[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Proposed Rules]
[Pages 39200-39375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16577]



[[Page 39199]]

Vol. 80

Wednesday,

No. 130

July 8, 2015

Part II





Department of Health and Human Services





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Center for Medicare & Medicaid Services





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42 CFR Parts 410, 412, 416





Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Short Inpatient Hospital Stays; Transition for Certain 
Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient 
Prospective Payment System; Proposed Rule

  Federal Register / Vol. 80 , No. 130 / Wednesday, July 8, 2015 / 
Proposed Rules  

[[Page 39200]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 412, 416, and 419

[CMS-1633-P]
RIN 0938-AS42


Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Short Inpatient Hospital Stays; Transition for Certain 
Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient 
Prospective Payment System

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2016 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this proposed rule, we 
describe the proposed changes to the amounts and factors used to 
determine the payment rates for Medicare services paid under the OPPS 
and those paid under the ASC payment system. In addition, this proposed 
rule would update and refine the requirements for the Hospital 
Outpatient Quality Reporting (OQR) Program and the ASC Quality 
Reporting (ASCQR) Program.
    Further, this proposed rule includes certain proposals relating to 
the hospital inpatient prospective payment system: proposed changes to 
the 2-midnight rule under the short inpatient hospital stay policy, as 
well as a discussion of the related -0.2 percent payment adjustment; 
and a proposed transition for Medicare-dependent, small rural hospitals 
located in all-urban States.

DATES: Comment Period: To be assured consideration, comments on all 
sections of this proposed rule must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on August 
31, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1633-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1633-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1633-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the ``SUPPLEMENTARY INFORMATION'' section.

FOR FURTHER INFORMATION CONTACT: 
    Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact 
Carol Schwartz at (410) 786-0576.
    Ambulatory Surgical Center (ASC) Payment System, contact Erick 
Chuang at (410) 786-1816.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia at (410) 786-7236.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Data Measures, 
contact Vinitha Meyyur at (410) 786-8819.
    Blood and Blood Products, contact Lela Strong at (410) 786-3213.
    Cancer Hospital Payments, contact David Rice at (410) 786-6004.
    Chronic Care Management (CCM) Services, contact Twi Jackson at 
(410) 786-1159.
    CPT and Level II Alphanumeric HCPCS Codes, contact Marjorie Baldo 
at (410) 786-4617.
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver at (410) 786-9379.
    Composite APCs (Extended Assessment and Management, Low Dose 
Brachytherapy, Multiple Imaging), contact Twi Jackson at (410) 786-
1159.
    Comprehensive APCs, contact Elisabeth Daniel at (410) 786-0237.
    Hospital Observation Services, contact Twi Jackson at (410) 786-
1159.
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Elizabeth Bainger at 
(410) 786-0529.
    Hospital Outpatient Quality Reporting (OQR) Program and Data 
Issues, contact Vinitha Meyyur at (410) 786-8819.
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Twi Jackson at (410) 786-1159.
    Inpatient Only Procedures List, contact Lela Strong at (410) 786-
3213.
    New Technology Intraocular Lenses (NTIOLs), contact John McInnes at 
(410) 786-0791.
    No Cost/Full Credit and Partial Credit Devices, contact Carol 
Schwartz at (410) 786-0576.
    OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237.
    OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier 
Payments, and Wage Index), contact David Rice at (410) 786-6004.
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Elisabeth Daniel at (410) 786-0237.
    OPPS Exceptions to the Two Times Rule, contact Marjorie Baldo at 
(410) 786-4617.

[[Page 39201]]

    OPPS Packaged Items/Services, contact Elisabeth Daniel at (410) 
786-0237.
    OPPS Pass-Through Devices and New Technology Procedures/Services, 
contact Carol Schwartz at (410) 786-0576.
    OPPS Status Indicators (SI) and Comment Indicators (CI), contact 
Marina Kushnirova at (410) 786-2682.
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact Dexter Dickey at (410) 786-6856.
    Rural Hospital Payments, contact David Rice at (410) 786-6004.
    Stereotactic Radiosurgery Services (SRS), contact Elisabeth Daniel 
at (410) 786-0237.
    Transition for Medicare-Dependent, Small Rural Hospitals in All-
Urban States, contact Shevi Marciano at (410) 786-4487.
    Two-Midnight Policy--General Issues, contact Twi Jackson at (410) 
786-1159.
    Two-Midnight Policy--Medical Review, contact Steven Rubio at (410) 
786-1782.
    All Other Issues Related to Hospital Outpatient and Ambulatory 
Surgical Center Payments Not Previously Identified, contact Marjorie 
Baldo at (410) 786-4617.

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
AMI Acute myocardial infarction
APC Ambulatory Payment Classification
APU Annual payment update
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAHPS Consumer Assessment of Healthcare Providers and Systems
CAP Competitive Acquisition Program
C-APC Comprehensive Ambulatory Payment Classification
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter-associated urinary tract infection
CBSA Core-Based Statistical Area
CCM Chronic care management
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CED Coverage with Evidence Development
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CI Comment indicator
CLABSI Central Line [Catheter] Associated Blood Stream Infection
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CR Change request
CRC Colorectal cancer
CSAC Consensus Standards Approval Committee
CT Computed tomography
CV Coefficient of variation
CY Calendar year
DFO Designated Federal Official
DIR Direct or indirect remuneration
DME Durable medical equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and 
Supplies
DRA Deficit Reduction Act of 2005, Public Law 109-171
DSH Disproportionate share hospital
EACH Essential access community hospital
EAM Extended assessment and management
EBRT External beam radiotherapy
ECG Electrocardiogram
ED Emergency department
EDTC Emergency department transfer communication
EHR Electronic health record
E/M Evaluation and management
ESRD End-stage renal disease
ESRD QIP End-Stage Renal Disease Quality Improvement Program
FACA Federal Advisory Committee Act, Public Law 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCP Health care personnel
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HCUP Healthcare Cost and Utilization Project
HEU Highly enriched uranium
HH QRP Home Health Quality Reporting Program
HHS Department of Health and Human Services
HIE Health information exchange
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
HPMS Health Plan Management System
IBD Inflammatory bowel disease
ICC Interclass correlation coefficient

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ICD Implantable cardioverter defibrillator
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10 International Classification of Diseases, Tenth Revision
ICH In-center hemodialysis
IDTF Independent diagnostic testing facility
IGI IHS Global Insight, Inc.
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IORT Intraoperative radiation treatment
IPFQR Inpatient Psychiatric Facility Quality Reporting
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IT Information technology
LCD Local coverage determination
LDR Low dose rate
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public 
Law 114-10
MAP Measure Application Partnership
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MEG Magnetoencephalography
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MLR Medical loss ratio
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MR Medical review
MRA Magnetic resonance angiography
MRgFUS Magnetic Resonance Image Guided Focused Ultrasound
MRI Magnetic resonance imaging
MRSA Methicillin-Resistant Staphylococcus Aures
MS-DRG Medicare severity diagnosis-related group
MSIS Medicaid Statistical Information System
MUC Measure under consideration
NCCI National Correct Coding Initiative
NDC National Drug Code
NEMA National Electrical Manufacturers Association
NHSN National Healthcare Safety Network
NOS Not otherwise specified
NPI National Provider Identifier
NPWT Negative Pressure Wound Therapy
NQF National Quality Forum
NQS National Quality Strategy
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
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
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCHQR PPS-Exempt Cancer Hospital Quality Reporting
PCR Payment-to-cost ratio
PDC Per day cost
PDE Prescription Drug Event
PE Practice expense
PEPPER Program Evaluation Payment Patterns Electronic Report
PHP Partial hospitalization program
PHSA Public Health Service Act, Public Law 96-88
PMA Premarket approval
PN Pneumonia
POS Place of service
PPI Producer Price Index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PQRS Physician Quality Reporting System
QDC Quality data code
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
RTI Research Triangle Institute, International
RVU Relative value unit
SAD Self-administered drug
SAMS Secure Access Management Services
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SES Socioeconomic status
SI Status indicator
SIR Standardized infection ratio
SNF Skilled nursing facility
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Surgical site infection
TEP Technical Expert Panel
TIP Transprostatic implant procedure
TOPs Transitional Outpatient Payments
USPSTF United States Preventive Services Task Force
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)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule 
With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Proposed Use of Single and Multiple Procedure Claims
    c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Proposed Data Development Process and Calculation of Costs 
Used for Ratesetting
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Panel Regarding Data Development
    d. Proposed Calculation of Single Procedure APC Criteria-Based 
Costs
    (1) Blood and Blood Products
    (2) Brachytherapy Sources
    e. Proposed Comprehensive APCs (C-APCs) for CY 2016
    (1) Background
    (2) Proposed C-APCs to be Paid under the C-APC Payment Policy 
for CY 2016
    (3) Proposed CY 2016 Policies for Specific C-APCs
    f. Proposed Calculation of Composite APC Criteria-Based Costs
    (1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (2) Mental Health Services Composite APC (APC 0034)
    (3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Proposed Changes to Packaged Items and Services
    a. Background and Rationale for Packaging in the OPPS
    b. Proposed Packaging Policies for CY 2016
    (1) Ancillary Services
    (2) Drugs and Biologicals that function as Supplies When Used in 
a Surgical Procedure
    (3) Clinical Diagnostic Laboratory Tests
    4. Proposed Calculation of OPPS Scaled Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default CCRs
    E. Proposed Adjustment for Rural SCHs and EACHs under Section 
1833(t)(13)(B) of the Act
    F. Proposed OPPS Payment to Certain Cancer Hospitals Described 
by Section 1886(d)(1)(B)(v) of the Act
    1. Background
    2. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2016

[[Page 39203]]

    G. Proposed Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    H. Proposed Calculation of an Adjusted Medicare Payment from the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
    1. Background
    2. Proposed OPPS Copayment Policy
    3. Proposed Calculation of an Adjusted Copayment Amount for an 
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Proposed Treatment of New CY 2015 Level II HCPCS and CPT 
Codes Effective April 1, 2015 and July 1, 2015 for Which We Are 
Soliciting Public Comments in this CY 2016 OPPS/ASC Proposed Rule
    2. Proposed Process for New Level II HCPCS Codes That Will Be 
Effective October 1, 2015 and January 1, 2016 for Which We Will Be 
Soliciting Public Comments in the CY 2016 OPPS/ASC Final Rule with 
Comment Period
    3. Proposed Treatment of New and Revised CY 2016 Category I and 
III CPT Codes That Will be Effective January 1, 2016 for Which We 
Are Soliciting Public Comments in This CY 2016 OPPS/ASC Proposed 
Rule
    B. Proposed OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Proposed APC Exceptions to the 2 Times Rule
    C. Proposed New Technology APCs
    1. Background
    2. Additional New Technology APC Groups
    3. Proposed Procedures Assigned to New Technology APCs
    a. Transprostatic Urethral Implant Procedure
    b. Retinal Prosthesis Implant Procedure
    D. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    1. Airway Endoscopy Procedures
    2. Diagnostic Tests and Related Services
    3. Excision/Biopsy and Incision and Drainage Procedures
    4. Gastrointestinal (GI) Procedures
    5. Imaging Services
    6. Orthopedic Procedures
    7. Skin Procedures
    8. Urology and Related Services Procedures
    9. Vascular Procedures (Excluding Endovascular Procedures)
IV. Proposed OPPS Payment for Devices
    A. Proposed Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. Proposed CY 2016 Policy
    2. Proposed Annual Rulemaking Process in Conjunction with 
Quarterly Review Process for Device Pass-through Payment 
Applications
    a. Background
    b. Proposed Revision to Application Process for Device Pass-
through Payments
    c. Criterion for Newness
    3. Provisions for Reducing Transitional Pass-Through Payments to 
Offset Costs Packaged into APC Groups
    a. Background
    b. Proposed CY 2016 Policy
    B. Proposed Device-Intensive Procedures
    1. Background
    2. Proposed Changes to Device Edit Policy
    3. Proposed Adjustment to OPPS Payment for No Cost/Full Credit 
and Partial Credit Devices
    a. Background
    b. Proposed Policy for CY 2016
    4. Proposed Adjustment to OPPS Payment for Discontinued Device-
Intensive Procedures
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Proposed Drugs and Biologicals with Expiring Pass-Through 
Status in CY 2015
    3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with 
New or Continuing Pass-Through Status in CY 2016
    4. Proposed Provisions for Reducing Transitional Pass-Through 
Payments for Policy-Packaged Drugs and Biologicals to Offset Costs 
Packaged into APC Groups
    a. Background
    b. Proposed Payment Offset Policy for Diagnostic 
Radiopharmaceuticals
    c. Proposed Payment Offset Policy for Contrast Agents
    d. Proposed Payment Offset Policy for Drugs, Biologicals, and 
Radiopharmaceuticals That Function as Supplies When Used in a 
Diagnostic Test or Procedure (Other Than Diagnostic 
Radiopharmaceuticals and Contrast Agents and Drugs and Biologicals 
That Function as Supplies When Used in a Surgical Procedure)
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals without Pass-Through Status
    1. Background
    2. Proposed Criteria for Packaging Payment for Drugs, 
Biologicals, and Radiopharmaceuticals
    a. Background
    b. Proposed Cost Threshold for Packaging of Payment for HCPCS 
Codes That Describe Certain Drugs, Certain Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Proposed High Cost/Low Cost Threshold for Packaged Skin 
Substitutes
    d. Proposed Packaging Determination for HCPCS Codes That 
Describe the Same Drug or Biological But Different Dosages
    3. Proposed Payment for Drugs and Biologicals without Pass-
Through Status That Are Not Packaged
    a. Proposed Payment for Specified Covered Outpatient Drugs 
(SCODs) and Other Separately Payable and Packaged Drugs and 
Biologicals
    b. Proposed CY 2016 Payment Policy
    4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    5. Proposed Payment Adjustment Policy for Radioisotopes Derived 
From Non-Highly Enriched Uranium Sources
    6. Proposed Payment for Blood Clotting Factors
    7. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital 
Claims Data
    C. Self-Administered Drugs (SADs) Technical Correction
    D. Proposed OPPS Payment for Biosimilar Biological Products
    1. Background
    2. Proposed Payment Policy for Biosimilar Biological Products
    3. Proposed OPPS Transitional Pass-Through Payment Policy for 
Biosimilar Biological Products
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits
    A. Proposed Payment for Hospital Outpatient Clinic and Emergency 
Department Visits
    B. Proposed Payment for Critical Care Services
    C. Proposed Payment for Chronic Care Management Services
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2016
    1. Proposed PHP APC Geometric Mean Per Diem Costs
    2. PHP Ratesetting Process
    a. Development of PHP claims
    b. Determination of CCRs for CMHCs and Hospital-Based PHPs
    (1) Calculation and Assessment of CMHC PHP CCRs
    (2) Calculation and Assessment of Hospital-Based PHP CCRs
    c. Identification of PHP Allowable Charges
    d. Determination of PHP APC Per Diem Costs
    e. Development of Service Days and Cost Modeling
    f. Issues Regarding Correct Coding and Reasonable Charges
    C. Proposed Separate Threshold for Outlier Payments to CMHCs
IX. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient List
    X. Proposed Nonrecurring Policy Changes
    A. Changes for Payment for Computed Tomography (CT)
    B. Lung Cancer Screening with Low Dose Computed Tomography
    C. Payment for Corneal Tissue in the HOPD and the ASC
    1. Background
    2. Proposed CY 2016 Change to Corneal Tissue Payment Policy in 
the HOPD and the ASC

[[Page 39204]]

XI. Proposed CY 2016 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2016 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2016 Comment Indicator Definitions
XII. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Proposed Treatment of New and Revised Codes
    1. Background on Current Process for Recognizing New and Revised 
Category I and Category III CPT Codes and Level II HCPCS Codes
    2. Proposed Treatment of New and Revised Level II HCPCS Codes 
and Category III CPT Codes Implemented in April 2015 and July 2015 
for Which We Are Soliciting Public Comments in this Proposed Rule
    3. Proposed Process for Recognizing New and Revised Category I 
and Category III CPT Codes That Will Be Effective January 1, 2016
    a. Current Process for Accepting Comments on New and Revised CPT 
Codes That Are Effective January 1
    b. Proposed Modification of the Current Process for Accepting 
Comments on New and Revised Category I and III CPT Codes That Are 
Effective January 1
    4. Proposed Process for New and Revised Level II HCPCS Codes 
That Will Be Effective October 1, 2015 and January 1, 2016 for Which 
We Will be Soliciting Public Comments in the CY 2016 OPPS/ASC Final 
Rule with Comment Period
    C. Proposed Update to the Lists of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Proposed Covered Surgical Procedures Designated as Office-
Based
    b. ASC Covered Surgical Procedures Designated as Device-
Intensive--Finalized Policy for CY 2015 and Proposed Policy for CY 
2016
    c. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    d. Proposed Adjustment to ASC Payments for Discontinued Device-
Intensive Procedures
    e. Proposed Additions to the List of ASC Covered Surgical 
Procedures
    f. ASC Treatment of Surgical Procedures Proposed for Removal 
from the OPPS Inpatient List for CY 2016
    2. Covered Ancillary Services
    a. Proposed List of Covered Ancillary Services
    b. Proposal to Exclude Corneal Tissue Procurement from the 
Covered Ancillary Services List When Used for Nontransplant 
Procedures
    c. Proposal to Remove Certain Services from the Covered 
Ancillary Services List That Are Not Used as Ancillary and Integral 
to a Covered Surgical Procedure
    D. Proposed ASC Payment for Covered Surgical Procedures and 
Covered Ancillary Services
    1. Proposed ASC Payment for Covered Surgical Procedures
    a. Background
    b. Proposed Update to ASC Covered Surgical Procedure Payment 
Rates for CY 2016
    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. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2016
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests to Establish New NTIOL Classes for CY 2016
    3. Payment Adjustment
    4. Proposed Newness Criterion
    F. Proposed ASC Payment and Comment Indicators
    1. Background
    2. Proposed ASC Payment and Comment Indicators
    G. Calculation of the Proposed ASC Conversion Factor and the 
Proposed ASC Payment Rates
    1. Background
    2. Proposed Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2016 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of Proposed CY 2016 ASC Payment Rates
XIII. Requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program
    A. Background
    1. Overview
    2. Statutory History of the Hospital OQR Program
    B. Hospital OQR Program Quality Measures
    1. Considerations in the Selection of Hospital OQR Program 
Quality Measures
    2. Retention of Hospital OQR Program Measures Adopted in 
Previous Payment Determinations
    3. Removal of Quality Measures from the Hospital OQR Program 
Measure Set
    a. Considerations in Removing Quality Measures from the Hospital 
OQR Program
    b. Criteria for Removal of ``Topped-Out'' Measures
    4. Hospital OQR Program Quality Measures Adopted in Previous 
Rulemaking
    5. Proposed Hospital OQR Program Quality Measure for Removal for 
CY 2017 Payment Determination and Subsequent Years
    6. Proposed New Hospital OQR Program Quality Measures for the CY 
2018 and CY 2019 Payment Determinations and Subsequent Years
    a. Proposed New Quality Measure for the CY 2018 Payment 
Determination and Subsequent Years: OP-33: External Beam 
Radiotherapy (EBRT) for Bone Metastases (NQF #1822)
    b. Proposed New Hospital OQR Program Quality Measure for the CY 
2019 Payment Determination and Subsequent Years: OP-34: Emergency 
Department Transfer Communication (EDTC) (NQF #0291)
    7. Hospital OQR Program Measures and Topics for Future 
Consideration
    8. Maintenance of Technical Specifications for Quality Measures
    9. Public Display of Quality Measures
    C. Administrative Requirements
    1. QualityNet Account and Security Administrator
    2. Proposed Requirements Regarding Participation Status
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    1. Proposed Change Regarding Hospital OQR Program Annual 
Percentage Update (APU) Determinations
    2. Requirements for Chart-Abstracted Measures Where Patient-
Level Data Are Submitted Directly to CMS
    3. Claims-Based Measure Data Requirements
    4. Proposed Data Submission Requirements for Measure Data 
Submitted via a Web-Based Tool
    a. Previously Finalized Measures
    b. Proposed Data Submission Requirements for Web-Based Measure 
OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF 
#1822) for the CY 2018 Payment Determination and Subsequent Years
    c. Proposed Data Submission Requirements for Web-Based Measure 
OP-34: Emergency Department Transfer Communication (EDTC) Measure 
for the CY 2019 Payment Determination and Subsequent Years
    5. Population and Sampling Data Requirements for the CY 2018 
Payment Determination and Subsequent Years
    6. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2018 
Payment Determination and Subsequent Years
    7. Extension or Exemption Process for the CY 2018 Payment 
Determination and Subsequent Years
    8. Hospital OQR Program Reconsideration and Appeals Procedures 
for the CY 2018 Payment Determination and Subsequent Years
    E. Proposed Payment Reduction for Hospitals That Fail to Meet 
the Hospital Outpatient Quality Reporting (OQR) Program Requirements 
for the CY 2016 Payment Determination
    1. Background
    2. Proposed Reporting Ratio Application and Associated 
Adjustment Policy for CY 2016
XIV. Requirements for the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program

[[Page 39205]]

    3. Regulatory History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. Policies for Retention and Removal of Quality Measures from 
the ASCQR Program
    3. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    4. ASCQR Program Quality Measures for the CY 2018 Payment 
Determination and Subsequent Years
    5. ASCQR Program Measures for Future Consideration
    a. Normothermia Outcome
    b. Unplanned Anterior Vitrectomy
    6. Maintenance of Technical Specifications for Quality Measures
    7. Public Reporting of ASCQR Program Data
    C. Administrative Requirements
    1. Requirements Regarding QualityNet Account and Security 
Administrator
    2. Requirements Regarding Participation Status
    D. Form, Manner, and Timing of Data Submitted for the ASCQR 
Program
    1. Requirements Regarding Data Processing and Collection Periods 
for Claims-Based Measures Using Quality Data Codes (QDCs)
    2. Minimum Threshold, Minimum Case Volume, and Data Completeness 
for Claims-Based Measures Using QDCs
    3. Requirements for Data Submitted Via a CMS Online Data 
Submission Tool
    4. Claims-Based Measure Data Requirements for the ASC-12: 
Facility Seven-Day Risk-Standardized Hospital Visit Rate after 
Outpatient Colonoscopy Measure for the CY 2018 Payment Determination 
and Subsequent Years
    5. Proposals for Indian Health Service (IHS) Hospital Outpatient 
Departments to Not Be Considered ASCs for the Purpose of the ASCQR 
Program
    6. ASCQR Program Validation of Claims-Based and CMS Web-Based 
Measures
    7. Extraordinary Circumstances Extensions or Exemptions for the 
CY 2018 Payment Determination and Subsequent Years
    8. ASCQR Program Reconsideration Procedures
    E. Payment Reduction for ASCs That Fail to Meet the ASCQR 
Program Requirements
XV. Short Inpatient Hospital Stays
    A. Background for the 2-Midnight Rule
    B. Proposed Policy Clarification for Medical Review of Inpatient 
Hospital Admissions under Medicare Part A
XVI. Proposed Transition for Medicare-Dependent, Small Rural 
Hospitals (MDHs) in All-Urban States under the Hospital Inpatient 
Prospective Payment System
    A. Background on the Medicare-Dependent, Small Rural Hospital 
(MDH) Program
    B. Implementation of New OMB Delineations and Urban to Rural 
Reclassifications
XVII. Files Available to the Public Via the Internet
XVIII. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Proposed Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    2. ASCQR Program Requirements
XIX. Response to Comments
XX. 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 Proposed OPPS Changes in this Proposed 
Rule
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed OPPS Changes on Hospitals
    (3) Estimated Effects of Proposed OPPS Changes on CMHCs
    (4) Estimated Effect of Proposed OPPS Changes on Beneficiaries
    (5) Estimated Effects of Proposed OPPS Changes on Other 
Providers
    (6) Estimated Effects of Proposed OPPS Changes on the Medicare 
and Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of Proposed CY 2016 ASC Payment System 
Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed CY 2016 ASC Payment System 
Policies on ASCs
    (3) Estimated Effects of Proposed ASC Payment System Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Proposed Requirements for the Hospital OQR Program
    e. Effects of Proposed Policies for the ASCQR Program
    f. Impact of the Proposed Policy Change for Medical Review of 
Inpatient Hospital Admissions Under Medicare Part A
    g. Impact of Proposed Transition for MDHs in All-Urban States 
under the IPPS
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXI. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this proposed rule, we are proposing to update the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments (HOPDs) and ambulatory 
surgical centers (ASCs) beginning January 1, 2016. Section 1833(t) of 
the Social Security Act (the Act) requires us to annually review and 
update the payment rates for services payable under the Hospital 
Outpatient Prospective Payment System (OPPS). Specifically, section 
1833(t)(9)(A) 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. In addition, under section 1833(i) of the Act, we annually 
review and update the ASC payment rates. We describe these and various 
other statutory authorities in the relevant sections of this proposed 
rule. In addition, this proposed rule would update and refine the 
requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program and the ASC Quality Reporting (ASCQR) Program.
    Further, we are proposing certain changes relating to the hospital 
inpatient prospective payment system (IPPS): Proposed changes to the 2-
midnight rule under the short inpatient hospital stay policy and a 
discussion of the related -0.2 percent payment adjustment; and a 
proposed transition for Medicare-dependent, small rural hospitals 
(MDHs) in all-urban States.
2. Summary of the Major Provisions
     OPPS Update: For CY 2016, we are proposing to increase the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.9 percent. This proposed increase is 
based on the proposed hospital inpatient market basket percentage 
increase of 2.7 percent for inpatient services paid under the hospital 
inpatient prospective payment system (IPPS), minus the proposed 
multifactor productivity (MFP) adjustment of 0.6 percentage point, and 
minus a 0.2 percentage point adjustment required by the Affordable Care 
Act. In addition, we are proposing to apply a 2.0 percent reduction to 
the conversion factor to redress the inflation in OPPS payment rates 
resulting from excess packaged payment under the OPPS for laboratory 
tests that are excepted from our final CY 2014 laboratory packaging 
policy, as discussed in section II.B. of this proposed rule. Under this 
proposed rule, we estimate that total payments for CY 2016, including 
beneficiary cost-sharing, to the approximate 3,800 facilities paid 
under the OPPS (including general acute care hospitals, children's 
hospitals, cancer hospitals, and community mental health centers 
(CMHCs)), would decrease by approximately $43 million compared to CY 
2015 payments, excluding our

[[Page 39206]]

estimated changes in enrollment, utilization, and case-mix.
    We are proposing to continue to implement the statutory 2.0 
percentage point reduction in payments for hospitals failing to meet 
the hospital outpatient quality reporting requirements, by applying a 
proposed reporting factor of 0.980 to the OPPS payments and copayments 
for all applicable services.
     Rural Adjustment: We are proposing to continue the 
adjustment of 7.1 percent to the OPPS payments to certain rural sole 
community hospitals (SCHs), including essential access community 
hospitals (EACHs). This proposed adjustment would 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 2016, we are 
proposing to continue to provide additional payments to cancer 
hospitals so that the cancer hospital's payment-to-cost ratio (PCR) 
after the additional payments is equal to the weighted average PCR for 
the other OPPS hospitals using the most recently submitted or settled 
cost report data. Based on those data, a proposed target PCR of 0.90 
would be used to determine the CY 2016 cancer hospital payment 
adjustment to be paid at cost report settlement. That is, the proposed 
payment adjustments would be the additional payments needed to result 
in a PCR equal to 0.90 for each cancer hospital.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2016, proposed payment for the acquisition and pharmacy overhead 
costs of separately payable drugs and biologicals that do not have 
pass-through status are set at the statutory default of average sales 
price (ASP) plus 6 percent.
     Payment of Biosimilar Biological Products: For CY 2016, we 
are proposing to pay for biosimilar biological products based on the 
payment allowance of the product as determined under section 1847A of 
the Act. We also are proposing to extend pass-through payment 
eligibility to biosimilar biological products and to set payment at the 
difference between the amount paid under section 1842(o) of the Act 
(that is, the payment allowance of the product as determined under 
section 1847A of the Act) and the otherwise applicable HOPD fee 
schedule amount.
     Packaging Policies: In CY 2015, we conditionally packaged 
certain ancillary services when they are integral, ancillary, 
supportive, dependent, or adjunctive to a primary service. For CY 2016, 
we are proposing to expand the set of conditionally packaged ancillary 
services to include three new APCs.
     Conditionally Packaged Outpatient Laboratory Tests: For CY 
2016, we are proposing to conditionally package laboratory tests 
(regardless of the date of service) on a claim with a service that is 
assigned status indicator ``S,'' ``T,'' or ``V'' unless an exception 
applies or the laboratory test is ``unrelated'' to the other HOPD 
service or services on the claim. We are proposing to establish a new 
status indicator ``Q4'' for this purpose. When laboratory tests are the 
only services on the claim, a separate payment at CLFS payment rates 
would be made. The ``L1'' modifier would still be used for 
``unrelated'' laboratory tests.
     Comprehensive APCs: We implemented the comprehensive APCs 
(C-APCs) policy for CY 2015 with a total of 25 C-APCs. In CY 2016, we 
are not proposing extensive changes to the already established 
methodology used for C-APCs. However, we are proposing to create nine 
new C-APCs that meet the previously established criteria.
     APC Restructuring: Section 1833(t)(9)(A) 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. 
For CY 2016, we conducted a comprehensive review of the structure of 
the APCs and codes and are proposing to restructure the OPPS APC 
groupings for nine APC clinical families based on the following 
principles: (1) Improved clinical homogeneity; (2) improved resource 
homogeneity; (3) reduced resource overlap in longstanding APCs; and (4) 
greater simplicity and improved understandability of the OPPS APC 
structure.
     New Process for Device Pass-Through Payment: Beginning in 
CY 2016, we are proposing to add a rulemaking component to the current 
quarterly device pass-through payment application process. 
Specifically, we are proposing to supplement the quarterly process by 
including a description of applications received (whether they are 
approved or denied) as well as our rationale for approving or denying 
the application in the next applicable OPPS proposed rule. This 
proposed change would help achieve the goals of increased transparency 
and stakeholder input. In addition, the proposal would align a portion 
of the OPPS device pass-through payment application process with the 
already established IPPS application process for new medical services 
and new technology add-on payments. We also are proposing that a device 
that requires FDA premarket approval or clearance is eligible to apply 
for device pass-through payment only if it is ``new,'' meaning that the 
pass-through payment application is submitted within 3 years from the 
date of the applicable FDA premarket approval, clearance, or 
investigational device exemption.
     Two-Midnight Rule: The 2-midnight rule was adopted 
effective October 1, 2013. Under the 2-midnight rule, an inpatient 
admission is generally appropriate for Medicare Part A payment if the 
physician (or other qualified practitioner) admits the patient as an 
inpatient based upon the expectation that the patient will need 
hospital care that crosses at least 2 midnights. In assessing the 
expected duration of necessary care, the physician (or other 
practitioner) may take into account outpatient hospital care received 
prior to inpatient admission. If the patient is expected to need less 
than 2 midnights of care in the hospital, the services furnished should 
generally be billed as outpatient services. In this proposed rule, we 
are proposing to modify our existing ``rare and unusual'' exceptions 
policy under which the only exceptions to the 2-midnight benchmark were 
cases involving services designated by CMS as inpatient only, and those 
rare and unusual circumstances published on the CMS Web site or other 
subregulatory guidance, to also allow exceptions to the 2-midnight 
benchmark to be determined on a case-by-case basis by the physician 
responsible for the care of the beneficiary, subject to medical review. 
However, we continue to expect that stays under 24 hours would rarely 
qualify for an exception to the 2-midnight benchmark. In addition, we 
are revising our medical review strategy and announcing that no later 
than October 1, 2015, we are changing the medical review strategy and 
have Quality Improvement Organization (QIO) contractors conduct reviews 
of short inpatient stays rather than the Medicare administrative 
contractors (MACs).
     Chronic Care Management (CCM): For CY 2016, we are 
proposing additional requirements for hospitals to bill and receive 
OPPS payment for CCM services described by CPT code 99490. These 
requirements include scope of service elements analogous to the scope 
of service elements finalized as

[[Page 39207]]

requirements in the CY 2015 Medicare Physician Fee Schedule (MPFS) 
final rule with comment period (79 FR 6715 through 67728).
     National Electrical Manufacturers Association (NEMA) 
Modifier: Effective for services furnished on or after January 1, 2016, 
section 218(a) of the PAMA amended section 1834 of the Act by 
establishing a new subsection 1834(p), which reduces payment for the 
technical component (TC) (and the TC of the global fee) under the MPFS 
and the OPPS (5 percent in 2016 and 15 percent in 2017 and subsequent 
years) for applicable computed tomography (CT) services identified by 
certain CPT HCPCS codes furnished using equipment that does not meet 
each of the attributes of the National Electrical Manufacturers 
Association (NEMA) Standard XR-29-2013, entitled ``Standard Attributes 
on CT Equipment Related to Dose Optimization and Management.'' The 
provision requires that information be provided and attested to by a 
supplier and a hospital outpatient department that indicates whether an 
applicable CT service was furnished that was not consistent with the 
NEMA CT equipment standard. To implement this provision, we are 
proposing to establish a new modifier that would be reported with 
specific CPT codes, effective January 1, 2016.
     New Process for Requesting Comments on New and Revised 
Category I and III CPT Codes: In the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66842 through 66844), we finalized a revised 
process of assigning APC and status indicators for new and revised 
Category I and III CPT codes that would be effective January 1. 
Specifically, we stated that we would include the proposed APC and 
status indicator assignments for the vast majority of new and revised 
CPT codes before they are used for payment purposes under the OPPS if 
the AMA provides CMS with the codes in time for the OPPS/ASC proposed 
rule. For the CY 2016 OPPS update, we received the CY 2016 CPT codes 
from AMA in time for inclusion to this CY 2016 OPPS/ASC proposed rule. 
The new and revised CY 2016 Category I and III CPT codes can be found 
in OPPS Addendum B and assigned to new comment indicator ``NP'' to 
indicate that the code is a new code for the next calendar year or the 
code is an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to the current 
calendar year with a proposed APC assignment and that comments will be 
accepted on the proposed APC assignment and status indicator.
     Ambulatory Surgical Center Payment Update: For CY 2016, we 
are proposing to increase payment rates under the ASC payment system by 
1.1 percent. This proposed 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 0.6 
percentage point. Based on this proposed update, we estimate that 
proposed total payments to ASCs (including beneficiary cost-sharing and 
estimated changes in enrollment, utilization, and case-mix), for CY 
2016 would be approximately $4.293 billion, an increase of 
approximately $186 million compared to estimated CY 2015 Medicare 
payments. In addition, we are proposing a revised process of assigning 
ASC payment indicators for new and revised Category I and III CPT codes 
that would be effective January 1, similar to the OPPS process we 
finalized in the CY 2015 OPPS/ASC final rule with comment period. 
Specifically, we are proposing to include the proposed ASC payment 
indicator assignments in the OPPS/ASC proposed rule for the vast 
majority of new and revised CPT codes before they are used for payment 
purposes under the ASC payment system if the American Medical 
Association (AMA) provides CMS with the codes in time for the OPPS/ASC 
proposed rule.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are making proposals for the CY 2017 
payment determination and subsequent years, the CY 2018 payment 
determination and subsequent years, and the CY 2019 payment 
determination and subsequent years. For CY 2017 and subsequent years, 
we are proposing to: (1) Remove the OP-15: Use of Brain Computed 
Tomography (CT) in the Emergency Department for Atraumatic Headache 
measure, effective January 1, 2016 (no data for this measure will be 
used for any payment determination); (2) change the deadline for 
withdrawing from the Hospital OQR Program from November 1 to August 31; 
(3) shift the quarters on which we base payment determinations; (4) 
change the data submission timeframe for measures submitted via the CMS 
Web-based tool (QualityNet Web site) from July 1 through November 1 to 
January 1 through May 15; (5) rename our extension and exception policy 
to extension and exemption policy; (6) change the deadline for 
submitting a reconsideration request from the first business day of the 
month of February of the affected payment year to the first business 
day on or after March 17 of the affected payment year; and (7) amend 42 
CFR 419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term ``fiscal 
year'' with the term ``calendar year.''
    For CY 2018 and subsequent years, we are proposing a new measure: 
OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF # 
1822). For CY 2019 and subsequent years, we also are proposing a new 
measure: OP-34: Emergency Department Transfer Communication (EDTC) (NQF 
# 0291). In addition, we are exploring electronic clinical quality 
measures (eCQMs) and whether, in future rulemaking, we would propose 
that hospitals have the option to voluntarily submit data for OP-18: 
Median Time from ED Arrival to ED Departure for Discharged ED Patients 
electronically beginning with the CY 2019 payment determination.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are proposing to align data 
submission end dates for data submitted using a Web-based tool, to 
align policies regarding paid claims to be included in the calculation 
for all claims-based measures, to modify the submission date for 
reconsideration requests, to modify our policy for the facility 
identifier for public reporting of ASCQR Program data, and to not 
consider IHS hospital outpatient departments that bill as ASCs to be 
ASCs for purposes of the ASCQR Program. We also are proposing to codify 
a number of existing and proposed policies and are soliciting public 
comments on the possible inclusion of two measures in the ASCQR Program 
measure set in the future.
3. Summary of Costs and Benefits
    In sections XX. and XXI. of this proposed rule, we set forth a 
detailed analysis of the regulatory and federalism impacts that the 
proposed changes would have on affected entities and beneficiaries. Key 
estimated impacts are described below.
a. Impacts of the Proposed OPPS Update
(1) Impacts of All OPPS Proposed Changes
    Table 65 in section XX. of this proposed rule displays the 
distributional impact of all the proposed OPPS changes on various 
groups of hospitals and CMHCs for CY 2016 compared to all estimated 
OPPS payments in CY 2015. We estimate that the proposed policies in 
this proposed rule would result in a 0.2 percent overall decrease in 
OPPS payments to providers. We estimate that proposed

[[Page 39208]]

total OPPS payments for CY 2016, including beneficiary cost-sharing, to 
the approximate 3,800 facilities paid under the OPPS (including general 
acute care hospitals, children's hospitals, cancer hospitals, and 
CMHCs) would decrease by approximately $43 million compared to CY 2015 
payments, excluding our estimated changes in enrollment, utilization, 
and case-mix.
    We estimated the isolated impact of our proposed OPPS policies on 
CMHCs because CMHCs are only paid for partial hospitalization services 
under the OPPS. Continuing the provider-specific structure that we 
adopted beginning in CY 2011 and basing payment fully on the type of 
provider furnishing the service, we estimate a 14.8 percent increase in 
CY 2016 payments to CMHCs relative to their CY 2015 payments.
(2) Impacts of the Proposed Updated Wage Indexes
    We estimate that our proposed update of the wage indexes based on 
the FY 2016 IPPS proposed rule wage indexes results in a 0.1 percent 
increase for urban hospitals and a -0.4 percent decrease for rural 
hospitals under the OPPS. These wage indexes include the continued 
implementation of the OMB labor market area delineations based on 2010 
Decennial Census data.
(3) Impacts of the Proposed Rural Adjustment and the Cancer Hospital 
Payment Adjustment
    There are no significant impacts of our proposed CY 2016 payment 
policies for hospitals that are eligible for the rural adjustment or 
for the cancer hospital payment adjustment. We are not proposing to 
make any change in policies for determining the rural and cancer 
hospital payment adjustments, and the adjustment amounts do not 
significantly impact the budget neutrality adjustments for these 
policies.
(4) Impacts of the Proposed OPD Fee Schedule Increase Factor
    As a result of the proposed OPD fee schedule increase factor, the 
proposed 2.0 percent reduction to the conversion factor to redress the 
inflation in OPPS payment rates resulting from excess packaged payment 
under the OPPS for laboratory tests that are excepted from our final CY 
2014 laboratory packaging policy, and other proposed budget neutrality 
adjustments, we estimate that urban and rural hospitals would 
experience decreases of approximately 0.1 percent for urban hospitals 
and 0.3 percent for rural hospitals. Classifying hospitals by teaching 
status or type of ownership suggests that these hospitals would receive 
similar decreases.
b. Impacts of the Proposed ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The proposed percentage change in 
estimated total payments by specialty groups under the proposed CY 2016 
payment rates compared to estimated CY 2015 payment rates ranges 
between 5 percent for auditory system services and -5 percent for 
hematologic and lymphatic system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our proposed CY 2016 policies to significantly 
affect the number of hospitals that do not receive a full annual 
payment update.
d. Impacts of the ASCQR Program
    We do not expect our proposed CY 2016 policies to significantly 
affect the number of ASCs that do not receive a full annual payment 
update.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security Act was enacted, Medicare 
payment for hospital outpatient services was based on hospital-specific 
costs. In an effort to ensure that Medicare and its beneficiaries pay 
appropriately for services and to encourage more efficient delivery of 
care, the Congress mandated replacement of the reasonable cost-based 
payment methodology with a prospective payment system (PPS). The 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 
1833(t) to the Act authorizing implementation of a PPS for hospital 
outpatient services. The OPPS was first implemented for services 
furnished on or after August 1, 2000. Implementing regulations for the 
OPPS are located at 42 CFR parts 410 and 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: The Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on 
March 30, 2010 (these two public laws are collectively known as the 
Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act 
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the 
Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 
112-96), enacted on February 22, 2012; the American Taxpayer Relief Act 
of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR 
Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the 
Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), 
enacted on March 27, 2014; and the Medicare Access and CHIP 
Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 
2015.
    Under the OPPS, we pay for hospital Part B services on a rate-per-
service basis that varies according to the APC group to which the 
service is assigned. We use the Healthcare Common Procedure Coding 
System (HCPCS) (which includes certain Current Procedural Terminology 
(CPT) codes) to identify and group the services within each APC. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C. of this proposed rule. Section 
1833(t)(1)(B) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by CMHCs), and 
certain inpatient hospital services that are paid under Medicare 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

[[Page 39209]]

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 exercises the 
authority granted under the statute to also exclude from the OPPS 
certain services that are paid under fee schedules or other payment 
systems. Such excluded services include, for example, the professional 
services of physicians and nonphysician practitioners paid under the 
Medicare Physician Fee Schedule (MPFS); certain 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.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals that are excluded from payment under the OPPS. These excluded 
hospitals include: Critical access hospitals (CAHs); hospitals located 
in Maryland and paid under the Maryland All-Payer Model; 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)(A) 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)

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel) to fulfill this requirement. 
In CY 2011, based on section 222 of the PHS Act which gives 
discretionary authority to the Secretary to convene advisory councils 
and committees, the Secretary expanded the panel's scope to include the 
supervision of hospital outpatient therapeutic services in addition to 
the APC groups and weights. To reflect this new role of the panel, the 
Secretary changed the panel's name to the Advisory Panel on Hospital 
Outpatient Payment (the HOP Panel, or the Panel). The Panel is not 
restricted to using data compiled by CMS, and in conducting its review, 
it may use data collected or developed by organizations outside the 
Department.
2. Establishment of the Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the HOP Panel, and at that time named the APC Panel. This 
expert panel is composed of 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 Panel's charter was amended 
on November 15, 2011, renaming the Panel and expanding the Panel's 
authority to include supervision of hospital outpatient therapeutic 
services and to add Critical Access Hospital (CAH) representation to 
its membership. The current charter was renewed on November 6, 2014 (80 
FR 23009) and the number of panel members was revised from up to 19 to 
up to 15 members.

[[Page 39210]]

    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/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meeting taking 
place on March 9, 2015. 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 status indicators 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 March 9, 2015 meeting that the subcommittees 
continue. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
March 9, 2015 Panel meeting are included in the sections of this 
proposed 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://facadatabase.gov/.

F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 38 timely pieces of correspondence on the 
CY 2015 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 10, 2014 (79 FR 66770), as well as in the 
correction notice that was published on February 24, 2015 (80 FR 9629), 
some of which contained comments on the interim APC assignments and/or 
status indicators of new or replacement HCPCS codes (identified with 
comment indicator ``NI'' in Addenda B, AA, and BB to that final rule). 
Summaries of the public comments on new or replacement codes will be 
set forth in the CY 2016 OPPS/ASC final rule with comment period under 
the appropriate subject-matter headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    For this CY 2016 OPPS/ASC proposed rule, we are proposing to 
recalibrate the APC relative payment weights for services furnished on 
or after January 1, 2016, and before January 1, 2017 (CY 2016), using 
the same basic methodology that we described in the CY 2015 OPPS/ASC 
final rule with comment period. That is, we are proposing to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for hospital outpatient department (HOPD) 
services, using the most recent available data to construct a database 
for calculating APC group weights. Therefore, for the purpose of 
recalibrating the proposed APC relative payment weights for CY 2016, we 
used approximately 151 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, 2014, and before January 1, 2015. For exact counts of claims 
used, we refer readers to the claims accounting narrative under 
supporting documentation for this CY 2016 OPPS/ASC proposed rule on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately151 million final action claims for services 
provided in hospital outpatient settings used to calculate the CY 2016 
OPPS payment rates for this proposed rule, approximately 117 million 
claims were the type of bill potentially appropriate for use in setting 
rates for OPPS services (but did not necessarily contain services 
payable under the OPPS). Of the approximately 117 million claims, 
approximately 4 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 113 million claims, we 
created approximately 88 million single records, of which approximately 
38 million were ``pseudo'' single or ``single session'' claims (created 
from approximately 16 million multiple procedure claims using the 
process we discuss later in this section). Approximately 3 million 
claims were trimmed out on cost or units in excess of +/- 3 standard 
deviations from the geometric mean or other trims, yielding 
approximately 85 million single bills for ratesetting. As described in 
section II.A.2. of this proposed rule, our data development process is 
designed with the goal of using appropriate cost information in setting 
the APC relative payment weights. The bypass process is described in 
section II.A.1.b. of this proposed rule. This section discusses how we 
develop ``pseudo'' single procedure claims (as defined below), with the 
intention of using more appropriate data from the available claims. In 
some cases, the bypass process allows us to use some portion of the 
submitted claim for cost estimation purposes, while the remaining 
information on the claim continues to be unusable. Consistent with the 
goal of using appropriate information in our data development process, 
we only use claims (or portions of each claim) that are appropriate for 
ratesetting purposes.
    The proposed APC relative weights and payments for CY 2016 in 
Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site) were calculated using

[[Page 39211]]

claims from CY 2014 that were processed through December 31, 2014. 
While prior to CY 2013 we historically based the payments on median 
hospital costs for services in the APC groups, beginning with the CY 
2013 OPPS, we established the cost-based relative payment weights for 
the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68259 through 68271). For the 
CY 2016 OPPS, we are proposing to use this same methodology, basing 
payments on geometric mean costs. Under this methodology, we select 
claims for services paid under the OPPS and match these claims to the 
most recent cost report filed by the individual hospitals represented 
in our claims data. We continue to believe that it is appropriate to 
use the most current full calendar year claims data and the most 
recently submitted cost reports to calculate the relative costs 
underpinning the APC relative payment weights and the CY 2016 payment 
rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2016, in general, we are proposing to continue to use single 
procedure claims to set the costs on which the APC relative payment 
weights are based. We generally use single procedure claims to set the 
estimated costs for APCs because we believe that the OPPS relative 
weights on which payment rates are based should be derived from the 
costs of furnishing one unit of one procedure and because, in many 
circumstances, we are unable to ensure that packaged costs can be 
appropriately allocated across multiple procedures performed on the 
same date of service.
    It is generally desirable to use the data from as many claims as 
possible to recalibrate the APC relative payment weights, including 
those claims for multiple procedures. As we have for several years, we 
are proposing to continue to use date of service stratification and a 
list of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
enables us to create multiple ``pseudo'' single procedure claims from 
claims that were submitted as multiple procedure claims spanning 
multiple dates of service, or claims that contained numerous separately 
paid procedures reported on the same date on one claim. We refer to 
these newly created single procedure claims as ``pseudo'' single 
procedure claims. The history of our use of a bypass list to generate 
``pseudo'' single procedure claims is well-documented, most recently in 
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66780 
through 66783). 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 2015. 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 2015, and we are proposing to continue this policy 
for CY 2016. We refer readers to section II.A.2.f. of the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66810 through 66816) for a 
discussion of the use of claims in modeling the costs for composite 
APCs and to section II.A.3. of the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66817 through 66823) for a discussion of our 
packaging policies for CY 2015. In addition, we are proposing to 
establish additional packaging policies for the CY 2016 OPPS, as 
discussed in section II.A.3. of this proposed rule.
    We are proposing to continue to apply these processes to enable us 
to use as much claims data as possible for ratesetting for the CY 2016 
OPPS. This methodology enabled us to create, for this proposed rule, 
approximately 38 million ``pseudo'' single procedure claims, including 
multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.f.(4) of this proposed rule for further discussion), 
to add to the approximately 49 million ``natural'' single procedure 
claims.
    In addition, we are proposing to continue our broader initiative to 
review, revise, and reorganize APCs across the OPPS to collectively 
group services that are clinically similar and have similar resource 
costs within the same APC. The proposed restructuring of APCs are 
discussed in the applicable sections of this proposed rule. In 
conjunction with this initiative, we are proposing to renumber the APCs 
(except for the composite APCs) primarily to achieve consecutive 
numbering of APCs within each clinical family of APCs, as discussed in 
section III.D. of this proposed rule. We are providing a crosswalk from 
the existing APC numbers to the proposed new APC renumber in Addendum Q 
to this proposed rule (which is available via the Internet on the CMS 
Web site).
    For CY 2016, we are proposing to bypass 178 HCPCS codes that are 
identified in Addendum N to this proposed rule (which is available via 
the Internet on the CMS Web site). Since the inception of the bypass 
list, which is the list of codes to be bypassed to convert multiple 
procedure claims to ``pseudo'' single procedure claims, we have 
calculated the percent of ``natural'' single bills that contained 
packaging for each HCPCS code and the amount of packaging on each 
``natural'' single bill for each code. Each year, we generally retain 
the codes on the previous year's bypass list and use the updated year's 
data (for CY 2016, data available for the March 9, 2015 meeting of the 
Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2014 
claims processed through September 30, 2014) to determine whether it 
would be appropriate to add additional codes to the previous year's 
bypass list. For CY 2016, we are proposing to continue to bypass all of 
the HCPCS codes on the CY 2015 OPPS bypass list, with the exception of 
HCPCS codes that we are proposing to delete for CY 2016, which are 
listed in Table 1 of this proposed rule. (We refer readers to Addendum 
N to the CY 2015 OPPS/ASC final rule with comment period for the CY 
2015 OPPS bypass list. Addendum N is available via the Internet on the 
CMS Web site.) We also are proposing to remove HCPCS codes that are not 
separately paid under the OPPS because the purpose of the bypass list 
is to obtain more data for those codes relevant to ratesetting. Some of 
the codes we are proposing to remove from the CY 2016 bypass list are 
affected by the CY 2016 proposed packaging policy, discussed in section 
II.A.3. of this proposed rule. Some of the codes we are proposing to 
remove have packaged cost patterns associated with their natural single 
major claims that would no longer meet the bypass list criterion of 5 
percent or fewer of the single major claims having packaged costs on 
the claim. In addition, we are proposing to add to the bypass list for 
CY 2016 HCPCS codes that are not on the CY 2015 bypass list that, using 
the March 9, 2015 Panel data (first 9 months of CY 2014 claims), met 
the empirical criteria for the bypass list that are summarized

[[Page 39212]]

below. Finally, to remain consistent with the CY 2016 proposal to 
continue to develop OPPS relative payment weights based on geometric 
mean costs, we also are proposing that the packaged cost criterion 
continue to be based on the geometric mean cost. The entire list 
proposed for CY 2016 (including the codes that remain on the bypass 
list from prior years) is open to public comment in this CY 2016 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. The proposed criteria for the bypass list are:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The geometric mean cost of packaging observed in the 
``natural'' single procedure claims is equal to or less than $55. This 
criterion also limits the amount of error in redistributed costs. 
During the assessment of claims against the bypass criteria, we do not 
know the dollar value of the packaged cost that should be appropriately 
attributed to the other procedures on the claim. Therefore, ensuring 
that redistributed costs associated with a bypass code are small in 
amount and volume protects the validity of cost estimates for low cost 
services billed with the bypassed service.
    We note that, as we did for CY 2015, we are proposing to continue 
to establish the CY 2016 OPPS relative payment weights based on 
geometric mean costs. To remain consistent in the metric used for 
identifying cost patterns, we are proposing to use the geometric mean 
cost of packaging to identify potential codes to add to the bypass 
list.
    In response to public comments on the CY 2010 OPPS/ASC proposed 
rule requesting that the packaged cost threshold be updated, we 
considered whether it would be appropriate to update the $50 packaged 
cost threshold for inflation when examining potential bypass list 
additions. As discussed in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60328), the real value of this packaged cost threshold 
criterion has declined due to inflation, making the packaged cost 
threshold more restrictive over time when considering additions to the 
bypass list. Therefore, adjusting the threshold by the market basket 
increase would prevent continuing decline in the threshold's real 
value. Based on the same rationale described for the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66781), we are proposing for CY 
2016 to continue to update the packaged cost threshold by the market 
basket increase. By applying the final CY 2015 market basket increase 
of 2.2 percent (79 FR 66825) to the prior nonrounded dollar threshold 
of $55.66 (79 FR 66781), we determined that the proposed threshold 
would remain for CY 2016 at $55 ($56.88 rounded to $55, the nearest $5 
increment). Therefore, we are proposing to set the geometric mean 
packaged cost threshold on the CY 2014 claims at $55 for a code to be 
considered for addition to the CY 2016 OPPS bypass list.
    For inclusion on the bypass list, a code cannot be a code for an 
unlisted service. Unlisted codes do not describe a specific service, 
and therefore their costs would not be appropriate for bypass list 
purposes.
    In addition, we are proposing to continue to include on the bypass 
list HCPCS codes that we believe have minimal associated packaging, 
based on our clinical assessment of the complete CY 2016 OPPS proposal. 
Some of these codes were identified by CMS, and some were identified in 
prior years by commenters with specialized knowledge of the packaging 
associated with specific services. We also are proposing to continue to 
include certain HCPCS codes on the bypass list in order to purposefully 
direct the assignment of packaged costs to a companion code where 
services always appear together and where there would otherwise be few 
single procedure claims available for ratesetting. For example, we have 
previously discussed our reasoning for adding HCPCS code G0390 (Trauma 
response team associated with hospital critical care service) to the 
bypass list (73 FR 68513).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of this proposed rule for further discussion of the treatment 
of ``overlap bypass codes.'') This process also created multiple 
imaging composite ``single session'' bills that could be used for 
calculating composite APC costs. ``Overlap bypass codes'' that are 
members of the proposed multiple imaging composite APCs are identified 
by asterisks (*) in Addendum N to this proposed rule (which is 
available via the Internet on the CMS Web site).
    Addendum N to this proposed rule includes the proposed list of 
bypass codes for CY 2016. The proposed list of bypass codes contains 
codes that were reported on claims for services in CY 2014 and, 
therefore, includes codes that were in effect in CY 2014 and used for 
billing but were deleted for CY 2015. We are retaining these deleted 
bypass codes on the proposed CY 2016 bypass list because these codes 
existed in CY 2014 and were covered OPD services in that period, and CY 
2014 claims data are used to calculate CY 2016 payment rates. Keeping 
these deleted bypass codes on the bypass list potentially allows us to 
create more ``pseudo'' single procedure claims for ratesetting 
purposes. ``Overlap bypass codes'' that are members of the proposed 
multiple imaging composite APCs are identified by asterisks (*) in the 
third column of Addendum N to this proposed rule. HCPCS codes that we 
are proposing to add for CY 2016 are identified by asterisks (*) in the 
fourth column of Addendum N.
    Table 1 below contains the list of codes that we are proposing to 
remove from the CY 2016 bypass list.

[[Page 39213]]



Table 1--HCPCS Codes Proposed To Be Removed From the CY 2016 Bypass List
------------------------------------------------------------------------
                HCPCS Code                     HCPCS Short descriptor
------------------------------------------------------------------------
11057.....................................  Trim skin lesions over 4.
57454.....................................  Bx/curett of cervix w/scope.
88348.....................................  Electron microscopy.
92240.....................................  Icg angiography.
92546.....................................  Sinusoidal rotational test.
------------------------------------------------------------------------

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2016, we are proposing to continue to use the hospital-
specific overall ancillary and departmental cost-to-charge ratios 
(CCRs) to convert charges to estimated costs through application of a 
revenue code-to-cost center crosswalk. To calculate the APC costs on 
which the proposed CY 2016 APC payment rates are based, we calculated 
hospital-specific overall ancillary CCRs and hospital-specific 
departmental CCRs for each hospital for which we had CY 2014 claims 
data by comparing these claims data to the most recently available 
hospital cost reports, which, in most cases, are from CY 2013. For the 
CY 2016 OPPS proposed rates, we used the set of claims processed during 
CY 2014. 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 2014 
(the year of claims data we used to calculate the proposed CY 2016 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2014 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). The calculation of blood costs is a 
longstanding exception (since the CY 2005 OPPS) to this general 
methodology for calculation of CCRs used for converting charges to 
costs on each claim. This exception is discussed in detail in the CY 
2007 OPPS/ASC final rule with comment period and discussed further in 
section II.A.2.d.(1) of this proposed rule.
    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 2014 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 2013. For this proposed rule, we used 
the most recently submitted cost reports to calculate the CCRs to be 
used to calculate costs for the proposed CY 2016 OPPS payment rates. If 
the most recently available cost report was submitted but not settled, 
we looked at the last settled cost report to determine the ratio of 
submitted to settled cost using the overall ancillary CCR, and we then 
adjusted the most recent available submitted, but not settled, cost 
report using that ratio. We then calculated both an overall ancillary 
CCR and cost center-specific CCRs for each hospital. We used the 
overall ancillary CCR referenced above for all purposes that require 
use of an overall ancillary CCR. We are proposing to continue this 
longstanding methodology for the calculation of costs for CY 2016.
    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). 
We retained this policy through CY 2015, and we are proposing to 
continue this practice for the CY 2016 OPPS.

[[Page 39214]]

    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 2014 HCRIS update to estimate costs in the 
proposed CY 2016 OPPS ratesetting process, we were able to calculate a 
valid implantable device CCR for 2,940 hospitals, a valid MRI CCR for 
1,978 hospitals, a valid CT scan CCR for 2,069 hospitals, and a valid 
Cardiac Catheterization CCR for 1,429 hospitals.
    In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we 
noted that, for CY 2014, 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 concluded 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 beginning in CY 2013 OPPS ratesetting, as discussed above.
    As we indicated in prior rulemaking (77 FR 68223 through 68225), 
once we 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 final rule with 
comment period (78 FR 74847), we conducted our analysis and concluded 
that we should develop distinct CCRs for each of the new cost centers 
and use them in ratesetting. Therefore, we began in the CY 2014 OPPS, 
continued in the CY 2015 OPPS, and we are proposing to retain this 
practice for the CY 2016 OPPS, to calculate the OPPS relative payment 
weights using distinct CCRs for cardiac catheterization, CT scan, MRI, 
and implantable medical devices. Section XIX. of this proposed rule 
includes the impacts of calculating the proposed CY 2016 OPPS relative 
payment weights using these standard cost centers that were adopted in 
CY 2014.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74847), we finalized a policy 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. 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. In Table 2 
below, we display CCR values for providers based on various cost 
allocation methods.

                Table 2--CCR Statistical Values Based on Use of Different Cost Allocation Methods
----------------------------------------------------------------------------------------------------------------
                                                                CT                              MRI
             Cost allocation method              ---------------------------------------------------------------
                                                    Median  CCR      Mean  CCR      Median  CCR      Mean  CCR
----------------------------------------------------------------------------------------------------------------
All Providers...................................          0.0451          0.0589          0.0890          0.1124
Square Feet Only................................          0.0364          0.0493          0.0787          0.1019
Direct Assign...................................          0.0641          0.0732          0.1078          0.1286
Dollar Value....................................          0.0536          0.0692          0.1001          0.1235
Direct Assign and Dollar Value..................          0.0534          0.0690          0.1004          0.1237
----------------------------------------------------------------------------------------------------------------

    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 adopted a 
policy in the CY 2014 OPPS/ASC final rule with comment period that we 
will sunset this policy in 4 years once the updated cost report data 
become available for ratesetting purposes. We stated that we believe 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. In Table 3 below, we display the impact of 
excluding claims based on the ``square feet'' cost allocation method 
from estimates of CT and MRI costs in CY 2016.

[[Page 39215]]



  Table 3--Percentage Change in Estimated Cost for CT and MRI APCs When
    Excluding Claims From Providers Using ``Square Feet'' as the Cost
                            Allocation Method
------------------------------------------------------------------------
                                   Proposed CY 2016 APC
      Proposed CY 2016 APC              descriptor        Percent change
------------------------------------------------------------------------
5570 *.........................  Computed Tomography                13.2
                                  without Contrast.
5571 *.........................  Level 1 Computed                    9.3
                                  Tomography with
                                  Contrast and Computed
                                  Tomography Angiography.
5581 *.........................  Magnetic Resonance                  7.6
                                  Imaging and Magnetic
                                  Resonance Angiography
                                  without Contrast.
5582 *.........................  Magnetic Resonance                  6.2
                                  Imaging and Magnetic
                                  Resonance Angiography
                                  with Contrast.
8005...........................  CT & CTA without                   12.1
                                  Contrast Composite.
8006...........................  CT & CTA with Contrast              9.0
                                  Composite.
8007...........................  MRI & MRA without                   7.1
                                  Contrast Composite.
8008...........................  MRI & MRA with Contrast             6.8
                                  Composite.
------------------------------------------------------------------------
* Proposed renumbered APC. We refer readers to Addendum Q to this
  proposed rule (which is available via the Internet on the CMS Web
  site) for a crosswalk of the existing APCs to the proposed renumbered
  APCs.

    In summary, we are proposing to continue 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 the CY 2016 OPPS. For 
the ``Magnetic Resonance Imaging (MRI)'' and ``Computed Tomography (CT) 
Scan'' APCs identified in Table 3 of this proposed rule, we are 
proposing to continue our policy of removing claims from cost modeling 
for those providers using ``square feet'' as the cost allocation 
statistic for CY 2016.
2. Proposed Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2016. The Hospital 
OPPS page on the CMS Web site on which this proposed rule is posted 
(http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used 
in the development of the proposed payment rates. That accounting 
provides additional detail regarding the number of claims derived at 
each stage of the process. In addition, below in this section we 
discuss the file of claims that comprises the data set that is 
available for purchase under a CMS data use agreement. The CMS Web 
site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing 
the ``OPPS Limited Data Set,'' which now includes the additional 
variables previously available only in the OPPS Identifiable Data Set, 
including ICD-9-CM diagnosis codes and revenue code payment amounts. 
This file is derived from the CY 2014 claims that were used to 
calculate the proposed payment rates for the CY 2016 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 2016, we are proposing to continue to 
use geometric mean costs to calculate the relative weights on which the 
proposed CY 2016 OPPS payment rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.f. of this proposed rule to calculate the costs we used to 
establish the proposed relative payment weights used in calculating the 
proposed OPPS payment rates for CY 2016 shown in Addenda A and B to 
this proposed rule (which are available via the Internet on the CMS Web 
site). We refer readers to section II.A.4. of this proposed rule for a 
discussion of the conversion of APC costs to scaled payment weights.
a. Claims Preparation
    For this proposed rule, we used the CY 2014 hospital outpatient 
claims processed through December 31, 2014, to calculate the geometric 
mean costs of APCs that underpin the proposed relative payment weights 
for CY 2016. To begin the calculation of the proposed relative payment 
weights for CY 2016, we pulled all claims for outpatient services 
furnished in CY 2014 from the national claims history file. This is not 
the population of claims paid under the OPPS, but all outpatient claims 
(including, for example, critical access hospital (CAH) claims and 
hospital claims for clinical laboratory tests for persons who are 
neither inpatients nor outpatients of the hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example, providers submit claims 
with a condition code 21 to elicit an official denial notice from 
Medicare and document that a service is not covered. We then excluded 
claims for services furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands because 
hospitals in those geographic areas are not paid under the OPPS, and, 
therefore, we do not use claims for services furnished in these areas 
in ratesetting.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 117 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.
    3. Claims that were bill type 76X (CMHC).
    To convert charges on the claims to estimated cost, we multiplied 
the charges on each claim by the appropriate hospital-specific CCR 
associated with the revenue code for the charge as discussed in section 
II.A.1.c. of this proposed rule. We then flagged

[[Page 39216]]

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 excluding all claims from 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. We retained the CY 2013 payment policy for 
separately payable drugs and biologicals through CY 2015, and we are 
proposing to continue this payment policy for CY 2016. We refer readers 
to section V.B.3. of this proposed rule for a complete discussion of 
our CY 2016 proposed payment policy for separately paid drugs and 
biologicals.
    We then removed line-items that were not paid during claims 
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,'' and ``V'' in the prospective year's 
payment system. This logic preserves charges for services that would 
not have been paid in the claim year but for which some estimate of 
cost is needed for the prospective year, such as services newly removed 
from the inpatient list for CY 2015 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 2016, we are proposing to continue the policy we implemented 
for CY 2013 and retained in subsequent years to exclude line-item data 
for pass-through drugs and biologicals (status indicator ``G'' for CY 
2013) and nonpass-through drugs and biologicals (status indicator ``K'' 
for CY 2013) 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 2015 OPPS/ASC final rule with 
comment period (79 FR 66788) of line-items with a status indicator of 
``S,'' ``T,'' or ``V,'' we believe that unpaid line-items represent 
services that are invalidly reported and, therefore, should not be used 
for ratesetting (we note that the deletion of status indicator ``X'' 
was finalized in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66821)). 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 2016 OPPS, as part of our proposal to continue packaging 
of clinical diagnostic laboratory tests, we also are proposing to apply 
the line item trim to these services if they did not receive payment in 
the claims year. Removing these lines ensures that, in establishing the 
CY 2016 OPPS relative

[[Page 39217]]

payment weights, we appropriately allocate the costs associated with 
packaging these services.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2016 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, in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66819 through 66821), we deleted status indicator ``X'' 
and revised the title and description of status indicator ``Q1'' to 
reflect that deletion. We also finalized the creation of status 
indicator ``J1'' in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66800 through 66809) to reflect the comprehensive APCs (C-APCs). 
For CY 2016, we are proposing to define major procedures as any HCPCS 
code having a status indicator of ``J1,'' ``J2,'' ``S,'' ``T,'' or 
``V,'' to define minor procedures as any code having a status indicator 
of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and to 
classify ``other'' procedures as any code having a status indicator 
other than one that we have classified as major or minor. For CY 2016, 
we are proposing to continue to assign status indicator ``R'' to blood 
and blood products; status indicator ``U'' to brachytherapy sources; 
status indicator ``Q1'' to all ``STV-packaged codes;'' status indicator 
``Q2'' to all ``T-packaged codes;'' and status indicator ``Q3'' to all 
codes that may be paid through a composite APC based on composite-
specific criteria or paid separately through single code APCs when the 
criteria are not met.
    As discussed in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and 
``Q3'' to facilitate identification of the different categories of 
codes. We are proposing to treat these codes in the same manner for 
data purposes for CY 2016 as we have treated them since CY 2008. 
Specifically, we are continuing to evaluate whether the criteria for 
separate payment of codes with status indicator ``Q1'' or ``Q2'' are 
met in determining whether they are treated as major or minor codes. 
Codes with status indicator ``Q1'' or ``Q2'' are carried through the 
data either with status indicator ``N'' as packaged or, if they meet 
the criteria for separate payment, they are given the status indicator 
of the APC to which they are assigned and are considered as ``pseudo'' 
single procedure claims for major codes. Codes assigned status 
indicator ``Q3'' are paid under individual APCs unless they occur in 
the combinations that qualify for payment as composite APCs and, 
therefore, they carry the status indicator of the individual APC to 
which they are assigned through the data process and are treated as 
major codes during both the split and ``pseudo'' single creation 
process. The calculation of the geometric mean costs for composite APCs 
from multiple procedure major claims is discussed in section II.A.2.f. 
of this proposed rule.
    Specifically, we are proposing to divide the remaining claims into 
the following five groups:
    1. Single Procedure Major Claims: Claims with a single separately 
payable procedure (that is, status indicator ``S,'' ``T,'' or ``V'' 
which includes codes with status indicator ``Q3''); claims with status 
indicator ``J1'' or ``J2,'' which receive special processing for C-
APCs, as discussed in section II.A.2.e. of this proposed rule; claims 
with one unit of a status indicator ``Q1'' code (``STV-packaged'') 
where there was no code with status indicator ``S,'' ``T,'' or ``V'' on 
the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
or ``V'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims include those 
codes with a status indicator ``Q2'' code (``T-packaged'') where there 
was no procedure with a status indicator ``T'' on the same claim on the 
same date of service but where there was another separately paid 
procedure on the same claim with the same date of service (that is, 
another code with status indicator ``S'' or ``V''). We also include in 
this set claims that contained one unit of one code when the bilateral 
modifier was appended to the code and the code was conditionally or 
independently bilateral. In these cases, the claims represented more 
than one unit of the service described by the code, notwithstanding 
that only one unit was billed.
    3. Single Procedure Minor Claims: Claims with a single HCPCS code 
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' 
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STV-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Procedure Minor Claims: Claims with multiple HCPCS 
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' 
``L,'' ``R,'' ``U,'' or ``N;'' claims that contain more than one code 
with status indicator ``Q1'' (``STV-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' or ``V'' on the same date of service; or claims 
that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with 
status indicator ``Q2'' but no code with status indicator ``T'' on the 
same date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment, and do not contain a 
code for a separately payable or packaged OPPS service. Non-OPPS claims 
include claims for therapy services paid sometimes under the OPPS but 
billed, in these non-OPPS cases, with revenue codes indicating that the 
therapy services would be paid under the Medicare Physician Fee 
Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STV-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used for ratesetting. Claims that contain codes to which we have 
assigned status indicator ``Q3'' (composite APC members) appear in both 
the data of the single and multiple major files used in this proposed 
rule, depending on the specific composite calculation.
    In this CY 2016 proposed rule, we are proposing to adjust the 
claims sorting process to determine whether a claim has a bilateral 
procedure modifier (Modifier 50) before claims are assigned to one of 
the five claims categories. This proposed adjustment shifts some claims 
that might otherwise be considered a single major procedure claim to 
the multiple major procedure claim category due to the presence of the 
bilateral modifier. We believe that this proposed adjustment more 
accurately sorts claims that have a bilateral modifier.

[[Page 39218]]

(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for this proposed 
rule, we examined both the multiple procedure major claims and the 
multiple procedure minor claims. We first examined the multiple major 
procedure claims for dates of service to determine if we could break 
them into ``pseudo'' single procedure claims using the dates of service 
for all lines on the claim. If we could create claims with single major 
procedures by using dates of service, we created a single procedure 
claim record for each separately payable procedure on a different date 
of service (that is, a ``pseudo'' single procedure claim).
    We also are proposing to use the bypass codes listed in Addendum N 
to this proposed rule (which is available via the Internet on the CMS 
Web site) and discussed in section II.A.1.b. of this proposed rule to 
remove separately payable procedures which we determined contained 
limited or no packaged costs or that were otherwise suitable for 
inclusion on the bypass list from a multiple procedure bill. As 
discussed above, we ignore the ``overlap bypass codes,'' that is, those 
HCPCS codes that are both on the bypass list and are members of the 
multiple imaging composite APCs, in this initial assessment for 
``pseudo'' single procedure claims. The proposed CY 2016 ``overlap 
bypass codes'' are listed in Addendum N to this proposed rule (which is 
available via the Internet on the CMS Web site). When one of the two 
separately payable procedures on a multiple procedure claim was on the 
bypass list, we split the claim into two ``pseudo'' single procedure 
claim records. The single procedure claim record that contained the 
bypass code did not retain packaged services. The single procedure 
claim record that contained the other separately payable procedure (but 
no bypass code) retained the packaged revenue code charges and the 
packaged HCPCS code charges. We also removed lines that contained 
multiple units of codes on the bypass list and treated them as 
``pseudo'' single procedure claims by dividing the cost for the 
multiple units by the number of units on the line. If one unit of a 
single, separately payable procedure code remained on the claim after 
removal of the multiple units of the bypass code, we created a 
``pseudo'' single procedure claim from that residual claim record, 
which retained the costs of packaged revenue codes and packaged HCPCS 
codes. This enabled us to use claims that would otherwise be multiple 
procedure claims and could not be used.
    We then assessed the claims to determine if the proposed criteria 
for the multiple imaging composite APCs, discussed in section 
II.A.2.f.(3) of this proposed rule, were met. If the criteria for the 
imaging composite APCs were met, we created a ``single session'' claim 
for the applicable imaging composite service and determined whether we 
could use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and, if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC costs on which the proposed CY 2016 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.
    We also are proposing to examine the multiple procedure minor 
claims to determine whether we could create ``pseudo'' single procedure 
claims. Specifically, where the claim contained multiple codes with 
status indicator ``Q1'' (``STV-packaged'') on the same date of service 
or contained multiple units of a single code with status indicator 
``Q1,'' we selected the status indicator ``Q1'' HCPCS code that had the 
highest CY 2015 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 2015 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 2015 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 2015 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 2015 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 2015 relative payment weight; other codes with status 
indicator ``Q2''; and other packaged HCPCS codes and packaged revenue 
code costs. We changed the status indicator for the selected code from 
a data status indicator of ``N'' to the status indicator of the APC to 
which the selected code was assigned, and we considered this claim as a 
major procedure claim.
    If a multiple procedure minor claim contained multiple codes with 
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1'' 
(``STV-packaged''), we selected the T-packaged status indicator ``Q2'' 
HCPCS code that had the highest relative payment weight for CY 2015 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 2015 relative payment weight; 
other codes with status indicator ``Q2;'' codes with status indicator 
``Q1'' (``STV-packaged''); and other packaged HCPCS codes and packaged 
revenue code costs. We selected status indicator ``Q2'' HCPCS codes 
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY 
2015 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2015 relative payment

[[Page 39219]]

weight, it became the primary code for the simulated single bill 
process. We changed the status indicator for the selected status 
indicator ``Q2'' (``T-packaged'') code from a data status indicator of 
``N'' to the status indicator of the APC to which the selected code was 
assigned and we considered this claim as a major procedure claim.
    We then applied our proposed process for creating ``pseudo'' single 
procedure claims to the conditionally packaged codes that do not meet 
the criteria for packaging, which enabled us to create single procedure 
claims from them, if they met the criteria for single procedure claims. 
Conditionally packaged codes are identified using status indicators 
``Q1'' and ``Q2,'' and are described in section XI.A. of this proposed 
rule.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral procedure modifier (Modifier 
50) because the line-item cost for the code represented the cost of two 
units of the procedure, notwithstanding that hospitals billed the code 
with a unit of one.
    We are proposing to continue to apply the methodology described 
above for the purpose of creating ``pseudo'' single procedure claims 
for the CY 2016 OPPS.
c. Completion of Claim Records and Geometric Mean Cost Calculations
(1) General Process
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this proposed rule 
(which is available via the Internet on the CMS Web site) and the costs 
of those lines for codes with status indicator ``Q1'' or ``Q2'' when 
they are not separately paid), and the costs of the services reported 
under packaged revenue codes in Table 4 below that appeared on the 
claim without a HCPCS code into the cost of the single major procedure 
remaining on the claim. For a more complete discussion of our proposed 
CY 2016 OPPS packaging policy, we refer readers to section II.A.3. of 
this proposed rule.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we are proposing to 
continue to compare the final list of packaged revenue codes that we 
adopt for CY 2016 to the revenue codes that the I/OCE will package for 
CY 2016 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 2016, as we did for CY 2015, we reviewed the changes to 
revenue codes that were effective during CY 2014 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we would propose to package for CY 2016. We believe that the 
charges reported under the revenue codes listed in Table 4 below 
continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2016, 
we are proposing to continue to package the costs that we derive from 
the charges reported without HCPCS codes under the revenue codes 
displayed in Table 4 below for purposes of calculating the geometric 
mean costs on which the proposed CY 2016 OPPS/ASC payment rates are 
based.

            Table 4--Proposed CY 2016 Packaged Revenue Codes
------------------------------------------------------------------------
              Revenue code                         Description
------------------------------------------------------------------------
250....................................  Pharmacy; General
                                          Classification
251....................................  Pharmacy; Generic Drugs
252....................................  Pharmacy; Non-Generic Drugs
254....................................  Pharmacy; Drugs Incident to
                                          Other Diagnostic Services
255....................................  Pharmacy; Drugs Incident to
                                          Radiology
257....................................  Pharmacy; Non-Prescription
258....................................  Pharmacy; IV Solutions
259....................................  Pharmacy; Other Pharmacy
260....................................  IV Therapy; General
                                          Classification
261....................................  IV Therapy; Infusion Pump
262....................................  IV Therapy; IV Therapy/Pharmacy
                                          Svcs
263....................................  IV Therapy; IV Therapy/Drug/
                                          Supply Delivery
264....................................  IV Therapy; IV Therapy/Supplies
269....................................  IV Therapy; Other IV Therapy
270....................................  Medical/Surgical Supplies and
                                          Devices; General
                                          Classification
271....................................  Medical/Surgical Supplies and
                                          Devices; Non-sterile Supply
272....................................  Medical/Surgical Supplies and
                                          Devices; Sterile Supply
275....................................  Medical/Surgical Supplies and
                                          Devices; Pacemaker
276....................................  Medical/Surgical Supplies and
                                          Devices; Intraocular Lens
278....................................  Medical/Surgical Supplies and
                                          Devices; Other Implants
279....................................  Medical/Surgical Supplies and
                                          Devices; Other Supplies/
                                          Devices
280....................................  Oncology; General
                                          Classification
289....................................  Oncology; Other Oncology
331....................................  Radiology--Therapeutic and/or
                                          Chemotherapy Administration;
                                          Chemotherapy Admin--Injected
332....................................  Radiology--Therapeutic and/or
                                          Chemotherapy Administration;
                                          Chemotherapy Admin--Oral
335....................................  Radiology--Therapeutic and/or
                                          Chemotherapy Administration;
                                          Chemotherapy Admin--IV
343....................................  Nuclear Medicine; Diagnostic
                                          Radiopharmaceuticals
344....................................  Nuclear Medicine; Therapeutic
                                          Radiopharmaceuticals
360....................................  Operating Room Services;
                                          General Classification
361....................................  Operating Room Services; Minor
                                          Surgery
362....................................  Operating Room Services; Organ
                                          Transplant- Other than Kidney
369....................................  Operating Room Services; Other
                                          OR Services
370....................................  Anesthesia; General
                                          Classification
371....................................  Anesthesia; Anesthesia Incident
                                          to Radiology
372....................................  Anesthesia; Anesthesia Incident
                                          to Other DX Services
379....................................  Anesthesia; Other Anesthesia
390....................................  Administration, Processing and
                                          Storage for Blood and Blood
                                          Components; General
                                          Classification
392....................................  Administration, Processing and
                                          Storage for Blood and Blood
                                          Components; Processing and
                                          Storage
399....................................  Administration, Processing and
                                          Storage for Blood and Blood
                                          Components; Other Blood
                                          Handling
410....................................  Respiratory Services; General
                                          Classification
412....................................  Respiratory Services;
                                          Inhalation Services
413....................................  Respiratory Services;
                                          Hyperbaric Oxygen Therapy
419....................................  Respiratory Services; Other
                                          Respiratory Services

[[Page 39220]]

 
621....................................  Medical Surgical Supplies--
                                          Extension of 027X; Supplies
                                          Incident to Radiology
622....................................  Medical Surgical Supplies--
                                          Extension of 027X; Supplies
                                          Incident to Other DX Services
623....................................  Medical Supplies--Extension of
                                          027X, Surgical Dressings
624....................................  Medical Surgical Supplies--
                                          Extension of 027X; FDA
                                          Investigational Devices
630....................................  Pharmacy--Extension of 025X;
                                          Reserved
631....................................  Pharmacy--Extension of 025X;
                                          Single Source Drug
632....................................  Pharmacy--Extension of 025X;
                                          Multiple Source Drug
633....................................  Pharmacy--Extension of 025X;
                                          Restrictive Prescription
681....................................  Trauma Response; Level I Trauma
682....................................  Trauma Response; Level II
                                          Trauma
683....................................  Trauma Response; Level III
                                          Trauma
684....................................  Trauma Response; Level IV
                                          Trauma
689....................................  Trauma Response; Other
700....................................  Cast Room; General
                                          Classification
710....................................  Recovery Room; General
                                          Classification
720....................................  Labor Room/Delivery; General
                                          Classification
721....................................  Labor Room/Delivery; Labor
722....................................  Labor Room/Delivery; Delivery
                                          Room
724....................................  Labor Room/Delivery; Birthing
                                          Center
729....................................  Labor Room/Delivery; Other
                                          Labor Room/Delivery
732....................................  EKG/ECG (Electrocardiogram);
                                          Telemetry
760....................................  Specialty Services; General
                                          Classification
761....................................  Specialty Services; Treatment
                                          Room
762....................................  Specialty services; Observation
                                          Hours
769....................................  Specialty Services; Other
                                          Specialty Services
770....................................  Preventive Care Services;
                                          General Classification
801....................................  Inpatient Renal Dialysis;
                                          Inpatient Hemodialysis
802....................................  Inpatient Renal Dialysis;
                                          Inpatient Peritoneal Dialysis
                                          (Non-CAPD)
803....................................  Inpatient Renal Dialysis;
                                          Inpatient Continuous
                                          Ambulatory Peritoneal Dialysis
                                          (CAPD)
804....................................  Inpatient Renal Dialysis;
                                          Inpatient Continuous Cycling
                                          Peritoneal Dialysis (CCPD)
809....................................  Inpatient Renal Dialysis; Other
                                          Inpatient Dialysis
810....................................  Acquisition of Body Components;
                                          General Classification
819....................................  Acquisition of Body Components;
                                          Other Donor
821....................................  Hemodialysis-Outpatient or
                                          Home; Hemodialysis Composite
                                          or Other Rate
824....................................  Hemodialysis-Outpatient or
                                          Home; Maintenance--100%
825....................................  Hemodialysis-Outpatient or
                                          Home; Support Services
829....................................  Hemodialysis-Outpatient or
                                          Home; Other OP Hemodialysis
942....................................  Other Therapeutic Services
                                          (also see 095X, an extension
                                          of 094x); Education/Training
943....................................  Other Therapeutic Services
                                          (also see 095X, an extension
                                          of 094X), Cardiac
                                          Rehabilitation
948....................................  Other Therapeutic Services
                                          (also see 095X, an extension
                                          of 094X), Pulmonary
                                          Rehabilitation
------------------------------------------------------------------------

    In accordance with our longstanding policy, we are proposing to 
continue to exclude: (1) Claims that had zero costs after summing all 
costs on the claim; and (2) claims containing packaging flag number 3. 
Effective for services furnished after July 1, 2014, 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 
Medicare Administrative Contractor (MAC) was required to allocate the 
sum of charges for services with a status indicator equaling ``S'' or 
``T'' based on the relative payment weight of the APC to which each 
code was assigned. We do not believe that these charges, which were 
token charges as submitted by the hospital, are valid reflections of 
hospital resources. Therefore, we deleted these claims. We also deleted 
claims for which the charges equaled the revenue center payment (that 
is, the Medicare payment) on the assumption that, where the charge 
equaled the payment, to apply a CCR to the charge would not yield a 
valid estimate of relative provider cost. We are proposing to continue 
these processes for the CY 2016 OPPS.
    For the remaining claims, we are proposing to then standardize 60 
percent of the costs of the claim (which we have previously determined 
to be the labor-related portion) for geographic differences in labor 
input costs. We made this adjustment by determining the wage index that 
applied to the hospital that furnished the service and dividing the 
cost for the separately paid HCPCS code furnished by the hospital by 
that wage index. The claims accounting that we provide for the proposed 
rule and final rule with comment period contains the formula we use to 
standardize the total cost for the effects of the wage index. As has 
been our policy since the inception of the OPPS, we are proposing to 
use the pre-reclassified wage indices for standardization because we 
believe that they better reflect the true costs of items and services 
in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most 
accurate unadjusted geometric mean costs. We are proposing to use these 
pre-reclassified wage indices for standardization using the new OMB 
labor market area delineations described in section II.C. of this 
proposed rule.
    In accordance with our longstanding practice, we also are proposing 
to exclude single and ``pseudo'' single procedure claims for which the 
total cost on the claim was outside 3 standard deviations from the 
geometric mean of units for each HCPCS code on the bypass list 
(because, as discussed above, we used claims that contain multiple 
units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 113 million 
claims were left. Using these approximately 113 million claims, we 
created approximately 105 million single and ``pseudo'' single 
procedure claims, of which we used approximately 88 million single 
bills (after trimming out approximately 17 million claims as discussed 
in section II.A.1.a. of this proposed rule) in the CY 2016 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 CYs 2013, 2014, and 2015 OPPS, we calculated the APC 
relative payment weights using geometric mean costs, and we are 
proposing to continue this practice for CY 2016. 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 2016 OPPS/ASC proposed policy to calculate relative 
payment weights based on geometric means, we refer readers to section 
II.A.2.c. of this proposed rule.
    We are proposing to use these claims to calculate the CY 2016 
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

[[Page 39221]]

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 2016 OPPS, we are proposing to 
continue to develop the APC relative payment weights based on geometric 
mean costs.
    We note that, for purposes of identifying significant HCPCS codes 
for examination in the 2 times rule, we consider codes that have more 
than 1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC geometric mean cost to be 
significant. This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 88 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 2016 policy to continue to base the 
relative payment weights on geometric mean costs, we believe that this 
same consideration for identifying significant HCPCS codes should apply 
because the principles are consistent with their use in the median-
based cost methodology. Unlisted codes are not used in establishing the 
percent of claims contributing to the APC, nor are their costs used in 
the calculation of the APC geometric mean. Finally, we reviewed the 
geometric mean costs for the services for which we are proposing to pay 
separately under this proposed rule, and we reassigned HCPCS codes to 
different APCs where it was necessary to ensure clinical and resource 
homogeneity within the APCs. The proposed APC geometric means were 
recalculated after we reassigned the affected HCPCS codes. Both the 
HCPCS code-specific geometric means and the APC geometric means were 
weighted to account for the inclusion of multiple units of the bypass 
codes in the creation of ``pseudo'' single procedure claims.
    As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this 
proposed rule, in some cases, APC geometric mean costs are calculated 
using variations of the process outlined above. Specifically, section 
II.A.2.d. of this proposed rule addresses the proposed calculation of 
single APC criteria-based geometric mean costs. Section II.A.2.f. of 
this proposed rule discusses the proposed calculation of composite APC 
criteria-based geometric mean costs. Section VIII.B. of this proposed 
rule addresses the methodology for calculating the proposed geometric 
mean costs for partial hospitalization services.
(2) Recommendations of the Panel Regarding Data Development
    At the March 9, 2015 meeting of the Panel, we discussed our 
standard analysis of APCs, and specifically, those APCs for which 
geometric mean costs in the Panel run of CY 2014 claims data varied 
significantly from the CY 2013 claims data used for the CY 2015 OPPS/
ASC final rule with comment period. We also discussed the claims 
accounting process for the CY 2015 OPPS/ASC final rule with comment 
period.
    At the March 9, 2015 Panel meeting, the Panel made two 
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 CMS provide the Panel 
with a list of APCs fluctuating significantly in costs at the next 
Panel meeting.
    CMS Response: We are accepting this recommendation.
d. Proposed Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For CY 2016, we are proposing to continue to establish payment 
rates for blood and blood products using our blood-specific CCR 
methodology, which utilizes actual or simulated CCRs from the most 
recently available hospital cost reports to convert hospital charges 
for blood and blood products to costs. This methodology has been our 
standard ratesetting methodology for blood and blood products since CY 
2005. It was developed in response to data analysis indicating that 
there was a significant difference in CCRs for those hospitals with and 
without blood-specific cost centers, and past public comments 
indicating that the former OPPS policy of defaulting to the overall 
hospital CCR for hospitals not reporting a blood-specific cost center 
often resulted in an underestimation of the true hospital costs for 
blood and blood products. Specifically, in order to address the 
differences in CCRs and to better reflect hospitals' costs, we are 
proposing to continue to simulate blood CCRs for each hospital that 
does not report a blood cost center by calculating the ratio of the 
blood-specific CCRs to hospitals' overall CCRs for those hospitals that 
do report costs and charges for blood cost centers. We also are 
proposing to 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 are proposing to calculate the costs upon which the proposed CY 2016 
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 that the hospital-specific simulated blood-
specific CCR methodology better 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

[[Page 39222]]

costs for these products. We continue to believe that this methodology 
in CY 2016 would result in costs for blood and blood products that 
appropriately reflect the relative estimated costs of these products 
for hospitals without blood cost centers and, therefore, for these 
blood products in general.
    We note that, as discussed in section II.A.2.e. of the CY 2014 
OPPS/ASC final rule with comment period (78 FR 74861 through 74910) and 
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66798 
through 66810), we defined a comprehensive APC (C-APC) as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Under this policy, we include the costs of blood and blood 
products when calculating the overall costs of these C-APCs. We are 
proposing to 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 C-
APCs (79 FR 66796). Because the costs of blood and blood products will 
be reflected in the overall costs of the C-APCs (and, as a result, in 
the final payment rates of the C-APCs), we are proposing to not make 
separate payments for blood and blood products when they appear on the 
same claims as services assigned to the C-APCs (79 FR 66796).
    We are inviting public comments on these proposals. We refer 
readers to Addendum B to this proposed rule (which is available via the 
Internet on the CMS Web site) for the proposed CY 2016 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).
(2) Brachytherapy Sources
    Section 1833(t)(2)(H) of the Act mandates the creation of 
additional groups of covered OPD services that classify devices of 
brachytherapy consisting of a seed or seeds (or radioactive source) 
(``brachytherapy sources'') separately from other services or groups of 
services. The statute provides certain criteria for the additional 
groups. For the history of OPPS payment for brachytherapy sources, we 
refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC 
final rule with comment period (77 FR 68240 through 68241). As we have 
stated in prior OPPS updates, we believe that adopting the general OPPS 
prospective payment methodology for brachytherapy sources is 
appropriate for a number of reasons (77 FR 68240). The general OPPS 
payment methodology uses costs based on claims data to set the relative 
payment weights for hospital outpatient services. This payment 
methodology results in more consistent, predictable, and equitable 
payment amounts per source across hospitals by averaging the extremely 
high and low values, in contrast to payment based on hospitals' charges 
adjusted to costs. We believe that the OPPS prospective payment 
methodology, as opposed to payment based on hospitals' charges adjusted 
to cost, also would provide hospitals with incentives for efficiency in 
the provision of brachytherapy services to Medicare beneficiaries. 
Moreover, this approach is consistent with our payment methodology for 
the vast majority of items and services paid under the OPPS. We refer 
readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66796 through 66798) for further discussion of the history of OPPS 
payment for brachytherapy sources.
    In this proposed rule, for CY 2016, we are proposing to use the 
costs derived from CY 2014 claims data to set the proposed CY 2016 
payment rates for brachytherapy sources, as we are proposing to use to 
set the proposed payment rates for most other items and services that 
would be paid under the CY 2016 OPPS. We based the proposed payment 
rates for brachytherapy sources on the geometric mean unit costs for 
each source, consistent with the methodology proposed for other items 
and services paid under the OPPS, as discussed in section II.A.2. of 
this proposed rule. We also are proposing to continue the other payment 
policies for brachytherapy sources that we finalized and first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537). We are proposing to pay for the stranded and nonstranded not 
otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate 
equal to the lowest stranded or nonstranded prospective payment rate 
for such sources, respectively, on a per source basis (as opposed to, 
for example, a per mCi), which is based on the policy we established in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). For 
CY 2016 and subsequent years, we also are proposing to continue the 
policy we first implemented in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60537) regarding payment for new brachytherapy 
sources for which we have no claims data, based on the same reasons we 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66786; which was delayed until January 1, 2010 by section 142 of Pub. 
L. 110-275). That policy is intended to enable us to assign new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    The proposed CY 2016 payment rates for brachytherapy sources are 
included in Addendum B to this proposed rule (which is available via 
the Internet on the CMS Web site) and are identified with status 
indicator ``U.''
    We are inviting public comments on this proposed policy. We also 
are requesting recommendations for new HCPCS codes to describe new 
brachytherapy sources consisting of a radioactive isotope, including a 
detailed rationale to support recommended new sources. Such 
recommendations should be directed to the Division of Outpatient Care, 
Mail Stop C4-03-27, Centers for Medicare and Medicaid Services, 7500 
Security Boulevard, Baltimore, MD 21244. We will continue to add new 
brachytherapy source codes and descriptors to our systems for payment 
on a quarterly basis.
e. Proposed Comprehensive APCs (C-APCs) for CY 2016
(1) Background
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 
through 74910), we finalized a comprehensive payment policy that 
packages payment for adjunctive and secondary items, services, and 
procedures into the most costly primary procedure under the OPPS at the 
claim level. The policy was finalized in CY 2014, but the effective 
date was delayed until January 1, 2015, to allow additional time for 
further analysis, opportunity for public comment, and systems 
preparation. The comprehensive APC (C-APC) policy was implemented 
effective January 1, 2015, with modifications and clarifications in 
response to public comments received regarding specific provisions of 
the C-APC policy (79 FR 66798 through 66810).
    A C-APC is defined as a classification for the provision of a 
primary service and all adjunctive services provided to

[[Page 39223]]

support the delivery of the primary service. We established C-APCs as a 
category broadly for OPPS payment and implemented 25 C-APCs beginning 
in CY 2015 (79 FR 66809 through 66810).
    Under this policy, we designated a HCPCS code assigned to a C-APC 
as the primary service (identified by a new OPPS status indicator 
``J1''). When such a primary service is reported on a hospital 
outpatient claim, taking into consideration the few exceptions that are 
discussed below, we make payment for all other items and services 
reported on the hospital outpatient claim as being integral, ancillary, 
supportive, dependent, and adjunctive to the primary service 
(hereinafter collectively referred to as ``adjunctive services'') and 
representing components of a complete comprehensive service (78 FR 
74865 and 79 FR 66799). Payments for adjunctive services are packaged 
into the payments for the primary services. This results in a single 
prospective payment for each of the primary, comprehensive services 
based on the costs of all reported services at the claim level.
    Services excluded from the C-APC policy include services that are 
not covered OPD services, services that cannot by statute be paid for 
under the OPPS, and services that are required by statute that must be 
separately paid. This includes certain mammography and ambulance 
services that are not ever covered OPD services in accordance with 
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also 
are required by statute to receive separate payment under section 
1833(t)(2)(H) of the Act; pass-through drugs and devices, which also 
require separate payment under section 1833(t)(6) of the Act; self-
administered drugs (SADs) that are not otherwise packaged as supplies 
because they are not covered under Medicare Part B under section 
1861(s)(2)(B) of the Act, and certain preventive services (78 FR 74865 
and 79 FR 66800 through 66801).
    The C-APC policy payment methodology set forth in the CY 2014 OPPS/
ASC final rule with comment period for the C-APCs and modified and 
implemented in CY 2015 is summarized as follows (78 FR 74887 and 79 FR 
66800):
    Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule 
with comment period, we define the C-APC payment policy as including 
all covered OPD services on a hospital outpatient claim reporting a 
primary service that is assigned to status indicator ``J1,'' excluding 
services that are not covered OPD services or that cannot by statute be 
paid for under the OPPS. HCPCS codes assigned to status indicator 
``J1'' are assigned to C-APCs based on our usual APC assignment 
methodology by evaluating the geometric mean costs of the primary 
service claims to establish resource similarity and the clinical 
characteristics of each procedure to establish clinical similarity 
within each APC.
    Services included under the C-APC payment packaging policy, that 
is, services that are typically adjunctive to the primary service, 
provided during the delivery of the comprehensive service, include 
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; 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 represent services that are provided 
during the complete comprehensive service, except the excluded services 
that are described below (78 FR 74865 and 79 FR 66800).
    In addition, payment for outpatient department services that are 
similar to therapy services and delivered either by therapists or 
nontherapists is included as part of the payment for the packaged 
complete comprehensive service. These services that are 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 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 
for under section 1834(k) of the Act, subject to annual therapy caps as 
applicable (78 FR 74867 and 79 FR 66800). However, certain other 
services similar to therapy services are considered and paid for as 
outpatient department services. Payment for these nontherapy outpatient 
department services that are reported with therapy codes and provided 
with a comprehensive service is included in the payment for the 
packaged complete comprehensive service. We note that these services, 
even though they are reported with therapy codes, are outpatient 
department services and not therapy services. Therefore, the 
requirement for functional reporting under the regulations at 42 CFR 
410.59(a)(4) and 42 CFR 410.60(a)(4) does not apply.
    Items included in the packaged payment provided in conjunction with 
the primary service also include all drugs, biologicals, and 
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and those drugs that are usually self-
administered (SADs), unless they function as packaged supplies (78 FR 
74868 through 74869 and 74909 and 79 FR 66800). We refer readers to 
Section 50.2M, Chapter 15, of the Medicare Benefit Policy Manual for a 
description of our policy on SADs treated as hospital outpatient 
supplies, including lists of SADs that function as supplies and those 
that do not function as supplies.
    Items and services excluded from the C-APC payment policy include: 
SADs that are not considered supplies because they are not covered 
under Medicare Part B under section 1861(s)(2)(B) of the Act; services 
excluded from the OPPS according to section 1833(t)(1)(B) of the Act, 
including recurring therapy services, which we considered unrelated to 
the comprehensive service (defined as therapy services reported on a 
separate facility claim for recurring services), ambulance services, 
diagnostic and screening mammography, the annual wellness visit 
providing personalized prevention plan services, and pass-through drugs 
and devices that are paid according to section 1833(t)(6) of the Act.
    We also excluded preventive services. For a description of the 
preventive services that are excluded from the C-APC payment policy, we 
refer readers to the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66800 through 66801) and the list below in Table 5, which also 
includes any new preventive services added for CY 2016.
    Other exclusions include brachytherapy services and pass-through 
drugs, biologicals, and devices that are required by statute to be 
separately payable (78 FR 74868 and 74909 and 79 FR 66801). In 
addition, we also excluded services assigned to OPPS status indicator 
``F,'' which are services not paid under the OPPS and are instead paid 
on a reasonable cost basis (that is, certain certified registered nurse 
assistant (CRNA) services, Hepatitis B vaccines, and corneal tissue 
acquisition, which is not part of a comprehensive service for CY 2015). 
In Table 5 below, we list the services that are excluded from the C-APC 
payment policy.

[[Page 39224]]



    Table 5--Comprehensive APC Payment Policy Exclusions for CY 2016
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Ambulance services;
Brachytherapy;
Diagnostic and mammography screenings;
Physical therapy, speech-language pathology and occupational therapy
 services--Therapy services reported on a separate facility claim for
 recurring services;
Pass-through drugs, biologicals, and devices;
Preventive services defined in 42 CFR410.2:
     Annual wellness visits providing personalized prevention
     plan services
     Initial preventive physical examinations
     Pneumococcal, influenza, and hepatitis B vaccines and
     administrations
     Mammography Screenings
     Pap smear screenings and pelvic examination screenings
     Low Dose Computed Tomography
     Prostate cancer screening tests
     Colorectal cancer screening tests
     Diabetes outpatient self-management training services
     Bone mass measurements
     Glaucoma screenings
     Medical nutrition therapy services
     Cardiovascular screening blood tests
     Diabetes screening tests
     Ultrasound screenings for abdominal aortic aneurysm
     Additional preventive services (as defined in section
     1861(ddd)(1) of the Act);
Self-administered drugs (SADs)--Drugs that are usually self-administered
 and do not function as supplies in the provision of the comprehensive
 service;
Services assigned to OPPS status indicator ``F'' (certain CRNA services,
 Hepatitis B vaccines and corneal tissue acquisition);
Services assigned to OPPS status indicator ``L'' (influenza and
 pneumococcal pneumonia vaccines); and
Certain Part B inpatient services--Ancillary Part B inpatient services
 payable under Part B when the primary ``J1'' service for the claim is
 not a payable Medicare Part B inpatient service (for example, exhausted
 Medicare Part A benefits, beneficiaries with Part B only).
------------------------------------------------------------------------

    We define each hospital outpatient claim reporting a single unit of 
a single primary service assigned to status indicator ``J1'' as a 
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). We 
sum all line item charges for services included on the C-APC claim, 
convert the charges to costs, and calculate the ``comprehensive'' 
geometric mean cost of one unit of each service assigned to status 
indicator ``J1.'' (We note that we use the term ``comprehensive'' to 
describe the geometric mean cost of a claim reporting ``J1'' service(s) 
or the geometric mean cost of a C-APC, inclusive of all of the items 
and services included in the C-APC service payment bundle.) Charges for 
services that would otherwise be separately payable are added to the 
charges for the primary service. This process differs from our 
traditional cost accounting methodology only in that all such services 
on the claim are packaged (except certain services as described above). 
We apply our standard data trims, excluding claims with extremely high 
primary units or extreme costs.
    The comprehensive geometric mean costs are used to establish 
resource similarity and, along with clinical similarity, dictate the 
assignment of the primary services to the C-APCs. We establish a 
ranking of each primary service (single unit only) to be assigned to 
status indicator ``J1'' according to their comprehensive geometric mean 
costs. For the minority of claims reporting more than one primary 
service assigned to status indicator ``J1'' or units thereof 
(approximately 20 percent of CY 2014 claims), we identify one ``J1'' 
service as the primary service for the claim based on our cost-based 
ranking of primary services. We then assign these multiple ``J1'' 
procedure claims to the C-APC to which the service designated as the 
primary service is assigned. If the reported ``J1'' services reported 
on a claim map to different C-APCs, we designate the ``J1'' service 
assigned to the C-APC with the highest comprehensive geometric mean 
cost as the primary service for that claim. If the reported multiple 
``J1'' services on a claim map to the same C-APC, we designate the most 
costly service (at the HCPCS code level) as the primary service for 
that claim. This process results in initial assignments of claims for 
the primary services assigned to status indicator ``J1'' to the most 
appropriate C-APCs based on both single and multiple procedure claims 
reporting these services and clinical and resource homogeneity.
    Complexity Adjustments. We use complexity adjustments to provide 
increased payment for certain comprehensive services. We apply a 
complexity adjustment by promoting qualifying ``J1'' service code 
combinations or code combinations of ``J1'' services and certain add-on 
codes (as described further below) from the originating C-APC (the C-
APC to which the designated primary service is first assigned) to a 
higher paying C-APC in the same clinical family of C-APCs, if 
reassignment is clinically appropriate and the reassignment would not 
create a violation of the 2 times rule in the receiving APC (the higher 
paying C-APC in the same clinical family of C-APCs). We implement this 
type of complexity adjustment when the code combination represents a 
complex, costly form or version of the primary service according to the 
following criteria:
     Frequency of 25 or more claims reporting the code 
combination (frequency threshold); and
     Violation of the 2 times rule (cost threshold).
    After designating a single primary service for a claim, we evaluate 
that service in combination with each of the other procedure codes 
reported on the claim assigned to status indicator ``J1'' (or certain 
add-on codes) to determine if they meet the complexity adjustment 
criteria. For new HCPCS codes, we determine initial C-APC assignments 
and complexity adjustments using the best data available, crosswalking 
the new HCPCS codes to predecessor codes wherever possible.
    Once we have determined that a particular code combination of 
``J1'' services (or combinations of ``J1'' services reported in 
conjunction with certain add-on codes) represents a complex version of 
the primary service

[[Page 39225]]

because it is sufficiently costly, frequent, and a subset of the 
primary comprehensive service overall according to the criteria 
described above, we promote the complex version of the primary service 
as described by the code combination to the next higher cost C-APC 
within the clinical family, unless the APC reassignment is not 
clinically appropriate, the reassignment would create a violation of 
the 2 times rule in the receiving APC, or the primary service is 
already assigned to the highest cost APC within the C-APC clinical 
family or assigned to the only C-APC in a clinical family. We do not 
create new APCs with a comprehensive geometric mean cost that is higher 
than the highest geometric mean cost (or only) C-APC in a clinical 
family just to accommodate potential complexity adjustments. Therefore, 
the highest payment for any code combination for services assigned to a 
C-APC would be the highest paying C-APC in the clinical family (79 FR 
66802).
    We package payment for all add-on codes into the payment for the C-
APC. However, certain primary service-add-on combinations may qualify 
for a complexity adjustment. First, the add-on code must be an eligible 
add-on code. The list of add-on codes that are eligible for complexity 
adjustment evaluation was included in Table 8 of the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66810), and also is identified as 
Addendum J to this proposed rule (which is available via the Internet 
on the CMS Web site). For CY 2016, we are not proposing to add any add-
on codes to the list of add-on codes that are evaluated for a 
complexity adjustment when performed in conjunction with a primary C-
APC procedure.
    To determine which combinations of primary service codes reported 
in conjunction with an eligible add-on code may qualify for a 
complexity adjustment for CY 2016, we apply the frequency and cost 
criteria thresholds discussed above, testing claims reporting one unit 
of a single primary service assigned to status indicator ``J1'' and any 
number of units of a single add-on code. If the frequency and cost 
criteria thresholds for a complexity adjustment are met, and 
reassignment to the next higher cost APC in the clinical family is 
appropriate, we make a complexity adjustment for the code combination; 
that is, we reassign the primary service code reported in conjunction 
with the eligible add-on code combination to a higher cost C-APC within 
the same clinical family of C-APCs. If any add-on code combination 
reported in conjunction with the primary service code does not qualify 
for a complexity adjustment, payment for these services is packaged 
within the payment for the complete comprehensive service. We list the 
complexity adjustments proposed for add-on code combinations for CY 
2016, along with all of the other proposed complexity adjustments, in 
Addendum J to this proposed rule (which is available via the Internet 
on the CMS Web site).
    We are providing in Addendum J to this proposed rule a breakdown of 
cost statistics for each code combination that would qualify for a 
complexity adjustment (including primary code and add-on code 
combinations). Addendum J to this proposed rule also contains summary 
cost statistics for each of the code combinations that describe a 
complex code combination that would qualify for a complexity adjustment 
and are proposed to be reassigned to the next higher cost C-APC within 
the clinical family. The combined statistics for all proposed 
reassigned complex code combinations are represented by an alphanumeric 
code with the last 4 digits of the designated primary service followed 
by ``A'' (indicating ``adjustment''). For example, the proposed 
geometric mean cost listed in Addendum J for the code combination 
described by complexity adjustment assignment 3208A, which is assigned 
to proposed renumbered C-APC 5223 (Level 3 Pacemaker and Similar 
Procedures) (existing APC 0089), includes all code combinations that 
are proposed to be reassigned to proposed renumbered C-APC 5223 when 
CPT code 33208 is the primary code. Providing the information contained 
in Addendum J in this proposed rule allows stakeholders the opportunity 
to better assess the impact associated with the proposed reassignment 
of each of the code combinations eligible for a complexity adjustment.
(2) Proposed C-APCs to be Paid under the C-APC Payment Policy for CY 
2016
(a) Proposed CY 2016 C-APCs
    For CY 2016, we are proposing to continue to implement the C-APC 
payment policy methodology made effective in CY 2015, as described in 
detail below. We are proposing to continue to define the services 
assigned to C-APCs as primary services, and to define a C-APC as a 
classification for the provision of a primary service and all 
adjunctive services and supplies provided to support the delivery of 
the primary service. We also are proposing to continue to follow the C-
APC payment policy methodology of including all covered OPD services on 
a hospital outpatient claim reporting a primary service that is 
assigned to status indicator ``J1,'' excluding services that are not 
covered OPD services or that cannot by statute be paid under the OPPS.
    After our annual review of the OPPS, we are proposing nine 
additional C-APCs to be paid under the existing C-APC payment policy 
beginning in CY 2016. All C-APCs, including those effective in CY 2016 
and those being proposed for CY 2016, are displayed in Table 6 below 
with the proposed new C-APCs denoted with an asterisk. Addendum J to 
this proposed rule (which is available via the Internet on the CMS Web 
site) contains all of the data related to the C-APC payment policy 
methodology, including the list of proposed complexity adjustments.

                                        Table 6--Proposed CY 2016 C-APCs
----------------------------------------------------------------------------------------------------------------
         Proposed CY 2016 C-APC+          Proposed CY 2016 APC descriptor        Clinical family       New C-APC
----------------------------------------------------------------------------------------------------------------
5222....................................  Level 2 Pacemaker and Similar    AICDP.....................  .........
                                           Procedures.
5223....................................  Level 3 Pacemaker and Similar    AICDP.....................  .........
                                           Procedures.
5224....................................  Level 4 Pacemaker and Similar    AICDP.....................  .........
                                           Procedures.
5231....................................  Level 1 ICD and Similar          AICDP.....................  .........
                                           Procedures.
5232....................................  Level 2 ICD and Similar          AICDP.....................  .........
                                           Procedures.
5093....................................  Level 3 Breast/Lymphatic         BREAS.....................  .........
                                           Surgery and Related Procedures.
5165....................................  Level 5 ENT Procedures.........  ENTXX.....................          *
5166....................................  Level 6 ENT Procedures.........  ENTXX.....................  .........
5211....................................  Level 1 Electrophysiologic       EPHYS.....................  .........
                                           Procedures.
5212....................................  Level 2 Electrophysiologic       EPHYS.....................  .........
                                           Procedures.
5213....................................  Level 3 Electrophysiologic       EPHYS.....................  .........
                                           Procedures.

[[Page 39226]]

 
5492....................................  Level 2 Intraocular Procedures.  EYEXX.....................          *
5493....................................  Level 3 Intraocular Procedures.  EYEXX.....................  .........
5494....................................  Level 4 Intraocular Procedures.  EYEXX.....................  .........
5331....................................  Complex GI Procedures..........  GIXXX.....................  .........
5415....................................  Level 5 Gynecologic Procedures.  GYNXX.....................  .........
5416....................................  Level 6 Gynecologic Procedures.  GYNXX.....................          *
5361....................................  Level 1 Laparoscopy............  LAPXX.....................          *
5362....................................  Level 2 Laparoscopy............  LAPXX.....................          *
5462....................................  Level 2 Neurostimulator and      NSTIM.....................  .........
                                           Related Procedures.
5463....................................  Level 3 Neurostimulator and      NSTIM.....................  .........
                                           Related Procedures.
5464....................................  Level 4 Neurostimulator and      NSTIM.....................  .........
                                           Related Procedures.
5123....................................  Level 3 Musculoskeletal          ORTHO.....................          *
                                           Procedures.
5124....................................  Level 4 Musculoskeletal          ORTHO.....................  .........
                                           Procedures.
5471....................................  Implantation of Drug Infusion    PUMPS.....................  .........
                                           Device.
5631....................................  Single Session Cranial           RADTX.....................  .........
                                           Stereotactic Radiosurgery.
5375....................................  Level 5 Urology and Related      UROXX.....................          *
                                           Services.
5376....................................  Level 6 Urology and Related      UROXX.....................  .........
                                           Services.
5377....................................  Level 7 Urology and Related      UROXX.....................  .........
                                           Services.
5191....................................  Level 1 Endovascular Procedures  VASCX.....................  .........
5192....................................  Level 2 Endovascular Procedures  VASCX.....................  .........
5193....................................  Level 3 Endovascular Procedures  VASCX.....................  .........
5881....................................  Ancillary Outpatient Services    N/A.......................          *
                                           When Patient Expires.
8011....................................  Comprehensive Observation        N/A.......................          *
                                           Services.
----------------------------------------------------------------------------------------------------------------
+ We refer readers to section III.D. of this proposed rule for a discussion of the proposed overall
  restructuring and renumbering of APCs and to Addendum Q to this proposed rule (which is available via the
  Internet on the CMS Web site) for a complete crosswalk of the existing APC numbers to the proposed new APC
  numbers.
* Proposed New C-APC for CY 2016.
Clinical Family Descriptor Key:
AICDP = Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices
BREAS = Breast Surgery
ENTXX = ENT Procedures
EPHYS = Cardiac Electrophysiology
EYEXX = Ophthalmic Surgery
GIXXX = Gastrointestinal Procedures
GYNXX = Gynecologic Procedures
LAPXX = Laparoscopic Procedures
NSTIM = Neurostimulators
ORTHO = Orthopedic Surgery
PUMPS = Implantable Drug Delivery Systems
RADTX = Radiation Oncology
UROXX = Urologic Procedures
VASCX = Vascular Procedures

(b) Proposed Observation Comprehensive APC
    As part of our proposed expansion of the C-APC payment policy 
methodology, we have identified an instance where we believe that 
comprehensive payments are appropriate, that is, when a claim contains 
a specific combination of services performed in combination with each 
other, as opposed to the presence of a single primary service 
identified by status indicator ``J1.'' To recognize such instances, for 
CY 2016, we are proposing to create a new status indicator ``J2'' to 
designate specific combinations of services that, when performed in 
combination with each other and reported on a hospital Medicare Part B 
outpatient claim, would allow for all other OPPS payable services and 
items reported on the claim (excluding all preventive services and 
certain Medicare Part B inpatient services) to be deemed adjunctive 
services representing components of a comprehensive service and 
resulting in a single prospective payment for the comprehensive service 
based on the costs of all reported services on the claim. Additional 
information about the proposed new status indicator ``J2'' and its 
proposed C-APC assignment is provided below.
    It has been our longstanding policy to provide payment to hospitals 
in certain circumstances when extended assessment and management of a 
patient occur (79 FR 66811 through 66812). Currently, payment for all 
qualifying extended assessment and management encounters is provided 
through APC 8009 (Extended Assessment and Management (EAM) Composite) 
(79 FR 66811 through 66812). Under this policy, we allow services 
identified by the following to qualify for payment through EAM 
composite APC 8009: a clinic visit HCPCS code G0463; a Level 4 or 5 
Type A ED visit (CPT code 99284 or 99285); a Level 5 Type B ED visit 
(HCPCS code G0384); a direct referral for observation (G0379), or 
critical care (CPT code 99291) provided by a hospital in conjunction 
with observation services of substantial duration (8 or more hours) 
(provided the observation was not furnished on the same day as surgery 
or postoperatively) (79 FR 66811 through 66812).
    For CY 2016, we are proposing to pay for all qualifying extended 
assessment and management encounters through a newly created 
``Comprehensive Observation Services'' C-APC (C-APC 8011) and to assign 
the services within this APC to proposed new status indicator ``J2,'' 
as described earlier in this section. Specifically, we are proposing to 
make a C-APC payment through the proposed new C-APC 8011 for claims 
that meet the following criteria:
     The claims do not contain a HCPCS code to which we have 
assigned status

[[Page 39227]]

indicator ``T'' that is reported with a date of service on the same day 
or 1 day earlier than the date of service associated with HCPCS code 
G0378;
     The claims contain 8 or more units of services described 
by HCPCS code G0378 (Observation services, per hour);
     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; 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)); CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient 
clinic visit for assessment and management of a patient) provided on 
the same date of service or 1 day before the date of service for HCPCS 
code G0378;
     The claims do not contain a HCPCS code to which we have 
assigned status indicator ``J1.''
    We are proposing to utilize all claims that meet the above criteria 
in ratesetting for the proposed new C-APC 8011, and to develop the 
geometric mean costs of the comprehensive service based on the costs of 
all reported OPPS payable services reported on the claim (excluding all 
preventive services and certain Medicare Part B inpatient services). 
The proposed CY 2016 geometric mean cost resulting from this 
methodology is approximately $2,111, based on 1,191,120 claims used for 
ratesetting.
    With the proposal to establish a new C-APC 8011 to capture 
qualifying extended assessment and management encounters that currently 
are paid using composite APC 8009, we are correspondingly proposing to 
delete APC 8009, as it would be replaced with proposed new C-APC 8011 
(Comprehensive Observation Services).
    As stated earlier, we are proposing to assign certain combinations 
of procedures within proposed new C-APC 8011 to the proposed new status 
indicator ``J2,'' to distinguish the new C-APC 8011 from the other C-
APCs. Comprehensive payment would be made through the new 
``Comprehensive Observation Services'' C-APC when a claim contains a 
specific combination of services performed in combination with each 
other, as opposed to the presence of a single primary service 
identified by status indicator ``J1.'' We believe that a distinction in 
the status indicator is necessary to distinguish between the logic 
required to identify when a claim qualifies for payment through a C-APC 
because of the presence of a status indicator ``J1'' procedure being 
present on the claim versus when a claim qualifies for payment through 
a C-APC because of the presence of a specific combination of services 
on the claim. Specifically, for proposed new C-APC 8011, we believe the 
assignment of certain combinations of services that qualify under 
proposed new C-APC 8011 to the new proposed status indicator ``J2'' is 
necessary as claims containing status indicator ``T'' procedures on the 
same day or day before observation care is provided would not be 
payable through the proposed new C-APC 8011 and the initial ``J1'' 
logic would not exclude claims containing status indicator ``T'' 
procedures from qualifying for payment.
    For claims reporting services qualifying for payment through a C-
APC assigned to status indicator ``J1'' and qualifying for payment 
through a C-APC with a status indicator of ``J2,'' we are proposing 
that payment would be made through the C-APC with status indicator 
``J1'' and all the OPPS payable services would be deemed adjunctive 
services to the primary status indicator ``J1'' service, including the 
specific combination of services performed in combination with each 
other that would otherwise qualify for payment through a C-APC with a 
status indicator of ``J2.'' We are proposing that the presence of the 
specific combination of services performed in combination with each 
other that would otherwise qualify the service for payment through a C-
APC because it is assigned to status indicator ``J2'' on a hospital 
outpatient claim would not result in a complexity adjustment for the 
service qualifying for payment through a C-APC because it is assigned 
to status indicator ``J1.''
    Under the C-APC payment policy, we note that, 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 pay a single 
copayment for the comprehensive service that would be subject to the 
copayment liability cap. As a result, we expect that this policy likely 
reduces the possibility that the overall beneficiary liability exceeds 
the cap for most of these types of claims.
    (3) Proposed CY 2016 Policies for Specific C-APCs
    (a) Stereotactic Radiosurgery (SRS)
    With the advent of C-APCs, the OPPS consists of a wide array of 
payment methodologies, ranging from separate payment for a single 
service to a C-APC payment for an entire outpatient encounter with 
multiple services. As described above, our C-APC payment policy 
generally provides payment for a primary service and all adjunctive 
services provided to support the delivery of the primary service, with 
certain exceptions, billed on the same claim regardless of the date of 
service. Since implementation of the C-APC policy and subsequent claims 
data analyses, we have observed circumstances in which necessary 
services that are appropriately included in an encounter payment are 
furnished prior to a primary service and billed separately. That is, 
our analysis of billing patterns associated with certain procedures 
assigned status indicator ``J1'' indicates providers are reporting 
planning services, imaging tests, and other ``planning and 
preparation'' services that are integrally associated with the direct 
provision of the ``J1'' procedure on a separate claim. The physician 
practice patterns associated with various stereotactic radiosurgery 
(SRS) treatments presents an example of this issue.
    Section 634 of the American Taxpayer Relief Act (ATRA) of 2012 
(Pub. L. 112-240) amended section 1833(t)(16) of the Act by adding a 
new subparagraph (D) to require that OPPS payments for Cobalt-60 based 
SRS (also referred to as gamma knife) be reduced to equal that of 
payments for robotic linear accelerator-based (LINAC) SRS, for covered 
OPD services furnished on or after April 1, 2013. This payment 
reduction does not apply to hospitals in rural areas, rural referral 
centers, or SCHs. In the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66809), we created C-APC 0067 (proposed to be renumbered 
to C-APC 5631 for CY 2016) for single-session cranial stereotactic 
radiosurgery (SRS). Because section 1833(t)(16)(D) of the Act requires 
equal payment for SRS delivered by Cobalt-60 based or LINAC based 
technology, proposed renumbered C-APC 5631 includes two types of SRS 
delivery instruments, which are described by HCPCS code 77371 
(Radiation treatment delivery, stereotactic radiosurgery [SRS], 
complete course of treatment cranial lesion(s) consisting of 1 session; 
multi-source Cobalt 60-based) and HCPCS code 77372 (Linear accelerator 
based) (79 FR 66862).
    Based on our analysis of CY 2014 claims data (the data used to 
develop the proposed CY 2016 payment rates), we identified differences 
in billing patterns between SRS procedures delivered using Cobalt-60 
based and LINAC based technologies. In particular,

[[Page 39228]]

our claims data analysis results revealed that SRS delivered by Cobalt-
60 based technologies (as described by HCPCS code 77371) typically 
included SRS treatment planning services (for example, imaging studies, 
radiation treatment aids, and treatment planning) and the actual SRS 
treatment on the same date of service and reported on the same claim. 
In contrast, claims data analysis results revealed that SRS delivered 
by LINAC based technologies (as described by HCPCS code 77372) 
frequently included services related to SRS treatment (for example, 
imaging studies, radiation treatment aids, and treatment planning) that 
were provided and reported on different dates of services and billed on 
claims separate from the actual SRS treatment. Because Cobalt-60 based 
and LINAC based technologies are assigned to proposed renumbered C-APC 
5631, the costs of both technologies are reflected in the APC payment 
rate.
    The policy intent of C-APCs is to bundle payment for all services 
related and adjunctive to the primary ``J1'' procedure. In light of 
this, we believe that all essential planning and preparation services 
should be paid through the C-APC. For clean payment, we would make a 
single payment through the C-APC that would include these essential 
planning and preparation services, and we would not pay separately for 
C-APC services when furnished prior to delivery of the ``J1'' procedure 
and reported on separate claims. SRS services are just one example of 
where this may be occurring under our C-APC policy.
    As a result of our SRS claims data findings, for CY 2016, we are 
proposing to change payment for SRS treatment under proposed renumbered 
C-APC 5631 by identifying any services that are differentially billed 
for HCPCS codes 77371 and 77372 on the same claim and on claims 1 month 
prior to delivery of SRS services in proposed renumbered C-APC 5631, 
including planning and preparation services, and removing them from our 
C-APC geometric mean calculation for CY 2016 and CY 2017 while we 
collect data using a modifier, which is discussed in greater detail 
below. For any codes that we remove from the C-APC bundle, we are 
proposing that those codes would receive separate payment even when 
appearing with a ``J1'' procedure code (HCPCS code 77371 or 77372) on 
the same claim for both CY 2016 and CY 2017. Specifically, we are 
proposing this treatment for the following codes for planning and 
preparation services:
     CT localization (HCPCS codes 77011 and 77014);
     MRI imaging (HCPCS codes 70551, 70552, and 70553);
     Clinical treatment planning (HCPCS codes 77280, 77285, 
77290, and 77295); and
     Physics consultation (HCPCS code 77336).
    We are inviting public comments on our proposal to remove planning 
and preparation service from our calculation of the CY 2016 and CY 2017 
payment rate for proposed renumbered C-APC 5631 and to allow for 
separate payment of these same services during CY 2016 and CY 2017 
using either modality. As discussed in detail below, our long-term goal 
is to create a single encounter payment for C-APC services by packaging 
all planning and preparation services that occur prior to the primary 
``J1'' procedure.
(b) Proposed Data Collection for Nonprimary Services in C-APCs
    As mentioned above, provider practice patterns can create a need 
for hospitals to perform services that are integral, ancillary, 
supportive, dependent, and adjunctive, hereinafter collectively 
referred to as ``adjunctive services'', to a comprehensive service 
prior to delivery of that service--for example, testing leads for a 
pacemaker insertion or planning for radiation treatment. As the C-APC 
policy continues to expand, we need a mechanism to identify these 
adjunctive services that are furnished prior to the associated primary 
service so that payments under the encounter-based C-APC will be more 
accurate.
    To meet this objective, for CY 2016, we are proposing to establish 
a HCPCS modifier to be reported with every code that is adjunctive to a 
comprehensive service, but is billed on a different claim. The modifier 
would be reported on UB-04 form (CMS Form 1450) for hospital outpatient 
services. Specifically, hospitals would report this modifier for 
services that are adjunctive to a primary procedure HCPCS code with 
status indicator ``J1'' and that are billed on a different claim than 
the primary ``J1'' service. The collection of this information would 
allow us to begin to assess the accuracy of the claims data used to set 
payment rates for C-APC services. This information would be useful in 
refining our C-APC ratesetting process. Based on the collection of 
these data, we envision creating a single encounter payment for the 
primary ``J1'' services that reflects resources of all the primary 
services. Further, we also would discontinue separate payment for any 
of these packaged adjunctive services, even when furnished prior to 
delivery of the primary service. As noted above, we are proposing to 
use the modifier to identify planning and preparation services for SRS 
primary procedures with this goal in mind. We are seeking additional 
public comment on whether to adopt a condition code as early as CY 
2017, which would replace this modifier to be used for CY 2016 data 
collection, for collecting this service-level information.
(c) Proposed Policy Regarding Payment for Claims Reporting Inpatient 
Only Services Performed on a Patient Who Dies Before Admission
    Currently, composite APC 0375 packages payment for all services 
provided on the same date as an inpatient only procedure that is 
performed emergently on an outpatient who dies before admission 
represented by the presence of modifier ``-CA'' on the claim. We are 
proposing to renumber APC 0375 to APC 5881 for CY 2016. For CY 2016, we 
are proposing to provide comprehensive payment through proposed 
renumbered C-APC 5881 for all services reported on the same claim as an 
inpatient only procedure billed with modifier ``-CA.'' This proposal 
provides for all services provided on the same claim as an inpatient 
only procedure billed with modifier ``-CA'' to be paid through a single 
prospective payment for the comprehensive service.
    f. Proposed Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care 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, mental health services,

[[Page 39229]]

and multiple imaging services. We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period for a full discussion of the development 
of the composite APC methodology (72 FR 66611 through 66614 and 66650 
through 66652) and the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74163) for more recent background.
    In this CY 2016 OPPS/ASC proposed rule, for CY 2016, we are 
proposing to continue our composite APC payment policies for LDR 
prostate brachytherapy services, mental health services, and multiple 
imaging services, as discussed below. For CY 2016, we are proposing to 
discontinue our composite APC payment policies for qualifying extended 
assessment and management services (APC 8009) and to pay for these 
services through proposed new C-APC 8011 (Comprehensive Observation 
Services), as presented in a proposal included under section II.A.2.e. 
of this proposed rule. As a result, we are proposing to delete APC 8009 
for CY 2016.
    We note that we finalized a policy to discontinue our composite APC 
payment policies for cardiac electrophysiologic evaluation and ablation 
services (APC 8000), and to pay for these services through C-APC 0086 
(Level III Electrophysiologic Procedures), as presented in a proposal 
included under section II.A.2.e. of the CY 2015 OPPS/ASC proposed rule 
(79 FR 66800 through 66810). As a result, in the CY 2015 OPPS/ASC final 
rule with comment period, we deleted APC 8000 for CY 2015 (79 FR 
66810). For CY 2016, we are proposing to continue to pay for cardiac 
electrophysiologic evaluation and ablation services through existing C-
APC 0086 (proposed to be renumbered C-APC 5213).
(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
    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 base 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. (We note that, for CY 2016, we are not 
proposing to change the existing number for composite APC 8001 as part 
of our overall APC restructuring and renumbering discussed in section 
III.D. of this proposed rule.)
    In this proposed rule, for CY 2016, we are proposing to continue to 
pay for LDR prostate brachytherapy services using the composite APC 
payment methodology proposed and implemented for CY 2008 through CY 
2015. That is, we are proposing to use CY 2014 claims reporting charges 
for both CPT codes 55875 and 77778 on the same date of service with no 
other separately paid procedure codes (other than those on the bypass 
list) to calculate the proposed payment rate for composite APC 8001. 
Consistent with our CY 2008 through CY 2015 practice, in this proposed 
rule, we are proposing 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) (proposed to be renumbered APC 5375 in this 
proposed rule) and APC 0651 (Complex Interstitial Radiation Source 
Application) (proposed to be renumber APC 5641 in this proposed rule), 
the APCs to which CPT codes 55875 and 77778 are assigned, respectively. 
We are proposing to continue to calculate the proposed geometric mean 
costs of procedures or services assigned to proposed renumbered APCS 
5375 and 5641 using single and ``pseudo'' single procedure claims. We 
continue to believe that composite APC 8001 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 proposed composite 
APC payment rate.
    Using a partial year of CY 2014 claims data available for this CY 
2016 proposed rule, we were able to use 226 claims that contained both 
CPT codes 55875 and 77778 to calculate the proposed geometric mean cost 
of approximately $3,807 for these procedures upon which the proposed CY 
2016 payment rate for composite APC 8001 is based.
(2) Mental Health Services Composite APC
    In this proposed rule, for CY 2016, we are proposing to continue 
our longstanding policy of limiting the aggregate payment for specified 
less resource-intensive mental health services furnished on the same 
date to the payment for a day of partial hospitalization services 
provided by a hospital, which we consider to be the most resource-
intensive of all outpatient mental health services. 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.
    Specifically, we are proposing that when the aggregate payment for 
specified mental health services provided by one hospital to a single 
beneficiary on one date of service based on the payment rates 
associated with the APCs for the individual services exceeds the 
maximum per diem payment rate for partial hospitalization services 
provided by a hospital, those specified mental health services would be 
assigned to proposed renumbered APC 8010 (Mental Health Services 
Composite) (existing APC 0034). We also are proposing to continue to 
set the payment rate for proposed renumbered APC 8010 (existing APC 
0034) at the same payment rate that we are proposing to establish for 
proposed renumbered APC 5862 (Level 2 Partial Hospitalization (4 or 
more services) for hospital-based PHPs) (existing APC 0176), which is 
the maximum partial hospitalization per diem payment rate for a 
hospital, and that the hospital continue to be paid one unit of 
proposed renumbered APC 8010. Under

[[Page 39230]]

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 proposed 
renumbered APC 5862 (existing APC 0176) for all of the specified mental 
health services furnished by the hospital on that single date of 
service. We continue to believe that the costs associated with 
administering a partial hospitalization program at a hospital represent 
the most resource-intensive of all outpatient mental health services. 
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.
(3) 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 12 of the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74920 through 74924).
    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 note that we are not proposing to renumber these composite APCs 
as part of our overall restructuring and renumbering of APCs as 
discussed in section III.D. of this proposed rule.)
    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 this proposed rule, for CY 2016, we are proposing to continue to 
pay for all multiple imaging procedures within an imaging family 
performed on the same date of service using the multiple imaging 
composite APC payment methodology. We continue to believe that this 
policy will reflect and promote the efficiencies hospitals can achieve 
when performing multiple imaging procedures during a single session.
    The proposed CY 2016 payment rates for the five multiple imaging 
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) are based on 
proposed geometric mean costs calculated from a partial year of CY 2014 
claims available for this proposed rule that qualified for composite 
payment under the current policy (that is, those claims with more than 
one procedure within the same family on a single date of service). To 
calculate the proposed geometric mean costs, we used the same 
methodology that we used to calculate the final CY 2014 and CY 2015 
geometric mean costs for these composite APCs, as described in the CY 
2014 OPPS/ASC final rule with comment period (78 FR 74918). 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, in accordance with our 
established methodology as stated in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 74918), are identified by asterisks in 
Addendum N to this CY 2016 proposed rule (which is available via the 
Internet on the CMS Web site) and are discussed in more detail in 
section II.A.1.b. of this proposed rule.
    For this CY 2016 proposed rule, we were able to identify 
approximately 584,194 ``single session'' claims out of an estimated 1.5 
million potential composite APC cases from our ratesetting claims data, 
approximately 39 percent of all eligible claims, to calculate the 
proposed CY 2016 geometric mean costs for the multiple imaging 
composite APCs.
    Table 7 of this proposed rule lists the proposed HCPCS codes that 
would be subject to the multiple imaging composite APC policy and their 
respective families and approximate composite APC proposed geometric 
mean costs for CY 2016.

 Table 7--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
   CY 2016 APC 8004 (Ultrasound       CY 2016 Approximate Proposed APC
            Composite)                    Geometric Mean Cost = $296
------------------------------------------------------------------------
76604.............................  Us exam, chest.
76700.............................  Us exam, abdom, complete.
76705.............................  Echo exam of abdomen.
76770.............................  Us exam abdo back wall, comp.
76775.............................  Us exam abdo back wall, lim.
76776.............................  Us exam k transpl w/Doppler.
76831.............................  Echo exam, uterus.
76856.............................  Us exam, pelvic, complete.

[[Page 39231]]

 
76870.............................  Us exam, scrotum.
76857.............................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------
   CY 2016 APC 8005 (CT and CTA       CY 2016 Approximate Proposed APC
   without Contrast Composite) *          Geometric Mean Cost = $325
------------------------------------------------------------------------
70450.............................  Ct head/brain w/o dye.
70480.............................  Ct orbit/ear/fossa w/o dye.
70486.............................  Ct maxillofacial w/o dye.
70490.............................  Ct soft tissue neck w/o dye.
71250.............................  Ct thorax w/o dye.
72125.............................  Ct neck spine w/o dye.
72128.............................  Ct chest spine w/o dye.
72131.............................  Ct lumbar spine w/o dye.
72192.............................  Ct pelvis w/o dye.
73200.............................  Ct upper extremity w/o dye.
73700.............................  Ct lower extremity w/o dye.
74150.............................  Ct abdomen w/o dye.
74261.............................  Ct colonography, w/o dye.
74176.............................  Ct angio abd & pelvis.
------------------------------------------------------------------------
 CY 2016 APC 8006 (CT and CTA with    CY 2016 Approximate Proposed APC
        Contrast Composite)               Geometric Mean Cost = $548
------------------------------------------------------------------------
70487.............................  Ct maxillofacial w/dye.
70460.............................  Ct head/brain w/dye.
70470.............................  Ct head/brain w/o & w/dye.
70481.............................  Ct orbit/ear/fossa w/dye.
70482.............................  Ct orbit/ear/fossa w/o & w/dye.
70488.............................  Ct maxillofacial w/o & w/dye.
70491.............................  Ct soft tissue neck w/dye.
70492.............................  Ct sft tsue nck w/o & w/dye.
70496.............................  Ct angiography, head.
70498.............................  Ct angiography, neck.
71260.............................  Ct thorax w/dye.
71270.............................  Ct thorax w/o & w/dye.
71275.............................  Ct angiography, chest.
72126.............................  Ct neck spine w/dye.
72127.............................  Ct neck spine w/o & w/dye.
72129.............................  Ct chest spine w/dye.
72130.............................  Ct chest spine w/o & w/dye.
72132.............................  Ct lumbar spine w/dye.
72133.............................  Ct lumbar spine w/o & w/dye.
72191.............................  Ct angiograph pelv w/o & w/dye.
72193.............................  Ct pelvis w/dye.
72194.............................  Ct pelvis w/o & w/dye.
73201.............................  Ct upper extremity w/dye.
73202.............................  Ct uppr extremity w/o & w/dye.
73206.............................  Ct angio upr extrm w/o & w/dye.
73701.............................  Ct lower extremity w/dye.
73702.............................  Ct lwr extremity w/o & w/dye.
73706.............................  Ct angio lwr extr w/o & w/dye.
74160.............................  Ct abdomen w/dye.
74170.............................  Ct abdomen w/o & w/dye.
74175.............................  Ct angio abdom w/o & w/dye.
74262.............................  Ct colonography, w/dye.
75635.............................  Ct angio abdominal arteries.
74177.............................  Ct angio abd & pelv w/contrast.
74178.............................  Ct angio abd & pelv 1+ regns.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the
 same session as a ``with contrast'' CT or CTA procedure, the I/OCE
 would assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
   CY 2016 APC 8007 (MRI and MRA      CY 2016 Approximate Proposed APC
   without Contrast Composite) *          Geometric Mean Cost = $631
------------------------------------------------------------------------
70336.............................  Magnetic image, jaw joint.
70540.............................  Mri orbit/face/neck w/o dye.
70544.............................  Mr angiography head w/o dye.
70547.............................  Mr angiography neck w/o dye.
70551.............................  Mri brain w/o dye.

[[Page 39232]]

 
70554.............................  Fmri brain by tech.
71550.............................  Mri chest w/o dye.
72141.............................  Mri neck spine w/o dye.
72146.............................  Mri chest spine w/o dye.
72148.............................  Mri lumbar spine w/o dye.
72195.............................  Mri pelvis w/o dye.
73218.............................  Mri upper extremity w/o dye.
73221.............................  Mri joint upr extrem w/o dye.
73718.............................  Mri lower extremity w/o dye.
73721.............................  Mri jnt of lwr extre w/o dye.
74181.............................  Mri abdomen w/o dye.
75557.............................  Cardiac mri for morph.
75559.............................  Cardiac mri w/stress img.
C8901.............................  MRA w/o cont, abd.
C8904.............................  MRI w/o cont, breast, uni.
C8907.............................  MRI w/o cont, breast, bi.
C8910.............................  MRA w/o cont, chest.
C8913.............................  MRA w/o cont, lwr ext.
C8919.............................  MRA w/o cont, pelvis.
C8932.............................  MRA, w/o dye, spinal canal.
C8935.............................  MRA, w/o dye, upper extr.
------------------------------------------------------------------------
CY 2016 APC 8008 (MRI and MRA with    CY 2016 Approximate Proposed APC
        Contrast Composite)               Geometric Mean Cost = $945
------------------------------------------------------------------------
70549.............................  Mr angiograph neck w/o & w/dye.
70542.............................  Mri orbit/face/neck w/dye.
70543.............................  Mri orbt/fac/nck w/o & w/dye.
70545.............................  Mr angiography head w/dye.
70546.............................  Mr angiograph head w/o & w/dye.
70547.............................  Mr angiography neck w/o dye.
70548.............................  Mr angiography neck w/dye.
70552.............................  Mri brain w/dye.
70553.............................  Mri brain w/o & w/dye.
71551.............................  Mri chest w/dye.
71552.............................  Mri chest w/o & w/dye.
72142.............................  Mri neck spine w/dye.
72147.............................  Mri chest spine w/dye.
72149.............................  Mri lumbar spine w/dye.
72156.............................  Mri neck spine w/o & w/dye.
72157.............................  Mri chest spine w/o & w/dye.
72158.............................  Mri lumbar spine w/o & w/dye.
72196.............................  Mri pelvis w/dye.
72197.............................  Mri pelvis w/o & w/dye.
73219.............................  Mri upper extremity w/dye.
73220.............................  Mri uppr extremity w/o & w/dye.
73222.............................  Mri joint upr extrem w/dye.
73223.............................  Mri joint upr extr w/o & w/dye.
73719.............................  Mri lower extremity w/dye.
73720.............................  Mri lwr extremity w/o & w/dye.
73722.............................  Mri joint of lwr extr w/dye.
73723.............................  Mri joint lwr extr w/o & w/dye.
74182.............................  Mri abdomen w/dye.
74183.............................  Mri abdomen w/o & w/dye.
75561.............................  Cardiac mri for morph w/dye.
75563.............................  Card mri w/stress img & dye.
C8900.............................  MRA w/cont, abd.
C8902.............................  MRA w/o fol w/cont, abd.
C8903.............................  MRI w/cont, breast, uni.
C8905.............................  MRI w/o fol w/cont, brst, un.
C8906.............................  MRI w/cont, breast, bi.
C8908.............................  MRI w/o fol w/cont, breast.
C8909.............................  MRA w/cont, chest.
C8911.............................  MRA w/o fol w/cont, chest.
C8912.............................  MRA w/cont, lwr ext.
C8914.............................  MRA w/o fol w/cont, lwr ext.
C8918.............................  MRA w/cont, pelvis.
C8920.............................  MRA w/o fol w/cont, pelvis.
C8931.............................  MRA, w/dye, spinal canal.
C8933.............................  MRA, w/o&w/dye, spinal canal.
C8934.............................  MRA, w/dye, upper extremity.
C8936.............................  MRA, w/o&w/dye, upper extr.
* If a ``without contrast'' MRI or MRA procedure is performed during the
 same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
 would assign APC 8008 rather than APC 8007.
------------------------------------------------------------------------


[[Page 39233]]

3. Proposed Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
    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 a 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 in the OPPS to maximize hospitals' 
incentives to provide care in the most efficient manner. For example, 
where there are a variety of devices, drugs, items, and supplies that 
could be used to furnish a service, some of which are more profitable 
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 item.
    Packaging also encourages hospitals to effectively negotiate with 
manufacturers and suppliers to reduce the purchase price of items and 
services or to explore alternative group purchasing arrangements, 
thereby encouraging the most economical health care delivery. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated 
with higher cost cases requiring many ancillary items and services and 
lower cost cases requiring fewer ancillary items and services. Because 
packaging encourages efficiency and is an essential component of a 
prospective payment system, packaging payment for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been a fundamental part of the OPPS 
since its implementation in August 2000. Over the last 15 years, as we 
have refined our understanding of the OPPS as a prospective payment 
system, we have packaged numerous services that were originally paid 
separately. As we continue to develop larger payment groups that more 
broadly reflect services provided in an encounter or episode of care, 
we have expanded the OPPS packaging policies. Most, but not necessarily 
all, items and services currently packaged in the OPPS are listed in 42 
CFR 419.2(b), including the two packaging policies that were added in 
CY 2015 (79 FR 66819 through 66823). 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 under the OPPS to determine which OPPS services 
can be packaged to further achieve the objective of advancing the OPPS 
toward a more prospective payment system.
    For CY 2016, 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 that they support. Specifically, we examined the HCPCS 
code definitions (including CPT code descriptors) to determine 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 this proposed rule, for CY 
2016, we are proposing to package the costs of selected newly 
identified ancillary services into payment with a primary service where 
we believe that the proposed packaged item or service is integral, 
ancillary, supportive, dependent, or adjunctive to the provision of 
care that was reported by the primary service HCPCS code. Below we 
discuss the items and services that we are proposing to package 
beginning in CY 2016. 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 final rule 
with comment period (72 FR 66580), the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74925), and the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66817).
b. Proposed Packaging Policies for CY 2016
(1) Ancillary Services
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819 
through 66822), we conditionally packaged payment for ancillary 
services assigned to APCs with a geometric mean cost of less than or 
equal to $100 (prior to application of the conditional packaging status 
indicator). The ancillary services that we identified are primarily 
minor diagnostic tests and procedures that are often performed with a 
primary service, although there are instances where hospitals provide 
such services alone and without another primary service during the same 
encounter. Under this policy, we assigned the conditionally packaged 
services to status indicator ``Q1,'' which indicates that the service 
is separately payable when not billed on the same date of service as a 
HCPCS code assigned status indicator ``S,'' ``T,'' or ``V.'' Exclusions 
to this ancillary service packaging policy include preventive services, 
certain psychiatric and counseling-related services, and certain low-
cost drug administration services. The policy adopted in CY 2015 was 
proposed in response to public comments on the CY 2014 ancillary 
packaging proposal, which expressed concern that certain low volume but 
relatively costly ancillary services would have been packaged into high 
volume but relatively inexpensive primary services (for example, a 
visit) (74 FR 74945). We noted in the CY 2015 OPPS/ASC final rule with 
comment period that the $100 geometric mean cost limit target was a 
selection criterion for the initial set of services in conditionally 
packaged ancillary service APCs under this packaging policy. The $100 
geometric mean cost target was not intended to be a threshold above 
which ancillary services will not be packaged, but was a basis for 
selecting the initial set of APCs under the conditional packaging 
policy for ancillary services, which would likely be updated and 
expanded upon in the future. An increase in the geometric mean cost of 
any of those packaged APCs to above $100 in future years does not 
change the conditionally packaged status of services assigned to the 
APCs selected in CY 2015 in a future year. When we finalized this 
policy, we stated that we would continue to consider services in these 
APCs to be conditionally packaged and would review the conditionally 
packaged status of ancillary services annually. The ancillary services 
packaging policy is codified in the regulations at 42 CFR 419.2(b)(7).

[[Page 39234]]

    For CY 2016, as we did in CY 2015, we examined categories of 
ancillary services that are integral, ancillary, supportive, dependent, 
or adjunctive items and services for which we believe payment would be 
appropriately packaged into payment of the primary services that they 
support. As previously stated, the $100 geometric mean cost target we 
adopted in CY 2015 was not intended to be a threshold above which 
ancillary services will not be packaged, but was a basis for selecting 
the initial set of APCs under the conditional packaging policy for 
ancillary services, which would likely be updated and expanded upon in 
the future. Accordingly, for CY 2016, we are proposing to not limit our 
examination to ancillary service APCs with a geometric mean cost of 
$100 or less. We believe there are some ancillary services that are 
assigned to APCs with a geometric mean cost above $100, but for which 
conditional packaging is appropriate, given the context in which the 
service is performed. For CY 2016, we are proposing to evaluate 
categories of ancillary services by considering the clinical similarity 
of such categories of services to the currently conditionally packaged 
ancillary services that have already been determined to be integral, 
ancillary, supportive, dependent, or adjunctive to a primary service. 
Under this proposal, we identified services in certain APCs that meet 
these criteria, and we did not apply the $100 geometric mean cost 
threshold that we applied for CY 2015. Specifically, for CY 2016, we 
are proposing to expand the set of conditionally packaged ancillary 
services to include services in the three APCs listed in Table 8 below. 
Ancillary services in the APCs in Table 8 are typically furnished with 
a higher paying, separately payable primary procedure.
    However, to avoid packaging a subset of high-cost pathology 
services into lower cost and nonprimary services (for example, low-cost 
imaging services) frequently billed with some of the services assigned 
to Level 3 and Level 4 pathology APCs, we are proposing to package 
Level 3 and 4 pathology services only when they are billed with a 
surgical service. We believe that pathology services are routine tests 
that are typically performed ancillary or adjunctive to another primary 
service, most commonly surgery. For the Level 3 and 4 pathology APCs 
listed below, we are proposing that the assigned status indicator would 
be ``Q2'' (``T packaging'').
    The HCPCS codes that we are proposing to conditionally package as 
ancillary services for CY 2016 are displayed in Addendum B to this CY 
2016 OPPS/ASC proposed rule (which is available via the Internet on the 
CMS Web site). The supporting documents for the proposed rule are 
available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

                Table 8--Proposed APCs for Conditionally Packaged Ancillary Services for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                             Proposed CY 2016
     Proposed renumbered CY 2016 APC\*\        Proposed CY 2016 APC title      OPPS status      Proposed CY 2016
                                                                                indicator         payment rate
----------------------------------------------------------------------------------------------------------------
5734.......................................  Level 4 Minor Procedures.....                 Q1            $119.58
5673.......................................  Level 3 Pathology............                 Q2             229.13
5674.......................................  Level 4 Pathology............                 Q2             459.96
----------------------------------------------------------------------------------------------------------------
\*\ Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) contains a
  crosswalk of the existing APC numbers to the proposed APC renumbers for CY 2016.

    In addition, we are proposing to continue to exclude certain 
services from this ancillary services packaging policy. As established 
in CY 2015, preventive services, certain psychiatric and counseling-
related services, and certain low-cost drug administration services are 
separately payable under the OPPS (79 FR 66819). Preventable services 
that would continue to be exempted from the ancillary service packaging 
policy for CY 2016 are listed in Table 9 below.

    Table 9--Proposed Preventive Services Exempted From the Ancillary
                        Services Packaging Policy
------------------------------------------------------------------------
                                                             Proposed
            HCPCS code                Short descriptor     renumbered CY
                                                            2016 APC\*\
------------------------------------------------------------------------
76977.............................  Us bone density                 5732
                                     measure.
77078.............................  Ct bone density                 5521
                                     axial.
77080.............................  Dxa bone density                5522
                                     axial.
77081.............................  Dxa bone density/               5521
                                     peripheral.
G0117.............................  Glaucoma scrn hgh               5732
                                     risk direc.
G0118.............................  Glaucoma scrn hgh               5732
                                     risk direc.
G0130.............................  Single energy x-ray             5521
                                     study.
G0389.............................  Ultrasound exam aaa             5531
                                     screen.
G0404.............................  Ekg tracing for                 5731
                                     initial prev.
Q0091.............................  Obtaining screen pap            5731
                                     smear.
------------------------------------------------------------------------
\*\ Addendum Q to this proposed rule (which is available via the
  Internet on the CMS Web site) contains a crosswalk of the existing APC
  numbers to the proposed APC renumbers.

(2) Drugs and Biologicals That Function as Supplies When Used in a 
Surgical Procedure
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74930 
through 74939), we finalized our policy at 42 CFR 419.2(b)(16) to 
unconditionally package all drugs and biologicals that function as 
supplies when used in a surgical procedure. As noted in that final rule 
with comment period, supplies are a large category of items that 
typically are either for single

[[Page 39235]]

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, drugs, biologicals, or 
radiopharmaceuticals (78 FR 74390). When evaluating whether a 
particular drug may meet the criteria for packaging under this policy, 
we do not consider low drug product utilization and/or drug product 
cost that exceeds the primary service APC payment to be factors in our 
determination (79 FR 66875). We unconditionally package all drugs and 
biologicals that function as supplies in a surgical procedure (79 FR 
74930).
    For CY 2016, we conducted a comprehensive review of CY 2015 
separately payable OPPS drugs; that is, drugs with either a status 
indicator of ``G'' or ``K.'' For each separately payable drug, we 
reviewed the FDA-approved label and conducted a clinical review to 
determine whether a drug is indicated for use in a surgical procedure. 
Based on our clinical review, for CY 2016, we are proposing to package 
payment for the four drugs that are listed in Table 10 below based on 
their primary function as a supply in a surgical procedure, which 
typically means that the drug or biological is integral to, dependent 
on, or supportive of a surgical procedure. We note that one drug, 
described by HCPCS code C9447, that would otherwise be packaged in CY 
2016 currently has pass-through payment status. Therefore, we are not 
proposing to package HCPCS code C9447 for CY 2016. Instead, we are 
proposing to package this drug for CY 2018, after its drug pass-through 
payment status has expired.

                     Table 10--Separately Payable Drugs Proposed for Unconditional Packaging
----------------------------------------------------------------------------------------------------------------
                                                                                                  Proposed first
           HCPCS code                Descriptor           CY 2015 status        Primary use in     calendar year
                                                            indicator         surgical procedure  to be packaged
----------------------------------------------------------------------------------------------------------------
J0583..........................  Injection,          K                        Percutaneous                  2016
                                  bivalirudin, 1 mg.                           Coronary
                                                                               Intervention[PCI]/
                                                                               PCTA
                                                                               [percutaneous
                                                                               transluminal
                                                                               coronary
                                                                               angioplasty]
                                                                               procedures.
J7315..........................  Mitomycin,          G                        Glaucoma surgery..            2016
                                  ophthalmic, 0.2
                                  mg.
C9447..........................  Injection,          G                        Cataract surgery..            2018
                                  phenylephrine and
                                  ketorolac, 4 ml
                                  vial.
J0130..........................  Injection           K                        PCI procedure.....            2016
                                  abciximab, 10 mg.
----------------------------------------------------------------------------------------------------------------

(3) Clinical Diagnostic Laboratory Tests
(a) Background
    In CY 2014, we finalized a policy to package certain clinical 
diagnostic laboratory tests in the OPPS (78 FR 74939 through 74942 and 
42 CFR 419.2(b)(17)). Under current policy, certain clinical diagnostic 
laboratory tests that are listed on the Clinical Laboratory Fee 
Schedule (CLFS) are packaged in the OPPS as integral, ancillary, 
supportive, dependent, or adjunctive to the primary service or services 
provided in the hospital outpatient setting on the same date of service 
as the laboratory test. Specifically, we conditionally package 
laboratory tests and only pay separately for a laboratory test when (1) 
it is the only service provided to a beneficiary on a given date of 
service; or (2) it is conducted on the same date of service as the 
primary service, but is ordered for a different purpose than the 
primary service ordered by a practitioner different than the 
practitioner who ordered the other OPPS services. Also excluded from 
this conditional packaging policy are molecular pathology tests 
described by CPT codes in the ranges of 81200 through 81383, 81400 
through 81408, and 81479 (78 FR 74939 through 74942), which are 
assigned status indicator ``A'' in Addendum B to this proposed rule 
(which is available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). When laboratory tests are not packaged under the OPPS and 
are listed on the CLFS, they are paid at the CLFS payment rates outside 
the OPPS under Medicare Part B.
    To implement our packaging policy in CY 2014, we assigned status 
indicator ``N,'' which describes unconditionally packaged items and 
services, to all laboratory tests paid at the CLFS rates except 
molecular pathology tests. We indicated in the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 74939) that hospitals should use the 
14X bill type for laboratory tests to bill and receive separate payment 
for unrelated laboratory tests excluded from the packaging proposal 
(except molecular pathology tests, which would still be reported on the 
13X bill type), including both: (1) Those laboratory tests that are the 
only service provided on a date of service, and (2) laboratory tests 
provided on the same date of service as another OPPS service but 
ordered for a different purpose than the primary service and by a 
different practitioner than the practitioner who ordered the primary 
service. Therefore, under our final policy, we relied on hospitals to 
identify when laboratory tests should be separately paid and bill those 
laboratory tests on a 14X bill type.
    Upon implementation of this final policy in January 2014, the 
National Uniform Billing Committee (NUBC) expressed concern that the 
14X bill type was not an appropriate choice of bill type for billing 
for laboratory tests other than for laboratory tests on referred 
specimens and requested that CMS find another mechanism for hospitals 
to bill for separately payable laboratory tests. (We refer readers to 
our Medicare Learning Network article on this issue on the CMS Web site 
at: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1412.pdf.) In Transmittal 
2971, Change Request 8776, July 2014 Update of the Hospital Outpatient 
Prospective Payment System (OPPS), which is available on the CMS Web 
site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2971CP.pdf, we implemented modifier ``L1'' 
(Separately payable laboratory test) to be used in lieu of the 14X bill 
type. Specifically, we stated that hospitals should use the ``L1'' 
modifier to indicate when laboratory tests meet either of the two 
exceptions for separate payment described above.
(b) CY 2016 Laboratory Test Packaging Proposals
    For CY 2016 and subsequent years, we are proposing a few revisions 
to our

[[Page 39236]]

current laboratory packaging policy. First, with regard to the 
particular molecular pathology tests in the code range expressly 
excluded from the current policy, we are proposing to expand this 
exclusion to exclude all molecular pathology tests from our packaging 
policy, including any new codes that also describe molecular pathology 
tests. In our rationale for excluding these laboratory tests from our 
final packaging policy in the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 74939), we stated that we did not propose to package 
molecular pathology laboratory tests because we believed 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. We believe that this rationale 
remains applicable and may be appropriately extended to any new 
molecular pathology tests. Therefore, for CY 2016, we are proposing to 
assign all laboratory tests that describe molecular pathology tests 
status indicator ``A'' in Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site), which means that they 
are separately paid at the CLFS rates outside of the OPPS.
    Second, we are proposing for CY 2016 to make separate payment for 
preventive laboratory tests and assign them a status indicator ``A'' in 
Addendum B to this proposed rule. Laboratory tests that are considered 
preventive appear in Section 1.2, Chapter 18 of the Medicare Claims 
Processing Manual (Pub. 100-04). We currently make an exception to 
conditional packaging of ancillary services for ancillary services that 
are also preventive services (79 FR 66819). For consistency, we believe 
that such an exception should also apply to laboratory tests that are 
classified as preventive services.
    Finally, for CY 2016, we are proposing to modify our current 
conditional packaging policy that laboratory tests are integral, 
ancillary, supportive, dependent, or adjunctive to a primary service or 
services provided in the hospital outpatient setting when those 
services are provided on the same date of service as the primary 
service and when they are ordered for the same purpose and by the same 
practitioner as the practitioner who ordered the primary service. 
Specifically, we are proposing to expand our current conditional 
packaging policy and consider laboratory tests provided during the same 
outpatient stay (rather than specifically provided on a same date of 
service as the primary service) as integral, ancillary, supportive, 
dependent, or adjunctive to a primary service or services, except when 
a laboratory test is ordered for a different purpose and by a different 
practitioner than the practitioner who ordered the other OPPS services. 
In some cases, outpatient hospital stays span more than a single date. 
For laboratory tests reported on a claim with a primary service, we do 
not believe that a different date of service for the laboratory test 
affects whether that test is integral, ancillary, supportive, 
dependent, or adjunctive to the primary service or services provided in 
the HOPD. Further, in reviewing our CY 2014 claims data, we observed 
hospitals indicating separate payment by reporting the ``L1'' modifier 
for only a few laboratory tests reported on different days than an OPPS 
service. We conclude that hospitals generally do not view laboratory 
tests occurring on a different day than a primary service during an 
outpatient stay as a reason for separate payment. Therefore, we are 
proposing to package laboratory tests that are reported on the same 
claim with a primary service, regardless of the date of service.
    This proposal does not affect our existing policy to provide 
separate payment for laboratory tests: (1) If they are the only 
services furnished to an outpatient and are the only services on a 
claim and have a payment rate on the CLFS; or (2) if they are ordered 
for a different purpose than another OPPS service by a practitioner 
different than the practitioner who ordered the primary service (78 FR 
74942). We also plan to continue to have hospitals report the ``L1'' 
modifier to identify any clinically ``unrelated'' laboratory tests that 
are furnished on the same claim as OPPS services, but are ordered by a 
different practitioner and for a different purpose than the primary 
OPPS services. However, as we discuss below, for ease of 
administration, we also are proposing to implement claims processing 
edits through a new conditional packaging status indicator ``Q4'' that 
would identify 13X bill type claims where there are only laboratory 
HCPCS codes that appear on the CLFS; automatically change their status 
indicator to ``A''; and pay them separately at the CLFS payment rates. 
For such claims, the ``L1'' modifier would not be used.
    Proposed status indicator ``Q4'' is defined as ``packaged APC 
payment if billed on the same claim as a HCPCS code assigned status 
indicator ``J1,'' ``J2,'' ``S,'' ``T,'' ``V,'' ``Q1,'' ``Q2,'' or 
``Q3,'' otherwise separately paid, and would apply to conditionally 
packaged laboratory tests. In our CY 2014 claims data, we observe some 
claims reporting laboratory services and no other OPPS services that 
were not paid because the hospital did not appropriately report the 
``L1'' modifier. We further believe that the status indicator ``N'' for 
unconditional packaging does not accurately reflect the payment status 
of these laboratory tests. These tests may be eligible to receive 
separate payment at the CLFS payment rates in several circumstances as 
discussed above. Assigning a ``QX'' modifier generally indicates 
conditional packaging, where services are packaged, except in certain 
circumstances where separate payment can occur. Proposing a distinct 
``Q4'' modifier allows for more precise categorization of the payment 
status of laboratory services. With the assignment of the proposed 
``Q4'' modifier to laboratory tests, we are proposing that modifier 
``L1'' would only be used to identify ``unrelated'' laboratory tests 
that are ordered for a different purpose and by a different 
practitioner than the other OPPS services on the claim.
    We are inviting public comments on these proposals.
4. Proposed Calculation of OPPS Scaled Payment Weights
    In this CY 2016 proposed rule, we are proposing to calculate the 
relative payment weights for each APC shown in Addenda A and B to this 
proposed rule (which are available via the Internet on the CMS Web 
site) using the APC costs discussed in sections II.A.1. and II.A.2. of 
this proposed rule. Prior to CY 2007, we standardized all of 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 an initial unscaled 
relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights to the median cost of 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 it was the mid-level clinic visit APC (that is, Level 3 of 
5 levels). We established a policy in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68283) of using geometric mean-based APC 
costs rather than median-based APC costs to calculate relative payment 
weights. We are

[[Page 39237]]

proposing to continue this policy for CY 2016 and subsequent years.
    As noted earlier for CY 2012 and CY 2013, outpatient clinic visits 
were assigned to one of five levels of clinic visit APCs, with APC 0606 
representing a mid-level clinic visit. In the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75036 through 75043), we finalized a 
new policy that created alphanumeric HCPCS code G0463 (Hospital 
outpatient clinic visit for assessment and management of a patient), 
representing any and all clinic visits under the OPPS. HCPCS code G0463 
was assigned to APC 0634 (Hospital Clinic Visits). We also finalized a 
policy to use CY 2012 claims data to develop the CY 2014 OPPS payment 
rates for HCPCS code G0463 based on the total geometric mean cost of 
the levels one through five CPT E/M codes for clinic visits previously 
recognized under the OPPS (CPT codes 99201 through 99205 and 99211 
through 99215). In addition, we finalized a policy to no longer 
recognize a distinction between new and established patient clinic 
visits.
    For the CY 2014 and CY 2015 OPPS final rules with comment period, 
we standardized all of the relative payment weights to the geometric 
mean cost of APC 0634 as discussed in section VII. of the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66823). As noted in section 
VII. of this proposed rule, for CY 2016, we are proposing to delete APC 
0634 and to move the outpatient clinic visit HCPCS code G0463 to APC 
0632 (Level 2 Examinations and Related Services). Accordingly, for CY 
2016 and subsequent years, we are proposing to standardize all of the 
relative payment weights to APC 0632. We believe that standardizing 
relative payment weights to the geometric mean of the APC to which 
HCPCS code G0463 is assigned maintains consistency in calculating 
unscaled weights that represent the cost of some of the most frequently 
provided OPPS services. For CY 2016, we are proposing to renumber APC 
0632 as APC 5012 (Level 2 Examination and Related Services). For CY 
2016, we are proposing to assign proposed renumbered APC 5012 a 
relative payment weight of 1.00 and to divide the geometric mean cost 
of each APC by the proposed geometric mean cost for proposed renumbered 
APC 5012 to derive the proposed unscaled relative payment weight for 
each APC. The choice of the APC on which to standardize the proposed 
relative payment weights does not affect 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 2016 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare the estimated 
aggregate weight using the CY 2015 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2016 unscaled 
relative payment weights.
    For CY 2015, we multiplied the CY 2015 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2014 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 2016, we 
are proposing to apply the same process using the estimated CY 2016 
unscaled relative payment weights rather than scaled relative payment 
weights. We are proposing to calculate the weight scaler by dividing 
the CY 2015 estimated aggregate weight by the unscaled CY 2016 
estimated aggregate weight.
    For a detailed discussion of the weight scalar 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. Click on the CY 2016 OPPS 
proposed rule link and open the claims accounting document link at the 
bottom of the page.
    In this CY 2016 proposed rule, we are proposing to compare the 
estimated unscaled relative payment weights in CY 2016 to the estimated 
total relative payment weights in CY 2015 using CY 2014 claims data, 
holding all other components of the payment system constant to isolate 
changes in total weight. Based on this comparison, we are proposing to 
adjust the calculated CY 2016 unscaled relative payment weights for 
purposes of budget neutrality. We are proposing to adjust the estimated 
CY 2016 unscaled relative payment weights by multiplying them by a 
weight scaler of 1.3823 to ensure that the proposed CY 2016 relative 
payment weights are scaled to be budget neutral. The proposed CY 2016 
relative payment weights listed in Addenda A and B to this proposed 
rule (which are available via the Internet on the CMS Web site) are 
scaled and incorporate the recalibration adjustments discussed in 
sections II.A.1. and II.A.2. of this proposed rule.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act provides that 
additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the conversion factor, weighting, 
and other adjustment factors for 2004 and 2005 under paragraph (9), but 
shall be taken into account for subsequent years. Therefore, the cost 
of those SCODs (as discussed in section V.B.3. of this proposed rule) 
is included in the budget neutrality calculations for the CY 2016 OPPS.

B. Proposed Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24477), consistent with current law, based on IHS 
Global Insight, Inc.'s first quarter 2015 forecast of the FY 2016 
market basket increase, the proposed FY 2016 IPPS market basket update 
is 2.7 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) 
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 
2016.
    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

[[Page 39238]]

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 2016 IPPS/
LTCH PPS proposed rule (80 FR 24478), we discussed the calculation of 
the proposed MFP adjustment for FY 2016, which is -0.6 percentage point 
reduction.
    We are proposing that if more recent data become subsequently 
available after the publication of this CY 2016 OPPS/ASC proposed rule 
(for example, a more recent estimate of the market basket increase and 
the MFP adjustment), we would use such updated data, if appropriate, to 
determine the CY 2016 market basket update and the MFP adjustment, 
components in calculating the OPD fee schedule increase factor under 
sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2016 
OPPS/ASC final rule with comment period.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that, 
for each of years 2010 through 2019, the OPD fee schedule increase 
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the 
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2016, 
section 1833(t)(3)(G)(iv) of the Act provides a -0.2 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)(iv) of the Act, we are proposing to 
apply a -0.2 percentage point reduction to the OPD fee schedule 
increase factor for CY 2016.
    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 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we are proposing to apply an OPD fee schedule increase factor of 
1.9 percent for the CY 2016 OPPS (which is 2.7 percent, the proposed 
estimate of the hospital inpatient market basket percentage increase, 
less the proposed 0.6 percentage point MFP adjustment, and less the 0.2 
percentage point additional adjustment).
    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. For further discussion of the Hospital OQR Program, we refer 
readers to section XIII. of this proposed rule.
    In this CY 2016 OPPS/ASC proposed rule, we are proposing to amend 
42 CFR 419.32(b)(1)(iv)(B) by adding new paragraph (7) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2016, 
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)(iv) 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 0.2 percentage point for CY 2016.
    To set the OPPS conversion factor for CY 2016, we are proposing to 
increase the CY 2015 conversion factor of $74.173 by 1.9 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we are proposing to 
further adjust the conversion factor for CY 2016 to ensure that any 
revisions made to the wage index and rural adjustment are made on a 
budget neutral basis. We are proposing to calculate an overall proposed 
budget neutrality factor of 0.9993 for wage index changes by comparing 
proposed total estimated payments from our simulation model using the 
proposed FY 2016 IPPS wage indexes to those payments using the FY 2015 
IPPS wage indexes, as adopted on a calendar year basis for the OPPS.
    For CY 2016, we are proposing to maintain the current rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment would be 1.0000.
    For CY 2016, we are proposing to continue previously established 
policies for implementing the cancer hospital payment adjustment 
described in section 1833(t)(18) of the Act, as discussed in section 
II.F. of this proposed rule. We are proposing to calculate a CY 2016 
budget neutrality adjustment factor for the cancer hospital payment 
adjustment by comparing estimated total CY 2016 payments under section 
1833(t) of the Act, including the proposed CY 2016 cancer hospital 
payment adjustment, to estimated CY 2016 total payments using the CY 
2015 final cancer hospital payment adjustment as required under section 
1833(t)(18)(B) of the Act. The CY 2016 proposed estimated payments 
applying the proposed CY 2016 cancer hospital payment adjustment are 
identical to estimated payments applying the CY 2015 final cancer 
hospital payment adjustment. Therefore, we are proposing to apply a 
budget neutrality adjustment factor of 1.0000 to the conversion factor 
for the cancer hospital payment adjustment.
    For this proposed rule, we estimate that proposed pass-through 
spending for drugs, biologicals, and devices for CY 2016 would equal 
approximately $136.8 million, which represents 0.25 percent of total 
projected CY 2016 OPPS spending. Therefore, the proposed conversion 
factor would be adjusted by the difference between the 0.13 percent 
estimate of pass-through spending for CY 2015 and the 0.25 percent 
estimate of proposed pass-through spending for CY 2016, resulting in a 
proposed adjustment for CY 2016 of -0.12 percent. Proposed estimated 
payments for outliers would be 1.0 percent of total OPPS payments for 
CY 2016. We currently estimate that outlier payments will be 0.95 
percent of total OPPS payments in CY 2015; the 1.0 percent for proposed 
outlier payments in CY 2016 would constitute a 0.05 percent increase in 
payment in CY 2016 relative to CY 2015.
    We also are proposing to exercise our authority in section 
1833(t)(3)(C)(iii) of the Act to further adjust the conversion factor 
to eliminate the effect of coding and classification changes that we 
believe resulted in a change in aggregate payments that do not reflect 
real changes in service-mix related to our final policy to package 
certain clinical diagnostic laboratory tests in the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 74939 through 74942). Below we 
discuss our proposed adjustment to the conversion factor to redress the 
inflation in the OPPS payment rates resulting from excess packaged 
payment under the OPPS for laboratory tests that we now understand 
continue to be paid separately outside the OPPS.
    The current clinical diagnostic laboratory test packaging policy 
packages payment for 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. Under 
current policy, payment for a laboratory test is not packaged when: (1) 
A laboratory test is the only service provided to the 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. The laboratory tests 
falling under these two exceptions continue to

[[Page 39239]]

be paid separately at the CLFS payment rates outside the OPPS.
    In addition, we exclude payment for molecular pathology tests 
described by CPT codes in the ranges of 81200 through 81383, 81400 
through 81404, and 81479 from packaging (78 FR 74939). In section 
II.A.3.b.(3) of this proposed rule, we are proposing to expand this 
exclusion to exclude all molecular pathology tests from our packaging 
policy, including any new codes that also describe molecular pathology 
tests. Finally, we continue to pay separately for referred specimens 
billed on a 14X bill type because these services will always consist 
only of laboratory services. We also make separate (that is, not 
packaged) payment for laboratory tests billed on a 12X (inpatient Part 
B) bill type claim when billed for reasons other than rebilling for a 
denied Part A claim, such as inpatient Part B coverage following 
exhausted Part A benefits. We refer readers to section II.A.3.b.(3) of 
this proposed rule for a detailed discussion of our laboratory test 
packaging policy exceptions and to review our proposals to modify our 
laboratory test packaging policy in light of current experience with 
this policy.
    In monitoring aggregate payments for CY 2014, we observed that OPPS 
spending for hospital outpatient services experienced double digit 
growth in 2014 compared to typical growth of 6 to 8 percent, due to our 
CY 2014 final policy to package laboratory services, without a 
comparable reduction in spending for laboratory services paid at the 
CLFS payment rates outside the OPPS. As part of our CY 2014 final 
policy to package certain clinical diagnostic laboratory tests, we both 
revised the OPPS relative payment weights to reflect packaged 
laboratory services, and we increased the OPPS relative weight scaler 
to reflect the estimated total cost of packaged laboratory services. In 
calculating the appropriate increase to the weight scaler for CY 2014, 
we estimated that we spent approximately $2.4 billion on laboratory 
services on 13X type bill claims, and we incorporated this aggregate 
amount of weight into our estimate of the 2013 relative weight when 
calculating the budget neutral weight scaler to scale all relative 
weights for CY 2014, except those with a fixed payment amount such as 
drugs paid at ASP+6 percent (78 FR 74948 through 74949). An adjustment 
to the overall weight scaler has a comparable effect on final payment 
as an adjustment to the conversion factor. We also assumed that 
separate payment would continue for laboratory services billed on 14X 
bill type claims for referred specimens and for select inpatient Part B 
claims billed on a 12X bill type claim. Thus, we expect to experience 
an increase in OPPS spending due to our final packaging policy and a 
commensurate reduction in overall payment for Medicare Part B 
laboratory tests paid at the CLFS rates outside the OPPS.
    However, upon reviewing actual claims for CY 2014, we observed an 
unexpectedly high volume of laboratory tests associated with $1 billion 
in spending for exceptions to our packaging policy for laboratory tests 
that continued to receive separate payment at the CLFS payment rates 
outside the OPPS. We did not observe a significant change in the 
overall volume of laboratory services being furnished. Specifically, we 
observed a pronounced shift in volume from billing on the 13X bill type 
claims to the 14X bill type claims beginning January 1, 2014, 
consistent with our final rule policy and then shifting back to the 13X 
bill type claims with an ``L1'' modifier when our instructions on 
billing for laboratory tests that are excepted from our laboratory 
packaging policy were implemented in July 2014. (We refer readers to 
Transmittal 2971, Change Request 8776, July 2014 Update of the Hospital 
Outpatient Prospective Payment System (OPPS), which is available on the 
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2971CP.pdf.) Because we do not observe a 
significant change in the number of laboratory services in our claims 
data, we conclude that the changes in aggregate payments under the OPPS 
are a result of changes in pricing alone and do not reflect real 
changes in service-mix.
    Therefore, we overestimated the adjustment necessary to account for 
the new policy to package laboratory tests and underestimated the 
amount of spending that would continue for laboratory tests paid at the 
CLFS rates outside the OPPS by approximately $1 billion. This $1 
billion effectively resulted in inflation in the OPPS payment rates 
resulting from excess packaged payment under the OPPS for laboratory 
tests for all OPPS services and duplicate payments for certain 
laboratory tests because we are paying the laboratory tests through 
packaged payment incorporated into the OPPS payment rates as well as 
through separate payment at the CLFS payment rates outside the OPPS.
    Section 1833(t)(3)(C)(iii) of the Act specifies that if the 
Secretary determines the adjustments for service-mix for a previous 
year (or estimates that such adjustments for a future year) did (or are 
likely to) result in a change in aggregate payments during the year 
that are a result of changes in the coding or classification of covered 
OPD services that do not reflect real changes in service-mix, the 
Secretary may adjust the conversion factor for subsequent years so as 
to eliminate the effect of such coding or classification changes. Based 
on this authority, we are proposing a reduction of 2.0 percentage 
points to the proposed CY 2016 conversion factor to redress 
inappropriate inflation in the OPPS payment rates and remove the $1 
billion in excess packaged payment. We also used the ``L1'' modifier 
information on the CY 2014 claims data that we use to model the OPPS to 
identify which laboratory services should be packaged into the 
associated OPPS services when establishing the proposed CY 2016 
relative weights. We are proposing this reduction in order to eliminate 
the effect of the coding and classification changes for payment for 
laboratory tests that resulted in changes in aggregate payments, but 
which did not result in real changes in service-mix under the OPPS. If 
we had been able to accurately forecast the amount of continued 
spending on separately payable laboratory tests that would continue in 
CY 2014 at the CLFS rates outside the OPPS, we would have incorporated 
a reduced amount of estimated spending into our CY 2014 OPPS budget 
neutrality calculations in CY 2014 rulemaking.
    We conducted several analyses to better understand the derivation 
of the overestimated adjustment made in CY 2014. These efforts included 
an attempt to determine how much spending at the CLFS payment rates 
outside the OPPS should have been packaged in CY 2014 with full 
knowledge of the actual volume for exceptions to our final laboratory 
tests packaging policy now that CY 2014 claims data are available for 
review. This assessment required some assumptions about what payment 
would have been at the CY 2014 CLFS payment amounts using the CLFS 
national limitation amount (NLA) price or the mode price among 
jurisdictions where an NLA did not exist for all laboratory services in 
12X, 13X, and 14X bill type claims less actual payments for those same 
services and the $2.4 billion in packaged payments. We adjusted our 
total estimates for incomplete claims data because the data that we use 
to model the proposed rule are data from CY 2014 claims processed as of 
December 31, 2014, estimated at 90 percent based on historical claims 
data.

[[Page 39240]]

As a result of this analysis, we estimated that we included a gross 
estimate of roughly $1.1 billion in excess packaged payment in the CY 
2014 OPPS payment rates for laboratory tests that were paid separately, 
as demonstrated by actual CY 2014 claims data. We also did a more 
straightforward analysis assessing total payment for our exceptions 
policy, in which we looked at the change in payment on 14X bill type 
claims for the first part of CY 2014 along with any payment for 
laboratory services billed with the ``L1'' modifier. This analysis 
resulted in a similar estimate of roughly $1.003 billion. Because both 
analyses resulted in an approximate $1 billion estimate of spending at 
the CLFS rates outside the OPPS that was packaged into the OPPS, we 
believe that a prospective adjustment to remove this $1 billion from 
the OPPS realigns total aggregate OPPS payments to reflect the 
resources associated with OPPS services. When we calculate the $1 
billion as a percent of actual total spending for OPPS services in CY 
2014 (approximately $50 billion), we determined an estimated 2.0 
percent reduction to total spending to be applied to the conversion 
factor. Therefore, we are proposing to apply a 2.0 percent adjustment 
to the proposed CY 2016 conversion factor to redress the inflation in 
the OPPS payment rates resulting from excess packaged payment under the 
OPPS for laboratory tests we now understand continue to be paid at the 
CLFS rates outside the OPPS for CY 2016 and subsequent years.
    For the CY 2017 OPPS rulemaking, we plan to review actual CY 2015 
claims data and assess whether our proposed adjustment for CY 2016 
accurately adjusted for the inflation in the OPPS payment rates under 
current policy.
    We provide a summary file of our analysis of separate payment at 
the CLFS rates outside the OPPS for laboratory services that are 
exceptions to our packaging policy which is available in the 
``Downloads'' section of the CMS Web site accompanying this proposed 
rule (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html). We note that the ``OPPS limited data set'' that we make 
available to accompany each proposed and final rule is not a complete 
set of institutional Part B claims, containing only the 12X, 13X, and 
14X bill types that we use to model the OPPS rates and excluding claims 
weeded or trimmed as discussed in our claims accounting document 
(http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).
    For this proposed rule, we also are proposing that hospitals that 
fail to meet the reporting requirements of the Hospital OQR Program 
would continue to be subject to a further reduction of 2.0 percentage 
points to the OPD fee schedule increase factor. For hospitals that fail 
to meet the requirements of the Hospital OQR Program, we are proposing 
to make all other adjustments discussed above, but use a reduced OPD 
fee schedule update factor of -0.1 percent (that is, the proposed OPD 
fee schedule increase factor of 1.9 percent further reduced by 2.0 
percentage points). This would result in a proposed reduced conversion 
factor for CY 2016 of $72.478 for hospitals that fail to meet the 
Hospital OQR requirements (a difference of -1.451 in the conversion 
factor relative to hospitals that meet the requirements).
    In summary, for CY 2016, we are proposing to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (7) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2016 to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(iv) of the Act. We are proposing to use a 
reduced conversion factor of $72.478 in the calculation of payments for 
hospitals that fail to meet the Hospital OQR Program requirements (a 
difference of -1.451 in the conversion factor relative to hospitals 
that meet the requirements).
    For CY 2016, we are proposing to continue previously established 
policies for implementing the cancer hospital payment adjustment 
described in section 1833(t)(18) of the Act, as discussed in section 
II.F. of this proposed rule.
    As a result of these proposed policies, the proposed OPD fee 
schedule increase factor for the CY 2016 OPPS is 1.9 percent (which is 
2.7 percent, the estimate of the hospital inpatient market basket 
percentage increase, less the proposed 0.6 percentage point MFP 
adjustment, and less the 0.2 percentage point additional adjustment). 
For CY 2016, we are proposing to use a conversion factor of $73.929 in 
the calculation of the national unadjusted payment rates for those 
items and services for which payment rates are calculated using 
geometric mean costs. That is, the proposed OPD fee schedule increase 
factor of 1.9 percent for CY 2016, the required wage index budget 
neutrality adjustment of approximately 0.9993, the proposed cancer 
hospital payment adjustment of 1.0000, the proposed -2.0 percent 
adjustment to the conversion factor to redress the inflation in the 
OPPS payment rates resulting from excess packaged payment under the 
OPPS for laboratory tests we now understand continue to be paid at the 
CLFS rates outside the OPPS, and the proposed adjustment of -0.12 
percentage point of projected OPPS spending for the difference in the 
pass-through spending result in a proposed conversion factor for CY 
2016 of $73.929.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B. of this proposed rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). Therefore, we are proposing to continue 
this policy for the CY 2016 OPPS. We refer readers to section II.H. of 
this proposed rule for a description and an example of how the wage 
index for a particular hospital is used to determine payment for the 
hospital.
    As discussed in section II.A.2.c. of this proposed rule, for 
estimating APC costs, we standardize 60 percent of estimated claims 
costs for geographic area wage variation using the same proposed FY 
2016 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 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 post-reclassified 
wage index as the calendar year wage index for adjusting the OPPS 
standard payment amounts for labor market

[[Page 39241]]

differences. Therefore, 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 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. In accordance with section 
1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.
    The Affordable Care Act contained several provisions affecting the 
wage index. These provisions were discussed in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74191). Section 10324 of the 
Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, 
which defines a frontier State and amended section 1833(t) of the Act 
to add new paragraph (19), which requires a frontier State wage index 
floor of 1.00 in certain cases, and states that the frontier State 
floor shall not be applied in a budget neutral manner. We codified 
these requirements in Sec.  419.43(c)(2) and (c)(3) of our regulations. 
For the CY 2016 OPPS, we are proposing to implement this provision in 
the same manner as we have since CY 2011. Under this policy, the 
frontier State hospitals would receive a wage index of 1.00 if the 
otherwise applicable wage index (including reclassification, rural and 
imputed floor, and rural floor budget neutrality) is less than 1.00. 
Because the HOPD receives a wage index based on the geographic location 
of the specific inpatient hospital with which it is associated, the 
frontier State wage index adjustment applicable for the inpatient 
hospital also would apply for any associated HOPD. We refer readers to 
the following sections in the FY 2011 through FY 2015 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: for FY 2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 
51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; for FY 
2014, 78 FR 50590 through 50591; and for FY 2015, 79 FR 49971.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2016 IPPS wage indexes 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 2016 IPPS/LTCH PPS proposed rule (80 FR 24463 
through 24472) for a detailed discussion of all proposed changes to the 
FY 2016 IPPS wage indexes. 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.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963) and the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24463 
through 24469), the Office of Management and Budget (OMB) issued 
revisions to the labor market area delineations on February 28, 2013 
(based on 2010 Decennial Census data), that included a number of 
significant changes such as new Core Based Statistical Areas (CBSAs), 
urban counties that became rural, rural counties that became urban, and 
existing CBSAs that were split apart (OMB Bulletin 13-01). This 
bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 49950 through 49985), we adopted the use of the OMB labor 
market area delineations that were based on the 2010 Decennial Census 
data.
    For the CY 2016 OPPS/ASC proposed rule, we are proposing to use the 
proposed FY 2016 hospital IPPS post-reclassified wage index for urban 
and rural areas as the wage index for the OPPS to determine the wage 
adjustments for both the OPPS payment rate and the copayment 
standardized amount for CY 2016. Thus, any adjustments that were 
proposed for the FY 2016 IPPS post-reclassified wage index would be 
reflected in the proposed CY 2016 OPPS wage index. (We refer readers to 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24463 through 24477) and 
the proposed FY 2016 hospital wage index files posted on the CMS Web 
site.)
    Hospitals that are paid under the OPPS, but not under the IPPS, do 
not have an assigned hospital wage index under the IPPS. Therefore, for 
non-IPPS hospitals paid under the OPPS, it is our longstanding policy 
to assign the wage index that would be applicable if the hospital were 
paid under the IPPS, based on its geographic location and any 
applicable wage index adjustments. We are proposing to continue this 
policy for CY 2016. The following is a brief summary of the major 
proposed FY 2016 IPPS wage index policies and adjustments that we are 
proposing to apply to these hospitals under the OPPS for CY 2016. We 
further refer readers to the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24463 through 24477) for a detailed discussion of the proposed changes 
to the FY 2016 wage indexes.
    It has been our longstanding policy to allow non-IPPS hospitals 
paid under the OPPS to qualify for the out-migration adjustment if they 
are located in a section 505 out-migration county (section 505 of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA)). Applying this adjustment is consistent with our policy of 
adopting IPPS wage index policies for hospitals paid under the OPPS. We 
note that, because non-IPPS hospitals cannot reclassify, they would be 
eligible for the out-migration wage adjustment if they are located in a 
section 505 out-migration county. This is the same out-migration 
adjustment policy that would apply if the hospital were paid under the 
IPPS. For CY 2016, we are proposing to continue our policy 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 MMA). The new Table 2 from the FY 2016 IPPS/LTCH 
PPS proposed rule (available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-
migration adjustment and IPPS hospitals that would receive the 
adjustment for FY 2016. (We note that the new FY 2016 proposed IPPS 
Table 2 consolidates information on counties eligible for the out-
migration adjustment that was previously issued as Table 4J.) We are 
including the proposed out-migration adjustment information from the 
new consolidated Table 2 from the FY 2016 IPPS/LTCH PPS proposed rule 
as Addendum L to this proposed rule with the addition of non-IPPS 
hospitals that would receive the section 505 out-migration adjustment 
under the CY 2016 OPPS. Addendum L is available via the Internet on the 
CMS Web site.
    As stated earlier, in the FY 2015 IPPS/LTCH PPS final rule, we 
adopted the OMB labor market area delineations issued by OMB in OMB 
Bulletin No. 13-01 on February 28, 2013, based on standards published 
on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data 
to delineate labor market areas for purposes of the IPPS

[[Page 39242]]

wage index. For IPPS wage index purposes, for hospitals that were 
located in urban CBSAs in FY 2014 but were designated as rural under 
these revised OMB labor market area delineations, we generally assigned 
them the urban wage index value of the CBSA in which they were 
physically located for FY 2014 for a period of 3 fiscal years (79 FR 
49957 through 49960). To be consistent, we applied the same policy to 
hospitals paid under the OPPS but not under the IPPS so that such 
hospitals will maintain the wage index of the CBSA in which they were 
physically located for FY 2014 for 3 calendar years (until December 31, 
2017). Thus, for the CY 2016 OPPS, consistent with the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24467 through 24468), this 3-year 
transition will continue for the second year in CY 2016. For CY 2015, 
we also finalized a 1-year blended wage index for all hospitals that 
experienced any decrease in their actual payment wage index exclusively 
due to the implementation of the new OMB delineations. In the CY 2015 
OPPS/ASC proposed rule, for purposes of the OPPS, we finalized a policy 
to apply this 1-year 50-percent transition blend to hospitals paid 
under the OPPS but not under the IPPS. Therefore, this one-year 
transition blend does not apply for the CY 2016 OPPS wage index because 
it expires at the end of CY 2015.
    In addition, for the FY 2016 IPPS, we proposed to extend the 
imputed floor policy (both the original methodology and alternative 
methodology) for another year, through September 30, 2016 (80 FR 24469 
through 24470). For purposes of the CY 2016 OPPS, we also are proposing 
to apply the imputed floor policy to hospitals paid under the OPPS but 
not under the IPPS so long as the IPPS continues an imputed floor 
policy.
    For CMHCs, for CY 2016, we are proposing to continue to calculate 
the wage index by using the post-reclassification IPPS wage index based 
on the CBSA where the CMHC is located. As with OPPS hospitals and for 
the same reasons, in CY 2015, we applied a 1-year, 50/50 blended wage 
index to CMHCs that would receive a lower wage index due to the new OMB 
labor market area delineations. However, this blended wage index does 
not apply in CY 2016 because it expires at the end of CY 2015. In 
addition, as with OPPS hospitals and for the same reasons, for CMHCs 
previously located in urban CBSAs that were designated as rural under 
the new OMB labor market area delineations, we finalized a policy to 
maintain the urban wage index value of the CBSA in which they were 
physically located for CY 2014 for 3 calendar years (until December 31, 
2017). Consistent with our current policy, the wage index that applies 
to CMHCs includes both the imputed floor adjustment and the rural floor 
adjustment, but does not include the out-migration adjustment because 
that adjustment only applies to hospitals.
    With the exception of the proposed out-migration wage adjustment 
table (Addendum L to this proposed rule, which is available via the 
Internet on the CMS Web site), which includes non-IPPS hospitals paid 
under the OPPS, we are not reprinting the proposed FY 2016 IPPS wage 
indexes referenced in this discussion of the wage index. We refer 
readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the proposed FY 
2016 IPPS wage index tables.

D. Proposed Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. MACs 
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 MAC is able to calculate the hospital's actual CCR from its 
most recently submitted Medicare cost report. These hospitals include, 
but are not limited to, hospitals that are new, have not accepted 
assignment of an existing hospital's provider agreement, and have not 
yet submitted a cost report. CMS also uses the statewide average 
default CCRs to determine payments for hospitals that appear to have a 
biased CCR (that is, the CCR falls outside the predetermined ceiling 
threshold for a valid CCR) or for hospitals in which the most recent 
cost report reflects an all-inclusive rate status (Medicare Claims 
Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). In this 
proposed rule, we are proposing to update the default ratios for CY 
2016 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 2016, we are proposing to continue to use our standard 
methodology of calculating the statewide average default CCRs using the 
same hospital overall CCRs that we use to adjust charges to costs on 
claims data for setting the proposed CY 2016 OPPS relative payment 
weights. Table 11 below lists the proposed CY 2016 default urban and 
rural CCRs by State and compares them to the CY 2015 default CCRs. 
These proposed CCRs represent the ratio of total costs to total charges 
for those cost centers relevant to outpatient services from each 
hospital's most recently submitted cost report, weighted by Medicare 
Part B charges. We also are proposing to adjust ratios from submitted 
cost reports to reflect the final settled status by applying the 
differential between settled to submitted overall CCRs for the cost 
centers relevant to outpatient services from the most recent pair of 
final settled and submitted cost reports. We then are proposing to 
weight each hospital's CCR by the volume of separately paid line-items 
on hospital claims corresponding to the year of the majority of cost 
reports used to calculate the overall CCRs. We refer readers to the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66680 through 
66682) and prior OPPS rules for a more detailed discussion of our 
established methodology for calculating the statewide average default 
CCRs, including the hospitals used in our calculations and our trimming 
criteria.
    For Maryland, we used an overall weighted average CCR for all 
hospitals in the Nation as a substitute for Maryland CCRs. Few 
hospitals in Maryland are eligible to receive payment under the OPPS, 
which limits the data available to calculate an accurate and 
representative CCR. The weighted CCR is used for Maryland because it 
takes into account each hospital's volume, rather than treating each 
hospital equally. We refer readers to the CY 2005 OPPS final rule with 
comment period (69 FR 65822) for further discussion and the rationale 
for our longstanding policy of using the national average CCR for 
Maryland. In general, observed changes in the statewide average default 
CCRs between CY 2015 and CY 2016 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 11 below lists the proposed statewide average default CCRs 
for OPPS services furnished on or after January 1, 2016.

[[Page 39243]]



                                Table 11--Proposed CY 2016 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Previous
                                                                                    Proposed CY     default CCR
                     State                                 Urban/Rural             2016 default    (CY 2015 OPPS
                                                                                        CCR         Final Rule)
----------------------------------------------------------------------------------------------------------------
ALABAMA.......................................  RURAL...........................           0.226           0.235
ALABAMA.......................................  URBAN...........................           0.172           0.186
ALASKA........................................  RURAL...........................           0.592           0.439
ALASKA........................................  URBAN...........................           0.286           0.294
ARIZONA.......................................  RURAL...........................           0.224           0.228
ARIZONA.......................................  URBAN...........................           0.176           0.181
ARKANSAS......................................  RURAL...........................           0.261           0.262
ARKANSAS......................................  URBAN...........................           0.222           0.239
CALIFORNIA....................................  RURAL...........................           0.180           0.178
CALIFORNIA....................................  URBAN...........................           0.196           0.196
COLORADO......................................  RURAL...........................           0.381           0.410
COLORADO......................................  URBAN...........................           0.212           0.219
CONNECTICUT...................................  RURAL...........................           0.337           0.339
CONNECTICUT...................................  URBAN...........................           0.267           0.273
DELAWARE......................................  URBAN...........................           0.316           0.314
DISTRICT OF COLUMBIA..........................  URBAN...........................           0.307           0.299
FLORIDA.......................................  RURAL...........................           0.169           0.180
FLORIDA.......................................  URBAN...........................           0.154           0.156
GEORGIA.......................................  RURAL...........................           0.253           0.256
GEORGIA.......................................  URBAN...........................           0.211           0.211
HAWAII........................................  RURAL...........................           0.339           0.337
HAWAII........................................  URBAN...........................           0.310           0.307
IDAHO.........................................  RURAL...........................           0.357           0.353
IDAHO.........................................  URBAN...........................           0.491           0.463
ILLINOIS......................................  RURAL...........................           0.251           0.252
ILLINOIS......................................  URBAN...........................           0.220           0.217
INDIANA.......................................  RURAL...........................           0.332           0.334
INDIANA.......................................  URBAN...........................           0.256           0.262
IOWA..........................................  RURAL...........................           0.308           0.321
IOWA..........................................  URBAN...........................           0.259           0.269
KANSAS........................................  RURAL...........................           0.302           0.300
KANSAS........................................  URBAN...........................           0.219           0.231
KENTUCKY......................................  RURAL...........................           0.223           0.231
KENTUCKY......................................  URBAN...........................           0.217           0.212
LOUISIANA.....................................  RURAL...........................           0.264           0.272
LOUISIANA.....................................  URBAN...........................           0.213           0.209
MAINE.........................................  RURAL...........................           0.465           0.430
MAINE.........................................  URBAN...........................           0.415           0.432
MARYLAND......................................  RURAL...........................           0.290           0.296
MARYLAND......................................  URBAN...........................           0.241           0.244
MASSACHUSETTS.................................  RURAL...........................           0.325           0.326
MASSACHUSETTS.................................  URBAN...........................           0.337           0.333
MICHIGAN......................................  RURAL...........................           0.339           0.371
MICHIGAN......................................  URBAN...........................           0.316           0.320
MINNESOTA.....................................  RURAL...........................           0.473           0.485
MINNESOTA.....................................  URBAN...........................           0.351           0.347
MISSISSIPPI...................................  RURAL...........................           0.240           0.247
MISSISSIPPI...................................  URBAN...........................           0.177           0.181
MISSOURI......................................  RURAL...........................           0.248           0.267
MISSOURI......................................  URBAN...........................           0.259           0.274
MONTANA.......................................  RURAL...........................           0.459           0.501
MONTANA.......................................  URBAN...........................           0.386           0.386
NEBRASKA......................................  RURAL...........................           0.280           0.290
NEBRASKA......................................  URBAN...........................           0.245           0.255
NEVADA........................................  RURAL...........................           0.221           0.241
NEVADA........................................  URBAN...........................           0.150           0.149
NEW HAMPSHIRE.................................  RURAL...........................           0.383           0.362
NEW HAMPSHIRE.................................  URBAN...........................           0.310           0.280
NEW JERSEY....................................  URBAN...........................           0.200           0.202
NEW MEXICO....................................  RURAL...........................           0.267           0.296
NEW MEXICO....................................  URBAN...........................           0.295           0.294
NEW YORK......................................  RURAL...........................           0.331           0.333
NEW YORK......................................  URBAN...........................           0.314           0.340
NORTH CAROLINA................................  RURAL...........................           0.280           0.280
NORTH CAROLINA................................  URBAN...........................           0.245           0.246
NORTH DAKOTA..................................  RURAL...........................           0.443           0.660
NORTH DAKOTA..................................  URBAN...........................           0.357           0.395
OHIO..........................................  RURAL...........................           0.301           0.317
OHIO..........................................  URBAN...........................           0.216           0.222

[[Page 39244]]

 
OKLAHOMA......................................  RURAL...........................           0.252           0.282
OKLAHOMA......................................  URBAN...........................           0.198           0.203
OREGON........................................  RURAL...........................           0.267           0.287
OREGON........................................  URBAN...........................           0.366           0.352
PENNSYLVANIA..................................  RURAL...........................           0.282           0.283
PENNSYLVANIA..................................  URBAN...........................           0.195           0.197
PUERTO RICO...................................  URBAN...........................           0.596           0.577
RHODE ISLAND..................................  URBAN...........................           0.298           0.297
SOUTH CAROLINA................................  RURAL...........................           0.193           0.191
SOUTH CAROLINA................................  URBAN...........................           0.211           0.207
SOUTH DAKOTA..................................  RURAL...........................           0.366           0.286
SOUTH DAKOTA..................................  URBAN...........................           0.225           0.214
TENNESSEE.....................................  RURAL...........................           0.203           0.203
TENNESSEE.....................................  URBAN...........................           0.180           0.188
TEXAS.........................................  RURAL...........................           0.249           0.251
TEXAS.........................................  URBAN...........................           0.183           0.203
UTAH..........................................  RURAL...........................           0.476           0.481
UTAH..........................................  URBAN...........................           0.336           0.335
VERMONT.......................................  RURAL...........................           0.437           0.439
VERMONT.......................................  URBAN...........................           0.352           0.353
VIRGINIA......................................  RURAL...........................           0.205           0.219
VIRGINIA......................................  URBAN...........................           0.258           0.241
WASHINGTON....................................  RURAL...........................           0.351           0.300
WASHINGTON....................................  URBAN...........................           0.323           0.330
WEST VIRGINIA.................................  RURAL...........................           0.313           0.312
WEST VIRGINIA.................................  URBAN...........................           0.311           0.300
WISCONSIN.....................................  RURAL...........................           0.325           0.328
WISCONSIN.....................................  URBAN...........................           0.292           0.294
WYOMING.......................................  RURAL...........................           0.441           0.429
WYOMING.......................................  URBAN...........................           0.311           0.262
----------------------------------------------------------------------------------------------------------------

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

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). 
Section 1833(t)(13) of the Act provided the Secretary the authority to 
make an adjustment to OPPS payments for rural hospitals, effective 
January 1, 2006, if justified by a study of the difference in costs by 
APC between hospitals in rural areas and hospitals in urban areas. Our 
analysis showed a difference in costs for rural SCHs. Therefore, for 
the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 
7.1 percent for all services and procedures paid under the OPPS, 
excluding separately payable drugs and biologicals, brachytherapy 
sources, and devices paid under the pass-through payment policy, in 
accordance with section 1833(t)(13)(B) of the Act.
    In 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, two 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 2015. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    For the CY 2016 OPPS, we are proposing to continue our policy of a 
7.1 percent payment adjustment that is done in a budget neutral manner 
for rural SCHs, including EACHs, for all services and procedures paid 
under the OPPS, excluding separately payable drugs and biologicals, 
devices paid under the pass-through payment policy, and items paid at 
charges reduced to costs.

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

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid 
the 11 hospitals that meet the criteria for cancer hospitals identified 
in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered 
outpatient hospital services. These cancer hospitals are exempted from 
payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced 
Budget Refinement Act

[[Page 39245]]

of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of 
the Act, ``Transitional Adjustment to Limit Decline in Payment,'' to 
determine OPPS payments to cancer and children's hospitals based on 
their pre-BBA payment amount (often referred to as ``held harmless'').
    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 in amount under the OPPS than the 
payment amount 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 the product of the hospital's reasonable costs for covered 
outpatient services 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 Cost Report or 
the Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form 
CMS-2552-10, respectively) as applicable each year. Section 
1833(t)(7)(I) of the Act exempts TOPs from budget neutrality 
calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed outpatient costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act, 
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of 
the Act requires the Secretary to take into consideration the cost of 
drugs and biologicals incurred by cancer and other hospitals. Section 
1833(t)(18)(B) of the Act provides that, if the Secretary determines 
that cancer hospitals' costs are greater than other hospitals' costs, 
the Secretary shall provide an appropriate adjustment under section 
1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after 
conducting the study required by section 1833(t)(18)(A) of the Act, we 
determined 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 these findings, we finalized a policy to provide a payment 
adjustment to the 11 specified cancer hospitals that reflects their 
higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74202 through 74206). Specifically, we 
adopted a policy to provide additional payments to the 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. For CY 2014, the target PCR for purposes 
of the cancer hospital payment adjustment was 0.89. For CY 2015, the 
target PCR was 0.90, as discussed in the CY 2015 OPPS/ASC final rule 
with comment period correction notice (80 FR 9629).
2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2016
    For CY 2016, we are proposing to continue our policy to provide 
additional payments to the 11 specified cancer hospitals so that each 
cancer hospital's final PCR is equal to the weighted average PCR (or 
``target PCR'') for the other OPPS hospitals using the most recent 
submitted or settled cost report data that are available at the time of 
the development of this proposed rule. To calculate the proposed CY 
2016 target PCR, we used the same extract of cost report data from 
HCRIS, as discussed in section II.A. of this proposed rule, used to 
estimate costs for the CY 2016 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 2014 claims 
data that we used to model the impact of the proposed CY 2016 APC 
relative payment weights (3,794 hospitals) because it is appropriate to 
use the same set of hospitals that we are using to calibrate the 
modeled CY 2016 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2013 to 2014. We then removed the cost report data of the 47 
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 18 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 a proposed analytic file of 3,729 
hospitals with cost report data.
    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to other hospitals furnishing services 
under the OPPS are approximately 90 percent of reasonable cost 
(weighted average PCR of 0.90). Therefore, we are proposing that the 
payment amount associated with the cancer hospital payment adjustment 
to be determined at cost report settlement would be the additional 
payment needed to result in a proposed target PCR equal to 0.90 for 
each cancer hospital. Table 12 below indicates the proposed estimated 
percentage increase in OPPS payments to each cancer hospital for CY 
2016 due to the cancer hospital payment adjustment policy.
    The actual amount of the CY 2016 cancer hospital payment adjustment 
for each cancer hospital will be determined at cost report settlement 
and will depend on each hospital's CY 2016 payments and costs. We note 
that the requirements contained in section 1833(t)(18) of the Act do 
not affect the existing statutory provisions that provide for TOPs for 
cancer hospitals. The TOPs will be assessed as usual after all 
payments, including the cancer hospital payment adjustment, have been 
made for a cost reporting period.

[[Page 39246]]



  Table 12--Estimated CY 2016 Hospital-Specific Payment Adjustment for Cancer Hospitals To Be Provided at Cost
                                                Report Settlement
----------------------------------------------------------------------------------------------------------------
                                                                                                     Estimated
                                                                                                    percentage
             Provider number                                   Hospital name                       increase  in
                                                                                                   OPPS payments
                                                                                                    for CY 2016
----------------------------------------------------------------------------------------------------------------
050146...................................  City of Hope Comprehensive Cancer Center.............            19.0
050660...................................  USC Norris Cancer Hospital...........................            19.3
100079...................................  Sylvester Comprehensive Cancer Center................            22.3
100271...................................  H. Lee Moffitt Cancer Center & Research Institute....            24.5
220162...................................  Dana-Farber Cancer Institute.........................            47.8
330154...................................  Memorial Sloan-Kettering Cancer Center...............            42.4
330354...................................  Roswell Park Cancer Institute........................            19.2
360242...................................  James Cancer Hospital & Solove Research Institute....            32.5
390196...................................  Fox Chase Cancer Center..............................            21.0
450076...................................  M.D. Anderson Cancer Center..........................            47.7
500138...................................  Seattle Cancer Care Alliance.........................            53.9
----------------------------------------------------------------------------------------------------------------

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    The OPPS provides outlier payments to hospitals to help mitigate 
the financial risk associated with high-cost and complex procedures, 
where a very costly service could present a hospital with significant 
financial loss. As explained in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66832 through 66834), we set our projected target 
for aggregate outlier payments at 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. 
Outlier payments are provided on a service-by-service basis when the 
cost of a service exceeds the APC payment amount multiplier threshold 
(the APC payment amount multiplied by a certain amount) as well as the 
APC payment amount plus a fixed-dollar amount threshold (the APC 
payment plus a certain amount of dollars). In CY 2015, the outlier 
threshold was met when the hospital's cost of furnishing a service 
exceeded 1.75 times (the multiplier threshold) the APC payment amount 
and exceeded the APC payment amount plus $2,775 (the fixed-dollar 
amount threshold) (79 FR 66834). If the cost of a service exceeds both 
the multiplier 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 amount. 
Beginning with CY 2009 payments, outlier payments are subject to a 
reconciliation process similar to the IPPS outlier reconciliation 
process for cost reports, as discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599).
    It has been our policy 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 2014 OPPS payment, using available CY 2014 
claims and the OPPS expenditure estimate for the FY 2016 President's 
Budget, is approximately 0.9 percent of the total aggregated OPPS 
payments. Therefore, for CY 2014, we estimate that we paid 1.0 percent 
below the CY 2014 outlier target of 1.0 percent of total aggregated 
OPPS payments.
    Using CY 2014 claims data and CY 2015 payment rates, we currently 
estimate that the aggregate outlier payments for CY 2015 will be 
approximately 0.95 percent of the total CY 2015 OPPS payments. The 
difference between 0.9 percent and the 1.0 percent target is reflected 
in the regulatory impact analysis in section XX. of this proposed rule. 
We provide estimated CY 2016 outlier payments for hospitals and CMHCs 
with claims included in the claims data that we used to model impacts 
in the Hospital-Specific Impacts--Provider-Specific Data file on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Proposed Outlier Calculation
    For CY 2016, we are proposing to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS. We are proposing that a portion of that 1.0 
percent, an amount equal to 0.49 percent of outlier payments (or 0.0049 
percent of total OPPS payments) would be allocated to CMHCs for PHP 
outlier payments. This is the amount of estimated outlier payments that 
would result from the proposed CMHC outlier threshold as a proportion 
of total estimated OPPS outlier payments. As discussed in section 
VIII.D. of this proposed rule, for CMHCs, we are proposing to continue 
our longstanding policy that if a CMHC's cost for partial 
hospitalization services, paid under either proposed renumbered APC 
5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) (existing 
APC 0172) or proposed renumbered APC 5852 (Level 2 Partial 
Hospitalization (4 or more services) for CMHCs) (existing APC 0173), 
exceeds 3.40 times the payment rate for proposed renumbered APC 5852, 
the outlier payment would be calculated as 50 percent of the amount by 
which the cost exceeds 3.40 times the proposed renumbered APC 5852 
payment rate. For further discussion of CMHC outlier payments, we refer 
readers to section VIII.D. of this proposed rule.
    To ensure that the estimated CY 2016 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we are proposing that the hospital outlier threshold be set so 
that outlier payments would be triggered when a hospital's cost of 
furnishing a service exceeds 1.75 times the APC payment amount and 
exceeds the APC payment amount plus $3,650.
    We calculated the proposed fixed-dollar threshold of $3,650 using 
the standard methodology most recently used for CY 2015 (79 FR 66833 
through 66834). For purposes of estimating outlier payments for this 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2015 update to the Outpatient Provider-Specific 
File (OPSF). The OPSF contains provider-specific data, such as the most 
current CCRs, which are

[[Page 39247]]

maintained by the MACs 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 2016 hospital outlier payments for this 
proposed rule, we inflated the charges on the CY 2014 claims using the 
same inflation factor of 1.0985 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24632 through 24633). We used an inflation factor of 1.0481 
to estimate CY 2015 charges from the CY 2014 charges reported on CY 
2014 claims. The methodology for determining this charge inflation 
factor is discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24632). As we stated in the CY 2005 OPPS final rule with comment period 
(69 FR 65845), we believe that the use of these charge inflation 
factors are appropriate for the OPPS because, with the exception of the 
inpatient routine service cost centers, hospitals use the same 
ancillary and outpatient cost centers to capture costs and charges for 
inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we are proposing to apply the same CCR 
inflation adjustment factor that we are proposing to apply for the FY 
2016 IPPS outlier calculation to the CCRs used to simulate the proposed 
CY 2016 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2016, we are proposing to apply an adjustment 
factor of 0.9795 to the CCRs that were in the April 2015 OPSF to trend 
them forward from CY 2015 to CY 2016. The methodology for calculating 
this proposed adjustment is discussed in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24633).
    To model hospital outlier payments for this proposed rule, we 
applied the overall CCRs from the April 2015 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.9795 to 
approximate CY 2016 CCRs) to charges on CY 2014 claims that were 
adjusted (using the proposed charge inflation factor of 1.0985 to 
approximate CY 2016 charges). We simulated aggregated CY 2016 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 2016 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $3,650, 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. For CMHCs, we are proposing that, if a CMHC's cost 
for partial hospitalization services, paid under either proposed 
renumbered APC 5851 (existing APC 0172) or proposed renumbered APC 5852 
(existing APC 0173), exceeds 3.40 times the payment rate for proposed 
renumbered 5852, the outlier payment would be calculated as 50 percent 
of the amount by which the cost exceeds 3.40 times the proposed 
renumbered APC 5852 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 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor; that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that will apply to certain outpatient items and services 
furnished by hospitals that are required to report outpatient quality 
data and that fail to meet the Hospital OQR Program requirements. For 
hospitals that fail to meet the Hospital OQR Program requirements, we 
are proposing to continue the policy that we implemented in CY 2010 
that the hospitals' costs will be compared to the reduced payments for 
purposes of outlier eligibility and payment calculation. For more 
information on the Hospital OQR Program, we refer readers to section 
XIII. of this proposed rule.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2016 OPPS/ASC proposed 
rule, the proposed payment rate for most services and procedures for 
which payment is made under the OPPS is the product of the proposed 
conversion factor calculated in accordance with section II.B. of this 
proposed rule and the proposed relative payment weight determined under 
section II.A. of this proposed rule. Therefore, the proposed national 
unadjusted payment rate for most APCs contained in Addendum A to this 
proposed rule (which is available via the Internet on the CMS Web site) 
and for most HCPCS codes to which separate payment under the OPPS has 
been assigned in Addendum B to this proposed rule (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
proposed CY 2016 scaled weight for the APC by the proposed CY 2016 
conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XIII. of this proposed rule.
    We demonstrate below the steps on how to determine the APC payments 
that will be made in a calendar year under the OPPS to a hospital that 
fulfills the Hospital OQR Program requirements and to a hospital that 
fails to meet the Hospital OQR Program requirements for a service that 
has any of the following status indicator assignments: ``J1,'' ``J2,'' 
``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' or ``V'' (as 
defined in Addendum D1 to this proposed rule, which is available via 
the Internet on the CMS Web site), in a circumstance in which the 
multiple procedure discount does not apply, the procedure is not 
bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program

[[Page 39248]]

requirements. We note that, in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66799), we created new status indicator ``J1'' to 
reflect the comprehensive APCs discussed in section II.A.2.e. of this 
proposed rule. We also note that we deleted status indicator ``X'' as 
part of the CY 2015 packaging policy for ancillary services, discussed 
in section II.A.3. of this proposed rule. We are proposing to create 
new status indicator ``J2'' to reflect the new C-APC 8011 
(Comprehensive Observation Services) proposed in this CY 2016 proposed 
rule, as discussed in section II.A.2.e.(2) of this proposed rule.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this proposed 
rule (which are available via the Internet on the CMS Web site) should 
follow the formulas presented in the following steps. For purposes of 
the payment calculations below, we refer to the proposed national 
unadjusted payment rate for hospitals that meet the requirements of the 
Hospital OQR Program as the ``full'' national unadjusted payment rate. 
We refer to the proposed 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 
proposed 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 proposed full CY 2016 OPPS fee schedule increase factor of 1.9 
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. We note that under the proposed CY 2016 OPPS policy for 
continuing to use the OMB labor market area delineations based on the 
2010 Decennial Census data for the wage indexes used under the IPPS, a 
hold harmless policy for the wage index may apply, as discussed in 
section II.C. of this proposed rule. The proposed wage index values 
assigned to each area reflect the geographic statistical areas (which 
are based upon OMB standards) to which hospitals are proposed to be 
assigned for FY 2016 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 proposed changes to 
the FY 2016 IPPS wage indexes, as applied to the CY 2016 OPPS, we refer 
readers to section II.C. of this proposed rule.) We are proposing to 
continue to apply a wage index floor of 1.00 to frontier States, in 
accordance with section 10324 of the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule (which is available via the 
Internet on the CMS Web site) contains the qualifying counties and the 
proposed associated wage index increase developed for the FY 2016 IPPS, 
which are listed in Table 4J in the FY 2016 IPPS/LTCH PPS proposed rule 
and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the 
hospital is not reclassified or redesignated under section 1886(d)(8) 
or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.

Xa is the labor-related portion of the national unadjusted payment rate 
(wage adjusted).
Xa = .60 * (national unadjusted payment rate) * applicable 
wage index.

    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted 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, as 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 are providing examples below of the calculation of both the 
proposed 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 
35614. This provider bills one service that is assigned to proposed 
renumbered APC 5072 (Level 2 Excision/Biopsy/Incision and Drainage) 
(existing APC 0019). The proposed CY 2016 full national unadjusted 
payment rate for APC 5072 is approximately $486.16. The proposed 
reduced national unadjusted payment rate for proposed renumbered APC 
5072 for a hospital

[[Page 39249]]

that fails to meet the Hospital OQR Program requirements is 
approximately $476.44. This proposed reduced rate is calculated by 
multiplying the proposed reporting ratio of 0.980 by the proposed full 
unadjusted payment rate for proposed renumbered APC 5072.
    The proposed FY 2016 wage index for a provider located in CBSA 
35614 in New York is 1.2998. The labor-related portion of the proposed 
full national unadjusted payment is approximately $379.15 (.60 * 
$486.16 * 1.2998). The labor-related portion of the proposed reduced 
national unadjusted payment is approximately $371.57 (.60 * $476.44* 
1.2998). The nonlabor-related portion of the proposed full national 
unadjusted payment is approximately $194.46 (.40 * $486.16). The 
nonlabor-related portion of the proposed reduced national unadjusted 
payment is approximately $190.58 (.40 * $476.44). The sum of the labor-
related and nonlabor-related portions of the proposed full national 
adjusted payment is approximately $573.61 ($379.15 + $194.46). The sum 
of the portions of the proposed reduced national adjusted payment is 
approximately $562.15 ($371.57 + $190.58).

I. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure performed in a year to the amount of the inpatient 
hospital deductible for that year.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. Proposed OPPS Copayment Policy
    For CY 2016, we are proposing to determine copayment amounts for 
new and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458).) In addition, we are 
proposing to use the same standard rounding principles that we have 
historically used in instances where the application of our standard 
copayment methodology would result in a copayment amount that is less 
than 20 percent and cannot be rounded, under standard rounding 
principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66687) in which we discuss our 
rationale for applying these rounding principles.) The proposed 
national unadjusted copayment amounts for services payable under the 
OPPS that would be effective January 1, 2016, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). As discussed in section XIII.E. of this proposed 
rule, for CY 2016, the proposed Medicare beneficiary's minimum 
unadjusted copayment and national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies will equal the 
product of the reporting ratio and the national unadjusted copayment, 
or the product of the reporting ratio and the minimum unadjusted 
copayment, respectively, for the service.
    We note that 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 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).
    In the CY 2004 OPPS final rule with comment period (68 FR 63459), 
we adopted a new methodology to calculate unadjusted copayment amounts 
in situations including reorganizing APCs, and we finalized the 
following rules to determine copayment amounts in CY 2004 and 
subsequent years.
     When an APC group consists solely of HCPCS codes that were 
not paid under the OPPS the prior year because they were packaged or 
excluded or are new codes, the unadjusted copayment amount would be 20 
percent of the APC payment rate.
     If a new APC that did not exist during the prior year is 
created and consists of HCPCS codes previously assigned to other APCs, 
the copayment amount is calculated as the product of the APC payment 
rate and the lowest coinsurance percentage of the codes comprising the 
new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC, and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a decrease in the coinsurance 
percentage for the reconfigured APC, the copayment amount would not 
change (unless retaining the copayment amount would result in a 
coinsurance rate less than 20 percent).
     If HCPCS codes are added to an APC, and, after 
recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in an increase in the coinsurance 
percentage for the reconfigured APC, the copayment amount would be 
calculated as the product of the payment rate of the reconfigured APC 
and the lowest coinsurance percentage of the codes being added to the 
reconfigured APC.
    We noted in that CY 2004 OPPS final rule with comment period that 
we would seek to lower the copayment percentage for a service in an APC 
from the prior year if the copayment percentage was greater than 20 
percent.

[[Page 39250]]

We noted that this principle was consistent with section 
1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the 
national unadjusted coinsurance rate so that beneficiary liability will 
eventually equal 20 percent of the OPPS payment rate for all OPPS 
services to which a copayment applies, and with section 1833(t)(3)(B) 
of the Act, which is consistent with the Congressional goal of 
achieving a 20-percent copayment percentage when fully phased in and 
gives the Secretary the authority to set rules for determining 
copayment amounts for new services. We further noted that the use of 
this methodology would, in general, reduce the beneficiary coinsurance 
rate and copayment amount for APCs for which the payment rate changes 
as the result of the reconfiguration of APCs and/or recalibration of 
relative payment weights (68 FR 63459). We believe the proposed 
reorganization of APCs discussed in section III.D. of this proposed 
rule hastens this movement toward copayments equal to 20 percent of an 
APC for reorganized APCs that previously had copayment percentages 
greater than 20 percent.
3. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using proposed renumbered APC 5072 (existing APC 0019), 
$97.50 is approximately 20 percent of the proposed full national 
unadjusted payment rate of $486.16. For APCs with only a minimum 
unadjusted copayment in Addenda A and B to this proposed rule (which 
are available via the Internet on the CMS Web site), the beneficiary 
payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.

B is the beneficiary payment percentage.
B = National unadjusted copayment for APC/national unadjusted payment 
rate for APC.

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

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2016, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). We note that the proposed national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
proposed rule reflect the proposed full CY 2016 OPD fee schedule 
increase factor discussed in section II.B. of this proposed rule.
    In addition, as noted above, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

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

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (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. Based on our review, we assign the new CPT and Level II 
HCPCS codes to interim status indicator (SI) and APC assignments. These 
interim assignments are finalized in the OPPS/ASC final rules. This 
quarterly process offers hospitals access to codes that may more 
accurately describe items or services furnished and provides payment or 
more accurate payment for these items or services in a timelier manner 
than if we 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.
    We note that, under the OPPS, the APC assignment determines the 
payment rate for an item, procedure, or service. For those items, 
procedures, or services not paid separately under the hospital OPPS, 
they are assigned to appropriate status indicators. Section XI. of this 
proposed rule provides a discussion of the various status indicators 
used under the OPPS. Certain payment indicators provide separate 
payment while others do not.
    In Table 13 below, we summarize our current process for updating 
codes through our OPPS quarterly update CRs, seeking public comments, 
and finalizing the treatment of these new codes under the OPPS.

[[Page 39251]]



                           Table 13--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS Quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2015...................  Level II HCPCS      April 1, 2015.....  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2015....................  Level II HCPCS      July 1, 2015......  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2015......  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2015.................  Level II HCPCS      October 1, 2015...  CY 2016 OPPS/ASC    CY 2017 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2016.................  Level II HCPCS      January 1, 2016...  CY 2016 OPPS/ASC    CY 2017 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2016...  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   CPT Codes.                              proposed rule.      final rule with
                                                                                               comment period.
----------------------------------------------------------------------------------------------------------------

    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we are soliciting public 
comments in this CY 2016 OPPS/ASC proposed rule or whether we will be 
soliciting public comments in the CY 2016 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2015 
OPPS/ASC final rule with comment period on the interim APC and status 
assignments for new CPT and Level II HCPCS codes that were effective 
January 1, 2015. We also sought public comments in the CY 2015 OPPS/ASC 
final rule with comment period on the interim APC and status 
assignments for new Level II HCPCS codes that became effective October 
1, 2014. These new and revised codes, with an effective date of October 
1, 2014, or January 1, 2015, 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 2015 
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, and were subject to public comment following publication 
of the CY 2015 OPPS/ASC final rule with comment period. We will respond 
to public comments and finalize our interim OPPS treatment of these 
codes in the CY 2016 OPPS/ASC final rule with comment period.
1. Proposed Treatment of New CY 2015 Level II HCPCS and CPT Codes 
Effective April 1, 2015 and July 1, 2015 for Which We Are Soliciting 
Public Comments in This CY 2016 OPPS/ASC Proposed Rule
    Through the April 2015 OPPS quarterly update CR (Transmittal 3217, 
Change Request 9097, dated March 13, 2015), and the July 2015 OPPS 
quarterly update CR (Transmittal 3280, Change Request 9205, dated June 
5, 2015), we recognized several new HCPCS codes for separate payment 
under the OPPS.
    Effective April 1, 2015, we made effective eight new Level II HCPCS 
codes and also assigned them to appropriate interim OPPS status 
indicators and APCs. Through the April 2015 OPPS quarterly update CR, 
we allowed separate payment for eight new Level II HCPCS codes. 
Specifically, as displayed in Table 14 below, we provided separate 
payment for HCPCS codes C2623, C9445, C9448, C9449, C9450, C9451, 
C9452, and Q9975. We note that HCPCS code C9448 was deleted on June 30, 
2015, and replaced with HCPCS code Q9978, effective July 1, 2015.

                          Table 14--New Level II HCPCS Codes Implemented in April 2015
----------------------------------------------------------------------------------------------------------------
                                                                     Proposed CY 2016
          CY 2015 HCPCS Code             CY 2015 Long descriptor     Status indicator     Proposed CY 2016 APC**
----------------------------------------------------------------------------------------------------------------
C2623.................................  Catheter, transluminal    H.....................  2623
                                         angioplasty, drug-
                                         coated, non-laser.
C9445.................................  Injection, c-1 esterase   G.....................  9445
                                         inhibitor (human),
                                         Ruconest, 10 units.
C9448................................  Netupitant 300mg and      N/A...................  N/A
                                         palonosetron 0.5 mg,
                                         oral.
C9449.................................  Injection, blinatumomab,  G.....................  9449
                                         1 mcg.
C9450.................................  Injection, fluocinolone   G.....................  9450
                                         acetonide intravitreal
                                         implant, 0.01 mg.
C9451.................................  Injection, peramivir, 1   G.....................  9451
                                         mg.
C9452.................................  Injection, ceftolozane    G.....................  9452
                                         50 mg and tazobactam,
                                         25 mg.
Q9975*................................  Injection, Factor VIII,   G.....................  1656
                                         FC Fusion Protein
                                         (Recombinant), per iu.
----------------------------------------------------------------------------------------------------------------
 HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.
*HCPCS code Q9975 was replaced with HCPCS code C9136 (Injection, factor viii, fc fusion protein, (recombinant),
  per i.u.), effective April 1, 2015.
**Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) contains a
  crosswalk of the existing APC numbers to the proposed new APC numbers for CY 2016.


[[Page 39252]]

    In this CY 2016 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments, where 
applicable, for the Level II HCPCS codes implemented on April 1, 2015 
and listed in Table 14 of this proposed rule. The proposed payment 
rates for these codes, where applicable, can be found in Addendum B to 
this proposed rule (which is available via the Internet on the CMS Web 
site).
    Effective July 1, 2015, we made effective several new CPT and Level 
II HCPCS codes and also assigned them to appropriate interim OPPS 
status indicators and APCs. Through the July 2015 OPPS quarterly update 
CR (Transmittal 3280, Change Request 9205, dated June 5, 2015), we 
assigned interim OPPS status indicators and APCs for two new Category 
III CPT codes and eight Level II HCPCS codes that were made effective 
July 1, 2015. Specifically, as displayed in Table 15 below, we made 
interim OPPS status indicators and APC assignments for Category III CPT 
codes 0392T and 0393T, and Level II HCPCS codes C2613, C9453, C9454, 
C9455, Q5101, Q9976, Q9977, and Q9978. Table 15 below lists the CPT and 
Level II HCPCS codes that were implemented on July 1, 2015, along with 
the proposed status indicators, proposed APC assignments, and proposed 
payment rates, where applicable, for CY 2016.
    We note that HCPCS code Q9978 replaced HCPCS code C9448 (Netupitant 
300 mg and palonosetron 0.5 mg, oral), beginning July 1, 2015. HCPCS 
code C9448 was made effective April 1, 2015, but the code was deleted 
June 30, 2015, because it was replaced with HCPCS code Q9978. HCPCS 
code C9448 was granted pass-through payment status when the code was 
implemented on April 1, 2015. Because HCPCS code Q9978 describes the 
same drug as HCPCS code C9448, we are proposing to continue the pass-
through payment status for HCPCS code Q9978, and assign the HCPCS Q-
code to the same APC and status indicator as its predecessor HCPCS C-
code, as shown in Table 15. Specifically, we are proposing to assign 
HCPCS code Q9978 to APC 9448 (Netupitant Palonosetron Oral) and status 
indicator ``G.''
    In addition, the CPT Editorial Panel established CPT codes 0392T 
and 0393T, effective July 1, 2015. We note that CPT code 0392T replaced 
HCPCS code C9737 (Laparoscopy, surgical, esophageal sphincter 
augmentation with device (e.g., magnetic band)), beginning July 1, 
2015. Because CPT code 0392T describes the same procedure as HCPCS code 
C9737, we are proposing to assign the CPT code to the same APC and 
status indicator as its predecessor HCPCS C-code, as shown in Table 15.
    In this CY 2016 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments, where 
applicable, for the CPT and Level II HCPCS codes implemented on July 1, 
2015 and listed in Table 15 of this proposed rule.

 Table 15--New Category III CPT and Level II HCPCS Codes Implemented in
                                July 2015
------------------------------------------------------------------------
                                                Proposed CY  Proposed CY
  CY 2015 CPT/HCPCS Code       CY 2015 Long     2016 Status      2016
                                descriptor       indicator     APC****
------------------------------------------------------------------------
C2613.....................  Lung biopsy plug             H          2613
                             with delivery
                             system.
C9453.....................  Injection,                   G          9453
                             nivolumab, 1 mg.
C9454.....................  Injection,                   G          9454
                             pasireotide long
                             acting, 1 mg.
C9455.....................  Injection,                   G          9455
                             siltuximab, 10
                             mg.
Q5101*....................  Injection,                   E           N/A
                             Filgrastim (G-
                             CSF),
                             Biosimilar, 1
                             microgram.
Q9976.....................  Injection, Ferric            E           N/A
                             Pyrophosphate
                             Citrate
                             Solution, 0.1 mg
                             of iron.
Q9977.....................  Compounded Drug,             N           N/A
                             Not Otherwise
                             Classified.
Q9978**...................  Netupitant 300 mg            G          9448
                             and Palonosetron
                             0.5 mg, oral.
0392T***..................  Laparoscopy,                Q2          5362
                             surgical,
                             esophageal
                             sphincter
                             augmentation
                             procedure,
                             placement of
                             sphincter
                             augmentation
                             device (i.e.,
                             magnetic band).
0393T.....................  Removal of                  Q2          5361
                             esophageal
                             sphincter
                             augmentation
                             device.
------------------------------------------------------------------------
*HCPCS code Q5101, Zarxio, was approved by the FDA on March 6, 2015. As
  the biosimilar is currently not being marketed, pricing information is
  not yet available. Once Zarxio is marketed we will make pricing
  information available at the soonest possible date on the OPPS payment
  files and payment for Zarxio will be retroactive to the date the
  product is first marketed.
**HCPCS code C9448 (Netupitant 300 mg and palonosetron 0.5 mg, oral) was
  deleted June 30, 2015, and replaced with HCPCS code Q9978, effective
  July 1, 2015.
***HCPCS code C9737 (Laparoscopy, surgical, esophageal sphincter
  augmentation with device (e.g., magnetic band) was deleted June 30,
  2015 and replaced with CPT code 0392T, effective July 1, 2015.
****We refer readers to Addendum Q to this proposed rule (which is
  available via the Internet on the CMS Web site) for a crosswalk of the
  existing APC numbers to the proposed new APC numbers for CY 2016.

    In summary, we are soliciting public comments on the proposed CY 
2016 status indicators, APC assignments, and payment rates for the 
Level II HCPCS codes and the Category III CPT codes that were made 
effective April 1, 2015, and July 1, 2015. These codes are listed in 
Tables 14 and 15 of this proposed rule. We also are proposing to 
finalize the status indicator and APC assignments and payment rates for 
these codes, if applicable, in the CY 2016 OPPS/ASC final rule with 
comment period. The proposed payment rates for these codes, where 
applicable, can be found in Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site).
2. Proposed Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2015 and January 1, 2016 for Which We Will Be Soliciting 
Public Comments in the CY 2016 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Level II HCPCS codes that are effective January 1 in the final rule 
with comment period, thereby updating the OPPS for the following 
calendar year. These codes are released to the public via the CMS HCPCS 
Web site, and also through the January OPPS quarterly update CRs. In 
the past, we also released new Level II HCPCS codes that are effective 
October 1 through the October OPPS quarterly update CRs and 
incorporated these new codes in the final rule with comment period, 
thereby updating the OPPS for the following calendar year.
    For CY 2016, we are proposing to continue our established policy of 
assigning comment indicator ``NI'' in Addendum B to the OPPS/ASC final

[[Page 39253]]

rule with comment period to those new Level II HCPCS codes that are 
effective October 1 and January 1 to indicate that we are assigning 
them an interim payment status which is subject to public comment. 
Specifically, the Level II HCPCS codes that will be effective October 
1, 2015 and January 1, 2016 would be flagged with comment indicator 
``NI'' in Addendum B to the CY 2016 OPPS/ASC final rule with comment 
period to indicate that we have assigned the codes an interim OPPS 
payment status for CY 2016. We will be inviting public comments in the 
CY 2016 OPPS/ASC final rule with comment period on the status 
indicator, APC assignments, and payment rates for these codes, if 
applicable, that would be finalized in the CY 2017 OPPS/ASC final rule 
with comment period.
3. Proposed Treatment of New and Revised CY 2016 Category I and III CPT 
Codes That Will Be Effective January 1, 2016, for Which We Are 
Soliciting Public Comments in This CY 2016 OPPS/ASC Proposed Rule
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 
through 66844), we finalized a revised process of assigning APC and 
status indicators for new and revised Category I and III CPT codes that 
would be effective January 1. Specifically, for the new/revised CPT 
codes that we receive in a timely manner from the AMA's CPT Editorial 
Panel, we finalized our proposal to include the codes that would be 
effective January 1 in the OPPS/ASC proposed rules, along with proposed 
APC and status indicator assignments for them, and to finalize the APC 
and status indicator assignments in the OPPS/ASC final rules beginning 
with the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We note 
that even if we find that we need to create HCPCS G-codes in place of 
certain CPT codes for the MPFS proposed rule, we do not anticipate that 
these HCPCS G-codes will always be necessary for OPPS purposes. We will 
make every effort to include proposed APC and status indicator 
assignments for all new and revised CPT codes that the AMA makes 
publicly available in time for us to include them in the proposed rule, 
and to avoid the resort to HCPCS G-codes and the resulting delay in 
utilization of the most current CPT codes. Also, we finalized our 
proposal to make interim APC and status indicator assignments for CPT 
codes that are not available in time for the proposed rule and that 
describe wholly new services (such as new technologies or new surgical 
procedures), solicit public comments, and finalize the specific APC and 
status indicator assignments for those codes in the following year's 
final rule.
    For the CY 2016 OPPS update, we received the CY 2016 CPT codes from 
AMA in time for inclusion in this CY 2016 OPPS/ASC proposed rule. The 
new and revised CY 2016 Category I and III CPT codes can be found in 
OPPS Addendum B and assigned to new comment indicator ``NP'' to 
indicate that the code is new for the next calendar year or the code is 
an existing code with substantial revision to its code descriptor in 
the next calendar year as compared to current calendar year with a 
proposed APC assignment and that comments will be accepted on the 
proposed APC assignment and status indicator. We refer readers to 
section XI.B. of this CY 2016 OPPS/ASC proposed rule for further 
discussion on the new proposed comment indicator ``NP.''
    Further, we remind readers that the CPT code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item described by the CPT 
code. Therefore, we are including the long descriptors for the new and 
revised CY 2016 CPT codes in Addendum O to this proposed rule (which is 
available via the Internet on the CMS Web site) so that the public can 
adequately comment on our proposed APCs and status indicator 
assignments. Because CPT procedure codes are 5 alpha-numeric characters 
and CMS systems only utilize 5-character HCPCS codes, we have developed 
alternative 5-character placeholder codes for this proposed rule. The 
placeholder codes can be found in Addendum O, specifically under the 
column labeled ``CY 2016 OPPS/ASC Proposed Rule 5-Digit CMS Placeholder 
Code,'' to this proposed rule. The final CPT code numbers will be 
included in the CY 2016 OPPS/ASC final rule with comment period. We 
note that not every code listed in Addendum O is subject to comment. 
For the new/revised Category I and III CPT codes, we are requesting 
comments on only those codes that are assigned to comment indicator 
``NP.'' Comments will not be accepted for new Category I CPT laboratory 
codes that are not assigned to ``NP'' comment indicator in Addendum O. 
Comments to these codes must be submitted at the Clinical Laboratory 
Fee Schedule (CLFS) Public Meeting, which is scheduled for July 16, 
2015.
    In summary, we are soliciting public comments on the proposed CY 
2016 status indicators and APC assignments for the new and revised 
Category I and III CPT codes that will be effective January 1, 2016. 
The CPT codes are listed in Addendum B to this proposed rule with short 
descriptors only. We list them again in Addendum O to this proposed 
rule with long descriptors. We also are proposing to finalize the 
status indicator and APC assignments for these codes (with their final 
CPT code numbers) in the CY 2016 OPPS/ASC final rule with comment 
period. The proposed status indicator, and APC assignment and payment 
rates for these codes, where applicable, can be found in Addendum B to 
this proposed rule (which is available via the Internet on the CMS Web 
site).

B. Proposed OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
codes to identify and group the services within each APC. The APCs are 
organized such that each group is homogeneous both clinically and in 
terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices that are 
not packaged into the payment for the procedure.
    We have packaged into the payment for each procedure or service 
within an APC group the costs associated with those items and services 
that 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

[[Page 39254]]

support. Therefore, we do not make separate payment for these packaged 
items or services. In general, packaged items and services include, but 
are not limited to the items and services listed in Sec.  419.2(b) of 
the regulations. A further discussion of packaged services is included 
in section II.A.3. of this proposed rule.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. For CY 
2016, we are proposing that 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 proposed renumbered APC 5012 
(Level 2 Examinations and Related Services) (existing APC 0632). The 
APC relative payment weights are scaled to proposed renumbered APC 5012 
because it is the hospital clinic visit APC and clinic visits are among 
the most frequently furnished services in the hospital outpatient 
setting. We note that, historically, we have proposed APC relative 
payment weights relative to the hospital costs of services included in 
existing APC 0634. In this proposed rule, we are proposing to reassign 
HCPCS code G0463 (Hospital outpatient clinic visit for assessment and 
management of a patient) from existing APC 0634 to proposed renumbered 
APC 5012 (for CY 2015, this is existing APC 0632). Proposed new APC 
5012 includes other services that are clinically similar with similar 
resource costs to the service described by HCPCS code G0463, such as 
HCPCS code G0402 (Initial preventive physical examination). 
Accordingly, for the CY 2016 OPPS update, we are proposing to delete 
existing APC 0634 and replace it with proposed renumbered APC 5012.
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 highest cost for an item or service in the APC group 
is more than 2 times greater than the lowest cost for an item or 
service within the same APC 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). In determining the 
APCs with a 2 times rule violation, we consider only those HCPCS codes 
that are significant based on the number of claims. We note that, for 
purposes of identifying significant procedure codes for examination 
under the 2 times rule, we consider procedure codes that have more than 
1,000 single major claims or procedure codes that have both greater 
than 99 single major claims and contribute at least 2 percent of the 
single major claims used to establish the APC cost to be significant 
(75 FR 71832). This longstanding definition of when a procedure code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims (or less than 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 
procedure code for which there are fewer than 99 single claims and 
which comprises less than 2 percent of the single major claims within 
an APC will have a negligible impact on the APC cost. In this proposed 
rule, for CY 2016, we are proposing to make exceptions to this limit on 
the variation of costs within each APC group in unusual cases, such as 
low-volume items and services.
    For the CY 2016 OPPS, we have identified the APCs with violations 
of the 2 times rule. Therefore, we are proposing changes to the 
procedure codes assigned to these APCs in Addendum B to this proposed 
rule. We note that Addendum B does not appear in the printed version of 
the Federal Register as part of this CY 2016 OPPS/ASC proposed rule. 
Rather, it is published and made available via the Internet on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate 
a violation of the 2 times rule or to improve clinical and resource 
homogeneity, we are proposing to reassign these procedure codes to new 
APCs that contain services that are similar with regard to both their 
clinical and resource characteristics. In many cases, the proposed 
procedure code reassignments and associated APC reconfigurations for CY 
2016 included in this proposed rule are related to changes in costs of 
services that were observed in the CY 2014 claims data newly available 
for CY 2016 ratesetting. We also are proposing changes to the status 
indicators for some procedure codes that are not specifically and 
separately discussed in this proposed rule. In these cases, we are 
proposing to change the status indicators for these procedure codes 
because we believe that another status indicator would more accurately 
describe their payment status from an OPPS perspective based on the 
policies that we are proposing for CY 2016. In addition, we are 
proposing to rename existing APCs or create new clinical APCs to 
complement the proposed procedure code reassignments. Addendum B to 
this CY 2016 OPPS/ASC proposed rule identifies with a comment indicator 
``CH'' those procedure codes for which we are proposing a change to the 
APC assignment or status indicator, or both, that were initially 
assigned in the July 1, 2015 OPPS Addendum B Update (available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html).
3. Proposed APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we are proposing for CY 
2016, we reviewed all of the APCs to determine which APCs would not 
meet the requirements of the 2 times rule. We used the following 
criteria to evaluate 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.
    Based on the CY 2014 claims data available for this CY 2016 
proposed rule, we found three APCs with violations of the 2 times rule. 
We applied the criteria as described above to identify the APCs that we 
are proposing to make exceptions for under the 2 times rule for CY 
2016, and identified three APCs that met the criteria for an exception 
to the 2 times rule based on the CY 2014 claims data available for this 
proposed rule. We did not include in that determination those APCs 
where a 2 times rule violation was not a relevant concept, such as 
existing APC 0375 (proposed for CY 2016 to be renumbered APC 5881 
(Ancillary Outpatient Services When Patient Dies)), which has an APC 
cost for a single service of $5,653.37. (We note that, in section 
II.A.2.e. of this proposed rule, we are proposing to convert proposed 
renumbered APC 5881 to a comprehensive APC for CY 2016. However, the 
APC cost is still not relevant to determine whether there is a

[[Page 39255]]

2 times rule violation in that comprehensive APC.)
    Therefore, we only identified those APCs, including those with 
criteria-based costs, with violations of the 2 times rule. For a 
detailed discussion of these criteria, we refer readers to the April 7, 
2000 OPPS final rule with comment period (65 FR 18457 and 18458).
    We note that, for cases in which a recommendation by the 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 (that is, a review 
of the latest OPPS claims data and group discussion of the issue) of 
resource use, clinical homogeneity, site of service, and the quality of 
the claims data used to determine the APC payment rates.
    Table 16 of this proposed rule lists the three APCs that we are 
proposing to make exceptions for under the 2 times rule for CY 2016 
based on the criteria cited above and claims data submitted between 
January 1, 2014, and December 31, 2014, and processed on or before 
December 31, 2014. For the final rule with comment period, we intend to 
use claims data for dates of service between January 1, 2014, and 
December 31, 2014, that were processed on or before June 30, 2015, and 
updated CCRs, if available.
    The geometric mean costs for hospital outpatient services for these 
and all other APCs that were used in the development of this proposed 
rule can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

    Table 16--Proposed APC Exceptions to the 2 Times Rule For CY 2016
------------------------------------------------------------------------
        Proposed CY 2016 APC*              Proposed CY 2016 APC Title
------------------------------------------------------------------------
5221.................................  Level 1 Pacemaker and Similar
                                        Procedures.
5673.................................  Level 3 Pathology.
5731.................................  Level 1 Minor Procedures.
------------------------------------------------------------------------
* We refer readers to Addendum Q to this proposed rule (which is
  available via the Internet on the CMS Web site) for a crosswalk of the
  existing APC numbers to the proposed new APC numbers.

C. Proposed New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to an appropriate clinical APC. This policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient data are available. It also allows us to retain a 
service in a New Technology APC for more than 2 years if sufficient 
data upon which to base a decision for reassignment have not been 
collected.
    Currently, there are 37 New Technology APC levels, ranging from the 
lowest cost band assigned to APC 1491 (New Technology--Level 1A ($0-
$10)) through the highest cost band assigned to APC 1574 (New 
Technology--Level XXXVII ($9,500-$10,000)). In the CY 2004 OPPS final 
rule with comment period (68 FR 63416), we restructured the New 
Technology APCs to make the cost intervals more consistent across 
payment levels and refined the cost bands for these APCs to retain two 
parallel sets of New Technology APCs, one set with a status indicator 
of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid 
under OPPS; separate APC payment) and the other set with a status 
indicator of ``T'' (Significant Procedure, Multiple Reduction Applies. 
Paid under OPPS; separate APC payment). These current New Technology 
APC configurations allow us to price new technology services more 
appropriately and consistently. (We note that we are not proposing to 
renumber the New Technology APCs in this proposed rule.)
    We note that the cost bands for the New Technology APCs, 
specifically, APCs 1491 through 1574, vary with increments ranging from 
$10 to $500. These cost bands identify the APCs to which new technology 
procedures and services with estimated service costs that fall within 
those cost bands are assigned under the OPPS. Payment for each APC is 
made at the mid-point of the APC's assigned cost band. For example, 
payment for New Technology APC 1507 (New Technology--Level VII ($500-
$600)) is made at $550.
    Every year we receive several requests for higher payment amounts 
under the New Technology APCs for specific procedures paid under the 
OPPS because they require the use of expensive equipment. We are taking 
this opportunity to reiterate our response in general to the issue of 
hospitals' capital expenditures as they relate to the OPPS and 
Medicare.
    Under the OPPS, one of our goals is to make payments that are 
appropriate for the services that are necessary for the treatment of 
Medicare beneficiaries. The OPPS, like other Medicare payment systems, 
is budget neutral and increases are limited to the annual hospital 
inpatient market basket increase. We believe that our payment rates 
generally reflect the costs that are associated with providing care to 
Medicare beneficiaries, and we believe that our rates are adequate to 
ensure access to services.
    For many emerging technologies, there is a transitional period 
during which utilization may be low, often because providers are first 
learning about the techniques and their clinical utility. Quite often, 
parties request that Medicare make higher payment amounts under the New 
Technology APCs for new procedures in that transitional phase. These 
requests, and their accompanying estimates for expected total patient 
utilization, often reflect very low rates of patient use of expensive 
equipment, resulting in high per use costs for which requesters believe 
Medicare should make full payment. However, we believe that it is most 
appropriate to set payment rates based on costs that are associated 
with providing care to Medicare beneficiaries. As claims data for new 
services become available, we use these data to establish payment rates 
for new technology.
2. Proposed Additional New Technology APC Groups
    Currently, there are 37 levels of New Technology APC groups with 
two parallel status indicators; one set with a status indicator of 
``S'' and the other set with a status indicator of ``T.'' To improve 
our ability to pay appropriately for new technology services and 
procedures, we are proposing to expand

[[Page 39256]]

the New Technology APC groups by adding 9 more levels, specifically, 
adding New Technology Levels 38 through 46. We are proposing this 
expansion to accommodate the assignment of the retinal prosthesis 
implantation procedure to a New Technology APC, which is discussed 
further below. Therefore, for the CY 2016 OPPS update, we are proposing 
to establish a new set of New Technology APCs 1575 through 1583 (for 
Levels 38 through 46) with OPPS status indicator ``S'' and a new set of 
New Technology APCs 1585 through 1593 (for Levels 38 through 46) with 
OPPS status indicator ``T.'' These two new sets of APCs have the same 
payment levels with one set subject to the multiple procedure payment 
reduction (T) and the other set not subject to the multiple procedure 
payment reduction (S). Each proposed set of new technology APC groups 
has identical group titles, payment rates, and minimum unadjusted 
copayments, but a different status indicator. Table 17 below includes 
the complete list of the proposed additional 18 New Technology APC 
groups for CY 2016.

   Table 17--Proposed Additional New Technology APC Groups for CY 2016
------------------------------------------------------------------------
                                     Proposed CY 2016 APC       Status
     Proposed new CY 2016 APC             Group title         indicator
------------------------------------------------------------------------
1575.............................  New Technology--Level 38            S
                                    ($10,000-$15,000).
1576.............................  New Technology--Level 39            S
                                    ($15,000-$20,000).
1577.............................  New Technology--Level 40            S
                                    ($20,000-$25,000).
1578.............................  New Technology--Level 41            S
                                    ($25,000-$30,000).
1579.............................  New Technology--Level 42            S
                                    ($30,000-$40,000).
1580.............................  New Technology--Level 43            S
                                    ($40,000-$50,000).
1581.............................  New Technology--Level 44            S
                                    ($50,000-$60,000).
1582.............................  New Technology--Level 45            S
                                    ($60,000-$70,000).
1583.............................  New Technology--Level 46            S
                                    ($70,000-$80,000).
1585.............................  New Technology--Level 38            T
                                    ($10,000-$15,000).
1586.............................  New Technology--Level 39            T
                                    ($15,000-$20,000).
1587.............................  New Technology--Level 40            T
                                    ($20,000-$25,000).
1588.............................  New Technology--Level 41            T
                                    ($25,000-$30,000).
1589.............................  New Technology--Level 42            T
                                    ($30,000-$40,000).
1590.............................  New Technology--Level 43            T
                                    ($40,000-$50,000).
1591.............................  New Technology--Level 44            T
                                    ($50,000-$60,000).
1592.............................  New Technology--Level 45            T
                                    ($60,000-$70,000).
1593.............................  New Technology--Level 46            T
                                    ($70,000-$80,000).
------------------------------------------------------------------------

    The proposed payment rates for New Technology APC groups 1575 
through 1583 and 1585 through 1593 can be found in Addendum A to this 
proposed rule (which is available via the Internet on the CMS Web 
site).
3. Proposed Procedures Assigned to New Technology APC Groups for CY 
2016
    As we explained in the CY 2002 OPPS final rule with comment period 
(66 FR 59902), we generally retain a procedure in the New Technology 
APC to which it is initially assigned until we have obtained sufficient 
claims data to justify reassignment of the procedure to a clinically 
appropriate APC. However, in cases where we find that our initial New 
Technology APC assignment was based on inaccurate or inadequate 
information (although it was the best information available at the 
time), or where the New Technology APCs are restructured, we may, based 
on more recent resource utilization information (including claims data) 
or the availability of refined New Technology APC cost bands, reassign 
the procedure or service to a different New Technology APC that more 
appropriately reflects its cost (66 FR 59903).
    Consistent with our current policy, for CY 2016, we are proposing 
to retain services within New Technology APC groups until we obtain 
sufficient claims data to justify reassignment of the service to a 
clinically appropriate APC. The flexibility associated with this policy 
allows us to reassign a service from a New Technology APC in less than 
2 years if sufficient claims data are available. It also allows us to 
retain a service in a New Technology APC for more than 2 years if 
sufficient claims data upon which to base a decision for reassignment 
have not been obtained (66 FR 59902).
a. Transprostatic Urethral Implant Procedure
    Currently, in CY 2015, there is one procedure that is receiving 
payment through a New Technology APC. Specifically, the procedure 
described by HCPCS code C9740 (Cystourethroscopy, with insertion of 
transprostatic implant; 4 or more implants) is assigned to New 
Technology APC 1564 (New Technology--Level XXVII ($4,500-$5,000)) with 
a payment rate of $4,750. This procedure was assigned to New Technology 
APC 1564 on April 1, 2014, when the HCPCS C-code was established.
    For the CY 2016 OPPS update, based on our review of the claims data 
for HCPCS code C9740 from April through December 2014, we found 100 
single claims (out of 128 total claims) with a geometric mean cost of 
approximately $5,648. Because there is not a full year of claims data 
and only 100 single claims are in our database for HCPCS code C9740, we 
are proposing to maintain the assignment of HCPCS code C9740 to New 
Technology APC 1564 for CY 2016. As described in section IV.B. of this 
proposed rule, we note that, based on the costs of the device relative 
to the procedure in this APC, the procedures assigned to APC 1564 would 
be device-intensive for CY 2016. The proposed CY 2016 payment rate for 
HCPCS code C9740 is included in Addendum B to this proposed rule (which 
is available via the Internet on the CMS Web site).
b. Retinal Prosthesis Implant Procedure
    CPT code 0100T (Placement of a subconjunctival retinal prosthesis 
receiver and pulse generator, and implantation of intra-ocular retinal 
electrode array, with vitrectomy) describes the implantation of a 
retinal prosthesis. This surgical procedure is currently assigned to 
APC 0673 that has a CY 2015 payment rate of approximately $3,123. The 
retinal prosthesis device that is used in the procedure described by 
CPT code 0100T is described by HCPCS code C1841 (Retinal prosthesis, 
includes all internal

[[Page 39257]]

and external components). The first retinal prosthesis (Argus[supreg] 
II Retinal Prosthesis System) was approved by the FDA in 2013 for adult 
patients with advanced retinitis pigmentosa. Pass-through status was 
granted for HCPCS code C1841 beginning October 1, 2013, and is proposed 
to expire on December 31, 2015. We refer readers to section IV.A.1.b. 
of this proposed rule for the discussion of the expiration of pass-
through for HCPCS code C1841.
    After pass-through status expires for a medical device, the payment 
for the device is packaged into the payment for the associated surgical 
procedure. The surgical procedure in which the Argus device (HCPCS code 
C1841) is implanted is described by CPT code 0100T. Review of the CY 
2014 OPPS claims data used for this CY 2016 OPPS/ASC proposed rule 
shows only one single claim for CPT code 0100T with HCPCS code C1841 on 
the claim. Due to the newness of this surgical procedure and its 
associated implantable device and the extremely low number of CY 2014 
HOPD claims for this procedure, we are proposing to reassign CPT code 
0100T from existing APC 0673 (Level III Intraocular Procedures) to 
proposed newly established New Technology APC 1593 (New Technology--
Level 46 ($70,000-$80,000)). We are proposing a CY 2016 OPPS payment of 
approximately $75,000 for proposed new APC 1593, which would be the 
payment for CPT code 0100T (not including the retinal prosthesis), plus 
the proposed maximum FY 2016 IPPS new technology add-on payment for a 
case involving the Argus[supreg] II Retinal Prosthesis System of 
$72,028.75 (80 FR 24425). Therefore, we are proposing to reassign CPT 
code 0100T to proposed new APC 1593 with a payment of $75,000 for CY 
2016. We refer readers to section III.C.2. of this proposed rule for a 
discussion of the proposed expansion of the New Technology APC levels. 
We believe that, given the newness of this procedure and the severe 
paucity of OPPS claims data, this approach provides a reasonable 
payment amount that is not significantly dissimilar to the payment for 
the same procedure provided in the hospital inpatient setting. Once we 
have more claims data, we will reassess the APC placement of the 
Argus[supreg] II Retinal Prosthesis System in light of our standard 
rate setting methodology. We are inviting public comments on this 
proposal.

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

    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and to revise the groups, relative 
payment weights, and the wage and other adjustments to take into 
account changes in medical practices, changes in technology, the 
addition of new services, new cost data, and other relevant information 
and factors. Therefore, every year we review and revise the APC 
assignments for many procedure codes and diagnosis codes based on our 
evaluation of these factors using the latest OPPS claims data. Although 
we do not discuss every APC change in the proposed and final rules, 
these changes are listed in the OPPS Addendum B of the proposed and 
final rules. Specifically, procedure and diagnosis codes with revised 
APC and/or status indicator assignments are identified by comment 
indicator ``CH'' (Active HCPCS code in current year and next calendar 
year, status indicator and/or APC assignment has changed) in the OPPS 
Addendum B payment file.
    In our efforts to improve clinical and resource homogeneity among 
the APC groupings and update the hospital OPPS, we conducted a 
comprehensive review of the current structure of the APCs and codes 
assignments for CY 2015. Consequently, as part of our broader efforts 
to thoroughly review, revise, and consolidate APCs to improve both 
resource and clinical homogeneity, we proposed in the CY 2015 OPPS/ASC 
proposed rule (79 FR 40981 through 40983) to restructure the first set 
of clinical families, specifically the ophthalmology and gynecology 
APCs. We proposed to restructure the APCs for these clinical families 
based on the following principles:
     Improved clinical homogeneity;
     Improved resource homogeneity;
     Reduced resource overlap in APCs within a clinical family; 
and
     Greater simplicity and improved understanding of the 
structure of the APCs.
    Based on our review, for CY 2015, we finalized the APC 
restructuring for the ophthalmology and gynecology APCs. For the 
complete discussion on the APC restructuring for the ophthalmology 
APCs, we refer readers to the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66857 through 66859). Similarly, for the complete 
discussion on the APC restructuring for the gynecology APCs, we refer 
readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66849 through 66851).
    For the CY 2016 update, as a part of our continued review of the 
structure of the APCs, we are proposing to restructure nine APC 
clinical families based on the same principles used for restructuring 
the ophthalmology and gynecology APCs for CY 2015. We discuss below our 
proposed restructuring for the nine APC clinical families. We note 
that, in conjunction with the proposed restructuring, we are proposing 
to renumber several families of APCs to provide consecutive APC numbers 
for consecutive APC levels within a clinical family for improved 
identification of APCs and ease of understanding the APC groupings. For 
example, the seven APC levels for urology procedures are proposed to be 
renumbered as APC 5371 (Level 1 Urology and Related Services), APC 5372 
(Level 2 Urology and Related Services), APC 5373 (Level 3 Urology and 
Related Services), APC 5374 (Level 4 Urology and Related Services), APC 
5375 (Level 5 Urology and Related Services), APC 5376 (Level 6 Urology 
and Related Services), and APC 5377 (Level 7 Urology and Related 
Services). We believe that consecutive numbering of the APCs will 
enhance the public understanding of the APC groups and will make it 
easier for them to communicate to the agency about issues concerning 
APCs. We note that, under this initiative, we are not proposing to 
change the numbering of the composite APCs or the New Technology APCs 
for CY 2016.
    Existing CY 2015 APC numbers and their proposed new CY 2016 APC 
numbers can be found in Addendum Q (Crosswalk of CY 2015 APC Numbers to 
CY 2016 APC Numbers) to this proposed rule, which is available via the 
Internet on the CMS Web site.
1. Airway Endoscopy Procedures
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs that 
contain airway endoscopy procedures. For CY 2016, we are proposing to 
restructure the OPPS APC groupings for airway endoscopy procedures to 
more appropriately reflect the costs and clinical characteristics of 
the procedures within each APC grouping in the context of the OPPS. The 
current APCs for airway endoscopy procedures are divided into upper 
airway and lower airway endoscopy APC series. After reviewing these 
APCs, we believe that consolidating the current upper airway and lower 
airway APC series into a single APC series for airway endoscopy 
procedures would result in improved resource homogeneity for the 
various airway endoscopy procedures, while maintaining clinical 
homogeneity. Therefore, for CY 2016, we are proposing to restructure 
and consolidate the APCs that include airway endoscopy

[[Page 39258]]

procedures into a single APC series. Table 18 below lists the current 
CY 2015 APCs that contain airway endoscopy procedures, and Table 19 
below lists the proposed CY 2016 APCs that result from our proposed 
consolidation and restructuring of the current airway endoscopy 
procedure APCs into a single APC series. The procedures assigned to 
each APC are listed in Addendum B to this proposed rule, which is 
available via the Internet on the CMS Web site. We are inviting public 
comments on this proposal.

                 Table 18--CY 2015 Airway Endoscopy APCs
------------------------------------------------------------------------
           CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0071............................  Level I Endoscopy Upper Airway.
0072............................  Level II Endoscopy Upper Airway.
0073............................  Level III Endoscopy Upper Airway.
0074............................  Level IV Endoscopy Upper Airway.
0075............................  Level V Endoscopy Upper Airway.
0076............................  Level I Endoscopy Lower Airway.
0415............................  Level II Endoscopy Lower Airway.
------------------------------------------------------------------------


            Table 19--Proposed CY 2016 Airway Endoscopy APCs
------------------------------------------------------------------------
  Proposed restructured/renumbered CY       Proposed CY 2016 APC Group
               2016 APC *                             title
------------------------------------------------------------------------
5151...................................  Level 1 Airway Endoscopy.
5152...................................  Level 2 Airway Endoscopy.
5153...................................  Level 3 Airway Endoscopy.
5154...................................  Level 4 Airway Endoscopy.
5155...................................  Level 5 Airway Endoscopy.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

2. Diagnostic Tests and Related Services
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs that 
contain diagnostic tests and related services. For CY 2016, we are 
proposing to restructure the OPPS APC groupings for diagnostic tests 
and related services to more appropriately reflect the costs and 
clinical characteristics of the services within each APC grouping in 
the context of the OPPS. The current APCs for diagnostic tests and 
related services are divided according to organ system or physiologic 
test type. After reviewing these APCs, we believe that the current APC 
structure is based on clinical categories that do not necessarily 
reflect significant differences in the delivery of these services in 
the HOPD. The current level of granularity for these APCs results in 
groupings that are unnecessarily narrow for the purposes of a 
prospective payment system. Therefore, for CY 2016, we are proposing to 
restructure and consolidate the APCs that include diagnostic tests and 
related services. We believe that this proposed restructuring and 
consolidation of APCs into larger APC groupings would more 
appropriately reflect a prospective payment system that is based on 
payment groupings and not code-specific payment rates, while 
maintaining clinical and resource homogeneity. Table 20 below lists the 
current CY 2015 APCs that contain nonimaging diagnostic tests, and 
Table 21 below lists the proposed CY 2016 APCs that result from our 
proposed consolidation and restructuring of the current diagnostic test 
and related services APCs. The procedures assigned to each APC are 
listed in Addendum B to this proposed rule, which is available via the 
Internet on the CMS Web site. We are inviting public comments on this 
proposal.

    Table 20--CY 2015 APCs That Contain Diagnostic Tests and Related
                                Services
------------------------------------------------------------------------
           CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0360............................  Level I Alimentary Tests.
0361............................  Level II Alimentary Tests.
0100............................  Cardiac Stress Tests.
0099............................  Electrocardiograms/Cardiography.
0231............................  Level III Eye Tests & Treatments.
0213............................  Level I Extended EEG, Sleep, and
                                   Cardiovascular Studies.
0209............................  Level II Extended EEG, Sleep, and
                                   Cardiovascular Studies.
0435............................  Level III Extended EEG, Sleep, and
                                   Cardiovascular Studies.
0215............................  Level I Nerve and Muscle Services.
0218............................  Level II Nerve and Muscle Services.
0216............................  Level III Nerve and Muscle Services.
0446............................  Level IV Nerve and Muscle Services.
0373............................  Neuropsychological Testing.
0097............................  Level I Noninvasive Physiologic
                                   Studies.
0096............................  Level II Noninvasive Physiologic
                                   Studies.
0363............................  Otorhinolaryngologic and Related
                                   Tests.
0367............................  Level I Pulmonary Tests.
0369............................  Level II Pulmonary Tests.
0126............................  Level I Urinary and Anal Procedures.
------------------------------------------------------------------------


  Table 21--Proposed CY 2016 Diagnostic Tests and Related Services APCs
------------------------------------------------------------------------
  Proposed restructured/renumbered CY       Proposed CY 2016 APC Group
               2016 APC *                             title
------------------------------------------------------------------------
5721...................................  Level 1 Diagnostic Tests and
                                          Related Services.
5722...................................  Level 2 Diagnostic Tests and
                                          Related Services.
5723...................................  Level 3 Diagnostic Tests and
                                          Related Services.
5724...................................  Level 4 Diagnostic Tests and
                                          Related Services.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

3. Excision/Biopsy and Incision and Drainage Procedures
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs for 
incision and drainage procedures as well as excision/biopsy procedures. 
The current APC structure for these procedures is organized into two 
series: incision and drainage procedures in one series and excision/
biopsy procedures in another series.
    Based on our evaluation of the current APC structure and the latest 
hospital outpatient claims data available for this proposed rule, we 
are proposing to revise these APCs by combining the incision and 
drainage procedures with the excision/biopsy procedures to more 
accurately reflect the resource costs and clinical characteristics of 
the procedures within each APC. Many of the procedures in these two 
series are clinically similar. Therefore, we believe that a single 
series encompassing incision and drainage procedures and excision/
biopsy procedures groups clinically similar procedures without 
unnecessary granularity. We believe that the proposed consolidation and 
restructuring of these APCs would more appropriately reflect a 
prospective payment system that is based on

[[Page 39259]]

payment for APC groupings with clinically similar procedures while 
maintaining resource homogeneity. Moreover, we believe that the 
proposed APC groupings would more accurately accommodate and align new 
services under the hospital OPPS when assigned to clinical APCs with 
services with similar clinical attributes and resource costs. 
Therefore, for CY 2016, we are proposing to consolidate and restructure 
the APCs that describe incision and drainage procedures as well as the 
excision/biopsy procedures by combining these procedures into a single 
APC series.
    Table 22 below lists the current CY 2015 APCs that contain incision 
and drainage as well as excision/biopsy procedures, and Table 23 below 
lists the proposed CY 2016 APCs that result from the proposed 
consolidating and restructuring of the APCs into a single APC series. 
The proposed payment rates for the specific CPT or Level II HCPCS codes 
for incision and drainage procedures as well as excision/biopsy 
procedures are included in Addendum B to this proposed rule, while the 
proposed payment rates for the specific APCs to which these procedures 
are assigned are included in Addendum A to this proposed rule. Both 
OPPS Addenda A and B are available via the Internet on the CMS Web 
site. We are inviting public comments on this proposal.

 Table 22--CY 2015 APCs To Which the Incision and Drainage and Excision/
                     Biopsy Procedures Are Assigned
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC group title
------------------------------------------------------------------------
0006................................  Level I Incision & Drainage.
0007................................  Level II Incision & Drainage.
0008................................  Level III Incision & Drainage.
0019................................  Level I Excision/Biopsy.
0020................................  Level II Excision/Biopsy.
0021................................  Level III Excision/Biopsy.
0022................................  Level IV Excision/Biopsy.
------------------------------------------------------------------------


    Table 23--Proposed CY 2016 APCs for Excision/Biopsy/Incision and
                           Drainage Procedures
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC group title
------------------------------------------------------------------------
5071................................  Level 1 Excision/Biopsy/Incision
                                       and Drainage.
5072................................  Level 2 Excision/Biopsy/Incision
                                       and Drainage.
5073................................  Level 3 Excision/Biopsy/Incision
                                       and Drainage.
5074................................  Level 4 Excision/Biopsy/Incision
                                       and Drainage.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

4. Gastrointestinal (GI) Procedures
    As a part of our comprehensive review of the structure of the APCs 
and procedure code assignments for CY 2016, we examined the APCs that 
contain gastrointestinal (GI) procedures. As explained below, as a 
result of our findings from this review, for CY 2016, we are proposing 
to restructure the APC groupings for GI procedures to more 
appropriately reflect the costs and the clinical characteristics of the 
procedures within each APC grouping in the context of the OPPS.
    The current APCs for GI procedures are partially organized 
according to location in the GI tract and type of surgery performed 
(endoscopy versus incisional surgery). After reviewing these APCs for 
GI procedures, we believe that the current APC construction is based on 
clinical categories that do not appropriately represent a consistent 
set of clinical categories throughout the entire spectrum of GI-related 
procedures. The current level of granularity for some of the GI APCs 
results in groupings that are unnecessarily narrow for the purposes of 
a prospective payment system. Therefore, for CY 2016, we are proposing 
to restructure and consolidate the APCs that contain GI procedures. We 
believe that consolidating these procedures under broader APC groupings 
primarily based on separating upper and lower GI procedures into two 
series with additional APCs containing abdominal and peritoneal 
procedures would more appropriately reflect a prospective payment 
system that is based on payment for clinically consistent APC groupings 
rather than code-specific payment rates while maintaining resource 
homogeneity. Furthermore, we believe that the proposed APC groupings 
would more accurately accommodate and align new services within 
clinical APCs with similar resource costs.
    Table 24 below lists the current CY 2015 APCs that contain GI 
procedures, and Table 25 below lists the proposed CY 2016 APCs that 
result from the proposed consolidation and restructuring of the current 
GI procedure APCs into a single APC series. The procedures assigned to 
each APC are listed in Addendum B to this proposed rule, which is 
available via the Internet on the CMS Web site. We are inviting public 
comments on this proposal.

                                             Table 24--CY 2015 APCs That Contain Gastrointestinal Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  CY 2015 APC                                                            CY 2015 APC Group title
--------------------------------------------------------------------------------------------------------------------------------------------------------
0148..........................................  Level I Anal/Rectal Procedures.
0155..........................................  Level II Anal/Rectal Procedures.
0149..........................................  Level III Anal/Rectal Procedures.
0150..........................................  Level IV Anal/Rectal Procedures.
0151..........................................  Endoscopic Retrograde Cholangio-Pancreaotography.
0384..........................................  GI Procedures with Stents.
0154..........................................  Hernia/Hydrocele Procedures.
0652..........................................  Insertion of Intraperitoneal and Pleural Catheters.
0143..........................................  Lower GI Endoscopy.
0152..........................................  Level I Percutaneous Abdominal and Biliary Procedures.
0423..........................................  Level II Percutaneous Abdominal and Biliary Procedures.
0153..........................................  Peritoneal and Abdominal Procedures.
0146..........................................  Level I Sigmoidoscopy and Anoscopy.
0147..........................................  Level II Sigmoidoscopy and Anoscopy.
0428..........................................  Level III Sigmoidoscopy and Anoscopy.
0142..........................................  Level I Small Intestine Endoscopy.
0424..........................................  Level II Small Intestine Endoscopy.

[[Page 39260]]

 
0070..........................................  Thoracentesis/Lavage Procedures.
0121..........................................  Level I Tube or Catheter Changes or Repositioning.
0427..........................................  Level II Tube or Catheter Changes or Repositioning.
0141..........................................  Level I Upper GI Procedures.
0419..........................................  Level II Upper GI Procedures.
0422..........................................  Level III Upper GI Procedures.
--------------------------------------------------------------------------------------------------------------------------------------------------------


     Table 25--Proposed CY 2016 APCs for Gastrointestinal Procedures
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC Group title
------------------------------------------------------------------------
5301................................  Level 1 Upper GI Procedures.
5302................................  Level 2 Upper GI Procedures.
5303................................  Level 3 Upper GI Procedures.
5311................................  Level 1 Lower GI Procedures.
5312................................  Level 2 Lower GI Procedures.
5313................................  Level 3 Lower GI Procedures.
5314................................  Level 4 Lower GI Procedures.
5331................................  Complex GI Procedures.
5341................................  Peritoneal and Abdominal
                                       Procedures.
5351................................  Level 1 Percutaneous Abdominal/
                                       Biliary Procedures and Related
                                       Procedures.
5352................................  Level 2 Percutaneous Abdominal/
                                       Biliary Procedures and Related
                                       Procedures.
5391................................  Level 1 Tube/Catheter Changes/
                                       Thoracentesis/Lavage.
5392................................  Level 2 Tube/Catheter Changes/
                                       Thoracentesis/Lavage.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

    In addition, we are proposing to accept the Panel's recommendation 
with regard to the APC assignment for four lower endoscopy stent 
procedures described by HCPCS codes that were established in CY 2015. 
The Panel recommended that the four CPT codes listed in Table 26 below 
be moved from their currently assigned APC to C-APC 0384 (GI Procedures 
with Stents). The Panel's recommendation was based on an analysis of 
the similarities in clinical characteristics and resource utilization 
between the procedures described by these four CPT codes and the 
procedures described by other CPT codes within existing (CY 2015) APCs 
0142, 0143 and 0147. (We note that, in section II.A.2.e. of the 
preamble of this proposed rule, we are proposing to renumber and 
retitle C-APC 0384 as ``C-APC 5331 (Complex GI Procedures)'' for CY 
2016.)

          Table 26--Gastrointestinal Procedures Proposed for Reassignment to New C-APC 5331 in CY 2016
----------------------------------------------------------------------------------------------------------------
                                         Procedure code
         CY 2015 CPT code                 description                CY 2015 APC          Proposed CY 2016 APC
----------------------------------------------------------------------------------------------------------------
44384............................  Ileoscopy, through stoma;  APC 0142 (Level I Small   C-APC 5331 (Complex GI
                                    with placement of          Intestine APC).           Procedures).
                                    endoscopic stent
                                    (includes pre- and post-
                                    dilation and guide wire
                                    passage, when performed).
44402............................  Colonoscopy through        APC 0143................  C-APC 5331
                                    stoma; with endoscopic    (Lower GI Endoscopy APC)  (Complex GI Procedures).
                                    stent placement
                                    (including pre- and post-
                                    dilation and guide wire
                                    passage, when performed).
45347............................  Sigmoidoscopy, flexible;   APC 0147................  C-APC 5331
                                    with placement of         (Level II Sigmoidoscopy   (Complex GI Procedures).
                                    endoscopic stent           and Anoscopy).
                                    (includes pre- and post-
                                    dilation and guide wire
                                    passage, when performed).
45389............................  Colonoscopy, flexible;     APC 0143................  C-APC 5331
                                    with endoscopic stent     (Lower GI Endoscopy APC)  (Complex GI Procedures).
                                    placement (includes pre-
                                    and post-dilation and
                                    guide wire passage, when
                                    performed).
----------------------------------------------------------------------------------------------------------------

5. Imaging Services
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs that 
contain imaging services. For CY 2016, we are proposing to restructure 
the OPPS APC groupings for imaging services to more appropriately 
reflect the costs and clinical characteristics of the procedures within 
each APC grouping in the context of the OPPS. The current APCs for 
imaging services are divided at the highest level between diagnostic 
radiology (for example, x-ray, CT, MRI, and ultrasound) and nuclear 
medicine imaging. After reviewing these APCs, we believe that the 
current APC structure is based on clinical categories that do not 
necessarily reflect significant differences in the delivery of these 
services in the HOPD. The current level of granularity for these APCs 
results in groupings that are unnecessarily narrow for the purposes of 
a prospective payment system. This excessive granularity is especially 
apparent with the APCs for x-ray based imaging services and nuclear 
medicine imaging services. Many of these APCs are currently structured 
according to organ or physiologic system that does not necessarily 
reflect either significant differences in resources or how these 
services are delivered in the HOPD.
    Therefore, for CY 2016, we are proposing to restructure and 
consolidate the APCs that include radiology and nuclear medicine 
services. We believe that this proposed restructuring and consolidation 
would result in APC groupings that would more appropriately reflect a 
prospective payment system that is based on payment for clinically 
consistent APC groupings and not code-specific payment rates, while 
maintaining clinical and resource homogeneity. Furthermore, the 
proposed APC groupings would more accurately

[[Page 39261]]

accommodate and align new services into clinical APCs with similar 
resource costs. Table 27 below lists the current CY 2015 APCs that 
contain radiology and nuclear medicine services, and Table 28 below 
lists the proposed CY 2016 APCs that result from the proposed 
consolidation and restructuring of the current radiology and nuclear 
medicine services APCs. The procedures assigned to each APC are listed 
in Addendum B to this proposed rule, which is available via the 
Internet on the CMS Web site. We are inviting public comments on this 
proposal.

            Table 27--CY 2015 Imaging-Related Procedures APCs
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0668................................  Level I Angiography and
                                       Venography.
0279................................  Level II Angiography and
                                       Venography.
0280................................  Level III Angiography and
                                       Venography.
0275................................  Arthrography.
0396................................  Bone Imaging.
0383................................  Cardiac Computed Tomographic
                                       Imaging.
0398................................  Level I Cardiac Imaging.
0377................................  Level II Cardiac Imaging.
0334................................  Combined Abdomen and Pelvis CT
                                       with Contrast.
0331................................  Combined Abdomen and Pelvis CT
                                       without Contrast.
0283................................  Computed Tomography with Contrast.
0332................................  Computed Tomography without
                                       Contrast.
0333................................  Computed Tomography without
                                       Contrast followed by Contrast.
8006................................  CT and CTA with Contrast
                                       Composite.
8005................................  CT and CTA without Contrast
                                       Composite.
0662................................  CT Angiography.
0265................................  Level I Diagnostic and Screening
                                       Ultrasound.
0266................................  Level II Diagnostic and Screening
                                       Ultrasound.
0267................................  Level III Diagnostic and Screening
                                       Ultrasound.
0278................................  Diagnostic Urography.
0276................................  Level I Digestive Radiology.
0277................................  Level II Digestive Radiology.
0388................................  Discography.
0177................................  Level I Echocardiogram with
                                       Contrast.
0178................................  Level II Echocardiogram with
                                       Contrast.
0269................................  Level I Echocardiogram Without
                                       Contrast.
0270................................  Level II Echocardiogram Without
                                       Contrast.
0390................................  Level I Endocrine Imaging.
0391................................  Level II Endocrine Imaging.
0272................................  Fluoroscopy and Other Radiology
                                       Services.
0395................................  Hepatobiliary Imaging.
0400................................  Hematopoietic Imaging.
0394................................  Hepatobiliary Imaging.
0284................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       with Contrast.
0336................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       without Contrast.
0337................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       without Contrast followed by
                                       Contrast.
0263................................  Level I Miscellaneous Radiology
                                       Procedures.
0317................................  Level II Miscellaneous Radiology
                                       Procedures.
8008................................  MRI and MRA with Contrast
                                       Composite.
8007................................  MRI and MRA without Contrast
                                       Composite.
0274................................  Myelography.
0403................................  Level I Nervous System Imaging.
0402................................  Level II Nervous System Imaging.
0260................................  Level I Plain Film Including Bone
                                       Density Measurement.
0261................................  Level II Plain Film Including Bone
                                       Density Measurement.
0308................................  Positron Emission Tomography (PET)
                                       imaging.
0401................................  Level I Pulmonary Imaging.
0378................................  Level II Pulmonary Imaging.
0404................................  Renal and Genitourinary Studies.
0406................................  Level I Tumor/Infection Imaging.
0414................................  Level II Tumor/Infection Imaging.
0408................................  Level III Tumor/Infection Imaging.
8004................................  Ultrasound Composite.
0393................................  Hematologic Processing & Studies.
------------------------------------------------------------------------


       Table 28--Proposed CY 2016 Imaging-Related Procedures APCs
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC Group title
------------------------------------------------------------------------
5521................................  Level 1 X-Ray and Related
                                       Services.
5522................................  Level 2 X-Ray and Related
                                       Services.
5523................................  Level 3 X-Ray and Related
                                       Services.
5524................................  Level 4 X-Ray and Related
                                       Services.
5525................................  Level 5 X-Ray and Related
                                       Services.
5526................................  Level 6 X-Ray and Related
                                       Services.
5531................................  Level 1 Ultrasound and Related
                                       Services.
5532................................  Level 2 Ultrasound and Related
                                       Services.
5551................................  Level 1 Echocardiogram Without
                                       Contrast.
5552................................  Level 2 Echocardiogram Without
                                       Contrast.
5561................................  Level 1 Echocardiogram with
                                       Contrast.
5562................................  Level 2 Echocardiogram with
                                       Contrast.
5570................................  Computed Tomography without
                                       Contrast.
5571................................  Level 1 Computed Tomography with
                                       Contrast and Computed Tomography
                                       Angiography.
5572................................  Level 2 Computed Tomography with
                                       Contrast and Computed Tomography
                                       Angiography.
5581................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       without Contrast.
5582................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       with Contrast.
5591................................  Level 1 Nuclear Medicine and
                                       Related Services.
5592................................  Level 2 Nuclear Medicine and
                                       Related Services.
5593................................  Level 3 Nuclear Medicine and
                                       Related Services.
8004................................  Ultrasound Composite.
8005................................  CT and CTA without Contrast
                                       Composite.
8006................................  CT and CTA with Contrast
                                       Composite.
8007................................  MRI and MRA without Contrast
                                       Composite.
8008................................  MRI and MRA with Contrast
                                       Composite.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

6. Orthopedic Procedures
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs that 
contain orthopedic-related procedures. For CY 2016, we are proposing to 
restructure the OPPS APC groupings for orthopedic surgery procedures to 
more appropriately reflect similar costs and clinical characteristics 
of the procedures within each APC grouping in the context of the OPPS. 
The current APCs for orthopedic-related procedures are primarily 
divided according to anatomy and the type of

[[Page 39262]]

musculoskeletal procedure. After reviewing these APCs, we believe that 
the current APC structure is based on clinical categories that do not 
necessarily reflect significant differences in the delivery of these 
services in the HOPD. The current level of granularity for these APCs 
results in groupings that are unnecessarily narrow for the purposes of 
a prospective payment system. For example, we see no reason for 
purposes of OPPS payment to continue to separate musculoskeletal 
procedures that do not involve the hand or foot from procedures that do 
include the hand or foot.
    Therefore, for CY 2016, we are proposing to restructure and 
consolidate the APCs for orthopedic surgery procedures. We believe that 
this proposed restructuring and consolidation would result in APC 
groupings that would more appropriately reflect a prospective payment 
system that is based on payment for clinically consistent APC groupings 
and not code-specific payment rates while maintaining clinical and 
resource homogeneity. Table 29 below lists the current CY 2015 APCs 
that contain orthopedic-related procedures, and Table 30 below lists 
the proposed CY 2016 APCs that result from the proposed restructuring 
and consolidation of the current orthopedic-related procedures APCs. 
The procedures assigned to each APC are listed in Addendum B to this 
proposed rule, which is available via the Internet on the CMS Web site. 
We are inviting public comments on this proposal.

          Table 29--CY 2015 Orthopedic-Related Procedures APCs
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0047................................  Arthroplasty.
0041................................  Level I Arthroscopy.
0042................................  Level II Arthroscopy.
0045................................  Bone/Joint Manipulation Under
                                       Anesthesia.
0057................................  Bunion Procedures.
0129................................  Level I Closed Treatment Fracture.
0138................................  Level II Closed Treatment
                                       Fracture.
0139................................  Level III Closed Treatment
                                       Fracture.
0431................................  Level IV Closed Treatment
                                       Fracture.
0055................................  Level I Foot Musculoskeletal
                                       Procedures.
0056................................  Level II Foot Musculoskeletal
                                       Procedures.
0053................................  Level I Hand Musculoskeletal
                                       Procedures.
0054................................  Level II Hand Musculoskeletal
                                       Procedures.
0208................................  Laminotomies and Laminectomies.
0049................................  Level I Musculoskeletal Procedures
                                       Except Hand and Foot.
0050................................  Level II Musculoskeletal
                                       Procedures Except Hand and Foot.
0051................................  Level III Musculoskeletal
                                       Procedures Except Hand and Foot.
0052................................  Level IV Musculoskeletal
                                       Procedures Except Hand and Foot.
0425................................  Level V Musculoskeletal Procedures
                                       Except Hand and Foot.
0058................................  Level II Strapping and Cast
                                       Application.
0059................................  Level I Strapping and Cast
                                       Application.
0062................................  Level I Treatment Fracture/
                                       Dislocation.
0063................................  Level II Treatment Fracture/
                                       Dislocation.
0064................................  Level III Treatment Fracture/
                                       Dislocation.
------------------------------------------------------------------------


      Table 30--Proposed CY 2016 Orthopedic-Related Procedures APCs
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC group title
------------------------------------------------------------------------
5101................................  Level 1 Strapping and Cast
                                       Application.
5102................................  Level 2 Strapping and Cast
                                       Application.
5111................................  Level 1 Closed Treatment Fracture
                                       and Related Services.
5112................................  Level 2 Closed Treatment Fracture
                                       and Related Services.
5113................................  Level 3 Closed Treatment Fracture
                                       and Related Services.
5121................................  Level1 Musculoskeletal Procedures.
5122................................  Level 2 Musculoskeletal
                                       Procedures.
5123................................  Level 3 Musculoskeletal
                                       Procedures.
5124................................  Level 4 Musculoskeletal
                                       Procedures.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

7. Skin Procedures
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we examined the APCs that 
describe skin procedures. Based on our evaluation of the latest 
hospital outpatient claims data available for this proposed rule, we 
are proposing to restructure all of the skin-related procedure APC 
assignments by combining the debridement and skin procedure APCs to 
more appropriately reflect the costs and clinical characteristics of 
the procedures within each APC. Clinically, the services assigned to 
the current debridement APC series are similar to the services assigned 
to the current skin procedures APCs. We believe that the services in 
these two APC series would be more appropriately represented in a 
single APC series described as skin procedures and related services. We 
believe that this proposed consolidation and restructuring of APCs more 
appropriately categorizes all of the skin procedures and related 
services within a series of APCs with different resources, such that 
the services within each proposed newly configured APC are comparable 
based on its clinical homogeneity and resource costs. Therefore, for CY 
2016, we are proposing to consolidate and restructure the skin and 
debridement APCs into a single APC series. Table 31 below lists the 
current CY 2015 APCs that contain skin and debridement procedures, and 
Table 32 below lists the proposed CY 2016 APCs that result from the 
proposed consolidation and restructuring of the current skin-related 
procedure APCs into a single APC series. The proposed payment rates for 
the specific CPT or Level II HCPCS skin procedure codes are specified 
in Addendum B to this proposed rule. The proposed payment rates for the 
specific APCs to which the skin procedures are proposed to be assigned 
are specified in Addendum A to this proposed rule. Both OPPS Addenda A 
and B are available via the Internet on the CMS Web site. We are 
inviting public comments on this proposal.

   Table 31--CY 2015 APCs to Which Debridement and Skin Procedures Are
                                Assigned
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0012................................  Level I Debridement & Destruction.
0015................................  Level II Debridement &
                                       Destruction.
0016................................  Level III Debridement &
                                       Destruction.
0017................................  Level IV Debridement &
                                       Destruction.
0326................................  Level I Skin Procedures.
0327................................  Level II Skin Procedures.
0328................................  Level III Skin Procedures.

[[Page 39263]]

 
0329................................  Level IV Skin Procedures.
------------------------------------------------------------------------


     Table 32--Proposed CY 2016 APCs Assignment for Skin Procedures
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC Group title
------------------------------------------------------------------------
5051................................  Level 1 Skin Procedures.
5052................................  Level 2 Skin Procedures.
5053................................  Level 3 Skin Procedures.
5054................................  Level 4 Skin Procedures.
5055................................  Level 5 Skin Procedures.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

8. Urology and Related Services Procedures
    For the CY 2016 OPPS update, based on our evaluation of the latest 
hospital outpatient claims data used for this proposed rule, we are 
proposing to revise all of the urology and related services APCs to 
more appropriately reflect the resource costs and clinical 
characteristics of the procedures within each APC. Currently, several 
of the urology-related APCs are differentiated based on their resource 
costs rather than clinical similarity. We believe that establishing 
more inclusive categories of the urology and related procedures is more 
appropriate for future ratesetting under the hospital OPPS because the 
restructured APCs have a more clinically appropriate granularity, while 
improving resource similarity. Further, we believe that this proposed 
revision and consolidation of APCs would more appropriately categorize 
all of the urology procedures and services within an APC group such 
that the services within each proposed newly configured APC are 
comparable clinically and with respect to resource use. Therefore, for 
CY 2016, we are proposing to restructure and consolidate the urology 
and related APCs into a single APC series. Table 33 below shows the CY 
2015 urology and related APCs and status indicator assignments, and 
Table 34 below lists the proposed CY 2016 APCs that result from the 
proposed consolidation and restructuring of the current urology and 
related APCs into a single APC series. The proposed payment rates for 
the specific CPT or Level II HCPCS urology and related procedure codes 
are included in Addendum B to this proposed rule. The proposed payment 
rates for the proposed specific APCs to which we are proposing to 
assign the urology and related procedures codes are included in 
Addendum A to this proposed rule. Both OPPS Addenda A and B are 
available via the Internet on the CMS Web site. We are inviting public 
comments on this proposal.

 Table 33--CY 2015 APCs to Which Urology & Related Services Are Assigned
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0160................................  Level I Cystourethroscopy and
                                       other Genitourinary Procedures.
0161................................  Level II Cystourethroscopy and
                                       other Genitourinary Procedures.
0162................................  Level III Cystourethroscopy and
                                       other Genitourinary Procedures.
0163................................  Level IV Cystourethroscopy and
                                       other Genitourinary Procedures.
0183................................  Level I Male Genital Procedures.
0181................................  Level II Male Genital Procedures.
0205................................  Level III Male Genital Procedures.
0184................................  Prostate Biopsy.
0166................................  Level I Urethral Procedures.
0168................................  Level II Urethral Procedures.
0126................................  Level I Urinary and Anal
                                       Procedures.
0164................................  Level II Urinary and Anal
                                       Procedures.
0156................................  Level III Urinary and Anal
                                       Procedures.
0165................................  Level IV Urinary and Anal
                                       Procedures.
0385................................  Level I Urogenital Procedures.
0386................................  Level II Urogenital Procedures.
------------------------------------------------------------------------


   Table 34--Proposed CY 2016 APCs Assigned to AL Urology and Related
                                Services
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC Group title
------------------------------------------------------------------------
5371................................  Level 1 Urology and Related
                                       Services.
5372................................  Level 2 Urology and Related
                                       Services.
5373................................  Level 3 Urology and Related
                                       Services.
5374................................  Level 4 Urology and Related
                                       Services.
5375................................  Level 5 Urology and Related
                                       Services.
5376................................  Level 6 Urology and Related
                                       Services.
5377................................  Level 7 Urology and Related
                                       Services.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

9. Vascular Procedures (Excluding Endovascular Procedures)
    For the CY 2016 OPPS update, based on our evaluation of the latest 
hospital outpatient claims data available for this proposed rule, we 
are proposing to restructure all of the vascular procedure-related APCs 
(excluding endovascular procedures) to more appropriately reflect the 
costs and clinical characteristics of the procedures within each APC. 
We believe that this proposed restructuring of APCs for vascular 
procedures more accurately categorizes all of the vascular procedures 
within an APC group, such that the services within each proposed newly 
configured APC are more comparable clinically and with respect to 
resource use. Table 35 below shows the vascular procedures APCs for CY 
2015, and Table 36 below shows the proposed vascular procedures APCs 
for CY 2016. The proposed payment rates for the vascular procedure 
codes are included in Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site). The proposed payment 
rates for the proposed specific APCs to which we are proposing to 
assign the urology and related procedures codes are included in Addenda 
A and B to this proposed rule. Both OPPS Addenda A and B are available 
via the Internet on the CMS Web site. We are inviting public comments 
on this proposal.

                Table 35--CY 2015 Vascular Procedure APCs
                   [Excluding Endovascular Procedures]
------------------------------------------------------------------------
             CY 2015 APC                    CY 2015 APC Group title
------------------------------------------------------------------------
0103................................  Miscellaneous Vascular Procedures.
0624................................  Phlebotomy and Minor Vascular
                                       Access Device.
0088................................  Thrombectomy.

[[Page 39264]]

 
0621................................  Level I Vascular Access
                                       Procedures.
0622................................  Level II Vascular Access
                                       Procedures.
0093................................  Vascular Reconstruction/Fistula
                                       Repair.
0219................................  Vascular Ligation.
------------------------------------------------------------------------


           Table 36--Proposed CY 2016 Vascular Procedures APCs
                   [Excluding Endovascular Procedures]
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                Proposed CY 2016 APC Group title
------------------------------------------------------------------------
5181................................  Level 1 Vascular Procedures.
5182................................  Level 2 Vascular Procedures.
5183................................  Level 3 Vascular Procedures.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing CY 2015 APC
  numbers to the new proposed CY 2016 numbers.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    Section 1833(t)(6)(B)(iii) of the Act sets forth the period for 
which a device category eligible for transitional pass-through payments 
under the OPPS may be in effect. The implementing regulation at 42 CFR 
419.66(g) provides that this pass-through payment eligibility period 
begins on the date CMS establishes a particular transitional pass-
through category of devices. The eligibility period is for at least 2 
years but no more than 3 years. 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; that is, the date CMS establishes a particular category of 
devices eligible for transitional pass-through payments. 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.
b. Proposed CY 2016 Policy
    As stated earlier, section 1833(t)(6)(B)(iii) requires that, under 
the OPPS, a category of devices be eligible for transitional pass-
through payments for at least 2 years, but not more than 3 years. There 
currently are four device categories eligible for pass-through payment: 
HCPCS code C1841 (Retinal prosthesis, includes all internal and 
external components) was established effective October 1, 2013. HCPCS 
code C2624 (Implantable wireless pulmonary artery pressure sensor with 
delivery catheter, including all system components) was established 
effective January 1, 2015. HCPCS code C2623 (Catheter, transluminal 
angioplasty, drug-coated, non-laser) was established effective April 1, 
2015. HCPCS code C2613 (Lung biopsy plug with delivery system) was 
established effective July 1, 2015. The pass-through payment status of 
the device category for HCPCS code C1841 will end on December 31, 2015. 
Therefore, in accordance with our established policy, beginning with CY 
2016, we are proposing to package the costs of the HCPCS code C1841 
devices into the costs related to the procedures with which the device 
is reported in the hospital claims data.
    If we create any new device categories for pass-through payment 
status during the remainder of CY 2015 or during CY 2016, we will 
propose future expiration dates in accordance with Sec.  419.66(g).
2. Proposed Annual Rulemaking Process in Conjunction With Quarterly 
Review Process for Device Pass-Through Payment Applications
a. Background
    Section 1833(t)(6)(B) of the Act requires payment to be made on a 
``pass-through'' basis for designated medical devices. As part of 
implementing the statute through regulations, we have continued to 
believe that it is important for hospitals to receive pass-through 
payments for devices that offer substantial clinical improvement in the 
treatment of Medicare beneficiaries to facilitate access by 
beneficiaries to the advantages of the new technology. Conversely, we 
have noted that the need for additional payments for devices that offer 
little or no clinical improvement over previously existing devices is 
less apparent. In such cases, these devices can still be used by 
hospitals, and hospitals will be paid for them through appropriate APC 
payment. Moreover, a goal is to target pass-through payments for those 
devices where cost considerations might be most likely to interfere 
with patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629).
    As specified in regulations at 42 CFR 419.66(b)(1) through (b)(3), 
to be eligible for transitional pass-through payment under the OPPS, a 
device must meet the following criteria: (1) If required by FDA, the 
device must have received FDA premarket approval or clearance (except 
for a device that has received an FDA investigational device exemption 
(IDE) and has been classified as a Category B device by the FDA), or 
meet another FDA exemption from premarket approval or clearance; (2) 
the device must be determined reasonable and necessary for the 
diagnosis or treatment of an illness or injury or to improve the 
functioning of a malformed body part, as provided under section 
1862(a)(1)(A) of the Act; and (3) the device must be an integral part 
of the service, 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. A device is not eligible if it is any of the following, as 
specified at Sec.  419.66(b)(4): Equipment, an instrument, apparatus, 
implement, or item of this type for which depreciation and financing 
expenses are recovered as depreciation assets as defined in Chapter 1 
of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or a 
material or supply furnished incident a service (for example, a suture, 
customized surgical kit, or clip, other than a radiological site 
marker).
    Separately, we use the following criteria, as set forth under Sec.  
419.66(c), to determine whether a category of devices should be 
established: The device must--
     Not be appropriately described by an existing category or 
by any category previously in effect established for transitional pass-
through payments, and was not being paid for as an outpatient service 
as of December 31, 1996;
     Have an average cost that is not ``insignificant'' 
relative to the payment amount for the procedure or service with which 
the device is associated as determined under Sec.  416.66(d); and
     Demonstrate a substantial clinical improvement, that is, 
substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment.

[[Page 39265]]

    More details on the requirements for device pass-through payment 
applications are included on the CMS Web site in the application form 
itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the 
``Downloads'' section.
    The current OPPS process for applying for a new device category for 
transitional pass-through payment is subregulatory; that is, device or 
implantable biological or skin substitute manufacturers, hospitals, or 
other interested parties may apply to the agency through an application 
process available online. The application determination process is 
handled outside of rulemaking. Applications are accepted by CMS on a 
rolling basis and determinations are made on a quarterly basis. 
Decisions by CMS to approve an application for a device for pass-
through payment under the OPPS are announced quarterly through a 
subregulatory process via program transmittal and are communicated 
directly to the applicant. Approvals are then referenced in our annual 
rulemaking as a means to establish payment periods. Currently, denials 
of applications for devices for pass-through payment status under the 
OPPS are communicated directly to the applicant and not announced 
publicly through rulemaking, program transmittal, or other public 
forum. Applicants for pass-through payment for a device whose 
application is denied may submit a reconsideration request to CMS. The 
applicant must send a written letter that explains the reasons for the 
request for reconsideration of CMS' decision, along with any additional 
information or evidence that may not have been included with the 
original application that may further support the reconsideration 
request. Currently, reconsiderations of denials of devices for pass-
through payment under the OPPS are handled similarly to initial denials 
through direct communication with the applicant.
    Over the years, stakeholders have opined that the current OPPS 
device pass-through payment application process lacks transparency and 
consistent approval standards. That is, stakeholders have suggested 
that the unavailability to the public of specific information about 
application decisions makes it difficult to determine if there are 
consistent approval standards because there is no public knowledge 
regarding which applications are rejected and which criteria are not 
met. Likewise, for approved applications, there is a lack of the 
specific information available to the public that led to approval of 
the application. Some stakeholders have requested that CMS increase 
transparency in the device pass-through payment application process by 
notifying the public, through rulemaking, of the number of applications 
received each year in aggregate and, for each application, include in 
rulemaking the preliminary decision, any additional details included in 
follow-up with the applicant, and the final decision, including the 
rationale for the approval or denial of the application. Stakeholders 
also have requested that CMS consult with industry and other 
stakeholders during the application review process.
    We agree with stakeholders that the current OPPS device pass-
through payment application process could benefit from increased 
transparency and stakeholder input. Therefore, for CY 2016, we are 
proposing changes to the OPPS device pass-through payment application 
process to help achieve the goals of increased transparency and 
stakeholder input. We are proposing to align a portion of the OPPS 
device pass-through payment application process with the already 
established inpatient prospective payment system (IPPS) application 
process for new medical services and new technology add-on payments. 
(We refer readers to sections 1886(d)(5)(K) and (d)(5)(L) of the Act 
and 42 CFR 412.87 and 412.88 for additional information on the IPPS 
process for approval of new medical services and technologies for new 
technology add-on payment under the IPPS.) Frequently, an applicant 
will apply for both device pass-through payments under the OPPS and for 
new technology add-on payments under the IPPS. Both the OPPS and the 
IPPS require that the applicant demonstrate that the technology 
represents a substantial clinical improvement relative to existing 
technologies. Approvals and denials of applications for new technology 
add-on payments under the IPPS are finalized through annual rulemaking. 
We discuss the specific changes that we are proposing for the 
transitional medical device pass-through payment application process 
under the OPPS in the section below.
b. Proposed Revisions to the Application Process for Device Pass-
Through Payments
    Beginning in CY 2016, we are proposing to add a rulemaking 
component to the current quarterly device pass-through payment 
application process. That is, we are proposing to supplement the 
quarterly process by including a description of applications received 
(whether they are approved or denied) as well as our rationale for 
approving or denying the application in the next applicable OPPS 
proposed rule. This proposed revised process would include providing 
information related to the establishment of the new device category, 
the cost thresholds, and the substantial clinical improvement 
criterion. For applications that are approved during the quarterly 
review process, based on public comments received in response to 
proposed rulemaking, we would either continue to maintain device pass-
through payment status or finalize a policy to discontinue pass-through 
payment status. In the rare case in which an applicant is approved 
during the quarterly process and then a decision is made in rulemaking 
to reverse the approval, the applicant could reapply with new 
information, in advance of the following year proposed rule. The 
application would be included in the proposed rule, along with a 
proposal to approve or deny device pass-through payment status and a 
final decision would be provided in the final rule after consideration 
of public comments.
    For applications that we deny during the quarterly review process, 
we are proposing to include the same type of information that we 
include for approved devices in the next applicable OPPS proposed rule 
and, after consideration of public comments received, could revisit our 
decision and either uphold the original decision of denial or approve 
the application based on additional evidence submitted through the 
rulemaking process. The final decision would be published in the 
appropriate final rule. In lieu of the informal reconsideration process 
that is currently in place for denied applications; we would only 
provide opportunity to reconsider applications that are denied through 
the rulemaking process. We are proposing to allow applicants whose 
applications are denied through the quarterly review process to 
withdraw their applications if they do not wish to go through the 
rulemaking process. If such a decision is made, the quarterly review 
decision to deny device pass-through payment for the application would 
be considered final and there would be no further reconsideration 
process available. By providing an opportunity for public comment, we 
believe that we would not only make the device pass-through payment 
application and review process more transparent, but also would assure 
that applicants have the benefit of public input on the ultimate 
decision to

[[Page 39266]]

approve or deny an application for device pass-through payments under 
the OPPS.
    Currently, the deadline for device pass-through payment 
applications is the first business day in March, June, September, and 
December of a year for consideration for the next quarter (at the 
earliest) of the calendar year. For example, under our proposal, CMS' 
decision on an application that is submitted by the first business day 
in March would likely be presented in that calendar year's OPPS 
proposed rule (assuming the application that is submitted is complete). 
Decisions on applications received after the first business day in 
March would be included in the OPPS proposed rule for the following 
calendar year.
    In response to requests for more transparency and public input on 
the device pass-through payment application process, we considered 
moving entirely to a yearly process through rulemaking and eliminating 
quarterly submissions. However, in an effort to maintain flexibility 
under the OPPS process for device pass-through payment applications, we 
believe that maintaining the quarterly process in addition to adding 
the annual rulemaking process may be beneficial because applications 
approved on a quarterly basis would be granted access to pass-through 
payments as soon as possible for approved devices. In addition, all 
applications would be considered through the rulemaking process, which 
would provide increased transparency and allow public input that would 
be considered in making a final determination. We are inviting public 
comments on this proposed approach as well as on whether moving to a 
rulemaking process entirely would be more helpful to further increase 
transparency and further align the review of applications submitted 
under both the IPPS and the OPPS.
c. Criterion for Newness
    Since the inception of transitional pass-through payments for new 
categories of medical devices on April 7, 2000, there has not been any 
specific criteria provided to evaluate the newness of the device for 
purposes of determining eligibility and receiving device pass-through 
payment under the OPPS. Section 1833(t)(6)(B)(ii)(I) of the Act 
requires that the Secretary shall establish criteria that will be used 
for creation of additional categories other than the initial categories 
described by section 1833(t)(6)(B)(i) of the Act through rulemaking. We 
believe that one prong of determining whether a new category should be 
established is whether or not the device seeking such new category 
status is itself new. We believe that the payment adjustment for 
transitional pass-through payments for devices under the OPPS was 
intended as an interim measure to allow for adequate payment of new 
innovative technology while we collected the necessary data to 
incorporate the costs for these devices into the base APC rate (66 FR 
55861). Typically, there is a lag of 2 to 3 years from the point when a 
new device is first introduced on the U.S. market (generally on the 
date that the device receives FDA approval) until it is reflected in 
our claims data.
    Existing regulations at Sec.  419.66(b)(1) specify that, if 
required by the FDA, the device must have received FDA premarket 
approval or clearance (except for a device that has received an FDA 
investigational device exemption (IDE) and has been classified as a 
Category B device by the FDA in accordance with Sec. Sec.  405.203 
through 405.207 and 405.211 through 405.215 of the regulations), or 
meet another appropriate FDA exemption from premarket approval or 
clearance. This existing regulatory provision does not address the 
issue of how dated these device approvals, clearances, or exemptions 
may be. As a result, a device that has received FDA approval, 
clearance, or exemption and has been available on the U.S. market for 
several years could apply for and possibly be approved for pass-through 
payments for a new device category if the device is not described by 
any of the existing (either currently active or expired) categories 
established for transitional device pass-through payments. Over the 
years, we have received applications for device pass-through payment 
for devices that have been on the market for several years. We do not 
believe that this is the intent of the regulation. Therefore, we are 
proposing to modify the medical device eligibility requirement at Sec.  
419.66(b)(1) to provide that not only must a device, if required, 
receive FDA premarket approval or clearance (except for a device that 
has received an FDA investigational device exemption (IDE) and has been 
classified as a Category B device by the FDA in accordance with 
Sec. Sec.  405.203 through 405.207 and 405.211 through 405.215 of the 
regulations) or meet another appropriate FDA exemption from premarket 
approval or clearance, but also that beginning with applications 
received on or after January 1, 2016, any such device must have 
received such approval or clearance, as applicable, within 3 years from 
the date of the application for transitional pass-through payment. That 
is, we are proposing to add a requirement to ensure that medical 
devices falling under Sec.  419.66(b)(1) and seeking creation of a 
category for device pass-through payment must be ``new.'' We believe 
that the proposed adjustment is consistent with section 
1833(t)(6)(B)(ii)(I) of the Act, which allows for establishing criteria 
that will be used for the creation of additional categories through 
rulemaking. This proposed adjustment also will further align the OPPS 
device pass-through process with the IPPS process for new medical 
services and new technology add-on payments (42 CFR 412.87(b)(2) and 78 
FR 50570) by adding the requirement that the device be new. 
Specifically, we are proposing that, beginning with applications 
received on or after January 1, 2016, a device will only be eligible 
for transitional pass-through payment under the OPPS if, in cases where 
the device requires FDA approval, clearance, or exemption, the device 
meets the newness criterion; that is, the date of original FDA approval 
or clearance and U.S. market availability is within 3 years from the 
date of the application for transitional pass-through payment. We are 
proposing to revise Sec.  419.66(b)(1) to reflect this proposal. We are 
inviting public comments on this proposal.
3. Proposed Provisions for Reducing Transitional Pass-Through Payments 
To Offset Costs Packaged Into APC Groups
a. Background
    Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional 
pass-through payment for an eligible device as the amount by which the 
hospital's charges for a device, adjusted to cost (the cost of the 
device), exceeds the portion of the otherwise applicable Medicare 
outpatient department fee schedule amount (the APC payment amount) 
associated with the device. We have an established policy to estimate 
the portion of each APC payment rate that could reasonably be 
attributed to the cost of the associated devices that are eligible for 
pass-through payments (66 FR 59904) for purposes of estimating the 
portion of the otherwise applicable APC payment amount associated with 
pass-through devices. For eligible device categories, we deduct an 
amount that reflects the portion of the APC payment amount that we 
determine is associated with the cost of the device, defined as the 
device APC offset amount, from the charges adjusted to cost for the 
device, as provided by section 1833(t)(6)(D)(ii) of the Act, to 
determine the pass-through payment amount for the eligible device. We 
have consistently used an

[[Page 39267]]

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. In the unusual 
case where the device offset amount exceeds the device pass-through 
payment amount, the regular APC rate would be paid.
    We published a list of all procedural APCs with the CY 2015 
portions (both percentages and dollar amounts) of the APC payment 
amounts that we determined 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 January 1, 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). Beginning January 1, 2015, skin 
substitutes are evaluated for pass-through status and payment using the 
device pass-through evaluation process (79 FR 66888).
b. Proposed CY 2016 Policy
    As we did for CY 2015, we are proposing to continue, for CY 2016, 
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 also are proposing to continue our established 
policies for calculating and setting the device APC offset amounts for 
each device category eligible for pass-through payment. In addition, we 
are proposing to continue to review each new device category on a case-
by-case basis to determine whether device costs associated with the new 
category are already packaged into the existing APC structure. If 
device costs packaged into the existing APC structure are associated 
with the new category, we are proposing to deduct the device APC offset 
amount from the pass-through payment for the device category. As stated 
earlier, these device APC offset amounts also would be used in order to 
evaluate whether the cost of a device in an application for a new 
device category for pass-through payment is not insignificant in 
relation to the APC payment amount for the service related to the 
category of devices (Sec.  419.66(d)).
    In addition, we are proposing to update the list of all procedural 
APCs with the final CY 2016 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 2016 device pass-
through payment applications and by CMS in reviewing those 
applications.

B. Proposed Device-Intensive Procedures

1. Background
    Under the OPPS, device-intensive APCs are defined as those APCs 
with a device offset greater than 40 percent (79 FR 66795). In 
assigning device-intensive status to an APC, the device costs of all 
procedures within the APC are calculated and the geometric mean device 
offset of all the procedures must exceed 40 percent. Almost all of the 
procedures assigned to device-intensive APCs utilize devices, and the 
device costs for the associated HCPCS codes exceed the 40-percent 
threshold. The no cost/full credit and partial credit device policy (79 
FR 66872 through 66873) applies to device-intensive APCs and is 
discussed in detail in section IV.B.3. of this proposed rule. A related 
device policy is the requirement that procedures assigned to certain 
(formerly device-dependent) APCs require the reporting of a device code 
on the claim (79 FR 66795).
2. Proposed Changes to Device Edit Policy
    In the CY 2015 OPPS/ASC final rule with comment period, we 
finalized a policy and implemented claims processing edits that require 
any of the device codes used in the previous device-to-procedure edits 
to be present on the claim whenever a procedure code assigned to any of 
the APCs listed below in Table 37 (the formerly device-dependent APCs) 
is reported on the claim (79 FR 66795).

Table 37--APCs That Require a Device Code To Be Reported on a Claim When
    a Procedure Assigned to One of These APCs Is Reported for CY 2015
------------------------------------------------------------------------
             CY 2015 APC                       CY 2015 APC title
------------------------------------------------------------------------
0039................................  Level III Neurostimulator.
0061................................  Level II Neurostimulator.
0083................................  Level I Endovascular.
0084................................  Level I EP.
0085................................  Level II EP.
0086................................  Level III EP.
0089................................  Level III Pacemaker.
0090................................  Level II Pacemaker.
0107................................  Level I ICD.
0108................................  Level II ICD.
0202................................  Level V Gynecologic Procedures.
0227................................  Implantation of Drug Infusion.
0229................................  Level II Endovascular.
0259................................  Level VII ENT Procedures.
0293................................  Level IV Intraocular.
0318................................  Level IV Neurostimulator.
0319................................  Level III Endovascular.
0384................................  GI Procedures with Stents.
0385................................  Level I Urogenital.
0386................................  Level II Urogenital.
0425................................  Level V Musculoskeletal.
0427................................  Level II Tube/Catheter.
0622................................  Level II Vascular Access.
0648................................  Level IV Breast Surgery.
0652................................  Insertion of IP/Pl. Cath.
0655................................  Level IV Pacemaker.
------------------------------------------------------------------------

    There are 10 APCs listed in Table 37 that are not device-intensive 
APCs; that is, their device offsets do not exceed 40 percent. We do not 
believe that we should continue to require device codes on claims for 
procedures that are not assigned to device-intensive APCs, as the 
relative device costs do not exceed the device-intensive threshold of 
40 percent. Unlike with device-intensive APCs, we believe it is not 
necessary to require the reporting of a device code for reporting 
device charges on a claim because the relative device costs are much 
less significant than those associated with device-intensive APCs. We 
believe that device code reporting requirements should only apply to 
the device-intensive APCs because these APCs have significant device 
costs that are associated with particular devices.

[[Page 39268]]

We note that, in CY 2015 (79 FR 66794 through 66795), we applied the 
device code reporting requirements to those formerly device-dependent 
APCs that also met the device-intensive APC definition. However, after 
further consideration, we no longer believe it is appropriate to 
restrict the application of this policy to only the subset of device-
intensive APCs that were formerly device-dependent and now believe the 
device code reporting requirements should apply to all device-intensive 
APCs, regardless of whether or not the APC was formerly device-
dependent. We believe that the device coding requirement should apply 
to procedures assigned to all device-intensive APCs because these are 
the APCs with significant device costs. Therefore, we are proposing for 
CY 2016 that only the procedures that require the implantation of a 
device that are assigned to a device-intensive APC would require a 
device code on the claim. The list of device-intensive APCs are listed 
in Table 38 below.

            Table 38--Proposed CY 2016 Device-Intensive APCs
------------------------------------------------------------------------
  Proposed renumbered CY 2016 APC *       Proposed CY 2016 APC title
------------------------------------------------------------------------
0039................................  Level III Neurostimulator &
                                       Related Procedures.
0061................................  Level II Neurostimulator & Related
                                       Procedures.
0089................................  Level III Pacemaker & Similar
                                       Procedures.
0090................................  Level II Pacemaker & Similar
                                       Procedures.
0105................................  Level I Pacemaker & Similar
                                       Procedures.
0107................................  Level I ICD & Similar Procedures.
0108................................  Level II ICD & Similar Procedures.
0227................................  Implantation of Drug Infusion
                                       Device.
0229................................  Level II Endovascular Procedures.
0259................................  Level VI ENT Procedures.
0293................................  Level III Intraocular Procedures.
0318................................  Level IV Neurostimulator & Related
                                       Procedures.
0319................................  Level III Endovascular Procedures.
0351................................  Level IV Intraocular Procedures.
0386................................  Level VII Urology & Related
                                       Procedures.
0425................................  Level IV Musculoskeletal
                                       Procedures.
0655................................  Level IV Pacemaker & Similar
                                       Procedures.
1564................................  New Technology--Level 27.
1593................................  New Technology--Level 46.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) provides a crosswalk of the existing APC numbers
  to the proposed APC renumbers.

    We are proposing that the claims processing edits are such that any 
device code, when reported on a claim with a procedure assigned to an 
APC listed in Table 38, would satisfy the edit. Claims submitted with a 
procedure code requiring a device assigned to an APC listed in Table 
38, but without any device code reported on the claim, would be 
returned to the provider.
3. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
a. Background
    To ensure equitable OPPS payment when a 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 were 
instructed to report no cost/full credit cases on the claim 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, hospitals are instructed to 
report a token device charge of less than $1.01. In cases in which the 
device being inserted is an upgrade (either of the same type of device 
or to a different type of device) with a full credit for the device 
being replaced, hospitals are instructed to report as the device charge 
the difference between the hospital's usual charge for the device being 
implanted and the hospital's 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 were 
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'' modifiers 
payment adjustment policies (72 FR 66743 through 66749).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), beginning in CY 2014, we modified our 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 had 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 reduced OPPS payment, for the applicable APCs, 
by the full or partial credit a hospital receives for a replaced 
device. Specifically, under this modified policy, hospitals are 
required to report on the claim 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 that is 50 percent or greater than the cost of the 
device. For CY 2014, we also limited the OPPS payment deduction for the 
applicable APCs to the total amount of the device offset when the 
``FD'' value code appears on a claim. For CY 2015, we continued 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 and to use the three criteria established in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68072 through 68077) for 
determining the APCs to which our CY 2015 policy will apply (79 FR 
66872 through 66873).
b. Proposed Policy for CY 2016
    For CY 2016 and subsequent years, we are proposing to continue 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, for CY 2016, we are proposing to continue 
to reduce the OPPS payment, for the device intensive APCs listed in 
Table 38 above, by the full or partial credit a provider receives for a 
replaced device. Under this proposed policy, hospitals would continue 
to be required to report on the claim the amount of the credit in the 
amount portion for value code ``FD'' when the hospital receives a 
credit for

[[Page 39269]]

a replaced device that is 50 percent or greater than the cost of the 
device. In CY 2015 and prior years, we specified a list of costly 
devices to which this APC payment adjustment would apply. Upon further 
consideration of our existing value code ``FD'' APC payment adjustment 
policy and the ability to deduct the actual amount of the device credit 
from the OPPS payment, regardless of the cost of the individual device, 
instead of a percentage of the device offset, we no longer believe it 
is necessary to restrict the application of this policy to a specific 
list of costly devices (most recently listed in Table 27 of the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66873)) as was necessary 
under the ``FB''/``FC'' modifier payment adjustment policy, which made 
APC payment adjustments as a percentage of the applicable device offset 
amount. Under the current policy, the actual amount of the device 
credit can be appropriately reported in the amount portion of value 
code ``FD'' and deducted from OPPS payment for all no cost/full credit 
and partial credit devices furnished in conjunction with a procedure 
assigned to a device intensive APC. Therefore, for CY 2016 and 
subsequent years, we are proposing to no longer specify a list of 
devices to which the OPPS payment adjustment for no cost/full credit 
and partial credit devices would apply. Instead, we are proposing to 
apply this APC payment adjustment to all replaced devices furnished in 
conjunction with a procedure assigned to a device-intensive APC when 
the hospital receives a credit for a replaced specified device that is 
50 percent or greater than the cost of the device.
    For CY 2016 and subsequent years, we also are proposing to continue 
using the three criteria established in the CY 2007 OPPS/ASC final rule 
with comment period for determining the APCs to which our proposed CY 
2016 policy would apply (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 APC 
must be device intensive; that is, the device offset amount must be 
significant, which is defined as exceeding 40 percent of the APC cost. 
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. As noted earlier in this section, APCs with a device 
offset that exceed the 40-percent threshold are called device-intensive 
APCs.
    We examined the offset amounts calculated from the CY 2016 proposed 
rule claims data and the clinical characteristics of the proposed CY 
2016 APCs to determine which APCs meet the criteria for CY 2016. The 
full list of device-intensive APCs to which we are proposing that the 
payment adjustment policy for no cost/full credit and partial credit 
devices would apply in CY 2016 is included in Table 38 above.
4. Proposed Adjustment to OPPS Payment for Discontinued Device-
Intensive Procedures
    It has been our longstanding policy to instruct hospitals to 
utilize an appropriate modifier on a claim to report when a procedure 
is discontinued, partially reduced, or cancelled. Specifically, when 
appropriate, hospitals are instructed to append modifiers 73, 74, and 
52 to report and be paid for expenses incurred in preparing a patient 
for a procedure and scheduling a room for performing the procedure 
where the service is subsequently discontinued (Medicare Claims 
Processing Manual (Pub. 100-04, Chapter 4, Section 20.6.4). The 
circumstances identifying when it is appropriate to append modifier 73, 
74, or 52 to a claim are detailed below.
    Modifier 73 is used by the hospital to indicate that a procedure 
requiring anesthesia was terminated due to extenuating circumstances or 
to circumstances that threatened the well-being of the patient after 
the patient had been prepared for the procedure (including procedural 
pre-medication when provided), and been taken to the room where the 
procedure was to be performed, but prior to administration of 
anesthesia. For purposes of billing for services furnished in the HOPD, 
anesthesia is defined to include local, regional blocks(s), moderate 
sedation/analgesia (``conscious sedation''), deep sedation/analgesia, 
or general anesthesia. Modifier 73 was created so that the costs 
incurred by the hospital to prepare the patient for the procedure and 
the resources expended in the procedure room and recovery room (if 
needed) could be recognized for payment even though the procedure was 
discontinued. Modifier 73 results in a payment rate of 50 percent of 
the full OPPS payment for the procedure.
    Modifier 74 is used by the hospital to indicate that a procedure 
requiring anesthesia was terminated after the induction of anesthesia 
or after the procedure was started (for example, the incision made, the 
intubation started, and the scope inserted) due to extenuating 
circumstances or to circumstances that threatened the well-being of the 
patient. This modifier may also be used to indicate that a planned 
surgical or diagnostic procedure was discontinued, partially reduced, 
or canceled at the physician's discretion after the administration of 
anesthesia. For purposes of billing for services furnished in the HOPD, 
anesthesia is defined to include local, regional blocks(s), moderate 
sedation/analgesia (``conscious sedation''), deep sedation/analgesia, 
or general anesthesia. Modifier 74 was created so that the costs 
incurred by the hospital to initiate the procedure (preparation of the 
patient, procedure room, and recovery room) could be recognized for 
payment even though the procedure was discontinued prior to completion. 
Modifier 74 results in a payment rate of 100 percent of the full OPPS 
payment for the procedure.
    Modifier 52 was revised in CY 2012 and is used by the hospital to 
indicate partial reduction, cancellation, or discontinuation of 
services for which anesthesia is not planned. (We refer readers to the 
January 2012 Update of the Hospital Outpatient Prospective Payment 
System (OPPS), Transmittal 2386, Change Request 7672, dated January 13, 
2012.) The modifier provides a means for reporting reduced services 
without disturbing the identification of the basic service. Modifier 52 
results in a payment rate of 50 percent of the full OPPS payment for 
the procedure.
    When a procedure assigned to a device-intensive APC is discontinued 
either prior to administration of anesthesia or for a procedure that 
does not require anesthesia, we presume that, in the majority of cases, 
the device was not used and remains sterile such that it could be used 
for another case. In these circumstances, under current policy, 
hospitals could be paid twice by Medicare for the same device, once for 
the initial procedure that was discontinued and again when the device 
is actually used. Accordingly, for CY 2016, we are proposing that, for 
procedures involving implantable devices that are assigned to a device-

[[Page 39270]]

intensive APC (defined as those APCs with a device offset greater than 
40 percent), we would reduce the APC payment amount for discontinued 
device-intensive procedures, where anesthesia has not been administered 
to the patient or the procedure does not require anesthesia, by 100 
percent of the device offset amount prior to applying the additional 
payment adjustments that apply when the procedure is discontinued. We 
are proposing to restrict the policy to device-intensive APCs so that 
the adjustment would not be triggered by the use of an inexpensive 
device whose cost would not constitute a significant portion of the 
total payment rate for an APC. At this time, we are not proposing to 
deduct the device offset amount from a procedure that was discontinued 
after anesthesia was administered (modifier 74) because we believe that 
it may be more likely that devices involved with such procedures may no 
longer be sterile, such that they could be restocked and used for 
another case. However, we are soliciting public comments on how often 
the device becomes ineligible for use in a subsequent case and whether 
we should deduct the device offset amount from claims with modifier 74 
as well.

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout this proposed rule, the term ``biological'' 
is used because this is the term that appears in section 1861(t) of the 
Act. ``Biological'' as used in this proposed rule includes (but is not 
necessarily limited to) ``biological product'' or ``biologic'' as 
defined in the Public Health Service Act. 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; 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 
Medicare 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 2016 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G'' in Addenda A and B to this proposed rule, which are available via 
the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. If the drug or biological is covered under 
a competitive acquisition contract under section 1847B of the Act, the 
pass-through payment amount is determined by the Secretary to be equal 
to the average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. However, we note that the 
Part B drug competitive acquisition program (CAP) has been postponed 
since CY 2009, and such a program has not been reinstated for CY 2016.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64. These regulations specify 
that the pass-through payment equals the amount determined under 
section 1842(o) of the Act minus the portion of the APC payment that 
CMS determines is associated with the drug or biological. Section 1847A 
of the Act establishes the average sales price (ASP) methodology, which 
is used for payment for drugs and biologicals described in section 
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, the wholesale acquisition cost 
(WAC), and the average wholesale price (AWP). In this proposed rule, 
the term ``ASP methodology'' and ``ASP-based'' are inclusive of all 
data sources and methodologies described therein. Additional 
information on the ASP methodology can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Proposed Drugs and Biologicals with Expiring Pass-Through Payment 
Status in CY 2015
    We are proposing that the pass-through status of 12 drugs and 
biologicals would expire on December 31, 2015, as listed in Table 39 
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by 
December 31, 2015. These drugs and biologicals were approved for pass-
through status on or before January 1, 2013. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status (specifically, anesthesia drugs; 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure (including diagnostic 
radiopharmaceuticals, contrast agents, and stress agents); 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 proposed at $100 for CY 2016), as discussed further in section 
V.B.2. of this proposed rule. If the estimated per day cost for the 
drug or biological is less than or equal to the applicable OPPS drug 
packaging threshold, we would package payment for the drug or 
biological into the payment for the associated procedure in the 
upcoming calendar year. If the estimated per day cost of the drug or 
biological is greater than the OPPS drug packaging threshold, we would 
provide separate payment at the applicable relative ASP-based payment 
amount

[[Page 39271]]

(which is proposed at ASP+6 percent for CY 2016, as discussed further 
in section V.B.3. of this proposed rule).

    Table 39--Proposed Drugs and Biologicals for Which Pass-Through Payment Status Expires December 31, 2015
----------------------------------------------------------------------------------------------------------------
         CY 2015 HCPCS code             CY 2015 long descriptor             CY 2015 SI             CY 2015 APC
----------------------------------------------------------------------------------------------------------------
A9520...............................  Technetium Tc 99m            N                                         N/A
                                       tilmanocept, diagnostic,
                                       up to 0.5 millicuries.
C9132...............................  Prothrombin complex          K                                        9132
                                       concentrate (human),
                                       Kcentra, per i.u. of
                                       Factor IX activity.
J1556...............................  Injection, immune globulin   K                                        9130
                                       (Bivigam), 500 mg.
J3060...............................  Injection, taliglucerase     K                                        9294
                                       alfa, 10 units.
J7315...............................  Mitomycin, ophthalmic, 0.2   N                                         N/A
                                       mg.
J7316...............................  Injection, Ocriplasmin,      K                                        9298
                                       0.125mg.
J9047...............................  Injection, carfilzomib, 1    K                                        9295
                                       mg.
J9262...............................  Injection, omacetaxine       K                                        9297
                                       mepesuccinate, 0.01 mg.
J9354...............................  Injection, ado-trastuzumab   K                                        9131
                                       emtansine, 1 mg.
J9400...............................  Injection, Ziv-Aflibercept,  K                                        9296
                                       1 mg.
Q4122...............................  Dermacell, per square        N                                         N/A
                                       centimeter.
Q4127...............................  Talymed, per square          N                                         N/A
                                       centimeter.
----------------------------------------------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or 
Continuing Pass-Through Payment Status in CY 2016
    We are proposing to continue pass-through payment status in CY 2016 
for 32 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, 2015. These drugs and biologicals, 
which were approved for pass-through status between January 1, 2013, 
and July 1, 2015, are listed in Table 40 below. The APCs and HCPCS 
codes for these drugs and biologicals approved for pass-through status 
through July 1, 2015 are assigned status indicator ``G'' in Addenda A 
and B to this proposed rule. Addenda A and B to this proposed rule are 
available via the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. Payment for drugs and biologicals with pass-through 
status under the OPPS is currently made at the physician's office 
payment rate of ASP+6 percent. We believe it is consistent with the 
statute to propose to continue to provide payment for drugs and 
biologicals with pass-through status at a proposed rate of ASP+6 
percent in CY 2016, which is the amount that drugs and biologicals 
receive under section 1842(o) of the Act.
    Therefore, for CY 2016, we are proposing to pay for pass-through 
drugs and biologicals at ASP+6 percent, equivalent to the rate these 
drugs and biologicals would receive in the physician's office setting 
in CY 2016. We are proposing that a $0.00 pass-through payment amount 
would be paid for most pass-through drugs and biologicals under the CY 
2016 OPPS because the difference between the amount authorized under 
section 1842(o) of the Act, which is proposed at 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 the following: 
contrast agents; diagnostic radiopharmaceuticals; 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), we are 
proposing that their pass-through payment amount would be equal to 
ASP+6 percent for CY 2016 because, if not for their pass-through 
status, payment for these products would be packaged into the 
associated procedure.
    In addition, we are proposing to continue to update pass-through 
payment rates on a quarterly basis on the CMS Web site during CY 2016 
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 68632 through 68635).
    In CY 2016, as is consistent with our CY 2015 policy for diagnostic 
and therapeutic radiopharmaceuticals, we are proposing to provide 
payment for both diagnostic and therapeutic radiopharmaceuticals that 
are granted pass-through payment 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 
payment status during CY 2016, we are proposing to follow the standard 
ASP methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
are proposing to provide pass-through payment at WAC+6 percent, the 
equivalent payment provided to pass-through drugs and biologicals 
without ASP information. If WAC information also is not available, we 
are proposing to provide payment for the pass-through 
radiopharmaceutical at 95 percent of its most recent AWP.
    As discussed in more detail in section II.A.3. of this proposed 
rule, we implemented a policy whereby payment for the following 
nonpass-through items is packaged into payment for the associated 
procedure: policy-packaged drugs which include contrast agents, stress 
agents, diagnostic radiopharmaceuticals, and 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 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

[[Page 39272]]

or biological. Because payment for a drug that is policy-packaged would 
otherwise be packaged if the product did not have pass-through payment 
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 V.A.4. of this proposed rule. It 
follows that the copayment for the nonpass-through payment portion (the 
otherwise applicable fee schedule amount that we also would offset from 
payment for the drug or biological if a payment offset applies) of the 
total OPPS payment for those drugs and biologicals, therefore, would 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 2015, we are proposing to 
continue to set the associated copayment amount to zero for CY 2016 for 
pass-through drugs and biologicals that would otherwise be packaged if 
the item did not have pass-through payment status. The 32 drugs and 
biologicals that we are proposing to continue to have pass-through 
payment status for CY 2016 or have been granted pass-through payment 
status as of July 2015 are shown in Table 40 below.

              Table 40--Proposed Drugs and Biologicals With Pass-Through Payment Status in CY 2016
----------------------------------------------------------------------------------------------------------------
                                Proposed CY 2016       CY 2016 Long                              Proposed new CY
      CY 2015 HCPCS code           HCPCS code           descriptor        Proposed CY 2016 SI      2016 APC *
----------------------------------------------------------------------------------------------------------------
A9586.........................  A9586...........  Florbetapir f18,       G                                  1664
                                                   diagnostic, per
                                                   study dose, up to 10
                                                   millicuries.
C9025.........................  C9025...........  Injection,             G                                  1488
                                                   ramucirumab, 5 mg.
C9026.........................  C9026...........  Injection,             G                                  1489
                                                   vedolizumab, 1 mg.
C9027.........................  C9027...........  Injection,             G                                  1490
                                                   pembrolizumab, 1 mg.
C9349.........................  C9349...........  PuraPly, and PuraPly   G                                  1657
                                                   Antimicrobial, any
                                                   type, per square
                                                   centimeter.
C9442.........................  C9442...........  Injection,             G                                  1658
                                                   belinostat, 10 mg.
C9443.........................  C9443...........  Injection,             G                                  1659
                                                   dalbavancin, 10 mg.
C9444.........................  C9444...........  Injection,             G                                  1660
                                                   oritavancin, 10 mg.
C9445.........................  C9445...........  Injection, c-1         G                                  9445
                                                   esterase inhibitor
                                                   (human), Ruconest,
                                                   10 units.
C9446.........................  C9446...........  Injection, tedizolid   G                                  1662
                                                   phosphate, 1 mg.
C9447.........................  C9447...........  Injection,             G                                  1663
                                                   phenylephrine and
                                                   ketorolac, 4 ml vial.
C9449.........................  C9449...........  Injection,             G                                  9449
                                                   blinatumomab, 1 mcg.
C9450.........................  C9450...........  Injection,             G                                  9450
                                                   fluocinolone
                                                   acetonide
                                                   intravitreal
                                                   implant, 0.19 mg.
C9451.........................  C9451...........  Injection, peramivir,  G                                  9451
                                                   1 mg.
C9452.........................  C9452...........  Injection,             G                                  9452
                                                   ceftolozane 50 mg
                                                   and tazobactam 25 mg.
C9453.........................  C9453...........  Injection, nivolumab,  G                                  9453
                                                   1 mg.
C9454.........................  C9454...........  Injection,             G                                  9454
                                                   pasireotide long
                                                   acting, 1 mg.
C9455.........................  C9455...........  Injection,             G                                  9455
                                                   siltuximab, 10 mg.
C9497.........................  C9497...........  Loxapine, inhalation   G                                  9497
                                                   powder, 10 mg.
C9022.........................  J1322...........  Injection, elosulfase  G                                  1480
                                                   alfa, 1 mg.
Q9970.........................  J1439...........  Injection, ferric      G                                  9441
                                                   carboxymaltose, 1 mg.
J1446.........................  J1446...........  Injection, TBO-        G                                  1477
                                                   Filgrastim, 5
                                                   micrograms.
C9023.........................  J3145...........  Injection,             G                                  1487
                                                   testosterone
                                                   undecanoate, 1 mg.
C9134.........................  J7181...........  Factor XIII            G                                  1746
                                                   (antihemophilic
                                                   factor,
                                                   recombinant),
                                                   Tretten, per i.u.
C9133.........................  J7200...........  Factor IX              G                                  1467
                                                   (antihemophilic
                                                   factor,
                                                   recombinant),
                                                   Rixubus, per i.u.
C9135.........................  J7201...........  Factor IX              G                                  1486
                                                   (antihemophilic
                                                   factor,
                                                   recombinant),
                                                   Alprolix, per i.u.
J7508.........................  J7508...........  Tacrolimus, Extended   G                                  1465
                                                   Release, Oral, 0.1
                                                   mg.
C9021.........................  J9301...........  Injection,             G                                  1476
                                                   obinutuzumab, 10 mg.
J9371.........................  J9371...........  Injection,             G                                  1466
                                                   Vincristine Sulfate
                                                   Liposome, 1 mg.
Q4121.........................  Q4121...........  Theraskin, per square  G                                  1479
                                                   centimeter.
C9136.........................  Q9975...........  Injection, factor      G                                  1656
                                                   viii, fc fusion
                                                   protein,
                                                   (recombinant), per
                                                   i.u..
C9448.........................  Q9978...........  Netupitant (300mg)     G                                  9448
                                                   and palonosetron
                                                   (0.5 mg), oral.
----------------------------------------------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) contains a
  crosswalk of the existing APC numbers to the proposed new APC numbers for CY 2016.

4. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Policy-Packaged Drugs and Biologicals 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 and radiology 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 non-pass-through diagnostic radiopharmaceuticals and 
contrast agents were packaged as a matter of policy.
    Beginning in CY 2014, in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74925), we finalized a policy to package nonpass-
through drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure. This category 
includes diagnostic radiopharmaceuticals, contrast agents, stress 
agents, and other diagnostic drugs. In addition, beginning in CY 2014, 
we finalized the packaging

[[Page 39273]]

of all drugs and biologicals that function as supplies when used in a 
surgical procedure (including but not limited to skin substitutes and 
implantable biologicals). These packaging policies are codified at 42 
CFR 419.2(b).
b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
and the otherwise applicable OPD fee schedule amount. 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. 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 2016, as we did in CY 2015, 
we are proposing to continue to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals. For CY 2016, there will be one 
diagnostic radiopharmaceutical with pass-through status under the OPPS, 
HCPCS code A9586 (Florbetapir f18, diagnostic, per study dose, up to 10 
millicuries). We currently apply the established radiopharmaceutical 
payment offset policy to pass-through payment for this product.
    Table 41 below displays the proposed APCs to which nuclear medicine 
procedures would be assigned in CY 2016 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.

Table 41--Proposed APCs to Which a Diagnostic Radiopharmaceutical Offset
                      May Be Applicable in CY 2016
------------------------------------------------------------------------
Proposed Restructured/ Renumbered CY
             2016 APC *                   Proposed CY 2016 APC title
------------------------------------------------------------------------
5591................................  Level 1 Nuclear Medicine and
                                       Related Services.
5592................................  Level 2 Nuclear Medicine and
                                       Related Services.
5593................................  Level 3 Nuclear Medicine and
                                       Related Services.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing APC numbers
  to the proposed new APC numbers for CY 2016.

c. Proposed Payment Offset Policy for Contrast Agents
    Section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
and the otherwise applicable OPD fee schedule amount. Because a payment 
offset is necessary in order to provide an appropriate transitional 
pass-through payment, we deduct from the pass-through payment for 
contrast agents an amount reflecting the portion of the APC payment 
associated with predecessor contrast agents in order to ensure no 
duplicate contrast agent payment is made.
    In CY 2010, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor contrast agents when considering new contrast agents for 
pass-through payment (74 FR 60482 through 60484). Specifically, we use 
the policy-packaged drug offset fraction for procedural APCs, 
calculated as 1 minus the following: the cost from single procedure 
claims in the APC after removing the cost for policy-packaged drugs 
divided by the cost from single procedure claims in the APC. To 
determine the actual APC offset amount for pass-through contrast agents 
that takes into consideration the otherwise applicable OPPS payment 
amount, we are proposing to multiply the policy packaged drug offset 
fraction by the APC payment amount for the procedure with which the 
pass-through contrast agent is used and, accordingly, reduce the 
separate OPPS payment for the pass-through contrast agent by this 
amount. For CY 2016, as we did in CY 2015, we are proposing to continue 
to apply our standard contrast agents offset policy to payment for any 
pass-through contrast agents (we refer readers to the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66879) for the final CY 2015 
policy).
    Although there are currently no contrast agents with pass-through 
payment status under the OPPS, we believe that a payment offset is 
necessary in the event that a new contrast agent is approved for pass-
through status during CY 2016 to provide an appropriate transitional 
pass-through payment for new contrast agents. We are proposing 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 41 above, and these 
APCs are displayed in Table 42 below. The methodology used to determine 
a proposed threshold cost for application of a contrast agent offset 
policy is described in detail in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60483 through 60484). For CY 2016 and subsequent 
years, we are proposing to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 42 of this proposed rule, a specific offset based on the 
procedural APC would be applied to payment for the contrast agent to 
ensure that duplicate payment is not made for the contrast agent.

 Table 42--Proposed APCs to Which a Contrast Agent Payment Offset May Be
                         Applicable for CY 2016
------------------------------------------------------------------------
 Proposed restructured/renumbered CY
             2016 APC *                   Proposed CY 2016 APC title
------------------------------------------------------------------------
5181................................  Level 1 Vascular Procedures and
                                       Related Services.
5182................................  Level 2 Vascular Procedures and
                                       Related Services.
5183................................  Level 3 Vascular Procedures and
                                       Related Services.

[[Page 39274]]

 
5188................................  Diagnostic Cardiac
                                       Catheterization.
5191................................  Level 1 Endovascular Procedures.
5192................................  Level 2 Endovascular Procedures.
5193................................  Level 3 Endovascular Procedures.
5351................................  Level 1 Percutaneous Abdominal/
                                       Biliary Procedures and Related
                                       Services.
5523................................  Level 3 X-Ray and Related
                                       Services.
5524................................  Level 4 X-Ray and Related
                                       Services.
5525................................  Level 5 X-Ray and Related
                                       Services.
5526................................  Level 6 X-Ray and Related
                                       Services.
5561................................  Level 1 Echocardiogram With
                                       Contrast.
5562................................  Level 2 Echocardiogram With
                                       Contrast.
5571................................  Computed Tomography With Contrast
                                       and Computed Tomography
                                       Angiography.
5582................................  Magnetic Resonance Imaging and
                                       Magnetic Resonance Angiography
                                       With Contrast.
5881................................  Ancillary Outpatient Service When
                                       Patient Expires.
8006................................  CT and CTA With Contrast
                                       Composite.
8008................................  MRI and MRA With Contrast
                                       Composite.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing APC numbers
  to the proposed new APC numbers for CY 2016.

d. Proposed Payment Offset Policy for Drugs, Biologicals, and 
Radiopharmaceuticals That Function as Supplies When Used in a 
Diagnostic Test or Procedure (Other Than Diagnostic 
Radiopharmaceuticals and Contrast Agents 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. In the CY 2014 
OPPS/ASC final rule with comment period (78 FR 74925), we finalized our 
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. As a part of this policy, we specifically finalized 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 
75019). Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we finalized a policy 
for CY 2014 to deduct from the pass-through payment for skin 
substitutes and stress agents an amount reflecting the portion of the 
APC payment associated with predecessor skin substitutes and stress 
agents in order to ensure no duplicate skin substitute or stress agent 
payment is made (78 FR 75019).
    In CY 2014, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor skin substitutes or stress agents when considering a new 
skin substitute or stress agent for pass-through payment (78 FR 75019). 
Specifically, in the case of pass-through skin substitutes, we use 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 use 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 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 75019). For CY 2016, 
as we did in CY 2015, we are proposing to continue to apply the skin 
substitute and stress agent offset policy to payment for pass-through 
skin substitutes and stress agents.
    For 2016, there will be two skin substitutes (HCPCS codes Q4121 and 
C9349) with pass-through payment status under the OPPS. We will apply 
the skin substitute payment offset policy to pass-through payment for 
these products. Table 43 below displays the proposed APCs to which skin 
substitute procedures would be assigned in CY 2016 and for which we 
expect that an APC offset could be applicable in the case of skin 
substitutes with pass-through status.
    Although there are currently no stress agents with pass-through 
status under the OPPS, we believe that a payment offset is necessary in 
the event that a new stress agent is approved for pass-through status 
during CY 2016 in order to provide an appropriate transitional pass-
through payment for new stress agents. Table 44 below displays the 
proposed APCs to which MPI procedures would be assigned in CY 2016 and 
for which we expect that an APC offset could be applicable in the case 
of a stress agent with pass-through status.

Table 43--Proposed APCs to Which a Skin Substitute Payment Offset May Be
                         Applicable for CY 2016
------------------------------------------------------------------------
     Proposed new CY 2016 APC *           Proposed CY 2016 APC title
------------------------------------------------------------------------
5054................................  Level 4 Skin Procedures.
5055................................  Level 5 Skin Procedures.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) contains a crosswalk of the existing APC numbers
  to the proposed new APC numbers for CY 2016.


  Table 44--Proposed APCs to Which a Stress Agent Payment Offset May Be
                         Applicable for CY 2016
------------------------------------------------------------------------
     Proposed new CY 2016 APC *           Proposed CY 2016 APC title
------------------------------------------------------------------------
5722................................  Level 2 Diagnostic Tests and
                                       Related Services.
5593................................  Level 3 Nuclear Medicine and
                                       Related Services.
------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet
  on the CMS Web site) for a crosswalk of the existing APC numbers to
  the proposed new APC numbers for CY 2016.

    We are proposing to continue to post annually on the CMS Web site 
at http://

[[Page 39275]]

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.

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

1. Background
    Under the policies that we established for the CY 2013 OPPS, we 
currently pay for drugs, biologicals, and radiopharmaceuticals that do 
not have pass-through payment status in one of two ways: (1) As a 
packaged payment included in the payment for the associated service, or 
(2) 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.
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this proposed rule, in accordance 
with section 1833(t)(16)(B) of the Act, the threshold for establishing 
separate APCs for payment of drugs and biologicals was set to $50 per 
administration during CYs 2005 and 2006. In CY 2007, we used the four 
quarter moving average Producer Price Index (PPI) levels for 
Pharmaceutical Preparations (Prescription) to trend the $50 threshold 
forward from the third quarter of CY 2005 (when the Pub. L. 108-173 
mandated threshold became effective) to the third quarter of CY 2007. 
We then rounded the resulting dollar amount to the nearest $5 increment 
in order to determine the CY 2007 threshold amount of $55. Using the 
same methodology as that used in CY 2007 (which is discussed in more 
detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68085 through 68086)), we set the packaging threshold for establishing 
separate APCs for drugs and biologicals at $95 for CY 2015 (79 FR 
66882).
    Following the CY 2007 methodology, for this CY 2016 OPPS/ASC 
proposed rule, we used the most recently available four quarter moving 
average PPI levels to trend the $50 threshold forward from the third 
quarter of CY 2005 to the third quarter of CY 2016 and rounded the 
resulting dollar amount ($100.22) to the nearest $5 increment, which 
yielded a figure of $100. 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.
    Based on the calculations described above, we are proposing a 
packaging threshold for CY 2016 of $100. For a more detailed discussion 
of the OPPS drug packaging threshold and the use of the PPI for 
Prescription Drugs, we refer readers to the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68085 through 68086).
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes 
That Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    To determine the proposed CY 2016 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 2014 
and were paid (via packaged or separate payment) under the OPPS. We 
used data from CY 2014 claims processed before January 1, 2015 for this 
calculation. However, we did not perform this calculation for those 
drugs and biologicals with multiple HCPCS codes that include different 
dosages, as described in section V.B.2.c. of this proposed rule, or for 
the following policy-packaged items that we are proposing to continue 
to package in CY 2016: anesthesia drugs; contrast agents; stress 
agents; diagnostic radiopharmaceuticals; 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.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2016, 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 68638). For each drug and biological HCPCS code, we used 
an estimated payment rate of ASP+6 percent (which is the payment rate 
we are proposing for separately payable drugs and biologicals for CY 
2016, as discussed in more detail in section V.B.3.b. of this proposed 
rule) to calculate the CY 2016 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2014 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2015) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2016, we are proposing to 
use payment rates based on the ASP data from the fourth quarter of CY 
2014 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the Internet on the CMS Web site) because 
these are the most recent data available for use at the time of 
development of this proposed rule. These data also were the basis for 
drug payments in the physician's office setting, effective April 1, 
2015. 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 2014 hospital claims data to determine their per 
day cost.
    We are proposing to package items with a per day cost less than or 
equal to $100, and identify items with a per day cost greater than $100 
as separately payable. Consistent with our past practice, we cross-
walked historical OPPS claims data from the CY 2014

[[Page 39276]]

HCPCS codes that were reported to the CY 2015 HCPCS codes that we 
display in Addendum B to this proposed rule (which is available via the 
Internet on the CMS Web site) for proposed payment in CY 2016.
    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 CY 2016 OPPS/ASC 
proposed rule, we are proposing to use ASP data from the first quarter 
of CY 2015, 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, 2015, along with updated hospital claims 
data from CY 2014. We note that we also are proposing to use these data 
for budget neutrality estimates and impact analyses for this CY 2016 
OPPS/ASC proposed rule.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B to the final rule with comment 
period will be based on ASP data from the second quarter of CY 2015. 
These data will be the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2015. These payment rates would then 
be updated in the January 2016 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2016. For items that do not currently have an ASP-based 
payment rate, we are proposing to recalculate their mean unit cost from 
all of the CY 2014 claims data and updated cost report information 
available for the CY 2016 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 2016 OPPS/
ASC proposed rule may be different from the same drug HCPCS code's 
packaging status determined based on the data used for the CY 2016 
OPPS/ASC final rule with comment period. Under such circumstances, we 
are proposing to continue to follow the established policies initially 
adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably 
pay for those drugs whose cost fluctuates relative to the proposed CY 
2016 OPPS drug packaging threshold and the drug's payment status 
(packaged or separately payable) in CY 2015. Specifically, for CY 2016, 
consistent with our historical practice, we are proposing to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2015 and that are proposed for separate payment in CY 
2016, and that then have per day costs equal to or less than the CY 
2016 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2016 final rule, would continue to 
receive separate payment in CY 2016.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2015 and that are proposed for separate payment in CY 2016, and 
that then have per day costs equal to or less than the CY 2016 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2016 final rule, would remain packaged in 
CY 2016.
     HCPCS codes for drugs and biologicals for which we are 
proposing packaged payment in CY 2016 but then have per day costs 
greater than the CY 2016 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2016 final 
rule, would receive separate payment in CY 2016.
c. Proposed High Cost/Low Cost Threshold for Packaged Skin Substitutes
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74938), we unconditionally packaged skin substitute products into their 
associated surgical procedures as part of a broader policy to package 
all drugs and biologicals that function as supplies when used in a 
surgical procedure. As part of the policy to finalize the packaging of 
skin substitutes, we also finalized a methodology that divides the skin 
substitutes into a high cost group and a low cost group, in order to 
ensure adequate resource homogeneity among APC assignments for the skin 
substitute application procedures (78 FR 74933). For the CY 2014 
update, assignment to the high cost or low cost skin substitute group 
depended upon a comparison of the July 2013 ASP+6 percent payment 
amount for each skin substitute to the weighted average payment per 
unit for all skin substitutes. The weighted average was calculated 
using the skin substitute utilization from the CY 2012 claims data and 
the July 2013 ASP+6 percent payment amounts. The high cost/low cost 
skin substitute threshold for CY 2014 was $32 per cm\2\. Skin 
substitutes that had a July 2013 ASP+6 percent amount above $32 per 
cm\2\ were classified in the high cost group, and skin substitutes that 
had a July 2013 ASP+6 percent amount at or below $32 per cm\2\ were 
classified in the low cost group. Any new skin substitutes without 
pricing information were assigned to the low cost category until 
pricing information was available to compare to the $32 per cm\2\ 
threshold for CY 2014. Skin substitutes with pass-through payment 
status were assigned to the high cost category, with an offset applied 
as described in section V.A.4.d. of the CY 2015 OPPS/ASC proposed rule 
(79 FR 40996).
    As discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40998 
through 40999) and final rule with comment period (79 FR 66882 through 
66885), after the effective date of the CY 2014 packaging policy, some 
skin substitute manufacturers brought the following issues to our 
attention regarding the CY 2014 methodology for determining the high 
cost/low cost threshold:
     Using ASP to determine a product's placement in the high 
or low cost category may unfairly disadvantage the limited number of 
skin substitute products that are sold in large sizes (that is, above 
150 cm\2\). Large size skin substitute products are primarily used for 
burns that are treated on an inpatient basis. These manufacturers 
contended that nonlinear pricing for skin substitute products sold in 
both large and small sizes results in lower per cm\2\ prices for large 
sizes. Therefore, the use of ASP data to categorize products into high 
and low cost categories can result in placement of products that have 
significant inpatient use of the large, lower-priced (per cm\2\) sizes 
into the low cost category, even though these large size products are 
not often used in the hospital outpatient department.
     Using a weighted average ASP to establish the high/low 
cost categories, combined with the drug pass-through policy, will lead 
to unstable high/low cost skin substitute categories in the future. 
According to one manufacturer, under our CY 2014 policy, manufacturers 
with products on pass-

[[Page 39277]]

through payment status have an incentive to set a very high price 
because hospitals are price-insensitive to products paid with pass-
through payments. As these new high priced pass-through skin 
substitutes capture more market share, the weighted average ASP high 
cost/low cost threshold could escalate rapidly, resulting in a shift in 
the assignment of many skin substitutes from the high cost category to 
the low cost category.
    We agreed with stakeholder concerns regarding the potential 
instability of the high/low cost categories associated with the drug 
pass-through policy, as well as stakeholder concerns about the 
inclusion of large-sized products that are primarily used for 
inpatients in the ASP calculation, when ASP is used to establish the 
high cost/low cost categories. As an alternative to using ASP data, in 
the CY 2015 OPPS/ASC final rule with comment period, we established the 
high cost/low cost threshold using an alternative methodology (that is, 
the weighted average mean unit cost (MUC) for all skin substitute 
products from claims data) that we believed may provide more stable 
high/low cost categories and resolve the issue associated with large 
sized products because the MUC will be derived from hospital outpatient 
claims only. We indicated that the threshold was based on costs from 
hospital outpatient claims data instead of manufacturer reported sales 
prices that would not include larger sizes primarily used for inpatient 
burn cases.
    As discussed in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66884), after consideration of the public comments we received 
on the CY 2015 OPPS/ASC proposed rule, we finalized a policy for CY 
2015 to maintain the high cost/low cost APC structure for skin 
substitute procedures in CY 2015, and we revised the existing 
methodology used to establish the high/low cost threshold with the 
alternative MUC methodology. We also finalized for CY 2015 the policies 
that skin substitutes with pass-through payment status would be 
assigned to the high cost category, and that skin substitutes with 
pricing information but without claims data to calculate an MUC would 
be assigned to either the high cost or low cost category based on the 
product's ASP+6 percent payment rate. If ASP is not available, we 
stated we would use WAC+6 percent or 95 percent of AWP to assign a 
product to either the high cost or low cost category. We also finalized 
a policy for CY 2015 that any new skin substitutes without pricing 
information will be assigned to the low cost category until pricing 
information is available to compare to the CY 2015 threshold. We stated 
that new skin substitute manufacturers must submit pricing information 
to CMS no later than the 15th of the third month prior to the effective 
date of the next OPPS quarterly update. For example, for a new skin 
substitute with new pricing information to be included in the July 1, 
2015 OPPS update and designated as included in the high cost group, 
verifiable pricing information must have been provided to CMS no later 
than April 15, 2015.
    We stated in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66884) that we would evaluate the per day cost (PDC) methodology 
and compare it to the MUC methodology in CY 2016 once CY 2014 claims 
data were available. For CY 2016, we analyzed CY 2014 claims data to 
calculate a threshold using both the MUC and PDC methods. To calculate 
a per patient, per day cost for each skin substitute product, we 
multiplied the total units by the mean unit cost and divided the 
product by the total number of days. We have posted a file on the CMS 
Web site that provides details on the CY 2016 high/low cost status for 
each skin substitute product based on a MUC threshold (rounded to the 
nearest $1) of $25 per cm\2\ and a PDC threshold (rounded to the 
nearest $1) of $1,050.
    For CY 2016, based on these calculations, we are proposing to 
determine the high/low cost status for each skin substitute product 
based on either a product's MUC exceeding the MUC threshold or the 
product's PDC exceeding the PDC threshold. Skin substitutes that exceed 
either of these thresholds would be assigned to the high cost group and 
all other products would be assigned to the low cost group. As 
demonstrated in the aforementioned file that we posted on the CMS Web 
site, we note that the majority of high cost products remain high cost 
under both methodologies. Observing fairly consistent results with both 
methodologies, we believe that, together, both thresholds constitute a 
more robust methodology for identifying high cost skin substitute 
products.
    We would continue to assign skin substitutes with pass-through 
payment status to the high cost category, and skin substitutes with 
pricing information but without claims data to calculate a MUC or PDC 
will be assigned to either the high cost or low cost category based on 
the product's ASP+6 percent payment rate as compared to the MUC 
threshold. If ASP is not available, we would use WAC+6 percent or 95 
percent of AWP to assign a product to either the high cost or low cost 
category. New skin substitutes without pricing information would be 
assigned to the low cost category until pricing information is 
available to compare to the CY 2016 MUC threshold.
    For CY 2016, we also are proposing to remove all implantable 
biologicals from the skin substitute cost group list because these 
products are typically used in internal surgical procedures to 
reinforce or repair soft tissue, and are not typically used to promote 
healing of wounds on the skin. The implantable biologicals that we are 
proposing to remove for the skin cost group are identified in Table 45 
below. Implantable biologicals are treated as packaged surgical 
supplies under the OPPS, which are captured under 42 CFR 419.2(b)(4).

    Table 45--Proposed Implantable Biologicals For Removal From Skin
                       Substitute Cost Group List
------------------------------------------------------------------------
                                                            Proposed CY
  Proposed CY 2016 HCPCS code     Proposed CY 2016 short    2016 status
                                        descriptor           indicator
------------------------------------------------------------------------
C9358..........................  SurgiMend, fetal.......               N
C9360..........................  SurgiMend, neonatal....               N
Q4107..........................  Graft Jacket...........               N
Q4125..........................  Arthroflex.............               N
Q4130..........................  Strattice TM...........               N
Q4142..........................  Xcm biologic tiss                     N
                                  matrix 1cm.
------------------------------------------------------------------------


[[Page 39278]]

    Table 46 below shows the CY 2015 high cost/low cost status for each 
product based on our combined threshold methodology. As noted earlier, 
we have posted a file on the CMS Web site that provides more 
information on the high cost/low cost disposition of each product for 
each threshold methodology. For the CY 2016 OPPS/ASC final rule with 
comment period, we will update the MUC and PDC threshold amounts using 
the most recently available CY 2014 claims data and CY 2015 pricing 
information.
    We are proposing that a skin substitute that is assigned to the 
high cost group in CY 2015 and exceeds either the MUC or PDC in this 
proposed rule for CY 2016 would be assigned to the high cost group for 
CY 2016, even if it no longer exceeds the MUC or PDC CY 2016 thresholds 
based on updated claims data and pricing information used in the CY 
2016 final rule with comment period.

                               Table 46--Proposed Skin Substitute Assignments to High Cost and Low Cost Groups for CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Proposed CY     Proposed CY
                                                                                                           CY 2015 High/   2016 High/Low   2016 High/Low
       Proposed  CY 2016 HCPCS code           CY 2016 Short descriptor      HCPCS Code      Proposed CY     Low status     status based    status based
                                                                              dosage         2016  SI        based on       on proposed     on proposed
                                                                                                           weighted MUC    weighted MUC    weighted PDC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Q4100.....................................  Skin Substitute, NOS........             N/A               N             Low             Low             Low
Q4102.....................................  Oasis Wound Matrix..........         1 cm\2\               N             Low             Low             Low
Q4103.....................................  Oasis Burn Matrix...........         1 cm\2\               N             Low            High            High
Q4111.....................................  Gammagraft..................         1 cm\2\               N             Low             Low             Low
Q4115.....................................  Alloskin....................         1 cm\2\               N             Low             Low             Low
Q4117 **..................................  Hyalomatrix.................         1 cm\2\               N             Low             Low             Low
Q4119.....................................  Matristem Wound Matrix......         1 cm\2\               N             Low             Low             Low
Q4120.....................................  Matristem Burn Matrix.......         1 cm\2\               N             Low             Low             Low
Q4124.....................................  Oasis Tri-layer Wound Matrix         1 cm\2\               N             Low             Low             Low
Q4135.....................................  Mediskin....................         1 cm\2\               N             Low             Low             Low
Q4136.....................................  Ezderm......................         1 cm\2\               N             Low             Low             Low
Q4141.....................................  Alloskin ac, 1cm............         1 cm\2\               N             Low             Low             Low
Q4142.....................................  Xcm Biologic Tissue Matrix           1 cm\2\               N             Low             Low            High
                                             1cm.
Q4143**...................................  Repriza, 1cm................         1 cm\2\               N             Low             Low             Low
Q4146.....................................  Tensix, 1CM.................         1 cm\2\               N             Low             Low             Low
Q4150**...................................  Allowrap DS or Dry 1 sq cm..         1 cm\2\               N            High             Low             Low
Q4151**...................................  AmnioBand, Guardian 1 sq cm.         1 cm\2\               N             Low             Low             Low
Q4153**...................................  Dermavest 1 square cm.......         1 cm\2\               N            High             Low             Low
Q4157**...................................  Revitalon 1 square cm.......         1 cm\2\               N             Low             Low             Low
Q4158**...................................  MariGen 1 square cm.........         1 cm\2\               N             Low             Low             Low
Q4159**...................................  Affinity 1 square cm........         1 cm\2\               N            High             Low             Low
C9349 \*\/ \**\...........................  PuraPly/PuraPly                      1 cm\2\               G            High            High            High
                                             Antimicrobial.
C9363.....................................  Integra Meshed Bil Wound Mat         1 cm\2\               N            High            High             Low
Q4101.....................................  Apligraf....................         1 cm\2\               N            High            High            High
Q4104.....................................  Integra BMWD................         1 cm\2\               N            High             Low             Low
Q4105.....................................  Integra DRT.................         1 cm\2\               N            High             Low            High
Q4106.....................................  Dermagraft..................         1 cm\2\               N            High            High             Low
Q4108.....................................  Integra Matrix..............         1 cm\2\               N            High             Low             Low
Q4110.....................................  Primatrix...................         1 cm\2\               N            High            High             Low
Q4116.....................................  Alloderm....................         1 cm\2\               N            High             Low            High
Q4121*....................................  Theraskin...................         1 cm\2\               G            High            High            High
Q4122**...................................  Dermacell...................         1 cm\2\               N            High            High            High
Q4123.....................................  Alloskin....................         1 cm\2\               N            High             Low            High
Q4126.....................................  Memoderm/derma/tranz/.......         1 cm\2\               N            High            High            High
                                            Integup.....................
Q4127.....................................  Talymed.....................         1 cm\2\               N            High            High            High
Q4128.....................................  Flexhd/Allopatchhd/Matrixhd.         1 cm\2\               N            High            High            High
Q4129**...................................  Unite Biomatrix.............         1 cm\2\               N            High             Low             Low
Q4131.....................................  Epifix......................         1 cm\2\               N            High            High            High
Q4132.....................................  Grafix Core.................         1 cm\2\               N            High            High            High
Q4133.....................................  Grafix Prime................         1 cm\2\               N            High            High            High
Q4134.....................................  hMatrix.....................         1 cm\2\               N            High             Low             Low
Q4137.....................................  Amnioexcel or Biodexcel, 1cm         1 cm\2\               N            High            High             Low
Q4138.....................................  Biodfence DryFlex, 1cm......         1 cm\2\               N            High            High            High
Q4140.....................................  Biodfence 1cm...............         1 cm\2\               N            High            High            High
Q4147**...................................  Architect ecm, 1cm..........            1 mg               N            High            High            High
Q4148.....................................  Neox 1k, 1cm................         1 cm\2\               N            High            High            High
Q4152**...................................  Dermapure 1 square cm.......         1 cm\2\               N            High            High            High
Q4154**...................................  Biovance 1 square cm........         1 cm\2\               N            High            High            High
Q4156**...................................  Neox 100 1 square cm........         1 cm\2\               N            High            High            High
Q4160**...................................  NuShield 1 square cm........         1 cm\2\               N            High            High            High
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Pass-through status in CY 2016.
**New HCPCS code. Claims data not available in CY 2014.


[[Page 39279]]

d. Proposed Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. 
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 2010 OPPS/ASC final rule with comment period (74 FR 60490 
through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages because we 
believed that adopting the standard HCPCS code-specific packaging 
determinations for these codes could lead to inappropriate payment 
incentives for hospitals to report certain HCPCS codes instead of 
others. We continue to believe that making packaging determinations on 
a drug-specific basis eliminates payment incentives for hospitals to 
report certain HCPCS codes for drugs and allows hospitals flexibility 
in choosing to report all HCPCS codes for different dosages of the same 
drug or only the lowest dosage HCPCS code. Therefore, we are proposing 
to continue our policy to make packaging determinations on a drug-
specific basis, rather than a HCPCS code-specific basis, for those 
HCPCS codes that describe the same drug or biological but different 
dosages in CY 2016.
    For CY 2016, 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 2014 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 2016 OPPS/ASC proposed rule and, as is our current policy for 
determining the packaging status of other drugs, we used the mean unit 
cost available from the CY 2014 claims data to make the proposed 
packaging determinations for these drugs: HCPCS code J3471 (Injection, 
hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp 
units)) and HCPCS code J3472 (Injection, hyaluronidase, ovine, 
preservative free, per 1000 usp units).
    For all other drugs and biologicals that have HCPCS codes 
describing different doses, we then multiplied the proposed 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 $100 (so that all HCPCS codes for the same drug 
or biological would be packaged) or greater than $100 (so that all 
HCPCS codes for the same drug or biological would be separately 
payable).
    The proposed packaging status of each drug and biological HCPCS 
code to which this methodology would apply in CY 2016 is displayed in 
Table 47 below.

    Table 47--Proposed HCPCS Codes to Which the CY 2016 Drug-Specific
             Packaging Determination Methodology Would Apply
------------------------------------------------------------------------
                                  Proposed CY 2016 long     Proposed CY
  Proposed CY 2016 HCPCS code           descriptor            2016 SI
------------------------------------------------------------------------
C9257..........................  Injection, bevacizumab,               K
                                  0.25 mg.
J9035..........................  Injection, bevacizumab,               K
                                  10 mg.
J1020..........................  Injection,                            N
                                  methylprednisolone
                                  acetate, 20 mg.
J1030..........................  Injection,                            N
                                  methylprednisolone
                                  acetate, 40 mg.
J1040..........................  Injection,                            N
                                  methylprednisolone
                                  acetate, 80 mg.
J1070..........................  Injection, testosterone               N
                                  cypionate, up to 100
                                  mg.
J1080..........................  Injection, testosterone               N
                                  cypionate, 1 cc, 200
                                  mg.
J1440..........................  Injection, filgrastim                 K
                                  (g-csf), 300 mcg.
J1441..........................  Injection, filgrastim                 K
                                  (g-csf), 480 mcg.
J1460..........................  Injection, gamma                      N
                                  globulin,
                                  intramuscular, 1 cc.
J1560..........................  Injection, gamma                      N
                                  globulin,
                                  intramuscular over 10
                                  cc.
J1642..........................  Injection, heparin                    N
                                  sodium, (heparin lock
                                  flush), per 10 units.
J1644..........................  Injection, heparin                    N
                                  sodium, per 1000 units.
J1850..........................  Injection, kanamycin                  N
                                  sulfate, up to 75 mg.
J1840..........................  Injection, kanamycin                  N
                                  sulfate, up to 500 mg.
J2270..........................  Injection, morphine                   N
                                  sulfate, up to 10 mg.
J2271..........................  Injection, morphine                   N
                                  sulfate, 100mg.
J2788..........................  Injection, rho d immune               N
                                  globulin, human,
                                  minidose, 50
                                  micrograms (250 i.u.).
J2790..........................  Injection, rho d immune               N
                                  globulin, human, full
                                  dose, 300 micrograms
                                  (1500 i.u.).
J2920..........................  Injection,                            N
                                  methylprednisolone
                                  sodium succinate, up
                                  to 40 mg.
J2930..........................  Injection,                            N
                                  methylprednisolone
                                  sodium succinate, up
                                  to 125 mg.
J3120..........................  Injection, testosterone               N
                                  enanthate, up to 100
                                  mg.
J3130..........................  Injection, testosterone               N
                                  enanthate, up to 200
                                  mg.
J3471..........................  Injection,                            N
                                  hyaluronidase, ovine,
                                  preservative free, per
                                  1 usp unit (up to 999
                                  usp units).
J3472..........................  Injection,                            N
                                  hyaluronidase, ovine,
                                  preservative free, per
                                  1000 usp units.
J7050..........................  Infusion, normal saline               N
                                  solution , 250 cc.
J7040..........................  Infusion, normal saline               N
                                  solution, sterile (500
                                  ml=1 unit).
J7030..........................  Infusion, normal saline               N
                                  solution , 1000 cc.
J7515..........................  Cyclosporine, oral, 25                N
                                  mg.
J7502..........................  Cyclosporine, oral, 100               N
                                  mg.
J8520..........................  Capecitabine, oral, 150               K
                                  mg.
J8521..........................  Capecitabine, oral, 500               K
                                  mg.

[[Page 39280]]

 
J9250..........................  Methotrexate sodium, 5                N
                                  mg.
J9260..........................  Methotrexate sodium, 50               N
                                  mg.
------------------------------------------------------------------------

3. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. Most physician Part B drugs are paid at ASP+6 percent 
pursuant to section 1842(o) and section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In this CY 2016 
OPPS/ASC proposed rule, we are proposing to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    Since CY 2006, we have attempted to establish a drug payment 
methodology that reflects hospitals' acquisition costs for drugs and 
biologicals while taking into account relevant pharmacy overhead and 
related handling expenses. We have attempted to collect more data on 
hospital overhead charges for drugs and biologicals by making several 
proposals that would require hospitals to change the way they report 
the cost and charges for drugs. None of these proposals were adopted 
due to significant stakeholder concern, including that hospitals stated 
that it would be administratively burdensome to report hospital 
overhead charges. We established a payment policy for separately 
payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642 
through 68643). We referred to this methodology as our standard drug 
payment methodology. 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'' in CY 2010 (an internal adjustment of 
the data) by redistributing cost from coded and uncoded packaged drugs 
and biologicals to separately payable drugs in order to provide more 
appropriate payments for drugs and biologicals in the HOPD. We 
continued this methodology, and we further refined it in CY 2012 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).
    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, in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68386), 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

[[Page 39281]]

and, therefore, may result in payment rates that are not as 
predictable, accurate, or appropriate as they could be. Section 
1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology 
for determining payment rates for SCODS wherein, if hospital 
acquisition cost data are not available, payment shall be equal 
(subject to any adjustment for overhead costs) to payment rates 
established under the methodology described in section 1842(o), 1847A, 
or 1847B of the Act. We refer to this alternative methodology as the 
``statutory default.'' 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 and, therefore, 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 (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 
biologicals for CY 2013 (77 FR 68389). We continued our final policy of 
paying the statutory default for both CY 2014 and CY 2015.
b. Proposed CY 2016 Payment Policy
    For CY 2016 and subsequent years, we are proposing to continue our 
CY 2015 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 
(the statutory default). We are proposing that the ASP+6 percent 
payment amount for separately payable drugs and biologicals requires no 
further adjustment and represents the combined acquisition and pharmacy 
overhead payment for drugs and biologicals. We also are proposing that 
payments for separately payable drugs and biologicals are included in 
the budget neutrality adjustments, under the requirements in section 
1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is 
not applied in determining payments for these separately paid drugs and 
biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this proposed rule (available via the 
Internet on the CMS Web site), which illustrate the proposed CY 2016 
payment of ASP+6 percent for separately payable non-pass-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 April 1, 2015, or WAC, AWP, or mean unit cost 
from CY 2014 claims data and updated cost report information available 
for this proposed rule. In general, these published payment rates are 
not reflective of actual proposed January 2016 payment rates. This is 
because payment rates for drugs and biologicals with ASP information 
for January 2016 will be determined through the standard quarterly 
process where ASP data submitted by manufacturers for the third quarter 
of 2015 (July 1, 2015 through September 30, 2015) will be used to set 
the payment rates that are released for the quarter beginning in 
January 2016 near the end of December 2015. In addition, proposed 
payment rates for drugs and biologicals in Addenda A and B to this 
proposed rule for which there was no ASP information available for 
April 2015 are based on mean unit cost in the available CY 2014 claims 
data. If ASP information becomes available for payment for the quarter 
beginning in January 2016, 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 proposed rule (reflecting April 2015 ASP data) that do not 
have ASP information available for the quarter beginning in January 
2016. These drugs and biologicals would then be paid based on mean unit 
cost data derived from CY 2014 hospital claims. Therefore, the proposed 
payment rates listed in Addenda A and B to this proposed rule are not 
for January 2016 payment purposes and are only illustrative of the 
proposed CY 2016 OPPS payment methodology using the most recently 
available information at the time of issuance of this proposed rule.
4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 2015, 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 2016. Therefore, we are 
proposing for CY 2016 to pay all nonpass-through, separately payable 
therapeutic radiopharmaceuticals at ASP+6 percent, based on the 
statutory default described in section 1833(t)(14)(A)(iii)(II) of the 
Act. For a full discussion of ASP-based payment for therapeutic 
radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60520 through 60521). We also are 
proposing to rely on CY 2014 mean unit cost data derived from hospital 
claims data for payment rates for therapeutic radiopharmaceuticals for 
which ASP data are unavailable and to update the payment rates for 
separately payable therapeutic radiopharmaceuticals according to our 
usual process for updating the payment rates for separately payable 
drugs and biologicals on a quarterly basis if updated ASP information 
is available. For a complete history of the OPPS payment policy for 
therapeutic radiopharmaceuticals, we refer readers to the CY 2005 OPPS 
final rule with comment period (69 FR 65811), the CY 2006 OPPS final 
rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60524).
    The proposed CY 2016 payment rates for nonpass-through separately 
payable therapeutic radiopharmaceuticals are included in Addenda A and 
B to this proposed rule (which are available via the Internet on the 
CMS Web site).

[[Page 39282]]

5. Proposed Payment Adjustment Policy for Radioisotopes Derived From 
Non-Highly Enriched Uranium Sources
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the 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 United States would like 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 3-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 by non-HEU sources (77 FR 68323). 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. The time period for this 
additional payment was not to exceed 5 years from January 1, 2013 (77 
FR 68321).
    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. 
As discussed in the CY 2015 OPPS/ASC final rule with comment period (79 
FR 66892), we reassessed this payment for CY 2015 and did not identify 
any new information that would cause us to modify payment. We stated 
that we were continuing the policy of providing an additional $10 
payment for radioisotopes produced by non-HEU sources for CY 2015. We 
also stated that although we will reassess this policy annually, 
consistent with the original policy in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68321), we do not anticipate that this 
additional payment would extend beyond CY 2017.
    We have reassessed this payment for CY 2016 and did not identify 
any new information that would cause us to modify payment. Therefore, 
for CY 2016, we are proposing to continue to provide an additional $10 
payment for radioisotopes produced by non-HEU sources.
6. Proposed Payment for Blood Clotting Factors
    For CY 2015, we provided payment for blood clotting factors under 
the same methodology as other non-pass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee (79 FR 66893). That is, for CY 2015, 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 2015 updated furnishing fee was $0.197 per unit.
    For CY 2016, we are proposing to pay for blood clotting factors at 
ASP+6 percent, consistent with our proposed payment policy for other 
nonpass-through separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Our policy to pay for a furnishing fee for blood clotting 
factors under the OPPS is consistent with the methodology applied in 
the physician office and inpatient hospital setting, and first 
articulated in the CY 2006 OPPS final rule with comment period (70 FR 
68661) and later discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66765). The proposed furnishing fee update is 
based on the percentage increase in the Consumer Price Index (CPI) for 
medical care for the 12-month period ending with June of the previous 
year. Because the Bureau of Labor Statistics releases the applicable 
CPI data after the MPFS and OPPS/ASC proposed rules are published, we 
are not able to include the actual updated furnishing fee in the 
proposed rules. Therefore, in accordance with our policy, as finalized 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), 
we are proposing to announce the actual figure for the percent change 
in the applicable CPI and the updated furnishing fee calculated based 
on that figure through applicable program instructions and posting on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
7. Proposed Payment for Non-Pass-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. Beginning in CY 2008 and continuing 
through CY 2015, we implemented a policy to provide payment for new 
drugs and biologicals with HCPCS codes (except those that are policy-
packaged), but which did not have pass-through status and were without 
OPPS hospital claims data, at an amount consistent with the final OPPS 
payment methodology for other separately payable non-pass-through drugs 
and biologicals for the given year.
    For CY 2016, we are proposing to continue this policy and provide 
payment for new drugs, biologicals, and therapeutic 
radiopharmaceuticals that do not have pass-through status at

[[Page 39283]]

ASP+6 percent, consistent with the proposed CY 2016 payment methodology 
for other separately payable non-pass-through drugs, biologicals, and 
therapeutic radiopharmaceuticals, which is proposed to be ASP+6 percent 
as discussed earlier in this section. 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 2016, we also are proposing to continue to package payment 
for all new nonpass-through policy-packaged products (diagnostic radio 
pharma ceuticals; contrast agents; stress 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 proposed CY 2016 HCPCS codes 
that do not replace predecessor HCPCS codes). This is consistent with 
the CY 2014 final packaging policy for 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 this proposed rule.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2016 and subsequent years, we are proposing 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 note that if 
the WAC is also unavailable, we would make payment at 95 percent of the 
product's most recent AWP. We also are proposing to assign status 
indicator ``K'' (Separately paid nonpass-through drugs and 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 are 
proposing that once their ASP data become available in later quarterly 
submissions, their payment rates under the OPPS would be adjusted so 
that the rates would be based on the ASP methodology and set to the 
proposed ASP-based amount (proposed for CY 2016 at ASP+6 percent) for 
items that have not been granted pass-through status. This proposed 
policy, which utilizes the ASP methodology 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 are proposing to continue to base the initial payment 
for new therapeutic radiopharmaceuticals with HCPCS codes, but which do 
not have pass-through status and are without claims data, on the WACs 
for these products if ASP data for these therapeutic 
radiopharmaceuticals are not available. If the WACs also are 
unavailable, we are proposing to make payment for new therapeutic 
radiopharmaceuticals at 95 percent of the products' most recent AWP 
because we would not have mean costs from hospital claims data upon 
which to base payment. As we are proposing with new drugs and 
biologicals, we are proposing to continue our policy of assigning 
status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, for CY 2016, we are 
proposing to announce any changes to the payment amounts for new drugs 
and biologicals in the CY 2016 OPPS/ASC final rule with comment period 
and also on a quarterly basis on the CMS Web site during CY 2016 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 2016 HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals were not available at 
the time of development of this proposed rule. However, these drugs, 
biologicals, and therapeutic radiopharmaceuticals will be included in 
Addendum B to the CY 2016 OPPS/ASC final rule with comment period 
(which will be available via the Internet on the CMS Web site), where 
they will be assigned comment indicator ``NI.'' This comment indicator 
reflects that their interim final OPPS treatment will be open to public 
comment in the CY 2016 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2014 and/or CY 2015 for which we did not have CY 2014 
hospital claims data available for this proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. In order to determine the packaging status of these 
products for CY 2016, we are proposing 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 non-pass-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 1 day in the 
hospital outpatient setting. This rationale was first adopted in the CY 
2006 OPPS/ASC final rule with comment period (70 FR 68666 through 
68667).
    We are proposing to package items for which we estimate the per day 
administration cost to be less than or equal to $100 and to pay 
separately for items for which we estimate the per day administration 
cost to be greater than $100 (with the exception of diagnostic 
radiopharmaceuticals; contrast agents; stress 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 
are proposing to continue to package regardless of cost) in CY 2016. We 
also are proposing that the CY 2016 payment for separately payable 
items without CY 2014 claims data would be ASP+6 percent, similar to 
payment for other separately payable nonpass-through drugs and 
biologicals under the OPPS. In accordance with the ASP methodology paid 
in the physician's office setting, in the absence of ASP data, we are 
proposing to use the WAC for the product to establish the initial 
payment rate and, if the WAC is also unavailable, we would make payment 
at 95 percent of the most recent AWP available. The proposed estimated 
units per day and status indicators for these items are displayed in 
Table 48 of this proposed rule.
    Finally, there are 33 drugs and biologicals, shown in Table 49 of 
this proposed rule, that were payable in CY 2014 but for which we 
lacked CY 2014 claims data and any other pricing information for the 
ASP methodology for this CY 2016 OPPS/ASC proposed rule. For CY 2010, 
we finalized a policy

[[Page 39284]]

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.
    For CY 2016, as we finalized in CY 2015 (79 FR 66894), we are 
proposing to continue to assign status indicator ``E'' to drugs and 
biologicals that lack CY 2014 claims data and pricing information for 
the ASP methodology. All drugs and biologicals without CY 2014 hospital 
claims data or data based on the ASP methodology that are assigned 
status indicator ``E'' on this basis at the time of this proposed rule 
for CY 2016 are displayed in Table 49 of this proposed rule. We also 
are proposing to continue our policy to assign the products status 
indicator ``K'' and pay for them separately for the remainder of CY 
2016 if pricing information becomes available.

                           Table 48--Drugs and Biologicals Without CY 2014 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated
                                        Proposed CY 2016 long     average number    Proposed CY    Proposed New
    Proposed CY 2016 HCPCS code               descriptor           of units per       2016 SI      CY 2016 APC *
                                                                        day
----------------------------------------------------------------------------------------------------------------
90581..............................  Anthrax vaccine, for                      1               N             N/A
                                      subcutaneous or
                                      intramuscular use.
C9293..............................  Injection, glucarpidase, 10             400               K            9293
                                      units.
J0215..............................  Injection, alefacept, 0.5                29               K            1633
                                      mg.
J0630..............................  Injection, calcitonin                     2               K            1433
                                      salmon, up to 400 units.
J0717..............................  Injection, certolizumab                 361               K            1474
                                      pegol, 1 mg.
J1324..............................  Injection, enfuvirtide, 1               169               K            1361
                                      mg.
J3355..............................  Injection, urofollitropin,                2               K            1741
                                      75 IU.
J3489..............................  Injection, Zoledronic Acid,               4               K            1356
                                      1 mg.
J7196..............................  Injection, antithrombin                 268               K            1332
                                      recombinant, 50 IU.
J8650..............................  Nabilone, oral, 1 mg.......               4               K            1424
J9306..............................  Injection, pertuzumab, 1 mg             450               K            1471
Q2050..............................  Injection, Doxorubicin                    7               K            7046
                                      Hydrochloride, Liposomal,
                                      Not Otherwise Specified,
                                      10 mg.
Q3027..............................  Injection, Interferon Beta-               3               K            1472
                                      1a, 1 mcg for
                                      Intramuscular Use.
----------------------------------------------------------------------------------------------------------------
* Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) contains a
  crosswalk of the existing APC numbers to the proposed new APC numbers for CY 2016.


     Table 49--Drugs and Biologicals Without CY 2014 Claims Data and Without Pricing Information for the ASP
                                                   Methodology
----------------------------------------------------------------------------------------------------------------
       Proposed CY 2016 HCPCS code          Proposed CY 2016 long descriptor           Proposed CY 2016 SI
----------------------------------------------------------------------------------------------------------------
90296...................................  Diphtheria antitoxin, equine, any     E
                                           route.
90477...................................  Adenovirus vaccine, type 7, live,     E
                                           for oral use.
90681...................................  Rotavirus vaccine, human,             E
                                           attenuated, 2 dose schedule, live,
                                           for oral use.
90704...................................  Mumps virus vaccine, live, for        E
                                           subcutaneous use.
90727...................................  Plague vaccine for intramuscular use  E
J0190...................................  Injection, biperiden lactate, per 5   E
                                           mg.
J0205...................................  Injection, alglucerase, per 10 units  E
J0350...................................  Injection, anistreplase, per 30       E
                                           units.
J0365...................................  Injection, aprotonin, 10,000 kiu....  E
J0395...................................  Injection, arbutamine hcl, 1 mg.....  E
J0710...................................  Injection, cephapirin sodium, up to   E
                                           1 gm.
J1180...................................  Injection, dyphylline, up to 500 mg.  E
J1435...................................  Injection, estrone, per 1 mg........  E
J1452...................................  Injection, fomivirsen sodium,         E
                                           intraocular, 1.65 mg.
J1562...................................  Injection, immune globulin            E
                                           (vivaglobin), 100 mg.
J1655...................................  Injection, tinzaparin sodium, 1000    E
                                           iu.
J1835...................................  Injection, itraconazole, 50 mg......  E
J2513...................................  Injection, pentastarch, 10%           E
                                           solution, 100 ml.
J2670...................................  Injection, tolazoline hcl, up to 25   E
                                           mg.
J2725...................................  Injection, protirelin, per 250 mcg..  E
J2940...................................  Injection, somatrem, 1 mg...........  E
J3320...................................  Injection, spectinomycin              E
                                           dihydrochloride, up to 2 gm.
J3400...................................  Injection, triflupromazine hcl, up    E
                                           to 20 mg.
J7191...................................  Factor viii (antihemophilic factor    E
                                           (porcine)), per i.u..
J7505...................................  Muromonab-cd3, parenteral, 5 mg.....  E
J7513...................................  Daclizumab, parenteral, 25 mg.......  E
J8562...................................  Fludarabine phosphate, oral, 10 mg..  E
J9160...................................  Injection, denileukin diftitox, 300   E
                                           micrograms.
J9165...................................  Injection, diethylstilbestrol         E
                                           diphosphate, 250 mg.
J9213...................................  Injection, interferon, alfa-2a,       E
                                           recombinant, 3 million units.
J9215...................................  Injection, interferon, alfa-n3,       E
                                           (human leukocyte derived), 250,000
                                           iu.
J9300...................................  Injection, gemtuzumab ozogamicin, 5   E
                                           mg.
Q0515...................................  Injection, sermorelin acetate, 1      E
                                           microgram.
----------------------------------------------------------------------------------------------------------------


[[Page 39285]]

C. Self-Administered Drugs (SADs) Technical Correction

    Sections 1861(s)(2)(A) and (s)(2)(B) of the Act define covered 
``medical and other health services'' to include both ``services and 
supplies'' and ``hospital services'', which both, in turn, include 
drugs and biologicals not usually self-administered by the patient. Our 
regulations at 42 CFR 410.29 set forth limitations on payment of drugs 
and biologicals under Medicare Part B, and capture the description of 
self-administered drugs noted in sections 1861(s)(2)(A) and (s)(2)(B) 
of the Act. In our review of Sec.  410.29, which defines exclusions to 
Medicare Part B payment for drugs and biologicals, we noted that 
paragraph (a), as currently written, excludes payment for any drug or 
biological that can be self-administered. We are proposing to make a 
technical correction that would amend the description of these drugs 
and biologicals at Sec.  410.29(a) to more appropriately reflect the 
statutory language. Specifically, we are proposing to delete the phrase 
``any drug or biological that can be self-administered'' and replace it 
with the phrase ``any drug or biological which is usually self-
administered by the patient''.

D. Proposed OPPS Payment for Biosimilar Biological Products

1. Background
    The Affordable Care Act authorized an abbreviated pathway for the 
licensing of biosimilar biological products. Under this abbreviated 
pathway, a proposed biological product that is demonstrated to be 
biosimilar to a reference product can rely on certain existing 
scientific knowledge about the safety, purity, and potency of the 
reference product to support licensure. Section 3139 of the Affordable 
Care Act amended section 1847A of the Act to add the definition of 
biosimilar biological product and set forth a payment methodology for 
biosimilar biological products. In 2010, CMS published regulations for 
the payment for biosimilar biological products that are administered in 
a physician's office (75 FR 73393 through 73394). However, at that 
time, it was not clear how or when the new Food and Drug Administration 
(FDA) approval pathway would be implemented or when biosimilar products 
would be approved.
    The FDA approved the first biosimilar under the new pathway on 
March 6, 2015. By the end of 2015, we anticipate that the FDA may 
approve several more biosimilar biological products, including products 
that have a common previously licensed reference product. Although we 
described our Medicare Part B payment policy for biosimilar biological 
products when administered in the physician office setting in the CY 
2011 MPFS final rule with comment period, we did not describe how 
payment would be made for these products when administered in the 
hospital outpatient department.
2. Proposed Payment Policy for Biosimilar Biological Products
    Section 1833(t)(14)(A)(iii) of the Act defines payment policy for 
separately covered outpatient drugs (SCODs), and currently, CMS pays 
for SCODs under the payment methodology set forth at section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). Through 
rulemaking, CMS adopted this payment methodology to apply to separately 
payable drugs and biologicals that are not SCODs. Under this authority, 
the payment rate for SCODs and applicable separately payable drugs and 
biologicals is determined in accordance with sections 1842(o) and 1847A 
of the Act, which generally equates to average sales price (ASP) plus 6 
percent.
    As noted above, the Affordable Care Act amended section 1847A of 
the Act to add the definition of biosimilar biological product and set 
forth a payment methodology for biosimilar biological products. Since 
the statutory authority under section 1833(t)(14)(A)(iii)(II) of the 
Act authorizes payment in accordance with section 1847A of the Act, and 
provides additional discretionary authority for such payments to be 
calculated and adjusted by the Secretary as necessary, we believe that 
it is reasonable to adopt a policy to pay for biosimilar biological 
products as provided under section 1847A(b)(8) of the Act. Therefore, 
we are proposing to extend the application of the methodology for 
determining the amount of payment applicable to SCODs authorized by 
section 1833(t)(14)(A)(iii)(II) of the Act, which, through rulemaking, 
is applicable separately paid drugs and biologicals, to biosimilar 
biological products provided under the OPPS. This equates to a payment 
determined under section 1847A of the Act. That is, we are proposing to 
pay for biosimilar biological products based on the payment allowance 
of the product as determined under section 1847A of the Act. In 
addition, we are proposing that nonpass-through biosimilar biological 
products would be subject to our threshold-packaged policy as described 
in section V.B.2. of this proposed rule.
    Consistent with our established OPPS drug, biological, and 
radiopharmaceutical payment policy, we are proposing that HCPCS coding 
and modifiers for biosimilar biological products will be based on 
policy established under the CY 2016 MPFS rule. Public comments on 
HCPCS codes and modifiers for biosimilar biological products should be 
submitted in response to the CY 2016 MPFS proposed rule.
3. Proposed OPPS Transitional Pass-Through Payment Policy for 
Biosimilar Biological Products
    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 hospital outpatient department fee 
schedule amount. Because section 1842(o)(1)(C) of the Act cross 
references section 1847A of the Act, we believe that it is reasonable 
to infer that biosimilar biological products are eligible for 
transitional pass-through payment, and that such payment amount may be 
set as the difference between the amount paid under section 1842(o) of 
the Act (that is, the payment allowance of the product determined under 
section 1847A(b)(8) of the Act) and the otherwise applicable hospital 
outpatient department fee schedule amount. Therefore, we are proposing 
to extend pass-through payment eligibility to biosimilar biological 
products and to establish pass-through payment based on the difference 
between the amount paid under section 1842(o) of the Act (that is, the 
payment allowance of the product determined under section 1847A(b)(8) 
of the Act) and the otherwise applicable hospital outpatient department 
fee schedule amount.
    We are soliciting public comments on our proposed payment policies 
for biosimilar biological products, including whether biosimilar 
biological products should be eligible for transitional pass-through 
payment, and the appropriate methodologies for determining payment for 
biosimilar biological products eligible for transitional pass-through 
payment.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not

[[Page 39286]]

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 
2016 entails estimating spending for two groups of items. The first 
group of items consists of device categories that are currently 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2016. 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 2015 or beginning in CY 2016. 
The sum of the CY 2016 pass-through estimates for these two groups of 
device categories equals the total CY 2016 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 2014 OPPS/ASC 
final rule with comment period (78 FR 75034 through 75036). 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), 
in this proposed rule, for CY 2016, we are proposing to include an 
estimate of any implantable biologicals eligible for pass-through 
payment in our estimate of pass-through spending for devices. 
Similarly, we finalized a policy in CY 2015 that applications for pass-
through payment for skin substitutes and similar products be evaluated 
using the medical device pass-through process and payment methodology 
(76 FR 66885 to 66888). Therefore, as we did beginning in CY 2015, for 
CY 2016, we also are proposing to include an estimate of any skin 
substitutes and similar products 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 2016. Because, as we are proposing to pay for most 
non-pass-through separately payable drugs and biologicals under the CY 
2016 OPPS at ASP+6 percent, as we discussed in section V.B.3. of this 
proposed rule, which represents the otherwise applicable fee schedule 
amount associated with most pass-through drugs and biologicals, and 
because, as we are proposing to pay for CY 2016 pass-through drugs and 
biologicals at ASP+6 percent, as we discussed in section V.A. of this 
proposed rule, our estimate of drug and biological pass-through payment 
for CY 2016 for this group of items is $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, we policy-
package all nonpass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies when used in a surgical procedure, as discussed in section 
II.A.3. of this proposed rule. We are proposing that all of these 
policy-packaged drugs and biologicals with pass-through status would be 
paid at ASP+6 percent, like other pass-through drugs and biologicals, 
for CY 2016. Therefore, our estimate of pass-through payment for 
policy-packaged drugs and biologicals with pass-through status approved 
prior to CY 2016 is not $0, as discussed below. In section V.A.4. of 
this proposed rule, we discuss our policy to determine if the costs of 
certain policy-packaged drugs or biologicals are already packaged into 
the existing APC structure. If we determine that a policy-packaged drug 
or biological approved for pass-through payment resembles predecessor 
drugs or biologicals already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment, we are 
proposing to offset the amount of pass-through payment for the policy-
packaged drug or biological. For these drugs or biologicals, the APC 
offset amount is the portion of the APC payment for the specific 
procedure performed with the pass-through drug or biological, which we 
refer to as the policy-packaged drug APC offset amount. If we determine 
that an offset is appropriate for a specific policy-packaged drug or 
biological receiving pass-through payment, we are proposing to reduce 
our estimate of pass-through payments for these drugs or biologicals by 
this amount.
    Similar to pass-through estimates for devices, the first group of 
drugs and biologicals requiring a pass-through payment estimate 
consists of those products that were recently made eligible for pass-
through payment and that will continue to be eligible for pass-through 
payment in CY 2016. 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 2015 or beginning in CY 2016. The sum of 
the proposed CY 2016 pass-through estimates for these two groups of 
drugs and biologicals equals the proposed total CY 2016 pass-through 
spending estimate for drugs and biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2016, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, 
and our OPPS policy from CY 2004

[[Page 39287]]

through CY 2015 (79 FR 66897 through 66898).
    For the first group, consisting of device categories that are 
currently eligible for pass-through payment and will continue to be 
eligible for pass-through payment in CY 2016, there are three active 
categories for CY 2016. For CY 2015, we established one new device 
category subsequent to the publication of the CY 2015 OPPS/ASC proposed 
rule, HCPCS code C2624 (Implantable wireless pulmonary artery pressure 
sensor with delivery catheter, including all system components), that 
was effective January 1, 2015. We estimate that HCPCS code C2624 will 
cost $50.5 million in pass-through expenditures in CY 2016. Effective 
Apri1 1, 2015, we established that HCPCS code C2623 (Catheter, 
transluminal angioplasty, drug-coated, non-laser) will be eligible for 
pass-through payment. We estimate that HCPCS code C2623 will cost $73 
million in pass-through expenditures in CY 2016. Effective July 1, 
2015, we established that HCPCS code C2613 (Lung biopsy plug with 
delivery system) will be eligible for pass-through payment. We estimate 
that HCPCS code C2613 will cost $3.3 million in pass-through 
expenditures in CY 2016. Based on the three device categories of HCPCS 
codes C2624, C2623, and C2613, we are proposing an estimate for the 
first group of devices of $126.8 million.
    In estimating our proposed CY 2016 pass-through spending for device 
categories in the second group, we include: Device categories that we 
knew at the time of the development of this proposed rule will be newly 
eligible for pass-through payment in CY 2016; additional device 
categories that we estimate could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2016; and contingent projections for new device categories 
established in the second through fourth quarters of CY 2016. We are 
proposing to use the general methodology described in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66778), while also taking 
into account recent OPPS experience in approving new pass-through 
device categories. For this proposed rule, the estimate of CY 2016 
pass-through spending for this second group of device categories is $10 
million.
    To estimate proposed CY 2016 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 payment status for CY 2016, we are proposing 
to use the most recent Medicare physician claims 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 2016 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 payment status in CY 2016, 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 are 
proposing to include in the CY 2016 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 determine that the policy-packaged drug or biological 
approved for pass-through payment resembles a predecessor drug or 
biological already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment. For this 
proposed rule, using the proposed methodology described above, we 
calculated a CY 2016 proposed spending estimate for this first group of 
drugs and biologicals of approximately $5.2 million.
    To estimate proposed CY 2016 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 this proposed rule are newly 
eligible for pass through payment in CY 2016, additional drugs and 
biologicals that we estimate could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2016, and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2016), we are proposing to use utilization 
estimates from pass-through applicants, pharmaceutical industry data, 
clinical information, recent trends in the per unit ASPs of hospital 
outpatient drugs, and projected annual changes in service volume and 
intensity as our basis for making the CY 2016 pass-through payment 
estimate. We also are proposing to consider the most recent OPPS 
experience in approving new pass-through drugs and biologicals. Using 
our proposed methodology for estimating CY 2016 pass-through payments 
for this second group of drugs, we calculated a proposed spending 
estimate for this second group of drugs and biologicals of 
approximately $4.6 million.
    In summary, in accordance with the methodology described above in 
this section, for this proposed rule, we estimate that proposed total 
pass-through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2016 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2016 would be 
approximately $146.6 million (approximately $136.8 million for device 
categories and approximately $9.8 million for drugs and biologicals), 
which represents 0.25 percent of total projected OPPS payments for CY 
2016. Therefore, we estimate that proposed pass-through spending in CY 
2016 would not amount to 2.0 percent of total projected OPPS CY 2016 
program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

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

    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and emergency department (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 in past rulemaking our intent to develop

[[Page 39288]]

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 has been broadly endorsed by the 
stakeholder community.
    With respect to outpatient clinic visits, in the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 75036 through 75045), we 
finalized a policy that created alphanumeric HCPCS code G0463 (Hospital 
outpatient clinic visit for assessment and management of a patient) for 
hospital use only, representing any and all clinic visits under the 
OPPS, and assigned HCPCS code G0463 to APC 0634 (Hospital Clinic 
Visits). We also finalized a policy to use CY 2012 claims data to 
develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on 
the total geometric mean cost of the levels one through five CPT E/M 
codes for clinic visits (five levels for new patient clinic visits and 
five levels for established patient clinic visits) previously 
recognized under the OPPS (CPT codes 99201 through 99205 and 99211 
through 99215). In addition, we finalized a policy to no longer 
recognize a distinction between new and established patient clinic 
visits.
    With respect to ED visits, in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75036 through 75043), we also stated our policy 
that we would 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 to establish the OPPS payment under 
our established standard process. We refer readers to the CY 2014 OPPS/
ASC final rule with comment period for a detailed discussion of the 
public comments and our rationale for the CY 2014 policies (78 FR 75036 
through 75043).
    In this proposed rule, for CY 2016, we are proposing to continue 
the current policy, adopted in CY 2014, for clinic and ED visits. HCPCS 
code G0463 (for hospital use only) will represent any and all clinic 
visits under the OPPS. As part of our broader initiative to restructure 
APCs across the OPPS to collectively group services that are clinically 
similar and have similar resource costs within the same APC, we are 
proposing to reassign HCPCS code G0463 from existing APC 0634 to 
proposed renumbered APC 5012 (Level 2 Examinations and Related 
Services), former APC 0632. Proposed renumbered APC 5012 includes other 
services that are clinically similar with similar resource costs to 
HCPCS code G0463, such as HCPCS code G0402 (Initial preventive physical 
examination). We are proposing to use CY 2014 claims data to develop 
the proposed CY 2016 OPPS payment rates for HCPCS code G0463 based on 
the total geometric mean cost of HCPCS code G0463, as CY 2014 is the 
first year for which claims data are available for this code. Finally, 
as we established in the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75042), there is no longer a policy to recognize a 
distinction between new and established patient clinic visits.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75040), we stated that additional study was 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, and that 
we believed it was 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. At this time, we continue to believe that additional study 
is needed to assess the most suitable payment structure for ED visits. 
Therefore, in this CY 2016 OPPS/ASC proposed rule, we are not proposing 
any change in ED visit coding. Rather, as we did for CY 2015 and prior 
years, for CY 2016, we are proposing to continue to use our existing 
methodology to recognize the existing five CPT codes for Type A ED 
visits as well as the five HCPCS codes that apply to Type B ED visits, 
and to establish the proposed CY 2016 OPPS payment rates using our 
established standard process. We may propose changes to the coding and 
APC assignments for ED visits in future rulemaking.

B. Proposed Payment for Critical Care Services

    For the history of the payment policy for critical care services, 
we refer readers to the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75043). In the CY 2014 OPPS/ASC final rule with comment period, 
we continued to use 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 example electrocardiograms, chest X-rays, and pulse 
oximetry. Critical care services are described by 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)).
    Since CY 2013, we have stated that we would continue to monitor the 
hospital claims data for CPT code 99291 in order to determine whether 
revisions to our current payment policy for critical care services are 
warranted based on changes in hospitals' billing practices. Because the 
CY 2011 through CY 2014 claims data (used for CY 2013 through CY 2016 
ratesetting, respectively) do not demonstrate any significant change in 
hospital billing practices for critical care services, we continue to 
believe that it would be inappropriate to pay separately for the 
ancillary services that hospitals typically report in addition to CPT 
codes for critical care services. Based on this pattern of billing 
practices, we continue to believe that packaging ancillary services 
into critical care services is appropriate. Therefore, for CY 2016 and 
subsequent years, we are proposing to continue our policy (that has 
been in place since CY 2011) to recognize the existing CPT codes for 
critical care services and establish a payment rate based on historical 
claims data. We also are proposing to continue to implement claims 
processing edits that conditionally package payment for the ancillary 
services that are reported on the same date of service as critical care 
services in order to avoid overpayment.

C. Proposed Payment for Chronic Care Management Services

    In the CY 2015 OPPS/ASC final rule with comment period, we assigned 
CPT code 99490 to APC 0631 (Level 1 Examinations and Related Services), 
with a payable status indicator of ``V,'' under general physician 
supervision. (In this proposed rule, for CY 2016 and subsequent years, 
we are proposing to renumber APC 0631 as APC 5011.) The current code 
descriptor for CPT code 99490 is ``Chronic care management services 
(CCM), at least 20 minutes of clinical staff time directed by a 
physician or other qualified health care

[[Page 39289]]

professional, per calendar month), with the following required 
elements:
     Multiple (two or more) chronic conditions expected to last 
at least 12 months, or until the death of the patient;
     Chronic conditions place the patient at significant risk 
of death, acute exacerbation/decompensation, or functional decline; and
     Comprehensive care plan established, implemented, revised, 
or monitored.''
    CPT code 99490 is a physician-directed service, where the physician 
is directing the clinical staff time spent on care management for a 
specific patient. As a physician-directed service, payment under the 
OPPS for CPT code 99490 is made to the hospital when the hospital's 
clinical staff furnishes the service at the direction of the physician 
(or other appropriate nonphysician practitioner) who meets all the 
requirements to bill CPT code 99490 under the MPFS. The billing 
physician or nonphysician practitioner directing the CCM services must 
meet the requirements to bill CPT code 99490 under the MPFS. These 
requirements are the same, regardless of whether the services described 
by CPT code 99490 are furnished in the office or in the HOPD.
    While CPT code 99490 has been payable under the OPPS since January 
1, 2015, we have received questions about specific requirements for 
hospitals to bill this code beyond those requirements discussed in the 
CY 2015 MPFS final rule with comment period. In response to these 
questions, we posted frequently asked questions (FAQs) and answers on 
the CMS Web site on May 8, 2015. These FAQs can be accessed on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/. In reviewing the questions from 
hospitals on billing of CCM services, we identified several issues that 
we believe need to be clarified. Therefore, for CY 2016 and subsequent 
years, we are proposing additional requirements for hospitals to bill 
and receive OPPS payment for CPT code 99490. These proposed 
requirements, discussed below, are in addition to those already 
required under the OPPS for billing CPT code 99490 in CY 2015.
    In accordance with the CPT code descriptor for CPT code 99490, a 
hospital can only bill CPT code 99490 and receive payment under the 
OPPS for furnishing clinical staff services under a physician's or 
other appropriate nonphysician practitioner's direction to a patient 
that has multiple (two or more) chronic conditions expected to last at 
least 12 months or until the death of the patient, and that place the 
patient at significant risk of death, acute exacerbation/
decompensation, or functional decline. While we have always expected 
the hospital furnishing the clinical staff portion of CCM services, as 
described by CPT code 99490, to have an established relationship with 
the patient and to provide care and treatment to the patient during the 
course of illness (that is, the chronic conditions that are expected to 
last at least 12 months), we have not previously specified through 
notice-and-comment rulemaking that the hospital must have an 
established relationship with the patient as a requirement for billing 
and OPPS payment for CPT code 99490. Therefore, for CY 2016 and 
subsequent years, we are proposing that a hospital would be able to 
bill CPT code 99490 for CCM services only when furnished to a patient 
who has been either admitted to the hospital as an inpatient or has 
been a registered outpatient of the hospital within the last 12 months 
and for whom the hospital furnished therapeutic services. Section 20.2, 
Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-04) 
defines a hospital outpatient as a person who has not been admitted by 
the hospital as an inpatient but is registered on the hospital records 
as an outpatient and receives services (other than supplies alone) from 
the hospital. We believe that hospitals furnishing services described 
by CPT code 99490 are, in all likelihood, already meeting this 
requirement as they are providing CCM services described by CPT code 
99490 to patients for whom they already provide care and treatment. 
However, we are proposing to adopt the relationship requirement as an 
explicit condition for billing and payment of CCM services under the 
OPPS.
    As outlined in the CY 2015 MPFS final rule with comment period (79 
FR 67721 through 67722), practitioners furnishing and billing CCM 
services as described by CPT code 99490 under the MPFS are required to 
(1) inform the beneficiary about the availability of the CCM services 
from the practitioner and obtain his or her written agreement to have 
the service(s) provided; (2) document in the beneficiary's medical 
record that all elements of the CCM service(s) were explained and 
offered to the beneficiary, noting the beneficiary's decision to accept 
or decline the service; and (3) inform the beneficiary that only one 
practitioner can furnish and be paid for these services during the 
calendar month service period. For CY 2016 and subsequent years, we are 
proposing to adopt analogous requirements for billing services 
described by CPT code 99490 under the OPPS. Specifically, we are 
proposing, for CY 2016 and subsequent years, that hospitals furnishing 
and billing services described by CPT code 99490 under the OPPS would 
be required to have documented in the hospital's medical record the 
patient's agreement to have the services provided, or alternatively, to 
have the patient's agreement to have the CCM services provided 
documented in a beneficiary's medical record that the hospital can 
access. In addition, for CY 2016 and subsequent years, we are proposing 
to require hospitals furnishing and billing for the CCM services 
described by CPT code 99490 under the OPPS to have documented in the 
hospital medical record (or beneficiary medical record that the 
hospital can access) that all elements of the CCM services were 
explained and offered to the beneficiary, including a notation of the 
beneficiary's decision to accept or decline the services. If the 
hospital is billing for the CCM services, we would expect the physician 
or practitioner under whose direction the services are furnished to 
have discussed with the beneficiary that hospital clinical staff will 
furnish the services and that the beneficiary could be liable for two 
separate copayments from both the hospital and physician. Consistent 
with the MPFS requirement that only one practitioner can furnish and be 
paid for services described by CPT code 99490 during the calendar month 
service period, we are proposing, for CY 2016 and subsequent years, 
that only one hospital can furnish and be paid for services described 
by CPT code 99490 during the calendar month service period. The 
physician or other appropriate nonphysician practitioner directing the 
CCM services should inform the beneficiary that only one hospital can 
furnish and be paid for these services during the calendar month 
service period. These proposed requirements are consistent with and 
support the MPFS requirements set forth in the CY 2015 MPFS final rule 
with comment period (79 FR 67728).
    In addition, a number of scope of service elements for CCM services 
were finalized as requirements to bill for CCM services described by 
CPT code 99490 in the CY 2015 MPFS final rule with comment period (79 
FR 67715 through 67728). For CY 2016 and subsequent years, we are 
proposing to require analogous scope of service elements for the CCM 
services, listed below, to be met in order for hospitals

[[Page 39290]]

to bill and receive OPPS payment for furnishing CCM services described 
by CPT code 99490. Specifically, we are proposing to require a hospital 
that bills and receives OPPS payment for their clinical staff 
furnishing CCM services described by CPT code 99490 under the direction 
of a physician or other appropriate nonphysician practitioner to 
provide--
     Structured recording of demographics, problems, 
medications, medication allergies, and the creation of a structured 
clinical summary record. A full list of problems, medications, and 
medication allergies in the electronic health record (EHR) must inform 
the care plan, care coordination, and ongoing clinical care.
     Access to care management services 24 hours a day/7 days a 
week (providing the beneficiary with a means to make timely contact 
with health care providers to address his or her urgent chronic care 
needs, regardless of the time of day or day of the week).
     Continuity of care with a designated practitioner or 
member of the care team with whom the beneficiary is able to get 
successive routine appointments.
     Care management for chronic conditions, including 
systematic assessment of the beneficiary's medical, functional, and 
psychosocial needs; system-based approaches to ensure timely receipt of 
all recommended preventive care services; medication reconciliation 
with review of adherence and potential interactions; and oversight of 
beneficiary self-management of medications.
     Documentation of the creation of a patient-centered care 
plan based on a physical, mental, cognitive, psychosocial, functional, 
and environmental assessment or reassessment and an inventory of 
resources and supports (a comprehensive care plan for all health 
issues). Electronically capture care plan information, make this 
information available on a 24 hour/7 day a week basis to all 
practitioners furnishing CCM services, and electronically share, as 
appropriate, with other practitioners and providers.
     A written or electronic copy of the care plan provided to 
the beneficiary, and document its provision in the electronic medical 
record using certified information technology (IT).
     Management of care transitions between and among health 
care providers and settings, including referrals to other clinicians; 
follow-up after an emergency department visit; and follow-up after 
discharges from hospitals, skilled nursing facilities, or other health 
care facilities. Electronic transmission of a clinical summary created 
using certified health IT to support care transitions.
     Coordination with home- and community-based clinical 
service providers required to support the patient's psychosocial needs 
and functional deficits. Communication to and from home- and community-
based providers regarding these patient needs must be documented in the 
patient's medical record.
     Enhanced opportunities for the beneficiary and any 
caregiver to communicate with the practitioner regarding the 
beneficiary's care through not only telephone access, but also through 
the use of secure messaging, internet, or other asynchronous non-face-
to-face consultation methods.
    Lastly, with respect to the EHR, for CY 2016 and subsequent years, 
we are proposing to adopt the requirements set forth in the CY 2015 
MPFS final rule with comment period (79 FR 67723 through 67724) and 
detailed below for billing services described by CPT code 99490 under 
the OPPS. Specifically, for CY 2016 and subsequent years, we are 
proposing to require the use of EHR technology that has been certified 
under the ONC Health Information Technology (IT) Certification Program 
as requisite for hospitals furnishing and receiving payment under the 
OPPS for the clinical staff portion of CCM services, to ensure that 
hospitals have adequate capabilities to allow members of the 
interdisciplinary care team to have timely access to the most updated 
information informing the care plan. We are proposing, for hospital 
payment under the OPPS, that the CCM services as described by CPT code 
99490 must be furnished using, at a minimum, the edition(s) of 
certification criteria that is acceptable for purposes of the EHR 
Incentive Programs as of December 31 of the calendar year preceding 
each MPFS payment year to meet the following core technology 
capabilities: Structured recording of demographics, problems, 
medications, medication allergies, and the creation of a structured 
clinical summary. We also are proposing to require hospitals to use 
certified IT to fulfill the CCM scope of service requirements whenever 
the requirements reference a health or medical record. This would 
ensure that requirements for billing CCM services under the MPFS and 
OPPS are consistent throughout each MPFS and OPPS payment year, and are 
automatically updated according to the certification criteria required 
for the EHR Incentive Programs. For payment for CCM services under the 
OPPS in CY 2016, this policy would allow hospitals to use EHR 
technology certified to, at a minimum, the 2014 edition of 
certification criteria to meet the final core capabilities for CCM 
services and to fulfill the scope of service requirements for CCM 
services whenever the requirements reference a health or medical 
record. The CY 2015 MPFS final rule with comment period (79 FR 67728) 
includes a detailed table summarizing when certified health IT is 
required to support the scope of service requirements. We remind 
stakeholders that, for all electronic sharing of beneficiary 
information under our final CCM services policies, HIPAA standards 
apply in the usual manner.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. Section 1861(ff)(1) of the Act defines partial hospitalization 
services as the items and services described in paragraph (2) 
prescribed by a physician and provided under a program described in 
paragraph (3) under the supervision of a physician pursuant to an 
individualized, written plan of treatment established and periodically 
reviewed by a physician (in consultation with appropriate staff 
participating in such program), which sets forth the physician's 
diagnosis, the type, amount, frequency, and duration of the items and 
services provided under the plan, and the goals for treatment under the 
plan. Section 1861(ff)(2) of the Act describes the items and services 
included in partial hospitalization services. Section 1861(ff)(3)(A) of 
the Act specifies that a partial hospitalization program (PHP) is a 
program furnished by a hospital to its outpatients or by a community 
mental health center (CMHC) (as defined in subparagraph (B)), and which 
is a distinct and organized intensive ambulatory treatment service 
offering less than 24-hour-daily care other than in an individual's 
home or in an inpatient or residential setting. Section 1861(ff)(3)(B) 
of the Act defines a community mental health center for purposes of 
this benefit.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, under 
42 CFR 419.21, that payments under the OPPS will be made for partial 
hospitalization

[[Page 39291]]

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 under APC 0172 (Level 
I Partial Hospitalization) and a higher amount for days with 4 or more 
services under 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 PHP APC 
per diem costs, upon which PHP APC per diem payment rates are based. We 
used only hospital-based PHP data because we were concerned about 
further reducing both PHP APC per diem payment rates without knowing 
the impact of the policy and payment changes we made in CY 2009. 
Because of the 2-year lag between data collection and rulemaking, the 
changes we made in CY 2009 were reflected for the first time in the 
claims data that we used to determine payment rates for the CY 2011 
rulemaking (74 FR 60556 through 60559).
    In CY 2011, in accordance with section 1301(b) of the Health Care 
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the 
description of a PHP in our regulations to specify that a PHP must be a 
distinct and organized intensive ambulatory treatment program offering 
less than 24-hour daily care other than in an individual's home or in 
an inpatient or residential setting. In addition, in accordance with 
section 1301(a) of HCERA 2010, we revised the definition of a CMHC in 
the regulations to conform to the revised definition now set forth 
under section 1861(ff)(3)(B) of the Act. We discussed our finalized 
policies for these two provisions of HCERA 2010 in section X.C. of the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we also established four separate PHP APC per diem payment 
rates, two for CMHCs (for Level I and Level II services) and two for 
hospital-based PHPs (for Level 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. 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,

[[Page 39292]]

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 costs and then 
adding that number to the CY 2011 final CMHC median costs. 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, 2011 WL 
3102049 (W.D.Tex. 2011), aff'd, 684 F.3d 527 (5th Cir. 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, 684 F.3d at 533).
    For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74348 through 74352), we determined the relative 
payment weights for PHP services provided by CMHCs based on data 
derived solely from CMHCs and the relative payment weights for 
hospital-based PHP services based exclusively on hospital data. The 
statute is reasonably interpreted to allow the relative payment weights 
for the OPPS payment rates for PHP services provided by CMHCs to be 
based solely on CMHC data and relative payment weights for hospital-
based PHP services to be based exclusively on hospital data. Section 
1833(t)(2)(C) of the Act requires the Secretary to establish relative 
payment weights for covered OPD services (and any groups of such 
services described in subparagraph (B)) based on hospital costs. In 
pertinent part, subparagraph (B) provides that the Secretary may 
establish groups of covered OPD services so that services classified 
within each group are comparable clinically and with respect to the use 
of resources. In accordance with subparagraph (B), we developed the PHP 
APCs, as set forth in Sec.  419.31 of the regulations (65 FR 18446 and 
18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed 
above, PHP services are grouped into APCs.
    Based on section 1833(t)(2)(C) of the Act, we believe that the word 
``establish'' can be interpreted as applying to APCs at the inception 
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In 
creating the original APC for PHP services (APC 0033), we did 
``establish'' the initial relative payment weight for PHP services, 
provided in both hospital-based and CMHC-based settings, only on the 
basis of hospital data. Subsequently, from CY 2003 through CY 2008, the 
relative payment weights for PHP services were based on a combination 
of hospital and CMHC data. For CY 2009, we established new APCs for PHP 
services based exclusively on hospital data. Specifically, we adopted a 
two-tiered APC methodology (in lieu of the original APC 0033) under 
which CMS paid one rate for days with 3 services (APC 0172) and a 
different payment rate for days with 4 or more services (APC 0173). 
These two new APCs were established using only hospital data. For CY 
2011, we added two new APCs (APCs 0175 and 0176) for PHP services 
provided by hospitals and based the relative payment weights for these 
APCs solely on hospital data. APCs 0172 and 0173 were designated for 
PHP services provided by CMHCs and were based on a mixture of hospital 
and CMHC data. As the Secretary argued in the Paladin case, the courts 
have consistently held that the phrase ``based on'' does not mean 
``based exclusively on.'' Thus, the relative payment weights for the 
two APCs for PHP services provided by CMHCs in CY 2011 were ``based 
on'' hospital data, no less than the relative payment weights for the 
two APCs for hospital-based PHP services.
    Although we used hospital data to establish the relative payment 
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we 
believe that 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 use data on claims from 1996 and use 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 2014 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 mean 
costs rather than on the median costs. For CY 2014, we established the 
four PHP APC per diem payment rates based on geometric mean cost levels 
calculated using the most recent claims and cost data for each provider 
type. We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period for a more detailed discussion (78 FR 75047 through 75050).

[[Page 39293]]

    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 
through 66908), we continued to apply our established policies to 
calculate the four PHP APC per diem payment rates based on PHP APC 
geometric mean per diem costs using the most recent claims and cost 
data for each provider type.

B. Proposed PHP APC Update for CY 2016

1. Proposed PHP APC Geometric Mean Per Diem Costs
    For CY 2016, we are proposing to continue 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 and cost 
data for each provider type. We are proposing to compute proposed CMHC 
PHP APC geometric mean per diem costs for Level 1 (3 services per day) 
and Level 2 (4 or more services per day) PHP services using only CY 
2014 CMHC claims data and the most recent cost data, and proposed 
hospital-based PHP APC geometric mean per diem costs for Level 1 and 
Level 2 PHP services using only CY 2014 hospital-based PHP claims data 
and the most recent cost data. These proposed geometric mean per diem 
costs are shown in Tables 50 and 51 of this proposed rule. To prevent 
confusion, we refer to the per diem information listed in Tables 50 and 
51 of this proposed rule as the proposed PHP APC per diem costs or the 
proposed PHP APC geometric mean per diem costs, and the per diem 
information listed in Addendum A to this proposed rule as the proposed 
PHP APC per diem payment rates or the proposed PHP APC geometric mean 
per diem payment rates. The PHP APC per diem costs are the provider-
specific costs derived from the most recent claims and cost data. The 
PHP APC per diem payment rates are the national unadjusted payment 
rates calculated after applying the OPPS budget neutrality adjustments 
described in sections II.A.4. and II.B. of this proposed rule.
    As part of the effort to increase the accuracy of the PHP per diem 
costs, we completed an extensive analysis of the claims and cost data, 
which included provider service usage, coding practices, and the 
ratesetting methodology. As part of our analysis, we also identified 
aberrant data from several providers that are impacting the calculation 
of the proposed PHP geometric mean per diem costs. Aberrant data are 
claims and/or cost data that are so abnormal that they skew the 
resulting geometric mean per diem costs. For example, we found claims 
with excessive CMHC charges resulting in CMHC geometric mean costs per 
day that are approximately the same as or more than the daily payment 
for inpatient psychiatric facility services. For an outpatient program 
like PHP, because it does not incur room and board costs such as an 
inpatient stay would, these costs per day are excessive. In addition, 
we found some CMHCs had very low costs per day (less than $25 per day). 
Without using a trimming process, the data from these providers will 
inappropriately skew the geometric mean per diem cost for Level 2 CMHC 
PHP services. Without the trim, the CMHC PHP APC geometric mean per 
diem cost is $172.62 for Level 2 services, which significantly diverges 
from the median cost per day of $148.14. When data are not skewed and 
are normally distributed, measures of central tendency such as the 
median and geometric mean will be very similar to each other. The 
differences between these two measures suggest skewing, and as 
previously noted, examination of the data confirmed that there are a 
few providers with extreme cost per day values. Level 1 CMHC geometric 
mean per diem costs were $103.10 before any trim is performed. Our 
proposed trim on total CMHC costs per day is performed before 
stratifying the data by payment tiers (Level 1 and Level 2 CMHC PHP 
services), and would affect both CMHC payment tiers.
    During our claims and cost data analysis, we also found aberrant 
data from some hospital-based PHP providers. Nearly all hospital-based 
PHPs recorded their costs using cost center 9000 (``Clinic'') as the 
source for the CCR for individual or group therapy services, 
psychiatric testing, and education/training services. These services 
comprise the majority of the PHP services provided. The existing OPPS 
3 standard deviation trim removed very extreme CCRs for 
cost center 9000, which were less than 0.0206 or greater than 28.3446, 
by defaulting two providers that failed this trim to their overall 
hospital ancillary CCR. However, the calculation of the 3 
standard deviations used to define the trim for cost center 9000 was 
influenced by these two providers, which had very extreme CCRs of 
178.0224 and 272.4451. Because these two hospital-based PHP providers 
remained in the data when we calculated the boundaries of the OPPS 
3 standard deviation trim, the upper limit of the trim 
boundaries was fairly high, at 28.3446. As such, some aberrant CCRs for 
cost center 9000 were not trimmed out, and still had high values 
ranging from 6.3840 to 19.996. We note in section II.D. of this 
proposed rule that OPPS defines a biased CCR as one that falls outside 
the predetermined ceiling threshold for a valid CCR; using CY 2014 cost 
report data, that threshold is 1.5. The hospital CCR ceiling thresholds 
or upper limits are available online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files-Items/2015-Annual-Policy-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.
    We are concerned that including aberrant data in the calculation of 
the proposed hospital-based PHP per diem payment rates would 
inappropriately skew these payment rates. When we included these 
aberrant CCRs, which ranged from 6.3840 to 19.996, in hospital-based 
PHP cost modeling, the geometric mean per diem costs were $267.04 for 
Level 1 services and $223.39 for Level 2 services. We note that the 
geometric mean per diem cost of the hospital-based PHP Level 1 APC was 
greater than that of the hospital-based PHP Level 2 APC, despite fewer 
services being provided. This occurred because a relatively higher 
share of high-CCR service days was reported for hospital-based PHP 
Level 1 services compared to hospital-based PHP Level 2 services. Due 
to the low volume of hospital-based PHP Level 1 services, the effect of 
the high-CCR service days on the resulting proposed geometric mean per 
diem costs is relatively greater than the effect of the high-CCR 
service days on the resulting proposed Level 2 geometric mean per diem 
costs. As such, the hospital-based Level 1 PHP APC geometric mean per 
diem costs are higher than the proposed geometric mean per diem costs 
for the hospital-based Level 2 PHP APC.
    In order to reduce or eliminate the impact of including aberrant 
data received from a few CMHCs and hospital-based PHP providers in the 
claims data used for ratesetting, we are proposing to use a 2 standard deviation trim for CMHCs and to apply a CCR greater 
than five (CCR>5) hospital service day trim for hospital-based PHP 
providers for CY 2016 and subsequent years.
    Under the 2 standard deviation trim proposal, we would 
exclude any CMHC when the CMHC's cost per day is more than 2 standard deviations from the geometric mean cost per day for 
all CMHCs. For example, based on our CY 2014 claims data used for CY 
2016 ratesetting, the geometric mean cost per day for all CMHCs before 
trimming is $168.16. Using the  2 standard deviation trim, 
three providers with geometric mean costs per day ranging

[[Page 39294]]

from as low as $23.50 to as high as $996.71 were excluded from the 
ratesetting for CY 2016. Excluding providers with extremely low or 
extremely high costs per day protects CMHCs from having those extreme 
costs per day inappropriately skew the CMHC PHP APC geometric mean per 
diem costs. In addition, we are proposing to use a 2 
standard deviation trim because, when we used this methodology, it 
aligned the geometric mean and median per diem costs for the CMHC Level 
2 PHP APC payment tier, which also indicates that the trim removed the 
skewing in the data caused by the inclusion of aberrant data received 
from the three providers. We believe that the 2 standard 
deviation trim would exclude CMHCs with aberrant data from the 
ratesetting process while allowing for the use of as much data as 
possible. In addition, implementing a 2 standard deviation 
trim on CMHCs would target these aberrancies without limiting overall 
per diem cost increases. A 2 standard deviation trim also 
is an accepted statistical approach for objectively mitigating extreme 
data. For normally distributed data, 2 standard deviations 
from the mean capture approximately 95 percent of the data.
    We are proposing to apply the 2 standard deviation trim 
to the geometric mean cost per day at the CMHC level. This application 
would exclude those CMHCs with costs per day 2 standard 
deviations from the geometric mean cost per day for all CMHCs. Under 
this proposal, three CMHCs with aberrant data would be removed from the 
ratesetting calculations. The exclusion of these three CMHCs removed 
from modeling 2,296 CMHC claims out of 25,383 total CMHC claims, in 
order to prevent inappropriate fluctuations in the payment rates. The 
resulting CMHC Level 2 PHP APC geometric mean per diem costs would be 
$147.51. The CMHC Level 1 PHP APC geometric mean per diem costs 
actually increased slightly when the trim was applied, from $103.10 to 
$105.82.
    We determined that proposing to use a higher trim level, such as 
2.5 or 3 standard deviations from the geometric 
mean, did not reduce the skewing caused by the inclusion of data from a 
few CMHC providers. In other words, using a higher trim level did not 
remove the CMHCs with aberrant data from the ratesetting process. 
Further, we believe that using a trim level lower than 2 
standard deviations would remove too much data. If a data distribution 
is approximately normally distributed, approximately 68 percent of the 
data fall within 1 standard deviation of the mean, and 
approximately 95 percent of the data fall within 2 standard 
deviations of the mean. Our goal was to remove outliers while using as 
much of the CMHC data as possible.
    We did not consider the CCR >5 service day trim for CMHCs, because 
longstanding PHP OPPS methodology defaults any CMHC CCR >1 to the 
statewide hospital ancillary CCR (we refer readers to the following 
section for a review of the PHP OPPS ratesetting methodology). Hospital 
statewide CCRs have been less than 1 and are available on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files-Items/2015-Annual-Policy-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending. In our 
CY 2016 ratesetting process, we identified only one CMHC that had a CCR 
>1. That CMHC's CCR was 1.019, and was defaulted to its appropriate 
hospital statewide CCR for CY 2016 ratesetting purposes.
    We considered applying the 2 standard deviation trim to 
hospital-based PHP providers as well. However, the 2 
standard deviation trim would have removed 25 hospital-based PHP 
providers with aberrant data out of 387 hospital-based PHP providers. 
We were concerned about removing data from that many providers, and 
sought an alternative that allowed for use of more of the data. 
Therefore, we are proposing a trim on CCRs, which we believe would be 
more effective in removing aberrant data and allowing the use or 
retention of more data. Trims on hospital and CMHC CCRs are already 
used with the OPPS system, but due to the two very extreme outlier CCRs 
for cost center 9000 previously mentioned, the OPPS 3 
standard deviation trim on hospital cost center 9000 CCRs had a higher 
upper limit than usual, and therefore did not trim all the claims with 
aberrant CCRs. As such, claims with aberrant data remain for some 
hospital-based PHPs. Therefore, for hospital-based PHPs, we are 
proposing to apply a trim on hospital service days when the CCR is 
greater than five (CCR>5) at the cost center level.
    Under our proposal, the CCR>5 hospital service day trim would 
remove hospital-based PHP service days that use a CCR>5 to calculate 
costs for at least one of their component services. Unlike the 2 standard deviation trim, which excludes CMHC providers that 
fail the trim, the CCR>5 trim would exclude any hospital-based PHP 
service day where any of the services on that day are associated with a 
CCR > 5. For example, assume a hospital-based PHP had a claim with a 
service day with one individual therapy service, two group therapy 
services, and one occupational therapy service. Assume that the 
hospital-based PHP's cost center CCRs associated with these services 
were 0.6, 0.6, 0.6, and 6.7, respectively. Because the CCR associated 
with the occupational therapy service is greater than 5, this 
particular day, and all other days for this provider where occupational 
therapy services were provided, would be excluded from the data used in 
ratesetting. Applying this trim removed service days from seven 
hospital-based PHP providers. After applying the CCR>5 trim, the Level 
1 hospital-based PHP APC geometric mean per diem cost changed from 
$267.04 to $195.73, and the Level 2 hospital-based PHP geometric mean 
per diem cost changed from $223.39 to $218.93. As expected, without 
including the aberrant CCR service days in the data used to calculate 
the proposed hospital-based PHP APC geometric mean per diem costs, the 
Level 1 hospital-based PHP APC geometric mean per diem cost is less 
than the Level 2 hospital-based PHP APC geometric mean per diem cost.
    As an alternative to these proposals for CMHCs and hospital-based 
PHPs, we considered proposing a 15-percent cap on changes in the 
geometric mean per diem costs. This cap would limit the increase or the 
decrease in the geometric mean per diem costs from one year to the next 
by capping the change at 15 percent. This cap also would protect 
providers from fluctuations in PHP APC per diem payment rates due to 
large increases or declines in the geometric mean per diem costs. 
However, we are not proposing this alternative because we believe that 
establishing such a cap would not specifically target aberrant data 
from a minority of providers, which is the purpose of our proposals.
    Targeting aberrant data is important in order to help stabilize the 
PHP APC geometric mean per diem costs for both CMHCs and hospital-based 
PHP services. As we receive updated claims and cost files, and as we 
continue analyzing PHP data, it is possible that the PHP trims that we 
are proposing may need refinement. We would propose any changes to the 
methodology that we finalize later this year through future notice-and-
comment rulemaking.
    Therefore, for CY 2016 and subsequent years, we are proposing to 
exclude any CMHC when the CMHC's costs per day are more than 2 standard deviations from the geometric mean cost per day for 
all CMHCs (Level 1 and Level 2), and to exclude hospital-based PHP 
service days when a CCR>5 is used

[[Page 39295]]

to calculate costs for at least one of their component services (Level 
1 and Level 2).
    The CY 2016 proposed PHP APC geometric mean per diem costs for 
CMHCs calculated under the proposed CY 2016 methodology using CY 2014 
claims data and the most recent cost data are $105.82 for Level 1 (3 
services per day) CMHC PHP services, and are $147.51 for Level 2 (4 or 
more services per day) CMHC PHP services.
    The CY 2016 proposed PHP APC geometric mean per diem costs for 
hospital-based PHPs calculated under the proposed CY 2016 methodology 
using CY 2014 claims data and the most recent cost report data are 
$195.73 for Level 1 (3 services per day) hospital-based PHP services, 
and are $218.93 for Level 2 (4 or more services per day) hospital-based 
PHP services.
    We recognize that several factors may cause a fluctuation in the 
PHP APC per diem payment rates, including direct changes to the PHP APC 
per diem costs (for example, establishing separate APCs and associated 
per diem payment rates for CMHCs and hospital-based providers based on 
the provider type's costs), changes to the OPPS (for example, basing 
the relative payment weights on geometric mean costs), and provider-
driven changes (for example, a provider's decision to change its mix of 
services or to change its charges and clinical practice for some 
services). We refer readers to a more complete discussion of this issue 
in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75049).
    The proposed CY 2016 PHP APC geometric mean per diem costs for the 
CMHC and hospital-based PHP APCs are shown in Tables 50 and 51 of this 
proposed rule. We note that Tables 50 and 51 below display the proposed 
PHP APC renumbering that is part of the proposed reorganization of OPPS 
APCs described in section III.D. of this proposed rule. Specifically, 
we are proposing to renumber the four PHP APCs, that is, APCs 0172, 
0173, 0175, and 0176, as APCs 5851, 5852, 5861, and 5862, respectively. 
As noted earlier in this section, we refer readers to Addendum A to 
this proposed rule (which is available via the Internet on the CMS Web 
site) for the proposed PHP APC payment rates.

  Table 50--Proposed CY 2016 PHP APC Geometric Mean Per Diem Costs for
                            CMHC PHP Services
------------------------------------------------------------------------
                                                           Proposed PHP
  Proposed renumbered CY                                   APC geometric
         2016 APC                    Group title           mean per diem
                                                               costs
------------------------------------------------------------------------
5851......................  Level 1 Partial                      $105.82
                             Hospitalization (3
                             services) for CMHCs.
5852......................  Level 2 Partial                       147.51
                             Hospitalization (4 or more
                             services) for CMHCs.
------------------------------------------------------------------------


  Table 51--Proposed CY 2016 PHP APC Geometric Mean Per Diem Costs for
                       Hospital-Based PHP Services
------------------------------------------------------------------------
                                                           Proposed PHP
  Proposed renumbered CY                                   APC geometric
         2016 APC                    Group title           mean per diem
                                                               costs
------------------------------------------------------------------------
5861......................  Level 1 Partial                      $195.73
                             Hospitalization (3
                             services) for hospital-
                             based PHPs.
5862......................  Level 2 Partial                       218.93
                             Hospitalization (4 or more
                             services) for hospital-
                             based PHPs.
------------------------------------------------------------------------

    We are inviting public comments on these proposals.
2. PHP Ratesetting Process
    While the PHP is part of the OPPS, PHP ratesetting has some unique 
aspects. To foster understanding and transparency, we are providing the 
following detailed explanation of the PHP APC ratesetting process. The 
OPPS ratesetting process includes various steps as part of its data 
development process, such as CCR determination and calculation of 
geometric mean per diem costs, identification of allowable charges, 
development of the APC relative payment weights, calculation of the APC 
payment rates, and establishment of outlier thresholds. We refer 
readers to section II. of this proposed rule and encourage readers to 
review these discussions to increase their overall understanding of the 
entire OPPS ratesetting process. We also refer readers to the OPPS 
Claims Accounting narrative, which is a supporting document to this 
proposed rule available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; click on the link to 
this proposed rule to find the Claims Accounting narrative. We 
encourage CMHCs and hospital-based PHPs to review their accounting and 
billing processes to ensure that they are following these procedures, 
which should result in greater accuracy in setting the PHP rates.
    We limit our discussion here primarily to the data development 
process and calculation of PHP APC geometric mean per diem costs used 
for PHP ratesetting. Our discussions focus on five major phases in 
modeling the data, which result in the development of PHP APC geometric 
mean per diem costs, and on the importance of correct coding and 
reasonable charges for PHPs, and include: (a) Development of PHP 
claims; (b) determination of CCRs for CMHCs and hospital-based PHPs; 
(c) identification of PHP allowable charges; (d) determination of PHP 
APC per diem costs; (e) development of service days and cost modeling; 
and (f) issues regarding correct coding and reasonable charges.
a. Development of PHP Claims
    We use outpatient claims from the national claims history file for 
the most recent available calendar year that were processed through 
December 31 of that year (that is, the calendar year that is 2 years 
before the calendar year at issue) to calculate the geometric mean 
costs of APCs that underpin the relative payment weights for the 
calendar year at issue. It is important to note that this is not the 
population of claims paid under the OPPS, but all outpatient claims as

[[Page 39296]]

explained in further detail in section II.A.2.a. of this proposed rule.
    We then exclude the following claims from OPPS ratesetting. These 
are claims where:
     No payment is made;
     There are more than 300 lines; or
     Services were furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, or the Northern Mariana Islands (these 
providers are not paid under the OPPS).
    From these outpatient claims, we extract all hospital outpatient 
PHP claims and all CMHC claims. PHP claims are extracted based on their 
specific bill types: 12X or 13X, with condition code 41, for hospital-
based PHPs; and 76X for CMHCs. For example, for this proposed rule, we 
used data from the CY 2014 hospital outpatient PHP and CMHC PHP claims 
from the national claims history file that were processed through 
December 31, 2014, to calculate the PHP APC geometric mean per diem 
costs that underpin the proposed PHP APC relative payment weights for 
CY 2016.
    As noted in section II.A.2.c. of this proposed rule and in the 
Claims Accounting narrative, we exclude hospital-based PHP claims if--
     They were submitted by critical access hospitals;
     They reported obviously erroneous units (for example, more 
than 100,000 units for a single service);
     They reported charge amounts equal to the payment 
received;
     They did not report at least one HCPCS code, because OPPS 
APCs are based upon HCPCS codes; or
     They only contained flu or pneumonia vaccine services, 
which are paid separately outside of OPPS.
    At the end of this process, we have identified the PHP claims that 
are appropriate and available to use to calculate PHP APC geometric 
mean per diem costs. These claims include dates of service, revenue 
codes, HCPCS codes for services provided, charges, and the payments 
Medicare made (the PHP APC per diem rates).
b. Determination of CCRs for CMHCs and Hospital-Based PHPs
    Next, we determine and assess each provider's CCR. This ratio, 
along with the charges from the claims, is used to estimate the costs, 
which are then used to determine the geometric mean per diem costs. 
There are specific policies we follow in determining which CCR to use 
in estimating costs, which differ for CMHCs and for hospital-based 
PHPs, largely due to differences in the cost reports for these two 
types of PHPs. PHPs should review section II.A.1.c. of this proposed 
rule and section 10.11, Chapter 4, of the Medicare Claims Processing 
Manual (internet-only manual (IOM), Pub. 100-04), which is available on 
the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf) for more specific discussion 
of CCRs used in PHP ratesetting.
(1) Calculation and Assessment of CMHC CCRs
    As noted in section VIII.A. of this proposed rule and section 
10.11.9, Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-
04), the CMHC CCR is calculated using the provider's most recent full 
year cost report, Form CMS 2088-92, and Medicare cost and charges from 
Worksheet C, Page 2. We divide costs from line 39.01, Column 3 by 
charges from line 39.02, Column 3 to calculate an overall CMHC CCR. The 
CMHC cost report forms and cost reporting instructions are available on 
the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLSort=0&DLSortDir=ascending.
    The most recent CMHC CCRs are posted to the Outpatient Provider 
Specific File (OPSF). We assess those CMHC CCRs within that file in 
preparation for use in cost estimation in the following manner:
     We use the most recent CMHC-specific CCR from the OPSF. If 
the CCR is not available (for example, the CMHC is a new provider with 
less than 12 months data), we use the hospital ancillary CCR associated 
with the provider's urban/rural designation and their state location. 
The statewide urban and rural hospital CCRs are available on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html.
     As described in Section 10.11.9, Chapter 4, of the 
Medicare Claims Processing Manual, for any CMHC with a CCR greater than 
1, we use the hospital ancillary CCR associated with its urban/rural 
designation and its State location.
    Once we have a CCR for each CMHC, we calculate the geometric mean 
of all CMHC CCRs. As described in the OPPS Claims Accounting narrative, 
we apply the OPPS 3 standard deviation trim to the CMHC 
CCRs; this trim excludes any CMHC with a CCR that is 3 
standard deviations from the geometric mean of all CMHC CCRs. At the 
end of this process, we have identified a CCR for all CMHCs that have 
not been excluded.
(2) Calculation and Assessment of Hospital-Based PHP CCRs
    Unlike CMHCs where there is one CCR calculated for each CMHC, 
hospital-based PHPs have CCRs for each cost center that is associated 
with PHP services. For hospital-based PHPs, we use the provider's most 
recent full year hospital cost report, whether tentatively settled or 
final settled, to identify CCRs, using the Healthcare Provider Cost 
Report Information System (HCRIS) file. The CCRs for hospital-based 
PHPs are calculated by cost center on hospital cost report Worksheet C, 
Part I, Column 9. The overall hospital CCR is calculated by the MAC, 
and is posted in the Provider-Specific File. The hospital cost report 
form CMS-2552-10 and cost reporting instructions are in Chapter 40 of 
the Provider Reimbursement Manual--Part 2, which is available on the 
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLSort=0&DLSortDir=ascending.
    We assess the hospital-based PHP CCRs as described in section 
II.A.2.a. of this proposed rule and in the OPPS Claims Accounting 
narrative, by applying the OPPS 3 standard deviation trim 
to hospital-based PHP CCRs within each cost center and to the overall 
hospital ancillary CCR. To perform this 3 standard 
deviation trim, we follow the following process. Each PHP revenue code 
is associated with particular cost centers on the cost report. The 
revenue-to-cost-center crosswalk identifies the primary, secondary (if 
any), and tertiary (if any) cost centers that are associated with each 
PHP revenue code, and which are the source for the CCRs used in PHP 
ratesetting. The PHP portion of that OPPS crosswalk is shown in Table 
52 below. Based on the revenue code, we first look for a CCR calculated 
from the primary cost center; if none exists or the CCR fails the 
3 standard deviation trim, we look for a CCR calculated 
from the secondary cost center. If there is no CCR calculated from the 
secondary cost center or the CCR fails the 3 standard 
deviation trim, we look for a CCR calculated from the tertiary cost 
center. If there is no CCR calculated from the tertiary cost center or 
the CCR fails the 3 standard deviation trim, we look to the 
hospital's overall ancillary CCR. If the hospital's overall ancillary 
CCR fails the 3 standard deviation trim, we exclude the 
hospital's claims data from ratesetting.

[[Page 39297]]

    For example, for revenue code 900, the primary cost center is 3550 
``Psychiatric/Psychological Services.'' If the CCR associated with this 
cost center passes the 3 standard deviation trim, we retain 
that CCR for use in ratesetting. If the CCR associated with primary 
cost center 3550 fails the trim, it is deleted, and we then move to 
cost center 9000 ``Clinic'' to assess the provider's CCR. If that CCR 
passes the 3 standard deviation trim, it is retained for 
use in ratesetting. If the CCR fails the 3 standard 
deviation trim, it is deleted, and we then would consider the CCR 
calculated from the tertiary cost center. However, for revenue code 
900, there is no tertiary cost center. If the primary, secondary (if 
any), and tertiary (if any) cost centers' CCRs fail the trim, we assess 
the hospital's overall ancillary CCR. If that overall ancillary CCR 
passes the 3 standard deviation trim, we retain it for use 
in ratesetting. If the overall ancillary CCR fails the 3 
standard deviation trim, we exclude the provider from ratesetting. This 
process of assessing the CCRs with a 3 standard deviation 
trim is repeated for each revenue code's associated cost centers. After 
applying this 3 standard deviation trim, we obtain a file 
with trimmed CCRs for use in ratesetting.
    The revenue-to-cost center crosswalk for all services paid under 
the OPPS is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html. We are providing an excerpt of the PHP portion of 
the OPPS crosswalk below.

                   Table 52--Revenue-to-Cost Center Crosswalk for PHP Allowable Revenue Codes
----------------------------------------------------------------------------------------------------------------
                                                 Primary cost                    Secondary cost
         Revenue code            Description     center source    Primary cost    center source   Secondary cost
                                                    for CCR       center name        for CCR       center name
----------------------------------------------------------------------------------------------------------------
0250.........................  Pharmacy.......            7300  Drugs Charged    ..............  ...............
                                                                 to Patients.
0430.........................  Occupational               6700  Occupational     ..............  ...............
                                Therapy.                         Therapy.
0900, 0914, 0915, 0916, or     Psychiatric/               3550  Psychiatric/               9000  Clinic.
 0918.                          Psychological                    Psychological
                                Treatment:                       Services.
                                Individual,
                                Group, and
                                Family
                                Therapy;
                                Psychological
                                testing.
0904 *.......................  Psychiatric/               3580  Recreational               3550  Psychiatric/
                                Psychological                    Therapy.                         Psychological
                                Treatment:                                                        Services.
                                Activity
                                Therapy.
0942.........................  Other                      9000  Clinic.........  ..............  ...............
                                Therapeutic
                                Services:
                                Education/
                                Training.
----------------------------------------------------------------------------------------------------------------
* Although not listed in this table, revenue code 0904 is the only PHP revenue code with a tertiary cost center
  serving as a source for the CCR, which is cost center 9000, ``Clinic.''

c. Identification of PHP Allowable Charges
    We use the PHP claims derived under the methodology discussed in 
section VIII.B.2.a. of this proposed rule to identify which charges are 
allowable for PHP ratesetting. Each revenue code line on the PHP claim 
must report a HCPCS code and a charge (except for revenue code 0250, 
which only requires that the charge be reported). Allowable charges are 
those charges for the HCPCS codes which are associated with PHP 
allowable revenue codes; PHP allowable revenue codes are revenue codes 
allowable for OPPS PHP ratesetting purposes. As discussed in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68412 to 68418), we 
updated the PHP allowable revenue codes and PHP allowable HCPCS codes 
for CY 2013 and subsequent years. They are included in Section 260, 
Chapter 4, of the Medicare Claims Processing Manual (IOM Pub. 100-04), 
which is available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf) and 
are shown in Table 53 below:

             Table 53--PHP Allowable Revenue and HCPCS Codes
------------------------------------------------------------------------
       Revenue code              Description             HCPCS code
------------------------------------------------------------------------
0250......................  Drugs and Biologicals  Not required.
043X......................  Occupational Therapy.  G0129.
0900......................  Behavioral Health      90791 or 90792.
                             Treatment/Services.
0904......................  Activity Therapy       G0176.
                             (Partial
                             Hospitalization).
0914......................  Individual             90785, 90832, 90833,
                             Psychotherapy.         90834, 90836, 90837,
                                                    90838, 90845, 90865,
                                                    or 90880.
0915......................  Group Therapy........  G0410 or G0411.
0916......................  Family Psychotherapy.  90846 or 90847.
0918......................  Psychiatric Testing..  96101, 96102, 96103,
                                                    96116, 96118, 96119,
                                                    or 96120.
0942......................  Education Training...  G0177.
------------------------------------------------------------------------

    The HCPCS codes shown in Table 53 above are those which are used in 
the four PHP APCs (existing APCs 0172, 0173, 0175, 0176, which are 
proposed to be renumbered APCs 5851, 5852, 5861, and 5862, 
respectively), and are also shown in Appendix C-a and Appendix P of the 
Integrated Outpatient Code Editor (IOCE) Specifications. As described 
in section III.D. of this proposed rule, we are proposing to renumber 
some of the OPPS APCs, and have shown both the proposed renumbered APCs 
and the existing APCs for partial hospitalization services above. The 
IOCE is available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/OCEQtrReleaseSpecs.html.

[[Page 39298]]

d. Determination of PHP APC Per Diem Costs
    The PHP CCRs described in section VIII.B.2.b. of this proposed rule 
are applied to the PHP claim charges described in section VIII.B.2.c. 
of this proposed rule to determine the PHP APC geometric mean per diem 
costs. Costs for each service line reported on CMHC claims are 
calculated by multiplying each service line charge by the CCR 
associated with the claim's provider. Costs for each service line 
reported on the hospital-based PHP claims are calculated by multiplying 
the service line charge by the CCR associated with the provider's 
service line's revenue code (using the revenue-to-cost center crosswalk 
hierarchy described in section VIII.B.2.b. of this proposed rule). For 
both CMHCs and hospital-based PHPs, charges are set to zero for 
services reporting revenue codes which are not included in the listing 
of PHP allowable revenue codes shown in Table 53 above.
e. Development of Service Days and Cost Modeling
    Only the claims service lines containing PHP allowable HCPCS codes 
(shown in Table 53 above) from the remaining hospital-based PHP and 
CMHC claims are retained for PHP cost determination. The costs, 
payments, and service units for all service lines occurring on the same 
service date, by the same provider, and for the same beneficiary are 
summed to calculate the PHP APC geometric mean per diem cost, per diem 
payment, and per diem service volume for each PHP service day. Any 
service days with zero per diem payments are removed.
    Because the PHP costs calculated above include the effects of 
geographic variation in wages, we use the wage index and county data to 
wage neutralize PHP APC per diem costs prior to the APC geometric mean 
per diem cost calculation. This removes the effects of geographic 
variation in costs used in the OPPS APC ratesetting process. Service 
days with no per diem costs or with no wage index values are removed. 
PHP service days with fewer than 3 service units are deleted and not 
considered for PHP cost modeling.
    As discussed in section VIII.B.1. of this proposed rule, there were 
several PHP providers with aberrant data. As such, we are proposing to 
exclude CMHCs that have a per diem cost that is 2 standard 
deviations from the overall CMHC geometric mean per diem cost, 
beginning in CY 2016. If implemented as proposed, this trim would 
exclude from the ratesetting process any CMHCs with extreme costs per 
day. We also are proposing to exclude service days with extreme 
hospital-based PHP CCR values which were not removed by the 3 standard deviation trim discussed above, if those service days 
have a CCR>5, beginning in CY 2016. Therefore, if our proposal is 
implemented, we would exclude hospital-based PHP service days where the 
CCR>5.
    PHP service days from CMHCs and from hospital-based PHPs with 
exactly 3 service units, or with 4 or more service units (based on 
allowable HCPCS codes shown in Table 53) are assigned to Level 1 or 
Level 2 PHP APCs as follows: (We note that we are proposing to renumber 
some of the OPPS APCs, and are showing both the proposed renumbered 
APCs and the existing APCs for partial hospitalization services below.)
     Level 1 Partial Hospitalization, proposed renumbered APC 
5851 (existing APC 0172): CMHC service days with exactly 3 service 
units;
     Level 2 Partial Hospitalization, proposed renumbered APC 
5852 (existing APC 0173): CMHC service days with 4 or more service 
units;
     Level 1 Partial Hospitalization, proposed renumbered APC 
5861 (existing APC 0175): Hospital-based PHP service days with exactly 
3 service units; and
     Level 2 Partial Hospitalization, proposed renumbered APC 
5862 (existing APC 0176): Hospital-based PHP service days with 4 or 
more service units.
    PHP service days with costs 3 standard deviations from 
the geometric mean costs within each APC are deleted and removed from 
modeling. The remaining PHP service days are used to calculate the 
geometric mean per diem cost for each PHP APC.
    These PHP APC geometric mean per diem costs undergo several more 
steps, as noted below, before becoming budget neutral PHP APC per diem 
payment rates. The PHP APCs are part of the larger OPPS. As proposed in 
section II.A. of this proposed rule, OPPS APC geometric mean per diem 
costs (including PHP APC geometric mean per diem costs) would be 
divided by the geometric mean per diem costs for proposed renumbered 
APC 5012 (Level 2 Examinations and Related Services) to calculate each 
PHP APC's unscaled relative payment weight. An unscaled relative 
payment weight is one that is not yet adjusted for budget neutrality. 
Budget neutrality is required under section 1833(t)(9)(B) of the Act, 
and ensures that the estimated aggregate weight under the OPPS for a 
calendar year is neither greater than nor less than the estimated 
aggregate weight that would have been made without the changes. To 
adjust for budget neutrality (that is, to scale the weights), we 
compare the estimated aggregated weight using the scaled relative 
payment weights from the previous calendar year at issue. For example, 
to adjust for budget neutrality (that is, to scale the weights) in this 
proposed rule, we compared the estimated aggregated weight using the CY 
2015 scaled relative payment weights to the estimated aggregate weight 
using the proposed CY 2016 unscaled relative payment weights. We refer 
readers to the ratesetting procedures described in Part 2 of the OPPS 
Claims Accounting narrative and in section II. of this proposed rule 
for more information on scaling the weights, and for details on the 
final steps of the process that lead to PHP APC per diem rates.
f. Issues Regarding Correct Coding and Reasonable Charges
    PHP claims with revenue codes other than those listed as allowable 
in Table 53 above, but which are associated with allowable PHP HCPCS 
codes, may still be paid, as described in the OPPS Claims Accounting 
narrative. The OPPS does not include charges associated with revenue 
codes which are not allowable for ratesetting purposes. In reviewing 
2013 and 2014 claims, we noticed that CMHCs were using correct revenue 
coding for nearly all claims, but that hospital-based PHPs were 
sometimes using other revenue codes, particularly revenue codes 0912 
and 0913. Revenue codes 0912 and 0913 are not on the allowable list of 
PHP revenue codes. As such, the charges associated with those two 
revenue codes are not included in ratesetting, even when revenue code 
0912 or 0913 is associated with a PHP allowable HCPCS code. For the 
most accurate ratesetting, it is imperative that providers follow 
coding guidelines for all revenue codes and all CPT and Level II HCPCS 
codes in a manner consistent with their descriptors, instructions, and 
correct coding principles. We also refer readers to the coding 
instructions given in the Claims Processing Manual. Following the 
correct coding guidelines will help ensure that we include all PHP 
costs in ratesetting.
    Finally, it appears that a few PHPs may not be reporting reasonable 
charges for their services on their claims. When this occurs with CMHCs 
or hospital-based PHPs that provide a high number of services during 
the year, the data used for ratesetting may be inappropriately skewed. 
Therefore, we remind PHPs of the regulations at 42

[[Page 39299]]

CFR 413.53 and existing CMS guidance related to charges, which is found 
in Chapter 22 of the Provider Reimbursement Manual, Part 1, which is 
available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.html?DLPage=1&DLSort=0&DLSortDir=ascending.
    In section 2202.4, we define ``Charges,'' as the regular rates 
established by the provider for services rendered to both beneficiaries 
and to other paying patients. Charges should be related consistently to 
the cost of the services and uniformly applied to all patients whether 
inpatient or outpatient. We also state in section 2204, ``Medicare 
Charges,'' that the Medicare charge for a specific service must be the 
same as the charge made to non-Medicare patients (including Medicaid, 
CHAMPUS, private, etc.) must be recorded in the respective income 
accounts of the facility, and must be related to the cost of the 
service. In section 2203, ``Provider Charge Structure as Basis for 
Apportionment,'' we state that each facility should have an established 
charge structure which is applied uniformly to each patient as services 
are furnished to the patient, and which is reasonably and consistently 
related to the cost of providing the services, so that its charges may 
be allowable for use in apportioning costs under the program. The 
Medicare program cannot dictate to a provider what its charges or 
charge structure may be. However, the program may determine whether or 
not the charges are allowable for use in apportioning costs under the 
program.

C. Proposed Separate Threshold for Outlier Payments to CMHCs

    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), after examining the costs, charges, and 
outlier payments for CMHCs, we believed that establishing a separate 
OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific 
outlier policy would direct OPPS outlier payments towards genuine cost 
of outlier cases, and address situations where charges were being 
artificially increased to enhance outlier payments.
    We created a separate outlier policy that would be specific to the 
estimated costs and OPPS payments provided to CMHCs. We note that, in 
the CY 2009 OPPS/ASC final rule with comment period, we established an 
outlier reconciliation policy to comprehensively address charging 
aberrations related to OPPS outlier payments (73 FR 68594 through 
68599). Therefore, beginning 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 believe that this 
difference in outlier payments indicates that the separate outlier 
threshold for CMHCs has been successful in keeping outlier payments to 
CMHCs in line with the percentage of OPPS payments made to CMHCs.
    In this CY 2016 proposed rule, we are proposing to continue to 
designate 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 2016, excluding outlier 
payments. CMHCs are projected to receive 0.04 percent of total OPPS 
payments in CY 2016, excluding outlier payments. Therefore, we are 
proposing to designate 0.49 percent of the estimated 1.0 percent 
outlier target amount for CMHCs. Based on our simulations of CMHC 
payments for CY 2016, in this proposed rule, we are proposing to 
continue to set the threshold for CY 2016 at 3.40 times the highest 
CMHC PHP APC payment rate (that is, proposed renumbered APC 5852 (Level 
2 Partial Hospitalization) (existing APC 0173). We continue to believe 
that this approach would neutralize the impact of inflated CMHC charges 
on outlier payments and better target outlier payments to those truly 
exceptionally high-cost cases that might otherwise limit beneficiary 
access.
    In addition, we are proposing to continue to apply the same outlier 
payment percentage that applies to hospitals. Therefore, for CY 2016, 
we are proposing to continue to pay 50 percent of CMHC APC geometric 
mean per diem costs over the threshold. In section II.G. of this 
proposed rule, for the hospital outpatient outlier payment policy, we 
are proposing to set a dollar threshold in addition to an APC 
multiplier threshold. Because the PHP APCs are the only APCs for which 
CMHCs may receive payment under the OPPS, we would not expect to 
redirect outlier payments by imposing a dollar threshold. Therefore, we 
are not proposing to set a dollar threshold for CMHC outlier payments.
    In summary, in this CY 2016 proposed rule, we are proposing to 
establish that if a CMHC's cost for partial hospitalization services, 
paid under either proposed renumbered APC 5851 (existing APC 0172) or 
proposed renumbered APC 5852 (existing APC 0173), exceeds 3.40 times 
the payment rate for proposed renumbered APC 5852, the outlier payment 
would be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the renumbered APC 5852 payment rate. We are 
inviting public comments on these proposals.

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

A. Background

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

B. Proposed Changes to the Inpatient Only List

    For the CY 2016 OPPS, we are proposing to use the same methodology 
(described in the November 15, 2004 final rule with comment period (69 
FR 65835)) of reviewing the current list of procedures on the inpatient 
only 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 only 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.

[[Page 39300]]

    Using this methodology, we identified seven procedures that could 
potentially be removed from the inpatient only list for CY 2016. We 
have reviewed the clinical characteristics and related evidence for 
these procedures for removal from the inpatient only list and found 
them to be appropriate candidates.
    For CY 2016, we are proposing to remove the following procedures 
from the inpatient only list:
     CPT code 0312T (Vagus nerve blocking therapy (morbid 
obesity); laparoscopic implantation of neurostimulator electrode array, 
anterior and posterior vagal trunks adjacent to esophagogastric 
junction (EGJ), with implantation of pulse generator, includes 
programming);
     CPT code 20936 (Autograft for spine surgery only (includes 
harvesting the graft); local (e.g., ribs, spinous process, or laminar 
fragments) obtained from the same incision);
     CPT code 20937 (Autograft for spine surgery only (includes 
harvesting the graft); morselized (through separate skin or fascial 
incision));
     CPT code 20938 (Autograft for spine surgery only (includes 
harvesting the graft); structural, bicortical or tricotical (through 
separate skin or fascial incision));
     CPT code 22552 (Arthrodesis, anterior interbody, including 
disc space preparation, discectomy, osteophytectomy and decompression 
of spinal cord and/or nerve roots; cervical below C2, each additional 
interspace);
     CPT code 54411 (Removal and replacement of all components 
of a multi-component inflatable penile prosthesis through an infected 
field at the same operative session, including the irrigation and 
debridement of infected tissue); and
     CPT code 54417 (Removal and replacement of non-inflatable 
(semi-rigid) or inflatable (self-contained) penile prosthesis through 
an infected field at the same operative sessions, including irrigation 
and debridement of infected tissue).
    The seven procedures we are proposing to remove from the inpatient 
only list for CY 2016 and their CPT codes, long descriptors, proposed 
APC assignments, and proposed status indictors are displayed in Table 
54 below.
    The complete list of codes that we are proposing to be paid by 
Medicare in CY 2016 only as inpatient procedures is included as 
Addendum E to this proposed rule (which is available via the Internet 
on the CMS Web site).

              Table 54--Procedures Proposed To Be Removed From the Inpatient Only List for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                             Proposed CY 2016   Proposed CY 2016
             CPT/HCPCS code                       Long descriptor            APC assignment *   status indicator
----------------------------------------------------------------------------------------------------------------
0312T..................................  Vagus nerve blocking therapy                    5463                 J1
                                          (morbid obesity); laparoscopic
                                          implantation of neurostimulator
                                          electrode array, anterior and
                                          posterior vagal trunks adjacent
                                          to esophagogastric junction
                                          (EGJ), with implantation of
                                          pulse generator, includes
                                          programming.
20936..................................  Autograft for spine surgery only                 N/A                  N
                                          (includes harvesting the graft);
                                          local (eg, ribs, spinous
                                          process, or laminar fragments)
                                          obtained from same incision.
20937..................................  Autograft for spine surgery only                 N/A                  N
                                          (includes harvesting the graft);
                                          morselized (through separate
                                          skin or fascial incision).
20938..................................  Autograft for spine surgery only                 N/A                  N
                                          (includes harvesting the graft);
                                          structural bicortical or
                                          tricortical (through separate
                                          skin or fascial incision).
22552..................................  Arthrodesis, anterior interbody,                 N/A                  N
                                          including disc space
                                          preparation, discectomy,
                                          osteophytectomy and
                                          decompression of spinal cord and/
                                          or nerve roots; cervical below
                                          C2, each additional interspace.
54411..................................  Removal and replacement of all                  5377                 J1
                                          components of a multi-component
                                          inflatable penile prosthesis
                                          through an infected field at the
                                          same operative session,
                                          including irrigation and
                                          debridement of infected tissue.
54417..................................  Removal and replacement of non-                 5377                 J1
                                          inflatable (semi-rigid) or
                                          inflatable (self-contained)
                                          penile prosthesis through an
                                          infected field at the same
                                          operative session, including
                                          irrigation and debridement of
                                          infected tissue.
----------------------------------------------------------------------------------------------------------------
* We refer readers to Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site)
  for a crosswalk from the existing APC numbers to the proposed new APC numbers for CY 2016.

X. Proposed Nonrecurring Policy Changes

A. Changes for Payment for Computed Tomography (CT)

    Section 218(a)(1) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) amended section 1834 of the Act by establishing 
a new subsection 1834(p). Effective for services furnished on or after 
January 1, 2016, new section 1834(p) of the Act reduces payment for the 
technical component (TC) of applicable computed tomography (CT) 
services paid under the MPFS and applicable CT services paid under the 
OPPS (a 5-percent reduction in 2016 and a 15-percent reduction in 2017 
and subsequent years). The applicable CT services are identified by 
HCPCS codes 70450 through 70498; 71250 through 71275; 72125 through 
72133; 72191 through 72194; 73200 through 73206; 73700 through 73706; 
74150 through 74178; 74261 through 74263; and 75571 through 75574 (and 
any succeeding codes) for services furnished using equipment that does 
not meet each of the attributes of the National Electrical 
Manufacturers Association (NEMA) Standard XR-29-2013, entitled 
``Standard Attributes on CT Equipment Related to Dose Optimization and 
Management.'' New section 1834(p)(4) of the Act specifies that the 
Secretary may apply successor standards through rulemaking.
    Section 1834(p)(6)(A) of the Act requires that information be 
provided and attested to by a supplier and a hospital outpatient 
department that indicates whether an applicable CT service was 
furnished that was not consistent with the standard set forth in 
section 1834(p)(6) of the Act (currently the NEMA CT equipment 
standard) and that such information may be included on a claim and may 
be a modifier. Section 1834(p)(6)(A) of the Act also provides that such 
information must be verified, as appropriate, as part of the periodic 
accreditation of suppliers under section 1834(e) of the Act and

[[Page 39301]]

hospitals under section 1865(a) of the Act. Section 218(a)(2) of the 
PAMA makes a conforming amendment to section 1833(t) of the Act by 
adding a new paragraph (20), which provides that the Secretary shall 
not take into account reduced expenditures that result from the 
application of section 1834(p) of the Act in making any budget neutral 
adjustments under the OPPS.
    To implement this provision, we are proposing to establish a new 
modifier to be used on claims that describes CT services furnished 
using equipment that does not meet each of the attributes of the NEMA 
Standard XR-29-2013. Beginning January 1, 2016, hospitals and suppliers 
would be required to use this modifier on claims for CT scans described 
by any of the CPT codes identified above (and any successor codes) that 
are furnished on non-NEMA Standard XR-29-2013-compliant CT scans. The 
use of this proposed modifier would result in the applicable payment 
reduction for the CT service, as specified under section 1834(p) of the 
Act.

B. Lung Cancer Screening With Low Dose Computed Tomography

    On February 5, 2015, CMS issued a national coverage determination 
(NCD) for the coverage of lung cancer screening with low dose computed 
tomography (LDCT) under Medicare. This coverage includes a lung cancer 
screening counseling and shared decision-making visit, and, for 
appropriate beneficiaries, annual screening for lung cancer with LDCT 
as an additional preventive service under Medicare if certain criteria 
are met. The decision memorandum announcing the NCD is available on the 
CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=274.
    The HCPCS codes that describe these services are HCPCS code GXXX1 
(Counseling visit to discuss need for lung cancer screening (LDCT) 
using low dose CT scan (service is for eligibility determination and 
share decision making)) and HCPCS code GXXX2 (Low dose CT scan (LDCT) 
for lung cancer screening). For the CY 2016 OPPS, we are proposing to 
assign HCPCS code GXXX1 to proposed renumbered APC 5822 (Level 2 Health 
and Behavior Services) (existing APC 0432) and HCPCS code GXXX2 to 
proposed renumbered APC 5570 (Computed Tomography without Contrast) 
(existing APC 0332).

C. Payment for Corneal Tissue in the HOPD and the ASC

1. Background
    In both the HOPD and the ASC, we have a longstanding policy of 
making separate payment for corneal tissue. In the HOPD, we make 
separate payment outside of the OPPS based on hospitals' reasonable 
costs to procure corneal tissue (65 FR 18448 through 18449). In the 
ASC, we pay separately for corneal tissue procurement as a covered 
ancillary service when it is integral to the performance of an ASC 
covered surgical procedure based on invoiced costs for the acquisition 
costs of corneal tissue (72 FR 42508 through 42509 and 42 CFR 
416.164(b)(3)). HCPCS code V2785 (Processing, preserving and 
transporting corneal tissue) is used to report corneal tissue in both 
the HOPD and the ASC.
    The original use (and currently the primary use) of corneal tissue 
is in corneal transplant surgery. Because corneal transplants are the 
primary procedures in which corneal tissue is used, in prior rulemaking 
discussions of the corneal tissue payment policy in both the HOPD and 
the ASC, we focused on the costs associated with corneal tissue when 
used in corneal transplants (65 FR 18448 through 18449 and 72 FR 42508 
through 42509). However, we have not expressly limited the corneal 
tissue payment policy to only corneal tissue used in corneal 
transplants. In the HOPD, we have stated that we will make separate 
payment, based on the hospital's reasonable costs incurred to acquire 
corneal tissue (65 FR 18450). Moreover, corneal tissue acquisition 
costs are excluded from the determination of OPPS payment rates under 
42 CFR 419.2(c)(8). This regulation was amended in the CY 2002 OPPS 
final rule (66 FR 59922) and the phrase ``incurred by hospitals that 
are paid on a reasonable cost basis'' was deleted. In the ASC, as 
stated above, we include corneal tissue procurement in the scope of ASC 
services as a covered ancillary service when it is integral to the 
performance of an ASC covered surgical procedure and pay separately for 
this service, so payment is not packaged into the ASC payment for the 
associated covered surgical procedure (72 FR 42509).
    In early 2015, a stakeholder asked whether the acquisition of 
corneal tissue used as grafting material in glaucoma shunt surgery 
could be reported with HCPCS code V2785 and separately paid under the 
ASC payment system. In reviewing our longstanding policy on separate 
payment for corneal tissue acquisition when furnished integral to a 
covered ASC surgical procedures, we determined that the current 
language does not limit separate payment for the acquisition of corneal 
tissue to corneal transplants. Accordingly, we included an instruction 
in the April 2015 ASC quarterly update (Transmittal 3234, Change 
Request 9100) that states that ASCs can bill for the acquisition of 
corneal allograft tissue used for coverage (CPT code 66180) or revision 
(CPT code 66185) of a glaucoma aqueous shunt with HCPCS code V2785. In 
Change Request 9100, we also stated that contractors pay for corneal 
tissue acquisition reported with HCPCS code V2785 based on acquisition/
invoice cost. The April 2015 ASC Change Request is available on the CMS 
Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R3234CP.pdf. Since the publication of the April 
2015 ASC instruction, stakeholders have complained about the different 
payment policies for corneal tissue used for patch grafting (which is 
paid separately) versus noncorneal tissue (sclera and pericardium, 
among others) used for patch grafting (which is packaged).
2. Proposed CY 2016 Change to Corneal Tissue Payment Policy in the HOPD 
and the ASC
    For CY 2016, we are proposing to limit the separate payment policy 
for corneal tissue acquisition costs in the HOPD and the ASC to only 
corneal tissue that is used in a corneal transplant procedure. In the 
HOPD, corneal tissue acquisition costs would be separately paid only 
when the corneal tissue is used in a corneal transplant procedure. 
Otherwise, the corneal tissue would be a packaged surgical supply in 
the OPPS under the regulation at 42 CFR 419.2(b)(4). In the ASC, we 
would include corneal tissue procurement as a covered ancillary service 
only when it is integral to the performance of a corneal transplant 
procedure that is an ASC covered surgical procedure, and pay separately 
for this service under the ASC payment system. We would implement this 
proposal as final by providing a specific list of corneal transplant 
procedure HCPCS codes with which HCPCS code V2785 may be reported in 
the January 2016 OPPS and ASC updates via change requests. This 
proposal would mean that, in the HOPD and the ASC, we would not make 
separate payment for corneal tissue when used in any nontransplant 
procedure (payment for the corneal tissue in that instance will be 
packaged with the surgical procedure). This proposal also would

[[Page 39302]]

mean that we would make packaged payment for all tissues used as patch 
grafts in glaucoma shunt surgery. We are not proposing to change any 
other aspect of the corneal tissue payment policy in either the HOPD or 
the ASC.
    We believe that limiting separate payment for corneal tissue to 
corneal transplants only is warranted for the following reasons:
     The public comments summarized in the CY 2000 OPPS final 
rule with comment period (65 FR 18448 through 18449) and referenced in 
the CY 2008 ASC final rule (72 FR 42508 through 42509) by the Eye Bank 
Association of America (EBAA) and the study report submitted the EBAA 
focused on corneal tissue acquisition for corneal transplants. These 
comments and the study were significant factors in the finalized 
corneal tissue separate payment policy that addressed corneal tissue 
acquisition costs associated with corneal tissue used in corneal 
transplants.
     Corneal tissue for transplantation requires more 
specialized and more costly processing than corneal tissue used as 
glaucoma shunt-tube patch grafts because of the fragility and 
importance of the corneal endothelium, of which the health and 
preservation are necessary for successful transplantation.
     Unlike corneas used for corneal transplantation, in which 
there is currently no substitute, there are multiple different tissue 
types, each with their own costs and relative benefits and detriments, 
available for glaucoma shunt surgery patch grafting.
     Given the numerous tissue options for patch grafting, we 
believe that Medicare beneficiaries will continue to have access to 
patch grafting in glaucoma shunt surgery in both the hospital setting 
and the ASC setting.
    We also are proposing to revise the related regulations at 42 CFR 
416.164(b)(3) and 419.2(c)(8) to specify that payment would be made for 
corneal tissue acquisition or procurement costs for corneal transplant 
procedures.
    We are inviting public comments on these proposals.

XI. Proposed CY 2016 OPPS Payment Status and Comment Indicators

A. Proposed CY 2016 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 
payment status indicators and their definitions that we are proposing 
for CY 2016 is displayed in Addendum D1 to this proposed rule, which is 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The proposed 
CY 2016 payment status indicator assignments for APCs and HCPCS codes 
are shown in Addendum A and Addendum B, respectively, to this proposed 
rule, which are available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    For CY 2016, we are proposing to create two new status indicators:
     ``J2'' to identify certain combinations of services that 
we are proposing to pay through new proposed C-APC 8011 (Comprehensive 
Observation Services). We refer readers to section II.A.2.e. of this 
proposed rule for a detailed discussion of this proposed change.
     ``Q4'' to identify conditionally packaged laboratory 
tests. We refer readers to section II.A.3. of this proposed rule for a 
detailed discussion of this proposed new status indicator.

B. Proposed CY 2016 Comment Indicator Definitions

    For the CY 2016 OPPS, we are proposing to use three comment 
indicators. Two comment indicators, ``CH'' and ``NI,'' which were in 
effect in CY 2015 would continue in CY 2016. In this proposed rule, we 
are proposing to create new comment indicator ``NP'' that would be used 
in the proposed rule to identify a new code for the next calendar year 
or an existing code with substantial revision to its code descriptor in 
the next calendar year as compared to current calendar year, proposed 
APC assignment; and that would indicate that comments will be accepted 
on the proposed APC assignment for the new code.
     ``CH''--Active HCPCS code 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.
     ``NP''--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, proposed APC 
assignment; comments will be accepted on the proposed APC assignment 
for the new code.
    We are proposing to use the ``CH'' comment indicator in this CY 
2016 OPPS/ASC proposed rule to indicate HCPCS codes for which the 
status indicator or APC assignment, or both, are proposed for change in 
CY 2016 compared to their assignment as of June 30, 2015. We believe 
that using the ``CH'' indicator in this proposed rule will facilitate 
the public's review of the changes that we are proposing for CY 2016. 
We are proposing to use the ``CH'' comment indicator in the CY 2016 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, will change in 
CY 2016 compared to their assignment as of December 31, 2015. 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 2016 OPPS/ASC final rule with comment period.
    For CY 2016, we are proposing that any existing HCPCS codes with 
substantial revisions to the code descriptors for CY 2016 compared to 
the CY 2015 descriptors would be labeled with comment indicator ``NI'' 
in Addendum B to the CY 2016 OPPS/ASC final rule with comment period. 
However, in order to receive the comment indicator ``NI,'' the CY 2016 
revision to the code descriptor (compared to the CY 2015 descriptor) 
must be significant such that the new code descriptor describes a new 
service or procedure for which the OPPS treatment may change. We are 
proposing to use comment indicator ``NI'' to indicate that these HCPCS 
codes will be open for comment as part of the CY 2016 OPPS/ASC final 
rule with comment period. Like all codes labeled with comment indicator 
``NI,'' we will respond to public comments and finalize their OPPS 
treatment in the CY 2017 OPPS/ASC final rule with comment period.
    In accordance with our usual practice, we are proposing that CPT 
and Level II HCPCS codes that are new for CY 2016 and that are included 
in Addendum B to the CY 2016 OPPS/ASC final rule with comment period 
also would be labeled with comment indicator ``NI'' in Addendum B to 
the CY 2016 OPPS/ASC final rule with comment period.
    We are proposing that CPT codes that are new for CY 2016 and any 
existing HCPCS codes with substantial revisions

[[Page 39303]]

to the code descriptors for CY 2016 compared to the CY 2015 descriptors 
that are included in Addendum B to this CY 2016 OPPS/ASC proposed rule 
would be labeled with new comment indicator ``NP'' in Addendum B to 
indicate that these CPT codes will be open for comment as part of this 
CY 2016 OPPS/ASC proposed rule. We will respond to public comments and 
finalize their OPPS assignment in the CY 2016 OPPS/ASC final rule with 
comment period.
    For further discussion on the treatment of new CY 2016 CPT codes 
that will be effective January 1, 2016, for which we are soliciting 
public comments in this CY 2016 OPPS/ASC proposed rule, we refer 
readers to section III. of this proposed rule.
    The proposed definitions of the OPPS comment indicators for CY 2016 
are listed in Addendum D2 to this proposed rule, which is available on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to payments to ASCs under Medicare, 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), the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68434 through 68467), the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75064 through 75090), and the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66915 through 66940).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under 42 CFR 416.2 and 416.166 of the Medicare 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 for which standard medical practice dictates 
that the beneficiary would not typically be expected to require active 
medical monitoring and care at midnight following the procedure 
(``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 (72 FR 42495), 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 payment 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. In the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66932 through 66934), we expanded the scope of ASC 
covered ancillary services to include certain diagnostic tests within 
the medicine range of CPT codes for which separate payment is allowed 
under the OPPS when they are integral to an ASC covered surgical 
procedure. Covered ancillary services are specified in Sec.  416.164(b) 
and, as stated previously, are eligible for separate ASC payment. 
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.C. of this proposed rule, because we 
base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, and we use quarterly change requests to update 
services covered under the OPPS, we also provide quarterly update 
change requests (CRs) for ASC covered surgical procedures and covered 
ancillary services throughout the year (January, April, July, and 
October). CMS releases new and revised Level II HCPCS codes to the 
public or recognizes the release of new and revised CPT codes by the 
AMA and makes these codes effective (that is, the codes are recognized 
on Medicare claims) via these ASC quarterly update CRs. CMS releases 
new and revised Category III CPT codes in the July and January CRs. 
Thus, these updates are to implement newly created and revised 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 and revised Category I CPT codes, 
except vaccine codes, are released only once a year and, therefore, are 
implemented only through the January quarterly update. New and revised 
Category I CPT vaccine codes are released twice a year and are 
implemented through the January and July quarterly updates. We refer 
readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for an 
example of how this process was used to update 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 codes, and codes with revised descriptors, 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 39304]]

B. Proposed Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised 
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 items, supplies, temporary 
procedures, and services not described by CPT codes.
    We finalized a policy in the August 2, 2007 final rule (72 FR 42533 
through 42535) to evaluate each year all new and revised 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. In 
addition, we identify new and revised codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. In prior rulemakings, we refer to this process as 
recognizing new codes; however, this process has always involved the 
recognition of new and revised codes. We consider revised codes to be 
new when they have substantial revision to their code descriptors that 
necessitate a change in the current ASC payment indicator. To clarify, 
we refer to these codes as new and revised in this proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we are proposing to solicit public comments in 
this proposed rule (and respond to those comments in the CY 2016 OPPS/
ASC final rule with comment period) or whether we will be soliciting 
public comments in the CY 2016 OPPS/ASC final rule with comment period 
(and responding to those comments in the CY 2017 OPPS/ASC final rule 
with comment period).
    We note that we sought public comments in the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66918) on the new and revised 
Category I and III CPT and Level II HCPCS codes that were effective 
January 1, 2015. We also sought public comments in the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66918) on the new and revised 
Level II HCPCS codes effective October 1, 2014. These new and revised 
codes, with an effective date of October 1, 2014, or January 1, 2015, 
were flagged with comment indicator ``NI'' in Addenda AA and BB to the 
CY 2015 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 2015 OPPS/ASC final rule with comment period. We will respond 
to public comments and finalize the treatment of these codes under the 
ASC payment system in the CY 2016 OPPS/ASC final rule with comment 
period.
2. Proposed Treatment of New and Revised Level II HCPCS Codes and 
Category III CPT Codes Implemented in April 2015 and July 2015 for 
Which We Are Soliciting Public Comments in This Proposed Rule
    In the April 2015 and July 2015 Change Requests (CRs), we made 
effective for April 1, 2015 and July 1, 2015, respectively, a total of 
13 new Level II HCPCS codes and two new Category III CPT codes that 
describe covered ASC services that were not addressed in the CY 2015 
OPPS/ASC final rule with comment period.
    In the April 2015 ASC quarterly update (Transmittal 3234, CR 9100, 
dated April 15, 2015), we added one new device Level II HCPCS code and 
seven new drug and biological Level II HCPCS codes to the list of 
covered ancillary services. Table 55 below lists the new Level II HCPCS 
codes that were implemented April 1, 2015, along with their proposed 
payment indicators for CY 2016.
    In the July 2015 ASC quarterly update (Transmittal 3279, CR 9207, 
dated June 5, 2015), we added one new device Level II HCPCS code and 
four new drug and biological Level II HCPCS codes to the list of 
covered ancillary services. Table 56 below lists the new Level II HCPCS 
codes that were implemented July 1, 2015. The proposed payment rates, 
where applicable, for these April and July codes can be found in 
Addendum BB to this proposed rule (which is available via the Internet 
on the CMS Web site).
    Through the July 2015 quarterly update CR, we also implemented ASC 
payment for two new Category III CPT codes as ASC covered surgical 
procedures, effective July 1, 2015. These codes are listed in Table 57 
below, along with their proposed payment indicators. The proposed 
payment rates for these new Category III CPT codes, can be found in 
Addendum AA to this proposed rule (which is available via the Internet 
on the CMS Web site).
    We are inviting public comments on these proposed payment 
indicators and the proposed payment rates for the new Category III CPT 
code and Level II HCPCS codes that were newly recognized as ASC covered 
surgical procedures or covered ancillary services in April 2015 and 
July 2015 through the quarterly update CRs, as listed in Tables 55, 56, 
and 57 below. We are proposing to finalize their payment indicators and 
their payment rates in the CY 2016 OPPS/ASC final rule with comment 
period.

  Table 55--New Level II HCPCS Codes for Covered Surgical Procedures or
          Covered Ancillary Services Implemented in April 2015
------------------------------------------------------------------------
                                                            Proposed CY
    CY 2015 HCPCS code         CY 2015 long descriptor     2016 payment
                                                             indicator
------------------------------------------------------------------------
C2623.....................  Catheter, transluminal                    J7
                             angioplasty, drug-coated,
                             non-laser.
C9445.....................  Injection, c-1 esterase                   K2
                             inhibitor (recombinant),
                             Ruconest, 10 units.
C9448 *...................  Netupitant 300mg and                      D5
                             palonosetron 0.5 mg, oral.
C9449.....................  Injection, blinatumomab, 1                K2
                             mcg.
C9450.....................  Injection, fluocinolone                   K2
                             acetonide intravitreal
                             implant, 0.01 mg.
C9451.....................  Injection, peramivir, 1 mg..              K2
C9452.....................  Injection, ceftolozane 50 mg              K2
                             and tazobactam 25 mg.
Q9975.....................  Injection, Factor VIII, FC                K2
                             Fusion Protein
                             (Recombinant), per iu.
------------------------------------------------------------------------
* HCPCS code C9448 was deleted June 30, 2015 and replaced with HCPCS
  code Q9978 effective July 1, 2015.


[[Page 39305]]


    Table 56--New Level II HCPCS Codes for Covered Ancillary Services
                        Implemented in July 2015
------------------------------------------------------------------------
                                                            Proposed CY
    CY 2015 HCPCS code         CY 2015 long descriptor     2016 payment
                                                             indicator
------------------------------------------------------------------------
C2613.....................  Lung biopsy plug with                     J7
                             delivery system.
C9453.....................  Injection, nivolumab, 1 mg..              K2
C9454.....................  Injection, pasireotide long               K2
                             acting, 1 mg.
C9455.....................  Injection, siltuximab, 10 mg              K2
Q9978*....................  Netupitant 300 mg and                     K2
                             Palonosetron 0.5 mg, oral.
------------------------------------------------------------------------
* HCPCS code Q9978 replaced HCPCS code C9448 effective July 1, 2015.


 Table 57--New Category III CPT Codes for Covered Surgical Procedures or
           Covered Ancillary Services Implemented in July 2015
------------------------------------------------------------------------
                                                            Proposed CY
     CY 2015 CPT code          CY 2015 long descriptor     2016 payment
                                                             indicator
------------------------------------------------------------------------
0392T.....................  Laparoscopy, surgical,                    G2
                             esophageal sphincter
                             augmentation procedure,
                             placement of sphincter
                             augmentation device (i.e.,
                             magnetic band).
0393T.....................  Removal of esophageal                     G2
                             sphincter augmentation
                             device.
------------------------------------------------------------------------

3. Proposed Process for Recognizing New and Revised Category I and 
Category III CPT Codes That Will Be Effective January 1, 2016
a. Current Process for Accepting Comments on New and Revised CPT Codes 
That Are Effective January 1
    Historically, we have not received new and revised Category I and 
Category III CPT codes that take effect at the beginning of a calendar 
year in time to include them in the proposed rule for that calendar 
year. Therefore, under the ASC payment system, the current process we 
have used is to incorporate new and revised Category I and Category III 
CPT codes that are effective January 1 in the final rule with comment 
period thereby updating the ASC payment system for the following 
calendar year. These codes are released to the public by the AMA via 
the annual CPT code books and electronic CPT code file. In addition, we 
include these codes in the January ASC quarterly update CR, and we list 
the codes in ASC Addendum AA and BB of the OPPS/ASC final rule with 
comment period. All of the new codes are flagged with comment indicator 
``NI'' in Addendum AA and Addendum 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. In addition, 
existing CPT codes that have substantial revision to their code 
descriptors that necessitate a change in the current ASC payment 
indicator are assigned to comment indicator ``NI.'' 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. For example, the new CPT codes that were effective January 
1, 2014 were assigned to comment indicator ``NI'' in Addendum AA and 
Addendum BB to the CY 2014 OPPS/ASC final rule with comment period. We 
responded to public comments received on the CY 2014 OPPS/ASC final 
rule with comment period and finalized the payment indicator 
assignments for these codes in the CY 2015 OPPS/ASC final rule with 
comment period; and we included the final ASC payment indicator 
assignments in Addendum AA and Addendum BB to that final rule with 
comment period.
    Several stakeholders, including consultants, device manufacturers, 
drug manufacturers, as well as specialty societies and hospitals, have 
expressed concern with the process we use to recognize new and revised 
CPT codes. They believe that we should publish proposed ASC payment 
indicators for the new and revised CPT codes that will be effective 
January 1 in the OPPS/ASC proposed rule for the prior year, and request 
public comments prior to finalizing them for the January 1 
implementation date. Further, the stakeholders believe that seeking 
public input on the ASC payment indicator assignments for these new and 
revised codes would assist CMS in assigning the CPT codes to 
appropriate payments under the ASC payment system. We were informed of 
similar concerns regarding our process for assigning interim payment 
values for revalued, and new and revised codes, under the MPFS and the 
OPPS. Consequently, we included proposed policies to address those 
concerns in the CY 2015 MPFS proposed rule (79 FR 40359 through 40364), 
and in the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979). 
Based on the comments that we received to the proposed rules, we 
finalized the policies in the CY 2015 MPFS final rule (79 FR 67602 
through 67609) and the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66841 through 66844).
    Like the MPFS and the OPPS, the ASC payment system relies 
principally upon the Current Procedural Terminology (CPT[supreg]) 
coding system maintained by the AMA for billing. CPT[supreg] is the 
standard code set adopted under the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) for outpatient services. The AMA CPT 
Editorial Panel's coding cycle occurs concurrently with our calendar 
year rulemaking cycle for the OPPS and the ASC payment system. The 
OPPS/ASC proposed rules have historically been published prior to the 
publication of the CPT codes that are generally made public in the 
fall, with a January 1 effective date, and therefore, we have not 
historically been able to include these codes in the OPPS/ASC proposed 
rules.
b. Proposed Modification of the Current Process for Accepting Comments 
on New and Revised Category I and III CPT Codes That Are Effective 
January 1
    In this CY 2016 OPPS/ASC proposed rule, we are proposing to make 
changes in the process we use to establish ASC payment indicators for 
new and revised Category I and Category III CPT codes. As discussed 
above, we finalized similar

[[Page 39306]]

revisions under the MPFS and the OPPS for establishing payment 
indicators for new and revised CPT codes that take effect each January 
1. Because new and revised codes that are received in time for the 
proposed rule are assigned proposed payment indicators and proposed APC 
assignments in the OPPS, we also need to propose corresponding payment 
rates and payment indicators in the ASC for those codes that are ASC 
covered surgical procedures and covered ancillary services. The 
proposed revised process would eliminate our current practice of 
assigning interim payment indicators for the vast majority of new and 
revised CPT codes that take effect on January 1 each year.
    Consequently, we are proposing that, for new and revised Category I 
and III CPT codes that we receive from the AMA CPT Editorial Panel too 
late for inclusion in the proposed rule for a year, we would delay 
adoption of the new and revised codes for that year and, instead, adopt 
coding policies and payment rates that conform, to the extent possible, 
to the policies and payment rates in place for the previous year. We 
are proposing to adopt these conforming coding and payment policies on 
an interim basis pending the result of our specific proposals for these 
new and revised codes through notice-and-comment rulemaking in the 
OPPS/ASC proposed rule for the following year. Because the changes in 
CPT codes are effective on January 1 of each year, and we would not 
have established payment indicators for these new or revised codes, it 
would not be practicable for Medicare to use those CPT codes. In this 
circumstance, we are proposing to create HCPCS G-codes to describe the 
predecessor codes for any codes that were revised or deleted as part of 
the annual CPT coding changes. However, if certain CPT codes are 
revised in a manner that would not affect the cost of inputs (for 
example, a grammatical change to CPT code descriptors), we would use 
these revised codes and continue to assign those codes to their current 
ASC payment indicator. For example, under this proposed process, if a 
single CPT code was separated into two codes and we did not receive 
those codes until May 2016, we would assign each of those codes to 
proposed payment indicator ``B5'' (Alternative code may be available; 
no payment made) in the final rule with comment period, to indicate 
that an alternate code is recognized under the ASC payment system. ASCs 
could not use those two new CPT codes to bill Medicare for ASC services 
the first year after the effective date of the codes. Instead, we would 
create a HCPCS G-code with the same description as the single 
predecessor CPT code, and continue to use the same ASC payment 
indicator for that code during the year. We would propose payment 
indicators for the two new CPT codes during rulemaking in CY 2017 for 
payment beginning in CY 2018.
    For new codes that describe wholly new services, as opposed to new 
or revised codes that describe services for which ASC payment indicator 
assignments are already established, we would make every effort to work 
with the AMA CPT Editorial Panel to ensure that we received the codes 
in time to propose payment rates in the proposed rule. However, if we 
do not receive the code for a wholly new service in time to include 
proposed ASC payment indicator assignments in the proposed rule for a 
year, we would need to establish interim ASC payment indicator 
assignments for the initial year. We are proposing to establish the 
initial ASC payment indicator assignments for wholly new services as 
interim final assignments, and to follow our current process to solicit 
and respond to public comments and finalize the ASC payment indicator 
assignments in the subsequent year.
    We recognize that the use of HCPCS G-codes may place an 
administrative burden on those ASCs that bill for services under the 
ASC payment system. We are hopeful that the AMA CPT Editorial Panel 
ultimately will be able to adjust its timelines and processes so that 
most, if not all, of the annual coding changes can be addressed in the 
proposed rule. We are proposing to finalize and implement the revised 
CMS process for establishing ASC payment indicator assignments for new 
and revised codes for CY 2016.
    In summary, we are proposing to include in the OPPS/ASC proposed 
rule the proposed ASC payment indicators for the vast majority of new 
and revised CPT codes before they are used for payment purposes under 
the ASC payment system. We would address new and revised CPT codes for 
the upcoming year that are available in time for the proposed rule by 
proposing ASC payment indicators for the codes. Otherwise, we would 
delay adoption of the new and revised codes for a year while using 
methods (including creating G-codes that describe the predecessor 
codes) to maintain the existing ASC payment indicators until the 
following year when we would include proposed assignments for the new 
and revised codes in the proposed rule. We are proposing to follow this 
revised process except in the case of a new CPT code that describes a 
wholly new service (such as a new technology or new surgical procedure) 
that has not previously been addressed under the ASC payment system. 
For codes that describe wholly new services for which we do not receive 
timely information from the AMA, we are proposing to establish interim 
ASC payment indicators in the OPPS/ASC final rules with comment period, 
as is our current process. The proposed revised process would eliminate 
our current practice of assigning interim ASC payment indicators for 
the vast majority of new and revised CPT codes that take effect on 
January 1 each year. We are inviting public comment on these proposals.
    For the CY 2016 ASC update, we received the CY 2016 Category I and 
Category III CPT codes from AMA in time for inclusion in this CY 2016 
OPPS/ASC proposed rule. The new and revised CY 2016 Category I and III 
CPT codes can be found in ASC Addendum AA and Addendum BB (which are 
available via the Internet on the CMS Web site) and are assigned to 
proposed new comment indicator ``NP'' to indicate that the code is new 
for the next calendar year or the code is an existing code with 
substantial revision to its code descriptor in the next calendar year 
as compared to current calendar year with a proposed ASC payment 
indicator and that comments will be accepted on the proposed payment 
indicator. We refer readers to section XII.F. of this proposed rule for 
further discussion on the new proposed comment indicator ``NP.'' 
Therefore, in this CY 2016 OPPS/ASC proposed rule, we are soliciting 
public comments on the proposed CY 2016 ASC payment indicators for the 
new and revised Category I and III CPT codes that would be effective 
January 1, 2016.
    Further, we remind readers that the CPT code descriptors that 
appear in ASC Addendum AA and BB are short descriptors and do not 
accurately describe the complete procedure, service, or item described 
by the CPT code. Therefore, we are including the long descriptors for 
the new and revised CY 2016 CPT codes in Addendum O to this proposed 
rule (which is available via the Internet on the CMS Web site) so that 
the public can adequately comment on our proposed ASC payment 
indicators. Because CPT procedure codes are 5 alpha-numeric characters 
and CMS systems only utilize 5 characters HCPCS codes, we have 
developed alternative 5-character placeholder codes for this proposed 
rule. The placeholder codes can be found in Addendum O to this proposed

[[Page 39307]]

rule, specifically under the column labeled ``CY 2016 OPPS/ASC Proposed 
Rule 5-Digit CMS Placeholder Code.'' The final CPT code numbers would 
be included in the CY 2016 OPPS/ASC final rule with comment period.
4. Proposed Process for New and Revised Level II HCPCS Codes That Will 
Be Effective October 1, 2015 and January 1, 2016 for Which We Will Be 
Soliciting Public Comments in the CY 2016 OPPS/ASC Final Rule With 
Comment Period
    Although we are proposing to revise our process for requesting 
public comments on the new and revised Category I and III CPT codes, we 
are not proposing any change to the process for requesting public 
comments on the new and revised Level II HCPCS codes that would be 
effective October 1 and January 1.
    As has been our practice in the past, we incorporate those new and 
revised Level II HCPCS codes that are effective January 1 in the final 
rule with comment period, thereby updating the ASC payment system for 
the following calendar year. These codes are released to the public via 
the CMS HCPCS Web site, and also through the January ASC quarterly 
update CRs. In the past, we also released new and revised Level II 
HCPCS codes that are effective October 1 through the October ASC 
quarterly update CRs and incorporated these new and revised codes in 
the final rule with comment period, thereby updating the ASC for the 
following calendar year. All of these codes are flagged with comment 
indicator ``NI'' in Addenda AA and BB to the OPPS/ASC final rule with 
comment period to indicate that we are assigning them an interim 
payment status which is subject to public comment. The payment 
indicator and payment rate, if applicable, for all such codes flagged 
with comment indicator ``NI'' are open to public comment in the OPPS/
ASC final rule with comment period, and we respond to these comments in 
the final rule with comment period for the next calendar year's OPPS/
ASC update.
    We are proposing to continue this process for CY 2016. 
Specifically, the Level II HCPCS codes that will be effective October 
1, 2015 and January 1, 2016 would be flagged with comment indicator 
``NI'' in Addendum AA and BB to the CY 2016 OPPS/ASC final rule with 
comment period to indicate that we have assigned the codes an interim 
ASC payment status for CY 2016. We will be inviting public comments on 
the proposed payment indicators and payment rates for these codes, if 
applicable, that would be finalized in the CY 2017 OPPS/ASC final rule 
with comment period.
    In Table 58 below, we summarize the CY 2016 process described in 
this section XII.B. of this proposed rule for updating codes through 
our ASC quarterly update CRs, seeking public comments, and finalizing 
the treatment of these new and revised codes under the ASC payment 
system.

  Table 58--Proposed Comment Timeframe for CY 2016 for New or Revised Category I AND III CPT Codes and Level II
                                                   HCPCS Codes
----------------------------------------------------------------------------------------------------------------
     ASC quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2015...................  Level II HCPCS      April 1, 2015.....  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2015....................  Level II HCPCS      July 1, 2015......  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2015......  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2015.................  Level II HCPCS      October 1, 2015...  CY 2016 OPPS/ASC    CY 2017 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2016.................  Level II HCPCS      January 1, 2016...  CY 2016 OPPS/ASC    CY 2017 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2016...  CY 2016 OPPS/ASC    CY 2016 OPPS/ASC
                                   CPT Codes.                              proposed rule.      final rule with
                                                                                               comment period.
----------------------------------------------------------------------------------------------------------------

    We are inviting public comment on this proposed process.

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

1. Covered Surgical Procedures
a. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated the 
procedure would be paid according to the standard ASC payment 
methodology based on its

[[Page 39308]]

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 covered surgical procedures eligible for payment in ASCs, each 
year we identify covered surgical procedures as either temporarily 
office-based (these are new procedure codes with little or no 
utilization data that we have determined are clinically similar to 
other procedures that are permanently office-based), permanently 
office-based, or nonoffice-based, after taking into account updated 
volume and utilization data.
(2) Proposed Changes for CY 2016 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this proposed rule, we followed our policy to 
annually review and update the covered 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 2014 volume and utilization data and the 
clinical characteristics for all covered surgical procedures that are 
assigned payment indicator ``G2'' (Nonoffice-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) in CY 2015, as well as for those procedures assigned one of the 
temporary office-based payment indicators, specifically ``P2,'' ``P3,'' 
or ``R2'' in the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66921 through 66923).
    Our review of the CY 2014 volume and utilization data resulted in 
our identification of two covered surgical procedures, CPT codes 43197 
(Esophagoscopy, flexible, transnasal; diagnostic, including collection 
of specimen(s) by brushing or washing, when performed (separate 
procedure)) and 43198 (Esophagoscopy, flexible, transnasal; with 
biopsy, single or multiple) that we believe meet the criteria for 
designation as office-based. The data indicate that these procedures 
are performed more than 50 percent of the time in physicians' offices 
and we believe the services are of a level of complexity consistent 
with other procedures performed routinely in physicians' offices. The 
two CPT codes we are proposing to permanently designate as office-based 
are listed in Table 59 below.
    We are inviting public comment on this proposal.

 Table 59--ASC Covered Surgical Procedures Newly Proposed as Permanently
                        Office-Based for CY 2016
------------------------------------------------------------------------
                                                            Proposed CY
 Proposed CY 2016 CPT   Proposed CY 2016    CY 2015 ASC      2016 ASC
         code           long descriptor       payment         payment
                                             indicator      indicator *
------------------------------------------------------------------------
43197................  Esophagoscopy,                 G2              P3
                        flexible,
                        transnasal;
                        diagnostic,
                        including
                        collection of
                        specimen(s) by
                        brushing or
                        washing, when
                        performed
                        (separate
                        procedure).
43198................  Esophagoscopy,                 G2              P3
                        flexible,
                        transnasal; with
                        biopsy, single
                        or multiple.
------------------------------------------------------------------------
* Proposed payment indicators are based on a comparison of the proposed
  rates according to the ASC standard ratesetting methodology and the
  MPFS proposed rates. Current law specifies a 0.5 percent update to the
  MPFS payment rates for CY 2016. For a discussion of the MPFS rates, we
  refer readers to the CY 2016 MPFS proposed rule.

    We also reviewed CY 2014 volume and utilization data and other 
information for six procedures finalized for temporary office-based 
status in Table 47 in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66922 through 66923). Among these six procedures, there 
were very few claims in our data or no claims data for five procedures: 
CPT code 0099T (Implantation of intrastromal corneal ring segments); 
CPT code 0299T (Extracorporeal shock wave for integumentary wound 
healing, high energy, including topical application and dressing care; 
initial wound); CPT code C9800 (Dermal injection procedure(s) for 
facial lipodystrophy syndrome (LDS) and provision of Radiesse or 
Sculptra dermal filler, including all items and supplies); CPT code 
10030 (Image-guided fluid collection drainage by catheter (e.g., 
abscess, hematoma, seroma, lymphocele, cyst), soft tissue (e.g., 
extremity, abdominal wall, neck), percutaneous); and CPT code 67229 
(Treatment of extensive or progressive retinopathy, one or more 
sessions; preterm infant (less than 37 weeks gestation at birth), 
performed from birth up to 1 year of age (e.g., retinopathy of 
prematurity), photocoagulation or cryotherapy). Consequently, we are 
proposing to maintain the temporary office-based designations for these 
five codes for CY 2016. We list all of these codes in Table 60, except 
for HCPCS code 0099T. HCPCS code 0099T was assigned payment indicator * 
R2 in the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66922), but this code is being replaced with a new CPT code currently 
identified with a CMS 5-digit placeholder code of 657XG. Table 61 
reflects the new CY 2016 codes for ASC covered surgical procedures with 
proposed temporary office-based designations.
    For CPT code 64617 (Chemodenervation of muscle(s); larynx, 
unilateral, percutaneous (e.g., for spasmodic dysphonia), includes 
guidance by needle electromyography, when performed), claims data 
indicate these procedures are performed more than 50 percent of the 
time in physicians' offices and we believe the services are of a level 
of complexity consistent with other procedures performed routinely in 
physicians' offices. Therefore, we are proposing to make the office-
based designation for CPT code 64617 permanent.
    The proposed CY 2016 payment indicator designations for the 
procedures that were temporarily designated as office-based in CY 2015 
are displayed in Table 60. The procedures for which the proposed 
office-based designations for CY 2016 are temporary also are indicated 
by asterisks in Addendum AA to this proposed rule (which is available 
via the Internet on the CMS Web site).

[[Page 39309]]



 Table 60--Proposed CY 2016 Payment Indicators for ASC Covered Surgical
 Procedures Designated as Temporarily Office-Based in the CY 2015 OPPS/
                   ASC Final Rule With Comment Period
------------------------------------------------------------------------
                                                            Proposed CY
                          CY 2015 long      CY 2015 ASC      2016 ASC
   CY 2015 CPT code        descriptor         payment         payment
                                             indicator     indicator * *
------------------------------------------------------------------------
0299T................  Extracorporeal               * R2            * R2
                        shock wave for
                        integumentary
                        wound healing,
                        high energy,
                        including
                        topical
                        application and
                        dressing care;
                        initial wound.
C9800................  Dermal injection             * R2            * R2
                        procedure(s) for
                        facial
                        lipodystrophy
                        syndrome (LDS)
                        and provision of
                        Radiesse or
                        Sculptra dermal
                        filler,
                        including all
                        items and
                        supplies.
10030................  Image-guided                 * P2            * P2
                        fluid collection
                        drainage by
                        catheter (e.g.,
                        abscess,
                        hematoma,
                        seroma,
                        lymphocele,
                        cyst), soft
                        tissue (e.g.,
                        extremity
                        abdominal wall,
                        neck),
                        percutaneous.
64617................  Chemodenervation             * P3            * P3
                        of muscle(s);
                        larynx,
                        unilateral,
                        percutaneous
                        (e.g., for
                        spasmodic
                        dysphonia),
                        includes
                        guidance by
                        needle
                        electromyography
                        , when performed.
67229................  Treatment of                 * R2            * R2
                        extensive or
                        progressive
                        retinopathy, one
                        or more
                        sessions;
                        preterm infant
                        (less than 37
                        weeks gestation
                        at birth),
                        performed from
                        birth up to 1
                        year of age
                        (e.g.,
                        retinopathy of
                        prematurity),
                        photocoagulation
                        or cryotherapy.
------------------------------------------------------------------------
* If designation is temporary.
* * Proposed payment indicators are based on a comparison of the
  proposed rates according to the ASC standard ratesetting methodology
  and the MPFS proposed rates. Current law specifies a 0.5 percent
  update to the MPFS payment rates for CY 2016. For a discussion of the
  MPFS rates, we refer readers to the CY 2016 MPFS proposed rule.

    For CY 2016, we also are proposing to designate certain new CY 2016 
codes for ASC covered surgical procedures as temporary office-based, 
displayed in Table 61. After reviewing the clinical characteristics, 
utilization, and volume of related codes, we determined that the 
procedures described by these 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 codes, we made the office-based designations temporary rather than 
permanent and we will reevaluate the procedures when data become 
available. The procedures for which the proposed office-based 
designations for CY 2016 are temporary also are indicated by asterisks 
in Addendum AA to this proposed rule (which is available via the 
Internet on the CMS Web site).
    We are inviting public comment on these proposals.

 Table 61--Proposed CY 2016 Payment Indicators for New CY 2016 CPT Codes
  for ASC Covered Surgical Procedures Designated as Temporarily Office-
                                  Based
------------------------------------------------------------------------
                                                            Proposed CY
   Proposed CY 2016 OPPS/ASC      Proposed CY 2016 long      2016 ASC
   proposed rule 5-digit CMS            descriptor            payment
     placeholder code * * *                                indicator * *
------------------------------------------------------------------------
6446A..........................  Paravertebral block                * R2
                                  (PVB) (paraspinous
                                  block), thoracic;
                                  single injection site
                                  (includes imaging
                                  guidance, when
                                  performed).
6446C..........................  Paravertebral block                * R2
                                  (PVB) (paraspinous
                                  block), thoracic;
                                  continuous infusion by
                                  catheter (includes
                                  imaging guidance, when
                                  performed).
03XXB..........................  Collagen cross-linking             * R2
                                  of cornea (including
                                  removal of the corneal
                                  epithelium and
                                  intraoperative
                                  pachymetry when
                                  performed).
657XG..........................  Implantation of                    P2 *
                                  intrastromal corneal
                                  ring segments.
------------------------------------------------------------------------
* If designation is temporary.
* * Proposed payment indicators are based on a comparison of the
  proposed rates according to the ASC standard ratesetting methodology
  and the MPFS proposed rates. Current law specifies a 0.5 percent
  update to the MPFS payment rates for CY 2016. For a discussion of the
  MPFS rates, we refer readers to the CY 2016 MPFS proposed rule.
* * * New CPT codes (with CMS 5-digit placeholder codes) that will be
  effective January 1, 2016. The proposed ASC payment rate for this code
  can be found in ASC Addendum AA, which is available via the Internet
  on the CMS Web site.

b. ASC Covered Surgical Procedures Designated as Device-Intensive--
Finalized Policy for CY 2015 and Proposed Policy for CY 2016
(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. According to that modified ASC payment methodology, we 
apply the device offset percentage based on the standard OPPS APC 
ratesetting methodology to the OPPS national unadjusted payment to 
determine the device cost included in the OPPS payment rate for a 
device-intensive ASC covered surgical procedure, which we then set as 
equal to the device portion of the national unadjusted ASC payment rate 
for the procedure. We then calculate the service portion of the ASC 
payment for device-intensive procedures by applying the uniform ASC 
conversion factor to the service (nondevice) portion of the OPPS 
relative payment weight for the device-intensive procedure. Finally, we 
sum the ASC device portion and ASC service portion to establish the 
full payment for the device-intensive procedure under the revised ASC 
payment system. For CY 2015, we implemented a

[[Page 39310]]

comprehensive APC policy under the OPPS under which we created 
comprehensive APCs to replace most of the then-current device-dependent 
APCs and a few nondevice-dependent APCs under the OPPS, which 
discontinued the device-dependent APC policy (79 FR 66798 through 
66810). We did not implement comprehensive APCs in the ASC payment 
system.
    Therefore, in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66925), we provided that all separately paid covered ancillary 
services that are provided integral to covered surgical procedures that 
mapped to comprehensive APCs 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. To avoid duplicating payment we 
provided that the CY 2015 ASC payment rates for these comprehensive 
APCs are based on the CY 2015 OPPS relative payments weights that had 
been calculated using the standard APC ratesetting methodology for the 
primary service instead of the relative payment weights that are based 
on the comprehensive bundled service. For the same reason, under the 
ASC payment system, we also used the standard OPPS APC ratesetting 
methodology instead of the comprehensive methodology to calculate the 
device offset percentage for comprehensive APCs for purposes of 
identifying device-intensive procedures and to calculate payment rates 
for device-intensive procedures assigned to comprehensive APCs. Because 
we implemented the comprehensive APC policy and, therefore, eliminated 
device-dependent APCs under the OPPS in CY 2015, we revised our 
definition of ASC device-intensive procedures to be those procedures 
that are assigned to any APC (not only an APC formerly designated as 
device-dependent) with a device offset percentage greater than 40 
percent based on the standard OPPS APC ratesetting methodology.
    We also provided that we would update the ASC list of covered 
surgical procedures that are eligible for payment according to our 
device-intensive procedure payment methodology, consistent with our 
modified definition of device-intensive procedures, reflecting the APC 
assignments of procedures and APC device offset percentages based on 
the CY 2013 OPPS claims and cost report data available for the CY 2015 
OPPS/ASC proposed rule and final rule with comment period.
(2) Proposed Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2016
    For CY 2016, we are proposing to continue our CY 2015 policies. 
Specifically, for CY 2016, we are proposing to update the ASC list of 
covered surgical procedures that are eligible for payment according to 
our device-intensive procedure payment methodology, consistent with our 
proposed modified definition of device-intensive procedures, reflecting 
the proposed APC assignments of procedures and APC device offset 
percentages based on the CY 2014 OPPS claims and cost report data 
available for the proposed rule.
    The ASC covered surgical procedures that we are proposing to 
designate as device-intensive and that would be subject to the device-
intensive procedure payment methodology for CY 2016 are listed in Table 
62 below. The CPT code, the CPT code short descriptor, the proposed CY 
2016 ASC payment indicator, the proposed CY 2016 OPPS APC assignment, 
the proposed CY 2016 OPPS APC device offset percentage, and an 
indication if the full credit/partial credit (FB/FC) device adjustment 
policy would apply are also listed in Table 62 below. All of these 
procedures are included in Addendum AA to this proposed rule (which is 
available via the Internet on the CMS Web site).
    We are inviting public comment on these proposals.
(3) Solicitation of Comments on Device-Intensive Policy for ASCs
    As discussed previously, prior to CY 2015, ASC device-intensive 
procedures were 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 implemented the 
comprehensive APC policy and, therefore, eliminated device-dependent 
APCs under the OPPS in CY 2015, we redefined ASC device-intensive 
procedures for CY 2015 as those procedures that are assigned to any APC 
with a device offset percentage greater than 40 percent based on the 
standard OPPS APC ratesetting methodology (79 FR 66923 through 66925).
    Payment rates for ASC device-intensive procedures are based on a 
modified payment methodology. As described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66829), under that modified 
payment methodology, we apply the device offset percentage based on the 
standard OPPS APC ratesetting methodology to the OPPS national 
unadjusted payment to determine the device cost included in the non-
comprehensive OPPS unadjusted payment rate for a device-intensive ASC 
covered surgical procedure, which we then set as equal to the device 
portion of the national unadjusted ASC payment rate for the procedure. 
We then calculate the service portion of the ASC payment for device-
intensive procedures by applying the uniform ASC conversion factor to 
the service (nondevice) portion of the OPPS relative payment weight for 
the device-intensive procedure, which is then scaled for ASC budget 
neutrality. Finally, we sum the ASC device portion and the ASC service 
portion to establish the full payment for the device-intensive 
procedure under the revised ASC payment system.
    We recognize that, in some instances, there may be a procedure that 
contains high-cost devices but is not assigned to a device-intensive 
APC. Where an ASC covered surgical procedure is not designated as 
device-intensive, the procedure would be paid under the ASC methodology 
established for that covered surgical procedure, through either an MPFS 
nonfacility PE RVU-based amount or an OPPS relative payment weight 
based methodology, depending on the ASC status indicator assignment.
    In response to stakeholder concerns regarding the situation where 
procedures with high-cost devices are not classified as device-
intensive under the ASC payment system, we are soliciting public 
comments for alternative methodologies for establishing device-
intensive status for ASC covered surgical procedures.
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost/full credit or partial credit as set forth in Sec.  
416.179 is consistent with the OPPS policy that was in effect until CY 
2014. The established ASC policy reduces payment to ASCs when a 
specified device is furnished without cost or with full credit or 
partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period for a full discussion of the ASC payment 
adjustment policy for no cost/full credit and partial credit devices 
(73 FR 68742 through 68744).
    As discussed in section IV.B. of the CY 2014 OPPS/ASC final rule 
with

[[Page 39311]]

comment period (78 FR 75005 through 75006), we finalized our proposal 
to modify our former policy of reducing OPPS payment for specified APCs 
when a hospital furnishes a specified device without cost or with a 
full or partial credit. Formerly, under the OPPS, our policy was 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 (but less 
than 100 percent) of the cost for the specified device. For CY 2014, we 
finalized our proposal to reduce OPPS payment for applicable APCs by 
the full or partial credit a provider receives for a replaced device, 
capped at the device offset amount.
    Although we finalized our proposal 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, in that final rule with 
comment period (78 FR 75076 through 75080), we finalized our proposal 
for CY 2014 to maintain our 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 finalized our proposal for CY 2014 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 are proposing to update the list of ASC covered device-intensive 
procedures, based on the revised device-intensive definition finalized 
last year, which would be subject to the no cost/full credit and 
partial credit device adjustment policy for CY 2016. Table 62 below 
displays the ASC covered device-intensive procedures that we are 
proposing would be subject to the no cost/full credit or partial credit 
device adjustment policy for CY 2016. Specifically, when a procedure 
that is listed in Table 62 is subject to the no cost/full credit or 
partial credit device adjustment policy and is performed to implant a 
device that is furnished at no cost or with full credit from the 
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the 
line with the procedure to implant the device. The contractor would 
reduce payment to the ASC by the device offset amount that we estimate 
represents the cost of the device when the necessary device is 
furnished without cost to the ASC or with full credit. We continue to 
believe that the reduction of ASC payment in these circumstances is 
necessary to pay appropriately for the covered surgical procedure being 
furnished by the ASC.
    For partial credit, we are proposing to reduce the payment for 
implantation procedures listed in Table 62 of this proposed rule that 
are subject to the no cost/full credit or partial credit device 
adjustment policy by one-half of the device offset amount that would be 
applied if a device was provided at no cost or with full credit, if the 
credit to the ASC is 50 percent or more (but less than 100 percent) 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 62 
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 (but less than 100 percent) of the cost of a device. In 
order to report that they received a partial credit of 50 percent or 
more (but less than 100 percent) 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 (but less than 100 percent) of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount. As finalized in the CY 2015 OPPS/ASC final rule 
with comment period, in order to ensure that our policy covers any 
situation involving a device-intensive procedure where an ASC may 
receive a device at no cost/full credit or partial credit, we apply our 
FB/FC policy to all device-intensive procedures (79 FR 66926).
    We are inviting public comment on these proposals.

  Table 62--ASC Covered Surgical Procedures Proposed for Designation as Device-Intensive for CY 2016, Including
 ASC Covered Surgical Procedures for Which the Proposed No Cost/Fill Credit or Partial Credit Device Adjustment
                                               Policy Would Apply
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed CY
                                                    Proposed CY     Proposed CY     2016 device   Proposed FB/FC
          HCPCS code            Short descriptor    2016 ASC PI      2016 OPPS        offset       policy would
                                                                       APC**        percentage         apply
----------------------------------------------------------------------------------------------------------------
0100T.........................  Prosth retina                 J8            1593          99.99%               Y
                                 receive&gen.
0171T.........................  Lumbar spine                  J8            5124          49.60%               Y
                                 proces distract.
0238T.........................  Trluml perip                  J8            5193          60.43%               Y
                                 athrc iliac art.
0282T.........................  Periph field                  J8            5462          56.27%               Y
                                 stimul trial.
0283T.........................  Periph field                  J8            5464          86.77%               Y
                                 stimul perm.
0302T.........................  Icar ischm                    J8            5223          68.50%               Y
                                 mntrng sys
                                 compl.
0303T.........................  Icar ischm                    J8            5222          72.88%               Y
                                 mntrng sys
                                 eltrd.
0304T.........................  Icar ischm                    J8            5222          72.88%               Y
                                 mntrng sys
                                 device.
0307T.........................  Rmvl icar ischm               J8            5221          45.44%               Y
                                 mntrng dvce.
0308T.........................  Insj ocular                   J8            5494          81.62%               Y
                                 telescope
                                 prosth.
0316T.........................  Replc vagus                   J8            5463          85.69%               Y
                                 nerve pls gen.
0387T.........................  Leadless c pm                 J8            5193          60.43%               Y
                                 ins/rpl ventr.
04XX1*........................  Insj/rplc                     J8            5223          68.50%               Y
                                 cardiac modulj
                                 sys.
04XX2*........................  Insj/rplc                     J8            5223          68.50%               Y
                                 cardiac modulj
                                 pls gn.
04XX3*........................  Insj/rplc car                 J8            5222          72.88%               Y
                                 modulj atr elt.
04XX4*........................  Insj/rplc car                 J8            5222          72.88%               Y
                                 modulj vnt elt.

[[Page 39312]]

 
04XX5*........................  Rmvl cardiac                  J8            5222          72.88%               Y
                                 modulj pls gen.
04XX7*........................  Rmvl & rpl car                J8            5224          72.68%               Y
                                 modulj pls gn.
19298.........................  Place breast rad              J8            5093          41.08%               Y
                                 tube/caths.
19325.........................  Enlarge breast                J8            5093          41.08%               Y
                                 with implant.
19342.........................  Delayed breast                J8            5093          41.08%               Y
                                 prosthesis.
19357.........................  Breast                        J8            5093          41.08%               Y
                                 reconstruction.
22551.........................  Neck spine                    J8            5124          49.60%               Y
                                 fuse&remov bel
                                 c2.
22554.........................  Neck spine                    J8            5124          49.60%               Y
                                 fusion.
22612.........................  Lumbar spine                  J8            5124          49.60%               Y
                                 fusion.
23465.........................  Repair shoulder               J8            5124          49.60%               Y
                                 capsule.
23485.........................  Revision of                   J8            5124          49.60%               Y
                                 collar bone.
23491.........................  Reinforce                     J8            5124          49.60%               Y
                                 shoulder bones.
23552.........................  Treat clavicle                J8            5124          49.60%               Y
                                 dislocation.
23615.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
23616.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
23680.........................  Treat                         J8            5124          49.60%               Y
                                 dislocation/
                                 fracture.
23800.........................  Fusion of                     J8            5124          49.60%               Y
                                 shoulder joint.
23802.........................  Fusion of                     J8            5124          49.60%               Y
                                 shoulder joint.
24346.........................  Reconstruct                   J8            5124          49.60%               Y
                                 elbow med
                                 ligmnt.
24361.........................  Reconstruct                   J8            5124          49.60%               Y
                                 elbow joint.
24363.........................  Replace elbow                 J8            5124          49.60%               Y
                                 joint.
24365.........................  Reconstruct head              J8            5124          49.60%               Y
                                 of radius.
24366.........................  Reconstruct head              J8            5124          49.60%               Y
                                 of radius.
24370.........................  Revise reconst                J8            5124          49.60%               Y
                                 elbow joint.
24371.........................  Revise reconst                J8            5124          49.60%               Y
                                 elbow joint.
24410.........................  Revision of                   J8            5124          49.60%               Y
                                 humerus.
24430.........................  Repair of                     J8            5124          49.60%               Y
                                 humerus.
24435.........................  Repair humerus                J8            5124          49.60%               Y
                                 with graft.
24498.........................  Reinforce                     J8            5124          49.60%               Y
                                 humerus.
24515.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24516.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24545.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24546.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24575.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24579.........................  Treat humerus                 J8            5124          49.60%               Y
                                 fracture.
24586.........................  Treat elbow                   J8            5124          49.60%               Y
                                 fracture.
24587.........................  Treat elbow                   J8            5124          49.60%               Y
                                 fracture.
24666.........................  Treat radius                  J8            5124          49.60%               Y
                                 fracture.
24802.........................  Fusion/graft of               J8            5124          49.60%               Y
                                 elbow joint.
25391.........................  Lengthen radius               J8            5124          49.60%               Y
                                 or ulna.
25420.........................  Repair/graft                  J8            5124          49.60%               Y
                                 radius & ulna.
25441.........................  Reconstruct                   J8            5124          49.60%               Y
                                 wrist joint.
25442.........................  Reconstruct                   J8            5124          49.60%               Y
                                 wrist joint.
25444.........................  Reconstruct                   J8            5124          49.60%               Y
                                 wrist joint.
25446.........................  Wrist                         J8            5124          49.60%               Y
                                 replacement.
25575.........................  Treat fracture                J8            5124          49.60%               Y
                                 radius/ulna.
25800.........................  Fusion of wrist               J8            5124          49.60%               Y
                                 joint.
25810.........................  Fusion/graft of               J8            5124          49.60%               Y
                                 wrist joint.
27279.........................  Arthrodesis                   J8            5124          49.60%               Y
                                 sacroiliac
                                 joint.
27415.........................  Osteochondral                 J8            5124          49.60%               Y
                                 knee allograft.
27428.........................  Reconstruction                J8            5124          49.60%               Y
                                 knee.
27429.........................  Reconstruction                J8            5124          49.60%               Y
                                 knee.
27438.........................  Revise kneecap                J8            5124          49.60%               Y
                                 with implant.
27440.........................  Revision of knee              J8            5124          49.60%               Y
                                 joint.
27442.........................  Revision of knee              J8            5124          49.60%               Y
                                 joint.
27443.........................  Revision of knee              J8            5124          49.60%               Y
                                 joint.
27446.........................  Revision of knee              J8            5124          49.60%               Y
                                 joint.
27745.........................  Reinforce tibia.              J8            5124          49.60%               Y
27758.........................  Treatment of                  J8            5124          49.60%               Y
                                 tibia fracture.
27759.........................  Treatment of                  J8            5124          49.60%               Y
                                 tibia fracture.
27823.........................  Treatment of                  J8            5124          49.60%               Y
                                 ankle fracture.
27827.........................  Treat lower leg               J8            5124          49.60%               Y
                                 fracture.
27828.........................  Treat lower leg               J8            5124          49.60%               Y
                                 fracture.
27870.........................  Fusion of ankle               J8            5124          49.60%               Y
                                 joint open.
27871.........................  Fusion of                     J8            5124          49.60%               Y
                                 tibiofibular
                                 joint.
28320.........................  Repair of foot                J8            5124          49.60%               Y
                                 bones.
28420.........................  Treat/graft heel              J8            5124          49.60%               Y
                                 fracture.

[[Page 39313]]

 
28705.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
28715.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
28725.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
28730.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
28735.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
28737.........................  Revision of foot              J8            5124          49.60%               Y
                                 bones.
28740.........................  Fusion of foot                J8            5124          49.60%               Y
                                 bones.
29889.........................  Knee arthroscopy/             J8            5124          49.60%               Y
                                 surgery.
29899.........................  Ankle                         J8            5124          49.60%               Y
                                 arthroscopy/
                                 surgery.
29907.........................  Subtalar arthro               J8            5124          49.60%               Y
                                 w/fusion.
33206.........................  Insert heart pm               J8            5223          68.50%               Y
                                 atrial.
33207.........................  Insert heart pm               J8            5223          68.50%               Y
                                 ventricular.
33208.........................  Insrt heart pm                J8            5223          68.50%               Y
                                 atrial & vent.
33210.........................  Insert electrd/               J8            5222          72.88%               Y
                                 pm cath sngl.
33211.........................  Insert card                   J8            5222          72.88%               Y
                                 electrodes dual.
33212.........................  Insert pulse gen              J8            5222          72.88%               Y
                                 sngl lead.
33213.........................  Insert pulse gen              J8            5223          68.50%               Y
                                 dual leads.
33214.........................  Upgrade of                    J8            5223          68.50%               Y
                                 pacemaker
                                 system.
33216.........................  Insert 1                      J8            5222          72.88%               Y
                                 electrode pm-
                                 defib.
33217.........................  Insert 2                      J8            5222          72.88%               Y
                                 electrode pm-
                                 defib.
33218.........................  Repair lead pace-             J8            5221          45.44%               Y
                                 defib one.
33220.........................  Repair lead pace-             J8            5221          45.44%               Y
                                 defib dual.
33221.........................  Insert pulse gen              J8            5224          72.68%               Y
                                 mult leads.
33224.........................  Insert pacing                 J8            5223          68.50%               Y
                                 lead & connect.
33227.........................  Remove&replace                J8            5222          72.88%               Y
                                 pm gen singl.
33228.........................  Remv&replc pm                 J8            5223          68.50%               Y
                                 gen dual lead.
33229.........................  Remv&replc pm                 J8            5224          72.68%               Y
                                 gen mult leads.
33230.........................  Insrt pulse gen               J8            5231          77.49%               Y
                                 w/dual leads.
33231.........................  Insrt pulse gen               J8            5232          80.65%               Y
                                 w/mult leads.
33233.........................  Removal of pm                 J8            5221          45.44%               Y
                                 generator.
33234.........................  Removal of                    J8            5221          45.44%               Y
                                 pacemaker
                                 system.
33235.........................  Removal                       J8            5221          45.44%               Y
                                 pacemaker
                                 electrode.
33240.........................  Insrt pulse gen               J8            5231          77.49%               Y
                                 w/singl lead.
33241.........................  Remove pulse                  J8            5221          45.44%               Y
                                 generator.
33249.........................  Insj/rplcmt                   J8            5232          80.65%               Y
                                 defib w/lead(s).
33262.........................  Rmvl& replc                   J8            5231          77.49%               Y
                                 pulse gen 1
                                 lead.
33263.........................  Rmvl & rplcmt                 J8            5231          77.49%               Y
                                 dfb gen 2 lead.
33264.........................  Rmvl & rplcmt                 J8            5232          80.65%               Y
                                 dfb gen mlt ld.
33270.........................  Ins/rep subq                  J8            5232          80.65%               Y
                                 defibrillator.
33271.........................  Insj subq                     J8            5222          72.88%               Y
                                 impltbl dfb
                                 elctrd.
33273.........................  Repos prev                    J8            5221          45.44%               Y
                                 impltbl subq
                                 dfb.
33282.........................  Implant pat-                  J8            5222          72.88%               Y
                                 active ht
                                 record.
36261.........................  Revision of                   J8            5221          45.44%               Y
                                 infusion pump.
36262.........................  Removal of                    J8            5221          45.44%               Y
                                 infusion pump.
37221.........................  Iliac revasc w/               J8            5192          50.56%               Y
                                 stent.
37225.........................  Fem/popl revas w/             J8            5192          50.56%               Y
                                 ather.
37226.........................  Fem/popl revasc               J8            5192          50.56%               Y
                                 w/stent.
37227.........................  Fem/popl revasc               J8            5193          60.43%               Y
                                 stnt & ather.
37228.........................  Tib/per revasc w/             J8            5192          50.56%               Y
                                 tla.
37229.........................  Tib/per revasc w/             J8            5193          60.43%               Y
                                 ather.
37230.........................  Tib/per revasc w/             J8            5193          60.43%               Y
                                 stent.
37231.........................  Tib/per revasc                J8            5193          60.43%               Y
                                 stent & ather.
37236.........................  Open/perq place               J8            5192          50.56%               Y
                                 stent 1st.
37238.........................  Open/perq place               J8            5192          50.56%               Y
                                 stent same.
50080.........................  Removal of                    J8            5376          53.72%               Y
                                 kidney stone.
50081.........................  Removal of                    J8            5376          53.72%               Y
                                 kidney stone.
53440.........................  Male sling                    J8            5376          53.72%               Y
                                 procedure.
53444.........................  Insert tandem                 J8            5376          53.72%               Y
                                 cuff.
53445.........................  Insert uro/ves                J8            5377          70.25%               Y
                                 nck sphincter.
53447.........................  Remove/replace                J8            5377          70.25%               Y
                                 ur sphincter.
54112.........................  Treat penis                   J8            5376          53.72%               Y
                                 lesion graft.
54400.........................  Insert semi-                  J8            5376          53.72%               Y
                                 rigid
                                 prosthesis.
54401.........................  Insert self-                  J8            5377          70.25%               Y
                                 contd
                                 prosthesis.
54405.........................  Insert multi-                 J8            5377          70.25%               Y
                                 comp penis pros.
54410.........................  Remove/replace                J8            5377          70.25%               Y
                                 penis prosth.
54416.........................  Remv/repl penis               J8            5377          70.25%               Y
                                 contain pros.
55873.........................  Cryoablate                    J8            5376          53.72%               Y
                                 prostate.

[[Page 39314]]

 
57120.........................  Closure of                    J8            5415          19.94%               Y
                                 vagina.
57310.........................  Repair                        J8            5416          18.21%               Y
                                 urethrovaginal
                                 lesion.
58260.........................  Vaginal                       J8            5415          19.94%               Y
                                 hysterectomy.
58262.........................  Vag hyst                      J8            5415          19.94%               Y
                                 including t/o.
58543.........................  Lsh uterus above              J8            5362          16.68%               Y
                                 250 g.
58544.........................  Lsh w/t/o uterus              J8            5362          16.68%               Y
                                 above 250 g.
58553.........................  Laparo-vag hyst               J8            5362          16.68%               Y
                                 complex.
58554.........................  Laparo-vag hyst               J8            5362          16.68%               Y
                                 w/t/o compl.
58573.........................  Tlh w/t/o uterus              J8            5362          16.68%               Y
                                 over 250 g.
61885.........................  Insrt/redo                    J8            5463          85.69%               Y
                                 neurostim 1
                                 array.
61886.........................  Implant                       J8            5464          86.77%               Y
                                 neurostim
                                 arrays.
61888.........................  Revise/remove                 J8            5462          56.27%               Y
                                 neuroreceiver.
62360.........................  Insert spine                  J8            5471          79.84%               Y
                                 infusion device.
62361.........................  Implant spine                 J8            5471          79.84%               Y
                                 infusion pump.
62362.........................  Implant spine                 J8            5471          79.84%               Y
                                 infusion pump.
63650.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
63655.........................  Implant                       J8            5463          85.69%               Y
                                 neuroelectrodes.
63663.........................  Revise spine                  J8            5462          56.27%               Y
                                 eltrd perq aray.
63664.........................  Revise spine                  J8            5462          56.27%               Y
                                 eltrd plate.
63685.........................  Insrt/redo spine              J8            5464          86.77%               Y
                                 n generator.
64553.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64555.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64561.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64565.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64568.........................  Inc for vagus n               J8            5464          86.77%               Y
                                 elect impl.
64569.........................  Revise/repl                   J8            5462          56.27%               Y
                                 vagus n eltrd.
64575.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64580.........................  Implant                       J8            5463          85.69%               Y
                                 neuroelectrodes.
64581.........................  Implant                       J8            5462          56.27%               Y
                                 neuroelectrodes.
64590.........................  Insrt/redo pn/                J8            5463          85.69%               Y
                                 gastr stimul.
65770.........................  Revise cornea                 J8            5493          62.97%               Y
                                 with implant.
69714.........................  Implant temple                J8            5124          49.60%               Y
                                 bone w/stimul.
69715.........................  Temple bne                    J8            5124          49.60%               Y
                                 implnt w/
                                 stimulat.
69718.........................  Revise temple                 J8            5124          49.60%               Y
                                 bone implant.
69930.........................  Implant cochlear              J8            5166          83.03%               Y
                                 device.
C9740.........................  Cysto impl 4 or               J8            1564          63.71%               Y
                                 more.
----------------------------------------------------------------------------------------------------------------
* New CPT codes (with CMS 5-digit placeholder codes) that would be effective January 1, 2016. The long
  descriptors for these new codes can be found in Addendum O to this proposed rule (which is available via the
  Internet on the CMS Web site).
** Addendum Q to this proposed rule (which is available via the Internet on the CMS Web site) contains a
  crosswalk of the existing CY 2015 APC numbers to the proposed new CY 2016 APC numbers.

d. Proposed Adjustment to ASC Payments for Discontinued Device-
Intensive Procedures
    As discussed in section IV.B.4. of this proposed rule, we are 
proposing to modify the calculation of OPPS payment when modifiers 
indicating that the procedure was discontinued appear on the claim. 
When a procedure assigned to a device-intensive APC is discontinued 
either prior to administration of anesthesia or for a procedure that 
does not require anesthesia, we presume that, in the majority of cases, 
the device was not used and remains sterile such that it could be used 
for another case. In these circumstances, under current policy, 
providers are being paid twice by Medicare for the same device, once 
for the initial procedure that was discontinued and again when the 
device is actually used. We believe that in cases where the procedure 
was not performed, that it would be appropriate to remove the estimated 
cost of the device, since it would have presumably not been used.
    We believe these same issues exist in the ASC setting, and thus are 
proposing that this alternative payment calculation where the device 
offset is removed before applying any standard downward payment 
adjustments because a full procedure was not performed would also apply 
to device-intensive procedures in the ASC system beginning in CY 2016, 
with modifiers 52 (reduced services) and 73 (Discontinued outpatient 
procedure prior to anesthesia administration), which are the same 
modifiers proposed in the OPPS. Modifier 52 is used to indicate certain 
circumstances in which a procedure is partially reduced or eliminated. 
Modifier 73 is used when a service is canceled prior to the surgical 
preparation due to circumstances that may threaten the well-being of a 
patient. Under this proposed methodology, any adjustment policies 
reducing payment would only apply to the procedural portion of the 
service, based on ASC payment after the device offset is removed. Use 
of modifiers 52 or 73 would thus result in 50 percent of ASC payment 
for the service, after the device offset has first been subtracted from 
the standard ASC payment amount. We are proposing to restrict the 
policy to ASC device-intensive procedures so that the adjustment would 
not be triggered by the use of an inexpensive device whose

[[Page 39315]]

cost would not constitute a significant portion of the total payment 
rate.
    Similar to the OPPS, we are not proposing to deduct the device 
offset amount from a procedure that was discontinued after anesthesia 
was administered (modifier 74) as we believe that it may be more likely 
that devices involved with such procedures are more likely to no longer 
be sterile such that they could be restocked and used for another case. 
However, we are soliciting public comments on how often the device 
becomes ineligible for use in a subsequent case and whether we should 
deduct the device offset amount from claims with modifier 74 as well. 
We are proposing to revise 42 CFR 416.172 to reflect this proposal.
    We are inviting public comment on this proposal and this proposed 
codification.
e. Proposed Additions to the List of ASC Covered Surgical Procedures
    We conducted a review of HCPCS codes that currently are paid under 
the OPPS, but not included on the ASC list of covered surgical 
procedures, to determine if changes in technology and/or medical 
practice affected the clinical appropriateness of these procedures for 
the ASC setting. Based on this review, we are proposing to update the 
list of ASC covered surgical procedures by adding 11 procedures to the 
list for CY 2016. We determined that these 11 procedures would not be 
expected to pose a significant risk to beneficiary safety when 
performed in an ASC, and would not be expected to require active 
medical monitoring and care of the beneficiary at midnight following 
the procedure. Therefore, we are proposing to include them on the list 
of ASC covered surgical procedures for CY 2016.
    The 11 procedures that we are proposing to add to the ASC list of 
covered surgical procedures, including their HCPCS code long 
descriptors and proposed CY 2016 payment indicators, are displayed in 
Table 63 below.
    We are inviting public comment on this proposal.

    Table 63--Proposed Additions to the List of ASC Covered Surgical
                         Procedures for CY 2016
------------------------------------------------------------------------
                                                            Proposed CY
                                 Proposed CY 2016 long       2016 ASC
 Proposed CY 2016 HCPCS code           descriptor             payment
                                                             indicator
------------------------------------------------------------------------
0171T........................  Insertion of posterior                 J8
                                spinous process
                                distraction device
                                (including necessary
                                removal of bone or
                                ligament for insertion
                                and imaging guidance),
                                lumbar; single level.
0172T........................  Insertion of posterior                 N1
                                spinous process
                                distraction device
                                (including necessary
                                removal of bone or
                                ligament for insertion
                                and imaging guidance),
                                lumbar; each additional
                                level.
57120........................  Colpocleisis (Le Fort                  J8
                                type).
57310........................  Closure of urethrovaginal              J8
                                fistula.
58260........................  Vaginal hysterectomy, for              J8
                                uterus 250 g or less.
58262........................  Vaginal hysterectomy, for              J8
                                uterus 250 g or less;
                                with removal of tube(s),
                                and/or ovary(s).
58543........................  Laparoscopy, surgical,                 J8
                                supracervical
                                hysterectomy, for uterus
                                greater than 250 g.
58544........................  Laparoscopy, surgical,                 J8
                                supracervical
                                hysterectomy, for uterus
                                greater than 250 g; with
                                removal of tube(s) and/
                                or ovary(s).
58553........................  Laparoscopy, surgical,                 J8
                                with vaginal
                                hysterectomy, for uterus
                                greater than 250 g.
58554........................  Laparoscopy, surgical,                 J8
                                with vaginal
                                hysterectomy, for uterus
                                greater than 250 g; with
                                removal of tube(s) and/
                                or ovary(s).
58573........................  Laparoscopy, surgical,                 J8
                                with total hysterectomy,
                                for uterus greater than
                                250 g; with removal of
                                tube(s) and/or ovary(s).
------------------------------------------------------------------------

f. ASC Treatment of Surgical Procedures Proposed for Removal From the 
OPPS Inpatient List for CY 2016
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include, in our annual 
evaluation of the ASC list of covered surgical procedures, a review of 
the procedures that are being proposed for removal from the OPPS 
inpatient list for possible inclusion on the ASC list of covered 
surgical procedures. We evaluated each of the seven procedures we are 
proposing to remove from the OPPS inpatient list for CY 2016 according 
to the criteria for exclusion from the list of covered ASC surgical 
procedures. We believe that these seven procedures should continue to 
be excluded from the ASC list of covered surgical procedures for CY 
2016 because they would be expected to pose a significant risk to 
beneficiary safety or to require an overnight stay in ASCs. The CPT 
codes for these seven procedures and their long descriptors are listed 
in Table 64 below.
    We are inviting public comment on the continued exclusion of these 
codes from the ASC list of covered surgical procedures.

Table 64--Procedures Proposed for Exclusion From the ASC List of Covered
 Surgical Procedures for CY 2016 That Are Proposed for Removal From the
                       CY 2016 OPPS Inpatient List
------------------------------------------------------------------------
             CPT Code                          Long descriptor
------------------------------------------------------------------------
0312T.............................  Vagus nerve blocking therapy (morbid
                                     obesity); laparoscopic implantation
                                     of neurostimulator electrode array,
                                     anterior and posterior vagal trunks
                                     adjacent to esophagogastric
                                     junction (EGJ), with implantation
                                     of pulse generator, includes
                                     programming
20936.............................  Autograft for spine surgery only
                                     (includes harvesting the graft);
                                     local (eg, ribs, spinous process,
                                     or laminar fragments) obtained from
                                     same incision
20937.............................  Autograft for spine surgery only
                                     (includes harvesting the graft);
                                     morselized (through separate skin
                                     or fascial incision)
20938.............................  Autograft for spine surgery only
                                     (includes harvesting the graft);
                                     structural bicortical or
                                     tricortical (through separate skin
                                     or fascial incision)
22552.............................  Arthrodesis, anterior interbody,
                                     including disc space preparation,
                                     discectomy, osteophytectomy and
                                     decompression of spinal cord and/or
                                     nerve roots; cervical below C2,
                                     each additional interspace

[[Page 39316]]

 
54411.............................  Removal and replacement of all
                                     components of a multi-component
                                     inflatable penile prosthesis
                                     through an infected field at the
                                     same operative session, including
                                     irrigation and debridement of
                                     infected tissue
54417.............................  Removal and replacement of non-
                                     inflatable (semi-rigid) or
                                     inflatable (self-contained) penile
                                     prosthesis through an infected
                                     field at the same operative
                                     session, including irrigation and
                                     debridement of infected tissue
------------------------------------------------------------------------

2. Covered Ancillary Services
a. Proposed List of Covered Ancillary Services
    Consistent with the established ASC payment system policy, we are 
proposing to update the ASC list of covered ancillary services to 
reflect the proposed payment status for the services under the CY 2016 
OPPS. Maintaining consistency with the OPPS may result in proposed 
changes to ASC payment indicators for some covered ancillary services 
because of changes that are being proposed under the OPPS for CY 2016. 
For example, a covered ancillary service that was separately paid under 
the revised ASC payment system in CY 2015 may be proposed for packaged 
status under the CY 2016 OPPS and, therefore, also under the ASC 
payment system for CY 2016.
    To maintain consistency with the OPPS, we are proposing that these 
services also would be packaged under the ASC payment system for CY 
2016. We are proposing to continue this reconciliation of packaged 
status for subsequent calendar years. Comment indicator ``CH,'' 
discussed in section XII.F. of this proposed rule, is used in Addendum 
BB to this proposed rule (which is available via the Internet on the 
CMS Web site) to indicate covered ancillary services for which we are 
proposing a change in the ASC payment indicator to reflect a proposed 
change in the OPPS treatment of the service for CY 2016.
    All ASC covered ancillary services and their proposed payment 
indicators for CY 2016 are included in Addendum BB to this proposed 
rule. We are inviting public comment on this proposal.
b. Proposal To Exclude Corneal Tissue Procurement From the Covered 
Ancillary Services List When Used for Nontransplant Procedures
    We refer readers to section X.C. of this proposed rule for a 
discussion of our proposal to include corneal tissue procurement as a 
covered ancillary service only when it is integral to the performance 
of a corneal transplant procedure that is an ASC covered surgical 
procedure.
c. Proposal to Remove Certain Services From the Covered Ancillary 
Services List That Are Not Used as Ancillary and Integral To a Covered 
Surgical Procedure
    It has come to our attention that we include codes for services on 
our covered ancillary services list that are not used as ancillary and 
integral to a covered ASC surgical procedure. In some cases, codes on 
the ASC covered ancillary services list are not provided in the ASC 
setting due to clinical practice. In examining the current ancillary 
services list and claims data available to us for CY 2016 proposed ASC 
rulemaking, we noted several services that are not and have not been 
historically furnished in the ASC setting. Several radiation therapy 
treatment services, including gamma knife stereotactic radiosurgery 
(SRS), are most frequently provided in the hospital outpatient setting 
and paid through the OPPS and also are infrequently furnished in 
freestanding radiation therapy centers and paid under the MPFS. Claims 
data indicate that it is not furnished in the ASC setting. Since ASCs 
do not appear to be utilizing these services as integral and ancillary 
to covered ASC surgical procedures, and given the specialized nature of 
the SRS treatment services, we would not expect them to be integral and 
ancillary to an ASC covered surgical procedure, we are proposing to 
remove radiation treatment codes for SRS services from the list of ASC 
covered ancillary services. Specifically, we are proposing to remove 
CPT codes 77371 (Radiation treatment delivery, stereotactic 
radiosurgery (srs), complete course of treatment of cranial lesion(s) 
consisting of 1 session; multi-source cobalt 60 based), 77372 
(Radiation treatment delivery, stereotactic radiosurgery (srs), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; linear accelerator based), and 77373 (Stereotactic body 
radiation therapy, treatment delivery, per fraction to 1 or more 
lesions, including image guidance, entire course not to exceed 5 
fractions) from the list of ASC covered ancillary services for CY 2016 
and subsequent years. We note that while we are proposing to remove 
these three codes from the list of ancillary covered services for CY 
2016 and subsequent years, we will continue to monitor the claims data 
to identify services for which clinical practice patterns indicate they 
are not provided in the ASC setting.
    We are inviting public comment on this proposal.

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

1. Proposed ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, we use the ASC 
standard ratesetting methodology of multiplying the ASC relative 
payment weight for the procedure by the ASC conversion factor for that 
same year 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, therefore, were 
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 2015 OPPS/ASC final rule with comment period (79 
FR 66915 through 66940), we updated the CY 2014 ASC payment rates for 
ASC

[[Page 39317]]

covered surgical procedures with payment indicators of ``A2,'' ``G2,'' 
and ``J8'' using CY 2013 data, consistent with the CY 2015 OPPS update. 
We also updated payment rates for device-intensive procedures to 
incorporate the CY 2015 OPPS device offset percentages calculated under 
the standard APC ratesetting methodology as discussed earlier in this 
section.
    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 2016 MPFS proposed rule) 
or the amount calculated using the ASC standard ratesetting methodology 
for the procedure. In the CY 2015 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 2015 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 2015 payment rate for the procedure under our final policy for the 
revised ASC payment system (Sec.  416.171(d)).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75081), we finalized our proposal to calculate the CY 2014 payment 
rates for ASC covered surgical procedures according to our established 
methodologies, with the exception of device removal procedures. For CY 
2014, we finalized a policy to conditionally package device removal 
codes under the OPPS. Under the OPPS, a conditionally packaged code 
(status indicators ``Q1'' and ``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 covered 
surgical procedure, HCPCS codes that are conditionally packaged under 
the OPPS are always packaged (payment indicator ``N1'') under the ASC 
payment system. Therefore, no Medicare payment would be made when a 
device removal procedure is performed in an ASC without another 
surgical procedure included on the claim; therefore, no Medicare 
payment would be made if a device was removed but not replaced. To 
address this concern, for the device removal procedures that are 
conditionally packaged in the OPPS (status indicator ``Q2''), we 
assigned the current ASC payment indicators associated with these 
procedures and continued to provide separate payment in CYs 2014 and 
2015.
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 
CY 2016
    We are proposing to update ASC payment rates for CY 2016 and 
subsequent years using the established rate calculation methodologies 
under Sec.  416.171 and using our established modified definition of 
device-intensive procedures, as discussed above. Because the proposed 
OPPS relative payment weights are based on geometric mean costs for CY 
2016 and subsequent years, the ASC system will use geometric means to 
determine proposed relative payment weights under the ASC standard 
methodology. We are proposing to continue to use the amount calculated 
under the ASC standard ratesetting methodology for procedures assigned 
payment indicators ``A2'' and ``G2.''
    We are proposing that payment rates for office-based procedures 
(payment indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive 
procedures (payment indicator ``J8'') be calculated according to our 
established policies and, for device-intensive procedures, using our 
established modified definition of device-intensive procedures, as 
discussed above. Therefore, we are proposing to update the payment 
amount for the service portion of the device-intensive procedures using 
the ASC standard ratesetting methodology and the payment amount for the 
device portion based on the proposed CY 2016 OPPS device offset 
percentages that have been calculated using the standard OPPS APC 
ratesetting methodology. Payment for office-based procedures is at the 
lesser of the proposed CY 2016 MPFS nonfacility PE RVU-based amount or 
the proposed CY 2016 ASC payment amount calculated according to the ASC 
standard ratesetting methodology.
    As we did for CYs 2014 and 2015, for CY 2016 and subsequent years, 
we are proposing to continue our policy for device removal procedures 
such that device removal procedures that are conditionally packaged in 
the OPPS (status indicators ``Q1'' and ``Q2'') would be assigned the 
current ASC payment indicators associated with these procedures and 
would continue to be paid separately under the ASC payment system.
    We are inviting public comment on these proposals.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
    Section 1833(a)(1) and section 1833(b)(1) of the Act waive the 
coinsurance and the Part B deductible for those preventive services 
under section 1861(ddd)(3)(A) of the Act as described in section 
1861(ww)(2) of the Act (excluding electrocardiograms) that are 
recommended by the United States Preventive Services Task Force 
(USPSTF) with a grade of A or B for any indication or population and 
that are appropriate for the individual. Section 1833(b) of the Act 
also waives the Part B deductible for colorectal cancer screening tests 
that become diagnostic. In the CY 2011 OPPS/ASC final rule with comment 
period, we finalized our policies with respect to these provisions and 
identified 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 are not proposing any changes to our policies or the 
categories of services for CY 2016. We identify the specific services 
with a double asterisk in Addenda AA and BB to this proposed rule 
(which are available via the Internet on the CMS Web site).
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

[[Page 39318]]

permanent pacing cardioverter-defibrillator system with transvenous 
lead(s), single or dual chamber) are performed on the same date of 
service in an ASC.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66931), we finalized our proposals under the OPPS that CPT code 33249, 
the primary code for CRT-D services, continue to be assigned to APC 
0108, and that payment for CPT code 33225 be packaged under the OPPS. 
We also finalized our proposals under the ASC payment system that CPT 
code 33249, the primary code for CRT-D services, will continue to be 
assigned to APC 0108, and payment for CPT code 33225 will be packaged 
into the payment for the primary covered surgical procedure (for 
example, CPT code 33249). We are not proposing any changes to these 
policies for CY 2016. We note that, in this proposed rule, we are 
proposing to renumber APC 0108 as APC 5232.
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 be assigned to APC 0651 (in this 
proposed rule, proposed to be renumbered APC 5641). When not performed 
on the same day as the service described by CPT code 77778, the service 
described by CPT code 55875 will be assigned to APC 0162 (in this 
proposed rule, proposed to be renumbered APC 5374). For a complete 
discussion of our policy regarding payment for LDR prostate 
brachytherapy services in ASCs, we refer readers to the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68457). We are not proposing 
any changes to our current policy regarding ASC payment for LDR 
prostate brachytherapy services for CY 2016.
2. Proposed Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged or 
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'') 
under the OPPS. In the CY 2013 OPPS/ASC rulemaking (77 FR 45169; 77 FR 
68457 through 68458), 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.
    Similarly, we also finalized our policy 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, therefore, will 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.
    Our ASC policies also provide separate payment for: (1) Certain 
items and services that CMS designates as contractor-priced, including, 
but not limited to, the procurement of corneal tissue; and (2) certain 
implantable items that have pass-through payment status under the OPPS. 
These categories do not have prospectively established ASC payment 
rates according to the final policies for the revised ASC payment 
system (72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). Under 
the revised ASC payment system, we have designated corneal tissue 
acquisition and hepatitis B vaccines as contractor-priced. Corneal 
tissue acquisition is contractor-priced based on the invoiced costs for 
acquiring the corneal tissue for transplantation. Hepatitis B vaccines 
are contractor-priced based on invoiced costs for the vaccine.

[[Page 39319]]

    Devices that are eligible for pass-through payment under the OPPS 
are separately paid under the ASC payment system and are contractor-
priced. Under the revised ASC payment system (72 FR 42502), payment for 
the surgical procedure associated with the pass-through device is made 
according to our standard methodology for the ASC payment system, based 
on only the service (nondevice) portion of the procedure's OPPS 
relative payment weight if the APC weight for the procedure includes 
other packaged device costs. We also refer to this methodology as 
applying a ``device offset'' to the ASC payment for the associated 
surgical procedure. This ensures that duplicate payment is not provided 
for any portion of an implanted device with OPPS pass-through payment 
status.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933 
through 66934), we finalized that, beginning in CY 2015, certain 
diagnostic tests within the medicine range of CPT codes for which 
separate payment is allowed under the OPPS are covered ancillary 
services when they are integral to an ASC covered surgical procedure. 
We finalized that diagnostic tests within the medicine range of CPT 
codes include all Category I CPT codes in the medicine range 
established by CPT, from 90000 to 99999, and Category III CPT codes and 
Level II HCPCS codes that describe diagnostic tests that crosswalk or 
are clinically similar to procedures in the medicine range established 
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also 
finalized our policy to pay for these tests 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 (79 FR 
66933 through 66934). We finalized that the diagnostic tests for which 
the payment is based on the ASC standard ratesetting methodology be 
assigned to payment indicator ``Z2'' and revised the definition of 
payment indicator ``Z2'' to include reference to diagnostic services 
and those for which the payment is based on the MPFS nonfacility PE 
RVU-based amount be assigned payment indicator ``Z3,'' and revised the 
definition of payment indicator ``Z3'' to include reference to 
diagnostic services.
b. Proposed Payment for Covered Ancillary Services for CY 2016
    For CY 2016 and subsequent years, we are proposing to update the 
ASC payment rates and to 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 2016 OPPS and ASC payment rates and subsequent year 
payment rates. We also are proposing to continue to set the CY 2016 ASC 
payment rates and subsequent year payment rates for brachytherapy 
sources and separately payable drugs and biologicals equal to the 
proposed OPPS payment rates for CY 2016.
    Consistent with established ASC payment policy (72 FR 42497), we 
are proposing that the CY 2016 payment for separately payable covered 
radiology services be based on a comparison of the proposed CY 2016 
MPFS nonfacility PE RVU-based amounts (we refer readers to the CY 2016 
MPFS proposed rule) and the CY 2016 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). 
We would make this same proposal for subsequent years. For CY 2016 and 
subsequent years, we also are proposing that payment for a radiology 
service would be packaged into the payment for the ASC covered surgical 
procedure if the radiology service is packaged or conditionally 
packaged under the OPPS. The payment indicators in Addendum BB to this 
proposed rule (which is available via the Internet on the CMS Web site) 
indicate whether the proposed payment rates for radiology services are 
based on the MPFS nonfacility PE RVU-based amount or the ASC standard 
ratesetting methodology, or whether payment for a radiology service is 
packaged into the payment for the covered surgical procedure (payment 
indicator ``N1''). Radiology services that we are proposing to pay 
based on the ASC standard ratesetting methodology in CY 2016 and 
subsequent years are assigned payment indicator ``Z2'' (Radiology or 
diagnostic 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 be assigned payment indicator ``Z3'' 
(Radiology or diagnostic 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 are proposing to continue this 
modification to the payment methodology for CY 2016 and subsequent 
years and, therefore, are proposing to assign the payment indicator 
``Z2'' to nuclear medicine procedures.
    As finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74429 through 74430), payment indicators for radiology services 
that use contrast agents are set to ``Z2'' so that payment for these 
procedures will be based on the OPPS relative payment weight and, 
therefore, will include the cost for the contrast agent. We are 
proposing to continue this modification to the payment methodology for 
CY 2016 and subsequent years and, therefore, are proposing to assign 
the payment indicator ``Z2'' to radiology services that use contrast 
agents.
    We are proposing to not make separate payment as a covered 
ancillary service for procurement of corneal tissue when used in any 
nontransplant procedure under the ASC payment system. For more detail 
on this CY 2016 proposal, we refer readers to section X.C. of this 
proposed rule. We are proposing, for CY 2016 ASC payment purposes, to 
continue to designate hepatitis B vaccines as contractor-priced based 
on the invoiced costs for the vaccine, and corneal tissue acquisition 
as contractor-priced based on the invoiced costs for acquiring the 
corneal tissue for transplant.
    Consistent with our established ASC payment policy, we are 
proposing that the CY 2016 payment for devices that are eligible for 
pass-through payment under the OPPS are separately paid under the ASC 
payment system and would be contractor-priced. Currently, the three 
devices that are eligible for pass-through payment in the OPPS are 
described by HCPCS code C1841 (Retinal prosthesis, includes all 
internal and external components), HCPCS code C2623 (Catheter, 
transluminal angioplasty, drug-coated, non-laser) and, beginning on 
July 1, HCPCS code C2613 (Lung biopsy plug with delivery system). As 
finalized in the CY 2015 OPPS/ASC final rule with comment period, HCPCS 
code C1841 will no longer be eligible for pass-through

[[Page 39320]]

payment in the OPPS for CY 2016 (79 FR 66870 through 66871), and thus 
the costs for devices described by HCPCS code C1841 would be packaged 
into the costs of the procedures with which the devices are reported in 
the hospital claims data used in the development of the OPPS relative 
payment weights that will be used to establish ASC payment rates for CY 
2016. Payment amounts for HCPCS codes C2623 and C2613 under the ASC 
payment system would be contractor-priced for CY 2016. Consistent with 
our current policy, we are proposing that payment for the surgical 
procedure associated with the pass-through device is made according to 
our standard methodology for the ASC payment system, based on only the 
service (nondevice) portion of the procedure's OPPS relative payment 
weight, if the APC weight for the procedure includes similar packaged 
device costs.
    Consistent with our current policy, we are proposing that certain 
diagnostic tests within the medicine range of CPT codes (that is, all 
Category I CPT codes in the medicine range established by CPT, from 
90000 to 99999, and Category III CPT codes and Level II HCPCS codes 
that describe diagnostic tests that crosswalk or are clinically similar 
to procedures in the medicine range established by CPT) for which 
separate payment is allowed under the OPPS are covered ancillary 
services when they are integral to an ASC covered surgical procedure. 
We would pay for these tests 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 (79 FR 66933 
through 66934). As discussed in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66934), for CY 2015, we identified one diagnostic 
test that is within the medicine range of CPT codes and for which 
separate payment is allowed under the OPPS: CPT code 91035 (Esophagus, 
gastroesophageal reflux test; with mucosal attached telemetry pH 
electrode placement, recording, analysis and interpretation). We added 
this code to the list of ASC covered ancillary services and finalized 
separate ASC payment as a covered ancillary service for this code 
beginning in CY 2015 when the test is integral to an ASC covered 
surgical procedure. We stated that we would expect the procedure 
described by CPT code 91035 to be integral to the endoscopic attachment 
of the electrode to the esophageal mucosa. There are no additional 
codes that meet this criterion for CY 2016.
    In summary, for CY 2016, we are proposing to continue the 
methodologies for paying for covered ancillary services established for 
CY 2015. Most covered ancillary services and their proposed payment 
indicators for CY 2016 are listed in Addendum BB to this proposed rule 
(which is available via the Internet on the CMS Web site).

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
NTIOLs is as follows:
     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 42 CFR 
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--
    ++ Provide a list of determinations made as a result of our review 
of all new NTIOL class requests and public comments;
    ++ When a new NTIOL class is created, 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.
    ++ Set the date of implementation of a payment adjustment in the 
case of approval of an IOL as a member of a new NTIOL class 
prospectively as of 30 days after publication of the ASC payment update 
final rule, consistent with the statutory requirement.
    ++ 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 2016
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2016 by March 2, 2015, the due date published in the CY 
2015 OPPS/ASC final rule with comment period (79 FR 66935).
3. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2016.
4. Proposed Newness Criterion
    Since the inception of the NTIOL policy in 1999, there has not been 
any specific criterion provided to evaluate the newness of a candidate 
IOL for new technology payment under the ASC payment system. Absence of 
any specific criterion means that, regardless of when an IOL was 
originally FDA approved and available on the U.S. market, the IOL could 
be established as a new NTIOL class if it satisfies the requirements of 
42 CFR 416.195. We believe that because the NTIOL payment adjustment 
under the statute was specifically created for IOLs that are ``new,'' 
the regulations at Sec.  416.195 should include a newness criterion. 
Therefore, we are proposing that, beginning in CY 2016, any application 
for a new NTIOL class must fulfill an additional criterion. 
Specifically, we are proposing that, beginning January 1, 2016, an 
NTIOL application will only be evaluated by CMS for a new IOL class if 
the IOL has received initial FDA premarket approval within the 3 years 
prior to the NTIOL application submission date. Without this proposed 
requirement, there is nothing in the existing regulations that would 
preclude an applicant from applying for and possibly being granted 
NTIOL status, despite U.S. market entry many years ago, which would be 
contrary to the plain meaning of ``new'' technology IOLs. We are 
proposing to revise Sec.  416.195(a)(1) of the regulations to reflect 
this proposal. We are inviting public comments on this proposal.

[[Page 39321]]

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy 
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC list of 
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services, including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new codes for the next calendar 
year for which the interim payment indicator assigned is subject to 
comment. The comment indicator ``NI'' also is assigned to existing 
codes with substantial revisions to their descriptors such that we 
consider them to be describing new services, as discussed in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60622). In the CY 
2016 OPPS/ASC final rule with comment period, we will respond to public 
comments and finalize the ASC treatment of all codes that are labeled 
with comment indicator ``NI'' in Addenda AA and BB to the CY 2015 OPPS/
ASC final rule with comment period.
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
proposed rule (which are available via the Internet on the CMS Web 
site) to indicate that the payment indicator assignment has changed for 
an active HCPCS code in the current year and the 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. Proposed ASC Payment and Comment Indicators
    For CY 2016 and subsequent years, we are proposing to continue 
using the current comment indicators of ``NI'' and ``CH.'' For CY 2016, 
there are new and revised Category I and III CPT codes, as well as new 
and revised Level II HCPCS codes. Therefore, we are proposing that 
Category I and III CPT codes that are new and revised for CY 2016 and 
any new and existing Level II HCPCS codes with substantial revisions to 
the code descriptors for CY 2016 compared to the CY 2015 descriptors 
that are included in ASC Addendum AA and BB to this CY 2016 OPPS/ASC 
proposed rule would be labeled with proposed new comment indicator 
``NP'' to indicate that these CPT and Level II HCPCS codes are open for 
comment as part of this CY 2016 OPPS/ASC proposed rule. Proposed new 
comment indicator ``NP'' means a 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, proposed ASC 
payment indicator; comments will be accepted on the proposed ASC 
payment indicator for the new code.
    For the CY 2016 update, we also are proposing to add ASC payment 
indicator ``B5'' (Alternative code may be available; no payment made) 
to ASC Addendum DD1 to this proposed rule (which is available via the 
Internet on the CMS Web site). This code indicates that an alternative 
code is recognized under the ASC payment system. We are proposing to 
add this payment indicator for situations where we receive new and 
revised Category I and Category III CPT codes too late for inclusion in 
a proposed rule, as discussed in section XII.B.3.b. of this proposed 
rule regarding our proposed process for accepting comments on new and 
revised Category I and III CPT codes that are effective January 1. We 
will respond to public comments and finalize their ASC assignment in 
the CY 2016 OPPS/ASC final rule with comment period. We refer readers 
to Addenda DD1 and DD2 to this proposed rule (which are available via 
the Internet on the CMS Web site) for the complete list of ASC payment 
and comment indicators proposed for the CY 2016 update.

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

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and the OPPS relative payment 
weights. Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system (the ASC conversion factor is 
multiplied by the relative payment weights calculated for many ASC 
services in order to establish payment rates). That is, application of 
the ASC conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 being 
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

[[Page 39322]]

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, 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. of the proposed rule), and certain diagnostic tests 
within the medicine range that are covered ancillary services, 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 IPPS hospital wage indexes 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 under the IPPS, using 
updated Core Based Statistical Areas (CBSAs) issued by OMB in June 
2003.
    The reclassification provision in section 1886(d)(10) of the Act is 
specific to hospitals. We believe that using the most recently 
available pre-floor and pre-reclassified IPPS hospital wage indexes 
results in the most appropriate adjustment to the labor portion of ASC 
costs. We continue to believe that the unadjusted hospital wage 
indexes, which are updated yearly and are used by many other Medicare 
payment systems, appropriately account for geographic variation in 
labor costs for ASCs. Therefore, the wage index for an ASC is the pre-
floor and pre-reclassified hospital wage index under the IPPS of the 
CBSA that maps to the CBSA where the ASC is located.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 
provides the delineations of all Metropolitan Statistical Areas, 
Metropolitan Divisions, Micropolitan Statistical Areas, Combined 
Statistical Areas, and New England City and Town Areas in the United 
States and Puerto Rico based on the standards published on June 28, 
2010 in the Federal Register (75 FR 37246 through 37252) and 2010 
Census Bureau data. (A copy of this bulletin may be obtained at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf.) In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 
49963), we implemented the use of the CBSA delineations issued by OMB 
in OMB Bulletin 13-01 for the IPPS hospital wage index beginning in FY 
2015. In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66937), we finalized a one-year transition policy that we applied in CY 
2015 for all ASCs that experienced any decrease in their actual wage 
index exclusively due to the implementation of the new OMB 
delineations. This transition does not apply in CY 2016.
    For CY 2016, the proposed CY 2016 ASC wage indexes fully reflect 
the new OMB labor market area delineations.
    We note that, in certain instances, there might be urban or rural 
areas for which there is no IPPS hospital that has wage index data that 
could be used to set the wage index for that area. For these areas, our 
policy has been to use the average of the wage indexes 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). For example, for CY 2014, we applied a proxy wage index based 
on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort 
Stewart, GA) and CBSA 08 (Rural Delaware).
    When all of the areas contiguous to the urban 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 indexes for urban areas in 
the State (75 FR 72058 through 72059).
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2016 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). Consistent with our established 
policy, we are proposing to scale the CY 2016 relative payment weights 
for ASCs according to the following method. Holding ASC utilization, 
the ASC conversion factor, and the mix of services constant from CY 
2014, we are proposing to compare the total payment using the CY 2015 
ASC relative payment weights with the total payment using the CY 2016 
ASC relative payment weights to take into account the changes in the 
OPPS relative payment weights between CY 2015 and CY 2016. We are 
proposing to use the ratio of CY 2015 to CY 2016 total payment (the 
weight scaler) to scale the ASC relative payment weights for CY 2016. 
The proposed CY 2016 ASC scaler is 0.9180 and scaling would apply to 
the ASC relative payment weights of the covered surgical procedures, 
covered ancillary radiology services, and certain diagnostic tests 
within the medicine range of CPT codes which are covered ancillary 
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

[[Page 39323]]

budget neutrality adjustments. At the time of this proposed rule, we 
have available 98 percent of CY 2014 ASC claims data.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2014 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2014 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 this proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2016 ASC payment system and 
subsequent years, we are proposing to calculate and apply a budget 
neutrality adjustment to the ASC conversion factor for supplier level 
changes in wage index values for the upcoming year, just as the OPPS 
wage index budget neutrality adjustment is calculated and applied to 
the OPPS conversion factor. For CY 2016, we calculated this proposed 
adjustment for the ASC payment system by using the most recent CY 2014 
claims data available and estimating the difference in total payment 
that would be created by introducing the proposed CY 2016 ASC wage 
indexes. Specifically, holding CY 2014 ASC utilization and service-mix 
and the proposed CY 2016 national payment rates after application of 
the weight scaler constant, we calculated the total adjusted payment 
using the CY 2015 ASC wage indexes (which reflect the new OMB 
delineations and include any applicable transition period) and the 
total adjusted payment using the proposed CY 2016 ASC wage indexes 
(which would fully reflect the new OMB delineations). 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 2015 ASC wage indexes to the total adjusted payment 
calculated with the proposed CY 2016 ASC wage indexes and applied the 
resulting ratio of 1.0014 (the proposed CY 2016 ASC wage index budget 
neutrality adjustment) to the CY 2015 ASC conversion factor to 
calculate the proposed CY 2016 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary 
has not updated amounts established under the revised ASC payment 
system in a calendar year, the payment amounts shall be increased by 
the percentage increase in the Consumer Price Index for all urban 
consumers (U.S. city average) as estimated by the Secretary for the 12-
month period ending with the midpoint of the year involved. Therefore, 
the statute 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. We refer readers to 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 
through 72064) for examples of how the MFP adjustment is applied to the 
ASC payment system.
    For this proposed rule, based on IHS Global Insight's (IGI's) 2015 
first quarter forecast with historical data through 2014 fourth 
quarter, for the 12-month period ending with the midpoint of CY 2016, 
the CPI-U update is projected to

[[Page 39324]]

be 1.7 percent. Also, based on IGI's 2015 first quarter forecast, the 
MFP adjustment for the period ending with the midpoint of CY 2016 is 
projected to be 0.6 percent. We finalized the methodology for 
calculating the MFP adjustment 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).
    As we discussed in the CY 2011 MPFS final rule with comment period, 
section 1833(i)(2)(D)(v) of the Act, as added by section 3401(k) of the 
Affordable Care Act, requires that any annual update to the ASC payment 
system after application of the quality adjustment 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 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). Historical published data on the 
measure of MFP is available on the Bureau of Labor Statistics' (BLS) 
Web site at http://www.bls.gov/mfp.
    MFP is derived by subtracting the contribution of labor and capital 
inputs growth from output growth. The projection of the components of 
MFP are currently produced by IHS Global Insight, Inc. (IGI), a 
nationally recognized economic forecasting firm with which CMS 
contracts to forecast the components of MFP. To generate a forecast of 
MFP, IGI replicates the MFP measure calculated by the BLS using a 
series of proxy variables derived from IGI's U.S. macroeconomic models. 
In the CY 2011 and CY 2012 MPFS final rules with comment period (75 FR 
73394 through 73396, 76 FR 73300 through 73301), we set forth the 
current methodology to generate a forecast of MFP. We identified each 
of the major MFP component series employed by the BLS to measure MFP as 
well as provided the corresponding concepts determined to be the best 
available proxies for the BLS series.
    Beginning with the CY 2016 rulemaking cycle, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs. Specifically, IGI has replaced the Real 
Effective Capital Stock used for Full Employment GDP with a forecast of 
BLS aggregate capital inputs recently developed by IGI using a 
regression model. This series provides a better fit to the BLS capital 
inputs, as measured by the differences between the actual BLS capital 
input growth rates and the estimated model growth rates over the 
historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the CY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although 
we discuss the IGI changes to the MFP proxy series in this proposed 
rule, in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
    For CY 2016, we are proposing to reduce the CPI-U update of 1.7 
percent by the MFP adjustment of 0.6 percentage point, resulting in an 
MFP-adjusted CPI-U update factor of 1.1 percent for ASCs meeting the 
quality reporting requirements. Therefore, we are proposing to apply a 
1.1 percent MFP-adjusted CPI-U update factor to the CY 2015 ASC 
conversion factor for ASCs meeting the quality reporting requirements. 
The ASCQR Program affected payment rates beginning in CY 2014 and, 
under this program, there is a 2.0 percentage point reduction to the 
CPI-U for ASCs that fail to meet the ASCQR Program requirements. We are 
proposing to reduce the CPI-U update of 1.7 percent by 2.0 percentage 
points for ASCs that do not meet the quality reporting requirements and 
then apply the 0.6 percentage point MFP reduction. Therefore, we are 
proposing to apply a -0.9 percent quality reporting/MFP-adjusted CPI-U 
update factor to the CY 2015 ASC conversion factor for ASCs not meeting 
the quality reporting requirements. We also are proposing that if more 
recent data are subsequently available (for example, a more recent 
estimate of the CY 2016 CPI-U update and MFP adjustment), we would use 
such data, if appropriate, to determine the CY 2016 ASC update for the 
final rule with comment period.
    For CY 2016, we also are proposing to adjust the CY 2015 ASC 
conversion factor ($44.058) by the proposed wage index budget 
neutrality factor of 1.0014 in addition to the MFP-adjusted CPI-U 
update factor of 1.1 percent discussed above, which results in a 
proposed CY 2016 ASC conversion factor of $44.605 for ASCs meeting the 
quality reporting requirements. For ASCs not meeting the quality 
reporting requirements, we are proposing to adjust the CY 2015 ASC 
conversion factor ($44.058) by the proposed wage index budget 
neutrality factor of 1.0014 in addition to the quality reporting/MFP-
adjusted CPI-U update factor of -0.9 percent discussed above, which 
results in a proposed CY 2016 ASC conversion factor of $43.723.
    We are inviting public comment on these proposals.
3. Display of Proposed CY 2016 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available via 
the Internet on the CMS Web site) display the proposed updated ASC 
payment rates for CY 2016 for covered surgical procedures and covered 
ancillary services, respectively. For those covered surgical procedures 
and covered ancillary services where the payment rate is the lower of 
the proposed rates under the ASC standard ratesetting methodology and 
the MPFS proposed rates, the proposed payment indicators and rates set 
forth in this proposed rule are based on a comparison using the 
proposed MPFS rates that would be effective January 1, 2016. For a 
discussion of the MPFS rates, we refer readers to the CY 2016 MPFS 
proposed rule.
    The proposed 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 proposed CY 2016 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``Proposed 
to be Subject to Multiple Procedure Discounting'' indicates that the 
surgical procedure would 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 2016. Display of the comment indicator ``NI'' in the column 
titled ``Comment Indicator'' indicates that the code is new (or 
substantially revised) and that

[[Page 39325]]

comments will be accepted on the interim APC assignment for the new 
code. Display of the comment indicator ``NP'' in the column titled 
``Comment Indicator'' indicates that the code is new (or substantially 
revised) and that comments will be accepted on the proposed assignments 
for the new code.
    The values displayed in the column titled ``Proposed CY 2016 
Payment Weight'' are the proposed relative payment weights for each of 
the listed services for CY 2016. The proposed relative payment weights 
for all covered surgical procedures and covered ancillary services 
where the ASC payment rates are based on OPPS relative payment weights 
were scaled for budget neutrality. Therefore, scaling was not applied 
to the device portion of the device-intensive procedures, services that 
are paid at the MPFS nonfacility PE RVU-based amount, separately 
payable covered ancillary services that have a predetermined national 
payment amount, such as drugs and biologicals and brachytherapy sources 
that are separately paid under the OPPS, or services that are 
contractor-priced or paid at reasonable cost in ASCs.
    To derive the proposed CY 2016 payment rate displayed in the 
``Proposed CY 2016 Payment Rate'' column, each ASC payment weight in 
the ``Proposed CY 2016 Payment Weight'' column was multiplied by the 
proposed CY 2016 conversion factor of $44.605. The proposed 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.G.2.b. of this 
proposed rule).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Proposed CY 2016 Payment Weight'' column for items and services 
with predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Proposed CY 2016 Payment'' column displays 
the proposed CY 2016 national unadjusted ASC payment rates for all 
items and services. The proposed CY 2016 ASC payment rates listed in 
Addendum BB for separately payable drugs and biologicals are based on 
ASP data used for payment in physicians' offices in April 2015.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are proposed to be excluded from payment in 
ASCs for CY 2016.

XIII. Requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program

A. Background

1. Overview
    CMS seeks to promote higher quality and more efficient healthcare 
for Medicare beneficiaries. In pursuit of these goals, CMS has 
implemented quality reporting programs for multiple care settings 
including the quality reporting program for hospital outpatient care, 
known as the Hospital Outpatient Quality Reporting (OQR) Program, 
formerly known as the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP). The Hospital OQR Program has generally been modeled 
after the quality reporting program for hospital inpatient services 
known as the Hospital Inpatient Quality Reporting (IQR) Program 
(formerly known as the Reporting Hospital Quality Data for Annual 
Payment Update (RHQDAPU) Program).
    In addition to the Hospital IQR and Hospital OQR Programs, CMS has 
implemented quality reporting programs for other care settings that 
provide financial incentives for the reporting of quality data to CMS. 
These additional programs include reporting for 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 (LTCH QRP) 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.
    In addition, CMS has implemented several value-based purchasing 
programs, including the Hospital Value-Based Purchasing (VBP) Program 
and the End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP), 
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 (NQS) and the CMS 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 various quality reporting programs. 
As appropriate, we will consider the adoption of measures with 
electronic specifications to enable the collection of this information 
as part of care delivery.
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68467 through 68469) for a discussion on the principles 
underlying consideration for future measures that we intend to use in 
implementing this and other quality reporting programs.
2. Statutory History of the Hospital OQR Program
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064 through 72065) for a detailed discussion of the 
statutory history of the Hospital OQR Program.

B. Hospital OQR Program Quality Measures

1. Considerations in the Selection of Hospital OQR Program Quality 
Measures
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74458 through 74460) for a detailed discussion of the 
priorities we consider for the Hospital OQR Program quality measure 
selection. We are not proposing any changes to our measure selection 
policy.
2. Retention of Hospital OQR Program Measures Adopted in Previous 
Payment Determinations
    We previously adopted a policy to retain measures from the previous 
year's Hospital OQR Program measure set for subsequent years' measure 
sets in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68471). Quality measures adopted in a previous year's rulemaking are 
retained in the Hospital OQR Program for use in subsequent years unless 
otherwise specified. We refer readers to that rule for more 
information. We are not proposing any

[[Page 39326]]

changes to our retention policy for previously adopted measures.
3. Removal of Quality Measures From the Hospital OQR Program Measure 
Set
a. Considerations in Removing Quality Measures From the Hospital OQR 
Program
    In the FY 2010 IPPS/LTCH PPS final rule for the Hospital IQR 
Program, we finalized a process for immediate retirement, which we 
later termed ``removal'' (74 FR 43863), of Hospital IQR Program 
measures based on evidence that the continued use of the measure as 
specified raised patient safety concerns. We adopted the same immediate 
measure retirement policy for the Hospital OQR Program in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60634 through 60635). We 
refer readers to the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68472 through 68473) for a discussion of our reasons for 
changing the term ``retirement'' to ``removal'' in the Hospital OQR 
Program. We are not proposing any changes to our policy to immediately 
remove measures as a result of patient safety concerns.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized a set of criteria for determining whether to remove measures 
from the Hospital OQR Program. We refer readers to the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68472 through 68473) for a 
discussion of our policy on removal of quality measures from the 
Hospital OQR Program. The benefits of removing a measure from the 
Hospital OQR Program will be assessed on a case-by-case basis (79 FR 
66941 through 66942). We note that, under this case-by-case approach, a 
measure will not be removed solely on the basis of meeting any specific 
criterion.
    The following criteria will be used to determine whether to remove 
a measure from the Hospital OQR Program: (i) Measure performance among 
hospitals is so high and unvarying that meaningful distinctions and 
improvements in performance can no longer be made (``topped-out'' 
measures); (ii) performance or improvement on a measure does not result 
in better patient outcomes; (iii) a measure does not align with current 
clinical guidelines or practice; (iv) the availability of a more 
broadly applicable (across settings, populations, or conditions) 
measure for the topic; (v) the availability of a measure that is more 
proximal in time to desired patient outcomes for the particular topic; 
(vi) the availability of a measure that is more strongly associated 
with desired patient outcomes for the particular topic; and (vii) 
collection or public reporting of a measure leads to negative 
unintended consequences such as patient harm. We are not proposing any 
changes to our measure removal policy.
b. Criteria for Removal of ``Topped-Out'' Measures
    As provided above, quality measures may be removed from the 
Hospital OQR Program when they are ``topped-out.'' We refer readers to 
CY 2015 OPPS/ASC final rule with comment period where we finalized our 
proposal to refine the criteria for determining when a measure is 
``topped-out'' (79 FR 66942). We are not proposing any changes to our 
``topped-out'' criteria policy.
4. Hospital OQR Program Quality Measures Adopted in Previous Rulemaking
    The previously finalized measure set for the Hospital OQR Program 
CY 2017 payment determination and subsequent years is listed below.

   Hospital OQR Program Measure Set Previously Adopted for the CY 2017
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
            NQF No.                           Measure name
------------------------------------------------------------------------
N/A...........................  OP-1: Median Time to Fibrinolysis.
0288..........................  OP-2: Fibrinolytic Therapy Received
                                 Within 30 Minutes of ED Arrival.
0290..........................  OP-3: Median Time to Transfer to Another
                                 Facility for Acute Coronary
                                 Intervention.
0286..........................  OP-4: Aspirin at Arrival.
0289..........................  OP-5: Median Time to ECG.
0514..........................  OP-8: MRI Lumbar Spine for Low Back
                                 Pain.
N/A...........................  OP-9: Mammography Follow-up Rates.
N/A...........................  OP-10: Abdomen CT--Use of Contrast
                                 Material.
0513..........................  OP-11: Thorax CT--Use of Contrast
                                 Material.
N/A...........................  OP-12: The Ability for Providers with
                                 HIT to Receive Laboratory Data
                                 Electronically Directly into their ONC-
                                 Certified EHR System as Discrete
                                 Searchable Data.
0669..........................  OP-13: Cardiac Imaging for Preoperative
                                 Risk Assessment for Non-Cardiac Low-
                                 Risk Surgery.
N/A...........................  OP-14: Simultaneous Use of Brain
                                 Computed Tomography (CT) and Sinus
                                 Computed Tomography (CT).
N/A...........................  OP-15: Use of Brain Computed Tomography
                                 (CT) in the Emergency Department for
                                 Atraumatic Headache.**
N/A...........................  OP-17: Tracking Clinical Results between
                                 Visits.
0496..........................  OP-18: Median Time from ED Arrival to ED
                                 Departure for Discharged ED Patients.
N/A...........................  OP-20: Door to Diagnostic Evaluation by
                                 a Qualified Medical Professional.
0662..........................  OP-21: Median Time to Pain Management
                                 for Long Bone Fracture.
N/A...........................  OP-22: ED--Left Without Being Seen.
0661..........................  OP-23: Head CT or MRI Scan Results for
                                 Acute Ischemic Stroke or Hemorrhagic
                                 Stroke who Received Head CT or MRI Scan
                                 Interpretation Within 45 minutes of ED
                                 Arrival.
N/A...........................  OP-25: Safe Surgery Checklist Use.
N/A...........................  OP-26: Hospital Outpatient Volume on
                                 Selected Outpatient Surgical
                                 Procedures.*
0431..........................  OP-27: Influenza Vaccination Coverage
                                 among Healthcare Personnel.
0658..........................  OP-29: Endoscopy/Polyp Surveillance:
                                 Appropriate Follow-up Interval for
                                 Normal Colonoscopy in Average Risk
                                 Patients.
0659..........................  OP-30: Endoscopy/Polyp Surveillance:
                                 Colonoscopy Interval for Patients with
                                 a History of Adenomatous Polyps--
                                 Avoidance of Inappropriate Use.
1536..........................  OP-31: Cataracts--Improvement in
                                 Patient's Visual Function within 90
                                 Days Following Cataract Surgery.***
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
  at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
** Measure we are proposing for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 6947).


[[Page 39327]]

    In the CY 2015 OPPS/ASC final rule with comment period, we 
finalized one new measure beginning with the CY 2018 payment 
determination: OP-32: Facility 7-Day Risk-Standardized Hospital Visit 
Rate after Outpatient Colonoscopy (79 FR 66948 through 66955). The 
previously finalized measure set for the Hospital OQR Program CY 2018 
payment determination and subsequent years is listed below. We note 
that we are proposing one new measure for the CY 2018 payment 
determination and subsequent years in section XIII.B.6.a. of this 
proposed rule.

   Hospital OQR Program Measure Set Previously Adopted for the CY 2018
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
            NQF No.                           Measure name
------------------------------------------------------------------------
N/A...........................  OP-1: Median Time to Fibrinolysis.
0288..........................  OP-2: Fibrinolytic Therapy Received
                                 Within 30 Minutes of ED Arrival.
0290..........................  OP-3: Median Time to Transfer to Another
                                 Facility for Acute Coronary
                                 Intervention.
0286..........................  OP-4: Aspirin at Arrival.
0289..........................  OP-5: Median Time to ECG.
0514..........................  OP-8: MRI Lumbar Spine for Low Back
                                 Pain.
N/A...........................  OP-9: Mammography Follow-up Rates.
N/A...........................  OP-10: Abdomen CT--Use of Contrast
                                 Material.
0513..........................  OP-11: Thorax CT--Use of Contrast
                                 Material.
N/A...........................  OP-12: The Ability for Providers with
                                 HIT to Receive Laboratory Data
                                 Electronically Directly into their ONC-
                                 Certified EHR System as Discrete
                                 Searchable Data.
0669..........................  OP-13: Cardiac Imaging for Preoperative
                                 Risk Assessment for Non- Cardiac Low-
                                 Risk Surgery.
N/A...........................  OP-14: Simultaneous Use of Brain
                                 Computed Tomography (CT) and Sinus
                                 Computed Tomography (CT).
N/A...........................  OP-15: Use of Brain Computed Tomography
                                 (CT) in the Emergency Department for
                                 Atraumatic Headache.**
N/A...........................  OP-17: Tracking Clinical Results between
                                 Visits.
0496..........................  OP-18: Median Time from ED Arrival to ED
                                 Departure for Discharged ED Patients.
N/A...........................  OP-20: Door to Diagnostic Evaluation by
                                 a Qualified Medical Professional.
0662..........................  OP-21: Median Time to Pain Management
                                 for Long Bone Fracture.
N/A...........................  OP-22: ED--Left Without Being Seen.
0661..........................  OP-23: Head CT or MRI Scan Results for
                                 Acute Ischemic Stroke or Hemorrhagic
                                 Stroke who Received Head CT or MRI Scan
                                 Interpretation Within 45 minutes of ED
                                 Arrival.
N/A...........................  OP-25: Safe Surgery Checklist Use.
N/A...........................  OP-26: Hospital Outpatient Volume on
                                 Selected Outpatient Surgical
                                 Procedures.*
0431..........................  OP-27: Influenza Vaccination Coverage
                                 among Healthcare Personnel.
0658..........................  OP-29: Endoscopy/Polyp Surveillance:
                                 Appropriate Follow-up Interval for
                                 Normal Colonoscopy in Average Risk
                                 Patients.
0659..........................  OP-30: Endoscopy/Polyp Surveillance:
                                 Colonoscopy Interval for Patients with
                                 a History of Adenomatous Polyps--
                                 Avoidance of Inappropriate Use.
1536..........................  OP-31: Cataracts--Improvement in
                                 Patient's Visual Function within 90
                                 Days Following Cataract Surgery.***
2539..........................  OP-32: Facility 7-Day Risk-Standardized
                                 Hospital Visit Rate after Outpatient
                                 Colonoscopy.
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
  at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
** Measure we are proposing for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).

5. Proposed Hospital OQR Program Quality Measure for Removal for CY 
2017 Payment Determination and Subsequent Years
    We are proposing to remove one measure from the Hospital OQR 
Program quality measure set beginning with the CY 2017 payment 
determination and subsequent years: OP-15: Use of Brain Computed 
Tomography (CT) in the Emergency Department for Atraumatic Headache. 
The inclusion of OP-15 in the Hospital OQR Program consistently has 
generated concerns from stakeholders since its adoption in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72077 through 72082). In 
the CY 2012 OPPS/ASC final rule with comment period, we deferred the 
public reporting of OP-15 (76 FR 74456). We extended the postponement 
of public reporting for this measure in the CY 2013 and CY 2014 OPPS/
ASC final rules with comment period (77 FR 68478 and 78 FR 75096). In 
addition, as we noted in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66963), we did not propose any changes to this policy. 
Public reporting for OP-15 continues to be deferred, and this deferral 
has no effect on any payment determinations (79 FR 66963).
    Since deferring the measure however, we continued to evaluate OP-
15. In CY 2011, we conducted a dry run of the measure and received many 
suggestions for refinements to the measure. Our technical expert panel 
examined the suggestions we received regarding the measure during the 
dry run as well as the comments we received during the maintenance 
process for this measure. Based on these comments, CMS refined the 
measure specifications for OP-15 to address most stakeholder concerns. 
Nevertheless, as discussed below, given the continued inconsistency of 
current clinical practice guidelines on which the measure is based, we 
are proposing to remove OP-15 for the CY 2017 payment determination and 
subsequent years.
    Based on our analysis, OP-15 meets the following criterion for 
removal: (iii) The measure does not align with current clinical 
guidelines or practice. We refer readers to the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68472) and the discussion above for a 
list of criteria we consider when determining whether to remove quality 
measures from the Hospital OQR Program. In peer-reviewed literature, 
headache guidelines have either excluded older adults or recommended a 
lower threshold for the use of CT

[[Page 39328]]

scans.\1\ Furthermore, stakeholders have expressed concern that this 
measure is influenced significantly by case mix, patient severity, and 
clinician behavior, and thus, fails to represent appropriateness or 
efficiency accurately.\2\ Based upon guidelines for use of CT scans 
published in peer-reviewed literature, we believe that OP-15,\3\ as 
currently adopted in the Hospital OQR Program, does not align with the 
most updated clinical guidelines or practice, satisfying removal 
criterion (iii).
---------------------------------------------------------------------------

    \1\ Available at: http://www.acepnow.com/article/proposed-measures-ct-scans-cause-concern/2/.
    \2\ Ibid.
    \3\ Hartsell W, et al. Randomized Trial of Short- Versus Long-
Course Radiotherapy for Palliation of Painful Bone Metastases. 
Journal of the National Cancer Institute, 2005: 97 (11): 798-804.
---------------------------------------------------------------------------

    For the reason stated above, we are proposing to remove OP-15: Use 
of Brain Computed Tomography (CT) in the Emergency Department for 
Atraumatic Headache from the Hospital OQR Program beginning with the CY 
2017 payment determination. Set out in the table below is the measure 
we are proposing to remove for the CY 2017 payment determination and 
subsequent years.

    Hospital OQR Program Measure Proposed for Removal for the CY 2017
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
            NQF No.                              Measure
------------------------------------------------------------------------
N/A...........................  OP-15: Use of Brain Computed Tomography
                                 (CT) in the Emergency Department for
                                 Atraumatic Headache.
------------------------------------------------------------------------

    We are inviting public comment on this proposal.
6. Proposed New Hospital OQR Program Quality Measures for the CY 2018 
and CY 2019 Payment Determinations and Subsequent Years
    We are proposing to adopt a total of two new measures for the 
Hospital OQR Program: (1) A Web-based quality measure for the CY 2018 
payment determination and subsequent years; and (2) a Web-based quality 
measure for the CY 2019 payment determination and subsequent years. 
These measures are discussed in detail below.
a. Proposed New Quality Measure for the CY 2018 Payment Determination 
and Subsequent Years: OP-33: External Beam Radiotherapy (EBRT) for Bone 
Metastases (NQF #1822)
    Bone metastases are a common manifestation of malignancy. Some 
cancer types have a bone metastasis prevalence as high as 70 to 95 
percent.\4\ EBRT is a widely used modality \5\ to provide pain relief 
in 50 to 80 percent of patients with painful bone metastases.\6\ In 
October 2009, the American Society for Radiation Oncology (ASTRO) 
organized a Task Force to perform an assessment of existing 
recommendations in order to address a lack of palliative radiotherapy 
guidelines. Based on a review of the literature, the Task Force 
recommended the following EBRT dosing schedules for patients with 
previously unirradiated painful bone metastases: 30 Gy over the course 
of 10 fractions; 24 Gy over the course of 6 fractions; 20 Gy over the 
course of 5 fractions; and a single 8 Gy fraction.\7\ Despite the 
recommendations, the actual doses applied for EBRT continue to include 
dosing schedules as high as 25 fractions.\8\ An international survey of 
radiation oncologists, of which \3/4\ of the respondents were members 
of ASTRO, found more than 100 different dose schedules in use.\9\ 
Measure testing by ASTRO noted nearly a 20 percent performance gap. 
Many studies support the conclusion that shorter EBRT schedules produce 
similar pain relief outcomes when compared to longer EBRT schedules, 
and that patients prefer shorter EBRT schedules because of their 
convenience, increased tolerability, and reduced side effects.\10\ In 
addition, the ASTRO Task Force found that the frequency and severity of 
side effects associated with a single fraction were the same or less 
than those associated with multiple fraction regimens, indicating that 
shorter treatment schedules may be preferable.\11\
---------------------------------------------------------------------------

    \4\ Coleman RE. Metastatic bone disease: clinical features, 
pathophysiology and treatment strategies. Cancer Treat Rev. 
2001;27:165-176.
    \5\ Chow E, Zeng L, Salvo N, Dennis K, Tsao M, Lutz S. Update on 
the Systematic Review of Palliative Radiotherapy Trials for Bone 
Metastases. Clin Onc. 2012;24:112-124. doi:10.1016/
j.clon.2011.11.004
    \6\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for 
bone metastases: An ASTRO evidence-based guideline. Int J Radiat 
Oncol Biol Phys. 2011;79(4):965-976.
    \7\ Ibid.
    \8\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
    \9\ Fairchild A, Barnes E, Ghosh S, et al. International 
Patterns of Practice in Palliative Radiotherapy for Painful Bone 
Metastases: Evidence-Based Practice? Int J Radiat Oncol Biol Phys. 
2009;75(5):1501-1510.
    \10\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
    \11\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for 
bone metastases: An ASTRO evidence-based guideline. Int J Radiat 
Oncol Biol Phys. 2011;79(4):965-976.
---------------------------------------------------------------------------

    To address concerns associated with unnecessary exposure to 
radiation and a desire for shorter and less painful treatment options, 
we are proposing to adopt one new Web-based quality measure for the CY 
2018 payment determination and subsequent years: OP-33: External Beam 
Radiotherapy for Bone Metastases (NQF #1822). This measure assesses the 
``[p]ercentage of patients (all-payer) with painful bone metastases and 
no history of previous radiation who receive EBRT with an acceptable 
dosing schedule.'' \12\ The measure numerator includes all patients 
with painful bone metastases and no previous radiation to the same site 
who receive EBRT with any of the following recommended fractionation 
schemes: 30Gy/10fxns; 24Gy/6fxns; 20Gy/5fxns; or 8Gy/1fxn. The measure 
denominator includes all patients with painful bone metastases and no 
previous radiation to the same site who receive EBRT. The following 
patients are excluded from the denominator: patients who have had 
previous radiation to the same site; patients with femoral axis 
cortical involvement greater than 3 cm in length; patients who have 
undergone a surgical stabilization procedure; and patients with spinal 
cord compression, cauda equina compression, or radicular pain. Detailed 
specifications for this proposed measure may be found at: https://www.qualityforum.org/QPS/1822. In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50278 through 50279), the PCHQR Program adopted the EBRT measure 
for the FY 2017 program and subsequent years.
---------------------------------------------------------------------------

    \12\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
---------------------------------------------------------------------------

    We believe that this measure will reduce the rate of EBRT services 
overuse, support our commitment to promoting patient safety, and 
support the NQS priority of Making Care Safer. Specifically, the 
proposed External Beam Radiotherapy for Bone Metastases

[[Page 39329]]

measure seeks to address the performance gap in treatment variation, 
ensure appropriate use of EBRT, and prevent the overuse of radiation 
therapy. We believe that this measure is necessary to support patient 
preferences for shorter EBRT schedules as well as to ensure patient 
safety, given that shorter treatment courses show similar or fewer side 
effects while producing similar clinical outcomes. The measure also 
takes into account the effective schedule for relieving pain from bone 
metastases, patient preferences and time and cost effectiveness.\13\
---------------------------------------------------------------------------

    \13\ Measure Submission and Evaluation Worksheet. Available at: 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

    In compliance with section 1890A(a)(2) of the Act, this measure was 
included in the publicly available document: ``List of Measures under 
Consideration for December 1, 2014.'' \14\ The MAP, a multi-stakeholder 
group convened by the NQF, reviews the measures under consideration for 
the Hospital OQR Program, among other Federal programs, and provides 
input on those measures to the Secretary. The MAP's 2015 
recommendations for quality measures under consideration are captured 
in the ``Spreadsheet of MAP 2015 Final Recommendations.'' \15\
---------------------------------------------------------------------------

    \14\ ``List of Measures under Consideration for December 1, 
2014.'' Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \15\ ``Spreadsheet of MAP 2015 Final Recommendations.'' 
Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
---------------------------------------------------------------------------

    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. The MAP supported this proposed 
measure, stating that ``External beam radiation can help provide 
patients with pain relief . . . this measure has a demonstrated 
performance gap and would begin to expand cancer care measurement to 
settings beyond the PPS-exempt cancer hospitals.'' \16\
---------------------------------------------------------------------------

    \16\ Ibid.
---------------------------------------------------------------------------

    Furthermore, we believe that this measure meets the requirement 
under section 1833(t)(17)(C)(i) of the Act, which states that ``The 
Secretary shall develop measures . . . that reflect consensus among 
affected parties and, to the extent feasible and practicable, shall 
include measures set forth by one or more national consensus building 
entities.'' We believe that this proposed measure reflects consensus 
among the affected parties, because it is NQF-endorsed and recommended 
by the MAP.
    We are inviting public comment on the proposal to include the 
following measure in the Hospital OQR Program for the CY 2018 payment 
determination and subsequent years.

------------------------------------------------------------------------
                                      Proposed measure for the CY 2018
               NQF #                payment determination and subsequent
                                                    years
------------------------------------------------------------------------
1822..............................  OP-33: External Beam Radiotherapy
                                     for Bone Metastases
------------------------------------------------------------------------

    The proposed and previously finalized measures for CY 2018 payment 
determination and subsequent years are listed below.

    Proposed Hospital OQR Program Measure Set for the CY 2018 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
             NQF #                            Measure name
------------------------------------------------------------------------
N/A...........................  OP-1: Median Time to Fibrinolysis.
0288..........................  OP-2: Fibrinolytic Therapy Received
                                 Within 30 Minutes of ED Arrival.
0290..........................  OP-3: Median Time to Transfer to Another
                                 Facility for Acute Coronary
                                 Intervention.
0289..........................  OP-5: Median Time to ECG.
0514..........................  OP-8: MRI Lumbar Spine for Low Back
                                 Pain.
N/A...........................  OP-9: Mammography Follow-up Rates.
N/A...........................  OP-10: Abdomen CT--Use of Contrast
                                 Material.
0513..........................  OP-11: Thorax CT--Use of Contrast
                                 Material.
N/A...........................  OP-12: The Ability for Providers with
                                 HIT to Receive Laboratory Data
                                 Electronically Directly into their ONC-
                                 Certified EHR System as Discrete
                                 Searchable Data.
0669..........................  OP-13: Cardiac Imaging for Preoperative
                                 Risk Assessment for Non-Cardiac Low-
                                 Risk Surgery.
N/A...........................  OP-14: Simultaneous Use of Brain
                                 Computed Tomography (CT) and Sinus
                                 Computed Tomography (CT).
N/A...........................  OP-17: Tracking Clinical Results between
                                 Visits.
0496..........................  OP-18: Median Time from ED Arrival to ED
                                 Departure for Discharged ED Patients.
N/A...........................  OP-20: Door to Diagnostic Evaluation by
                                 a Qualified Medical Professional.
0662..........................  OP-21: Median Time to Pain Management
                                 for Long Bone Fracture.
N/A...........................  OP-22: ED--Left Without Being Seen.
0661..........................  OP-23: ED--Head CT or MRI Scan Results
                                 for Acute Ischemic Stroke or
                                 Hemorrhagic Stroke who Received Head CT
                                 or MRI Scan Interpretation Within 45
                                 minutes of Arrival.
N/A...........................  OP-25: Safe Surgery Checklist Use.
N/A...........................  OP-26: Hospital Outpatient Volume on
                                 Selected Outpatient Surgical
                                 Procedures.*
0431..........................  OP-27: Influenza Vaccination Coverage
                                 among Healthcare Personnel.
0658..........................  OP-29: Endoscopy/Polyp Surveillance:
                                 Appropriate Follow-up Interval for
                                 Normal Colonoscopy in Average Risk
                                 Patients
0659..........................  OP-30: Endoscopy/Polyp Surveillance:
                                 Colonoscopy Interval for Patients with
                                 a History of Adenomatous Polyps--
                                 Avoidance of Inappropriate Use.
1536..........................  OP-31: Cataracts--Improvement in
                                 Patient's Visual Function within 90
                                 Days Following Cataract Surgery.* *
2539..........................  OP-32: Facility 7-Day Risk-Standardized
                                 Hospital Visit Rate after Outpatient
                                 Colonoscopy.
1822..........................  OP-33: External Beam Radiotherapy for
                                 Bone Metastases.* * *
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
  at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.

[[Page 39330]]

 
* * Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).
* * * New measure proposed for the CY 2018 payment determination and
  subsequent years.

b. Proposed New Hospital OQR Program Quality Measure for the CY 2019 
Payment Determination and Subsequent Years: OP-34: Emergency Department 
Transfer Communication (EDTC) (NQF #0291)
    Communication problems significantly contribute to adverse events 
in hospitals, accounting for 65 percent of sentinel events (patient 
safety events not primarily related to the natural course of the 
patient's illness or underlying condition that result in death, 
permanent harm, or severe temporary harm where intervention is required 
to sustain life) tracked by The Joint Commission.\17\ Additionally, 
information deficits frequently result when patients transfer between 
hospitals and primary care physicians in the community \18\ and between 
hospitals and long-term care facilities.\19\ According to patient 
safety studies,\20\ the highest percentage of preventable and negligent 
adverse events within a hospital occur in the Emergency Department.\21\ 
The prevention of medical errors in the Emergency Department setting is 
gaining attention throughout the nation,\22\ but performance measures 
for Emergency Department care are lacking.\23\
---------------------------------------------------------------------------

    \17\ Available at: http://www.jointcommission.org/Improving_Americas_Hospitals_The_Joint_Commissions_Annual_Report_on_Quality_and_Safety_-_2007/..
    \18\ Kripalani, S., LeFevre, F., Phillips, C. et al. Deficits in 
Communication and Information Transfer between Hospital-Based and 
Primary Care Physicians: Implications for Patient Safety and 
Continuity of Care. JAMA 297(8):831-841, 2007.
    \19\ Cortes T., Wexler S. and Fitzpatrick J. The transition of 
elderly patients between hospitals and nursing homes. Improving 
nurse-to-nurse communication. Journal of Gerontological Nursing. 
30(6):10-5, 2004.
    \20\ Leape, L., Brennan, T., Laird, N. et al. The Nature of 
Adverse Events in Hospitalized Patients. Results of the Harvard 
Medical Practice Study II. New England Journal of Medicine 324:377-
384, 1991.
    \21\ Thomas, E., Studdert, D., Burstin, H. et al. Incidence and 
Types of Adverse Events and Negligent Care in Utah and Colorado. 
Medical Care 38:261-271, 2000.
    \22\ Schenkel, S. Promoting Patient Safety and Preventing 
Medical Error in Emergency Departments. Academic Emergency Medicine 
7:1204-1222, 2000.
    \23\ Welch, S., Augustine, J., Camago, C. and Reese, C. 
Emergency Department Performance Measures and Benchmarking Summit. 
Academic Emergency Medicine, 13(10):1074-1080, 2006.
---------------------------------------------------------------------------

    Effective and timely communication of a patient's clinical status 
and other relevant information at the time of transfer from the 
hospital is essential for supporting appropriate continuity of care. 
Establishment of an effective transition from one treatment setting to 
another is enhanced by providing the receiving providers and facilities 
with sufficient information regarding treatment during hospitalization. 
Studies have shown that readmissions can be prevented by providing 
detailed, personalized information about patients at the time they are 
transferred to home or any other site.\24\
---------------------------------------------------------------------------

    \24\ Jack BW, Chetty VK, Anthony D, et al. A reengineered 
hospital discharge program to decrease rehospitalization. Ann Intern 
Med 2009; 150:178-187.
---------------------------------------------------------------------------

    To address concerns associated with care when patients are 
transferred from Emergency Departments to other facilities, we are 
proposing to adopt one new Web-based quality measure for the Hospital 
OQR Program effective with the CY 2019 payment determination and 
subsequent years: OP-34: Emergency Department Transfer Communication 
(EDTC) (NQF #0291).
    We are proposing to implement this measure beginning with the CY 
2019 payment determination and subsequent years instead of the CY 2018 
payment determination and subsequent years in order to give hospitals 
adequate time to implement the proposed measure. We believe hospitals 
will require approximately three to six months in order to familiarize 
themselves with the implementation protocol and tools related to the 
EDTC measure and to make associated improvements prior to the first 
reporting deadline. If we were to propose and finalize this measure 
beginning with the CY 2018 payment determination, we believe that 
hospitals may not have adequate time to put the processes and 
procedures in place necessary to collect this measure.
    The EDTC measure captures the ``[p]ercentage of patients 
transferred to another healthcare facility whose medical record 
documentation indicated that administrative and clinical information 
was communicated to the receiving facility in an appropriate time 
frame.'' \25\ This measure is designed to prevent gaps in care 
transitions caused by inadequate or insufficient information that lead 
to avoidable adverse events. Such events cost CMS approximately $15 
billion due in part to avoidable patient readmissions.\26\ The measure 
has been rigorously peer reviewed and extensively tested with field 
tests from 2004 to 2014 across 16 States in 249 hospitals.\27\
---------------------------------------------------------------------------

    \25\ Available at: http://www.qualityforum.org/QPS/0291.
    \26\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \27\ Refining and Field Testing a Relevant Set of Quality 
Measures for Rural Hospitals Final Report June 30, 2005. Available 
at: http://rhrc.umn.edu/wp-content/files_mf/rh_ruralmeasuresfinalreport_063005.pdf.
---------------------------------------------------------------------------

    The measure consists of seven subcomponents: (a) Administrative 
data; (b) patient information; (c) vital signs; (d) medication; (e) 
physician information; (f) nursing information; and (g) procedure and 
test results. The subcomponents are further comprised of a total of 
twenty-seven elements, illustrated in the table below. We note that the 
EDTC measure does not require hospitals to submit patient data on each 
of these elements; but rather, hospitals would be required to answer 
yes or no as to whether these clinical indicators were recorded and 
communicated to the receiving facility prior to departure (Subsection 
1) or within 60 minutes of transfer (Subsections 2 through 7).

       Numerator Elements for OP-34: Emergency Department Transfer
                              Communication
                       (EDTC) Measure (NQF #0291)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
  Administrative communication (EDTC-Subsection 1)......................
------------------------------------------------------------------------
                        Nurse to nurse communication.
                        Physician to physician communication.
------------------------------------------------------------------------
  Patient information (EDTC-Subsection 2)...............................
------------------------------------------------------------------------
                        Name.

[[Page 39331]]

 
                        Address.
                        Age.
                        Gender.
                        Significant others contact information.
                        Insurance.
------------------------------------------------------------------------
  Vital signs (EDTC-Subsection 3).......................................
------------------------------------------------------------------------
                        Pulse.
                        Respiratory rate.
                        Blood pressure.
                        Oxygen saturation.
                        Temperature.
                        Glasgow score or other neuro assessment for
                         trauma, cognitively altered or neuro patients
                         only.
------------------------------------------------------------------------
  Medication information (EDTC-Subsection 4)............................
------------------------------------------------------------------------
                        Medications administered in ED.
                        Allergies.
                        Home medications.
------------------------------------------------------------------------
  Physician or practitioner generated information (EDTC-Subsection 5)...
------------------------------------------------------------------------
                        History and physical.
                        Reason for transfer and/or plan of care.
------------------------------------------------------------------------
  Nurse generated information (EDTC-Subsection 6).......................
------------------------------------------------------------------------
                        Assessments/interventions/response.
                        Sensory Status (formerly Impairments).
                        Catheters.
                        Immobilizations.
                        Respiratory support.
                        Oral limitations.
------------------------------------------------------------------------
  Procedures and tests (EDTC-Subsection 7)..............................
------------------------------------------------------------------------
                        Tests and procedures done.
                        Tests and procedure results sent.
------------------------------------------------------------------------

    We are proposing to use a scoring methodology by which the facility 
score is reported as the percentage (0-100 percent) of all cases with a 
perfect score of ``7.'' To calculate this score, hospitals assign a 
value of ``0'' or ``1'' to each of the seven subcomponents for each 
case. In order to achieve a value of ``1'' for each subcomponent, the 
hospital must have recorded and transferred patient data pertaining to 
all of the elements that comprise that particular subcomponent; if data 
for any element fails to be recorded or transferred, then the value 
assigned to that subcomponent would be ``0.'' Next, subcomponent scores 
are added together, for a total ranging from ``0'' to ``7'' per case. 
Finally, the facility score is calculated by adding all of the cases 
that achieved a perfect score of ``7'' and dividing that number by the 
total number of cases to reflect the percentage of all cases that 
received a perfect score.
    Example 1 below illustrates a case in which all patient data 
elements were recorded and transferred to the receiving facility.

    Example 1 of Calculation for OP-34: Emergency Department Transfer
                              Communication
                   (EDTC) Measure (NQF #0291) by Case
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Administrative communication (EDTC-Subsection 1)
------------------------------------------------------------------------
Y.....................  Nurse to nurse communication.
Y.....................  Physician to physician communication.
------------------------------------------------------------------------
Sub-1 Score = 1
------------------------------------------------------------------------
Patient information (EDTC-Subsection 2)
------------------------------------------------------------------------
Y.....................  Name.
Y.....................  Address.
Y.....................  Age.
Y.....................  Gender.
Y.....................  Significant others contact information.
Y.....................  Insurance.
------------------------------------------------------------------------

[[Page 39332]]

 
Sub-2 Score = 1
------------------------------------------------------------------------
Vital signs (EDTC-Subsection 3)
------------------------------------------------------------------------
Y.....................  Pulse.
Y.....................  Respiratory rate.
Y.....................  Blood pressure.
Y.....................  Oxygen saturation.
Y.....................  Temperature.
Y.....................  Glasgow score or other neuro assessment for
                         trauma, cognitively altered or neuro patients
                         only.
------------------------------------------------------------------------
Sub-3 Score = 1
------------------------------------------------------------------------
Medication information (EDTC-Subsection 4)
------------------------------------------------------------------------
Y.....................  Medications administered in ED.
Y.....................  Allergies.
Y.....................  Home medications.
------------------------------------------------------------------------
Sub-4 Score = 1
------------------------------------------------------------------------
Physician or practitioner generated information (EDTC-Subsection 5)
------------------------------------------------------------------------
Y.....................  History and physical.
Y.....................  Reason for transfer and/or plan of care.
------------------------------------------------------------------------
Sub-5 Score = 1
------------------------------------------------------------------------
Nurse generated information (EDTC-Subsection 6)
------------------------------------------------------------------------
Y.....................  Assessments/interventions/response.
Y.....................  Sensory Status (formerly Impairments).
Y.....................  Catheters.
Y.....................  Immobilizations.
Y.....................  Respiratory support.
Y.....................  Oral limitations.
------------------------------------------------------------------------
Sub-6 Score = 1
------------------------------------------------------------------------
Procedures and tests (EDTC-Subsection 7)
------------------------------------------------------------------------
Y.....................  Tests and procedures done.
Y.....................  Tests and procedure results sent.
------------------------------------------------------------------------
Sub-7 Score = 1
------------------------------------------------------------------------
(Sub-1 (1) + Sub-2 (1) + Sub-3 (1) + Sub-4 (1) + Sub-5 (1) + Sub-6 (1) +
 Sub-7 (1) = 7
------------------------------------------------------------------------
``7'' equals a perfect score; therefore, TOTAL SCORE FOR THIS CASE = 7
------------------------------------------------------------------------

    Example 2 below illustrates a case in which some patient data 
elements failed to be recorded and/or transferred to the receiving 
facility.

    Example 2 of Calculation for OP-34: Emergency Department Transfer
                              Communication
                   (EDTC) Measure (NQF #0291) by Case
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Administrative communication (EDTC-Subsection 1)
------------------------------------------------------------------------
Y.....................  Nurse to nurse communication.
Y.....................  Physician to physician communication.
------------------------------------------------------------------------
Sub-1 Score = 1
------------------------------------------------------------------------
Patient information (EDTC-Subsection 2)
------------------------------------------------------------------------
Y.....................  Name.
Y.....................  Address.
Y.....................  Age.
Y.....................  Gender.
Y.....................  Significant others contact information.

[[Page 39333]]

 
Y.....................  Insurance.
------------------------------------------------------------------------
Sub-2 Score = 1
------------------------------------------------------------------------
Vital signs (EDTC-Subsection 3)
------------------------------------------------------------------------
Y.....................  Pulse.
Y.....................  Respiratory rate.
Y.....................  Blood pressure.
Y.....................  Oxygen saturation.
Y.....................  Temperature.
N.....................  Glasgow score or other neuro assessment for
                         trauma, cognitively altered or neuro patients
                         only.
------------------------------------------------------------------------
Sub-3 Score = 0
------------------------------------------------------------------------
Medication information (EDTC-Subsection 4)
------------------------------------------------------------------------
Y.....................  Medications administered in ED.
Y.....................  Allergies.
N.....................  Home medications.
------------------------------------------------------------------------
Sub-4 Score = 0
------------------------------------------------------------------------
Physician or practitioner generated information (EDTC-Subsection 5)
------------------------------------------------------------------------
Y.....................  History and physical.
Y.....................  Reason for transfer and/or plan of care.
------------------------------------------------------------------------
Sub-5 Score = 1
------------------------------------------------------------------------
Nurse generated information (EDTC-Subsection 6)
------------------------------------------------------------------------
Y.....................  Assessments/interventions/response.
Y.....................  Sensory Status (formerly Impairments).
Y.....................  Catheters.
Y.....................  Immobilizations.
Y.....................  Respiratory support.
Y.....................  Oral limitations.
------------------------------------------------------------------------
Sub-6 Score = 1
------------------------------------------------------------------------
Procedures and tests (EDTC-Subsection 7)
------------------------------------------------------------------------
Y.....................  Tests and procedures done.
Y.....................  Tests and procedure results sent.
------------------------------------------------------------------------
Sub-7 Score = 1
------------------------------------------------------------------------
(Sub-1 (1) + Sub-2 (1) + Sub-3 (0) + Sub-4 (0) + Sub-5 (1) + Sub-6 (1) +
 Sub-7 (1) = 5
------------------------------------------------------------------------
``5'' does not equal a perfect score of ``7''; therefore, TOTAL SCORE
 FOR THIS CASE = 0
------------------------------------------------------------------------

    For more information on this measure, including its specifications, 
we refer readers to the Current Emergency Department Transfer 
Communication Measurement Specifications, Data Definitions, and Data 
Collection Tool at: http://rhrc.umn.edu/2012/02/ed-transfer-submission-manual.
    Additional information on this measure is also available at: http://www.qualityforum.org/QPS/0291.
    As discussed above, the proposed EDTC measure seeks to address gaps 
in care coordination, by ensuring that vital patient information is 
both recorded and shared with the subsequent provider. We believe that 
the EDTC measure would increase the quality of care provided to 
patients, reduce avoidable readmissions, and increase patient safety. 
More timely communication of vital information results in better care, 
reduction of systemic medical errors, and improved patient outcomes. In 
addition, we believe that this measure will promote the NQS priority of 
Effective Communication and Coordination of Care. As articulated by 
HHS, ``Care coordination is a conscious effort to ensure that all key 
information needed to make clinical decisions is available to patients 
and providers. It is defined as the deliberate organization of patient 
care activities between two or more participants involved in a 
patient's care to facilitate appropriate delivery of health care 
services.'' \28\ Critically, the availability of the transfer record to 
the next level provider within 60 minutes after departure supports more 
effective care coordination and patient safety, since a delay in 
communication can result in medication or treatment errors.
---------------------------------------------------------------------------

    \28\ US DHHS. ``National Healthcare Disparities Report 2013.'' 
Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html.
---------------------------------------------------------------------------

    In compliance with section 1890A(a)(2) of the Act, this measure was 
included in the publicly available document: ``List of Measures under

[[Page 39334]]

Consideration for December 1, 2014.'' \29\ As stated above, the MAP 
reviews the measures under consideration for the Hospital OQR Program, 
among other federal programs, and provides input on those measures to 
the Secretary. The MAP's 2015 recommendations for quality measures 
under consideration are captured in the ``Spreadsheet of MAP 2015 Final 
Recommendations.'' \30\
---------------------------------------------------------------------------

    \29\ ``List of Measures under Consideration for December 1, 
2014.'' Available at: www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \30\ MAP. February 2015. ``Spreadsheet of MAP 2015 Final 
Recommendations''. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
---------------------------------------------------------------------------

    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. The MAP supported this measure, 
stating that ``This measure would help to address a previously 
identified gap around improving care coordination and would help ensure 
vital information is transferred between sites of care. The EDTC 
measure set consists of seven components that focus on communication 
between facilities around the transfer of patients. The measure set 
assists in filling the workgroup identified priority gap of enhancing 
care coordination efforts.'' \31\ In addition, as stated above, the 
proposed measure addresses the NQS priority of Communication and Care 
Coordination.
---------------------------------------------------------------------------

    \31\ Ibid.
---------------------------------------------------------------------------

    We believe this measure meets the requirement under section 
1833(t)(17)(C)(i) of the Act, which states that ``The Secretary shall 
develop measures . . . that reflect consensus among affected parties 
and, to the extent feasible and practicable, shall include measures set 
forth by one or more national consensus building entities.'' We believe 
this proposed measure reflects consensus among the affected parties, 
because it is NQF-endorsed and supported by the MAP.
    We are inviting public comment on the proposal to include the 
following measure in the Hospital OQR Program for the CY 2019 payment 
determination and subsequent years.

------------------------------------------------------------------------
                                       Proposed Measure for the CY 2019
               NQF #                      Payment Determination and
                                               Subsequent Years
------------------------------------------------------------------------
0291...............................  OP-34: Emergency Department
                                      Transfer Communication Measure.
------------------------------------------------------------------------

    The proposed and previously finalized measures for the CY 2019 
payment determination and subsequent years are listed below.

    Proposed Hospital OQR Program Measure Set for the CY 2019 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
               NQF #                             Measure name
------------------------------------------------------------------------
N/A................................  OP-1: Median Time to Fibrinolysis.
0288...............................  OP-2: Fibrinolytic Therapy Received
                                      Within 30 Minutes of ED Arrival.
0290...............................  OP-3: Median Time to Transfer to
                                      Another Facility for Acute
                                      Coronary Intervention.
0289...............................  OP-5: Median Time to ECG.
0514...............................  OP-8: MRI Lumbar Spine for Low Back
                                      Pain.
N/A................................  OP-9: Mammography Follow-up Rates.
N/A................................  OP-10: Abdomen CT--Use of Contrast
                                      Material.
0513...............................  OP-11: Thorax CT--Use of Contrast
                                      Material.
N/A................................  OP-12: The Ability for Providers
                                      with HIT to Receive Laboratory
                                      Data Electronically Directly into
                                      their ONC-Certified EHR System as
                                      Discrete Searchable Data.
0669...............................  OP-13: Cardiac Imaging for
                                      Preoperative Risk Assessment for
                                      Non-Cardiac Low-Risk Surgery.
N/A................................  OP-14: Simultaneous Use of Brain
                                      Computed Tomography (CT) and Sinus
                                      Computed Tomography (CT).
N/A................................  OP-17: Tracking Clinical Results
                                      between Visits.
0496...............................  OP-18: Median Time from ED Arrival
                                      to ED Departure for Discharged ED
                                      Patients.
N/A................................  OP-20: Door to Diagnostic
                                      Evaluation by a Qualified Medical
                                      Professional.
0662...............................  OP-21: Median Time to Pain
                                      Management for Long Bone Fracture.
N/A................................  OP-22: ED--Left Without Being Seen.
0661...............................  OP-23: ED--Head CT or MRI Scan
                                      Results for Acute Ischemic Stroke
                                      or Hemorrhagic Stroke who Received
                                      Head CT or MRI Scan Interpretation
                                      Within 45 minutes of Arrival.
N/A................................  OP-25: Safe Surgery Checklist Use.
N/A................................  OP-26: Hospital Outpatient Volume
                                      on Selected Outpatient Surgical
                                      Procedures.*
0431...............................  OP-27: Influenza Vaccination
                                      Coverage among Healthcare
                                      Personnel.
0658...............................  OP-29: Endoscopy/Polyp
                                      Surveillance: Appropriate Follow-
                                      up Interval for Normal Colonoscopy
                                      in Average Risk Patients.
0659...............................  OP-30: Endoscopy/Polyp
                                      Surveillance: Colonoscopy Interval
                                      for Patients with a History of
                                      Adenomatous Polyps--Avoidance of
                                      Inappropriate Use.
1536...............................  OP-31: Cataracts--Improvement in
                                      Patient's Visual Function within
                                      90 Days Following Cataract
                                      Surgery.* *
2539...............................  OP-32: Facility 7-Day Risk-
                                      Standardized Hospital Visit Rate
                                      after Outpatient Colonoscopy.
1822...............................  OP-33: External Beam Radiotherapy
                                      for Bone Metastases.* * * *
0291...............................  OP-34: Emergency Department
                                      Transfer Communication Measure.* *
                                      * *
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
  at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
* * Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).
* * * New measure proposed for the CY 2018 payment determination and
  subsequent years.
* * * * New measure proposed for the CY 2019 payment determination and
  subsequent years.


[[Page 39335]]

7. Hospital OQR Program Measures and 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 (health IT), care coordination, patient safety, and volume. 
For future payment determinations, we are considering expanding these 
measure areas and creating measures in new areas. Specifically, we are 
exploring electronic clinical quality measures (eCQMs) and whether, in 
future rulemaking, we would propose that hospitals have the option to 
voluntarily submit data for OP-18: Median Time from ED Arrival to ED 
Departure for Discharged ED Patients electronically beginning with the 
CY 2019 payment determination. Hospitals would otherwise still be 
required to submit data for this measure through chart abstraction.
    We believe all patients, their families, and their healthcare 
providers should have consistent and timely access to their health 
information in a standardized format that can be securely exchanged 
between the patient, providers, and others involved in the patient's 
care.\32\ To that end, we are committed to accelerating health 
information exchange (HIE) through the use of electronic health records 
(EHRs) and other types of health IT across the broader care continuum 
through a number of initiatives including: (1) Alignment of incentives 
and payment adjustments to encourage provider adoption and optimization 
of health IT and HIE services through Medicare and Medicaid payment 
policies; (2) adoption of common standards and certification 
requirements for interoperable health IT; (3) support for privacy and 
security of patient information across all HIE-focused initiatives; and 
(4) governance of health information networks. More information on the 
governance of health information networks and its role in facilitating 
interoperability of health information systems can be found at: http://www.healthit.gov/sites/default/files/ONC10yearInteroperabilityConceptPaper.pdf.
---------------------------------------------------------------------------

    \32\ HHS August 2013 Statement, ``Principles and Strategies for 
Accelerating Health Information Exchange.'' Available at: http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf.
---------------------------------------------------------------------------

    We believe that HIE and the use of certified EHR technology can 
effectively and efficiently help providers improve internal care 
delivery practices, support management of patient care across the 
continuum, and support the reporting of electronically specified 
clinical quality measures. On March 30, 2015, ONC published in the 
Federal Register a proposed rule (80 FR 16804) that proposes a new 2015 
Edition Base EHR definition, as well as modifications to the ONC Health 
IT Certification Program to make it open and accessible to more types 
of health IT and health IT that supports various care and practice 
settings. It also proposes to establish the capabilities and 
specifications that certified EHR technology (CEHRT) would need to 
include to, at a minimum, support the achievement of meaningful use by 
eligible professionals and hospitals under the Medicare and Medicaid 
EHR Incentive Programs (EHR Incentive Programs) when such edition is 
required for use under these programs. More information on the 2015 
Edition EHR Certification Criteria proposed rule can be found at: 
http://healthit.gov/policy-researchers-implementers/standards-and-certification-regulations.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through 
50810), the Hospital IQR Program finalized a policy to allow hospitals 
to voluntarily electronically report at least one quarter of CY 2014 
quality measure data for each measure in one or more of four measure 
sets (STK, VTE, ED, and PC). In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50241 through 50246 and 50249 through 50253), the Hospital IQR 
Program finalized a policy that hospitals may voluntarily report any 16 
of 28 Hospital IQR Program electronic clinical quality measures that 
align with the Medicare EHR Incentive Program as long as those measures 
span three different NQS priority areas. Most recently in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24581 through 24582), the Hospital 
IQR Program proposed to make reporting of electronic clinical quality 
measures required rather than voluntary. Under the proposal, hospitals 
would be required to submit both Q3 and Q4 of 2016 data for 16 
electronic clinical quality measures (80 FR 24581 through 24582).
    We anticipate that as EHR technology evolves and more health IT 
infrastructure is operational, we will begin to accept electronic 
reporting of many measures from EHR technology certified under the ONC 
Health IT Certification Program. We are working diligently toward this 
goal. We believe that this progress would significantly reduce the 
administrative burden on hospitals under the Hospital OQR Program to 
report chart-abstracted measures.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72074) we finalized OP-18: Median Time from ED Arrival to ED Departure 
for Discharged ED Patients (NQF # 0496), the only measure in our 
current measure set which is specified as an eCQM, or e-specified. The 
e-specification for this measure is available at: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/2014_eCQM_Specs_for_EH.zip in the folder entitled: 
EH_CMS32v2_NQF0496_ED3_MedianTime.
    Median Time from ED Arrival to ED Departure for Discharged ED 
Patients (NQF #0496) was adopted by the Medicare and Medicaid EHR 
Incentive Program for Eligible Hospitals and Critical Access Hospitals 
(CAHs) as one of 29 clinical quality measures available for reporting 
under the program beginning with Federal fiscal year 2014 (77 FR 54086 
through 54087).
    For the reasons stated above, we believe it is important to 
encourage providers to submit this measure electronically. In addition, 
allowing submission of OP-18 as an eCQM will begin to align the 
Hospital OQR Program with the Medicare EHR Incentive Program for 
Eligible Hospitals and CAHs in a manner similar to our proposals for 
the Hospital IQR Program (80 FR 24581 through 24582; 24587). Therefore, 
we are considering proposing a policy in future rulemaking that would 
give hospitals an option to voluntarily submit data for this measure 
electronically beginning with the CY 2019 payment determination. 
Hospitals that chose not to submit electronically would still be 
required to submit data though chart abstraction.
    We are inviting public comment on our intention to make this 
proposal in the future.
8. Maintenance of Technical Specifications for Quality Measures
    CMS maintains technical specifications for previously adopted 
Hospital OQR Program measures. These specifications are updated as we 
continue to develop the Hospital OQR Program. The manuals that contain 
specifications for the previously adopted measures can be found on the 
QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1196289981244.
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68469 through 68470), for a discussion of our policy for 
updating Hospital OQR Program measures, the same policy we adopted for 
updating Hospital IQR Program measures, which

[[Page 39336]]

includes the subregulatory process for making updates to the adopted 
measures (77 FR 53504 through 53505). This policy expanded upon the 
subregulatory process for updating measures that we finalized in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68766 through 
68767). We are not proposing any changes to these policies.
9. Public Display of Quality Measures
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75092) for our finalized public display policy. A more 
robust discussion of our policy for the publication of Hospital OQR 
Program data on the Hospital Compare Web site and noninteractive CMS 
Web sites can be found in the CY 2014 OPPS/ASC proposed rule (78 FR 
43645). We are not proposing any changes to our public display policy.

C. Administrative Requirements

1. QualityNet Account and Security Administrator
    The QualityNet security administrator requirements, including 
setting up a QualityNet account and the associated timelines, are 
unchanged from those adopted in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75108 through 75109). In that final rule with 
comment period, we codified these procedural requirements at 42 CFR 
419.46(a).
    We are not proposing any changes to these requirements.
2. Proposed Requirements Regarding Participation Status
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75108 through 75109) for requirements for participation 
and withdrawal from the Hospital OQR Program. In that final rule with 
comment period, we codified these procedural requirements at 42 CFR 
419.46(b).
    In this proposed rule, we are proposing to make one change to the 
requirements regarding participation in the Hospital OQR Program 
beginning with the CY 2017 payment determination. Currently, a 
participating hospital may withdraw from the Hospital OQR Program any 
time from January 1 to November 1 (42 CFR 419.46(b)) of the year prior 
to the affected annual payment update by submitting a withdrawal form 
to CMS via the secure portion of the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1192804525137.
    We are proposing that beginning with the CY 2017 payment 
determination, hospitals must submit a withdrawal form to CMS via the 
QualityNet Web site up to and including August 31 of the year prior to 
the affected annual payment update. For example, for the CY 2017 
payment determination, the withdrawal deadline would change from 
November 1, 2016 to any time up to and including August 31, 2016 under 
this proposal.
    The proposed change to the withdrawal deadline is consistent with 
the ASCQR Program withdrawal deadline described in section XIV.C.2. of 
this proposed rule and in proposed 42 CFR 416.305(b). We believe 
aligning deadlines across programs will reduce provider burden by 
streamlining processes and procedures.
    In addition, as we discuss below in section XIII.D.1. of this 
proposed rule, we are proposing to move the timeline for when we make 
annual percentage update (APU) determinations to allow both CMS and 
stakeholders more time to review the APU determinations before the 
beginning of the calendar year. To ensure the correct hospitals are 
included in the APU determinations, we also need to know at an earlier 
date which hospitals have withdrawn from the Hospital OQR Program.
    We also are proposing to make a conforming revision to 42 CFR 
419.46(b) which currently states that the hospital may withdraw any 
time from January 1 to November 1 of the year prior to the affected 
annual payment updates to state that the hospital may withdraw any time 
up to and including August 31 of the year prior to the affected annual 
payment updates.
    We are inviting public comment on our proposals to change the 
withdrawal deadline and to revise 42 CFR 419.46(b) to reflect this 
change.

D. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program

1. Proposed Change Regarding Hospital OQR Program Annual Percentage 
Update (APU) Determinations
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75110 
through 75111), we specify that our data submission deadlines will be 
posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1205442058760.
    The data submission requirements document, Hospital OQR Quality 
Measures and Timelines for CY 2016 and Subsequent Payment 
Determinations,\33\ explains that the chart-abstracted data on which we 
base APU determinations on is quarter 3 of the 2 years prior to the 
payment determination through quarter 2 of the year prior to the 
payment determination. For example, we base our APU determinations for 
the CY 2016 Hospital OQR Program on chart-abstracted data from quarter 
3, 2014, through quarter 2, 2015. Chart-abstracted data from quarter 2, 
2015 must be submitted by November 1, 2015. APU determinations are 
applied to payments beginning in January of the following year, 
providing less than 2 months between the time the data on which we base 
APU determinations is submitted for validation and the beginning of the 
payments that are affected by this data. This timeline creates 
compressed processing issues for CMS, and compressed timelines for 
hospitals to review their APU determination decisions.
---------------------------------------------------------------------------

    \33\ The Hospital OQR Quality Measures and Timelines for CY 2016 
and Subsequent Payment Determinations. Available at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890446207&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DHOQR_CY2016_MsrTmlns_0315.pdf&blobcol=urldata&blobtable=MungoBlobs.
---------------------------------------------------------------------------

    To ease this burden for both CMS and hospitals, we are proposing to 
change the timeframe on which we base APU determinations for the 
Hospital OQR Program. We currently base APU determinations on chart-
abstracted data from patient encounter quarter 3 of 2 years prior to 
the payment determination through patient encounter quarter 2 of the 
year prior to the payment determination. We are proposing to change 
that timeframe to patient encounter quarter 2 of the 2 years prior to 
the payment determination through patient encounter quarter 1 of the 
year prior to the payment determination beginning with the CY 2018 
payment determination and for subsequent years. Because the deadline 
for hospitals to submit chart-abstracted data for quarter 1 is August 
1, this will afford both CMS and hospitals additional time to review 
the APU determinations before they are implemented in January. Current 
and detailed information about data validation requirements and 
deadlines is posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228758729356.
    To facilitate this process, we are proposing to transition to the 
newly proposed timeframe for the CY 2018 payment determination and 
subsequent

[[Page 39337]]

years and use only three quarters of data for determining the CY 2017 
payment determination as illustrated in the tables below. However, we 
note that data submission deadlines will not be changing.

                      APU Determination Transition
             [CY 2016 Payment Determination (Current State)]
------------------------------------------------------------------------
                                                           Clinical data
                Patient encounter quarter                   submission
                                                             deadline
------------------------------------------------------------------------
Q3 2014 (July 1-Sept. 30)...............................        2/1/2015
Q4 2014 (Oct. 1-Dec. 31)................................        5/1/2015
Q1 2015 (Jan. 1-March 31)...............................        8/1/2015
Q2 2015 (April 1-June 30)...............................       11/1/2015
------------------------------------------------------------------------


    [Proposed CY 2017 Payment Determination (Future State--Transition
                                Period)]
------------------------------------------------------------------------
                                              Clinical data  submission
         Patient encounter quarter                    deadline
------------------------------------------------------------------------
Q3 2015 (July 1-Sept. 30).................  2/1/2016
Q4 2015 (Oct. 1-Dec. 31)..................  5/1/2016
Q1 2016 (Jan. 1-March 31).................  8/1/2016
------------------------------------------------------------------------


  [Proposed CY 2018 Payment Determination and Subsequent Years (Future
                                 State)]
------------------------------------------------------------------------
                                              Clinical data  submission
         Patient encounter quarter                    deadline
------------------------------------------------------------------------
Q2 2016 (April 1-June 30).................  11/1/2016
Q3 2016 (July 1-Sept. 30).................  2/1/2017
Q4 2016 (Oct. 1-Dec. 31)..................  5/1/2017
Q1 2017 (Jan. 1-March 31).................  8/1/2017
------------------------------------------------------------------------

    We refer readers to section XIII.D.8. of this proposed rule, where 
we are proposing to update our validation processes to reflect these 
changes.
    We are inviting public comment on our proposals.
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data 
Are Submitted Directly to CMS
    The following previously finalized Hospital OQR Program chart-
abstracted measures require patient-level data to be submitted for the 
CY 2018 payment determination and subsequent years:
     OP-1: Median Time to Fibrinolysis;
     OP-2: Fibrinolytic Therapy Received Within 30 Minutes of 
ED Arrival (NQF #0288);
     OP-3: Median Time to Transfer to Another Facility for 
Acute Coronary Intervention (NQF #0290);
     OP-4: Aspirin at Arrival (NQF #0286)
     OP-5: Median Time to ECG (NQF #0289);
     OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients (NQF #0496);
     OP-20: Door to Diagnostic Evaluation by a Qualified 
Medical Professional;
     OP-21: ED--Median Time to Pain Management for Long Bone 
Fracture (NQF #0662);
     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 (NQF #0661);
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68481 through 68484) for a discussion of the form, 
manner, and timing for data submission requirements of these measures 
for the CY 2014 payment determination and subsequent years.
    We are not proposing any changes to these policies.
3. Claims-Based Measure Data Requirements
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75111 through 75112) for a discussion of the general 
claims-based measure data submission requirements for the CY 2015 
payment determination and subsequent years. We note that, in section 
XIII.B.5. of this proposed rule, we are proposing to remove OP-15: Use 
of Brain Computed Tomography (CT) in the Emergency Department for 
Atraumatic Headache beginning with the CY 2017 payment determination 
and subsequent years. If this proposal is adopted, for the CY 2018 
payment determination and subsequent years, there will be a total of 
seven claims-based measures:
     OP-8: MRI Lumbar Spine for Low Back Pain (NQF #0514);
     OP-9: Mammography Follow-Up Rates;
     OP-10: Abdomen CT--Use of Contrast Material;
     OP-11: Thorax CT--Use of Contrast Material (NQF #0513);
     OP-13: Cardiac Imaging for Preoperative Risk Assessment 
for Non-Cardiac Low Risk Surgery (NQF #0669);
     OP-14: Simultaneous Use of Brain Computed Tomography (CT) 
and Sinus Computed Tomography (CT); and
     OP-32: Facility 7-Day Risk-Standardized Hospital Visit 
Rate after Outpatient Colonoscopy.
    We are not proposing any changes to our claims-based measure data 
submission requirements.
4. Proposed Data Submission Requirements for Measure Data Submitted via 
a Web-Based Tool
a. Previously Finalized Measures
    The following Web-based quality measures previously finalized and 
retained in the Hospital OQR Program require data to be submitted via a 
Web-based tool (CMS' QualityNet Web site or CDC's NHSN Web site) for 
the CY 2017 payment determination and subsequent years:
     OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their ONC-Certified EHR 
System as Discrete Searchable Data (via CMS' QualityNet Web site);
     OP-17: Tracking Clinical Results between Visits (via CMS' 
QualityNet Web site);
     OP-22: ED--Left Without Being Seen (via CMS' QualityNet 
Web site);
     OP-25: Safe Surgery Checklist Use (via CMS' QualityNet Web 
site);
     OP-26: Hospital Outpatient Volume on Selected Outpatient 
Surgical Procedures (via CMS' QualityNet Web site); and,
     OP-27: Influenza Vaccination Coverage among Healthcare 
Personnel (via the CDC NHSN Web site).
    In addition to these measures, the following chart-abstracted 
measures previously finalized and retained in the Hospital OQR Program 
require data to be submitted via the Web-based tool for the CY 2017 
payment determination and subsequent years:
     OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up 
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658); 
and
     OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF #1536).
    We note that, in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66962 through 66963), we categorized OP-29 and OP-30 as 
chart-abstracted measures. However, unlike other chart-abstracted 
measures, OP-29 and OP-30 are submitted through a Web-based tool (CMS' 
QualityNet Web site).

[[Page 39338]]

    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75112 through 75115) for a discussion of the requirements 
for measure data submitted via the CMS QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1205442125082) for the CY 2016 payment determination and subsequent years. In 
addition, we refer readers to the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75097 through 75100) for a discussion of the 
requirements for measure data submitted via the CDC NHSN Web site.
    We are proposing to make one change to the data submission 
requirements for measures submitted via the CMS Web-based tool 
(QualityNet Web site) beginning with the CY 2017 payment determination. 
This proposal does not affect OP-27, which is submitted via the CDC 
NHSN Web site. Previously, we finalized that for measures reported via 
the CMS Web-based tool, hospitals must report data between July 1 and 
November 1 of the year prior to the payment determination with respect 
to the encounter period of January 1 to December 31 of 2 years prior to 
the payment determination year (78 FR 75112).
    Beginning with the CY 2017 payment determination, however, we are 
proposing that hospitals must report data between January 1 and May 15 
of the year prior to the payment determination with respect to the 
encounter period of January 1 to December 31 of 2 years prior to the 
payment determination year. For example, for the CY 2017 payment 
determination, the data submission window would be January 1, 2016 
through May 15, 2016 for the January 1, 2015 to December 31, 2015 
encounter period.
    We are proposing this new data submission period to be consistent 
with the data submission deadlines proposed by the ASCQR Program in 
section XIV.D.3. of this proposed rule and to align with the submission 
deadline for OP-27: Influenza Vaccination Coverage among Healthcare 
Personnel, reported via the CDC NHSN Web site. We have determined that 
aligning all Web-based tool data submission deadlines with this May 15 
deadline would allow for streamlined hospital submissions, earlier 
public reporting of that measure data--possibly as soon as October of 
the data submission year--and reduced administrative burden associated 
with tracking multiple submission deadlines for these measures.
    We are inviting public comment on our proposal to change the data 
submission period for measures submitted via the CMS Web-based tool.
b. Proposed Data Submission Requirements for Web-Based Measure OP-33: 
External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) for 
the CY 2018 Payment Determination and Subsequent Years
    As discussed in section XIII.B.6.a. of this proposed rule, we are 
proposing one new Web-based measure for the CY 2018 payment 
determination and subsequent years, OP-33: External Beam Radiotherapy 
(EBRT) for Bone Metastases (NQF #1822). For data submission for the CY 
2018 payment determination and subsequent years, we are proposing that 
hospitals can either: (1) Report OP-33 beginning with services 
furnished on January 1, 2016 in accordance with the data submission 
requirements for measure data submitted via the CMS Web-based tool 
(QualityNet Web site) as proposed above in section XIII.D.4.a. of this 
proposed rule; or (2) submit an aggregate data file (for example, a 
file in comma separated value (csv) format or other format as will be 
specified in the data submission requirements on QualityNet \34\) for 
this measure through a vendor (via QualityNet infrastructure) 
containing aggregated data at the hospital level. The aggregate data 
file shall combine all patient information, rather than reporting 
individual patient level data. The data submission deadline for either 
method would be May 15. We believe that also giving hospitals the 
option to submit data via vendors will help to streamline processes and 
procedures. Detailed information about format and submission 
requirements will be posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1191255879384.
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    We are inviting public comment on our proposal.
c. Proposed Data Submission Requirements for Web-Based Measure OP-34: 
Emergency Department Transfer Communication (EDTC) Measure for the CY 
2019 Payment Determination and Subsequent Years
    As discussed in section XIII.B.6.b. of this proposed rule, we are 
proposing one new Web-based measure for the CY 2019 payment 
determination and subsequent years, OP-34: Emergency Department 
Transfer Communication (EDTC) Measure (NQF #0291). For data submission 
for the CY 2019 payment determination and subsequent years, we are 
proposing that hospitals can either: (1) Report OP-34 beginning with 
January 1, 2017 outpatient encounter dates in accordance with the data 
submission requirements for measure data submitted via the CMS Web-
Based Tool (QualityNet Web site) as proposed above in section 
XIII.D.4.a. of this proposed rule; or (2) submit an aggregate data file 
(for example, a file in comma separated value (csv) format or other 
format as will be specified in the data submission requirements on 
QualityNet \35\) for this measure through a vendor (via QualityNet 
infrastructure) containing aggregated data at the hospital level. The 
aggregate data file shall combine all patient information, rather than 
reporting individual patient level data. The data submission deadline 
for either method would be May 15. We believe that also giving 
hospitals the option to submit data via vendors will help to streamline 
processes and procedures. Detailed information about format and 
submission requirements will be posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1191255879384.
---------------------------------------------------------------------------

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    We are inviting public comment on our proposal.
5. Population and Sampling Data Requirements for the CY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74482 through 74483) for discussions of our 
policy that hospitals may voluntarily submit aggregate population and 
sample size counts for Medicare and non-Medicare encounters for the 
measure populations for which chart-abstracted data must be submitted.
    We are not proposing any changes to our population and sampling 
requirements.
6. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS for the CY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment

[[Page 39339]]

period (77 FR 68484 through 68487) and the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66964 through 66965) for a discussion of 
finalized policies regarding our validation requirements. We codified 
these policies at 42 CFR 419.46(e). Currently, validation is based on 
four quarters of data (validation quarter 2, validation quarter 3, 
validation quarter 4, and validation quarter 1) (75 FR 72104 and 79 FR 
66965).
    As discussed above in section XIII.D.1. of this proposed rule, we 
are proposing to make conforming changes to our validation scoring 
process to reflect proposed changes in the APU determination 
timeframes. For the CY 2017 payment determination, we are proposing 
that validation be based on three quarters of data (quarter 2, quarter 
3 and quarter 4 of 2015). In addition, for the CY 2018 payment 
determination and subsequent years, we are proposing that validation 
again be based on four quarters of data; however those quarters are 
validation quarter 1, validation quarter 2, validation quarter 3 and 
validation quarter 4. We note that the data submission deadlines will 
remain unchanged. Detailed information about data validation 
requirements and deadlines will be posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228758729356.
    Finally, we are proposing to make one editorial correction to 42 
CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term 
``calendar year.''
    We are inviting public comment on our proposals.
7. Extension or Exemption Process for the CY 2018 Payment Determination 
and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66966), and 42 CFR 419.46(d) for a complete 
discussion of our extraordinary circumstances extension or exception 
process under the Hospital OQR Program.
    We are proposing to change the name of this process from extension 
and exception to extension and exemption. We also are proposing to make 
corresponding changes to the regulation text at 42 CFR 419.46(d). These 
proposed changes would align the Hospital OQR Program policies with 
those of the Hospital IQR Program (79 FR 50101) and ASCQR Program (79 
FR 66987).
    We are inviting public comment on our proposals.
8. Hospital OQR Program Reconsideration and Appeals Procedures for the 
CY 2018 Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487 through 68489) and the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75118 through 75119) for a discussion of our 
reconsideration and appeals procedures. We codified this process by 
which participating hospitals may submit requests for reconsideration 
at 42 CFR 419.46(f). We also codified 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.
    Currently, 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 (78 FR 75118 through 
75119). We are proposing that beginning with the CY 2018 payment 
determination, hospitals must submit a reconsideration request to CMS 
via the QualityNet Web site by no later than the first business day on 
or after March 17 of the affected payment year.
    We are proposing this new reconsideration submission deadline to be 
consistent with the proposed ASCQR Program reconsideration submission 
deadline in section XIV.D.8. of this proposed rule. As stated above, we 
believe that aligning deadlines across programs leads to decreased 
provider burden by streamlining processes and procedures.
    We also are proposing to make a conforming change to 42 CFR 
419.46(f)(1) from the first business day of the month of February of 
the affected payment year to the first business day on or after March 
17 of the affected payment year.
    In addition, we are proposing to make an editorial correction to 42 
CFR 419.46(f)(1) to replace the term ``fiscal year'' with the term 
``calendar year.''
    We are inviting public comment on these proposals.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital Outpatient Quality Reporting (OQR) Program Requirements for 
the CY 2016 Payment Determination

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, specified 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. Hospitals that meet the reporting requirements receive 
the full OPPS payment update without the reduction. For a more detailed 
discussion of how this payment reduction 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 payment weight for the APC to which the service is assigned. 
The OPPS conversion factor, which is updated annually by the OPD fee 
schedule increase factor, is used to calculate the OPPS payment rate 
for services with the following status indicators (listed in Addendum B 
to this proposed rule, which is available via the Internet on the CMS 
Web site): ``J1,'' ``J2,'' ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' 
``T,'' ``V,'' or ``U.'' We note that we are proposing to adopt status 
indicator ``J2'' for certain comprehensive services furnished to 
beneficiaries who receive at least 8 hours of observation services in 
the hospital outpatient department; more information about this status 
indicator may be found in section XI.A. of this proposed rule. Payment 
for all services assigned to these status indicators will be subject to 
the reduction of the

[[Page 39340]]

national unadjusted payment rates for hospitals that fail to meet 
Hospital OQR Program requirements, 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.
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. 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 payment weights by the reduced conversion factor. For example, 
to determine the reduced national unadjusted payment rates that applied 
to hospitals that failed to meet their quality reporting requirements 
for the CY 2010 OPPS, we multiplied the final full national unadjusted 
payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule 
with comment period by the CY 2010 OPPS final reporting ratio of 0.980 
(74 FR 60642).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the reporting 
ratio to both the minimum unadjusted copayment and national unadjusted 
copayment for services provided by 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 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. Similarly, OPPS outlier payments made 
for high cost and complex procedures will continue to be made when 
outlier 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. We established this policy in the OPPS beginning in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a 
complete discussion of the OPPS outlier calculation and eligibility 
criteria, we refer readers to section II.G. of this proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2016
    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2016 annual payment update factor. 
For the CY 2016 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of $72.478 by the 
proposed full conversion factor of $73.929. We are proposing to 
continue to apply the reporting ratio to all services calculated using 
the OPPS conversion factor. For the CY 2016 OPPS, we are proposing to 
apply the reporting ratio, when applicable, to all HCPCS codes to which 
we have proposed status indicator assignments of ``J1,'' ``J2,'' ``P,'' 
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' and ``U'' (other 
than new technology APCs to which we have proposed status indicator 
assignment of ``S'' and ``T''). We note that, discussed in sections 
II.A.2.e. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66962), we finalized our proposal to develop status indicator ``J1'' as 
part of our CY 2015 comprehensive APC policy, and to apply the 
reporting ratio to the comprehensive APCs. We are proposing to continue 
to exclude services paid under New Technology APCs. We are proposing to 
continue to apply the reporting ratio to the national unadjusted 
payment rates and the minimum unadjusted and national unadjusted 
copayment rates of all applicable services for those hospitals that 
fail to meet the Hospital OQR Program reporting requirements. We also 
are proposing to continue to apply all other applicable standard 
adjustments to the OPPS national unadjusted payment rates for hospitals 
that fail to meet the requirements of the Hospital OQR Program. 
Similarly, we are proposing to continue to calculate OPPS outlier 
eligibility and outlier payment based on the reduced payment rates for 
those hospitals that fail to meet the reporting requirements.
    We are inviting public comments on these proposals.

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

A. Background

1. Overview
    We refer readers to section XIII.A.1. of this proposed rule for a 
general overview of our quality reporting programs.
2. Statutory History of the Ambulatory Surgical Center 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 74494) for a detailed 
discussion of the statutory history of the ASCQR Program.
3. Regulatory History of the ASCQR Program
    We refer readers to section XV.A.3. of the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75122) for an overview of the 
regulatory history of the ASCQR Program, and to section XIV.4. of the 
CY 2015 OPPS/ASC final rule with comment period for subsequently 
enacted policies (79 FR 66966 through 66987).
    In this proposed rule, we are proposing to establish a new Subpart 
H under 42 CFR part 416 to codify many of the administrative policies 
regarding

[[Page 39341]]

the ASCQR Program. We are proposing to codify our statutory authority 
for the ASCQR Program in new proposed 42 CFR 416.300(a). In that 
proposed section, we state that section 1833(i)(2)(D)(iv) and (i)(7) of 
the Act authorizes the Secretary to implement a revised ASC payment 
system in a manner so as to provide for a 2.0 percentage point 
reduction in any annual update for an ASC's failure to report on 
quality measures in accordance with the Secretary's requirements. In 
new proposed 42 CFR 416.300(b), we state that this subpart contains the 
specific requirements and standards for the ASCQR Program. We note that 
we have previously referenced the statutory basis for the ASCQR Program 
in 42 CFR part 416, subpart F (42 CFR 416.160(a)) and the 2 percentage 
point reduction for ASCs that do not meet ASCQR Program requirements at 
42 CFR 416.171(a)(2)(iii).
    We are inviting public comment on our proposals to codify the scope 
and basis for the ASCQR Program.

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 
priorities we consider for ASCQR Program quality measure selection. We 
are not proposing any changes to this policy.
2. Policies for Retention and Removal of Quality Measures From the 
ASCQR Program
    We previously adopted a policy that quality measures adopted for an 
ASCQR Program measure set for a previous payment determination year be 
retained in the ASCQR Program for measure sets for subsequent payment 
determination years, except when they are removed, suspended, or 
replaced as indicated (76 FR 74494 and 74504; 77 FR 68494 through 
68495; 78 FR 75122; 79 FR 66967 through 66969). We are not proposing 
any changes to this policy; however, we are proposing to codify this 
policy at proposed new 42 CFR 416.320(a).
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66967 
through 66969), we finalized a process for removing adopted measures. 
Specifically, in cases where we believe that the continued use of a 
measure as specified raises patient safety concerns, we will 
immediately remove a quality measure from the ASCQR Program. In these 
situations, we will promptly notify ASCs and the public of the removal 
of the measure and the reasons for its removal through the ASCQR 
Program ListServ and the ASCQR Program QualityNet Web site. We will 
confirm the removal of the measure due to patient safety concerns in 
the next ASCQR Program rulemaking. We are not proposing any changes to 
this process. However, we are proposing to codify this process at 
proposed new 42 CFR 416.320(b).
    As stated in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66968), unless a measure raises specific safety concerns, we 
will use the regular rulemaking process to remove, suspend, or replace 
quality measures in the ASCQR Program to allow for public comment. In 
these situations, we will use the following criteria to determine 
whether to remove a measure from the ASCQR Program: (1) Measure 
performance among ASCs is so high and unvarying that meaningful 
distinctions and improvements in performance can no longer be made 
(``topped-out'' measures); (2) availability of alternative measures 
with a stronger relationship to 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 other than patient harm. The 
benefits of removing a measure from the ASCQR Program will be assessed 
on a case-by-case basis. We intend for all the criteria to apply to all 
measures to the extent possible. A measure will not be removed solely 
on the basis of meeting any specific criterion. In any given situation, 
we will focus only on the criteria that are relevant to a particular 
set of circumstances.
    As provided above, one of the criteria to determine whether to 
remove a measure from the ASCQR Program is when it is ``topped-out'' 
(that is, when measure performance among ASCs is so high and unvarying 
that meaningful distinctions and improvements in performance can no 
longer be made). For purposes of the ASCQR Program, a measure is 
considered to be topped-out when it meets both of the following 
criteria: (1) Statistically indistinguishable performance at the 75th 
and 90th percentiles (defined as when the difference between the 75th 
and 90th percentiles for an ASC's measure is within two times the 
standard error of the full data set); and (2) a truncated coefficient 
of variation less than or equal to 0.10. We are not proposing any 
changes to this process for measure removal, suspension, or 
replacement. However, we are proposing to codify this measure removal 
process at proposed new 42 CFR 416.320(c).
    We are inviting public comment on our proposals to codify these 
existing policies.
3. 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 implemented the ASCQR Program effective with the CY 
2014 payment determination. 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 payment determination and subsequent 
years, two measures with data submission directly to CMS via an online 
Web-based tool for the CY 2015 payment determination and subsequent 
years, and one process of care, preventive service measure submitted 
via an online, Web-based tool to CDC's National Health Safety Network 
(NHSN) for the CY 2016 payment determination and subsequent years. In 
the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 
through 75130), we adopted three chart-abstracted measures with data 
submission to CMS via an online Web-based tool for the CY 2016 payment 
determination and subsequent years. In the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66984 through 66985), we excluded one of 
these measures, ASC-11: Cataracts: Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery (NQF #1536), from 
the CY 2016 payment determination measure set and allowed for voluntary 
data collection and reporting for the CY 2017 payment determination and 
subsequent years. In the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66970 through 66979), we adopted one additional claims-
based measure for the CY 2018 payment determination and subsequent 
years.
    Most of the quality measures adopted for use by the ASCQR Program 
are NQF-endorsed, although such endorsement is not an ASCQR Program 
requirement for adopting a measure. Two measures previously adopted for 
the ASCQR Program are not currently NQF-endorsed, and were not endorsed 
when

[[Page 39342]]

adopted for the program (ASC-6: Safe Surgery Checklist Use and ASC-7: 
ASC Facility Volume Data on Selected ASC Surgical Procedures). Further, 
ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after 
Outpatient Colonoscopy (NQF #2539) was not NQF-endorsed at the time it 
was adopted for the ASCQR Program, but now is NQF-endorsed. Recently, 
NQF removed endorsement from ASC-5: Prophylactic Intravenous (IV) 
Antibiotic Timing (formerly NQF #0264).\36\ We continue to believe that 
ASC-5 is appropriate for measurement of the quality of care furnished 
by ASCs and should be retained by the ASCQR Program; the measure is 
supported by clinical evidence \37\ and the measure steward will be 
continuing to support the measure.\38\ We will continue to evaluate the 
appropriateness of this measure for the ASCQR Program as we do other 
measures.
    The previously finalized measure set for the ASCQR Program CY 2017 
payment determination and subsequent years is listed below.
---------------------------------------------------------------------------

    \36\ http://www.qualityforum.org/Publications/2015/02/NQF-Endorsed_Measures_for_Surgical_Procedures.aspx.
    \37\ Burke J. Maximizing appropriate antibiotic prophylaxis for 
surgical patients: An update from LDS Hospital, Salt Lake City. Clin 
Infect Dis. 2001; 33 (Suppl 2): S78-83.
    \38\ http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.

 ASCQR Program Measure Set Previously Finalized for the CY 2017 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
        ASC No.                  NQF No.               Measure name
------------------------------------------------------------------------
ASC-1..................  0263...................  Patient Burn.
ASC-2..................  0266...................  Patient Fall.
ASC-3..................  0267...................  Wrong Site, Wrong
                                                   Side, Wrong Patient,
                                                   Wrong Procedure,
                                                   Wrong Implant.
ASC-4..................  0265...................  All-Cause Hospital
                                                   Transfer/Admission .*
ASC-5..................  N/A....................  Prophylactic
                                                   Intravenous (IV)
                                                   Antibiotic Timing.
ASC-6..................  N/A....................  Safe Surgery Checklist
                                                   Use.
ASC-7..................  N/A....................  ASC Facility Volume
                                                   Data on Selected ASC
                                                   Surgical Procedures.
                                                  Procedure categories
                                                   and corresponding
                                                   HCPCS codes are
                                                   located at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 =1228772475754.
ASC-8..................  0431...................  Influenza Vaccination
                                                   Coverage among
                                                   Healthcare Personnel.
ASC-9..................  0658...................  Endoscopy/Polyp
                                                   Surveillance:
                                                   Appropriate Follow-Up
                                                   Interval for Normal
                                                   Colonoscopy in
                                                   Average Risk
                                                   Patients.
ASC-10.................  0659...................  Endoscopy/Polyp
                                                   Surveillance:
                                                   Colonoscopy Interval
                                                   for Patients with a
                                                   History of
                                                   Adenomatous Polyps--
                                                   Avoidance of
                                                   Inappropriate Use.
ASC-11.................  1536...................  Cataracts: Improvement
                                                   in Patient's Visual
                                                   Function within 90
                                                   Days Following
                                                   Cataract Surgery .**
------------------------------------------------------------------------
* This measure was previously titled ``Hospital Transfer/Admission.''
  According to the NQF Web site, the title was changed to better reflect
  what is being measured. We have updated the title of this measure to
  align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017
  payment determination as set forth in section XIV.E.3.c. of the CY
  2015 OPPS/ASC final rule with comment period (79 FR 66984 through
  66985).

    The previously finalized measure set for the ASCQR Program CY 2018 
payment determination and subsequent years is listed below.

 ASCQR Program Measure Set Previously Finalized for the CY 2018 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
        ASC No.                  NQF No.               Measure name
------------------------------------------------------------------------
ASC-1..................  0263...................  Patient Burn.
ASC-2..................  0266...................  Patient Fall.
ASC-3..................  0267...................  Wrong Site, Wrong
                                                   Side, Wrong Patient,
                                                   Wrong Procedure,
                                                   Wrong Implant.
ASC-4..................  0265...................  All-Cause Hospital
                                                   Transfer/Admission .*
ASC-5..................  N/A....................  Prophylactic
                                                   Intravenous (IV)
                                                   Antibiotic Timing.
ASC-6..................  N/A....................  Safe Surgery Checklist
                                                   Use.
ASC-7..................  N/A....................  ASC Facility Volume
                                                   Data on Selected ASC
                                                   Surgical Procedures.
                                                  Procedure categories
                                                   and corresponding
                                                   HCPCS codes are
                                                   located at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 =1228772475754.
ASC-8..................  0431...................  Influenza Vaccination
                                                   Coverage among
                                                   Healthcare Personnel.
ASC-9..................  0658...................  Endoscopy/Polyp
                                                   Surveillance:
                                                   Appropriate Follow-Up
                                                   Interval for Normal
                                                   Colonoscopy in
                                                   Average Risk
                                                   Patients.
ASC-10.................  0659...................  Endoscopy/Polyp
                                                   Surveillance:
                                                   Colonoscopy Interval
                                                   for Patients with a
                                                   History of
                                                   Adenomatous Polyps--
                                                   Avoidance of
                                                   Inappropriate Use.
ASC-11.................  1536...................  Cataracts: Improvement
                                                   in Patient's Visual
                                                   Function within 90
                                                   Days Following
                                                   Cataract Surgery .**
ASC-12.................  2539...................  Facility Seven-Day
                                                   Risk--Standardized
                                                   Hospital Visit Rate
                                                   after Outpatient
                                                   Colonoscopy .***
------------------------------------------------------------------------
* This measure was previously titled ``Hospital Transfer/Admission.''
  According to the NQF Web site, the title was changed to better reflect
  what is being measured. We have updated the title of this measure to
  align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017
  payment determination as set forth in section XIV.E.3.c. of the CY
  2015 OPPS/ASC final rule with comment period (79 FR 66984 through
  66985).
*** New measure finalized for the CY 2018 payment determination and
  subsequent years in the CY 2015 OPPS/ASC final rule with comment
  period (79 FR 66970 through 66979).


[[Page 39343]]

4. ASCQR Program Quality Measures for the CY 2018 Payment Determination 
and Subsequent Years
    We are not proposing to adopt any additional measures for the ASCQR 
Program for the CY 2018 payment determination and subsequent years in 
this proposed rule.
5. ASCQR Program Measures for Future Consideration
    In the CY 2013 OPPS/ASC final rule with comment period, we set 
forth our approach to future measure selection and development (77 FR 
68493 through 68494). We seek to develop a comprehensive set of quality 
measures to be available for widespread use for making informed 
decisions and quality improvement in the ASC setting (77 FR 68496). We 
also seek to align these quality measures with the National Quality 
Strategy (NQS), the CMS Strategic Plan (which includes the CMS Quality 
Strategy), and our other quality reporting and value-based purchasing 
programs, as appropriate. Accordingly, as we stated in the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66979), in considering 
future ASCQR Program measures, we are focusing on the following NQS and 
CMS Quality Strategy measure domains: Make care safer; strengthen 
person and family engagement; promote effective communication and 
coordination of care; promote effective prevention and treatment; work 
with communities to promote best practices of healthy living; and make 
care affordable.
    In this proposed rule, we also are inviting public comment on two 
measures developed by the ASC Quality Collaboration for inclusion in 
the ASCQR Program in the future.
a. Normothermia Outcome
    The first measure under consideration is the Normothermia Outcome 
measure which assesses the percentage of patients having surgical 
procedures under general or neuraxial anesthesia of 60 minutes or more 
in duration who are normothermic within 15 minutes of arrival in the 
post-anesthesia care unit. This issue is of interest to the ASCQR 
Program because impairment of thermoregulatory control due to 
anesthesia may result in perioperative hypothermia. Perioperative 
hypothermia is associated with numerous adverse outcomes, including: 
Cardiac complications; \39\ surgical site infections; \40\ impaired 
coagulation; \41\ and colligation of drug effects.\42\ When 
intraoperative normothermia is maintained, patients experience fewer 
adverse outcomes and their overall care costs are lower.\43\ This 
measure is of interest to the ASCQR Program because many surgical 
procedures performed at ASCs involve anesthesia; therefore, it is an 
outcome measure of significance for ASCs.\44\ It also addresses the 
MAP-identified priority measure area for the ASCQR Program of 
anesthesia-related complications.\45\
---------------------------------------------------------------------------

    \39\ Frank S.M., Fleisher L.A., Breslow M.J., et al. 
Perioperative maintenance of normothermia reduces the incidence of 
morbid cardiac events: A randomized clinical trial. JAMA. 1997; 
277(14): 1127-1134.
    \40\ Kurz A., Sessler D.I., Lenhardt R. Perioperative 
normothermia to reduce the incidence of surgical-wound infection and 
shorten hospitalization: Study of wound infection and temperature 
group. N Engl J Med. 1996; 334(19): 1209-1215.
    \41\ Rajagopalan S., Mascha E., Na J., Sessler D.I. The effects 
of mild hypothermia on blood loss and transfusion requirements 
during total hip arthroplasty. Lancet. 1996; 347(8997): 289-292.
    \42\ Kurz A. Physiology of thermoregulation. Best Pract Res Clin 
Anaesthesiol. 2008; 22(4): 627-644.
    \43\ Mahoney C.B., Odom J. Maintaining intraoperative 
normothermia: A meta-analysis of outcomes with costs. AANA Journal. 
1999; 67(2): 155-164.
    \44\ MAP Hospital Workgroup Transcript.
    \45\ National Quality Forum. MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Hospitals. Rep. National 
Quality Forum, Feb. 2015. Available at: http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx.
---------------------------------------------------------------------------

    The specifications for this measure for the ASC setting can be 
found at:  http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.
b. Unplanned Anterior Vitrectomy
    The second measure under consideration for future payment 
determination years is the Unplanned Anterior Vitrectomy measure. This 
measure assesses the percentage of cataract surgery patients who have 
an unplanned anterior vitrectomy (removal of the vitreous present in 
the anterior chamber of the eye). Cataracts are a leading cause of 
blindness in the United States, with 24.4 million cases in 2010.\46\ 
Each year, approximately 1.5 million patients undergo cataract surgery 
to improve their vision.\47\ An unplanned anterior vitrectomy is 
performed when vitreous inadvertently prolapses into the anterior 
segment of the eye during cataract surgery. While unplanned anterior 
vitrectomy rates are relatively low, this procedure complication may 
result in poor visual outcomes and other complications, including 
retinal detachment.\48\ This measure is of interest to the ASCQR 
Program because cataract surgery is a procedure commonly performed at 
ASCs; therefore, it is an outcome measure of significance for ASCs.\49\ 
It also addresses the MAP-identified priority measure area of procedure 
complications for the ASCQR Program.\50\
---------------------------------------------------------------------------

    \46\ National Eye Institute. ``Cataracts.'' Cataracts. National 
Institutes of Health, n.d. Available at: https://www.nei.nih.gov/eyedata/cataract#1.
    \47\ ``Measure Application Partnership Hospital Workgroup'', 
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
    \48\ Chen M., Lamattina K.C., Patrianakos T, Dwarakanathan S. 
Complication rate of posterior capsule rupture with vitreous loss 
during phacoemulsification at a Hawaiian cataract surgical center: A 
clinical audit. Clin Ophthamlol. 2014 Feb 5; 8: 375-378.
    \49\ ``Measure Application Partnership Hospital Workgroup'', 
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
    \50\ National Quality Forum. MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Hospitals. Rep. National 
Quality Forum, Feb. 2015. Available at: http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx.
---------------------------------------------------------------------------

    The specifications for this measure for the ASC setting can be 
found at:  http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.
    Both measures have received conditional support from the MAP, 
pending the completion of reliability testing and NQF endorsement. A 
summary of the MAP recommendations can be found at: http://www.qualityforum.org/setting_priorities/partnership/measure_applications_partnership.aspx under the title ``Spreadsheet of 
MAP 2015 Final Recommendations.''
    We are inviting public comment on the possible inclusion of these 
measures in the ASCQR Program measure set in the future. As stated 
previously, we are not proposing to adopt any new measures for the CY 
2018 payment determination or subsequent years in this proposed rule.
6. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74513 through 74514), where we finalized our proposal to 
follow the same process for updating the ASCQR Program measures that we 
adopted for the Hospital OQR Program measures, including the 
subregulatory process for making updates to the adopted measures. In 
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68496 
through 68497), the CY 2014 OPPS/ASC final rule with comment period (78 
FR 75131), and the CY 2015 OPPS/ASC final rule with

[[Page 39344]]

comment period (79 FR 66981), we provided additional clarification 
regarding the ASCQR Program policy in the context of the previously 
finalized Hospital OQR Program policy, including the processes for 
addressing nonsubstantive and substantive changes to adopted measures.
    We maintain technical specifications for previously adopted ASCQR 
Program measures in the ASCQR Program Measures Specifications Manual. 
These specifications are updated as we continue to develop the ASCQR 
Program. We maintain the technical specifications for the measures 
adopted for the ASCQR Program by updating this Specifications Manual. 
The versions of the Specifications Manual that contain specifications 
for the previously adopted measures can be found on the QualityNet Web 
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754.
    As stated in the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75131), we will determine what constitutes a substantive versus 
a nonsubstantive change to a measure's specifications on a case-by-case 
basis. If we determine that a change to a measure previously adopted in 
the ASCQR Program is nonsubstantive, we will use a subregulatory 
process to revise the ASCQR Program Specifications Manual so that it 
clearly identifies the updates to that measure and provide links to 
where additional information on the changes can be found. We will 
provide notification of the measure specification update on the 
QualityNet Web site and in the ASCQR Program Specifications Manual, and 
will provide sufficient lead time for ASCs to implement the revisions 
where changes to the data collection systems would be necessary. We 
will continue to use rulemaking to adopt substantive updates to 
measures in the ASCQR Program. We are not proposing any changes to 
these policies. However, we are proposing to codify these policies at 
proposed new 42 CFR 416.325.
    We previously finalized a policy to post technical specifications 
on a CMS Web site in addition to posting this information on QualityNet 
because we believed doing so would increase ASC awareness of our 
technical specifications in our outreach and education (76 FR 74514). 
However, we now believe that posting technical specifications on 
QualityNet alone is preferable to prevent possible inconsistencies 
associated with accessing multiple sites for information and to reduce 
burden. We believe that posting this information on a single site is a 
more efficient process that still provides ASCs with complete access to 
the technical specifications for ASCQR Program purposes. Therefore, we 
are not posting the technical specifications on a CMS Web site in 
addition to posting this information on QualityNet for the ASCQR 
Program.
    We are inviting public comment on our proposal to codify our 
existing policies.
7. Public Reporting of ASCQR Program Data
    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 are proposing to codify this existing policy at proposed new 
42 CFR 416.315.
    We also finalized a policy to display these data at the CMS 
Certification Number (CCN) level in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74514 through 74515). However, we are now 
proposing to change this policy. ASCs typically report quality measure 
data to CMS using their National Provider Identifier (NPI), which is 
their billing identifier on the CMS-1500 form as non-institutional 
billers. Further, payment determinations also are made by NPI. Because 
an ASC CCN can have multiple NPIs, publication of data by CCN can 
aggregate data for multiple facilities, thereby reducing identification 
of individual facility information. To allow for identification of 
individual facility information, beginning with any public reporting 
that occurs on or after January 1, 2016, we are proposing to display 
the data by the NPI when data are submitted by the NPI. We believe 
identifying data by the NPI would enable consumers to make more 
informed decisions about their care because the public would be able to 
distinguish between ASCs. Further, it would also help ASCs to better 
understand their performance on measures collected under the ASCQR 
Program. We also are proposing, beginning with any public reporting 
that occurs on or after January 1, 2016, to display data by the CCN 
when data are submitted by the CCN. When data are submitted by the CCN, 
all NPIs associated with the CCN would be assigned the CCN's value 
because we would not be able to parse the data by the NPI. For example, 
in the case of ASC-8: Influenza Vaccination Coverage among Healthcare 
Personnel measure (NQF #0431), the one ASCQR Program measure where data 
are submitted by the CCN as this is the identifier used by the CDC's 
NHSN, we would not be able to parse the data by the NPI. Thus, the data 
displayed for ASC-8 would be the same for all of the NPIs under the 
same CCN. We are proposing to codify this proposal at proposed new 42 
CFR 416.315.
    We are inviting public comment on our proposal to display data by 
the NPI if the data are submitted by the NPI and to display data by the 
CCN if the data are submitted by the CCN beginning with any public 
reporting that occurs on or after January 1, 2016, and to codify this 
policy and our existing policies.

C. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75132 
through 75133), we finalized our requirements regarding QualityNet 
accounts and QualityNet security administrators under the ASCQR Program 
for the CY 2016 payment determination and subsequent years. Under these 
requirements, ASCs must maintain a QualityNet account in order to 
submit quality measure data to the QualityNet Web site for all Web-
based measures submitted via a CMS online data submission tool. 
Further, a QualityNet security administrator is necessary to set up a 
QualityNet user account to be able to enter data via an online tool 
located on the QualityNet Web site. The registration process for the 
QualityNet security administrator is described on the QualityNet Web 
site. We recommend that ASCs submit documentation required for the 
creation of a QualityNet Account at least 4 to 6 weeks prior to any 
quality measure data submission deadline for the ASCQR Program. The 
QualityNet security administrator typically fulfills a variety of tasks 
related to quality reporting for ASCs, such as creating, approving, 
editing, and terminating QualityNet user accounts, and monitoring 
QualityNet usage to maintain proper security and confidentiality. We 
are not proposing any changes to these policies. We are proposing to 
codify these existing requirements at proposed new 42 CFR 
416.310(c)(1)(i).
    We are inviting public comment on our proposal to codify our 
existing requirements.
2. Requirements Regarding Participation Status
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through 
53640), we

[[Page 39345]]

finalized our participation policy. Under this policy, an ASC is 
considered as participating in the ASCQR Program once the ASC submits 
any quality measure data to the ASCQR Program. Further, once an ASC 
submits any quality measure data and is considered participating in the 
ASCQR Program, an ASC would still be considered participating in the 
ASCQR Program, regardless of whether the ASC continues to submit 
quality measure data, unless the ASC withdraws from the ASCQR Program.
    An ASC may withdraw from the ASCQR Program by submitting to CMS a 
withdrawal of participation form that can be found in the secure 
portion of the QualityNet Web site, indicating that it is withdrawing 
and the initial payment determination year to which the withdrawal 
applies. Once the ASC has withdrawn, an ASC will incur a 2.0 percentage 
point reduction in its ASC annual payment update for that payment 
determination year and any subsequent payment determinations in which 
it is withdrawn.
    An ASC will be considered as rejoining the ASCQR Program if it 
begins to submit any quality measure data again to the ASCQR Program. 
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75133 
through 75135), for the CY 2016 payment determination and subsequent 
years, we finalized our policies that all program requirements would 
apply to all ASCs designated as open in the Certification and Survey 
Provider Enhanced Reporting (CASPER) system for at least four months 
prior to the beginning of data collection for a payment determination 
and that an ASC may withdraw from the ASCQR Program any time up to and 
including August 31 of the year preceding a payment determination. For 
example, an ASC can withdraw from the ASCQR Program at any time up to 
and including August 31, 2016 for the CY 2017 payment determination. We 
are not proposing any changes to these policies. However, we are 
proposing to codify these existing requirements at proposed new 42 CFR 
416.305(a) and (b).
    As finalized in the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75135 through 75137), for the CY 2016 payment determination and 
subsequent years, ASCs with fewer than 240 Medicare claims (Medicare 
primary and secondary payer) per year during an annual reporting period 
for a payment determination year are not required to participate in the 
ASCQR Program for the subsequent annual reporting period for that 
subsequent payment determination year. For example, an ASC with fewer 
than 240 Medicare claims in CY 2016 (payment determination year 2018) 
would not be required to participate in the ASCQR Program in CY 2017 
(payment determination year 2019). We are not proposing any changes to 
these existing requirements. However, we are proposing to codify these 
existing requirements at proposed new 42 CFR 416.305(c).
    We are inviting public comment on our proposal to codify our 
existing policies.

D. Form, Manner, and Timing of Data Submitted for the ASCQR Program

1. Requirements Regarding Data Processing and Collection Periods for 
Claims-Based Measures Using Quality Data Codes (QDCs)
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68497 
through 68498), we finalized our data processing and collection 
policies for the claims-based measures using QDCs for the CY 2015 
payment determination and subsequent years. Specifically, ASCs 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 claims-based quality measures reported using QDCs is the 
calendar year 2 years prior to the payment determination year. Only 
claims for services furnished in each calendar year paid by the 
Medicare administrative contractor (MAC) by April 30 of the following 
year of the ending data collection time period will be included in the 
data used for the payment determination. In this proposed rule, we are 
not proposing any changes to these existing requirements. However, we 
are proposing to codify these existing requirement at proposed new 42 
CFR 416.310(a)(1) and (2).
    We are inviting public comment on our proposal to codify our 
existing policies.
2. Minimum Threshold, Minimum Case Volume, and Data Completeness for 
Claims-Based Measures Using QDCs
    The requirements for minimum threshold, minimum case volume, and 
data completeness for participation in the ASCQR program for the CY 
2015 payment determination and subsequent years are set forth in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68498 through 
68499) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75135 through 75137). As stated in the CY 2013 rule, for ASCQR Program 
purposes, data completeness for claims-based measures using QDCs is 
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 that 
meet measure specifications, but do not have the appropriate QDCs on 
the submitted Medicare claims. For the CY 2016 payment determination 
and subsequent years, the minimum threshold for successful reporting is 
that at least 50 percent of Medicare claims meeting measures 
specifications contain the appropriate QDC. ASCs that meet this minimum 
threshold are regarded as having provided complete data for the claims-
based measures using QDCs for the ASCQR Program. In this proposed rule, 
we are not proposing any changes to these existing requirements. 
However, we are proposing to codify these existing requirements at 
proposed new 42 CFR 416.310(a)(3).
    We are inviting public comment on our proposal to codify our 
existing policies.
3. Requirements for Data Submitted Via an Online Data Submission Tool
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75137 
through 75139), we finalized the data collection time period for 
quality measures for which data are submitted via a CMS online data 
submission tool as services furnished during the calendar year 2 years 
prior to the payment determination year. We also finalized our policy 
that these data will be submitted during the time period of January 1 
to August 15 in the year prior to the affected payment determination 
year.
    We established a different time period for data collection and 
submission for ASC-8: Influenza Vaccination Coverage among Healthcare 
Personnel (NQF #0431), which is submitted via the CDC's NHSN rather 
than a CMS online data submission tool. For ASC-8, the data collection 
for the CY 2016 payment determination is from October 1, 2014 through 
March 31, 2015 (the 2014-2015 influenza season data) (76 FR 74510) and 
for the CY 2017 payment determination and subsequent years is from 
October 1 of the year 2 years prior to the payment determination year 
to March 31 of the year prior to the payment determination year (79 FR 
66986), and the submission deadline is May 15 of the year when the 
influenza season ends (79 FR 66985 through 66986).
    We are proposing to implement a May 15 submission deadline for all 
data

[[Page 39346]]

submitted via a CMS Web-based tool in the ASCQR Program for the CY 2017 
payment determination and subsequent years. This proposal currently 
would include the following measures: ASC-6: Safe Surgery Checklist 
Use; ASC-7: ASC Facility Volume Data on Selected ASC Surgical 
Procedures; ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up 
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658); 
ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients 
with a History of Adenomatous Polyps--Avoidance of Inappropriate Use 
(NQF #0659); and ASC-11: Cataracts: Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery (NQF #1536).\51\ 
Therefore, we are proposing that data collected for a quality measure 
for which data are submitted via a CMS online data submission tool must 
be submitted during the time period of January 1 to May 15 in the year 
prior to the payment determination year for the CY 2017 payment 
determination and subsequent years. We are proposing this change 
because we believe that aligning all Web-based tool data submission 
deadlines with the end date of May 15 would allow for earlier public 
reporting of measure data and reduce the administrative burden for ASCs 
associated with tracking multiple submission deadlines for these 
measures.
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    \51\ We note that this is a voluntary measure for the CY 2017 
payment determination and subsequent years. This proposal would mean 
that ASCs that choose to submit data for this measure also would 
need to submit such data between January 1 and May 15 for the CY 
2018 payment determination and subsequent years.
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    We also are proposing to codify these proposed and existing 
requirements at proposed new 42 CFR 416.310(c)(1)(ii) and (2).
    We are inviting public comment on our proposal to change the data 
submission time period beginning with the CY 2017 payment determination 
for measures for which data are submitted via a CMS online data 
submission tool, and our proposal to codify this proposed policy and 
our existing policy.
4. Claims-Based Measure Data Requirements for the ASC-12: Facility 
Seven-Day Risk--Standardized Hospital Visit Rate After Outpatient 
Colonoscopy Measure for the CY 2018 Payment Determination and 
Subsequent Years
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66970 
through 66979), we adopted ASC-12: Facility 7-Day Risk--Standardized 
Hospital Visit Rate after Outpatient Colonoscopy (NQF #2539) in the 
ASCQR Program for the CY 2018 payment determination and subsequent 
years. At the time we adopted this measure, it was not NQF-endorsed; it 
has subsequently been endorsed by the NQF. Unlike the other claims-
based measures adopted for the ASCQR Program, this claims-based measure 
does not require any additional data submission, such as QDCs. In the 
CY 2015 OPPS/ASC final rule with comment period (79 FR 66985), we 
finalized the policy to use paid Medicare FFS claims from the calendar 
year 2 years before the payment determination year. We are now 
proposing to align our policy regarding the paid claims to be included 
in the calculation for claims-based measures not using QDCs with our 
policy regarding the paid claims to be included for the claims-based 
measures using QDCs.
    Therefore, beginning with the CY 2018 payment determination, we are 
proposing to use claims for services furnished in each calendar year 
that have been paid by the MAC by April 30 of the following year of the 
ending data collection time period to be included in the data used for 
the payment determination. We believe that this claim paid date would 
allow ASCs sufficient time to submit claims and at the same time allow 
CMS sufficient time to complete required data analysis and processing 
to make payment determinations and to supply this information to the 
MACs. For example, for the CY 2018 payment determination, for 
calculating ASC-12, we would use claims for services furnished in CY 
2016 (January 1, 2016 through December 21, 2016) that were paid by the 
MAC by April 30, 2017.
    We are proposing to codify this policy at proposed new 42 CFR 
416.310(b).
    We are inviting public comment on our proposal regarding the paid 
claims to be included in the data used for the payment determination 
year beginning with the CY 2018 payment determination, and our proposal 
to codify this proposal and our existing policies.
5. Proposal for Indian Health Service (IHS) Hospital Outpatient 
Departments To Not Be Considered ASCs for the Purposes of the ASCQR 
Program
    Indian Health Service (IHS) hospital outpatient departments are 
able to bill Medicare for ASC services and be paid based on the ASC 
rates for services under the ASC payment system as described in Section 
40.2.1, Chapter 19 of the Medicare Claims Processing Manual and Section 
260.1, Chapter 15 of the Medicare Benefit Policy Manual (http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c19.pdf, http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c15.pdf). We have considered these entities to 
be ASCs for purposes of the ASCQR Program due to their payment under 
the ASC payment system. These entities are included under Section 260.1 
(Definition of Ambulatory Surgical Centers), Chapter 15 of the Medicare 
Benefit Policy Manual.
    We now are proposing that these facilities not be considered ASCs 
for purposes of the ASCQR Program, beginning with the CY 2017 payment 
determination. As stated in the manuals, in order to bill for ASC 
services, these IHS hospital outpatient departments must meet the 
conditions of participation for hospitals defined in 42 CFR part 482 
and are not certified as separate ASC entities. Because these IHS 
hospital outpatient departments are required to meet the conditions of 
participation for hospitals, which state that the hospital's governing 
body must ensure that its quality assessment and performance 
improvement program involves all hospital departments and services, 
they should be included in the hospitals' ongoing, hospital-wide, data-
driven quality assessment and performance improvement programs (42 CFR 
482.21), which we believe ensures that these IHS hospital outpatient 
departments engage in continuous quality improvement efforts outside of 
participation in CMS' quality reporting programs. For these reasons, we 
are proposing that IHS hospital outpatient departments that bill 
Medicare for ASC services under the ASC payment system are not to be 
considered as ASCs for the purposes of the ASCQR Program. These 
facilities would not be required to meet ASCQR Program requirements and 
would not receive any payment reduction under the ASCQR Program. We are 
proposing to codify this proposal at proposed new 42 CFR 416.305(d).
    We are inviting public comment on this proposal and our proposal to 
codify it.
6. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53641 through 53642) for a complete discussion of our policy not to 
require validation of claims-based measures (beyond the usual claims 
validation activities conducted by our MACs) or Web-based measures for 
the ASCQR

[[Page 39347]]

Program. In this proposed rule, we are not proposing any changes to 
this policy.
7. Extraordinary Circumstances Extensions or Exemptions for the CY 2018 
Payment Determination and Subsequent Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53642 through 53643) 
and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140 
through 75141), we adopted procedures for extraordinary circumstance 
extensions or exemption requests for the submission of information 
required under the ASCQR Program.\52\ Specifically, CMS may grant an 
extension or exemption for the submission of information in the event 
of extraordinary circumstances beyond the control of an ASC, such as 
when an act of nature affects an entire region or locale, or a 
systematic problem with one of our data collection systems directly or 
indirectly affects data submission. We may grant an extension or 
exemption as follows:
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    \52\ In the CY 2015 OPPS/ASC final rule with comment period (79 
FR 66987), we stated that we will refer to the process as the 
``Extraneous Circumstances Extensions or Exemptions'' process rather 
than the ``Extraordinary Circumstances Extensions or Waivers'' 
process.
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    (1) Upon request by the ASC. Specific requirements for submission 
of a request for an extension or exemption are available on the 
QualityNet Web site; or
    (2) At the discretion of CMS. CMS may grant extensions or 
exemptions to ASCs that have not requested them when CMS determines 
that an extraordinary circumstance has occurred.
    In this proposed rule, we are not proposing any changes to these 
requirements. However, we are proposing to codify these existing 
procedures at proposed new 42 CFR 416.310(d).
    We are inviting public comment on our proposal to codify our 
existing policies.
8. ASCQR Program Reconsideration Procedures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 through 53644) 
and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75141), 
we set forth our requirements for an informal reconsideration process. 
Specifically, an ASC may request reconsideration of a decision by CMS 
that it has not met the requirements of the ASCQR Program for a 
particular payment determination year by submitting a reconsideration 
request (signed by a person who has authority to sign on behalf of the 
ASC) to CMS by March 17 of the affected payment determination year. A 
reconsideration request must contain the following information:
     ASC CCN and related NPI(s);
     The name of the ASC;
     The CMS-identified reason for not meeting the requirements 
of the ASCQR Program for the affected payment determination year as 
provided in any CMS notification to the ASC;
     The ASC's basis for requesting reconsideration. The ASC 
must identify its specific reason(s) for believing it met the ASCQR 
Program requirements for the affected payment determination year and 
should not be subject to the reduced ASC annual payment update;
     The ASC-designated personnel contact information, 
including name, email address, telephone number, and mailing address 
(must include physical mailing address, not just a post office box); 
and
     A copy of all materials that the ASC submitted to comply 
with the requirements of the affected ASCQR Program payment 
determination year. With regard to information on claims, ASCs are not 
required to submit copies of all submitted claims, but instead may 
focus on the specific claims at issue. For these claims, ASCs should 
submit relevant information, which could include copies of the actual 
claims at issue.
    Upon receipt of a request for reconsideration, CMS will do the 
following:
     Provide an email acknowledgement, using the contact 
information provided in the reconsideration request, notifying the ASC 
that the request has been received; and
     Provide a formal response to the ASC contact, using the 
information provided in the reconsideration request notifying the ASC 
of the outcome of the reconsideration process.
    For those ASCs that submit a reconsideration request, the 
reconsideration determination is the final ASCQR Program payment 
determination. For ASCs that do not submit a timely reconsideration 
request, the CMS determination is the final payment determination. 
There is no appeal of any final ASCQR Program payment determination.
    In this proposed rule, we are proposing one change to these 
requirements. Under our current reconsideration procedures, ASCs are 
required to submit reconsideration requests by March 17 of the affected 
payment determination year (77 FR 53643 through 53644). However, we 
recognize that, in some payment years, March 17 may fall outside of the 
business week. Therefore, we are proposing that, beginning with the CY 
2017 payment determination, ASCs must submit a reconsideration request 
to CMS by no later than the first business day on or after March 17 of 
the affected payment year . We are proposing to codify these existing 
procedures at proposed new 42 CFR 416.330.
    We are inviting public comment on our proposal to change the 
reconsideration request submission deadline and our proposal to codify 
these policies.

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

1. Statutory Background
    We refer readers to section XV.C.1. of the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75131 through 75132) for a detailed 
discussion of the statutory background regarding payment reductions for 
ASCs that fail to meet the ASCQR Program requirements.
2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the 
ASCQR Program Requirements for a 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 
will be reduced by 2.0 percentage points for ASCs that fail to meet the 
reporting requirements of the ASCQR Program. This reduction applied 
beginning with the CY 2014 payment rates. For a complete discussion of 
the calculation of the ASC conversion factor, we refer readers to 
section XII.G. of this proposed rule.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 
through 68500), in order to implement the requirement to reduce the 
annual update for ASCs that fail to meet the

[[Page 39348]]

ASCQR Program requirements, we finalized our proposal that we would 
calculate two conversion factors: a full update conversion factor and 
an ASCQR Program reduced update conversion factor. We finalized our 
proposal to calculate the reduced national unadjusted payment rates 
using the ASCQR Program reduced update conversion factor that would 
apply to ASCs that fail to meet their quality reporting requirements 
for that calendar year payment determination. We finalized our proposal 
that application of the 2.0 percentage point reduction to the annual 
update may result in the update to the ASC payment system being less 
than zero prior to the application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to this proposed rule, which are available via the Internet 
on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,'' ``Z2,'' as well 
as the service portion of device-intensive procedures identified by 
``J8.'' We finalized our proposal that payment for all services 
assigned the payment indicators listed above would be subject to the 
reduction of the national unadjusted payment rates for applicable ASCs 
using the ASCQR Program reduced update conversion factor.
    The conversion factor is not used to calculate the ASC payment 
rates for separately payable services that are assigned status 
indicators other than payment indicators ``A2,'' ``G2,'' ``J8,'' 
``P2,'' ``R2,'' and ``Z2.'' These services include separately payable 
drugs and biologicals, pass-through devices that are contractor-priced, 
brachytherapy sources that are paid based on the OPPS payment rates, 
and certain office-based procedures, certain radiology services and 
diagnostic tests where payment is based on the MPFS nonfacility PE RVU-
based 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) 
are paid at the lesser of the MPFS nonfacility PE RVU-based amounts or 
the amount calculated under the standard ASC ratesetting methodology. 
Similarly, in section XII.D.2.b. of the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66933 through 66934), we finalized our 
proposal that payment for the new category of covered ancillary 
services (that is, certain diagnostic test codes within the medical 
range of CPT codes for which separate payment is allowed under the OPPS 
and when they are integral to an ASC covered surgical procedure) will 
be at the lesser of the MPFS nonfacility PE RVU-based amounts or the 
rate calculated according to the standard ASC ratesetting methodology. 
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68500), 
we finalized our proposal that the standard ASC ratesetting methodology 
for this type of 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 these procedures or 
services 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, in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68500), we finalized our proposal that the 
Medicare beneficiary's national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies will be based 
on the reduced national unadjusted payment rate.
    In that final rule with comment period, 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 (77 FR 68500). 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 and CY 2015 OPPS/ASC final rules with comment 
periods (78 FR 75132 and 79 FR 66981 through 66982), we did not make 
any changes to these policies.
    In this CY 2016 OPPS/ASC proposed rule, we are not proposing any 
changes to these policies.

XV. Short Inpatient Hospital Stays

A. Background on the 2-Midnight Rule

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through 
50954), we discussed CMS' longstanding policy on how Medicare 
contractors review inpatient hospital and CAH admissions for payment 
purposes. In that final rule, we discussed previously existing Medicare 
policy contained in the Section 10, Chapter 1 of the Medicare Benefit 
Policy Manual (MBPM) that stated that when a beneficiary receives a 
minor surgical procedure or other treatment in the hospital that is 
expected to keep him or her in the hospital for only a few hours (less 
than 24 hours), the services generally should be billed as outpatient 
hospital services, regardless of the hour the beneficiary comes to the 
hospital, whether he or she uses a bed, and whether he or she remains 
in the hospital past midnight. We noted that we have been clear that 
this billing instruction does not override the clinical judgment of the 
physician to keep the beneficiary at the hospital, to order specific 
services, or to determine appropriate levels of nursing care or 
physical locations within the hospital. Rather, this instruction 
provided a benchmark to ensure that all beneficiaries received 
consistent application of their Medicare Part A benefit to whatever 
clinical services were medically necessary.
    However, due to persistently large improper payment rates in short-
stay hospital inpatient claims, requests to provide additional guidance 
regarding the proper billing of those services, and concerns about 
increasingly long stays of Medicare beneficiaries as outpatients due to 
hospital uncertainties about payment, we modified and clarified our 
general rule in the regulations with respect to Medicare payment for 
inpatient hospital admissions. Specifically, in the FY 2014 IPPS/LTCH 
PPS final rule, we provided guidance for payment purposes that 
specified that, generally, a hospital inpatient admission is considered 
reasonable and necessary if a physician or other qualified practitioner 
(collectively, ``physician'') orders such admission based on the 
expectation that the

[[Page 39349]]

beneficiary's length of stay will exceed 2 midnights or if the 
beneficiary requires a procedure specified as inpatient only under 
Sec.  419.22 of the regulations. We finalized at Sec.  412.3(d)(1) of 
the regulations that services designated under the OPPS as inpatient 
only procedures would continue to be appropriate for inpatient hospital 
admission and payment under Medicare Part A. In addition, we finalized 
a benchmark providing that surgical procedures, diagnostic tests, and 
other treatments would be generally considered appropriate for 
inpatient hospital admission and payment under Medicare Part A when the 
physician expects the patient to require a stay that crosses at least 2 
midnights and admits the patient to the hospital based upon that 
expectation. Conversely, when a beneficiary enters a hospital for a 
surgical procedure not specified as inpatient only under Sec.  
419.22(n), a diagnostic test, or any other treatment, and the physician 
expects to keep the beneficiary in the hospital for only a limited 
period of time that does not cross 2 midnights, the services would be 
generally inappropriate for payment under Medicare Part A, regardless 
of the hour that the beneficiary came to the hospital or whether the 
beneficiary used a bed.
    We finalized a policy at Sec.  412.3(d)(2) (originally designated 
as Sec.  412.3(e)(2) and later redesignated as Sec.  412.3(d)(2)) of 
the regulations that if an unforeseen circumstance, such as beneficiary 
death or transfer, results in a shorter beneficiary stay than the 
physician's reasonable expectation of at least 2 midnights, the patient 
may still be considered to be appropriately treated on an inpatient 
basis for payment purposes, and the hospital inpatient payment may be 
made under Medicare Part A.
    In addition to the new hospital admission guidance, we also 
finalized two distinct, although related, medical review policies, a 2-
midnight ``benchmark'' and a 2-midnight ``presumption,'' effective for 
admissions on or after October 1, 2013. The 2-midnight benchmark, which 
is described in more detail below, represents guidance to reviewers to 
identify when an inpatient admission is generally appropriate for 
Medicare coverage and payment, while the 2-midnight presumption relates 
to instructions to medical reviewers regarding the selection of claims 
for medical review. Specifically, under the 2-midnight presumption, 
inpatient hospital claims with lengths of stay greater than 2 midnights 
after the formal admission following the order are presumed to be 
appropriate for Medicare Part A payment and will not be the focus of 
medical review efforts, absent evidence of systematic gaming, abuse, or 
delays in the provision of care in an attempt to qualify for the 2-
midnight presumption.
    With respect to the 2-midnight benchmark, the starting point is 
when the beneficiary begins receiving hospital care as either a 
registered outpatient or after inpatient admission. That is, for 
purposes of determining whether the 2-midnight benchmark is met and, 
therefore, whether an inpatient admission is appropriate for Medicare 
Part A payment, we consider the physician's expectation including the 
total time spent receiving hospital care--not only the expected 
duration of care after inpatient admission, but also any time the 
beneficiary has spent (before inpatient admission) receiving outpatient 
services such as observation services, treatments in the emergency 
department, and procedures provided in the operating room or other 
treatment area. From the medical review perspective, while the time the 
beneficiary spent as an outpatient before the admission order is 
written is not considered inpatient time, it is considered during the 
medical review process for purposes of determining whether the 2-
midnight benchmark was met and, therefore, whether payment is 
appropriate under Medicare Part A. For beneficiaries who do not arrive 
through the emergency department or are directly receiving inpatient 
services (for example, inpatient admission order written prior to 
admission for an elective admission), the starting point for medical 
review purposes is when the beneficiary starts receiving services 
following arrival at the hospital. For Medicare payment purposes, both 
the decision to keep the patient at the hospital and the expectation of 
needed duration of the stay must be supported by documentation in the 
medical record based on such factors as beneficiary medical history and 
comorbidities, the severity of signs and symptoms, current medical 
needs, and the risk of an adverse event during hospitalization.
    With respect to inpatient stays spanning less than 2 midnights 
after admission, we instructed contractors that, although such claims 
would not be subject to the presumption, the admission may still be 
appropriate for Medicare Part A payment because time spent as an 
outpatient should be considered in determining whether there was a 
reasonable expectation that the hospital care would span 2 or more 
midnights. In other words, even if an inpatient admission was for only 
1 Medicare utilization day, medical reviewers are instructed to 
consider the total duration of hospital care, both pre- and post-
inpatient admission, when making the determination of whether the 
inpatient stay was reasonable and necessary for purposes of Medicare 
Part A payment. For those admissions in which the basis for the 
physician expectation of care surpassing 2 midnights is reasonable and 
well-documented, reviewers may apply the 2-midnight benchmark to 
incorporate all of the time a beneficiary received care in the 
hospital.
    We continue to believe that use of the 2-midnight benchmark gives 
appropriate consideration to the medical judgment of physicians and 
also furthers the goal of clearly identifying when an inpatient 
admission is appropriate for payment under Medicare Part A. More 
specifically, as we described in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50943 through 50954), factors such as the procedures being 
performed and the beneficiary's condition and comorbidities apply when 
the physician formulates his or her expectation regarding the need for 
hospital care, while the determination of whether an admission is 
appropriately billed and paid under Medicare Part A or Part B is based 
upon the physician's medical judgment regarding the beneficiary's 
expected length of stay. We have not identified any circumstances where 
the 2-midnight benchmark restricts the physician to a specific pattern 
of care, as the 2-midnight benchmark, like the previous 24-hour 
benchmark, does not prevent the physician from ordering or providing 
any service at any hospital, regardless of the expected duration of the 
service. Rather, this policy provides guidance on when the hospitalized 
beneficiary's care is appropriate for coverage and payment under 
Medicare Part A benefits as an inpatient, and when the beneficiary's 
care is appropriate for coverage and payment under Medicare Part B 
benefits as an outpatient.
    On the other hand, we also acknowledge that certain procedures may 
have intrinsic risks, recovery impacts, or complexities that would 
cause them to be appropriate for inpatient coverage under Medicare Part 
A regardless of the length of hospital time the admitting physician 
expects a particular patient to require. We believe that the OPPS 
inpatient only list of procedures identifies those procedures and, 
therefore, procedures on that list are not subject to the 2-midnight 
benchmark for purposes of inpatient hospital payment. We explained in 
the

[[Page 39350]]

FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through 50954) that we 
might specify additional exceptions to the generally applicable 
benchmark through subregulatory guidance, including revised manual 
instructions. Accordingly, since publication of the final rule, we have 
accepted and considered suggestions from stakeholders regarding 
potential ``rare and unusual'' circumstances under which an inpatient 
admission that is expected to span less than 2 midnights would 
nonetheless be appropriate for Medicare Part A payment.
    In January 2014, we identified medically necessary, newly initiated 
mechanical ventilation (excluding anticipated intubations related to 
minor surgical procedures or other treatment) as the first such rare 
and unusual exception to the 2-midnight benchmark. We announced this 
exception by posting it on the CMS Web site. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50147), we invited further feedback on suggested 
exceptions to the 2-midnight benchmark, in recognition that there could 
be additional rare and unusual circumstances that we have not 
identified that justify payment as an inpatient admission under 
Medicare Part A, absent an expectation of care spanning at least 2 
midnights.
    With respect to the 2-midnight benchmark, we have been clear that 
this instruction does not override the clinical judgment of the 
physician regarding the need to keep the beneficiary at the hospital, 
to order specific services, or to determine appropriate levels of 
nursing care or physical locations within the hospital. Rather, as with 
the previous 24-hour benchmark in the MBPM, this instruction provides a 
benchmark to ensure that all beneficiaries receive consistent 
application of their Medicare Part A benefit to medically necessary 
clinical services.
    As part of our efforts to provide education to stakeholders on the 
2-midnight rule, CMS has hosted numerous ``Open Door Forums,'' 
conducted national provider calls, and shared information and answers 
to frequently asked questions on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html.
    In addition, we instructed MACs to conduct ``probe and educate'' 
reviews for inpatient claims with dates of admission on or after 
October 1, 2013 through September 30, 2014, to assess provider 
understanding and compliance with the new policy. We also imposed a 
moratorium on recovery auditor post-payment medical reviews of 
inpatient hospital patient status for claims with dates of admission 
between October 1, 2013 and September 30, 2014. On April 1, 2014, the 
Protecting Access to Medicare Act of 2014 Pub. L. 113-93) was enacted. 
Section 111 of Pub. L. 113-93 permitted CMS to continue medical review 
activities under the MAC probe and educate process through March 31, 
2015. The same law also extended the CMS moratorium on recovery auditor 
reviews of inpatient hospital patient status for claims with dates of 
admission through March 31, 2015. On April 16, 2015, the Medicare 
Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) was 
enacted. Section 521 of Pub. L. 114-10 permitted CMS to further extend 
the medical review activities under the inpatient hospital probe and 
educate process and extended the moratorium that precludes recovery 
auditor reviews of inpatient hospital patient status for claims with 
dates of admission through September 30, 2015. MACs have completed the 
first and second rounds of probe reviews and provider education and are 
starting on a third round of probe reviews, to be completed on or 
before September 30, 2015. Throughout the probe and educate process to 
date, we have seen positive effects and improved provider understanding 
of the 2-midnight rule. For example, the second round of probe and 
educate denial rates were lower than those in the first round, which 
may reflect improved provider understanding of the 2 midnight rule 
after the implementation of the first round of provider education. In 
addition, anecdotal reports indicate that providers found that the 
education provided for post-probe reviews was effective in promoting 
better understanding of the policy.
    In response to industry feedback, including suggestions to limit 
the Recovery Audit Program, on December 30, 2014, we announced a number 
of changes to the Recovery Audit Program. To address hospitals' 
concerns that they do not have the opportunity to rebill for medically 
necessary Medicare Part B inpatient services by the time a medical 
review contractor has denied a Medicare Part A inpatient claim, we are 
changing the recovery auditor ``look-back period'' for patient status 
reviews to 6 months from the date of service in cases where a hospital 
submits the claim within 3 months of the date that it provides the 
service. We have established limits on additional documentation 
requests (ADRs) that are based on a hospital's compliance with Medicare 
rules, incrementally applied ADR limits for providers that are new to 
recovery auditor reviews, and diversified ADR limits across all types 
of claims for a certain provider. We also have established a 
requirement that recovery auditors must complete complex reviews within 
30 days, and failure to do so will result in the loss of the recovery 
auditor's contingency fee, even if an error is found. Finally, we will 
require recovery auditors to wait 30 days before sending a claim to the 
MAC for adjustment. This 30-day period will allow the provider to 
submit a discussion period request to the recovery auditor before the 
MAC makes any payment adjustments. These changes will be effective with 
the next recovery audit program contract awards.

B. Proposed Policy Change for Medical Review of Inpatient Hospital 
Admissions Under Medicare Part A

    While we have been clear that the 2-midnight benchmark does not 
override the clinical judgment of the physician regarding the need to 
keep the beneficiary at the hospital, to order specific services, or to 
determine appropriate levels of nursing care or physical locations 
within the hospital, some stakeholders have argued that the 2-midnight 
benchmark removes physician judgment from the decision to admit a 
patient for inpatient hospital services. We disagree. We continue to 
believe that the 2-midnight benchmark provides, for payment purposes, 
clear guidance on when a hospital inpatient admission is appropriate 
for Medicare Part A payment, while respecting the role of physician 
judgment, although we acknowledge that our current payment policy and 
medical review policy focus on physician judgment regarding the 
expected duration of medically necessary hospital care. However, we 
believe the concerns raised by stakeholders merit continued 
consideration.
    In light of the aforementioned stakeholder concern and in our 
continued effort to develop the most appropriate and applicable 
framework for determining when payment under Medicare Part A is 
appropriate for inpatient admissions, we are proposing to modify our 
existing ``rare and unusual'' exceptions policy to allow for Medicare 
Part A payment on a case-by-case basis for inpatient admissions that do 
not satisfy the 2-midnight benchmark, if the documentation in the 
medical record supports the admitting physician's determination that 
the patient requires inpatient hospital care despite an expected length 
of stay that is less than 2 midnights. For payment

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purposes, the following factors, among others, would be relevant to 
determining whether an inpatient admission where the patient stay is 
expected to be less than 2 midnights is nonetheless appropriate for 
Part A payment:
     The severity of the signs and symptoms exhibited by the 
patient;
     The medical predictability of something adverse happening 
to the patient; and
     The need for diagnostic studies that appropriately are 
outpatient services (that is, their performance does not ordinarily 
require the patient to remain at the hospital for 24 hours or more).
    We note that, under the existing rare and unusual policy, only one 
exception--prolonged mechanical ventilation--has been identified to 
date. Upon further consideration and based on feedback from 
stakeholders, we believe there may be other patient-specific 
circumstances where certain cases may nonetheless be appropriate for 
Part A payment, absent an expected stay of at least 2 midnights. Such 
circumstances would be determined on a case-by-case basis. Under the 
proposed revised policy, for purposes of Medicare payment, an inpatient 
admission will be payable under Part A if the documentation in the 
medical record supports either the admitting physician's reasonable 
expectation that the patient will require hospital care spanning at 
least 2 midnights, or the physician's determination based on factors 
such as those identified above, that the patient requires formal 
admission to the hospital on an inpatient basis.
    Accordingly, we are proposing to revise Sec.  412.3(d)(1) of the 
regulations to reflect this modification. Existing Sec.  412.3(d)(1) 
specifies, in relevant part, that if the physician expects to keep the 
patient in the hospital for only a limited period of time that does not 
cross 2 midnights, the services are generally inappropriate for 
inpatient admission and inpatient payment under Medicare Part A, 
regardless of the hour that the patient came to the hospital or whether 
the patient used a bed. We are proposing to revise Sec.  412.3(d) to 
state that when the admitting physician expects a hospital patient to 
require hospital care for only a limited period of time that does not 
cross 2 midnights, the services may be appropriate for payment under 
Medicare Part A if the physician determines and documents in the 
patient's medical record that the patient requires a reasonable and 
necessary admission to the hospital as an inpatient. In general, we 
would expect that with most inpatient admissions where the stay is 
expected to last less than the 2-midnight benchmark, the patient will 
remain in the hospital at least overnight but acknowledge that the 
patient can be unexpectedly discharged or transferred to another 
hospital and not actually use a hospital bed overnight. Cases for which 
the physician determines that an inpatient admission is necessary, but 
that do not span at least 1 midnight, will be prioritized for medical 
review. In addition to the proposed substantive changes discussed 
earlier in this section, we also proposing to revise existing 
paragraphs (d)(1) and (d)(2) for clarity.
    Under the proposed policy change, for stays for which the physician 
expects the patient to need less than 2 midnights of hospital care and 
the procedure is not on the inpatient only list or on the national 
exception list, an inpatient admission would be payable on a case-by-
case basis under Medicare Part A in those circumstances under which the 
physician determines that an inpatient stay is warranted and the 
documentation in the medical record supports that an inpatient 
admission is necessary.
    We are not proposing any changes for hospital stays that are 
expected to be greater than 2 midnights; that is, if the physician 
expects the patient to require hospital care that spans at least 2 
midnights and admits the patient based on that expectation, the 
services are generally appropriate for Medicare Part A payment. (We 
note that this policy applies to hospital admissions where the patient 
is reasonably expected to stay at least 2 midnights, and payment will 
still be appropriate where the medical record supports the admitting 
physician's reasonable expectation that the patient would stay at least 
2 midnights but the actual stay was less due to unforeseen 
circumstances, such as unexpected patient death, transfer, clinical 
improvement, or departure against medical advice.) We also are not 
proposing to change the 2-midnight presumption.
    Our existing policy provides for payment under Part A based upon 
the admitting physician's clinical judgment that a patient will require 
hospital care that is expected to span at least 2 midnights. This 
proposed change also would allow for payment under Part A on a case-by-
case basis for stays expected to last less than the 2-midnight 
benchmark, based upon the admitting physician's clinical judgment that 
inpatient hospital admission is appropriate. Consistent with 
longstanding Medicare policy, the decision to formally admit a patient 
to the hospital is subject to medical review.
    Under our proposed revision to the policy for cases not meeting the 
2-midnight rule, where the medical record does not support a reasonable 
expectation of the need for care crossing at least 2 midnights, and for 
inpatient admissions not related to a surgical procedure specified by 
Medicare as inpatient only under Sec.  419.22(n) or for which there was 
not a national exception (currently, there is an exception for new 
onset mechanical ventilation), payment of the claim under Medicare Part 
A will be subject to the clinical judgment of the medical reviewer. As 
under our current policy, under our proposed revised policy, the 
medical reviewer's clinical judgment would involve the synthesis of all 
submitted medical record information (for example, progress notes, 
diagnostic findings, medications, nursing notes, and other supporting 
documentation) to make a medical review determination on whether the 
clinical requirements in the relevant policy have been met. In 
addition, Medicare review contractors must abide by CMS policies in 
conducting payment determinations, but are permitted to take into 
account evidence-based guidelines or commercial utilization tools that 
may aid such a decision. While Medicare review contractors may continue 
to use commercial screening tools to help evaluate the inpatient 
admission decision for purposes of payment under Medicare Part A, such 
tools are not binding on the hospital, CMS, or its review contractors. 
This type of information also may be appropriately considered by the 
physician as part of the complex medical judgment that guides his or 
her decision to keep a beneficiary in the hospital and formulation of 
the expected length of stay. Some members of the hospital industry have 
argued that Medicare should adopt specific criteria for medical review 
entities to use when reviewing short-stay hospital claims. We are 
inviting public comments on whether specific medical review criteria 
should be adopted for inpatient hospital admissions that are not 
expected to span at least 2 midnights and, if so, what those criteria 
should be.
    Although CMS reviewers will take into consideration the physician's 
decision to admit a beneficiary, the admission must be reasonable and 
necessary and supported by clear documentation in the patient's medical 
record in order to be covered under Medicare Part A. Likewise, in order 
to be covered under Medicare Part A, the care furnished must also be 
reasonable

[[Page 39352]]

and necessary. Section 1862(a)(1) of the Act prohibits payment under 
the Medicare program for services that are not reasonable and necessary 
for the diagnosis or treatment of illness or injury. In cases where CMS 
reviewers find that an inpatient admission is not medically reasonable 
and necessary and thus not appropriate for payment under Medicare Part 
A, we note that the beneficiary's patient status remains ``inpatient'' 
as of the time of the inpatient admission, and is not changed to 
outpatient, because 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, as stated in CMS 
Ruling 1455-R (78 FR 16617). In these cases, the hospital will not 
receive payments for the beneficiary under Medicare Part A but may be 
able to submit a Medicare Part B inpatient claim for the Part B 
services that would have been payable to the hospital had the 
beneficiary originally been treated as an outpatient.
    We note that our proposed change in policy for payment of hospital 
care expected to last less than 2 midnights does not negate our 
longstanding policy, which recognizes that there are certain situations 
in which a hospital inpatient admission is rarely appropriate for 
Medicare Part A payment. We continue to believe, as stated above and as 
stated in the MBPM, that when a beneficiary receives a minor surgical 
procedure or other treatment in the hospital that is expected to keep 
him or her in the hospital for only a few hours (less than 24 hours), 
the services should generally be billed as outpatient hospital 
services, regardless of the hour the beneficiary comes to the hospital, 
whether he or she uses a bed, and whether he or she remains in the 
hospital past midnight (Section 10, Chapter 1 of the MBPM). 
Accordingly, we would expect it to be rare and unusual for a 
beneficiary to require inpatient hospital admission after having a 
minor surgical procedure or other treatment in the hospital that is 
expected to keep him or her in the hospital for only a few hours and 
not at least overnight. We will monitor the number of these types of 
admissions and plan to prioritize these types of cases for medical 
review.
    Currently, the MACs perform ``probe and educate'' audits under the 
2-midnight rule. Regardless of whether we finalize the policy proposals 
outlined above, we are announcing that, no later than October 1, 2015, 
we are changing the medical review strategy and plan to have Quality 
Improvement Organization (QIO) contractors conduct these reviews of 
short inpatient stays rather than the MACs. Among the QIO's statutory 
duties is the review of some or all of the professional activities of 
providers and practitioners in the QIO's service area, subject to the 
terms of the QIO contracts, in the provision of health care items or 
services to Medicare beneficiaries. Such QIO reviews are for the 
purposes of determining whether providers and practitioners are 
delivering services that are reasonable and medically necessary, 
whether the quality of services meets professionally recognized 
standards of care, and, for inpatient services, whether the services 
could be effectively furnished on an outpatient basis or in a different 
type of inpatient facility. Section 1154(a)(1) of the Act authorizes 
QIOs to review whether services and items billed under Medicare are 
reasonable and medically necessary and whether services that are 
provided on an inpatient basis could be appropriately and effectively 
provided on an outpatient basis, while section 1154(a)(2) of the Act 
provides for payment determinations to be made based on these QIO 
reviews. Section 1154(a)(18) of the Act includes provisions that 
involve broad authority for the Secretary to direct additional 
activities by QIOs to improve the effectiveness, efficiency, economy, 
and quality of services under the Medicare program. These reviews are 
integral to the determination of whether items and services should be 
payable under the Medicare program.
    In addition to the reviews to ensure coverage in accordance with 
Medicare standards under sections 1154(a)(1) and (a)(2) of the Act, QIO 
case review work is an effort to measurably improve the quality of 
health care for Medicare beneficiaries as well as all individuals 
protected under the Emergency Medical Treatment and Labor Act (EMTALA) 
and to provide peer review. QIOs have longstanding program experience 
in addressing beneficiary complaints, provider-based notice appeals, 
violations of EMTALA, Higher Weighted Diagnosis Related-Group (HWDRG) 
coding reviews, and other related responsibilities as articulated in 
the Act. Further, in the performance of their current quality 
improvement activities and medical reviews, QIOs routinely collaborate 
and interact with State survey agencies, MACs, recovery auditors, and 
qualified independent contractors (QICs).
    In addition to their expedited appeal and quality of care review 
expertise, QIOs currently perform both coding and medical necessity 
reviews. For example, when conducting HWDRG coding reviews, QIOs 
already analyze claims submitted by hospitals with proposed changes to 
billing codes that would allow the hospital to receive a higher 
weighted DRG payment for the care delivered. In these HWDRG reviews, 
QIOs ensure that the clinical circumstances in which the care was 
provided accurately matches the provider's claim for payment. QIOs also 
currently perform reviews to confirm that all services and items 
provided were reasonable and medically necessary, consistent with 
section 1862(a)(1) or 1862(a)(9) of the Act. Further in those instances 
when the HWDRG review involves a service provided during a short 
inpatient stay, QIOs also perform a corresponding medical review to 
validate adherence to the current 2-midnight policy.
    As previously mentioned in this section, we are changing our 
medical review strategy for short hospital stays and will have QIO 
contractors conduct reviews of short inpatient stays. QIO contractors 
are well-suited to conduct these short-stay inpatient reviews because 
these reviews fit within the scope of the QIO statutory functions and 
because their quality improvement programs are aligned with the HHS' 
National Quality Strategy objective to provide ``better care and better 
health at lower cost.'' QIOs, by their design, are groups of regional 
and national health quality experts, clinicians, and consumers 
organized to improve the care delivered to people with Medicare. As 
indicated previously, QIOs manage a variety of beneficiary complaints 
and quality of care case reviews to ensure consistency in health care 
delivery and practice in the inpatient and outpatient setting while 
taking into consideration clinical practice guidelines and other local 
factors important to beneficiaries, providers, and practitioners, and 
the Department. These capabilities will be useful in making case-by-
case review determinations.
    To mitigate the perception of a potential conflict of interest 
between medical review and quality improvement functions of the QIOs, 
on August 1, 2014, the QIO program separated medical case review from 
its quality improvement activities in each State under two types of 
regional contracts. These include Beneficiary and Family Centered Care 
QIOs (BFCC-QIOs) contractors who perform medical case review, and 
Quality Innovation Network QIOs (QIN-QIOs) contractors who perform 
quality improvement activities and provide technical assistance to 
providers and practitioners. In addition, the restructured QIO program 
uses a non-QIO a contractor to assist CMS in the

[[Page 39353]]

monitoring and oversight of the BFCC-QIO case review activities.
    Under the new medical review short-stay inpatient review process 
that we will adopt by October 1, 2015, QIOs will review a sample of 
post-payment claims and make a determination of the medical 
appropriateness of the admission as an inpatient. As mentioned earlier 
in this section, we continue to believe that when a beneficiary 
receives a minor surgical procedure or other treatment in the hospital 
that is expected to keep him or her in the hospital for only a few 
hours (less than 24 hours), the services should generally be billed as 
outpatient hospital services, regardless of the hour the beneficiary 
comes to the hospital, whether he or she uses a bed, and whether he or 
she remains in the hospital past midnight (Section 10, Chapter 1 of the 
MBPM). Accordingly, we would expect it to be rare and unusual for a 
beneficiary to require inpatient hospital admission after having a 
minor surgical procedure or other treatment in the hospital that is 
expected to keep him or her in the hospital for a period of time that 
is only for a few hours and does not span at least overnight. We will 
monitor the number of these types of admissions and plan to prioritize 
these types of cases for medical review.
    QIOs will refer claim denials to the MACs for payment adjustments. 
Providers' appeals of denied claims will be addressed under the 
provisions of section 1869 of the Act. QIOs will educate hospitals 
about claims denied under the 2-midnight policy and collaborate with 
these hospitals in their development of a quality improvement framework 
to improve organizational processes and/or systems. Under the QIO 
short-stay inpatient review process, those hospitals that are found to 
exhibit a pattern of practices, including, but not limited to: Having 
high denial rates and consistently failing to adhere to the 2-midnight 
rule (including having frequent inpatient hospital admissions for stays 
that do not span one midnight), or failing to improve their performance 
after QIO educational intervention, will be referred to the recovery 
auditors for further payment audit.
    In addition to the formal medical review process, we intend to 
continuously monitor and evaluate the proposed changes to the 2-
midnight payment policy and medical review strategy. We will 
specifically examine and evaluate applicable claims data and any other 
data available in order to determine whether any patterns of case-by-
case exceptions exist that might be appropriately announced as uniform, 
national exceptions, to examine the effect on short-stay inpatient 
claims and long outpatient observation stays, and to observe any other 
trends which might affect beneficiary access, outcomes, and quality of 
care. We also will monitor applicable data for signs of systematic 
gaming of this policy. We will continue to assess the 2-midnight 
payment policy in future years, and, as with all Medicare payment 
policies, may make future payment modifications based on the trends 
observed.
    As mentioned earlier in this section, section 521 of Pub. L. 114-10 
prohibits recovery auditors from performing patient status reviews for 
claims with dates of admission October 1, 2013 through September 30, 
2015. Under current law, recovery auditors may resume such reviews for 
dates of admission of October 1, 2015 and later. After that date, the 
recovery auditors will conduct patient status reviews focused on those 
providers that are referred from the QIOs and have high denial rates. 
The number of claims that a recovery auditor will be allowed to review 
for patient status will be based on the claim volume of the hospital 
and the denial rate identified by the QIO. We will adopt this new 
medical review strategy regardless of whether the 2-midnight rule 
remains unchanged or is modified.
    As stated earlier, one of the reasons we adopted the 2-midnight 
rule was because of concerns about the growing trend of long outpatient 
hospital stays. We note that preliminary data suggest that the 2-
midnight rule as it relates to hospital stays spanning at least 2 
midnights has been effective in reducing long outpatient hospital 
stays. Specifically, our data show that the proportion of outpatient 
long-stay encounters (more than 2 days) involving observation services 
decreased by 11 percent in FY 2014 compared to FY 2013. The trend in 
these data is consistent with our adoption of the 2-midnight rule on 
October 1, 2013.
    As noted previously, we are not proposing to change the 2-midnight 
presumption for purposes of medical review. That is, inpatient stays 
for which the patient remained in the hospital at least 2 midnights 
following formal admission to the hospital will continue to be presumed 
appropriate for inpatient hospital payment under Medicare Part A and 
will generally not be selected for medical review of patient status.
    We welcome stakeholder comment and feedback on this proposed change 
and on future changes to the 2-midnight rule. We note that several 
stakeholder groups have examined short-stay payment policies, but that 
there is no consensus on what a short-stay payment policy should be. We 
also note that MedPAC has recently recommended repealing the 2-midnight 
rule in its entirety, in Chapter 7 of its June Report to Congress. 
MedPAC has not recommended a short-stay payment policy. We have 
requested public comment on three different occasions on issues related 
to when a patient is appropriately admitted as an inpatient or when the 
patient is appropriately treated as an outpatient, including potential 
payment policy options to address this issue. The public comment 
process has not produced any consensus on a recommended payment policy 
proposal to address this issue. In a letter earlier this year, the 
American Hospital Association provided us with its analysis for several 
payment policy alternatives and their potential impact. The association 
did not recommend adoption of a particular payment policy in this area. 
We continue to be open to considering potential payment policy options 
that have the potential to address this issue.

XVI. Proposed Transition for Medicare-Dependent, Small Rural Hospitals 
(MDHs) in All-Urban States Under the Hospital Inpatient Prospective 
Payment System

A. Background on the Medicare-Dependent, Small Rural Hospital (MDH) 
Program

    Section 1885(d)(5)(G) of the Act provides special payment 
protections under the hospital inpatient prospective payment system 
(IPPS) to Medicare-dependent, small rural hospitals (MDHs). Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area, has not more than 100 beds, is not a sole 
community hospital (SCH), and has a high percentage of Medicare 
discharges (that is, not less than 60 percent of its inpatient days or 
discharges either in its 1987 cost reporting year or in 2 of its most 
recent 3 settled Medicare cost reporting years). MDHs are paid for 
their hospital inpatient services based on the higher of the Federal 
rate or a blended rate based, in part, on the Federal rate and, in 
part, on the MDH's hospital-specific rate. Specifically, the blended 
rate is calculated using the Federal rate payment plus 75 percent of 
the amount by which the Federal rate payment is exceeded by the MDH's 
hospital-specific rate payments. For additional information on the MDH 
program and the payment methodology, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51683 through 51684).

[[Page 39354]]

    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50022), 
under prior law, as specified in section 5003(a) of Public Law 109-171 
(DRA 2005), the MDH program was to be in effect through the end of FY 
2011 only. The program has since been extended several times. Most 
recently, section 205 of the Medicare Access and CHIP Reauthorization 
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015, provides 
for an extension of the MDH program through FY 2017. Specifically, 
section 205 of the MACRA amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act by striking the ``April 1, 2015'' end 
date for the MDH program and inserting ``October 1, 2017''.

B. Implementation of New OMB Delineations and Urban to Rural 
Reclassification

    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 
established revised delineations for Metropolitan Statistical Areas 
(MSAs), Micropolitan Statistical Areas, and Combined Statistical Areas, 
and provided guidance on the use of the delineations of these 
statistical areas. These delineations are based on 2010 decennial 
Census data. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 
through 49991), we adopted the new OMB labor market area delineations 
beginning in FY 2015. Consequently, there were 105 counties that were 
previously located in rural areas that became urban under the new OMB 
delineations (79 Fr 49953). As noted above, under section 
1886(d)(5)(G)(iv) of the Act, an MDH must be located in a rural area.
    The transition of certain counties from rural to urban under the 
new OMB delineations required MDHs in those counties to apply for rural 
status in order to retain their MDH classifications and avoid losing 
the special payment protections provided to MDHs. In order to be 
approved for a rural reclassification, a hospital that is located in an 
urban area must meet one of the following four criteria under section 
1886(d)(8)(E)(ii) of the Act (codified at 42 CFR 412.103):
    (1) The hospital is located in a rural census tract of an MSA, as 
determined under the most recent version of the Goldsmith Modification, 
the Rural-Urban Commuting Area (RUCA) codes;
    (2) The hospital is located in an area designated by any law or 
regulation of such State as a rural area or is designated by such State 
as a rural hospital;
    (3) The hospital would qualify as a rural referral center (RRC) or 
a sole community hospital (SCH) if the hospital were located in a rural 
area; and
    (4) The hospital meets such other criteria as the Secretary may 
specify.
    In addition, under section 1886(d)(8)(E) of the Act, in order for a 
hospital to reclassify from an urban area to a rural area, the State in 
which the hospital is located must have a rural area. In other words, a 
hospital may not reclassify from urban to rural under section 
1886(d)(8)(E) of the Act in an all-urban State, which, as of October 1, 
2014, included New Jersey, Delaware, and Rhode Island.
    MDHs that shifted from rural to urban under the new OMB 
delineations may apply for rural reclassification under Sec.  412.103. 
In a situation where a hospital could not reclassify to a rural area 
under Sec.  412.103 because it is now located in an all-urban State, 
the hospital would have lost its MDH status and would be paid for 
hospital inpatient services at the Federal rate, which may be 
substantially lower than the MDH's hospital-specific rate. Given that 
the MDH program was scheduled to expire April 1, 2015, but was recently 
extended to expire effective October 1, 2017, by section 205 of the 
MACRA, we believe it would be appropriate to provide a prospective 
payment rate transition period for MDHs that cannot retain such status 
due to their location in a newly redesignated urban area located in an 
all-urban State and, therefore, the lack of a rural area within their 
State into which they could reclassify.
    We are proposing that, effective January 1, 2016, payments to 
hospitals that lost their MDH status because they are no longer in a 
rural area due to the adoption of the new OMB delineations and are now 
located in all-urban States would transition from payments based, in 
part, on the hospital-specific rate to payments based entirely on the 
Federal rate. As stated earlier, currently, an MDH receives the higher 
of the Federal rate or the Federal rate payment plus 75 percent of the 
amount by which the Federal rate payment is exceeded by its hospital-
specific rate payment. We are proposing that, for discharges occurring 
on or after January 1, 2016, and before October 1, 2016, a former MDH 
in an all-urban State would receive the Federal rate plus two-thirds of 
75 percent of the amount by which the Federal rate payment is exceeded 
by its hospital-specific rate payment. For FY 2017, that is, for 
discharges occurring on or after October 1, 2016, and before October 1, 
2017, we are proposing that such a former MDH would receive the Federal 
rate plus one-third of 75 percent of the amount by which the Federal 
rate payment is exceeded by the hospital's hospital-specific rate. For 
FY 2018, that is, for discharges occurring on or after October 1, 2018, 
we are proposing that these former MDHs would be solely paid based on 
the Federal rate.
    We believe it is appropriate to apply these proposed transitional 
payments for hospitals formerly located in rural areas and formerly 
classified as MDHs that are now located in all-urban States, given the 
potentially significant payment impacts for these hospitals and the 
fact that a hospital may not reclassify from urban to rural under 
section 1886(d)(8)(E) of the Act in an all-urban State. Allowing a 
gradual transition for such hospitals from payments based, in part, on 
the hospital-specific rate to payments based solely on the Federal rate 
would minimize the negative impact of our adoption of the new OMB 
delineations which caused certain rural hospitals to lose their MDH 
status.
    We are inviting public comments on our proposal.

XVII. Files Available to the Public via the Internet

    The Addenda to the OPPS/ASC proposed rules and the final rules with 
comment period are published and available only via the Internet on the 
CMS Web site. To view the Addenda to this proposed rule pertaining to 
proposed CY 2016 payments under the OPPS, we refer readers to the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; select ``1633-P'' from the list of regulations. All OPPS 
Addenda to this proposed rule are contained in the zipped folder 
entitled ``Proposed 2016 OPPS 1633-P Addenda'' at the bottom of the 
page. To view the Addenda to this proposed rule pertaining to the 
proposed CY 2016 payments under the ASC payment system, we refer 
readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html; 
select ``1633-P'' from the list of regulations. All ASC Addenda to this 
proposed rule are contained in the zipped folders entitled ``Addendum 
AA, BB, DD1 and DD2'' and ``Addendum EE''.
    For CY 2016, we are proposing to add two new Addenda: Proposed 
Addendum O, which lists the proposed new and revised CPT codes for CY 
2016; and proposed Addendum Q, which includes a crosswalk from CY 2015 
APC numbers to proposed new CY 2016 APC numbers.

[[Page 39355]]

XVIII. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and to solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comments on each of the issues outlined 
above for the information collection requirements discussed below.

B. Associated Information Collections Not Specified in Regulatory Text

    In this CY 2016 OPPS/ASC proposed rule, we make 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 proposed requirements.
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 (76 FR 74451). 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), the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68527 through 
68532), the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75170 through 75172), and the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 67012 through 67015) for detailed discussions of Hospital 
OQR Program information collection requirements we have previously 
finalized. The information collection requirements associated with the 
Hospital OQR Program are currently approved under OMB control number 
0938-1009.
    Below we discuss only the changes in burden resulting from the 
provisions in this proposed rule.
a. Estimated Burden of Hospital OQR Program Proposals for the CY 2017 
Payment Determination and Subsequent Years
    In section XIII. of this proposed rule, we are proposing to make 
several changes to the Hospital OQR Program for the CY 2017 payment 
determination and subsequent years. Specifically, we are proposing to: 
(1) Remove the OP-15: Use of Brain Computed Tomography (CT) in the 
Emergency Department for Atraumatic Headache measure, effective January 
1, 2016 (no data for this measure will be used for any payment 
determination); (2) change the deadline for withdrawing from the 
Hospital OQR Program from November 1 to August 31; (3) shift the 
quarters on which we base payment determinations; (4) change the data 
submission timeframe for measures submitted via the CMS Web-based tool 
(QualityNet Web site) from July 1 through November 1 to January 1 
through May 15; (5) rename our extension and exception policy to 
extension and exemption policy; (6) change the deadline for submitting 
a reconsideration request from the first business day of the month of 
February of the affected payment year to the first business day on or 
after March 17 of the affected payment year; and (7) amend 42 CFR 
419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term ``fiscal 
year'' with the term ``calendar year.'' While there is burden 
associated with filing a reconsideration request, section 3518(c)(1)(B) 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3518(c)(1)(B)) 
excludes collection activities during the conduct of administrative 
actions such as reconsiderations. We do not believe that any of these 
changes would increase burden, as further discussed below.
    We are proposing to make conforming changes to our validation 
scoring process to reflect proposed changes in the APU determination 
timeframes. For the CY 2017 payment determination, we are proposing 
that validation be based on three quarters of data (quarter 2, quarter 
3 and quarter 4 of 2015.) For this transition year, we estimate that 
the burden associated with validation reporting would be reduced by 25 
percent because hospitals would submit validation data for three 
quarters instead of four.
(1) Measure Proposed for Removal for the CY 2017 Payment Determination 
and Subsequent Years
    As discussed in section XIII.B.5. of this proposed rule, we are 
proposing to remove OP-15: Use of Brain Computed Tomography (CT) in the 
Emergency Department for Atraumatic Headache beginning with the CY 2017 
payment determination. OP-15 is a claims-based measure. As we noted in 
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68530), we 
calculate claims-based measures using Medicare FFS claims data that do 
not require additional hospital data submissions. In addition, public 
reporting of OP-15 has been deferred since the CY 2013 OPPS/ASC final 
rule with comment period (76 FR 74456 and http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228774991461 under 1.6--Imaging Efficiency, ``OP-15 Use of Brain 
Computed Tomography (CT) in the Emergency Department for Atraumatic 
Headache''). We estimate that there would be no change in burden based 
on our proposal to remove this measure.
(2) Changes to Reporting Requirements for the CY 2017 Payment 
Determination and Subsequent Years
    In section XIII.E. of this proposed rule, we are proposing to make 
several changes to the reporting requirements for the Hospital OQR 
Program. Specifically, we are proposing to: (1) Change the deadline for 
withdrawing from the program from November 1 to up to and including 
August 31; (2) shift the quarters on which we base payment 
determinations; (3) change the data submission timeframe for measures 
submitted via the CMS Web-based tool (QualityNet Web site) from July 1 
through November 1 to January 1 through May 15; (4) rename our 
extension and exception policy to extension and exemption policy; (5) 
change the deadline for submitting a reconsideration request from the 
first business day of the month of February of the affected payment 
year to the first business day on or after March 17 of the affected 
payment year. Although we are proposing to change deadlines, these date 
changes do not change the amount of time required to enter data. 
Therefore, the hourly burden and resultant financial impact would 
remain the same.
    In addition, we are proposing to make conforming changes to our 
validation scoring process to reflect proposed changes in the APU 
determination

[[Page 39356]]

timeframes. For the CY 2017 payment determination, we are proposing 
that validation be based on three quarters of data (quarter 2, quarter 
3 and quarter 4 of 2015.) For prior payment determinations, we sampled 
500 hospitals for validation and estimated that it would take each 
hospital 12 hours to comply with the data submission requirements for 
four quarters. We estimate that data submission for three quarters 
would reduce the number of hours required by 25 percent (from 12 hours 
to 9 hours per hospital). Therefore, we estimate a total burden of 
approximately 4,500 hours (500 hospitals x 9 hours/hospital) and a 
total financial impact of $135,000 ($30/hour x 4,500 hours) for the CY 
2017 payment determination. In summary, for the CY 2017 payment 
determination, we estimate a total burden of 3.5 million hours across 
all hospitals for a total of $105 million. This is a reduction of 1,500 
hours and $45,000 across all hospitals from last year's estimate.
b. Estimated Burden of Hospital OQR Program Proposals for the CY 2018 
Payment Determination and Subsequent Years
    For the CY 2018 payment determination and subsequent years, we are 
making two new proposals. First, in section XIII.B.6.a. of this 
proposed rule, we are proposing one new measure for the CY 2018 payment 
determination and subsequent years: OP-33: External Beam Radiotherapy 
(EBRT) for Bone Metastases (NQF #1822). In section XIII.E.5. of this 
proposed rule, we are proposing that hospitals can either: (1) Report 
aggregate level data for OP-33 submitted via the CMS Web-based tool 
(QualityNet Web site); or (2) submit an aggregate data file for this 
measure through a vendor (via the QualityNet infrastructure).
    For hospitals choosing the first data submission method, and 
consistent with prior years, we believe that submitting a measure 
through the Web-based tool has two burden components: first, the time 
required to abstract the data for the measure; and second, the time 
required to enter these data into the Web-based tool. In the CY 2015 
OPPS/ASC final rule with comment period (79 FR 67013), we estimated 
that it would take hospitals approximately a total of 35 minutes to 
collect chart-abstracted data for 12 Web-based measures. To calculate 
the burden associated with a collecting chart-abstracted data for a 
single Web-based measure, we divided the total number of minutes (35) 
previously estimated by the number of measures (12). Therefore, we 
estimate the burden to collect chart-abstracted data for a single Web-
based measure to be 2.92 minutes (or 0.049 hours.). Based on our most 
recent data (Quarter 4 2013--Quarter 3 2014) for Hospital OQR Program 
measures, we estimate that the average hospital would submit 48 cases 
per year for OP-33. Therefore, we believe that the average hospital 
would spend 2.352 hours (0.049 hours/measure/case x 48 cases) chart-
abstracting data for this measure.
    In addition, consistent with prior years (78 FR 75171 through 
75172), we estimate that each participating hospital would spend 10 
minutes (0.167 hours) per measure per year to collect and submit the 
data via the Web-based tool. Therefore, we estimate that, in total, the 
proposed measure would increase burden by 2.519 hours (2.352 hours + 
0.167 hours) per year. Consistent with prior years (79 FR 67013), we 
believe that approximately 3,300 hospitals participate in the Hospital 
OQR Program for the CY 2017 payment determination. Therefore, we 
estimate a total increase in burden across all participating hospitals 
of approximately 8,313 hours (2.519 hours/hospital x 3,300 hospitals) 
(rounded) per year. Finally, consistent with prior years (79 FR 67013), 
we estimate that a hospital pays an individual approximately $30 per 
hour to abstract and submit these data.
    For hospitals choosing the second data submission method, we do not 
have any baseline data on which to estimate how many hospitals might 
elect to submit data through a vendor. However, we generally estimate 
that burden will be less than the first data submission method. In 
future years, we will adjust the burden estimate to account for 
hospitals that elect to submit data through a vendor.
    The second proposal we are proposing for the CY 2018 payment 
determination and subsequent years, is that validation again be based 
on four quarters of data; however those quarters are validation quarter 
1, validation quarter 2, validation quarter 3 and validation quarter 4. 
For payment determinations prior to CY 2017, we sampled 500 hospitals 
for validation and estimated that it would take each hospital 12 hours 
to comply with the data submission requirements for four quarters. 
Therefore, we estimate a total burden of approximately 6,000 hours (500 
hospitals x 12 hours/hospital) and a total financial impact of $180,000 
($30/hour x 6,000 hours) in burden associated with validation for the 
CY 2018 payment determination and subsequent years. This is an increase 
of 1,500 hours and $45,000 across all hospitals from the CY 2017 
estimate.
    Therefore, we estimate a total financial increase in burden would 
be $89.21 per hospital (2.97 hours x $30/hour) or $294,000 (9,813 hours 
x $30/hour) (rounded) across all participating hospitals as a result of 
our proposals for the CY 2018 payment determination and subsequent 
years.
c. Estimated Burden of Hospital OQR Program Proposals for the CY 2019 
Payment Determination and Subsequent Years
    For the CY 2019 payment determination and subsequent years, we are 
making one new proposal. In section XIII.B.6.b. of this proposed rule, 
we are proposing one new measure for the CY 2019 payment determination 
and subsequent years: OP-34: Emergency Department Transfer 
Communication (EDTC) (NQF #0291). In section XIII.E.6. of this proposed 
rule, we are proposing that hospitals can either: (1) Report aggregate 
level data for OP-34 submitted via the CMS Web-based tool (QualityNet 
Web site); or (2) submit an aggregate data file for this measure 
through a vendor (via QualityNet infrastructure). For hospitals 
choosing the first data submission method, and consistent with prior 
years, we believe that submitting a measure through the Web-based tool 
has two burden components: first, the time required to abstract the 
data for the measure; and second, the time required to enter this data 
into the Web-based tool. In the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 67013), we estimated that it would take hospitals 
approximately a total of 35 minutes to collect chart-abstracted data 
for 12 Web-based measures.
    To calculate the burden associated with a collecting chart-
abstracted data for a single Web-based measure, we divided the total 
number of number of minutes (35) previously estimated by the number of 
measures (12). Therefore, we estimate the burden to collect chart-
abstracted data for a single Web-based measure to be 2.92 minutes (or 
0.049 hours). Based on our most recent data (Quarter 4 2013-Quarter 3 
2014) for Hospital OQR Program, ED-Throughput measures OP-18: Median 
Time from ED Arrival to ED Departure for Discharged ED Patients (NQF# 
0496) (75 FR 72086) and OP-20: Door to Diagnostic Evaluation by a 
Qualified Medical Professional (75 FR 72087 through 72088), we estimate 
that the average hospital would submit 495 cases per year for OP-34. 
Therefore, we believe that the average hospital would spend 24.255 
hours (0.049 hours/case x 495 cases) chart-abstracting data for this 
measure.

[[Page 39357]]

    In addition, consistent with prior years (78 FR 75171), we estimate 
that each participating hospital would spend 10 minutes (0.167 hours) 
per measure per year to collect and submit the data via the Web-based 
tool. Therefore, we estimate that, in total, the proposed measure would 
increase burden by 24.422 hours (24.255 hours + 0.167 hours) per 
hospital per year. Consistent with prior years (79 FR 67013), we 
believe that approximately 3,300 hospitals participate in the Hospital 
OQR Program for the CY 2017 payment determination. Therefore, we 
estimate a total increase in burden across all participating hospitals 
of 80,592.6 hours (24.422 hours/hospital x 3,300 hospitals) per year. 
Finally, consistent with prior years (79 FR 67013), we estimate that a 
hospital pays an individual approximately $30 per hour to abstract and 
submit this data.
    For hospitals choosing the second data submission method, we do not 
have any baseline data on which to estimate how many hospitals might 
elect to submit data through a vendor. However, we generally estimate 
that burden will be less than the first data submission method. In 
future years, we will adjust the burden estimate to account for 
hospitals that elect to submit data through a vendor.
    Therefore, we estimate a total financial increase in burden would 
be $732.66 per hospital (24.422 hours x $30/hour) or $2.4 million 
(80,592.6 hours x $30/hour) (rounded) across all participating 
hospitals as a result of our proposals for the CY 2019 payment 
determination and subsequent years.
    We are inviting public comment on the burden associated with these 
proposed information collection requirements.
2. ASCQR Program Requirements
a. Background
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74554), the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53672), the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68532 through 68533), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75172 through 75174), and the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 67015 through 67016) for detailed 
discussions of the ASCQR Program information collection requirements we 
have previously finalized.
b. Policy Proposals Effective Beginning With the CY 2017 Payment 
Determination
    We are proposing to codify a number of existing policies related to 
program participation and withdrawal, data collection and submission, 
public reporting, retention and removal of quality measures, measures 
maintenance, extraordinary circumstances extensions or waivers, and the 
reconsideration process. We are codifying only existing policies with 
the exception of the policy proposals discussed below. For existing 
policies with proposed codification, we do not anticipate any 
additional burden to ASCs affecting the CY 2017 payment determination 
or subsequent years because there are no changes to these policies.
    In terms of our proposals for the ASCQR Program in this proposed 
rule, we are proposing to implement a submission deadline with an end 
date of May 15 for all data submitted via a Web-based tool beginning 
with the CY 2017 payment determination. We do not anticipate additional 
burden as the data collection and submission requirements have not 
changed, only the deadline has moved to a slightly earlier date that we 
anticipate would alleviate burden by aligning data submission 
deadlines. We also are proposing, beginning with the CY 2017 payment 
determination, to not consider IHS hospital outpatient departments that 
bill as ASCs to be ASCs for purposes of the ASCQR Program. This 
proposal would eliminate the burden associated with participation in 
the ASCQR Program for six IHS hospital outpatient departments that 
currently are required to participate in the ASCQR Program or be 
subject to a possible reduction in payment.
    We are further proposing a minor change to the reconsideration 
request deadline to ensure our deadline for these requests will always 
fall on a business day effective beginning with the CY 2017 payment 
determination. We do not anticipate that there would be any additional 
burden as the materials to be submitted are unchanged and the deadline 
does not result in reduced time to submit a reconsideration request. In 
addition, we are proposing to display data by the NPI if data are 
submitted by the NPI or by the CCN if data are submitted by the CCN for 
any public reporting that occurs on or after January 1, 2016. Again, we 
do not anticipate any additional burden because it does not alter the 
administrative or reporting requirements governing ASC's participation 
in the ASCQR Program.
    Finally, we are proposing, for claims-based measures not using 
QDCs, to use claims for services furnished in each calendar year that 
have been paid by the MAC by April 30 of the following year of the 
ending data collection time period in the measure calculation for the 
payment determination year beginning with the CY 2018 payment 
determination. We do not anticipate any additional burden to ASCs based 
on this proposal affecting the CY 2017 payment determination or 
subsequent years because it does not alter the administrative or 
reporting requirements governing ASC's participation in the ASCQR 
Program.
c. Claims-Based Measures for the CY 2018 Payment Determination and 
Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68532), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75172 through 75174), and the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 67015 through 67016) for detailed 
discussions of the information collection requirements for the six 
previously adopted claims-based ASCQR Program measures (five outcome 
measures and one process measure). The six previously adopted measures 
are: ASC-1: Patient Burn (NQF #0263); ASC-2: Patient Fall (NQF #0266); 
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong 
Implant (NQF #0267); ASC-4: Hospital Transfer/Admission (NQF #0265); 
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing; and ASC-12: 
Facility Seven-Day Risk-Standardized Hospital Visit Rate after 
Outpatient Colonoscopy. The first five of these measures require the 
reporting of Quality Data Codes (QDCs), but the sixth measure, ASC-12, 
while utilizing data from paid Medicare FFS claims, it does not require 
ASCs to submit QDCs. For the reasons we discussed in the CY 2014 OPPS/
ASC final rule with comment period (78 FR 75172 through 75173) and the 
CY 2015 OPPS/ASC final rule with comment period (79 FR 67016), we 
estimate that the reporting burden to report QDCs for the five claims-
based outcome measures that utilize QDCs would be nominal. We do not 
anticipate that ASC-12 would create any additional burden to ASCs for 
the CY 2018 payment determination and for subsequent years because no 
additional data are required from ASCs; only information necessary for 
Medicare payment is utilized for calculating this measure.
d. Web-Based Measures for the CY 2018 Payment Determination and 
Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68532) and the CY 2014 OPPS/ASC final rule with comment

[[Page 39358]]

period (78 FR 75172 through 75174) for detailed discussions of the 
information collection requirements for the five previously-adopted 
Web-based measures, excluding ASC-11, which we proposed for voluntary 
inclusion in the ASCQR Program for the CY 2017 payment determination 
and subsequent years. The five previously adopted measures are: ASC-6: 
Safe Surgery Checklist Use; ASC-7: ASC Facility Volume Data on Selected 
ASC Surgical Procedures; ASC-8: Influenza Vaccination Coverage Among 
Healthcare Personnel (NQF #0431); ASC-9: Endoscopy/Polyp Surveillance: 
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk 
Patients (NQF #0658); and ASC-10: Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous Polyps-
Avoidance of Inappropriate Use (NQF #0659).
    For the reasons we discussed in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75173 through 75174), we estimate that the 
reporting burden for the ASC-6: Safe Surgery Checklist Use and the ASC-
7: ASC Facility Volume measures would be 1,757 hours (5,260 ASCsx x x2 
measures x 0.167 hours per ASC) and $52,710 (1,757 hours x $30.00 per 
hour) annually for the CY 2018 payment determination and for subsequent 
years.
    For the reasons discussed in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75173 through 75174), we estimate that the 
reporting burden for the ASC-8: Influenza Vaccination Coverage Among 
Healthcare Personnel (NQF #0431) measure would be 18,005 hours (5,260 
ASCs x 0.083 hours per facility = 437 hours for NHSN registration, and 
5,260 ASCs x 0.167 hours per response for 20 workers per facility = 
17,568 hours for data submission) and $540,150 (18,005 hours x $30.00 
per hour) annually for the CY 2018 payment determination and for 
subsequent years.
    For the reasons discussed in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75173 through 75174), we estimate that the 
reporting burden for ASCs with a single case per ASC for the chart-
abstracted ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up 
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) 
and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps-Avoidance of 
Inappropriate Use (NQF #0659) measures would be 3,067 hours (5,260 ASCs 
x 0.583 hours per case per ASC) and $92,010 (3,067 hours x $30.00 per 
hour) annually for the CY 2018 payment determination and for subsequent 
years.
    In the CY 2015 OPPS/ASC final rule with comment period, we 
finalized our proposal that data collection and submission be voluntary 
for the CY 2017 payment determination and subsequent years for ASC-11: 
Cataracts: Improvement in Patient's Visual Function within 90 Days 
Following Cataract Surgery (NQF #1536); that is, we will not subject 
ASCs to a payment reduction with respect to this measure during the 
period of voluntary reporting (79 FR 66984 through 66985). For the 
reasons discussed in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 67016), we estimate the total burden for this measure for 
ASCs with a single case per ASC to be 613 hours (1,052 ASCs x 0.583 
hours per case per ASC) and $18,390 (613 hours x $30.00 per hour) 
annually for the CY 2018 payment determination and subsequent years.
e. Extraordinary Circumstances Extension or Exemptions Process
    For a complete discussion of our ``Extraordinary Circumstances 
Extension or Waiver'' process under the ASCQR Program, which we 
retitled as the ``Extraordinary Circumstances Extensions or 
Exemptions'' process in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66987), we refer readers to the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75140). We are not proposing to make 
any changes to this process.
e. Reconsideration
    In this proposed rule, we are proposing a minor change to the 
reconsideration request deadline to ensure our deadline for these 
requests would always fall on a business day. We do not anticipate that 
there would be any additional burden as the materials to be submitted 
are unchanged and the deadline does not result in reduced time to 
submit a reconsideration request. We also are proposing to codify our 
reconsideration request process at 42 CFR 416.330.
    While there is burden associated with filing a reconsideration 
request, section 3518(c)(1)(B) of the Paperwork Reduction Act of 1995 
(44 U.S.C. 3518(c)(1)(B)) excludes collection activities during the 
conduct of administrative actions such as reconsiderations.
    We are inviting public comment on the burden associated with these 
information collection requirements.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-1633-P; Fax: (202) 395-6974; or Email: [email protected].

XIX. Response to Comments

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

XX. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule, as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Contract with America Advancement 
Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). This section of the 
proposed rule contains the impact and other economic analyses for the 
provisions that we are proposing for CY 2016.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule has been designated as an economically 
significant rule under section 3(f)(1) of Executive Order 12866

[[Page 39359]]

and a major rule under the Contract with America Advancement Act of 
1996 (Pub. L. 104-121). Accordingly, this proposed rule has been 
reviewed by the Office of Management and Budget. We have prepared a 
regulatory impact analysis that, to the best of our ability, presents 
the costs and benefits of this proposed rule. We are soliciting 
comments on the regulatory impact analysis in this proposed rule, and 
we will address the public comments we receive in the final rule with 
comment period as appropriate.
2. Statement of Need
    This proposed rule is necessary to propose updates to the Medicare 
hospital OPPS rates. It is necessary to make proposed changes to the 
payment policies and rates for outpatient services furnished by 
hospitals and CMHCs in CY 2016. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion 
factor used to determine the payment rates for APCs. We also are 
required under section 1833(t)(9)(A) of the Act to review, not less 
often than annually, and revise the groups, the relative payment 
weights, and the wage and other adjustments described in section 
1833(t)(2) of the Act. We must review the clinical integrity of payment 
groups and relative payment weights at least annually. We are proposing 
to revise the APC relative payment weights using claims data for 
services furnished on and after January 1, 2014, through and including 
December 31, 2014 and processed through December 31, 2014, and updated 
cost report information.
    This proposed rule also is necessary to propose updates to the ASC 
payment rates for CY 2016, 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 2016. Because 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, 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.
3. Overall Impacts for the Proposed OPPS and ASC Payment Provisions
    We estimate that the total decrease in Federal government 
expenditures under the OPPS for CY 2016 compared to CY 2015 due to the 
proposed changes in this proposed rule, would be approximately $43 
million. Taking into account our estimated changes in enrollment, 
utilization, and case-mix, we estimate that the proposed OPPS 
expenditures for CY 2016 would be approximately $3.2 billion higher 
relative to expenditures in CY 2015. We note that this estimate of $3.2 
billion does not include the proposed 2.0 percent reduction to the 
conversion factor to address the inflation in OPPS payment rates 
resulting from excess packaged payment under the OPPS for laboratory 
tests that are excepted from our final CY 2014 laboratory packaging 
policy, as discussed in section II.B. of this proposed rule. Because 
this proposed rule is economically significant as measured by the 
threshold of an additional $100 million in expenditures in 1 year, we 
have prepared this regulatory impact analysis that, to the best of our 
ability, presents its costs and benefits. Table 65 displays the 
distributional impact of the proposed CY 2016 changes in OPPS payment 
to various groups of hospitals and for CMHCs.
    We estimate that the proposed update to the conversion factor and 
other proposed adjustments (not including the effects of proposed 
outlier payments, the proposed pass-through estimates, and the proposed 
application of the frontier State wage adjustment for CY 2016) would 
decrease total OPPS payments by 0.1 percent in CY 2016. The proposed 
changes to the APC weights, the proposed changes to the wage indexes, 
the proposed continuation of a payment adjustment for rural SCHs, 
including EACHs, and the proposed payment adjustment for cancer 
hospitals would not increase OPPS payments because these proposed 
changes to the OPPS are budget neutral. However, these proposed updates 
would change the distribution of payments within the budget neutral 
system. We estimate that the proposed total change in payments between 
CY 2015 and CY 2016, considering all payments, including the proposed 
adjustment to the conversion factor to address the inflation in OPPS 
payment rates resulting from excess packaged payment under the OPPS for 
laboratory tests, proposed changes in estimated total outlier payments, 
pass-through payments, and the application of the frontier State wage 
adjustment outside of budget neutrality, in addition to the application 
of the OPD fee schedule increase factor after all adjustments required 
by sections 1833(t)(3)(F), 1833(t)(3)(G), and 1833(t)(17) of the Act, 
would decrease total estimated OPPS payments by 0.2 percent.
    We estimate the proposed total increase (from proposed changes to 
the ASC provisions in this proposed rule as well as from enrollment, 
utilization, and case-mix changes) in Medicare expenditures under the 
ASC payment system for CY 2016 compared to CY 2015 to be approximately 
$169 million. Because the proposed provisions for the ASC payment 
system are part of a proposed rule that is economically significant as 
measured by the $100 million threshold, we have prepared a regulatory 
impact analysis of the proposed changes to the ASC payment system that, 
to the best of our ability, presents the costs and benefits of this 
portion of the proposed rule. Table 66 and Table 67 of this proposed 
rule display the redistributive impact of the proposed CY 2016 changes 
on ASC payment, grouped by specialty area and then grouped by 
procedures with the greatest ASC expenditures, respectively.
4. Detailed Economic Analyses
a. Estimated Effects of Proposed OPPS Changes in This Proposed Rule
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2016 policy changes on various hospital groups. We 
post on the CMS Web site our proposed hospital-specific estimated 
payments for CY 2016 with the other supporting documentation for this 
proposed rule. To view the proposed 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-1633-P'' from the list of regulations 
and notices. The hospital-specific file layout and the hospital-
specific file are listed with the other supporting documentation for 
this proposed rule. We show hospital-specific data only for hospitals 
whose claims were used for modeling the impacts shown in Table 65 
below. We do not show hospital-specific impacts for hospitals whose 
claims we were unable to use. We refer readers to section II.A. of this 
proposed rule for a discussion of the hospitals whose claims we do not 
use for ratesetting and impact purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other proposed 
payment policies constant. We use the best data available, but do not 
attempt to predict behavioral responses to our policy changes. In 
addition, we have not made

[[Page 39360]]

adjustments for future changes in variables such as service volume, 
service-mix, or number of encounters. We are soliciting public comment 
and information about the anticipated effects of our proposed changes 
on providers and our methodology for estimating them. Any public 
comments that we receive will be addressed in the applicable sections 
of the final rule with comment period that discuss the specific 
policies.
(2) Estimated Effects of Proposed OPPS Changes on Hospitals
    Table 65 below shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all facilities, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA amount. We also include CMHCs in the first line that 
includes all providers. We now include a second line for all hospitals, 
excluding permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 65, 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 2016, we are proposing to continue to pay 
CMHCs under proposed renumbered APC 5851 (existing APC 0172) (Level 1 
Partial Hospitalization (3 services) for CMHCs) and proposed renumbered 
APC 5852 (existing APC 0173) (Level 2 Partial Hospitalization (4 or 
more services) for CMHCs), and we are proposing to pay hospitals for 
partial hospitalization services under proposed renumbered APC 5861 
(existing APC 0175) (Level 1 Partial Hospitalization (3 services) for 
hospital-based PHPs) and APC 5862 (existing APC 0176) (Level 2 Partial 
Hospitalization (4 or more services) for hospital-based PHPs).
    The estimated decrease in the proposed total payments made under 
the OPPS is determined largely by the increase to the conversion factor 
under the statutory methodology and the proposed adjustment to the 
conversion factor to address the inflation in OPPS payment rates 
resulting from excess packaged payment under the OPPS for laboratory 
tests. The distributional impacts presented do not include assumptions 
about changes in volume and service-mix. The conversion factor is 
updated annually by the OPD fee schedule increase factor as discussed 
in detail in section II.B. of this proposed rule. Section 
1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule 
increase factor is equal to the market basket percentage increase 
applicable under section 1886(b)(3)(B)(iii) of the Act, which we refer 
to as the IPPS market basket percentage increase. The proposed IPPS 
market basket percentage increase for FY 2016 is 2.7 percent (80 FR 
24477). Section 1833(t)(3)(F)(i) of the Act reduces that 2.7 percent by 
the multifactor productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is proposed to be 0.6 
percentage point for FY 2016 (which is also the proposed MFP adjustment 
for FY 2016 in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24478)); 
and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act further 
reduce the market basket percentage increase by 0.2 percentage point, 
resulting in the proposed OPD fee schedule increase factor of 1.9 
percent. We are using the proposed OPD fee schedule increase factor of 
1.9 percent in the calculation of the CY 2016 OPPS conversion factor. 
We are also applying a proposed reduction of 2.0 percent to address the 
inflation in OPPS payment rates resulting from excess packaged payment 
under the OPPS for laboratory tests. 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 2016 estimates in Table 65.
    To illustrate the impact of the proposed CY 2016 changes, our 
analysis begins with a baseline simulation model that uses the CY 2015 
relative payment weights, the FY 2015 final IPPS wage indexes that 
include reclassifications, and the final CY 2015 conversion factor. 
Table 65 shows the estimated redistribution of the proposed increase or 
decrease in payments for CY 2016 over CY 2015 payments to hospitals and 
CMHCs as a result of the following factors: The impact of the proposed 
APC reconfiguration and recalibration changes between CY 2015 and CY 
2016 (Column 2); the proposed wage indexes and the proposed provider 
adjustments (Column 3); the combined impact of all of the proposed 
changes described in the preceding columns plus the proposed 1.9 
percent OPD fee schedule increase factor update to the conversion 
factor and the proposed -2.0 percent adjustment to the conversion 
factor to address the inflation in OPPS payment rates resulting from 
excess packaged payment under the OPPS for laboratory tests (Column 4); 
and the estimated impact taking into account all proposed payments for 
CY 2016 relative to all payments for CY 2015, including the impact of 
proposed changes in estimated outlier payments, the frontier State wage 
adjustment, and proposed changes to the pass-through payment estimate 
(Column 5).
    We did not model an explicit budget neutrality adjustment for the 
rural adjustment for SCHs because we are proposing to maintain the 
current adjustment percentage for CY 2016. Because the proposed updates 
to the conversion factor (including the proposed update of the OPD fee 
schedule increase factor), the estimated cost of the proposed rural 
adjustment, and the estimated cost of proposed projected pass-through 
payment for CY 2016 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 proposed wage index changes on the 
hospital. However, proposed total payments made under this system and 
the extent to which this proposed rule would redistribute money during 
implementation also will depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2015 and CY 2016 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the proposed rates for CY 2016 would 
decrease Medicare OPPS payments by an estimated 0.2 percent. 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 results in a proposed estimated 0.2 percent 
decrease in Medicare payments to all other hospitals. These proposed 
estimated payments would not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 65 shows the total number of 
facilities (3,912), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2014 hospital 
outpatient and CMHC claims data to model CY 2015 and proposed CY 2016 
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 2015 or proposed CY 2016 payment and entities 
that are not paid under the OPPS. The latter entities include CAHs, 
all-inclusive

[[Page 39361]]

hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
proposed rule. At this time, we are unable to calculate a 
disproportionate share hospital (DSH) variable for hospitals that are 
not also paid under the IPPS, since DSH payments are only made to 
hospitals paid under 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 (3,791), 
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 
the 58 CMHCs at the bottom of the impact table and discuss that impact 
separately below.
Column 2: APC Recalibration--All Proposed Changes
    Column 2 shows the estimated effect of proposed APC recalibration. 
Column 2 also reflects any proposed changes in multiple procedure 
discount patterns or conditional packaging that occur as a result of 
the proposed changes in the relative magnitude of payment weights. As a 
result of proposed APC recalibration, we estimate that urban hospitals 
would experience no change, with the impact ranging from an increase of 
0.1 percent to a decrease of 0.2 percent, depending on the number of 
beds. Rural hospitals would experience a 0.2 percent increase, with the 
impact ranging from an increase of 0.7 percent to a decrease of 0.1 
percent, depending on the number of beds. Major teaching hospitals 
would experience a decrease of 0.1 percent overall.
Column 3: Proposed Wage Indexes and the Effect of the Proposed Provider 
Adjustments
    Column 3 demonstrates the combined budget neutral impact of the 
proposed APC recalibration; the proposed updates for the wage indexes 
with the proposed fiscal year (FY) 2016 IPPS post-reclassification wage 
indexes; and the proposed rural adjustment. We modeled the independent 
effect of the proposed budget neutrality adjustments and the proposed 
OPD fee schedule increase factor by using the relative payment weights 
and wage indexes for each year, and using a CY 2015 conversion factor 
that included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indexes.
    Column 3 reflects the independent effects of the proposed updated 
wage indexes, including the application of proposed budget neutrality 
for the proposed rural floor policy on a nationwide basis. This column 
excludes the effects of the proposed frontier State wage index 
adjustment, which is not budget neutral and is included in Column 5. We 
did not model a proposed budget neutrality adjustment for the proposed 
rural adjustment for SCHs because we are proposing to continue the 
rural payment adjustment of 7.1 percent to rural SCHs for CY 2016, as 
described in section II.E. of this proposed rule.
    We modeled the independent effect of proposing to update the wage 
indexes by varying only the wage indexes, holding APC relative payment 
weights, service-mix, and the rural adjustment constant and using the 
proposed CY 2016 scaled weights and a CY 2015 conversion factor that 
included a budget neutrality adjustment for the effect of the proposed 
changes to the wage indexes between CY 2015 and CY 2016. The proposed 
FY 2016 wage policy results in modest redistributions.
    There is no difference in impact between the CY 2015 cancer 
hospital payment adjustment and the proposed CY 2016 cancer hospital 
payment adjustment because we are proposing to use the same payment-to-
cost ratio target in CY 2016 as in the CY 2015 OPPS/ASC final rule with 
comment period correction notice (80 FR 9629 through 9636).
Column 4: All Proposed Budget Neutrality Changes Combined With the 
Proposed Market Basket Update and the Proposed Adjustment To Address 
Excess Packaged Payment for Laboratory Tests
    Column 4 demonstrates the combined impact of all of the proposed 
changes previously described, the proposed update to the conversion 
factor of 1.9 percent, and the proposed 2.0 percent reduction due to 
the proposed adjustment to the conversion factor to address the 
inflation in OPPS payment rates resulting from excess packaged payment 
under the OPPS for laboratory tests. Overall, these proposed changes 
would decrease payments to urban hospitals by 0.1 percent and to rural 
hospitals by 0.3 percent. Most classes of hospitals would receive a 
decrease in line with the proposed 0.1 percent overall decrease after 
the proposed update and the proposed adjustment to the conversion 
factor to address excess packaged payment for laboratory tests are 
applied to the proposed budget neutrality adjustments.
Column 5: All Proposed Changes for CY 2016
    Column 5 depicts the full impact of the proposed CY 2016 policies 
on each hospital group by including the effect of all of the proposed 
changes for CY 2016 and comparing them to all estimated payments in CY 
2015. Column 5 shows the combined budget neutral effects of Column 2 
and 3; the proposed OPD fee schedule increase; the impact of the 
proposed frontier State wage index adjustment; the impact of estimated 
proposed OPPS outlier payments as discussed in section II.G. of this 
proposed rule; the proposed change in the Hospital OQR Program payment 
reduction for the small number of hospitals in our impact model that 
failed to meet the reporting requirements (discussed in section XIII. 
of this proposed rule); and the difference in proposed 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 2015 update (and assumed, for 
modeling purposes, to be the same number for CY 2016), we included 60 
hospitals in our model because they had both CY 2014 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
of the proposed changes for CY 2016 would decrease payments to all 
facilities by 0.2 percent for CY 2016. We modeled the independent 
effect of all of the proposed changes in Column 5 using the final 
relative payment weights for CY 2015 and the proposed relative payment 
weights for CY 2016. We used the final conversion factor for CY 2015 of 
$74.173 and the proposed CY 2016 conversion factor of $73.929 discussed 
in section II.B. of this proposed rule.
    Column 5 contains simulated outlier payments for each year. We used 
the proposed 1-year charge inflation factor used in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24632) of 4.8 percent (1.048116) to 
increase individual costs on the CY 2014 claims, and we used the most 
recent overall CCR in the April 2015 Outpatient Provider-Specific File 
(OPSF) to estimate outlier payments for CY 2015. Using the CY 2014 
claims and a proposed 4.8 percent charge inflation factor, we currently 
estimate that outlier payments for CY 2015, using a multiple

[[Page 39362]]

threshold of 1.75 and a fixed-dollar threshold of $2,775 would be 
approximately 0.95 percent of total payments. The estimated current 
outlier payments of 0.95 percent are incorporated in the comparison in 
Column 5. We used the same set of claims and a proposed charge 
inflation factor of 9.8 percent (1.098547) and the CCRs in the April 
2015 OPSF, with an adjustment of 0.9795, to reflect relative changes in 
cost and charge inflation between CY 2014 and CY 2016, to model the 
proposed CY 2016 outliers at 1.0 percent of estimated total payments 
using a multiple threshold of 1.75 and a proposed fixed-dollar 
threshold of $3,650. The charge inflation and CCR inflation factors are 
discussed in detail in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24632 through 24633).
    We estimate that the anticipated change in payment between CY 2015 
and CY 2016 for the hospitals failing to meet the Hospital OQR Program 
requirements would be negligible. Overall, we estimate that facilities 
would experience a decrease of 0.2 percent under this proposed rule in 
CY 2016 relative to total spending in CY 2015. This projected decrease 
(shown in Column 5) of Table 65 reflects the proposed 1.9 percent OPD 
fee schedule increase factor, less 2.0 percent for the proposed 
adjustment to the conversion factor to address the inflation in OPPS 
payment rates resulting from excess packaged payment under the OPPS for 
laboratory tests, less 0.12 percent for the proposed change in the 
pass-through estimate between CY 2015 and CY 2016, plus 0.05 percent 
for the difference in estimated outlier payments between CY 2015 (0.95 
percent) and CY 2016 (proposed 1.0 percent). We estimate that the 
combined effect of all of the proposed changes for CY 2016 would 
decrease payments to urban hospitals by 0.2 percent. Overall, we 
estimate that rural hospitals would experience a 0.3 percent decrease 
as a result of the combined effects of all of the proposed changes for 
CY 2016.
    Among hospitals by teaching status, we estimate that the impacts 
resulting from the combined effects of all proposed changes would 
include a decrease of 0.3 percent for major teaching hospitals and a 
decrease of 0.2 percent for nonteaching hospitals. Minor teaching 
hospitals would experience an estimated decrease of 0.1 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would experience a decrease of 0.2 percent, proprietary hospitals would 
experience a decrease of 0.2 percent, and governmental hospitals would 
experience a decrease of 0.4 percent.

                    Table 65--Estimated Impact of the Proposed CY 2016 Changes for the Hospital Outpatient Prospective Payment System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                All proposed budget
                                                                                                                  neutral changes
                                                                                                                (combined cols 2,3)
                                                                                                                   with proposed
                                                                       APC  Recalibration   New wage index and     market basket
                                                      Number of          (all proposed           provider       update and proposed      All proposed
                                                      hospitals             changes)           adjustments         adjustment to           changes
                                                                                                                   address excess
                                                                                                                  packaged payment
                                                                                                                   for laboratory
                                                                                                                       tests
                                                                 (1)                  (2)                  (3)                  (4)                  (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *...............................                3,912                  0.0                  0.0                 -0.1                 -0.2
ALL HOSPITALS..................................                3,791                  0.0                  0.0                 -0.1                 -0.2
(excludes hospitals permanently held harmless
 and CMHCs):
URBAN HOSPITALS................................                2,942                  0.0                  0.1                 -0.1                 -0.2
    LARGE URBAN (GT 1 MILL.)...................                1,613                  0.0                  0.1                  0.0                 -0.1
    OTHER URBAN (LE 1 MILL.)...................                1,329                 -0.1                  0.0                 -0.1                 -0.2
RURAL HOSPITALS:                                                 849                  0.2                 -0.4                 -0.3                 -0.3
    SOLE COMMUNITY.............................                  379                  0.1                 -0.3                 -0.3                 -0.3
    OTHER RURAL................................                  470                  0.3                 -0.5                 -0.3                 -0.3
BEDS (URBAN):
    0-99 BEDS..................................                1,015                  0.0                 -0.2                 -0.4                 -0.5
    100-199 BEDS...............................                  844                  0.1                  0.1                  0.0                 -0.1
    200-299 BEDS...............................                  463                  0.1                  0.1                  0.1                  0.0
    300-499 BEDS...............................                  406                  0.0                  0.1                  0.0                 -0.1
    500+ BEDS..................................                  214                 -0.2                  0.0                 -0.3                 -0.4
BEDS (RURAL):
    0-49 BEDS..................................                  337                  0.7                 -0.3                  0.3                  0.2
    50-100 BEDS................................                  311                  0.3                 -0.2                 -0.1                 -0.1
    101-149 BEDS...............................                  114                  0.1                 -0.5                 -0.5                 -0.5
    150-199 BEDS...............................                   46                  0.3                 -0.2                 -0.1                 -0.3
    200+ BEDS..................................                   41                 -0.1                 -0.7                 -1.0                 -1.1
REGION (URBAN):
    NEW ENGLAND................................                  150                  0.7                 -0.5                  0.0                  0.0
    MIDDLE ATLANTIC............................                  352                 -0.1                  0.2                  0.0                 -0.1
    SOUTH ATLANTIC.............................                  469                 -0.1                  0.2                 -0.1                 -0.3
    EAST NORTH CENT............................                  475                 -0.1                  0.0                 -0.2                 -0.3
    EAST SOUTH CENT............................                  181                 -0.3                 -0.3                 -0.8                 -0.9
    WEST NORTH CENT............................                  183                  0.0                 -0.3                 -0.4                 -0.5

[[Page 39363]]

 
    WEST SOUTH CENT............................                  509                  0.2                 -0.2                 -0.1                 -0.2
    MOUNTAIN...................................                  193                  0.0                  0.3                  0.2                 -0.1
    PACIFIC....................................                  381                 -0.1                  0.7                  0.5                  0.4
    PUERTO RICO................................                   49                 -1.6                 -1.7                 -3.3                 -3.4
REGION (RURAL):
    NEW ENGLAND................................                   22                  0.5                 -0.6                 -0.2                 -0.2
    MIDDLE ATLANTIC............................                   58                  0.4                 -0.9                 -0.6                 -0.3
    SOUTH ATLANTIC.............................                  126                 -0.1                  0.2                  0.0                 -0.1
    EAST NORTH CENT............................                  120                  0.1                 -0.1                 -0.1                 -0.2
    EAST SOUTH CENT............................                  162                  0.3                 -0.7                 -0.5                 -0.6
    WEST NORTH CENT............................                  102                  0.2                 -0.5                 -0.4                 -0.3
    WEST SOUTH CENT............................                  174                  0.8                 -1.1                 -0.5                 -0.6
    MOUNTAIN...................................                   61                  0.0                  0.1                 -0.1                 -0.4
    PACIFIC....................................                   24                  0.0                  0.3                  0.1                  0.1
TEACHING STATUS:
    NON-TEACHING...............................                 2758                  0.0                  0.0                 -0.1                 -0.2
    MINOR......................................                  709                  0.1                  0.0                  0.0                 -0.1
    MAJOR......................................                  324                 -0.1                  0.1                 -0.2                 -0.3
DSH PATIENT PERCENT:
    0..........................................                   24                 -1.2                 -0.4                 -1.7                 -1.4
    GT 0-0.10..................................                  324                 -0.3                  0.0                 -0.4                 -0.5
    0.10-0.16..................................                  331                  0.1                  0.0                  0.0                  0.0
    0.16-0.23..................................                  650                  0.0                  0.0                 -0.2                 -0.2
    0.23-0.35..................................                 1086                  0.0                 -0.1                 -0.2                 -0.3
    GE 0.35....................................                  817                  0.0                  0.1                  0.0                 -0.1
    DSH NOT AVAILABLE **.......................                  559                  3.1                 -0.1                  2.8                  2.4
URBAN TEACHING/DSH:
    TEACHING & DSH.............................                  941                  0.0                  0.1                 -0.1                 -0.2
    NO TEACHING/DSH............................                 1456                  0.0                  0.0                 -0.1                 -0.2
    NO TEACHING/NO DSH.........................                   23                 -1.2                 -0.3                 -1.6                 -1.5
    DSH NOT AVAILABLE **.......................                  522                  3.2                  0.1                  3.0                  2.6
TYPE OF OWNERSHIP:
    VOLUNTARY..................................                 2000                  0.0                  0.1                 -0.1                 -0.2
    PROPRIETARY................................                 1271                  0.4                 -0.2                  0.0                 -0.2
    GOVERNMENT.................................                  520                 -0.1                  0.0                 -0.2                 -0.4
CMHCs..........................................                   58                 22.2                 -0.4                 21.1                 14.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) includes all proposed CY 2016 OPPS policies and compares those to the CY 2015 OPPS.
Column (3) shows the budget neutral impact of updating the wage index by applying the proposed FY 2016 hospital inpatient wage index, including all hold
  harmless policies and transitional wages. The final rural adjustment continues our current policy of 7.1 percent so the budget neutrality factor is 1.
  The budget neutrality adjustment for the cancer hospital adjustment is 1.000 because the payment-to-cost ratio target remains the same as in the CY
  2015 OPPS/ASC final rule with comment period correction notice (80 FR 9629 through 9636).
Column (4) shows the impact of all budget neutrality adjustments and the addition of the proposed 1.9 percent OPD fee schedule update factor (2.7
  percent reduced by 0.6 percentage points for the proposed productivity adjustment and further reduced by 0.2 percentage point in order to satisfy
  statutory requirements set forth in the Affordable Care Act). Column 4 also includes the proposed -2.0 percent adjustment to the conversion factor to
  address the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests.
Column (5) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier
  payments, and applying the frontier State wage adjustment.
* These 3,912 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
  hospitals.

(3) Estimated Effects of Proposed OPPS Changes on CMHCs
    The last line of Table 65 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization services under the 
OPPS. In CY 2015, CMHCs are paid under two APCs for these services: 
Existing APC 0172 (Level 1 Partial Hospitalization (3 services) for 
CMHCs) (proposed renumbered APC 5851 for CY 2016) and existing APC 0173 
(Level 2 Partial Hospitalization (4

[[Page 39364]]

or more services) for CMHCs) (proposed renumbered APC 5852 for CY 
2016). Hospitals are paid for partial hospitalization services under 
existing APC 0175 (Level 1 Partial Hospitalization (3 services) for 
hospital-based PHPs) (proposed renumbered APC 5861 for CY 2016) and 
existing APC 0176 (Level 2 Partial Hospitalization (4 or more services) 
for hospital-based PHPs) (proposed renumbered APC 5862 for CY 2016). We 
use our standard ratesetting methodology to derive the proposed payment 
rates for each APC based on the cost data derived from claims and cost 
data for the provider-type-specific APC. For CY 2016, we are proposing 
to continue the provider-type-specific APC structure that we adopted in 
CY 2011. We modeled the impact of this APC policy assuming that CMHCs 
would continue to provide the same number of days of PHP care, with 
each day having either 3 services or 4 or more services, as seen in the 
CY 2014 claims data used for this proposed rule. 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. We estimate that CMHCs would experience an overall 
14.8 percent increase in payments from CY 2015 (shown in Column 5). We 
note that this would include the proposed trimming methodology 
described in section VIII.B. of this proposed rule.
    Column 3 shows that the estimated impact of adopting the proposed 
FY 2016 wage index values would result in a small decrease of 0.4 
percent to CMHCs. Column 4 shows that combining this proposed OPD fee 
schedule increase factor, proposed adjustment to the conversion to 
address the inflation in OPPS payment rates resulting from excess 
packaged payment under the OPPS for laboratory tests, along with 
proposed changes in APC policy for CY 2016 and the proposed FY 2016 
wage index updates, would result in an estimated increase of 21.1 
percent. Column 5 shows that adding the proposed changes in outlier and 
pass-though payments would result in a total 14.8 percent increase in 
payment for CMHCs. This reflects all proposed changes to CMHCs for CY 
2016.
(4) Estimated Effect of Proposed OPPS Changes on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment would 
increase for services for which the OPPS payments would rise and would 
decrease for services for which the OPPS payments would fall. For 
further discussion on the calculation of the proposed national 
unadjusted copayments and minimum unadjusted copayments, we refer 
readers to section II.I. of this proposed rule. In all cases, section 
1833(t)(8)(C)(i) of the Act limits beneficiary liability for copayment 
for a procedure performed in a year to the hospital inpatient 
deductible for the applicable year.
    We estimate that the aggregate beneficiary coinsurance percentage 
would be 19.3 percent for all services paid under the OPPS in CY 2016. 
The estimated aggregate beneficiary coinsurance reflects general system 
adjustments, including the proposed recalibration of the APC relative 
payment weights, proposed APC reorganization, proposed change in the 
portion of OPPS payments dedicated to pass-through payments, and the 
proposed CY 2016 comprehensive APC payment policy discussed in section 
II.A.2.e. of this proposed rule.
(5) Estimated Effects of Proposed OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs as discussed in section XII. 
of this proposed rule. No types of providers or suppliers other than 
hospitals, CMHCs, and ASCs would be affected by the proposed changes in 
this proposed rule.
(6) Estimated Effects of Proposed OPPS Changes on the Medicare and 
Medicaid Programs
    The effect on the Medicare program is expected to be a decrease of 
$43 million in program payments for OPPS services furnished in CY 2016. 
The effect on the Medicaid program is expected to be limited to 
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 XX.A. of this proposed rule.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are proposing and the reasons 
for our selected alternatives are discussed throughout this proposed 
rule. In this section, we discuss some of the significant issues and 
the alternatives considered.
     Alternatives Considered for the Methodology for Assigning 
Skin Substitutes to High or Low Cost Groups
    We refer readers to section V.B.2.c. of this proposed rule for a 
discussion of our proposal to determine the high/low cost status for 
each skin substitute product based on either a product's mean unit cost 
(MUC) exceeding the MUC threshold or the product's per day cost (PDC) 
exceeding the PDC threshold. As discussed in that section, we also 
considered, but did not propose, to determine high/low cost status for 
each skin substitute using just MUC or just PDC instead of both.
     Alternatives Considered for Application of the Device 
Offset for Discontinued Procedures for Device Intensive Procedures
    We refer readers to section IV.B.4. of this proposed rule for a 
discussion of our proposal to deduct the device offset amount for 
procedures in device-intensive APCs that are discontinued. As discussed 
in that section, we considered, but did not propose, to apply the 
device offset to procedures for which anesthesia has already been 
administered (that is, those identified by Modifier 74).
b. Estimated Effects of Proposed CY 2016 ASC Payment System Policies
    Most ASC payment rates are calculated by multiplying the ASC 
conversion factor by the ASC relative payment weight. As discussed 
fully in section XII. of this proposed rule, we are proposing to set 
the CY 2016 ASC relative payment weights by scaling the proposed CY 
2016 OPPS relative payment weights by the ASC scalar of 0.9180. The 
estimated effects of the proposed updated relative payment weights on 
payment rates are varied and are reflected in the estimated payments 
displayed in Tables 66 and 67 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 2016 payment 
determinations will be based on the application of a 2.0 percentage 
points reduction to the annual update factor, which currently is the 
CPI-U. We calculated the proposed CY 2016 ASC conversion factor by 
adjusting the CY 2015 ASC conversion factor by 1.0014 to account for 
changes in the pre-floor and pre-reclassified hospital wage indexes 
between CY 2015 and CY 2016 and by applying the

[[Page 39365]]

proposed CY 2016 MFP-adjusted CPI-U update factor of 1.1 percent 
(projected CPI-U update of 1.7 percent minus a proposed projected 
productivity adjustment of 0.6 percentage point). The proposed CY 2016 
ASC conversion factor is $44.605.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2016 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2014 and CY 2016 with precision. We believe that the net effect on 
Medicare expenditures resulting from the proposed CY 2016 changes would 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of Proposed 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 proposed update to the CY 2016 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2016 updates to the ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2014 claims data. Table 66 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2015 payments to 
estimated proposed CY 2016 payments, and Table 67 shows a comparison of 
estimated CY 2015 payments to estimated proposed CY 2016 payments for 
procedures that we estimate would receive the most Medicare payment in 
CY 2015.
    Table 66 shows the estimated effects on aggregate Medicare payments 
under the ASC payment system by surgical specialty or ancillary items 
and services group. We have aggregated the surgical HCPCS codes by 
specialty group, grouped all HCPCS codes for covered ancillary items 
and services into a single group, and then estimated the effect on 
aggregated payment for surgical specialty and ancillary items and 
services groups. The groups are sorted for display in descending order 
by estimated Medicare program payment to ASCs. The following is an 
explanation of the information presented in Table 66.
     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 2015 ASC Payments were calculated 
using CY 2014 ASC utilization (the most recent full year of ASC 
utilization) and CY 2015 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2015 ASC payments.
     Column 3--Estimated Proposed CY 2016 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 proposed updates to ASC payment rates 
for CY 2016 compared to CY 2015.
    As seen in Table 66, for the six specialty groups that account for 
the most ASC utilization and spending, we estimate that the proposed 
update to ASC rates for CY 2016 would result in a 1-percent increase in 
aggregate payment amounts for eye and ocular adnexa procedures, a 3-
percent increase in aggregate payment amounts for digestive system 
procedures, a 1-percent increase in aggregate payment amounts for 
nervous system procedures, a 2-percent decrease in aggregate payment 
amounts for musculoskeletal system procedures, a 2-percent increase in 
aggregate payment amounts for genitourinary system procedures, and no 
change in aggregate payment amounts for integumentary system 
procedures.
    Also displayed in Table 66 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. We estimate 
that aggregate payments for these items and services would remain at 
$21 million for CY 2016.

  Table 66--Estimated Impact of the Proposed CY 2016 Update to the ASC
 Payment System on Aggregate Proposed CY 2016 Medicare Program Payments
       by Surgical Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
                                    Estimated CY 2015      Estimated
     Surgical specialty group        ASC payments (in   proposed CY 2016
                                        millions)        percent change
(1)                                               (2)                (3)
------------------------------------------------------------------------
Total.............................             $3,899                  1
Eye and ocular adnexa.............              1,537                  1
Digestive system..................                809                  3
Nervous system....................                618                  1
Musculoskeletal system............                486                 -2
Genitourinary system..............                176                  2
Integumentary system..............                135                  0
Respiratory system................                 55                  4

[[Page 39366]]

 
Cardiovascular system.............                 42                  1
Ancillary items and services......                 21                  0
Auditory system...................                 14                  5
Hematologic & lymphatic systems...                  6                 -5
------------------------------------------------------------------------

    Table 67 below shows the estimated impact of the proposed updates 
to the revised ASC payment system on aggregate ASC payments for 
selected surgical procedures during CY 2016. The table displays 30 of 
the procedures receiving the greatest estimated CY 2015 aggregate 
Medicare payments to ASCs. The HCPCS codes are sorted in descending 
order by estimated CY 2015 program payment.
     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2015 ASC Payments were calculated 
using CY 2014 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2015 ASC payment rates. The estimated CY 2015 
payments are expressed in millions of dollars.
     Column 4--Estimated Proposed CY 2016 Percent Change 
reflects the percent differences between the estimated ASC payment for 
CY 2015 and the estimated proposed payment for CY 2016 based on the 
proposed update.

  Table 67--Estimated Impact of the Proposed CY 2016 Update to the ASC Payment System on Aggregate Payments for
                                               Selected Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                   Estimated CY
                                                                                     2015 ASC      Estimated CY
               CPT/HCPCS code                          Short descriptor             payment (in    2016 percent
                                                                                     millions)        change
(1)                                          (2)................................             (3)             (4)
----------------------------------------------------------------------------------------------------------------
66984......................................  Cataract surg w/iol 1 stage........          $1,094               1
43239......................................  Egd biopsy single/multiple.........             177               2
45380......................................  Colonoscopy and biopsy.............             181              -2
45385......................................  Colonoscopy w/lesion removal.......             117              -2
66982......................................  Cataract surgery complex...........              95               1
64483......................................  Inj foramen epidural l/s...........              94             -10
62311......................................  Inject spine lumbar/sacral.........              75             -10
45378......................................  Diagnostic colonoscopy.............              69              -3
66821......................................  After cataract laser surgery.......              65               3
64493......................................  Inj paravert f jnt l/s 1 lev.......              53              32
G0105......................................  Colorectal scrn; hi risk ind.......              46              18
64635......................................  Destroy lumb/sac facet jnt.........              50              -2
63650......................................  Implant neuroelectrodes............              52               5
G0121......................................  Colon ca scrn not hi rsk ind.......              43              18
64590......................................  Insrt/redo pn/gastr stimul.........              44              -6
15823......................................  Revision of upper eyelid...........              33               1
63685......................................  Insrt/redo spine n generator.......              54               2
29827......................................  Arthroscop rotator cuff repr.......              50              11
64721......................................  Carpal tunnel surgery..............              30               4
29881......................................  Knee arthroscopy/surgery...........              28              15
29824......................................  Shoulder arthroscopy/surgery.......              21             -43
29880......................................  Knee arthroscopy/surgery...........              24              15
43235......................................  Egd diagnostic brush wash..........              24               2
62310......................................  Inject spine cerv/thoracic.........              23             -10
29823......................................  Shoulder arthroscopy/surgery.......              13             -43
52000......................................  Cystoscopy.........................              22              -4
G0260......................................  Inj for sacroiliac jt anesth.......              22             -10
45384......................................  Colonoscopy w/lesion removal.......              20              -2
67042......................................  Vit for macular hole...............              22               0
26055......................................  Incise finger tendon sheath........              21              23
----------------------------------------------------------------------------------------------------------------


[[Page 39367]]

(3) Estimated Effects of Proposed ASC Payment System Policies on 
Beneficiaries
    We estimate that the proposed CY 2016 update to the ASC payment 
system would be generally positive for beneficiaries with respect to 
the new procedures that we are proposing to add to the ASC list of 
covered surgical procedures and for those that we are proposing to 
designate as office-based for CY 2016. First, other than certain 
preventive services where coinsurance and the Part B deductible is 
waived to comply with section 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 under the OPPS, where the beneficiary is 
responsible for copayments that range from 20 percent to 40 percent of 
the procedure payment (other than for certain preventive services). 
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 under the MPFS compared to the ASC. However, 
for those additional procedures that we are proposing to designate as 
office-based in CY 2016, the beneficiary coinsurance amount under the 
ASC payment system generally would be no greater than the beneficiary 
coinsurance under the MPFS because the coinsurance under both payment 
systems generally is 20 percent (except for certain preventive services 
where the coinsurance is waived under both payment systems).
(4) Alternative ASC Payment Policies Considered
     Alternatives Considered for Application of the Device 
Offset for Discontinued Procedures for Device Intensive Procedures
    We refer readers to section XII.C.1.d. of this proposed rule for a 
discussion of our proposal to deduct the device offset amount for 
device intensive procedures that are discontinued before applying any 
standard downward payment adjustment. As discussed in that section, we 
considered, but did not propose, to apply the device offset to 
procedures for which anesthesia has already been administered (that is, 
those identified by Modifier 74).
c. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget Web site at: https://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf, we have 
prepared two accounting statements to illustrate the impacts of this 
proposed rule. The first accounting statement, Table 68 below, 
illustrates the classification of expenditures for the proposed CY 2016 
estimated hospital OPPS incurred benefit impacts associated with the 
proposed CY 2016 OPD fee schedule increase, based on the 2015 Trustee's 
Report, and the proposed adjustment to the conversion factor to address 
the inflation in OPPS payment rates resulting from excess packaged 
payment under the OPPS for laboratory tests. The second accounting 
statement, Table 69 below, illustrates the classification of 
expenditures associated with the proposed 1.1 percent CY 2016 update to 
the ASC payment system, based on the provisions of this proposed rule 
and the baseline spending estimates for ASCs in the 2015 Trustee's 
Report. Lastly, the tables classify most estimated impacts as 
transfers.

Table 68--Accounting Statement: Proposed CY 2016 Estimated Hospital OPPS
 Transfers From CY 2015 to CY 2016 Associated With the Proposed CY 2016
     Hospital Outpatient OPD Fee Schedule Increase and the Proposed
   Adjustment to Address Excess Packaged Payment for Laboratory Tests
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$43 million
From Whom to Whom......................  Federal Government to
                                          outpatient hospitals and other
                                          providers who receive payment
                                          under the hospital OPPS
Total..................................  -$43 million
------------------------------------------------------------------------


  Table 69--Accounting Statement: Classification of Estimated Transfers
  From CY 2015 to CY 2016 as a Result of the Proposed CY 2016 Update to
                         the ASC Payment System
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $35 million
From Whom to Whom......................  Federal Government to Medicare
                                          Providers and Suppliers
Total..................................  $35 million
------------------------------------------------------------------------

d. Effects of Proposed Requirements for the Hospital OQR Program
    We refer readers to CY 2015 OPPS/ASC final rule with comment period 
(79 FR 67018) for the estimated effects of OPPS changes on hospitals 
for the CY 2017 payment determination. In section XIII. of this 
proposed rule, we are proposing changes to policies affecting the 
Hospital OQR Program. Of the 3,292 hospitals that met eligibility 
requirements for the CY 2015 payment determination, we determined that 
113 hospitals did not meet the requirements to receive the full OPD fee 
schedule increase factor. Most of these hospitals (71 of the 113) chose 
not to participate in the Hospital OQR Program for the CY 2015 payment 
determination. We estimate that approximately 115 hospitals would not 
receive the full OPD fee schedule increase factor for the CY 2018 
payment determination and subsequent years.
    In section XIII. of this proposed rule, we are proposing to make 
several changes to the Hospital OQR Program for the CY 2017 payment 
determination and subsequent years, the CY 2018 payment determination 
and subsequent years, and the CY 2019 payment determination and 
subsequent years. For the CY 2017 payment determination and subsequent 
years, we are proposing to: (1) Remove OP-15: Use of Brain Computed 
Tomography (CT) in the Emergency Department for Atraumatic Headache 
measure, effective January 1, 2016 (no data for this measure will be 
used for any payment determination); (2) change the deadline for 
withdrawing from the program from November 1 to August 31; (3) shift 
the quarters on which we base payment determinations; (4) change the 
data submission timeframe for measures submitted via the CMS Web-based 
tool (QualityNet Web site) from July 1 through November 1 to January 1 
through May 15; (5) rename our extension and exception

[[Page 39368]]

policy to extension and exemption policy; (6) change the deadline for 
submitting a reconsideration request from the first business day of the 
month of February of the affected payment year to the first business 
day on or after March 17 of the affected payment year; and (7) amend 42 
CFR 419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term ``fiscal 
year'' with the term ``calendar year.'' While there is burden 
associated with filing a reconsideration request, section 3518(c)(1)(B) 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3518(c)(1)(B)) 
excludes collection activities during the conduct of administrative 
actions such as reconsiderations. We do not believe that any of the 
other changes we are proposing would increase burden, as further 
discussed below.
    In addition, we are proposing to make conforming changes to our 
validation scoring process to reflect proposed changes in the APU 
determination timeframes. For the CY 2017 payment determination, we are 
proposing that validation be based on three quarters of data (quarter 
2, quarter 3, and quarter 4 of 2015). For the CY 2017 transition year, 
we estimate that the burden associated with validation reporting would 
be reduced by 25 percent because hospitals would submit validation data 
for three quarters instead of four. For prior payment determinations, 
we sampled 500 hospitals for validation and estimated that it would 
take each hospital 12 hours to comply with the data submission 
requirements for four quarters. We estimate that data submission for 
three quarters would reduce the number of hours required by 25 percent 
(from 12 hours to 9 hours per hospital). Therefore, we estimate a total 
burden of approximately 4,500 hours (500 hospitals x 9 hours/hospital) 
and a total financial impact of $135,000 ($30/hour x 4,500 hours) for 
the CY 2017 payment determination. In summary, for the CY 2017 payment 
determination, we estimate a total burden of 3.5 million hours across 
all hospitals for a total of $105 million. This is a reduction of 1,500 
hours and $45,000 across all hospitals from last year's estimate.
    For the CY 2018 payment determination and subsequent years, we are 
proposing two changes to the program. First, we are proposing a new 
measure OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases 
(NQF #1822). As discussed in section XVIII.B.1.b. of this proposed 
rule, we believe that this measure would result in a total increase in 
burden across all participating hospitals of 8,313 hours or $249,000 
per year (rounded). Second, we are proposing for the CY 2018 payment 
determination and subsequent years, that validation again be based on 
four quarters of data; however those quarters are validation quarter 1, 
validation quarter 2, validation quarter 3 and validation quarter 4. 
For payment determinations prior to CY 2017, we sampled 500 hospitals 
for validation and estimated that it would take each hospital 12 hours 
to comply with the data submission requirements for four quarters. 
Therefore, we estimate a total burden of approximately 6,000 hours (500 
hospitals x 12 hours/hospital) and a total financial impact of $180,000 
($30/hour x 6,000 hours) in burden associated with validation for the 
CY 2018 payment determination and subsequent years. This is an increase 
of 1,500 hours and $45,000 across all hospitals from the CY 2017 
estimate.
    For the CY 2019 payment determination and subsequent years, we are 
proposing one change to the program; we are proposing a new measure OP-
34: Emergency Department Transfer Communication (EDTC) (NQF #0291). As 
discussed in section XVIII.B.1.c. of this proposed rule, we believe 
that this measure would result in a total increase in burden across all 
participating hospitals of 80,593 hours or $2.41 million per year 
(rounded). In summary, we estimate that all of the proposals made in 
this proposed rule for the Hospital OQR Program would result in a total 
increase in burden across all participating hospitals of 88,905 hours 
or $2.67 million (rounded).
    We refer readers to the information collection requirements section 
XVIII.B.1. of this proposed rule for a detailed discussion of the 
financial and hourly burden of the proposed additional requirements for 
submitting data to the Hospital OQR Program.
e. Effects of Proposed Requirements for the ASCQR Program
    As discussed in section XIV. of this proposed rule, we are 
proposing to adopt policies affecting the ASCQR Program. For the CY 
2015 payment determination, of the 5,260 ASCs that met eligibility 
requirements for the ASCQR Program, 116 ASCs did not meet the 
requirements to receive the full annual payment update.
    We are not proposing to add any quality measures to the ASCQR 
measure set for the CY 2018 payment determination. We do not believe 
that the other measures we previously adopted would cause any 
additional ASCs to fail to meet the ASCQR Program requirements. (We 
refer readers to the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66978 through 66979) for a list of these measures.) In addition, 
we do not believe that any of the other proposals we are proposing in 
this proposed rule would increase the number of ASCs that do not 
receive a full annual payment update for the CY 2018 payment 
determination. We expect a reduction due to our proposal that IHS 
hospital outpatient departments billing as ASCs would no longer be 
considered ASCs for the purposes of the ASCQR Program. Thus, as CY 2016 
and CY 2017 payment determination information is not yet available, 
using the CY 2015 payment determination numbers as a baseline, we 
estimate that approximately 115 ASCs would not receive the full annual 
payment update in CY 2018 due to failure to meet the ASCQR Program 
requirements.
    Based on the previously finalized policies for the ASCQR program 
and the proposals made in this proposed rule, we estimate a total 
burden of approximately 4.34 hours per ASC for facilities not 
submitting data for ASC-11 ([1,757 hours for ASC-6 and ASC-7 + 18,005 
hours for ASC-8 + 3,067 hours for ASC-9 and ASC-10]/5,260 ASCs = 4.34 
hours per ASC for all required measures) and approximately 4.92 hours 
for facilities voluntarily reporting data for ASC-11 \53\ (4.34 hours 
for reporting all required measures + [613 hours for ASC-11/1,052 ASCs] 
= 4.92 hours), or approximately 23,442 hours (1,757 hours for ASC-6 and 
ASC-7 + 18,005 hours for ASC-8 + 3,067 hours for ASC-9 and ASC-10 + 613 
hours for ASC-11 = 23,442 hours) across all ASCs associated with 
participating in the ASCQR Program for the CY 2018 payment 
determination. We further estimate a resulting total financial burden 
of $130 per ASC for facilities not submitting data for ASC-11 ([$52,710 
for ASC-6 and ASC-7 + $540,150 for ASC-8 + $92,010 for ASC-9 and ASC-
10]/5,260 ASCs = $130 per ASC for all required measures) and 
approximately $148 per ASC for facilities voluntarily reporting data 
under ASC-11 ($130 for all required measures + [$18,390/1,052 ASCs] = 
$148), or $703,260 ($52,710 for ASC-6 and ASC-7 + $540,150 for ASC-8 + 
$92,010 for ASC-9 and ASC-10 + $18,390 for ASC-11 = $703,260) across 
all ASCs.
---------------------------------------------------------------------------

    \53\ As noted in the CY 2015 OPPS/ASC final rule with comment 
period, we anticipate that approximately 20 percent of ASCs, or 
1,052 facilities, would elect to report ASC-11 on a voluntary basis 
(79 FR 67016).
---------------------------------------------------------------------------

    We refer readers to the information collection requirements in 
section XVIII.B.2 of this proposed rule for a detailed discussion of 
the financial and

[[Page 39369]]

hourly burden of the ASCQR Program's current and proposed requirements.
    We are inviting public comment on the burden associated with these 
proposals.
f. Impact of the Proposed Policy Change for Medical Review of Inpatient 
Hospital Admissions Under Medicare Part A
    As discussed in section XV. of this proposed rule, we are proposing 
a policy change for medical review of inpatient hospital admissions 
under Medicare Part A. In this section, we discuss the estimate by our 
actuaries of the overall impact of the proposed policy change described 
in section XV of this proposed rule. We also discuss the estimate by 
our actuaries of the overall impact of the 2-midnight rule adopted in 
the FY 2014 IPPS/LTCH PPS rulemaking, including a review by our 
actuaries of the claims data since the implementation of the 2-midnight 
rule.
    In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649 through 
27650), we discussed our actuaries' estimate that our current 2-
midnight policy would increase IPPS expenditures by approximately $220 
million in FY 2014. These additional expenditures were expected to 
result from a net increase in hospital inpatient encounters due to some 
outpatient encounters spanning more than 2 midnights moving to the IPPS 
from the OPPS, and some inpatient encounters of less than 2 midnights 
moving from the IPPS to the OPPS. We also proposed to use our 
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of 
the Act to offset this estimated $220 million in additional 
expenditures with a -0.2 percent adjustment to the IPPS rates. As 
discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50952 through 
50954), after considering the public comments received, our actuaries 
continued to estimate that there would be approximately $220 million in 
additional expenditures resulting from the 2-midnight rule and we 
adopted the -0.2 percent adjustment beginning in FY 2014.
    There were several components of the -0.2 percent adjustment 
estimate. First, in estimating the number of inpatient stays that would 
shift to the outpatient setting, inpatient claims containing a surgical 
MS-DRG were analyzed. These claims were from FY 2011, although FY 2009 
and FY 2010 claims data were also examined and the results were 
consistent with the FY 2011 results. Claims containing medical MS-DRGs 
and those that resulted in death or a transfer were excluded because it 
was assumed that these cases would be unaffected by the policy change. 
In making this assumption, the actuaries believed that behavioral 
changes by hospitals and admitting practitioners would mitigate some of 
the impact of cases shifting between the inpatient hospital setting and 
the outpatient hospital setting. Specifically, the actuaries assumed 
that most inpatient medical encounters spanning less than 2 midnights 
before the current 2-midnight rule was implemented might extend past 2 
midnights after its implementation and still be considered inpatient. 
They believed that the clinical assessments and protocols used by 
physicians to develop an expected length of stay for medical cases 
were, in general, more variable and less defined than those used to 
develop an expected length of stay for surgical cases. Under our 
proposed policy, our actuaries assume that some of these medical 
encounters might revert back to no longer extending past 2-midnights. 
However, they would not generally cause a significant increase or 
decrease in expenditures because they are inpatient under the current 
policy and could remain inpatient under the proposed policy. With 
respect to surgical encounters, under the current policy our actuaries 
assumed that cases spanning less than two midnights containing a 
surgical MS-DRG would shift from the inpatient setting to the 
outpatient setting. Under the proposed policy, our actuaries assume 
that as a result of the experience that hospitals have gained under the 
current 2-midnight rule and the continued potential for medical review 
of these cases, these cases generally would not shift back to the 
inpatient setting in significant numbers.
    A second component of the -0.2 percent adjustment estimate was the 
number of outpatient encounters assumed to shift to the inpatient 
setting. Outpatient claims that included spending for observation care 
or a major procedure were analyzed. Outpatient stays that were shorter 
than 2 midnights and those that were not for observation care or for a 
major procedure were excluded because it was assumed that these cases 
would be unaffected by the policy change. Under the current policy, our 
actuaries assumed that the cases for observation care or a major 
procedure that spanned more than 2 midnights would shift from the 
outpatient setting to the inpatient setting. Because the proposed 
policy only impacts cases spanning less than 2 midnights after 
admission, our actuaries do not assume any significant additional 
shifts in outpatient encounters spanning more than 2 midnights to the 
inpatient setting if our proposal is adopted. With respect to 
outpatient encounters that span less than 2 midnights, as a result of 
the experience that hospitals have gained under the current 2-midnight 
rule, the continued potential for medical review of these cases, and 
the fact that our experience indicates that the majority of these cases 
were generally not inpatient prior to the current 2-midnight policy, 
our actuaries assume that these cases would generally remain in the 
outpatient setting under our proposed policy.
    Another component of the -0.2 percent adjustment estimate was the 
assumption that payment under the OPPS would be roughly 30 percent of 
the payment under the IPPS for encounters shifting between the two 
systems, and the beneficiary would be responsible for 20 percent of the 
payment under the OPPS. Our actuaries continue to assume this payment 
differential under our proposed policy.
    Because our actuaries do not assume any significant additional 
shifts between the inpatient setting and the outpatient setting as a 
result of our proposed policy, and because there is also no change in 
the assumption regarding the 30-percent outpatient/inpatient payment 
differential, our actuaries do not estimate that overall IPPS 
expenditures would be significantly different under the proposed policy 
change for the medical review of inpatient hospital admissions under 
Medicare Part A described in section XV. of this proposed rule.
    As we indicated for the original -0.2 percent adjustment estimate, 
there is a certain degree of uncertainty surrounding any cost estimate. 
Our actuaries have determined that the methodology, data, and 
assumptions used here are reasonable for the purpose of estimating the 
overall impact of the proposed policy. It is important to note that the 
assumptions used for purposes of reasonably estimating overall impacts 
should not be construed as absolute statements about every individual 
encounter. For example, under our current policy, our actuaries did not 
expect that every single surgical MS-DRG encounter spanning less than 2 
midnights would shift to the outpatient setting, that every single 
medical MS-DRG encounter would remain in the inpatient setting, and 
that every single outpatient observation stay or major surgical 
encounter spanning more than 2 midnights would shift to the inpatient 
setting. However, for purposes of developing the -0.2 percent 
adjustment estimate under the current policy, a model where cases 
involving a surgical

[[Page 39370]]

MS-DRG spanning less than 2 midnights in the historical data shifted to 
the outpatient setting, cases involving a medical MS-DRG spanning less 
than 2 midnights in the historical data remained in the inpatient 
setting, and outpatient observation stays and major surgical encounters 
spanning more than 2 midnights in the historical data shifted to the 
inpatient setting yielded a reasonable estimate of the net effect of 
the 2-midnight policy. To the extent the actual experience might vary 
for each of the individual assumptions, our actuaries estimated that 
the total net effect of that variation would not significantly impact 
the estimate. Similarly, under our proposed policy, our actuaries do 
not expect that every single inpatient case would remain an inpatient 
case and every single outpatient case would remain an outpatient case. 
Rather, they estimate that total net effect of variation between their 
assumptions and actual experience would not significantly impact the 
estimate.
    Our actuaries also provided some important caveats with the 
original estimate that continue to hold true for the estimate of the 
proposed policy. They noted that the actual costs or savings would 
depend substantially on possible changes in behavior by hospitals and 
the medical review entities, and that such changes could not be 
anticipated with certainty. They also noted that the estimates did 
depend critically on the assumed utilization changes in the inpatient 
and outpatient hospital settings. While they believed that the 
assumptions were reasonable, they indicated that relatively small 
changes would have a disproportionate effect on the estimate. For this 
reason, the estimate was subject to a much greater degree of 
uncertainty than usual, and the actual results could have differed 
significantly from the estimate. All of these caveats also apply to the 
estimate that the proposed policy would not have a significant impact 
on expenditures.
    Our actuaries have been periodically reviewing the claims 
experience to date under the 2-midnight rule and comparing it to the 
experience of the previous time period. Below are a few observations 
from this review. Our actuaries have attempted to complete the claims 
data (that is, to adjust for lags between the time when claims were 
incurred but not yet received) in performing the review. Full incurred 
experience for the more recent time periods, when available, could 
result in a different outcome.
    Our actuaries found that the proportion of outpatient long-stay 
observation encounters (more than 2 days) as compared to all outpatient 
encounters decreased by 11 percent in FY 2014 compared to FY 2013 (6 
percent in the fourth quarter of CY 2013; 11 percent in the first 
quarter of CY 2014; 13 percent in the second quarter of CY 2014; and 14 
percent in the third quarter of CY 2014) and also by 11 percent in CY 
2014 compared to CY 2013 (6 percent in the fourth quarter of CY 2014).
    They found the proportion of 2-4 day inpatient stays as compared to 
all inpatient stays increased by 3.0 percent in FY 2014 compared to FY 
2013 (3.4 percent in the fourth quarter of CY 2013; 3.5 percent in the 
first quarter of CY 2014; 2.8 percent in the second quarter of CY 2014; 
and 2.4 percent in the third quarter of CY 2014) and increased by 2.7 
percent in CY 2014 compared to CY 2013 (2 percent in the fourth quarter 
of CY 2014).
    They found the proportion of very short stay inpatient admissions 
(0 and 1 days) decreased by 9.0 percent in FY 2014 compared to FY 2013 
(10.5 percent in the fourth quarter of CY 2013; 8.2 percent in the 
first quarter of CY 2014; 8.2 percent in the second quarter of CY 2014; 
and 7.7 percent in the third quarter of CY 2014) and decreased by 7.3 
percent in CY 2014 compared to CY 2013 (3.4 percent in the fourth 
quarter of CY 2014).
    Overall, the cumulative effect of these inpatient shifts show no 
change in the proportion of inpatient stays of 4 days or more.
    The data thus far is consistent with the assumptions used by our 
actuaries to develop the original -0.2 percent adjustment estimate: 
Outpatient long stay observations (more than 2 days) have declined; 2-4 
day inpatient stays have increased; and very short inpatient stays (1 
day or less) have decreased. The fact that there has been no change in 
the proportion of inpatient stays of 4 days or more is consistent with 
the assumption that the decrease in very short stay inpatient cases 
under the current policy would be offset by the shift of longer 
outpatient encounters to inpatient. Our actuaries will continue to 
review the claims experience under the 2-midnight rule, and we will 
take those reviews into account when considering future rulemaking.
    As was the case when our actuaries developed the original -0.2 
percent adjustment estimate and continues to be the case now, the 
outpatient and inpatient data files are publicly available. The CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html provides information about ordering 
the ``OPPS Limited Data Set'' containing the outpatient hospital data. 
The CMS Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ provides information about 
ordering the ``MedPAR Limited Data Set (LDS)-Hospital (National)'' 
containing the inpatient hospital data.
g. Impact of Proposed Transition for MDHs in All-Urban States Under the 
IPPS
    In section XVI. of this proposed rule, we discuss our proposal to 
provide a transition period under the IPPS for hospitals that lost 
their MDH status because they are no longer in a rural area due to the 
implementation of the new OMB labor market area delineations and are 
now located in an all-urban State. A facility is eligible for 
designation as an MDH only if it is either physically located in a 
rural area or has been reclassified under 42 CFR 412.103. However, a 
hospital that is located in an all-urban State cannot apply for 
reclassification as rural under 42 CFR 412.103 because its State does 
not have a rural area into which it can reclassify. We are proposing 
that, for discharges occurring on or after January 1, 2016, and before 
October 1, 2016, under the IPPS, a former MDH in an all-urban State 
would receive the Federal rate plus two-thirds of 75 percent of the 
amount by which the Federal rate payment is exceeded by its hospital-
specific rate payment. For FY 2017, that is, for discharges occurring 
on or after October 1, 2016, and before October 1, 2017, we are 
proposing that such former MDH would receive the Federal rate plus one-
third of 75 percent of the amount by which the Federal rate payment is 
exceeded by the hospital's hospital-specific rate. For FY 2018, that 
is, for discharges occurring on or after October 1, 2018, we are 
proposing that these former MDHs would be solely paid based on the 
Federal rate. We estimate that there is one provider that was 
classified an MDH prior to the effective date of the new OMB 
delineations on October 1, 2014, and is located in a newly all-urban 
State. We estimate the costs associated with the transition period for 
this hospital to be approximately $9 million.

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

[[Page 39371]]

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 $38.5 million or less in any single year or by the hospital's not-
for-profit status. Most ASCs and most CMHCs are considered small 
businesses with total revenues of $15 million or less in any single 
year. For details, see the Small Business Administration's ``Table of 
Small Business Size Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this 
proposed rule may have a significant impact on approximately 648 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 $144 million. This proposed rule does 
not mandate any requirements for State, local, or tribal governments, 
or for the private sector.

D. Conclusion

    The changes we are proposing to make in this proposed rule would 
affect all classes of hospitals paid under the OPPS and would affect 
both CMHCs and ASCs. We estimate that most classes of hospitals paid 
under the OPPS would experience a modest increase or a minimal decrease 
in payment for services furnished under the OPPS in CY 2015. Table 65 
demonstrates the estimated distributional impact of the OPPS budget 
neutrality requirements that would result in a 0.2 percent decrease in 
payments for all services paid under the OPPS in CY 2016, after 
considering all of the proposed changes to APC reconfiguration and 
recalibration, as well as the proposed OPD fee schedule increase 
factor, proposed adjustment to the conversion factor to address the 
inflation in OPPS payment rates resulting from excess packaged payment 
under the OPPS for laboratory tests, proposed wage index changes, 
including the proposed frontier State wage index adjustment, proposed 
estimated payment for outliers, and proposed changes to the pass-
through payment estimate. However, some classes of providers that are 
paid under the OPPS would experience more significant gains or losses 
in OPPS payments in CY 2016.
    The proposed updates to the ASC payment system for CY 2016 would 
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 66 demonstrates 
the estimated distributional impact among ASC surgical specialties of 
the proposed MFP-adjusted CPI-U update factor of 1.1 percent for CY 
2016.

XXI. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications. We have examined the OPPS and ASC provisions included in 
this proposed rule in accordance with Executive Order 13132, 
Federalism, and have determined that they 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 65 of 
this proposed rule, we estimate that OPPS payments to governmental 
hospitals (including State and local governmental hospitals) would 
decrease payment by 0.2 percent under this proposed rule. While we do 
not know the number of ASCs or CMHCs with government ownership, we 
anticipate that it is small. The analyses we have provided in this 
section of this proposed rule, in conjunction with the remainder of 
this document, demonstrate that this proposed rule is consistent with 
the regulatory philosophy and principles identified in Executive Order 
12866, the RFA, and section 1102(b) of the Act.
    This proposed rule would affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals, CMHCs, and ASCs, and some effects may be 
significant.

List of Subjects

42 CFR Part 410

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

42 CFR Part 412

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

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter 
IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

    Authority: Secs. 1102, 1834, 1871, and 1893 of the Social 
Security Act (42 U.S.C. 1302, 1395m, 1395hh, and 1395ddd).

0
2. Section 410.29 is amended by revising paragraph (a) to read as 
follows:


Sec.  410.29  Limitations on drugs and biologicals.

* * * * *
    (a) Except as provided in Sec.  410.28(a) for outpatient diagnostic 
services and Sec.  410.63(b) for blood clotting factors, and except for 
EPO, any drug or biological which is usually self-administered by the 
patient.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
3. The authority citation for Part 412 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Pub. L. 113-67, and sec 112 of Pub. L. 113-
93.


[[Page 39372]]


0
4. Section 412.3 is amended by revising paragraph (d) to read as 
follows:


Sec.  412.3  Admissions.

* * * * *
    (d)(1) Except as specified in paragraphs (d)(2) and (3) of this 
section, an inpatient admission is generally appropriate for payment 
under Medicare Part A when the admitting physician expects the patient 
to require hospital care that crosses two midnights.
    (i) The expectation of the physician should be based on such 
complex medical factors as patient history and comorbidities, the 
severity of signs and symptoms, current medical needs, and the risk of 
an adverse event. The factors that lead to a particular clinical 
expectation must be documented in the medical record in order to be 
granted consideration.
    (ii) If an unforeseen circumstance, such as a beneficiary's death 
or transfer, results in a shorter beneficiary stay than the physician's 
expectation of at least 2 midnights, the patient may be considered to 
be appropriately treated on an inpatient basis, and payment for an 
inpatient hospital stay may be made under Medicare Part A.
    (2) An inpatient admission for a surgical procedure specified by 
Medicare as inpatient only under Sec.  419.22(n) of this chapter is 
generally appropriate for payment under Medicare Part A, regardless of 
the expected duration of care.
    (3) Where the admitting physician expects a patient to require 
hospital care for only a limited period of time that does not cross 2 
midnights, an inpatient admission may be appropriate for payment under 
Medicare Part A based on the clinical judgment of the admitting 
physician and medical record support for that determination. The 
physician's decision should be based on such complex medical factors as 
patient history and comorbidities, the severity of signs and symptoms, 
current medical needs, and the risk of an adverse event. In these 
cases, the factors that lead to the decision to admit the patient as an 
inpatient must be supported by the medical record in order to be 
granted consideration.

PART 416--AMBULATORY SURGICAL SERVICES

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

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

0
6. Section 416.164 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  416.164  Scope of ASC services.

* * * * *
    (b) * * *
    (3) Certain items and services that CMS designates as contractor-
priced, including, but not limited to, the acquisition or procurement 
of corneal tissue for corneal transplant procedures;
* * * * *
0
7. Section 416.172 is amended by revising paragraph (f) to read as 
follows:


Sec.  416.172  Adjustments to national payment rates.

* * * * *
    (f) Interrupted procedures. (1) Subject to the provisions of 
paragraph (f)(2) of this section, when a covered surgical procedure or 
covered ancillary service is terminated prior to completion due to 
extenuating circumstances or circumstances that threaten the well-being 
of the patient, the Medicare program payment amount and the beneficiary 
coinsurance amount are based on one of the following:
    (i) The full program and beneficiary coinsurance amounts if the 
procedure for which anesthesia is planned is discontinued after the 
induction of anesthesia or after the procedure is started;
    (ii) One-half of the full program and beneficiary coinsurance 
amounts if the procedure for which anesthesia is planned is 
discontinued after the patient is prepared for surgery and taken to the 
room where the procedure is to be performed but before the anesthesia 
is induced; or
    (iii) One-half of the full program and beneficiary coinsurance 
amounts if a covered surgical procedure or covered ancillary service 
for which anesthesia is not planned is discontinued after the patient 
is prepared and taken to the room where the service is to be provided.
    (2) Beginning CY 2016, if the covered surgical procedure is a 
device-intensive procedure, the full device portion of ASC device-
intensive procedure is removed prior to determining the Medicare 
program payment amount and beneficiary copayment amount identified in 
paragraphs (f)(1)(ii) and (f)(1)(iii) of this section.
* * * * *
0
8. Section 416.195 is amended by revising paragraph (a)(1) to read as 
follows:


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

    (a) * * *
    (1) The IOL is considered new. Under this provision, CMS will 
evaluate an application for a new technology IOL only if the IOL type 
has received initial FDA premarket approval within the 3 years prior to 
the new technology IOL application submission date.
* * * * *
0
9. Subpart H is added to read as follows:
Subpart H--Requirements Under the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
Sec.
416.300 Basis and scope of subpart.
416.305 Participation and withdrawal requirements under the ASCQR 
Program.
416.310 Data collection and submission requirements under the ASCQR 
Program.
416.315 Public reporting of data under the ASCQR Program.
416.320 Retention and removal of quality measures under the ASCQR 
Program.
416.325 Measure maintenance under the ASCQR Program.
416.330 Reconsiderations under the ASCQR Program.

Subpart H--Requirements Under the Ambulatory Surgical Center 
Quality Reporting (ASCQR) Program


Sec.  416.300  Basis and scope of subpart.

    (a) Statutory basis. Section 1833(i)(2)(D)(iv) and (i)(7) of the 
Act authorizes the Secretary to implement a revised ASC payment system 
in a manner so as to provide for a 2.0 percentage point reduction in 
any annual update for an ASC's failure to report on quality measures in 
accordance with the Secretary's requirements.
    (b) Scope. This subpart contains specific requirements and 
standards for the ASCQR Program.


Sec.  416.305  Participation and withdrawal requirements under the 
ASCQR Program.

    (a) Participation in the ASCQR Program. Except as provided in 
paragraph (c) of this section, an ambulatory surgical center (ASC) is 
considered as participating in the ASCQR Program once the ASC submits 
any quality measure data to the ASCQR Program and has been designated 
as open in the Certification and Survey Provider Enhanced Reporting 
system for at least four months prior to the beginning of data 
collection for a payment determination.
    (b) Withdrawal from the ASCQR Program. (1) An ASC may withdraw from 
the ASCQR Program by submitting to CMS a withdrawal of participation 
form that can be found in the secure portion of the QualityNet Web 
site.
    (2) An ASC may withdraw from the ASCQR Program any time up to and

[[Page 39373]]

including August 31 of the year preceding a payment determination.
    (3) Except as provided in paragraph (c) of this section, an ASC 
will incur a 2.0 percentage point reduction in its ASC annual payment 
update for that payment determination year and any subsequent payment 
determinations in which it is withdrawn.
    (4) An ASC will be considered as rejoining the ASCQR Program if it 
begins to submit any quality measure data again to the ASCQR Program.
    (c) Minimum case volume for program participation. ASCs with fewer 
than 240 Medicare claims (Medicare primary and secondary payer) per 
year during an annual reporting period for a payment determination year 
are not required to participate in the ASCQR Program for the subsequent 
annual reporting period for that subsequent payment determination year.
    (d) Indian Health Service hospital outpatient department 
participation. Beginning with the CY 2017 payment determination, Indian 
Health Service hospital outpatient departments that bill Medicare under 
the Ambulatory Surgical Center payment system are not considered ASCs 
for the purposes of the ASCQR Program. These facilities are not 
required to meet ASCQR Program requirements and will not receive 
payment reductions under the ASCQR Program.


Sec.  416.310  Data collection and submission requirements under the 
ASCQR Program.

    (a) Requirements for claims-based measures using quality data codes 
(QDCs).
    (1) ASCs 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.
    (2) The data collection period for claims-based quality measures 
reported using QDCs is the calendar year 2 years prior to the payment 
determination year. Only claims for services furnished in each calendar 
year paid by the Medicare Administrative Contractor (MAC) by April 30 
of the following year of the ending data collection time period will be 
included in the data used for the payment determination year.
    (3) For ASCQR Program purposes, data completeness for claims-based 
measures using QDCs is 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 that meet measure specifications, but do not 
have the appropriate QDCs on the submitted Medicare claim. The minimum 
threshold for successful reporting is that at least 50 percent of 
Medicare claims meeting measure specifications contain the appropriate 
QDCs. ASCs that meet this minimum threshold are regarded as having 
provided complete data for the claims-based measures using QDCs for the 
ASCQR Program.
    (b) Requirements for claims-based measures not using QDCs. The data 
collection period for claims-based quality measures not using QDCs is 
Medicare fee-for-service claims from the calendar year 2 years prior to 
the payment determination year. Only claims for services furnished in 
each calendar year paid by the MAC by April 30 of the following year of 
the ending data collection time period will be included in the data 
used for the payment determination.
    (c) Requirements for data submitted via an online data submission 
tool--(1) Requirements for data submitted via a CMS online data 
submission tool--(i) QualityNet account for Web-based measures. ASCs 
must maintain a QualityNet account in order to submit quality measure 
data to the QualityNet Web site for all Web-based measures submitted 
via a CMS online data submission tool. A QualityNet security 
administrator is necessary to set-up such an account for the purpose of 
submitting this information.
    (ii) Data collection requirements. The data collection time period 
for quality measures for which data is submitted via a CMS online data 
submission tool is for services furnished during the calendar year 2 
years prior to the payment determination year. Beginning with the CY 
2017 payment determination year, data collected must be submitted 
during the time period of January 1 to May 15 in the year prior to the 
payment determination year.
    (2) Requirements for data submitted via a non-CMS online data 
submission tool. The data collection time period for ASC-8: Influenza 
Vaccination Coverage Among Healthcare Personnel is from October 1 of 
the year 2 years prior to the payment determination year to March 31 
during the calendar year prior to the payment determination year. Data 
collected must be submitted by May 15 in the year prior to the payment 
determination year.
    (d) Extension or exemption. CMS may grant an extension or exemption 
for the submission of information in the event of extraordinary 
circumstances beyond the control of an ASC, or a systematic problem 
with one of CMS' data collection systems directly or indirectly affects 
data submission. CMS may grant an extension or exemption as follows:
    (1) Upon request of the ASC. Specific requirements for submission 
of a request for an extension or exemption are available on the 
QualityNet Web site; or
    (2) At the discretion of CMS. CMS may grant extensions or 
exemptions to ASCs that have not requested them when CMS determines 
that an extraordinary circumstance has occurred.


Sec.  416.315  Public reporting of data under the ASCQR Program.

    Data that an ASC submitted for the ASCQR Program will be made 
publicly available on a CMS Web site after providing the ASC an 
opportunity to review the data to be made public. CMS will display ASC 
data by the National Provider Identifier (NPI) when data are submitted 
by the NPI. CMS will display ASC data by the CMS Certification Number 
(CCN) when data are submitted by the CCNs, such that all NPIs 
associated with that CCN will be assigned the CCN's value.


Sec.  416.320  Retention and removal of quality measures under the 
ASCQR Program.

    (a) General rule for the retention of quality measures. Quality 
measures adopted for an ASCQR Program measure set for a previous 
payment determination year are retained in the ASCQR Program for 
measure sets for subsequent payment determination years, except when 
they are removed, suspended, or replaced as set forth in paragraphs (b) 
and (c) of this section.
    (b) Immediate measure removal. In cases where CMS believes that the 
continued use of a measure as specified raises patient safety concerns, 
CMS will immediately remove a quality measure from the ASCQR Program 
and will promptly notify ASCs and the public of the removal of the 
measure and the reasons for its removal through the ASCQR Program 
ListServ and the ASCQR Program QualityNet Web site. CMS will confirm 
the removal of the measure for patient safety concerns in the next 
ASCQR Program rulemaking.
    (c) Measure removal, suspension, or replacement through the 
rulemaking process. Unless a measure raises specific safety concerns as 
set forth in paragraph (b) of this section, CMS will use the regular 
rulemaking process to remove, suspend, or replace quality measures in 
the ASCQR Program to allow for public comment.
    (1) Criteria for removal of quality measures. (i) CMS will use the 
following criteria to determine whether to remove a measure from the 
ASCQR Program:

[[Page 39374]]

    (A) Measure performance among ASCs is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer 
be made (topped-out measures);
    (B) Availability of alternative measures with a stronger 
relationship to patient outcomes;
    (C) A measure does not align with current clinical guidelines or 
practice;
    (D) The availability of a more broadly applicable (across settings, 
populations, or conditions) measure for the topic;
    (E) The availability of a measure that is more proximal in time to 
desired patient outcomes for the particular topic;
    (F) The availability of a measure that is more strongly associated 
with desired patient outcomes for the particular topic; and
    (G) Collection or public reporting of a measure leads to negative 
unintended consequences other than patient harm.
    (ii) The benefits of removing a measure from the ASCQR Program will 
be assessed on a case-by-case basis. A measure will not be removed 
solely on the basis of meeting any specific criterion.
    (2) Criteria to determine topped-out measures. For the purposes of 
the ASCQR Program, a measure is considered to be topped-out under 
paragraph (c)(1)(i)(A) of this section when it meets both of the 
following criteria:
    (i) Statistically indistinguishable performance at the 75th and 
90th percentiles (defined as when the difference between the 75th and 
90th percentiles for an ASC's measure is within two times the standard 
error of the full data set); and
    (ii) A truncated coefficient of variation less than or equal to 
0.10.


Sec.  416.325  Measure maintenance under the ASCQR Program.

    (a) Measure maintenance under the ASCQR Program. CMS follows 
different procedures to update the measure specifications under the 
ASCQR Program based on whether the change is substantive or 
nonsubstantive. CMS will determine what constitutes a substantive 
versus a nonsubstantive change to a measure's specifications on a case-
by-case basis.
    (b) Substantive changes. CMS will continue to use rulemaking to 
adopt substantive updates to measures in the ASCQR Program.
    (c) Nonsubstantive changes. If CMS determines that a change to a 
measure previously adopted in the ASCQR Program is nonsubstantive, CMS 
will use a subregulatory process to revise the ASCQR Program 
Specifications Manual so that it clearly identifies the changes to that 
measure and provide links to where additional information on the 
changes can be found. When a measure undergoes subregulatory 
maintenance, CMS will provide notification of the measure specification 
update on the QualityNet Web site and in the ASCQR Program 
Specifications Manual, and will provide sufficient lead time for ASCs 
to implement the revisions where changes to the data collection systems 
would be necessary.


Sec.  416.330  Reconsiderations under the ASCQR Program.

    (a) Reconsiderations of ASCQR Program decisions. An ASC may request 
reconsideration of a decision by CMS that it has not met the 
requirements of the ASCQR Program for a particular payment 
determination year. An ASC must submit a reconsideration request to CMS 
by no later than the first business day on or after March 17 of the 
affected payment year.
    (b) Requirements for reconsideration requests. A reconsideration 
request must contain the following information:
    (1) The ASC CCN and related NPI(s);
    (2) The name of the ASC;
    (3) The CMS-identified reason for not meeting the requirements of 
the ASCQR Program for the affected payment determination year as 
provided in any CMS notification to the ASC;
    (4) The ASC's basis for requesting reconsideration. The ASC must 
identify its specific reason(s) for believing it met the ASCQR Program 
requirements for the affected payment determination year and should not 
be subject to the reduced ASC annual payment update;
    (5) The ASC-designated personnel contact information, including 
name, email address, telephone number, and mailing address (must 
include physical mailing address, not just a post office box); and
    (6) A copy of all materials that the ASC submitted to comply with 
the requirements of the affected ASCQR Program payment determination 
year. With regard to information on claims, ASCs are not required to 
submit copies of all submitted claims, but instead may focus on the 
specific claims at issue. For these claims, ASCs should submit relevant 
information, which could include copies of the actual claims at issue.
    (c) Reconsideration process. Upon receipt of a request for 
reconsideration, CMS will do the following:
    (1) Provide an email acknowledgement, using the contact information 
provided in the reconsideration request, notifying the ASC that the 
request has been received; and
    (2) Provide a formal response to the ASC contact using the 
information provided in the reconsideration request notifying the ASC 
of the outcome of the reconsideration process.
    (d) Final ASCQR Program payment determination. For an ASC that 
submits a reconsideration request, the reconsideration determination is 
the final ASCQR Program payment determination. For an ASC that does not 
submit a timely reconsideration request, the CMS determination is the 
final payment determination. There is no appeal of any final ASCQR 
Program payment determination.

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

0
10. The authority citation for Part 419 continues to read as follows:

    Authority: Secs. 1102, 1833(t), and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395l(t), and 1395hh).

0
11. Section 419.2 is amended by revising paragraph (c)(8) to read as 
follows:


Sec.  419.2  Basis of payment.

* * * * *
    (c) * * *
    (8) Corneal tissue acquisition or procurement costs for corneal 
transplant procedures.
0
12. Section 419.32 is amended by adding new paragraph (b)(1)(iv)(B)(7) 
to read as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (iv) * * *
    (B) * * *
    (7) For calendar year 2016, a multifactor productivity adjustment 
(as determined by CMS), and 0.2 percentage point.
* * * * *
0
13. Section 419.44 is amended by revising paragraph (b) to read as 
follows:


Sec.  419.44  Payment reductions for procedures.

* * * * *
    (b) Interrupted procedures. (1) Subject to the provisions of 
paragraph (b)(2) of this section, when a procedure is terminated prior 
to completion due to extenuating circumstances or circumstances that 
threaten the well-being of the patient, the Medicare program payment 
amount and the

[[Page 39375]]

beneficiary copayment amount are based on--
    (i) The full program and beneficiary copayment amounts if the 
procedure for which anesthesia is planned is discontinued after the 
induction of anesthesia or after the procedure is started;
    (ii) One-half the full program and the beneficiary copayment 
amounts if the procedure for which anesthesia is planned is 
discontinued after the patient is prepared and taken to the room where 
the procedure is to be performed but before anesthesia is induced; or
    (iii) One-half of the full program and beneficiary copayment 
amounts if a procedure for which anesthesia is not planned is 
discontinued after the patient is prepared and taken to the room where 
the procedure is to be performed.
    (2) Beginning CY 2016, if a procedure involves an implantable 
device assigned to a device-intensive APC, the full device portion of 
the device-intensive APC procedure payment is removed prior to 
determining the program and beneficiary copayment amounts identified in 
paragraphs (b)(1)(ii) and (b)(1)(iii) of this section.
0
14. Section 419.46 is amended by revising paragraphs (b), (d), (e), and 
(f)(1) to read as follows:


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

* * * * *
    (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 up to and 
including August 31 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.
* * * * *
    (d) Exemption. CMS may grant an extension or exemption 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 exemption as 
follows:
    (1) Upon request by the hospital. Specific requirements for 
submission of a request for an extension or exemption are available on 
the QualityNet Web site.
    (2) At the discretion of CMS. CMS may grant extensions or 
exemptions 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(t)(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 
calendar year if it achieves at least a 75-percent reliability score, 
as determined by CMS.
    (f) * * *
    (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 calendar 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 on or after March 17 of the affected payment year as determined 
using the date the request was mailed or submitted to CMS.
* * * * *
0
15. Section 419.66 is amended by revising paragraph (b)(1) to read as 
follows:


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

* * * * *
    (b) * * *
    (1) If required by the FDA, the device must have received FDA 
premarket approval or clearance (except for a device that has received 
an FDA investigational device exemption (IDE) and has been classified 
as a Category B device by the FDA in accordance with Sec. Sec.  405.203 
through 405.207 and 405.211 through 405.215 of this chapter), or meet 
another appropriate FDA exemption from premarket approval or clearance. 
Under this provision, CMS will consider only applications for a medical 
device submitted within 3 years from the date of the initial FDA 
approval or clearance, if required.
* * * * *

    Dated: June 26, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 26, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-16577 Filed 7-1-15; 4:15 pm]
BILLING CODE 4120-01-P