaceutical agent(s); multiple areas) from APC 0414 (Level II
Tumor/Infection Imaging), which has a CY 2013 payment rate of
approximately $503, to APC 0406 (Level I Tumor/Infection Imaging),
which had a proposed rule payment rate of approximately $383.
(The proposed payment rates cited above reflect the corrected
proposed rates in the September 6, 2013 OPPS Addendum B, which was
posted on the CMS Web site.)
Comment: Several commenters objected to the proposed reduction in
the CY 2014 payment rate for the DaTscan imaging procedure (including
the packaged radiopharmaceutical) as a result of packaging of the
radiopharmaceutical into CPT code 78607 and retention of the procedure
in APC 0402, following expiration of the pass-through status of the
procedure. The commenters objected to the reduction from the pass-
through payment amount of approximately $1,975 for HCPCS code A9584 in
addition to the payment of approximately $458 for CPT code 78607 for CY
2013. The commenters believed that the payment rate reduction for CPT
code 78607 (into which the radiopharmaceutical will be packaged for CY
2014) would hinder beneficiary access to care for this service. Several
commenters believed that CPT code 78607 would be more appropriately
assigned to APC 0308 (Positron Emission Tomography (PET) Imaging)
rather than APC 0402 because CPT code 78607 is a new imaging service
that uses more resources and is not clinically similar to the
cisternography and shunt evaluation scans assigned to APC 0402. (We
note that the CY 2014 final rule geometric mean cost of APC 0308 is
approximately $1,315.)
Response: We agree with the commenters that it would be appropriate
to reassign CPT code 78607 to an APC that contains services more
similar in terms of costs to CPT code 78607 and to correct the 2 times
rule violation in APC 0402. However, we do not agree with the
commenters that the procedure described by CPT code 78607 is clinically
similar to PET scans. Therefore, we are not assigning CPT code 78607 to
APC 0308. Based on clinical homogeneity and similar resource use, we
are reassigning CPT code 78607 from APC 0402 to APC 0408 (Level III
Tumor/Infection Imaging) for CY 2014, which has a final rule geometric
mean cost of approximately $1,161.
Comment: One commenter asked CMS to explain its rationale for
proposing to reassign CPT code 78647 from APC 0402 to APC 0403. The
commenter believed that this reassignment would decrease the payment
rate for the procedure described by CPT code 78647.
Response: The final rule geometric mean cost of APC 0402 is
approximately $535, and the final rule geometric mean cost of APC 0403
is approximately $163. The final rule geometric mean cost of CPT code
78647 is approximately $434, which is much closer to the final rule
geometric mean cost of APC 0402 than the final rule geometric mean cost
of APC 0403. While there is no violation of the 2 times rule in APC
0403 due to the claims volume of the services in this APC, the
geometric mean cost of CPT code 78647 is more than two times the
geometric mean cost of the other services in APC 0403. Because the
final rule geometric mean cost of CPT code 78647 is more similar to the
geometric mean costs of the services assigned to APC 0402, we are not
finalizing our proposal to reassign CPT code 78647 from APC 0402 to APC
0403. We will continue to maintain the code's current assignment to APC
0402 for CY 2014.
Comment: One commenter asked CMS to explain its rationale for
proposing to reassign CPT code 78605 from APC 0403 to APC 0402 for CY
2014.
Response: Based on updated CY 2012 claims data, the final rule
geometric mean cost of CPT code 78605 (approximately $781) is much
closer to the final rule geometric mean cost of APC 0402 (approximately
$535) than to the final rule geometric mean cost of APC 0403
(approximately $163). Therefore, based on the similarity of the costs
of the services assigned to APCs 0402 and 0403, we are finalizing our
proposal to reassign CPT code 78605 from APC 0403 to APC 0402.
Comment: One commenter asked CMS to explain its rationale for
proposing to reassign CPT code 78801 from APC 0414 to APC 0406 for CY
2014.
Response: We proposed the reassignment of CPT code 78801 from APC
0414 to APC 0406 for CY 2014 because we had updated claims data for CY
2014 ratesetting, which indicated that the continued assignment of CPT
code 78801 to APC 0414 would violate the 2 times rule. The final rule
geometric mean cost of CPT code 78801 (approximately $362) is much
closer to the final rule geometric mean cost of APC 0406 (approximately
$384) than the final rule geometric mean cost of APC 0414
(approximately $659), and is clinically similar to the other tumor
imaging services assigned to APC 0406. Therefore, we are finalizing our
proposal to reassign CPT code 78801 from APC 0414 to APC 0406 for CY
2014.
8. Radiology Oncology
a. 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 procedure of placing and removing (if
performed) an applicator into the breast for radiation therapy. We
became aware of the procedure via a New Technology APC application, and
upon approval of the application, we created HCPCS code C9726 because
there were no HCPCS codes that described this procedure. For CY 2013,
HCPCS code C9726 is assigned to APC 0028, which has a payment rate of
$1,862.77. Based on our CY 2014 proposed rule claims data, HCPCS code
C9726 had a proposed geometric mean cost of approximately $2,165 based
upon 8 single claims, and APC 0028 had a proposed geometric mean cost
of approximately $2,047.
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

[[Page 74988]]

treatment session). For CY 2013, we finalized a policy to assign these
CPT codes to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and
MEG), with a CY 2013 payment rate of $978.25 because we believed these
IORT service codes were similar to other services assigned to APC 0065
in terms of clinical characteristics, and the range of estimated costs
for IORT services (77 FR 68345). For CY 2014, we proposed to maintain
the APC assignment for CPT codes 77424 and 77425 to APC 0065, which we
proposed to rename ``APC 0065 (IORT, MRgFUS, and MEG)'', with a
proposed payment rate of approximately $1,715. (The proposed payment
rate reflects the corrected proposed rate in the September 6, 2013 OPPS
Addendum B, which was posted on the CMS Web site.)
In the CY 2014 OPPS/ASC proposed rule, we noted that both 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 that
it would no longer be required to report the placement and removal of
the applicator via HCPCS code C9726 on a claim. Therefore, we proposed
to delete HCPCS code C9726, effective January 1, 2014 (78 FR 43593).
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
proposed to continue to assign to APC 0065.
Comment: Many commenters disagreed with CMS' assertion that IORT
services include 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 with
the proposal to delete HCPCS code C9726 because it would no longer be
required to report that service on the claim. Several commenters
indicated that the service described by HCPCS code C9726 is performed
by the surgeon before and after IORT delivery, and represents the cost
of the applicator and hospital costs related to the surgeon's placement
of the applicator, while CPT codes 77424 and 77425 represent radiation
therapy treatment delivery performed by the radiation oncologist and
medical physicist and are limited to the technical costs of IORT
delivery. Many commenters stated that the AMA's CPT Editorial Panel did
not include placement and removal of the applicator in the descriptions
of CPT codes 77424 and 77425. Some commenters also indicated that
placement and removal of applicators for radiation therapy for various
other parts of the body are separately reported on claims and paid
under the OPPS. Some commenters expressed concern with the quality of
the data used for ratesetting, such as the small number of single
frequency claims available reporting CPT codes 77424 and 77425. One
commenter suggested that CMS propose a comprehensive APC payment
methodology for IORT for CY 2015 to include CPT codes 77424 and 77424
because the services are performed in a single operative session.
Response: Our proposal to delete HCPCS code C9726 was based on the
premise that placement of an applicator is a necessary part of the
delivery of IORT, and that the placement of an applicator was included
in the procedures described by CPT codes 77424 and 77425. There are
currently no service codes other than HCPCS code C9726 that separately
describe placement of a rigid applicator for IORT breast radiation
delivery, as there are for some other radiation delivery services. The
commenters argued that the service that has been reported along with
HCPCS code C9726 by providers on claims is surgical, not a radiation
oncology service, and that the service is not included in the
descriptions of CPT codes 77424 and 77425. Therefore, after considering
all of the public comments on IORT, we are not finalizing our proposal
to delete HCPCS code C9726 for CY 2014. However, to make the coding
consistent with other intraoperative procedures involving catheters or
applicators used for radiation therapy treatment of the breast, for CY
2014, we are designating HCPCS code C9726 as an add-on code to the
primary procedure that involved the intraoperative placement of the
applicator into the breast. We are revising the code descriptor for
HCPCS code C9726 to read: ``Placement and removal (if performed) of
applicator into breast for intraoperative radiation therapy, add-on to
primary breast procedure.'' Payment for HCPCS code C9726 is being
packaged into the payment for the primary procedure, consistent with
our policy to package add-on codes for CY 2014.
We agree with the commenters that there are a small number of
single frequency claims for CPT codes 77424 and 77425, and we believe
that is the case for HCPCS code C9726 as well. We appreciate the
commenters' suggestions for alternative payment methodologies for IORT
and may consider such alternatives in the future.
After consideration of the public comments we received, we are not
finalizing our proposal to delete HCPCS code C9726 for CY 2014. We are
designating HCPCS code C9726 as an add-on code for which payment is
being packaged into the payment for CPT codes 77424 and 77425, the
primary procedures that involve the intraoperative placement of the
applicator into the breast, consistent with our policy to package add-
on codes for CY 2014. We are revising the code descriptor for HCPCS
code C9726 to read: ``Placement and removal (if performed) of
applicator into breast for intraoperative radiation therapy, add-on to
primary breast procedure.'' We are continuing to assign CPT codes 77424
and 77425 to APC 0065 for CY 2014, which has a final geometric mean
cost of $1,253. We are also changing the descriptor of APC 0065 to
``IORT, MRgFUS, and MEG''.
b. Proton Beam Therapy (APCs 0664 and 0667)
APC 0664 (Level I Proton Beam Radiation Therapy) includes two
procedures: CPT code 77520 (Proton treatment delivery; simple, without
compensation) and CPT code 77522 (Proton treatment delivery; simple,
with compensation). APC 0667 (Level II Proton Beam Radiation Therapy)
also includes two procedures: CPT code 77523 (Proton treatment
delivery, intermediate) and CPT code 77525 (Proton treatment delivery,
complex). 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 the claims data used in developing the CY 2014 proposed
rule, we determined a violation of the 2 times rule in APC 0664. As we
discuss in section III.B. of this final rule with comment period, a 2
times rule violation occurs when the cost of the highest cost
significant item or service within an APC group is more than 2 times
greater than the cost of the lowest cost significant 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 is met, there is not
a 2 times rule violation even if the highest cost item or service is
more than 2 times greater than the cost of the lowest cost

[[Page 74989]]

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 rule violation within APC 0664 because the claims volume for
CPT code 77520 was not significant (72 FR 66719; 75 FR 71901; and 77 FR
68341). However, for CY 2014, the volume of claims in the proposed rule
claims data for CPT code 77520 increased--the number of single claims
was greater than 99 and contributed at least 2 percent of the single
claims used to establish the cost of APC 0664--resulting in a 2 times
rule violation within APC 0664.
To resolve the 2 times rule violation, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43593), we proposed 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 proposed to delete APC
0664. We invited public comments on this proposal.
Comment: Several commenters stated that they duplicated CMS'
ratesetting calculations for proton beam therapy services and
determined that the threshold for claims volume that would constitute a
2 times rule violation in APC 0664 was not met. The commenters asserted
that because there was no 2 times rule violation within APC 0664
according to their calculations, CMS should not finalize its proposal
to delete APC 0664 and reassign CPT codes 77520 and 77522 to APC 0667
in order to avoid a 2 times rule violation. The commenters also
believed that the simple proton beam treatment delivery services
assigned to APC 0664 are not clinically similar enough to warrant their
combination with the intermediate and complex proton beam treatment
delivery services currently assigned to APC 0667.
Response: Using the additional final rule claims data in accordance
with our standard OPPS ratesetting methodology, we determined that the
number of claims for CPT code 77520 is not significant and, therefore,
a 2 times rule violation within APC 0664 does not exist for CY 2014.
After consideration of the public comments we received, because
there is now no 2 times rule violation within APC 0664, we are not
finalizing our proposal to delete APC 0664 and reassign CPT codes 77520
and 77522 to APC 0667. We are continuing the current APC configuration
for CY 2014. As we do annually for all APCs, we will review the
appropriateness of the APC assignments for proton beam therapy services
for the CY 2015 rulemaking cycle.
c. 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 radiation source types, specifically, Cobalt-60 and linear
accelerator (linac). Among the linac-based SRS procedures, the current
HCPCS G-codes distinguish between procedures that use robotic and non-
robotic linac devices (66 FR 59865). In CY 2007, new CPT codes for SRS
were established, and at that time, we recognized one of the three SRS
CPT codes for separate payment under the OPPS. We did not replace all
of the HCPCS G-codes for SRS with all of the new CPT codes in CY 2007
because we believed at that time that the distinctions reflected in the
HCPCS G-codes should be maintained for APC assignment purposes.
Specifically, in CY 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 described by 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 CY 2007, HCPCS codes G0173, G0251, G0339, G0340, and CPT code
77371 have been the codes used under the OPPS to describe SRS treatment
delivery procedures. However, SRS techniques and equipment have evolved
and expanded over time. In light of these developments and our
understanding of current SRS technology and clinical practice, 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 for purposes of OPPS payment.
Based on our review of the current SRS technology, we understand 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 non-robotic linac-based SRS
through the HCPCS G-codes.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43593 through 43594),
we proposed to replace the existing four HCPCS codes: G0173, G0251,
G0339, and G0340 with the SRS CPT codes 77372 and 77373. We stated that
we believe that utilizing all of the CPT codes for SRS (CPT codes
77371, 77372, and 77373) would more accurately capture the distinctions
between the various SRS procedures that are currently used; namely, (1)
Cobalt-60 versus linac and (2) single session cranial treatment versus
fractionated treatments. Table 16 of the proposed rule showed the
complete list of HCPCS G-codes and CPT codes for SRS, along with their
long descriptors. The table also showed the proposed CPT codes and
their associated status indicators and APC assignments for the current
HCPCS G-codes for SRS that we proposed to replace. We proposed to
assign only CPT code 77373 to APC 0066, which we proposed to rename
``Level I Stereotactic Radiosurgery.'' We proposed to reassign CPT code
77371 and assign CPT code 77372, the two single session cranial
treatment codes, to APC 0067, which we proposed 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.
The CY 2014 proposed APC payment rates for the CPT codes for SRS were
listed in Addendum B to the proposed rule (which is available via the
Internet on the CMS Web site). Further, we proposed to finalize their
status indicators and their APC assignments and payment rates in this
CY 2014 OPPS/ASC final rule with comment period.
We note that we published a corrected OPPS Addendum B payment file
that was posted on the CMS Web site on September 6, 2013, after it was
brought to our attention that the initial proposed payment rates that
were published on July 19, 2013, for the SRS codes did not include the
claims data for the SRS HCPCS G-codes. Specifically, our initial
proposed payment rate of approximately $2,481 for APC 0066 only
included claims data for CPT code 77373 and did not include claims data
for HCPCS codes G0251, G0339, and G0340. In addition, our initial
proposed payment rate of approximately $8,576 for APC 0067 only
included claims data for CPT codes 77372 and 77371 and did not include
claims data for HCPCS code G0173. Consequently, we corrected this error
and posted the corrected payment rates for APCs 0066 and 0067 on

[[Page 74990]]

September 6, 2013. Because of this correction, we extended the public
comment period for the CY 2014 SRS proposals to September 16, 2013 (78
FR 54842). Table 27 below shows the list of HCPCS G-codes and CPT codes
for SRS, along with their long descriptors, and the corrected CY 2014
proposed APC payment rates.
In addition, although the SRS HCPCS G-codes will no longer be
separately payable under the OPPS, the HCPCS codes will remain active
under the MPFS for CY 2014. Consequently, we proposed to change the
OPPS status indicator for HCPCS G-codes for SRS from status indicator
``S'' to ``B'' (Alternative code may be available under the OPPS) for
CY 2014.
Comment: Most commenters agreed with CMS' proposal and urged CMS to
finalize the coding, APC assignment, and payment levels for the SRS CPT
codes. The commenters agreed that utilizing the CPT codes would
standardize the reporting of SRS services across all payers, which the
hospital industry has favored since the SRS treatment delivery CPT
codes were established in CY 2007. One commenter noted that the use of
the CPT codes would eliminate confusion among providers regarding how
to report the SRS treatment delivery services.
Response: We appreciate the commenters' support for our proposal.
We believe that adopting the SRS treatment delivery CPT codes and
restructuring the SRS APCs appropriately distinguishes payment for
single session cranial SRS treatment from fractionated SRS treatment.
Comment: Several commenters that utilize both the linear
accelerator-based SRS technology and Cobalt-60 SRS technology supported
CMS' proposal and stated that the change would equalize payments for
both technologies for single session cranial SRS. One commenter stated
that the proposal is appropriate because there is no clinical data that
supports the need for differential payment for these technologies. This
commenter further stated that current medical literature cites no
difference in clinical effectiveness for one system over another, and
stated that in terms of outcomes, the linac-based system is clinically
comparable to a Cobalt-60 system for single session cranial SRS. In
addition, some commenters stated that the proposal is consistent with
the provisions of section 634 of the American Taxpayer Relief Act
(ATRA) of 2012.
Response: We appreciate the commenters' support for our proposal.
As specified in the April 2013 OPPS Update CR (Transmittal 2664, CR
8228) dated March 1, 2013, section 634 of the ATRA requires that,
effective April 1, 2013, if the payment amount for Cobalt-60 based SRS,
as described by CPT code 77371, exceeds the payment amount for linear
accelerator-based SRS, as described by HCPCS code G0173 (or a successor
code), the payment for CPT code 77371 must be reduced to the payment
amount for HCPCS code G0173. The requirement does not apply to rural
hospitals, sole community hospitals, or rural referral centers. In this
final rule with comment period, for CY 2014, we are reassigning CPT
code 77371 and assigning CPT code 77372 (the successor codes for HCPCS
code G0173) to APC 0067. Therefore, CPT codes 77371 and 77372 will have
the same payment amount. We agree with the commenters that this APC
assignment satisfies the requirements of section 634 of the ATRA.
Comment: Some commenters expressed concern regarding the proposal
for SRS and suggested that CMS delay implementation of the proposal.
The commenters suggested that, to pay appropriately for SRS services,
CMS consider for CY 2015 the development of a comprehensive APC for the
procedures assigned to APC 0067 (which includes CPT codes 77371 and
77372), similar to the comprehensive APC proposal for high-cost,
device-dependent services. The commenters stated that single session
cranial SRS procedures performed with either Cobalt 60-based SRS or
linac-based SRS are device-dependent procedures and cannot be performed
without use of the costly technology. The commenter further stated that
having one comprehensive APC for single session cranial SRS is
appropriate and consistent with the requirements of section 634 of the
ATRA. The commenters encouraged CMS to consider the comprehensive APC
payment methodology to appropriately pay for services, regardless of
the specific equipment used to deliver SRS treatment.
Response: We do not agree with the commenters' suggestion to delay
implementation of the proposal because we believe that adopting the CPT
codes and restructuring the SRS APCs improve the clinical and resource
homogeneity for SRS while satisfying the requirements of section 634 of
the ATRA.
We appreciate the commenters' suggestion to create a comprehensive
APC payment methodology for SRS services. However, because such a
change would require public notice and opportunity to comment, we will
consider and evaluate the appropriateness of such a payment methodology
in the future.
Comment: Some commenters who were not supportive of the proposals
relating to SRS stated that the corrected proposed APC payment rates
for the SRS codes were too low, and requested that CMS utilize the
initial proposed APC payment rates for APCs 0066 and 0067.
Response: As explained above, we revised the initial proposed
payment rates for APCs 0066 and 0067 after it was brought to our
attention that our ratesetting for these APCs did not include claims
data for the appropriate HCPCS codes, including the various HCPCS G-
codes that were proposed for deletion. We should have included the CY
2012 SRS HCPCS G-code claims data in our proposed CY 2014 ratesetting;
otherwise, some of the services would be significantly underrepresented
in the APC payment calculations. We believe that the corrected proposed
APC payment rates that include claims data for the SRS HCPCS G-codes
accurately reflect all of the SRS services that are used to configure
APCs 0066 and 0067.
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Comment: Some commenters expressed concern with the proposed
packaging of payments for certain CPT codes describing the Cobalt-60
SRS procedure. In particular, the commenters indicated that the
proposal to package ancillary services, including certain SRS radiation
planning codes, penalizes hospitals for providing the more efficient
form of SRS, namely, the Cobalt-60 technology, which is provided as a
single-day service. Some of the commenters stated that under CMS'
packaging proposal, hospitals would experience a decrease in payment
for performing the Cobalt-60 procedure because the procedures that they
perform on the same day would no longer be paid separately. In
particular, the commenters were concerned that the proposed policy for
packaging of payment for CPT codes 77290, 77295, 77300, 77334, and
77370, if finalized, would result in higher payments for patients
treated with linac-based SRS technologies because the payment for
planning services would not be packaged--that is, planning services
occur on a different day than the day of delivery of linac-based SRS
services.
Response: As discussed in section II.A.3. of this final rule with
comment period, we are not finalizing our proposal to package payment
of ancillary tests. The SRS planning services, specifically those
described by CPT codes 77290, 77295, 77300, 77334, and 77370, for which
payments were initially proposed to be packaged under our packaging
proposal for ancillary services, will continue to be paid separately
for CY 2014. The final CY 2014 long descriptors, status indicators, and
APC assignments for these CPT codes are listed in Table 28 below.

[[Page 74993]]

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Comment: Some commenters questioned the use of claims data for
certain HCPCS G-codes for determining the corrected payment rates for
APCs 0066 and 0067. The commenters stated that the initial proposed
payment rates were correct. In addition, some commenters did not
believe that claims data for HCPCS code G0173 should have been used to
determine the payment rate for APC 0067 because this code was more than
likely reported for ``other than brain'' tumors. In addition, the
commenters stated that the corrected payment rates result in a 2 times
rule violation in both APC 0066 and APC 0067, and, therefore, CMS
should not finalize its proposal.
Response: HCPCS code G0173 describes a single session linac-based
SRS procedure. We believe that this code is appropriately crosswalked
to CPT code 77372, and adequately represents single session cranial SRS
cases. Although a 2 times rule violation did occur in APC 0067, as we
describe in section II.A.B.3. of this final rule with comment period,
we may make exceptions to the 2 times rule in certain cases. In the
case of the SRS treatment delivery services, we believe that adopting
the CPT codes and restructuring the SRS APCs improves clinical and
resource homogeneity for both types of cranial single session SRS
procedures. Furthermore, assigning CPT codes 77371 and 77372 to the
same APC also satisfies the requirements of section 634 of the ATRA. If
CPT codes 77371 and 77372 were assigned to different APCs, the payment
rate for CPT code 77371 would have to be reduced to equal the payment
rate for CPT code 77372. As a majority of the commenters preferred, we
believe that the assignment of CPT codes 77371 and 77372 to the same
APC, with the blended payment rate as opposed to current CY 2013
payment reduction for CPT code 77371, is most appropriate.
Comment: One commenter recommended that CMS exclude the claims data
associated with HCPCS code G0251 when determining the payment rate for
APC 0066. The commenter indicated that HCPCS code G0251 is used most
often for fractionated cranial SRS, not for stereotactic body radiation
therapy (SBRT), as described by CPT code 77373. The commenter

[[Page 74994]]

recommended that CMS reassign HCPCS code G0251 to its own APC, which is
similar to the CY 2013 APC assignment.
Response: Both HCPCS code G0251 and CPT code 77373 describe
fractionated cranial SRS services that involve between 1 to 5 fractions
of treatment. Based on the code descriptor, we believe that the service
described by HCPCS code G0251 is appropriately crosswalked to CPT code
77373.
Comment: Some commenters stated that CMS only used approximately 20
percent of the claims data for CPT code 77371 to set the payment rate
for APC 0067, and suggested that CMS use more of the claims data for
Cobalt-60 SRS in the ratesetting process.
Response: For the CY 2014 update, we proposed to set the payment
rate for APC 0067 based on claims data for HCPCS code G0173 and CPT
codes 77371 and 77372. To determine the corrected proposed APC payment
rates, we used approximately 41 percent (953 single claims out of 4,672
total claims) of the claims for CPT code 77371 to set the proposed
payment rate for APC 0067. For this final rule with comment period, we
used approximately 27 percent (425 single claims out of 4,672 total
claims) of the claims for CPT code 77371 and approximately 72 percent
of the claims for HCPCS code G0173 (1,136 single claims out of 1,771
total claims to set the payment rate for APC 0067. Based on these
codes, our analysis of the latest hospital outpatient claims data shows
a final CY 2014 geometric mean cost of approximately $3,604 for APC
0067.
Comment: Several commenters disagreed with the proposal to replace
the HCPCS G-codes and use the CPT codes to describe the SRS treatment
delivery services. The commenters stated that the SRS HCPCS G-codes are
preferable to the CPT codes because they accurately describe the
current standard SRS techniques. The commenters further stated that the
CPT code descriptors reflect old technologies. In addition, some
commenters requested that CMS retain the existing APC structure and use
of HCPCS G-codes for SRS treatment delivery services because they
believed the HCPCS G-codes more accurately reflect the costs and
practice of full body, cranial, multi- and single-session robotic SRS.
One commenter also suggested that CMS delete CPT codes 77371 and 77372
and replace them with one code that describes a single session
intracranial SRS treatment procedure with no mention of the radiation
source in the code descriptor.
Response: As stated above, we believe that it is no longer
necessary to continue to distinguish robotic versus non-robotic linac-
based SRS through HCPCS G-codes. We believe that the CPT codes for SRS
treatment delivery, although more general than the HCPCS G-codes,
accurately describe the most significant distinctions between the
various SRS procedures: (1) Cobalt-60 versus linac radiation sources;
and (2) single session cranial versus fractionated treatments. If the
three-code SRS delivery CPT coding scheme that was created by the CPT
Editorial Panel for CY 2007 is considered to be inadequate by SRS
stakeholders, we believe that coding reform in this area would be best
addressed through a dedicated CPT workgroup that would include all of
the various physician specialties, such as neurosurgery and radiation
oncology, and the other stakeholders involved in the delivery of this
critical treatment modality. We also believe that it is best that we
generally refrain from creating supplemental HCPCS G-codes or C-codes
that describe the attributes of a particular device under the
assumption of more precise coding but without the benefit of a broad
perspective of stakeholder and physician specialist input. Otherwise,
we risk unintentionally creating a competitive advantage for a
particular technology through the establishment and use of codes that
may not be based on the most complete understanding of the clinical
science of SRS treatment delivery.
Comment: Several commenters requested that CMS clarify the report
instructions for CPT codes 77372 and 77373 because there is confusion
regarding how these services should be reported. The commenters stated
that the lack of clarify promotes inefficiency and ensures misuse of
CPT codes.
Response: We agree with the commenters that the transition from the
HCPCS G-codes to the CPT codes could be confusing in certain cases.
Therefore, we are providing the following coding guidance for CPT codes
77371, 77372, and 77373. CPT code 77371 is to be used only for single
session cranial SRS cases performed with a Cobalt-60 device, and CPT
code 77372 is to be used only for single session cranial SRS cases
performed with a linac-based device. The term ``cranial'' means that
the pathological lesion(s) that are the target of the radiation is
located in the patient's cranium or head. The term ``single session''
means that the entire intracranial lesion or lesions that comprise the
patient's diagnosis are treated in their entirety during a single
treatment session on a single day. CPT code 77372 is never to be used
for the first fraction or any other fraction of a fractionated
treatment. CPT code 77372 is to be used only for single session cranial
linac-based SRS treatment. Fractionated SRS treatment is any SRS
delivery service requiring more than a single session of SRS treatment
for a cranial lesion, up to a total of no more than five fractions, and
one to five sessions (but no more than five) for non-cranial lesions.
CPT code 77373 is to be used for any fraction (including the first
fraction) in any series of fractionated treatments, regardless of the
anatomical location of the lesion or lesions being radiated.
Fractionated cranial SRS treatment is any cranial SRS delivery service
that exceeds one treatment session and fractionated non-cranial SRS
treatment is any non-cranial SRS delivery service, regardless of the
number of fractions but never more than five. Therefore, CPT code 77373
is the exclusive code (and the use of no other SRS treatment delivery
code is permitted) for any and all fractionated SRS treatment services
delivered anywhere in the body, including, but not limited to, the
cranium or head. CPT code 77372 is not to be used for the first
fraction of a fractionated cranial SRS treatment series and must only
be used in cranial SRS delivery service when there is a single
treatment session to treat the patient's entire condition.
Although we believe that this coding guidance is clear to ensure
reporting compliance, we will activate coding edits to prevent the use
of more than one type of SRS treatment delivery CPT code per diagnosis
per patient along with no more than five fractions for CPT code 77373.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal without modification. Specifically, we
are finalizing our proposal to reassign CPT code 77371 to APC 0067;
replace HCPCS code G0173 with CPT code 77372 and assign the code to APC
0067; and replace HCPCS codes G0251, G0339, and G0340 with CPT code
77373 and assign this code to APC 0066. In addition, although the SRS
HCPCS G-codes will no longer be separately payable under the OPPS, the
codes will remain active under the MPFS for CY 2014. Consequently, we
are finalizing our proposal to change the status indicator for the
HCPCS G-codes for SRS services to OPPS status indicator ``B''
(Alternative code may be available under the OPPS) for CY 2014. Table
29 below shows the final CPT codes for the SRS treatment delivery
services, their status indicators, APC assignments, and payment rates
for CY 2014.
BILLING CODE 4120-01-P

[[Page 74995]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.328

[[Page 74996]]

BILLING CODE 4120-01-C
9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
Effective January 1, 2013, the CPT Editorial Panel created two new
Category I CPT codes: CPT code 31660 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when performed; with bronchial
thermoplasty, 1 lobe) and CPT code 31661 (Bronchoscopy, rigid or
flexible, including fluoroscopic guidance, when performed; with
bronchial thermoplasty, 2 or more lobes). These new CPT codes replaced
two Category III CPT codes: CPT code 0276T (Bronchoscopy, rigid or
flexible, including fluoroscopic guidance, when performed; with
bronchial thermoplasty, 1 lobe) and CPT code 0277T (Bronchoscopy, rigid
or flexible, including fluoroscopic guidance, when performed; with
bronchial thermoplasty, 2 or more lobes), which were deleted as of
January 1, 2013. In the CY OPPS/ASC 2013 final rule with comment period
(77 FR 68352), we finalized a policy that, beginning January 1, 2014,
device category C1886 (Catheter, extravascular tissue ablation, any
modality (insertable)) will no longer be eligible for pass-through
payments, and its device costs will be packaged with the costs of the
procedures with which the HCPCS code C1886 device is reported in the
claims data. We reiterated that final policy in the CY 2014 OPPS/ASC
proposed rule (78 FR 43595). The HCPCS code C1886 device is used in the
procedures described by CPT codes 31660 and 31661. Therefore, the HCPCS
code C1886 device costs will be packaged with the costs of the
procedures described by CPT codes 31660 and 31661. Bronchial
thermoplasty CPT codes 0276T and 0277T are assigned to APC 0415 (Level
II Endoscopy Lower Airway) for CY 2013, and we proposed to assign
bronchial thermoplasty CPT codes 31660 and 31661 to APC 0415 for CY
2014 with a proposed payment rate of approximately $2,177.
Comment: One commenter stated that bronchial thermoplasty CPT codes
31660 and 31661 (as well as the CPT codes 0276T and 0277T) are
inappropriately assigned to APC 0415. The commenter expressed concern
that under the CMS proposal to expire device HCPCS code C1886 from
pass-through payment status, the payment rate for APC 0415 will not
reflect the costs associated with CPT codes 31660 and 31661, the
procedure with which the HCPCS code C1886 device is used. The commenter
stated that the two bronchial thermoplasty CPT codes available in CY
2012, CPT code 0276T and CPT code 0277T, were subject to noncoverage
policies for all Category III CPT codes by most Medicare Administrative
Contractors (MACs), which resulted in few Medicare claims for CY 2012,
the claims data year used for CY 2014 ratesetting. The commenter
further stated that claims data show that some providers submitted
claims reporting bronchial thermoplasty services with the HCPCS code
C1886 device, while others did not, and that, as a result, the HCPCS
code C1886 device charge data understate the cost of the C1886 device,
which is reportedly $2,500.
The commenter also expressed its concerns regarding the composition
of APC 0415. The commenter believed that the payment rate for APC 0415
is driven by claims reporting one high-volume code, CPT code 31629
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when
performed; with transbronchial needle aspiration biopsy(s), trachea,
main stem and/or lobar bronchus(i)) because the proposed payment rate
of APC 0415 of approximately $2,177 is close to the CPT code 31629
proposed rule geometric mean cost of approximately $2,122. The
commenter recommended two options to increase the payment rate for
bronchial thermoplasty services as a means to adequately pay for the
cost of the service. One option was to split APC 0415 into two levels,
with many of the higher volume, lower cost procedure codes assigned to
the Level II Endoscopy Lower Airway APC and the lower volume, higher
cost procedure codes assigned to a new proposed Level III Endoscopy
Lower Airway APC. The second option recommended by the commenter was to
assign CPT codes 31660 and 31661 to APC 0423 (Level II Percutaneous
Abdominal and Biliary Procedures), which the commenter believed has a
number of clinical similarities, including one pulmonary procedure
described by CPT code 32998 (Ablation therapy for reduction or
eradication of 1 or more pulmonary tumor(s) including pleura or chest
wall when involved by tumor extension, percutaneous, radiofrequency,
unilateral).
Response: Regarding the commenter's concerns about the claims data
for bronchial thermoplasty services, we believe that the cost of the
HCPCS code C1886 device is reflected in the proposed payment rate for
APC 0415, the APC to which we proposed to assign CPT codes 31660 and
31661. In a data analysis of the claims reporting CPT codes 0276T and
0277T, we found that, of the 37 single frequency claims available for
the data analysis for CPT code 0276T, 16 single claims reported the
HCPCS code C1886 device with a geometric mean cost of approximately
$3,726, while 21 single claims did not report the HCPCS code C1886
device, yet the geometric mean cost was approximately $3,825.
Therefore, it appears that hospitals did not separately report the
HCPCS code C1886 device for pass-through payment on claims reporting
CPT code 0276T but instead reported the cost of the HCPCS code C1886
device as part of the cost of the procedure described by CPT code
0276T. Of the 18 claims reporting the procedure described by CPT code
0277T in our CY 2012 claims data, 10 claims were submitted with the
HCPCS code C1886 device reported separately, with a geometric mean cost
of approximately $4,175, while 8 claims were submitted without the
HCPCS code C1886 device reported separately, with a somewhat lower
geometric mean cost of $2,780. However, our final geometric mean costs
(based on the final rule claims data) for CPT codes 0276T and 0277T,
$4,019 and $3,700, respectively, are similar to the geometric mean cost
of bronchial thermoplasty services with the HCPCS code C1886 device
reported separately that we found in our analysis of CPT codes 0276T
and 0277T described above. Therefore, we believe that the payment rate
for APC 0415 appropriately reflects the costs of the HCPCS code C1886
device.
We do not agree that APC 0423 would be a more appropriate APC
assignment for CPT codes 31660 and 31661. Although there is one
pulmonary procedure in APC 0423, CPT code 32998, it is a procedure with
a percutaneous approach, which is very different than a bronchoscopy
approach. In addition, we do not agree with the commenter's suggestion
that APC 0415 be split into two lower airway endoscopy APCs. The
creation of a Level III lower airway endoscopy APC suggested by the
commenter would result in relatively few single frequency claims
available for ratesetting--495 claims for the suggested Level III APC
compared to 5,174 single claims for the suggested Level II APC, based
on CY 2014 final rule claims data. This lower frequency would promote
volatility of costs for such a Level III lower airway endoscopy APC.
Based on the reasons set forth above, we are finalizing our proposal to
assign bronchial thermoplasty services CPT codes 31660 and 31661 to APC
0415 for CY 2014, which has a geometric mean cost of approximately
$2,007.

[[Page 74997]]

b. Direct Laryngoscopy (APC 0074)
For CY 2013, we assigned CPT code 31571 (Laryngoscopy, direct, with
injection into vocal cord(s), therapeutic; with operating microscope or
telescope) to APC 0075 (Level V Endoscopy Upper Airway), with a payment
rate of $2,026.82. For CY 2014, we proposed to assign CPT code 31571 to
APC 0074 (Level IV Endoscopy Upper Airway), with a proposed payment
rate of approximately $1,532. (The proposed payment rate reflects the
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which
was posted on the CMS Web site.)
Comment: One commenter stated that the proposed rule cost of CPT
code 31571 does not support the reassignment of this procedure code
from APC 0075 to APC 0074. The commenter believed that the proposed
payment rate for APC 0074 does not adequately cover the cost of the
procedure described by CPT code 31571, in light of the fact that the
geometric mean cost of CPT code 31571 increased from approximately
$1,849 for CY 2013 to $1,956 in the CY 2014 proposed rule.
Response: The structure of APCs 0074 and 0075 required the proposed
realignment of the procedures within those APCs to avoid 2 times rule
violations. If CPT code 31571 remained assigned to APC 0075, a 2 times
rule violation would have resulted because the cost of the procedure is
more than two times less than the significant procedure with the
highest geometric mean cost, CPT code 31276 (Nasal/sinus endoscopy,
surgical with frontal sinus exploration, with or without removal of
tissue from frontal sinus), which had a proposed rule geometric mean
cost of approximately $4,623. This situation appears to remain the case
based on final rule claims data. The final rule geometric mean cost of
CPT code 31571 is approximately $1,951 and the final rule geometric
mean cost of CPT code 31276 is approximately $4,504, which would result
in a 2 times rule violation if the two procedures were assigned to the
same APC. We note that the geometric mean cost of APC 0074 has
increased from $1,390.85 for CY 2013, to approximately $1,547 for the
CY 2014 proposed rule, and approximately $1,887 for this CY 2014 final
rule with comment period. Furthermore, we believe that the procedure
described by CPT code 31571 is similar in terms of clinical composition
and resource costs to the other procedures assigned to APC 0074. The
final rule geometric mean cost of CPT code 31571 is approximately
$1,951, while the final rule geometric mean cost for APC 0074 is
approximately $1,887, and the final rule geometric mean cost for APC
0075 is approximately $3,062. Therefore, we are finalizing our proposal
to reassign CPT code 31571 from APC 0075 to APC 0074 for CY 2014.
c. Pulmonary Rehabilitation Services (APC 0077)
For CY 2014, we proposed to reassign HCPCS code G0424 (Pulmonary
rehabilitation, including exercise (includes monitoring), one hour, per
session, up to two sessions per day) from APC 0102 (Level II Pulmonary
Treatment) to APC 0077 (Level I Pulmonary Treatment), with a proposed
payment rate of approximately $39. (The proposed payment rate reflects
the corrected proposed rate in the September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web site.) We note that, for CY 2013, HCPCS
code G0424 was assigned to APC 0102 with a similar payment rate of
approximately $39.
CMS established HCPCS code G0424 effective January 1, 2010, to
describe a one-hour session of pulmonary rehabilitation. This HCPCS
code was established consistent with the requirements set forth in
section 144(a)(1) of Public Law 110-275 (MIPPA), which added section
1861(fff) to the Act, to provide Medicare Part B coverage and payment
for a comprehensive program of pulmonary rehabilitation services
furnished to beneficiaries with chronic obstructive pulmonary disease,
effective January 1, 2010.
Comment: Several commenters expressed concern about the
reassignment of HCPCS code G0424 to APC 0077, which is the same APC to
which HCPCS codes G0237 (Therapeutic procedures to increase strength or
endurance of respiratory muscles, face to face, one on one, each 15
minutes (includes monitoring)), G0238 (Therapeutic procedures to
improve respiratory function, other than described by G0237, one on
one, face to face, per 15 minutes (includes monitoring)), and G0239
(Therapeutic procedures to improve respiratory function or increase
strength or endurance of respiratory muscles, two or more individuals
(includes monitoring)), are assigned. Several commenters stated that
the length of time in performing the service described by HCPCS code
G0424 is not consistent with the length of time to perform the other
services assigned to APC 0077. In particular, the commenters stated
that HCPCS code G0424 represents a 60-minute to 90-minute procedure,
which is not similar to the time requirement of the two procedures
assigned to APC 0077, HCPCS codes G0237 and G0238, which represent 15-
minute procedures. Because of the time required to perform the service,
the commenters believed that HCPCS code G0424 should not be assigned to
the same APC as HCPCS codes G0237 and G0238. In addition, several
commenters stated that the assignment of HCPCS code G0424 to APC 0077
would create a 2 times rule violation. Some commenters further believed
that hospitals are underreporting the costs of the procedure described
by HCPCS code G0424, and stated that hospitals may be confused about
the differences in costs for the procedures described by HCPCS codes
G0237 and G0238 (15-minute procedures) and G0424 (60-90 minute
procedures). Some commenters recommended that CMS establish a payment
for HCPCS code G0424 using claims data from HCPCS codes G0237, G0238,
and G0239, similar to the simulated methodology that CMS used in CY
2010 before actual claims data for HCPCS code G0424 became available.
Response: Prior to CY 2012, we did not have available actual claims
data for HCPCS code G0424, and consequently, for CY 2010 and CY 2011,
we utilized a simulated methodology to arrive at an appropriate payment
for the procedure described by HCPCS code G0424. We discussed this
simulated methodology extensively in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74263 through 74267). Because HCPCS code
G0424 became effective January 1, 2010, the first year of actual claims
data for this service was used in the CY 2012 OPPS update.
Specifically, in CY 2012, we had data available for HCPCS code G0424
for payments for OPPS services based on claims submitted from January
1, 2010 through December 31, 2010. Payment for HCPCS code G0424 for CY
2012 was approximately $37.42. For the CY 2014 OPPS update, payment for
the procedure described by HCPCS code G0424 is based on claims
submitted from January 1, 2012 through December 31, 2012. Similar to
our findings for the CY 2012 and CY 2013 OPPS updates, we have a very
robust set of claims for the procedure described by HCPCS code G0424
for the CY 2014 update. Based on our latest hospital outpatient claims
data, the resource cost associated with HCPCS code G0424 is comparable
to the other services assigned to APC 0077. Specifically, our latest
hospital outpatient claims data show that the geometric mean cost for
HCPCS code G0424 is approximately $43, based on 457,226 single claims
(out of 459,199

[[Page 74998]]

total claims), which is similar to the proposed payment rate of
approximately $39 for APC 0077. We note that APC 0077 included various
pulmonary treatments whose geometric mean costs range between $23 and
$43. Based on the latest hospital outpatient claims data, we believe
that HCPCS code G0424 can be appropriately reassigned to APC 0077.
Regarding the commenters' statement about hospitals underreporting
the costs of the procedure described by HCPCS code G0424, we have no
evidence of such underreporting. Furthermore, as we have previously
stated, ``[b]eyond our standard OPPS trimming methodology . . . that we
apply to those claims that have passed various types of claims
processing edits, it is not our general policy to judge the accuracy of
hospital coding and charging for purposes of ratesetting'' (75 FR
71838). We expect hospitals to report their services appropriately.
We disagree with the commenters' assertion that assigning HCPCS
code G0424 to APC 0077 would create a 2 times rule violation. We
reviewed the costs of the procedures that would be assigned to APC
0077, including the cost of the procedure described by HCPCS code G0424
and did not find a violation of the 2 times rule in the APC. As has
been our practice since the implementation of the OPPS, we annually
review all the items and services within an APC group to determine,
with respect to comparability of the use of resources, any 2 times rule
violations. In making this determination, we review our claims data and
determine whether we need to make changes to the current APC
assignments for the following year. For HCPCS code G0424, we evaluated
its APC assignment for the CY 2014 update, and determined that APC 0077
is the appropriate assignment for this service based on its clinical
homogeneity and resource similarity to the other services assigned to
APC 0077.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification, to reassign
HCPCS code G0424 from APC 0102 to APC 0077. APC 0077 has a final CY
2014 geometric mean cost of approximately $39. The final CY 2014
payment rate for HCPCS code G0424 can be found in Addendum B to this CY
2014 OPPS/ASC final rule with comment period (which is available via
the Internet on the CMS Web site).
10. Other Services
a. Balloon Sinus Dilation (APCs 0074 and 0075)
For CY 2013, we assigned CPT codes 31295 (Nasal/sinus endoscopy,
surgical; with dilation of maxillary sinus ostium (eg, balloon
dilation), transnasal or via canine fossa), 31296 (Nasal/sinus
endoscopy, surgical; with dilation of frontal sinus ostium (eg, balloon
dilation)), and 31297 (Nasal/sinus endoscopy, surgical; with dilation
of sphenoid sinus ostium (eg, balloon dilation)) to APC 0075 (Level V
Endoscopy Upper Airway), with a payment rate of $2,026.82. For CY 2014,
we proposed to continue to assign CPT codes 31295, 31296, and 31297 to
APC 0075.
Comment: One commenter stated that the proposed geometric mean cost
of APC 0075 of approximately $2,378 is driven by the cost and frequency
of a single code, CPT code 31541 (Laryngoscopy, direct, operative, with
excision of tumor and/or stripping of vocal cords or epiglottis; with
operating microscope or telescope), which had a proposed geometric mean
cost of approximately $2,085, and comprised 61 percent of the APC's
single frequency claims for ratesetting. The commenter requested that
CMS analyze the appropriateness of continuing to assign CPT codes
31295, 31296, and 31297 to APC 0075 and/or the appropriateness of
continuing to assign CPT code 31541 to APC 0075.
Response: Based on updated claims data, we reviewed the procedures
in APC 0074 (Level IV Endoscopy Upper Airway) and APC 0075. During our
review, we found 2 times rule violations in both APCs. To resolve one
of the 2 times rule violations, we reassigned CPT code 31541 from APC
0075 to APC 0074 for CY 2014. As a result, the final rule geometric
mean cost of APC 0075 increased to approximately $3,062.
The final rule geometric mean costs of CPT codes 31295, 31296, and
31297 are $2,456, $2,894, and $1,905, respectively. Therefore, while we
are continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY
2014, to avoid another 2 times rule violation, we are reassigning CPT
code 31297, which has an appreciably lower geometric mean cost than the
geometric mean cost of CPT codes 31295 and 31296, to APC 0074 for CY
2014. APC 0074 has a CY 2014 final geometric mean cost of approximately
$1,887.
After consideration of the public comments we received, we are
continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY 2014,
as we proposed. However, we are reassigning CPT code 31297 to APC 0074
for CY 2014. In addition, we are reassigning CPT code 31541 from APC
0075 to APC 0074 for CY 2014.
b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
We created HCPCS code C9736 (Laparoscopy, surgical, radiofrequency
ablation of uterine fibroid(s), including intraoperative guidance and
monitoring, when performed) effective July 1, 2013. The procedure
became known to us by means of an application to assign the procedure
to a New Technology APC. We assigned HCPCS code C9736 to APC 0131
(Level II Laparoscopy) because we believed that it has the greatest
degree of clinical similarity to the laparoscopic procedures assigned
to that APC. APC 0131 has a CY 2013 payment rate of $3,487.15. We
proposed to continue to assign HCPCS code C9736 to APC 0131 for CY
2014, with a proposed payment rate of approximately $3,765. (The
proposed payment rate reflects the corrected proposed rate in the
September 6, 2013 OPPS Addendum B, which was posted on the CMS Web
site.)
The AMA's CPT Editorial Panel recently created new Category III CPT
code 0336T (Laparoscopy, surgical, ablation of uterine fibroid(s),
including intraoperative ultrasound guidance and monitoring,
radiofrequency), to be effective January 1, 2014, which describes the
procedure described by HCPCS code C9736. Because HCPCS code C9736
became effective July 1, 2013, there are no claims data available for
this code for ratesetting purposes.
At its August 26, 2013 meeting, the HOP Panel recommended that CMS
move HCPCS code C9736 from APC 0131 to APC 0174 (Level IV Laparoscopy).
Comment: A few commenters recommended that CMS reassign HCPCS code
C9736 (or its successor code, CPT code 0336T) to APC 0174 for CY 2014
because the resources involved in performing the procedure are more
similar to the resources used in performing procedures assigned to APC
0174. The commenters stated that two CPT codes assigned to APC 0174,
CPT code 47370 (Laparoscopy, surgical, ablation of 1 or more liver
tumor(s); radiofrequency) and CPT code 50542 (Laparoscopy, surgical;
ablation of renal mass lesion(s), including intraoperative ultrasound
guidance and monitoring, when performed), have clinical and resource
characteristics similar to the characteristics of the procedures
described by HCPCS code C9736. The commenters stated that both
procedures are performed in an operating room

[[Page 74999]]

(OR) under general anesthesia and involve diagnostic laparoscopy, and
both procedures use approximately 160 to 180 minutes of OR time. One
commenter estimated that OR time for other procedures assigned to APC
0131 averages 122 minutes. Other commenters stated that the single-use
RF probe used in the procedure described by HCPCS code C9736 costs
$2,584, which is part of more than $3,400 in total device and supply
costs. They added that other procedures assigned to APC 0131 are not as
device intensive, whereas procedures assigned to APC 0174 are device
intensive. The commenters also requested that CMS delete HCPCS code
C9736 and use the new CPT code 0336T, upon its effective date, January
1, 2014.
Response: We do not have claims data on HCPCS code C9736 for
ratesetting purposes because the code is new, effective July 1, 2013.
We routinely assign procedure or service codes to clinical APCs before
we have claims data that are indicative of the resource costs of a
procedure or service. We make these assignments initially, using the
best currently available information, while reviewing claims data once
such data become available and making reassignments accordingly, based
on those data. We agree with the HOP Panel and the commenters that
resources used to perform the procedure described by HCPCS code C9736
appear to be more similar to the resources used to perform some of the
services already assigned to APC 0174. Because new CPT code 0336T
describes the procedure described by HCPCS code C9736 and is considered
its successor code, we are deleting HCPCS code C9736, effective January
1, 2014, and assigning CPT code 0336T to APC 0174 for CY 2014. As with
all new services under the OPPS, the APC assignment of CPT code 0336T
is subject to review once our claims data begin to reflect the cost of
this procedure.
After consideration of the public comments we received, we are
deleting HCPCS code C9736, effective January 1, 2014, and assigning CPT
code 0336T to APC 0174 for CY 2014, which has a final geometric mean
cost of approximately $8,623.
c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
The AMA's CPT Editorial Panel created two Category III CPT codes
that describe Magnetic Resonance Image Guided Focused Ultrasound
(MRgFUS) used in ablation of uterine fibroids, effective January 1,
2005: CPT codes 0071T (Focused ultrasound ablation of uterine
leiomyomata, including MR guidance; total leiomyomata volume less than
200 cc of tissue) and 0072T (Focused ultrasound ablation of uterine
leiomyomata, including MR guidance; total leiomyomata volume greater or
equal to 200 cc of tissue). The CMS HCPCS Workgroup created a third
code related to MRgFUS, HCPCS code C9734 (Focused ultrasound ablation/
therapeutic intervention, other than uterine leiomyomata, with magnetic
resonance (MR) guidance), effective April 1, 2013. HCPCS code C9734
originally described the service ``with or without MR guidance''.
However, effective July l, 2013, we changed the descriptor to only
specify ``with magnetic resonance guidance''. For CY 2013, all three of
the MRgFUS codes are assigned to APC 0067 (Level II Stereotactic
Radiosurgery), with HCPCS code C9734 added to APC 0067 effective April
1, 2013. The CY 2013 payment rate for APC 0067 is $3,300.64. For CY
2014, as part of a proposed restructuring of the Stereotactic
Radiosurgery (SRS) APCs and procedures, we proposed to reassign SRS
procedures to other APCs and to maintain intraoperative radiation
therapy (IORT) and magnetoencephalography (MEG) procedures in APC 0065.
We proposed to reassign the service codes for MRgFUS procedures to APC
0065 based on clinical coherence to the other procedures assigned to
APC 0065. In addition, we proposed to rename APC 0065 ``IORT, MRgFUS,
and MEG,'' which has a CY 2014 proposed payment rate of approximately
$1,714 (78 FR 43593 through 43594). (The CY 2014 proposed payment rate
reflects the corrected proposed rate in the September 6, 2013 OPPS
Addendum B, which was posted on the CMS Web site.) The proposal to
restructure the APCs that pay for SRS, IORT, MRgFUS, and MEG procedures
would reduce the number of APCs under which payment is made for SRS,
IORT, MRgFUS, and MEG procedures from four to three APCs. We note that
there are no claims data for CPT codes 0071T and 0072T, or HCPCS code
C9734, available for CY 2014 ratesetting purposes.
Comment: Commenters expressed concern about the CY 2014 proposed
reassignment of MRgFUS services to APC 0065, and stated that MRgFUS
services are not appropriate for assignment to APC 0065 based on
clinical and resource characteristics of other services assigned to APC
0065. One commenter opined that MRgFUS services are more similar
clinically to the SRS services assigned to APC 0067, in terms of
treatment set-up, delivery of radiation, and post-procedure recovery,
except that MRgFUS services use nonionizing radiation. This commenter
also believed that MRgFUS services are similar in resources to the SRS
services assigned to APC 0067, estimating hospital costs for services
described by CPT codes 0071T and 0072T at $5,439 each, and the cost of
the service described by HCPCS code C9734 at $6,073, which are similar
to the proposed payment rate of APC 0067 of approximately $5,615.
A few commenters urged CMS not to reduce the payment rates for
MRgFUS services, as part of restructuring the SRS APCs, or to package
payment for other services related to MRgFUS. The commenters noted that
the CY 2014 proposal would reduce the payment rate for MRgFUS services
by nearly half of the amount of the payment rate for APC 0067 for CY
2013, in addition to reductions in payment as a result of the packaging
of related radiation oncology services.
One commenter identified a number of services performed with MRgFUS
for which CMS has proposed to package payment and estimated the
foregone separate payments for these services, if CMS packages them, to
total approximately $2,800. The commenter recommended that, if CMS
finalizes packaging of these services, CMS compensate providers for
performance of the MRgFUS services by assigning MRgFUS procedure codes
to either APC 0229 (Level II Endovascular Revascularization of the
Lower Extremity), which has a proposed payment rate of approximately
$10,314, or a New Technology APC reflecting a similar level of
resources use. The commenter acknowledged that there are few Medicare
claims data reporting the MRgFUS procedure codes, and stated that the
procedures described by CPT codes 0071T and 0072T are generally
performed on younger women and that, although HCPCS code C9734 is a new
code effective in CY 2013, the commenter expects there will be a
significant number of patients over age 65 with metastatic bone cancer
who will receive treatment with the procedure described by HCPCS code
C9734.
Response: We do not agree with the commenter that MRgFUS procedures
are similar to SRS procedures assigned to APC 0067 because of the
clinical differences between MRgFUS and SRS, which is a specialized
type of radiation therapy. We believe that MRgFUS procedures are more
similar to the services in restructured APC 0065, which are distinct
from SRS clinical characteristics. We note there are no claims data
available for CPT codes 0071T and 0072T or HCPCS code C9734

[[Page 75000]]

for CY 2014 ratesetting. Regarding the cost estimates for MRgFUS
procedures presented by the commenter, it is our longstanding policy to
reassign procedures to APCs based on Medicare claims data that support
reassignment, rather than relying on external cost estimates.
After consideration of the public comments we received, we are
finalizing our proposal to reassign CPT codes 0071T, 0072T, and HCPCS
code C9734 to APC 0065 for CY 2014. The final rule geometric mean cost
of APC 0065 is approximately $1,253.
Our proposed and final packaging policies for CY 2014 are discussed
in section II.A.3. of this final rule with comment period.
d. Flow Cytometry (APC 0433)
For CY 2014, we proposed to reassign CPT code 88184 (Flow
cytometry, cell surface, cytoplasmic, or nuclear marker, technical
component only; first marker) from APC 0433 (Level II Pathology) to APC
0344 (Level IV Pathology), with a proposed payment rate of
approximately $273. (The proposed payment rate reflects the corrected
proposed rate in the September 6, 2013 OPPS Addendum B, which was
posted on the CMS Web site.) In addition, for CY 2014, we proposed to
package payment for CPT code 88185 (Flow cytometry, cell surface,
cytoplasmic, or nuclear marker, technical component only; each
additional marker (list separately in addition to code for first
marker)), which is currently assigned to APC 0342 (Level I Pathology)
as an add-on code. We refer readers to section II.A.3. of this final
rule with comment period for further discussion of our proposed and
final payment methodology for add-on codes for CY 2014.
Comment: One commenter expressed disappointment with CMS' decision
to decrease the payment rate for flow cytometry CPT codes 88184 and
88185.
Response: We note that the CY 2013 payment rate for CPT code 88184
was approximately $23 and the CY 2013 payment rate for CPT code 88185
was approximately $13. For CY 2014, we proposed to reassign CPT code
88184 from APC 0433 to APC 0344 with a payment rate of approximately
$273 based on our claims data for the proposed rule.
We also proposed to package payment for CPT code 88185 because it
is an add-on code. We refer readers to section II.A.3. of this final
rule with comment period for further discussion of our final payment
methodology for add-on codes for CY 2014.
Based on our latest hospital outpatient claims data, we decided not
to revise the APC assignment for CPT code 88184 and instead decided to
retain the code's assignment to APC 0433 (Level II Pathology), which is
the same APC to which CPT code 88184 was assigned for CY 2013. Analysis
of the claims data shows a final rule geometric mean cost of
approximately $35 for CPT code 88184, which is similar to the final
rule geometric mean cost of approximately $37 for APC 0433.
After consideration of the public comment that we received and
review of our latest hospital outpatient claims data for this final
rule with comment period, we are revising our proposal and will
continue to assign CPT code 88184 to APC 0433 for CY 2014. CPT code
88184 has a final payment rate of approximately $37 for CY 2014, which
is slightly higher than the payment rate of approximately $23 for CY
2013. This final payment rate also can be found in Addendum B to this
CY 2014 OPPS/ASC final rule with comment period (which is available via
the Internet on the CMS Web site). The final policy for packaging CPT
code 88185 as an add-on code for CY 2014 is discussed in section
II.A.3. of this final rule with comment period.
e. Hormone Pellet Implant (APC 0420)
For CY 2014, we proposed to reassign CPT code 11980 (Subcutaneous
hormone pellet implantation (implantation of estradiol and/or
testosterone pellets beneath the skin)) from APC 0340 (Level I Minor
Procedures) to APC 0420 (Level II Minor Procedures), with a proposed
payment rate of approximately $103. (The proposed payment rate reflects
the corrected proposed rate in the September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web site.)
In the proposed rule, we note that we proposed to make some changes
related to APC 0340 for CY 2014. We proposed to revise the title of APC
0340 from ``Minor Ancillary Procedures'' to ``Level I Minor
Procedures'' and to establish a second level APC to describe minor
ancillary procedures, specifically, APC 0420, with the title of ``Level
II Minor Procedures,'' as listed in Addendum A to the CY 2014 OPPS/ASC
proposed rule, which was posted on the CMS Web site. Based on our
review of the latest CY 2012 hospital outpatient claims data, we
believed that these changes were necessary to pay appropriately for the
services assigned to APC 0340.
Comment: One commenter expressed concern about the APC assignment
of CPT code 11980 and suggested two options to address the code's APC
assignment. Under the first option, the commenter suggested that CMS
consider establishing a new APC that describes minor ancillary
procedures, specifically a Level III Minor Procedures APC, and assign
CPT code 11980 to this newly created APC. Because there are several
procedures with varying costs assigned to APC 0340 and APC 0420, the
commenter suggested restructuring the minor procedures APCs by
establishing payment ranges for each level of service. In particular,
the commenter suggested that the Level I Minor Procedures APC would
have a geometric means cost in the range of $0 to $120, the Level II
Minor Procedures APC would have a geometric mean cost in the range of
$121 to $300, and the Level III Minor Procedures would have a geometric
mean cost of greater than $300. As an alternative option, the commenter
recommended that CMS reassign CPT code 11980 to APC 0189 (Level III
Female Reproductive Procedure).
Response: As the commenter stated, the procedure described by CPT
code 11980 involves both testosterone pellets for men and estradiol
pellets for women. Because all the procedures in APC 0189 relate to
female procedures, we do not believe that APC 0189 would be an
appropriate APC assignment for CPT code 11980. In addition, based on
our review of the updated hospital outpatient claims data, we believe
the two-level APC appropriately pays for the minor procedures that are
currently assigned to APCs 0340 and 0420.
As has been our practice since the implementation of the OPPS, we
annually review all the items and services within an APC group to
determine, with respect to comparability of the use of resources, for
any 2 times rule violations. In making this determination, we review
our claims data and determine whether we need to make changes to the
current APC assignments for the following year. We will reevaluate the
APC assignment of CPT code 11980 for the CY 2015 OPPS rulemaking cycle.
After consideration of the public comment that we received, we are
finalizing our proposal to reassign CPT code 11980 to APC 0420, which
has a final geometric mean cost of approximately $99 for CY 2014. The
final CY 2014 payment rate for CPT code 11980 can be found in Addendum
B to this final rule with comment period (which is available via the
Internet on the CMS Web site).
f. Peyronie Disease Injection Procedure (APC 0164)
For CY 2014, we proposed to reassign CPT code 54200 (Injection
procedure for peyronie disease) from APC 0164 (Level

[[Page 75001]]

II Urinary and Anal Procedures) to APC 0126 (Level I Urinary and Anal
Procedures), with a proposed payment rate of approximately $137, based
on its clinical and resource similarity to other procedures assigned to
APC 0126. (The proposed payment rate reflects the corrected proposed
rate in the September 6, 2013 OPPS Addendum B, which was posted on the
CMS Web site.)
Comment: One commenter expressed concern with the proposal to
reassign CPT code 54200 to APC 0126 and requested that CMS continue to
assign this code to APC 0164, which is the APC assignment for CY 2013.
The commenter stated the CPT code 54200 is clinically similar to the
procedures described by CPT codes 54220 (Irrigation of corpora
cavernosa for priapism) and 54235 (Injection of corpora cavernosa with
pharmacologic agent(s) (eg, papaverine, phentolamine)), which are
assigned to APC 0164. The commenter indicated that all three procedures
(CPT codes 54200, 54220, and 54235) involve needle placements and
should be assigned to the same APC. In addition, the commenter
requested that CMS establish a low geometric mean cost of $163 for APC
0164.
Response: We examined the latest CY 2012 hospital outpatient claims
data, which are based on claims submitted from January 1, 2012 through
December 31, 2012, and we agree with the commenter's suggestion to
continue to assign CPT code 54200 to APC 0164. Our analysis reveals
that the resource cost associated with the procedure described by CPT
code 54200 is similar to the resource cost of the procedure described
by CPT code 54220, which is assigned to APC 0164. Specifically, the
geometric mean cost for CPT code 54200 is approximately $167 based on
330 single claims (out of 351 total claims), which is similar to the
geometric mean cost of approximately $166 for CPT code 54220 based on
25 single claims (out of 427 total claims). Based on the claims data,
we believe that CPT code 54200 should continue to be assigned to APC
0164.
With regard to the commenter's suggestion to set the geometric mean
cost at $163 for APC 0164, we do not cap the geometric mean cost based
on suggested amounts. The geometric mean cost is determined based on
consideration of the costs of all of the procedures and the number of
claims within a given APC. We refer readers to section II.A. of this
final rule with comment period for a discussion of our methodology in
determining the APC geometric mean costs.
After consideration of the public comment we received, we are not
finalizing our proposal to reassign CPT code 54200 from APC 0164 to APC
0126 for CY 2014. Rather, we are maintaining the APC assignment for CPT
code 54200 to APC 0164, which has a final CY 2014 geometric mean cost
of approximately $212. The final CY 2014 payment rate for CPT code
54200 can be found in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
We established HCPCS code G0456 (Negative pressure wound therapy,
(e.g. vacuum assisted drainage collection) using a mechanically-powered
device, not durable medical equipment, including provision of cartridge
and dressing(s), topical application(s), wound assessment, and
instructions for ongoing care, per session; total wound(s) surface area
less than or equal to 50 square centimeters) and HCPCS code G0457
(Negative pressure wound therapy, (e.g. vacuum assisted drainage
collection) using a mechanically-powered device, not durable medical
equipment, including provision of cartridge and dressing(s), topical
application(s), wound assessment, and instructions for ongoing care,
per session; total wound(s) surface area greater than 50 square
centimeters), effective January 1, 2013, to provide a payment mechanism
for negative pressure wound therapy services furnished through a
disposable device. We assigned these services to APC 0016 (Level IV
Debridement & Destruction), which has a CY 2013 payment rate of
approximately $210. For CY 2014, we proposed to continue to assign
HCPCS codes G0456 and G0457 to APC 0016, with a proposed payment rate
of approximately $272. (The proposed payment rate reflects the
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which
was posted on the CMS Web site.)
Comment: Some commenters requested that CMS reassign HCPCS codes
G0456 and G0457 from APC 0016 to proposed APC 0186 (Level III Skin
Repair). The commenters believed that, based on clinical homogeneity
and resource costs of the other procedures assigned to proposed APC
0186, proposed APC 0186 is the most appropriate assignment for HCPCS
codes G0456 and G0457. Another commenter stated that the cost of
providing NPWT is in the range of $450 to $500, which more closely
aligns with the CY 2013 payment rate of approximately $393 for proposed
APC 0135 (Level IV Skin Repair). One commenter believed that HCPCS
codes G0456 and G0457 are clinically similar to the wound care
procedures described by CPT codes 12020, 13100, 13101, 15002, and
15003, which were assigned to APC 0135 for CY 2013.
Response: We disagree with the commenters' assertion that HCPCS
codes G0456 and G0457 are similar, in terms of clinical homogeneity or
resource costs, to CPT codes 12020, 13100, 13101, and 15002. Our
analysis of the latest hospital outpatient claims data indicates that
the resource costs for the services described by CPT codes 12020,
13100, 13101, and 15002 are in the range of $474 to $570. Specifically,
the geometric mean cost for CPT code 12020 is approximately $522 based
on 1,082 single claims (out of 2,254 total claims), for CPT code 13100,
approximately $474 based on 81 single claims (out of 341 total claims),
for CPT code 13101, approximately $570 based on 1,198 single claims
(out of 3,725 total claims), and for CPT code 15002, approximately $547
based on 657 single claims (out of 4,119 total claims). (We have not
included the geometric mean cost for CPT code 15003 in this discussion
because it is an add-on code that will be packaged in the CY 2014 OPPS
update.) We believe that the resource costs for the services described
by the negative pressure wound therapy HCPCS codes G0456 and G0457 may
be slightly higher than the resource costs for the services described
by the negative pressure wound therapy CPT codes 97605 and 97606, but
not as significant as those services described by CPT codes 12020,
13100, 13101, and 15002. Our claims data show that the geometric mean
cost for HCPCS code 97605 is approximately $100 based on 66,355 single
claims (out of 85,285 total claims), and approximately $140 for CPT
code 97606 based on 7,681 single claims (out of 10,771 total claims).
Based on the nature of the procedure, the advice from our medical
advisors, and our claims data for CPT codes 12020, 13100, 13101, 15002,
97605, and 97606, we believe that APC 0016, which has a geometric mean
cost of approximately $276, is the more appropriate APC assignment for
HCPCS codes G0456 and G0457 because these procedures describe
debridement-type services rather than skin repair procedures.
Because HCPCS codes G0456 and G0457 are new for CY 2013, we expect
to have claims data next year, at which time, we will reevaluate the
APC assignments for both codes in preparation for the CY 2015
rulemaking cycle. We remind hospitals that we

[[Page 75002]]

review, on an annual basis, the APC assignments for all services and
items paid under the OPPS.
Comment: One commenter who responded to the CY 2013 OPPS/ASC final
rule with comment period believed that the CY 2013 payment rate of
approximately $210 for both HCPCS codes G0456 and G0457 is
inappropriate considering that the current national average selling
price for the device used with the procedure is approximately $270. In
addition, the commenter requested that CMS revise the status indicator
of HCPCS codes G0456 and G0457 from ``T'' (Significant Procedure,
Multiple Reduction Applies) to ``S'' (Significant Procedure, Not
Discounted When Multiple) in order to not undercompensate hospitals for
performing the procedure when it is performed with other services on
the same day.
Response: For the CY 2014 update, the payment rate for HCPCS codes
G0456 and G0457 will increase from $210 for CY 2013 to approximately
$275 for CY 2014. As stated above, because HCPCS codes G0456 and G0457
are new for CY 2013, we expect to have claims data next year, at which
time we will reevaluate the APC assignments for both codes in
preparation for the CY 2015 rulemaking cycle.
With regards to the status indicator assignment of HCPCS codes
G0456 and G0457, we note that all codes assigned to APC 0016 are
crosswalked to status indicator ``T'' and have no corresponding ``S''
status indicator. In addition, we do not believe that every service or
procedure should be paid at 100 percent. The multiple procedure
reduction for status indicator ``T'' services recognizes that
efficiencies are gained when multiple procedures are performed in a
single session. We believe that this policy is appropriately applied to
the wound treatment procedures in question.
After consideration of the public comments that we received, we are
finalizing our CY 2014 proposal, without modification, to continue to
assign HCPCS codes G0456 and G0457 to APC 0016, which has a final CY
2014 geometric mean cost of approximately $276. The final CY 2014
payment rate for HCPCS codes G0456 and G0457 can be found in Addendum B
to this final rule with comment period (which is available via the
Internet on the CMS Web site).
h. Platelet Rich Plasma (PRP) (APC 0327)
For CY 2014, we proposed to continue to assign HCPCS code G0460
(Autologous platelet rich plasma for chronic wounds/ulcers, including
phlebotomy, centrifugation, and all other preparatory procedures,
administration and dressings, per treatment) to APC 0013 (Level II
Debridement & Destruction) with a proposed payment rate of
approximately $83. (The proposed payment rate reflects the corrected
proposed rate in the September 6, 2013 OPPS Addendum B, which was
posted on the CMS Web site.)
Comment: Many of the commenters disagreed with the proposed APC
assignment for HCPCS code G0460. Several commenters stated that the
proposed payment rate of approximately $83 for APC 0013 does not
adequately pay for the cost of providing the service described by HCPCS
code G0460. Some of the commenters reported that the actual cost to
provide PRP services is between $400 and $450. Other commenters
reported a specific cost of $458 to perform the procedure. Most of the
commenters stated that HCPCS code G0460 is inappropriately assigned to
APC 0013 and urged CMS to reassign the code to APC 0135 (Level IV Skin
Repair), which had a proposed payment rate of approximately $862. One
commenter stated that PRP services are more analogous to the tissue-
based wound procedures that are assigned to APC 0135 (Level III Skin
Repair) for CY 2013, which has a payment rate of $393.38 for the first
100cm2.
Response: We reviewed all the codes assigned to the Debridement &
Destruction APCs as well as the Skin Repair APCs. After further
consultation with our medical advisors, we agree with the commenters
that HCPCS code G0460 would be more appropriately assigned to one of
the Skin Repair APCs. For CY 2014, there are four Skin Repair APCs. We
have renumbered these APCS with sequential numbers as follows: (1) APC
0326 (Level I Skin Repair); (2) APC 0327 (Level II Skin Repair); (3)
APC 0328 (Level III Skin Repair); and (4) APC 0329 (Level IV Skin
Repair). After consideration of the public comments we received, and
based on the clinical comparability of the procedure and the
approximate resource costs associated with the procedure as compared to
other procedures assigned to the Skin Repair APCs, we believe that APC
0327 is the most appropriate APC assignment for HCPCS code G0460. APC
0327 has a final geometric mean cost of approximately $411 for CY 2014.
The final CY 2014 payment rate for HCPCS code G0460 can be found in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site).
It has been our practice since the implementation of the OPPS in
2000 to review, on an annual basis, the APC assignments for the
procedures and services paid under the OPPS. We will review the APC
assignment for HCPCS code G0460 and determine whether an APC
reassignment is necessary for the CY 2015 ratesetting.
i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium
(HEU) Sources (APC 1442)
Radioisotopes are widely used in modern medical imaging,
particularly for cardiac imaging and predominantly for the elderly
(Medicare) population. Technetium 99 (Tc-99m), the radioisotope used in
the majority of such diagnostic imaging services, is currently produced
in legacy reactors outside of the United States using highly enriched
uranium (HEU).
The Administration has established an agenda to eliminate domestic
reliance on these reactors, and is promoting the conversion of all
medical radioisotope production to non-HEU sources. Alternative methods
for producing Tc-99m without HEU are technologically and economically
viable, and conversion to such production has begun and is expected to
be completed within a 5-year time period. We expect this change in the
supply source for the radioisotope used for modern medical imaging will
introduce new costs into the payment system that are not accounted for
in the historical claims data. Therefore, for CY 2013, we finalized a
policy to provide an additional payment of $10 for the marginal cost
for radioisotopes produced from non-HEU sources over the costs for
radioisotopes produced by HEU sources (77 FR 68316). Under this policy,
hospitals report HCPCS code Q9969 (Tc-99m from non-highly enriched
uranium source, full cost recovery add-on, per study dose) once per
dose along with any diagnostic scan or scans furnished using Tc-99m as
long as the Tc-99m doses used can be certified by the hospital to be at
least 95 percent derived from non-HEU sources.
Comment: Several commenters requested changes in the additional
payment for Technetium-99m produced from non-highly enriched uranium
(non-HEU) sources, as described by HCPCS code Q9969. One commenter was
concerned that CMS did not utilize stakeholder feedback to craft a more
effective payment methodology, such as ensuring that the payment leads
to Full Cost Recovery higher in the supply chain, or paying
radiopharmacies for the additional costs of maintaining segregated
channels for HEU and LEU.

[[Page 75003]]

One commenter was concerned about the beneficiary's responsibility for
a 20-percent copayment. That commenter also believed that the $10
payment was too low. Specific changes requested by commenters included
elimination of the copayment, increase in the payment rate, expanding
it to other radioisotopes, and modifying the payment in response to
industry suggestions during stakeholder meetings and/or paying
separately for diagnostic radiopharmaceuticals.
Response: We implemented this payment for a specific purpose based
on industry and government concerns and considering stakeholder
requests and stakeholder feedback. We determined that non-HEU sourced
Mo-99, the Tc-99m precursor, is expected to cost more than current
sources from legacy reactors, and this increased cost will adversely
impact hospitals. In evaluating that concern, we determined that there
is a probability that those costs will not be passed on uniformly as
the industry converts. Therefore, we used our authority under section
1833(t)(2)(E) of the Act to ensure payment equity among hospitals to
propose and finalize a policy through rulemaking that created this
additional payment to address the incremental cost of obtaining Tc-99m
from the new sources of supply. We stated in our CY 2013 OPPS/ASC final
rule with comment period (77 FR 68316) that our expectation was that
the transition to non-HEU sourced Mo-99 would be completed within 4 to
5 years and that there might be a need to make differential payments
for a period of 4 to 5 years. We further stated that we would reassess,
and propose if necessary, on an annual basis, whether such an
adjustment continued to be necessary and whether any changes to the
adjustment were warranted. We have reassessed this payment for CY 2014
and have not identified any new information that would cause us to
modify the payment at this time. We do not agree with the commenters'
suggestion to eliminate the beneficiary's copayment because section
1833(t)(8) of the Act and Sec. Sec. 419.41 through 419.45 of the
regulations require a beneficiary copayment.

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3 years. This pass-through
payment eligibility period begins with the first date on which
transitional pass-through payments may be made for any medical device
that is described by the category. We may establish a new device
category for pass-through payment in any quarter. Under our established
policy, we base the pass-through status expiration date for a device
category on the date on which pass-through payment is effective for the
category, which is the first date on which pass-through payment may be
made for any medical device that is described by such category. We
propose and finalize the dates for expiration of pass-through status
for device categories as part of the OPPS annual update.
We also have an established policy to package the costs of the
devices that are no longer eligible for pass-through payments into the
costs of the procedures with which the devices are reported in the
claims data used to set the payment rates (67 FR 66763). Brachytherapy
sources, which are now separately paid in accordance with section
1833(t)(2)(H) of the Act, are an exception to this established policy.
There currently are 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 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. 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 CY 2013 OPPS/ASC proposed rule (78 FR 43595), in the
case of device category C1840, we proposed 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 had a proposed geometric mean cost of approximately
$1,794. When the HCPCS 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 geometric mean
cost of the procedure is approximately $15,249. Based on this geometric
mean cost for CPT code 0308T, we proposed to create new APC 0351 (Level
VII Anterior Segment Eye Procedures), and to assign CPT code 0308T to
this APC, which had a proposed geometric mean cost of approximately
$15,249. We stated in the proposed rule that the geometric mean cost
for CY 2014 that will be reported in the final rule for this new APC
will depend on the geometric mean cost of CPT code 0308T (including the
cost of HCPCS code C1840) as calculated using claims data available for
the final rule.
Comment: One commenter requested that CMS extend the pass-through
payment period of HCPCS code C1830 because one local Medicare
contractor had denied ASC payment at least twice because the Medicare
claim form was reportedly incorrectly completed. The commenter stated
that there is a lack of consistent guidance on how ASC claims for pass-
through items are to be submitted.
Response: We are not extending the period of pass-through payment
of HCPCS code C1830. Under the ASC payment system, Sec. 416.164(b)(2)
of the regulations requires that we pay separately for certain
implantable items and services that have pass-through status under the
OPPS.
HCPCS code C1830 was made effective for pass-through payment as of
October 1, 2011, and we finalized a December 31, 2013 expiration date
from pass-through payment for HCPCS code C1830 under the OPPS in the CY
2013 OPPS/ASC final rule with comment period (77 FR 68353). We cannot
extend the pass-through payment status of HCPCS code C1830 through CY
2014, because such an extension would make

[[Page 75004]]

the pass-through payment status effective longer than the maximum 3-
year period permitted under section 1833(t)(6)(B)(iii) of the Act. As
we stated in the proposed rule, after December 31, 2013, the costs for
devices described by HCPCS code C1830 will be packaged into the costs
of the procedure with which the device is reported in the hospital
claims data used in the development of the OPPS relative payment
weights that will be used to establish the ASC payment rates for CY
2014 (78 FR 43638). Therefore, we are not altering the decision to
expire category C1830 from pass-through payment as of January 1, 2014,
or our ASC policy. We are not aware of systematic problems with billing
of HCPCS code C1830 either in the OPPS payment system or the ASC
payment system. The commenter cited that there were several instances
in which one local contractor rejected HCPCS code C1830 claims from an
ASC. Our OPPS claims data reflect that nearly 1,900 claims from for
HCPCS code C1830 were processed with a geometric mean cost of
approximately $126. Therefore, it appears that most HCPCS code C1830
pass-through payment claims were adjudicated successfully in the OPPS,
and we believe this is true in the ASC setting as well. Because pass-
through devices are contractor priced in the ASC, there may be more
interactions between ASCs and MACs on pass-through claims than is
typical for hospitals. We are not aware of widespread problems with ASC
processing of claims for HCPCS code C1830.
Comment: One commenter concurred with the proposed assignment of
CPT code 0308T to new APC 0351, as well as the designation of this
procedure as device-intensive in the ASC setting. The commenter also
urged CMS to only use claims from hospitals that are customers of the
manufacturer of the HCPCS code C1840 device as claims used with CPT
code 0308T because that company is reportedly the sole manufacturer of
the device. The commenter noted that four claims were from a hospital
that was not a customer, and which apparently reported costs with CPT
code 0308T that were much too low to represent the HCPCS code C1840
device cost.
Response: We appreciate the commenter's support for the APC
assignment of CPT code 0308T. Regarding the recommendation to use
claims only from customers of the device manufacturer, we do not
generally screen claims in the manner suggested by the commenter.
After consideration of the public comments we received, we are
maintaining our previous decision to expire device categories C1830,
C1840, and C1886 from pass-through payment status, which we finalized
in the CY 2013 OPPS/ASC final rule with comment period, and we are
finalizing our proposal to package the costs of these devices with the
procedures with which they are billed. We also are finalizing for CY
2014 the proposed assignment of CPT code 0308T to APC 0351. The final
CY 2014 geometric mean cost of APC 0351 is approximately $15,606.
As we indicated in the CY 2014 OPPS/ASC proposed rule, with the
expiration of device categories C1830, C1840, and C1886 from pass-
through payment status at the end of CY 2013, there are no currently
active categories for which we would expire 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. (There is one new device category eligible for pass-through
payment that we created effective October 1, 2013, C1841 (Retinal
prosthesis, includes all internal and external components). However,
this category will not expire in CY 2014.)
2. Provisions for Reducing Transitional Pass-Through Payments To Offset
Costs Packaged Into APC Groups
a. Background
Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional
pass-through payment for an eligible device as the amount by which the
hospital's charges for a device, adjusted to cost (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. CY 2014 Policy
In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), we proposed 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 proposed to continue
our policy, for CY 2014, that the pass-through evaluation process and
pass-

[[Page 75005]]

through payment methodology for implantable biologicals that are
surgically inserted or implanted (through a surgical incision or a
natural orifice) and that are newly approved for pass-through status
beginning on or after January 1, 2010, be the device pass-through
process and payment methodology only. The rationale for this policy is
provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60471 through 60477). We also proposed to continue our established
policies for calculating and setting the device APC offset amounts for
each device category eligible for pass-through payment. In addition, we
proposed to continue to review each new device category on a case-by-
case basis to determine whether device costs associated with the new
category are already packaged into the existing APC structure. If
device costs packaged into the existing APC structure are associated
with the new category, we proposed to deduct the device APC offset
amount from the pass-through payment for the device category. As stated
earlier, these device APC offset amounts also would be used in order to
evaluate whether the cost of a device in an application for a new
device category for pass-through payment is not insignificant in
relation to the APC payment amount for the service related to the
category of devices (Sec. 419.66(d)).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), for CY 2014,
we also proposed to continue our policy established in CY 2010 to
include implantable biologicals in our calculation of the device APC
offset amounts. In addition, we proposed to continue to calculate and
set any device APC offset amount for 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 (78 FR 43596).
In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43596),
we proposed 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.
We did not receive any public comments on these proposals.
Therefore, we are finalizing them for CY 2014 without modification. In
addition, we will update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final CY 2014
portions of the APC payment amounts that we determine are associated
with the cost of devices so that this information is available for use
by the public in developing potential CY 2014 device pass-through
payment applications and by CMS in reviewing those applications.
3. 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 the CY 2014 OPPS/ASC proposed rule (78 FR
43596), we proposed 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 proposed to provide guidance on
the meaning of the term ``integral'' and delete the term
``subordinate'' from the existing regulation in the proposed rule. In
the proposed rule, we stated that 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 proposed 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 read as follows: ``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.''
We did not receive any public comments on this proposal. Therefore,
we are finalizing, without modification, our proposal to delete the
term ``subordinate'' from this criterion's regulatory text under
existing Sec. 419.66(b)(3). The final revised Sec. 419.66(b)(3)
regulatory language reads as follows: ``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. 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

[[Page 75006]]

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. Policy for CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597),
beginning in CY 2014, we proposed 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 proposed to reduce OPPS payment, for the
applicable APCs listed in Table 17 of the proposed rule, by the full or
partial credit a hospital 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 of the proposed rule 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597),
for CY 2014, we proposed to continue using the three criteria
established in the CY 2007 OPPS/ASC final rule with comment period for
determining the APCs to which 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 temporarily); and (3) the device offset amount must be
significant, which, for purposes of this policy, is defined as
exceeding 40 percent of the APC cost. We also proposed to continue to
restrict the devices to which the APC payment adjustment would apply to
a specific set of costly devices to ensure that the adjustment would
not be triggered by the implantation of an inexpensive device whose
cost would not constitute a significant proportion of the total payment
rate for an APC. We stated that 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.
Comment: A majority of commenters supported CMS' proposed
adjustment to the OPPS payment for no cost/full credit and partial
credit devices, while some commenters requested that CMS rescind its
proposal because they believed it would cause additional administrative
burden. One commenter argued that using the ``FD'' value code
methodology in the OPPS would lead to inaccuracy of claims. One
commenter stated that, in some cases, if a full credit were received,
the entire APC payment would be consumed by the credit and the hospital
would receive no payment for the procedural portion of the service.
That commenter suggested that CMS develop a floor for the offset and
urged CMS to work with hospital stakeholders to better understand the
overall impact to hospitals and to ensure that hospitals would be
appropriately paid for the procedural aspect of the device/lead
replacement. Another commenter requested that CMS remove APCs 0082,
0083 0104, 0229, 0319, and 0656 from the final listing of APCs covered
by the no cost/full credit policy.
Response: We appreciate the support of our proposal by the majority
of commenters. We disagree with commenters' assertion that the proposed
change from the ``FB''/``FC'' modifiers to the ``FD'' value code for
the adjustment to OPPS payment for no cost/full credit and partial
credit devices would cause added administrative burden. We believe that
the use of the ``FD'' value code will not cause added administrative
burden for hospitals. We also disagree with the assertion that using
the ``FD'' value code methodology in the OPPS would lead to an
inaccuracy in claims. We believe that the use of the ``FD'' value code
methodology could lead to greater accuracy in our claims data. However,
we are sensitive to the commenter's concerns that, in some cases, if a
full credit were received, the entire APC payment would be consumed by
the credit and the hospital would receive no payment for the nondevice
portion of the costs related to the service. Therefore, we are limiting
the OPPS payment deduction for the applicable APCs listed below in
Table 30 of this final rule with comment period to the total amount of
the device offset when the ``FD'' value code appears on a claim.
Hospitals would still be required to report the amount of the credit in
the amount portion for value code ``FD'' when the hospital receives a
credit for a replaced device listed in Table 18 of the proposed rule
that is 50 percent or greater than the cost of the device. We continue
to believe that APCs 0082, 0083, 0104, 0229, 0319, and 0656 are
appropriately identified as APCs to which the no cost/full credit and
partial credit device adjustment policy will apply for CY 2014.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal 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.
Specifically, we are finalizing our proposal to require hospitals 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 31 of this final rule with comment period that is 50
percent or greater than the cost of the device. We also are finalizing
our proposal to limit the OPPS payment deduction for the applicable
APCs listed below in Table 30 of this final rule with comment period to
the total amount of

[[Page 75007]]

the device offset when the ``FD'' value code appears on a claim.
We proposed 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.
We examined the offset amounts calculated from the CY 2014 final
rule data and the clinical characteristics of the final CY 2014 APCs to
determine which APCs meet the criteria for CY 2014. Based on the CY
2012 claims data available for this final rule with comment period, we
are not making any changes to the proposed lists of APCs and devices to
which this modified policy applies.
Table 30 below lists the APCs to which the finalized modified
payment adjustment policy for no cost/full credit and partial credit
devices applies in CY 2014.
Table 31 below lists the devices to which the finalized modified
payment adjustment policy for no cost/full credit and partial credit
devices applies in CY 2014.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

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

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

1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biologicals (also referred to as biologics). As enacted by the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 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 also are provided for certain
``new'' drugs and biologicals that were not being paid for as an HOPD
service as of December 31, 1996 and whose cost is ``not insignificant''
in relation to the OPPS payments for the procedures or services
associated with the new drug or biological. For pass-through payment
purposes, radiopharmaceuticals are included as ``drugs.'' 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 were assigned status indicator
``G'' in Addenda A and B to the 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 competitive acquisition program (CAP) 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 final rule with
comment period, the term ``ASP methodology'' and ``ASP-based'' are
inclusive of all data sources and methodologies described therein.
Additional information on the ASP methodology can be found on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
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. Drugs and Biologicals With Expiring Pass-Through Status in CY 2013
In the CY 2014 OPPS/ASC proposed rule (78 FR 43598), we proposed
that the pass-through status of 15 drugs and biologicals would expire
on December 31, 2013, as listed in Table 19 of the proposed rule (78 FR
43599). 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
groups of policy packaged products described in section II.A.3. of the
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 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 $90 for CY 2014), as discussed further in section V.B.2. of this
final rule with comment period. 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 ASP+6 percent for CY 2014, as discussed further in
section V.B.3. of this final rule with comment period).
Comment: One commenter recommended that CMS provide pass-through
status for new drugs, specifically diagnostic radiopharmaceuticals, for
a full 3-year period. The commenter asserted that providing pass-
through status for 3 years would help provide a more current and
accurate data set on which to base payment for the associated nuclear
medicine procedure into which the radiopharmaceutical is subsequently
packaged. To provide for a full 3-year pass-through period, the
commenter recommended that the pass-through status for drugs and
biologicals expire on a quarterly basis rather than on an annual basis.
Response: As we stated in the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74287), the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68363), and as described in section V.A. of this
final rule with comment period, section 1833(t)(6)(C)(i)(II) of the Act
permits CMS to make pass-through payments for a period of at least 2
but not more than 3 years, after the product's first payment as a
hospital outpatient service under Medicare Part B. We continue to
believe that this period of payment appropriately facilitates
dissemination of these new products into clinical practice and
facilitates the collection of sufficient hospital claims data
reflective

[[Page 75011]]

of their costs for future OPPS ratesetting. Our longstanding practice
has been to provide pass-through payment for a period of 2 to 3 years,
with expiration of pass-through status proposed and finalized through
the annual rulemaking process. Each year, when proposing to expire the
pass-through status of certain drugs and biologicals, we examine our
claims data for these products. We observe that hospitals typically
have incorporated these products into their chargemasters based on the
utilization and costs observed in our claims data. Under the existing
pass-through policy, we begin pass-through payment on a quarterly
basis, depending on when applications are submitted to us for
consideration. We are confident that the period of time for which
drugs, biologicals, contrast agents, and radiopharmaceuticals receive
pass-through status, which is at least 2 but no more than 3 years, is
appropriate for CMS to collect the sufficient amount of data to make a
packaging determination. We further note that we are in full compliance
with the requirements of the Act, which states that pass-through status
is given for at least 2 but no more than 3 years.
Comment: One commenter stated that the pass-through status for
HCPCS code Q4131 (Epifix, per square centimeter) should not expire on
December 31, 2013, because this product has not received pass-through
payments for a period of at least 2 years after the payment was first
made for this product as a hospital outpatient service under Medicare
Part B, as required by statute. The commenter indicated that pass-
through payment for HCPCS code Q4131 was first made in February 2012.
Response: Upon review of our CY 2012 claims data, we agree with the
commenter that HCPCS code Q4131 has not received pass-through payments
for the minimum period of ``at least 2 years'' as required by statute.
Therefore, we are not finalizing our proposal to expire the pass-
through status for HCPCS code Q4131 on December 31, 2013.
After consideration of the public comments we received, we are
modifying our proposal to expire the pass-through status of the 15
drugs and biologicals that were listed in Table 19 of the CY 2014 OPPS/
ASC proposed rule (78 FR 43599). The pass-through status for HCPCS code
Q4131 will not expire on December 31, 2013, but will continue for CY
2014. Table 32 lists the drugs and biologicals for which pass-through
status will expire on December 31, 2013, as well as the final status
indicators and the final APC assignments for these drugs and
biologicals for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.331

[[Page 75012]]

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing
Pass-Through Status in CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43599), we proposed 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, were listed
in Table 20 of the proposed rule (78 FR 43600). The APCs and HCPCS
codes for these drugs and biologicals approved for pass-through status
through April 1, 2013 were assigned status indicator ``G'' in Addenda A
and B of the proposed rule. Addenda A and B for the 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 stated in the proposed rule that 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, which is the amount that drugs and
biologicals receive under section 1842(o) of the Act.
Therefore, for CY 2014, we proposed to pay for pass-through drugs
and biologicals at ASP+6 percent, equivalent to the rate these drugs
and biologicals would receive in the physician's office setting in CY
2014. We proposed 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 policy-packaged drugs (which include contrast
agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new
groups of policy packaged products described in section II.A.3. of this
final rule with comment period, 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 when used in a surgical procedure), we proposed 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 proposed 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 proposed to provide payment
for both diagnostic and therapeutic radiopharmaceuticals that are
granted pass-through status based on the ASP methodology. As stated
above, for purposes of pass-through payment, we consider
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a
diagnostic or therapeutic radiopharmaceutical receives pass-through
status during CY 2014, we proposed to follow the standard ASP
methodology to determine the pass-through payment rate that drugs
receive under section 1842(o) of the Act, which is ASP+6 percent. If
ASP data are not available for a radiopharmaceutical, we proposed to
provide pass-through payment at WAC+6 percent, the equivalent payment
provided to pass-through drugs and biologicals without ASP information.
If WAC information is also not available, we proposed to provide
payment for the pass-through radiopharmaceutical at 95 percent of its
most recent AWP.
Comment: One commenter requested that CMS provide a higher payment
amount for radiopharmaceuticals that are granted pass-through status.
Response: We note that, for CY 2014, consistent with our CY 2013
payment policy for diagnostic and therapeutic radiopharmaceuticals, we
proposed to provide payment for both diagnostic and therapeutic
radiopharmaceuticals with pass-through status based on the ASP
methodology. As stated above, the ASP methodology, as applied under the
OPPS, uses several sources of data as a basis for payment, including
the ASP, WAC if ASP is unavailable, and 95 percent of the
radiopharmaceutical's most recent AWP if ASP and WAC are unavailable.
For purposes of pass-through payment, we consider radiopharmaceuticals
to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic
radiopharmaceutical receives pass-through status during CY 2014, we
proposed to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS to account for the acquisition as
well as pharmacy overhead and handling costs. We continue to believe
that a single payment is appropriate for diagnostic
radiopharmaceuticals with pass-through status in CY 2014, and that the
payment rate of ASP+6 percent (or payment based on the ASP methodology)
is appropriate to provide payment for both the radiopharmaceutical's
acquisition cost and any associated handling and overhead costs.
After consideration of the public comments we received, we are
finalizing our proposal to provide payment for drugs, biologicals,
diagnostic and therapeutic radiopharmaceuticals, and contrast agents
that are granted pass-through status based on the ASP methodology. If a
diagnostic or therapeutic radiopharmaceutical receives pass-through
status during CY 2014, we will follow the standard ASP methodology to
determine the pass-through payment rate that drugs receive under
section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not
available for a radiopharmaceutical, we will provide pass-through
payment at WAC+6 percent, the equivalent payment provided to pass-
through drugs and biologicals without ASP information. If WAC
information is also not available, we will provide payment for the
pass-through radiopharmaceutical at 95 percent of its most recent AWP.
As discussed in more detail in section II.A.3. of this final rule
with comment period, 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. In the CY 2014 OPPS/ASC
proposed rule, we proposed to continue the packaging of these items,
and we also proposed new groups of policy-packaged products described
in section II.A.3. of the proposed rule, namely drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test

[[Page 75013]]

or procedure and drugs and biologicals that function as supplies 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 calculation of the policy-packaged
drug APC offset amounts is described in more detail in section IV.A.2.
of this final rule with comment period. It follows that the copayment
for the nonpass-through payment portion (the otherwise applicable fee
schedule amount that we would also offset from payment for the drug or
biological if a payment offset applies) of the total OPPS payment for
those drugs and biologicals would, therefore, be accounted for in the
copayment for the associated clinical APC in which the drug or
biological is used.
According to section 1833(t)(8)(E) of the Act, the amount of
copayment associated with pass-through items is equal to the amount of
copayment that would be applicable if the pass-through adjustment was
not applied. Therefore, as we did in CY 2013, we proposed 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 proposed 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
the 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 proposed to not publish a copayment amount for these items in
Addenda A and B to the proposed rule (which are available via the
Internet on the CMS Web site).
Comment: Commenters supported the CY 2014 proposal to continue to
set the associated copayment amounts to zero for pass-through
diagnostic radiopharmaceuticals, contrast agents, and other drugs and
biologicals that would otherwise be packaged if the product did not
have pass-through status. The commenters noted that this policy is
consistent with statutory requirements and provides cost-saving
benefits to beneficiaries. One commenter requested that CMS expand the
$0 copayment policy to pass-through therapeutic radiopharmaceuticals as
well.
Response: We appreciate the commenters' support of our proposal.
According to section 1833(t)(8)(E) of the Act, the amount of copayment
associated with pass-through items is equal to the amount of copayment
that would be applicable if the pass-through adjustment was not
applied. Therefore, we believe that the copayment amount should be zero
for drugs and biologicals that would otherwise be packaged if the item
did not have pass-through status. However, therapeutic
radiopharmaceuticals without pass-through status are not packaged but
are paid at ASP+6 percent. Therefore, the copayment for a therapeutic
radiopharmaceutical with pass-through status cannot be zero but must be
based on the payment amount for the therapeutic radiopharmaceutical
when it does not have pass-through status.
After consideration of the public comments received, we are
finalizing our proposal, without modification, to continue to set the
associated copayment amount for pass-through diagnostic
radiopharmaceuticals, contrast agents, and anesthesia drugs that would
otherwise be packaged if the item did not have pass-through status to
zero for CY 2014. We also are finalizing our proposal to extend this
policy to the additional categories of policy-packaged drugs and
biologicals that have pass-through status, and to set a copayment
amount of zero for these drugs and biologicals for CY 2014.
The 26 drugs and biologicals that will continue to have pass-
through status for CY 2014 or have been granted pass-through status as
of January 2014 are shown in Table 33 below. As is our standard
methodology, we annually review new permanent HCPCS codes and delete
temporary HCPCS C-codes if an alternate permanent HCPCS code is
available for purposes of OPPS billing and payment. Table 33 includes
those coding changes.

BILLING CODE 4120-01-P

[[Page 75014]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.332

[[Page 75015]]

BILLING CODE 4120-01-C
4. 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 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, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43601), we proposed 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 when used in a surgical procedure, as
discussed in section II.A.3. of this final rule with comment period.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
As previously noted, radiopharmaceuticals are considered to be
drugs for OPPS pass-through payment purposes. As described above,
section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) of the Act
and the otherwise applicable OPD fee schedule amount. There are
currently two diagnostic radiopharmaceuticals with pass-through status
under the OPPS. HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic,
per study dose, up to 5 millicuries) was granted pass-through status
using HCPCS code C9406 beginning July 1, 2011, and we proposed that its
pass-through status would expire on December 31, 2013. HCPCS code C1204
(Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was
granted pass-through status beginning October 1, 2013. We currently
apply the established radiopharmaceutical payment offset policy to
pass-through payment for these products. As described earlier in
section V.A.3. of this final rule with comment period, we proposed that
new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6
percent, while those 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, for
purposes of the OPPS, 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. For CY 2014, as we did in CY 2013, we proposed to continue to
apply the diagnostic radiopharmaceutical offset policy to payment for
pass-through diagnostic radiopharmaceuticals.
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 proposed 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 (78 FR 43601). Under this proposed policy, the
OPPS payment amount for nuclear medicine procedures are not 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. Therefore,
we do not believe that the burden on hospitals of adhering to the
nuclear medicine ``FB'' modifier policy continues to be warranted.
Comment: Commenters recommended that CMS publish preliminary offset
amounts for diagnostic radiopharmaceuticals and contrast agents with
the proposed rule to allow for meaningful assessment of and public
comment on the data.
Response: The exact data used to calculate all of the proposed and
final payment rates, including the associated offset amounts, for the
CY 2014 OPPS are available for purchase under a CMS data use agreement
through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. This Web site
includes

[[Page 75016]]

information about purchasing the ``OPPS Limited Data Set,'' which now
includes the additional variables previously available only in the OPPS
identifiable data set, including ICD 9 CMS diagnosis codes and revenue
code payment amounts. We do not post the offset amounts by APC until
publication of the final rule with comment period because we assign
services to APCs based on our estimate of their full resource cost,
including, but not limited to, packaged diagnostic radiopharmaceuticals
and contrast agents. The offset amount is the portion of each APC
payment rate that could reasonably be attributed to the cost of
predecessor diagnostic radiopharmaceuticals and contrast agents when
considering a new diagnostic radiopharmaceutical and contrast agent for
pass-through payment and has no bearing on APC assignment.
Comment: One commenter believed that CMS should not discontinue the
requirement for hospitals to append modifier ``FB'' to specified
nuclear medicine procedures in cases in which the diagnostic
radiopharmaceutical is received at no cost or full credit. The
commenter suggested that this is a relatively new policy and,
therefore, should be maintained for at least another year.
Response: Based on claims data, it appears that hospitals rarely
receive diagnostic radiopharmaceuticals at no cost or full credit.
Therefore, we do not believe that the ``FB'' modifier policy, as it
relates to diagnostic radiopharmaceuticals, is warranted.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to apply the
diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described in the CY 2014
OPPS/ASC proposed rule (78 FR 43601). We will continue to reduce the
payment amount for procedures in the APCs listed in Table 34 in this
final rule with comment period by the full policy-packaged offset
amount appropriate for diagnostic radiopharmaceuticals. We also are
finalizing our proposal 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 or full credit. Under this
finalized policy, the OPPS payment amount for nuclear medicine
procedures is not reduced when a diagnostic radiopharmaceutical is
received at no cost or full credit.
Table 34 below displays the APCs to which nuclear medicine
procedures will 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.
[GRAPHIC] [TIFF OMITTED] TR10DE13.333

[[Page 75017]]

c. Payment Offset Policy for Contrast Agents
Section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) of the Act
and the otherwise applicable OPD fee schedule amount. Currently, there
are no contrast agents with pass-through status under the OPPS. As
described in section V.A.4.c. of the proposed rule (78 FR 43602), we
proposed 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,
at 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, in the CY 2014 OPPS/ASC proposed rule (78 FR
43602), we proposed, for new contrast agents that are approved for
pass-through status as a drug or biological during CY 2014, to deduct
from the payment an amount that reflects the portion of the APC payment
associated with predecessor contrast agents. This was proposed in order
to ensure that 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 proposed to continue to apply this same policy to
contrast agents. Specifically, we proposed 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 proposed
to multiply the policy packaged drug offset fraction by the APC payment
amount for the procedure with which the pass-through contrast agent is
used and, accordingly, reduce the separate OPPS payment for the pass-
through contrast agent by this amount. We proposed to continue to apply
this methodology for CY 2014 to recognize that when a contrast agent
with pass-through status is billed with any procedural APC listed in
Table 22 of the proposed rule (78 FR 43602 through 43603), 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.
We proposed to identify procedural APCs for which we expect a
contrast offset could be applicable in the case of a pass-through
contrast agent as any procedural APC with a policy-packaged drug amount
greater than $20 that is not a nuclear medicine APC identified in Table
34 above, and these APCs are displayed in Table 35 below. The
methodology used to determine a threshold cost for application of a
contrast agent offset policy is described in detail in the CY 2010
OPPS/ASC final rule with comment period (70 FR 60483 through 60484).
For CY 2014, we proposed to continue to recognize that when a contrast
agent with pass-through status is billed with any procedural APC listed
in Table 22 of the proposed rule (78 FR 43602 through 43603), a
specific offset based on the procedural APC would be applied to payment
for the contrast agent to ensure that duplicate payment is not made for
the contrast agent.
As we proposed, for this final rule with comment period, we will
continue to post annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be
used for that year for purposes of both evaluating cost significance
for candidate pass-through device categories and drugs and biologicals,
including contrast agents, and establishing any appropriate APC offset
amounts. Specifically, the file will continue to provide the amounts
and percentages of APC payment associated with packaged implantable
devices, ``policy packaged'' drugs, and ``threshold-packaged'' drugs
and biologicals for every OPPS clinical APC.
After consideration of the public comments we received, we are
finalizing our proposal for CY 2014 without modification. We will
continue to recognize that when a contrast agent with pass-through
status is billed with any procedural APC listed in Table 35 below, a
specific offset based on the procedural APC will be applied to the
payment for the contrast agent to ensure that duplicate payment is not
made for the contrast agent.

[[Page 75018]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.334

d. Payment Offset Policy for Products Packaged According to the 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 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 the CY 2014 OPPS/ASC 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 when used in a
surgical procedure, we specifically proposed 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 (78 FR 43570 through 43572). We
believe that a payment offset, similar to the offset

[[Page 75019]]

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 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 proposed for CY 2014 to deduct an amount that reflects
the portion of the APC payment associated with predecessor products in
order to ensure no duplicate payment is made 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 when used in a surgical procedure
(78 FR 43603).
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 proposed 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 when used in a surgical procedure (78 FR
43603). Specifically, in the case of pass-through skin substitutes, we
proposed 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
proposed 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 proposed
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 (78 FR 43603).
We did not receive any public comments on this proposal. Therefore,
we are finalizing our proposal, without modification, to recognize that
when a skin substitute with pass-through status is billed with any
procedural APC listed in Table 36 below, a specific offset based on the
procedural APC will be applied to the payment for the skin substitute
to ensure that duplicate payment is not made for the skin substitute.
In addition, when a stress agent with pass-through status is billed
with any procedural APC listed in Table 37 below, a specific offset
based on the procedural APC will be applied to the payment for the
stress agent to ensure that duplicate payment is not made for the
stress agent.
Table 36 below displays the APCs to which skin substitute
procedures will 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 37 below displays the APCs to which MPI procedures will 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.
As we proposed, we will continue to post annually on the CMS Web
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset
amounts that will be used for that year for purposes of both evaluating
cost significance for candidate pass-through device categories and
drugs and biologicals 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.

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B. 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. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this final rule with comment
period, in accordance with section 1833(t)(16)(B) of the Act, the
threshold for establishing separate APCs for payment of drugs and
biologicals was set to $50 per administration during CYs 2005 and 2006.
In CY 2007, we used the four quarter moving average Producer Price
Index (PPI) levels for Pharmaceutical Preparations (Prescription) to
trend the $50 threshold forward from the third quarter of CY 2005 (when
the Pub. L. 108-173 mandated threshold became effective) to the third
quarter of CY 2007. We then rounded the resulting dollar amount to the
nearest $5 increment in order to determine the CY 2007 threshold amount
of $55. Using the same methodology as that used in CY 2007 (which is
discussed in more detail in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68085 through 68086)), we set the packaging
threshold for establishing separate APCs for drugs and biologicals at
$60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold
at $65; for CY 2011, we set the packaging threshold at $70; 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 the CY 2014 OPPS/ASC
proposed rule (78 FR 43604), 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 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

[[Page 75021]]

comment period) and have been incorporated into our calculation. Based
on the calculations described above, we proposed 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. Cost Threshold for Packaging of Payment for HCPCS Codes That
Describe Certain Drugs, Certain Biologicals, and Therapeutic
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
In the CY 2014 OPPS/ASC proposed rule (78 FR 43604), to determine
the proposed CY 2014 packaging status for all nonpass-through drugs and
biologicals that are not policy packaged, we calculated, on a HCPCS
code-specific basis, the per day cost of all drugs, 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 the proposed rule, or for diagnostic
radiopharmaceuticals, contrast agents, anesthesia drugs, and
implantable biologicals that we proposed 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 the 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 proposed for separately payable drugs and biologicals for CY
2014, as discussed in more detail in section V.B.3.b. of the 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 proposed 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 the proposed rule (which
are available via the Internet on the CMS Web site) because these were
the most recent data available for use at the time of development of
the proposed rule. These data 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 proposed 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 displayed in Addendum B of
the proposed rule (which is available via the Internet on the CMS Web
site) for payment in CY 2014.
Comment: The majority of commenters objected to the proposed
increase in the OPPS packaging threshold to $90 for CY 2014. The
commenters recommended that CMS consider either eliminating the drug
packaging threshold and providing separate payment for all drugs with
HCPCS codes or freezing the packaging threshold at $80 for CY 2014. A
few commenters suggested that CMS limit increases in the packaging
threshold amount to the hospital market basket update factor for the
year that is reflective of all statutory adjustments.
Response: As stated in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68086), we believe that packaging certain items is a
fundamental component of a prospective payment system, that updating
the packaging threshold of $50 for the CY 2005 OPPS is consistent with
industry and government practices, and that the PPI for Prescription
Drugs is an appropriate mechanism to gauge Part B drug inflation.
Therefore, because of our continued belief that packaging is a
fundamental component of a prospective payment system that continues to
provide important flexibility and efficiency in the delivery of high
quality hospital outpatient services, we are not adopting the
commenters' recommendations to pay separately for all drugs,
biologicals, and radiopharmaceuticals for CY 2014 or to eliminate or to
freeze the packaging threshold at $80.
We disagree with the commenters who suggested that CMS limit
increases in the outpatient drug packaging threshold amount to the
hospital update factor for the year, reflective of all statutory
adjustments or the market basket update. As stated above, we continue
to believe that updating the $50 threshold of the CY 2005 OPPS is
consistent with industry and government practices and that the PPI for
Prescription Drugs is an appropriate mechanism to gauge Part B drug
inflation. As we stated in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68085), we believe that the PPI for Prescription Drugs
reflects price changes at the wholesale or manufacturer stage. Because
OPPS payment rates for drugs and biologicals are generally based on the
ASP data that are reported by their manufacturers, we believe that the
PPI for Prescription Drugs is an appropriate price index to use to
update the packaging threshold for CY 2007 and beyond. In contrast, the
market basket update contains numerous price proxies, including, but
not limited to, proxies for wages and salaries, utilities, and
nonlabor-related expenses, that are not related to price increases for
prescription drugs. Therefore, we believe that the market basket as a
whole is not an appropriate mechanism for determining the outpatient
drug packaging threshold amount. Within the calculation of the market
basket update, we use the PPI for Prescription Drugs specifically to
measure the price growth for prescription drugs, but price changes for
prescription drugs are only one component of price changes for the
numerous items and services hospitals purchase.
Since publication of the CY 2014 OPPS/ASC proposed rule, consistent
with our policy of updating the packaging threshold with more recently
available data for this final rule with comment period, we have again
followed the CY 2007 methodology for CY 2014 and used updated four
quarter moving average PPI index levels provided by the CMS Office of
the Actuary to trend the $50 threshold forward from the third quarter
of CY 2005 to the third quarter of CY 2014. We then rounded the
resulting updated dollar amount ($91.27) to the nearest $5 increment,
which yielded a figure of $90. Therefore, after consideration for the
public comments we received, and consistent with our methodology for

[[Page 75022]]

establishing the packaging threshold using the most recent PPI forecast
data, we are adopting a CY 2014 packaging threshold of $90.
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
are subject to quarterly updates. For our calculation of per day costs
of HCPCS codes for drugs and biologicals in this final rule with
comment period, we used 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 used these data for budget
neutrality estimates and impact analyses for this final rule with
comment period.
Payment rates for HCPCS codes for separately payable drugs and
biologicals included in Addenda A and B to this final rule with comment
period are based on ASP data from the second quarter of CY 2013. These
data are the basis for calculating payment rates for drugs and
biologicals in the physician's office setting using the ASP
methodology, effective October 1, 2013. These payment rates will 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 recalculated their mean unit cost from all of the CY
2012 claims data and updated cost report information available for this
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 final rule with comment period may be different from the same drug
HCPCS code's packaging status determined based on the data used for the
proposed rule. Under such circumstances, we proposed to continue to
follow the established policies initially adopted for the CY 2005 OPPS
(69 FR 65780) in order to more equitably pay for those drugs whose cost
fluctuates relative to the proposed CY 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 proposed 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 were 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
proposed 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.
We did not receive any public comments on our proposal to apply the
established policies initially adopted for the CY 2005 OPPS (69 FR
65780) in order to more equitably pay for those drugs whose cost
fluctuates relative to the CY 2014 OPPS drug packaging threshold and
the drug's payment status (packaged or separately payable) in CY 2013.
Therefore, we are finalizing our proposal, without modification, for CY
2014.
We note that we proposed to package HCPCS codes 90734
(Meningococcal conjugate vaccine, serogroups a, c, y and w-135
(tetravalent), for intramuscular use), J0630 (Injection, calcitonin
salmon, up to 400 units), and J1570 (Injection, ganciclovir sodium, 500
mg) for CY 2014. Using updated ASPs and the CY 2012 hospital claims
data available for this final rule with comment period, HCPCS codes
90734, J0630, and J1570 now have per day costs greater than $90. In
accordance with our established policy for such cases, for CY 2014 we
will pay for HCPCS codes 90734, J0630, and J1570 separately.
In addition, because we did not have claims data for HCPCS code
J7191 (Factor viii (antihemophilic factor (porcine)), per IU) in the CY
2014 OPPS/ASC proposed rule, we had proposed a status indicator of
``E'' for this product in CY 2014. However, since publication of the
proposed rule, we have received claims data and the per day cost for
this product is more than the $90 CY 2014 packaged threshold. HCPCS
code J7191 will be paid separately and will be assigned a status
indicator of ``K'' for CY 2014.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug
or Biological But Different Dosages
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS
codes reporting different dosages for the same covered Part B drugs or
biologicals in order to reduce hospitals' administrative burden by
permitting them to report all HCPCS codes for drugs and biologicals. In
general, prior to CY 2008, the OPPS recognized for payment only the
HCPCS code that described the lowest dosage of a drug or biological. We
extended this recognition to multiple HCPCS codes for several other
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009,
we applied a policy that assigned the status indicator of the
previously recognized HCPCS code to the associated newly recognized
code(s), reflecting the packaged or separately payable status of the
new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72
FR 66775), we explained that once claims data were available for these
previously unrecognized HCPCS codes, we would determine the packaging
status and resulting status indicator for each HCPCS code according to
the general, established HCPCS code-specific methodology for
determining a code's packaging status for a given update year. However,
we also stated that we planned to closely follow our claims data to
ensure that our annual packaging determinations for the different HCPCS
codes describing the same drug or biological did not create
inappropriate payment incentives for hospitals to report certain HCPCS
codes instead of others.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490
through 60491), we finalized a policy to make a single packaging
determination

[[Page 75023]]

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, in
the CY 2014 OPPS/ASC proposed rule (78 FR 43606), we proposed to
continue our policy to make packaging determinations on a drug-specific
basis, rather than a HCPCS code-specific basis, for those HCPCS codes
that describe the same drug or biological but different dosages in CY
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. The following drugs
did not have pricing information available for the ASP methodology for
this CY 2014 OPPS/ASC final rule with comment period 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).
For all other drugs and biologicals that have HCPCS codes
describing different doses, 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).
We did not receive any public comments on this proposal. Therefore,
we are finalizing our CY 2014 proposal, without modification, to
continue 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. The
packaging status of each drug and biological HCPCS code to which this
methodology will apply is displayed in Table 38 below.
BILLING CODE 4120-01-P

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[[Page 75025]]

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[[Page 75026]]

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BILLING CODE 4120-01-C
3. Payment for Drugs and Biologicals Without Pass-Through Status That
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other
Separately Payable and Packaged Drugs and Biologicals
Section 1833(t)(14) of the Act defines certain separately payable
radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' (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. 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 the CY 2014 OPPS/
ASC proposed rule (78 FR 43608), we proposed 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

[[Page 75027]]

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 the
range of 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, 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. CY 2014 Payment Policy
In the CY 2014 OPPS/ASC proposed rule (78 FR 43608), we proposed to
continue our CY 2013 policy and pay for separately payable drugs and
biologicals at ASP+6 percent pursuant to section
1833(t)(14)(A)(iii)(II) of the Act, referred to as the ``statutory
default.'' We proposed that the ASP+6 percent payment amount for
separately payable drugs and biologicals requires no further adjustment
and represents the combined acquisition and pharmacy overhead payment
for drugs and biologicals. We also proposed that payments for
separately payable drugs and biologicals are included in the budget
neutrality adjustments, under the requirements in section 1833(t)(9)(B)
of the Act, and that the budget neutral weight scaler is not applied in
determining payments for these separately paid drugs and biologicals.
Comment: Commenters supported CMS' proposal to pay for separately
payable drugs and biologicals based on the statutory default rate of
ASP+6 percent. The commenters stated that ASP+6 percent is
administratively simple, improves stability of drug and biological
payments, and better covers the costs of drug acquisition and pharmacy
overhead. A few commenters supported CMS' proposal, but recommended
that CMS examine ways to compensate hospitals for the unique, higher
overhead and handling costs associated with therapeutic
radiopharmaceuticals. One commenter recommended that CMS design a
payment strategy that would maintain the current ASP+6 percent for
branded drug products but provide for a much higher payment rate for
multi-source generic drugs.
Response: We appreciate the commenters' support of our proposal. We
continue to believe that ASP+6 percent based on the statutory default
is appropriate for hospitals for CY 2014 and that this percentage
amount includes payment for acquisition and overhead cost. We see no
evidence that an additional overhead adjustment is required for
separately payable drugs, biologicals and therapeutic
radiopharmaceuticals for CY 2014. With regard to the development of a
multi-tiered payment strategy that would encourage the use of generic
drugs over their branded counterparts, we made no such proposal and,
therefore, consider this comment outside the scope of the proposed
rule.
Comment: Some commenters recommended that CMS require hospitals to
bill all drugs with HCPCS codes under revenue code 0636 in order to
improve its data on packaged drugs.
Response: We do not accept the commenter's recommendation that CMS
require drugs and biologicals to be reported under revenue code 0636.
We believe that drugs and biologicals also may be appropriately
reported in revenue code categories other than revenue code 0636,
including, but not limited to, revenue codes 025x and 062x. As we
stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR
71966), we recognize that hospitals may carry the costs of drugs and
biologicals in multiple cost centers and that it may not be appropriate
to report the cost of all drugs and biologicals in one specified
revenue code. In addition, we generally require hospitals to follow
National Uniform Billing Committee (NUBC) guidance for the choice of an
appropriate revenue code that is also appropriate for the hospital's
internal accounting processes.

[[Page 75028]]

Comment: One commenter asked that, for CY 2014, CMS consider paying
for influenza and PPV vaccines at 106 percent of ASP instead of paying
for the items at reasonable cost.
Response: We consider this comment outside the scope of the
proposed rule.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to pay for separately
payable drugs and biologicals at ASP+6 percent based on section
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6
percent payment amount for separately payable drugs and biologicals
requires no further adjustment and represents the combined acquisition
and pharmacy overhead payment for drugs and biologicals for CY 2014. In
addition, we are finalizing our proposal which states that payment for
separately payable drugs and biologicals be included in the budget
neutrality adjustments, under the requirements of section 1833(t)(9)(B)
of the Act, and that the budget neutral weight scaler is not applied in
determining payment of these separately paid drugs and biologicals.
We note that separately payable drug and biological payment rates
listed in Addenda A and B to this final rule with comment period, which
illustrate the final CY 2014 payment of ASP+6 percent for separately
payable nonpass-through drugs and biologicals and ASP+6 percent for
pass-through drugs and biologicals, reflect either ASP information that
is the basis for calculating payment rates for drugs and biologicals in
the physician's office setting effective October 1, 2013, or WAC, AWP,
or mean unit cost from CY 2012 claims data and updated cost report
information available for this final rule with comment period. In
general, these published payment rates are not reflective of actual
January 2014 payment rates. This is because payment rates for drugs and
biologicals with ASP information for January 2014 will be determined
through the standard quarterly process where ASP data submitted by
manufacturers for the third quarter of 2013 (July 1, 2013 through
September 30, 2013) are used to set the payment rates that are released
for the quarter beginning in January 2014 near the end of December
2013. In addition, payment rates for drugs and biologicals in Addenda A
and B to this final rule with comment period for which there was no ASP
information available for October 2013 are based on mean unit cost in
the available CY 2012 claims data. If ASP information becomes available
for payment for the quarter beginning in January 2014, we will price
payment for these drugs and biologicals based on their newly available
ASP information. Finally, there may be drugs and biologicals that have
ASP information available for this final rule with comment period
(reflecting October 2013 ASP data) that do not have ASP information
available for the quarter beginning in January 2014. These drugs and
biologicals will then be paid based on mean unit cost data derived from
CY 2012 hospital claims. Therefore, the payment rates listed in Addenda
A and B to this final rule with comment period are not for January 2014
payment purposes and are only illustrative of the CY 2014 OPPS payment
methodology using the most recently available information at the time
of issuance of this final rule with comment period.
4. Payment Policy for Therapeutic Radiopharmaceuticals
Beginning in CY 2010 and continuing for CY 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, in the CY 2014
OPPS/ASC proposed rule (78 FR 43609), we proposed 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 proposed 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).
Comment: Commenters supported CMS' proposal to pay for separately
payable therapeutic radiopharmaceuticals under the statutory default
payment rate of ASP+6 percent, if ASP data are submitted to CMS.
Response: We appreciate the commenters' support. We continue to
believe that providing payment for therapeutic radiopharmaceuticals
based on ASP or mean unit cost if ASP information is not available
would provide appropriate payment for these products. When ASP data are
not available, we believe that paying for therapeutic
radiopharmaceuticals using mean unit cost will appropriately pay for
the average hospital acquisition and associated handling costs of
nonpass-through separately payable therapeutic radiopharmaceuticals. As
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60523), although using mean unit cost for payment for therapeutic
radiopharmaceuticals when ASP data are not available is not the usual
OPPS process (the usual process relies on alternative data sources such
as WAC or AWP when ASP information is temporarily unavailable, prior to
defaulting to the mean unit cost from hospital claims data), we
continue to believe that WAC or AWP is not an appropriate proxy to
provide OPPS payment for average therapeutic radiopharmaceutical
acquisition cost and associated handling costs when manufacturers are
not required to submit ASP data. Payment based on WAC or AWP under the
established OPPS ASP methodology for payment of separately payable
drugs and biologicals is usually temporary for a calendar quarter until
a manufacturer is able to submit the required ASP data in accordance
with the quarterly ASP submission timeframes for reporting under
section 1847A of the Act. Because ASP reporting for OPPS payment of
separately payable therapeutic radiopharmaceutical is not required, a
manufacturer's choice to not submit ASP could result in payment for a
separately payable therapeutic radiopharmaceutical based on WAC or AWP
for a full year, a result which we believe would be inappropriate.

[[Page 75029]]

Comment: One commenter indicated that the proposed payment rate for
the therapeutic radiopharmaceutical identified by HCPCS code A9517
(Iodine i-131 sodium iodide capsule(s), therapeutic, per millicurie)
decreased by 54 percent compared to the CY 2013 payment rate and
questioned the reason for this proposed reduction.
Response: The CY 2013 payment rate for HCPCS code A9517 is $17.74
per millicurie. The proposed CY 2014 payment rate for HCPCS code A9517
was $18.70, which is a 5.4 percent increase compared to the CY 2013
payment rate. The final CY 2014 payment rate for HCPCS code A9517 is
$18.52, which is a 4.4 percent increase compared to the CY 2013 payment
rate.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to pay all
nonpass-through, separately payable therapeutic radiopharmaceuticals at
ASP+6 percent. We are also finalizing our proposal to continue 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. The CY 2014 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are
included in Addenda A and B to this final rule with comment period
(which are available via the Internet on the CMS Web site).
5. 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43609), for CY 2014,
we proposed to pay for blood clotting factors at ASP+6 percent,
consistent with our proposed payment policy for other nonpass-through
separately payable drugs and biologicals, and to continue our policy
for payment of the furnishing fee using an updated amount. Our policy
to pay for a furnishing fee for blood clotting factors under the OPPS
is consistent with the methodology applied in the physician office and
inpatient hospital setting, and first articulated in the CY 2006 OPPS
final rule with comment period (70 FR 68661) and later discussed in the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The
proposed furnishing fee update was based on the percentage increase in
the Consumer Price Index (CPI) for medical care for the 12-month period
ending with June of the previous year. Because the Bureau of Labor
Statistics releases the applicable CPI data after the MPFS and OPPS/ASC
proposed rules are published, we were not able to include the actual
updated furnishing fee in the proposed rules. Therefore, in accordance
with our policy, as finalized in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66765), we proposed to announce the actual figure
for the percent change in the applicable CPI and the updated furnishing
fee calculated based on that figure through applicable program
instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
Comment: Commenters supported CMS' proposal to pay for blood
clotting factors at ASP+6 percent and to continue to apply the
furnishing fee for blood clotting factors provided in the OPD.
Response: We appreciate the commenters' support of our policy.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to provide payment for
blood clotting factors under the same methodology as other separately
payable drugs and biologicals under the OPPS and to continue payment of
an updated furnishing fee. We will announce the actual figure of the
percent change in the applicable CPI and the updated furnishing fee
calculation based on that figure through the applicable program
instructions and posting on the CMS Web site.
6. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims
Data
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005
and 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 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

[[Page 75030]]

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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43610), we proposed 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 proposed to package payment for all new
nonpass-through policy-packaged products (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 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 of 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 when used in a surgical procedure, as discussed in
more detail in section II.A.3. of the proposed rule and this final rule
with comment period.
In accordance with the OPPS ASP methodology, in the absence of ASP
data, for CY 2014, we proposed to continue our policy of using the WAC
for the product to establish the initial payment rate for new nonpass-
through drugs and biologicals with HCPCS codes, but which are without
OPPS claims data. However, we noted that if the WAC is also
unavailable, we would make payment at 95 percent of the product's most
recent AWP. We also proposed to assign status indicator ``K''
(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 and
biologicals for which we do not have ASP data, we proposed that once
their ASP data become available in later quarterly submissions, their
payment rates under the OPPS would be adjusted so that the rates would
be based on the ASP methodology and set to the finalized ASP-based
amount (proposed for CY 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 and biologicals would be treated
like other drugs and biologicals under the OPPS, unless they are
granted pass-through status.
Similarly, we proposed to continue to base the initial payment for
new therapeutic radiopharmaceuticals with HCPCS codes, but which do not
have pass-through status and are without claims data, on the WACs for
these products if ASP data for these therapeutic radiopharmaceuticals
are not available. If the WACs are also unavailable, we proposed to
make payment for new therapeutic radiopharmaceuticals at 95 percent of
the products' most recent AWP because we would not have mean costs from
hospital claims data upon which to base payment. As we proposed with
new drugs and biologicals, we proposed to continue our policy of
assigning status indicator ``K'' to HCPCS codes for new therapeutic
radiopharmaceuticals without OPPS claims data for which we have not
granted pass-through status.
Consistent with other ASP-based payment, we proposed to announce
any changes to the payment amounts for new drugs and biologicals in
this 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 were not available at the time of
development of the proposed rule. However, these agents are included in
Addendum B to this CY 2014 OPPS/ASC final rule with comment period
(which is available via the Internet on the CMS Web site), where they
are assigned comment indicator ``NI.'' This comment indicator reflects
that their interim final OPPS treatment is open to public comment in
this CY 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 the proposed rule and for which
there are no other HCPCS codes that describe different doses of the
same drug, but which have pricing information available for the ASP
methodology. In order to determine the packaging status of these
products for CY 2014, we proposed to continue our policy to calculate
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 (78 FR 43610). This rationale was first
adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR
68666 and 68667). We proposed to package items for which we estimated
the per day administration cost to be less than or equal to $90 and to
pay separately for items for which we estimated the per day
administration cost to be 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 when used in a surgical procedure, which we
proposed to package regardless of cost) in CY 2014. We also proposed
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 proposed to use the WAC
for the product to establish the initial payment rate and, if the WAC
is also unavailable, we would make payment at 95 percent of the most
recent AWP available. The proposed estimated units

[[Page 75031]]

per day and status indicators for these items were displayed in Table
26 of the proposed rule (78 FR 43611).
Finally, there were 11 drugs and biologicals, shown in Table 27 of
the proposed rule (78 FR 43612), 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 the CY 2014 OPPS/ASC proposed rule. For CY
2010, we finalized a policy to assign 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 of a drug or biological. 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 for the ASP methodology. We continued this
policy for CY 2011, CY 2012, and CY 2013 (75 FR 71973, 76 FR 74334, and
77 FR 68396, respectively). For CY 2014, we proposed 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 were assigned status indicator ``E''
on this basis at the time of the proposed rule for CY 2014 were
displayed in Table 27 of the proposed rule (78 FR 43612). We also
proposed to continue our policy to assign the products status indicator
``K'' and pay for them separately for the remainder of CY 2014 if
pricing information were to become available.
We did not receive any public comments on our CY 2014 proposals to
provide payment for new drugs, biologicals, and therapeutic
radiopharmaceuticals using the ASP methodology and to use an estimated
per day cost in order to determine the packaging status of drugs and
biologicals for which we have pricing information available but do not
have hospital claims data available. Therefore, we are finalizing these
proposals without modification. The final estimated units per day and
status indicators for drugs and biologicals for which we have pricing
information available but do not have hospital claims data available
for CY 2014 are displayed in Table 39 below.
We also did not receive any public comments on our proposal to
continue to assign status indicator ``E'' to drugs and biologicals that
lack CY 2012 claims data and pricing information for the ASP
methodology and, therefore, we are finalizing this proposal without
modification. 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 final rule with
comment period for CY 2014 are displayed in Table 40 below.
BILLING CODE 4120-01-P

[[Page 75032]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.339

[[Page 75033]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.340

BILLING CODE 4120-01-C

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. In
the CY 2014 OPPS/ASC proposed rule (78 FR 43612), we proposed 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.
Comment: Several commenters indicated that CMS should continue to
apply the nuclear medicine procedure-to-radiolabeled product edits to
ensure that all packaged costs are included on nuclear medicine claims
in order to establish appropriate payment rates in the future.
Response: We do not agree with commenters that we should continue
the nuclear medicine procedure-to-radiolabeled product edits. We
believe that 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. 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.
After consideration of the public comments we received, we are
finalizing our proposal to no longer require the nuclear medicine
procedure-to-radiolabeled product edits. Hospitals

[[Page 75034]]

will still be expected to adhere to the guidelines of correct coding
and append the correct radiolabeled product code to the claim when
applicable.

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage,'' currently not to exceed 2.0 percent of total
program payments estimated to be made for all covered services under
the OPPS furnished for that year. If we estimate before the beginning
of the calendar year that the total amount of pass-through payments in
that year would exceed the applicable percentage, section
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction
in the amount of each of the transitional pass-through payments made in
that year to ensure that the limit is not exceeded. We estimate the
pass-through spending to determine whether payments exceed the
applicable percentage and the appropriate 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 equals 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 not been proposed to be
reinstated for CY 2014. Because we will 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 final rule
with comment period, which represents the otherwise applicable fee
schedule amount associated with most pass-through drugs and
biologicals, and because we will pay for CY 2014 pass-through drugs and
biologicals at ASP+6 percent, as we discussed in section V.A. of this
final rule with comment period, our estimate of drug and biological
pass-through payment for CY 2014 for this group of items was $0, as
discussed below.
Furthermore, payment for certain drugs, specifically diagnostic
radiopharmaceuticals and contrast agents, without pass-through status
will always be packaged into payment for the associated procedures and
these products will not be separately paid. In addition, as we
proposed, we are policy-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 when used in a surgical procedure for CY 2014, as
discussed in section II.A.3. of this final rule with comment period.
All of these policy-packaged drugs and biologicals with pass-through
status will 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
final rule with comment period, we discuss our proposed and finalized
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 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
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 will 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 CY 2014 pass-through estimates for these two groups of drugs and
biologicals equals the total CY 2014 pass-through spending estimate for
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43613),
we are setting the applicable pass-through payment percentage limit at
2.0

[[Page 75035]]

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 is one device category, C1841 (Retinal prosthesis,
includes all internal and external components), receiving pass-through
payment for CY 2013, made effective subsequent to the proposed rule on
October 1, 2013, that will continue to be eligible for pass-through
payment for CY 2014. As discussed in section IV.A. of this final rule
with comment period, 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 $0.5 million. 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
final 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 final 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 using 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.
We did not receive any public comments regarding our proposed
estimate for device pass-through spending. For this final rule with
comment period, the estimate of CY 2014 pass-through spending for this
second group of device categories is $9.5 million, which is a slight
decrease from the $10 million estimate in the proposed rule (78 FR
43613). Using our established methodology, we are establishing that the
total estimated pass-through spending for device categories for CY 2014
(spending for the first group of device categories ($0.5 million) plus
spending for the second group of device categories ($9.5 million)) will
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 utilized 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 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 packaged if the product
was not paid separately due to its pass-through status, we 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 the proposed rule, using the
methodology described above, we calculated a CY 2014 proposed spending
estimate for this first group of drugs and biologicals of approximately
$0.962 million.
We did not receive any public comments on our proposed methodology
for calculating the spending estimate for the first group of drugs and
nonimplantable biologicals. Therefore, for this final rule with comment
period, we are finalizing our proposed methodology. Using our
established methodology and updated data and information, we calculated
a final CY 2014 spending estimate for the first group of drugs and
nonimplantable biologicals of approximately $1.4 million.
To estimate CY 2014 pass-through spending for drugs and biologicals
in the second group (that is, drugs and biologicals that we knew at the
time of development of the final 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 final 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 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 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 spending
estimate for this second group of drugs and biologicals of
approximately $0.165 million.
We did not receive any public comments on our proposed methodology
for estimating CY 2014 pass-through payments for this second group of
drugs and nonimplantable biologicals. Therefore, for this final rule
with comment period, we are finalizing our proposed methodology. Using
that methodology and updated data and information, we calculated a
final CY 2014 spending estimate for this second group of drugs and
implantable biologicals of approximately $0.9 million.
As discussed in section V.A. of this final rule with comment
period, radiopharmaceuticals are considered drugs for pass-through
purposes. Therefore, we include radiopharmaceuticals in our CY 2014
pass-through spending estimate for drugs and biologicals. Our CY 2014
estimate for total pass-through spending for drugs and biologicals
(spending for the first group of drugs and biologicals ($1.4 million)
plus spending for the second group of drugs and biologicals ($0.9
million)) equals $2.3 million.
In summary, in accordance with the methodology described above in
this section, for this final rule with comment period, we estimate that
total pass-through spending for the device categories and the drugs and
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 will be
approximately $12.3 million

[[Page 75036]]

(approximately $10 million for device categories and approximately $2.3
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 will not amount to 2.0 percent of total
projected OPPS CY 2014 program spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report HCPCS visit codes to describe three
types of OPPS services: clinic visits, emergency department (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 41. 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.

BILLING CODE 4120-01-P

[[Page 75037]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.341

[[Page 75038]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.342

B. 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 43616),
for CY 2014, we proposed 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 proposed 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 stated that 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, we indicated
that 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 manner as stated in section II.A.3. of the proposed
rule. We stated that we believed 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 stated that 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 believed 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. We stated that 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, we stated that
our proposal would allow a large universe of claims to be utilized for
ratesetting for each of the three newly proposed alphanumeric Level II
HCPCS visit codes. We stated that 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 believed 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 proposed 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 stated that
we 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 proposed 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 proposed to create a new alphanumeric HCPCS G-
code for hospital use only representing any clinic visit under the OPPS
and to assign the newly created alphanumeric clinic visit HCPCS G-code
to its own newly created APC 0634. Using CY 2012 claims data, we
proposed to develop CY 2014 OPPS payment rates for the new HCPCS G-code
based on the total geometric mean cost of the levels 1 through 5 CPT E/
M codes for clinic visits currently recognized under the OPPS (CPT
codes 99201 through 99205 and 99211 through 99215). We stated that
while we would use data for CPT codes 99201 through 99205 and 99211
through 99215 from

[[Page 75039]]

claims billed in CY 2012 to calculate the geometric 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 proposed to no
longer recognize a distinction between new and established patient
clinic visits. Under this proposal, all clinic visits would be reported
using the new HCPCS G-code, 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43614
through 43617), we proposed to discontinue our longstanding policy of
recognizing five distinct visit levels for Type A ED visits and instead
proposed to create a new alphanumeric HCPCS G-code for hospital use
only representing any Type A ED visit under the OPPS. We proposed to
assign the newly created alphanumeric Type A ED visit HCPCS G-code to
its own newly created APC 0635. Using CY 2012 claims data, we proposed
to develop CY 2014 OPPS payment rates for new HCPCS G-code based on the
total geometric 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). We stated that while we would use data for CPT codes
99281 through 99285 from claims billed in CY 2012 to calculate the
geometric 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 proposed to discontinue our longstanding
policy of recognizing five distinct visit levels for Type B ED visits
and instead proposed to create a new alphanumeric HCPCS G-code
representing all Type B ED visits under the OPPS. We proposed to assign
the newly created alphanumeric Type B ED visit HCPCS G-code to its own
newly created APC 0636. Using CY 2012 claims data, we proposed to
develop CY 2014 OPPS payment rates for new HCPCS G-code based on the
total geometric 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). We stated that while we would use data for HCPCS codes
G0380 through G0384 from claims billed in CY 2012 to calculate the
geometric 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 noted that we would use the hospital claims data for the three
new HCPCS G-codes when available for future ratesetting. We summarized
the proposed changes to the visit coding and payment structure in Table
29 of the proposed rule (78 FR 43616). We welcomed 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 stated that
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 indicated that we were 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. We stated that
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 were
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 welcomed 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. We stated that if
commenters provided 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 noted that, to the extent that
commenters recommended 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.
Comment: Commenters specifically opposed CMS' proposal to collapse
the current five levels of ED visits into a single visit level for both
Type A and Type B ED visits. Commenters stated that the proposed single
payment for Type A ED and Type B ED visits captures too broad a range
of ED visits, which could result in payment rates that are inadequate
for treatment of beneficiaries who require higher levels of care.
Commenters also stated that a single ED visit level would result in
higher copayment amounts for beneficiaries receiving services
consistent with a lower level ED visit. Commenters expressed concern
that hospitals would pressure physicians and hospital staff to reduce
the time in the ED to lessen the potential loss of revenues associated
with a single level ED visit payment, potentially leading to a
deterioration of patient care. Commenters argued that the proposed ED
visit policy is inequitable to hospitals that consistently have a more
complex case-mix and a greater than average utilization of the higher
level ED visit codes, such as trauma centers, teaching hospitals, and
hospitals that have taken steps to shift lower-acuity ED patients into
Type B EDs or onsite or nearby urgent care clinics. Commenters urged
CMS to exclude trauma care from any consolidation of ED payment levels
to ensure that designated trauma centers are fairly paid for the care
they provide. Commenters expressed reservations about a single payment
for ED visits in light of a potential increase in ED usage and ED
patient acuity due to newly insured individuals having access to care
under the Affordable Care Act.
Commenters also argued that there is a bias toward lower level
visit code costs in calculating the geometric mean cost for the new
collapsed visit codes as higher level visit codes are more often billed
with separately paid procedures on the same day of service. Commenters
expressed additional reservations with the proposed policy in light of
their inability to conduct impact analysis on the proposed policy due
to initial errors in the CY 2014 OPPS/ASC proposed rule data.
Commenters also stated the proposed policy removes CMS' ability to
track and document differences in patient acuity and is inconsistent
with CMS' previously stated purpose in creating Medicare Severity
Diagnosis-Related Groups (MS-DRGs) under the IPPS to account for
differences in costs due to differences in patient severity.
Moreover, commenters stated that the proposed policy should not be
implemented in CY 2014 due to its interaction with CMS' proposal to
expand packaging of services and hospitals' administrative training
sessions currently underway to implement International Classification
of Diseases, 10th Edition (ICD-10). Commenters asserted that the
proposed policy would create added administrative burden as other
payers will continue to require the reporting of the five E/M code
levels. Commenters suggested that CMS work with the AMA to develop
facility-specific CPT codes

[[Page 75040]]

for Type A ED and Type B ED visits and seek input from industry
stakeholders, specifically hospital representatives, to develop
descriptions for these new codes that allow for their consistent
application by hospital outpatient departments. Commenters also
recommended that CMS develop hospital-specific national guidelines for
hospitals to report ED visits.
Commenters stated that they did not understand why this proposal is
necessary in light of CMS' previous statements that hospitals are
generally billing appropriately and in a consistent manner that
distinguishes among the different levels of visits based on the
required hospital resources and CMS' current utilization of
Comprehensive Error Rate Testing (CERT), Recovery Audit Contractors
(RACs), Zone Program Integrity Contractors (ZPICs), and other methods
of review to identify medically unnecessary services. Commenters stated
that CMS should conduct selected focused audits in lieu of the proposed
policy if CMS believes that hospitals are upcoding.
Response: We appreciate all of the public comments we received on
our proposal to collapse the current five levels of ED visits into a
single visit level for both Type A and Type B ED visits. We
specifically sought comment on whether there are certain high or low
complexity cases that would not be best accommodated by a single level
of payment. We stated in the proposed rule that, if such cases exist,
we would 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. We also stated in the proposed rule
that if commenters provided 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. As discussed above, we received
several comments that a single payment for an ED visit might
underrepresent resources required to treat the most complex patients,
such as trauma patients. We find this to be a compelling issue, for
which an alternative payment structure, possibly including more than
one payment level, may be warranted. However, at this time, additional
study is needed to fully assess the most suitable payment structure for
ED visits, including the particular number of visit levels that would
not underrepresent resources required to treat the most complex
patients, such as trauma patients. For CY 2014, we believe it is best
to delay any change in ED visit coding while we reevaluate the most
appropriate payment structure for Type A and Type B ED visits. We will
maintain the current coding structure consisting of five visit levels
for CY 2014 while we consider alternative payment structures.
Comment: Commenters suggested the following alternatives to our
proposed policy: One commenter requested that CMS alter its proposal
and create one APC for Type A ED and Type B ED visits as proposed, but
continue to allow the reporting of the current CPT E/M codes instead of
creating new HCPCS codes. Multiple commenters suggested that CMS employ
a three acuity level model to pay for Type A ED and Type B ED visits
under the OPPS. Another commenter suggested CMS continue to use the
current CPT codes for clinic E/M services but assign the CPT codes to
one of three ED Visit APCs. One commenter suggested CMS create three
composite ED services based on the ancillary services packaged with ED
claim. A few commenters recommended, on a short-term basis, that CMS
develop a set of three trauma[hyphen]specific HCPCS codes for all
trauma patients, for whom a trauma team is activated.
Response: We appreciate the thoughtful and detailed alternatives
presented by commenters. We need additional time to study and fully
consider these alternatives and other comments received with respect to
how our proposed ED visits policy would affect payments for the most
complex patients. We believe it is best to delay any change in ED visit
coding while we consider further the most appropriate payment structure
for Type A and Type B ED visits.
Comment: Commenters generally opposed our proposal to create a
single new alphanumeric HCPCS G-code for hospital use only representing
all clinic visits under the OPPS and to assign the newly created
alphanumeric clinic visit HCPCS G-code to its own newly created APC
0634. Some commenters raised similar concerns about a single payment
for clinic visits as they did for ED visits, although there were fewer
objections to a single payment for clinic visits and those objections
lacked the forcefulness and specificity of the objections to a single
level of payment for Type A and Type B ED visits. A few commenters
stated that, while they did not favor a single payment for clinic
visits, given the nature of the services provided at clinic visits, a
single payment level would be acceptable. A majority of commenters
supported CMS' proposal to eliminate the distinction between ``new''
and ``established'' patient visits. As with ED visits, commenters
stated that the proposed single clinic visit code and associated single
payment are overly broad, which could result in payment rates that are
inadequate for treatment of beneficiaries who require higher levels of
care and higher copayment amounts for beneficiaries receiving lower
level visits. Commenters expressed concern that hospitals would
pressure physicians and hospital staff to reduce the time in clinic
visits to lessen the potential loss of revenues associated with a
single level clinic visit payment, potentially leading to a
deterioration of patient care. Commenters asserted that the proposed
policy would create added administrative burden as other payers will
continue to require the reporting of the five E/M CPT codes to describe
clinic visits. Commenters argued that the proposed policy is
inequitable to many tertiary care and teaching hospitals, including
those hospitals that consistently have a more complex case-mix and a
greater than average utilization of the higher level E/M codes.
Commenters also argued there is a likely bias toward lower level visit
code costs in calculating the geometric mean cost for the new collapsed
visit codes as higher level visit codes are more often billed with
separately paid procedures on the same day of service. Commenters
expressed additional reservations with the proposal in light of their
inability to conduct impact analysis on the proposed policy due to
initial errors in the CY 2014 OPPS/ASC proposed rule data. Commenters
stated that the proposed policy removes CMS' ability to track and
document differences in patient acuity and is inconsistent with CMS'
previously stated purpose in creating MS-DRGs under the IPPS to account
for differences in costs due to differences in patient severity.
Moreover, commenters stated the proposed policy should not be
implemented in CY 2014 due to its interaction with CMS' proposal to
expand packaging and hospitals' administrative training sessions
currently underway to implement ICD-10. Commenters suggested CMS work
with the AMA to develop facility-specific CPT codes for E/M clinic
visits (with no distinction between new and established patients) and
seek input from industry stakeholders, specifically hospital
representatives, to develop descriptions for these new codes that allow
for their consistent application by hospital outpatient clinics.
Commenters also recommended that CMS develop

[[Page 75041]]

hospital-specific national guidelines for hospitals to report clinic
visits.
Commenters expressed a lack of understanding of why this proposal
is necessary in light of CMS' previous statements that hospitals are
generally billing appropriately and in a consistent manner that
distinguishes among the different levels of visits based on the
required hospital resources and CMS' current utilization of CERT, RACs,
ZPICs, and other methods of review to identify medically unnecessary
services. Commenters stated that CMS should conduct selected focused
audits in lieu of the proposed policy if CMS believes that hospitals
are upcoding.
Response: We appreciate all of the public comments we received on
our proposed policy to create a single new alphanumeric HCPCS G-code
for hospital use only representing any clinic visit under the OPPS and
the assignment of the newly created alphanumeric clinic visit HCPCS G-
code to its own newly created APC 0634. We disagree with the commenters
that the proposed clinic visit code is overly broad. While we agree
that the proposed clinic APC encompasses a range of visits for
beneficiaries with different medical issues, we believe that the
spectrum of hospital resources provided during an outpatient hospital
clinic visit is appropriately captured and reflected in the single
level payment for clinic visits. We also believe that a single visit
code is consistent with a prospective payment system, where payment is
based on an average estimated relative cost for the service, although
the cost of individual cases may be more or less costly than the
average. We do not observe wide disparity among the estimated geometric
mean costs for new or established clinic visits in our data, and there
is significantly less disparity in estimated geometric mean costs among
the current five clinic visit levels than there is among the five ED
visit levels.
We believe the proposed payment rate for APC 0634 represents an
appropriate payment for clinic visits as it is based on the geometric
mean costs of all visits. Although the cost for any given clinic visit
may be higher or lower than the geometric mean cost of APC 0634, the
payment remains appropriate to the hospital delivering a variety of
clinic visits. The high volume of claims from every level of clinic CPT
code that we used for ratesetting for the newly created alphanumeric
Level II HCPCS clinic visit code allows us to have accurate data upon
which to develop appropriate payment rates.
With regard to specific concerns for hospitals that treat patients
with a more complex case-mix, we note that the relatively low estimated
cost of clinic visits overall would result in much less underpayment or
overpayment for hospitals that may serve a population with a more
complex overall case-mix. We also note that the range among the
geometric mean cost of the current five clinic visit levels is much
smaller than the range for the current five levels of ED visits. In
addition, the commenters' support for eliminating distinctions for new
and established patients suggests that hospitals prefer the
administrative ease of not tracking new or established patients even
though we make differential payment for these visits, and we observe
differential costs for these CPT codes in our claims data.
We disagree with the commenters' statement that there is a likely
bias toward including more lower level visit code costs in calculating
the geometric mean cost for the new collapsed visit codes. Commenters
have argued that higher level visit codes are more often billed with
separately paid procedures on the same day of service and that we are
less likely to be able to isolate claims with a single higher level CPT
code. For clinic visits, we observed comparable distributions of claims
between higher and lower levels across new and established clinic visit
CPT codes in both the single bill claims used for ratesetting and all
claims. We concluded that the distribution of claims data among higher
and lower level CPT codes used to establish the proposed payment rate
for APC 0634 is comparable to the total distribution of claims among
CPT code levels in the CY 2012 claims data in our CPT cost files. We do
not believe that our single bill methodology biases the resulting
geometric mean in any way.
We disagree with commenters that our proposal for a single payment
is contrary to CMS' stated purpose in creating MS-DRGs under the IPPS
to account for differences in costs due to differences in patient
severity. MS-DRGs are designed to reflect significant differences in
resource costs for an inpatient stay. The MS-DRG classification of a
particular discharge is based, as appropriate, on the patient's age,
sex, principal diagnosis (that is, the diagnosis established after
study to be chiefly responsible for causing the patient's admission to
the hospital), secondary diagnoses, procedures performed, and discharge
status. A single payment for a clinic visit does not pose the same
level of financial risk. The observed cost differences among levels of
CPT codes in the claims data are not dramatic. Further, hospitals will
receive separate payment for many other services furnished in the same
encounter and will not incur the same level of financial risk as for an
inpatient stay.
Regarding the commenters' inability to conduct impact analysis on
our visit proposal because of some initial limited errors in the
proposed rule payment files, we note that we released corrected data
files on August 28, 2013, and extended the comment period to September
16, 2013, on the technical corrections noted in the correcting document
published in the Federal Register on September 6, 2013 (78 FR 54842).
For a more detailed discussion of the OPPS data process, we refer
readers to section II.A. of this final rule with comment period.
We disagree with the commenters that hospitals would pressure
physicians and hospital staff to furnish a diminished level of care to
beneficiaries in an attempt to mitigate any potential loss of revenue
associated with a single level clinic visit payment that is based on an
average of relative costs of all clinic visit codes and is proportional
to their appearance in the claims data. As with all prospective payment
systems that depend upon a prospectively established payment derived
from relative cost, less costly cases generate greater net revenue for
the hospital than more costly cases. Payments may be greater than or
less than the cost of any particular case. It is our belief and
continued expectation that hospitals and physicians and other
practitioners will furnish appropriate care to Medicare beneficiaries.
We continue to believe discontinuing the use of the five levels of
HCPCS visit codes for clinic visits will 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 they provide. We believe the
advantages of this reduced administrative burden outweigh any potential
loss in CMS' ability to track and document differences in patient
acuity for clinic visits. We note that the level of CPT code is not the
only method for assessing patient acuity. Diagnosis coding and the type
and frequency of other services billed on a visit claim also
communicate patient acuity. We disagree with the commenters that
finalization of our proposed clinic visit policy should be delayed
because of our CY 2014 proposal to expand packaging or the presence of
hospital training sessions to implement ICD-10 coding. We note that our
CY 2014 OPPS packaging policies create no additional administrative

[[Page 75042]]

burden for hospital coding for visits. We continue to expect hospitals
to correctly code for the services they furnish. We also believe that
the combination of a single HCPCS G-code to describe all clinic visits,
the discontinuance of the requirement that hospitals track criteria for
billing either new or established clinic visits, and the discontinuance
of the requirement for hospitals to distinguish different clinic visit
levels through internal guidelines will result in significant
administrative simplification for hospitals.
With regard to national guidelines, we have stated that it would be
desirable to many hospitals to have national guidelines (76 FR 74345
through 74346). However, we also understand that it would be disruptive
and administratively burdensome to other hospitals that have
successfully adopted internal guidelines to implement any new set of
national guidelines. With regard to the potential for facility-specific
CPT codes, as we have also stated in the past (76 FR 74346), if the AMA
were to create facility-specific CPT codes for reporting visits
provided in HOPDs, we would consider such codes for OPPS use.
With regard to the comment that the proposal is unexpected, each
annual rulemaking cycle includes some proposed policy changes to the
OPPS, and some of those proposals may be more or less predictable. We
believe that, despite hospitals' use of internal guidelines,
differentiating between five different clinic visit levels is
challenging because the difference between consecutive levels is
incremental and nuanced. A single code and a single level of payment
for all clinic visits eliminate the difficulty of distinguishing, for
example, a level 1 clinic visit versus a level 2, or a level 2 versus a
level 3, etc. A single code also negates the ability or incentive for
hospitals to ``upcode'' patients whose visits do not fall clearly into
one category or another, and removes any financial advantage to any
hospitals that would engage in upcoding in the future.
Comment: Commenters suggested the following alternatives to our
proposed policy: One commenter suggested that CMS alter its proposal
and create one APC for each type of E/M visit per encounter as
proposed, but continue to allow the reporting of the current CPT E/M
codes instead of creating new HCPCS codes. Multiple commenters
suggested that CMS employ a three acuity level model to pay for clinic
visits under the OPPS. Another commenter suggested that CMS continue to
use the current CPT codes for clinic E/M services but assign the CPT
codes to one of two Clinic Visit APCs.
Response: We appreciate the thoughtful and detailed suggestions
presented by the commenters. We continue to believe that creating a new
HCPCS code is more appropriate than maintaining the current CPT coding
and then creating a separate payment. Separate CPT codes would continue
to require guidelines. It also would be more difficult to eliminate the
distinction between new and established clinic visits while continuing
to recognize CPT codes that make that distinction. With regard to
creating three APCs rather than one, we do not believe this achieves
the incentive for efficiency associated with a single clinic visit
code, and that three APCs would maintain some of the same incentives in
the current five levels of APCs. At this time we believe that
collapsing the existing five levels of clinic visit codes into one new
alphanumeric HCPCS G-code and assigning this code to new APC 0634 is
the optimal OPPS payment policy for clinic visits.
After consideration of the public comments we received, we are
finalizing our proposal to create a new alphanumeric HCPCS code, G0463
(Hospital outpatient clinic visit for assessment and management of a
patient), for hospital use only representing any clinic visit under the
OPPS and to assign new HCPCS code G0463 to new APC 0634. We also are
finalizing our proposal to use CY 2012 claims data to develop CY 2014
OPPS payment rates for the new HCPCS code G0463 based on the total
geometric 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). In addition, we are finalizing
our proposal to no longer recognize a distinction between new and
established patient clinic visits.
We are not finalizing our proposal for CY 2014 to discontinue our
longstanding policy of recognizing five distinct visit levels for Type
A ED visits and to create a new alphanumeric HCPCS G-code for hospital
use only representing any Type A ED visit under the OPPS. Similarly, we
are not finalizing our proposal for CY 2014 to discontinue our
longstanding policy of recognizing five distinct visit levels for Type
B ED visits and to create a new alphanumeric HCPCS G-code for hospital
use only representing any Type B ED visit under the OPPS. In addition,
we are not finalizing our proposal to assign the newly created
alphanumeric Type A ED visit HCPCS G-code to its own newly created APC
0635, nor are we finalizing our proposal to assign the newly created
alphanumeric Type B ED visit HCPCS G-code to its own newly created APC
0636. Instead, we will continue to use our existing methodology to
recognize the existing CPT codes for Type A ED visits as well as the
five HCPCS codes that apply to Type B ED visits, and establish the CY
2014 OPPS payment under our established standard process (77 FR 68399
through 68404). These codes and their APC assignments for CY 2013
compared to their APC assignments for CY 2014 are depicted below in
Table 42.

[[Page 75043]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.343

We intend to further explore the issues described above related to
ED visits, for example, concerns about excessively costly patients,
such as trauma patients, and potential alternatives that commenters
provided to address this issue. We may propose changes to the coding
and APC assignments for ED visits in future rulemaking.

C. Payment for Critical Care Services

In the CY 2014 OPPS/ASC proposed rule (78 FR 43616 through 43617),
we proposed to continue the methodology established in the CY 2011
OPPS/ASC final rule with comment period for calculating a payment rate
for critical care services that includes packaged payment of ancillary
services. For CY 2010 and in prior years, the AMA CPT Editorial Panel
defined critical care CPT codes 99291 (Critical care, evaluation and
management of the critically ill or critically injured patient; first
30-74 minutes) and 99292 (Critical care, evaluation and management of
the critically ill or critically injured patient; each additional 30
minutes (List separately in addition to code for primary service)) to
include a wide range of ancillary services such as electrocardiograms,
chest X-rays, and pulse oximetry. As we have stated in manual
instruction, we expect hospitals to report in accordance with CPT
guidance unless we instruct otherwise. For critical care in particular,
we instructed hospitals that any services that the CPT Editorial Panel
indicates are included in the reporting of CPT code 99291 (including
those services that would otherwise be reported by and paid to
hospitals using any of the CPT codes specified by the CPT Editorial
Panel) should not be billed separately. Instead, hospitals were
instructed to report charges for any services provided as part of the
critical care services. In establishing payment rates for critical care
services and other services, CMS packages the costs of certain items
and services separately reported by HCPCS codes into payment for
critical care services and other services, according to the standard
OPPS methodology for packaging costs (Medicare Claims Processing
Manual, Pub. 100-04, Chapter 4, Section 160.1).
For CY 2011, the AMA CPT Editorial Panel revised its guidance for
the critical care codes to specifically state that, for hospital
reporting purposes, critical care codes do not include the specified
ancillary services. Beginning in CY 2011, hospitals that report in
accordance with the CPT guidelines should report all of the ancillary
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

[[Page 75044]]

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 had 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 geometric mean and median line item
costs as well as the geometric mean and median line item charges for
CPT code 99291, when compared to CY 2010 hospital claims data.
Specifically, we noted that the geometric mean and median line item
costs increased 13 percent and 16 percent, respectively, and the
geometric 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43617), we stated that
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 showed increases in the geometric mean line item costs as
well as the geometric 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
stated that 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 proposed 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
proposed to continue to implement claims processing edits that
conditionally package payment for the ancillary services that are
reported on the same date of service as critical care services in order
to avoid overpayment.
Comment: Commenters recommended that CMS, in setting the payment
rate for packaging ancillary services into the critical care services,
establish a methodology that ensures that multiple cost report revenue
centers are included in the review.
Response: The methodology that the commenters recommended is
consistent with the methodology we already have in place. As discussed
in section II.A.1.c. of this final rule with comment period, we
calculate hospital-specific overall ancillary CCRs and hospital-
specific departmental CCRs for each

[[Page 75045]]

hospital for which we have claims data. We apply the hospital-specific
CCR to the hospital's charges at the most detailed level possible,
based on a revenue code-to-cost center crosswalk that contains a
hierarchy of CCRs used to estimate costs from charges for each revenue
code. Therefore, we base our cost estimation of each packaged ancillary
service on the most specific cost center to which the revenue code
reported with that service maps. We then package the cost that we
estimate as a result of that process into the geometric mean cost
calculation for critical care.
After consideration of the public comments received, we are
finalizing our proposal 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 finalizing our proposal 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.

VIII. Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for individuals who have an acute mental
illness. Section 1861(ff)(1) of the Act defines partial hospitalization
services as ``the items and services described in paragraph (2)
prescribed by a physician and provided under a program described in
paragraph (3) under the supervision of a physician pursuant to an
individualized, written plan of treatment established and periodically
reviewed by a physician (in consultation with appropriate staff
participating in such program), which 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

[[Page 75046]]

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 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

[[Page 75047]]

PHP services were based on a combination of hospital and CMHC data. For
CY 2009, we established new APCs for PHP services based exclusively on
hospital data. Specifically, we adopted a two-tiered APC methodology
(in lieu of the original APC 0033) under which CMS paid one rate for
days with 3 services (APC 0172) and a different payment rate for days
with 4 or more services (APC 0173). These two new APCs were established
using only hospital data. For CY 2011, we added two new APCs (APCs 0175
and 0176) for PHP services provided by hospitals and based the relative
payment weights for these APCs solely on hospital data. APCs 0172 and
0173 were designated for PHP services provided by CMHCs and were based
on a mixture of hospital and CMHC data. As the Secretary argued in the
Paladin case, the courts have consistently held that the phrase ``based
on'' does not mean ``based exclusively on.'' Thus, the relative payment
weights for the two APCs for PHP services provided by CMHCs in CY 2011
were ``based on'' hospital data, no less than the relative payment
weights for the two APCs for hospital-based PHP services.
Although we used hospital data to establish the relative payment
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we
believe that we have the authority to discontinue the use of hospital
data in determining the OPPS relative payment weights for PHP services
provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make
plain that the data source for the relative payment weights is subject
to change from one period to another. Section 1833(t)(2)(C) of the Act
provides that, in establishing the relative payment weights, ``the
Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from
the most recent available cost reports.'' 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. PHP APC Update for CY 2014

In the CY 2014 OPPS/ASC proposed rule (78 FR 43618 through 43622),
for CY 2014, we proposed 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 that were shown in Table 30 of
the CY 2014 OPPS/ASC proposed rule (78 FR 43620) are reflected in Table
42a below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.344

For CY 2014, the proposed geometric mean per diem costs for days
with 3 services (Level I) was approximately $95 for CMHCs and
approximately $213 for hospital-based PHPs. The proposed geometric mean
per diem costs for days with 4 or more services (Level II) was
approximately $106 for CMHCs and approximately $215 for 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

[[Page 75048]]

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.
The proposed CY 2014 geometric mean per diem costs for the PHP APCs
were shown in Tables 31 and 32 of the CY 2014 OPPS/ASC proposed rule
(78 FR 43620 through 43621). We invited public comments on these
proposals.
Comment: Many commenters supported the continued distinction
between APC payments for PHP services provided by CMHCs and APC
payments for PHP services provided by hospital-based PHPs. These
commenters believed that the cost structures of the two provider types
are significantly different and, therefore, the payments should be
different. Conversely, a few commenters stated that they do not like
the distinction between provider types. Instead, these commenters
believed that CMHCs and hospital-based PHPs should receive the same
payment rates. The commenters believed that the ratesetting methodology
used to establish payment rates for PHP services also has fueled a
fundamental shift in payments away from less expensive CMHCs to more
expensive hospital-based PHPs, resulting in overall higher CMS
expenditures for the same services, which is discriminating against
CMHCs that provide identical PHP services.
One commenter did not agree with CMS' statement that ``CMHCs have a
lower cost structure than hospital-based PHP providers, in part because
the data showed that CMHCs provide fewer PHP services in a day and use
less costly staff than hospital-based PHPs.'' The commenter stated that
CMS implies that ``CMHCs provide less valuable services than hospital-
based PHPs, hire less qualified staff, and overall perform very poorly
compared to hospital-based PHPs.''
Some commenters also continued to support CMS' creation of two-
tiered payments for partial hospitalization services. They believed
that these changes to the PHP payment structure have been a positive
step in addressing the twin goals of ensuring long-term stability and
improving the accuracy of payments.
Response: We understand the concerns raised by the commenters
regarding the differences between CMHC PHP APC per diem payment rates
and hospital-based PHP APC per diem payment rates. We are not
discriminating against CMHCs or any other health care provider, nor are
we encouraging the use of a specific provider type which would lead to
a shift in payments; we are calculating the payment rates for PHP
services based on the claims and cost report data submitted by our
providers. We continue to believe that it is important to calculate PHP
APC per diem payment rates based on the data for each type of provider
in order to appropriately pay for PHP services. We also believe that
the CMHC and the hospital-based PHP APC per diem payment rates
accurately reflect the claims and cost report data of CMHCs and
hospital-based providers, respectively. The PHP APC per diem payment
rates are directly related to the accuracy of the claims and cost
report data submitted by providers. Therefore, it is imperative that
providers submit accurate claims and cost reports in order for the
payment rates to most accurately reflect the costs to providers. The
resulting PHP APC per diem payment rates reflect the cost of what
providers expend to maintain such programs.
CMHCs and hospital-based PHPs continue to show significant
differences in their costs. As we explained in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74347), we attributed the
decrease in costs to CMHCs having a lower cost structure than hospital-
based PHP providers, in part, because the data showed (and continue to
show) that CMHCs provide fewer PHP services in a day and use less
costly staff than hospital-based PHPs. In other words, hospital-based
providers have traditionally provided more services than CMHCs during a
PHP day. Providing fewer services during a PHP day results in less
overhead expense for the provider; that is, less time the provider
needs to pay staff, less time the provider needs to heat the building,
and less time the provider needs to light the building. Therefore,
providing fewer PHP services during a day directly contributes to a
lower overall cost structure. We did not intend to imply that, in
comparison to hospital-based PHPs, CMHCs provide inferior, less
valuable or poor quality services or are poor performers; we were
merely stating the differences in these providers' cost structures
based on cost analysis. In light of these differences in cost
structures between provider types, it is inappropriate to treat CMHCs
and hospital-based PHP providers in the same manner. We have been
concerned that paying hospital-based PHPs at a lower payment rate than
their cost structure reflects could lead to closures and possible
access problems for hospital-based programs providing services to
Medicare beneficiaries, given that hospital-based PHPs offer the widest
access to PHP services because they are located across the country. At
the same time, we believe it is inappropriate to overpay CMHCs in
comparison to their cost structures.
We appreciate the commenters who continue to support the two-tiered
payments for PHP services. We believe that paying providers based on
the four PHP APC per diem payment rates supports continued access to
the PHP benefit, while also providing appropriate payment based on the
unique cost structures of CMHCs and hospital-based PHPs.
Finally, we consistently monitor the OPPS to identify potential
refinements that would improve the accuracy and stability of the
payment system. We will continue to monitor the impact of our payment
policies on the PHP benefit and its providers.
Comment: A few commenters expressed concern regarding the adverse
impact the proposed payment rates for CY 2014 would have on CMHC
providers across the country. One commenter stated that since the
adoption of the provider-specific structure in CY 2011, payment for
partial hospitalization services provided by CMHCs has decreased by
approximately 50 percent. This commenter indicated that, in CY 2013,
the per diem payment rates for PHP services provided by CMHCs decreased
by another 4.4 percent as a result of changing the methodology from
median-based relative payment weights to geometric mean-based relative
payment weights. The commenter also stated that, for CY 2014, CMS is
proposing to further decrease payments for PHP services provided by
CMHCs by approximately 3.8 percent. A few commenters stated that many
Medicare CMHCs have closed over the years and they believed that
payment rate reductions are a primary reason for the closures. These
commenters pointed out

[[Page 75049]]

that another reduction in the per diem payment rates may result in more
CMHC closures, therefore decreasing the number of providers and
available resources for the most disadvantaged portion of the
beneficiary population.
Commenters also expressed concern regarding the decrease in payment
rates for Level II hospital-based PHP services. One commenter stated
that the proposed 9.2 percent decrease in the Level II per diem payment
rate for hospital-based PHPs would result in inadequate payment for
hospitals' direct and indirect costs and that any further reductions to
Medicare payment rates will put their program in jeopardy. A few
commenters requested that CMS suspend the proposed PHP per diem payment
rates for CY 2014 and, instead, maintain the CY 2013 PHP per diem
payment rates for CY 2014.
Response: We understand the concerns raised by the commenters that
a reduction in payment rates for CY 2014 will not adequately pay for
their costs to provide PHP services and may result in closures for both
CMHCs and hospital-based PHPs. However, based on the final geometric
mean per diem costs for CY 2014, CMHCs will receive an increase in
geometric mean per diem costs from CY 2013 to CY 2014 for APC 0172
Level I (3 service days) from $87.39 to $99.39 and the geometric mean
per diem costs for APC 0173 Level II (4 or more service days) will
basically remain the same ($112.12 for CY 2014 compared to $112.82 for
CY 2013). Hospital-based PHPs also will receive an increase in
geometric mean per diem costs from CY 2013 to CY 2014 for APC 0175
Level I (3 service days) from $185.90 to $190.82. Only the geometric
mean per diem costs for APC 0176 Level II (4 or more service days) will
decrease from CY 2013 to CY 2014 from $234.81 to $214.39. As discussed
in the prior response, we believe that the CMHC and the hospital-based
PHP APC per diem payment rates accurately reflect the claims and cost
report data of the CMHCs and hospital-based providers, respectively.
The resulting PHP APC per diem payment rates and the APC payment
structures reflect the cost of what providers expend to maintain such
programs. Therefore, it is unclear to us why this would lead to program
or business closures. As we stated in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74350), the closure of PHPs may be due to a
number of reasons, such as poor business management or marketing
decisions, competition, oversaturation of certain geographic areas, and
Federal and State fraud and abuse efforts, among others. However, we
take seriously the commenters' concerns that a reduction in PHP APC per
diem payment rates could erode the viability of PHPs and make it more
difficult for beneficiaries to receive needed mental health services.
Therefore, we monitor facility closings and openings to make sure that
access issues do not exist, and we will continue to do so in the
future.
In response to the comment that the payment rates for PHP services
have decreased as a result of changing the methodology from median-
based relative payment weights to geometric mean-based relative payment
weights, we have made changes throughout the history of the OPPS with a
goal of deriving more accurate information from available claims and
cost report data, as well as increasing the benefits of using a metric
that more accurately describes the range of costs associated with
providing services and, thus, resulting in the most appropriate
payments. We continue to believe that basing the relative payment
weights on geometric mean costs promotes better stability in the
payment system by making OPPS payments more reflective of the range of
costs associated with providing services. Therefore, we believe that
using geometric mean costs to calculate the relative payment weights
for the OPPS represents an improvement to our cost estimation process
and leads to the establishment of relative payment weights that are
more reflective of service cost patterns.
Finally, in response to commenters requesting that we suspend the
proposed CY 2014 PHP payment rates and maintain the CY 2013 PHP APC
payment rates, as we discussed above, we cannot establish payment rates
that do not accurately reflect current claims and cost report data.
Therefore, we are not suspending implementation of the CY 2014 PHP APC
per diem payment rates.
Comment: Several commenters indicated that the proposed PHP per
diem payment rates for CY 2014 show again that payment rates continue
to materially fluctuate from one year to another. The commenters
expressed concern regarding the variation in payment from year to year
for this critically important service and noted that significant
fluctuations from year to year make budgeting difficult for hospital-
based PHPs. Another commenter asked if the decrease in the APC 0176
payment rate is due solely to the costs associated with the services,
or if the decrease is compounded by the other significant changes in
the proposed rule--namely, a significant change in the packaging of
services, which will shift significant dollars around in the OPPS
system.
Response: We recognize the commenters' concern regarding variance
in payment rates from year to year. We believe that payment rates for
PHP services fluctuate from year to year based on a variety of factors,
including direct changes to the PHP APC per diem payment rate, changes
to the OPPS, and provider-driven changes.
Over the past several years, we have made changes to PHP APC per
diem payment rates to more accurately align the payments with costs.
The changes have included establishing separate APCs and associated per
diem payment rates for CMHCs and hospital-based providers based on each
provider's costs, under which we pay one amount for days with 3
services and another amount for days with 4 or more services.
Additionally, the OPPS is a budget neutral payment system, and as a
result, changes in the relative payment weights associated with certain
services may affect those of other services in the payment system.
Further, changes in payment policy also may have effects on the payment
rates each year. For example, basing the relative payment weights on
geometric mean costs rather than median costs affected the payment
rates.
Finally, provider-driven changes affect the payment rates. The
case-mix and number of services provided, as well as changes to the
charging structure and the variety of hospitals and CMHCs providing the
services, contribute to changes in the payment rates. Providers may
choose to update or maintain their charges each year based on a variety
of business reasons, but these changes to charges often vary depending
on the different services each provider furnishes as well as the
business decisions of the provider. Therefore, a provider's decision to
change its mix of services or to change its charges and clinical
practice for some services also contributes to the fluctuation in
payment rates. Therefore, both policy and data changes influence the
changes in the PHP APC payment rates, as they do for all services each
year.
In response to the commenter who asked if the decrease in the
payment rate for APC 0176 is due solely to the costs associated with
PHP services, or if the decrease is compounded by other significant
changes in the proposed rule, the decrease is due to both. There is a
decrease in the Level II PHP hospital-based geometric mean per diem
costs of approximately $21 from the CY 2013 Level II hospital-based PHP
per diem amount of $235 to the CY 2014 Level II

[[Page 75050]]

hospital-based PHP per diem amount of approximately $214 before any
changes that may result from relative payment weights associated with
other services in the OPPS. That said, we believe that the payment rate
for APC 0176 continues to accurately reflect the costs associated with
providing PHP services in the hospital setting.
We will continue to explore ways to minimize fluctuations in the
PHP payment rates because we agree that a high level of volatility is
not desirable. However, we also believe that changes in estimated costs
from one year to the next are appropriate in a payment system that is
annually updated to more accurately estimate the cost of a service upon
which the relative payment weights are based.
In summary, after consideration of the public comments we received,
we are finalizing our CY 2014 proposal, without modification, to update
the four PHP APC per diem payment rates based on geometric mean cost
levels calculated using the most recent claims data for each provider
type. The updated PHP APCs geometric mean per diem costs for PHP
services that we are finalizing for CY 2014 are shown in Tables 43 and
44 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.345

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622),
we noted that 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 stated that we are considering a number of possible
future modifications to certain aspects of the PHP benefit. We did not
propose new Medicare policy in this discussion of possible future
modifications in the CY 2014 OPPS/ASC proposed rule. Instead, we
requested public comments on possible future initiatives.
For example, 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 whether
alternative methodologies to pay for PHP services would reduce
unnecessary care while maintaining or increasing the quality of care
provided. We invited public comments on alternative payment
methodologies.
Another area in which we solicited public comments is whether
payment based on an episode of care, or a per diem similar to those
used in 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

[[Page 75051]]

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.
Comment: Commenters primarily opposed changing the PHP payment
methodology from a per diem based calculation to an episode of care
based calculation. We received several public comments requesting a
single payment for PHP services, as well as several public comments
stating that there is a need for more research to determine the best
method of payment. Mainly, commenters suggested that CMS take three
steps: (1) Establish a ratesetting task force to develop a new payment
rate methodology that captures all relevant data and reflects the real
costs to providers to deliver these services; (2) examine the Medicare
mental health benefits; and (3) encourage legislative changes to expand
mental health services. These commenters stressed that any proposed
change to the payment methodology for PHP services must involve
relevant stakeholders in Federal agencies (such as SAMHSA) as well as
representatives from CMHCs and hospital providers and associations.
Response: We appreciate the commenters' input and suggestions and
will take them under advisement for future refinements.
Comment: Commenters indicated that the Medicare PHP benefit is
critical in keeping beneficiaries out of emergency rooms and in the
community, and urged CMS to proceed cautiously in proposing reforms
that may erode what is already a fragile safety net of providers. The
commenters believed that any changes to the PHP payment methodology
should not be considered in isolation. The commenters suggested that
CMS look at Medicare benefits for psychiatric services overall and take
the necessary steps to develop coverage of a comprehensive set of
services across all settings of care that meet the needs of the
population.
Several commenters cited a recent report sponsored by the National
Association of Psychiatric Health Systems which they said found that
the benefits derived from patients participating in PHPs extend the
time between readmissions. According to their analysis, the time-to-
readmission ratio for these Medicare beneficiaries was 131 days versus
59 days between admissions for those beneficiaries who did not
participate in PHPs.
Many commenters representing hospitals and hospital associations
indicated that it would be premature to assume that a change in the
payment methodology would achieve the goals that CMS has described in
the proposed rule without statutory changes to the existing PHP
benefit. A few commenters indicated that in the absence of any relevant
payment research or substantive proposals, they could not comment on
whether an episode of care or a per diem based payment for the PHP
benefit would result in more suitable payment rates, indicating that
additional research is an important next step before determining
whether or not either approach would have the intended effects and is
sustainable.
One commenter believed that improvements in PHP models can be made
and suggested that CMS consider other treatment approaches that are
less rigid than the current PHP guidelines, especially the required
number of service hours and days of treatment required per week. The
commenter believed that more flexibility in this area is necessary to
accommodate patients' work and family schedules. For example, a model
of intensive outpatient services estimated at 3 hours per day, 3 days
per week would allow more flexibility to meet patient needs clinically
and personally. The commenter did not believe that the application of
an episode of care payment methodology for PHP services would be
appropriate due to the vagueness of the period and the intensity and
uniqueness of each patient's illness. However, the commenter supported
CMS' efforts to communicate with stakeholders on possible future
initiatives for PHP services.
Commenters also stated that an enhanced per diem payment rate that
reflects the costs of treating patients with more complicated clinical
needs similar to the IPF PPS would also be worth considering.
Many commenters representing hospital associations indicated that
it would be useful to evaluate the way in which overall Medicare mental
health benefits are structured. The commenters believed that, compared
to the scope of services many private health insurers cover, Medicare
benefits are much narrower. The commenters stated, for instance, that
Medicare beneficiaries are currently limited to only 190 days of
inpatient psychiatric hospital care in their lifetime. According to the
commenters, no other Medicare inpatient hospital service has this type
of arbitrary cap on benefits. In addition, the commenters stated that,
rather than covering the full continuum of behavioral health care
services, Medicare currently covers only inpatient psychiatric care,
hospital-based and CMHC-based PHP services, and office-based services.
The commenters further stated that the PHP benefit is drawn very
narrowly so as to only cover care for the most acutely ill patients who
would otherwise require hospitalization. As a result, according to the
commenters, the parts of the continuum missing from current Medicare
benefits include formal coverage of intensive outpatient care,
residential treatment, psychosocial rehabilitation, and care
management. The commenters believed that this makes it difficult for
providers to provide Medicare beneficiaries with the appropriate
services at the right level and time.
These commenters stated that broadening the Medicare mental health
benefit structure to encompass the other components of the continuum
would require statutory changes. The commenters believed that making
minimal changes, such as revising the PHP payment structure, will not
address the larger limitations of the Medicare benefit design.
One commenter recommended that a single provider-based payment
structure be established for PHP services that reflects the intensity
of services that people with serious mental illnesses generally require
because this benefit is meant to substitute for inpatient care or as a
step-down level of care. To achieve long-term stability and payment
accuracy, the commenter suggested that CMS maintain the per diem
payment methodology. The commenter believed that an episode-of-care
payment methodology is more appropriate for the typical and predictable
treatment of physical ailments and issues, but not for mental health
treatment.
One commenter recommended that CMS establish the same payment rates
and two-tiered payment structure for all providers with no
differentiation between payment rates for hospital-based PHP services
and payments rates for PHP services provided by CMHCs. The commenter
also urged CMS to establish quality and outcomes criteria to evaluate
performance, influence future ratesetting, and provide rewards to
individual providers for outstanding quality and outcomes while at the
same time keeping their cost under control.

[[Page 75052]]

Response: We appreciate the commenters' suggestions and
recommendations for strengthening the PHP benefit and payment
structure. We will take them under advisement for any future
refinements.
Another area on which we solicited public comments was physician
certification/recertification that an 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
furnished to 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. For more details, we refer readers to 42 CFR 424.24(e).
Current regulations specify that a physician recertification must
be signed by a physician who is treating the patient and has knowledge
of the patient's response to treatment. A 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 invited 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 stated that we were
interested in whether the first recertification date should be changed
to some other standard that accords with best practices and why.
Comment: Several commenters indicated that they had no recommended
changes to physician certification and recertification requirements and
did not believe that an alternative recommendation is warranted at this
time. The commenters indicated that they did not believe that there was
any reason to change the 18-day recertification requirement and the
``no longer than 30 days'' length of time requirement for a subsequent
recertification. In addition, the commenters indicated that their
organization member hospitals have not identified these requirements as
a problem, nor are they aware of any best practices that would suggest
the need for such a change in the requirements.
Response: We thank the commenters for their input and suggestions
and will take them under advisement for future refinements
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 indicated that 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
invited public comments on two issues: (1) the best way that discharge
from a PHP could 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, address,
and appointment date and time;
A confirmed place to live in a stable environment with
support services; and
Other care coordination information.
Comment: With regard to additions to the written plan of treatment,
several commenters supported including in the written plan of treatment
a full list of patients' medications, dosages, and any necessary
prescriptions as well as written notice of the 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, address and appointment date and time. However, the
commenters did not believe that it would be feasible for a PHP to
provide a ``confirmed place to live in a stable environment with
support services'' for its patients. The commenters noted that among
the admission criteria for a PHP is the requirement that the patient
``have an adequate support system to sustain/maintain themselves
outside the partial hospitalization program.'' The commenters believed
that, while a PHP may be able to provide some limited assistance for a
patient to maintain and enhance his or her stable environment, the
program cannot ensure the sustainability of the environment or keep a
patient enrolled in a PHP until that environment can be established.
The commenters pointed out that ensuring this type of environment
would require intensive case management. The commenters believed that,
if intensive case management was included in the PHP benefit available
to Medicare beneficiaries, it would be a helpful enhancement to the
program. Therefore, the commenters urged CMS to continue stakeholder
engagement to discuss the goals of additional documentation
requirements within the written plan of treatment.
Several commenters suggested additional requirements for the
written plan of treatment to better direct PHP resources to ensure
appropriate discharges and follow-up services, such as expedited
discharge for patients who are no longer at risk for inpatient
psychiatric hospitalizations, and specific actions to assist patients
at discharge, including providing written instructions for medications,
documentation of the next appointment with the appropriate Medicare
Part B participating practitioner, confirmation of a place of
residence, and other care coordination information. One commenter
stated that the PHP medical necessity criterion should include care for
the acute exacerbation of a psychiatric condition and care for
prevention of admission or readmission to the hospital. One commenter
suggested that any written treatment plan for a patient receiving PHP
services include goals that will curtail the patient's need for a
higher level of care through adherence to the PHP's attendance
requirements and his or her prescribed medication regimen, identify the
patient's symptoms and prognosis for improvement, and take into
consideration the patient's coping skills. The commenter stated that
the treatment plan must be concise. Another commenter agreed that the
diagnosis of

[[Page 75053]]

a patient enrolled in a PHP should be consistent with those
attributable to persons with chronic and persistent mental illnesses
and included in the written treatment plan for PHP services.
Response: We thank the commenters for their input and suggestions
and will take them under advisement for future refinements.
We also stated that we were 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 requested 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?
In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we stated that
we would appreciate feedback on all of these areas for future
consideration and invited public comments on these issues.
Comment: Many commenters indicated that they have long supported
the quality measures that are now included as part of the IPFQR
program, and noted that the measures are well tested, reliable, and
valid and have broad stakeholder support. The commenters asked that CMS
initiate a conversation with the measure developers to determine if any
of these measures would be suitable for the outpatient setting. In
particular, the commenters indicated that the care transition measure
(HBIPS 7) and the antipsychotic medication measures (HBIPS 4 and 5) are
likely candidates and worthy of further discussion. Other commenters
also suggested that CMS consider the HBIPS 6 measure regarding
continuity of care and the HBIPS 1 measure regarding admission
screening for violence risk, substance use, psychological trauma
history, and patient strengths. These commenters stated that preserving
the continuity of care between the inpatient and outpatient setting is
an important goal, and indicated that starting with these inpatient
measures may prove informative as CMS moves forward in considering
alternative measures for the hospital outpatient department setting.
Many commenters urged CMS to work collaboratively with the
Technical Expert Panel that it has established to develop, test, and
fully vet any measure concepts before proceeding with measure
development. Many commenters supported measuring the quality and safety
of behavioral health care across the continuum of care and indicated
that it may be appropriate to implement measures for PHPs. However, the
commenters stated that any measures selected to assess the quality of
PHP services should be specified, tested and National Quality Forum
(NQF)-endorsed for that care setting, and reviewed by the Measure
Applications Partnership (MAP) before the measures are proposed for
inclusion under a quality reporting program for PHP services provided
on an outpatient basis. One commenter supported the development of
quality measures for PHP services and recommended that CMS work with
SAMHSA on their proposed National Behavioral Health Quality Framework
that was recently released for public comment, to determine how this
framework might apply or be modified to apply to quality measures for
PHP services.
Another commenter stated that the quality indicators CMS are
seeking must be very specific and relate to the patient's current
outpatient visit. The commenter suggested the following quality
indicators and discharge requirements for PHP services in order to
evaluate performance: (1) Access--The number of program days of
scheduled operation from the time of a request for services to the
first scheduled day of service; (2) Treatment Intensity--The percentage
of scheduled attendance consistent with a minimum attendance average of
4 days per calendar week over an episode of care; (3) Discharge
Planning--The percentage of patients with a scheduled follow-up
appointment within 14 days after the date of discharge (as needed); and
(4) Continuity of Care--The percentage of post-discharge continuity of
care plans provided to the next level of care providers upon discharge.
Another commenter suggested that, instead of calculating the PHP
APC per diem payment rates using claims data, CMS should use the
quality of the provided services to base payments, including record
reviews, denials due to lack of medical necessity or inadequate
documentation, site visits, interviews with patients, and most
importantly patient outcomes. The commenter stated that rewarding
providers for higher quality care as measured by selected standards
instead of rewarding providers for increasing the cost of the services
provided is a better way to improve the quality of any service. The
commenter further stated that establishing quality measures will
support constructive changes throughout the payment system and will
encourage performance improvements by all providers (regardless of
setting--CMHC or hospital outpatient department). The commenter
believed that value-based purchasing incentives (rather than antiquated
payment methodologies involving cost-based purchasing) is more
appropriate to improve the quality of care provided.
Response: We thank the commenters for their input and suggestions
and will take them under advisement for future refinements.
We appreciate the wide range of comments we received from health
and behavioral health care associations, hospitals, providers and
professionals interested in future initiatives related to partial
hospitalization services. We will take them into consideration for
further rulemaking to strengthen the PHP benefit and payment structure.

D. 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 in 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

[[Page 75054]]

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 the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we proposed 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 0.07 percent of total
OPPS payments in CY 2014, excluding outlier payments. Therefore, we
proposed to designate 0.0016 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 proposed 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 stated that 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 proposed to
continue to apply the same outlier payment percentage that applies to
hospitals. Therefore, for CY 2014, we proposed to continue to pay 50
percent of CMHC per diem costs over the threshold. In section II.G. of
the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for the hospital
outpatient outlier payment policy, we proposed to set a dollar
threshold in addition to an APC multiplier threshold. Because the PHP
APCs are the only APCs for which CMHCs may receive payment under the
OPPS, we would not expect to redirect outlier payments by imposing a
dollar threshold. Therefore, we did not propose to set a dollar
threshold for CMHC outlier payments.
In summary, we proposed to establish that if a CMHC's cost for
partial hospitalization services, paid under either APC 0172 or APC
0173, exceeds 3.40 times the payment rate for APC 0173, the outlier
payment would be calculated as 50 percent of the amount by which the
cost exceeds 3.40 times the APC 0173 payment rate. We invited public
comments on these proposals.
Comment: A few commenters stated that no changes should be made to
outlier payments for CMHCs.
Response: We appreciate the commenters' input.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal to set a separate outlier threshold for
CMHCs. As discussed in section II.G. of this final rule with comment
period, using more recent data for this final rule with comment period,
we set the target for hospital outpatient outlier payments at 1.00
percent of total estimated OPPS payments. We allocated a portion of the
1.00 percent, an amount equal to 0.16 percent of outlier payments or
0.0016 percent of total estimated OPPS payments to CMHCs for PHP
outlier payments. For CY 2014, as proposed, we are setting the CMHC
outlier threshold at 3.40 multiplied by the APC 0173 payment amount and
the CY 2014 outlier percentage applicable to costs in excess of the
threshold at 50 percent. In other words, if a CMHC's cost for partial
hospitalization services, paid under either APC 0172 or APC 0173,
exceeds 3.40 times the payment rate for APC 0173, the outlier payment
will be calculated as 50 percent of the amount by which the cost
exceeds 3.40 times the APC 0173 payment rate.

IX. Procedures That Will 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. Changes to the Inpatient List

In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for the CY
2014 OPPS, we proposed to use the same methodology (described in the
November 15, 2004 final rule with comment period (69 FR 65835)) of
reviewing the current list of procedures on the inpatient list to
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 proposed to not remove any procedures from the inpatient
list for CY 2014.
Comment: Several commenters requested that CMS remove CPT codes
37182 (Insertion of transvenous intrahepatic portosystemic shunt(s)
(TIPS) (includes venous access, hepatic and portal vein
catheterization, portography with hemodynamic evaluation, intrahepatic
tract formation/dilatation, stent placement and all associated imaging
guidance and documentation); 37183 (Revision of transvenous
intrahepatic portosystemic shunt(s) (TIPS) (includes venous access,
hepatic and portal vein catheterization, portography with hemodynamic
evaluation, intrahepatic tract recanulization/dilatation, stent
placement and all associated imaging guidance and documentation); 54411
(Removal and replacement of a multi-component inflatable penile
prosthesis through an infected field at the same operative session);
and 54417 (Removal and replacement of a non-inflatable (semi-rigid) or
inflatable (self-contained) penile prosthesis through an infected field
at the same operative session) from the CY 2014 inpatient list based on
their own experience, specialty society recommendation, or designation
of a procedure as safe in the outpatient setting under one of the many
clinical guidelines available.
Response: We reevaluated data on CPT codes 37182, 37183, 54411, and
54417 using recent utilization data and further clinical review
performed by CMS medical advisors. As a result of the reevaluation, we
have determined that these procedures can be safely performed only in
the inpatient setting. We are not removing them from the inpatient list
for CY 2014.
Comment: Some commenters requested that CMS add CPT codes 44202
(Laparoscopy, surgical; enterectomy, resection of small intestine,
single resection and anastomosis), 44203 (Laparoscopy, surgical; each
additional small intestine

[[Page 75055]]

resection and anastomosis), 44204 (Laparoscopy, surgical; colectomy,
partial, with anastomosis); 44205 (Laparoscopy, surgical; colectomy,
partial, with removal of terminal ileum with ileocolostomy), 44206
(Laparoscopy, surgical; colectomy, partial, with end colostomy and
closure of distal segment (Hartmann type procedure)), 44207
(Laparoscopy, surgical; colectomy, partial, with anastomosis, with
coloproctostomy (low pelvic anastomosis)), 44208 (Laparoscopy,
surgical; colectomy, partial, with anastomosis, with coloproctostomy
(low pelvic anastomosis) with colostomy), and 44213 (Laparoscopy,
surgical, mobilization (take-down) of splenic flexure performed in
conjunction with partial colectomy (List separately in addition to
primary procedure)) to the inpatient list.
Response: We reevaluated data on CPT codes 44206, 44207, 44208, and
44213 using recent utilization data and further clinical review
performed by CMS medical advisors. As a result of the reevaluation, we
agree with the commenters that these procedures can be safely performed
only in the inpatient setting. Therefore, we are adding CPT codes
44206, 44207, 44208, and 44213 to the inpatient list. We note that CPT
codes 44202, 44203, 44204, and 44205 are currently assigned to the
inpatient list.
Comment: Other commenters requested that CMS add CPT codes 33233
(Removal of permanent pacemaker pulse generator only), 33234 (Removal
of transvenous pacemaker electrode(s): single lead system, atrial or
Ventricular), 33235 (Removal of transvenous pacemaker electrode(s):
dual lead system), 33241 (Removal of pacing cardioverter defibrillator
pulse generator only), and 33244 (Removal of single or dual chamber
pacing cardioverter-defibrillator electrodes; by transvenous
extraction) to the inpatient list.
Response: We reevaluated data on CPT codes 33233, 33234, 33235,
33241, and 33244 using recent utilization data and further clinical
review performed by CMS medical advisors. As a result of the
reevaluation, we determined that these five procedures can be safely
performed in the outpatient setting. Therefore, we are not adding CPT
codes 33233, 33234, 33235, 33241, and 33244 to the inpatient list for
CY 2014.
Comment: A few commenters requested that the inpatient list be
eliminated in its entirety.
Response: We continue to believe that the inpatient only list is a
valuable tool for ensuring that the OPPS only pays for services that
can safely be performed in the hospital outpatient setting, and we are
not eliminating the inpatient only list at this time. We believe that
there are many surgical procedures that cannot be safely performed on a
typical Medicare beneficiary in the hospital outpatient setting.
Therefore, it would be inappropriate for us to assign them separately
payable status indicators and establish payment rates in the OPPS.
Comment: One commenter recommended that CMS remove the fourth
criterion, ``A determination is made that the procedure is being
performed in numerous hospitals on an outpatient basis,'' to determine
whether codes potentially could be removed from the inpatient list
because it will be difficult, if not impossible, to meet this
criterion.
Response: We disagree with the commenter that this criterion is
impossible to meet and note that the criterion has been a part of our
longstanding and established methodology for identifying any procedures
that potentially could be removed from the inpatient list for a number
of years without significant concern raised by public commenters. We
also remind the commenter that removal from the inpatient list does not
necessarily require that all five criteria be satisfied. It is possible
that a procedure could be removed from the inpatient list even if only
a subset of the five criteria is satisfied for a particular service.
Therefore, we do not find reason to remove the fourth criterion from
our established methodology for identifying any procedures that
potentially could be removed from the inpatient list. If this were the
case for a service (even though it may appear unlikely), the service
may be a good candidate for removal from the inpatient list.
After consideration of the public comments we received, we are
finalizing our proposal to continue to use the methodology described in
the November 15, 2004 final rule with comment period to identify any
procedure that may be removed from the inpatient list, and are
modifying our proposal for procedures on the inpatient list for CY 2014
by adding CPT codes 44206, 44207, 44208, and 44213 to the CY 2014
inpatient only list.
The procedures that we are adding to the inpatient only list for CY
2014 and their CPT codes, long descriptors, and status indictors are
displayed in Table 45 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.346

[[Page 75056]]

The complete list of codes that we will be paid by Medicare in CY
2014 only as inpatient procedures is included as Addendum E to this
final rule with comment period (which is available via the Internet on
the CMS Web site).

X. 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
in 2012 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. In
addition, 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 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. Therefore, as we discussed in the CY 2014 OPPS/ASC proposed
rule (78 FR 43623), 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. We stated in the proposed rule that, for CY 2014, we
anticipated 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).
In the proposed rule, we stated that we were 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 requested
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.
Comment: Most commenters urged CMS to extend the direct supervision
enforcement instruction for at least one more year in order to study
the possible unintended consequences on Medicare beneficiary access to
care and, at the same time, to develop policies that exempt CAHs and
small, rural PPS hospitals from the requirement for direct supervision.
The commenters stated that some small rural hospitals and CAHs have
insufficient staff available to furnish direct supervision in CY 2014.
The primary contributing factors cited were difficulty recruiting
physician and nonphysician practitioners to practice in rural areas,
and a desire by patients to see the providers they are familiar and
comfortable with locally, outside of working hours. The commenters
stated that it is particularly difficult to furnish direct supervision
for critical specialty services, such as radiation oncology services,
that cannot be supervised by a hospital emergency department physician
or nonphysician practitioner, because of the volume of emergency
patients or lack of specialty expertise.
These commenters believed that if the direct supervision
requirement is enforced in CY 2014 for CAHs and small rural hospitals,
some of these facilities will be forced to close altogether, and others
will have to limit their hours of operation for chemotherapy,
intravenous infusion of antibiotics and other drugs, cardiac and
pulmonary rehabilitation, observation, blood transfusion, radiation
oncology and wound care services. The commenters expressed concern that
hospital revenues would be reduced from these business lines, and that
some patients would elect to discontinue their care because of
increased cost or inability to travel farther distances to obtain
access to these services. The commenters

[[Page 75057]]

believed that reduced access will result in additional hospital
readmissions and increased Medicare spending. Several commenters
believed that access will be especially difficult given the anticipated
increase in utilization likely to begin in 2014 as a result of the
implementation of the online health insurance marketplaces and the
expansion of Medicaid under the Affordable Care Act.
MedPAC stated in its public comment that, in light of the decision
to enforce the supervision instructions, CMS should continue working
with the Panel to define services that are appropriate for general
supervision.
Response: 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). Most hospital outpatient
therapeutic services must be furnished directly (are not delegable);
therefore, general supervision would not be appropriate for the
majority of services. The independent Panel review advisory process was
established through notice and comment rulemaking as the means of
identifying 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 (76 FR 74360 through 74371). We encourage
hospitals to continue using the Panel process to bring to CMS'
attention services 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, especially
those the commenters mentioned that have not yet been evaluated by the
Panel, such as blood transfusion, chemotherapy and radiation therapy,
and wound care 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).
Regarding pulmonary rehabilitation (PR) and cardiac rehabilitation
(CR) services also mentioned by the commenters, in the CY 2009 OPPS/ASC
final rule with comment period (74 FR 60573), we stated that while we
have some flexibility to determine the type of practitioner who may
supervise other hospital outpatient therapeutic services, in the case
of PR, CR, and intensive cardiac rehabilitation (ICR) services, the
statutory language does not provide such flexibility. Section
1861(eee)(2)(B) of the Act imposes strict requirements, describing the
direct physician supervision standard for PR, CR, and ICR services, and
does not give flexibility to modify the requirement to allow for other
supervisory practitioners.
After consideration of the public comments we received, we are not
extending the enforcement instruction another year for CY 2014. The
enforcement instruction will expire December 31, 2013.
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 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).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43624), we stated that
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 requires
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. In the CY 2014 OPPS/ASC proposed rule, we
stated that 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.
Comment: Commenters supported this clarification, stating that it
answers many questions regarding whether Medicare requires hourly
evaluations of the patient during the provision of observation
services.
Response: We appreciate the commenters' support and are finalizing
our clarification without modification. 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,'' for these services.
There is one therapy cap for OT services and another separate therapy
cap for PT and SLP services combined. As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43624), in the CY 2014 Medicare Physician
Fee Schedule (MPFS) proposed rule (78 FR 43332), we proposed to subject
outpatient therapy services furnished by a CAH to the therapy caps and,
if extended by statute, 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 proposed to continue this methodology for
2014 and subsequent years. CAHs will still be paid for therapy services
under the reasonable cost methodology for CAH outpatient services
described under section 1834(g) of the Act. We refer

[[Page 75058]]

readers to the CY 2014 MPFS final rule with comment period for detailed
information about our proposal, a summation of the public comments we
received on the proposal and our responses, and detailed information
about our final policy. After consideration of all of the public
comments we received, in the CY 2014 MPFS final rule, we are finalizing
our proposal to apply the therapy caps and related provisions to
services furnished by a CAH beginning on January 1, 2014. We are
including in this CY 2014 OPPS/ASC final rule with comment period a
reference to the final policy as an additional means to direct CAHs'
attention to our policies in the CY 2014 MPFS final rule.

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

1. Overview
In the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626),
we proposed 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 proposed 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, 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
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 hospital outpatient therapeutic services 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, the conditions of payment that derive from the
``incident to'' nature of the services paid apply to all hospital
outpatient therapeutic services.
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 a 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, 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 Sec. 410.27(a)(1)(iv)(C) and (D), we regulate the
qualifications of physicians and nonphysician practitioners supervising
other personnel that are personally performing a service, or part of a
service. In the CY 2011 OPPS/ASC

[[Page 75059]]

final rule with comment period, we stated our belief that that in order
to furnish assistance and direction, the supervising practitioner would
have to be State-licensed and possess hospital privileges to perform
the supervised procedure (75 FR 72007). Similarly, in the CY 2010 OPPS/
ASC final rule with comment period, we stated that the supervisory
practitioner ``must have, within his or her State scope of practice and
hospital-granted privileges, the ability to perform the service or
procedure'' that he or she is supervising (74 FR 60580).
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 expanded. 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
payment regulations regarding hospital outpatient therapeutic services
and supplies incident to the services of nonphysician practitioners
contain this requirement. Therefore, 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 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.'' In
the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we
proposed amendments to our regulations in order to address this
recommendation.
3. Proposed and Final Policy
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,
in the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we
proposed 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 proposed to add a
provision under a new paragraph (a)(1)(vi) under Sec. 410.27 to
specify 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.'' We stated that 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.
We indicated that the proposal is consistent with other areas of
the Medicare program where CMS defers to State rules regarding the
delivery of

[[Page 75060]]

hospital services. For example, in determining who can admit patients
as inpatients of a hospital, the hospital conditions of participation
(CoPs) defer to State law and the authority of the hospital's governing
body and medical staff to grant admitting privileges in accordance with
the laws of the State in which the hospital is located. Section
482.12(c)(2) provides: ``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 [which lists practitioners that must
care for Medicare patients], that patient is under the care of a doctor
of medicine or osteopathy.'' Therefore, in determining who may admit
inpatients to a hospital, Medicare defers to State law rules. 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.'' Similarly,
under the CoP at 42 CFR 482.22(a), we provide that a hospital's medical
staff which grants admitting privileges ``must include doctors of
medicine or osteopathy. In accordance with State law, including scope-
of-practice laws, the medical staff may also include other categories
of nonphysician practitioners determined as eligible for appointment by
the governing body.'' Under the CoP at 42 CFR 482.11(c), the hospital
must assure that personnel are licensed or meet other applicable
standards that are required by State or local laws.
We believe it is appropriate to similarly require as a condition of
payment for individual services 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.
We solicited public comments on our proposal.
Comment: Several commenters supported the general premise that
individuals who provide services and supplies incident to a physician's
services must do so in compliance with State law. However, the
commenters opposed the ``broad nature'' of the proposed regulatory text
because they believed that it might expose hospitals to liability under
the False Claims Act in situations where a hospital improperly billed
Medicare for services because the physician or practitioner had some
minor defect with his or her license or certification, but there was no
concern about a practitioner acting outside the scope of practice or
the quality of care furnished. Several commenters asserted that the
proposal is not necessary or appropriate because sanctions for these
issues are already available under the CoPs and section 1156 of the
Act. These commenters noted that section 1156 of the Act requires
hospitals to ensure that the services it furnishes are of a quality
that meet professionally recognized standards of care, and, upon a
finding that in a substantial number of cases the hospital failed to
comply substantially with this obligation, or that it grossly and
flagrantly violated this obligation in one or more instances, the
hospital is subject to a corrective action plan. The commenters noted
that, while the sanction for violating the CoPs and the penalties under
section 1156 of the Act do not include payment recoupment for the
particular services furnished, the sanctions, including termination of
the Medicare provider agreement and corrective action plans, are
significant.
Several commenters supported the proposal because they recommended
that CMS allow hospital personnel to continue working, possibly
indefinitely, without the direct supervision of physicians or other
qualified nonphysician practitioners in certain smaller hospitals.
These commenters believed the proposal would be an important means of
ensuring that ancillary personnel are properly trained, experienced,
and potentially--in some States--even licensed, given that they would
furnish services relatively independently in CAHs and small rural
hospitals without direct supervision. The commenters stated that the
proposal would ensure that technicians and other individuals furnishing
``incident to'' services are properly educated, trained, and
experienced, and would ensure high quality care, not just for Medicare
beneficiaries, but for all patients.
Response: We agree with commenters that the CoPs and other
statutory provisions provide for corrective action plans as a condition
to continued eligibility to provide Medicare and Medicaid services on a
reimbursable basis. However, we believe it is appropriate to also
recoup payment for individual services if they are not furnished in
accordance with applicable State law, and that the possibility of
sanctions in the form of payment recoupment can help ensure compliance
with the law.
We are concerned with the comments that indicated that our proposed
revision to Sec. 410.27 is necessary, in the absence of a direct
supervision standard for payment, to ensure the safety and quality of
care or compliance with State law. The instruction regarding
enforcement of supervision requirements (discussed in section XI.A. of
this final rule with comment period) does not relieve CAHs or small
rural hospitals of their obligations under State law, the hospital
CoPs, or section 1156 of the Act, to ensure that the individuals who
furnish hospital outpatient therapeutic services are licensed and
otherwise qualified to do so. The enforcement instruction (available on
the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/Physician_Supervision_Nonenf_Notice.pdf) specifically states, ``CMS continues
to expect the hospitals covered under this notice to fulfill all other
Medicare program requirements when providing services to Medicare
beneficiaries and when billing Medicare for those services. While CMS
is instructing contractors not to enforce the supervision requirements
for outpatient therapeutic services in these hospitals for CY 2010-
2013, we continue to emphasize quality and safety for services provided
to all patients in these facilities.'' We note that as discussed in
section X.A.1. of this final rule with comment period, the enforcement
instruction will not be extended for CY 2014. These public comments
reinforce our belief that conditions of payment for individual
services, in the form of both the outpatient supervision rules and the
proposed requirement for compliance with State laws, are necessary to
ensure the safety and quality of care for Medicare beneficiaries. The
hospital outpatient supervision rules are directed at ensuring that
supervisory practitioners are licensed or authorized by the State and
possess hospital

[[Page 75061]]

privileges to direct and, if necessary, intervene in the services they
supervise (75 FR 72007), while our proposed requirement for compliance
with applicable State law ensures that supervised individuals are
licensed and qualified to provide the services or aspects of services
that are delegated to them.
After consideration of the public comments we received, we are
finalizing proposed new paragraph (a)(1)(vi) under Sec. 410.27,
without modification, 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.'' This final
policy does not impose any new requirements on hospitals that bill the
Medicare program because practitioners and other personnel furnishing
services already are required to comply with the laws of the State in
which the services are furnished. This regulatory change simply adopts
the existing requirements as a condition of payment under Medicare.
Codifying this requirement provides the Federal government with a clear
basis to deny Medicare payment when services are not furnished in
accordance with applicable State law, as well as to ensure 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.
4. Technical Correction
In the CY 2014 OPPS/ASC proposed rule (78 FR 43626), we stated
that, 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.''
In the CY 2014 OPPS/ASC proposed rule, we proposed 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 proposed 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 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. . . .''
We did not receive any public comments on this proposed technical
correction. Therefore, we are finalizing the correction without
modification.

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

As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43626)
and in the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule
(78 FR 43301), 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 Carol M. Ostrom, ``Why You Might Pay Twice for One Visit to
a Doctor,'' Seattle Times, November 3, 2012, and Ann O'Malley, 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's office. As
more physician practices become hospital-based, news articles have
highlighted beneficiary liability that is incurred when services are
provided in a hospital-based physician practice. 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 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 in a
freestanding clinic or in a physician office. When a service is
furnished in a freestanding clinic or a physician office, only one
payment is made to the physician (under the MPFS). However, when a
service is provided in a hospital or a ``physician office'' that is a
provider-based department of a hospital, Medicare pays the hospital a
``facility fee'' and pays the physician separately for the physician
portion of the service. When a service is furnished in a hospital (or a
provider-based department of a hospital), the payment to the physician
is lower than the payment to the physician for the same service
furnished outside the hospital (or the provider-based department of a
hospital). However, the total payment (facility fee plus physician fee)
is generally more for a service furnished in a hospital (or a provider-
based department of a hospital) than for the same service furnished in
a freestanding clinic or a physician office. The beneficiary pays
coinsurance for both the physician payment and the 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 42 CFR 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
of services furnished in off-campus provider-based departments of the
hospital.
We stated in the CY 2014 OPPS/ASC and MPFS proposed rules that in
order to better understand the growing trend toward hospital
acquisition of physician offices and subsequent treatment of those
locations as off-campus provider-

[[Page 75062]]

based outpatient departments, we were considering collecting
information that would allow us to analyze the frequency, type, and
payment of services furnished in off-campus provider-based hospital
departments. We stated that we have considered several potential
methods for physician and hospital claims. Claims-based approaches
could include: (1) For physician services, creating a new place of
service (POS) code for off campus departments of a provider as part of
item 24B of the CMS-1500 claim form, comparable to current POS codes
such as ``22 Outpatient'' and ``23 Emergency Room-Hospital'' when
physician services are furnished in an off-campus provider-based
department; or (2) 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, CMS Form 2552-10. We
noted 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. In the
proposed rules, we invited public comments on the best means for
collecting information on the frequency, type, and payment of services
furnished in off-campus provider-based departments of hospitals.
Comment: While most commenters agreed on the need to collect
information on the frequency, type, and payment of services furnished
in off-campus provider-based departments of hospitals, they expressed
different opinions on how to best collect these additional data. Some
commenters preferred identifying services furnished in provider-based
departments on the Medicare cost report, while other commenters
preferred one of the claims-based approaches. Some commenters supported
either approach and noted the trade-offs in terms of the type of data
that could be collected accurately and the administrative burden
involved. Some commenters suggested that CMS convene a group of
stakeholders to develop consensus on the best approach. Commenters
generally recommended that CMS choose the least administratively
burdensome approach that would ensure accurate data collection, but did
not necessarily agree on what approach would optimally achieve that
result. For example, commenters indicated that limiting the data
collection to cost report approaches results in little administrative
burden for physicians because they do not file cost reports, but could
result in varying degrees of administrative effort for hospitals,
depending on the specific cost reporting requirements.
Several commenters noted that some hospitals already voluntarily
identify costs specific to provider-based departments on their cost
reports. These commenters asserted that because cost and charge
information is already reported separately, there would be no
additional burden, although additional variables or changes to the
structure of the cost report may be required. In addition, the
commenters noted that cost report information would be transparent and
audited for accuracy. One commenter recommended aggregate reporting of
all off-campus provider-based departments as one or several cost
centers. Another commenter suggested that CMS consider assigning
separate subprovider numbers for off-campus departments similar to
those used for rehabilitation and psychiatric units.
Other commenters believed that a HCPCS modifier would more clearly
identify specific services provided, and would provide better
information about the type and level of care furnished. Some commenters
believed that a HCPCS modifier would be the least administratively
burdensome approach because hospitals and physicians already report a
number of claims-based modifiers. However, other commenters, using this
same fact about the number of existing claims-based modifiers, argued
that additional modifiers would increase administrative burden because
this approach would increase the modifiers that would need to be
considered when billing. Commenters recommended that CMS consider the
establishment of a new POS code because they believed this approach
would be less administratively burdensome than attaching a modifier to
each service reported on the claim that was furnished in an off-campus
provider-based department. Some commenters stated that establishing a
new POS code would generate a better outcome under the MPFS than the
OPPS because, under the OPPS, a single claim is more likely to contain
lines for services furnished in both on-campus and off-campus
departments of the hospital on the same day for the same beneficiary.
MedPAC believed there may be some limited value in collecting data
on services furnished in off-campus provider-based departments to
validate the accuracy of site-of-service reporting when the physician's
office is off-campus but bills as an outpatient department, but did not
recommend a particular data collection approach. MedPAC indicated that
any data collection effort should not prevent the development of
policies to align payment rates across settings.
Response: We appreciate the public feedback in response to our
solicitation of public comments in the CY 2014 OPPS/ASC and MPFS
proposed rules. We will take the public comments received into
consideration as we continue to consider approaches to collecting data
on services furnished in off-campus provider-based departments.

XI. CY 2014 OPPS Payment Status and Comment Indicators

A. 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 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 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 changes to CY 2014 status
indicators and their definitions are discussed in detail below.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014,
we proposed to create a new status indicator ``J1'' to identify HCPCS
codes that are paid under a comprehensive APC. We proposed that a claim
with the new proposed status indicator ``J1'' would trigger a
comprehensive APC payment for the claim.
The public comments that we received on the status indicator ``J1''
are discussed in detail in section II.A.2.e. of this final rule with
comment period. After consideration of the public comments we received,
we have decided to finalize status indicator ``J1''

[[Page 75063]]

but with a delayed effective date of CY 2015.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014,
we proposed to delete status indicator ``X'' and assign ancillary
services that are currently assigned status indicator ``X'' to either
status indicator ``Q1'' or ``S.'' Services assigned status indicator
``Q1'' include many minor diagnostic tests that are generally ancillary
to and performed with another service. However, services assigned to
status indicator ``Q1'' also may be performed alone. Given the nature
of these services and their role in hospital outpatient care, we stated
that 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 stated that we believe it is
appropriate to conditionally package all ancillary services that are
currently assigned to status indicator ``X,'' and we proposed to assign
them to status indicator ``Q1.'' We also proposed that preventive
services currently assigned status indicator ``X'' would 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 final rule with comment period. In
addition, we proposed 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'' was proposed for
deletion.
The public comments that we received regarding ancillary services
assigned to status indicator ``X'' are discussed in detail in section
II.A.3. of this final rule with comment period. As discussed in that
section, we are not finalizing our CY 2014 proposal to package
ancillary services. Therefore, we are not deleting status indicator
``X'' for CY 2014.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for CY 2014,
we proposed to revise the definitions of status indicators ``S'' and
``T'' to remove the word ``significant'' from these definitions. We
stated that it is no longer necessary to distinguish significant
procedures from ancillary services because we proposed to delete the
status indicator that describes ancillary services. We also proposed 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.''
Comment: One commenter recommended that CMS consider allowing
different status indicator assignments for HCPCS codes within an APC
(for example, some of the codes within an APC could be assigned status
indicator ``S'' and others could be assigned status indicator ``T'')
and evaluate the need to permit HCPCS codes within the same APC to have
a different assigned status indicator than that assigned to the APC
under which it is being paid. The commenter believed this was needed to
ensure appropriate payments and access to affected services.
Response: We appreciate the commenter's interest in refining the
methodology used for assigning status indicators ``S'' and ``T'' under
the OPPS. However, we did propose a change to our policy of assigning
status indicators to APCs and, therefore, are not making such a change
for CY 2014. However, we may consider this comment during future
rulemaking.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal, without modification. We are
finalizing our proposal to revise the definitions of status indicators
``S'' and ``T'' to remove the word ``significant'' from these
definitions; and to add the word ``service'' to the definition of
status indicator ``S'' to indicate ``procedure or service; not
discounted when multiple'' and to status indicator ``T'' to indicate
``procedure or service; multiple reduction applies.'' We believe that
these revisions better describe the entire range of procedures and
services that will be assigned these status indicators for CY 2014.
In addition, we proposed to update the definition of status
indicator ``A'' for CY 2014. We proposed 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.''
We did not receive any public comments regarding our proposed
update of the definition of status indicator ``A.'' Therefore, we are
adopting, as final, our proposal for CY 2014.

B. CY 2014 Comment Indicator Definitions

In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for the CY
2014 OPPS, we proposed 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 proposed to use the ``CH'' comment indicator in the CY 2014
OPPS/ASC proposed rule to indicate HCPCS codes for which the status
indicator or APC assignment, or both, were proposed for change in CY
2014 compared to their assignment as of June 30, 2013. We stated that
we believe that using the ``CH'' indicator in the proposed rule would
facilitate the public's review of the changes that we proposed for CY
2014.
We proposed to use the ``CH'' comment indicator in this 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. We stated
that the use of the comment indicator ``CH'' in association with a
composite APC indicates that the configuration of the composite APC
would be changed in the CY 2014 OPPS/ASC final rule with comment
period.
In addition, we proposed that any existing HCPCS codes with
substantial revisions to the code descriptors for CY 2014 compared to
the CY 2013 descriptors would be labeled with comment indicator ``NI''
in Addendum B to the CY 2014 OPPS/ASC final rule with comment period.
However, we stated that 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 this CY 2014 OPPS/ASC final
rule with comment period. Like all codes labeled with comment indicator

[[Page 75064]]

``NI,'' we stated that we would 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 proposed that CPT and
Level II HCPCS codes that are new for CY 2014 also would 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 this CY 2014
OPPS/ASC final rule with comment period are subject to comment. HCPCS
codes that do not appear with comment indicator ``NI'' in this CY 2014
OPPS/ASC final rule with comment period are not open to public comment,
unless we specifically request additional comments elsewhere in this
final rule with comment period.
Comment: One commenter requested that CMS create a new comment
indicator for changes to an APC assignment and to keep comment
indicator ``CH'' to designate changes to status indicators. The
commenter also suggested that CMS create a new comment indictor to
indicate that a code's descriptor has changed significantly while
retaining comment indicator ``NI'' to indicate that a code is brand
new.
Response: We have no operational need to create additional comment
indicators that are specific to various types of changes. Therefore, we
believe that the CY 2013 definitions of the OPPS comment indicators
continue to be appropriate for CY 2014 and we are continuing to use
those definitions without modification for CY 2014. The final
definitions of the OPPS status indicators 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. 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 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 final rule with comment
period, because we base ASC payment policies for covered surgical
procedures, drugs, biologicals, and certain other covered ancillary
services on the OPPS payment policies, we also provide quarterly update
change requests (CRs) for ASC services throughout the year (January,
April, July, and October). CMS releases new Level II codes to the
public or recognizes the release of new CPT codes by the AMA and makes
these codes effective (that is, the codes are recognized on Medicare
claims) outside of the formal rulemaking process via these ASC
quarterly update CRs. Thus, 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.

[[Page 75065]]

B. Treatment of New Codes

1. 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
and vaccine codes; (2) Category III CPT codes, which describe new and
emerging technologies, services, and procedures; and (3) Level II HCPCS
codes, which are used primarily to identify products, supplies,
temporary procedures, and services not described by CPT codes.
We finalized a policy in the August 2, 2007 final rule to evaluate
each year all new Category I and Category III CPT codes and Level II
HCPCS codes that describe surgical procedures, and to make preliminary
determinations during the annual OPPS/ASC rulemaking process regarding
whether or not they meet the criteria for payment in the ASC setting as
covered surgical procedures and, if so, whether or not they are office-
based procedures (72 FR 42533 through 42535). In addition, we identify
new codes as ASC covered ancillary services based upon the final
payment policies of the revised ASC payment system.
We have separated our discussion below into two sections based on
whether we proposed to solicit public comments in the CY 2014 OPPS/ASC
proposed rule (and respond to those comments in this CY 2014 OPPS/ASC
final rule with comment period) or whether we are soliciting public
comments in this 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. In the proposed
rule, we stated that we will respond to public comments and finalize
the treatment of these codes under the ASC payment system in this CY
2014 OPPS/ASC final rule with comment period.
2. Treatment of New Level II HCPCS Codes and Category III CPT Codes
Implemented in April 2013 and July 2013 for Which We Solicited Public
Comments in the 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 of the CY 2014 OPPS/ASC proposed rule (78 FR
43630) listed 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 of the CY
2014 OPPS/ASC proposed rule, as corrected (78 FR 43630; Table 34 was
corrected in the September 6, 2013 correcting document (78 FR 54845))
listed 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 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 solicited 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 of the proposed
rule, as corrected (78 FR 43630; Table 34 was corrected in the
September 6, 2013 correcting document (78 FR 54845)). 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 of the CY 2014 OPPS/ASC proposed
rule (78 FR 43630) were included in Addenda AA or BB to the proposed
rule, as corrected (which are 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 the proposed rule, as corrected) were not available to us
in time for incorporation into the Addenda to the OPPS/ASC proposed
rule, our policy is to include these HCPCS codes and their proposed
payment indicators and payment rates in the preamble to the proposed
rule but not in the Addenda to the proposed rule. These codes and their
final payment indicators and rates are included in the appropriate
Addendum to this CY 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 of the CY 2014 OPPS/ASC proposed rule as
corrected (78 FR 43630; 78 FR 54845) were not included in Addenda AA or
BB to the proposed rule, as corrected (which are 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 are included in Addenda AA or BB to this
CY 2014 OPPS/ASC final rule with comment period, consistent with our
annual update policy.
We solicited public comment on these proposed payment indicators
and the proposed payment rates for the new Level II HCPCS codes that
were newly recognized as ASC covered surgical procedures or covered
ancillary services in April 2013 and July 2013 through the quarterly
update CRs, as listed in Tables

[[Page 75066]]

33 and 34 of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR
43630; 78 FR 54845). We proposed to finalize their payment indicators
and their payment rates in this CY 2014 OPPS/ASC final rule with
comment period.
We did not receive any public comments regarding our proposals. We
are adopting as final for CY 2014 the ASC payment indicators for the
ASC covered surgical procedures and covered ancillary services
described by the new Level II HCPCS codes implemented in April and July
2013 through the quarterly update CRs as shown below, in Tables 46 and
47, respectively. These new HCPCS codes are also displayed in Addenda
AA and BB to this final rule with comment period. We note that after
publication of the CY 2014 OPPS/ASC proposed rule, the CMS HCPCS
Workgroup created permanent HCPCS J-codes for CY 2014 to replace
certain temporary HCPCS C-codes made effective for CY 2013. These
permanent CY 2014 HCPCS J-codes are listed alongside the temporary CY
2013 HCPCS C-codes in Tables 46 and 47 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.347

[GRAPHIC] [TIFF OMITTED] TR10DE13.348

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 were listed in Table 35
of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43631; Table
35 was corrected in the September 6, 2013 correcting document

[[Page 75067]]

(78 FR 54845)), 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 were not available to us in time for incorporation into the
Addenda to the OPPS/ASC proposed rule, our policy is to include the
codes, their proposed payment indicators, and proposed payment rates in
the preamble to the proposed rule but not in the Addenda to the
proposed rule. The codes listed in Table 35 of the CY 2014 OPPS/ASC
proposed rule, as corrected (78 FR 43631; 78 FR 54845) and their final
payment indicators and rates are included in Addendum BB to this CY
2014 OPPS/ASC final rule with comment period.
We proposed 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 solicited public comment on the 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 of the
proposed rule, as corrected. We proposed to finalize their payment
indicators and their payment rates in this CY 2014 OPPS/ASC final rule
with comment period.
We did not receive any public comments regarding this proposal. We
are adopting as final for CY 2014 the ASC payment indicators for the
covered ancillary services described by the new Category III CPT codes
implemented in the July 2013 CR as shown in Table 48 below. The new CPT
codes implemented in July 2013 are also displayed in Addendum BB to
this final rule with comment period (which is available via the
Internet on the CMS Web site).
[GRAPHIC] [TIFF OMITTED] TR10DE13.349

3. Process for New Level II HCPCS Codes and Category I and III CPT
Codes for Which We Are Soliciting Public Comments in This CY 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43631), we proposed to
continue this process for CY 2014. Specifically, for CY 2014, we
proposed 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. We stated that
these codes would be flagged with comment indicator ``NI'' in Addenda
AA and BB to this CY 2014 OPPS/ASC final rule with comment period to
indicate that we have assigned them an interim payment status. We also
stated that their payment indicators and payment rates, if applicable,
would be open to public comment in the CY 2014 OPPS/ASC final rule with
comment period and would be finalized in the CY 2015 OPPS/ASC final
rule with comment period.
We did not receive any public comments regarding this proposed
process. For CY 2014, we are finalizing our proposal, without
modification, to continue our established process for recognizing and
soliciting public comments on new Level II HCPCS codes and Category I
and III CPT codes that become effective on October 1, 2013, or January
1, 2014, as described above.

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

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
We conducted a review of all HCPCS codes that currently are paid
under the

[[Page 75068]]

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, in the CY
2014 OPPS/ASC proposed rule (78 FR 43631), we did not propose additions
to the list of ASC covered surgical procedures for CY 2014.
Comment: One commenter reiterated a previous request that, with
knowledge of the anatomic location, CMS should apply the safety
criteria to the entire spectrum of services reportable by an unlisted
code. The commenter believed that, under such an analysis, CMS would
determine that the following unlisted codes associated with eye
procedures would not compromise patient safety and, therefore, should
be added to the list of ASC covered surgical procedures: CPT code 66999
(Unlisted procedure, anterior segment of eye); CPT code 67299 (Unlisted
procedure, posterior segment); CPT code 67399 (Unlisted procedure,
ocular muscle); CPT code 67999 (Unlisted procedure, eyelids); CPT code
68399 (Unlisted procedure, conjunctiva); and CPT code 68899 (Unlisted
procedure, lacrimal system).
Response: As we have stated in the past (72 FR 42484 through 42486;
75 FR 72032 through 72033; 76 FR 74380; and 77 FR 68439), procedures
that are reported by the CPT unlisted codes are not eligible for
addition to the ASC list because we do not know what specific procedure
would be represented by an unlisted code. Our charge requires us to
evaluate each surgical procedure for potential safety risk and expected
need for overnight monitoring and to exclude from ASC payment
procedures that would be expected to pose a threat to beneficiary
safety or require active medical monitoring at midnight following the
procedure. It is not possible to evaluate procedures that would be
reported by unlisted CPT codes according to these criteria. This final
policy is discussed in detail in the August 2, 2007 final rule (72 FR
42484 through 42486).
Comment: Commenters requested that CMS add the procedures described
by the 54 CPT codes displayed in Table 49 below to the list of ASC
covered surgical procedures. The commenters argued that these
procedures are as safe as procedures that are currently on the list of
ASC covered procedures and, based on a survey, ASCs report positive
outcomes when these procedures are performed on non-Medicare patients.
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Response: We reviewed all of the eligible surgical procedures that
commenters requested for addition to the ASC list of covered surgical
procedures. Of the 54 requested procedures requested for addition to
the ASC list, we did not review the 6 procedures that are reported by
CPT codes that are on the OPPS inpatient only list (identified with one
asterisk in Table 49) or the 2 procedures that may be reported by CPT
unlisted codes because these codes are not eligible for addition to the
ASC list (identified with two asterisks in Table 49), consistent with
our final policy which is discussed in detail in the August 2, 2007
final rule (72 FR 42484 through 42486; 42 CFR 416.171(c)). In addition,
we did not review the 7 procedures reported by CPT codes that are
already on the ASC list of covered surgical procedures (identified with
three asterisks in Table 49).
With regard to the remaining 39 procedures in Table 49 that
commenters requested be added to the list of ASC covered surgical
procedures, we do not agree that all of the procedures are appropriate
for provision to Medicare beneficiaries in ASCs. Although the
commenters asserted that the procedures they were requesting for
addition to the list are as safe as procedures already on the list, our
review did not support those assertions. We exclude from ASC payment
any procedure for which standard medical practice dictates that the
beneficiary who undergoes the procedure would typically be expected to
require active medical monitoring and care at midnight following the
procedure (overnight stay) as well as all surgical procedures that our
medical advisors determine may be expected to pose a significant safety
risk to Medicare beneficiaries when performed in an ASC. The criteria
used under the revised ASC payment system to identify procedures that
would be expected to pose a significant safety risk when performed in
an ASC include, but are not limited to, those procedures that:
Generally result in extensive blood loss; require major or prolonged
invasion of body cavities; directly involve major blood vessels; are
generally emergent or life threatening in nature; commonly require
systemic thrombolytic therapy; are designated as requiring inpatient
care under Sec. 419.22(n); can only be reported using a CPT unlisted
surgical procedure code; or are otherwise excluded under Sec. 411.15
(we refer readers to Sec. 416.166).
In our review of the procedures listed in Table 49, we found that
many of the

[[Page 75071]]

procedures either would be expected to pose a threat to beneficiary
safety or require active medical monitoring at midnight following the
procedure. Specifically, we found that prevailing medical practice
called for inpatient hospital stays for beneficiaries undergoing many
of the procedures and that some of the procedures directly involve
major blood vessels and/or may result in extensive blood loss. However,
we agree with commenters that the procedures described by CPT codes
27415, 27524, 60240, and 60500 meet the criteria under Sec. 416.166
and would be safely performed in the ASC setting and would not require
overnight stays. We are adding these CPT codes to the ASC list of
covered surgical procedures for CY 2014.
After consideration of the public comments we received, we are
finalizing the addition of the four procedures requested by the
commenters to the CY 2014 list of ASC covered surgical procedures. The
procedures, their descriptors, and payment indicators are displayed in
Table 50 below.
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b. Covered Surgical Procedures Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC list of covered surgical procedures in CY 2008 or later years that
we determine are performed predominantly (more than 50 percent of the
time) in physicians' offices based on consideration of the most recent
available volume and utilization data for each individual procedure
code and/or, if appropriate, the clinical characteristics, utilization,
and volume of related codes. In that rule, we also finalized our policy
to exempt all procedures on the CY 2007 ASC list from application of
the office-based classification (72 FR 42512). The procedures that were
added to the ASC list of covered surgical procedures beginning in CY
2008 that we determined were office-based were identified in Addendum
AA to that rule by payment indicator ``P2'' (Office-based surgical
procedure added to ASC list in CY 2008 or later with MPFS nonfacility
PE RVUs; payment based on OPPS relative payment weight); ``P3''
(Office-based surgical procedures added to ASC list in CY 2008 or later
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on
OPPS relative payment weight), depending on whether we estimated it
would be paid according to the standard ASC payment methodology based
on its OPPS relative payment weight or at the MPFS nonfacility PE RVU-
based amount.
Consistent with our final policy to annually review and update the
list of surgical procedures eligible for payment in ASCs, each year we
identify surgical procedures as either temporarily office-based,
permanently office-based, or non-office-based, after taking into
account updated volume and utilization data.
(2) Changes for CY 2014 to Covered Surgical Procedures Designated as
Office-Based
In developing the CY 2014 OPPS/ASC proposed rule, we followed our
policy to annually review and update the surgical procedures for which
ASC payment is made and to identify new procedures that may be
appropriate for ASC payment, including their potential designation as
office-based. We reviewed CY 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).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43632), we stated that
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. We stated that the
data indicated that these procedures are performed more than 50 percent
of the time in physicians' offices and that 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 proposed to permanently designate as office-based were listed
in Table 36 of the CY 2014 OPPS/ASC proposed rule (78 FR 43632). We
invited public comment on this proposal.
Comment: One commenter disagreed with the policy to make payment at
the lower of the ASC rate or the MPFS nonfacility PE RVU payment amount
for procedures that CMS identifies as office-based. This commenter
expressed concern that this policy does not provide adequate payment
for some services performed in an ASC.
Response: We have responded to this comment in the past and we
continue to believe that our policy of identifying low complexity
procedures that are usually provided in physicians' offices

[[Page 75072]]

and limiting their payment in ASCs to the physician's office payment
amount is necessary and valid. We believe this is the most appropriate
approach to prevent payment incentives for services to move from
physicians' offices to ASCs for the many newly covered low complexity
procedures on the ASC list. We refer readers to our response to this
comment in the CY 2010, CY 2011, CY 2012, and CY 2013 OPPS/ASC final
rules with comment period (74 FR 60605 through 60607; 75 FR 72034
through 72036; 76 FR 74401; and 77 FR 68444 through 68445,
respectively).
Comment: One commenter believed that the procedure described by CPT
code 37761 (Ligation of perforator vein(s), subfascial, open, including
ultrasound guidance, when performed, 1 leg) should not be designated as
office-based. This commenter suggested that inaccurate coding for place
of service results in the volume and utilization data indicating that
the procedure is performed more than 50 percent of the time in
physicians' offices and that the level of complexity associated with
CPT code 37761 is not consistent with other procedures performed
routinely in physicians' offices.
Response: Our review of the CY 2012 volume and utilization data
indicates that CPT code 37761 is performed 53 percent of the time in
physicians' offices. Our policy is to designate as office-based those
procedures that are performed more than 50 percent of the time in
physicians' offices; therefore, we are designating CPT code 37761 as
office-based for CY 2014 as we proposed.
After consideration of the public comments we received, we are
finalizing our CY 2014 proposal to designate the procedures described
by CPT codes 26341, 36595, and 37761 as permanently office-based as
displayed in Table 51 below.
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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 through 68444 and 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
proposed 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 proposed to

[[Page 75073]]

assign payment indicator ``G2'' to this covered surgical procedure code
in CY 2014 (78 FR 43632).
The three remaining procedures that have temporary office-based
designations for CY 2013 were proposed to be packaged under the OPPS
for CY 2014 as discussed in section II.A.3. of the proposed rule.
Consequently, we proposed to 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
were displayed in Table 37 of the CY 2014 OPPS/ASC proposed rule (78 FR
43632 through 43633). The procedures for which the proposed office-
based designations for CY 2014 are temporary also were indicated by
asterisks in Addendum AA to the proposed rule, as corrected (which is
available via the Internet on the CMS Web site). We invited public
comment on these proposals.
We did not receive any public comments on these proposals. For CY
2014, we are finalizing our proposal, without modification, to continue
to designate four of the eight procedures (listed in Table 37 of the CY
2014 OPPS/ASC proposed rule (78 FR 43632 through 43633) and restated in
Table 52 below), which were designated as temporarily office-based for
CY 2013, as temporarily office-based for CY 2014. In addition, we are
finalizing our proposal to not designate CPT code 0227T (Anoscopy, high
resolution (HRA) (with magnification and chemical agent enhancement);
with biopsy(ies)) as office-based in CY 2014 and are assigning payment
indicator ``G2'' to this code. Finally, we are finalizing our proposal
to assign payment indicator ``N1'' to HCPCS code 0300T because this
procedure will be packaged under the OPPS for CY 2014. However, we are
not finalizing our proposal to package the procedures identified by
HCPCS codes 0226T and 0299T under the OPPS. We reviewed CY 2012 volume
and utilization data and other information for HCPCS codes 0226T and
0299T which had temporary office-based designations in CY 2013. Because
there are very few claims reporting HCPCS codes 0226T and 0299T, we
will maintain their temporary office-based designations for CY 2014.
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As we discuss in section XII.B.3. of the CY 2014 OPPS/ASC proposed
rule (78 FR 43631) and this final rule with comment period, we
incorporate new Category I and Category III CPT codes and new Level II
HCPCS codes that are effective October 1, 2013 and January 1, 2014 in
this final rule with comment period. Because these codes were not
available to us until after the CY 2014 OPPS/ASC proposed rule was
published, these codes were not included in that rule. After reviewing
the clinical characteristics, utilization, and volume of related codes,
we determined that two of the procedures described by new CPT codes
would be predominantly performed in physicians' offices. However,
because we had no utilization data for the procedures specifically
described by these new CPT

[[Page 75075]]

codes, we made the office-based designations temporary rather than
permanent and we will reevaluate the procedures when data become
available.
The temporary payment indicators for the two office-based
procedures displayed in Table 53 below are flagged with comment
indicator ``NI'' in Addendum AA to this OPPS/ASC final rule with
comment period to indicate that we are assigning them an interim
payment status which is subject to public comment. We will respond to
any public comments received in the CY 2015 OPPS/ASC final rule with
comment period.
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c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
As discussed in the August 2, 2007 final rule (72 FR 42503 through
42508), we adopted a modified payment methodology for calculating the
ASC payment rates for covered surgical procedures that are assigned to
the subset of OPPS device-dependent APCs with a device offset
percentage greater than 50 percent of the APC cost under the OPPS, in
order to ensure that payment for the procedure is adequate to provide
packaged payment for the high-cost implantable devices used in those
procedures.
(2) Changes to List of ASC Covered Surgical Procedures Designated as
Device-Intensive for CY 2014
As discussed in section II.A.2.e of the CY 2014 OPPS/ASC proposed
rule (78 FR 43558 through 43561), for CY 2014, we proposed to create 29
comprehensive APCs to replace 29 of the most costly device-dependent
APCs under the OPPS. We proposed 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 proposed 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 proposed that all
separately paid OPPS 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 proposed 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 proposed to create
comprehensive APCs to replace 29 of the 39 device-dependent APCs under
the OPPS, we proposed to define ASC device-intensive procedures as
those procedures that are assigned to any APC with a device offset
percentage

[[Page 75076]]

greater than 50 percent based on the standard OPPS APC ratesetting
methodology. We proposed changes to Sec. 416.171(b)(2) to reflect this
proposal.
We also proposed 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 proposed to designate
as device-intensive and that would be subject to the device-intensive
procedure payment methodology for CY 2014 were listed in Table 38 of
the CY 2014 OPPS/ASC proposed rule (78 FR 43634 through 43635). The CPT
code, the CPT code short descriptor, the proposed CY 2014 ASC 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
were also listed in Table 38. All of these procedures were included in
Addendum AA to the proposed rule, as corrected (which is available via
the Internet on the CMS Web site). We invited public comment on this
proposal.
Comment: Some commenters expressed the same general concerns made
in previous rulemakings regarding the sufficiency of ASC payment for
device-related services and recommended modifications to the ASC
device-intensive payment methodology. The commenters argued that CMS
should apply the device-intensive payment methodology to all procedures
for which CMS can establish a median device cost and not just to the
procedures where the device offset percentage is greater than 50
percent of the APC cost under the OPPS. In a related suggestion, some
commenters urged CMS to establish the threshold used to determine
device-intensive procedures at 50 percent of the ``unadjusted'' ASC
payment rate (OPPS relative weight multiplied by the ASC conversion
factor) instead of the OPPS payment rate. The commenters also made the
same argument as made in prior rulemakings--that CMS should not adjust
the device portion of the ASC payment for device-intensive procedures
by the wage index.
Response: In the August 2, 2007 final rule (72 FR 42504), we
established a modified payment methodology for calculating ASC payment
rates for device-intensive procedures under the ASC payment system. We
defined device-intensive procedures as those procedures that are
assigned to device-dependent APCs under the OPPS with device costs of
greater than 50 percent of the APC cost (that is, the device offset
percentage is greater than 50). In the CY 2014 OPPS/ASC proposed rule
(78 FR 43558 through 43561), we proposed to create comprehensive APCs
to replace 29 of the 39 device-dependent APCs under the OPPS. Because
of this proposed change for the OPPS, we proposed to define ASC device-
intensive procedures as those procedures that are assigned to any APC
with a device offset percentage greater than 50 percent. Because we are
not implementing the comprehensive APC policy under the OPPS until CY
2015, as discussed in section II.A.2.e. of this final rule with comment
period, we are not finalizing this proposal for the ASC payment system
and will continue to use our current definition of device-intensive
procedures.
We do not agree with the commenters that the device-intensive
methodology should be applied to all procedures where a device offset
can be established. Nor do we agree with the commenters who suggested
using a threshold to determine device-intensive procedures that is
based on 50 percent of the ASC payment rate instead of the OPPS payment
rate. We continue to believe that when device costs comprise 50 percent
or less of total procedure costs, those costs are less likely to be as
predictable across sites-of-service. Accordingly, we believe that it is
possible for ASCs to achieve efficiencies relative to HOPDs when
providing those procedures, and that the application of the ASC
conversion factor to the entire ASC payment weight is appropriate. We
refer readers to our response to this comment in the CY 2010, CY 2011,
CY 2012, and CY 2013 OPPS/ASC final rules with comment period (74 FR
60608 and 60609; 75 FR 72039; 76 FR 74409; and 77 FR 68449,
respectively).
We also continue to believe it would not be appropriate to vary the
portion of the national payment that is wage-adjusted for different
services, such as applying the wage index only to the service portion
of the ASC payment for device-intensive procedures, as the commenters
requested, because our ASC policy is to be consistent with the OPPS
because ASC payment rates are based on the OPPS relative payment
weights. Therefore, we apply the ASC geographic wage adjustment to the
entire ASC payment rate for device-intensive procedures. We refer
readers to our response to this comment in the CY 2009, CY 2010, CY
2011, CY 2012 and CY 2013 OPPS/ASC final rules with comment period (73
FR 68735; 74 FR 60608 through 60609; 75 FR 72039; 76 FR 74409; and 77
FR 68449, respectively).
As indicated in section II.A.2.e of this final rule with comment
period, after consideration of the public comments we received
regarding the proposed OPPS comprehensive APC policy, we are finalizing
our proposal to create 29 comprehensive APCs to replace 29 of the most
costly device dependent APCs under the OPPS, but we will not implement
the comprehensive APC policy until CY 2015. Therefore, under the ASC
payment system, we are not finalizing our proposal to revise Sec.
416.171(b)(2) to define ASC device-intensive procedures as those
procedures that are assigned to any APC with a device offset percentage
greater than 50 percent. For CY 2014, we will continue to define ASC
device-intensive procedures as those procedures that are assigned to
device-dependent APCs under the OPPS with device costs greater than 50
percent of the APC cost. We are updating the ASC list of covered
surgical procedures that are eligible for payment according to our
current device-intensive procedure payment methodology and reflecting
the APC assignments of procedures and APC device offset percentages
based on the CY 2012 OPPS claims and cost report data available for
this final rule with comment period. We are designating the ASC covered
surgical procedures displayed in Table 54 below as device-intensive and
subject to the device-intensive procedure payment methodology for CY
2014. The CPT code, the CPT code short descriptor, the final CY 2014
ASC payment indicator (PI), the final CY 2014 OPPS APC assignment, the
final CY 2014 OPPS APC device offset percentage, and an indication if
the full credit/partial credit (FB/FC) device adjustment policy will
apply, also are listed in Table 54 of this final rule with comment
period. All of these procedures are included in Addendum AA to this
final rule with comment period (which is available via the Internet on
the CMS Web site).
d. 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

[[Page 75077]]

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 the CY 2014 OPPS/ASC proposed rule
(78 FR 43596 through 43598), we proposed 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 proposed to reduce OPPS payment for applicable
APCs by the full or partial credit a provider receives for a replaced
device.
Although we proposed 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 proposed 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 proposed 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 proposed 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 of the CY 2014 OPPS/ASC proposed rule (78
FR 43634 through 43635) displays the ASC covered device-intensive
procedures that we proposed would be subject to the no cost/full credit
or partial credit device adjustment policy for CY 2014. Specifically,
when a procedure that was 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 proposed 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. We invited public comment on these proposals.
We did not receive any comments on our CY 2014 proposal to continue
the no cost/full credit and partial credit device adjustment policy for
ASCs. For CY 2014, as proposed, we will reduce the payment for the
device implantation procedures listed in Table 54 below that are
subject to the adjustment by the full device offset amount if a device
is furnished without cost or with full credit. ASCs must append the
HCPCS modifier ``FB'' to the HCPCS code for a surgical procedure listed
in Table 54 below when the device is furnished without cost or with
full credit. In addition, for CY 2014, we will reduce the payment for
the device implantation procedures listed in Table 54 below that are
subject to the adjustment by one half of the device offset amount if a
device is provided with partial credit, if the credit to the ASC is 50
percent or more of the device cost. The ASC must append the HCPCS
``FC'' modifier to the HCPCS code for a surgical procedure listed in
Table 54 below that is subject to the partial credit device adjustment
policy when the facility receives a partial credit of 50 percent or
more of the cost of a device.
BILLING CODE 4120-01-P

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e. ASC Treatment of Surgical Procedures Removed 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 in the CY 2014 OPPS/ASC
proposed rule (78 FR 43636) we did not propose 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
proposed 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43568
through 43576), we proposed 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 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 proposed that these
services also would be packaged under the ASC payment system for CY
2014. Comment indicator ``CH,'' discussed in section XII.F. of the
proposed rule (78 FR 43639), was used in Addendum BB to the proposed
rule, as corrected (which is available via the Internet on the CMS Web
site) to indicate covered ancillary services for which we proposed a
change in the ASC payment indicator to reflect a proposed change in the
OPPS treatment of the service for CY 2014.
Except for the Level II HCPCS codes and Level III CPT codes listed
in Table 34 and Table 35 of the CY 2014 OPPS/ASC proposed rule, as
corrected (78 FR 43630 through 43631; 78 FR 54845), all ASC covered
ancillary services and their proposed payment indicators for CY 2014
were included in Addendum BB to the proposed rule, as corrected. We
invited public comment on this proposal.
We did not receive any public comments on our proposal. Therefore,
we are finalizing, without modification, our proposal to update the ASC
list of covered ancillary services to reflect the payment status for
the services under the OPPS. All CY 2014 ASC covered ancillary services
and their final payment indicators are included in Addendum BB to this
final rule with comment period (which is available via the Internet on
the CMS Web site).

[[Page 75081]]

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

1. 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 final rule with
comment period) 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. Update to ASC Covered Surgical Procedure Payment Rates for CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43636 through 43637),
we proposed 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 proposed to continue to use the amount
calculated under the ASC standard ratesetting methodology for
procedures assigned payment indicators ``A2'' and ``G2.''
We proposed that payment rates for office-based procedures (payment
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures
(payment indicator ``J8'') be calculated according to our established
policies, incorporating the device-intensive procedure methodology as
appropriate. Thus, we proposed to update the payment amounts for
device-intensive procedures, 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. We invited public
comment on these proposals.
Comment: With regard to device removal procedures, commenters
recommended that CMS modify its policy to package procedures in the ASC
when the procedures are conditionally packaged in the OPPS. The
commenters stated that, under this policy, no Medicare payment would be
made for device removal procedures performed in an ASC if the device
was removed and not replaced because the device removal procedures are
proposed to be conditionally packaged under the OPPS.
Response: We agree with the commenters' concerns regarding payment
for device removal procedures performed in an ASC. Under the OPPS, a
conditionally packaged code (status indicators ``Q1'' or ``Q2'')
describes a HCPCS code where the payment is packaged when it is
provided with a significant procedure but is separately paid when the
service appears on the claim without a significant procedure. Because
ASC services always include a surgical procedure, HCPCS codes that are
conditionally packaged under the OPPS are always packaged (payment
indicator ``N1'') under the ASC payment system. Under the OPPS, we are
finalizing a proposal to conditionally package device removal codes for
CY 2014. Therefore, under our current ASC policy to package payment for
services that are conditionally packaged in the OPPS, no Medicare
payment would be made when a device removal procedure is performed in
an ASC without another surgical procedure included on the claim. We
believe that our ASC policy to package procedures that are
conditionally packaged in the OPPS should be modified with regard to
device removal procedures so that these procedures will continue to be
separately paid in the ASC.
After consideration of the public comments we received, we are
finalizing our proposal to calculate CY 2014 payment rates for ASC
covered surgical procedures according to our established methodologies,
with the exception of device removal procedures. For the 71 device
removal procedures that are conditionally packaged in the OPPS (status
indicator ``Q2''), we will not follow our usual policy to package these
procedures in the ASC but, instead, will assign the current ASC payment
indicators associated with these procedures and continue to provide
separate payment in CY 2014.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43637),
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

[[Page 75082]]

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 categories of services and 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 did not propose any changes to our
policies or the categories of services for CY 2014 in the CY 2014 OPPS/
ASC proposed rule (78 FR 43637). We identify the specific services with
a double asterisk in Addenda AA and BB to this final rule with comment
period.
d. 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43637),
we proposed 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 proposed 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 invited public comment on these proposals.
As indicated in section II.A.2.e. of this final rule with comment
period, after consideration of public comments we received regarding
the proposed OPPS comprehensive APC policy, we are finalizing our
proposal to create 29 comprehensive APCs to replace 29 of the most
costly device-dependent APCs under the OPPS but we will not implement
the finalized comprehensive APC policy until CY 2015. Consequently, CPT
code 33225 will not be packaged under the OPPS for CY 2014 but will be
separately paid. Therefore, we are not finalizing our proposal to
package CPT code 33225 under the ASC payment system. For CY 2014, we
will continue our current policy regarding ASC payment for CRT-D
services. The CY 2014 ASC payment rate for CRT-D services will be based
on the OPPS payment rate applicable to APC 0108 when procedures
described by CPT codes 33225 and 33249 are performed on the same date
of service in an ASC. ASCs will use the corresponding HCPCS Level II G-
code (G0448) for proper reporting when the procedures described by CPT
codes 33225 and 33249 are performed on the same date of service. When
not performed on the same day as the service described by CPT code
33225, ASC payment for the service described by CPT code 33249 will be
based on APC 0108 using the device-intensive methodology. When not
performed on the same day as the service described by CPT code 33249,
ASC payment for the service described by CPT code 33225 will be based
on APC 0655 using the device-intensive methodology.
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). In the CY 2014 OPPS/ASC proposed rule (78 FR 43637), we did not
propose any changes to our current policy regarding ASC payment for LDR
prostate brachytherapy services for CY 2014.

[[Page 75083]]

2. Payment for Covered Ancillary Services
a. Background
Our final payment policies under the revised ASC payment system for
covered ancillary services vary according to the particular type of
service and its payment policy under the OPPS. Our overall policy
provides separate ASC payment for certain ancillary items and services
integrally related to the provision of ASC covered surgical procedures
that are paid separately under the OPPS and provides packaged ASC
payment for other ancillary items and services that are packaged or
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'')
under the OPPS. In the CY 2013 OPPS/ASC proposed rule (77 FR 45169), we
further clarified our policy regarding the payment indicator assignment
of codes that are conditionally packaged in the OPPS (status indicators
``Q1'' and ``Q2''). Under the OPPS, a conditionally packaged code
describes a HCPCS code where the payment is packaged when it is
provided with a significant procedure but is separately paid when the
service appears on the claim without a significant procedure. Because
ASC services always include a surgical procedure, HCPCS codes that are
conditionally packaged under the OPPS are always packaged (payment
indictor ``N1'') under the ASC payment system. Thus, our final policy
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 four 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)),
HCPCS code C1841 (Retinal prosthesis, includes all internal and
external components), and HCPCS code C1886 (Catheter, extravascular
tissue ablation, any modality (insertable)). Payment amounts for HCPCS
codes C1830, C1840, C1841, 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 are used to establish ASC payment
rates for CY 2014. HCPCS code C1841 was approved for pass-through
payment effective October 1, 2013, and will continue to be eligible for
pass-through payment in CY 2014.
b. Payment for Covered Ancillary Services for CY 2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43638 through 43639),
for CY 2014, we proposed to update the ASC payment rates and make
changes to ASC payment indicators as necessary to maintain consistency
between the OPPS and ASC payment system regarding the packaged or
separately payable status of services and the proposed CY 2014 OPPS and
ASC payment rates. We also proposed to set the CY 2014 ASC payment
rates for brachytherapy sources and separately payable drugs and
biologicals 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 was based on a comparison of the proposed CY 2014 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

[[Page 75084]]

the payment for the ASC covered surgical procedure if the radiology
service is packaged or conditionally packaged under the OPPS. The
payment indicators in Addendum BB to the proposed rule, as corrected,
indicate whether the proposed payment rates for radiology services are
based on the MPFS nonfacility PE RVU-based amount or the ASC standard
ratesetting methodology, or whether payment for a radiology service is
packaged into the payment for the covered surgical procedure (payment
indicator ``N1''). Radiology services that we proposed to pay based on
the ASC standard ratesetting methodology were 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 were assigned payment
indicator ``Z3'' (Radiology service paid separately when provided
integral to a surgical procedure on ASC list; payment based on MPFS
nonfacility PE RVUs).
As finalized in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 72050), payment indicators for all nuclear medicine procedures
(defined as CPT codes in the range of 78000 through 78999) that are
designated as radiology services that are paid separately when provided
integral to a surgical procedure on the ASC list are set to ``Z2'' so
that payment 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 proposed 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 proposed 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 were listed in Addendum BB to the proposed rule, as
corrected (which is available via the Internet on the CMS Web site). We
invited public comment on these proposals.
Comment: One commenter requested that the procedure described by
CPT code 33225 (Insertion of pacing electrode, cardiac venous system,
for left ventricular pacing, at time of insertion of pacing
cardioverter-defibrillator or pacemaker pulse generator (e.g., for
upgrade to dual chamber system) (list separately in addition to code
for primary procedure)) be excluded from the OPPS policy to package
add-on codes due to impact on the proposed CY 2014 ASC payment rates
for cardiac resynchronization therapy implant procedures (CRT-P, which
is identified by CPT codes 33206 (Insertion of new or replacement of
permanent pacemaker with transvenous electrode(s); atrial) and 33207
(Insertion of new or replacement of permanent pacemaker with
transvenous electrode(s); ventricular)) that include this add-on code.
The commenter indicated that the proposed ASC payment rates for CRT-P
services decrease by about 35 percent due to OPPS packaging of the add-
on CPT code 33225.
Response: Our payment policies under the revised ASC payment system
for covered ancillary services provide 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
provide packaged ASC payment for other ancillary items and services
that are packaged or conditionally packaged (status indicators ``N,''
``Q1,'' and ``Q2'') under the OPPS. As detailed in section II.A.3.c. of
this final rule with comment period, we are finalizing our proposal to
package procedures described by add-on codes under the OPPS for CY
2014. Therefore, in order to align the ASC payment bundles with those
under the OPPS, the ASC payment for CPT code 33225 will be packaged
into the payment for the associated procedures and will not be
separately paid in CY 2014.
Comment: Commenters stated that hospitals perform more ancillary
services than ASCs and, therefore, greater packaging is appropriate
under the OPPS, but not under the ASC payment system. Commenters also
suggested that, because laboratory tests associated with ASC procedures
are paid under the Clinical Laboratory Fee Schedule, duplicate payment
will occur if the OPPS relative weights that are used to calculate ASC
payment rates include costs for laboratory tests.
Response: As detailed in section II.A.3. of this final rule with
comment period, we are finalizing our proposal to package the following
items and services under the OPPS 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 when used in a surgical procedure; (3) clinical diagnostic
laboratory tests; (4) procedures described by add-on codes; and (5)
device removal procedures. However, we are not finalizing our proposal
to package ancillary services or diagnostic tests on the bypass list
under the OPPS for CY 2014. Therefore, with respect to the commenters'
concerns about the proposed packaging of ancillary services, ancillary
services will continue to have separate payment in CY 2014 under the
OPPS.
With respect to the concern raised by commenters regarding
duplicate payment of laboratory tests, packaging laboratory services
under the OPPS will increase the relative payment weights and,
subsequently, the ASC payment rates for those surgical procedures that
include laboratory tests when provided in the hospital outpatient
department. However, because we uniformly scale the ASC relative
payment weights each update year to make them budget neutral, the
changes to the relative payment weights that are associated with
laboratory packaging will not result in duplicate or additional
Medicare payment in aggregate. In addition, because the packaged
laboratory tests are spread over many APCs, we also believe that the
impact on particular services is minor. Furthermore, fewer laboratory
tests should be necessary in the ASC as diagnostic evaluations are not
performed in the ASC.
After consideration of the public comments we received, we are
providing CY 2014 payment for covered ancillary services in accordance
with the policies finalized in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68458 through 68459). Covered ancillary services
and their final CY 2014 payment indicators are listed in Addendum BB
(which is available via the Internet on the CMS Web site) to this final
rule with comment period.

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle
Our process for reviewing applications to establish new classes of
new technology intraocular lenses (NTIOLs) is as follows:

[[Page 75085]]

Applicants submit their NTIOL requests for review to CMS
by the annual 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 Pub. L. 103-432 and our regulations at Sec.
416.185(b), the deadline for receipt of public comments is 30 days
following publication of the list of requests in the proposed rule.
In the final rule updating the ASC and OPPS payment rates
for the following calendar year, we--
[cir] Provide a list of determinations made as a result of our
review of all new NTIOL class requests and public comments;
[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
As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43639),
we did not receive any requests for review to establish a new NTIOL
class for CY 2014 by 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 did not propose to revise the payment adjustment amount for CY 2014.
4. Announcement of CY 2014 Deadline for Submitting Requests for CMS
Review of Applications for a New Class of NTIOLs
In accordance with 42 CFR 416.185(a) of our regulations, CMS
announces that in order to be considered for payment effective
beginning in CY 2015, requests for review of applications for a new
class of new technology IOLs must be received at CMS by 5 p.m. EST, on
March 3, 2014. Send requests to ASC/NTIOL, Division of Outpatient Care,
Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500
Security Boulevard, Baltimore, MD 21244-1850. To be considered,
requests for NTIOL reviews must include the information requested on
the CMS Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 final rule, we also created final comment indicators for
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66855). We created Addendum DD1 to define ASC payment
indicators that we use in Addenda AA and BB to provide payment
information regarding covered surgical procedures and covered ancillary
services, respectively, under the revised ASC payment system. The ASC
payment indicators in Addendum DD1 are intended to capture policy
relevant characteristics of HCPCS codes that may receive packaged or
separate payment in ASCs, such as whether they were on the ASC list of
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment
methodology; and their classification as separately payable ancillary
services including radiology services, brachytherapy sources, OPPS
pass-through devices, corneal tissue acquisition services, drugs or
biologicals, or NTIOLs.
We also created Addendum DD2 that lists the ASC comment indicators.
The ASC comment indicators used in Addenda AA and BB to the proposed
rules and final rules with comment period serve to identify, for the
revised ASC payment system, the status of a specific HCPCS code and its
payment indicator with respect to the timeframe when comments will be
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final
rule with comment period to indicate new codes for the next calendar
year for which the interim payment indicator assigned is subject to
comment. The comment indicator ``NI'' is also assigned to existing
codes with substantial revisions to their descriptors such that we
consider them to be describing new services, as discussed in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60622). In this CY
2014 OPPS/ASC final rule with comment period, we respond to public
comments and finalize the ASC treatment of all codes that are labeled
with comment indicator ``NI'' in Addenda AA and BB to the CY 2013 OPPS/
ASC final rule with comment period.
The ``CH'' comment indicator is used in Addenda AA and BB to the
proposed rule, as corrected (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 the 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.
2. ASC Payment and Comment Indicators
In the CY 2014 OPPS/ASC proposed rule (78 FR 43640), we did not
propose any changes to the definitions of the ASC payment and comment
indicators for CY 2014. We referred readers to Addenda DD1 and DD2 to
the CY 2014 OPPS/ASC 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.
Addenda DD1 and DD2 to this final rule with comment period (which
are available via the Internet on the CMS Web site) contain the
complete list of payment and commenter indicators for the CY 2014
update.

[[Page 75086]]

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

1. Background
In the August 2, 2007 final rule (72 FR 42493), we established our
policy to base ASC relative payment weights and payment rates under the
revised ASC payment system on APC groups and the OPPS relative payment
weights. Consistent with that policy and the requirement at section
1833(i)(2)(D)(ii) of the Act that the revised payment system be
implemented so that it would be budget neutral, the initial ASC
conversion factor (CY 2008) was calculated so that estimated total
Medicare payments under the revised ASC payment system in the first
year would be budget neutral to estimated total Medicare payments under
the prior (CY 2007) ASC payment system (the ASC conversion factor is
multiplied by the relative payment weights calculated for many ASC
services in order to establish payment rates). That is, application of
the ASC conversion factor was designed to result in aggregate Medicare
expenditures under the revised ASC payment system in CY 2008 equal to
aggregate Medicare expenditures that would have occurred in CY 2008 in
the absence of the revised 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; 42 CFR
416.171(e)).
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 final rule with comment period), the
established policy is to set the payment rate at the lower of the MPFS
unadjusted nonfacility PE RVU-based amount or the amount calculated
using the ASC standard ratesetting methodology. Further, as discussed
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841
through 66843), we also adopted alternative ratesetting methodologies
for specific types of services (for example, device-intensive
procedures).
As discussed in the August 2, 2007 final rule (72 FR 42517 through
42518) and as codified at Sec. 416.172(c) of the regulations, the
revised ASC payment system accounts for geographic wage variation when
calculating individual ASC payments by applying the pre-floor and pre-
reclassified hospital wage indices to the labor-related share, which is
50 percent of the ASC payment amount 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).
When all of the areas contiguous to the CBSA of interest are rural
and there is no IPPS hospital that has wage index data that could be
used to set the wage index for that area, we determine the ASC wage
index by calculating the average of all wage indices for urban areas in
the State (75 FR 72058 through 72059). In other situations, where there
are no IPPS hospitals located in a relevant labor market area, we will
continue our current policy of calculating an urban or rural area's
wage index by calculating the average of the wage indices for CBSAs (or
metropolitan divisions where applicable) that are contiguous to the
area with no wage index.
Comment: Several commenters made the same recommendation that was
made in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), CY 2012 (76
FR 74446), and CY 2013 (77 FR 68463) rulemakings--that is, that CMS
adopt for the ASC payment system the same wage index values used for
hospital payment under the OPPS.
Response: We have responded to this comment in the past, and
believe our prior rationale for using unadjusted wage indices is still
a sound one. We continue to believe that the unadjusted hospital wage
indices, which are updated yearly and are used by almost all Medicare
payment systems, appropriately account for geographic variance in labor
costs for ASCs. We refer readers to our response to this comment in the
CY 2011 OPPS/ASC final rule with comment period (75 FR 72059). We
discuss our budget neutrality adjustment for changes to the wage
indices below in section XIV.H.2.b. of this final rule with comment
period.
After consideration of the public comments we received, we are
continuing our established policy to account for geographic wage
variation in labor cost when calculating individual ASC payment by
applying the pre-floor and pre-reclassified hospital wage index

[[Page 75087]]

values that CMS calculated for payment, using updated CBSAs. Further,
we are continuing our established policy 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. For CY 2014, we also are
continuing our policy established in the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72058 through 72059) to set the ASC wage
index by calculating the average of all wage indices for urban areas in
the State when there is no IPPS hospital that has wage index data that
could be used to set the wage index for that area, and all contiguous
areas to the CBSA are rural.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43640 through
43641), we proposed 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 proposed 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 proposed 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 0.9102 as corrected (78 FR
43641; 78 FR 54843, 54845) and scaling would apply to the ASC relative
payment weights of the covered surgical procedures and covered
ancillary radiology services for which the ASC payment rates are based
on OPPS relative payment weights.
Scaling would not apply in the case of ASC payment for separately
payable covered ancillary services that have a predetermined national
payment amount (that is, their national ASC payment amounts are not
based on OPPS relative payment weights), such as drugs and biologicals
that are separately paid or services that are contractor-priced or paid
at reasonable cost in ASCs. Any service with a predetermined national
payment amount would be included in the ASC budget neutrality
comparison, but scaling of the ASC relative payment weights would not
apply to those services. The ASC payment weights for those services
without predetermined national payment amounts (that is, those services
with national payment amounts that would be based on OPPS relative
payment weights) would be scaled to eliminate any difference in the
total payment between the current year and the update year.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. At the time of the CY 2014 proposed rule, we had available
98 percent of CY 2012 ASC claims data. For this final rule with comment
period, we have approximately 99 percent of all ASC claims data for CY
2012.
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.
For this final rule with comment period, we used our methodology
described above to calculate the scaler adjustment using updated ASC
claims data. The final CY 2014 scaler adjustment is 0.9235. This scaler
adjustment is necessary to make the difference in aggregate ASC
payments calculated using the CY 2013 ASC relative payment weights and
the CY 2014 relative payment weights budget neutral. We calculated the
difference in aggregate payments due to the change in relative payment
weights holding constant the ASC conversion factor, the most recent CY
2012 ASC utilization from our claims data, and the CY 2013 wage index
values. For this final CY 2014 calculation, we used the CY 2013 ASC
conversion factor updated by the CY 2014 CPI-U, which is projected to
be 1.7 percent, less the multifactor productivity adjustment of 0.5
percent, as discussed below in section XIV.H.2.b. of this final rule
with comment period.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider level changes, most notably a change in the wage index
values for the upcoming year, to the conversion factor. Consistent with
our final ASC payment policy, in the CY 2014 OPPS/ASC proposed rule (78
FR 43641 through 43642), for the CY 2014 ASC payment system, we
proposed to calculate and apply a budget neutrality adjustment to the
ASC conversion factor for supplier level changes in wage index values
for the upcoming year, just as the OPPS wage index budget neutrality
adjustment is calculated and applied to the OPPS conversion factor. For
CY 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 CY 2014 ASC wage indices do 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

[[Page 75088]]

``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. 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).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43642), based on IHS
Global Insight's (IGI's) 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 was 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 was
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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 invited
public comment on these proposals.
Comment: As in previous years, commenters requested that CMS adopt
the hospital market basket to update the ASC payment system instead of
using the CPI-U. The commenters argued that the CPI-U does not fairly
represent the costs borne by the ASC industry because the prices
measured in the basket of

[[Page 75089]]

goods comprising the index reflect the types and weights of categories
typical of an American household, rather than an outpatient surgical
provider. Commenters believed that the hospital market basket more
closely reflects the cost structure of ASCs than does the basket of
goods included in the CPI-U. Commenters stated that adopting the
hospital market basket to update ASC payment rates would minimize the
divergence in CY 2014 payments in ASCs compared to HOPDs and would
ensure continued beneficiary access to ASCs.
Commenters also indicated that the hospital market basket is a more
appropriate index to use for the ASC update now that CMS is required to
apply the MFP adjustment to the ASC annual update. Commenters stated
that, as an output price index, the CPI-U index already accounts for
productivity thus ASCs, in essence, are receiving a productivity
adjustment that is twice that applied to the HOPD update. Because CMS
has discretion regarding the index used to update ASCs, but is required
in statute to adjust the ASC update by the MFP, commenters urged CMS to
use the hospital market basket, which is an input price index that does
not already account for productivity, to update ASC payment rates and
thereby allow the appropriate application of the required productivity
adjustment. These commenters suggested that if the CPI-U continues to
be used to update ASC payment rates, CMS should remove the productivity
gains from the CPI-U. Commenters also requested that the 10-year MFP
measurement period be uniform in ASCs and HOPDs so that there is no
discrepancy in the estimates of the MFP that will provide additional
divergence between the ASC and HOPD updates.
Response: While commenters argue that the items included in the
CPI-U index may not adequately measure inflation for the goods and
services provided by ASCs and that use of the hospital market basket
would minimize the divergence in the payment rates between the OPPS and
ASC payment system, we believe that the hospital market basket does not
align with the cost structures of ASCs. Hospitals provide a much wider
range of services, such as room and board and emergency services, and
the costs associated with providing these services are not part of the
ASC cost structure. Therefore, at this time, we do not believe that it
is appropriate to use the hospital market basket for the ASC annual
update.
We recognize that the CPI-U is an output price index that accounts
for productivity. However, section 1833(i)(2)(D)(v) of the Act requires
the agency to reduce the annual update factor by the MFP adjustment.
For the reasons stated above, we do not believe that the hospital
market basket appropriately reflects the cost structures of ASCs, and
because we do not have cost data on ASCs, we are continuing to use the
CPI-U which we believe provides a reasonable approximation of the price
increases facing ASCs. We appreciate the commenter's suggestion to
adjust the CPI-U for productivity and will take this suggestion into
consideration should we propose changes to the ASC update factor in the
future. Regarding alignment of the MFP adjustment across payment
systems, for the reasons stated in the CY 2011 MPFS final rule with
comment period (75 FR 73396), we believe that it is more appropriate to
align the MFP adjustment with the update timeframe for each payment
system rather than aligning the MFP adjustment across payment systems.
After consideration of the public comments we received, we are
applying our established methodology for determining the final CY 2014
ASC conversion factor. Using more complete CY 2012 data for this final
rule with comment period than was available for the proposed rule, we
calculated a wage index budget neutrality adjustment of 1.0009. Based
on IGI's 2013 third quarter forecast, the CPI-U for the 12-month period
ending with the midpoint of CY 2014 is now projected to be 1.7 percent,
while the MFP adjustment (using the revised IGI series to proxy the
labor index used in the MFP forecast calculation as discussed and
finalized in the CY 2012 MPFS final rule with comment period (76 FR
73300 through 73301) is 0.5 percent, resulting in an MFP-adjusted CPI-U
update factor of 1.2 percent for ASCs that meet the quality reporting
requirements. The final ASC conversion factor of $43.471, for ASCs that
meet the quality reporting requirements, is the product of the CY 2013
conversion factor of $42.917 multiplied by the wage index budget
neutrality adjustment of 1.0009 and the MFP-adjusted CPI-U payment
update of 1.2 percent. For ASCs that do not meet the quality reporting
requirements, we are reducing the CPI-U update of 1.7 percent by 2.0
percentage points and then we are applying the 0.5 percent MFP
reduction, resulting in a -0.8 percent quality reporting/MFP-adjusted
CPI-U update factor. The final ASC conversion factor of $42.612 for
ASCs that do not meet the quality reporting requirements is the product
of the CY 2013 conversion factor of $42.917 multiplied by the wage
index budget neutrality adjustment of 1.0009 and the quality reporting/
MFP-adjusted CPI-U payment update of -0.8 percent.
3. Display of CY 2014 ASC Payment Rates
Addenda AA and BB to this CY 2014 OPPS/ASC final rule with comment
period (which are available via the Internet on the CMS Web site)
display the final updated ASC payment rates for CY 2014 for covered
surgical procedures and covered ancillary services, respectively. The
payment rates included in these addenda reflect the full ASC payment
update and not the reduced payment update used to calculate payment
rates for ASCs not meeting the quality reporting requirements under the
ASCQR Program. These addenda contain several types of information
related to the 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 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

[[Page 75090]]

covered ancillary services that have a predetermined national payment
amount, such as drugs and biologicals and brachytherapy sources that
are separately paid under the OPPS, or services that are contractor-
priced or paid at reasonable cost in ASCs.
To derive the CY 2014 payment rate displayed in the ``CY 2014
Payment Rate'' column, each ASC payment weight in the ``CY 2014 Payment
Weight'' column was multiplied by the CY 2014 conversion factor of
$43.471. The conversion factor includes a budget neutrality adjustment
for changes in the wage index values and the annual update factor as
reduced by the productivity adjustment (as discussed in section
XII.H.2.b. of this final rule with comment period).
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 CY
2014 national unadjusted ASC payment rates for all items and services.
The 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 October 2013.
Addendum EE provides the HCPCS codes and short descriptors for
surgical procedures that are to be excluded from payment in ASCs for CY
2014.
We did not receive any public comments regarding the continuation
of our policy to provide CY 2014 ASC payment information as detailed in
Addenda AA and BB. Therefore, Addenda AA and BB to this final rule with
comment period (which are available via the Internet on the CMS Web
site) display the updated ASC payment rates for CY 2014 for covered
surgical procedures and covered ancillary services, respectively, and
provide additional information related to the CY 2014 rates.

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 refer
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR
68467 through 68469) for the discussion of the principles for our
considerations for future measures, and we intend to generally apply
these same principles in future rulemaking.
Comment: One commenter requested that for burden reduction
purposes, CMS should not implement more than two chart-abstracted
measures per year.
Response: We consider potential reporting burden on hospitals. We
do weigh the relevance and the utility of measures against potential
burden on providers. We thank the commenters for the feedback and will
take it into consideration for future proposals. We note that we are
working toward the eventual adoption of electronically-specified
measures, which will reduce the burden of chart-abstracted measures.
Comment: A few commenters recommended that CMS ensure that the
proposed measures are specified to provide an opportunity for
stakeholders' input.
Response: We note that all the proposed measures are fully
specified and we have provided links to the detailed measure
specifications. Since all of the proposed measures are NQF-endorsed,
the specifications were all submitted to NQF by the measure stewards.
We believe that these measure specifications will provide the detailed
information needed for the public to understand the measures being
proposed and to provide meaningful comments on the proposed measures
during the rulemaking process. Proposed measures are not included in
the Hospital OQR Specifications Manual because we generally incorporate

[[Page 75091]]

specifications for measures to be used in the program into the Hospital
OQR Specifications Manual, along with implementation guidance after
publication of the final rule with comment period, but prior to
implementation. For maintenance of technical specifications, our
general policy is to provide six months lead time between Hospital OQR
Specifications Manual publication and the start date of collection so
that providers have adequate time to prepare for new reporting
requirements.
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 measures based upon changes to guidelines upon which the measures
are based. We will revise the Hospital OQR 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-10,
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 to
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 adequately balances our need to incorporate nonsubstantive updates
to 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.
Comment: One commenter noted that the conversion of a measure to
use ICD-10-CM/PCS should be considered a substantive change that
follows current proposed rulemaking processes. The commenter requested
clarification regarding the publication, preview, and comment period
via rulemaking for ICD-9-CM to ICD-10-CM/PCS mappings for all value
sets for diagnoses and procedures used by measures specified in this
rule.
Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504), we
included examples in the Hospital IQR Program context of what we might
generally regard as nonsubstantive changes to measures. Our examples
included updated diagnosis or procedure codes, medication updates for
categories of medications, or a broadening of age ranges.
We will be transitioning all of our billing and measurement systems
from ICD-9 to ICD-10. In preparation for this transition, we: (1)
translated the ICD-9 versions of the measure specifications to ICD-10;
(2) recently published this crosswalk for the Hospital OQR Program on
our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalOutpatientQualityReportingProgram.html; and. (3) solicited
comment on this crosswalk from July 1, 2013 through August 31, 2013.
We normally incorporate coding updates for the measures using our
established subregulatory process because such updates do not change
the basic, underlying concepts being measured. Moving from ICD-9 to the
ICD-10 coding system falls within the parameters of our subregulatory
process. However, we recognize that in moving to ICD-10 coding, there
may be some nuances in the measures that, when translated, result in
unanticipated differences in performance, and consequently, prior
measure results do not correspond to results for the same measures
under the new coding system. In this situation, we will determine
whether to continue publicly reporting the quarters of data that were
collected under the ICD-9 coding system, or report only the newer
quarters of data collected under the ICD-10 coding system. We intend to
study the effect of transitioning to the ICD-10 system on trendability
of results once implementation has occurred and data are available to
do so in order to inform this future policy.
We will continue to use rulemaking to adopt substantive updates to
measures we have adopted for the Hospital OQR Program. However, any
change to a measure would need to be evaluated on a case by-case basis
to determine whether or not it is, in fact, substantive.

[[Page 75092]]

b. Publication of Hospital OQR Program Data
We refer readers to the CY 2014 OPPS/ASC proposed rule (78 FR
43645) for the discussion of our policy for the publication of Hospital
OQR Program data on Hospital Compare and non-interactive CMS Web sites.
Comment: One commenter encouraged CMS to ensure the Hospital
Compare Web site remains user-friendly, even though it must present
data that can be complicated and potentially confusing if not well
structured. The commenter emphasized that the information published on
Hospital Compare be accurate and fair, but also impartial and presented
in plain English at a sixth-grade reading level. The commenter
recommended that CMS display data on Hospital Compare in a simple
format with easy navigation and minimal graphics in the interest of
data that loads quickly on a variety of devices and at slower internet
connection speeds. The commenter encouraged CMS to offer the data in
languages commonly spoken in the United States, and cites the Medicare
Prescription Drug Benefit Manual, Chapter 2, Section 30.7 to point out
that CMS has standards governing Web site translation that should be
applied for the purpose of making the data available on Hospital
Compare more accessible.
Response: We thank this commenter for this thoughtful feedback
regarding the public reporting of data on Hospital Compare. We will
look at the feasibility of modifying the Web site to incorporate these
suggestions.

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 as 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 (a term we later changed to ``removal'') of
Hospital IQR Program measures based on evidence that the continued use
of the measure as specified raised 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 the CY 2013 OPPS/ASC final rule with comment period, we changed
the term from ``retirement'' to ``removal,'' in line with the same
change in the Hospital IQR Program. We discuss our reasons for this
change at 77 FR 68472 through 68473. 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 measures from the Hospital IQR Program
(formerly known as the RHQDAPU Program) measures. These criteria are:
(1) Measure performance among hospitals is so high and unvarying that
meaningful distinctions and improvements in performance can no longer
be made (``topped out'' measures); (2) performance or improvement on a
measure does not result in better patient outcomes; (3) a measure does
not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or conditions) measure for the topic; (5) the availability
of a measure that is more proximal in time to desired patient outcomes
for the particular topic; (6) the availability of a measure that is
more strongly associated with desired patient outcomes for the
particular topic; and (7) collection or public reporting of a measure
leads to negative unintended consequences such as patient harm. These
criteria were suggested by commenters during Hospital IQR Program
rulemaking, and we determined that these criteria are also applicable
in evaluating Hospital OQR Program quality measures for removal. In the
CY 2013 OPPS/ASC 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.
Comment: A few commenters urged CMS to remove 7 previously adopted
Hospital OQR Program measures (OP-9, OP-10, OP-14, OP-15, OP-20, OP-22,
and OP-25), which are either not NQF-endorsed or not recommended by the
MAP.
Response: While this comment is outside the scope of what we
proposed, we would like to provide some clarification. In the CY 2013
OPPS/ASC final rule with comment period, we responded to the same
comments on these measures. We refer readers to our responses in 77 FR
68472 through 68473.
2. Removal of Two Chart-Abstracted Measures from the Hospital OQR
Program
In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647),
we proposed in section XIII.C.2, titled ``Proposed Removal of Two
Chart-Abstracted Measures From the Hospital OQR Program,'' 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. We reflected our proposal in a chart (78 FR 43647) depicting
measures we proposed to remove, and also referred in the title of the
chart to CY 2016 as the first payment year affected by our proposal.
However, in section XIII.H.2.b of the proposed rule (78 FR 43653),
titled ``Effects of Proposed Changes on data submission for CY 2015 and
CY 2016 Payment Determinations and Subsequent Years,'' we proposed to
remove these measures for the CY 2015 payment determination and
subsequent years. We received comments regarding this contradictory
information and inquiries about when the proposed removal of both OP-19
and OP-24 would actually be effective. We would like to address those
comments here before discussing individual measures.
Comment: Many commenters noted that the discussions in the preamble
of the proposed rule regarding the removal of OP-19 and OP-24 were
inconsistent in sections XIII.C.2 and XIII.H.2.b. of the proposed rule.
Commenters requested clarification and many also encouraged CMS to
remove these measures for the CY 2015 payment determination and
subsequent years.
Response: We would like to apologize for this error and wish to
clarify that we intended to propose removing these measures for the CY
2015 payment determination and subsequent years, and instead
inadvertently referred to their removal as being proposed for the CY
2016 payment determination and subsequent years in XIII.C.2. We

[[Page 75093]]

appreciate commenters support for removing OP-19 and OP-24 for the CY
2015 payment determination and subsequent years.
The rationales for proposing to remove these measures are discussed
below.
a. 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 at the time, 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 to both
hospitals and CMS. 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
measure is workable in the Medicare EHR Incentive Program because,
unlike the Hospital OQR Program, it does not rely on chart-abstraction,
which can result in variations in data elements. Instead, the Medicare
EHR Incentive Program incorporates a methodology that includes
standardized data elements. In addition, there are no comparable
patient privacy concerns, since in the Medicare EHR Incentive Program,
patient e-data is password protected.
This MU core objective provides patients discharged from the
inpatient department or Emergency Department (ED) online access to the
ED 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 proposed to
remove this measure from the Hospital OQR Program. We invited public
comment on the proposed removal of this measure from the Hospital OQR
Program.
Comment: Many commenters stated that data collection for measure
OP-19 is burdensome and strongly supported CMS' justifications for
removing the measure.
Response: We thank the commenters for supporting our decision to
remove OP-19 for the CY 2015 payment determination and subsequent
years.
Comment: One commenter noted that, in the case of OP-19, hospitals
were instructed to continue to report some value for this measure
because the CMS data systems are not able to accommodate a missing
field without error. The commenter stated that while OP-19 was
suspended, reporting hospitals needed to continue to collect and report
data and ensure that the data field for OP-19 was completed to ensure
the entire file would be accepted into the CMS clinical data warehouse.
Response: We appreciate the commenter's concern. We refer the
reader to the CY 2012 OPPS/ASC final rule with comment period (77 FR
68475 through 68476) for a discussion of this same topic. We reiterate
that, while it is true that the burden of populating some value in the
data field for OP-19 is indeed placed on the reporting hospital, it is
not accurate that the hospital is now or ever was required to continue
to collect OP-19 data by chart abstraction or to report a meaningful
value for OP-19 to the clinical data warehouse once we suspended the
measure. In our memorandum to suspend OP-19, in subsequent discussions
in the Federal Register, and in our educational materials and
educational support calls, we attempted to make clear that we

[[Page 75094]]

would not use or validate any data that came in for OP-19.
We agree it is burdensome that our current system will not accept a
null value for OP-19. An upcoming release of our Hospital Reporting
system will address this issue by removing OP-19 and OP-24 from our
data collection fields. This system release is anticipated for summer
2014. We have also instructed the system contractor to build
flexibility into the data collection system so that, in the future, we
are able to execute our policy for suspension or removal of measures
without causing undue burden to the reporting community.
After consideration of the public comments we received, we are
finalizing the removal of OP-19 with the clarification that removal
applies for the CY 2015 payment determination and subsequent years.
b. 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. These instructions were needed
for chart-abstraction beginning on January 1, 2013. We also indicated
that this measure would be applied to the CY 2015 payment
determination.
In the CY 2014 OPPS/ASC proposed rule, we proposed to remove this
measure from the Hospital OQR Program due to continued difficulties
with defining the measure care setting. The measure specifications
provided by the measure steward, the American College of Cardiology
(ACC), identify the applicable care setting as a `Clinician Office/
Clinic.' However, in developing the specifications for this measure for
a hospital outpatient clinic setting, several issues arose, including
difficulty in accurately identifying hospital outpatient visits for
evaluation and management purposes using either chart abstraction or
HOPD claims data, and difficulty in determining the particular hospital
outpatient clinic visit that 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
proposed to remove OP-24 from the Hospital OQR Program. We invited
public comment on this proposal.
Comment: Many commenters strongly supported CMS' justification for
removing measure OP-24.
Response: We appreciate all the feedback supporting our proposal to
remove OP-24 from the Hospital OQR Program measure set for the CY 2015
payment determination and subsequent years.
After consideration of the public comments we received, we are
finalizing the removal of OP-19 and OP-24 for the CY 2015 payment
determination and subsequent years.
[GRAPHIC] [TIFF OMITTED] TR10DE13.359

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 determination and
subsequent years under the Hospital OQR Program. This table also
includes OP-19 and OP-24, with a notation that we are removing these
two measures for the CY 2015 payment determination and subsequent
years.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR10DE13.360

[[Page 75096]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.361

Comment: Some commenters expressed views regarding some of the
previously finalized measures that CMS intends to continue using under
the Hospital OQR Program. Commenters also provided suggestions on these
measures, regarding measure implementation, adding exceptions, and
revising measure specifications.
Response: We thank the commenters for their comments. Because these
comments address measures that we have finalized in the past through
notice and comment rulemaking, we do not believe they are within the
scope of this current rulemaking. However, we intend to consider all of
these views for future rulemaking and Hospital OQR Program development.

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43647 through 43651),
we proposed 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/Polyp Surveillance: Appropriate
follow-up interval for normal colonoscopy in average risk patients (NQF
0658), (3) Endoscopy/Polyp surveillance: Colonoscopy Interval
for Patients with a History of Adenomatous Polyps--Avoidance of
Inappropriate Use (NQF 0659), and (4) Cataracts: Improvement
in Patient's Visional Function within 90 Days Following Cataract
Surgery (NQF 1536).
All of 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. Section 1890A(a)(2) is
part of the pre-rulemaking process established under section 1890A of
the Act, and requires the Secretary to make available to the public by
December 1st of each year a list of certain categories of quality and
efficiency measures that the Secretary is considering for the Medicare
program. The measures we proposed 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. As required under section
1890A(a)(4) of the Act, 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 proposed 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 the proposed method of collection was
provided in section XIII.H.2. of the proposed rule (78 FR 43653).
To enhance our efforts to collect high quality data for the
Hospital OQR measures while minimizing burden for HOPDs, we also sought
public comment on whether we should collect patient-level data via
certified EHR technology on the four proposed chart-abstracted measures
(this would not apply to the one HAI measure, Influenza Vaccination
Coverage among Healthcare Personnel), and the potential timing for
doing so. Any future ability to collect patient-level data via EHR
technology 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.
Comment: A few commenters recommended that if CMS finalizes new
chart-abstracted measures in the Hospital OQR Program, CMS should not
collect patient-level data through EHR technology for these measures;
rather, CMS should limit data collection to aggregate data. Many
commenters did not support patient-level data collection specifically
due to EHR system concerns. These commenters supported collecting
aggregate data because the EHR environment is not mature. One commenter
stated that a group of its stakeholder hospitals are in the early
stages of adopting EHR systems and encouraged CMS to delay requiring
patient-level data where their infrastructure is not ready to collect
patient information.
Some commenters do not support patient-level data collection using
EHR technology due to concerns about protecting the privacy of EHR
data. One commenter believed that until CMS can ensure patients'
records can be securely maintained and transmitted, CMS should not
collect patient-level data via EHR technology.
Response: We appreciate the comments we received on whether we
should collect patient-level data via certified EHR technology on the
four

[[Page 75097]]

proposed chart-abstracted measures and the potential timing for doing
so.
We agree with commenters that chart-abstracted measure data
collected in aggregate form is currently the most appropriate
collection method, and we are finalizing the aggregate mode of data
collection for the three new chart-abstracted measures in section
XIII.H.2.f. of this final rule with comment period.
We will consider these commenters' concerns in proposing future
updates to the program and updates or expansions to the Hospital OQR
Program measures. Specifically, we will continue to consider the
maturity of EHR systems in future proposals to collect HOPD data via
EHR technology. We understand the need for additional infrastructural
development on the part of hospitals and CMS and the adoption of
standards for capturing, formatting, and securely transmitting the data
elements that make up 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.
Comment: A few commenters did not support aggregate data collection
for the proposed chart-abstracted measures, and suggested that CMS only
adopt measures where a validation strategy is in place. These
commenters pointed out that the use of aggregate data in lieu of
patient-level data does not allow for validation of data accuracy. The
commenters believed that without validation, there is no opportunity
for robust field-testing to ensure that electronic and chart-abstracted
measures provide comparable results.
Response: We interpret these commenters' views as being in support
of patient-level data collection and data collection via EHR
technology. We likewise support the future adoption of measures with
patient-level data collection, via EHR technology, and where submitted
data may be validated. We have not, to date, proposed measures for the
OQR Program with the EHR mode of data collection. In this final rule
with comment period, we have finalized three measures that are chart-
abstracted with aggregate data submission via the Web-based tool. We
cannot validate the data that is submitted in this manner. We agree
with commenters that validation is a way to measure the accuracy of
data submitted, and hope to be able to accomplish validation using EHR
technology to collect data sometime in the near future.
Comment: Some commenters pointed out that CMS' collection of
aggregate data might not actually have the effect of reducing burden.
These commenters believed this would be the case if hospitals must
first perform a patient-level review for each medical record in order
to compile the aggregate data. Commenters were generally concerned
about burden, and some commenters favored both an emphasis on adoption
of claims-based measures and measures that do not require chart
abstraction.
Response: We appreciate the commenters' concerns about the burden
that can be involved in collecting aggregate-level data. We sought
public comment on whether we should collect patient-level data via
certified EHR technology on the four proposed chart-abstracted measures
(this would not apply to the one HAI measure, Influenza Vaccination
Coverage among Healthcare Personnel), and the potential timing for
doing so. We interpret these commenters as being in favor of collecting
patient-level data when it is feasible. We will take these comments
into consideration in future rulemaking.
These comments are similar to comments we received related to how
hospitals should gather information to report on our most recent
proposed measures. We refer readers to section XIII.H.2.f of this final
rule with comment period where we address these comments.
Comment: Many commenters offered views generally applicable to data
collection in the Hospital OQR Program, but not specific to the
proposed measures described in section XIII.E of the CY 2014 OPPS/ASC
proposed rule (78 FR 43647). Commenters voiced commitment to: (1)
providing data to measure quality of care; (2) supporting CMS'
alignment of measures and requirements across data reporting and value
based purchasing programs whenever possible and as early as possible in
the implementation phases of new programs; (3) allowing stakeholders to
meet Meaningful Use (MU) standards through submission of data to the
Hospital OQR Program; and, (4) adopting future EHR measures that are
fully endorsed, tested, and specified by CMS. Many commenters asked CMS
to consider technology barriers to efficient and accurate EHR-based
quality reporting, including the need for widely adopted standards,
information models, and vocabularies to support EHR-based reporting.
Many commenters also asked CMS not to adopt aggressive timelines for
EHR data submission and recommended specific policies and timelines
related to electronic submission. Some commenters urged CMS to
carefully consider confidentiality, privacy, and security regulations,
and to consider State-based regulations before implementing EHR
measures for use by Partial Hospitalization Programs (PHPs) in HOPDs.
Finally, several commenters suggested that CMS should convene a work
group that includes the hospital industry to collaborate on how best to
collect the data needed to accurately capture the care provided in off-
campus provider-based departments.
Response: We will take these comments into consideration for future
rulemaking for our quality reporting programs.
Each of the proposed measures is described in greater detail below.
1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF
0431)
The 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 a high rate of influenza vaccination coverage
among HCP is intended to help protect HCP and their patients in
hospital settings and reduce disease burden and healthcare costs. Due
to the potentially significant impact of HCP influenza vaccination on
patient outcomes, we believe this measure is

[[Page 75098]]

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 proposed to adopt this process measure for the CY 2016 payment
determination and subsequent years. We also proposed that Hospital OPDs
use the NHSN infrastructure and protocol to report the measure for
Hospital OQR Program purposes. Hospitals currently submit data to NHSN
to comply with the requirements of the Hospital IQR Program and those
requirements will be unchanged for data submission to NHSN for the
Hospital OQR Program. 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 a vaccination; 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 since 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 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 stated in the CY 2009 OPPS/ASC final
rule with comment period (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 the proposed rule for a
detailed discussion of data collection (78 FR 43656). We invited public
comment on this proposal.
Comment: Several commenters opposed this measure and contended that
the measure is duplicative of the Influenza vaccination measure in the
Hospital IQR Program. Commenters stated that it is burdensome to report
the same measure for both settings. A few commenters requested
clarifications for the measure inclusions for both hospital inpatient
and outpatient settings. Some commenters noted that hospital staff may
float between different hospital inpatient and outpatient locations on
different days and they requested clear guidelines to identify staff
working at different hospital locations. A few commenters recommended
allowing hospitals to report by attesting through the Hospital IQR
Program that both their inpatient and outpatient healthcare personnel
are vaccinated.
Response: We recognize that the current measure specifications may
lead to some redundancy in data collection and data submission of this
measure in both the inpatient and outpatient settings. We are aware
that some HCP may work across both of these settings. We also realize
that it may be difficult for hospitals to accurately attribute HCP
using current instructions to report accurate data for both the
Hospital IQR and Hospital OQR Programs.
After considering the public comments we received and our
discussion with the CDC's NHSN, we plan to address the commenters'
concerns by providing clear instructions on the appropriate attribution
of HCP working in the outpatient setting. We intend to provide these
instructions in time for the first data collection period beginning in
October 2014 and before the data submission deadline on May 15, 2015.
The instructions will be included in the measure specifications in our
planned December 2013 addendum to the Hospital OQR Specifications
Manual, which will be available on the QualityNet Web site (https://
www.qualitynet.org).
We also intend to separately clarify HCP definitions for the
inpatient setting with respect to the Hospital IQR Program in the
Hospital IQR Specifications Manual, which we anticipate will be
published on April 1, 2014 to cover the discharges dated October 1,
2014-June 30, 2015. In addition, as the measure steward, the CDC's NHSN
plans to set up the capability to clearly differentiate reporting on
its Web site for the hospital inpatient and outpatient settings.
Comment: One commenter believed that this measure may not be
necessary as many hospitals already require the influenza vaccination
as a condition for employment. Another commenter requested a waiver for
States with legislation prohibiting healthcare providers from requiring
employees to obtain influenza vaccination as a condition for
employment.
Response: We believe that this proposed measure is necessary for
achieving high levels of vaccination in HCP and that this new measure
provides useful information to consumers of healthcare services. We
note that a recent report by CDC (Morbidity and Mortality Weekly Report
2013; 62(38):781-786) found that during the 2012-2013 influenza season,
30 percent of HCP worked in settings where influenza vaccination was
required, 46 percent worked in settings where it was promoted but not
required, and 24 percent worked in settings where it was neither
required nor promoted. Vaccination adherence at facilities with a
contingency requirement for employment was 96.5 percent. Rates were
lower in facilities that promoted, but did not require vaccination
(76.9 percent) and lower still in facilities that neither required nor
promoted vaccination (50.4 percent). Thus, there is wide variation in
workplace programs for the influenza vaccination and in vaccine
coverage among HCP. Therefore, we believe that tracking influenza
vaccination coverage is pivotal to raise vaccination adherence to

[[Page 75099]]

higher and more uniform levels across the Nation.
We acknowledge the commenter's concern regarding State laws
prohibiting providers from requiring that healthcare workers get an
influenza vaccination. We want to clarify that the numerator of the
population of this measure includes more than just HCPs who received an
influenza vaccination administered at the healthcare facility, or who
reported in writing (paper or electronic) or provided documentation
that they received an influenza vaccination elsewhere. The numerator
population also includes HCP who: (a) have a medical contraindication/
condition of severe allergic reaction to eggs or to other components of
the vaccine; (b) have a history of Guillain-Barre Syndrome within 6
weeks after a previous influenza vaccination; (c) declined a
vaccination; (d) have an unknown vaccination status or do not otherwise
meet any of the other definitions in the numerator categories. We
believe that these last three categories encompass HCP who may not have
been vaccinated and cannot be required to comply with a vaccination
requirement under State law. Therefore, we do not believe that a waiver
is needed for States where legislation prohibits providers from
requiring that HCPs get influenza vaccinations as a condition of
employment. Regardless of whether requiring the influenza vaccination
with employment is prohibited by the State, HOPDs can still take
actions to improve their vaccination rates.
Comment: One commenter asked whether CMS would publicly report this
measure separately for the Hospital OQR Program, instead of reporting a
hospital-wide rate, which includes hospital inpatient units and off-
campus clinics, among others.
Response: In the upcoming CY 2015 OPPS/ASC proposed rulemaking, we
will provide detailed proposals regarding the public reporting of this
measure as stated above.
After consideration of the public comments we received, we are
finalizing as proposed the measure OP-27: Influenza Vaccination
Coverage among Healthcare Personnel (NQF 0431) for the
Hospital OQR Program for the CY 2016 payment determination and
subsequent years.
For the proposed rule, we received many general comments applicable
to the four proposed chart-abstracted measures. We have organized this
preamble by first summarizing and responding to these general comments
applicable to these four measures, summarizing and responding to
measure-specific comments, and then describing our final policy.
Comment: A few commenters supported adopting all four proposed
chart-abstracted measures. However, many other commenters opposed all
four proposed chart-abstracted measures based on their claims that
follow-up visits and assessments are performed in places other than in
HOPDs. Thus, HOPDs may not be able to access other patient records or
they may not be able to track down the patients who may go elsewhere
for follow-up. The commenters stated that HOPDs merely provide a
facility for physicians to perform certain procedures, but follow-up
visits are performed at physician offices. Many commenters viewed the
four proposed chart-abstracted measures as ``Clinician Office'' setting
measures designed to measure, for example, ophthalmologist and other
physician performance and not HOPD performance. Commenters stated that,
for example, ophthalmologists assess post-operative visual function and
patient outcomes, and determine additional surgical procedures as
necessary in their respective offices and not in the HOPD. Likewise,
physicians perform colonoscopy at HOPDs, but follow-up colonoscopy
intervals are determined by the physician and documented in medical
records kept in the physician's office.
Some commenters asserted that measures for the outpatient setting
should be geared towards tracking the care of patients during their
HOPD visits. Patients who receive some type of care in the HOPD do not
always receive the majority of their care in HOPDs, because they are
most likely to be followed by their primary care physicians for other
medical care. Therefore, it is generally not practical to have the HOPD
tracking the long-term follow-up care of its patients.
The commenters recommended that because CMS wishes to eventually
align the hospital and physician quality programs, CMS must design
measures that recognize that there are differences in how facilities
and physicians collect information, report quality measures, and
interact with patients.
Many commenters concluded that these four measures are more
appropriate as Physician Quality Reporting System (PQRS) measures,
because physicians are better suited to track and follow-up patients
(PQRS is a voluntary reporting system that provides an incentive
payment to identified individual eligible physicians). Commenters
asserted that the measures are duplicative as both PQRS measures and
Hospital OQR Program measures.
Some commenters expressed concerns that the measures are neither
NQF-endorsed for the HOPD setting nor field-tested.
Response: We thank those commenters who expressed support for the
measures. While these measures are suitable for clinician office
settings, as indicated by commenters, we also believe they are suitable
for settings that supply services to the same target populations for
the measures, such as HOPDs. The intent of the measures is to promote
accountability for Medicare beneficiaries, improve the coordination of
services, reduce fragmented care, encourage redesigned care processes
for high quality and efficient service delivery, and incentivize higher
value care. These measures focus on the patient and encourage
physicians, such as ophthalmologists, to collaborate, communicate, and
share information with HOPDs. We hope this new mode of coordination
will become the common practice in healthcare delivery.
HOPDs provide care without the higher cost associated with
inpatient hospitalization. More and more procedures are done safely and
effectively on an outpatient basis and we expect this trend will
continue. Therefore, we believe that assessing care coordination is a
very important aspect of evaluating the overall quality of care
furnished by HOPDs. We stress that true clinical integration is
evidenced by effective patient coordination of care across health care
settings, providers, and suppliers and is best shown when there is a
structure in place that is patient-focused and where clinicians
collaborate on best practices in an effort to furnish higher quality
care that they likely would not achieve if working independently.
We do not believe these measures are duplicative of PQRS measures
because, even though the measures' indicators are the same, the level
of analysis is different (facility versus physician). We plan to make
nonsubstantive tweaks to the measure, such as updating and modifying
HCPCS codes, in order to better fit the measure for a HOPD level of
analysis. We hope to set new milestones in the integral coordination
and collaboration of care across outpatient provider types and
facilities, as spurred by these measures. Regarding the comments that
the proposed chart-abstracted measures have not been field-tested, we
note that all three measures that we are finalizing (as discussed
below) were field-tested in the HOPD facility setting by the measure
stewards. These three measures are: (1)

[[Page 75100]]

Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal
colonoscopy in average risk patients (NQF 0658); (2)
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of Inappropriate Use (NQF
0659); and, (3) Cataracts: Improvement in Patient's Visual
Function within 90 Days Following Cataract Surgery (NQF 1536).
We are finalizing the same three chart-abstracted measures in both
the Hospital OQR Program and ASCQR Program for the CY 2016 payment
determination and subsequent years.
Finalizing these measures for the Hospital OQR Program would
further align measures across outpatient hospital and ambulatory
settings, which furnish many similar services to beneficiaries. The
availability of identical outcome measures at HOPDs and ASCs will
enable beneficiaries to compare facilities and make informed decisions.
In addition, we believe the measures are appropriate for the HOPD
setting, because the services assessed by these measures are frequently
performed in HOPDs. Also, all three of the chart-abstracted measures
that we are finalizing are NQF-endorsed for the Ambulatory Care:
Clinician Office/Clinic setting, which we have historically interpreted
as including the HOPD setting.
Comment: Some commenters noted that an initial cataract surgery or
colonoscopy may be performed at a different HOPD. This situation would
make retrieving data burdensome. Some commenters believed that
obtaining office visit records and surgical outcome data from other
physician offices is an intrusive violation of patient privacy.
Response: There may be some instances in which a HOPD may have
great difficulty in obtaining information from other HOPDs, and some
additional information may need to be obtained directly from patients
for these measures. But as a general matter, our overarching goal for
adopting the three proposed measures is to encourage the coordination
of care across health care settings, providers, and suppliers as often
as possible. We would like to see HOPDs, ophthalmologists and other
physicians actively and routinely engaged in exchanging information to
better communicate and coordinate the care of patients.
We note that there are a variety of ways to collect patient-related
data and, at times, it may be appropriate for HOPDs to obtain data
directly from the ophthalmologist or other physician who either ordered
a procedure for a patient or performed that procedure. HOPDs may have
professional and commercial relationships with these ophthalmologists
or other physicians. As such, an HOPD may have the ability to develop
the means to obtain follow-up information including using contractual
requirements to share such information with HOPDs.
We also note that HOPDs and referring physicians are generally
subject to the HIPAA Privacy, Security, and Breach Notification Rules,
and are required to protect the privacy and confidentiality of their
patients' protected health information as required by those rules. We
expect that HOPDs and physicians would adhere to any applicable
requirements in providing and obtaining this information in order to
prevent any violations of patient privacy.
We believe that our implementation strategy for these measures will
minimize collection and reporting burden. We detail the data submission
procedures for the measures in section XIII.H.2. of this final rule
with comment period.
Comment: Many commenters asserted that it is extremely burdensome
to retrieve timely the data from physician offices and that the data
would be difficult to validate. A few commenters strongly believed that
the huge reporting burden from the four proposed chart-abstracted
measures could be diminished if claims are used as the data source.
Response: We appreciate commenters' concerns that it could be
difficult or burdensome for hospitals to retrieve from physician
offices the data they will need for the chart-abstracted measures in a
timely manner. We believe such problems are more likely to occur in the
early phases of establishing these measures, when hospitals and
physicians have not yet set up effective infrastructures to routinely
exchange information. In order to accommodate these concerns, we have
taken several steps that we believe should alleviate some of this
burden. The Web-based collection strategy we are finalizing for the
measures and subsequent release of specifications and implementation
guidance in the Hospital OQR Specifications Manual will address some of
the concerns about feasibility of data collection raised by the
commenters. To further reduce burden, we are also finalizing a low case
threshold exemption and a sampling methodology for hospitals with a
high volume of cases covered by the new measures. We believe that these
provisions should together significantly reduce burden for the three
chart-abstracted measures we are finalizing. We have discussed these
modifications in more detail in section XIII.H.2.f of this final rule
with comment period.
We do not include chart-abstracted measures submitted via the Web-
based tool in our validation procedures and, therefore, we will not be
validating these measures at this time. Although some commenters would
prefer that we use claims as the source for this data, we believe these
measures will have the positive effect, in a number of instances, of
requiring providers to communicate with each other. Using these kinds
of measures will help us capture HOPDs' efforts at care coordination,
which is something we want to measure, and that we do not believe we
can measure with claims. We are also not aware of any applicable coding
to capture this communication and coordination of patient care.
We received specific comments on the individual proposed chart-
abstracted measures and they are discussed below.
2. Complications Within 30 Days Following Cataract Surgery Requiring
Additional Surgical Procedures (NQF 0564)
The 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

[[Page 75101]]

surgeries associated with complications.\5\
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\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.
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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 the proposed rule for a
detailed discussion of data collection. We invited public comment on
this proposal.
Comment: Many commenters noted that this measure is unnecessary as
complications from cataract surgery are rare and data collection would
be very burdensome, since the volume of cataract surgery performed is
huge. Commenters added that this measure requires very detailed
information about not only specific complications that may have
occurred, but also data on any additional follow up surgical procedures
to accurately report data for this measure.
Response: As discussed in the proposed rule (78 FR 43649), a large
number of complications from cataract surgery occur even though the
percentage of complications from cataract surgery is small. The MAP
indicated that the measure addresses a high impact condition that is
not adequately addressed in the Hospital OQR measure set. Therefore, we
believe that complications following cataract surgery which would
require additional surgical procedures are important to measure.
However, unlike the other three measures we proposed, we agree that
a HOPD would incur significant additional burden to collect the
detailed information about specific complications and required
additional surgical procedures to accurately report this measure. This
would far exceed the burden we believe accompanies the other chart-
abstracted measures that we proposed in the proposed rule. We have
emphasized that we believe that care coordination between providers and
practitioners is an essential element of appropriate, high quality
care, and that the element of coordination cannot be measured using a
claims-based or other form of measure.
Nonetheless, this is one instance in which we believe the burden
involved in collecting the data required for chart-abstraction far
outweighs the benefits in measuring care coordination.
We have based our conclusion on the fact that a HOPD would be
required to acquire far more information than the more fundamental
follow up information that accompanies the other measures we proposed
(such as the patient survey data for OP-31, which basically involves
collecting a patient's perceptions about visual improvement following
cataract surgery). In contrast, there is far more information necessary
for OP-28 and the nature of that information is more detailed,
complicated, and very likely much more difficult for an HOPD to
acquire. We agree with the commenters that this measure requires very
detailed information about not only specific complications that may
have occurred, but also data on specific additional follow up surgical
procedures to accurately report data for this measure.
Because we continue to believe this is an important area to measure
quality of care, we plan to explore other ways to collect this data,
including the potential development of a claims-based risk-adjusted
outcome measure of cataract complications, which would address the same
quality issues as this measure, but minimize the burden associated with
measurement to the greatest degree possible. Further, we anticipate
that the new measure would be applicable to both the ASC and HOPD
settings. We have previously developed a robust methodology for using
claims to identify surgical complications for patients who have had
total hip and knee replacements, and therefore, we believe that it may
be possible to do so for cataract surgeries as well. This is not the
case with the other three measures, which do not measure surgical
complications.
After consideration of the public comments we received, and in
light of the above reasons, we are not finalizing this proposed measure
for the Hospital OQR Program at this time.
3. Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients (NQF 0658)
The 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.
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\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 the proposed rule for a
detailed discussion of data collection. We

[[Page 75102]]

invited public comment on this proposal.
Comment: One commenter interpreted the MAP's recommendation of
``Support Direction,'' to mean that a measure was not, in the MAP's
opinion, ready for implementation in the Hospital OQR Program.
Commenters stated that CMS should only finalize measures fully
supported by the MAP.
Response: We take into account all MAP input when deciding on which
measures to adopt for the program. We note that in addition to MAP
input, we also consider feedback that we receive from many other
stakeholders such as providers, specialty societies, measure
developers, patients, and their caregivers during the rulemaking public
comment period in evaluating whether to finalize measures. We
continuously review and revise the measures in our programs to ensure
that only the highest caliber measures are selected. We stress,
however, that we are only required to consider the input provided by
the MAP. The ultimate decision on whether to include a measure for the
program rests solely with the Secretary. Although, ideally, we would
want the MAP to fully support all measures for our programs, we
recognize that it is not always possible. A ``support direction''
recommendation by the MAP indicates ``measures, measure concepts, or
measure ideas that should be phased into the program measure set over
time, after specific issues are addressed.'' The MAP's reasons for
supporting the direction of a measure can vary greatly, from measure to
measure. In some instances, for example, the MAP might simply believe
that a measure should first receive NQF endorsement.
We believe that this measure addresses the critical issue of
colonoscopies potentially performed too frequently and potentially
increasing patients' exposure to procedural harm. Because the procedure
is performed often at HOPDs, we believe that this measure is necessary
for the Hospital OQR Program.
After consideration of the public comments we received, we are
finalizing this measure for the CY 2016 payment determination and
subsequent years as proposed.
4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients
with a History of Adenomatous Polyps--Avoidance of Inappropriate Use
(NQF 0659)
This 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}
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\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.
---------------------------------------------------------------------------

The measure numerator for the 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. A ``support
direction'' recommendation by the MAP indicates ``measures, measure
concepts, or measure ideas that should be phased into the program
measure set over time, after specific issues are addressed'' (for
example, obtaining NQF endorsement). Currently the NQF endorsement is
time-limited.
We refer readers to section XIII.H.2. of the proposed rule for a
detailed discussion of data collection. We invited public comment on
this proposal.
Comment: One commenter interpreted the MAP's ``Support Direction''
recommendation to mean that a measure was not, in the MAP's opinion,
ready for implementation in the HQQR Program. Commenters stated that
CMS should only finalize measures fully supported by the MAP.
Response: We refer readers to our response above to the same MAP
recommendation concerns expressed with respect to the Endoscopy/Polyp
Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in
Average Risk Patients (NQF 0658) measure.
We believe that this measure addresses the critical area of timely
following-up colonoscopies to detect important colonic lesions after
newly diagnosed adenomatous polyps have been removed by colonoscopy.
Proper timing can be effective in reducing the incidence of subsequent
colorectal cancer. Because colonoscopy is so commonly performed at
HOPDs, and because this measure addresses a significant gap in the
Hospital OQR Program, we believe that this measure is necessary for the
Hospital OQR Program. We also note that NQF recently lifted its time-
limited endorsement and the measure is now fully-endorsed by NQF. We
expect that this change will appear on the NQF Web site in the near
future.
After consideration of the public comments we received, we are
finalizing this measure, without modification, for the Hospital OQR
Program as proposed.
5. Cataracts--Improvement in Patient's Visual Function Within 90 Days
Following Cataract Surgery (NQF 1536)
The 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

[[Page 75103]]

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\
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\9\ National Quality Measures Clearing House. Agency for
Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
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We proposed 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. 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. We refer readers to section XIII.H.2. of the proposed
rule for a detailed discussion of data collection. We invited public
comment on this proposal.
Comment: One commenter stated that the measure requires patients to
complete a pre-operative and a post-operative visual function
questionnaire. The follow-up survey may occur in intervals of one day,
two weeks or one month post-op. The pre- and post-surgery surveys are
conducted in the physician office and they are compared for analysis.
The commenter noted it takes a third-party administrator to process the
questionnaire in order to prevent the introduction of bias (such as how
a physician characterizes a patient's progress) and this administrative
cost would impose a new burden for HOPDs.
Response: We note that the pre-operative and post-operative surveys
can be done in person at the HOPD or physician's office or via phone,
email, or mail. The two surveys can be analyzed by the physician or the
HOPD. However, given that this measure collects standard clinical
follow-up information, we would expect physicians and HOPDs to already
have standard operating procedures in place in order to conduct these
visual assessments or for HOPDs to acquire them from patients'
physicians in order to properly follow up by comparing pre- and post-
operative surveys. Therefore, we do not believe this measure should
impose undue additional burden.
Also, while a HOPD may want to utilize a third party administrator
to process survey information, we do not believe one should be
necessary. We believe that including this measure in the Hospital OQR
Program is important because, as the MAP stated and we believe, this
measure falls under a category of measures inadequately represented in
the Hospital OQR Program measure set, and the measure exemplifies
patient reported outcomes in the delivery of care.
In response to the comments we have received on the burden
associated with the chart-abstracted measures we are finalizing, we
have modified our implementation strategy in a manner that we believe
will significantly minimize collection and reporting burden. We detail
the data submission procedures for this measure and others in section
XIII.H.2. of this final rule with comment period.
After consideration of the public comments we received, we are
finalizing this measure for the CY 2016 payment determination and
subsequent years as proposed.
In summary, we are finalizing four new measures (one CDC/NHSN
measure and three chart-abstracted measures): (1) Influenza Vaccination
Coverage among Healthcare Personnel; (2) Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk
Patients; (3) Endoscopy/Polyp 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 for the CY 2016
payment determination and subsequent years.

[[Page 75104]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.362

The finalized measure set (a total of 28 measures) for the Hospital
OQR Program for the CY 2016 payment determination and subsequent years
is listed in the table below.
BILLING CODE 4120-01-P

[[Page 75105]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.363

[[Page 75106]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.364

BILLING CODE 4120-01-C

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 Health Information
Technology (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 electronic
specifications (e-specifications). This includes completing e-
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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43651), we indicated
that 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, all of which are targeting the same broad measure
domains for future expansion.
We invited public comment on this approach and on our suggestions
and rationale for possible measure topics for future consideration in
the Hospital OQR Program.
Comment: Commenters presented the following as possible future
measure topics:
A patients' experience of care measure
A core patient safety measure set or a serious hospital-
acquired infection composite measure that includes Central Line Bundle
Compliance, Clostridium difficile (C-difficile), catheter-associated
urinary tract infection (CAUTI), and MRSA Bacteremia (MRSA)
Clinician-level measures that can be applied appropriately
in the hospital outpatient setting for conditions such as diabetes,
coronary artery disease, and COPD
Patient-Reported Outcomes Measures
Response: We thank the commenters for the feedback and will take it
into consideration for future measures.
In addition, we solicited comments on the following potential
quality measure topics for partial hospitalization programs (PHPs) that
are part of HOPDs. Some of these measure topics are currently part of
the IPFQR Program, and some of them we are currently considering for
the IPFQR Program: Polyp-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 measure topics would advance our goal of aligning
measurement of PHPs in HOPDs with that of the IPFQR Program over time.
Comment: One commenter recommended that CMS not propose any of the
measures topics for PHPs in HOPDs for the Hospital OQR Program until
such measures are specified and tested in the PHP setting, and NQF-
endorsed and reviewed by the MAP. The commenter was concerned about the
need for more infrastructure support for additional measures.
Response: We thank the commenter for the suggestions. We will take
these comments into account when considering whether to propose the
measures for PHPs in future rulemaking.
Comment: Some commenters made specific recommendations for new
measure proposals for PHPs. Commenters believed that with appropriate
modification, the adoption of some of the IPFQR Program measures for
PHPs could promote enhanced care coordination between PHPs and IPFs.
Specifically, the commenters recommended modifying two pairs of
IPFQR measures for the PHP setting: Hospital-Based Inpatient
Psychiatric Services (HBIPS) 4 and 5 (multiple antipsychotics); and
HBIPS 6 and 7 (continuity of care). According to the

[[Page 75107]]

commenters, HBIPS 4 requires the identification of patients who are
discharged on two or more antipsychotic medications, while HBIPS 5
reports the number of patients discharged on multiple antipsychotic
medications with appropriate justification. Antipsychotics are
important tools in managing behavior, but often have significant side
effects, especially when multiple antipsychotic medications are used
concurrently. It is often appropriate to reduce (or ``taper'') the
number of antipsychotics given to patients, but the tapering of drugs
cannot always be completed during an inpatient hospitalization. Based
on the information they presented, commenters contended it would be
appropriate to measure PHPs on HBIPS 4 and 5 because antipsychotic
medication tapering can and often does continue in PHPs. Furthermore,
commenters stated that using setting-appropriate versions of HBIPS 4
and 5 in both IPFs and PHPs might encourage better coordination of the
use of antipsychotic medications across these two settings.
Commenters also noted that similarly, HBIPS 6 measures whether a
post-discharge continuing care plan is created, while HBIPS 7 measures
whether the post-discharge continuing care plan is transmitted to the
next level of care provider. A plan of care provides the next provider
with a summary of a patient's course of treatment, discharge
medications and any recommendations for ongoing care. Whenever a
patient changes care settings, the transmission of a plan of care
equips the new health care team with important information to shape a
patient's treatment plan. Based on the commenters' understanding of the
measures they described, they asserted that assessing both IPFs and
PHPs on these measures could reinforce the need for ongoing, two-way
communication across a patient's behavioral health care team.
Response: We thank the commenters for the detailed recommendations
for future measures for PHPs. We will take them into consideration when
we develop measures for PHPs.

G. 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 requirements 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 final rule with comment period, which is available via the
Internet on the CMS Web site): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,''
``S,'' ``T,'' ``V,'' or ``U.'' We note that we proposed to delete
status indicator ``X'' as described in sections II.A.3. and XI. of the
proposed rule. We also note that we proposed to develop status
indicator ``J1'' as part of the proposed comprehensive APC discussed in
section II.A.2.e. of the 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 through 68771) for a
discussion of this policy.
We did not receive any public comments on the CY 2014 OPPS status
indicators to which the payment reduction to OPPS payment rates would
apply, for hospitals who fail to meet the OQR reporting requirements.
We note that the ``J1'' status indicator would not apply in the CY 2014
OPPS, due to the delay in implementation of the comprehensive APC
policy, which is discussed in section II.A.2.e. of this final rule with
comment period. We also note that status indicator ``X'' was not
deleted, because the packaging proposal for ancillary services was not
finalized for the CY 2014 OPPS, as discussed in section II.A.3. of this
final rule with comment period. Therefore, the reporting ratio would
continue to apply to services with status indicator ``X.''
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

[[Page 75108]]

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 the proposed
rule.
2. Reporting Ratio Application and Associated Adjustment Policy for CY
2014
In the CY 2014 OPPS/ASC proposed rule (78 FR 43652), we proposed to
continue our established policy of applying the reduction of the OPD
fee schedule increase factor through the use of a reporting ratio for
those hospitals that fail to meet the Hospital OQR Program requirements
for the full CY 2014 annual payment update factor. For the CY 2014
OPPS, the proposed reporting ratio was 0.980, calculated by dividing
the proposed reduced conversion factor of $71.273 by the proposed full
conversion factor of $72.728. We proposed to continue to apply the
reporting ratio to all services calculated using the OPPS conversion
factor. For the CY 2014 OPPS, we proposed to apply the reporting ratio,
when applicable, to all HCPCS codes to which we have assigned status
indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,''
and ``U'' (other than new technology APCs to which we have assigned
status indicators ``S'' and ``T''). We note that we proposed to delete
status indicator ``X'' as described in sections II.A.3. and XI. of the
proposed rule. We also note that we proposed to develop status
indicator ``J1'' as part of the proposed comprehensive APC discussed in
section II.A.2.e. of the proposed rule and to apply the reporting ratio
to the comprehensive APCs. We proposed to continue to exclude services
paid under New Technology APCs. We proposed to continue to apply the
reporting ratio to the national unadjusted payment rates and the
minimum unadjusted and national unadjusted copayment rates of all
applicable services for those hospitals that fail to meet the Hospital
OQR Program reporting requirements. We also proposed to continue to
apply all other applicable standard adjustments to the OPPS national
unadjusted payment rates for hospitals that fail to meet the
requirements of the Hospital OQR Program. Similarly, we proposed to
continue to calculate OPPS outlier eligibility and outlier payment
based on the reduced payment rates for those hospitals that fail to
meet the reporting requirements.
We invited public comment on these proposals.
Comment: One commenter suggested that OPPS outlier payments for
hospitals that failed to meet the Hospital OQR Program requirements be
calculated based on the full adjusted payment as if they met the
requirements. The commenter believed that otherwise, hospitals could
potentially receive an outlier payment as a result of failing to comply
with the quality reporting requirements.
Response: In the CY 2009 OPPS/ASC final rule with comment period
(78 FR 68772), we described how failure to meet the Hospital OQR
Program requirements would affect certain OPPS payment adjustments. For
the OPPS outlier payment calculation, we finalized a policy to
calculate OPPS outliers using payments with the Hospital OQR Program
reduction already applied. This application of the quality reporting
payment reduction in calculating the OPPS outliers is similar to how
this issue is handled under the IPPS.
After consideration of the public comment we received, we are
finalizing our proposal to apply the Hospital OQR Program reduction in
the manner described above and, therefore, are finalizing our proposal,
with modification to reflect the CY 2014 OPPS status indicators to
which the adjustment would apply.
As a result, for the CY 2014 OPPS, we are applying a reporting
ratio of 0.980 to the national unadjusted payments, minimum unadjusted
copayments, and national unadjusted copayments for all applicable
services for those hospitals failing to meet the Hospital OQR Program
reporting requirements. This reporting ratio applies to HCPCS codes
assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,''
``T,'' ``U,'' ``V,'' or ``X'' excluding services paid under New
Technology APCs. All other applicable standard adjustments to the OPPS
national unadjusted payment rates for hospitals that fail to meet the
requirements of the Hospital OQR Program will continue to apply. We
continue to calculate OPPS outlier eligibility and outlier payment
based on the reduced rates for those hospitals that fail to meet the
reporting requirements.

H. 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 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/

[[Page 75109]]

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). In the CY 2014 OPPS/ASC proposed rule (78
FR 43653), we proposed 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 for submitting 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). In the CY 2014 OPPS/ASC proposed rule (78 FR 43653), we
proposed 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 invited public comment on this proposal.
Comment: One commenter supported codifying administrative
requirements for the Hospital OQR Program.
Response: We thank the commenter for this support.
Comment: One commenter requested clarification regarding whether
the proposed regulations apply to a hospital provider-based free
standing emergency department that is not located on the campus of a
hospital.
Response: Hospital OQR Program reporting is by CMS Certification
Number (CCN), not by the physical location of clinical services
provided. If the hospital has a free standing location that is included
in a hospital CCN governing its eligibility to bill Medicare claims via
OPPS, then services provided at that location should be included in the
Hospital OQR Program reporting, along with all activity reported for
that CCN. A hospital may refer to the Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1191255879384) for technical and educational support including contact
information for questions on how to participate in the Hospital OQR
Program to successfully receive a full APU.
After consideration of the public comments we received, we are
finalizing as proposed, our proposal to codify certain Hospital OQR
Program procedural requirements at Sec. 419.46.
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 in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60637); 15 measures finalized for the CY 2012 payment
determination in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 72083 through 72084); 23 measures finalized for the CY 2013
payment determination in the CY 2011 OPPS/ASC final rule with comment
(75 FR 72090); 26 measures finalized for the CY 2014 and CY 2015
payment determination in the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74469 and 74473) and no additional measures finalized for
the CY 2015 payment determination in the CY 2013 OPPS/ASC final rule
with comment (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).
In this final rule with comment period, we are finalizing four
additional new measures. For a full list of current Hospital OQR
measures, we refer readers to the table in section XIII.H.2.f. of this
final rule with comment period.
b. Effects of Changes on Data Submission for CY 2015 and CY 2016
Payment Determinations and Subsequent Years
In section XIII.C.2.a. of the CY 2014 OPPS/ASC proposed rule (78 FR
43646 through 43647), we proposed to remove OP-19 for the CY 2016
payment determination and subsequent years. In section XIII.H.2.b. of
the CY 2014 OPPS/

[[Page 75110]]

ASC proposed rule (78 FR 43653), however, we referred to the removal of
OP-19 as being proposed for removal for CY 2015 and subsequent years.
We intended for the proposal language in these two sections to match;
specifically, we intended that the removal of OP-19 should begin with
the CY 2015 payment determination and continue forward into subsequent
years. Our proposal to remove OP-19 from the Hospital OQR Program
beginning with the CY 2015 payment determination (this is our earliest
opportunity to remove the measure from the Hospital OQR Program) would
not require a participating hospital to take any new action, because we
previously suspended OP-19 effective with January 1, 2012 encounters,
and we have not used OP-19 data to meet requirements for any payment
determination under the Hospital OQR Program or in public reporting.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647)
in section XIII.C.2.a, we proposed to remove OP-24 from the Hospital
OQR Program for the CY 2016 payment determination and subsequent years.
In section XIII.H.2.b. of the CY 2014 OPPS/ASC proposed rule (78 FR
43653), however, we referred to the removal of OP-24 as being proposed
for removal for the CY 2015 payment determination and subsequent years.
We intended for the proposal language in these two sections to match;
specifically, we intended that the removal of OP-24 should begin with
the CY 2015 payment determination and continue forward into subsequent
years. Our proposal to remove OP-24 from the Hospital OQR Program
beginning with the CY 2015 payment determination (this is our earliest
opportunity to remove the measure from the Hospital OQR Program) would
not require a participating hospital to take any new action, because to
date, we have not required hospitals to submit data for OP-24.
For the CY 2016 payment determination and subsequent years, in
section XIII.E. of the proposed rule, we proposed to add five
additional measures to the program, but we are only finalizing four of
the five as additional new measures.
The four finalized, new measures are:
One measure that requires hospitals to submit data annually via an
online tool located on the CDC's NHSN Web site:
OP-27: Influenza Vaccination Coverage among Healthcare
Personnel.
Three remaining measures that require hospitals to submit data
annually via the QualityNet Web site:
OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up
interval for normal colonoscopy in average risk patients;
OP-30: Endoscopy/Polyp 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.
We refer readers to section XIII.E. for a discussion about these
new finalized measures, and our decision not to finalize measure OP-28:
Complications within 30 Days Following Cataract Surgery Requiring
Additional Surgical Procedures.
In section XIII.H.2.f below, we discuss proposed and finalized
requirements for data collection for each of the four new measures by
mode of data submission.
c. General Requirements
In the CY 2014 OPPS/ASC proposed rule (78 FR 43654), we did not
propose to make any changes to the Hospital OQR Program procedural
requirements that we discussed and adopted in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74480 through 74482). We proposed
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. In the CY 2014 OPPS/ASC proposed rule (78 FR
43654), we proposed 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 proposed
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 proposed 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. All hospitals, whether the Medicare acceptance date
is 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 invited public comment on these proposals.
Comment: One commenter supported codifying procedural requirements
for the Hospital OQR Program.
Response: We thank this commenter for support.
Comment: Commenters expressed concerns regarding the 30 day preview
period for a hospital to preview data that will be posted on the
Hospital Compare Web site and made available to the public. Commenters
question the adequacy of this preview period to correct errors.
Response: While we appreciate these concerns, because these
comments are outside the scope of our proposed rule, we will take the
comments into consideration for future rulemaking.
After consideration of the public comments we received, we are
finalizing as proposed our proposal to codify general submission
requirements at Sec. 419.46(c): (1) our practice of posting actual
submission deadlines by measure and by data type on the QualityNet Web
site (http://www.QualityNet.org) at Sec. 419.46(c)(2); and (2) our
policies for

[[Page 75111]]

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.
d. Chart-Abstracted Measure Requirements for the CY 2015 Payment
Determination 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 did not propose any new
chart-abstracted measures where patient-level data is submitted
directly to CMS in the proposed rule.
e. Claims-Based Measure Data Requirements for the CY 2015 Payment
Determination and Subsequent Years
The table in section XIII.D. of the proposed rule includes measures
that the Hospital OQR Program collects by accessing electronic Medicare
claims data submitted by hospitals for reimbursement.
We did not propose any new claims-based measures in the proposed
rule. Therefore, the following 6 existing 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).
In the CY 2012 OPPS/ASC final rule with comment period, we deferred
the public reporting of OP-15, a claims-based measure (76 FR 74456). We
did not propose any changes to this policy. As discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43654), 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
hospitals' 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
would 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
encounter period from July 1, 2012 through June 30, 2013 for the
calculation of the claims-based measures. This is a departure from the
previous deadlines used for these measures. Prior to the CY 2013 final
rule, the time period for encounters for the CY 2014 payment
determination was January 1, 2011 to December 31, 2011. Under the
policy finalized in the CY 2013 OPPS/ASC final rule with comment
period, for the CY 2015 payment determination, we are using the
encounter period July 1, 2012 to June 30, 2013. 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. This
modification brings our claims data six months more current effective
with the CY 2015 payment determination.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43655), we proposed,
for the CY 2016 payment determination and subsequent years, 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 following year. For the CY 2016 payment
determination, this 12 month period for calculation of claims-based
measures would be from July 1, 2013 through June 30, 2014. We invited
public comment on this proposal.
Comment: One commenter believed that the recent changes in the IPPS
rulemaking regarding the two midnight benchmarks for Medicare Part A
payment will result in more bills that are ``split'' bills (denied
Medicare Part A inpatient, but allowed to bill Medicare Part B
outpatient services). The commenter expressed concern that these
billing situations would pose a problem for under-submission in the
Hospital OQR Program and would like to understand how these billing
types will be handled in the outpatient ``core measures'' program such
that hospitals do not have to identify up to hundreds of outpatient
bills that were intended to be inpatient for the purpose of accurately
meeting the submission requirements. The commenter appeared to be
concerned that, at the time chart-abstraction happens, the hospital's
universe of claims may not be complete as it would exclude Part B
outpatient claims that are created and billed at some future point in
time pursuant to a Part A inpatient claim denial. The commenter
believes the chart abstractor might be at risk of ``under-submission''
(failing to sample or submit data corresponding to a sufficiently high
enough number of cases to meet Hospital OQR Program requirements).
Response: We believe this commenter is referring to our policies
finalized in the FY 2014 IPPS/LTCH PPS final rule regarding hospital
Part B billing following reasonable and necessary Part A hospital
inpatient claim denials (78 FR 50908 through 50938). Specifically, in
the final rule we provided that if a Medicare Part A claim for
inpatient hospital services is denied because the inpatient admission
was not reasonable and necessary, or if a hospital determines under
Sec. 482.30(d) or Sec. 485.641 (utilization review) after a
beneficiary is discharged that the beneficiary's inpatient admission
was not reasonable and necessary, the hospital may bill Medicare for
the Part B inpatient services (furnished after the time of inpatient
admission) that would have been reasonable and necessary if the
beneficiary had been treated as a hospital outpatient rather than
admitted as an inpatient, provided the beneficiary

[[Page 75112]]

is enrolled in Medicare Part B. These services must be submitted on a
Part B inpatient claim. We also provided that for beneficiaries treated
as hospital outpatients prior to an inpatient admission who are
enrolled in Medicare Part B, hospitals may continue to bill Part B for
hospital outpatient services that were furnished in the 3-day (1-day
for non-IPPS hospitals) payment window prior to the inpatient
admission. These services must be submitted on a Part B outpatient
claim. When billing Part B following this type of Part A hospital
inpatient claim denial, hospitals cannot change a beneficiary's patient
status from inpatient to outpatient. The beneficiary was formally
admitted as an inpatient and there is no provision to change a
beneficiary's status after he or she is discharged from the hospital.
Therefore, the beneficiary is considered an outpatient for services
billed on the Part B outpatient claim, and is considered an inpatient
for services billed on the Part B inpatient claim. For Part A claims
with dates of admission on or after October 1, 2013, timely filing
applies such that hospitals must submit the Part B claims within 12
months of the date of service in order to receive payment (78 FR 50922
through 50924).
Under the Hospital OQR Program, hospitals are required to submit
data on quality measures for hospital outpatient services furnished
within a given timeframe (encounter dates). A hospital's claims data
supports two types of OQR measures of quality: claims based measures
and chart-abstracted measures (claims data can be used to identify
cases eligible for chart-abstraction). With regard to claims-based
measures, in the CY 2013 OPPS/ASC final rule with comment period (77 FR
68483), we described that, for the upcoming CY 2015 payment
determination, we will use paid, FFS claims for services during the
time period from July 1, 2012 through June 30, 2013. We would like to
clarify that these paid, FFS claims are Part B outpatient claims.
Inpatient services are excluded, so all Part B inpatient claims are
excluded. However, we will include paid Part B outpatient claims for
services furnished in the 3-day (1-day for non-IPPS hospitals) payment
window prior to an inpatient admission, along with other paid Part B
outpatient claims, if they are paid prior to the cut-off date for
claims inclusion of September 30, 2013. For the CY 2015 payment
determination, we note that hospitals have a longer timeframe (beyond
the usual timely filing deadline) to submit certain rebilled Part B
outpatient claims for services furnished during the Hospital OQR
reporting period of July 1, 2012 through June 30, 2013 (78 FR 50935
through 50936). Part B outpatient claims for these dates of service
that are processed and paid after the claims inclusion cut-off of
September 30, 2013 will not be included in the Hospital OQR Program CY
2015 payment determination.
As it relates to chart-abstracted data, the hospital is responsible
for submitting complete data that are available at the submission
deadline for each measure of quality, and we will assess submitted
data. If a claim is not timely available for the associated medical
record's inclusion in the chart-abstractor's universe of records, the
chart-abstractor cannot include data from that record in data submitted
to CMS.
After consideration of the public comments we received, we are
finalizing as proposed our proposal to continue to use paid Medicare
FFS claims from a 12-month period from July 1st of the 3 years before
the payment determination through June 30th of the following year.
f. 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.
Measure OP-22: ED Patient Left Without Being Seen, is included in
this list because, while patient-level data for this measure is
collected via chart-abstraction, HOPDs submit aggregate data using an
online tool. Thus, the same schedule for encounter periods and data
submission deadlines applies to OP-22.
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.
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.
In the CY 2014 OPPS/ASC proposed rule, we proposed to apply a
similar schedule for the CY 2016 payment determination and subsequent
years. We proposed 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 also proposed to apply the same mode of data collection and
deadlines to the following proposed chart-abstracted measures.
OP-28: Complications within 30 days Following Cataract
Surgery Requiring Additional Surgical Procedures (this measure was not
finalized and will not be implemented);
OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up

[[Page 75113]]

interval for normal colonoscopy in average risk patients;
OP-30: Endoscopy/Polyp 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 proposed that hospitals
submit aggregate-level data through the CMS Web-based tool (the
QualityNet Web site). As with OP-22, a chart-abstracted measure that is
submitted once annually via the Web-based tool, hospitals would submit
the data required for these newly proposed measures for a particular
program year once annually during the data submission window proposed
for Web-based measures as stated above, and would do so via the
Outpatient section on the QualityNet secure Web site. While we proposed
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 proposed
to 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, in the CY 2014 OPPS/ASC proposed rule (78 FR
43656), we summarized for the proposed and existing chart-abstracted
measures collected via the Web-based tool, data collection periods and
deadlines as they apply to just the CY 2016 payment determination.
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 invited public comment on these proposals.
In section XIII.E of this final rule with comment period, we
describe that, in the CY 2014 OPPS/ASC proposed rule (78 FR 43647
through 43648) we sought public comment on whether we should collect
patient-level data via certified EHR technology on the four proposed
chart-abstracted measures (this would not apply to the one HAI measure,
OP-27: Influenza Vaccination Coverage among Healthcare Personnel), and
the potential timing for doing so. We refer readers to section XIII.E
of this final rule with comment period for a discussion of the related
public comments.
Comment: Several commenters raised general questions about the two
colonoscopy measures CMS proposed without making a distinction between
the two measures. Commenters expressed concern about determining the
appropriate interval between colonoscopies if a patient had his or her
last colonoscopy in a different HOPD or other facility. Another
commenter was concerned about how HOPDs should be collecting the pre-
procedure information necessary to make these determinations, noting
that it would require significant system changes to achieve accurate
data collection. The commenter described as an example having to set up
a system with an NP or RN collecting a sufficient amount of accurate
colonoscopy history from a patient during the patient's pre-procedure
visits. The commenter believed that such a system would be necessary to
determine whether an additional colonoscopy is necessary based on
recommended frequency guidelines. The commenters also pointed out that
many colonoscopies are performed at a facility that is not within the
same entity as the ordering physician's practice, making it difficult
for the HOPD to acquire medical records that are in the physician's
possession.
Response: We appreciate these comments. We expect that, to address
these measures, HOPDs will need to either ask patients about their
colonoscopy history and polyp status, or acquire that information from
such sources as the patient's physician or the facility that performed
the most recent colonoscopy. This data will be critical for HOPDs
attempting to determine an appropriate interval between colonoscopies.
Pre-procedure information can include a patient's history, perhaps
in the form of a medical record or as obtained through verbal
communication with the patient. We believe this information, which
includes how recently patients had their previous colonoscopy and any
other factors that might affect a HOPD's determination of an
appropriate interval, is essential to a HOPD's decision about when to
perform a follow-up colonoscopy. Acquiring this information may mean
that some HOPDs must gather more information than they may be
accustomed to.
We believe that HOPDs that perform certain procedures must manage
the risk of procedural harm to patients and coordinate care by
improving the communication between the HOPD, its patients, specialist
physician offices, ASCs, surgeons performing procedures, and other
outpatient departments. We expect some providers will need to adopt new
processes to effectively gather this information in order to manage the
risk of procedural harm, and to report data for this measure. For
example, HOPDs may in some cases need to establish some form of pre-
procedure interaction with patients in order to establish their
procedural history, either by using an NP or RN, as one commenter
suggested, by using a survey form, or by some other method. There may
be some concern that, despite HOPDs managing risk of procedural harm to
the best of their abilities, patients may not always be able to
accurately represent their polyp history during direct interactions
with caregivers. In these instances, patients can authorize the release
of medical information from one provider or practitioner to another.
Comment: One commenter recommended that CMS require reporting of
data that is included in validation.
Response: We believe this commenter would like the Hospital OQR
Program to restrict data collection to measures that are also subject
to validation processes. We refer readers to section XIII.E.1. above
for a discussion of this issue.
Comment: Many commenters believed that these measures are
burdensome and the data is not easily attained in the outpatient
setting. Many commenters argued that CMS' proposed requirement to
collect aggregate-level data to report through the Web-based tool would
actually increase the burden on hospitals. These commenters point out
that the hospital must perform patient-level reviews to report
aggregate-level data. One commenter believed that the submission of
aggregate data using the Web-based tool required time spent manually
entering data into QualityNet and made it more burdensome for a
hospital to work with a vendor.
The commenters stated that, unless CMS intends to release full
specifications, including clear and complete measure numerator,
denominator, exclusion criteria, and algorithms, hospitals will
experience burden in having to review and interpret NQF specifications
for each of the new measures. One commenter stated that there are
difficulties with CMS' infrastructure, and the commenter believes that
any additional measures are likely to cause operational difficulties
with data collection via the QualityNet Web site.
Response: We understand all new measures impose some burden on
hospitals to gather and report data. We also appreciate that many
commenters favor CMS adopting claims-based measures into the Hospital
OQR

[[Page 75114]]

Program whenever possible, as we discuss in section XIII.E.1 above.
However, we believe that the measures we are adopting are important
indicators of the quality of care HOPDs provide and that any effort in
acquiring data and burden in reporting that data is appropriate based
on the importance of measuring the quality of care.
Regarding the burden imposed by Web-based reporting, we would like
to clarify that the Hospital OQR Program requires entering aggregate
data via the Web-based tool, not patient-level data or detail. A
hospital is required to populate one numerator and one denominator
field for the applicable measures onto QualityNet. However, hospitals
would still be required to perform a patient-level review of medical
records to compile aggregate data. Hospitals would abstract data for
new measures OP-29, OP-30, and OP-31 the same way they have been
abstracting data for all other previously finalized chart-abstracted
measures; this process involves identifying their total aggregate sums
for the numerator and denominator.
For the new measures (OP-29, OP-30, and OP-31), it should not be
difficult for a hospital to use the Web-based tool to enter aggregate
data, making a vendor unnecessary. In fact, we are not aware that any
hospitals currently use a vendor to submit data for measure OP-22.
However, if a hospital does choose to use a vendor, we do not see any
reason why finalizing these new measures would necessarily make working
with a vendor more difficult. Vendors routinely provide services to
hospitals, submitting large amounts of detailed, and often complex,
data to CMS on the hospitals' behalf.
We believe that reporting the aggregate-level data required by the
new measures via the Web-based tool is less burdensome to hospitals
than reporting patient-level data. We believe that the ease with which
hospitals can submit their aggregate counts using our Web-based tool
(the QualityNet Web site) reduces the burden of reporting. As we noted
above, this process is the same process we finalized for OP-22 and
similar to the process we finalized for a quality measure in the
Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53537).
We will provide full, in-depth specifications for OP-29, OP-30, and
OP-31 in the upcoming December 2013 addendum to the Hospital OQR
Specifications Manual. We note that numerators, denominators, and
exclusions have been established and made public as shown on the NQF
Web site. The Hospital OQR Specifications Manual includes instructions
for identifying a measure's population (for example, using specific
data elements), an algorithm for each measure in both diagram and
narrative form, and sampling methodology for measures as applicable.
The Hospital OQR Specifications Manual also includes information on the
rationale for each measure, how each measure is publicly reported, how
improvement is noted, etc., and it identifies references to Medical or
other scientific journals that include discussion of a measure's focus.
We would like to clarify that we are finalizing that a hospital would
submit aggregate numerators, denominators, exclusion counts, and total
populations and sample sizes for the new measures (OP-29, OP-30, and
OP-31) according to the measure specifications.
However, we are sensitive to commenters' concerns regarding burden,
and as such, we are addressing it in two ways--applying a sampling
scheme and a low case threshold exemption. We intend to decrease burden
and facilitate data reporting for these measures by allowing random
sampling of cases when volume is high, instead of collecting
information for all eligible patients. In our December 2013 addendum to
the Hospital OQR Specifications Manual, we will publish a sampling
methodology for these new measures that will take into account the
burden that these new measures may place on hospitals during the CY
2014 encounter period. Specifically, we will employ the same sampling
requirements for these measures that are currently used for the ED
Throughput measure set (that is, measures OP-18/NQF 0496, OP-20/NQF
0498, and OP-22/NQF 0499). Sampling is a process of selecting a
representative part of a population in order to estimate the hospital's
performance, without collecting data for its entire population. In this
way, using a statistically valid sample, a hospital can measure its
performance in an effective and efficient manner. We describe how to
obtain a statistically valid sample and the current sampling
methodology and requirements for ED Throughput Measure Set within
``Section 4--Population and Sampling Specifications'' of the Hospital
OQR Specifications Manual, v7.0 at the QualityNet Web site (https://
www.qualitynet.org). There, the ED Throughput Sampling requirement is
located in Table 3. A hospital should follow the same methodology for
new measures OP-29 (NQF 0658), OP-30 (NQF 0659), and OP-31 (NQF 1536).
In the upcoming release of the addendum to the Hospital OQR
Specifications Manual (available at the QualityNet Web site https://
www.qualitynet.org), we will include information that the ED Throughput
Sampling requirements at Table 3 are also applicable to new measures
OP-29, OP-30, and OP-31.
We will adjust the sampling requirement based on our experience
with collecting this data in the first year.
In addition, we are implementing a low case threshold exemption for
newly finalized measures OP-29, OP-30, and OP-31. To reduce the burden
on hospitals that treat a low number of patients, this exemption
excludes hospitals that perform 20 or fewer relevant procedures per
measure in any year from having to submit data for that year for
measures OP-29, OP-30, and OP-31. This low case threshold exemption is
consistent with our practice for chart-abstracted measures in the
Hospital IQR Program (73 FR 48617), but annualized to be consistent
with the Hospital OQR Program's single annual reporting requirement for
these three measures. Because data for OP-29, OP-30, and OP-31 are to
be submitted once annually via Web-based tool, we will not require
hospitals that perform 20 or fewer cases per year per measure to submit
this data annually.
We agree our data collection system experiences malfunctions, and
we work to resolve system issues as quickly as we are able to through
our contractors. However, the system functionality to report aggregate
data using the Web based tool is stable at this time and our
contractors assure us that the system will be able to collect aggregate
data for OP-29, OP-30, and OP-31 by the first deadline for measure
submission.
After consideration of the public comments we received, we are
finalizing our proposal, for the CY 2016 payment determination and
subsequent years, that hospitals will be required to submit Web-based
data between July 1 and November 1 of the year prior to a payment
determination with respect to the encounter period of January 1 to
December 31 of two years prior to a payment determination year. For
example, for the CY 2016 payment determination, the encounter period is
January 1, 2014 to December 31, 2014 and the data submission window is
July 1, 2015 through November 1, 2015. The CY 2014 encounter data is
scheduled to be displayed on Hospital Compare in December 2015.
We also are finalizing our proposals: (1) To apply a uniform mode
of data collection and deadlines to the new measures OP-29, OP-30, and
OP-31; (2) that hospitals submit aggregate-level data through the CMS
Web-based tool (the outpatient section of the QualityNet Web site);
and, (3) that hospitals submit

[[Page 75115]]

all aggregate-level data required for a particular program year once
annually during the data submission window.
In addition, we are finalizing a sampling scheme and low case
threshold exemption. We will publish a sampling scheme for newly
finalized measures in the upcoming December 2013 addendum to the
Hospital OQR Specifications Manual. For the low case threshold
exemption, we are finalizing that any hospital that performs 20 or
fewer procedures annually for a particular new measure, will not be
required to submit any data for that new measure.
Set out below are the finalized data collection requirements for
chart-abstracted measures that are collected annually via the Web-based
tool illustrating how these policies will apply to just the CY 2016
payment determination.
[GRAPHIC] [TIFF OMITTED] TR10DE13.365

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g. Data Submission Requirements for a Measure Reported Via NHSN for the
CY 2016 Payment Determination and Subsequent Years
As discussed in section XIII.E.1. of this final rule with comment
period, we are finalizing the addition of OP-27: Influenza Vaccination
Coverage among Healthcare Personnel to the Hospital OQR Program measure
set. We proposed to use the data submission and reporting standard
procedures set forth by the CDC for NHSN participation for submission
of this measure to NHSN. Hospitals currently submit data to NHSN to
comply with the requirements of the Hospital IQR Program and those
requirements will be unchanged for data submission to NHSN for the
Hospital OQR Program. 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 proposed 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 proposed 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
corresponds to that finalized by the Hospital IQR Program in the FY
2014 IPPS/LTCH final rule (78 FR 50821).
We invited public comment on these proposals.
Comment: One commenter expressed concern regarding whether the NHSN
system will be overwhelmed if a large number of independent HOPDs began
to submit data on the influenza measure. The commenter urged that prior
to implementation of any HOPD measures in the NHSN, CMS and CDC must
work together to find the necessary resources to sustain and expand the
reporting capabilities of the NHSN.
The commenter also stated that hospitals are having difficulty in
obtaining reports from the NHSN system and when this problem is
reported to NHSN, hospitals either receive no response or a generic
response with no expected correction date provided. The commenter
voiced concerns that this limits hospitals' ability to use NHSN data
for performance improvement efforts, and that the concerns raised by
the lack of system reliability must be mitigated through appropriate
funding and quality control.
Response: We thank the commenter for the feedback. We believe this
commenter is referring to the availability of feedback, in report form,
to indicate whether a hospital has successfully reported HAI data to
NHSN for purposes of meeting payment determination requirements for the
Hospital IQR Program. The Hospital OQR Program has not, to date,
required reporting to the NHSN system. HOPDs will report to the CDC
using their CCN. Since hospitals have a single CCN, hospitals that
already report data to the CDC's NHSN Web site for purposes of the
Hospital IQR Program will not need to reenroll or get a new account,
because they have already established their CCN identity. Where
hospitals currently report data for the HCP vaccination rate for the
inpatient setting, the CDC will add a drop-down option for hospitals to
distinguish the reporting of data for the outpatient setting. The CDC
will capture and transmit this outpatient data to CMS using the
existing infrastructure for capturing and transmitting data for the
inpatient setting.
The Hospital IQR Program has experienced problems with HAI feedback
reports generated from CDC data in the past due to programming issues
which have been corrected as they are identified. These experiences
with the Hospital IQR Program report will be leveraged in the CMS
outpatient feedback report, called the Provider Participation Report.
The existing Provider Participation Report will be modified to include
a column to indicate whether a facility has successfully reported the
HCP influenza vaccination measure data for purposes of the Hospital OQR
program.
NHSN has addressed and corrected previous issues with system strain
and slow data-set generation due to high volume requests for data and
reports. NHSN continues to closely monitor the Web site for any new
potential issues and strives to respond immediately. In light of these
changes, we do not believe that it is likely that the NHSN system will
be overwhelmed by this proposed reporting. The proposed reporting
relies on making modest extensions to the existing NHSN infrastructure
where the reporting is parallel to existing HCP data capture for the
inpatient setting.
Comment: Several commenters asked how we will require reporting of
students and volunteers at the hospital for this measure. One commenter
would like clarification on how to gather data for personnel who were
immunized outside of the reporting hospital. Commenters point out that
it is a strain on resources to collect data on these categories of
vaccinated personnel.
Response: We believe that hospitals are well equipped to report
these categories of vaccinated personnel, since they already report
these categories for personnel working in hospital inpatient
departments in the Hospital IQR Program. CMS and CDC believe that only
small modifications are necessary to report these categories of
vaccinated personnel for hospital outpatient departments, since many
hospitals use the same human resource system to collect relevant
information on both hospital inpatient and outpatient department
personnel. The CDC will collaborate with CMS on refining and publishing
specifications for how to attribute workers by setting. CMS will refer
to the CDC's specifications in the December 2013 addendum to the
Hospital OQR Specifications Manual that will be available on the
Quality Net Web site (https://qualitynet.org).
The numerator of the population of this measure includes personnel
who 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. The
numerator also includes those who were determined to have a medical
contraindication or particular allergy or immune status, who declined
the influenza vaccination, or who have an unknown vaccination status or
do not meet other NQF numerator categories (to review the NQF Measure
Description and Numerator and Denominator Statements, please refer to
the NQF Web site at http://www.qualityforum.org/Home.aspx). We believe
the numerator categories will alleviate some of the difficulty a
hospital may have in tracking down the vaccination status of some
categories of HCW. We recognize the challenge for hospitals in
collecting data for students, volunteers, and offsite personnel. We

[[Page 75117]]

nonetheless believe that the benefit of reducing influenza in hospitals
outweighs any burden incurred by screening all staff, volunteers,
students, and offsite personnel. We believe that this burden should, by
and large, amount to gathering information about immunization during
initial worker orientation and during flu vaccine season for existing
workers, providing vaccines when appropriate, and keeping track of who
has been vaccinated.
After consideration of the public comments we received, we are
finalizing as proposed our proposal to use the data submission and
reporting standard procedures set forth by the CDC for NHSN
participation in general and for submission of data for this measure to
NHSN. We are also finalizing our proposal to adopt the NHSN HAI measure
data collection timeframe of October 1st through March 31st for this
measure. The first deadline for hospitals to submit this data will be
May 15, 2015 with respect to the October 1, 2015 through March 31, 2015
encounter period.
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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43656), we did not
propose 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. In the CY 2014 OPPS/ASC proposed rule (78
FR 43656 through 43657), we did not propose any changes to this policy.
However, we proposed 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.
We invited public comment on our proposal to codify these
requirements.
Comment: One commenter supported codifying Hospital OQR procedures.
Response: We appreciate this commenter's support.
Comment: One commenter was opposed to the Hospital OQR Program
using any threshold for establishing a passing rate of reliability for
validation as criteria for a hospital achieving a full annual payment
update. The commenter stated that, due to the complexity of the
measures and the fact that there has been no evidence facilities submit
inaccurate data to give the appearance of higher quality of care on the
Hospital Compare Web site, the Hospital OQR Program should only look at
whether a facility submits records when and as requested. The commenter
believed that successful submission of records should be sufficient to
assure data integrity.
Response: We disagree. While we appreciate the commenter's
perspective that hospitals are not motivated to submit data that
inaccurately represents their care to appear to have higher quality of
care on the Hospital Compare Web site, we nevertheless remain committed
that all hospitals are responsible for submitting accurate data. All
reporting hospitals are subject to selection for validation each
payment determination year, which provides an additional incentive to
maintain data quality. The validation process assesses overall data
accuracy using data abstracted by CMS from hospital medical record
copies, as compared to the data that a hospital submits to CMS. This
process is intended to ensure that hospitals submit high quality and
accurate data to CMS. We believe the opportunity for a hospital to be
selected for validation is a motivator for the hospital to maintain
stringent chart abstraction and data submission standards.
However, we believe that requiring hospitals to meet a reliability
score serves a purpose beyond deterring hospitals from manipulating
their data for display purposes. We believe that requiring a
reliability score also motivates hospitals: (1) To continuously improve
their internal operations to accurately capture the high quality care
they provide; (2) to obtain data that can be measured and compared
meaningfully across peer hospitals; and, (3) to report data to support
our movement away from reimbursement for volume of care provided and
toward reimbursement for quality of care. We appreciate the work
hospitals do to refine processes to improve the quality of care they
provide to patients and to report data reliably on measures of quality.
After consideration of the public comments we received, we are
finalizing our proposal to codify at Sec. 419.46(e) of our regulations
our existing policies regarding validation of patient encounters at
selected participating hospitals.
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. In the CY 2014 OPPS/ASC proposed rule (78 FR 43657), we did
not propose any changes to this policy.

[[Page 75118]]

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. In the CY 2014 OPPS/ASC proposed rule (78 FR 43657), we did
not propose 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. In the CY 2014 OPPS/ASC proposed rule (78
FR 43657), we did not propose any changes to our procedures regarding
medical record requests.
However, we proposed to codify these procedures at Sec. 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 invited public comment on our proposal to codify these
procedures.
We did not receive any public comment on our proposal to codify
medical record documentation requests and validation and validation
score calculation procedures. Therefore, we are finalizing our proposal
to codify these procedures at Sec. Sec. 419.46(e)(1) and (e)(2).

I. 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43657 through 43658),
we proposed one change to the reconsideration request procedures to
ensure our deadline for reconsideration requests will always fall on a
business day. We also proposed 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.
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 proposed 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 instead. As proposed, the Reconsideration Request
form for the CY 2014 payment determination would be required on
February 3, 2014, which is a Monday, because this is the first business
day in February; however, the form for the CY 2015 payment
determination would be required on February 2, 2015, which is also a
Monday, and the first business day in February. We note that while we
use the CY 2014 and 2015 payment determinations as examples, we
proposed this policy for the CY 2014 payment determination and
subsequent years. The other requirements of the form would remain
unchanged. We requested public comment on this proposal.
We also proposed 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 in the month of February of
the affected payment 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, 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 proposed 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 did not propose 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 75119]]

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 45
calendar day timeframe, our review is initially limited to determining
whether the CMS contractor received the requested medical record
documentation within 45 calendar days, and whether the hospital
received the initial medical record request and reminder notice. If we
determine that the CMS contractor timely received 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 45 calendar day period,
we do not further consider the hospital's request. (We note that in the
proposed rule (78 FR 43658), we inadvertently referred to 30 calendar
days, instead of 45 calendar days in this bulleted item. We used the
correct 45 day timeframe in our discussion of Hospital OQR Program
validation requirements in section XIII.H.3. of the proposed rule (78
FR 43656) and in proposed Sec. 419.46(e)(1) (78 FR 43704).
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), as we have provided in our
codification at Sec. 419.46(f)(3).
We invited public comment on these proposals.
Comment: Several commenters supported CMS' proposed change to the
reconsideration request procedures to ensure our deadline for
reconsideration requests will always fall on a business day.
Response: We appreciate these commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to: (1) Change the deadline by which
participating hospitals may submit requests for reconsideration; and,
(2) codify this deadline and our procedural requirements for requesting
a reconsideration at Sec. 419.46(f) of our regulations.

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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43658), we proposed
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 proposed 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 proposed 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 did not propose 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; and,
(2) If we make the determination to grant a waiver or extension to
hospitals that have not requested them, because we determine that an
extraordinary

[[Page 75120]]

circumstance has occurred in a region or locale, we would communicate
this decision to hospitals and vendors through routine communication
channels, including but not limited to emails and notices on the
QualityNet Web site.
We invited public comment on these proposals.
Comment: Several commenters supported CMS' proposal to waive
requirements where we have systemic errors.
Response: We appreciate these commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to include a waiver or extension for CMS'
systemic errors and to codify language for the general requirements for
our extension or waiver process, including our systemic errors waiver/
extension policy at Sec. 419.46(d).

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. 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's
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
In the CY 2014 OPPS/ASC proposed rule (78 FR 43659), for the
Hospital VBP Program, we proposed to implement an independent CMS
review that will be an additional appeal process available to
hospitals, beyond the existing review and corrections process (77 FR
53578 through 53581 and 76 FR 74544 through 74547) and appeal process
codified at Sec. 412.167. We proposed that a hospital would be able to
request this additional independent CMS review only if it first
completes the appeal process at Sec. 412.167(b) and is dissatisfied
with the result. We stated our belief that our proposal to require
hospitals to complete the existing appeal process at Sec. 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
stated our intent to provide hospitals with our independent review
decision within 90 calendar days following the receipt of a hospital's
independent review request. We also proposed to codify this policy in
our regulations at Sec. 412.167 by redesignating the existing
paragraph (c) as paragraph (d), and inserting a new paragraph (c).
We invited public comments on these proposals.
Comment: Numerous commenters supported the proposed independent
review process, including the proposed 90-day limit on independent
review requests. Some commenters suggested that CMS include the
proposed 90-day time limit for hospitals to request the independent
review process in the regulation text. One commenter also urged CMS to
align the Hospital VBP Program with the Physician Value-Based Payment
Modifier Program, including the appeals and independent review process.
Response: We appreciate the commenters' support and note that our
intention is to provide hospitals with a decision on an independent
review request as quickly as possible. We also appreciate the
commenters' suggestion that we include the 90-day timeframe for
independent CMS reviews in our regulation text. While we will strive to
complete those reviews within 90 days, we do not believe that it is
appropriate at this time to incorporate a firm deadline into our
regulations. We recognize that the number and complexity of these
reviews will impact the actual completion timeframe. We also strongly
encourage hospitals to request this additional independent CMS review
within 30 days after they receive a decision on an appeal submitted
under the regulations at Sec. 412.167(b).
With respect to the commenters' suggestion that we align the
Hospital VBP Program with the Physician Value-Based Payment Modifier
Program, we are currently examining how we might be able to align
various quality reporting and pay-for-performance programs.
After consideration of the public comments we received, we are
finalizing the independent CMS review process as proposed. We also are
finalizing our proposal to codify this policy at Sec. 412.167 by
redesignating existing paragraph (c) as paragraph (d), and inserting a
new paragraph (c).

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

As described in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50681
through 50687), we have adopted the CLABSI, CAUTI, and SSI measures,
which are reported to CDC's National Healthcare Safety Network (NHSN),
for the FY 2016 Hospital VBP Program. However, when we proposed to
adopt these measures in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27610 through 27611), we inadvertently did not make FY 2016 performance
and baseline period proposals for these proposed measures. In the CY
2014 OPPS/ASC proposed rule (78 FR 43659), we proposed to adopt FY 2016
performance and baseline periods for these measures so that we would
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

[[Page 75121]]

(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 proposed 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 proposed 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
invited public comments on these proposals.
Comment: Numerous commenters supported the proposed performance and
baseline periods, but argued that CMS should not adopt the CAUTI and
CLABSI measures for the Hospital VBP Program because they have been
finalized for the HAC Reduction Program. Commenters stated that it is
inappropriate to penalize hospitals more than once for the same
measure, and that two programs adopting the same measures may be
confusing for hospitals and patients, especially because the two
programs calculate performance differently. Other commenters opposed
any measures that are not NQF-endorsed or risk-adjusted, and suggested
that CMS suspend the CLABSI and SSI measures from the Hospital VBP
Program.
Response: We appreciate the commenters' input. However, the
proposals in the CY 2014 OPPS/ASC proposed rule were limited to the FY
2016 performance and baseline periods for the CAUTI, CLABSI, and SSI
measures, not the adoption of the measures themselves. We adopted these
measures for the FY 2016 Hospital VBP Program in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50686 through 50687), and responded to public
comments on the substance of those measures in the same final rule (78
FR 50683). Accordingly, we view the public comments we received on the
substance of these measures to be outside the scope of the CY 2014
OPPS/ASC proposed rule.
Comment: Some commenters noted that the CAUTI, CLABSI, and SSI
measures underwent changes between the proposed baseline period of CY
2012 and the proposed performance period of CY 2014. The commenters
noted that these changes may be confounding as CMS attempts to assess
hospital performance on the measures. Commenters also noted that CDC
may make additional definition changes to the CAUTI measure in CY 2014,
and urged CMS to consider data instability when comparing data
collection periods.
Response: We appreciate the commenters' suggestion. The changes to
the CAUTI, CLABSI, and SSI measures cited by the commenters were
changes the CDC made to standardize the process hospitals use to
identify healthcare-associated infections (HAIs) and reflect
operational practices already widely used for identifying those
infections. Specifically, the change to the definition of ``HAI'' that
applies to each of these measures improves each measure's objectivity
and promotes greater standardized reporting. The CDC has informed CMS
that it does not expect those changes to significantly impact the
measure rates. In addition, our own clinically based qualitative review
of the measure definition changes indicate that these measure
definition refinements will not substantially change national and
hospital performance rates used in our FY 2016 measure rate and score
calculations using CY 2012 and CY 2014 data. In this clinically based
review, we assessed the clinical consistency of measure definitions
across time, hospital adherence to current clinical guidelines, and
relevant clinical outcomes associated with these infections. Our review
found that the overall measure definitions for each of these measures
remained consistent from a clinical perspective, and supported
consistent and valid measurement of relevant clinical outcomes in CY
2012 and CY 2014.
We will continue to closely monitor the impact of the definitional
changes made to the CAUTI, CLABSI, and SSI measures between CY 2012 and
CY 2014 as we continue to collect data in these measures.
As we stated in prior rulemaking, we believe strongly that
hospitals must be encouraged through the Hospital VBP Program to
minimize infection events that present significant health risks to
patients. We also believe that the CAUTI, CLABSI, and SSI measures
provide information critical to this quality improvement effort by
tracking infection events.
Comment: Numerous commenters supported the proposals and stated
that adopting the calendar year makes more sense than the finalized 11-
month performance period for the CLABSI measure for FY 2015.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing the FY 2016 performance and baseline periods for the CAUTI,
CLABSI, and SSI measures as proposed.
The finalized performance and baseline periods for the CAUTI,
CLABSI, and SSI measures for the FY 2016 Hospital VBP Program appear in
the following table.
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[[Page 75122]]

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

A. Background

1. Overview
We refer readers to section XIII.A.1. of this final rule with
comment period for a general overview of our quality reporting
programs.
2. Statutory History of the ASC Quality Reporting (ASCQR) Program
We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74492 through 74493) for a detailed
discussion of the statutory history of the ASCQR Program.
3. 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, 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 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.
Comment: A few commenters recommended that CMS ensure that the
proposed measures are specified to provide an opportunity for
stakeholders input.
Response: We note that all the proposed measures are fully
specified and we provide the links to the detailed measure
specifications which were submitted to NQF by the measure stewards. We
believe that these measure specifications provided the detailed
information needed for the public to understand the measures being
proposed and to be able to provide meaningful comments on the proposed
measures during the rulemaking process. Proposed measures are not
included in the ASCQR Specifications Manual (Specifications Manual)
because we generally incorporate specifications for measures to be used
in the ASCQR Program into the Specifications Manual, along with
implementation guidance, after publication of the rule, but prior to
implementation. As mentioned in section XV.B.5. of this final rule with
comment period, which discusses maintenance of technical
specifications, our general policy is to provide six months lead time
between Specifications Manual publication and the start date of
collection so that ASCs have adequate time to prepare for new reporting
requirements.
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.

[[Page 75123]]

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[[Page 75124]]

3. Additional ASCQR Program Quality Measures for the CY 2016 Payment
Determination and Subsequent Years
In the CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664),
we proposed 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
Measures Application Partnership (MAP).
We stated that 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) of the Act, 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 the measures 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.
As part of the MAP's input and recommendations 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
proposed 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 (NQF 0564 being the exception): (a) Complications
within 30 Days following Cataract Surgery Requiring Additional Surgical
Procedures (NQF 0564); (b) Endoscopy/Polyp Surveillance:
Appropriate follow-up interval for normal colonoscopy in average risk
patients (NQF 0658); (c) Endoscopy/Polyp 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 proposed that data collection for these four measures would
begin in CY 2014. We referred readers to section XV.D. of the proposed
rule for detailed discussion of data collection and submission time
frames. We proposed 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 for ASC-
6 (Safe Surgery Checklist Use) and ASC-7 (ASC Facility Volume Data on
Selected ASC Surgical Procedures). We invited public comment on these
proposals. More information regarding this proposed method of
collection was provided in section XV.D.5.c. of the 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 sought public comment on alternative data collection strategies
for these four proposed measures. In particular, we sought comment on
collection of patient-level data through registries or other third
party data aggregators, and via certified electronic health record
(EHR) technology, along with the potential timing for doing so.
Comment: Some commenters believed that CMS should allow ASCs to
meet the requirements of the ASCQR Program using registry-based
reporting and urged CMS to propose a registry-based reporting option
that would allow ASCs to fulfill all program requirements through a
single mechanism to simplify and streamline the process of data
submission. Other commenters urged CMS to focus on options to reduce
reporting burden associated with data submission through multiple
portals (claims-based, QualityNet, and NHSN), suggesting instead the
use of registries or electronic health records.
Response: We thank the commenters for these suggestions. We agree
that it could reduce burden to have a registry-based mechanism for data
submission.
We have not proposed a registry-based reporting option because
currently, there is not a registry in place that is collecting
information on the quality measures that we have adopted in this
program. Should registry-based

[[Page 75125]]

reporting of the ASC quality measures become available in the future,
we will explore further the viability of incorporating a registry-based
reporting mechanism in the ASCQR Program.
Regarding the use of EHR systems for reporting quality data, we
agree that reporting by this method could reduce reporting burden.
However, we are not aware of quality measures for ASCs that have been
specified for electronic reporting. In addition, if such measures do
exist, we would need to understand the current state of EHR adoption by
ASCs before proposing them. In a previous environmental scan, which
included an assessment of the readiness of ASC to electronically report
quality data, we found low levels of EHR use by ASCs. We are in the
process of updating the environmental scan of ASCs, which will include
an analysis of EHR adoption and an assessment of ASCs' abilities to
report quality data via EHR systems. We believe that ASCs continue to
be slow to adopt EHRs because many of them are small facilities and
there has been no incentive program to encourage such adoption, but we
intend to assess this position based upon the results of our updated
environmental scan.
For the proposed rule, we received many general comments that are
applicable to all four proposed measures. We have organized the
document by first summarizing and responding to these general comments
that are applicable to all the four proposed measures, and then
summarizing and responding to measure-specific comments and describing
our final policy.
Comment: Many commenters stated that ASCs only render the facility
for ophthalmologists to perform cataract surgery and that follow-up
visits, post-operative visual assessments and tracking of complications
are performed at the ophthalmologists' offices. Likewise, physicians
perform colonoscopies at ASCs, but follow-up colonoscopy intervals are
determined and documented by the physician in medical records kept in
the physicians' offices. Commenters noted that ASCs do not have long
term relationships with patients and Federal regulations do not permit
ASCs to provide postoperative follow-up care; therefore, the patient
would not visit the ASC, but rather another site, for post-operative
care and identification of complications. Many commenters perceived the
four proposed chart-abstracted measures as ``Clinician Office'' setting
measures designed to measure ophthalmologist and other physician
performance and not ASC performance. Commenters gave as examples
ophthalmologists who assess post-operative visual function and patient
outcomes, and determine whether additional surgical procedures are
necessary, and physicians who receive pathology reports and determine
the colonoscopy intervals for their patients. Therefore, commenters
believed these four measures are better suited as Physician Quality
Reporting System (PQRS) measures. Commenters considered the measures as
duplicative of the PQRS measures.
Some commenters expressed concerns that the measures are neither
NQF-endorsed nor field tested for the facility setting. Other
commenters stated that CMS must re-specify, test, and obtain NQF
endorsement of these measures at the facility level of analysis before
they can be adopted for the ASCQR Program.
Some commenters believed that the four proposed measures require
ASCs to expend resources engaged in quality reporting activities that
would have no direct impact on facility performance improvement
efforts.
Response: As noted above, 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. As stated in the
CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664), we believe
these measures are appropriate for measuring the quality of care in the
ASC setting. Further, the three measures that we are finalizing (as
discussed below) are NQF-endorsed for the ``Ambulatory Care: Ambulatory
Surgery Center (ASC)'' setting. Therefore, we respectfully disagree
with the commenters and continue to believe that these quality measures
are appropriate for the ASC setting. With respect to the commenters who
stated that the proposed chart-abstracted measures should be re-
specified and field-tested, we note that all three measures that we are
finalizing (as discussed below) were specified for the ASC setting and
field tested at the ASC facility setting level by the measure steward.
Further, we do not believe these measures are duplicative of PQRS
measures because even though the measure indicators are the same, the
level of analysis (facility versus physician) is different. The measure
indicators for the ASCQR Program will reflect the HCPCS codes for the
ASC facility level of analysis. As we stated in the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68493), in implementing the ASCQR
Program, one of our principles is that measures should be aligned
across Medicare and Medicaid public reporting and incentive payment
systems to promote coordinated efforts to improve quality. We hope to
set new milestones in the intrinsic coordination and collaboration of
hand-off care across outpatient providers and suppliers, as reflected
in these measures.
We also do not agree that the four proposed measures would have no
direct impact on facility performance improvement efforts. Rather, we
believe that these measures promote accountability for the care
provided to Medicare beneficiaries, improve the coordination and
collaboration of services, reduce fragmented care, encourage redesigned
care processes for high quality and efficient service delivery, and
incentivize higher value care.
ASCs provide care without the higher costs associated with
hospitalization. More and more procedures are done safely and
effectively in an ambulatory care setting and we expect such trend will
continue. Hence, we believe that assessing care coordination is a very
important aspect of evaluating the overall quality of the care
furnished by ASCs. We stress that real clinical integration is
evidenced by effective patient coordination of care across health care
settings, providers, and suppliers and is best shown when there is a
structure in place that is patient-focused and where clinicians
collaborate on best practices in an effort to furnish higher quality
care that they likely would not achieve if working independently.
As discussed in detail in sections XIII.E.3., 4., and 5. of this
final rule with comment period and below, we are finalizing the same
chart-abstracted measures for the Hospital OQR Program as we are for
the ASCQR Program for the CY 2016 payment determination and subsequent
years: (1) Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval
for Normal Colonoscopy in Average Risk Patients; (2) Endoscopy/Polyp
Surveillance: Colonoscopy Interval for Patients with a History of
Adenomatous Polyps--Avoidance of Inappropriate Use; and (3) Cataracts--
Improvement in Patient's Visual Function Within 90 Days Following
Cataract Surgery. The adoption of these measures in the hospital
outpatient and ASC settings will further align measures across
outpatient and ambulatory settings which furnish many similar services
to beneficiaries. The availability of identical outcome measures at
HOPDs and ASCs enable

[[Page 75126]]

beneficiaries to compare facilities and make informed decisions.
Comment: Some commenters believed that obtaining patient data from
the ophthalmologist's or other physician's office is not always
feasible. Commenters also noted that the initial and subsequent
surgical cataract and colonoscopy procedures due to complications may
occur at two different ASCs. In addition, commenters also believed that
obtaining patient information from the ophthalmologist's or other
physician's office would be an intrusive violation of patient privacy.
Response: Our overarching goal for adopting the three proposed
measures is to encourage the coordination of care across health care
settings, providers, and suppliers as frequently as possible. We would
like to see ASCs, ophthalmologists, and other physicians actively and
routinely engaged in exchanging information to better communicate and
coordinate the care of patients.
We note that ASCs have professional and commercial relationships
with the ophthalmologists or other physicians that perform procedures
and are paid for services rendered at their facilities. As such, ASCs
have the ability to develop the means to obtain follow-up information
that include, but are not limited to, inclusion of contractual
requirements to supply such information to the ASC. The availability of
follow-up information from physicians performing procedures at an ASC
is further discussed in section XVI.D.5.c. of this final rule with
comment period
Regarding the issue of patient privacy, we note that ASCs and
referring physicians are generally subject to the HIPAA Privacy,
Security, and Breach Notification Rules, and are required to protect
the privacy and confidentiality of their patients' protected health
information as required by those rules. We expect that ASCs and
physicians would adhere to any applicable requirements in providing and
obtaining this information and would not violate patient privacy.
We believe that our implementation strategy for these measures will
minimize collection and reporting burden, as discussed in section
XV.D.5.c. of this final rule with comment period.
Comment: Many commenters expressed concern that it is extremely
burdensome for ASCs, which do not widely use EHRs, to retrieve outcome
data from ophthalmologist and other physician offices.
Response: We appreciate commenters' concerns that it could be
difficult or burdensome for ASCs to retrieve from physician offices the
data they will need for the chart-abstracted measures. We believe such
problems are more likely to occur in the early phases of establishing
these measures, when ASCs and physicians have not yet set up effective
infrastructures to routinely exchange information. In order to
accommodate these concerns, we have taken steps that we believe should
alleviate some of this burden. The Web-based collection strategy we are
finalizing for the measures and subsequent release of specifications
and implementation guidance in the ASCQR Specifications Manual will
address some of the concerns about feasibility of data collection
raised by the commenters. To further reduce burden, we are finalizing a
sampling methodology for ASCs. We believe that this should
significantly reduce burden for the three chart-abstracted measures
that we are finalizing. We discuss these steps designed to reduce
burden in more detail in section XV.D.5.c. of this final rule with
comment period.
We recognize that EHR technology currently may not be widely used
in ASCs. However, with the ongoing progress of EHR technology in
healthcare delivery, we expect more ASCs will have EHR technology at
their disposal in the future. As mentioned previously, we will be
conducting an environmental scan to assess EHR implementation in ASCs
and readiness for electronic reporting in the future. We will take
these factors into account before including an EHR-based reporting
mechanism for the ASCQR Program.
We received specific comments on the individual proposed measures
and they are discussed below in the sections addressing each of the
proposed measures.
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.
---------------------------------------------------------------------------

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

[[Page 75127]]

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 invited public comment on this proposal.
Comment: Many commenters believed that this measure is not a good
measure to include in the ASCQR Program measure set because
complications from cataract surgery are rare, data collection would be
very burdensome, and the volume of cataract surgery performed at ASCs
is huge. Commenters added that this measure requires very detailed
information about not only specific complications that may have
occurred, but also data on any additional follow-up surgical procedures
to accurately report data for this measure. A few commenters stated
that subsequent surgical procedures due to complications from the
previous cataract surgery may not occur at the same ASC. ASCs also
would need to determine if a patient who experienced any of the above-
listed complications then underwent any of a list of 39 specified
operative procedures (identified by a list of CPT codes) within the 30-
day period following the index surgery.
Response: As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR
43661) and in this final rule with comment period, a large number of
complications from cataract surgery occur even though the percentage of
complications from cataract surgery is small. Therefore, we believe
that complications following cataract surgery which would require
additional surgical procedures are important to measure. However, after
consideration of the public comments we received, we agree that this
measure as specified imposes a significant burden on an ASC to collect
the required data that far exceeds the burden we believe accompanies
the other chart-abstracted measures that we proposed in the CY 2014
OPPS/ASC proposed rule. We have emphasized that we believe that care
coordination between ASCs and practitioners is an essential element of
appropriate, high quality care, and that the element of coordination
cannot be measured using a claims-based or other form of measure.
Nonetheless, this is one instance in which we believe the burden
involved in collecting the data required for chart-abstraction far
outweighs the benefits in measuring care coordination. That is because
an ASC would be required to acquire far more information than the more
fundamental follow up information that accompanies the other measures
(such as the patient survey data for ASC-11, which basically involves
collecting information on a patient's perceptions about visual
improvement following cataract surgery). In contrast, there is far more
information necessary for this measure and the nature of that
information is more detailed, complicated and very likely much more
difficult for an ASC to acquire. We agree with the commenters that this
measure requires very detailed information about not only specific
complications that may have occurred, but also data on specific
additional follow up surgical procedures to accurately report data for
this measure.
Because we continue to believe this is an important area to measure
quality of care, we plan to explore ways to collect these data,
including the potential development of a claims-based risk-adjusted
outcome measure of cataract complications, which would address the same
quality issues as this measure, but minimize the burden associated with
measurement to the greatest degree possible. Further, we anticipate
that the proposed new measure would be applicable to the ASC and HOPD
settings. For these reasons, we have decided not to finalize this
particular measure of cataract surgery complications.
After consideration of the public comments we received, we are not
finalizing this measure for the ASCQR Program for the CY 2016 payment
determination and subsequent years.
b. Endoscopy/Polyp 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 determination and subsequent years, we
proposed to adopt the Endoscopy/Polyp 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 a 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

[[Page 75128]]

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 invited public comment on this proposal.
Comment: One commenter asserted that the MAP's ``Support
Direction,'' recommendation means the measure was not, in the MAP's
opinion, ready for implementation in the ASCQR Program. Commenters
stated that CMS should only finalize measures fully supported by the
MAP.
Response: We take into account all MAP input when deciding on which
measures to adopt for the program. We note that in addition to MAP
input, we also consider feedback that we receive from many other
stakeholders such as suppliers, specialty societies, measure
developers, patients, and their caregivers during the rulemaking public
comment period in evaluating whether to finalize measures. We
continuously review and revise the measures in our programs to ensure
that only the highest caliber measures are selected. We stress,
however, that we are only required to consider the input provided by
the MAP. The ultimate decision on whether to include a measure for the
program rests solely with the Secretary.
We believe that this measure addresses a critical area of
colonoscopies being performed too frequently, which may increase
patients' exposure to procedural harm. The procedure is performed often
at ASCs; therefore, we believe the measure is important for the ASCQR
Program. Further, we believe that the Web-based collection strategy we
are finalizing for the measures along with the release of
specifications and implementation guidance in the Specifications Manual
will address concerns about feasibility of data collection raised by
the MAP.
After consideration of the public comments we received, we are
adopting this measure for the CY 2016 payment determination and
subsequent years as proposed.
c. Endoscopy/Polyp 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 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
proposed to adopt the Endoscopy/Polyp 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. While this measure had been endorsed by the NQF for a
limited time period, recent communications with NQF have revealed that
this measure is now fully endorsed; it is expected that this status
update will be reflected on the NQF Web site in the near future.
We invited public comment on this proposal.
Comment: Some commenters asserted that the MAP's ``Support
Direction'' recommendation means the measure is not, in the MAP's
opinion, ready for implementation in the ASCQR Program. Commenters
stated that CMS should only finalize measures fully supported by the
MAP.
Response: We refer readers to our response above to the same MAP
recommendation concerns expressed with respect to the Endoscopy/Polyp
Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in
Average Risk Patients (NQF 0658) measure. We believe that
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of Inappropriate Use measure
addresses a critical area of timely follow-up colonoscopy to detect
important colonic lesions effectively in reducing subsequent colorectal
cancer incidence, after newly diagnosed adenomatous polyps have been
removed by colonoscopy. Because colonoscopies are performed so often at
ASCs, the measure is important for the ASCQR Program. Further, we
believe that the Web-based collection strategy we are finalizing for
the measures and subsequent release of specifications and
implementation guidance in the Specifications Manual will address
concerns about feasibility of data collection raised by the MAP.
After consideration of the public comments we received, we are
adopting this measure for the CY 2016 payment determination and
subsequent years as proposed.

[[Page 75129]]

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 intraocular lens
(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 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
proposed 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 on the Web site at: http://www.qualityforum.org/QPS/1536.
Additional information for the measure specifications can be found in
the NQF Measure Evaluation available on the Web site 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.'' 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 invited public comment on this proposal.
Comment: One commenter stated that the measure requires patients to
complete a pre-operative and a post-operative visual function
questionnaire. The follow-up survey may occur in intervals of one day,
two weeks or one month post-op. The pre- and post-surgery surveys are
conducted in the physician office and they are compared for analysis.
The commenter noted it takes a third-party administrator to process the
questionnaire in order to prevent the introduction of bias and this
administrative cost would impose a new burden for ASCs.
Response: This measure collects standard clinical follow-up
information. We would expect that physicians responsible for post-
operative cataract surgery care to have standard operating procedures
in place under which physicians would conduct these visual assessments.
We do not believe a third party administrator to process survey
information for ASC interpretation is necessary because we expect that
ASCs would obtain the outcome information necessary for this measure
from the physician that performed the surgery (as discussed in section
XVI.D.5.c. of this final rule with comment period, all physicians
involved in co-management of a cataract surgery patient should have
these results). We believe that no bias would be introduced or
associated administrative cost imposed because outcome interpretation
would not be done at the ASC. Finally, we believe that including this
measure in the ASCQR Program is important because, as the MAP stated
and we believe, this measure falls under a category of measures
inadequately addressed in the ASCQR Program measure set, and the
measure serves to drive coordination of care.
In response to the comments we have received on the burden
associated with the chart-abstracted measures we are finalizing, we
have modified our implementation strategy in a manner that we believe
will significantly minimize collection and reporting burden. We detail
these procedures for and further discuss the issue of obtaining data
for this measure in section XV.D.5.c. of this final rule with comment
period.
After consideration of the public comments we received, we are
adopting this measure for CY 2016 payment determination and subsequent
years as proposed.
In summary, we are finalizing our proposals for the CY 2016 payment
determination and subsequent years to adopt three chart-abstracted
measures: (1) Endoscopy/Polyp Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in Average Risk Patients; (2)
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of Inappropriate Use; and (3)
Cataracts: Improvement in Patient's Visual Function within 90 Days
Following Cataract Surgery. We will collect aggregate data (numerators,
denominators, and exclusions) on all ASC patients for these three
finalized chart-abstracted measures via an online Web-based tool that
will be made available to ASCs via the QualityNet Web site. Data
submission requirements for these three measures are discussed in
section XV.D.5.c. of this final rule with comment period.

[[Page 75130]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.368

The finalized measure set (a total of 11 measures) for the ASCQR
Program for the CY 2016 payment determination and subsequent years is
listed in the table below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.369

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 invited public comment on these
measurement topics.
Comment: Commenters presented the following suggestions for future
measure topics:
Equipment Reprocessing;
Sedation Safety;
Post-Discharge Emergency Department Visit within 72 Hours
of ASC Procedure;
Hospital admission following discharge from an ASC;
Normothermia;
Venous Thromboembolism; and
Surgical Site Infection.

[[Page 75131]]

Response: We thank the commenters for their feedback and will take
the suggestions into considerations for future measure topics for the
ASCQR Program.
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), including the subregulatory
process for making updates to the adopted measures. We believe that a
measure can be updated through this subregulatory process provided it
is a nonsubstantive change. We 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.
We believe that non-substantive changes may include updates to any
measure 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. We also will post the updates
on the QualityNet Web site at: https://www.QualityNet.org. We will
provide sufficient lead time for ASCs to implement the changes where
changes to the data collection systems would be necessary. We generally
release the 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-10, CPT, 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.
Examples of changes that we might generally consider to be substantive
would be those in which the changes are so significant that the measure
is no longer the same measure, or when a standard of performance
assessed by a measure becomes more stringent (for example, changes in
acceptable timing of medication, procedure/process, or test
administration). Again, we make the determination of what constitutes a
substantive versus a nonsubstantive change on a case-by-case basis.
We believe that this policy adequately balances our need to
incorporate nonsubstantive updates to ASCQR Program measures in the
most expeditious manner possible, while preserving the public's ability
to comment on updates that so fundamentally change a 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 nonsubstantive
apply to all measures in the ASCQR Program.
As noted above, we finalized our proposal to follow the same
process for updating the ASCQR Program measures that we adopted for the
Hospital OQR Program measures in the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74513 through 74514). We also provided additional
clarification regarding the ASCQR Program policy in the context of the
previously finalized Hospital OQR program policy in the CY 2013 OPPS/
ASC final rule with comment period. 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43664), we did not
propose any changes to these policies.
Comment: One commenter noted that the conversion of a measure to
use ICD-10-CM/PCS should be considered as a substantive change that
follows current proposed rulemaking processes. The commenter requested
clarification regarding the publication, preview, and comment period
for ICD-9-CM to ICD-10-CM/PCS mappings for all value sets for diagnoses
and procedures used by measures specified in this rule.
Response: None of the current ASCQR measures utilize ICD-9 codes to
define numerators, denominators, exclusions, and other data elements
for the measures. To the extent that we adopt any future ASCQR measures
that utilize ICD-9 codes in measure data elements, we will crosswalk
those ICD-9 codes to ICD-10 prior to including the measures in the
ASCQR Specifications Manual to inform data collection. We note that we
do not consider updating codes from ICD-9 to ICD-10 a substantive
change to a measure because doing so does not change the intent or
meaning of the measure.
Comment: Some commenters stated that ASCs should be allowed to
review their data. These commenters also believed that ASCs should have
the ability to correct any errors prior to the data being made publicly
available because a few errors could cause extreme differences in
actual versus publicly reported rates.
Response: We thank the commenters for raising these issues. In the
CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through
74515), we 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. We will
address processes for public reporting in further detail in future
rulemaking.

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 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

[[Page 75132]]

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 Each Payment Determination Year
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 final rule with comment period.
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 final rule with comment period, which are available
via the Internet on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,''
``Z2,'' as well as the service portion of device-intensive procedures
identified by ``J8.'' We 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 final rule with comment period)
are paid at the lesser of the MPFS non-facility PE RVU-based amounts
and the standard ASC ratesetting methodology. We 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43664 through 43665),
we did not propose any changes to these policies.

D. Administrative Requirements

1. 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
the security function of this role and aligns terminology for the ASCQR
Program with the Hospital IQR and OQR Programs. While the main purpose
of a QualityNet security administrator is to

[[Page 75133]]

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. Therefore, 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 the Specifications Manual 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
required ASCs to submit quality measure data for two quality measures
(safe surgery checklist use and ASC facility volume data on selected
ASC surgical procedures) collected from services provided during the
January 1, 2012 to December 31, 2012 timeframe 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 required that ASCs identify and register a
QualityNet security administrator who followed the registration process
located on the QualityNet Web site and submitted the information as
specified on this site. Because submission of these data was not
required until the July 1, 2013 to August 15, 2013 time period, we
required 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 was no later than August 15, 2013. ASCs could have
had a QualityNet security administrator prior to this date, but it was
not required.
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. We did 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 noted 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. Requirements for the CY 2016 Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed rule (78 FR 43666), for the CY
2016 payment determination and subsequent years, we proposed 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 the current user accounts lapsed or
were discontinued. 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 and a current user account
is required for submitting data. Therefore, an ASC would need to
acquire a QualityNet security administrator only if no current
QualityNet account exists 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 is
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 invited public comment on these proposals.
We did not receive any public comments regarding our proposals on
QualityNet account and security administrator requirements under the
ASCQR Program. Therefore, we are finalizing our proposals that ASCs
will 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 and that ASCs will be required to have an active account by
any specified data entry deadline in order to submit required data for
the CY 2016 payment determination and subsequent years.
2. 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

[[Page 75134]]

(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. 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.
In the FY 2013 IPPS/LTCH PPS rulemaking (77 FR 28103, 53639), 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 is located on the QualityNet Web site. 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 would 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 clarified in the CY 2014 OPPS/ASC proposed rule (78
FR 43667) that these deadlines mean up to and including August 31 in
each of these respective years.
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. Requirements for the CY 2016 Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed rule (78 FR 43667), for the CY
2016 payment determination and subsequent years, we proposed 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. Therefore, 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
proposed 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. Therefore,
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 invited public comment on these proposals.
We did not receive any comments regarding participation status
under the ASCQR Program and we are finalizing our proposals without
modification. Specifically, we are finalizing that, for the CY 2016
payment determination and subsequent years, an ASC can withdraw from
the ASCQR Program at any time up to and including August 31 of the year
preceding a payment determination, and all ASCQR Program requirements
would apply to all ASCs designated as open in

[[Page 75135]]

the CASPER system at least 4 months prior to the beginning of data
collection for a payment determination.
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
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
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 only claims for services furnished between October 1, 2012
and December 31, 2012 paid by the administrative contractor by April
30, 2013 would be included in the data used for the CY 2014 payment
determination. We believe that this claim paid date allowed 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. Only claims for services furnished in each calendar
year paid by the administrative contractor by April 30 of the following
year of the ending data collection time period would be included in the
data used for the payment determination year. Therefore, for example,
only claims for services furnished in CY 2013 (January 1, 2013 through
December 31, 2013) paid by the administrative contractor by April 30,
2014 would be included in the data used for the CY 2015 payment
determination.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43667 through 43668),
we did not propose any changes to these policies.
4. 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. Requirements for the CY 2016 Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed rule (78 FR 43668 through 43669),
for the CY 2016 payment determination and subsequent years, we proposed
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.

[[Page 75136]]

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. Therefore, for the CY 2016 payment determination and subsequent
years, we proposed 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 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
proposed 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 invited public comment on this proposal.
Comment: Many commenters supported CMS' proposal that ASCs must
have a minimum of 240 Medicare claims (primary plus secondary payer) or
otherwise be exempt from ASCQR Program requirements.
Response: We thank the commenters for their support. We agree that
a minimum case threshold for program participation to alleviate burden
on small facilities and for those with few Medicare claims is
appropriate.
Comment: Many commenters stated that while they appreciated that a
claims-based reporting mechanism can lessen the burden of data
collection and reporting, they were concerned that the current measures
using the QDC reporting mechanism were not specified, tested, or NQF-
endorsed for claims-based reporting.
Response: We thank the commenters for their understanding of how
the use of QDCs can limit burden and that this is an important
consideration. Regarding the use of QDCs submitted on claims for ASC-1
through ASC-5, the NQF has endorsed ASC-1 through ASC-5 as appropriate
for the ASC setting and data collection of case information has been
tested in this setting. Further, for all of these measures which count
rare, adverse events, it is expected that the number of cases for any
ASC would be very small. Therefore, while ASCs would garner the
information from patient records, the QDC reporting mechanism is the
way ASCs report the collected data. The measures using the QDCs for
reporting and the QDCs are specified and contained in the
Specifications Manual which is available on the QualityNet Web site.
Based upon our initial data collection for encounters occurring during
October 1, 2012 to December 31, 2012, the vast majority of ASCs are
able to successfully submit data for these measures using QDCs. In
addition, QDCs are successfully used for data collection for other CMS
quality programs, including the PQRS and e-Prescribing Incentive
Program. Therefore, we do not see a need to also test the ability of
ASCs to submit data for these measures via QDCs placed on Medicare
claims.
Comment: Several commenters suggested that measure-level exemptions
for ASC-5, Prophylactic Intravenous (IV) Antibiotic Timing would be
appropriate. These commenters argued that single-specialty ASCs that
provide gastrointestinal endoscopies or ophthalmic procedures do not
administer IV prophylaxis and that not having an exemption method
created undue burden. Suggested exemption methods included an
attestation form or the development of a QDC indicating non-use.
Response: We thank the commenters for these ideas and agree that
single specialty ASCs would rarely, if at all, use IV prophylaxis. We
have investigated using administrative claims data as a means to
exclude ASCs from having to report data for this measure based on
procedures billed as well as examined QDC-data reported to date.
Unfortunately, we have not yet been able to identify a method to
exclude ASCs based on these data and are reluctant to allow a blanket
exemption from reporting measure data based upon the completion of a
form or one-time reporting of a QDC without any ability to assess the
veracity of the basis for exemption. At issue is a means to
independently verify that an ASC does not ever administer IV
prophylaxis. We remain open to various means of reducing burden,
including the potential use of measure-level exemptions if an evidence-
based solution can be developed. However, we note that this particular
measure does not place any more burden on ASCs compared to any of the
other finalized measures where data are reported via QDCs because all
of the current ASCQR Program measures reported using QDCs are expected
to have low numbers of events.
Comment: Some commenters agreed with the proposal to have a minimum
case volume, but indicated that it was not clear how the 240-claim
threshold correlates to the 10 percent of ASCs submitting the lowest
volume of Medicare claims. These commenters' review of the CMS Limited
Data Set file accompanying the CY 2014 OPPS/ASC proposed rule suggested
the 10 percent target would be reached with a lower claim threshold.
Some commenters agreed that implementation of a minimum threshold
policy was important, but expressed concern that some ASCs may ``fall
in and out'' of being required to participate and encouraged CMS to
issue annual reminders of this policy. Some commenters also believed
that any ASC eligible for the exemption that wishes to report for
reasons other than receiving a payment should be able to do so.
Response: We thank these commenters for supporting our proposal
while requesting clarification of the basis for the selected threshold
value. In selecting the 240-claim threshold, we utilized the October 1,
2012 to December 31, 2012 claims data submitted for the CY 2014 payment
determination. Based upon this analysis, approximately 10 percent of
ASCs fell below the 60 claims per quarter, which we extrapolated to 240
claims per year threshold. We will continue to monitor these data and,
if adjustment in the claims volume threshold appears necessary, we will
make proposals in future rulemaking.
Regarding ASCs that may have claims volume such that they would be
required to participate one year and not

[[Page 75137]]

the next, we would encourage ASCs to monitor their claims volume via
CMS-supplied reports. We agree that annual reminders of the policy
would be useful and intend to issue such reminders via listserv and
postings on the QualityNet Web site.
Regarding the ability of an ASC eligible for the exemption that
wished to report data, though not being required to do so for ASCQR
Program purposes, we did not make any proposals that would prohibit
ASCs from reporting data. Therefore, we clarify here that, if any
Medicare-certified ASCs wish to report data under the ASCQR Program,
they may do so, however, they must follow all program requirements for
submitting data and any data reported could be made publicly available
unless the ASC withdraws using the process outlined in section
XV.D.2.a. of this final rule with comment period. We clarify here that
ASCs that are exempt from all requirements due to low Medicare case
volume would not be subject to a reduction in their annual payment
update if they voluntarily report data.
After consideration of the public comments we received, we are
finalizing our proposals without modification. Specifically, for the CY
2016 payment determination and subsequent years, we are finalizing our
proposal that the minimum threshold for successful reporting be that at
least 50 percent of claims meeting measure specifications contain QDCs.
We also are finalizing that an ASC must have a minimum case volume of
240 Medicare claims (primary plus secondary payer) per year (which is
an average of 60 per quarter) to be required to participate in the
ASCQR Program. ASCs that have fewer than 240 Medicare claims per year
during a reporting period for a payment determination year will not be
required to participate in the ASCQR Program for the subsequent
reporting period for that subsequent payment determination year.
5. 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. Requirements for the CY 2016 Payment Determination and Subsequent
Years for Measures Currently Finalized
In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), for the CY
2016 payment determination and subsequent years, we proposed 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. Therefore,
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 proposed 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 31,
2014. (In the proposed rule (78 FR 43669), although we stated that data
collection time periods would be for services furnished during the
calendar year two years prior to the payment determination year, we
inadvertently stated that the time period for the CY 2016 payment
determination was ``January 1, 2014 to December 1, 2014.'')
We invited public comment on these proposals.
Comment: Several commenters agreed that moving the data collection
period ahead one year and expanding the data submission timeframe to
begin January 1 through August 15 for the CY 2016 payment determination
and subsequent years rather than July 1 through August 15 as finalized
previously for the CY 2015 payment determination are appropriate and
beneficial changes for the Safe Surgery Checklist Use and ASC Facility
Volume Data on Selected ASC Surgical Procedures measures. Some of these
commenters cautioned that, while they supported the shifting of the
data collection time period, they believed the alignment will result in
a significant amount of confusion and that extensive educational
outreach would be necessary.
Response: We thank the commenters for their support of our
proposals; we agree that aligning data collection periods and data
submission time frames for these measures across payment determination
years are appropriate and beneficial changes for the ASCQR Program. We
appreciate the cautioning of possible confusion with the data
collection timeframes. We believe that, since there will be a year of
not having to collect these data, there will be sufficient time to
provide educational outreach on this matter.
After consideration of the public comments we received, we are
finalizing our proposals regarding data collection and submission
requirements for the Safe Surgery Checklist Use and ASC Facility Volume
Data on Selected ASC Surgical Procedures measures for the CY 2016
payment determination and subsequent years. Specifically, for these
measures for which data will be submitted via an online data submission
tool available on http://www.qualitynet.org, we are finalizing 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. These changes
provide a longer timeframe for allowing data submission for these
measures compared to the CY 2015 payment determination, align the data
collection time periods for the claims-based and Web-based measures,
and result in data not being 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 measures.
No data will be collected for calendar year 2013 (January 1, 2013 to
December 31, 2013) for the Safe Surgery

[[Page 75138]]

Checklist Use and ASC Facility Volume Data on Selected ASC Surgical
Procedures measures because the CY 2015 payment determination will use
data from services performed in the January 1, 2012 to December 31,
2012 time period and the CY 2016 payment determination will use data
from services performed in January 1, 2014 to December 31, 2014.
c. Requirements for the CY 2016 Payment Determination and Subsequent
Years for New Measures With Data Submission via a CMS Web-Based Tool
In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we proposed to
adopt four additional chart-abstracted measures for the ASCQR Program
and proposed 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/Polyp Surveillance: Appropriate follow-up interval for normal
colonoscopy in average risk patients; (3) Endoscopy/Polyp 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 final rule with comment period.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we wished 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. Therefore,
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 proposed that data collection and reporting for these measures
would begin with the CY 2016 payment determination.
In addition, we proposed for these measures, and any future
measures for the ASCQR Program where data are submitted via 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.
Therefore, 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. We stated that these proposals are
in alignment with proposals in section XV.D.5. of the 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 the Web site at: http://
www.qualitynet.org.
We invited public comment on these proposals.
Comment: Many commenters did not support collection of aggregate
data for the four proposed measures because they did not support the
addition of these measures to the ASCQR Program.
Response: We discuss the adoption of three of the four proposed new
measures for the ASCQR Program in section XV.B.3. of this final rule
with comment period.
Comment: Some commenters stated that the collection of follow-up
data for the proposed measures would be burdensome because ASCs would
have data related only to the procedures performed at the ASC and not
for procedures performed off-site. Many commenters asserted that it is
extremely burdensome to retrieve timely the data from the physician or
ophthalmologist offices and such data would be difficult to validate.
Other commenters stated that given the high volume of cataract surgery,
it would be extremely burdensome to extract data from medical records.
In addition, commenters noted that the initial and subsequent surgical
cataract and colonoscopy procedures due to complications may occur at
more than one facility. Some commenters strongly believed that the huge
reporting burden from the four proposed chart-abstracted measures could
be diminished if claims are used as the data source.
Response: We appreciate the commenters' concerns and acknowledge
that the adoption of the three new measures we are finalizing will
result in some additional burden to ASCs. However, we do not believe
that this will be an undue or insurmountable burden. Regarding the
ability to obtain follow-up information, we believe that ASCs have
professional and commercial relationships with the physicians that
perform surgical procedures and are paid for those services rendered at
their facilities. The newly adopted measures are concerned only with
the procedures performed at the ASC.
For the three measures being adopted in this final rule with
comment period, the physician performing and billing for the procedure
would have or is expected to have the information necessary to report
on the measure. For the Endoscopy/Polyp Surveillance: Appropriate
Follow-up Interval for Normal Colonscopy in Average Risk Patient
measure, standard medical practice is that the physician performing the
procedure would make the determination of whether the results were
normal and would make the appropriate recommendation that would be
documented in the patient's medical record. For the Endoscopy/Polyp
Surveillance: Colonoscopy Interval for Patients with a History of
Adenomatous Polyps--Avoidance of Inappropriate Use measure, the
physician performing the procedure would have the information of
whether a patient had a history of adenomatous polyps and for Medicare
claims, this is reflected on the claim by including HCPCS code G0105
which indicates a colonoscopy on an individual at high risk. In the
case of the Cataracts: Improvement in Patient's Visual Function within
90 Days Following Cataract Surgery measure, patients undergoing
cataract surgery are often co-managed with preoperative care,
intraoperative services, and post-operative care (90 days) stages
identified by Medicare. Co-management of cataract care requires a
written transfer agreement between the surgeon and receiving doctor(s)
with all physicians involved retaining the results of the first post-
operative visit as part of the patient's medical record.
Although we believe this approach is reasonable and not unduly
burdensome, after consideration of the many comments we received on
this issue regarding the burden of collecting this information, in this
final rule with comment period we are permitting ASCs to collect
information on a sample of eligible patients, with minimal case

[[Page 75139]]

number requirements, instead of requiring the collection of information
on all eligible patients. Sampling is a process of selecting a
representative part of a population in order to estimate the ASC's
performance, without collecting data for its entire population. In this
way, using a statistically valid sample, an ASC can measure its
performance in an effective and efficient manner. Sampling will reduce
burden significantly for ASCs with high volume because the number of
cases that must have data reported will be significantly reduced. We
have provided the option of sampling in other quality reporting
programs when we have determined that it would be appropriate,
including the Hospital IQR and OQR Programs. As with our other quality
reporting programs, sampling specifications for the new ASCQR Program
quality measures, which describe how to obtain a statistically valid
sample and the current sampling methodology and requirements for these
measures, will be included in the ASCQR Specifications Manual, which
will be made available on the QualityNet Web site in December 2013. We
believe that the improved clinical patient outcomes that can result
from these measures outweigh any remaining burden that ASCs may incur
from data collection associated with them.
Regarding the use of claims data as the information source for the
three measures being adopted, we agree that this data collection
mechanism can be used to reduce burden. However, we are not aware of
coding for claims payment that could be used to specify the new
measures being adopted for the ASCQR Program.
Comment: Several commenters expressed concern about the limited
amount of time that ASCs would have to respond to and prepare for any
new measures finalized in the rulemaking process. Because the CY 2014
OPPS/ASC final rule with comment period will likely be published in
November 2013, ASCs would have only 2 months to become aware of and
versed in the new quality measures finalized in the rule, to develop
and implement the changes in daily processes and operational systems
needed to collect the required data, and to initiate data collection
making this timeline inadequate in length. These commenters believed
that implementing a new measure is more challenging than revising an
existing measure; as such, a minimum of 6 months of advance notice
should be extended for any new measures. In addition, these commenters
suggested that if any of the proposed measures are adopted in this
rulemaking, the data collection period should be modified to January 1,
2015 through December 31, 2015 with data submission in 2016, for use
toward the CY 2017 payment determination.
Response: We thank the commenters for their well-thought out
suggestions regarding data collection, submission, and use for new
measures. However, due to the importance of the new measures being
finalized in this rulemaking, we believe the proposed timeframes for
these activities are justifiable and adequate because, although the
data would be collected for services furnished during the CY 2014
timeframe, data would not need to be submitted until 2015, providing
additional time from finalization of this final rule with comment
period to time when the data would actually have to be submitted.
After consideration of the public comments we received, we are
finalizing our proposal without modification for data submission and
timeframes on three new measures for the ASCQR Program being adopted in
this final rule with comment period. The new measures we are adopting
are: (1) Endoscopy/Polyp Surveillance: Appropriate follow-up interval
for normal colonoscopy in average risk patients; (2) Endoscopy/Polyp
Surveillance: Colonoscopy Interval for Patients with a History of
Adenomatous Polyps--Avoidance of Inappropriate Use; and, (3) Cataracts:
Improvement in Patient's Visual Function within 90 Days Following
Cataract Surgery. Specifically, we are finalizing that ASCs must submit
aggregate data (numerators, denominators, and exclusions) for these
three measures on all ASC patients and that these data will be
collected via an online Web-based tool that would be made available to
ASCs via the QualityNet Web site. However, as discussed above, we are
permitting ASCs to collect information on a sample of eligible
patients, with minimal case number requirements, instead of requiring
the collection of information on all eligible patients. The sampling
specifications for the new ASCQR Program quality measures will be
included in the ASCQR Specifications Manual, which will be made
available on the QualityNet Web site in December 2013.
We are also finalizing, as proposed without modification, that
beginning with the CY 2016 payment determination (and for all
subsequent payment determination years), the data collection time
period will be the calendar year (January 1 to December 31) 2 years
prior to the affected payment determination year, and the data
collected will be submitted during the time period of January 1 to
August 15 in the year prior to the affected payment determination year.
Therefore, for the CY 2016 payment determination, the data collection
time period will be January 1, 2014 to December 31, 2014, and the data
submission time period will be January 1, 2015 to August 15, 2015.
6. 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, 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. Requirements for the CY 2016 Payment Determination
In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed to
use the data submission and reporting standard procedures that have
been set forth by CDC for NHSN participation in general and for
submission of this measure to NHSN. We refer readers to the CDC's NHSN
Web site (for detailed procedures for 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 installation is required to access this site)). We
stated in the proposed rule that we believed 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. However, based on public
comments we received, ASCs may not be as familiar with NHSN reporting
as we previously believed.
We separately proposed that ASCs would have until August 15, 2015
to submit their 2014-2015 influenza season data (October 1, 2014
through March 31, 2015) to NHSN. We proposed an August 15, 2015
deadline because this date is the latest date possible for data entry
that will provide sufficient

[[Page 75140]]

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 invited public comment on these proposals.
Comment: Several commenters protested that ASCs are entirely
unfamiliar with NHSN. These commenters pointed out that, while a number
of States have mandated NHSN reporting, many of those State
requirements do not include ASCs and though some States mandate NHSN
reporting for ASCs, the surgical procedures being monitored for
reporting purposes are not often performed in the ASC setting. Thus,
ASCs generally do not have data to report to NHSN. These commenters
cautioned that CMS and CDC should plan to make significant investments
of time, personnel, and other resources to support initial enrollment
and reporting to ensure successful implementation of NHSN reporting by
ASCs. These commenters also suggested that revisions in the CDC's NHSN
site to reduce confusion for ASCs, such as revising documentation to
include ASCs, replace the term ``hospital'' with ``facility'',
simplifying set-up instructions, and continuance of the planned
elimination of the digital certificate requirement for NHSN access
could facilitate ASC participation.
Response: We thank the commenters for voicing these concerns and
providing constructive suggestions. We note that CDC estimates that
only 285 ASCs are currently enrolled and reporting in the NHSN. We
agree that resources will be required to ensure successful
implementation of ASC reporting to the NHSN to meet ASCQR Program
requirements. CMS and CDC are working together in this endeavor and
will be considering the comments received that are aimed at improving
the NHSN site and will be implementing educational efforts for ASCs.
Because we believe CMS' and CDC's efforts will address many of the
commenters' concerns, we are finalizing our proposal to use the data
submission and reporting standard procedures without modification; that
is, to use those procedures that have been set forth by CDC for NHSN
participation in general and for submission of this measure to NHSN. We
believe ASCs have sufficient time to set up NHSN accounts and to become
familiar with all reporting procedures to be able to successfully
report data because we intend to propose a 2015 data submission
deadline.
Comment: Several commenters supported CMS' proposal of an August
15, 2015 deadline as alignment of submission deadlines within the ASCQR
Program was a sensible approach that would limit confusion. Some of
these commenters noted that an earlier deadline served no useful ASCQR
Program purpose. Other commenters supported an August 15, 2015 deadline
for ASCs to submit their 2014-2015 influenza season data because, while
this date is not consistent with the deadline for other quality
reporting programs that enter data for this measure via NHSN, the ASCQR
Program is already quite complex, featuring three different data
submission methods for the CY 2016 payment determination. Given this
complexity, a consistent data submission deadline could help minimize
confusion across the NHSN and QualityNet data entry systems.
Several commenters disagreed with an August 15, 2015 data
submission deadline for ASCs as it differed from the May 15th deadline
proposed for two other CMS quality data reporting programs, the
Hospital IQR and Hospital OQR Programs. Some of these commenters
believed that providing ASCs with a later deadline would provide an
unfair advantage because ASCs would have longer to submit their data.
Other commenters believed that having a differing date for ASCs than
other facilities would be confusing to ASCs, thereby, disadvantaging
ASCs.
Response: We thank the commenters for their thoughts regarding an
August 15, 2015 deadline for ASCs to submit their 2014-2015 influenza
vaccination data (October 1, 2014 through March 31, 2015). We generally
try, when feasible, to align requirements across quality reporting
programs, but program requirements are tailored to individual quality
reporting program needs. Due to issues raised by commenters regarding
our proposed August 15, 2015 deadline, we are not finalizing a data
submission deadline for 2014-2015 influenza vaccination and instead
intend to issue proposals regarding a 2015 data submission deadline for
this measure in the CY 2015 OPPS/ASC proposed rule.
After consideration of the public comments received, we are
finalizing our proposal to use the data submission and reporting
standard procedures set forth by CDC for NHSN participation for the
ASCQR Program without modification. As stated above, we are not
finalizing our proposal regarding an August 15, 2015 data submission
deadline for ASC-8 due to concerns expressed by commenters. We intend
to issue proposals regarding a 2015 data submission deadline for this
measure in the CY 2015 OPPS/ASC proposed rule which is scheduled to be
finalized in late CY 2014.
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

[[Page 75141]]

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. Additional Criterion for Extraordinary Circumstance Waivers or
Extensions for CY 2014 and Subsequent Years
In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed
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 proposed
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 invited public comment on this proposal.
Comment: Several commenters supported and expressed their
appreciation for CMS' proposal to grant waivers or extensions for data
submission requirements if we determine a systematic problem with any
data collection system directly or indirectly affected the ability of
ASCs to submit data.
Response: We thank the commenters for supporting our proposal.
After consideration of the public comments we received, we are
finalizing our proposal without modification to grant waivers or
extensions to ASCs for data submission requirements if we determine
that a systematic problem with any part of our data collection system
directly or indirectly affected the ability of ASCs to submit data. If
we make the determination to grant a waiver or extension, we will
communicate this decision through listserv notice and posting via our
QualityNet Web site (https://www.qualitynet.org).
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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we did not
propose any changes to this informal reconsideration process. However,
we clarified 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.

XVI. Final Rule: 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
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 be made only 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.
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

[[Page 75142]]

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. Regulatory Changes

In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we proposed to
modify the regulations so that all of the OPOs must meet two out of the
three outcome measures to be recertified. We were concerned about the
requirement to automatically decertify OPOs if they fail to meet all
three of the outcome measures. We believed that the requirement that
each OPO meet all three outcome measures as set forth in Sec. 486.318
was unnecessarily stringent. For that reason, we proposed to modify the
outcome measure requirement so that OPOs would be required to meet two
of the three outcome measures. We noted that the majority of OPOs were
meeting all three of the outcome measures. Based on our experience, we
observed that many of the OPOs that were failing to meet all three
outcome measures were meeting two of the three measures and were 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 were performing satisfactorily
and should not be decertified based solely on their failure to meet one
outcome measure. This belief was based not only on our observation and
monitoring of these OPOs' performance, but also on some concerns with
the outcome measures, which we discussed in detail in the proposed rule
(78 FR 43671 through 43672).
Specifically, we proposed to revise paragraphs (a)(1) and (b) of
Sec. 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. We also asked for public comments on
any other potential empirically based outcome measures for OPOs that
might be used in the future. Most of the commenters opposed this
proposal. The commenters indicated that the proposal did not address
the problems with the current outcome measures and recommended that CMS
develop a different strategy for the upcoming recertification cycle.
Some of the commenters expressed concerns about the outcome measures
and requested additional changes so that an OPO could be recertified
even if it failed to meet any of the outcome measures. A summary of the
public comments and our responses follow.
Comment: Some commenters acknowledged the thought that CMS had put
into the proposal and the challenges CMS would face in revising the
outcome measures. Commenters also acknowledged that the proposal would
have a beneficial effect on some of the OPOs that would otherwise be
decertified under the current outcome measures requirement.
Response: We appreciate these comments. We believe that modifying
the outcome measure requirement so that OPOs must now meet two out of
the three outcome measures will benefit both the OPOs and the potential
recipients on the waiting lists by avoiding the decertification of OPOs
that are performing satisfactorily.
Comment: Other commenters indicated that the proposed revisions
were insufficient to address their numerous concerns about problems
that the commenters believed were inherently related to the existing
outcome measures.
Response: As we noted in the proposed rule, we have received
feedback from various members of the OPO community regarding these
concerns, which are addressed in more detail below. We acknowledge that
the provisions set forth in this final rule do not address all of the
specific concerns raised by commenters. Despite the critical comments
relating to the current measures, no commenters suggested any
empirically based outcome measures that could be used in the future,
except for a few commenters that suggested using the OPTN yield
measure. However, other commenters were also critical of that measure.
OPOs perform an important role in the health care system, and we
understand the challenge OPOs face in developing relationships with
hospitals and health care professionals, as well as in obtaining
consent from families to procure organs. However, Congress required the
Secretary to create outcome and process performance measures to
encourage OPOs to improve their performance. The OPO CfCs are designed
to encourage OPOs to be more efficient in procuring organs in order to
save more lives. We also note that the current outcome measures were
largely based upon public comments we received to the OPO proposed rule
(CMS-3064-P), and that many of the concerns relating to the outcome
measures were not raised during prior rulemaking (71 FR 30999 through
31005). We believe that the vast majority of the 58 OPOs will be able
to meet two out of the three outcome measures. We also believe that the
outcome measures continue to provide a fair basis for comparing OPOs'
performance.
Comment: Several commenters suggested that, instead of proposing a
modification to the outcome measures requirement, CMS take a two-part
approach concerning the outcome measures and recertification. First,
the commenters suggested a revision to 42 CFR 486.312(c) to state that
CMS ``may'' voluntarily not renew an OPO's agreement if it failed to
meet the performance measures. The commenters suggested that the CfCs
be modified so that CMS has the discretion to renew the agreement
despite an OPO's failure to meet all three of the outcome measures,
essentially changing the regulatory language from ``will not
voluntarily renew'' the agreement with an OPO to ``may renew'' the
agreement. Second, the commenters recommended that CMS be allowed to
work with OPOs that failed to meet the performance measures to develop
corrective action plans, or a similar improvement process, comparable
to the process currently used for transplant centers.
Response: We appreciate the concerns expressed by the commenters.
However, we believe that the commenters' recommended approach would be
inconsistent with section 1138(b)(1)(C) of the Act that permits payment
for organ procurement costs ``only if'' the OPO meets ``performance-
related standards prescribed by the Secretary.'' In addition, we note
that the Organ Procurement Organization Certification Act of 2000
required the Secretary to establish through rulemaking multiple outcome
measures based upon empirical evidence, obtained through reasonable
efforts, of organ donor potential and other related factors in each
service area of qualified OPOs and that these measures must be used as
part of the recertification process. Consistent with the statute, the
Secretary developed the standards through notice and comment rulemaking
and the final standards reflect public input. The outcome measures
constitute an empirically based standard that is applied to all of the
OPOs and allow a comparison of an OPO's performance to the performance
of its peers. We believe that changing ``will not'' to ``may'' in the
regulations would effectively render this empirically based standard a
nullity and would eliminate any meaningful empirically based standards
for the recertification process. We believe that the suggested change
would be contrary to the plain language of the relevant

[[Page 75143]]

statutes; therefore, we are not able to adopt the suggested change. We
also believe that it would be contrary to Congress' express intent to
recertify an OPO that failed to meet the outcome and performance
measures during the past performance period. OPO performance is a
critical element of the organ transplantation system in the United
States. An OPO that is efficient in procuring organs and delivering
them to recipients will save more lives than an ineffective OPO.
Replacing an OPO that failed to meet the performance measures with an
alternative organization that has been successful in the past is likely
to increase the supply of organs available to patients on the organ
transplant waiting lists.
Comment: Several commenters expressed concerns about the ``limited
appeals process'' available to OPOs that are decertified due to the
outcome measures. The commenters also indicated that ``CMS noted
repeatedly that no appeal on `substantive' issues may be allowed.''
Response: The OPO CfCs set forth at 42 CFR 486.314 specifically
state that ``the OPO may appeal the de-certification on substantive and
procedural grounds.'' Therefore, the OPO CfCs do not ``limit'' the
grounds upon which an OPO can appeal a decertification. In addition, we
will consider exercising our enforcement discretion, including
consideration of outcome measures, on a case-by-case basis when
appropriate as part of the review process.
Comment: Many commenters indicated that the proposed revisions were
insufficient to address their numerous concerns about problems that the
commenters believed were inherently related to the existing outcome
measures. Some commenters asserted that the measures are flawed because
there were significant problems with how the outcome measures were
initially developed and the validity of the outcome measures has not
been established. They also stated that CMS had acknowledged that the
current outcome measures are flawed or have significant problems.
Response: We disagree with the comment. The outcomes measures were
developed through a public process, using notice and comment
rulemaking. We made significant changes to our proposed standards based
on the comments and recommendations of the OPOs, including the national
association that represents all OPOs (71 FR 30999). The first outcome
measure allows us to assess an OPO's conversion rate of potential
donors to actual donors so that we can determine how an OPO has
performed in regard to donor potential in its own designated service
area as well as how it has performed compared to other OPOs. The second
outcome measure uses the statistical methodology developed by the SRTR
for determining an expected donation rate for each OPO, allowing an
assessment of how an OPO has performed in view of its expected
performance. Our third measure is comprised of three individual
measures for organs transplanted per donor and organs used for research
per donor. This third measure allows us to assess how well an OPO
fulfills its ultimate mission--recovering viable organs and placing
them with transplant centers for transplantation--as well as its
commitment to placing organs for research (71 FR 31000).
In the preamble to the proposed rule, we acknowledged that we had
some concerns about the outcome measures due to input we had received
from the OPO community. We also indicated that we believe that OPOs
should not be decertified based solely on their failure to meet one
outcome measure because our experience with the OPOs indicated that the
OPOs that were failing one of the outcome measures were performing
satisfactorily. In addition, we noted that the majority of OPOs are
meeting all three outcome measures and we expect that only a small
number of OPOs would not be able to meet at least two of the outcome
measures. If the current outcome measures were fundamentally flawed or
had significant problems, we would anticipate that the number of OPOs
that would not successfully meet this requirement would be much higher.
Therefore, while we acknowledge that there are concerns with the
current outcome measures, we believe the current measures are a valid
means of measuring OPO performance in keeping with the statutory
requirements. Each measure is empirical; that is, based upon
observation or statistically derived from data.
Comment: Some commenters believe the existing regulatory standards
are flawed because the data upon which the outcome measures are based
are self-reported and are not verified by another source; therefore,
the accuracy of the data cannot be verified.
Response: We disagree with the commenters' premise that the
reported information cannot be verified. All OPOs are required to
provide specific information to the OPTN, the SRTR, and CMS (42 CFR
486.328). This information includes, but is not limited to, the number
of eligible deaths; the number of eligible donors; the number of organs
transplanted, by organ type; and the results of death record reviews.
In addition, the data that are to be used for recertification purposes
must be reported to the OPTN of all deaths in all hospitals and
critical access hospitals (CAHs) in the OPO's DSA, unless a particular
hospital or CAH has been granted a waiver and is working with another
OPO (42 CFR 486.328(c)). We are able to independently audit the
hospital's records. Moreover, if an OPO determines that any data was
incorrect, through death record reviews or any other means, it has 30
days to report the accurate data to the OPTN (42 CFR 486.328(d)).
Therefore, if any OPOs are not reporting accurate data, they are not
incompliance with this condition and could be subject to regulatory
sanctions, up to and including decertification. Thus, we believe that
there are sufficient tools to verify the reported information.
Comment: Some commenters suggested that the definitions of
``eligible death'' and ``donor'' are being interpreted and clinically
implemented in an inconsistent manner among the OPOs, which could
negatively impact some of the OPOs' performance on the outcome
measures.
Response: We agree that data should be accurately and consistently
reported, and we established these definitions to standardize the terms
to the greatest extent possible. We expect that all of the OPOs will
interpret and implement all of the CfCs, including the definitions, and
report their data in good faith. We adopted the definition of
``eligible deaths'' using the OPTN definition of that term in response
to public comments (71 FR 30985). We note that the commenter does not
criticize the definitions per se, but instead focuses on how some OPOs
are applying those definitions. Considering the very divergent
circumstances present with donors, we acknowledge that there may be
times that different OPOs would disagree about whether a particular
individual's death should be classified as an ``eligible death'' and
subsequently whether the donor is an ``eligible donor.'' While some
variation is possible, we believe that these cases should be rare. If
there are questions or concerns about how to interpret and implement
any of the requirements or report data, those questions or concerns
should be communicated to CMS or OPTN so they can be addressed.
We are disturbed by the commenters' suggestion that some OPOs may
be interpreting certain requirements and reporting their data in a way
designed to gain an unfair advantage over other OPOs in their
performance on the outcome measures. Despite these

[[Page 75144]]

comments, we have not been given any specific evidence that the alleged
practice is actually occurring. We also note that we evaluate OPOs for
their compliance with the applicable CfCs, including the condition for
reporting of data at 42 CFR 486.328. An OPO could face decertification
if it is found in violation of those rules. We will scrutinize the data
to assess for any unfair actions taken by an OPO.
Comment: Some commenters suggested that the outcome measures
provide a disincentive to organ procurement, which is resulting in
fewer, rather than more, organs being recovered for transplantation.
One commenter gave the example of a potential donor with multiple
comorbidities for whom the OPO could only expect to be able to procure
the liver for transplant. The commenter stated that if an OPO is
concerned about the third outcome measure, which, among other things,
measures the organs transplanted per donor (yield measurement), there
is a disincentive to pursue that donor because they would likely only
recover a single organ.
Response: We disagree. While our empirically based outcome measures
do measure various aspects of the OPOs performance, the measures
specifically encourage OPOs to fulfill their ultimate mission, which is
the recovery of transplantable organs and placement with transplant
centers for transplantation for patients, as well as for research
purposes.
Comment: Some commenters suggested that there are conflicts between
the OPO CfCs and the transplant center (TC) Conditions of Participation
(CoPs). The commenters stated that the OPO CfCs incentivize OPOs to
pursue as many donors as possible and procure as many transplantable
organs as possible. However, the commenter added, the TC CoPs require
transplant centers to meet specific outcome measures for graft and
patient survival. For example, the commenter stated that concerns
related to these outcome measures may cause some transplant surgeons to
decide not to transplant certain types of organs, such as organs
procured from Donors after Cardiac Determination of Death (DCDD). The
commenter believed that this could result in some organs procured by
OPOs not being transplanted, which would negatively impact the third
(yield) measure.
Response: As explained in the proposed rule and in the background
section above, our regulations with respect to outcomes measures for
OPOs reflect the specific standards Congress required the Secretary to
develop for measuring OPO performance under the Organ Procurement
Organization Certification Act of 2000. Our rules are fully consistent
with those statutory directives. Transplant centers, in contrast, are
not required to meet regulatory standards that are based on the OPO
statute. However, we will examine our standards in an attempt to
determine if greater synergy is possible in the future.
Comment: Many commenters noted that they agreed with the DHHS
Secretary's Advisory Committee on Organ Transplantation's (ACOT)
Recommendation 55 that was made in August 2012 (http://www.organdonor.gov/legislation/acotrecs55.html accessed on November 18,
2013), which, among other things, includes a recommendation that the
DHHS Secretary direct CMS and the Health Resources and Services
Administration (HRSA) to confer with the OPO community to conduct a
comprehensive review of the regulatory requirements for OPOs and
transplant centers and promulgate regulatory and policy changes to OPO
requirements, including, but not limited to, ``a statistically sound
method for yield measures for OPOs'' (http://www.organdonor.gov/legislation/acotrecs55.html).
Response: We are interested in continuing to improve our standards
and are currently conducting a comprehensive review of the OPO CfCs and
will consider these public comments in any future rulemaking. However,
we believe it would be unfair to OPOs to develop new standards at this
time and to apply those standards retroactively for past periods.
After consideration of the public comments we received, we are
finalizing as proposed the revisions to 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.
In the CY 2014 OPPS/ASC proposed rule (78 FR 43672), we also
solicited public comments on any other potential empirically based
outcome measures for OPOs that might be used in future rulemaking. We
stated that we would especially appreciate public comments on the new
yield measure that was produced by the SRTR and is being used by the
OPTN. The OPTN recently adopted this new yield measure, which
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 may allow 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. In the proposed rule, we stated that 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 had noted that the lists are not the
same. We stated that if the new OPTN measure proves to be a more
accurate reflection of performance as measured by the organs
transplanted for each donor in each individual DSA (as it is accepted
by HRSA and the OPO community), this may provide an alternative outcome
measure that could be adopted in the future. We referred readers to the
SRTR Web site at http://www.srtr.org/csr/current/Tech_notes.aspx for
specific details on the risk adjustment models used for this measure.
Comment: A few of the commenters noted the the OPTN yield measure
was an improvement over the current outcome measures and that it should
be considered by CMS. However, these commenters also noted that there
were issues with this measure. One commenter noted that the OPTN
measure was ``too new'' and ``needs some vetting before it can be
accurately used to define performance.'' Another commenter noted that
the measure ``requires further revision.''
Response: We are currently conducting a comprehensive review of the
OPO CfCs. We will consider these public comments concerning the current
outcome measures and the new OPTN yield measure if we proceed with
future rulemaking.

XVII. Final Rule: 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

[[Page 75145]]

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 that 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 (RFPs) used to contract with QIOs include significant detail
on the work performed by the QIOs. Our proposal did not include changes
to this approach to the QIO Program and was intended to provide a
framework to guide the contracting process by establishing minimum
eligibility criteria, direction for how CMS will determine that the
minimum criteria are met, and a basic process for how awards are made.

B. Basis for Proposals and Finalized Policies

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, in the CY 2014 OPPS/ASC proposed rule (78 FR
43672 through 43678 and 43705 through 43706), we proposed 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 work. We proposed to change the terminology
related to the geographic area in which a QIO must perform its
different functions. As amended, the statute authorizes the
establishment of ``such local, State, regional, national or other
geographic areas as the Secretary determines appropriate'' for QIO
contract awards. We also proposed revisions to existing regulation text
regarding the eligibility of a health care facility association to be a
QIO and revisions to eliminate provisions at Sec. 475.106 regarding
the eligibility of payor organizations to be QIOs based on the proposed
revisions to eliminate obsolete text and to codify the eligibility
provisions for payor organizations in a different section. The
statutory amendments also include a change in the contract period for a
QIO, extending it from 3 to 5 years. Therefore, we proposed to include
in Sec. 475.107 language to reflect the TAAEA amendment to section
1153(c) of the Act, which modified the statutory 3-year QIO contract
term to a 5-year contract term. 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 included the 5-year time period in the
proposed rule as a technical correction in order to make the regulation
consistent with the amended statute. 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. We
stated in the preamble to our proposal that the proposed revisions to
Sec. Sec. 475.101 through 475.107 were 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. We stated that we will focus contract
determinations on the ability of organizations to perform QIO functions
as stated in the RFP. In the proposed rule, we solicited 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.
In addition, we proposed in Sec. 475.1 and Sec. 476.1 a technical
correction to redesignate paragraphs (a) through (d) in the definition
of ``Five percent or more owner'' as paragraphs (1) through (4). The
specific proposed 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 aggregate 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. As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43673), we 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 in connection with quality improvement initiatives or
other activities that do not, by law, require use of licensed
physicians or certified practitioners. We anticipate that these other
professionals may offer valuable insight to QIOs on

[[Page 75146]]

ways to enhance the performance of their QIO functions, as well as
provide services designed to help QIOs maximize their impact. We
proposed 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, we intended that the proposed
standards 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 multidisciplinary support in quality improvement. As indicated
in the CY 2014 OPPS/ASC proposed rule (78 FR 43673), we sought 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 of section 1154(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 purpose 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. The TAAEA also
amended section 1154(a) of the Act to permit QIOs to perform one or
more QIO functions instead of all QIO functions listed in the statute.
Different QIOs might now be required to work on one or more different
tasks within a QIO area; that is, all QIOs might no longer be required
to handle the complete and broad range of QIO activities within their
respective geographic areas but to focus on particular tasks of QIO
work. For example, one QIO 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, while another QIO is required to perform case review in
the same area.
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 beneficiaries 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 permit the inclusion of organizations that can help to improve care
processes for Medicare beneficiaries. We proposed 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 proposed
the addition to the QIO requirements of a new focus on patient and
family engagement and patient and family inclusion in case reviews and
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 proposed and are
adopting as final are intended to ensure that we have the flexibility
we need to reconsider as necessary 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 in the CY 2014 OPPS/ASC proposed rule (78
FR 43672 through 43678) focus on the primary functional
responsibilities of a QIO as a basis for determining eligibility. These
responsibilities are case review (which includes the statutory minimum
standards) and quality improvement initiatives. As stated in the
proposed rule, we believe that the eligibility and contracting
standards proposed for QIOs focus on the necessary minimum requirements
for successful operation of the QIO Program.

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43673 through 43678),
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 Part 475. Part
475 includes definitions and standards governing eligibility and the
award of contracts to QIOs. We proposed to replace nomenclature that
has been amended by 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.
We have summarized the public comments we received and our
responses below, using the regulation sections as headings to guide the
discussion. In some cases, we have summarized and discussed issues
raised by commenters in connection with the substantive issue rather
than the regulation section identified by the commenter in order to
better discuss each topic. For example, we have addressed comments
about the need for objectivity and neutrality from all QIOs in
connection with our discussion below in Sec. 475.101 below, although
some commenters raised this issue in connection with Sec. 475.105.
Comment: As a general matter about the proposal, one commenter
urged CMS to postpone proposed changes to the QIO Program until ``the
pace of healthcare reform is less frenetic, physician practices are
more stable,'' and ``CMS has a clearer sense of how the proposed
changes would impact the quality and costs of patient care.''

[[Page 75147]]

Response: Although there have been many changes made through health
care reform since 2010, there have been very few programmatic changes
made in this particular area of health care quality improvement. The
science of quality improvement has changed significantly over the last
few decades and we believe that these proposed regulatory changes,
which allow flexibility for any number of possible configurations, are
long overdue. Further, the substantial changes made by the TAAEA are
generally effective with QIO contracts awarded after January 1, 2012.
As we approach the conclusion of the current QIO contracts and consider
awarding QIO contracts after the enactment of the TAAEA, we believe
that these changes are best accomplished now. As we move forward, we
hope to capitalize on past successes of the QIO Program as well as
improve the program by establishing a more flexible, efficient,
patient-centered and family-centered model.
1. Nomenclature Changes
In order to align the regulations with the nomenclature changes
made by section 261 of the TAAEA, we proposed nomenclature changes
where necessary in 42 CFR Part 475. For example, we proposed 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 used 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 proposed 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).''
Comment: One commenter asserted that CMS' proposed change of the
term ``peer review'' to ``quality improvement'' is vague and its impact
is unclear.
Response: We have made changes to the nomenclature throughout Parts
475 and 476 consistent with the changes made to nomenclature in the
title and text of the statute at sections 1151, 1152, 1153 and 1154 of
the Act. As we mention above, similar changes to the regulatory
references to these organizations have been made in the past. However,
the prior nomenclature changes were made without changing the
definition or function of the QIOs. We have made changes in this final
rule to reflect the program's shift from a compliance-oriented focus to
one emphasizing quality improvement in addition to completing the
nomenclature changes made by the TAAEA, modernizing and improving the
QIO Program, and changing the eligibility requirements for QIOs.
After consideration of the public comment we received on the
nomenclature changes, we are finalizing these proposed changes to Parts
475 and 476 without modification.
2. Addition and Revision of Definitions
In the CY 2014 OPPS/ASC proposed rule (78 FR 43674), we proposed
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 proposed 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. Further, we
proposed a technical revision to the definition of ``Five percent or
more owner'' in Part 475. In the proposed rule, we solicited public
comments on our proposed definitions and revisions.
We proposed 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 provided this list to illustrate the range and scope of
case reviews but we noted in the proposed rule 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 did not receive any public comments on the proposed definition
of ``case review'' and proposed amendments to the definition of ``five
percent or more owner''. We are finalizing the technical revision to
the definition of ``five percent or more owner''. We are finalizing the
proposed definition of ``case review'' with one slight modification to
eliminate the word ``including'' in paragraph (5) to avoid the
suggestion that appeals and DRG validation reviews are the only types
of medical necessity review. As with the proposed definition, the final
rule provides a nonexhaustive list of types of case reviews.
We proposed to expand the definition of ``physician'' beyond the
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
proposed the following definition of physician for both Parts 475 and
476: 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) 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 stated our belief
that the proposed revisions are necessary to eliminate references in
paragraphs (1) and (2) of the existing definition 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 proposed to amend paragraph (3) of the existing
definition so that it no longer applies to only American Samoa, the
Northern Mariana Islands, and the Trust Territory of the Pacific
Islands. We proposed 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. In the proposed rule, we
solicited public comments on whether our proposed definition is
sufficiently inclusive and appropriate to achieve these goals.
In addition, we proposed to define the terms ``practitioner'' and
``quality improvement initiative'' for purposes of Part 475 by cross-
referencing the existing definitions for these terms at Sec. 476.1.
Comment: A few commenters supported the proposed changes to the
definition of ``physician'', and one

[[Page 75148]]

commenter supported the expanded definition of ``physician'' which the
commenter believed better reflected the definition contained in the
TAAEA. Several other commenters suggested that CMS' proposed change to
expand the definition of ``physician'' may lead to review of the
actions of doctors of medicine and osteopathy by other ``limited''
licensed practitioners and recommended that physicians should only be
subject to review by other physicians, preferably practicing physicians
in the same specialty or a peer level match. Commenters requested that
CMS clarify that the proposed changes are not intended to replace peer
review by QIOs with reviews of physicians' decisions by nonphysician
providers. Another commenter was concerned with the potential impact
the broad definition of ``physician'' will have with respect to its use
in Sec. 476.98.
Response: We appreciate the commenters' responses on this issue.
While we believe that the requirements in section 1154(d) of the Act
and the regulations at Sec. 476.98(a) make it clear that QIOs are,
except in limited circumstances, required to use a peer-to-peer match
when performing reviews, we understand that the expansion of the
definition of ``physician'' may mean that the peer conducting the
review may not always be licensed in the same State where the care took
place but must be licensed where the physician is working. We note that
section 1154(d) of the Act provides that no QIO shall use the services
of an individual who is not a duly licensed doctor of medicine,
osteopathy, dentistry, optometry, or podiatry to make final
determinations of denial of services provided by such physicians. In
addition, we understand the commenters concern that the expanded
definition of ``physician'' may lead to review of the action of
physicians by physicians practicing in another specialty. We would like
to clarify that, despite one commenter's suggestion in support of the
proposed definition, the TAAEA does not include a definition of
physician. It remains unclear why some commenters believed that our
broadening of the definition of ``physician'' would lead to care
provided by physicians being reviewed by nonphysicians. We reiterate
that there are safeguards in the statute and regulations to ensure
that, during case review, there is a peer-to-peer match whenever
possible and that physician decisions will not be reviewed by
nonphysician providers. We also note that our subregulatory guidance,
such as the definition of ``peer reviewer'' in the QIO Manual,
emphasizes the requirement to use a specialty match whenever possible.
The QIO Manual can be found on our Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/qio110c05.pdf. The
QIO Manual stipulates that a peer reviewer is ``a reviewer who is
either a physician or other practitioner who matches, as closely as
possible, the variables of licensure, specialty, and practice setting
of the physician or practitioner under review'' and that only in
``cases in which there is no peer match available, the QIO can use
another physician reviewer without the same expertise.''
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to revise the definition
of ``physician'' under Sec. 475.1 and Sec. 476.1.
In connection with our proposal to revise the requirements that an
entity must meet to serve as a QIO, we also proposed to define, in
Sec. 475.1, the terminology related to the geographic area in which a
QIO must perform its different functions. Before our proposal in the CY
2014 OPPS/ASC proposed rule, the regulations in Part 475 did not define
this area but did 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 proposed 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.'' We stated that our proposal to add this definition
was 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, we also stated that 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 proposed
change, we stated our intent 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.
We note that, on May 2, 2013, a Request for Information (RFI) was
distributed seeking information about the methods we may use to assign
work to QIO contractors. In the RFI, we stated that ``to accomplish our
goal of further improving care for Medicare beneficiaries, CMS intends
to restructure how it administers the Program.'' In addition, we
solicited ``comments about four potential options the Agency may use to
divide work among a varying number of QIO contractors across the
country.'' Many of the commenters who responded to the proposed rule
appear to have been aware of the RFI and many seem to have been
addressing the regional proposals in the RFI as part of their comments
on the proposed rule.
Under the current QIO Program, although there are State-based
contract awards, some QIOs share corporate parents and several QIOs
subcontract to other QIOs for QIO work. The regulatory proposal was not
to regionalize QIOs but to adopt a definition of ``QIO area'' that
would apply if the contracts were awarded on a regional basis or a
State-by-State basis and to implement statutory flexibility that does
not mandate specific geographic areas for QIO contracts nor prohibit
regional contracts.
The RFP process will be the process through which the contract's
geographic areas are defined. We would like to make clear that it is
our intent that the regulation as proposed, and as finalized, permits
flexibility in terms of designing the work and the geographic area for
each QIO. The contracting process will finalize the details of the
program's structural changes, if any.
Comment: One commenter supported CMS' proposed changes in
terminology from ``QIO review area'' to ``QIO area'' in order to
emphasize that this term may encompass more than ``review'' functions.
One commenter supported the expansion of a greater geographic area and
stated that the proposed definition of ``QIO area'' versus ``QIO review
area'' emphasizes that the proposed term encompasses more than
``review'' functions which may provide a broader scope for choosing an
appropriately sized geographic area and may assist in identifying the
capability and functionality as a means to identify organizations to
perform specific QIO contract functions. Some commenters stated that
this proposed definition allows for more flexibility and will allow for
the designation of QIOs that are best equipped to provide a specific
set of services. Other commenters indicated that the rapidly changing
requirements make it increasingly difficult for every QIO to have the
requisite expertise and specialization in order to be a subject matter
expert on all QIO initiatives and activities. These

[[Page 75149]]

commenters stated that a regional QIO approach has great potential to
ensure every State has the same level of expert support and is
consistently receiving the same information.
Response: We appreciate the comments in support of the expanded
definition of ``QIO area'' and the general approach underpinning our
proposal that would allow specific QIOs to focus and develop expertise
in a single area of quality improvement. The QIO Program has expanded
beyond case reviews and the changes proposed reflect the array of tasks
that QIOs are currently performing. We agree that the increased
flexibility is beneficial and plan to, wherever possible, create
efficiencies of scale to pool expertise in the interests of
establishing and spreading best practices. We would like to clarify
that a regional approach to the QIO Program structure is one option
that we are considering. However, we have a variety of geographic
options available under the statute and the regulation as finalized in
this final rule.
Comment: Several commenters stated that many practicing physicians
have spent years building relationships with their local QIOs and
suggested that these State-based QIOs have a degree of credibility with
local Medicare beneficiaries and providers. In addition, commenters
stated that the State-based QIOs are better able to identify problems
in their local communities, design appropriate solutions, and identify
local physician leaders to initiate projects. The commenters also
stated that they have had ``long and fruitful collaboration'' with
their respective State-based QIO and indicated that this relationship
has resulted in sustained quality improvements for their Medicare
beneficiaries. These commenters further stated that valuable time and
resources would be lost as relationships and trust would need to be
forged again to ensure provider engagement in educational
opportunities. One commenter stated that, although some function-
specific QIOs may address unmet needs, these QIOs should not be
established at the expense of State-based QIOs. This commenter
recommended that a cost effective alternative would be for CMS to give
high-performing existing QIOs the option to expand their portfolio of
quality improvement activities during contract renegotiations.
Response: The proposed rule and this final rule do not require
regionalization but rather permit the creation of contract areas other
than on a State-by-State basis. In determining how to best implement
the flexibility afforded to the Secretary by the statutory changes made
through the TAAEA, we will consider several factors. For example, under
the current structure of the QIO Program, there already exists a multi-
State subcontracting structure for the appeal case reviews. There also
are several multi-State corporate QIO management structures that have
operated successfully for many scopes of work. These structures have
been able to capitalize on the strengths and the expertise of
particular entities.
In addition, we believe that, for some functions, QIO contracts
that cross State lines would create economies of scale and
standardization of processes and eliminate duplicative administrative
and management overhead. This potential structure would improve
communication between CMS and the QIOs and decrease the contracting and
administrative burden currently faced by both entities. Further, to the
extent that quality improvement initiatives are designed in connection
with nationwide quality measurements or quality improvement programs,
QIOs would not be hampered by serving larger QIO areas. We are aware
that many providers have established strong relationships with local
QIO staff, and we understand the importance of preserving these ties.
We expect to maintain in future QIO contracts the type of local ``on
the ground'' involvement, which is tailored to meet the needs of
communities and longstanding relationships that have been built between
providers and QIO staff under the existing structure.
We believe that the proposed changes to the definition of ``QIO
area'' will enable flexibility and targeting of program expertise in
the best interests of beneficiaries and are consistent with our efforts
to continually strive to make the QIO Program more efficient. In
addition, we note that in Sec. Sec. 475.102 and 475.103, discussed in
more detail below, we proposed and are finalizing provisions to take
into account the geographic location of an organization applying for a
QIO contract. Those provisions do not list exhaustive factors for
consideration in awarding QIO contracts and we may include additional
factors where and when necessary.
Comment: One commenter supported CMS' proposal to define ``QIO
area'' and believed that it would be in the best interest of Medicare
beneficiaries. In addition, the commenter encouraged CMS to take
advantage of the opportunity for flexibility provided when contracting
with QIOs. Some commenters supported CMS' proposed QIO Program changes
by affirming that greater standardization and nationally recognized
expertise are advantageous for activities such as assistance with
education and data submission for quality measurement programs, and
technical advice related to quality measurement specifications. One
commenter asserted that the proposed QIO Program changes may result in
reduced spending by approximately $330 million based upon Congressional
Budget Office estimates by demonstrating more cost effective strategies
for delivering services. This commenter also supported CMS' proposal to
expand the definition of a QIO area that would allow a QIO to serve in
more than one State. The commenter indicated that regional QIOs (formed
by more than one single-State QIO contract held by a single corporate
entity) already currently exist and believed that having regional QIOs
is logical from an economy of scale perspective. One commenter stated
that it recognizes that economies of scale and efficiencies may occur
but indicated its concern that a ``dramatic change to mandated multi-
State [QIO] contracts'' would introduce the possibility that some
States may be left without a local source for quality improvement
technical assistance.
Some commenters recognized the efficiencies and effectiveness that
may be achieved to the QIO Program and recommended that, in situations
where successful work has been demonstrated through QIOs that cover
multiple States (formed by more than one single-State QIO contract held
by a single corporate entity), CMS use these collaborations to test the
feasibility and effectiveness of the expanded ``QIO area'' definition
as a first phase in restructuring the QIO contracts and QIO areas.
However, some commenters asserted that it would be difficult to
maintain the ``local perspective'' in a regionalized QIO structure,
that they did not see evidence for ``radical, untested'' changes to the
State-based nature of the QIO Program and stated that CMS' proposed
changes seem to have been undertaken with little consultation with
either the national or local practitioner community of their respective
States. Some commenters maintained that the proposed changes in the QIO
Program would cause the current State-based QIO experience and
expertise to be ``sacrificed.'' One commenter also believed that long-
term care providers may be held responsible to increase their
administrative duties in order to interact with a separate organization
for each function. One commenter stated that a single-State QIO may be
better able to understand and focus on the Medicare beneficiaries and
providers being served for more densely populated States.

[[Page 75150]]

Response: We reiterate that the proposed rule and this final rule
do not require regionalization but rather permit the creation of
contract areas other than on a State-by-State basis. We appreciate the
support for these regulatory provisions and agree that standardization
and better targeting of subject-matter expertise will help increase the
efficiency of the QIO Program and create better value for Medicare
beneficiaries. While we did not propose in the proposed rule that we
would establish a regional structure, we acknowledge that the proposed
rule, once finalized, would accommodate that structure. We believe that
having the flexibility to adopt a different QIO contract structure, if
we choose to establish one, would enable the QIO Program to benefit
from the lessons already learned through the multi-State corporate
structure of many QIOs. There are currently 10 corporations that have
coordinated separate QIO contracts to cover 26 States. In addition to
the multi-State corporate structure, some QIOs have established
subcontracting relationships with other QIOs for conflict of interest
or administrative efficiency purposes that have also generated savings.
Based on the QIO Program's history with these subcontracting and
corporate structures that cross State lines, we believe that multi-
State QIO structures have been successfully tested as a model for
potential QIO structural changes. At the same time, we believe that
this final rule makes it clear that the local involvement and expertise
that is so important will be maintained. As an example, the
requirements in Sec. 475.102(a) of this final rule make it clear that,
in determining eligibility for performing case review, we will take
into consideration ``the organization's proposed involvement of and
access to physicians and practitioners in the QIO area with the
appropriate expertise and specialization in the areas of health care
related to case reviews'' and ``the organization's ability to take into
consideration urban versus rural, local, and regional characteristics
in the health care setting where care under review is provided.''
Furthermore, the RFI issued in May 2013 also generated significant
comment, in some cases from providers and provider associations, which
we intend to consider as part of the procurement process. Also, we
received public comments on our regulatory proposal from practitioners
and providers, which we considered as part of this rulemaking. In
addition to these opportunities to comment and present their views, we
anticipate that providers and practitioners will provide us feedback on
any changes that we will be implementing in the next QIO procurement
and contract cycle so that we may continue to improve the QIO Program.
In addition, Sec. Sec. 475.102(b) and 475.103(b), as finalized, permit
CMS to consider size and location of an organization as part of
determining whether the organization has demonstrated the ability to
perform case review or quality improvement initiatives as a QIO. We
intend to interpret and apply the provisions in Part 475 as finalized
in this rule to ensure local experience and expertise are available,
maintained, and utilized by all QIOs in connection with case reviews
and where necessary for quality improvement initiatives.
After consideration of the public comments we received, we are
finalizing the proposed definition, without modification, of 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.'' This term appears throughout Part 475 and
is used consistent with this definition.
We also proposed to add definitions of the terms ``quality
improvement initiative'' and ``practitioner'' to Part 475 and to define
them by cross referencing the definitions of the terms in Sec. 476.1.
Comment: One commenter noted that CMS proposed to cross-reference
the definition of ``quality improvement initiative'' in Sec. 475.1 to
Sec. 476.1 and indicated that a definition of ``quality improvement
initiative'' was not included in the proposed rule nor does the Code of
Federal Regulations (October 1, 2012 Edition) include a definition of
it. The commenter suggested that CMS provide a definition of ``quality
improvement initiative'' that reflects the principles of contemporary
quality improvement.
Response: The current definition of ``quality improvement
initiative'' under Sec. 476.1 was finalized in the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68559). The regulations as
amended are accessible through the electronic Code of Federal
Regulations at www.ecfr.gov.
We did not receive any public comments on the proposed cross-
reference to the term ``practitioner'' and are finalizing that
definition for Part 475 without modification. After consideration of
the public comment we received regarding the term ``quality improvement
initiative,'' we also are finalizing this definition without
modification.
3. 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 the CY 2014 OPPS/ASC proposed
rule (78 FR 43674 through 43675), we proposed 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.
We did not receive any public comments on the proposed revisions to
Sec. 475.100, and we are finalizing these revisions as proposed
without modification.
4. Eligibility Requirements for QIOs (Sec. Sec. 475.101 Through
475.106)
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 the CY 2014 OPPS/ASC proposed rule (78 FR 43675
through 43678 and 43705 through 43706) proposed to implement the
changes in the QIO eligibility standards made by the TAAEA.
As a general matter, we recognize and appreciate the vital role of
physicians in the work of the QIOs but 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 organizational
structure, we proposed 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 the proposed rule, we solicited public comments on our focus on
these primary QIO functions of case review and quality improvement
initiatives and

[[Page 75151]]

how this functional approach would ensure that QIOs are appropriately
selected for contract award. We proposed to vacate existing text at
Sec. Sec. 475.104 and 475.106 and reserve these two section numbers.
We respond to the public comments we received that are specific to
each regulation topic below and address how we are finalizing
Sec. Sec. 475.101 through 475.106. We note that, while some commenters
specifically identified regulation sections as part of the comment, we
have grouped the comments by topic.
a. Eligibility To Be Awarded a QIO Contract (Sec. 475.101)
In the CY 2014 OPPS/ASC proposed rule (78 FR 43675 through 43676),
we proposed that revised Sec. 475.101 would no longer reference
``physician-sponsored organizations'' and ``physician-access
organizations,'' would include a 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 proposed 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 sections 1152(2) and
(3) of the Act as amended by the TAAEA. Second, in paragraph (b), we
proposed 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 characterized the functions of a QIO as the
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. We stated
that, in our view, these broad categories encompass the work QIOs are
required to perform under section 1154 of the Act. We stated our belief
that our proposal reflects a different approach to structuring the QIO
requirements than the current rule: We proposed 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, case reviews and 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
proposed to incorporate the flexibility provided in section 1154(a) of
the Act 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 such additional
activities are determined necessary to improve the quality of care for
Medicare beneficiaries.
Finally, in paragraph (c) of Sec. 475.101, we proposed that a QIO
must demonstrate 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
proposed this requirement because it reflects the multidisciplinary and
multi-stakeholder 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 stated our belief that motivating
beneficiaries to become involved in their own health care may reduce
waste and ultimately improve the quality and efficiency of health care.
We noted that 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 actively engage
beneficiaries, families, and consumers in health care decisions
emphasizes our commitment to patient and family engagement as an
essential component of the QIO Program.
In the proposed rule, we solicited public comments on whether our
proposal sufficiently incorporated the statutory flexibility,
identified the goals of the QIO eligibility requirements, and provided
guidance on how organizations will be determined eligible for QIO
contracts.
Comment: One commenter suggested that these proposed changes may
qualify as ``lowering the standards to become a QIO'' and therefore
stated that providers may not be willing to engage with these entities
and progress may cease.
Response: The commenter was not specific about how the proposal
appeared to lower standards for QIOs. We recognize that our proposal
would establish, in Sec. 475.101, the ``minimum level of resources and
skills'' an organization must have in order to demonstrate its
capability to perform as a QIO. However, we do not intend for these
factors to be the only criteria we use to evaluate organizations
requesting QIO contracts. The RFPs will include detailed information
that will be used in evaluating each offeror. The standards we proposed
at Sec. Sec. 475.102 and 475.103 are a description of the factors we
may use and should not be interpreted as an exhaustive list.
Comment: One commenter stated that the proposed change in the
definition of eligible organizations to remove from Sec. 475. 105 the
restriction from contracting with an association of health facilities
may not ensure that all providers have equal access to quality
improvement efforts within a given region. The commenter indicated that
all trade and professional associations do not represent all providers
within a region and questioned how CMS will assure ``equal access and
assistance'' will be provided to all providers, regardless of
membership status in the potential association being responsible for or
involved in working with providers on quality initiatives. This
commenter believed that if a trade or professional association were to
become a QIO, that QIO would show preference to those providers who are
members of its trade or association.
Response: Although these comments were made in reference to
proposed Sec. 475.102 and Sec. 475.103, we believe that all public
comments concerning eligibility and our proposed changes to make some
general requirement changes are best discussed together with the
comments specifically addressing our proposed eligibility changes in
Sec. 475.101. We also appreciate the concern that, by amending Sec.
475.105 to expand eligibility to associations of health care
facilities, some providers may not receive treatment equal to those
providers affiliated with the professional organization. We note that
the TAAEA specifically amended the statutory prohibition on
associations of

[[Page 75152]]

health care facilities serving as QIOs and that our proposal to change
Sec. 475.105 was designed to reflect the statutory change. In response
to these concerns, we have added language to the QIO eligibility
requirements in Sec. 475.101(d) to emphasize that an organization must
demonstrate its ``ability to perform the functions of a QIO with
objectivity and impartiality and in a fair and neutral manner.''
Comment: In the context of the definition of ``QIO area'', some
commenters stated that QIOs should have experience and a trusted
relationship with practitioners when engaging in quality improvement
initiatives, as these characteristics are necessary to ensure that
patients are protected from errors, and that errors, when they occur,
are corrected. These commenters also stated that QIOs must be able to
demonstrate fairness to practitioners as well as a commitment to
patient-centered care.
Response: We agree with the commenters who requested that we
include a requirement that an organization be able to perform QIO
quality improvement initiative functions in a fair and neutral manner.
We also believe that this criterion should be applied to all QIO
functions. We agree that an organization should be free from any
conflicts of interest and be able to demonstrate fairness and serve as
an objective party. To address these concerns, we have added final
language at Sec. 475.101(d), a requirement that QIO organizations be
able to ``Demonstrate the ability to perform the functions of a QIO
with objectivity and impartiality and in a fair and neutral manner.''
Comment: Some commenters were concerned with CMS' proposal in Sec.
475.101(c) that, in order for organizations to qualify for QIO
contracts, they must demonstrate the ability to actively engage
beneficiaries, families and consumers, as applicable, in case reviews
or quality improvement initiatives. These commenters asked for further
clarification as to how CMS envisions incorporating patients and
families into the case review function. Some commenters asserted that
it is appropriate to consider how patients and families can be of
assistance in areas such as patient perception of care, patient
decision-making, patient safety, and quality. In addition, these
commenters asserted that consumer engagement in health care is a
relatively new field with a small body of research and evidence and
believed that CMS may be challenged to assess whether QIO applicants
are able to demonstrate the ability to actively engage beneficiaries in
case reviews.
Response: We recently began a Patient and Family Engagement
Campaign (PFEC), which has been implemented in 25 States. The purpose
of this project is to support QIOs who propose fresh and original
models to develop and implement a local PFEC that supports HHS' and
CMS' goals of person-centeredness and family engagement. The underlying
goals of this effort are to involve patients and families in decisions
regarding health and healthcare in order to ensure consistency with
patient preferences and priorities and empower them to take action for
their own health care that could improve quality of life. We believe
that this 1-year project will provide strategies and results that can
be available for all QIOs to use. We also believe that the beneficiary
complaint, and beneficiary appeal processes are excellent opportunities
to incorporate patient and family engagement into case review
activities. We expect to learn strategies from the PFEC that can be
spread and utilized in future case review activities that involve
direct communication with Medicare beneficiaries.
Although Patient and Family Engagement is a relatively new field,
we believe that there is sufficient activity in the health care
community to require that QIOs incorporate Patient and Family
Engagement techniques in their contract proposals, strategies, and
techniques. Because current information regarding evaluation and
measurement of Patient and Family Engagement is limited, we intend use
evaluation strategies and benchmarks successfully adopted by the
Hospital Engagement Networks (HENs) to measure this new QIO activity.
Outside of those measurement techniques tested by HENs and proposed by
QIOs, we are not planning to be immediately prescriptive in our
requirements for measuring QIOs' tasks in this new field. We refer
readers to the following CMS Web site for more information concerning
HENs: http://partnershipforpatients.cms.gov/about-the-partnership/hospital-engagement-networks/thehospitalengagementnetworks.html.
Comment: Some commenters supported the proposed changes to separate
the two primary functions of the QIO contracts, case reviews and
quality improvement initiatives, and supported the focus on the
functions the organization performs rather than the structure of the
organization itself. One commenter expressed concern regarding the
extent to which CMS may further delineate or separate work within the
case review and quality improvement functions and cautioned CMS against
severe subdivision of work within each of the functions, as they
believe this would require hospitals to potentially work with many
different QIO contractors.
One commenter argued that bifurcating case review and quality
improvement initiatives would increase administrative burden on
providers and weaken the collaborative relationship with providers,
QIOs, and other community stakeholders. This commenter urged CMS to
retain an integrated approach to QIO work. Other commenters supported
separating these functions, but requested that CMS not separate the
case reviews so much so that a provider could be working with multiple
QIOs for different types of cases, as this could prove confusing,
burdensome, and expensive.
One commenter argued that the case review and quality improvement
functions of QIOs should not be bifurcated because case review provides
a QIO with the opportunity to identify, test, implement, and measure
results in areas where providers need quality improvement assistance.
The commenter also stated that fragmenting the functions would increase
administrative burdens on providers because they would be required to
act with multiple entities, and this would impede relationships between
QIOs and facilities that are essential to quality improvement. Another
commenter stated that CMS should consider a mechanism for linking
quality improvement and case review contractors for the purpose of
information sharing because, without this link, it is difficult to
determine systemic and isolated issues. Another commenter stated that,
if the two functions are bifurcated, there should be a plan for how
these organizations will avoid giving conflicting, competing, or
fragmented messages.
Response: We believe that a division of case review from quality
improvement work would benefit the program by removing the tension and
potential conflict of interest between performing case review of
providers' care and then attempting to engage those same providers in
quality improvement initiatives to improve quality. As we have
previously done, the QIO Program will continue and possibly expand its
use of National Coordinating Centers (NCCs) to help with the
coordination of case review and quality improvement work. Although
providers may be asked to work with more than one QIO, allowing a
single QIO to focus on a specific task will be beneficial to that QIO
in becoming a stronger subject-matter

[[Page 75153]]

expert. The more expertise a QIO achieves, the more likely it will be
that the QIO will effectively spread best practices in its engagement
with providers. We believe that the flexibility to combine or separate
these functions is best made during the contract process. Therefore,
the regulation we are finalizing explicitly permits but does not
require the division of these functions.
Comment: Some commenters supported CMS' proposal to ensure that QIO
governance includes representatives of consumers and health care
providers. The commenters believed that including these representatives
would ensure that the CMS envisioned multidisciplinary and multi-
stakeholder approach to QIO activities is implemented.
One commenter agreed with the importance of ensuring that essential
voices have a role in the governance of the QIOs but suggested that CMS
avoid specifying QIO governance requirements which may be viewed as too
prescriptive and may result in token rather than meaningful
representation.
Response: The requirement to have at least one consumer and one
provider representative on the QIO's governance board is a statutory
requirement from section 1152 of the Act. Therefore, we have no
authority to eliminate this requirement in our regulations. We also
believe that it is beneficial to the QIO Program to have both provider
and consumer groups properly involved in QIO governance level decision-
making. However, to ensure that we are not too prescriptive in our
governance requirements, we did not propose additional requirements or
details beyond the statutory mandate. For example, we did not require
that beneficiaries also be represented as members of the board.
Instead, in Sec. 475.101(c), we chose to require that a QIO
demonstrate its ability to actively engage these partners in case
reviews and quality improvement initiatives.
Comment: One commenter expressed concern that the possible change
where by regional review agents would no longer need to be local,
physician-based organizations and could be for-profit entities was
insulated from public comment in the recent RFI.
Response: We appreciate the public comments regarding our
eligibility proposal in the proposed rule. The RFI was issued to
solicit comments only on potential options for restructuring and
dividing work among QIOs. Although some commenters believed that the
RFI provided limited opportunity to comment on the overall changes CMS
is considering, we knew that the public would have ample opportunity to
comment on our proposal for revisions to the regulations to implement
the statutory amendments that were created by the TAAEA through this
regulation comment process. We understand the commenters' concern that
QIOs are no longer required to be physician-sponsored or physician-
access organizations. However, as we discussed in the preamble to the
proposed rule, we believe that contemporary quality improvement should
involve a multidisciplinary team of practitioners. Although the
revisions do allow for additional for-profit entities (health care
associations) to be QIOs, there has never been a requirement that QIO
organizations be nonprofit organizations.
Comment: One commenter expressed concern that because quality
improvement initiatives require complete trust in the participating
organizations, it may be difficult for providers to separate the
potential conflict that would exist between a payor organization that
is both paying for services and providing assistance in improving
quality and efficiency. The commenter stated that providers would be
placed in the position of determining whether activities are truly in
the best interest of the beneficiary or in the best interest of the
payor organization.
Some commenters requested that CMS revise the proposed regulatory
language changes in the final rule to exclude provider and payor
organizations from QIO eligibility criteria as either a prime
contractor or as subcontractors, or to revise the proposed changes to
reflect similar language to that of the State Medicaid agencies that
are required to demonstrate that they can act with independence and
objectivity from their own program. These commenters suggested that
provider and payor organizations are advocates for their paying members
and believed that there may be an unfair competitive advantage for
other business opportunities where, for example, a State hospital
association may be put in the position of reviewing and/or undertaking
quality initiatives with its own members. In addition, the commenters
stated that these proposed changes may undermine conflict-of-interest
safeguards currently in place because these organizations have
professional and financial relationships that they believe may hinder
their ability to be independent and neutral.
Response: We agree with the commenters that impartiality and
objectivity are keystones to QIO success; these commenters suggested
that we revise our proposed changes to Sec. Sec. 475.102 and 475.103
to reflect similar language to that of proposed Sec. 475.102(c), which
requires that State Medicaid agencies demonstrate that they can act
with independence and objectivity from their own program. We also
understand that payor organizations may find themselves in a difficult
position when working with the providers who receive payments from the
organization. We appreciate the public comments cautioning us about
potential conflicts of interest that may arise from our proposal in
Sec. 475.105 about the eligibility of payor organizations to serve as
QIOs. We believe that all QIOs should be required to perform quality
improvement initiatives in a fair and neutral manner and believe that
this criterion should be applied to all QIO functions. We also agree
that an organization should be free from any conflicts of interest and
be able to serve as an objective party.
To address these concerns, we are finalizing proposed Sec. 475.101
by adding a new paragraph (d) that requires all QIOs to ``[d]emonstrate
the ability to perform the functions of a QIO with objectivity and
impartiality and in a fair and neutral manner.'' In addition, in this
final rule, we have added language to Sec. 475.105(a)(3) to make payor
organizations ineligible for QIO contracts unless the payor
organization ``demonstrates to the satisfaction of CMS that, in
performing QIO activities, the payor organization will act with
complete objectivity and independence from its payor program.''
After consideration of the public comments we received, we are
adopting as final, with one minor technical modification, the proposed
revised provisions of Sec. 475.101(a) through (c) that contain the
requirements that an organization must meet to be eligible for a QIO
contract. In paragraph (c), we are finalizing a minor technical
modification to the text to use ``and/or'' instead of ``or'' to be
consistent with how paragraph (b)(2) treats eligibility standards for
performing case review and quality improvement initiatives. We are
finalizing a new paragraph at Sec. 475.101(d) to add an objectivity
and neutrality requirement as well.
b. Eligibility Requirements for QIOs to Perform Case Reviews and
Quality Improvement Initiatives (Sec. 475.102 and Sec. 475.103)
In the CY 2014 OPPS/ASC proposed rule (78 FR 43676), we proposed to
list the various factors CMS may use to determine that an organization
has demonstrated its ability to perform case reviews. We stated that we
do not consider this list to be comprehensive, but an indication of the
types of factors

[[Page 75154]]

we intend to focus on. The list of factors emphasizes the importance of
QIOs having access to qualified physicians and practitioners for the
purpose of performing case reviews.
Case reviews are concerned with care that was, should be, or should
have been 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 proposed to revise Sec. Sec. 475.102 and
475.103 to provide that CMS will determine if an organization is
capable of performing case reviews and quality improvement initiatives,
respectively, using an illustrative list of similar factors and
including the same constraints on Medicaid agencies serving as QIOs
(with the one additional requirement that these agencies demonstrate
objectivity and independence from the Medicaid program). Because the
proposals at Sec. Sec. 475.102 and 475.103 are similar, we discuss
these proposals, the public comments we received, and the final
provisions together.
In Sec. 475.102(a) and Sec. 475.103(a), we proposed illustrative
lists of the types of factors CMS may use to determine that an
organization has demonstrated the ability to perform case reviews or
quality improvement initiatives based on factors related to how the QIO
work will be performed and the underlying capabilities necessary for
performing well. We do not consider these lists to be comprehensive,
but an indication of the kinds of factors on which we intend to focus.
Under our proposals in Sec. 475.102(a)(1) and (a)(2) and Sec.
475.103(a)(1) and (a)(2), CMS would consider virtually identical
factors such as: (1) The organization's proposed processes,
capabilities, quantitative and/or qualitative performance objectives,
and methodology for performing case reviews or quality improvement
initiatives; and (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 or quality improvement initiatives.
Under Sec. 475.102(a)(3) and (a)(4), with respect to performing
case reviews, we proposed that CMS would consider 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; and the organization's ability to take into consideration
evidence-based national clinical guidelines and professionally
recognized standards of care. Under Sec. 475.103(a)(3), with respect
to performing quality improvement initiatives, we proposed that CMS
would consider the organization's access to professionals with
appropriate knowledge of quality improvement methodologies and
practices. Our proposals at Sec. 475.102(a)(5) and Sec. 475.103(a)(3)
included the use of virtually identical evaluation factors such as the
organization's access to qualified information technology (IT)
expertise. In the proposed rule, regarding Sec. 475.102(a) and Sec.
475.103(a), we solicited comment on whether the regulation text should
incorporate the standards for QIOs that we proposed to use and the
factors we intend to consider when determining whether those standards
have been met. The comments received and our responses are set forth
below.
Comment: One commenter suggested that, in determining QIO
eligibility as a result of the proposed changes, CMS consider how case
review types, such as beneficiary complaints and general quality of
care reviews, may be more effective when carried out by a local QIO
organization rather than a regional model. In addition, as noted above,
several other commenters raised concerns about using regions rather
than States as the service area for QIO contracts.
Response: We discuss above many of the public comments about
regional QIO contracts in the context of our rule finalizing the
definition of ``QIO area.'' We also considered whether the success of
case review types that involve direct contact with beneficiaries would
suffer under a regional model. We believe that an established
subcontracting relationship that one QIO currently has with 20 other
QIOs to perform appeals work for them during the weekends serves as a
model that has shown that this type of multi-State coordination can be
done. In fact, this arrangement has been done seamlessly and with
greater efficiency than the State-based model. This model allows those
QIOs who have a low volume of appeals during their weekend downtime to
direct those cases to a single entity. This arrangement has generated
savings in administrative overhead by redirecting the fragmented volume
to one QIO for more efficient processing. We believe that the success
of this existing model could be replicated under regional QIO contracts
for case review functions. However, as we discuss above, we agree with
commenters that sensitivity to and knowledge of the local health care
area and issues are necessary for QIO success. Along these lines, we
are finalizing Sec. 475.102(a)(3) with the addition of the word
``local'' to clarify that this is one of the factors to be considered
in determining whether an organization has demonstrated the ability to
perform case reviews. In addition, we note that Sec. Sec. 475.102(b)
and 475.103(b) explicitly permit CMS to consider the geographic
location of an organization as part of this determination about the
ability to perform, respectively, case reviews and quality improvement
initiatives.
Comment: Although some commenters supported CMS' proposed criteria,
many commenters suggested additional or revised criteria for
determining whether an organization has demonstrated the ability to
perform case reviews. Some commenters indicated that CMS should add to
its evaluation criteria whether an organization can conduct case
reviews in a fair and neutral manner. One commenter suggested that CMS
add: (1) Experience as a QIO; (2) whether the organization has a
formal, internal quality management system; (3) whether the staff has
quality credentials (for example, Certified Professional in Healthcare
Quality, Certified Health Care Quality Management, and Six Sigma); and
(4) whether the organization is free of actual or perceived
organizational conflicts of interest and able to serve as an objective
party. One commenter specifically requested guidance regarding CMS'
statement that it will not ``limit evidence an organization may present
to demonstrate its capability to perform case reviews'' when reviewing
prior experience. Many commenters suggested additional or revised
criteria for determining whether an organization has demonstrated the
ability to perform quality improvement activities. These commenters
suggested that CMS add: (1) Ability to foster a relationship of trust
and engagement with clinicians and executive leaders; (2) demonstrated
capability to convene and establish effective working relationship with
various stakeholders, because QIOs

[[Page 75155]]

should support coordinated care and breaking down silos and building a
more coordinated infrastructure; (3) demonstrated capacity to collect,
analyze, and share data with providers that spurs improvement because
data collection and sharing data are critical in quality improvement;
(4) ability to complement and not duplicate quality improvement efforts
already underway through State, regional, and Federal programs; (5)
ability to access and include others, especially those with performance
improvement experience; (6) experience with and an approach to change
management because CMS has on many occasions stated that QIOs will be
required to represent CMS as ``change agents''; (7) demonstrated
ability to be a neutral, independent organization and provide objective
assistance to providers without favoritism or conflict of interest,
specifically because failing to achieve quality metrics can lead to
financial penalties; and (8) demonstrated ability to share best
practices.
Response: As discussed above in connection with our final rule at
Sec. 475.101(d), we believe that whether an organization can conduct
case reviews in a fair and neutral manner is an important consideration
and that this criterion of neutrality and fairness should be applied to
all QIO functions. In addition, we agree that this regulation should
not limit the information and factors used to determine whether an
organization applying to be a QIO has demonstrated its ability to
perform case review and/or quality improvement initiatives. Because we
are finalizing our proposal to expand criteria to qualify for QIO
contracts beyond physician-sponsored and physician-access organizations
and we intend to make our qualification criteria fair for all potential
organizations who qualify, we will interpret and implement Sec. Sec.
475.102 and 475.103 as providing illustrative and nonexhaustive
criteria for consideration. We do not plan to unreasonably limit
evidence an organization may present to demonstrate its capability to
perform QIO functions to specific QIO experience and agree that
information such as that identified by the commenters may be relevant.
We particularly appreciate the recommendation that we require that all
QIO organizations have a formal internal quality management system and
a staff with quality credentials, and although the factors listed in
paragraph (a) are not meant as an exhaustive list, we will take into
consideration the requirements recommended by these commenters and we
may include them in our RFPs.
Comment: Commenters requested more information regarding how CMS
will evaluate and weigh reasons for and against the award of contracts,
and noted that CMS proposed nonexhaustive lists of types of factors
without specifying the weight each would receive or what other factors
CMS might consider.
Response: Although we proposed to establish the ``minimum level of
resources and skills'' an organization must have in order to
demonstrate its capability to perform as a QIO, we do not intend for
the factors listed in the regulations to be the only criteria we use in
our evaluation of organizations requesting QIO contracts. The RFP will
include detailed information that will be used in evaluating each
offeror and, if we decide to use a weighted evaluation methodology, the
weights to be used in the evaluation of proposals.
Our proposals at Sec. 475.102(b) and Sec. 475.103(b) include the
following virtually identical evaluation factors. In paragraph (b) of
these sections, we proposed that CMS may consider characteristics such
as the geographic location, size, and prior experience, that CMS finds
relevant, of an organization in order to determine whether the
organization has the capability to perform case review activities or
quality improvement initiatives. A summary of the public comments we
received on paragraph (b) of Sec. Sec. 475.102 and 475.103 and our
responses are set forth below.
Comment: Some commenters supported using a regional approach to
conduct case reviews. However, the commenters urged CMS to make sure
that contractors have mechanisms in place to ensure that they
comprehend and consider regional characteristics of providers. Another
commenter argued that case reviews would be more effective when done
locally rather than by a centralized or regional organization because
it is more effective for a local QIO to uncover breakdowns in systems
and processes of care.
Response: In addition to the provisions in paragraph (a) of
Sec. Sec. 475.102 and 475.103 that address involvement and access to
physicians with appropriate expertise and our addition of local
characteristics to the list of what a QIO must be able to consider in
performing case review, our proposal in paragraph (b) for both
Sec. Sec. 475.102 and 475.103 would permit CMS to consider the
geographic location and size of organizations applying to be QIOs. As
noted above, we believe that the current QIO tested subcontracting
structure for handling appeals review across State lines verifies that
case review can be performed effectively and efficiently through a more
regionalized structure. To the extent that the geographic location of
an organization is a barrier or enhancement to successful performance,
the regulation as proposed and as finalized would permit CMS to
consider the location. The final rule provides the flexibility that is
necessary to consider all relevant facts about the geographic location
and size of an organization compared to the QIO area that will be
served. Further, the addition of the term ``local'' to Sec. 475.102(a)
clarifies that we deem the consideration of local characteristics
essential.
Comment: Another commenter stated that the second sentence proposed
in Sec. 475.103(b) should be revised so that CMS must consider prior
experience in health care quality improvement and that such prior
experience must include conducting quality improvement initiatives that
achieved successful results.
Response: We agree with the recommendation that CMS should consider
prior experience in health care quality improvement and whether that
such prior experience achieved successful results. In response to this
comment, we are finalizing Sec. 475.103(b) with additional language to
include the commenter's suggestion that CMS consider relevant quality
improvement initiative experience and whether it achieved successful
results.
Finally, we proposed to include in a revised version of 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. Section 475.104(d) currently includes requirements that
a State government must meet in order to qualify as a QIO. Under our
proposal, Sec. 475.102 would be revised to apply this additional
requirement in connection with case reviews. Similarly, as proposed,
the provision at Sec. 475.103(c) includes the requirements that a
State government must meet to qualify as a QIO that performs quality
improvement initiatives. While both Sec. Sec. 475.102(c) and
475.103(c), with respect to State governments that administer a
Medicaid program, maintain the substance of the existing rule, each of
this makes it clear that the scope of the review will be limited to
case review and quality improvement initiatives, respectively. In order
to do this, in Sec. 475.102(c), we proposed to replace the term
``utilization and quality review functions'' with the term ``case
review'' and in Sec. 475.103(c), we proposed to replace the same term
with ``quality improvement initiatives.'' We proposed

[[Page 75156]]

to revise the language in Sec. 475.102(c) and Sec. 475.103(c) 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. We did not receive any public comments on the proposed
revisions to Sec. 475.102(c) and Sec. 475.103(c), and therefore are
finalizing them as proposed.
We also received a number of public comments about Sec. Sec.
475.102 and 475.103 generally rather than about specific paragraphs of
those sections. We address those public comments below.
Comment: Commenters stated that QIOs should be permitted
flexibility to offer different types of assistance to providers because
many different approaches may be pursued by providers in a given
jurisdiction.
Response: We appreciate this comment and do not plan to use this
regulation to prohibit QIOs from offering technical assistance or to
implement quality improvement initiatives through approaches and
techniques if they are determined to be the best for the population in
the QIO area.
Comment: Commenters suggested that CMS allow hospitals to work with
multiple QIOs because different QIOs may have various types of subject-
matter expertise. However, commenters also noted that managing multiple
contracts may be difficult for small or resource-strapped hospitals,
potentially limiting their involvement in quality improvement
activities.
Response: We appreciate the support for separating some QIO
functions to allow for QIO development of specialized expertise and
will take this comment into consideration when developing the details
in our RFPs. We also understand that working with multiple QIOs may be
difficult, and we will include national coordination of QIO tasks
through NCCs to aid providers in navigating the QIO contract structure.
Comment: One commenter stated that it is essential to quality
improvement initiative work to have a local presence and understand
contextual factors such as pressures and incentives of the community
and its circumstances. Another commenter stated that the planned
changes would make QIOs less focused on quality improvement at the
community level and less able to forge partnerships with providers and
patients to address challenges.
Response: We agree with the importance of a local presence as a
means to forge important partnerships with providers and beneficiaries.
We intend to spell out these requirements in detail in the RFPs. We
believe that our intent is made clear in Sec. 475.103 of the
regulations which states that in determining eligibility for performing
quality improvement initiatives, we will take into consideration ``the
organization's proposed involvement of and access to physicians and
practitioners in the QIO area with the appropriate expertise and
specialization in the areas of health care concerning the quality
improvement initiative'' and that paragraph (b) permits us to consider
the geographic location of a QIO as necessary. Our intent is to put in
place safeguards to ensure there is local involvement during quality
improvement initiatives. Although case review concerns care that was
given at one specific place, quality improvement initiatives may
address national or regional issues. We would like to reiterate that
these characteristics are not an exhaustive list and that these factors
can be considered in each procurement as necessary.
Commenters on the proposed revisions to Sec. 475.102 and Sec.
475.103 also raised the topic of objectivity and impartiality of the
QIO. These public comments are addressed above in connection with the
general eligibility requirements in Sec. 475.101.
After consideration of the public comments we received, we are
adopting proposed Sec. Sec. 475.102 and 475.103 as final, with
modifications. We are finalizing paragraph (a)(3) of Sec. 475.102 with
the addition of ``local'' to the list of characteristics that an
organization must be able to take into consideration. We also are
making minor revisions to the proposed text in finalizing Sec.
475.103: (1) to change the wording in Sec. 475.103(a)(2) and (a)(3) in
order to mirror the language in Sec. 475.102(a)(2) and to avoid any
inadvertent ambiguity as to whether these provisions will be
interpreted consistently; (2) to make technical edits to the text of
Sec. 475.103(a)(2) and (a)(3) to change ``initiative'' to
``initiatives'' and ``methodologies'' to ``methodology'' to improve
readability of these paragraphs; (3) to create Sec. 475.103(a)(4) to
reorganize how we have included access to qualified information
technology expertise as a factor; and (4) to revise Sec. 475.103(b) to
specify that CMS may consider whether quality improvement initiative
experience ``achieved successful results.''
c. Prohibitions on Eligibility as a QIO (Sec. Sec. 475.105 and
475.106)
In the CY 2014 OPPS/ASC proposed rule (78 FR 43677), we proposed
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 proposed 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 organization
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, the
payor entity can qualify as a QIO so long as all other eligibility
criteria are met. We reflected this interpretation in the proposed rule
as Sec. 475.105(a)(3). As discussed in section XVII.C.4.a. of this
final rule with comment period, after consideration of the public
comments we received, we also are revising the final requirement under
Sec. 475.101(d) to impose a general objectivity requirement for all
QIOs. In addition to

[[Page 75157]]

that, under Sec. 475.105(a)(3), we are finalizing specific provisions
for payor organizations that serve as QIOs which state that any payor
organization meeting these requirements (now broken out and specified
in Sec. 475.105(a)(3)(i)) must also demonstrate to CMS' satisfaction
that ``in performing QIO activities,'' the payor organization will act
with complete objectivity and independence from its payor program (now
specified in Sec. 475.105(a)(3)(ii)).
The existing paragraph (b) of Sec. 475.105 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 proposed to delete and reserve paragraph (b) of Sec. 475.105 in its
entirety. Paragraph (c) was proposed to 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 stated that we do
not believe that these proposed changes affect the underlying substance
of the prohibitions.
As noted above, we proposed to delete and reserve all of Sec.
475.106 in light of our proposed changes to Sec. 475.105. We noted our
belief 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.
Comment: Some commenters believed that health care affiliates
should not conduct case reviews of health care facilities in the QIO
area but also believed health care facility affiliates may be excellent
organizations to lead the quality improvement functions of QIOs as
evidenced through the achievements made through the HEN initiative.
Therefore, the commenters requested that CMS revise the language of the
proposed changes in the final rule so that health care facility
affiliates would be eligible for QIO contracts that focus on quality
improvement efforts. In addition, the commenters indicated that if CMS
were not to make this suggested revision, then CMS would preclude some
of the entities with whom CMS currently partners under the HEN
initiative from becoming QIO contractors.
Response: We believe that implementing the additional flexibilities
granted by the changes in the statute will improve the QIO Program.
However, based on the authority being adopted with the revisions to
Sec. Sec. 475.101 through 475.103, we will cautiously make changes
that have been tested and that have appropriate safeguards to protect
against any real or perceived conflict of interest among QIOs,
providers, and beneficiaries. Section 1153(b)(3) of the Act expressly
prohibits a health care facility or an affiliate of a health care
facility from serving as a QIO in the area within the area served by
the facility. The statute also specifies when an organization will not
be considered to be affiliated with a health care facility in
connection with this prohibition. We believe that the restriction under
section 1153(b)(3) of the Act prohibits CMS from entering into QIO
contracts with health care affiliates, as reflected in this final rule,
means that some current quality contractors (such as some HENs
participating in the Partnership for Patients initiative, for example)
may not qualify as QIOs.
After consideration of the public comment we received, we are
adopting, as final, proposed revised Sec. 475.105 with one
modification: We are adding language under paragraph (a)(3) and, in the
process, splitting some of the text in paragraph (a)(3) into two
paragraphs (i) and (ii), to specify that a payor organization will be
considered ineligible for QIO contracts unless 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), meets all the other requirements and
standards of the part, and demonstrates to the satisfaction of CMS
that, ``in performing QIO activities, the payor organization will act
with complete objectivity and independence from its payor program.''
5. QIO Contract Awards (Sec. 475.107)
The existing regulations at 42 CFR Part 475 include requirements
related to the establishment of QIO contracts and the assignment of
bonus points. We proposed 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'' because
these provisions are obsolete in light of the changes to section
1152(1) of the Act and our proposals relating to the eligibility
standards for an organization awarded a QIO contract. We also proposed
to use cross-references in Sec. 475.107(a) and (b) to the revised
standards we proposed in Sec. Sec. 475.101 through 475.103. We
proposed 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)).
In addition, we proposed to revise the regulatory language
addressing the length of QIO contracts. 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
proposed 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.
We received public comments related to these topics and discuss
them below.
Comment: Some commenters stated that CMS' proposal that QIO
contract awards be based on the selection of an organization from all
proposals that set forth minimally acceptable plans may be construed to
limit the contract award determination to a ``lowest price technically
acceptable standard'' (LPTA). In addition, the commenters discouraged
CMS from applying LPTA evaluation criteria and proposed that CMS
continue its current policies and make selection based on a
determination of best value using a ``tradeoff'' evaluation process in
which technical quality is the primary consideration and all other
evaluation factors are more important than cost/price.
One commenter also noted that ensuring the highest quality services
should be considered the ultimate criterion in selecting a quality
improvement organization. Another commenter noted the value of LPTA
procurements, but suggested that, if CMS applies this approach to case
reviews, it define ``technically acceptable'' to ensure adequate
quality because ensuring the highest quality services should be
considered the ultimate criterion in selecting a case review QIO. Some
commenters further suggested that CMS clarify the proposed changes
pertaining to past performance because they believed that, in the
context of lowest price technically acceptable, an offeror whose
experience is ``unknown'' is considered ``acceptable'' for contract
award. These commenters asserted that CMS' proposed changes (to use
lowest price technically acceptable and consider past performance) are
conflicting and reiterates that, if prior experience/past performance
is important, lowest price

[[Page 75158]]

technically acceptable bids are not an acceptable evaluation criterion.
Response: Although these commenters generally identified Sec. Sec.
475.101, 475.102 and 475.103 as the basis for the comments, we discuss
these comments here because they also address concerns about the
process we proposed in Sec. 475.107 for how to conduct the procurement
for QIO contracts. Part of our proposal was meant to establish the
``minimum level of resources and skills'' that an organization must
have in order to demonstrate its capability to perform as a QIO and we
proposed at Sec. 475.107(a) and (b) that CMS identify the proposals
that meet the standards described in Sec. Sec. 475.101 through
475.103. However, we did not intend for the factors listed in those
sections to be the only criteria in our evaluation of organizations
requesting QIO contracts or the ultimate decision to award a QIO
contract. In addition to the minimum requirements listed in Sec.
475.101, other standards we included in other sections are examples of
the factors we may use and should not be interpreted as an exhaustive
list.
We do not intend to change our evaluation methodology to begin
using the lowest price technically acceptable standard and did not
intend our proposal to suggest that. We will continue our current
practice of making a selection based on a determination of best value
that takes into consideration both technical quality and price. As the
contracting process is a public one, with administrative processes for
questions to be asked and answered, protests to be filed and addressed,
and subject to oversight, we are confident that organizations applying
to receive QIO contracts will be adequately informed of the evaluation
criteria and methods used to award contracts and that it is in the best
interest of the QIO Program for the regulatory standards to be
flexible.
We are finalizing text at Sec. 475.107(a) that we believe more
clearly communicates that CMS will ensure compliance with the minimum
standards described in Sec. Sec. 475.101 through 475.105 without
suggesting that CMS will award contracts to every entity that meets
those minimum requirements. The text finalized in this final rule at
Sec. 475.107 makes it clear that CMS will ensure that all QIO awardees
meet the requirements of Sec. Sec. 475.101 through 475.103, subject to
the restrictions at Sec. 475.105. In addition, we believe that the
text as finalized preserves the statutory flexibility provided for the
contracting process consistent with the intent underlying our proposal.
The finalized regulation at Sec. 475.107(a) will ensure that QIO
contract awardees meet the requirements of Sec. Sec. 475.101, 475.102,
and 475.103, as applicable and subject to the prohibitions in Sec.
475.105.
Comment: Many commenters supported CMS' proposed changes of
extending the contracting period from 3 years to 5 years. Some
commenters stated that this proposal may allow for an improvement in
the QIO's review activities through sustained data collection. In
addition, these commenters indicated that this proposed change would
provide more time to focus on the assigned tasks rather than the
demands of the contracting cycle.
One commenter stated that it would be prudent for CMS in awarding a
contract to a new QIO organizational type to consider awarding a 2-year
contract with 3 optional 1-year expansions in order to be certain that
the new QIO organization is capable of performing the tasks in an
acceptable manner.
Response: We appreciate the commenters' support of the change in
contract term to 5 years. We agree that the 5-year contract cycle will
allow CMS and the QIOs to have a meaningful portion of the contract
term to concentrate on program work and the assigned tasks rather than
preparing for contract transition. We acknowledge the commenter's
suggestion that a shorter base period with option years may allow for
us to make contract changes if a new organization is having difficulty
with the contract requirements. However, section 1153(c)(3) of the Act
requires that the contract ``shall be for an initial term of five years
and shall be renewable for terms of five years thereafter.'' Therefore,
we are finalizing the proposed language that extends the QIO contract
term to 5 years.
After consideration of the public comments we received, we are
adopting, as final, proposed Sec. 475.107 with modifications. We are
revising Sec. 475.107 to make the language more succinct and to avoid
any misinterpretation that this section might somehow restrict
contracting procedures or otherwise limit the Agency's flexibility.
Further, we are finalizing, at paragraph (b) instead of at paragraph
(c), the proposed language for the length of QIO contracts.

XVIII. Final Rule: 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

[[Page 75159]]

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. In the CY 2014 OPPS/ASC proposed rule (78 FR 43678),
we indicated that we were 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 proposed 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 proposed 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.
We did not receive any public comments on our proposal to make
these technical corrections to the definition of ``hospital-based EP''
in Sec. 495.4 of the regulations. Therefore, we are finalizing these
technical corrections as proposed. Specifically, (1) paragraph
(1)(ii)(A) of the definition of ``hospital-based EP'' in Sec. 495.4 is
revised to read ``The Federal fiscal year 2 years before the payment
adjustment year; or'' and paragraph (1)(ii)(B) of the definition is
revised to read ``The Federal fiscal year 3 years before the payment
adjustment year.''; and (2) the introductory text of the definition is
revised 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 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

[[Page 75160]]

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.
As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR
43679), we want to avoid further delay in taking into account the
services furnished by EPs in Method II CAH outpatient settings.
Therefore, we proposed 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
made this proposal solely in order to take into account the special
circumstances of those EPs as described above. We stated that, 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 proposed 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 (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.
We indicated in the proposed rule that 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. We stated that it was important to note that, due to the systems
limitations described

[[Page 75161]]

above, we were 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 lacked the ability to retrieve
line-level furnishing EP identifying information for Method II CAH
claims during the years prior to FY 2013. We invited public comments on
this proposal.
Comment: Commenters were uniformly in favor of the proposal.
Specifically, the commenters stated that they appreciated the agency's
proposal to allow physicians who provide services in the outpatient
departments of CAHs and have their services billed by the CAH under
Method 2 to participate in the EHR incentive program in 2013. While the
commenters noted that it is unfortunate that CMS' information systems
have, until now, unfairly prevented these physicians from participating
in the EHR Incentive Program because they could not use data from the
UB-04 claims to identify services provided by the physician, they urged
CMS to adopt both the proposed approach to identifying eligible
physicians using 2013 claims data submitted on the UB-04 and the
proposed hold harmless policy for those physicians who are determined
to be eligible using the 2012 data, but not the new 2013 data. They
also urged CMS to act as quickly as possible to provide detailed
guidance on how physicians can take advantage of this policy change.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal concerning hospital-based determinations for
certain EPs for the 2013 payment year. We will move as quickly as
possible to provide detailed guidance on how EPs can take advantage of
this policy change and to educate rural providers accordingly.
We are finalizing our proposal, without modification, 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. For payment year 2013 only, we will
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 (October
1, 2012 through September 30, 2013), we will use that data to identify
which EPs had Method II CAH service billings during that year, and we
will 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 will be eligible to demonstrate meaningful
use for the relevant EHR reporting period and potentially qualify for
an EHR incentive payment for payment year 2013. As we indicated in the
proposed rule, 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 will 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) will be held harmless to the determination made on the basis of
FY 2013 claims data and considered nonhospital-based for payment year
2013.

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
As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR
43680), 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 proposed 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 stated that we
understood 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

[[Page 75162]]

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 invited public
comments on this proposal.
Comment: One commenter supported the proposal.
Response: We appreciate the commenter's support.
After consideration of the public comment we received, we are
finalizing, without modification, the proposed revision to 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.

XIX. Medicare Program: Provider Reimbursement Determinations and
Appeals: Final Rule

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 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 Pub. L. 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. Technical Conforming Change
As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43680
through 43681), 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), Pub. L. 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.
As we stated in the CY 2014 OPPS/ASC proposed rule, 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, in the CY 2014 OPPS/ASC proposed rule
(78 FR 43681), we proposed to make a technical conforming change to
Sec. 405.1804(a) to conform the regulation to the current statute.
This technical conforming change clarifies 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.
We did not receive any public comments on this proposed technical
conforming change. Therefore, for the reasons set out in the proposed
rule, we are finalizing the proposed revisions to Sec. 405.1804(a)
without modification.

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 42 CFR 413.20(b) and
413.24(f). Through its review and settlement process, the intermediary
determines the total amount of reimbursement due to a provider for its
cost reporting period. This constitutes an ``intermediary
determination,'' as defined in Sec. 405.1801(a). In accordance with

[[Page 75163]]

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 to 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 to a provider sometimes first arise in, that is,
the pertinent facts occur or start during, or are reported by the
provider and determined by the intermediary 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 to 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.'' Some of the factual underpinnings of
determinations of reasonable cost reimbursement under section 1861(v)
of the Act are subject to review for each cost report in which the
provider claims the cost under the general principle that ``payment is
to be made on the basis of current costs of the individual provider,
rather than costs of a past period'' (42 CFR 413.5(a)). For example,
reimbursement for a provider's bad debts arising from unpaid Medicare
deductibles and coinsurance may be denied under 42 CFR 413.89 in the
first fiscal period it is claimed because the collection effort on the
account has not ceased and the account cannot yet be deemed worthless.
However, the same bad debt may be deemed allowable in the following
fiscal period, when the collection effort has ceased and the account
has been determined to be worthless. Similarly, interest expense is
subject to review each fiscal period to determine whether it is
allowable for each fiscal period during the life of the loan (42 CFR
413.153).
Other ``predicate facts'' are determined once, either in the first
fiscal period in which they arise or are first determined, or in the
first fiscal period that they are used as part of a formula for
reimbursement, and then applied as part of that reimbursement formula
for several fiscal periods thereafter. These facts are not reevaluated
annually to determine whether they support a determination that a
particular cost is reasonable because the formula is a proxy for
reasonable costs. Instead, the formula itself will provide for changes
in costs through an updating factor or otherwise. 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 ``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 itself is a
``predicate fact'' for the following 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
in the intermediary determination that is appealed. We refer readers to
section 1878(a) of the Act and current regulations at Sec. Sec.
405.1835(a)(1) and (b) (Board appeals) and Sec. 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 provides that a provider's appeal rights after reopening are
limited to the specific matters altered in the revised intermediary
determination.
In many instances, when a factual matter arises in, or is
determined for, the same fiscal period as the cost reporting period at
issue, 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, an earlier fiscal period and that
factual data then is used differently or applied to determine
reimbursement in one or more later fiscal periods, our longstanding

[[Page 75164]]

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: (1) The NPR for the cost reporting period in which the
predicate fact first arose, or was first determined; or (2) the NPR for
the period for which such predicate fact was first used or applied by
the intermediary to determine reimbursement. For example, assuming base
period costs calculated for the period consisting of the 12 months
prior to the hospital's 2002 cost reporting period, that is, its 2001
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
hospital's 2001 base period or its 2002 period (when the base year
costs were first used to determine reimbursement). 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, that is, its 2001 or 2002 cost reporting
periods. These are the only fiscal periods in which the hospital could
or seek reopening of its base period costs. Of course, if the
hospital's base period costs were later redetermined through appeal or
reopening of its 2001 or 2002 NPRs, then the hospital could appeal or
request reopening of those determinations. In addition, the hospital
could appeal the determination of the 2008 cost reporting period target
amount within 180 days of the NPR for the 2008 cost reporting period.
The hospital could also request the reopening of the determination of
its 2008 cost reporting period target amount within 3 years of the NPR
for its 2008 cost reporting period. However, the hospital could not
revise the determination of its 2001 base year costs through an appeal
or reopening of its 2008 target amount.
Many reimbursement formulas require the use of predicate facts,
where data or a factual finding is taken from an earlier fiscal period
and used to determine the amount of provider reimbursement in the
fiscal period under review. As discussed above, we believe that these
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 was first determined by the intermediary or the fiscal
period in which such fact was first used or applied to determine
reimbursement. In some instances, a reimbursement statute may
necessitate the use of data from a fiscal period that is not found in
that period's cost report or NPR (such as ``off the cost report,'' or
underlying documentation). We believe that 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 pursuant to that reimbursement statute.
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 direct 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 the lawfulness of the
reaudit regulation (then designated as Sec. 413.86(e)).
As discussed above, we also recognize that not all facts occurring
in prior fiscal periods are ``predicate facts'' in the same sense,
because they are not determined once, but may be subject to review on
an annual basis as part of the determination of a provider's reasonable
cost reimbursement under section 1861(v) of the Act, such as the facts
underpinning reimbursement for Medicare bad debts or allowable interest
expense. Because these facts are subject to review each fiscal period
by the intermediary, the intermediary's findings should also continue
to be subject to review, either through an appeal or reopening.
As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43683),
we believe that the above-described interpretation of our rules
regarding the appeal and 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's 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 in which
such predicate fact first arose or for the fiscal period for which such
fact was first determined by the intermediary. Further, the use or
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's cost in question.
Accordingly, in the CY 2014 OPPS/ASC proposed rule (78 FR 43682 through
43683), we proposed 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 of the NPR 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/or (2) the application of the
predicate fact is subject to change through a timely appeal or
reopening of the NPR for the fiscal period in which the fact was first
used (or applied) by the intermediary to determine the

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provider's reimbursement. As discussed earlier, this ``first
application'' or ``first use'' of a predicate fact may involve
underlying documentation that is ``off the cost report.''
We note that a recent court decision conflicts with our settled
interpretation of the regulations for provider appeals and cost report
reopenings. 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 were such predicate facts timely appealed or reopened
for the fiscal periods in which such facts were first used (or applied)
by the intermediary to determine the providers' reimbursement. The
predicate facts at issue in this case were the teaching hospitals'
full-time equivalent (FTE) resident 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
direct GME reimbursement for the first time in the hospitals' 1998 cost
reporting periods. The providers could have challenged their FTE
resident 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 direct GME 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 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 proposed 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 noted that this proposed revision of Sec. 405.1885
would apply to all Medicare reimbursement determinations, and not only
to direct GME payment, which was the particular issue in Kaiser
Foundation Hospitals v. Sebelius. In the CY 2014 OPPS/ASC proposed rule
(78 FR 43683 through 43684), we stated that, because the proposed
revision clarifies longstanding agency policy, we were 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) 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 stated our view that the proposed revision was not
impermissibly retroactive in effect because the proposal clarified
longstanding agency policy and practice, and was procedural in nature.
We referred 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, we
referred readers to section 1871(e)(1)(A) of the Act, which 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 various statutory
provisions such as the target amount (under section 1886(b) of the Act)
and the cap on residents for GME reimbursement (under section
1886(h)(4)(F)(i) of the Act); the 180-day period for filing appeals to
the Board (under section 1878(a)(3) of the Act); and the 3-year limit
on reopening (under Sec. Sec. 405.1885(b)(1), (2) of the regulations).
We have further determined that it would be in the public interest to
apply 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 proposed revisions only to Sec. 405.1885, in
order to clarify our regulations in accordance with this proposal, we
stated that we were 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 requested
public comments with respect to amending the language of these
additional regulations for appeals before the intermediary and the
Board, but did not receive any timely comments on this point.
Comment: Two commenters opposed adoption of the proposed revisions
because including findings of predicate facts in the reopening rule
would undermine the accuracy of reimbursement determinations when a
provider or the Medicare program learned of the inaccuracy after the 3-
year period for reopening had expired. Other commenters opposed the
change because it would prevent teaching hospitals from challenging
their IME or direct GME resident caps if they have not already done so.
Response: We disagree with the commenters that the revisions to the
reopening rules would materially undermine the accuracy of Medicare
reimbursement because a provider could still seek revisions to a final
intermediary determination by filing an appeal or requesting reopening
and the intermediary could still initiate reopening on its own motion,
and those appeal and reopening procedures are available over a lengthy
period under the statute and regulations. Even before the appeal and
reopening periods begin, providers have 5 months after the close of the
cost reporting period to submit reports, and the intermediary is
required to make its determination within a reasonable period of time
thereafter. After a final intermediary determination

[[Page 75166]]

is issued, the Medicare statute authorizes appeal to the Board within
180 days of the final intermediary determination. The reopening
regulations allow six times as long--3 years--for reopening of a final
intermediary determination. Therefore, an NPR may be reopened many
years after a fact arises during the cost reporting period at issue,
depending on when the intermediary determination is issued. When a
reopening results in a revised intermediary determination, the provider
then may appeal or request reopening of the specific issue in the
revised intermediary determination, resulting in review of the revised
intermediary determination at an even more remote time. This reopening
scheme, which the Supreme Court described as ``generous'' in Your Home
Visiting Nurse Services, Inc. v. Shalala, 525 U.S. 449, 455 (1999), is
intended to strike a balance between accurate reimbursement and
administrative finality, in the interests of both the provider and the
Medicare program. The proposed revisions merely clarify that a finding
of predicate fact is also subject to reopening for a 3-year period.
Moreover, the proposed revisions would not affect the exception to the
3-year reopening period for fraud or similar fault by a party to the
final intermediary determination.
With respect to the IME and direct GME resident caps, we
established in an August 1997 interim final rule that we would
determine those caps in the course of settling cost reports starting on
or after October 1, 1997 (for direct GME) or with discharges on or
after October 1, 1997 (for IME), thereby putting teaching hospitals on
notice that their caps would be determined at that time (62 FR 45966,
46003 through 46005 (August 29, 1997)). This is consistent with the
resident cap statutory provisions (under section 1886(h)(4)(F) and
section 1886(d)(5)(b)(v) of the Act), which require the use of the
number of unweighted FTE residents for the cost reporting period ending
on or before December 31, 1996, for cost reporting periods (or
discharges, for IME) starting on or after October 1, 1997. We did not
read this provision to allow for continuing challenges to this number
of residents. Before the Kaiser decision, neither providers nor the
Medicare program were allowed to challenge the 1996 FTE resident cap
except through a timely appeal or reopening of the NPR for the 1996
base year or the first fiscal period in which the caps were applied.
For example, we refer readers to Hillcrest Riverside, Inc. v. Sebelius,
680 F. Supp. 2d 30 (D.D.C. 2010); and Swedish Am. Hosp. v. Sebelius,
773 F. Supp. 2d 1 (D.D.C. 2011). Indeed, many teaching hospitals
challenged their NPRs for the 1996 fiscal period in order to correct
perceived deficiencies in their caps. For example, we refer readers to
Henry Ford Health Sys. v. Dep't of Health & Human Servs, 654 F. 3d 660
(6th Cir. 2011); Univ. of Chicago Med. Ctr. v. Sebelius, 618 F.3d 739
(7th Cir. 2010); Rhode Island Hosp. v. Leavitt, 548 F.3d 29 (1st Cir.
2008); and Riverside Methodist Hosp. v. Thompson, No. C2-02-94, 2003 WL
22658129 (S.D. Ohio July 31, 2003). In our view, teaching hospitals
have been allowed ample opportunity to correct their resident caps.
Comment: One commenter stated that it would support the proposed
revisions if they bound CMS to accept as final a determination of
predicate fact that had not been timely appealed or reopened, but which
the provider now recognized had been determined inaccurately. According
to the commenter, it was classified as a sole community hospital (SCH),
but later realized that it was not the only like hospital within 25
miles. The then-applicable regulations for SCH status specified that
the designation will be revisited if there is ``a change in
circumstance'' and that ``CMS will cancel the hospital's classification
as a sole community hospital effective with the date that the hospital
no longer met the criteria for classification consistent with the
provisions of Sec. 405.1885'' for the reopening of NPRs (42 CFR
412.92(b)(3)(iii) (2011)). The commenter asserted that, because it was
not the only like hospital within 25 miles, it was appropriate to
cancel its SCH designation, but it was not appropriate to recover
reimbursement for past cost years because there had been no change in
circumstances. The commenter asked whether the proposed revisions to
the reopening rules, which apply to pending appeals, would govern its
pending Board appeal challenging the recovery of reimbursement for past
fiscal periods.
Response: Without passing judgment on the merits of the commenter's
pending Board appeal, this would appear to present a situation where,
under the proposed revisions, the determination of a predicate fact
(the provider's distance from a like hospital) was beyond the 3-year
reopening period. We note that in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53258, 53674), we amended Sec. 412.92(b)(3) to require
providers to disclose facts to CMS that would be material to initial
SCH designations and if providers fail to disclose these facts, their
SCH status will be cancelled.
Comment: One commenter asked if the proposed revisions would apply
to determinations of successive predicate facts, such as the
commenter's Medicare Advantage days, total days, and education costs
used in the Nursing and Allied Health Education (NAHE) Managed Care
payment. The commenter also asked whether these predicate facts could
be challenged by reopening the NPR for the fiscal period in which such
facts are used to calculate payment, which is usually two fiscal
periods afterward.
Response: As discussed in the example of the TEFRA target amount,
predicate facts may arise in multiple years. The proposed revisions
would permit reopening of the final determination of a provider's
Medicare Advantage days, total days, and NAHE payment for purposes of
computing the NAHE Managed Care payment either in the fiscal period
such costs and days were first determined, or in the fiscal period they
were first used to calculate the NAHE Managed Care payment.
Comment: One commenter, noting that reopening of intermediary
determinations is completely within the discretion of the intermediary,
requested that CMS ensure that the intermediaries do not use this
discretion to impair a provider's ability to correct a predicate fact.
The commenter suggested that if a provider's request to reopen a
predicate fact determination is denied, then recognition should be
given to the timely filed reopening request in an appeal of the
subsequent cost year, especially in situations where the first
application of the predicate fact results in a reimbursement impact
that is less than the jurisdictional amount for appeal to the Board.
Response: The regulations provide the fiscal intermediaries with
unreviewable discretion as to whether to reopen specific findings on
matters at issue in a final intermediary determination, and program
manual instructions include guidance for the intermediary's exercise of
its discretionary reopening authority. We refer readers to the Provider
Reimbursement Manual (CMS Pub. 15-1), Section 2931.2. We believe that
the intermediary's reopening authority has always encompassed specific
findings about predicate facts, and we see no basis for limiting the
intermediary's discretion whether to reopen particular findings of
predicate fact. As the Supreme Court recognized, reopening is provided
by the grace of the Secretary (Your Home, 525 U.S. at 455). The Court
found that the discretionary nature of reopening reflected the
practical realities of the Medicare program where ``the few dozen
[intermediaries] often

[[Page 75167]]

need 3 years within which to discover overpayments in the tens of
thousands of NPRs that they issue, while each of the tens of thousands
of sophisticated Medicare-provider recipients of these NPRs is
generally capable of identifying an underpayment in its own NPR within
the 180-day time period specified in 42 U.S.C. 1395oo(a)(3)'' for
appeals to the Board (Id. at 455-56). If a provider wants to challenge
a finding of predicate fact where the reimbursement impact is less than
the statutory jurisdictional minimum of $10,000 for Board appeals,
Sec. 405.1811 of the regulations gives the provider a right to appeal
to the intermediary hearing officers if the amount in controversy is at
least $1,000 and the other requirements for intermediary hearing
officer jurisdiction are satisfied. Thus, providers can appeal findings
of predicate fact to the Board or the intermediary hearing officers
within 180 days of a final intermediary determination, in addition to
requesting reopening of a predicate fact within 3 years of such
determinations.
Comment: One commenter suggested that application of the proposed
revisions be limited to findings of fact that had not been appealed,
instead of applying to issues on which the provider had received an
adverse finding on the merits. For those issues, the commenter believed
that it had the right to bring successive challenges to the finding of
predicate fact after an adverse decision on the merits of a challenge
to the finding of predicate fact in the first year it arose or was
determined.
Response: We do not perceive a basis to limit the application of
the proposed revisions to findings of predicate facts that have not
been appealed. We believe that the proposed revisions should also apply
to issues on which the provider has received an adverse final decision
on the merits. Indeed, Sec. 405.1803(d) of the regulations requires
the intermediary to determine the effect of a final decision and issue
any revised intermediary determination that proves necessary. Moreover,
settled rules of issue preclusion, including the requirement that the
issue be litigated on the merits by opposing parties, would apply to a
final decision on the merits of the disputed predicate facts after
exhaustion of administrative remedies and judicial review. We note that
because appeals of an NPR sometime are not resolved finally before NPRs
are issued for later fiscal periods, providers that wish to preserve
their rights to administrative and judicial review sometimes will
challenge predicate facts in successive appeals and actions for
judicial review until the first appeal is finally resolved. But upon
final resolution of the first appeal, the parties usually do not
relitigate the same finding of predicate facts in the appeals for later
fiscal periods.
Comment: Several commenters opposed the proposed revisions to the
reopening rules because the commenters were concerned that the Medicare
program had reserved the right to create exceptions by regulation or
Ruling that would benefit the program, but not Medicare providers. The
commenters were also concerned that the Medicare program would
interpret reimbursement provisions in the Medicare statute to authorize
the revision of predicate facts only when it would result in reduced
reimbursement to providers.
Response: In discussing the proposed revisions, we stated that the
3-year limit on reopening of a predicate fact might be countered by a
statutory provision or a specific regulation on reimbursement of the
matter at issue. This statement acknowledges that the proposed
revisions cannot override a contrary statutory provision, and that
revisions to the generally applicable reopening rules are not intended
to trump the provisions of a specific reimbursement regulation.
Instead, the proposed revisions to the reopening rules reflect the
Medicare program's longstanding policy not to revisit predicate facts
more than 3 years after the predicate fact arose or was first
determined in a final intermediary determination. In cases where it has
been necessary to adjust cost report data for use in later fiscal
periods as a base year or cap after the 3-year reopening period has
expired, the Medicare program has relied on statutory authority to make
such adjustments and used notice and comment rulemaking to alert
providers to the basis, purpose, and scope of the adjustments. For
example, we refer readers to Regions Hospital v. Shalala, 522 U.S. 448
(1998) (sustaining the GME reaudit rule). These procedural protections
would be reinforced by the proposed revisions to the reopening rules.
However, in light of the comments we received, we are limiting the
scope of this final rule to ``predicate facts'' that are determined
once and then used to determine payments for one or more fiscal periods
after the fiscal period in which the facts arose or were determined. We
are not applying these final provisions to facts that are subject to
annual evaluation as part of the intermediary's final determination of
reasonable cost reimbursement under section 1861(v) of the Act. We
believe that narrowing the definition of ``predicate facts'' in this
fashion will help allay commenters' concerns that the proposed
revisions will be subject to ad hoc exceptions that only serve to
disadvantage providers. We note that the annual evaluation of certain
predicate facts in the determination of reasonable cost reimbursement
can increase the provider's reimbursement in later fiscal periods. For
example, if a provider incurs a Medicare bad debt in 2002, but the debt
is not deemed uncollectable until 2009, the bad debt would be
reimbursable in 2009 if all the requirements of Sec. 413.89 were
satisfied.
Comment: Several commenters took issue with CMS' characterization
of the proposed revisions as codifying longstanding policy. Instead,
the commenters pointed to the decisions cited in the D.C. Circuit's
Kaiser Foundation Hospitals decision as evidence that CMS has not taken
a consistent position on when predicate facts can be reexamined, but
instead has taken the position that benefits the program.
Response: We disagree with the commenters' assertion that the
proposed revisions do not reflect our longstanding interpretation of
the reopening regulations. The reopening rules, which were first
promulgated in 1974, have always been interpreted and applied in an
even-handed manner such that a given reopening might increase,
decrease, or leave unchanged the provider's program reimbursement. The
reimbursement effect of a specific reopening is determined by the
governing law and the factual circumstances of the matter at issue.
Moreover, we disagree with the commenters' assertion that in
certain cases we have reexamined predicate facts beyond the 3-year
reopening period without authority for doing so. In three of these
cases, a reimbursement regulation allowed reexamination of predicate
facts so long as the underlying amount of reimbursement was not changed
beyond the 3-year reopening period. For example, in proposing the GME
reaudit rule that the Supreme Court later upheld in Regions Hospital,
we acknowledged that ``a special exception'' to the general reopening
rules was required to reexamine cost reports from the inpatient
prospective payment system base year beyond the 3-year reopening period
(53 FR 36592, September 21, 1988). In Edgemont Hospital v. Mutual of
Omaha Insurance Co., PRRB Dec. No. 95-D34, 1995 WL 933971 (Apr. 6,
1995), adjustments to the amount of operating costs considered in
establishing the TEFRA target amount or rate-of-increase ceiling were
authorized by Sec. 413.40(g). If the Medicare program took the view
that the reopening rules permitted the

[[Page 75168]]

reexamination of predicate facts beyond the 3-year reopening period, as
the commenters suggested, then there would have been no need for the
above-referenced regulations on GME reauditing and TEFRA limit
adjustments to operating costs.
Contrary to the commenters' assertions, the Medicare program has
applied its reopening rules to determinations of predicate facts to the
benefit of providers. For example, when a provider received an adverse
decision on its target amount for its first year, but the intermediary
had failed to issue timely notices of reopening for the following
fiscal periods, we instructed the intermediaries not to attempt to
adjust those target amounts, which allowed the provider to retain
reimbursement in excess of the cost ceilings calculated with the
correct target amounts. Similarly, we have instructed intermediaries
not to attempt to change incorrectly calculated high direct GME or IME
resident caps for fiscal periods that were beyond the reopening period.
The other cases cited by commenters do not concern ``predicate
facts'' as defined in the proposed revisions. HealthEast Bethesda
Lutheran Hospital & Rehabilitation Center v. Shalala, 164 F.3d 415 (8th
Cir. 1998), concerned interest expenses evaluated under Sec.
413.153(b)(2). As we have discussed above, interest expense, when
considered on a reasonable cost basis, is subject to reexamination in
each fiscal period to determine whether the cost at issue qualifies as
``necessary'' interest expense for that fiscal period. We refer readers
to Sec. 413.5(a) of the regulations. The facts associated with these
expenses, like bad debt arising from non-payment of Medicare
deductibles and coinsurance, are not determined once and applied
thereafter to determine reimbursement in subsequent fiscal periods.
They are not within the scope of the proposed revisions, as we have
revised it in response to the comments.
The remaining decision referenced by the commenters, Mark Twain St.
Joseph's Healthcare Corp. v. Leavitt, 154 Fed. Appx. 651 (9th Cir.
2005), also does not support the commenters' view. In that case, the
court held that recalculation of the provider's hospital specific rate
did not violate the finality provisions of Sec. Sec. 412.71 and
412.72; rather, the intermediary properly reopened the determination to
correct an administrative error. If anything, the finality provisions
of Sec. Sec. 412.71(d) and 412.72(b) are consistent with our position
that once a predicate fact, such as the hospital specific rate, is
finally determined, it is not subject to continuing requests for review
or reopening beyond the 3-year reopening period at the instigation of
either the intermediary or the provider.
Comment: Several commenters stated that CMS proposed to apply the
revisions to the reopening rules retroactively, but that CMS had no
authority to do so. Based on the D.C. Circuit's decision in Kaiser
Foundation Hospitals and earlier decisions cited therein, the
commenters stated that the proposed revisions to the reopening rules
did not reflect longstanding Medicare policy, and thus the revisions
did not clarify such policy. The commenters also stated that the
proposed revisions would be contrary to the public interest in ensuring
the accuracy of reimbursement determinations. One commenter also stated
that it would be contrary to the public interest to apply the proposed
revisions to pending appeals when providers have relied on the existing
regulations.
Response: As explained in the proposed rule, we disagree with the
D.C. Circuit's decision in Kaiser Foundation Hospitals, including the
court's discussion of decisions in a few prior cases. As discussed
above, we believe that the circumstances presented in those prior cases
are not similar to those in Kaiser, and we also have narrowed the scope
of the proposed revisions to address these concerns. In any event, in a
program the size of the Medicare program, with thousands of providers
submitting voluminous cost reports annually over the course of nearly
50 years, we do not believe that the few reimbursement decisions cited
by the D.C. Circuit provide a reasonable basis for providers to forego
their statutory right to appeal to the Board, and the regulatory
process for reopening, by invoking an alleged right to seek revisions
to predicate facts beyond the 3-year reopening period.
Nonetheless, we recognize that the D.C. Circuit rejected our
interpretation of the reopening rules, and the court found that we had
applied the rules differently in a few earlier cases. By amending the
reopening rules now, our purpose is to articulate clearly what we had
intended the regulations to say in the first place, so that the revised
rules will be applied consistently by confining the reopening of
predicate facts to the 3-year reopening period.
We continue to believe that application of the revised rules to
intermediary determinations issued on or after the effective date of
this final rule, and to appeals and reopenings (including requests for
reopening) that are pending on or after the same effective date, is not
impermissibly retroactive in effect. Any finding of a predicate fact
inherently has a degree of retroactivity because Congress (or the
Medicare program) has assigned a future reimbursement consequence to
provider actions that have already taken place, usually before the
enactment of the relevant reimbursement statute. For example, when
Congress enacted the direct GME and IME resident cap statute in 1997,
and used a base year that ended no later than December 31, 1996, it
assigned future consequences (the resident cap) to actions that were
already completed (the provider's employment of residents during the
1996 cost reporting period).
We believe that this is a form of ``secondary retroactivity''
inasmuch as future consequences are attached to past actions, but such
secondary retroactivity does not violate due process or, in the case of
regulations, the Administrative Procedure Act, if the regulation is not
unreasonable. For example, we refer readers to Bowen v. Georgetown
Univ. Hosp., 488 U.S. 203, 219-220 (1988) (Scalia, J., concurring); and
Nat'l Cable & Telecomms. Ass'n v. FCC, 567 F.3d 659, 670-71 (D.C. Cir.
2009). Applying the proposed revisions to pending intermediary
determinations, appeals, and reopenings will not affect the amount of
reimbursement a provider received for the cost reporting period in
which the predicate fact first arose or was determined. Nor would such
application of the proposed changes to the reopening rules invalidate
any revisions to predicate facts that were finalized prior to the
effective date of this final rule. Instead, the revised reopening rules
govern only the timing of permissible revisions to predicate facts, as
of the effective date of this final rule, and thus the revisions to the
reopening rules are procedural in nature.
The scope of applicability of the revised reopening rules also does
not undermine providers' settled expectations. A provider cannot
reasonably expect to be allowed to revise a predicate fact after the
180-day filing period for an appeal after the right has expired, when
the only remaining means of securing such relief is through the
discretionary reopening process. We refer readers to Bergerco Canada v.
U.S. Treasury Dept., 129 F.3d 189, 194-95 (D.C. Cir. 1997) (changes to
discretionary licensing procedure made after plaintiff had filed
request for license did not impair any rights of the plaintiff). After
the 3-year period to request reopening has elapsed, a provider has no
reasonable expectation

[[Page 75169]]

of securing revisions to predicate facts. While one of the commenters
suggested that the Kaiser decision effectively established the
governing law, the decision is of such recent vintage that few
providers could have relied on it as a basis for changing predicate
facts after expiration of the 3-year reopening period. Moreover, the
strictures against retroactivity do not apply to procedural rules,
which the reopening rules plainly are. We refer readers to Combs v.
Commissioner of Social Security, 459 F.3d 640, 647 (6th Cir. 2006) (en
banc).
In any event, if the revisions to the reopening rules were deemed a
retroactive application of a substantive change to a regulation, we
continue to believe that section 1871(e)(1)(A) of the Act permits
retroactive application because it is necessary to ensure compliance
with various statutory payment provisions such as the TEFRA target
amount (under section 1886(b) of the Act) and the caps on residents for
GME and IME reimbursement (under sections 1886(h)(4)(F) and
1886(d)(5)(B)(v) of the Act); the 180-day filing period for appeals to
the Board (under section 1878(a)(3) of the Act); and the 3-year period
for reopening (under Sec. Sec. 405.1885(b)(1), and (b)(2) of the
regulations). In addition, we continue to believe that retroactive
application furthers the public interest in safeguarding the 3-year
limit on reopening and the interests of both Medicare providers and the
Medicare program in preserving the finality of reimbursement
determinations. Contrary to the commenter's assertion, the revised
reopening rules still provide an avenue to correct predicate facts,
thus promoting accuracy in reimbursement determinations. The revised
reopening rules also protect the interests of administrative finality
by ensuring that both Medicare providers and the Medicare program can
close their books on a cost reporting period without worrying that the
other party will invoke the Kaiser decision to make changes to
predicate facts long after the close of the 3-year reopening period,
when documents and witnesses may no longer be available.
After consideration of the public comments we received, we are
adopting the proposed revisions to Sec. Sec. 405.1885(a)(1) and
(a)(2)(iv) 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 with the following modifications: We are adding language
to paragraph (a)(1)(iii) that defines the ``predicate facts'' that are
subject to the revisions as factual findings for one cost reporting
period that once determined are used in one or more subsequent cost
reporting periods to determine reimbursement. We are adding language to
paragraph (b)(2)(iv) to clarify that it does not apply to factual
findings when made as part of a determination of reasonable cost under
section 1861(v)(1)(A) of the Act. Paragraph (a)(1)(iv) also was
reworded for clarity. 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 of the NPR 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/or (2)
the application of the predicate fact is subject to change through a
timely appeal or reopening of the NPR for the fiscal period in which
the fact was first used (or applied), by the intermediary to determine
the provider's reimbursement. The general 3-year reopening period
applies to findings about such predicate facts and the reopening period
is calculated separately for each finding about each predicate fact. At
this time, we have decided not to make similar changes regarding
predicate facts to the regulations governing intermediary appeals at
Sec. 405.1811 and appeals to the Board at Sec. 405.1835.

XX. Files Available to the Public Via the Internet

In the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we proposed to
create new Addendum P--Proposed OPPS Items and Services That Will Be
Packaged for CY 2014.
We did not receive any public comments related to the proposed
creation of new Addendum P and are finalizing our proposal without
modification.
The Addenda of the proposed rules and the final rules with comment
period will be published and available only via the Internet on the CMS
Web site. To view the Addenda of this final rule with comment period
pertaining to 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-FC'' from the list of regulations. All Addenda for
this final rule with comment period are contained in the zipped folder
entitled ``2014 OPPS 1601-FC Addenda'' at the bottom of the page.
To view the Addenda of this final rule with comment period
pertaining to 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-
FC'' from the list of regulations. All Addenda for this final rule with
comment period are contained in the zipped folders 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we solicited
public comments on each of the issues outlined above for the
information collection requirements discussed below.

B. Requirements in Regulation Text

1. Changes to the Outcome Measure Requirement for OPOs
In section XVI. of this final rule with comment period, 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 proposed 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

[[Page 75170]]

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. Changes to the Medicare Fee-for-Service EHR Incentive Program
In section XVIII. of the CY 2014 OPPS/ASC proposed rule, we
proposed to revise 42 CFR 495.4 to provide a special method for making
hospital-based determinations for 2013 only in the cases of those EPs
who reassign their benefits to Method II CAHs. We also proposed 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 44517 through 44544)
and Stage 2 (77 FR 54125 through 54135) 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 the proposed rule did not modify or
increase the information collection requirements of the program in any
way.
After reviewing the public comments we received on the proposed
rule, we are finalizing our proposals discussed in section XVIII. of
this document. These final policies do not modify or increase the
information collection requirements of the Medicare Fee-for-Service EHR
Incentive Program in any way.

C. Associated Information Collections Not Specified in Regulatory Text

In the CY 2014 OPPS/ASC proposed rule, we made reference to
proposed associated information collection requirements that were not
discussed in the regulation text contained in the proposed rule. The
following is a discussion of those requirements, any public comments we
received, and our responses to those public comments.
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. In the CY 2014 OPPS/ASC
proposed rule, we did not propose to add any additional measures for
the CY 2015 payment determination and subsequent years; therefore,
there will not be an increase 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
this final rule with comment period, we are finalizing our proposal to
remove the OP-19 and OP-24 measures from the Hospital OQR Program for
the CY 2015 payment determination and subsequent years (78 FR 43646
through 43647, 78 FR 43653). We refer readers to section XIII.C.2. of
this final rule with comment period for our discussion of the removal
of these measures. Because one of the measures was previously suspended
and the other deferred, removing them will not impact our previous
burden estimate and it remains unchanged.
In addition, we are finalizing our proposals to codify existing
policies related to program participation and withdrawal, data
submission, extraordinary circumstances extensions or waivers, data
validation, and the reconsideration process. Because we are only
codifying existing policies (including finalizing a clarification that
we may grant extensions or waivers if systemic problems in our data
collection systems directly or indirectly affect the ability of
hospitals to submit data), we do not anticipate any additional burden
to hospitals based on these proposals affecting the CY 2015 payment
determination or subsequent years.
The Hospital OQR program has 3 types of measures that utilize
different methods of data collection/submission--chart-abstracted
measures that require HOPDs to collected data from chart-abstraction,
and submit that data directly to CMS, Web-based measures submitted via
the QualityNet Web site (this includes some chart abstracted measures
that are also submitted via the QualityNet Web site) and measures
submitted via the CDC's NHSN Web site. In the CY 2014 OPPS/ASC proposed
rule, there is only one section heading for all of these measures:
``Web-based Measures for the CY 2016 Payment Determination and
Subsequent Years'' (78 FR 43685). We intended to include headings for
the other two kinds of measures, but these were inadvertently deleted.
For the new measures, this resulted in burden estimates for three
chart-abstracted measures submitted directly to CMS via a Web-based
tool, and one measure submitted via CDC's NHSN all appearing under a
heading that refers to just one type of measure. In this final rule
with comment period, we have corrected this error and separated the
content appropriately using separate section headings for each of the
different kinds of measures.
For the CY 2016 payment determination and subsequent years, the
burden associated with Hospital OQR Program procedures consists of the
time and effort associated with collecting and submitting data for the
3 different kinds of measures. Where we have chart-abstracted measures
that are collected via Web-based tool, they are included below in
section XXI.C.1.b., where their chart-abstraction burden is estimated,

[[Page 75171]]

and in section XXI.C.1.c., where we estimate their Web submission
burden.
We believe there is a burden associated with successful
participation in the Hospital OQR Program, where successful
participation results in a full annual payment update (APU) for a
particular payment determination. This burden would include, but not be
limited to: maintaining familiarity with the Hospital OQR Program
requirements (for example, participating in the monthly educational
webinars, reading information available at the QualityNet Web site
https://qualitynet.org, checking feedback reports to indicate a
facility's current status or performance, reaching out to the Hospital
OQR Program support contractor to make specific inquiries); staying up
to date with system requirements (for example, updating passwords,
maintaining a system that is fully functional in the QualityNet
environment, etc.); and communicating how program requirements must be
operationalized within the individual facility. For each hospital, we
estimate burden as follows, for one annual cycle of the program:
Program requirements (20 hours),
System requirements (2 hours)
Managing facility operations (20 hours)
The burden for one hospital is therefore the sum of these 3 areas
above and therefore estimated at 42 hours. We calculate the total
burden for the approximately 3,300 participating hospitals as 138,600
hours (42 hours multiplied by 3,300 facilities).
b. Chart-Abstracted Measures for the CY 2016 Payment Determination and
Subsequent Years
We estimated, based on our past experiences with chart-abstracted
measures, that there will be approximately 3,300 respondents per year
and that each participating hospital will spend 35 minutes per case to
collect and submit the data. As a result, the estimated burden
associated with one case per hospital would be 1,924 hours (3,300
hospitals x 0.583 hours per hospital). We estimated the financial
burden for all hospitals to collect and submit data using our estimate
of one case per hospital would be $57,717 (3,300 hospitals x $30.00 per
hour x 0.583 hours). We note that this estimate is based on estimates
of all of these measures being collected using the same methods of
chart abstraction, but excludes estimates for data submission for
measures that HOPDs will report via a Web-based tool.
Based upon the data submitted for the CY 2012 and CY 2013 payment
determinations, we estimated there will be a total of 1,679,700 cases
per year, or approximately 509 cases per year per hospital. However,
hospitals will vary greatly on the number of cases per HOPD due to
specialization. Based on those numbers though, the estimated annual
hourly burden associated with the aforementioned data submission
requirements for the chart-abstracted data for all hospitals (excluding
submission burden for measures submitted through the Web-based tool) is
979,265 hours (1,679,700 cases per year x 0.583 hours per case). This
estimate is based on data submitted previously and includes burden
associated with measure OP-22, which is a chart-abstracted measure with
Web-based submission.
For the CY 2016 payment determination, the three newly finalized
measures (OP-29, OP-30, and OP-31) are chart-abstracted measures with
Web-based submission. These three measures will add to the burden. In
this rulemaking, we estimate the maximum burden, but in future
rulemaking, we will update our burden estimate based on actual data we
receive. To estimate maximum burden, we assume all facilities will have
adequate volume to sample at the highest number of required cases. If a
hospital is obligated to chart-abstract the highest number of cases
from the instructions we provide to indicate appropriate sampling
methodology based on hospital's volume, this is a basis for us to
calculate a maximum burden estimate. Using the same sampling
methodology we have used in the past, which can be found on Table 3 (ED
Throughput) of ``Section 4-Population, Sampling and Transmission'' in
the Hospital Outpatient Quality Reporting Specifications Manual, v7.0
available at https://qualitynet.org, we estimate that each of the
approximately 3,300 responding hospitals will have volume adequate to
support quarterly sample sizes of 96 cases, for a total of 384 cases
(96 cases per quarter x 4 quarters) to be abstracted by each hospital
annually for one new measure.
Based on these assumptions for the three new measures, the total
additional cases for one hospital to sample would be 1,152 (384 cases
annually per measure x 3 measures). We estimate that the time to chart
abstract one case is 25 minutes. We estimate 25 minutes per case (or
0.417 hours per case) based on chart-abstraction time less the time to
submit Web-based measures in aggregate (0.583 hours - 0.167 hours =
0.417 hours per measure). For the approximately 3,300 reporting
hospitals, we therefore estimate the total maximum burden associated is
1,584,000 hours (3,300 hospitals x 0.417 hours per hospital x 1,152
cases). We estimate the maximum financial burden for all hospitals to
collect and submit data via the Web-based tool for the three new
measures to be $47,520,000 (3,300 hospitals x $30.00 per hour x
1,584,000 hours).
For chart-abstracted measures that HOPDs will not submit via a Web-
based tool, HOPDs will incur a financial burden associated with chart
abstraction and data submission for these non-Web-based measures, which
requires that HOPDs submit patient-level data directly to CMS. We
estimated the financial burden associated with these measures for all
hospitals as $29,377,953 (1,679,700 cases per year x $30.00 per hour x
0.583 hours per case).
c. Web-Based Measures Submitted Directly to CMS for the CY 2016 Payment
Determination and Subsequent Years
For the CY 2016 payment determination and subsequent years, we
proposed to add five measures to the program. Of these five measures,
four are chart-abstracted measures requiring that HOPDs submit patient-
level data directly to CMS using a Web-based tool, with data collection
beginning in CY 2014. Based on public comment we received regarding
burden, we are not finalizing proposed measure OP-28 as part of the
Hospital OQR Program measure set. Therefore, we are only finalizing
three of the four chart-abstracted measures that we proposed. We refer
readers to section XIII.E.2 of this final rule with comment period for
a discussion of public comments regarding OP-28. We also refer readers
to section XIII.G.2.f. of this final rule with comment period for our
discussion of specific data collection requirements we finalized, which
serves as the basis of our estimates of burden described.
For previously finalized Web-based measures (OP-12, OP-17, OP-25,
and OP-26), our measurement methods are somewhat different from the
methods we use for one existing measure and the three newly finalized
Web-based measures (OP-29, OP-30, and OP-31). We estimated the burden
of chart-abstraction for the subset of the four of these measures that
are also chart-abstracted (OP-22, OP-29, OP-30, and OP-31). It is
appropriate to consider this subset of four measures in both the
section on chart-abstraction burden and in this section estimating Web-
based measure burden because not all Web-based measures are also chart-
abstracted. Our estimate in this section is based on the chart-
abstraction for these four measures being complete by

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the hospital at the time of Web-based entry. Each participating
hospital would spend 10 minutes per measure per year to collect and
submit the data. In the case of the subset of four chart-abstracted
measures, the estimate here is only for the time associated with
entering aggregate totals into our Web-based tool. The estimated annual
burden associated with these measures is 4,409 hours (3,300 hospitals x
0.167 hours per measure x 8 measures per hospital) for the CY 2016
payment determination. This burden is based on a collection burden for
OP-12, OP-17, OP-25, and OP-26 and a Web-based submission burden for
all of the measures that are submitted via a Web-based tool.
HOPDs will incur a financial burden associated with identifying and
submitting data for these eight Web-based measures. We estimated that
the financial burden associated with these measures would be $132,264
(3,300 hospitals x $30.00 per hour x 0.167 hours per measure x 8
measures). Of these eight measures, 4 are chart-abstracted. As noted
above, we include the chart-abstraction burden for the subset of 4
chart-abstracted measures (1 previously finalized, 3 finalized in this
rulemaking) submitted via Web-based tool in the section on chart-
abstracted data collection above.
d. NHSN HAI Measure for the CY 2016 Payment Determination and
Subsequent Years
For the NHSN HAI measure Influenza Vaccination Coverage among
Healthcare Personnel (OP-27), the burden involved would be from
gathering information either from existing reports or by other methods
such as surveying the healthcare personnel population. In the CY 2014
OPPS/ASC proposed rule (78 FR 43685), we used an estimate of 10
vaccinations per outpatient hospital. Since then, we have obtained a
more accurate estimate for the number of vaccinations per hospital and
have reflected that in our calculations below. Using data from the
United States Department of Labor Bureau of Labor Statistics,
Occupational Employment Statistics Query System, and the total of all
workers for Outpatient Care Centers Code 621400, the number of
personnel for all hospitals is 640,360. We estimate 640,360 responses
for a total burden of 106,940 hours (0.167 hours per response x 640,360
responses).
HOPDs will incur a financial burden associated with data submission
for this measure. Using the total of all Outpatient Care Center workers
from the Bureau of Labor Statistics, as described above, we estimate
that the financial burden associated with this measure for all HOPDs
would be $3,208,203 ($30.00 per hour x 106,940 hours).
We invited public comment on the burden associated with the
information collection requirements for the chart-abstracted measures,
the Web-based measures submitted directly to CMS, and the measure
submitted via CDC's NHSN. We did not receive any comments on the burden
associated with information collection requirements. Therefore, we are
finalizing our burden estimates.
e. Hospital OQR Program Validation Requirements for the CY 2015 Payment
Determination and Subsequent Years
We use a sampling methodology, which involves establishing a
particular 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 do not validate measures submitted via Web-based
tool or submitted to NHSN. The validation burden for a HOPD is the time
and effort necessary to submit validation data to a CMS contractor. In
the CY 2014 OPPS/ASC proposed rule, we did not propose any changes to
our validation procedures. As a result, the burden associated with the
validation procedures for the CY 2015 payment determination is the same
as previously finalized for CY 2014 in the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68531). We estimated that it would take each
of the 500 sampled hospitals approximately 12 hours to comply with
these data submission requirements. To comply with the requirements, we
estimated 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. The estimated annual
burden associated with the data validation process for the CY 2015
payment determination is approximately 6,000 hours (500 selected
hospitals x 12 hours per hospital).
HOPDs will incur a financial burden associated with the required
data abstraction and data submission for the validation process. We
estimated that the financial burden associated with validation would be
$180,000 ($30.00 per hour x 6,000 hours).
These requirements were approved under OCN: 0938-1109. This
approval expired on October 31, 2013.
We invited public comment on the burden associated with data
validation information collection procedures. We did not receive any
public comments. Therefore, we are finalizing our burden estimates as
proposed.
f. Hospital OQR Program Reconsideration and Appeals Procedures
In section XIII.I. of the proposed rule and this final rule with
comment period, for the CY 2015 payment determination and subsequent
years, we proposed and are finalizing a minor change to the
reconsideration request process to ensure our deadline for these
requests will always fall on a business day. We also proposed and are
finalizing our proposal 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 (the ASC Quality Collaboration's voluntary reporting program)
(http://www.ascquality.org), 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

[[Page 75173]]

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 invited public comment on the burden associated with these
information collection requirements. We did not receive any public
comments on our burden discussion in the CY 2014 OPPS/ASC proposed rule
(78 FR 43686) regarding the five previously finalized claims-based
measures for the CY 2014 payment determination.
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
adopted 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. Therefore, 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 estimated 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 x 0.167 hours per ASC).
For the CY 2016 payment determination, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43669), we proposed, and are finalizing in this
final rule with comment period, that ASCs would report data for the
Safe Surgery Checklist Use measure and the ASC Facility 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 Use measure for the
CY 2016 payment determination, we estimated 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 Facility Volume Data on
Selected ASC Surgical Procedures measure, we estimated 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 estimated
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) would 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 the CY 2014 OPPS/ASC
proposed rule (78 FR 43686), we proposed 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 we discuss in section XV.B.3. of this final
rule with comment period, we are finalizing the adoption of three of
these four measures. For the chart-abstracted measures, we estimated
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 of 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, in the proposed rule we stated that ASCs would incur a
financial burden associated with chart abstraction and data submission
for these four proposed measures. We estimated that ASCs (in the
proposed rule (78 FR 43686), we erroneously referred to ``for a chart-
abstracted case, an ASC'') would incur costs of $91,997 (5,260 ASCs x
$30.00 per hour x 0.583 hours). We solicited public comment on the
impact of adding these measures and requiring data submission. We also
invited public comment on the burden associated with these information
collection requirements.
For the previously finalized Web-based Safe Surgery Checklist Use
and ASC Facility Volume Data on Selected ASC Surgical Procedures
measures for the CY 2016 payment determination, we received public
comments that increasing the data submission time period was an
appropriate and beneficial change that did not increase burden. These
comments are discussed in section XV.D.5.b of this final rule with
comment period.
For the claims-based measures, we received public comments that
data collection via claims was a way to reduce burden. These comments
are discussed in sections XV.D.4 and XV.D.5. of this final rule with
comment period.
We discuss public comments we received on burden associated with
data collection for the NHSN HAI measure: Influenza Vaccination
Coverage among Healthcare Personnel in section XV.D.6.b. of this final
rule with comment period.
We discuss public comments we received on burden associated with
the collection of aggregated data via a CMS Web-based tool in sections
XV.B.3 and XV.D.5.c. of this final rule with comment period.
After consideration of the public comments received, we are
finalizing our burden estimates related to claims-

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based and Web-based measures for the CY 2015 and 2016 payment
determinations as proposed.
c. Program Administrative Requirements and QualityNet Accounts;
Extraordinary Circumstances Extension or Waiver 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 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 estimated 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.
We invited public comment on the burden associated with these
information collection requirements.
We did not receive any public comments on our burden discussion in
the proposed rule and are finalizing these burden estimates as
proposed.
3. Hospital VBP Program Requirements
In section XIV. of the proposed rule, for the Hospital VBP Program,
we proposed 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 Sec. 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 invited public comment on the burden associated with these
information collection requirements.
We did not receive any public comments on our burden discussion in
the proposed rule.

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

XXIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
We have examined the impacts of the final rule with comment period
and the final rules in this document as required by Executive Order
12866 on Regulatory Planning and Review (September 30, 1993), Executive
Order 13563 on Improving Regulation and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub.
L. 96-354), section 1102(b) of the Social Security Act, section 202 of
the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub.
L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and
the Contract with America Advancement Act of 1996 (Pub. L. 104-121) (5
U.S.C. 804(2)). This section of the final rule with comment period
contains the impact and other economic analyses for the provisions that
we are finalizing.
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This final rule with comment period 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 final rule
with comment period has been reviewed by

[[Page 75175]]

the Office of Management and Budget. We have prepared a regulatory
impact analysis that, to the best of our ability, presents the costs
and benefits of this final rule with comment period. In the CY 2014
OPPS/ASC proposed rule (78 FR 43687 through 43688), we solicited public
comments on the regulatory impact analysis provided. We address the
public comments we received in this section below and in other sections
of this final rule with comment period as appropriate.
2. Statement of Need
This final rule with comment period is necessary to update the
Medicare hospital OPPS rates. It is necessary to make changes to the
payment policies and rates for outpatient services furnished by
hospitals and CMHCs in CY 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 revising
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 continuing the current payment adjustment for
rural SCHs, including EACHs. In addition, section 10324 of the
Affordable Care Act, as amended by HCERA, authorizes a wage index of
1.00 for certain frontier States. Section 1833(t)(17) of the Act
requires that subsection (d) hospitals that fail to meet quality
reporting requirements under the Hospital OQR Program incur a reduction
of 2.0 percentage points to their OPD fee schedule increase factor. In
this final rule with comment period, we are implementing these payment
provisions.
This final rule with comment period 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 final
rule with comment period.
3. Overall Impacts for the OPPS and ASC Payment Provisions
We estimate that the effects of the final OPPS payment provisions
will result in expenditures exceeding $100 million in any 1 year. We
estimate that the total increase from the changes in this final rule
with comment period in Federal government expenditures under the OPPS
for CY 2014 compared to CY 2013 will be approximately $600 million.
Taking into account our estimated changes in enrollment, utilization,
and case-mix, we estimate that the OPPS expenditures for CY 2014 will
be approximately $4.372 billion higher relative to expenditures in CY
2013. Because this final rule with comment period is economically
significant as measured by the $100 million threshold, we have prepared
this regulatory impact analysis that, to the best of our ability,
presents its costs and benefits. Table 55 displays the redistributional
impact of the CY 2014 changes in OPPS payment to various groups of
hospitals and for CMHCs.
We estimate that the update to the conversion factor and other
adjustments (not including the effects of outlier payments, the pass-
through estimates, and the application of the frontier State wage
adjustment for CY 2014) will increase total OPPS payments by 1.7
percent in CY 2014. The changes to the APC weights, the changes to the
wage indices, the continuation of a payment adjustment for rural SCHs,
including EACHs, and the payment adjustment for cancer hospitals will
not increase OPPS payments because these changes to the OPPS are budget
neutral. However, these updates will change the distribution of
payments within the budget neutral system. We estimate that the total
change in payments between CY 2013 and CY 2014, considering all
payments, including changes in estimated total outlier payments, pass-
through payments, and the application of the frontier State wage
adjustment outside of budget neutrality, in addition to the application
of the OPD fee schedule increase factor after all adjustments required
by sections 1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act,
will increase total estimated OPPS payments by 1.8 percent.
We estimate the total increase (from changes to the ASC provisions
in this final rule with comment period 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 $143
million. Because the provisions for the ASC payment system are part of
a final rule that is economically significant as measured by the $100
million threshold, we have prepared a regulatory impact analysis of the
changes to the ASC payment system that, to the best of our ability,
presents the costs and benefits of this portion of the final rule with
comment period. Tables 56 and Table 57 of this final rule with comment
period display the redistributional impact of the 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 Final OPPS Changes in This Final Rule With
Comment Period
(1) Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the CY 2014 policy changes on various hospital groups. As we did for
the proposed rule, we post on the CMS Web site our hospital-specific
estimated payments for CY 2014 with the other supporting documentation
for this final rule with comment period. To view the hospital-specific
estimates, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the Web site, select ``regulations and notices'' from
the left side of the page and then select ``CMS-1601-FC'' from the list
of regulations and notices. The hospital-specific file layout and the
hospital-specific file are listed with the other supporting
documentation for this

[[Page 75176]]

final rule with comment period. We show hospital-specific data only for
hospitals whose claims were used for modeling the impacts shown in
Table 55 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 final rule with comment period for a discussion of the
hospitals whose claims we do not use for ratesetting and impact
purposes.
We estimate the effects of the individual policy changes by
estimating payments per service, while holding all other payment
policies constant. We use the best data available, but do not attempt
to predict behavioral responses to our policy changes. In addition, we
do not make adjustments for future changes in variables such as service
volume, service-mix, or number of encounters. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43687 through 43688), we solicited public comment
and information about the anticipated effects of our proposed changes
on providers and our methodology for estimating them. Any public
comments that we received are addressed in the applicable sections of
this final rule with comment period that discuss the specific policies.
Comment: Numerous comments raised concerns about the lack of
transparency created by introducing multiple policies into a complex
payment system that was created by insufficient guidance on how
proposed payment rates were developed, technical errors, insufficient
policy details, and a lack of detailed impact analyses for each
proposal.
Response: With regard to the lack of detailed impact analyses, we
believe that our approach of modeling the overall impact of the payment
system on classes of hospitals is one aspect of fostering transparency.
However, assessing the impacts of a specific policy also relies on
clear discussion of proposed changes and rationale, final modeled
relative weights, summary data files and tables, and public use files.
Overall impacts can allow a quick assessment of how multiple
interacting policies combine to impact proposed payments, but can never
provide the amount of additional detail that an individual commenter
would desire for their specific product(s) or set of services.
We make numerous separate summary data files and public use files
available, along with a discussion of our modeling processes, and we
believe that this is the best means to foster robust public data-
related comments on specific policies. We continuously examine ways in
which the data process could be simplified or made clearer, and we also
welcome and appreciate public comment with regards to potential
improvements. This year, we again received numerous thoughtful comments
supported by detailed data analyses suggesting that commenters have
modeled the data to draw detail on their specific policy interest.
Finally, individual facilities have more recent internal data on the
mix of services that they provide than the distribution of services in
our claims data, and this should allow them to assess the impact on
their facility along with discussion of the proposed policy in preamble
text.
(2) Estimated Effects of OPPS Changes on Hospitals
Table 55 below shows the estimated impact of this final rule with
comment period on hospitals. Historically, the first line of the impact
table, which estimates the change in payments to all facilities, has
always included cancer and children's hospitals, which are held
harmless to their pre-BBA amount. We also include CMHCs in the first
line that includes all providers because we include CMHCs in our weight
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 55 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 2014, we are continuing to pay 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 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 final rule with
comment period. Section 1833(t)(3)(C)(iv) of the Act provides that the
OPD fee schedule increase factor is equal to the market basket
percentage increase applicable under section 1886(b)(3)(B)(iii) of the
Act, which we refer to as the IPPS market basket percentage increase.
The final IPPS market basket percentage increase for FY 2014 is 2.5
percent (78 FR 50507). 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 0.5 percentage
points for FY 2014 (which is also the MFP adjustment for FY 2014 in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 51003); 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 OPD fee schedule increase factor of 1.7 percent, which we are
using in the calculation of the 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 55.
To illustrate the impact of the 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 55
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: The independent effect of all relative weight
changes between CY 2014 and CY 2013, resulting from final policies
other than the packaging of outpatient laboratory services previously
paid under the clinical laboratory fee schedule (CLFS) into the OPPS
(Column 2); the marginal impact of the final policy to package clinical
laboratory services (Column 3); the combined impact of the changes
between CY 2013 and CY 2014 modeled in Columns 2 and 3 (Column 4: APC
reconfiguration and recalibration for CY 2014 compared to CY 2013
payments, the combined effect of Columns 2 and 3); the final wage
indices and the rural and cancer hospital adjustments (Column 5); the
combined impact of all the changes described in the preceding columns
plus the 1.7 percent OPD fee schedule increase factor update to the
conversion factor (Column 6); the combined impact shown in Column 6
plus the CY 2014 frontier State wage

[[Page 75177]]

index adjustment (Column 7); and the estimated impact taking into
account all payments for CY 2014 relative to all payments for CY 2013,
including the impact of changes in estimated outlier payments and
changes to the pass-through payment estimate (Column 8).
We did not model an explicit budget neutrality adjustment for the
rural adjustment for SCHs because we are not making any changes to the
policy for CY 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 final rule with comment period will redistribute money
during implementation also will depend on changes in volume, practice
patterns, and the mix of services billed between CY 2013 and CY 2014 by
various groups of hospitals, which CMS cannot forecast.
Overall, we estimate that the final OPPS rates for CY 2014 will
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 changes will result in a
1.9 percent estimated increase in Medicare payments to all other
hospitals. Those estimated payments will not significantly impact other
providers.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 55 shows the total number of
facilities (4,068), including designated cancer and children's
hospitals and CMHCs, for which we were able to use CY 2012 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
final rule with comment period. At this time, we are unable to
calculate a disproportionate share (DSH) variable for hospitals not
participating in the IPPS. Hospitals for which we do not have a DSH
variable are grouped separately and generally include freestanding
psychiatric hospitals, rehabilitation hospitals, and long-term care
hospitals. We show the total number of OPPS hospitals (3,905),
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
101 CMHCs at the bottom of the impact table and discuss that impact
separately below.
Column 2: APC Recalibration for Policies Other Than Outpatient
Laboratory Test Packaging
Column 2 shows the estimated independent effect of all relative
weight changes between CY 2013 and CY 2014 resulting from final
policies other than packaging outpatient laboratory tests previously
paid under the clinical laboratory fee schedule into the OPPS. These
final policies include packaging drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure (stress agents and Cysview), drugs and
biologicals that function as supplies when used in a surgical procedure
(skin substitutes), certain procedures described by add-on codes, and
device removal procedures; new cost report data for estimating CT and
MRI relative weights; and revisions to coding and APC structure for
stereotactic radiosurgery. This column also reflects reclassification
of services among APC groups due to updated CY 2012 hospital claims
data and the most recent hospital cost report data available. Changes
due to APC recalibration are less significant than in the CY 2014 OPPS/
ASC proposed rule impact analysis, as several proposed policies were
not finalized. Increases for rural hospitals are largely attributable
to adoption of a single payment for clinic visits. Reductions for low
volume hospitals, particularly rural hospitals, are attributable to
reductions for certain mental health services. Under the OPPS, payment
for mental health services on a single day cannot exceed payment for
partial hospitalization, and APC recalibration reduces the relative
weight for partial hospitalization for CY 2014.
Column 3: APC Recalibration Due to Packaging Outpatient Laboratory
Services
Column 3 shows the estimated impact of APC recalibration within the
CY 2014 OPPS resulting from our packaging policy for outpatient
laboratory services currently paid under the CLFS. This column compares
the estimated CY 2014 OPPS payments with the addition of packaged
laboratory services to CY 2014 OPPS payment in Column 2 plus payment
for laboratory services at CY 2013 CLFS payment rates. Packaging
laboratory services modestly reduces payment to rural hospitals who no
longer receive separate payment for common laboratory tests. Relative
weights for visits, x-rays, and the small set of common services
furnished by rural hospitals (shown in Column 1) do increase with
packaging, but this does not fully offset the impact of packaging
laboratory tests. Packaging laboratory services also results in modest
reductions to major teaching hospitals.
Column 4: APC Recalibration--All Changes
Column 4 shows the estimated combined effect of APC recalibration
related to the policies modeled in Columns 2 and 3. Column 4 also
reflects any changes in multiple procedure discount patterns or
conditional packaging that occur as a result of the changes in the
relative magnitude of payment weights. As a result of APC
recalibration, we estimate that urban hospitals will experience an
increase of 0.1 percent, with the impact ranging from an increase of
0.4 percent to a decrease of 0.3 percent depending on the number of
beds. Rural hospitals will experience a decrease of 0.4 percent, with
the impact ranging from an increase of 0.5 percent to a decrease of 1.7
percent depending on the number of beds. Major teaching hospitals
experience a decrease of 0.6 percent overall, largely attributable to
packaging laboratory services. Packaging laboratory services also
modestly reduces the relative weight for major teaching hospitals,
while minor teaching hospitals and nonteaching hospitals experience
modest increases.

[[Page 75178]]

Column 5: New Wage Indices and the Effect of the Rural and Cancer
Hospital Adjustments
Column 5 demonstrates the combined budget neutral impact of APC
recalibration; updating the wage indexes with the final fiscal year
(FY) 2014 IPPS post-reclassification wage indexes; the rural
adjustment; and the cancer hospital payment adjustment. We modeled the
independent effect of the budget neutrality adjustments and the OPD fee
schedule increase factor by using the relative payment weights and wage
indices for each year, and using a CY 2013 conversion factor that
included the OPD fee schedule increase and a budget neutrality
adjustment for differences in wage indices. We also updated the list of
counties qualifying for the section 505 out-migration adjustment.
Column 5 reflects the independent effects of the updated wage
indices, including the application of budget neutrality for the rural
floor policy on a nationwide basis. This column excludes the effects of
the frontier State wage index adjustment, which is not budget neutral
and is included in Column 7. We did not model a budget neutrality
adjustment for the rural adjustment for SCHs because we are not making
any changes to the policy for CY 2014. We are continuing the rural
payment adjustment of 7.1 percent to rural SCHs for CY 2014, as
described in section II.E. of this final rule with comment period.
We modeled the independent effect of updating the wage indices by
varying only the wage indices, holding APC relative payment weights,
service-mix, and the rural adjustment constant and using the CY 2014
scaled weights and a CY 2013 conversion factor that included a budget
neutrality adjustment for the effect of changing the wage indices
between CY 2013 and CY 2014. Modest redistributions are the result of
final FY 2014 wage policy.
The modeled differential between the CY 2013 cancer hospital
payment adjustment and the CY 2014 cancer hospital payment adjustment
had a minor effect on budget neutrality. We note that cancer hospitals
receive about $24 million less under the CY 2014 adjustment, which
appears as a 0.1 increase for the general hospital population in row 2
of Column 5, All Hospitals (excluding cancer and children's hospitals,
and CMHCs).
Column 6: All Budget Neutrality Changes Combined With the Market Basket
Update
Column 6 demonstrates the combined impact of all the changes
previously described and the update to the conversion factor of 1.7
percent. It shows the estimated cumulative impact of the budget neutral
adjustments from Columns 4 and 5 and the OPD fee schedule increase
factor of 1.7 percent. With the exception of small rural hospitals and
rural hospitals in the Middle Atlantic, we estimate that the addition
of the 1.7 percent market basket alleviates negative impacts on
payments for CY 2014 created by budget neutrality made in Columns 4 and
5 for payments made to most hospitals. Overall, these changes increase
payments to urban hospitals by 1.9 percent and to rural hospitals by
1.1 percent. Most classes of hospitals will receive an increase in line
with the 1.7 percent overall increase after the update is applied to
the budget neutrality adjustments.
Column 7: All Adjustments With the Frontier State Wage Index Adjustment
This column shows the impact of all budget neutrality adjustments,
application of the 1.7 percent OPD fee schedule increase factor, and
the nonbudget neutral impact of applying the CY 2014 frontier State
wage adjustment (that is, the frontier State wage index change in
addition to all changes reflected in Column 6). This column differs
from Column 6 solely based on application of the nonbudget neutral
frontier State wage index adjustment. Rural hospitals in West North
Central and Mountain States experience increases in payment of 3.2 and
2.3 percent, respectively, as a result of the frontier State wage index
adjustment, while urban hospitals in those States experience increases
of 3.6 and 2.1 percent, respectively.
Column 8: All Changes for CY 2014
Column 8 depicts the full impact of the CY 2014 policies on each
hospital group by including the effect of all of the changes for CY
2014 and comparing them to all estimated payments in CY 2013. Column 8
shows the combined budget neutral effects of Column 4 and 5; the OPD
fee schedule increase; the impact of the frontier State wage index
adjustment; the impact of estimated OPPS outlier payments as discussed
in section II.G. of this final rule with comment period; the change in
the Hospital OQR Program payment reduction for the small number of
hospitals in our impact model that failed to meet the reporting
requirements (discussed in section XIII. of this final rule with
comment period); and the difference in 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 52
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
changes for CY 2014 will increase payments to all providers by 1.8
percent for CY 2014. We modeled the independent effect of all changes
in Column 8 using the final relative payment weights for CY 2013 and
the final relative payment weights for CY 2014. We used the final
conversion factor for CY 2013 of $71.313 and the final CY 2014
conversion factor of $72.672 discussed in section II.B. of this final
rule with comment period.
Column 8 contains simulated outlier payments for each year. We used
the one year charge inflation factor used in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50982) of 4.73 percent (1.0473) to increase
individual costs on the CY 2012 claims, and we used the most recent
overall CCR in the July 2013 Outpatient Provider-Specific File (OPSF)
to estimate outlier payments for CY 2013. Using the CY 2012 claims and
a 4.73 percent charge inflation factor, we currently estimate that
outlier payments for CY 2013, using a multiple threshold of 1.75 and a
fixed-dollar threshold of $2,025 will be approximately 1.1 percent of
total payments. The estimated current outlier payments of 1.1 percent
are incorporated in the comparison in Column 8. We used the same set of
claims and a charge inflation factor of 9.69 percent (1.0969) and the
CCRs in the July 2013 OPSF, with an adjustment of 0.9645, to reflect
relative changes in cost and charge inflation between CY 2012 and CY
2014, to model the CY 2014 outliers at 1.0 percent of estimated total
payments using a multiple threshold of 1.75 and a fixed-dollar
threshold of $2,900.
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 will be negligible. Overall, we estimate that facilities
will experience an increase of 1.8 percent under this final rule with
comment period in CY 2014 relative to total spending in CY 2013. This
projected increase (shown in Column 8) of Table 55 reflects the 1.7
percent OPD fee schedule increase factor, with 0.13 percent for the
change in the pass-through estimate between CY 2013 and CY 2014, less
0.1 percent for the difference in estimated outlier payments

[[Page 75179]]

between CY 2013 (1.1 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 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 is 1.9 percent
after rounding. We estimate that the combined effect of all changes for
CY 2014 will increase payments to urban hospitals by 2.0 percent.
Overall, we estimate that rural hospitals will experience a 1.1
percent increase as a result of the combined effects of all changes for
CY 2014. We estimate that rural hospitals that bill less than 5,000
lines of OPPS services will experience an increase of 2.2 percent and
rural hospitals that bill 5,000 or more lines of OPPS services will
experience increases ranging from 0.1 to 5.0 percent.
Among hospitals by teaching status, we estimate that the impacts
resulting from the combined effects of all changes will include an
increase of 1.4 percent for major teaching hospitals and 1.8 percent
for nonteaching hospitals. Minor teaching hospitals will experience an
estimated increase of 2.3 percent.
In our analysis, we also have categorized hospitals by type of
ownership. Based on this analysis, we estimate that voluntary hospitals
will experience an increase of 2.0 percent, proprietary hospitals will
experience an increase of 2.0 percent, and governmental hospitals will
experience an increase of 1.1 percent.

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
(3) Estimated Effects of OPPS Changes on CMHCs
The last line of Table 55 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
ratesetting 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 continuing the
provider-specific APC structure that we adopted in CY 2011. We modeled
the impact of this APC policy assuming that CMHCs will continue to
provide the same number of days of PHP care, with each day having
either 3 services or 4 or more services, as seen in the CY 2012 claims
data used for this final rule with comment period. We excluded days
with 1 or 2 services because our policy only pays a per diem rate for
partial hospitalization when 3 or more qualifying services are provided
to the beneficiary.
Packaging outpatient laboratory tests results in a 1.8 percent
payment increase to CMHCs, which is offset by a 1.3 percent decrease in
payments from APC recalibration for policies other than packaging
outpatient laboratory tests. Together with the market basket and all
other changes, we estimate that CMHCs will experience an overall 1.8
percent increase in payments from CY 2013 (shown in Column 8).
Column 5 shows that the estimated impact of adopting the final FY
2014 wage index values will result in a small decrease of 0.4 percent
to CMHCs. We note that all providers paid under the OPPS, including
CMHCs, will receive a 1.7 percent OPD fee schedule increase factor.
Column 6 shows that combining this OPD fee schedule increase factor,
along with changes in APC policy for CY 2014 and the FY 2014 wage index
updates, will result in an estimated increase of 1.7 percent. Column 7
shows that adding the frontier State wage index adjustment will result
in no change to the cumulative 1.7 percent increase. Column 8 shows
that adding the changes in outlier and pass-though payments will result
in an additional 0.1 percent increase in payment for CMHCs, for a total
increase of 1.8 percent. This reflects all changes to CMHCs for CY
2014.
(4) Estimated Effect of OPPS Changes on Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary share of payment will
increase for services for which the OPPS payments will rise and will
decrease for services for which the OPPS payments will fall. For
further discussion on the calculation of the national unadjusted
copayments and minimum unadjusted copayments, we refer readers to
section II.I. of this final rule with comment period. In all cases, the
statute limits beneficiary liability for copayment for a procedure to
the hospital inpatient deductible for the applicable year. The CY 2014
inpatient hospital deductible is $1,216.
We estimate that the aggregate beneficiary coinsurance percentage
will be 21.7 percent for all services paid under the OPPS in CY 2014.
The estimated aggregate beneficiary coinsurance reflects the final
policy to package laboratory services into the outpatient hospital
services with which they are billed in addition to general system
adjustments, including recalibration of the APC relative payment
weights, change in the portion of OPPS payments dedicated to pass-
through payments, and changes in the cancer hospital payment
adjustment.
(5) Estimated Effects of OPPS Changes on Other Providers
The relative payment weights and payment amounts established under
the OPPS affect the payments made to ASCs as discussed in section XII.
of this final rule with comment period. No types of providers or
suppliers other than hospitals, CMHCs and ASCs will be affected by the
changes in this final rule with comment period.
(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid
Programs
The effect on the Medicare program is expected to be $600 million
in additional program payments for OPPS services furnished in CY 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
final rule with comment period.
(7) Alternative OPPS Policies Considered
Alternatives to the OPPS changes we proposed and are making and the
reasons for our selected alternatives are discussed throughout this
final rule with comment period. In this section, we discuss some of the
major issues and the alternatives considered.
Alternatives Considered for the Establishment of Comprehensive
APCs
We proposed in section II.A.2.e. of the OPPS proposed rule to
create 29 comprehensive APCs for CY 2014 to prospectively pay for
device-dependent hospital outpatient services associated with 121 HCPCS
codes. We proposed 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. For services
that trigger a comprehensive APC payment, the comprehensive APC would
treat all individually reported codes on the claim as representing
components of the comprehensive service, resulting in a single
prospective payment based on the cost of all individually reported
codes on the claim. For these APCs, we proposed 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 proposed 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 believed the proposed
polices would 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
services when they are furnished to a hospital inpatient.
We considered implementing this policy for CY 2014 as proposed, but
in

[[Page 75185]]

response to public comments we received and because we are providing
significantly greater detail on the comprehensive APC payment
calculation methodology, we are delaying implementation of the policy
for 1 year (we refer readers to section II.A.2.e. of this final rule
with comment period). Although we are finalizing our comprehensive APC
policy effective CY 2015, we also are inviting additional public
comment because there is significant additional information on the
comprehensive APC policy in the preamble of this final rule with
comment period. We also believe that additional time to consider
operational issues over a longer period of time is appropriate for this
new payment methodology. We have published tables in this final rule
with comment period to demonstrate how this policy would have been
implemented in CY 2014, and we will be considering any additional
public comments we receive when we update the policy for CY 2015 to
account for changes that may occur in the CY 2013 claims data.
In our final policy, we have revised some of our APC assignments to
better align resource requirements in accordance with our usual 2 times
rule adjustments and also to ensure that the resources required with
certain complex subsets of procedures are similarly aligned with the
other services in the APC. We have created a complexity adjustment to
assign certain other subsets of complex procedures to different APCs
than the simpler versions of those services. We have reassigned the
composite cardiac ablation APC to the comprehensive APC for combined
electrophysiology and cardiac ablation in order to remove an ambiguity
in our proposed rule, and we have modified our proposal to base the APC
assignment on the identification of the service with the greatest
single service cost in the CY 2012 claims data rather than the proposed
service with the greatest CY 2012 single service payment. Finally, we
are not finalizing our proposal to include costs from certain inpatient
room and board cost centers for comprehensive APC ratesetting because
the outpatient costs associated with services in comprehensive APCs
should not be reported in these inpatient cost centers. Also, we have
removed the cost of brachytherapy seeds from comprehensive payment and
specified that these seeds will be paid through unpackaged dedicated
APC payments.
We considered but did not implement a number of other options. We
considered implementing this policy for CY 2014 as proposed, but did
not do so because we believe we should provide an opportunity for
additional public comment as well as a longer time period for
operational implementation by CMS contractors and other stakeholders.
We considered but did not implement comprehensive APCs as originally
proposed. Although we believe that an averaged payment system similar
to the IPPS with a single payment for a primary or comprehensive
service is our goal and would be feasible, we agreed with commenters
that the sudden transition from component payments to comprehensive
payments could potentially create some economic challenges for some
hospitals. Although we noted that a single payment for single and
multiple component procedures, including short stay procedures, has
worked well in the IPPS for almost 30 years, we determined that a
complexity adjustment as recommended by commenters could reduce the
spread of costs and ease the transition as hospitals explore mechanisms
to increase efficiencies if their mean costs of a specific complex
procedure exceed the average cost.
We considered but did not implement recommendations to eliminate
certain proposed APCs from conversion to comprehensive payments. All of
the proposals for exclusion were based on multiple component payments
or on coding changes. We considered excluding the different APCs where
commenters expressed concerns. However, after analysis of each APC,
after applying our usual processes of modeling coding changes, and
after developing and applying a complexity adjustment for high volume
complex services with a high cost variance from the mean payment, we
determined that these processes applied equally well to the various
APCs and no sets of services stood out as inappropriate for conversion
on the basis of coding changes or the basis of multiple component
procedures that could not have any potential adverse impact mitigated.
We considered but did not implement a multiple procedure adjustment
to the comprehensive APC payment. As an alternative to the complexity
adjustment, we considered a multiplier to be applied when two or more
individual procedures were performed during the same comprehensive
service. However we did not consider that, in our current year
analyses, a single multiplier reflected the entire range of services
that could be combined. We also did not believe that a multiple
procedure adjustment was consistent with the concept of the
comprehensive service representing a single entire service to a
beneficiary. However we will continue to explore other options to
account for multiple components, including multiple surgical procedures
as well as multiple devices, as we continue to analyze comprehensive
APCs in the future.
We considered but did not implement a less comprehensive packaging
policy for comprehensive APCs. We had considered a less comprehensive
packaging policy before our proposed rule, but we did not believe that
was advantageous as we discussed in the proposed rule. We reconsidered
those options after receiving comments, but noted that the few comments
suggesting more limited packaging were balanced by the comments
agreeing with our comprehensive concept. We did not receive any public
comments on this topic concerning issues that we had not already
considered, so therefore we did not modify the packaging rules other
than the exclusion of brachytherapy seeds as noted.
Alternatives Considered for Payment of Hospital Outpatient
Visits
As described in section VII. of this final rule with comment
period, we are finalizing our proposal to replace the current five
levels of visit codes for each clinic visit with a new alphanumeric
Level II HCPCS code representing a single level of payment for clinic
visits. We also are finalizing our proposal to assign the new
alphanumeric Level II HCPCS to newly created APC 0634 with CY 2014 OPPS
payment rates based on the total geometric mean costs of Level 1
through Level 5 clinic visit codes obtained from CY 2012 OPPS claims
data. For CY 2014, we are not finalizing our proposal to replace the
current five levels of visit codes for each Type A ED, and Type B ED
visits with two new alphanumeric Level II HCPCS codes representing a
single level of payment for Type A and Type B of ED visits,
respectively.
In developing this policy, we considered two alternatives, the
first of which was to finalize our proposal to replace the current five
levels of visit codes for each Type A ED, and Type B ED visits with two
new alphanumeric Level II HCPCS codes representing a single level of
payment for Type A and Type B of ED visits, respectively, in addition
to finalizing our proposal to replace the current five levels of visit
codes for each clinic visit with a new alphanumeric Level II HCPCS code
representing a single level of payment for clinic visits.
While we believe this alternative could offer advantages over the
current CY 2013 OPPS visit payment policy, we

[[Page 75186]]

did not choose this alternative because as we describe is section VII.
of this final rule with comment period, in light of the thoughtful and
detailed alternatives put forth by commenters, as well as the comments
on the potential issues associated with a single level of payment for
ED visits that both require additional study on our part here at CMS,
we believe it is best to delay any change in ED visit coding while we
further consider the most appropriate payment structure for Type A and
Type B ED visits.
We also considered replacing the current five levels of visit codes
for each clinic, Type A ED, and Type B ED visit with six 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 also 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 final
rule with comment period, we believed that a single level of payment
for each type of clinic visit was the best policy option as this
proposal would be easily implemented by hospitals; reduces
administrative burden relative to the existing 5-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
payment structure. For ED visits, we believe it is best to delay any
change in ED visit coding while we consider further the most
appropriate payment structure for Type A and Type B ED visits, for the
reasons stated earlier in this section. Therefore, we are finalizing
our proposal to create a new alphanumeric Level II HCPCS code to
describe all levels of clinic visits rather than continue to recognize
five levels each of clinic visits. We are not finalizing our proposal
to create two new alphanumeric Level II HCPCS codes to describe all
levels of Type A and Type B ED visits, respectively, rather than
continue to recognize five levels each of Type A and Type B ED visits.
b. Estimated Effects of CY 2014 ASC Payment System Final 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 final rule with comment period, we are setting the
CY 2014 ASC relative payment weights by scaling the CY 2014 OPPS
relative payment weights by the proposed ASC scaler of 0.9235. The
estimated effects of the updated relative payment weights on payment
rates are varied and are reflected in the estimated payments displayed
in Tables 56 and 57 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 CY 2014 ASC conversion factor by adjusting the
CY 2013 ASC conversion factor by 1.0009 to account for changes in the
pre-floor and pre-reclassified hospital wage indices between CY 2013
and CY 2014 and by applying the CY 2014 MFP-adjusted CPI-U update
factor of 1.2 percent (projected CPI-U update of 1.7 percent minus a
projected productivity adjustment of 0.5 percent). The CY 2014 ASC
conversion factor is $43.471.
(1) Limitations of Our Analysis
Presented here are the projected effects of the 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 CY 2014 changes will be small in the
aggregate for all ASCs. However, such changes may have differential
effects across surgical specialty groups as ASCs continue to adjust to
the payment rates based on the policies of the revised ASC payment
system. We are unable to accurately project such changes at a
disaggregated level. Clearly, individual ASCs will experience changes
in payment that differ from the aggregated estimated impacts presented
below.
(2) Estimated Effects of CY 2014 ASC Payment System Policies on ASCs
Some ASCs are multispecialty facilities that perform the gamut of
surgical procedures from excision of lesions to hernia repair to
cataract extraction; others focus on a single specialty and perform
only a limited range of surgical procedures, such as eye, digestive
system, or orthopedic procedures. The combined effect on an individual
ASC of the update to the CY 2014 payments will depend on a number of
factors, including, but not limited to, the mix of services the ASC
provides, the volume of specific services provided by the ASC, the
percentage of its patients who are Medicare beneficiaries, and the
extent to which an ASC provides different services in the coming year.
The following discussion presents tables that display estimates of the
impact of the CY 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 56 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 57 shows a comparison of estimated CY 2013 payments
to estimated CY 2014 payments for procedures that we estimate will
receive the most Medicare payment in CY 2013.
Table 56 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,

[[Page 75187]]

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 56.
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 are attributable to updates to ASC payment rates for CY 2014
compared to CY 2013.
As seen in Table 56, we estimate that the update to ASC rates for
CY 2014 will result in a 1 percent increase in aggregate payment
amounts for eye and ocular adnexa procedures, a 5 percent increase in
aggregate payment amounts for digestive system procedures, and a 3
percent decrease in aggregate payment amounts for nervous system
procedures.
Generally, for the surgical specialty groups that account for less
ASC utilization and spending, we estimate that the payment effects of
the CY 2014 update are variable. For instance, we estimate that, in the
aggregate, payment for musculoskeletal system procedures will not
change, whereas payment for genitourinary system procedures,
integumentary system procedures and respiratory system procedures will
increase by 3 to 14 percent under the CY 2014 rates.
An estimated increase in aggregate payment for the specialty group
does not mean that all procedures in the group will experience
increased payment rates. For example, the estimated increase for CY
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 will
increase by 6 percent for CY 2014.
Also displayed in Table 56 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 will decrease by
11 percent for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.374

Table 57 below shows the estimated impact of the 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

[[Page 75188]]

the greatest estimated CY 2013 aggregate Medicare payments to ASCs. The
HCPCS codes are sorted in descending order by estimated CY 2013 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 CY 2013 ASC payment rates. The estimated CY 2013
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 update.
BILLING CODE 4210-01-P

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[GRAPHIC] [TIFF OMITTED] TR10DE13.375

[[Page 75190]]

BILLING CODE 4210-01-C
(3) Estimated Effects of ASC Payment System Policies on Beneficiaries
We estimate that the CY 2014 update to the ASC payment system will
be generally positive for beneficiaries with respect to the new
procedures that we are adding to the ASC list of covered surgical
procedures and for those that we are designating as office-based for CY
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 designating as office-based in CY
2014, the beneficiary coinsurance amount will 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 making to the ASC
payment system and the reasons that we have chosen specific options are
discussed throughout this final rule with comment period. There are no
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
final rule with comment period. The first accounting statement, Table
58 (below) illustrates the classification of expenditures for the CY
2014 estimated hospital OPPS incurred benefit impacts associated with
the CY 2014 OPD fee schedule increase, based on the 2013 Trustee's
Report. The second accounting statement, Table 59 (below) illustrates
the classification of expenditures associated with the 1.2 percent CY
2014 update to the ASC payment system, based on the provisions of this
final rule with comment period and the baseline spending estimates for
ASCs in the 2013 Trustee's Report. The third accounting statement,
Table 60 (below), illustrates the classification of expenditures
associated with the 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.

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d. Effects of Requirements for the Hospital OQR Program
In section XIII. of this final rule with comment period, we are
adopting policies affecting the Hospital OQR Program.
Out of 3,352 hospitals that met eligibility requirements, we
determined that 94 hospitals did not meet the requirements to receive
the full OPD fee schedule increase factor for CY 2013. Most of these
hospitals (90 of the 94) chose not to participate in the Hospital OQR
Program. We estimate that 88 hospitals may not receive the full OPD fee
schedule increase factor in CY 2014 and that 90 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

[[Page 75192]]

for the validation score because we believed this level was reasonable
for hospitals to achieve while still ensuring accuracy of the data. In
addition, 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 CY 2014 OPPS/ASC final rule with comment period, for CY
2016 payment determination and subsequent years, we are adding four
quality measures with data collection to begin in CY 2014. For three of
these measures, data will be submitted via an online tool located on a
CMS Web site and one will be submitted via CDC's NHSN. We are removing
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 will 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 CY 2014 Policies for the ASCQR Program
In section XV. of this final rule with comment period, for the
ASCQR Program, we are adopting three additional quality measures for
the CY 2016 payment determination and subsequent years. Data collection
for these proposed measures will begin in CY 2014. We will 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 also are adopting
for the CY 2016 payment determination and subsequent years requirements
for a QualityNet account and security administrator, facility
participation, a minimum threshold and minimum volume for claims-based
measures, and data collection and submission for new measures and for
certain previously finalized 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, although we are not able to estimate the level of this impact
at this time.
f. Effects of Changes to the CfCs for OPOs Relating to the Outcome
Measures Requirement for Recertification
In section XVI. of this final rule with comment period, we
discussed our proposed and final policies 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 revised policy will 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 revised policy will have a
significantly positive effect on the OPOs that avoided automatic
decertification, it is very difficult to quantify the impact of this
policy change. As discussed under section XXI.C. of this final rule
with comment period relating to the ICR requirements, we anticipate
that most OPOs that are decertified will engage in the appeals process
as set forth in Sec. 486.314. However, we have no reliable way of
estimating how many OPOs will likely obtain reversals of their
decertifications during reconsideration or how many would 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 policy change to the outcome measures requirement, we are unable
to provide a specific estimate of that cost savings.
g. Effects of Revisions of the QIO Regulations
In section XVII. of this final rule with comment period rule, we
are updating the regulations at 42 CFR 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 final rule with
comment period, we set forth policies 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 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 regulatory changes ``would modify the provisions under
which CMS contracts

[[Page 75193]]

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 Revised Policies 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 final rule with comment
period, we are revising 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 policy change. 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 will be determined to be
nonhospital-based for 2013 under our revised policy, 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. Therefore, it is
necessary to rely on estimates for each of these factors. As much as
possible, we 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
also use 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 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 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 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 qualify for the first time and receive the maximum
incentive payment, our revised policy 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 revised policy will result in considerably less
than $50,000,000 in payments over and above the payments we would make
in the absence of this policy 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 final rule with comment
period, we are revising 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

[[Page 75194]]

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 policy
change 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
policy change will 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 final rule with comment period may have a significant impact
on approximately 2,040 hospitals with voluntary ownership. For details,
see the Small Business Administration's ``Table of Small Business Size
Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has 100 or fewer beds. We estimate that this final
rule with comment period may have a significant impact on approximately
709 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 final rule with
comment period does not mandate any requirements for State, local, or
tribal governments, or for the private sector.

D. Conclusion

The changes we are making in this final rule with comment period
will affect all classes of hospitals paid under the OPPS and will
affect both CMHCs and ASCs. We estimate that most classes of hospitals
paid under the OPPS will experience a modest increase or a minimal
decrease in payment for services furnished under the OPPS in CY 2013.
Table 55 demonstrates the estimated distributional impact of the OPPS
budget neutrality requirements that will result in a 1.8 percent
increase in payments for all services paid under the OPPS in CY 2014,
after considering all of the changes to APC reconfiguration and
recalibration, as well as the OPD fee schedule increase factor, wage
index changes, including the frontier State wage index adjustment,
estimated payment for outliers, and changes to the pass-through payment
estimate. However, some classes of providers that are paid under the
OPPS will experience more significant gains and others will experience
modest losses in OPPS payments in CY 2014.
The updates to the ASC payment system for CY 2014 will affect each
of the approximately 5,300 ASCs currently approved for participation in
the Medicare program. The effect on an individual ASC will depend on
its mix of patients, the proportion of the ASC's patients who are
Medicare beneficiaries, the degree to which the payments for the
procedures offered by the ASC are changed under the ASC payment system,
and the extent to which the ASC provides a different set of procedures
in the coming year. Table 56 demonstrates the estimated distributional
impact among ASC surgical specialties of the MFP-adjusted CPI-U update
factor of 1.2 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 final rule with comment period in accordance with Executive Order
13132, Federalism, and have determined that they will not have a
substantial direct effect on State, local or tribal governments,
preempt State law, or otherwise have a Federalism implication. As
reflected in Table 55 of this final rule with comment period, we
estimate that OPPS payments to governmental hospitals (including State
and local governmental hospitals) will increase by 1.1 percent under
this final rule with comment period. While we do not know the number of
ASCs or CMHCs with government ownership, we anticipate that it is
small. The analyses we have provided in this section of this final rule
with comment period, in conjunction with the remainder of this
document, demonstrate that this final rule with comment period is
consistent with the regulatory philosophy and principles identified in
Executive Order 12866, the RFA, and section 1102(b) of the Act.
This final rule with comment period will affect payments to a
substantial number of small rural hospitals and a small number of rural
ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some
effects may be significant.

XXV. Waiver of 60-Day Delay of Effective Date

In the absence of an appropriation for FY 2014 or a Continuing
Resolution, the Federal Government shut down on October 1, 2013. During
this shutdown, which lasted from October 1, 2013 through October 16,
2013, only excepted operations continued, which largely excluded work
on the final rule with comment period and the final rules contained in
this document. Accordingly, most of the work on these rules was not
completed in accordance with our usual schedule for final payment
rules, which aims for an issuance date of November 1, followed by an
effective date of January 1, to ensure that the policies are effective
at the start of the calendar year to which they apply.
We ordinarily provide a 60-day delay in the effective date of final
rules after the date they are issued. The 60-day delay in effective
date can be waived, however, if the agency finds, for good cause, that
the delay is impracticable, unnecessary, or contrary to the public
interest, and the agency incorporates a statement of the findings and
its reasons in the rule issued. We believe it would be contrary to the
public interest to delay the effective date of the OPPS and ASC payment
systems portions,

[[Page 75195]]

including the Hospital OQR Program and the ASCQR Program parts of the
final rule with comment period contained in this document. In
accordance with sections 1833(t) and 1833(i) of the Act, the OPPS and
the ASC payment systems are calendar year payment systems, and we
typically issue the OPPS/ASC payment systems final rule with comment
period by November 1 of each year to both comply with the requirement
to annually review and update these payment systems and ensure that the
payment policies for these systems are effective on January 1, the
first day of the calendar year to which the policies are intended to
apply. The Hospital OQR Program and the ASCQR Program are intended to
align with the OPPS and the ASC payment system, respectively.
We also believe it would be contrary to the public interest to
delay the effective date of the Hospital VBP Program performance and
baseline period policies being finalized in this document. These
policies are being finalized in this document solely because we
inadvertently neglected to propose and finalize them in the FY 2014
IPPS/LTCH PPS proposed and final rules. These policies are intended to
align with the previously finalized performance and baseline periods
for other measures included in the FY 2016 Hospital VBP Program, with
January 1, 2014 being the start date of reporting. In addition, a delay
in effective date would be contrary to the public interest in ensuring
that payments under the IPPS to hospitals in FY 2016 properly and
completely reflect their performance on quality measures in 2014.
We also believe that it would be contrary to the public interest to
delay the effective date of the revisions to the provider reimbursement
determinations and appeals reopening rule under 42 CFR 405.1885 in this
document because, as stated herein, we have determined that applying
these revisions to currently pending cost reports, appeals, and
reopenings is in the public interest in finality of payment amounts and
necessary to comply with the requirements of sections 1878 and 1886 of
the Act.
If the effective date of this final rule with comment period and
final rules mentioned above in this document is delayed by 60 days, the
OPPS and ASC payment system policies (including the Hospital OQR and
the ASCQR Program policies), the Hospital VBP Program performance and
baseline period policies, and the revisions to the provider
reimbursement determinations and appeals regulations at 42 CFR
405.1885, adopted in this final rule with comment period and final
rules, will not be effective as of the beginning of the payment year.
We note that our waiver of the delayed effective date only applies to
the OPPS and ASC payment system policies (including the Hospital OQR
and the ASCQR Program policies), the Hospital VBP Program performance
and baseline period policies, and the revisions to the provider
reimbursement determinations and appeals regulations at 42 CFR
405.1885, that are adopted in this final rule with comment period and
in the applicable final rules. The delayed effective date for all other
policies in the final rules in this document is not waived, and these
policies will be effective on January 27, 2014.

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 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 amending 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).
(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 finding of fact based on a factual matter
that first arose in or was first determined for a cost reporting period
that predates the period at issue (in an appeal filed, or a reopening

[[Page 75196]]

requested by a provider or initiated by an intermediary, under this
subpart), and once determined, was used to determine an aspect of the
provider's reimbursement for one or more later cost reporting periods.
(iv) Except as provided for by this section, Sec. 405.1887, and
Sec. 405.1889, a specific finding on a matter at issue may not be
reopened and, if reopened, revised.
* * * * *
(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 (a)(1)(iv) of this section, but not to
such findings when made as part of a determination of reasonable cost
under section 1861(v)(1)(A) of the Act.
* * * * *

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, 1862, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395y, and 1395hh).

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 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES

0
8. 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, 1395l(t), and 1395hh).

0
9. Section 419.2 is amended by revising paragraphs (b) introductory
text, (b)(3), and (b)(11) and adding paragraphs (b)(13) through (18) 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;
* * * * *
(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;
* * * * *
(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) Drugs and biological that function as supplies when used in a
surgical procedure (including, but not limited to, skin substitutes and
similar products that aid wound healing and implantable biological);
(17) Certain clinical diagnostic laboratory tests; and
(18) Certain services described by add-on codes.
* * * * *

0
10. Section 419.22 is amended by revising the introductory text and
paragraphs (j) and (1) to read as follows:

Sec. 419.22 Hospital 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)(11), prosthetic devices,
prosthetic supplies, and orthotic devices.
* * * * *
(l) Except as provided in Sec. 419.2(b)(17), clinical diagnostic
laboratory tests.
* * * * *

0
11. 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
12. Section 419.46 is added to Subpart D to read as follows:

[[Page 75197]]

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 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.

[[Page 75198]]

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
13. 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 it remains with the
patient when the patient is released from the hospital.
* * * * *

PART 475--QUALITY IMPROVEMENT ORGANIZATIONS

0
14. 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
15. 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) though (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
16. 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, and/or quality improvement initiatives as set forth in
Sec. 475.103.
(d) Demonstrate the ability to perform the functions of a QIO with
objectivity and impartiality and in a fair and neutral manner.

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 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, local, 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

[[Page 75199]]

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 with the appropriate
expertise and specialization in the areas of health care concerning the
quality improvement initiatives;
(3) The organization's access to professionals with appropriate
knowledge of quality improvement methodologies and practices; and
(4) 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 quality
improvement initiatives; such prior experience may include prior
similar quality improvement initiative experience and whether it
achieved successful results.
(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--
(i) There is no other entity available for an area with which the
Secretary can enter into a contract under this part; or
(ii) 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), meets
all other requirements and standards of this part, and demonstrates to
the satisfaction of CMS that, in performing QIO activities, the payor
organization will act with complete objectivity and independence from
its payor program.
(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--
(a) Ensure that all awardees meet the requirements of Sec. Sec.
475.101 through 475.103, as applicable; and
(b) 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
17. 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
18. The heading of part 476 is revised to read as set forth above.

0
19. In Sec. 476.1, 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 or 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
20. 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
21. 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
22. 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) De-certification and competition. If an OPO does not meet two
out of the 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 de-certified. If the OPO does not appeal or the OPO
appeals and the reconsideration official and CMS hearing officer uphold
the de-certification, the OPO's service area is opened for competition
from other OPOs. The de-certified 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
23. 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:
* * * * *

[[Page 75200]]

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

0
24. 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
25. 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 HIPAA
standard transaction as an inpatient hospital or emergency room setting
in each of the Federal fiscal years 2012 and 2013.
* * * * *

0
26. 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: November 14, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: November 20, 2013.
Kathleen Sebelius,
Secretary.
[FR Doc. 2013-28737 Filed 11-27-13; 4:15 pm]
BILLING CODE 4120-01-P