[Federal Register Volume 80, Number 219 (Friday, November 13, 2015)]
[Rules and Regulations]
[Pages 70298-70607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27943]



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Vol. 80

Friday,

No. 219

November 13, 2015

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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





Medicare 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; Provider Administrative Appeals and 
Judicial Review; Final Rule

  Federal Register / Vol. 80 , No. 219 / Friday, November 13, 2015 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 413, 416, and 419

[CMS-1633-FC; CMS-1607-F2]
RIN 0938-AS42; 0938-AS11


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; Provider Administrative Appeals and 
Judicial Review

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

ACTION: Final rule with comment period; final rule.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2016 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare services paid under the 
OPPS and those paid under the ASC payment system. In addition, this 
final rule with comment period updates and refines the requirements for 
the Hospital Outpatient Quality Reporting (OQR) Program and the ASC 
Quality Reporting (ASCQR) Program.
    Further, this document includes certain finalized policies relating 
to the hospital inpatient prospective payment system: Changes to the 2-
midnight rule under the short inpatient hospital stay policy; and a 
payment transition for hospitals that lost their status as a Medicare-
dependent, small rural hospital (MDH) because they are no longer in a 
rural area due to the implementation of the new Office of Management 
and Budget delineations in FY 2015 and have not reclassified from urban 
to rural before January 1, 2016.
    In addition, this document contains a final rule that finalizes 
certain 2015 proposals, and addresses public comments received, 
relating to the changes in the Medicare regulations governing provider 
administrative appeals and judicial review relating to appropriate 
claims in provider cost reports.

DATES: Effective Date: This final rule with comment period and final 
rule are effective on January 1, 2016.
    Comment Period: To be assured consideration, comments on the 
payment classifications assigned to HCPCS codes identified in Addenda 
B, AA, and BB with the ``NI'' comment indicator and on other areas 
specified throughout this final rule with comment period must be 
received at one of the addresses provided in the ADDRESSES section no 
later than 5 p.m. EST on December 29, 2015.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Requests for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
1, 2016, at the following address: ASC/NTIOL, Division of Outpatient 
Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 
7500 Security Boulevard, Baltimore, MD 21244-1850.

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

FOR FURTHER INFORMATION CONTACT: Advisory Panel on Hospital Outpatient 
Payment (HOP Panel), contact Carol Schwartz at (410) 786-0576.
    Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth 
Daniel at (410) 786-0237.
    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) Program 
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) Hospital Services, contact Twi 
Jackson at (410) 786-1159.
    CPT and Level II Alphanumeric HCPCS Codes--Process for Requesting 
Comments, 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 Lela Strong at (410) 786-3213.

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    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 Measures, 
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.
    Medicare Cost Reports: Appropriate Claims and Provider Appeals, 
contact Kellie Shannon at (410) 786-0416.
    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 2 Times Rule, contact Marjorie Baldo at 
(410) 786-4617.
    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 Former Medicare-Dependent, Small Rural Hospitals, 
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, Pub. L. 105-33
    BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
    BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
    BLS Bureau of Labor Statistics
    CAH Critical access hospital
    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, Pub. L. 109-171
DSH Disproportionate share hospital
EACH Essential access community hospital
EAM Extended assessment and management
EBRT External beam radiotherapy

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ECG Electrocardiogram
ED Emergency department
EDTC Emergency department transfer communication
EHR Electronic health record
EJR Expedited judicial review
E/M Evaluation and management
ESRD End-stage renal disease
ESRD QIP End-Stage Renal Disease Quality Improvement Program
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FTE Full-time equivalent
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
GME Graduate medical education
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L. 
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, 
Pub. L. 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
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
IME Indirect medical education
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, Pub. L. 
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, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Pub. L. 110-275
MLR Medical loss ratio
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
MPFS Medicare Physician Fee Schedule
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
NPR Notice of program reimbursement
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, Pub. L. 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, Pub. L. 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, Pub. L. 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
PRM Provider Reimbursement Manual
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
    G. Public Comments Received on the CY 2016 OPPS/ASC Proposed 
Rule
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Use of Single and Multiple Procedure Claims
    c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
    (1) Splitting Claims

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    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Panel Regarding Data Development
    d. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Blood and Blood Products
    (2) Brachytherapy Sources
    e. Comprehensive APCs (C-APCs) for CY 2016
    (1) Background
    (2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016
    (3) CY 2016 Policies for Specific C-APCs
    f. Calculation of Composite APC Criteria-Based Costs
    (1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
    (2) Mental Health Services Composite APC
    (3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Changes to Packaged Items and Services
    a. Background and Rationale for Packaging in the OPPS
    b. 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. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    F. OPPS Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act
    1. Background
    2. Payment Adjustment for Certain Cancer Hospitals for CY 2016
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Outlier Calculation
    3. Final Outlier Calculation
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New CY 2015 Level II HCPCS and CPT Codes 
Effective April 1, 2015 and July 1, 2015 for Which We Solicited 
Public Comments in the CY 2016 OPPS/ASC Proposed Rule
    2. Process for New Level II HCPCS Codes That Became Effective 
October 1, 2015 and New Level II HCPCS Codes That Will Be Effective 
January 1, 2016 for Which We Are Soliciting Public Comments in this 
CY 2016 OPPS/ASC Final Rule With Comment Period
    3. Treatment of New and Revised CY 2016 Category I and III CPT 
Codes That Will Be Effective January 1, 2016 for Which We Solicited 
Public Comments in the CY 2016 OPPS/ASC Proposed Rule
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. APC Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Additional New Technology APC Groups
    3. Procedures Assigned to New Technology APCs for CY 2016
    a. Transprostatic Urethral Implant Procedure
    b. Retinal Prosthesis Implant Procedure
    D. OPPS Ambulatory Payment Classification (APC) Group Policies
    1. Airway Endoscopy Procedures
    2. Cardiovascular Procedures and Services
    a. Cardiac Contractility Modulation (CCM) Therapy
    b. Cardiac Rehabilitation
    c. Cardiac Telemetry
    3. Diagnostic Tests and Related Services
    4. Excision/Biopsy and Incision and Drainage Procedures
    5. Eye Surgery and Other Eye-Related Procedures
    a. Implantable Miniature Telescope (CPT Code 0308T)
    b. Other Ocular Procedures
    6. Gastrointestinal (GI) Procedures
    7. Gynecologic Procedures and Services
    8. Imaging Services
    6. Orthopedic Procedures
    9. Skin Procedures
    10. Pathology Services
    11. Radiology Oncology Procedures and Services
    a. Therapeutic Radiation Treatment Preparation
    b. Radiation Therapy (Including Brachytherapy)
    c. Fractionated Stereotactic Radiosurgery (SRS)
    12. Skin Procedures
    a. Negative Pressure Wound Therapy (NPWT)
    b. Platelet Rich Plasma (PRP)
    13. Urology and Related Services
    14. Vascular Procedures (Excluding Endovascular Procedures)
    15. Other Procedures and Services
    a. Ear, Nose, Throat (ENT) Procedures
    b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)
    c. Stem Cell Transplant
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. CY 2016 Policy
    2. Annual Rulemaking Process in Conjunction With Quarterly 
Review Process for Device Pass-Through Payment Applications
    a. Background
    b. Revision to the 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. CY 2016 Policy
    B. Device-Intensive Procedures
    1. Background
    2. Changes to Device Edit Policy
    3. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    a. Background
    b. Policy for CY 2016
    4. Adjustment to OPPS Payment for Discontinued Device-Intensive 
Procedures
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals With Expiring Pass-Through Status in CY 
2015
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2016
    4. Provisions for Reducing Transitional Pass-Through Payments 
for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged 
Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    d. Payment Offset Policy for 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. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. High Cost/Low Cost Threshold for Packaged Skin Substitutes
    d. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological but Different Dosages
    3. Payment for Drugs and Biologicals Without Pass-Through Status 
That Are Not Packaged
    a. Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    b. CY 2016 Payment Policy
    4. Payment Policy for Therapeutic Radiopharmaceuticals
    5. Payment Adjustment Policy for Radioisotopes Derived From Non-
Highly Enriched Uranium Sources
    6. Payment for Blood Clotting Factors
    7. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital 
Claims Data

[[Page 70302]]

    C. Self-Administered Drugs (SADs) Technical Correction
    D. OPPS Payment for Biosimilar Biological Products
    1. Background
    2. Payment Policy for Biosimilar Biological Products
    3. OPPS Transitional Pass-Through Payment Policy for Biosimilar 
Biological Products
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
    A. Payment for Hospital Outpatient Clinic and Emergency 
Department Visits
    B. Payment for Critical Care Services
    C. Payment for Chronic Care Management Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2016
    1. 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
    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. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient Only List
X. Nonrecurring Policy Changes
    A. Advance Care Planning Services
    B. Changes for Payment for Computed Tomography (CT)
    C. Lung Cancer Screening With Low Dose Computed Tomography
    D. Payment for Procurement of Corneal Tissue Used in Procedures 
in the HOPD and the ASC
    1. Background
    2. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD 
and the ASC
XI. CY 2016 OPPS Payment Status and Comment Indicators
    A. CY 2016 OPPS Payment Status Indicator Definitions
    B. CY 2016 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. 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. Treatment of New and Revised Level II HCPCS Codes and 
Category III CPT Codes Implemented in April 2015 and July 2015 for 
Which We Solicited Public Comments in the Proposed Rule
    3. 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. Modification of the Current Process for Accepting Comments on 
New and Revised Category I and III CPT Codes That are Effective 
January 1
    4. Process for New and Revised Level II HCPCS Codes That Will Be 
Effective October 1, 2015 and January 1, 2016 for Which We Are 
Soliciting Public Comments in This CY 2016 OPPS/ASC Final Rule With 
Comment Period
    C. Update to the Lists of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Covered Surgical Procedures Designated as Office-Based
    b. ASC Covered Surgical Procedures Designated as Device-
Intensive--Finalized Policy for CY 2015 and Policy for CY 2016
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    d. Adjustment to ASC Payments for Discontinued Device-Intensive 
Procedures
    e. Additions to the List of ASC Covered Surgical Procedures
    f. ASC Treatment of Surgical Procedures That Are Removed From 
the OPPS Inpatient List for CY 2016
    2. Covered Ancillary Services
    a. List of Covered Ancillary Services
    b. Exclusion of Corneal Tissue Procurement From the Covered 
Ancillary Services List When Used for Nontransplant Procedures
    c. Removal of Certain Services from the Covered Ancillary 
Services List That are Not Used as Ancillary and Integral to a 
Covered Surgical Procedure
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. ASC Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
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. Payment for Covered Ancillary Services
    a. Background
    b. 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. Newness Criterion
    5. Announcement of CY 2016 Deadline for Submitting Requests for 
CMS Review of Applications for a New Class of NTIOLs
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2016 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of 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. Hospital OQR Program Quality Measure Removed for the CY 2017 
Payment Determination and Subsequent Years
    6. New Hospital OQR Program Quality Measures for the CY 2018 and 
CY 2019 Payment Determinations and Subsequent Years
    a. 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. Requirements Regarding Participation Status
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    1. 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

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    3. Claims-Based Measure Data Requirements
    4. Data Submission Requirements for Measure Data Submitted Via a 
Web-Based Tool
    a. Previously Finalized Measures
    b. 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. 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. 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
    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 7-Day Risk-Standardized Hospital Visit Rate After 
Outpatient Colonoscopy Measure for the CY 2018 Payment Determination 
and Subsequent Years
    5. Indian Health Service (IHS) Hospital Outpatient Departments 
Not 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. Policy Clarification for Medical Review of Inpatient Hospital 
Admissions under Medicare Part A
XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals 
(MDHs) 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. Final Rule: Appropriate Claims in Provider Cost Reports; 
Administrative Appeals by Providers and Judicial Review
    A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS 
Proposed Rule
    B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH 
PPS Final Rule
    C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed 
Rule
    1. Background for Payments and Cost Reporting Requirements
    2. Background for Administrative Appeals by Providers and 
Judicial Review
    3. Background for Appropriate Claims in Provider Cost Reports
    D. Addition to the Cost Reporting Regulations of the Substantive 
Reimbursement Requirement of an Appropriate Cost Report Claim
    1. Proposed Provisions (New Sec.  413.24(j))
    2. Statutory Authority and Rationale for Proposed Sec.  
413.24(j)
    3. Summary of Public Comments, CMS Responses, and Statement of 
Finalized Policies for Sec.  413.24(j)
    E. Revisions to the Provider Reimbursement Appeals Regulations
    1. Elimination of the Jurisdictional Requirement of an 
Appropriate Cost Report Claim
    a. Proposed Revisions to Sec. Sec.  405.1835 and 405.1840
    b. Summary of Public Comments and Our Responses and Finalized 
Policies
    2. Board Review of Compliance With Cost Report Claim 
Requirements Under Sec.  413.24(j)
    a. Proposed Addition of New Sec.  405.1873
    b. Summary of Public Comments and Our Responses and Finalized 
Policies
    3. Related Revisions to Sec.  405.1875 Regarding Administrator 
Review
    4. Conforming Changes to the Board Appeals Regulations and 
Corresponding Revisions to the Contractor Hearing Regulations
    a. Technical Corrections to 42 CFR part 405, subpart R and All 
Subparts of 42 CFR Part 413
    b. Technical Corrections and Conforming Changes to Sec. Sec.  
405.1801 and 405.1803
    c. Technical Corrections and Conforming Changes to Sec. Sec.  
405.1811, 405.1813, and 405.1814
    d. Addition of New Sec.  405.1832
    e. Revisions to Sec.  405.1834
    f. Technical Corrections and Conforming Changes to Sec. Sec.  
405.1836, 405.1837, and 405.1839
    F. Collection of Information Requirements
    G. Impact of Requiring Appropriate Claims in Provider Cost 
Reports and Eliminating That Requirement for Administrative Appeals 
by Providers
XVIII. Files Available to the Public Via the Internet
XIX. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    2. ASCQR Program Requirements
XX. Response to Comments
XXI. 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 OPPS Changes in This Final Rule With 
Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of OPPS Changes on Hospitals
    (3) Estimated Effects of OPPS Changes on CMHCs
    (4) Estimated Effect of OPPS Changes on Beneficiaries
    (5) Estimated Effects of OPPS Changes on Other Providers
    (6) Estimated Effects of OPPS Changes on the Medicare and 
Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of CY 2016 ASC Payment System Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of CY 2016 ASC Payment System Policies on 
ASCs
    (3) Estimated Effects of ASC Payment System Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered

[[Page 70304]]

    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital OQR Program
    e. Effects of Policies for the ASCQR Program
    f. Impact of the Policy Change for Medical Review of Inpatient 
Hospital Admissions Under Medicare Part A
    g. Impact of Transition for Former MDHs under the IPPS
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this document, we are updating 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 final rule with comment 
period. In addition, this document updates and refines the requirements 
for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC 
Quality Reporting (ASCQR) Program.
    Further, we are making certain changes relating to the hospital 
inpatient prospective payment system (IPPS): Changes to the 2-midnight 
rule under the short inpatient hospital stay policy; and a payment 
transition for hospitals that lost their MDH status because they are no 
longer in a rural area due to the implementation of the new OMB 
delineations in FY 2015 and have not reclassified from urban to rural 
under 42 CFR 412.103 before January 1, 2016.
    In addition, we are finalizing certain 2015 proposed policies, and 
addressing public comments, relating to the changes in the Medicare 
regulations governing provider administrative appeals and judicial 
review relating to appropriate claims in provider cost reports.
2. Summary of the Major Provisions
     OPPS Update: For CY 2016, we are decreasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of -0.3 percent. This increase factor is based 
on the hospital inpatient market basket percentage increase of 2.4 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage 
point adjustment required by the Affordable Care Act. In addition, we 
are applying 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 final rule with comment period. Under this rule, 
we estimate that total payments for CY 2016, including beneficiary 
cost-sharing, to the approximate 4,000 facilities paid under the OPPS 
(including general acute care hospitals, children's hospitals, cancer 
hospitals, and community mental health centers (CMHCs)), will decrease 
by approximately $133 million compared to CY 2015 payments, excluding 
our estimated changes in enrollment, utilization, and case-mix.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals failing to meet the hospital 
outpatient quality reporting requirements, by applying a proposed 
reporting factor of 0.980 to the OPPS payments and copayments for all 
applicable services.
     Rural Adjustment: We are continuing the adjustment of 7.1 
percent to the OPPS payments to certain rural sole community hospitals 
(SCHs), including essential access community hospitals (EACHs). This 
adjustment will apply to all services paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to cost.
     Cancer Hospital Payment Adjustment: For CY 2016, we are 
continuing 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 target PCR of 0.92 will be used to 
determine the CY 2016 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the payment adjustments will be the 
additional payments needed to result in a PCR equal to 0.92 for each 
cancer hospital.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2016, 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 Skin Substitutes: Payment for skin substitutes 
will utilize the high/low cost APC structure based on exceeding a 
threshold based on mean unit cost (MUC) or per day cost (PDC). Further, 
for CY 2016, skin substitutes with pass-through payment status will be 
assigned to the high cost category. Skin substitutes with pricing 
information but without claims data to calculate either an 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. Moreover, 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 2016 thresholds.
     Payment of Biosimilar Biological Products: For CY 2016, we 
are paying for biosimilar biological products based on the payment 
allowance of the product as determined under section 1847A of the Act. 
We also are extending 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 expanding the set of conditionally packaged ancillary services 
to include three new APCs.
     Conditionally Packaged Outpatient Laboratory Tests: For CY 
2016, we are conditionally packaging 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

[[Page 70305]]

service or services on the claim. We are establishing 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 will be 
made. The ``L1'' modifier will 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 making extensive changes to the already established methodology 
used for C-APCs. However, we are creating 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 restructuring 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 adding a rulemaking component to the current quarterly 
device pass-through payment application process. Specifically, we are 
supplementing the quarterly process by including a description of 
applications received as well as our rationale for approving the 
application in the next applicable OPPS proposed rule. Applications 
that we do not approve based on the evidence available during the 
quarterly review process will be described in the next applicable OPPS 
proposed rule, unless the applicant withdraws its application. The 
addition of rulemaking to the device pass-through application process 
will help achieve the goals of increased transparency and stakeholder 
input. In addition, this change will 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 establishing policy 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 initial FDA premarket approval or clearance, or, in the 
case of a delay of market availability, within 3 years of market 
availability.
     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 final rule, we are 
modifying our existing ``exceptions'' policy under which previously the 
only exceptions to the 2-midnight benchmark were cases involving 
services designated by CMS as inpatient only, and those published on 
the CMS Web site or other subregulatory guidance. Specifically, we are 
finalizing our proposal 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 
revised our medical review strategy to have Quality Improvement 
Organization (QIO) contractors conduct reviews of short inpatient stays 
rather than the Medicare administrative contractors (MACs), and the 
QIOs assumed medical responsibility for hospital stays affected by the 
2-midnight rule on October 1, 2015.
     Advanced Care Planning (ACP): For CY 2016, we are 
conditionally packaging payment for the service described by CPT code 
99497 (Advance care planning including the explanation and discussion 
of advance directives such as standard forms (with completion of such 
forms, when performed), by the physician or other qualified health care 
professional; first 30 minutes, face-to-face with the patient, family 
member(s), and/or surrogate). Consequently, this code is assigned to a 
conditionally packaged payment status indicator of ``Q1.'' When this 
service is furnished with another service paid under the OPPS, payment 
will be package; when it is the only service furnished, payment will be 
made separately. CPT code 99498 (Advance care planning including the 
explanation and discussion of advance directives such as standard forms 
(with completion of such forms, when performed), by the physician or 
other qualified health care professional; each additional 30 minutes 
(List separately in addition to code for primary procedure)) is an add-
on code and therefore payment for the service described by this code is 
unconditionally packaged (assigned status indicator ``N'') in the OPPS 
in accordance with 42 CFR 419.2(b)(18).
     Chronic Care Management (CCM): For CY 2016, we are adding 
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 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 
establishing a new modifier that will 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

[[Page 70306]]

assigning APC and status indicators for new and revised Category I and 
III CPT codes that will 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 for inclusion in the 
CY 2016 OPPS/ASC proposed rule. We received public comments on the 
proposed OPPS status indicators for the new CY 2016 CPT codes, which we 
address in this final rule with comment period.
     Ambulatory Surgical Center Payment Update: For CY 2016, we 
are increasing payment rates under the ASC payment system by 0.3 
percent for ASCs that meet the quality reporting requirements under the 
ASCQR Program. This increase is based on a projected CPI-U update of 
0.8 percent minus a multifactor productivity adjustment required by the 
Affordable Care Act of 0.5 percentage point. Based on this update, we 
estimate that total payments to ASCs (including beneficiary cost-
sharing and estimated changes in enrollment, utilization, and case-
mix), for CY 2016 will be approximately $4.221 billion, an increase of 
approximately $128 million compared to estimated CY 2015 Medicare 
payments. In addition, we are establishing 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 including 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. We received public comments on the proposed ASC payment 
indicators for the new CY 2016 CPT codes, which we address in this 
final rule with comment period.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are establishing requirements for the CY 
2017 payment determination and subsequent years and the CY 2018 payment 
determination and subsequent years. For CY 2017 and subsequent years, 
we are: (1) Removing 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) changing the deadline for withdrawing from the 
Hospital OQR Program from November 1 to August 31 and revising the 
related regulations to reflect this change; (3) transitioning to a new 
payment determination timeframe that will use only three quarters of 
data for the CY 2017 payment determination; (4) making conforming 
changes to our validation scoring process to reflect changes in the APU 
determination timeframe; (5) changing the data submission timeframe for 
measures submitted via the CMS Web-based tool (QualityNet Web site) to 
January 1 through May 15; (6) fixing a typographical error to correct 
the name of our extension and exception policy to extension and 
exemption policy; (7) changing the deadline for submitting a 
reconsideration request to the first business day on or after March 17 
of the affected payment year; and (8) amending 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 (1) adding a new measure: 
OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF 
#1822) with a modification to the proposed manner of data submission, 
and (2) shifting the quarters on which we base payment determinations 
to again include four quarters of data.
    In addition, we are exploring use of electronic clinical quality 
measures (eCQMs) and whether, in future rulemaking, we will propose 
that hospitals have the option to voluntarily submit data for the OP-
18: Median Time from ED Arrival to ED Departure for Discharged ED 
Patients measure electronically possibly beginning with the CY 2019 
payment determination.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are aligning our policies regarding 
paid claims to be included in the calculation for all claims-based 
measures, modifying the submission date for reconsideration requests, 
modifying our policy for the facility identifier for public reporting 
of ASCQR Program data, and finalizing our policy to not consider IHS 
hospital outpatient departments that bill as ASCs to be ASCs for 
purposes of the ASCQR Program. In addition, we are continuing to use 
the existing submission deadlines for data submitted via an online data 
submission tool. We also are codifying a number of existing and new 
policies. We also address public comments that we solicited in the 
proposed rule on the possible inclusion of two measures in the ASCQR 
Program measure set in the future.
3. Summary of Costs and Benefits
    In sections XXI. and XXII. of this final rule with comment period, 
we set forth a detailed analysis of the regulatory and Federalism 
impacts that the changes will have on affected entities and 
beneficiaries. Key estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
    Table 70 in section XXI. of this final rule with comment period 
displays the distributional impact of all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2016 compared to all estimated 
OPPS payments in CY 2015. We estimate that the policies finalized in 
this final rule with comment period will result in a 0.4 percent 
overall decrease in OPPS payments to providers. We estimate that total 
OPPS payments for CY 2016, including beneficiary cost-sharing, to the 
approximate 4,000 facilities paid under the OPPS (including general 
acute care hospitals, children's hospitals, cancer hospitals, and 
CMHCs) will decrease by approximately $133 million compared to CY 2015 
payments, excluding our estimated changes in enrollment, utilization, 
and case-mix.
    We estimated the isolated impact of our OPPS policies on CMHCs 
because CMHCs are only paid for partial hospitalization services under 
the OPPS. Continuing the provider-specific structure that we adopted 
beginning in CY 2011 and basing payment fully on the type of provider 
furnishing the service, we estimate a 23.1 percent increase in CY 2016 
payments to CMHCs relative to their CY 2015 payments.
(2) Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the FY 
2016 IPPS final wage indexes results in no change 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.

[[Page 70307]]

(3) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2016 payment policies 
for hospitals that are eligible for the rural adjustment or for the 
cancer hospital payment adjustment. We are not making any change in 
policies for determining the rural and cancer hospital payment 
adjustments, and the adjustment amounts do not significantly impact the 
budget neutrality adjustments for these policies.
(4) Impacts of the OPD Fee Schedule Increase Factor
    As a result of the OPD fee schedule increase factor, the 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 budget neutrality adjustments, 
we estimate that urban and rural hospitals will experience decreases of 
approximately 0.4 percent for urban hospitals and 0.6 percent for rural 
hospitals. Classifying hospitals by teaching status or type of 
ownership suggests that these hospitals will receive similar decreases.
b. Impacts of the ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the CY 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 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 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 final rule with comment 
period. Section 1833(t)(1)(B) of the Act provides for payment under the 
OPPS for hospital outpatient services designated by the Secretary 
(which includes partial hospitalization services furnished by CMHCs), 
and certain inpatient hospital services that are paid under 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 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

[[Page 70308]]

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 
Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-
113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment 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.
    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 August 24, 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

[[Page 70309]]

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 assignment of 
HCPCS codes regarding services for which separate payment is made.
    Each of these subcommittees was established by a majority vote from 
the full Panel during a scheduled Panel meeting, and the Panel 
recommended at the August 24, 2015 meeting that the subcommittees 
continue. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
August 24, 2015 Panel meeting are included in the sections of this 
final rule with comment period 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 are set 
forth in this CY 2016 OPPS/ASC final rule with comment period under the 
appropriate subject-matter headings.

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

    We received approximately 670 timely pieces of correspondence on 
the CY 2016 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 8, 2015 (80 FR 39200). We note that we received some 
public comments that were outside the scope of the proposed rule. Out-
of-scope public comments are not addressed in this CY 2016 OPPS/ASC 
final rule with comment period. Summaries of the public comments that 
are within the scope of the proposed rule and our responses are set 
forth in the various sections of this final rule with comment period 
under the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39210), for the CY 
2016 OPPS, we proposed 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 
proposed to recalibrate the relative payment weights for each APC based 
on claims and cost report data for hospital outpatient department 
(HOPD) services, using the most recent available data to construct a 
database for calculating APC group weights. Therefore, for the purpose 
of recalibrating the proposed APC relative payment weights for CY 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 HOPD services furnished on or after January 1, 2014, and 
before January 1, 2015. For this final rule with comment period, for 
the purpose of recalibrating the final APC relative payment weights for 
CY 2016, we used approximately 163 million final action claims (claims 
for which all disputes and adjustments have been resolved and payment 
has been made) for HOPD services furnished on or after January 1, 2014, 
and before January 1, 2015. For exact numbers of claims used, we refer 
readers to the claims accounting narrative under supporting 
documentation for the CY 2016 OPPS/ASC proposed rule and this final 
rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 163 million final action claims for services 
provided in hospital outpatient settings used to calculate the CY 2016 
OPPS payment rates for this final rule with comment period, 
approximately 125 million claims were the type of bill potentially 
appropriate for use in setting rates for OPPS services (but did not 
necessarily contain services payable under the OPPS). Of the 
approximately 125 million claims, approximately 3 million claims were 
not for services paid under the OPPS or were excluded as not 
appropriate for use (for example, erroneous cost-to-charge ratios 
(CCRs) or no HCPCS codes reported on the claim). From the remaining 
approximately 122 million claims, we created approximately 95 million 
single records, of which approximately 43 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 52 
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 92 million single claims for 
ratesetting. As described in section II.A.2. of this final rule with 
comment period, our data development process is designed with the goal 
of using appropriate cost information in setting the APC relative 
payment weights. The bypass process is described in section II.A.1.b. 
of this final rule with comment period. This section discusses how we 
develop ``pseudo'' single procedure claims (as defined below), with the 
intention of using more appropriate data from the available claims. In 
some cases, the bypass process allows us to use some portion of the 
submitted claim for cost estimation purposes, while the remaining 
information on the claim continues to be unusable. Consistent with the 
goal of using appropriate information in our data development process, 
we only use claims (or portions of each claim) that are appropriate for 
ratesetting purposes.
    The final APC relative weights and payments for CY 2016 in Addenda 
A and B to this final rule with comment period (which are available via 
the Internet on the CMS Web site) were calculated using claims from CY 
2014 that were processed through June 30, 2015. 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

[[Page 70310]]

discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68259 through 68271). For the CY 2016 OPPS, as we proposed, we used 
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. Use of Single and Multiple Procedure Claims
    For CY 2016, in general, we proposed to continue to use single 
procedure claims to set the costs on which the APC relative payment 
weights are based. We generally use single procedure claims to set the 
estimated costs for APCs because we believe that the OPPS relative 
weights on which payment rates are based should be derived from the 
costs of furnishing one unit of one procedure and because, in many 
circumstances, we are unable to ensure that packaged costs can be 
appropriately allocated across multiple procedures performed on the 
same date of service.
    It is generally desirable to use the data from as many claims as 
possible to recalibrate the APC relative payment weights, including 
those claims for multiple procedures. As we have for several years, we 
proposed to use date of service stratification and a list of codes to 
be bypassed to convert multiple procedure claims to ``pseudo'' single 
procedure claims. Through bypassing specified codes that we believe do 
not have significant packaged costs, we are able to use more data from 
multiple procedure claims. In many cases, this enabled us to create 
multiple ``pseudo'' single procedure claims from claims that were 
submitted as multiple procedure claims spanning multiple dates of 
service, or claims that contained numerous separately paid procedures 
reported on the same date on one claim. We refer to these newly created 
single procedure claims as ``pseudo'' single procedure claims. The 
history of our use of a bypass list to generate ``pseudo'' single 
procedure claims is well-documented, most recently in the CY 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 proposed 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 proposed to establish additional packaging policies for 
the CY 2016 OPPS, as discussed in section II.A.3. of this final rule 
with comment period.
    In the proposed rule, we proposed 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 the 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 the 
proposed rule for further discussion), to add to the approximately 49 
million ``natural'' single procedure claims.
    In addition, we proposed 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 restructuring of APCs are discussed in 
the applicable sections of this final rule with comment period. In 
conjunction with this initiative, we proposed 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 final rule with comment period. For the proposed 
rule, we provided a crosswalk from the existing APC numbers to the 
proposed new APC renumber in Addendum Q to the proposed rule (which is 
available via the Internet on the CMS Web site).
    For CY 2016, in the proposed rule, we proposed to bypass 197 HCPCS 
codes that were identified in Addendum N to the proposed rule (which is 
available via the Internet on the CMS Web site). Since the inception of 
the bypass list, which is the list of codes to be bypassed to convert 
multiple procedure claims to ``pseudo'' single procedure claims, we 
have calculated the percent of ``natural'' single claims that contained 
packaging for each HCPCS code and the amount of packaging on each 
``natural'' single claim 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 proposed rule from CY 2014 
claims processed through December 31, 2014) to determine whether it 
would be appropriate to add additional codes to the previous year's 
bypass list. For CY 2016, we proposed to continue to bypass all of the 
HCPCS codes on the CY 2015 OPPS bypass list, with the exception of 
HCPCS codes that we proposed to delete for CY 2016, which were listed 
in Table 1 of the 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 proposed to remove HCPCS codes that are not separately 
paid under the OPPS because the purpose of the bypass list is to obtain 
more data for those codes relevant to ratesetting. Some of the codes we 
proposed to remove from the CY 2016 bypass list were affected by the CY 
2016 proposed packaging policy, discussed in section II.A.3. of this 
final rule with comment period. Some of the codes we proposed 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 proposed to add to the bypass list for CY 2016 HCPCS 
codes that are not on the CY 2015 bypass list that, using the proposed 
rule data (CY 2014 claims), met the empirical criteria for the bypass 
list that are summarized 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 proposed to establish that the 
packaged cost criterion would 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) was open to public 
comment in the CY 2016 OPPS/ASC

[[Page 70311]]

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 were:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The 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 proposed 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 proposed to use the geometric mean cost of packaging 
to identify potential codes to add to the bypass list.
    In response to public comments on the CY 2010 OPPS/ASC proposed 
rule requesting that the packaged cost threshold be updated, we 
considered whether it would be appropriate to update the $50 packaged 
cost threshold for inflation when examining potential bypass list 
additions. As discussed in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60328), the real value of this packaged cost threshold 
criterion has declined due to inflation, making the packaged cost 
threshold more restrictive over time when considering additions to the 
bypass list. Therefore, adjusting the threshold by the market basket 
increase would prevent continuing decline in the threshold's real 
value. Based on the same rationale described for the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66781), we proposed 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 proposed to set the geometric mean packaged 
cost threshold based on the CY 2014 claims data 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 proposed 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 proposed to continue to 
include certain HCPCS codes on the bypass list in order to purposefully 
direct the assignment of packaged costs to a companion code where 
services always appear together and where there would otherwise be few 
single procedure claims available for ratesetting. For example, we have 
previously discussed our reasoning for adding HCPCS code G0390 (Trauma 
response team associated with hospital critical care service) to the 
bypass list (73 FR 68513).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' claims, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of the proposed rule and this final rule with comment period 
for further discussion of the treatment of ``overlap bypass codes.'') 
This process also created multiple imaging composite ``single session'' 
claims that could be used for calculating composite APC costs. 
``Overlap bypass codes'' that are members of the proposed multiple 
imaging composite APCs were identified by asterisks (*) in Addendum N 
to the proposed rule (which is available via the Internet on the CMS 
Web site).
    Addendum N to the proposed rule included the proposed list of 
bypass codes for CY 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 retained 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 allowed us to 
create more ``pseudo'' single procedure claims for ratesetting 
purposes. ``Overlap bypass codes'' that were members of the proposed 
multiple imaging composite APCs were identified by asterisks (*) in the 
third column of Addendum N to the proposed rule. HCPCS codes that we 
proposed to add for CY 2016 were identified by asterisks (*) in the 
fourth column of Addendum N.
    We did not receive any public comments on our proposals for use of 
single and multiple procedure code claims for ratesetting. Therefore, 
we are adopting as final the proposed ``pseudo'' single claims process 
and the final CY 2016 bypass list of 197 HCPCS codes, as displayed in 
Addendum N to this final rule with comment period (which is available 
via the Internet on the CMS Web site). Table 1 below contains the list 
of codes that we are removing from the CY 2016 bypass list.

[[Page 70312]]



        Table 1--HCPCS Codes 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. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39213), we proposed to 
continue to use the hospital-specific overall ancillary and 
departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the proposed CY 2016 APC 
payment rates were based, we calculated hospital-specific overall 
ancillary CCRs and hospital-specific departmental CCRs for each 
hospital for which we had CY 2014 claims data by comparing these claims 
data to the most recently available hospital cost reports, which, in 
most cases, were 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 the proposed rule and this final rule with 
comment period.
    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 the proposed rule, we used 
the most recently submitted cost reports to calculate the CCRs to be 
used to calculate costs for the proposed CY 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 proposed 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

[[Page 70313]]

2015, and we proposed to continue this practice for the CY 2016 OPPS.
    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 June 2015 HCRIS update to estimate costs in the final CY 
2016 OPPS ratesetting process, of the 3,830 impact providers, we were 
able to calculate a valid implantable device CCR for 2,969 hospitals 
(78 percent), a valid MRI CCR for 2,080 hospitals (54 percent), a valid 
CT scan CCR for 2,166 hospitals (57 percent), and a valid Cardiac 
Catheterization CCR for 1,434 hospitals (37 percent).
    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 proposed 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 the proposed rule and 
section XXI. of this final rule with comment period include the impacts 
of calculating the 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 Statiscal Values Based on Use of Different Cost Allocation Methods
----------------------------------------------------------------------------------------------------------------
                                                             CT                                MRI
           Cost allocation method            -------------------------------------------------------------------
                                                 Median CCR        Mean CCR        Median CCR        Mean CCR
----------------------------------------------------------------------------------------------------------------
All Providers...............................           0.0436           0.0582           0.0874           0.1111
Square Feet Only............................           0.0361           0.0507           0.0780           0.1026
Direct Assign...............................           0.0638           0.0716           0.1076           0.1273
Dollar Value................................           0.0508           0.0667           0.0972           0.1204
Direct Assign and Dollar Value..............           0.0508           0.0668           0.0976           0.1203
----------------------------------------------------------------------------------------------------------------

    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 70314]]



   Table 3--Percent Change in Estimated Cost for CT and MRI APCs When
    Excluding Claims From Providers Using ``Square Feet'' as the Cost
                            Allocation Method
------------------------------------------------------------------------
        CY 2016 APC             CY 2016 APC descriptor    Percent change
------------------------------------------------------------------------
5570 *.....................  Computed Tomography without            15.4
                              Contrast.
5571 *.....................  Level 1 Computed Tomography            10.2
                              with Contrast and Computed
                              Tomography Angiography.
5572 *.....................  Level 2 Computed Tomography            10.5
                              with Contrast and Computed
                              Tomography Angiography.
5581 *.....................  Magnetic Resonance Imaging              8.1
                              and Magnetic Resonance
                              Angiography without
                              Contrast.
5582 *.....................  Magnetic Resonance Imaging              6.2
                              and Magnetic Resonance
                              Angiography with Contrast.
8005.......................  CT & CTA without Contrast              13.7
                              Composite.
8006.......................  CT & CTA with Contrast                  9.8
                              Composite.
8007.......................  MRI & MRA without Contrast              6.9
                              Composite.
8008.......................  MRI & MRA with Contrast                 6.8
                              Composite.
------------------------------------------------------------------------
* Renumbered APC for CY 2016.

    In summary, we proposed 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 the proposed rule, we proposed to 
continue our policy of removing claims from cost modeling for those 
providers using ``square feet'' as the cost allocation statistic for CY 
2016.
    Comment: Several commenters supported CMS' proposal to continue 
removing claims submitted by providers that use the ``square feet'' 
cost allocation methodology from cost modeling for the CT and MRI APCs. 
A few commenters suggested that CMS continue its policy of removing 
claims from providers that use this method for the CY 2018 OPPS update 
and subsequent calendar years.
    Response: We appreciate the commenters' support. As described in 
the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), the 
current policy of calculating CT and MRI APC relative payment weights 
using only data from providers that do not use the ``square feet'' cost 
allocation method was part of a transitional policy to allow providers 
to adopt cost allocation methods that improve data and payment 
accuracy. In the CY 2014 OPPS/ASC final rule with comment period, we 
noted that we would sunset that policy in 4 years and estimate the CY 
2018 CT and MRI APC relative payment weights using cost data from all 
providers, regardless of which cost allocation method the provider 
employed. While some commenters believe that we should continue this 
transition policy of excluding ``square feet'' data from OPPS 
ratesetting for the CY 2018 OPPS update and subsequent calendar years, 
we believe that we have given providers sufficient time to adopt one of 
the more precise cost allocation methodologies.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 above, we are continuing our policy of removing 
claims from providers that use the ``square feet'' cost allocation 
methodology for CY 2016 CT and MRI APC cost modeling.
2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment rates for CY 2016. The 
Hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an 
accounting of claims used in the development of the 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 and final 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 proposed to continue to use 
geometric mean costs to calculate the relative weights on which the 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 final rule with comment period to calculate the costs 
we used to establish the relative payment weights used in calculating 
the OPPS payment rates for CY 2016 shown in Addenda A and B to this 
final rule with comment period (which are available via the Internet on 
the CMS Web site). We refer readers to section II.A.4. of the proposed 
rule and this final rule with comment period for a discussion of the 
conversion of APC costs to scaled payment weights.
    Comment: A few commenters suggested that CMS increase the 
transparency of its cost estimation process and provide additional 
detail on how various types of HCPCS code are treated within CMS' 
claims processing.
    Response: We thank the commenters for these suggestions. We have 
updated the claims accounting narrative for this

[[Page 70315]]

final rule with comment period to include additional information on the 
requested various types of HCPCS code where feasible. This updated 
claims accounting narrative is available on the 2016 OPPS Final Rule 
page of the CMS Web site (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html).
    Comment: One commenter suggested that CMS present proposals for 
significant payment changes, such as expanded packaging, APC 
configurations, or new comprehensive APCs, at least 1 year before 
issuance of a proposed rule. The commenter believed that this would 
increase the transparency of policy changes and facilitate stakeholder 
review and analysis of the proposed changes.
    Response: We thank the commenter for this suggestion. We believe 
that, for each proposed policy change, we assess the appropriate 
timeframe for implementation and will continue to do so in the future. 
We understand that modeling the OPPS is time-consuming and technically 
complex, and we strive to aid these efforts by providing numerous data 
files, public use files, and narrative descriptions of the claims 
accounting process for each rule.
a. Claims Preparation
    For the 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. For this final rule with comment period, we used the CY 
2014 hospital outpatient claims processed through June 30, 2015, to 
calculate the geometric mean costs of APCs that underpin the final 
relative payment weights for CY 2016. To begin the calculation of the 
relative payment weights for CY 2016, we selected 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 claims are submitted by providers to Medicare with the 
knowledge that no payment would be made. For example, providers submit 
claims with a condition code 21 to elicit an official denial notice 
from Medicare to document that a service is not covered under the OPPS. 
We then excluded claims for services furnished in Maryland, Guam, the 
U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands 
because hospitals in those geographic areas are not paid under the 
OPPS, and, therefore, we do not use claims for services furnished in 
these areas in ratesetting.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 125 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
therefore, these claims were not used to set OPPS payment rates.
    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 final rule with comment period. We then flagged and 
excluded CAH claims (which are not paid under the OPPS) and claims from 
hospitals with invalid CCRs. The latter included claims from hospitals 
without a CCR; those from hospitals paid an all-inclusive rate; those 
from hospitals with obviously erroneous CCRs (greater than 90 or less 
than 0.0001); and those from hospitals with overall ancillary CCRs that 
were identified as outliers (that exceeded 3 standard 
deviations from the geometric mean after removing error CCRs). In 
addition, we trimmed the CCRs at the cost center (that is, 
departmental) level by removing the CCRs for each cost center as 
outliers if they exceeded 3 standard deviations from the 
geometric mean. We used a four-tiered hierarchy of cost center CCRs, 
which is the revenue code-to-cost center crosswalk, to match a cost 
center to every possible revenue code appearing in the outpatient 
claims that is relevant to OPPS services, with the top tier being the 
most common cost center and the last tier being the default CCR. If a 
hospital's cost center CCR was deleted by trimming, we set the CCR for 
that cost center to ``missing'' so that another cost center CCR in the 
revenue center hierarchy could apply. If no other cost center CCR could 
apply to the revenue code on the claim, we used the hospital's overall 
ancillary CCR for the revenue code in question as the default CCR. For 
example, if a visit was reported under the clinic revenue code but the 
hospital did not have a clinic cost center, we mapped the hospital-
specific overall ancillary CCR to the clinic revenue code. The revenue 
code-to-cost center crosswalk is available for inspection on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not 
use in establishing relative costs or to model impacts are identified 
with an ``N'' in the revenue code-to-cost center crosswalk.
    We applied the CCRs as described above to claims with bill type 
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in 
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the 
Northern Mariana Islands and 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

[[Page 70316]]

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 as we proposed, we are continuing this payment policy for CY 
2016. We refer readers to section V.B.3. of this final rule with 
comment period for a complete discussion of our CY 2016 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 proposed 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 and adoption of our 
proposal to continue packaging payment for clinical diagnostic 
laboratory tests, as we proposed, we also are applying 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 payment weights, we appropriately allocate the costs 
associated with packaging these services. Additional details and a 
summary of public comments received and our responses regarding 
packaging payment for clinical laboratory tests can be found in section 
II.A.3.b.(3) of this final rule with comment period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), for the CY 
2016 OPPS, we proposed to 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 proposed to define major procedures as any procedure 
described by a HCPCS code that is assigned a status indicator of 
``J1,'' ``J2,'' ``S,'' ``T,'' or ``V,'' to define minor procedures as 
any procedure described by a HCPCS code that is assigned a status 
indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' 
and to classify ``other'' procedures as any procedure described by a 
HCPCS code that is assigned a status indicator other than one that we 
have classified as major or minor. For CY 2016, we proposed to continue 
to assign status indicator ``R'' to HCPCS codes for blood and blood 
products; status indicator ``U'' to HCPCS codes for brachytherapy 
sources; status indicator ``Q1'' to all HCPCS ``STV-packaged codes''; 
status indicator ``Q2'' to all HCPCS ``T-packaged codes''; status 
indicator ``Q3'' to all HCPCS 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; and new status 
indicator ``Q4'' to HCPCS codes for laboratory tests that will be 
conditionally packaged 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. For more information on status indicator ``Q4,'' 
we refer readers to section II.A.3.b.(3) of this final rule with 
comment period.
    As discussed in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and 
``Q3'' to facilitate identification of the different categories of 
codes. We proposed to treat these codes in the same manner for data 
purposes for CY 2016 as we have treated them since CY 2008. 
Specifically, for CY 2016, we are continuing to evaluate whether the 
criteria for separate payment of codes with a status indicator of 
``Q1'' or ``Q2'' are met in determining whether they are treated as 
major or minor codes. Claims containing codes with a status indicator 
of ``Q1'' or ``Q2'' are processed through the data system either with 
status indicator ``N'' to indicate that the services are packaged for 
payment or, if they meet the criteria for separate payment, they are 
assigned the status indicator of the APC to which they are assigned and 
are considered as ``pseudo'' single procedure claims for major codes. 
Claims containing codes that are assigned status indicator ``Q3'' are 
paid under individual APCs unless they occur in the combinations that 
qualify for payment as composite APCs

[[Page 70317]]

and, therefore, they are assigned the status indicator of the 
individual APC to which they are assigned through the data process and 
are treated as major codes during both the split and ``pseudo'' single 
creation process. The calculation of the geometric mean costs for 
composite APCs from multiple procedure major claims is discussed in 
section II.A.2.f. of this final rule with comment period. HCPCS codes 
with status indicator ``Q4'' only appear in the OPPS model if they are 
packaged on a claim with a service that is assigned status indicator 
``S,'' ``T,'' or ``V.''
    Specifically, we proposed 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 final rule with comment 
period; 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 final rule 
with comment period, depending on the specific composite calculation.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), we proposed 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 stated that we believe that this 
proposed adjustment more accurately sorts claims that have a bilateral 
modifier.
    We did not receive any public comments on the proposed process to 
categorize claims used in CY 2016 OPPS cost modeling. Therefore, we are 
finalizing our policy as proposed.
(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for the 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 proposed to use the bypass codes listed in Addendum N to 
the proposed rule (which is available via the Internet on the CMS Web 
site) and discussed in section II.A.1.b. of the proposed rule and this 
final rule with comment period to remove separately payable procedures 
which we determined contained limited or no packaged costs or that were 
otherwise suitable for inclusion on the bypass list from a multiple 
procedure bill. As discussed above, we ignored the ``overlap bypass 
codes,'' that is, those HCPCS codes that were 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'' were listed in Addendum N to the 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,

[[Page 70318]]

which retained the costs of packaged revenue codes and packaged HCPCS 
codes. This enabled us to use claims that would otherwise be multiple 
procedure claims and could not be used.
    We then assessed the claims to determine if the criteria for the 
multiple imaging composite APCs, discussed in section II.A.2.f.(3) of 
the proposed rule and this final rule with comment period, were met. If 
the criteria for the imaging composite APCs were met, we created a 
``single session'' claim for the applicable imaging composite service 
and determined whether we could use the claim in ratesetting. For HCPCS 
codes that are both conditionally packaged and are members of a 
multiple imaging composite APC, we first assessed whether the code 
would be packaged and, if so, the code ceased to be available for 
further assessment as part of the composite APC. Because the packaged 
code will not be a separately payable procedure, we considered it to be 
unavailable for use in setting the composite APC costs on which the 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 examined the multiple procedure minor claims to determine 
whether we could create ``pseudo'' single procedure claims. 
Specifically, where the claim contained multiple codes with status 
indicator ``Q1'' (``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, we proposed that 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 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 revised process for creating ``pseudo'' single 
procedure claims to the conditionally packaged codes that do not meet 
the criteria for packaging, which enabled us to create single procedure 
claims from them, if they met the criteria for single procedure claims. 
Conditionally packaged codes are identified using status indicators 
``Q1'' and ``Q2,'' and are described in section XI.A. of this final 
rule with comment period.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral 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 did not receive any public comments on our proposed methodology 
for creating ``pseudo'' single procedure claims. Therefore, we are 
finalizing our proposal to continue to apply the methodology described 
above for the purpose of creating ``pseudo'' single procedure claims 
for the CY 2016 OPPS. The final CY 2016 bypass codes and ``overlap 
bypass codes'' are listed in Addendum N to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
c. Completion of Claim Records and Geometric Mean Cost Calculations
(1) General Process
    We proposed to then package the costs of packaged HCPCS codes 
(codes with status indicator ``N'' listed in Addendum B to the 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

[[Page 70319]]

services reported under packaged revenue codes in Table 4 of the 
proposed rule (Table 4 below in this final rule with comment period) 
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 CY 2016 OPPS packaging policy, we refer readers to 
section II.A.3. of this final rule with comment period.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we are continuing 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 proposed to package for CY 2016. We stated in the 
proposed rule that we believe that the charges reported under the 
revenue codes listed in Table 4 of the proposed rule continue to 
reflect ancillary and supportive services for which hospitals report 
charges without HCPCS codes. Therefore, for CY 2016, we proposed to 
continue to package the costs that we derive from the charges reported 
without HCPCS codes under the revenue codes displayed in Table 4 of the 
proposed rule for purposes of calculating the geometric mean costs on 
which the CY 2016 OPPS/ASC payment rates are based.
    Comment: One commenter suggested that CMS revisit its ratesetting 
methodology to prevent items or services that are more costly than a 
primary service from being packaged into the payment for the primary 
service. The commenter also suggested that only items or services that 
are clinically relevant to a primary service be packaged for payment 
with a primary service.
    Response: We thank the commenter for these suggestions. Since the 
beginning of the OPPS and throughout its development, we have striven 
to find ways to improve our methodologies for estimating the costs 
associated with providing services, including our methodology for 
packaging services. We will continue to look at ways to improve our 
ratesetting process, including improving our packaging logic, in future 
payment years. We only assign packaged status indicators to services 
that we determine are ancillary, supportive, dependent, or adjunctive 
to a primary service. We disagree with the commenter that only payment 
for less costly services should be packaged into payment for a primary 
service, as the cost of a packaged service relative to a primary 
service is not necessarily determinative of packaged status.
    For the reasons set forth in the proposed rule, we are finalizing 
the proposed packaged revenue codes for CY 2016, without modification, 
which are identified in Table 4 below.

                 Table 4--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.

[[Page 70320]]

 
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.
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 proposed to continue 
to exclude: (1) Claims that had zero costs after summing all costs on 
the claim; and (2) claims containing packaging flag number 3. Effective 
for services furnished 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 continuing these processes for the CY 
2016 OPPS.
    For the remaining claims, we then standardized 60 percent of the 
costs of the claim (which we have previously determined to be the 
labor-related portion) for geographic differences in labor input costs. 
We made this adjustment by determining the wage index that applied to 
the hospital that furnished the service and dividing the cost for the 
separately paid HCPCS code furnished by the hospital by that wage 
index. The claims accounting that we provide for the proposed 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

[[Page 70321]]

has been our policy since the inception of the OPPS, we used 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 used these pre-reclassified wage indices for 
standardization using the new OMB labor market area delineations 
described in section II.C. of this final rule with comment period.
    In accordance with our longstanding practice, we also excluded 
single and ``pseudo'' single procedure claims for which the total cost 
on the claim was outside 3 standard deviations from the geometric mean 
of units for each HCPCS code on the bypass list (because, as discussed 
above, we used claims that contain multiple units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 122 million 
claims remained. Using these approximately 122 million claims, we 
created approximately 95 million single and ``pseudo'' single procedure 
claims, of which we used approximately 92 million single claims (after 
trimming out approximately 3 million claims as discussed in section 
II.A.1.a. of this final rule with comment period) 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 
continuing 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 policy to calculate relative payment weights 
based on geometric means, we refer readers to section II.A.2.c. of this 
final rule with comment period.
    We used these claims to calculate the CY 2016 geometric mean costs 
for each separately payable procedure described by the HCPCS code and 
each APC. The comparison of HCPCS code-specific and APC geometric mean 
costs determines the applicability of the 2 times rule. Section 
1833(t)(2) of the Act provides that, subject to certain exceptions, the 
items and services within an APC group shall not be treated as 
comparable with respect to the use of resources if the highest median 
cost (or mean cost, if elected by the Secretary) for an item or service 
within the group is more than 2 times greater than the lowest median 
cost (or mean cost, if so elected) for an item or service within the 
same group (the 2 times rule). While we have historically applied the 2 
times rule based on median costs, in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68270), as part of the CY 2013 policy to 
develop the OPPS relative payment weights based on geometric mean 
costs, we also applied the 2 times rule based on geometric mean costs. 
For the CY 2016 OPPS, as we proposed, we are continuing to develop the 
APC relative payment weights based on geometric mean costs.
    We note that, for purposes of identifying significant HCPCS codes 
for examination in the 2 times rule, we consider codes that have more 
than 1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC geometric mean cost to be 
significant. This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 92 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 claims 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 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 will pay separately 
under this final rule with comment period, and we reassigned HCPCS 
codes to different APCs where it was necessary to ensure clinical and 
resource homogeneity within the APCs. The APC geometric means were 
recalculated after we reassigned the affected HCPCS codes. Both the 
HCPCS code-specific geometric means and the APC geometric means were 
weighted to account for the inclusion of multiple units of the bypass 
codes in the creation of ``pseudo'' single procedure claims.
    As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this 
final rule with comment period, in some cases, APC geometric mean costs 
were calculated using variations of the process outlined above. 
Specifically, section II.A.2.d. of this final rule with comment period 
addresses the calculation of single APC criteria-based geometric mean 
costs. Section II.A.2.f. of this final rule with comment period 
discusses the calculation of composite APC criteria-based geometric 
mean costs. Section VIII.B. of this final rule with comment period 
addresses the methodology for calculating the geometric mean costs for 
partial hospitalization services.
    We did not receive any public comments on our proposal for 
completion of claims records and calculation of geometric means cost. 
Therefore, we are adopting the geometric means calculation process that 
we proposed as final. We are finalizing our proposed methodology for 
calculating geometric means costs for purposes of creating relative 
payment weights and subsequent APC payment rates for the CY 2016 OPPS.
(2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment (the Panel) Regarding Data Development
    At the August 24, 2015 meeting of the Panel, we discussed our 
standard analysis of APCs, specifically those APCs for which geometric 
mean costs in the proposed rule 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 ``pseudo'' 
single development process for the CY 2015 OPPS/ASC final rule with 
comment period.
    At the August 24, 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

[[Page 70322]]

significantly in costs at the next Panel meeting.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that Michael Schroyer serve as 
Chair of the Data Subcommittee.
    CMS Response: We are accepting this recommendation.
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
(a) Methodology
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016, 
we proposed to continue to establish payment rates for blood and blood 
products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-specific cost center often resulted in an 
underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the differences in CCRs and 
to better reflect hospitals' costs, we proposed to continue to simulate 
blood CCRs for each hospital that does not report a blood cost center 
by calculating the ratio of the blood-specific CCRs to hospitals' 
overall CCRs for those hospitals that do report costs and charges for 
blood cost centers. We also proposed 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 proposed to calculate the costs upon which 
the 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 stated in the proposed rule that 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 costs for these products. We continue to believe 
that this methodology in CY 2016 will result in costs for blood and 
blood products that appropriately reflect the relative estimated costs 
of these products for hospitals without blood cost centers and, 
therefore, for these blood products in general.
    We invited public comments on this proposal to continue this 
longstanding methodology.
    Comment: Commenters supported the proposal to continue to 
separately pay for blood and blood products using a blood-specific CCR 
methodology.
    Response: We appreciate the commenters' support.
    Comment: Numerous commenters (various hospitals, blood centers, 
associations, and other stakeholders) expressed concern regarding the 
proposed CY 2016 payment rates for blood and blood products. The 
commenters believed that the proposed payment rates do not accurately 
reflect the cost of collecting, processing, and distributing blood 
products to patients. The commenters noted that the payment rates did 
not align with the costs statistics data provided with the proposed 
rule, and therefore the commenters believed that the CY 2016 proposed 
payment rates for blood and blood products were produced in error.
    Response: We acknowledge that an error occurred in the calculation 
of the proposed CY 2016 payment rates for blood and blood products 
included in the proposed rule. The payment rates included in the 
proposed rule erroneously were not calculated using the hospital-
specific simulated blood-specific CCR methodology described in the 
proposed rule (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). As a result of correcting this 
error, payment rates for blood and blood products increased 
approximately 10 percent to 60 percent from the proposed CY 2016 
payment rates. We have corrected this error in this final rule with 
comment period and the final CY 2016 payment rates reflect this 
correction.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2016 proposal to continue to 
establish payment rates for blood and blood products using our blood-
specific CCR methodology. The final CY 2016 payment rates for blood and 
blood products (which are identified with status indicator ``R'') are 
reflective of the use of the hospital-specific simulated blood-specific 
CCR methodology and can be found in Addendum B to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
(b) New HCPCS Codes for Pathogen-Reduced Blood Products
    For CY 2016, the HCPCS Workgroup established three new HCPCS P-
codes for new pathogen-reduced blood products, effective January 1, 
2016, as follows:
     P9070 (Plasma, pooled multiple donor, pathogen reduced, 
frozen, each unit);
     P9071 (Plasma (single donor), pathogen reduced, frozen, 
each unit); and
     P9072 (Platelets, pheresis, pathogen reduced, each unit).
    The term ``pathogen reduction'' describes various techniques 
(including treatment with Amotosalen and UVA light) used on blood 
products to eliminate certain pathogens and reduce the risk of 
transfusion-associated infections. As discussed above, we calculate 
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. Because these three HCPCS P-
codes are new for CY 2016, there are currently no claims data on the 
charges and costs for these blood products upon which to apply our 
blood-specific CCR methodology. Therefore, we are establishing interim 
payment rates for these three HCPCS P-codes based on a crosswalk to 
existing blood product HCPCS codes that we believe provide the best 
proxy for the costs of the three new blood products described by the 
above listed new HCPCS P-codes. Table 5 below list the new pathogen-
reduced blood products

[[Page 70323]]

HCPCS P-codes and their payment crosswalks.

 Table 5--New Pathogen-Reduced Blood Products HCPCS P-Codes and Interim Payment Rates and Crosswalks for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                                   Final CY 2016
New CY 2016 HCPCS  P-code    New HCPCS P-code        Crosswalked HCPCS      Crosswalked HCPCS P-   OPPS payment
                              long descriptor           P[dash]code         code long descriptor      amount
----------------------------------------------------------------------------------------------------------------
P9070....................  Plasma, pooled        P9059....................  Fresh frozen plasma           $73.08
                            multiple donor,                                  between 8-24 hours
                            pathogen reduced,                                of collection, each
                            frozen, each unit.                               unit.
P9071....................  Plasma (single        P9017....................  Fresh frozen plasma            72.56
                            donor), pathogen                                 (single donor),
                            reduced, frozen,                                 frozen within 8
                            each unit.                                       hours of
                                                                             collection, each
                                                                             unit.
P9072....................  Platelets, pheresis,  P9037....................  Platelets, pheresis,          641.85
                            pathogen reduced,                                leukocytes reduced,
                            each unit.                                       irradiated, each
                                                                             unit.
----------------------------------------------------------------------------------------------------------------

    These interim payment rates are open for public comment in this CY 
2016 final rule with comment period. Specifically, the new HCPCS P-
codes are flagged with comment indicator ``NI'' in Addendum B to this 
final rule with comment period to indicate that we have assigned the 
codes an interim OPPS payment status for CY 2016 and are seeking public 
comments on the APC and status indicator assignments. Once we have 
claims data for these new HCPCS P-codes, we will calculate payment 
rates using the claims data that should be available for these new 
codes beginning in CY 2018, which is our practice for other blood 
products for which claims data have been available for 2 years.
    During the process of creating these new HCPCS P-codes for the 
three pathogen-reduced blood products, we examined the current set of 
HCPCS P-codes, which became effective many years ago. We believe that 
the HCPCS P-codes for these products could benefit from a careful 
examination and review with possible revision and updating to make the 
HCPCS P-codes describing blood products reflect current product 
descriptions and utilization while minimizing redundancy and 
potentially outdated descriptors. Therefore, we intend in future 
rulemaking to evaluate the set of HCPCS P-codes and propose revisions 
that may be necessary to create a current and robust code set for blood 
products.
(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 
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 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016, 
we proposed to use the costs derived from CY 2014 claims data to set 
the proposed CY 2016 payment rates for brachytherapy sources, as we 
proposed 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 the proposed rule and this final rule with comment 
period. We also proposed 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 proposed 
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 proposed to continue the policy we first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537) regarding payment for new brachytherapy sources for which we 
have no claims data, based on the same reasons we discussed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66786; which was 
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 were 
included in Addendum B to the proposed rule (which is available via the 
Internet on the CMS Web site) and were identified with status indicator 
``U.''
    We invited public comments on this proposed policy. We also 
requested recommendations for new HCPCS codes to describe new 
brachytherapy sources consisting of a radioactive isotope, including a 
detailed rationale to support recommended new sources.
    Comment: One commenter expressed concern regarding the outpatient

[[Page 70324]]

hospital claims data that CMS used to set the prospective payment rates 
for brachytherapy sources. The commenter stated that high dose rate 
(HDR) brachytherapy devices are renewable because the devices have a 
90-day use span and are used in the treatment of multiple patients 
during this 90-day span. According to the commenter, the true cost of 
treatment involving brachytherapy sources depends on the number of 
patients treated by a hospital within a 90-day period, as well as the 
number of treatments required and the intensity of the treatments. For 
this reason, the commenter believed that it is difficult to establish 
fair and adequate prospective payment rates for brachytherapy sources. 
The commenter also noted that the brachytherapy source payment data 
continue to show huge variation in per unit cost across hospitals.
    In addition, the commenter believed that CMS' claims data contain 
rank order anomalies, causing the usual cost relationship between the 
high activity palladium-103 source (HCPCS code C2635, Brachytherapy 
source, non-stranded, high activity, palladium-103, greater than 2.2 
mci (NIST) per source) and the low activity palladium-103 sources 
(HCPCS code C2640, Brachytherapy source, stranded, palladium-103, per 
source and HCPCS code C2641, Brachytherapy source, non-stranded, 
palladium-103, per source) to be reversed. The commenter noted that the 
proposed geometric mean costs of the brachytherapy source HCPCS codes 
are approximately $35, $72, and $72, respectively. The commenters 
stated that, based on its experience, stranded palladium-103 sources 
(HCPCS code C2640) always cost more than non-stranded palladium-103 
sources (HCPCS code C2641), which is not reflected in the proposed rule 
claims data that CMS used. The commenter expressed concern that payment 
for brachytherapy sources are unstable and fluctuate significantly 
since CMS implemented the prospective payment methodology based on 
source-specific median cost in CY 2010 and geometric mean unit cost in 
CY 2013.
    Response: As stated above, we believe that geometric mean costs 
based on hospital claims data for brachytherapy sources have produced 
reasonably consistent per-source cost estimates over the past several 
years, comparable to the patterns we have observed for many other OPPS 
services whose payments are set based upon relative payment weights 
from claims data. We believe that our per-source payment methodology 
specific to each source's radioisotope, radioactive intensity, and 
stranded or non-stranded configuration, supplemented by payment based 
on the number of sources used in a specific clinical case, adequately 
accounts for the major expected sources of variability across 
treatments. (We refer readers to 72 FR 66782; 74 FR 60534; 75 FR 71979; 
76 FR 74161; 77 FR 68241; 78 FR 74861; and 79 FR 66796.) We believe 
that the CY 2014 brachytherapy source claims data used for CY 2016 
ratesetting produce adequate payment rates for brachytherapy sources. 
In addition, as we have explained previously, a prospective payment 
system relies upon the concept of averaging, where the payment may be 
more or less than the estimated cost of providing a service for a 
particular patient. With the exception of outlier cases, the payment 
for services is adequate to ensure access to appropriate care. In the 
case of brachytherapy sources for which the law requires separate 
payment groups, without packaging, the costs of these individual items 
could be expected to show greater variation than some other APCs under 
the OPPS because higher variability in costs for some component items 
and services is not balanced with lower variability in costs for 
others, and because relative payment weights are typically estimated 
using a smaller set of claims. Nevertheless, we believe that 
prospective payment rates for brachytherapy sources based on geometric 
mean costs of the services reported on claims calculated according to 
the standard OPPS methodology are appropriate and provide hospitals 
with the greatest incentives for efficiency in furnishing brachytherapy 
treatment.
    Under the OPPS, it is the relativity of costs, not the absolute 
costs, that is important, and we believe that brachytherapy sources are 
appropriately paid according to the standard OPPS approach. 
Furthermore, some sources may have geometric mean costs and payment 
rates based on 50 or fewer providers because it is not uncommon for 
OPPS rates to be based on claims from a relatively small number of 
hospitals that furnished the service in the year of claims data 
available for the OPPS update year. Fifty hospitals may report hundreds 
of brachytherapy sources on claims for many cases and comprise the 
universe of providers using particular low volume sources, for which we 
are required to pay separately by statute. Further, our methodology for 
estimating geometric mean costs for brachytherapy sources utilizes all 
line-item charges for those sources, which allows us to use all 
hospital reported charge and estimated cost information to set payment 
rates for these items. Therefore, no brachytherapy source claims are 
excluded from the calculation of geometric means costs. We have no 
reason to believe that prospective payment rates based on claims data 
from those providers furnishing a particular source do not 
appropriately reflect the cost of that source to hospitals. As with 
most other OPPS services, we note that the geometric mean costs for 
brachytherapy sources are based upon the costs of those providers' 
sources in CY 2014. Hospitals individually determine their charge for 
an item or service, and one of Medicare's primary requirements for 
setting a charge is that it be reasonably and consistently related to 
the cost of the item or service for that facility. (We refer readers to 
the Medicare Provider Reimbursement Manual, Part I, Section 2203, 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.) We then estimate 
a cost from that charge using the hospital's most recent Medicare 
hospital cost report data in our standard OPPS ratesetting process.
    We acknowledge that HDR brachytherapy sources such as HDR iridium-
192 have a fixed active life and must be replaced every 90 days. As a 
result, a hospital's per treatment cost for the source would be 
dependent on the number of treatments furnished per source. The cost of 
the brachytherapy source must be amortized over the life of the source. 
Therefore, when establishing charges for HDR iridium-192, we expect 
hospitals to project the number of treatments that would be provided 
over the life of the source and establish charges for the source 
accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; 77 FR 
68242; and 78 FR 74861). For most payable services under the OPPS, our 
practice is to establish prospective payment rates based on the 
geometric mean costs determined from hospitals' claims data to provide 
incentives for efficient and cost effective delivery of these services.
    With regard to the commenter's stated concerns relating to the 
differences in costs for high-activity and low-activity palladium-103 
sources, our claims data consistently have shown higher average costs 
for low-activity palladium-103 sources. For the high-activity 
palladium-103 sources described by HCPCS code C2635, our claims data 
showed that 9 hospitals submitted claims for this source in CY 2014, 
compared to 91 and 145 hospitals that submitted claims for the low-
activity palladium-103 sources described by

[[Page 70325]]

HCPCS codes C2640 and C2641, respectively. It is clear from these 
claims data that fewer hospitals furnished the high-activity palladium-
103 source than the low-activity palladium-103 sources, and we expect 
that the hospital cost distribution for those hospitals could be 
different than the cost distribution of the large numbers of hospitals 
reporting the low-activity palladium-103 sources, as previously stated 
(74 FR 60535; 75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). 
These varied cost distributions clearly contribute to the observed 
relationship in geometric mean cost between the different types of 
sources. However, we see no reason why our standard ratesetting 
methodology for brachytherapy sources that relies on all claims data 
from all hospitals furnishing brachytherapy sources would not yield 
valid geometric mean costs for those hospitals furnishing the different 
brachytherapy sources upon which CY 2016 prospective payments are 
based.
    Comment: A number of commenters noted that the proposed CY 2016 
payment rate for brachytherapy sources described by HCPCS code C2616 
(Brachytx, non-str, yttrium-90) would not adequately cover a hospital's 
true cost for purchasing the device. The commenters expressed concern 
that the claims data used to calculate the CY 2016 proposed payment 
rate does not accurately represent charges for the Y-90 brachytherapy 
devices and the CY 2015 purchase price incurred by hospitals. In 
addition, the commenters believed that inconsistent or incorrect 
reporting (or both) of revenue codes for the use of Y-90 brachytherapy 
devices adversely affected the proposed CY 2016 payment rate for HCPCS 
code C2616.
    Response: As illustrated in Table 6 below, the CY 2016 geometric 
mean cost of brachytherapy sources described by HCPCS code C2616 for 
this final rule with comment period is approximately $16,760, compared 
with approximately $16,160 for CY 2015, and $16,890 for CY 2014. 
Furthermore, we note that the CY 2016 geometric mean cost is based on a 
greater number of providers, days, and units in comparison to CY 2014 
and CY 2015.

  Table 6--Cost Statistics for Brachytheraopy Sources Described by HCPCS Code C2616 for CY 2014 Through CY 2016
----------------------------------------------------------------------------------------------------------------
                                                     Number of                                    Geometric mean
         Calendar year             HCPCS code        providers         Days            Units         unit cost
----------------------------------------------------------------------------------------------------------------
2014..........................  C2616...........             246           2,237           2,237      $16,888.06
2015..........................  C2616...........             299           2,464           2,464       16,164.79
2016..........................  C2616...........             352           3,153           3,153       16,764.72
----------------------------------------------------------------------------------------------------------------

    We believe that some variation in relative cost from year to year 
is to be expected in a prospective payment system, particularly for 
low-volume items.
    For all APCs whose payment rates are based upon relative payment 
weights, we note that the quality and accuracy of reported units and 
charges significantly influence the final geometric mean costs that are 
the basis for our payments. Beyond our standard OPPS trimming 
methodology (described in section II.A.2. for this final rule with 
comment period) that we apply to those claims that have passed various 
types of claims processing edits, it is not our policy to critique the 
accuracy of hospital coding and charging for the purpose of 
ratesetting. Moreover, we do not believe it is necessary to incorporate 
external cost data from manufacturers of Y-90 brachytherapy sources (or 
any other brachytherapy sources) because, in a relative weight system 
like the OPPS, it is the relativity of the costs of services to one 
another, rather than absolute cost, that is important in setting 
payment rates. External data lack relativity to the estimated costs 
derived from the claims and cost report data and generally are not 
appropriate for determining relative weights that result in payment 
rates when costs derives from hospital claims and cost report data for 
services are available.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to set the payment rates for 
brachytherapy sources using our established prospective payment 
methodology, which is based on geometric mean costs. The CY 2016 final 
payment rates for brachytherapy sources are found in Addendum B to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
    As stated in the proposed rule, we continue to invite hospitals and 
other parties to submit recommendations to us for new codes to describe 
new brachytherapy 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. 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 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

[[Page 70326]]

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. Services and procedures described by 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 7, 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 7 below, we list the services that are excluded from the C-APC 
payment policy.

    Table 7--Comprehensive APC Payment Policy Exclusions for CY 2016
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Ambulance services;
------------------------------------------------------------------------
Brachytherapy;
------------------------------------------------------------------------

[[Page 70327]]

 
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 CFR 410.2:
     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

[[Page 70328]]

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 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 was identified 
as Addendum J to the proposed rule (which is available via the Internet 
on the CMS Web site). In the CY 2016 OPPS/ASC proposed rule (80 FR 
39225), for CY 2016, we did not propose 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 complexity adjustments, in Addendum J 
to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
    We are providing in Addendum J to this final rule with comment 
period a breakdown of cost statistics for each code combination that 
will qualify for a complexity adjustment (including primary code and 
add-on code combinations). Addendum J to this final rule with comment 
period also contains summary cost statistics for each of the code 
combinations that describe a complex code combination that will qualify 
for a complexity adjustment and will be reassigned to the next higher 
cost C-APC within the clinical family. The combined statistics for all 
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 geometric mean 
cost listed in Addendum J for the code combination described by 
complexity adjustment assignment 3208A, which is assigned to renumbered 
C-APC 5223 (Level 3 Pacemaker and Similar Procedures) (previously APC 
0089), includes all code combinations that are reassigned to renumbered 
C-APC 5223 when CPT code 33208 is the primary code. Providing the 
information contained in Addendum J in this final rule with comment 
period allows stakeholders the opportunity to better assess the impact 
associated with the reassignment of each of the code combinations 
eligible for a complexity adjustment.
(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016
(a) CY 2016 C-APCs
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39225), for CY 2016, 
we proposed to continue to apply the C-APC payment policy methodology 
made effective in CY 2015, as described in detail below. We proposed 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 proposed 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.
    As indicated in the CY 2016 OPPS/ASC proposed rule (80 FR 39225), 
after our annual review of the OPPS, we proposed to establish 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, were displayed in Table 6 of the 
proposed rule with the proposed new C-APCs denoted with an asterisk. 
Addendum J to the proposed rule (which is available via the Internet on 
the CMS Web site) contained all of the data related to the C-APC 
payment policy methodology, including the list of proposed complexity 
adjustments.
    Comment: Several commenters generally supported the concept of 
creating larger payment bundles under the OPPS. The commenters endorsed 
the C-APC payment policy and the proposal to establish nine additional 
C-APCs for CY 2016 to be paid under the existing policy.
    Response: We appreciate the commenters' support.
    Comment: Some commenters expressed concerns that the C-APC payment 
rates do not accurately reflect all of the costs associated with the 
primary service and all adjunctive services. Many of these commenters 
opposed the expansion of the C-APC policy and requested a delay in the 
implementation of the proposed CY 2016 C-APCs until the effect of the 
existing C-APCs can be assessed. Other commenters stated that the C-APC 
payment rates may not appropriately account for the cost of recurring 
services such as radiation oncology and dialysis that are unrelated to 
the primary service, but may be included in a C-

[[Page 70329]]

APC claim. Some commenters also requested CMS to provide for 
transparency in the development of C-APC payment rates and data inputs.
    Response: We do not believe that we should delay implementation of 
the proposed CY 2016 C-APCs to allow time for assessment of the effect 
of the existing C-APCs. It is unclear what specific analyses the 
commenters are requesting we perform before establishing additional C-
APCs. In addition, we believe we have provided adequate information to 
enable stakeholders sufficient time to perform independent analysis of 
the proposed C-APC payment rates and their effects.
    We believe that the additional nine C-APCs that we proposed for CY 
2016 and the existing 25 C-APCs meet the established C-APC criteria. In 
addition, the commenters did not present any data or evidence that 
would suggest that the C-APC payment methodology used to calculate the 
CY 2016 payment rates is inappropriate. We calculate payment rates for 
C-APCs with the same basic methodology used to calculate payment rates 
for other APCs. We calculated the final relative payment weights for C-
APCs by using relative costs derived from our standard process as 
described earlier in section II.A. of this final rule with comment 
period. Specifically, after converting charges to costs on the claims, 
we identified all claims reporting a single procedure described by a 
HCPCS code assigned to status indicator ``J1'' as constituting a 
comprehensive service. These claims were, by definition, classified as 
single major procedure claims. Any claims that contained more than one 
of these procedures were identified but were included in calculating 
the cost of the procedure that had the greatest cost when traditional 
HCPCS level accounting was applied. All other costs were summed to 
calculate the total cost of the comprehensive service, and statistics 
for those services were calculated in the usual manner. Claims with 
extreme costs were excluded in accordance with our usual process. We 
used the final relative payment weights of these comprehensive services 
to calculate final payments following our standard methodology. We 
believe that the C-APC payment methodology is consistent with our goal 
of making the OPPS more like a prospective payment system and less like 
a fee schedule. As is our current practice, we intend to continue to 
review and monitor all of our payment rates to ensure that they are 
accurate and reflect the average resource costs of furnishing a service 
or set of services. In the event that we discover inaccuracies in the 
development of payment rates, CMS will take appropriate action and make 
adjustments as necessary.
    With respect to the public comments regarding the inclusion of 
unrelated services on a C-APC claim, we note that we have responded to 
similar comments in a prior rulemaking. We refer readers to the CY 2014 
OPPS/ASC final rule with comment period (78 FR 74865) and CY 2015 OPPS/
ASC final rule with comment period (79 FR 66804 and 66806) for a 
complete discussion of this issue. We believe that the central 
attribute of the C-APC payment policy is the packaging of all the 
services related to the primary service, with the exception of those 
services described above that, according to the statute, cannot be 
packaged or the list of preventive services that generally would not be 
provided at the time of a major procedure assigned to a C-APC. We 
believe that other services performed at the time of major procedures 
included in C-APCs can reasonably be considered to be related to the 
primary service or procedure. Therefore, we consider all services 
reported on the claim to be related to the primary service and include 
these services in establishing the payment rate for the C-APC. We do 
not believe that a significant amount of unrelated services would be 
billed on the claim for the primary service.
    Further, we note that the comments received regarding this issue 
were primarily concerned with unrelated services reported on claims 
spanning 30 days. We have previously issued manual guidance in the 
Internet Only Manual, Pub. 100-4, Chapter 1, Section 50.2.2, that 
states that only recurring services should be billed monthly. We also 
have specified that, in the event that a recurring service occurs on 
the same day as an acute service that falls within the span of the 
recurring service claim, hospitals should bill separately for recurring 
services on a monthly claim (repetitive billing) and submit a separate 
claim for the acute service (79 FR 66804). In addition, we have 
instructed hospitals that laboratory tests ordered by unrelated 
providers for unrelated medical conditions may be billed on a 14X bill-
type (78 FR 74926).
    Lastly, we do not believe that it would be an undue hardship for 
some hospitals to alter their processes in order to submit separate 
claims for services that are unrelated both clinically and in regard to 
time to the comprehensive service.
    In response to comments requesting additional transparency of the 
development of C-APCs and their proposed cost, we believe that the data 
made available to the public as part of the proposed rule was 
appropriate, clear, and sufficient. For further information on our data 
process, we refer readers to section II.A.1.b. of this final rule with 
comment period.
    Comment: A few commenters requested that CMS provide more clarity 
regarding the definition of adjunctive services.
    Response: A description of services that are considered to be 
adjunctive to the primary comprehensive service is provided in the CY 
2014 OPPS/ASC final rule with comment period (78 FR 74865) as well as 
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800). As 
previously stated, adjunctive services include services that are 
integral, ancillary, supportive, or dependent that are provided during 
the delivery of the comprehensive service. This includes the diagnostic 
procedures, laboratory tests and other diagnostic tests, and treatments 
that assist in the delivery of the primary procedure; visits and 
evaluations performed in association with the procedure; uncoded 
services and supplies used during the service; outpatient department 
services delivered by therapists as part of the comprehensive service; 
durable medical equipment as well as prosthetic and orthotic items and 
supplies when provided as part of the outpatient service; and any other 
components reported by HCPCS codes that are provided during the 
comprehensive service, except for mammography services and ambulance 
services, which are never payable as OPD services in accordance with 
section 1833(t)(1)(B)(iv) of the Act.
    Comment: One commenter expressed concerns regarding payment for 
durable medical equipment that is included on the claim with a primary 
service and packaged into the C-APC payment for the service. The 
commenter stated that, with the implementation of the C-APC payment 
policy, these items and services are no longer paid under separate fee 
schedules and their costs are included in determining the relative 
weights for the C-APCs. Further, the commenter stated that CMS did not 
provide any evidence that funds were added to the OPPS for these 
packaged groups and that not adding these funds could potentially add 
costs to the payment system without increasing payment rates. In 
addition, the commenter expressed concerns that the relative weights of 
the new C-APCs will increase, in turn causing the relative weights of 
other APCs to decrease, which would unfairly decrease payment rates for 
those other separately paid procedures.

[[Page 70330]]

    Response: The costs of durable medical equipment, prosthetics, and 
orthotics have been accounted for in the OPPS. Funds were transferred 
from the DMEPOS Fee Schedule to the OPPS to account for costs of 
durable medical equipment. We refer readers to the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66823) for a discussion of the 
redistribution from the DMEPOS Fee Schedule to the OPPS of 
approximately $1 million.
    Also, with regard to the effect of the increase in the relative 
weights for the C-APCs, we disagree with the commenters that payment 
rates for other separately paid procedures are unfairly reduced. 
Because funds were transferred from the DMEPOS Fee Schedule to account 
for the costs of durable medical equipment, the relativity of the OPPS 
payment weights has not been distorted. This accounting for additional 
DME costs would make the relative payment weights of OPPS services 
(both comprehensive and noncomprehensive) reflective of their estimated 
costs. Further, in a budget neutral system, changes to any OPPS 
relative payment weights have redistributional effects throughout the 
system and any policy changes or data updates have the potential to 
cause these effects.
    Comment: One commenter opposed CMS' proposal to assign the 
procedure described by new CPT code 0392T (Laparoscopy, surgical, 
esophageal sphincter augmentation procedure, placement of sphincter 
augmentation device (i.e., magnetic band)) to C-APC 5362 (Level 2 
Laparoscopy). Although the commenter did not suggest a specific APC or 
C-APC to which the procedure should be assigned, the commenter stated 
that the proposed C-APC assignment for the procedure described by CPT 
code 0392T results in a significant payment reduction for the procedure 
and creates a situation where the cost of the device represents 
approximately 51 percent of the payment rate for C-APC 5362. Therefore, 
the commenter requested that CMS consider an alternative APC assignment 
for this procedure. Another commenter suggested that CMS create a third 
level to the C-APC structure for the Laparoscopic Procedures clinical 
family that includes laparoscopic procedures with a mean geometric cost 
that is greater than $8,000.
    Response: We disagree with the commenter's request. As a part of 
our broader efforts to thoroughly review, revise, and consolidate APCs 
to improve both resource and clinical homogeneity, we proposed a two-
level APC structure for laparoscopy procedures for CY 2016. This 
proposal reduced the levels in the Laparoscopic Procedures clinical 
family from four levels in CY 2015 to two levels proposed for CY 2016. 
The procedure described by CPT code 0392T is similar in terms of 
clinical characteristics to the other procedures assigned to C-APC 5362 
(Level 2 Laparoscopy), which has the highest payment rate in this 
clinical family. In addition, CPT code 0392T replaced HCPCS code C9737 
(Laparoscopy, surgical, esophageal sphincter augmentation with device 
(e.g., magnetic band)), beginning July 1, 2015. In CY 2015, the 
procedure described by HCPCS code C9737 was assigned to APC 0174 (Level 
4 Laparoscopy). Because CPT code 0392T describes the same procedure as 
HCPCS code C9737, we proposed to assign the new CPT code to the same 
APC and status indicator as its predecessor HCPCS C-code. In addition, 
because CPT code 0392T is new for CY 2015 and we do not have claims 
data for ratesetting purposes for this code, we used the geometric mean 
cost of the predecessor HCPCS code (C9737) as a proxy for the APC 
assignment. The geometric mean cost of the procedure described by HCPCS 
code C9737 is approximately $9,779 and the geometric mean cost of C-APC 
5362 is approximately $7,179, which comprises significant services 
ranging in cost from approximately $6,139 to approximately $9,551. 
Therefore, the assignment of CPT code 0392T to C-APC 5362 is based on 
similar resource use and does not result in a violation of the 2 times 
rule. In addition, CPT code 0392T is a laparoscopic procedure that is 
similar in clinical characteristics to other procedures assigned to C-
APC 5362. Once we have available claims data for the procedure 
described by CPT code 0392T, we intend to reevaluate this APC 
assignment under the yearly review of APC assignments.
    We believe that the procedures assigned to C-APC 5362 have similar 
resource utilization and do not create a violation of the 2 times rule 
within the C-APC. Therefore, we do not believe that creating another 
level in the structure of this clinical family is warranted.
    Comment: One commenter recommended that the Neurostimulators C-APC 
clinical family be restructured to: (1) Assign all of the single and 
multiple lead combination procedures to C-APC 5462 (Level 2 
Neurostimulators); (2) assign all of the single generators (without 
placement of a lead) and low cost combination full system implants (one 
generator and one or more leads) to C-APC 5463 (Level 3 
Neurostimulator); and (3) assign all of the multiple generators for 
bilateral procedures and high cost full system implants (one generator 
and one or more leads) to C-APC 5464 (Level 4 Neurostimulators). The 
commenter noted that it appears that the procedures assigned to the 
Neurostimulators C-APC clinical family were based on the comparable 
cost of the procedures alone rather than also factoring in clinical 
similarity. The commenter believed that the recommended restructuring 
would improve the clinical coherence of the procedures assigned to the 
neurostimulators C-APC family and increase the stability of the C-APC.
    Response: We do not believe that we should restructure the 
Neurostimulators C-APC clinical family as recommended by the commenter. 
We note that APC groupings are based on two factors, clinical 
similarity and resource similarity. The highest level in this APC 
series includes various combinations of neurostimulator generator 
implantation procedures with or without leads (and no other types of 
procedures) within the specified cost range. The commenter suggested 
that we define clinical similarity very narrowly with strict adherence 
to the CPT code descriptors. If the OPPS were a fee schedule that did 
not assign procedures to groups, this could be an acceptable approach. 
However, the OPPS is a prospective payment system that uses APC 
groupings of clinically similar services. We believe that the proposed 
structure of this C-APC clinical family best meets the objective of 
both clinical and resource homogeneity within the context of a 
prospective payment system.
    Comment: A few commenters requested that CMS make modifications to 
the C-APC complexity adjustment policy. Some commenters requested that 
CMS revise the criteria for a claim to qualify for a complexity 
adjustment beyond the current frequency and cost thresholds to account 
for the patient acuity experienced at institutions such as academic 
medical centers, cancer hospitals, and trauma centers. Other commenters 
requested that CMS consider the inclusion of three or more primary 
``J1'' codes in the evaluation of complexity adjustments instead of the 
current code pair comparison policy. The commenter believed that the 
reliance on code combinations based on cost ranking of codes would lead 
to instability in the complexity adjustments from year to year, and 
would not take into consideration a large number of comprehensive 
claims with multiple ``J1'' services.
    Response: While we acknowledge the challenges involved with 
treating

[[Page 70331]]

complex patients, as discussed in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66805), OPPS payments are not currently based on 
patient severity or diagnosis like payments under the IPPS. Therefore, 
we are unable to make adjustments based on these factors.
    With regard to considering the inclusion of three or more primary 
``J1'' services in evaluation of complexity adjustments, we reiterate 
our statement in the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66806) in which we disagreed that assigning complexity 
adjustments based on cost ranking of primary and secondary codes is 
either insufficient or would result in instability of the complexity 
adjustments in future years. Ranking ``J1'' services based on 
comprehensive geometric mean costs to determine the primary ``J1'' 
service on a claim does not result in instability in the evaluation of 
complexity adjustments because, by definition, the complexity 
adjustment is for costly cases relative to the primary (most costly) 
``J1'' service. We proposed complexity adjustments for certain code 
pairs to provide a higher payment by promoting the claim for high cost 
procedure pairs consisting of a primary comprehensive procedure and a 
secondary comprehensive procedure that represent sufficiently frequent 
and sufficiently costly comprehensive procedure pairs to the next 
higher paying APC within a clinical family, such that these claims are 
separated from and provided a higher payment than all of the services 
that are accounted for in the APC assignment of the primary service. We 
do not believe that providing a complexity adjustment to any claim that 
has three or more ``J1'' services or to all claims reporting code pairs 
of ``J1'' services that meet the cost and frequency criteria would 
adequately serve the stated purpose of the policy. The intent of the 
complexity adjustment policy is to identify a limited number of costly 
procedure pairs that would qualify for a higher payment at the next 
higher paying C-APC within the clinical family, not to unpackage and 
separately pay for all of the high cost services that are associated 
with the primary ``J1'' procedure.
    Comment: One commenter requested that CMS allow any add-on codes 
describing status indicator ``J1'' procedures to be eligible for 
complexity adjustments when the codes appear on the claim in 
combination with a primary ``J1''service. The commenter noted that the 
current list of add-on codes eligible for complexity adjustments 
includes only add-on codes formerly assigned to device-dependent APCs. 
The commenter further reasoned that, because CMS has extended the 
concept of C-APCs beyond the original policy of applying the 
comprehensive APC methodology to device-dependent APCs, the list of 
eligible add-on procedures should be expanded as well.
    Response: We agree with the commenters. The current policy allows 
add-on codes that were (prior to CY 2015) assigned to device-dependent 
APCs to be evaluated for a complexity adjustment when provided in 
combination with a primary ``J1'' service. This policy was adopted 
because the original group of C-APCs was primarily the former device-
dependent APCs; therefore, the add-on codes that were evaluated for a 
complexity adjustment were consistent with the codes assigned as 
primary ``J1''services under the original C-APCs. As we expand the 
number of C-APCs, we believe that we must also expand the number of 
add-on codes that can be evaluated for a complexity adjustment beyond 
only those add-on codes that were once assigned to device-dependent 
APCs. Therefore, we are revising the list of add-on codes that are 
evaluated for a complexity adjustment to include all add-on codes that 
can be appropriately reported in combination with a base code that 
describes a primary ``J1''service.
    In order to qualify for a complexity adjustment, the primary 
service add-on combination must meet the frequency (25 or more claims 
reporting the code combination) and cost (no violation of the 2 times 
rule) thresholds discussed above. Table 8 of the CY 2015 OPPS/ASC final 
rule with comment period (79 FR 66810) (now also Table 8 in this final 
rule with comment period) has been updated to include the additional 
add-on codes that can be evaluated for a complexity adjustment.

 Table 8--Final CY 2016 Packaged CPT Add-On Codes That Are Evaluated for
                         a Complexity Adjustment
------------------------------------------------------------------------
     CY 2016 CPT/HCPCS add-on code          CY 2016 short descriptor
------------------------------------------------------------------------
C9601.................................  Perc drug-el cor stent bran.
C9603.................................  Perc d-e cor stent ather br.
C9605.................................  Perc d-e cor revasc t cabg b.
C9608.................................  Perc d-e cor revasc chro add.
G0289.................................  Arthro, loose body + chondro.
0172T.................................  Lumbar spine process addl.
0205T.................................  Inirs each vessel add-on.
0289T.................................  Laser inc for pkp/lkp donor.
0290T.................................  Laser inc for pkp/lkp recip.
0291T.................................  Iv oct for proc init vessel.
0294T.................................  Ins lt atrl mont pres lead.
0376T.................................  Insert ant segment drain int.
0396T.................................  Intraop kinetic balnce sensr.
0397T.................................  Ercp w/optical endomicroscpy.
20930.................................  Sp bone algrft morsel add-on.
20931.................................  Sp bone algrft struct add-o.
20936.................................  Sp bone agrft local add-on.
20937.................................  Sp bone agrft morsel add-on.
20938.................................  Sp bone agrft struct add-on.
22515.................................  Perq vertebral augmentation.
22552.................................  Addl neck spine fusion.
22585.................................  Additional spinal fusion.
22614.................................  Spine fusion extra segment.
22632.................................  Spine fusion extra segment.
22840.................................  Insert spine fixation device.
22841.................................  Insert spine fixation device.
22842.................................  Insert spine fixation device.
22843.................................  Insert spine fixation device.
22844.................................  Insert spine fixation device.
22845.................................  Insert spine fixation device.
22846.................................  Insert spine fixation device.
22847.................................  Insert spine fixation device.
22848.................................  Insert spine fixation device.
22851.................................  Apply spine prosth device.
22858.................................  Second level cer diskectomy.
27358.................................  Remove femur lesion/fixation.
29826.................................  Shoulder arthroscopy/surgery.
33225.................................  L ventric pacing lead add-on.
37222.................................  Iliac revasc add-on.
37223.................................  Iliac revasc w/stent add-on.
37232.................................  Tib/per revasc add-on.
37233.................................  Tibper revasc w/ather add-on.
37234.................................  Revsc opn/prq tib/pero stent.
37235.................................  Tib/per revasc stnt & ather.
37237.................................  Open/perq place stent ea add.
37239.................................  Open/perq place stent ea add.
38900.................................  Io map of sent lymph node.
43273.................................  Endoscopic pancreatoscopy.
43283.................................  Lap esoph lengthening.
43338.................................  Esoph lengthening.
49326.................................  Lap w/omentopexy add-on.
49327.................................  Lap ins device for rt.
49435.................................  Insert subq exten to ip cath.

[[Page 70332]]

 
57267.................................  Insert mesh/pelvic flr addon.
60512.................................  Autotransplant parathyroid.
63035.................................  Spinal disk surgery add-on.
63043.................................  Laminotomy addl cervical.
63044.................................  Laminotomy addl lumbar.
63048.................................  Remove spinal lamina add-on.
63057.................................  Decompress spine cord add-on.
63066.................................  Decompress spine cord add-on.
63076.................................  Neck spine disk surgery.
65757.................................  Prep corneal endo allograft.
66990.................................  Ophthalmic endoscope add-on.
92921.................................  Prq cardiac angio addl art.
92925.................................  Prq card angio/athrect addl.
92929.................................  Prq card stent w/angio addl.
92934.................................  Prq card stent/ath/angio.
92938.................................  Prq revasc byp graft addl.
92944.................................  Prq card revasc chronic addl.
92973.................................  Prq coronary mech thrombect.
92974.................................  Cath place cardio brachytx.
92978.................................  Intravasc us heart add-on.
92998.................................  Pul art balloon repr precut.
93462.................................  L hrt cath trnsptl puncture.
93463.................................  Drug admin & hemodynmic meas.
93571.................................  Heart flow reserve measure.
93609.................................  Map tachycardia add-on.
93613.................................  Electrophys map 3d add-on.
93621.................................  Electrophysiology evaluation.
93622.................................  Electrophysiology evaluation.
93623.................................  Stimulation pacing heart.
93655.................................  Ablate arrhythmia add on.
93657.................................  Tx l/r atrial fib addl.
93662.................................  Intracardiac ecg (ice).
------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal with a slight modification to establish 10 
additional C-APCs to be paid under the existing C-APC payment policy 
beginning in CY 2016. Because an additional level 5 was added to the 
musculoskeletal procedures APC series (we refer readers to section 
III.D.9. of this final rule with comment period), the final number of 
additional C-APCs for CY 2016 is 10. In addition, we are adopting a 
final policy to include all add-on codes that are paired with a primary 
service assigned status indicator ``J1'' to be evaluated to qualify for 
a complexity adjustment as shown in Table 8 above. All C-APCs, 
including those newly added for CY 2016, are displayed in Table 9 of 
this final rule with comment period with the new C-APCs denoted with an 
asterisk. Addendum J to this final rule with comment period (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 complexity adjustments.

                                          Table 9--Final CY 2016 C-APCs
----------------------------------------------------------------------------------------------------------------
         CY 2016 C-APC \+\           CY 2016 APC Group title           Clinical family              New C-APC
----------------------------------------------------------------------------------------------------------------
5222..............................  Level 2 Pacemaker and     AICDP............................  ...............
                                     Similar Procedures.
5223..............................  Level 3 Pacemaker and     AICDP............................  ...............
                                     Similar Procedures.
5224..............................  Level 4 Pacemaker and     AICDP............................  ...............
                                     Similar 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                   EPHYS............................  ...............
                                     Electrophysiologic
                                     Procedures.
5212..............................  Level 2                   EPHYS............................  ...............
                                     Electrophysiologic
                                     Procedures.
5213..............................  Level 3                   EPHYS............................  ...............
                                     Electrophysiologic
                                     Procedures.
5492..............................  Level 2 Intraocular       EYEXX............................               *
                                     Procedures.
5493..............................  Level 3 Intraocular       EYEXX............................  ...............
                                     Procedures.
5494..............................  Level 4 Intraocular       EYEXX............................  ...............
                                     Procedures.
5331..............................  Complex GI Procedures...  GIXXX............................  ...............
5415..............................  Level 5 Gynecologic       GYNXX............................  ...............
                                     Procedures.
5416..............................  Level 6 Gynecologic       GYNXX............................               *
                                     Procedures.
5361..............................  Level 1 Laparoscopy.....  LAPXX............................               *
5362..............................  Level 2 Laparoscopy.....  LAPXX............................               *
5462..............................  Level 2 Neurostimulator   NSTIM............................  ...............
                                     and Related Procedures.
5463..............................  Level 3 Neurostimulator   NSTIM............................  ...............
                                     and Related Procedures.
5464..............................  Level 4 Neurostimulator   NSTIM............................  ...............
                                     and Related Procedures.
5123..............................  Level 3 Musculoskeletal   ORTHO............................               *
                                     Procedures.
5124..............................  Level 4 Musculoskeletal   ORTHO............................  ...............
                                     Procedures.
5125..............................  Level 5 Musculoskeletal   ORTHO............................               *
                                     Procedures.
5471..............................  Implantation of Drug      PUMPS............................  ...............
                                     Infusion Device.
5627..............................  Level 7 Radiation         RADTX............................  ...............
                                     Therapy.
5375..............................  Level 5 Urology and       UROXX............................               *
                                     Related Services.
5376..............................  Level 6 Urology and       UROXX............................  ...............
                                     Related Services.
5377..............................  Level 7 Urology and       UROXX............................  ...............
                                     Related Services.
5191..............................  Level 1 Endovascular      VASCX............................  ...............
                                     Procedures.
5192..............................  Level 2 Endovascular      VASCX............................  ...............
                                     Procedures.
5193..............................  Level 3 Endovascular      VASCX............................  ...............
                                     Procedures.
5881..............................  Ancillary Outpatient      N/A..............................               *
                                     Services When Patient
                                     Expires.
8011..............................  Comprehensive             N/A..............................               *
                                     Observation Services.
----------------------------------------------------------------------------------------------------------------
\+\ We refer readers to section III.D. of this final rule with comment period for a discussion of the overall
  restructuring and renumbering of APCs.

[[Page 70333]]

 
* 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) Observation Comprehensive APC (C-APC 8011)
    As part of our 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, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39226), for CY 2016, we proposed 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 (described by HCPCS code G0463); a 
Level 4 or 5 Type A ED visit (described by CPT codes 99284 or 99285); a 
Level 5 Type B ED visit (described by HCPCS code G0384); and a direct 
referral for observation (described by HCPCS code G0379), or critical 
care services (described by 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 proposed 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 proposed 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 procedure described by a HCPCS 
code to which we have assigned status 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 services described by HCPCS code G0378;
     The claims contain 8 or more units of services described 
by HCPCS code G0378 (Observation services, per hour);
     The claims contain services described by one of the 
following codes: HCPCS code G0379 (Direct referral of patient for 
hospital observation care) on the same date of service as services 
described by 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 
services described by HCPCS code G0378; and
     The claims do not contain services described by a HCPCS 
code to which we have assigned status indicator ``J1.''
    We proposed to utilize all of the 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 was 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, in the CY 2016 OPPS/ASC proposed 
rule, we correspondingly proposed to delete APC 8009, as it would be 
replaced with proposed new C-APC 8011.
    As stated earlier, we proposed 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 C-APC 8011 
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 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

[[Page 70334]]

of services that qualify under proposed new C-APC 8011 to the new 
proposed status indicator ``J2'' is necessary because claims containing 
procedures assigned status indicator ``T'' that are performed 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 procedures assigned status 
indicator ``T'' from qualifying for payment through another 
appropriately assigned C-APC based on the primary ``J1'' procedure.
    For claims reporting services assigned to status indicator ``J1'' 
that qualify for payment through a C-APC and services assigned to 
status indicator ``J2'' that qualify for payment through a C-APC, we 
proposed that payment for services would be made through the C-APC to 
which the primary ``J1'' procedure is assigned or through the C-APC to 
which the primary ``J2'' procedures is assigned, and all of the OPPS 
payable services performed 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 based on the 
primary procedure being assigned to status indicator ``J2.'' We 
proposed 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 the primary procedure 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.
    Comment: Many commenters, including MedPAC, supported the proposal 
to create new C-APC 8011. The majority of those commenters who 
supported the proposal requested that CMS not allow any claims 
reporting a surgical procedure (assigned status indicator ``T'') to 
qualify for payment through C-APC 8011, regardless of whether the 
procedure assigned status indicator ``T'' was furnished before or after 
observation services (described by HCPCS code G0378) were provided. A 
few other commenters who supported the proposal requested that CMS make 
separate payment for services assigned to the proposed new C-APC 8011 
and the procedure assigned status indicator ``T,'' when a procedure 
assigned status indicator ``T'' was furnished after observation 
services were provided as part of an encounter that would otherwise 
qualify for payment through the proposed new C-APC 8011. One commenter 
requested that CMS package payment for all procedures assigned status 
indicator ``T'' into the payment for the services through the proposed 
new C-APC 8011, regardless of whether the procedure assigned status 
indicator ``T'' was provided prior to or after the furnishing the 
services described by HCPCS code G0378 when both services are present 
on a claim that would otherwise qualify for payment through the 
proposed new C-APC 8011. Other commenters recommended that CMS make 
modifications to the proposal, including creating a cost threshold to 
exclude relative high-cost but low frequency services from being 
packaged into the payment for services assigned to C-APC 8011; 
excluding the payment for specified covered outpatient drugs (SCODs) 
from being packaged into the payment for proposed new C-APC 8011; 
establishing multiple observation C-APCs; and creating a complexity 
adjustment factor for services assigned to proposed new C-APC 8011 
similar to the complexity adjustment used for services assigned status 
indicator ``J1'' and paid through other C-APCs.
    Response: We appreciate the commenters' support of our proposal to 
create new C-APC 8011. In response to comments pertaining to packaging 
the payment for procedures assigned status indicator ``T'' into the 
payment for proposed new C-APC 8011, we are sensitive to commenters' 
concerns regarding packaging payment for potentially high-cost surgical 
procedures into the payment for an observation C-APC and agree that 
claims reporting procedures assigned status indicator ``T'' should not 
qualify for payment through C-APC 8011, regardless of whether the 
procedure assigned status indicator ``T'' was furnished before or after 
observation services (described by HCPCS code G0378) were provided. We 
believe that excluding all claims reporting procedures assigned status 
indicator ``T'' from qualifying for payment through the new C-APC 8011 
will eliminate any need to create a cost threshold to exclude payment 
for relative high-cost but low frequency services from being packaged 
into the payment for C-APC 8011, as well as eliminate any need to 
create a complexity adjustment factor for services assigned to C-APC 
8011 or to create multiple observation C-APCs.
    While we believe that payment for surgical procedures should not be 
packaged into the payment for services assigned to C-APC 8011, we do 
not believe that separate payment should be made for both C-APC 8011 
and the procedure assigned status indicator ``T'' when the procedure 
assigned status indicator ``T'' was provided as part of an encounter 
that would otherwise qualify for payment through the proposed new C-APC 
8011.
    Accordingly, we are adopting a policy that payment for observation 
services will always be packaged when furnished with a procedure 
assigned status indicator ``T.'' For CY 2016, consistent with our 
modified final policy discussed in this final rule with comment period, 
payment for observation services will be packaged into the surgical 
procedure when comprehensive observation services are furnished with a 
procedure assigned status indicator ``T,'' while eligible separately 
payable services will receive separate payment.
    In addition, we do not believe that payment for SCODs should be 
excluded from packaging into the payment made through C-APC 8011 
because the services are considered supportive and ancillary when 
furnished during an outpatient observation encounter and, therefore, 
are appropriate for inclusion in the comprehensive payment through C-
APC 8011.
    Comment: A number of commenters who supported the proposal 
suggested that CMS include all emergency department (ED) visits as 
eligible services paid through C-APC 8011, as opposed to limiting the 
eligible services to only high-level ED visits.
    Response: We agree with the commenters' suggestion that CMS assign 
all ED visits to C-APC 8011, rather than only the high-level ED visits, 
because we believe that all ED visits should be eligible to trigger C-
APC payment in the same fashion that all clinic visits are eligible to 
trigger C-APC payment to C-APC 8011. We believe that including all ED 
visits in C-APC 8011 is more consistent with our comprehensive payment 
policy. Allowing all ED visits to be eligible to trigger C-APC payment 
through C-APC 8011 means that we will make C-APC payment for the full 
spectrum of ED and clinic visits when furnished in conjunction with 8 
or more

[[Page 70335]]

hours of observation and without a surgical procedure.
    Comment: One commenter requested that CMS withdraw its requirement 
to ``carve out,'' or not include under the reported observation hours, 
the number of hours associated with active monitoring.
    Response: We disagree with the commenter. Consistent with Section 
290.2.2 of Chapter 4 of the Medicare Claims Processing Manual, 
observation services should not be billed concurrently with diagnostic 
or therapeutic services for which active monitoring is a part of the 
procedure.
    Comment: Some commenters expressed concern that the proposed 
payment rate for C-APC 8011 does not adequately cover the costs of the 
services involved, and may result in a disincentive for hospitals to 
establish policies that result in premature discharge of these 
patients.
    Response: The proposed geometric mean cost of C-APC 8011 upon which 
the CY 2016 proposed payment rate is based, represents the geometric 
mean cost of all services reported on claims that qualified for payment 
through the former EAM composite APC. Based on the approximately 1.2 
million claims used for ratesetting for C-APC 8011, we believe that the 
CY 2016 geometric mean cost and associated CY 2016 payment rate 
appropriately reflect the appropriate comprehensive payment for 
encounters qualifying for payment through C-APC 8011. Accordingly, we 
do not believe the proposed payment rate for C-APC 8011 would 
incentivize hospitals to prematurely discharge patients.
    Comment: A few commenters expressed concern that, because the 
breadth of services that may be included in these observation stays 
varies widely based on the specific diagnoses associated with the stay, 
critical care hospitals and those hospitals in areas with low socio-
demographic status may be disproportionately penalized by receiving 
payment for services through C-APC 8011. Another commenter expressed 
concern that the proposed creation of C-APC 8011 would incentivize use 
of the least expensive test for complex Medicare patients with serious 
life-threatening symptoms, regardless of what may be the best test for 
a patient at a given time based on the physician's clinical judgment.
    Response: We do not agree with the commenters' assertion that the 
creation of new C-APC 8011 would incentivize hospitals to furnish the 
cheapest test to complex Medicare patients at the expense of what may 
be the most appropriate course of treatment because we believe that 
hospitals provide appropriate reasonable and necessary care that is in 
the best interest of the patient, and if furnishing a more costly test 
represents the most appropriate course of treatment, hospitals would 
provide such a service. As noted earlier in this section, the payment 
rate for C-APC 8011 was based on all services reported on claims that 
previously qualified for the EAM composite APC. Therefore, we believe 
the payment rate appropriately reflects the average resources expended 
in furnishing comprehensive observation services. In addition, we have 
no reason or evidence to support the commenters' assertion that 
critical care hospitals and those in areas with low socio-demographic 
status may be disproportionately penalized by receiving payment for 
services through C-APC 8011, as the commenter did not explain the basis 
for this assertion. We believe that hospitals will continue to provide 
appropriate care that is reasonable and necessary. We note that, as 
part of our annual rulemaking cycle, we will continue to examine the 
claims data and monitor any changes in the provision of care associated 
with furnishing observation services and payment through C-APC 8011.
    Comment: A number of commenters requested that CMS provide 
additional transparency on the development of C-APC 8011 and its 
proposed cost, as well as assess the risk of care fragmentation and 
analyze the impact of the C-APC payment methodology on a variety of 
factors such as length of stay, patient diagnosis, and patient age. One 
commenter asked CMS to remind providers of the critical importance of 
reporting all services provided to patients, regardless of whether they 
are separately paid or not.
    Response: In response to comments requesting additional 
transparency on the development of C-APC 8011 and its proposed cost, we 
believe that the data made available to the public as part of the 
addenda to the proposed rule was appropriate, clear, and sufficient. 
For further information on our data process, we refer readers to 
section II.A.1.b. of this final rule with comment period. Furthermore, 
as indicated earlier in this section, as part of our annual rulemaking 
cycle, we will continue to examine the claims data and monitor any 
changes in the provision of care, including care fragmentation and 
other factors such as length of stay associated with furnishing 
observation services and payment through C-APC 8011. We also remind 
providers to report all services provided to patients, regardless of 
whether they are separately paid or not.
    A number of comments presented specific issues pertaining to self-
administered drugs, long observation stays, outpatient observation 
notice, and the 3-day inpatient stay requirement for Medicare paid 
skilled nursing facility (SNF) coverage. We did not propose or discuss 
policies in the proposed rule that implicated any of the specific 
issues raised by the commenters. Therefore, we believe these comments 
are outside the scope of the proposed rule, and we are not responding 
to them in this final with comment period.
    After consideration of the public comments we received, effective 
beginning CY 2016, we are finalizing our proposals to delete APC 8009, 
to establish new C-APC 8011, and to develop the geometric mean costs of 
the C-APCs 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). We also are finalizing our 
proposal to pay for all qualifying extended assessment and management 
encounters through C-APC 8011 and to assign the services within this 
APC to proposed new status indicator ``J2.'' In addition, we are 
modifying our proposed criteria for services to qualify for 
comprehensive payment through C-APC 8011 and how we identify all claims 
used in ratesetting for the new C-APC 8011. Specifically, we are 
adopting the following two modifications to our proposal: (1) The 
criteria for services to qualify for payment through C-APC 8011 and the 
claims identified for purposes of ratesetting for C-APC 8011 will 
exclude all claims containing a status indicator ``T'' procedure from 
qualification; and (2) any level ED visit is an eligible service that 
could trigger qualification and payment through C-APC 8011, as opposed 
to only high-level emergency department visits. The finalized criteria 
for services to qualify for payment through C-APC 8011 are listed 
below. All claims meeting these criteria will be utilized in 
ratesetting purposes for C-APC 8011 for CY 2016.
     The claims do not contain a procedure described by a HCPCS 
code to which we have assigned status indicator ``T'';
     The claims contain 8 or more units of services described 
by HCPCS code G0378 (Observation services, per hour);
     The claims contain services provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378 that 
are described by 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;

[[Page 70336]]

CPT code 99281 (Emergency department visit for the evaluation and 
management of a patient (Level 1)); CPT code 99282 (Emergency 
department visit for the evaluation and management of a patient (Level 
2)); CPT code 99283 (Emergency department visit for the evaluation and 
management of a patient (Level 3)); CPT code 99284 (Emergency 
department visit for the evaluation and management of a patient (Level 
4)); CPT code 99285 (Emergency department visit for the evaluation and 
management of a patient (Level 5)) or HCPCS code G0380 (Type B 
emergency department visit (Level 1)); HCPCS code G0381 (Type B 
emergency department visit (Level 2)); HCPCS code G0382 (Type B 
emergency department visit (Level 3)); HCPCS code G0383 (Type B 
emergency department visit (Level 4)); HCPCS code G0384 (Type B 
emergency department visit (Level 5)); 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); and
     The claims do not contain a service that is described by a 
HCPCS code to which we have assigned status indicator ``J1.''
    The final CY 2016 geometric mean cost for C-APC 8011 resulting from 
this methodology is approximately $2,275, based on 1,338,889 claims 
used for ratesetting.
(3) 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, reported 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 entire outpatient 
encounter payment are furnished prior to a primary ``J1'' service and 
billed separately. That is, our analysis of billing patterns associated 
with certain procedures assigned status indicator ``J1'' indicates that 
providers are reporting planning services, imaging tests, and other 
``planning and preparation'' services that are integrally associated 
with the direct provision of the primary ``J1'' service on a separate 
claim. The physician practice patterns associated with reporting the 
provision of 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 (which was proposed to be 
renumbered to C-APC 5631 for CY 2016) for procedures involving single-
session cranial SRS services. 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 
services involving 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).
    As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39228), 
based on our analysis of CY 2014 claims data (the data used to develop 
the proposed CY 2016 payment rates), we identified differences in the 
billing patterns for SRS procedures delivered using Cobalt-60 based and 
LINAC based technologies. In particular, our claims data analysis 
results revealed that services involving 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 
deliveries of SRS treatment on the same date of service and reported on 
the same claim. In contrast, claims data analysis results revealed that 
services involving 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 on different dates of 
services and reported on claims separate from the actual delivery of 
SRS treatment. Because services involving Cobalt-60 based and LINAC-
based technologies are proposed to be assigned to proposed renumbered 
C-APC 5631, the costs of both technologies are reflected in the C-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 
also should be paid through the C-APC. For accuracy of payment, we make 
a single payment through the C-APC that includes payment for these 
essential planning and preparation services, and we do not pay 
separately for C-APC services when they are furnished prior to delivery 
of the primary ``J1'' procedure and reported on separate claims. 
Procedures involving SRS services are just one example of where this 
may be occurring under our C-APC payment policy.
    As a result of our SRS claims data findings, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39228), for CY 2016, we proposed to change 
payment for SRS treatment under proposed renumbered C-APC 5631 by 
identifying any services that are differentially reported using HCPCS 
codes 77371 and 77372 on the same claim and on claims one month prior 
to the delivery of SRS services in proposed renumbered C-APC 5631, 
including planning and preparation services, and removing these claims 
from our C-APC geometric mean cost calculations for CY 2016 and CY 
2017, while we collect data using a modifier, which is discussed in 
greater detail below. For any of the services that we remove from the 
C-APC payment bundle, we proposed that those services would receive 
separate payment even when appearing in combination with a primary 
``J1'' procedure (described either by HCPCS code 77371 or 77372) on the 
same claim for both CY 2016 and CY 2017. Specifically, we proposed to 
apply 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 invited public comments on our proposal to remove claims 
reporting planning and preparation service for SRS treatment from our 
geometric mean

[[Page 70337]]

cost calculation for 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 prospective 
payment for the entire outpatient encounter by packaging payment for 
all C-APC services, including all planning and preparation services 
that occur prior to the primary ``J1'' procedure.
    Comment: Several commenters supported our policy proposal to remove 
claims reporting planning and preparation services from the geometric 
mean cost calculations for proposed renumbered C-APC 5631. The 
commenters believed that because of the coding changes implemented over 
the past few years to describe SRS delivery by LINAC-based and Cobalt-
60 based technologies, hospitals have incorrectly coded claims 
reporting SRS services. To remedy perceived payment inaccuracies for C-
APC 5631, the commenters urged CMS to adopt the policy as proposed.
    Response: We appreciate the commenters' support of our proposal.
    Comment: In contrast, many commenters opposed the policy proposal 
regarding payment for SRS services and recommended that CMS leave the 
four identified categories of services within the C-APC payment 
methodology for CY 2016 and work with stakeholders to improve the 
coding guidance for SRS services.
    Response: As we stated in the proposed rule, the policy intent of 
the 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 
services that are adjunctive to the primary service should be paid 
through the C-APC. However, our claims analysis has shown that the 
services described by HCPCS codes that we proposed to exclude from the 
C-APC payment were frequently reported on a separate claim than the 
primary ``J1'' SRS service and, therefore, received separate payment in 
addition to the full C-APC payment. Therefore, to collect claims data 
on the adjunctive services for the SRS ``J1'' procedures and to ensure 
appropriate ratesetting for the SRS C-APC in the future, we believe it 
is necessary to unbundle payment for the adjunctive services for CY 
2016 and CY 2017. Because the intent of a C-APC is to bundle payment 
for all services related and adjunctive to the primary ``J1'' 
procedure, we agree that coding and billing guidance and instructions 
for SRS services should reflect the inclusion of the comprehensive 
services that were furnished in conjunction with the primary ``J1'' 
service and we proposed the use of a modifier to better identify when 
related comprehensive services were being billed separately.
    Comment: One commenter requested clarification on how CMS will pay 
for planning and preparation services performed prior to the actual 
delivery of the SRS service, such as basic dosimetry (CPT code 77300), 
since CMS did not specifically propose to remove these costs from the 
calculation of C-APC 5631.
    Response: Only the above-identified 10 planning and preparation CPT 
codes that we proposed to remove from the C-APC bundle payment for SRS 
delivery services will be paid for separately in CY 2016 when furnished 
to a beneficiary within one month of the SRS treatment. For CY 2016 and 
CY 2017, these codes will not be included in the C-APC payment for SRS 
even if they are furnished on the same date of service. The services 
that we did not propose to remove from the geometric mean cost 
calculations will continue to be paid through C-APC 5631 (for CY 2016, 
this will be C-APC 5627). However, we remind hospitals that procedure 
codes related to the primary SRS service should either be reported on 
the same claim, or, if furnished on a different date than the primary 
service, must include modifier ``CP'' that we are adopting in this 
final rule with comment period (as discussed in detail below).
    Comment: Commenters requested that CMS provide additional guidance 
on the specific items and services, apart from the four identified 
categories, that are to be reported with the proposed modifier as 
integral, ancillary, supportive, dependent, and adjunctive to either 
HCPCS code 77371 or 77372. Commenters also asked for clarification on 
the time period in which CMS will consider the delivery of a service to 
be adjunctive to the primary ``J1'' SRS treatment.
    Response: As we stated in the proposed rule, any service that is 
integral, ancillary, supportive, dependent and adjunctive to the 
primary ``J1'' service identified by either HCPCS code 77371 or 77372 
that is reported on a different claim than the primary ``J1'' service 
must be billed with the HCPCS modifier. We believe that hospitals, 
physicians, and other clinical staff that furnish comprehensive 
services are in a position to identify these types of related services. 
We do not believe that it is feasible or practicable for us to identify 
all of the services that could potentially be related to a primary 
``J1'' service given differences in medical practice. We expect 
providers to identify any adjunctive services provided within 30 days 
prior to SRS treatment.
    After consideration of the public comments we received, for CY 2016 
and CY 2017, we are finalizing our proposal to remove planning and 
preparation services (identified by the following 10 specific HCPCS 
codes: 70551, 70552, 70553, 77011, 77014, 77280, 77285, 77290, 77295, 
and 77336) from the geometric mean cost calculations for proposed C-APC 
5631 which, beginning in CY 2016, will be C-APC 5627 (Level 7 Radiation 
Therapy). In addition, for CY 2016 and CY 2017, we will separately pay 
for planning and preparation services adjunctive to the delivery of the 
SRS treatment through either modality, regardless of whether they are 
furnished on the same date of service as the primary ``J1'' SRS 
service.
(b) 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 the 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 delivery of the 
associated primary ``J1'' service so that payments under the encounter-
based C-APC will be more accurate.
    To meet this objective, in the CY 2016 OPPS/ASC proposed rule (80 
FR 39228), for CY 2016, we proposed to establish a HCPCS modifier to be 
reported with every service code that describes an adjunctive service 
to a comprehensive service, but is reported on a different claim. We 
proposed that 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 code assigned a status indicator ``J1'' and that are reported 
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 primary ``J1'' services that reflects the costs 
of all of the resources used during

[[Page 70338]]

the delivery of the primary services. We also would discontinue 
separate payment for any of these packaged adjunctive services, even 
when furnished prior to delivery of the primary ``J1''service. As noted 
above, we proposed to use the modifier to identify planning and 
preparation services for primary ``J1'' procedures involving SRS 
services with this goal in mind.
    We invited additional public comments 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.
    Comment: Overall, few commenters supported CMS' proposed policy to 
collect claims data on the costs of adjunctive services furnished prior 
to a primary ``J1'' procedure and reported on a different claim. Those 
commenters who supported the policy proposal encouraged CMS to 
implement this proposal to begin an effort to include the costs of all 
planning and preparation services in the payment bundles for C-APCs.
    Response: We appreciate the commenters' support.
    Comment: A significant number of commenters opposed the proposed 
policy to require hospitals to report a modifier with every HCPCS code 
that describes services that are adjunctive to a comprehensive service 
(as described by a ``J1'' status indicator), but reported on a 
different claim. The commonly cited concerns among the commenters who 
opposed the proposed policy were as follows:
     Definition of related and adjunctive services. Commenters 
requested that CMS provide greater clarity on the definition of 
adjunctive services. Specifically, the commenters recommended that CMS 
identify and propose adjunctive services by HCPCS code for each primary 
``J1'' service, similar to the SRS C-APC proposal, so that hospitals 
will know which HCPCS codes describing adjunctive services to report 
with the modifier. Without specific guidance from CMS on the scope of 
these adjunctive services, some commenters expressed uncertainty about 
their ability to accurately report services using the modifier.
     Operational challenges and administrative burden. 
Commenters asserted that operationalizing new reporting requirements 
for modifiers is challenging because it requires a manual claims review 
to determine appropriateness of a modifier. In addition, commenters 
recommended that CMS delay implementation or withdraw the proposed 
modifier for C-APC adjunctive services data collection so that 
facilities can successfully implement ICD-10 and accurately use the PO 
modifier and the new modifier 59 subset X (E,S,P, and U).
    Response: We appreciate the thoughtful comments that were submitted 
and, based on the above-mentioned issues, particularly the desire for 
CMs to provide additional information pertaining to adjunctive services 
for each C-APC raised by the commenters, are modifying our proposal to 
only require that the modifier be used with respect to reporting 
adjunctive services related to primary ``J1'' SRS services that are 
reported separately on different claims. We believe that it is 
appropriate to finalize our proposal to require the use of the modifier 
for adjunctive SRS services based on our analysis of claims data and 
information submitted by stakeholders who are familiar with the 
distinct processes of care for each type of SRS technology. We are not 
finalizing our proposal to require the use of the modifier for 
reporting any other C-APC services at this time. We will take these 
comments into consideration if we propose a modifier for the other C-
APCs in future rulemaking.
    Comment: Several commenters raised technical questions about the 
application of the proposed adjunctive services modifier. Specifically, 
commenters posed the following questions:
     Should facilities report adjunctive planning and 
preparation services when furnished in a setting outside of the HOPD?
     Are adjunctive services limited to preoperative testing 
and planning services only?
     Does the modifier apply to services performed by different 
physicians within a health system?
    Response: As noted above, we are finalizing our proposal to require 
the use of the modifier for reporting adjunctive and related services 
to a primary ``J1'' SRS procedure at this time. We intend to issue 
further subregulatory guidance on use of the modifier with respect to 
SRS services prior to January 1, 2016. The commenters' technical 
questions will be addressed in that guidance.
    Comment: One commenter supported the use of a modifier over a 
condition code to report adjunctive services. The commenter stated that 
because CMS proposed to require the use of the modifier for CY 2016, it 
is less burdensome to continue its use in subsequent years than switch 
to a condition code. In addition, several commenters asked CMS to delay 
implementation of the requirement to use the adjunctive services 
modifier until additional clarifying instruction is provided on how to 
identify adjunctive services furnished prior to a primary ``J1'' 
service. Alternatively, commenters recommended that CMS follow a step-
wise roll out approach and propose select C-APCs through annual 
rulemaking for which the use of the adjunctive services modifier will 
be required.
    Response: We appreciate the feedback from the commenter regarding 
the preference for use of a modifier rather than a condition code. For 
CY 2016, we are finalizing a policy to only require the use of the 
HCPCS code modifier for adjunctive services related to primary ``J1'' 
SRS services (described by HCPCS codes 77371 and 77372) that are 
reported on a separate claim than the primary ``J1'' service. In 
response to comments on additional clarification on how to identify 
adjunctive services, we have identified these services for SRS 
treatments in this final rule with comment period. Because we are not 
adopting a policy to require the use of this HCPCS modifier for other 
C-APCs at this time, we are not providing additional information 
relating to adjunctive services for other C-APCs in this final rule 
with comment period.
    After consideration of the public comments we received we are 
finalizing our proposal, with modification. Specifically, for CY 2016 
and CY 2017, we are adopting a policy to require the use of a HCPCS 
code modifier for adjunctive SRS C-APC services that are reported 
separate from the primary ``J1'' SRS service. Effective January 1, 
2016, hospitals must use the HCPCS code modifier ``CP'' (Adjunctive 
service related to a procedure assigned to a comprehensive ambulatory 
payment classification (C-APC) procedure, but reported on a different 
claim) to report adjunctive service(s) related to a primary ``J1'' SRS 
services that is reported on a separate claim than the primary ``J1'' 
service. With respect to other C-APCs, we are not adopting a policy to 
require the use of the HCPCS code modifier to identify adjunctive 
services that are reported separately at this time, but may consider 
doing so in the future.
(c) Payment for Claims Reporting Inpatient Only Services Performed on a 
Patient Who Dies Before Admission
    Currently, composite APC 0375 (Ancillary Outpatient Services When 
Patient Dies) packages payment for all services provided on the same 
date as an inpatient only procedure that is performed on an emergence 
basis on an outpatient who dies before admission

[[Page 70339]]

when the modifier ``-CA'' appears on the claim. For CY 2016, we 
proposed to provide payment through proposed renumbered C-APC 5881 for 
all services reported on the same claim as an inpatient only procedure 
with the modifier ``-CA.'' We stated in the proposed rule that this 
proposal provides for all services reported on the same claim as an 
inpatient only procedure with modifier ``-CA'' would be paid through a 
single prospective payment for the comprehensive service. In the CY 
2016 OPPS/ASC proposed rule (80 FR 39228), we proposed to renumber APC 
0375 as APC 5881 (Ancillary Outpatient Services When Patient Dies) for 
CY 2016.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing, without modification, our proposal to provide 
payment through renumbered C-APC 5881 for all services provided on the 
same date and reported on the same claim as an inpatient only procedure 
with the modifier ``-CA.''
f. Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way enables 
hospitals to manage their resources with maximum flexibility by 
monitoring and adjusting the volume and efficiency of services 
themselves. An additional advantage to the composite APC model is that 
we can use data from correctly coded multiple procedure claims to 
calculate payment rates for the specified combinations of services, 
rather than relying upon single procedure claims which may be low in 
volume and/or incorrectly coded. Under the OPPS, we currently have 
composite policies for extended assessment and management services, low 
dose rate (LDR) prostate brachytherapy, mental health services, and 
multiple imaging services. We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period for a full discussion of the development 
of the composite APC methodology (72 FR 66611 through 66614 and 66650 
through 66652) and the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74163) for more recent background.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39228 through 39232), 
for CY 2016, we proposed 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 proposed 
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 the proposed rule. As a result, we proposed to 
delete APC 8009 for CY 2016.
    We noted 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 proposed to continue to pay for 
cardiac electrophysiologic evaluation and ablation services through 
existing C-APC 0086 (that was 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 did not 
propose to renumber composite APC 8001 as part of our overall APC 
restructuring and renumbering discussed in section III.D. of the 
proposed rule.)
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39229), for CY 2016, 
we proposed 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 proposed 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 the proposed rule, we proposed to not 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) (which was proposed to be 
renumbered APC 5375 in the proposed rule) and APC 0651 (Complex 
Interstitial Radiation Source Application) (which was proposed to be 
renumbered APC 5641 in the proposed rule), the APCs to which CPT codes 
55875 and 77778 are assigned, respectively. We proposed 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 stated that 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

[[Page 70340]]

also stated that we 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 the 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 was based.
    Comment: One commenter expressed concern that the proposed CY 2016 
payment rate for APC 8001 is based only on 226 claims that reported 
both CPT codes 55875 and 77778 on the same date of service, a 
significant decrease in the number of claims used from the CY 2015 
final rule ratesetting, which was based on 406 available claims.
    Response: We were able to identify 240 claims in the CY 2014 claims 
data available for this CY 2016 final rule, which we used to set the 
final CY 2016 payment rate for APC 8001 (which has a geometric mean 
cost of approximately $3,542), compared to the 226 claims that were 
available and used for ratesetting for the CY 2016 proposed rule (which 
had a geometric mean cost of approximately $3,807). With regard to the 
commenters' concern regarding the decrease in the number of claims 
available for CY 2016 ratesetting relative to the number of claims 
available for CY 2015 ratesetting, we note that there is typically some 
fluctuation in costs from year to year. We acknowledge that the number 
of claims available and used for ratesetting for APC 8001 has 
continuously decreased over recent years. However, the percentage of 
single frequency claims compared to total claims that were available 
and that we were able to use for ratesetting in this final rule with 
comment period is comparable to prior years.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue to use the 
payment rate for composite APC 8001 to pay for LDR prostate 
brachytherapy services for CY 2016 and to set the payment rate for this 
APC using our established methodology.
(2) Mental Health Services Composite APC
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39229 through 39230), 
for CY 2016, we proposed to continue our longstanding policy of 
limiting the aggregate payment for specified less resource-intensive 
mental health services furnished on the same date to the payment for a 
day of partial hospitalization services provided by a hospital, which 
we consider to be the most resource-intensive of all outpatient mental 
health 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 proposed that when the aggregate payment for 
specified mental health services provided by one hospital to a single 
beneficiary on one date of service based on the payment rates 
associated with the APCs for the individual services exceeds the 
maximum per diem payment rate for partial hospitalization services 
provided by a hospital, those specified mental health services would be 
assigned to proposed renumbered composite APC 8010 (Mental Health 
Services Composite) (existing APC 0034). We also proposed to continue 
to set the payment rate for proposed renumbered composite APC 8010 at 
the same payment rate that we proposed 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 the payment rate for proposed 
renumbered composite APC 8010. Under this policy, the I/OCE would 
continue to determine whether to pay for these specified mental health 
services individually, or to make a single payment at the same payment 
rate established for 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 stated that we continue to 
believe that the costs associated with administering a partial 
hospitalization program at a hospital represent the most resource-
intensive of all outpatient mental health 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.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2016 proposal, without modification, 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 
will be assigned to renumbered composite APC 8010 (Mental Health 
Services Composite) (existing APC 0034) for CY 2016. For CY 2016, we 
also will continue to set the payment rate for renumbered composite APC 
8010 (existing APC 0034) at the same payment rate that we established 
for 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 will continue to be paid the payment rate for 
renumbered composite APC 8010.
(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 submits a claim for 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 under 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

[[Page 70341]]

     APC 8008 (MRI and MRA with Contrast Composite).
    (We note that we did not propose to renumber these composite APCs 
as part of our overall restructuring and renumbering of APCs as 
discussed in section III.D. of the 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 based on the payment rate for APC 8008, the ``with 
contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for payment based on the composite APC payment rate, which includes any 
packaged services furnished on the same date of service. The standard 
(noncomposite) APC assignments continue to apply for single imaging 
procedures and multiple imaging procedures performed across families. 
For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39230), for CY 2016, 
we proposed to continue to pay for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite APC payment methodology. We stated that 
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) were based on 
proposed geometric mean costs calculated from a partial year of CY 2014 
claims available for the proposed rule that qualified for composite 
payment under the current policy (that is, those claims reporting 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), were identified by asterisks in 
Addendum N to the 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 the proposed rule and this final rule with comment period.
    For the CY 2016 OPPS/ASC proposed rule, we were able to identify 
approximately 584,194 ``single session'' claims out of an estimated 1.5 
million potential claims for payment through composite APCs from our 
ratesetting claims data, which represents 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 the proposed 
rule listed 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.
    Comment: One commenter supported CMS' decision to not propose any 
new multiple imaging composite APCs and requested that CMS provide 
stakeholders with the opportunity to meaningfully comment on any new 
composite APCs that the agency may propose in the future.
    Response: We appreciate the commenter's support.
    After consideration of the public comment we received, we are 
finalizing our proposal to continue the use of multiple imaging 
composite APCs to pay for services providing more than one imaging 
procedure from the same family on the same date, without modification. 
For this CY 2016 final rule with comment period, we were able to 
identify approximately 616,602 ``single session'' claims out of an 
estimated 1.6 million potential claims for payment through composite 
APCs from our ratesetting claims data, which represents approximately 
38 percent of all eligible claims, to calculate the final CY 2016 
geometric mean costs for the multiple imaging composite APCs. Table 10 
below lists the HCPCS codes that are subject to the multiple imaging 
composite APC policy and their respective families and approximate 
composite APC geometric mean costs for CY 2016.

Table 10--OPPS Imaging Families and Multiple Imaging Procedure Composite
                                  APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
CY 2016 APC 8004 (Ultrasound Composite)  CY 2016 Approximate APC
                                          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.
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 without   CY 2016 Approximate APC
         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.

[[Page 70342]]

 
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 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
 assigns the procedure to APC 8006 rather than APC 8005..
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
 CY 2016 APC 8007 (MRI and MRA without   CY 2016 Approximate APC
         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.
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.

[[Page 70343]]

 
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 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
 assigns the procedure to APC 8008 rather than APC 8007..
------------------------------------------------------------------------

3. 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

[[Page 70344]]

variety of devices, drugs, items, and supplies that could be used to 
furnish a service, some of which are more costly 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. 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). 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). 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 general, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39233 through 39236), for CY 2016, we 
proposed 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 proposed to package beginning in CY 2016 and are finalizing in 
this final rule with comment period.
b. 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).
    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, in the CY 2016 OPPS/ASC proposed rule (80 FR 
39233), for CY 2016, we proposed to not limit our examination to 
ancillary service APCs with a geometric mean cost of $100 or less. The 
geometric mean cost limit of $100 only applied in 2015, and it is no 
longer relevant. We stated in the

[[Page 70345]]

proposed rule that 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 proposed 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. Specifically, for CY 2016, we proposed to expand the 
set of conditionally packaged ancillary services to include services in 
the three APCs listed in Table 8 of the proposed rule (80 FR 39234) 
(APC 5734 (Level 4 Minor Procedures); APC 5673 (Level 3 Pathology); and 
APC 5674 (Level 4 Pathology)). Ancillary services in the APCs in Table 
8 of the proposed rule 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 possibly 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 proposed 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, to establish or confirm a diagnosis. 
For the Level 3 and 4 pathology APCs, we proposed that the assigned 
status indicator would be ``Q2'' (``T packaging''). The HCPCS codes 
that we proposed to conditionally package as ancillary services for CY 
2016 were displayed in Addendum B to the 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.
    Comment: Several commenters supported designating as conditionally 
packaged the services assigned to APCs 5734, 5673, and 5674.
    Response: We appreciate the commenters' support.
    Comment: Several commenters objected to the conditional packaging 
proposal. Some commenters objected because they believed that CMS has 
finalized too many new packaging policies in recent years. Other 
commenters objected to the proposed conditionally packaging of the 
services in the Levels 3 and 4 Pathology APCs because they believed 
that these more expensive pathology tests (as compared to the services 
assigned to the Levels 1 and 2 Pathology APCs) could be packaged with 
less costly surgical procedures.
    Response: The number of other recent packaging proposals in the CY 
2014 and CY 2015 OPPS/ASC final rules with comment periods has no 
bearing on this CY 2016 packaging proposal. The CY 2016 packaging 
proposal is based on the payment packaging principles specified 
earlier. We believe that these three APCs consist of services that are 
generally integral, ancillary, supportive, dependent, or adjunctive to 
a primary service. In addition, because this proposal is for 
conditional packaging, if the services are provided alone, the services 
would be separately paid. We also have not stated that more costly 
services cannot be packaged into less costly services.
    After consideration of the public comments we received, we are 
finalizing our proposal to conditionally packaged ancillary services 
assigned to APCs 5734, 5673, and 5674 for CY 2016. The three APCs and 
their CY 2016 final status indicators and payment rates are displayed 
in Table 11 below.

                    Table 11--APCs for Conditionally Packaged Ancillary Services for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                   CY 2016 OPPS
           Renumbered CY 2016 APC                     CY 2016 APC title               status          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
----------------------------------------------------------------------------------------------------------------

    The HCPCS codes that we are conditionally packaging as ancillary 
services for CY 2016 are displayed in Addendum B to this CY 2016 OPPS/
ASC final rule with comment period (which is available via the Internet 
on the CMS Web site). The supporting documents for the final rule with 
comment period are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    In addition, in the CY 2016 OPPS/ASC proposed rule (80 FR 39234), 
we proposed 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 
were listed in Table 9 of the proposed rule.
    Comment: Several commenters supported this proposal.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our policy to continue to exempt preventive services from 
the ancillary services packaging policy for CY 2016. Preventive 
services that will continue to be exempted from the ancillary service 
packaging policy for CY 2016 and subsequent years are listed in Table 
12 below.

               Table 12--Preventive Services Exempted From the Ancillary Services Packaging Policy
----------------------------------------------------------------------------------------------------------------
                                                                                 CY 2016  status
                 HCPCS code                           Short descriptor               indicator      CY 2016 APC
----------------------------------------------------------------------------------------------------------------
76977......................................  Us bone density measure...........               S             5732

[[Page 70346]]

 
77078......................................  Ct bone density axial.............               S             5521
77080......................................  Dxa bone density axial............               S             5522
77081......................................  Dxa bone density/peripheral.......               S             5521
G0117......................................  Glaucoma scrn hgh risk direc......               S             5732
G0118......................................  Glaucoma scrn hgh risk direc......               S             5732
G0130......................................  Single energy x-ray study.........               S             5521
G0389......................................  Ultrasound exam aaa screen........               S             5531
G0404......................................  Ekg tracing for initial prev......               S             5731
Q0091......................................  Obtaining screen pap smear........               S             5731
----------------------------------------------------------------------------------------------------------------

(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 a 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 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 (as compared to 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, in the CY 2016 OPPS/ASC proposed rule (80 
FR 39235), for CY 2016, we proposed to package payment for the four 
drugs that were listed in Table 10 of the proposed rule (80 FR 39235) 
based on their primary function as a supply in a surgical procedure, 
which typically means that the drug or biological is integral to or 
dependent on or supportive of or adjunctive to a surgical procedure 
(HCPCS code J0583 (Injection, bivalirudin, 1 mg); HCPCS code J7315 
(Mitomycin, ophthalmic, 0.2 mg); HCPCS code C9447 (Injection, 
phenylephrine and ketorolac, 4 ml vial); and HCPCS code J0130 
(Injection abciximab, 10 mg)). We noted in the proposed rule that one 
drug, described by HCPCS code C9447, whose payment would otherwise be 
packaged in CY 2016, currently has pass-through payment status. 
Therefore, we did not propose to package payment for the drug described 
by HCPCS code C9447 for CY 2016. Instead, we proposed to package 
payment for this drug for CY 2018, after its drug pass-through payment 
status has expired.
    Comment: A few commenters requested that CMS not package the drug 
described by HCPCS code J7315 as a surgical supply. One commenter in 
particular believed that, because the drug mitomycin is not necessarily 
required in all trabeculectomies, the packaging regulation for drugs 
and biologicals that function as supplies when used in a surgical 
procedure specified at Sec.  419.2(b)(16) of the regulations should not 
apply to HCPCS code J7315.
    Response: We addressed a similar comment and explained this 
packaging policy as it applies to HCPCS code J7315 in the CY 2014 OPPS/
ASC final rule with comment period (78 FR 74938). We are repeating some 
of the points made in our response here. First, HCPCS code J7315 
describes a drug. Second, indication for the drug described by HCPCS 
code J7315 is ``for use as an adjunct to ab externo glaucoma surgery'' 
(emphasis added). The drugs that function as surgical supplies 
packaging policy specified at Sec.  419.2(b)(16) applies to all drugs 
and biologicals that are either integral or ancillary or supportive or 
dependent or adjunctive to a surgical procedure (78 FR 74938). Because 
the drug described by HCPCS code J7315 is an adjunct to surgery (the 
drug's only indication), payment for the drug is packaged in CY 2016 in 
accordance with Sec.  419.2(b)(16). For purposes of packaging payment, 
it does not matter in what percentage of trabeculectomies the drug 
described by HCPCS code J7315 is used. Packaging policies apply both to 
products that are used as a necessary ingredient to a procedure 
(meaning that the test or procedure cannot be performed without the 
product) and to products that are optional and only occasionally used 
with a procedure. The frequency of use relative to overall procedure 
frequency is not a factor in determining whether a drug or biological 
is packaged under Sec.  419.2(b)(16). With packaging of a drug or 
biological payment into the procedure payment, surgeons, hospitals, and 
ASCs can weigh the clinical utility of the product for a particular 
case against the cost of the product (because payment is fixed for the 
overall procedure and includes all supplies). If the clinical utility 
of a product is high relative to the cost, hospitals and ASCs (on an 
order by a physician) would be more likely to use the product. If the 
opposite is true, they would be less likely to use a product. Packaging 
policies support the medically necessary use of products and should 
restrain use that may be more a matter of convenience than of medical 
necessity. Therefore, we are finalizing our proposal to package the 
drug described by HCPCS code J7315 (and assign it status indicator 
``N'') for CY 2016 and subsequent years.
    Comment: One commenter expressed concern that mitomycin is overused 
in trabeculectomies. The commenter believed that target intraocular 
pressures (IOPs) should be better tailored to the individual patient 
rather than always aiming for very low IOPs that are achievable with 
mitomycin. The commenter stated that the current CMS payment policy of 
separate payment for mitomycin may encourage the use of mitomycin in 
trabeculectomy.

[[Page 70347]]

    Response: We appreciate this thoughtful comment. As stated above, 
we believe that packaging payment for mitomycin will require facilities 
to focus on the clinical utility of mitomycin in a particular case 
because using the packaged drug will be a cost that must be covered by 
the trabeculectomy procedure payment. On the contrary, separate payment 
for drugs creates a financial incentive for hospitals and ASCs to use 
drugs because they are paid an additional amount at ASP+6 percent. In 
addition, if the facility acquires a drug whose payment is at less than 
ASP, the profit for using the drug is even greater than 6 percent of 
the drug's ASP.
    Comment: One commenter requested that CMS not package the drug 
described by HCPCS code C9447 (phenylephrine and ketorolac) as a 
surgical supply beginning in CY 2018. While the commenter did not 
disagree that the drug would be subject to the packaging regulation at 
Sec.  419.2(b)(16), the commenter predicted that packaging of this drug 
will result in the use of lower quality alternative drugs. In addition, 
the commenter requested that, if CMS packages payment for the drug 
described by HCPCS code C9447, CMS create a separate APC with higher 
payment rates for procedures that use packaged drugs.
    Response: Because the drug described by HCPCS code C9447 functions 
as a surgical supply in cataract surgery, payment for the drug will be 
packaged under Sec.  419.2(b)(16) after its pass-through status expires 
beginning in CY 2018. Which particular drugs surgeons, hospitals, and 
ASCs will employ to perform cataract surgery is a matter of choice by 
the physician and the facility. Through packaging of the payment for 
supplies into the payment for the procedure, CMS generally leaves 
decision-making about which packaged services to use during a procedure 
in the hands of physicians and providers. We believe that pass-through 
payment status should facilitate the use of the drug described by HCPCS 
code C9447. With the packaging of the payment for the drug described by 
HCPCS code C9447 into the cataract surgery procedure payment, we 
believe surgeons, hospitals, and ASCs can weigh the clinical utility of 
the product for a particular case against the cost of the product 
(because payment is fixed for the overall procedure and includes all 
supplies). If the clinical utility of the drug is high relative to its 
cost, hospitals and ASCs (on an order by a physician) would be more 
likely to use the product. If the opposite is true, they would be less 
likely to use the product. If successful cataract surgery depends upon 
the use of the drug described by HCPCS code C9447, we expect that 
hospitals and ASCs will bear the additional cost of the drug. As noted 
above, packaging policies support the medically necessary use of 
products and should restrain use that may be more a matter of 
convenience than of medical necessity.
    We are finalizing our proposal to package the drug described by 
HCPCS code C9447 (and assign it status indicator ``N'') beginning in CY 
2018 and subsequent years. We are not creating a separate APC with a 
higher payment for cataract surgery that uses the drug described by 
HCPCS code C9447, as the commenter requested. We believe that doing so 
would be inconsistent with the packaging policy. The payment for 
cataract surgery is a total payment that includes all necessary 
equipment and supplies, including drugs and biologicals that are 
employed before, during, and after a surgery.
    Comment: One commenter requested that CMS not package payment for 
the drug described by HCPCS code J0583. The commenter stated that, 
because HCPCS code J0583 describes a specified covered outpatient drug 
(SCOD), the drug cannot be packaged because of the specific statutory 
payment methodology that applies to SCODs. The commenter also requested 
that, if CMS finalizes the proposal to package payment for the drug 
described by HCPCS code J0583 as a surgical supply, CMS should also 
package payment for the drugs described by HCPCS codes J1327 
(Eptifibatide) and J3246 (Tirofiban hydrochloride) to ensure that the 
packaging policy is not implemented in an arbitrary and capricious 
manner.
    Response: We have previously explained why SCODs can be packaged in 
the OPPS (72 FR 66766). The drug described by HCPCS code J0583 is 
indicated for various types of patients undergoing percutaneous 
coronary intervention (PCI), which we consider to be a surgical 
procedure for purposes of this packaging policy. The drugs described by 
HCPCS codes J1327 and J3246 mentioned by the commenter have other 
indications besides facilitating PCI. The drugs described by HCPCS 
codes J1327 and J3246 are indicated for the treatment of acute coronary 
syndrome (ACS). These drugs were not among the drugs proposed to be 
packaged as surgical supplies because they have nonsurgical 
indications.
    Comment: A few commenters requested that CMS revise its packaging 
policy to unpackage payment for diagnostic radiopharmaceuticals, stress 
agents, and Cysview. The commenters believed that packaging payment for 
these products limits patient access.
    Response: We disagree with the commenters that packaging limits 
patient access to diagnostic radiopharmaceuticals, stress agents, and 
Cysview. We believe that unconditionally packaging diagnostic 
radiopharmaceuticals, stress agents, Cysview, and other drugs and 
biologicals that function as surgical supplies establishes better 
incentives to ensure clinically appropriate patient care.
    As discussed in the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 74925 through 74926), like other prospective payment systems, 
the OPPS relies on the concept of averaging, where the payment may be 
more or less than the estimated cost of providing a specific service or 
bundle of specific services for a particular patient. There are many 
items and services in the OPPS in which use of the item or service may 
increase the cost per case above that of the average or typical case, 
and there are cases where no additional items or services are necessary 
and the cost of a typical case is much less than the average. This is a 
fundamental aspect of a prospective payment system. Overall, we believe 
that OPPS payments reflect average estimated costs for both situations 
and encourage the hospital to assess the appropriate use of those 
additional items and services in diagnosing bladder cancer and other 
diseases.
    While we continuously examine our claims data to identify data 
anomalies or inconsistencies in billing patterns, we also welcome and 
appreciate public comments that support claims data on how our 
packaging policy may adversely impacts patient access.
    After consideration of the public comments we received, we are 
finalizing our proposal to package payment for the four discussed 
drugs. We are not modifying our drug packaging policy and will continue 
to package drugs and biologicals that function as supplies when used in 
a surgical procedure as codified at 42 CFR 419.2(b)(15) and (b)(16). 
Table 13 below lists the drugs that we are finalizing as 
unconditionally packaged surgical supplies beginning in the calendar 
year indicated in the table.

[[Page 70348]]



                                  Table 13--Drugs Packaged as Surgical Supplies
----------------------------------------------------------------------------------------------------------------
                                                        CY 2015  status       Primary use in      First calendar
          HCPCS code                  Descriptor            indicator       surgical procedure     year packaged
----------------------------------------------------------------------------------------------------------------
J0583........................  Injection, bivalirudin,               K   Percutaneous Coronary              2016
                                1 mg.                                     Intervention[PCI]/PCTA
                                                                          [percutaneous
                                                                          transluminal coronary
                                                                          angioplasty]
                                                                          procedures.
J7315........................  Mitomycin, ophthalmic,                G   Glaucoma surgery.......            2016
                                0.2 mg.
C9447........................  Injection,                            G   Cataract surgery.......            2018
                                phenylephrine and
                                ketorolac, 4 ml vial.
J0130........................  Injection abciximab, 10               K   PCI procedure..........            2016
                                mg.
----------------------------------------------------------------------------------------------------------------

(3) Clinical Diagnostic Laboratory Tests
(a) Background
    In CY 2014, we finalized a policy to package payment for most 
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 diagnosis than the 
other hospital outpatient services and ordered by a practitioner 
different than the practitioner who ordered the other hospital 
outpatient 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 final rule with comment period (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 laboratory tests that are the only services provided on a date of 
service and laboratory tests provided on the same date of service as 
another hospital outpatient service but ordered for a different 
diagnosis than the primary service and ordered by a different 
practitioner than the practitioner who ordered the other hospital 
outpatient 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 and Finalized Policies
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39235 through 39236), 
for CY 2016 and subsequent years, we proposed a few revisions to the 
laboratory packaging policy. First, with regard to the particular 
molecular pathology tests in the code range expressly excluded from the 
previous policy, we proposed 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. As stated in the CY 2016 OPPS/ASC proposed rule, 
we believe that this rationale remains applicable and may be 
appropriately extended to any new molecular pathology tests. Therefore, 
for CY 2016, we proposed to assign all laboratory tests that describe 
molecular pathology tests status indicator ``A'' in Addendum B to the 
proposed rule (which is available via the Internet on the CMS Web 
site), which means that they would be separately paid at the CLFS rates 
outside of the OPPS.
    Second, in the CY 2016 OPPS/ASC proposed rule (80 FR 39236), we 
proposed for CY 2016 to make separate payment for preventive laboratory 
tests and we assigned them status indicator ``A'' in Addendum B to the 
proposed rule. Laboratory tests that are considered preventive are 
listed 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). We stated in the proposed rule that, 
for consistency, we believe that such an

[[Page 70349]]

exception should also apply to laboratory tests that are classified as 
preventive services.
    Finally, for CY 2016, we proposed in the CY 2016 OPPS/ASC proposed 
rule (80 FR 39236) 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 
diagnosis and by the same practitioner as the practitioner who ordered 
the other hospital outpatient service. Specifically, we proposed to 
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 diagnosis and by a different 
practitioner than the practitioner who ordered the other hospital 
outpatient 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 stated in the proposed rule that 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, as we discussed in the proposed rule, 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 another hospital outpatient service. We 
concluded 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 
proposed to package laboratory tests that are reported on the same 
claim with a primary service, regardless of the date of service.
    As stated in the proposed rule (80 FR 39236), 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 diagnosis than 
another hospital outpatient service by a practitioner different than 
the practitioner who ordered the other hospital outpatient service (78 
FR 74942). As indicated in the proposed rule, 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 diagnosis than the other hospital outpatient service. 
However, for ease of administration, we also proposed 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 (80 FR 39236). 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 observed 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. With the assignment of the proposed ``Q4'' modifier to 
laboratory tests, we proposed that modifier ``L1'' would only be used 
to identify ``unrelated'' laboratory tests that are ordered for a 
different diagnosis and by a different practitioner than the other 
hospital outpatient services on the claim.
    We invited public comments on these proposals.
    Comment: Many commenters agreed with expanding the molecular 
pathology test exception to include new molecular pathology tests, and 
not only the tests listed in the CY 2014 OPPS/ASC final rule with 
comment period. In addition, many commenters agreed with the proposal 
for separate payment for preventive laboratory tests.
    Response: We appreciate the commenters' support for these 
proposals.
    Comment: A few commenters disagreed with the assignment of status 
indicator ``E'' (Not paid by Medicare when submitted on outpatient 
claims) for the following CPT codes that describe new multianalyte 
assays with algorithmic analyses (MAAAs):
     CPT code 81490 (Autoimmune (rheumatoid arthritis), 
analysis of 12 biomarkers using immunoassays, utilizing serum, 
prognostic algorithm reported as a disease activity score);
     CPT code 81535 (Oncology (gynecologic), live tumor cell 
culture and chemotherapeutic response by DAPI stain and morphology, 
predictive algorithm reported as a drug response score; first single 
drug or drug combination);
     CPT code 81536 (Oncology (gynecologic), live tumor cell 
culture and chemotherapeutic response by DAPI stain and morphology, 
predictive algorithm reported as a drug response score; each additional 
single drug or drug combination (List separately in addition to code 
for primary procedure)); and
     CPT code 81538 (Oncology (lung), mass spectrometric 8-
protein signature, including amyloid A, utilizing serum, prognostic and 
predictive algorithm reported as good versus poor overall survival).
    In addition, the commenters agreed with CMS' designation of certain 
other MAAAs as separately paid molecular pathology tests, but requested 
that CMS also assign status indicator ``A'' to the four MAAAs codes 
listed above. The commenters believed that the rationale stated in the 
proposed rule for not packaging payment for molecular pathology 
laboratory tests (that is, that ``we believed that these relatively new 
tests [molecular pathology laboratory 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 . . . package'' (80 FR 39236)) 
applies equally to the four new nonmolecular pathology MAAAs listed 
above, and for this reason, payment for these MAAAs should also not be 
packaged.
    Response: We agree in part with the commenters. We agree that the 
MAAAs codes in question should not be assigned status indicator ``E'' 
for CY 2016 because there is some local Medicare coverage for these 
codes. However, the proposal was limited to molecular pathology 
laboratory tests and not to any laboratory test that could possibly fit 
into the molecular pathology test exception rationale. While we did not 
propose to extend the packaging exception that applies to molecular 
pathology laboratory tests to these nonmolecular pathology MAAAs 
laboratory tests, we may consider whether additional exceptions to the 
OPPS laboratory test packaging policy should apply to tests other than

[[Page 70350]]

molecular pathology tests in the future. For CY 2016, the four MAAAs 
codes listed above are assigned status indicator ``Q4.''
    Comment: Many commenters supported the proposed ``Q4'' status 
indicator for conditionally packaged laboratory tests. The commenters 
expressed their appreciation for the administrative convenience this 
policy will afford hospitals in receiving separate payment without the 
use of a modifier for laboratory tests provided without other hospital 
services. However, some commenters objected to the associated logic of 
applying laboratory test packaging at the claim level instead of at the 
date of service level. These commenters believed that laboratory tests 
performed during an outpatient hospital stay but on a different date of 
service might not be ancillary to a primary service on a different date 
of service. Some commenters also believed that payment for laboratory 
tests should not be packaged into payment for other conditionally 
packaged services that are assigned status indicator ``Q1'' or ``Q2,'' 
because they were concerned that the cost of some packaged laboratory 
tests could exceed the cost of other conditionally packaged services 
into which the laboratory tests are packaged.
    Response: We appreciate the commenters' support for the proposed 
``Q4'' status indicator. However, we believe that the ``Q4'' status 
indicator should apply at the claim level. We believe that it is 
appropriate to package payment for laboratory tests that are provided 
on a different date of service than other hospital services. For 
example, a patient could be seen in the emergency room and receive some 
laboratory tests prior to midnight and receive the remainder of the 
services after midnight on a different date of service. This order of 
services should not affect whether the laboratory tests are packaged. 
Therefore, we believe that the ``Q4'' status indicator should identify 
packaging of laboratory tests into procedures on the same claim, 
regardless of the date of service, unless an exception applies. 
Regarding the commenters' concern about costly laboratory tests 
possibly being packaged into less costly services that are assigned 
status indicator ``Q1'' or ``Q2,'' it is possible that this could 
happen but, given the low cost of most laboratory tests relative to 
most other hospital outpatient services, we do not believe that this 
would be a common occurrence. In addition, packaging in the OPPS is not 
limited to only ancillary or subordinate services that are lower cost 
than a primary service. In some cases, the packaged services can have a 
higher cost than the primary service.
    After consideration of the public comments we received, we are 
finalizing the changes to the laboratory test packaging policy as 
proposed, with one modification. We are assigning status indicator 
``Q4'' (instead of ``E'') to CPT codes 81490, 81535, 81536, and 81538. 
Status indicator assignments for laboratory tests are included in 
Addendum B to this final rule with comment period (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.
4. Calculation of OPPS Scaled Payment Weights
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39236 through 39237), 
we proposed to calculate the relative payment weights for each APC 
shown in Addenda A and B to the proposed rule (which are available via 
the Internet on the CMS Web site) using the APC costs discussed in 
sections II.A.1. and II.A.2. of the proposed rule. 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 APC 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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39236 
through 39237), we proposed 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 the CY 2016 proposed rule, for CY 2016, we proposed to delete 
APC 0634 and to move the outpatient clinic visit HCPCS code G0463 to 
APC 0632 (Level 2 Examinations and Related Services) (80 FR 39237). 
Accordingly, for CY 2016 and subsequent years, we proposed to 
standardize all of the relative payment weights to APC 0632. As stated 
in the proposed rule, 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 proposed to renumber APC 0632 as APC 5012 
(Level 2 Examination and Related Services). For CY 2016, we proposed 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

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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 proposed 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.
    We did not receive any public comments on our proposal to use the 
geometric mean cost of renumbered APC 5012 to standardize relative 
payment weights. Therefore, we are finalizing the use of the relative 
payment weight of 1.00 for APC 5012 to derive the unscaled relative 
payment weight for each APC.
    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 
proposed to apply the same process using the estimated CY 2016 unscaled 
relative payment weights rather than scaled relative payment weights. 
We proposed to calculate the weight scaler by dividing the CY 2015 
estimated aggregate weight by the unscaled CY 2016 estimated aggregate 
weight (80 FR 39237).
    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 
final rule link and open the claims accounting document link at the 
bottom of the page.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39237), we proposed 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 proposed to adjust the calculated CY 2016 unscaled relative payment 
weights for purposes of budget neutrality. We proposed 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 the 
proposed rule (which are available via the Internet on the CMS Web 
site) were scaled and incorporated the recalibration adjustments 
discussed in sections II.A.1. and II.A.2. of the 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 final rule with 
comment period) is included in the budget neutrality calculations for 
the CY 2016 OPPS.
    We did not receive any public comments on the proposed weight 
scaler calculation. Therefore, we are finalizing the calculation 
process described in the proposed rule without modification. Using 
updating final rule claims data, we are updating the estimated CY 2016 
unscaled relative payment weights by multiplying them by a weight 
scaler of 1.3852 to ensure that the final CY 2016 relative payment 
weights are scaled to be budget neutral.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. In the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49508), consistent with current law, based on IHS 
Global Insight, Inc.'s second quarter 2015 forecast of the FY 2016 
market basket increase, the FY 2016 IPPS market basket update is 2.4 
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 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 final rule 
(80 FR 49509), we discussed the calculation of the final MFP adjustment 
for FY 2016, which is a 0.5 percentage point reduction.
    In the CY 2016 OPPS/ASC proposed rule, we proposed that if more 
recent data became subsequently available after the publication of the 
proposed rule (for example, a more recent estimate of the market basket 
increase and the MFP adjustment), we would use such 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. Consistent with 
that proposal, and the FY 2016 IPPS/LTCH PPS final rule, we applied the 
updated final FY 2016 market basket percentage increase and the MFP 
adjustment to the OPD fee schedule increase factor for the CY 2016 
OPPS.
    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, in the CY 2016 
OPPS/ASC proposed rule, we proposed 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

[[Page 70352]]

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 applying an OPD fee schedule increase 
factor of 1.7 percent for the CY 2016 OPPS (which is 2.4 percent, the 
final estimate of the hospital inpatient market basket percentage 
increase, less the final 0.5 percentage point MFP adjustment, and less 
the 0.2 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 final rule with comment period.
    In the CY 2016 OPPS/ASC proposed rule, we proposed 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.
    We did not receive any public comments on our proposed adjustments 
to the OPD fee schedule increase factor or on the proposed changes to 
the regulations at 42 CFR 419.32(b)(1)(iv)(B). For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and finalizing the changes to the regulations as proposed.
    To set the OPPS conversion factor for the CY 2016 proposed rule, we 
increased the CY 2015 conversion factor of $74.173 by 1.9 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we further adjusted 
the conversion factor for CY 2016 to ensure that any revisions made to 
the wage index and rural adjustment were made on a budget neutral 
basis. We calculated an overall budget neutrality factor of 0.9993 for 
wage index changes by comparing total estimated payments from our 
simulation model using the 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 the CY 2016 proposed rule, we maintained the current rural 
adjustment policy, as discussed in section II.E. of this final rule 
with comment period. Therefore, we set the budget neutrality factor for 
the rural adjustment is 1.0000.
    For the CY 2016 proposed rule, we proposed to continue previously 
established policies for implementing the cancer hospital payment 
adjustment described in section 1833(t)(18) of the Act, as discussed in 
section II.F. of this final rule with comment period. Consistent with 
that policy, we calculated 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 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 estimated payments applying the CY 2016 cancer hospital payment 
adjustment are identical to estimated payments applying the CY 2015 
final cancer hospital payment adjustment. Therefore, we applied a 
budget neutrality adjustment factor of 1.0000 to the conversion factor 
for the cancer hospital payment adjustment.
    For the proposed rule, we estimated that pass-through spending for 
drugs, biologicals, and devices for CY 2016 would equal approximately 
$136.8 million, which represented 0.25 percent of total projected CY 
2016 OPPS spending. Therefore, the conversion factor was adjusted by 
the difference between the 0.13 percent estimate of pass-through 
spending for CY 2015 and the 0.25 percent estimate of pass-through 
spending for CY 2016, resulting in an adjustment for CY 2016 of -0.12 
percent. Estimated payments for outliers remained at 1.0 percent of 
total OPPS payments for CY 2016. We estimated for the proposed rule 
that outlier payments would be 0.95 percent of total OPPS payments in 
CY 2015; the 1.0 percent for outlier payments in CY 2016 would 
constitute a 0.05 percent increase in payment in CY 2016 relative to CY 
2015.
    We did not receive any public comments on our proposed general 
methodology for calculating the CY 2016 conversion factor. Therefore, 
we are finalizing the methodology in this final rule with comment 
period.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39238), we also 
proposed 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 and final 
adjustment to the conversion factor to redress the inflation in the 
OPPS payment rates for CY 2016 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 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 the proposed rule, we proposed 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 final 
rule with comment period for a detailed discussion of our laboratory 
test packaging policy exceptions and to review our proposals, and final 
policy, 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

[[Page 70353]]

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 stated that we 
expected 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, as we discussed in the CY 2016 OPPS/ASC proposed rule (80 
FR 39239), 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 did not observe a 
significant change in the number of laboratory services in our claims 
data, we concluded that the changes in aggregate payments under the 
OPPS were a result of changes in pricing alone and did 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 proposed a reduction of 2.0 percentage points to 
the proposed CY 2016 conversion factor to redress inappropriate 
inflation in the OPPS payment rates and prevent CY 2016 payment rates 
from including $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 proposed 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. 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 
stated that we believe that a prospective adjustment to remove $1 
billion from the CY 2016 OPPS payment rates would realign total 
aggregate OPPS payments to reflect the resources associated with OPPS 
services. When we calculated 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

[[Page 70354]]

reduction to total spending to be applied to the conversion factor in 
CY 2016. Therefore, in the CY 2016 OPPS/ASC proposed rule, we proposed 
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.
    We also stated in the proposed rule that, 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 provided 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 the proposed 
rule (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html). We noted 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 the proposed rule, we also proposed 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 proposed 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).
    Comment: MedPAC and other commenters commended CMS for recognizing 
that an adjustment to OPPS payment rates was warranted in light of the 
effects of the laboratory services packaging policy. MedPAC noted that 
the proposal to adjust payment rates to prevent continued excess 
payment is consistent with adjustments CMS has made in IPPS, Medicare 
Advantage, and the home health prospective payment system in the past.
    Response: We appreciate the commenters' support.
    Comment: Several commenters suggested that the purpose of the 
proposed adjustment was to recoup overpayments in CY 2014 and CY 2015, 
and that recouping overpayments made in prior years was inconsistent 
with a prospective payment system.
    Response: The proposed -2.0 percent adjustment to the conversion 
factor would not recoup ``overpayments'' made for CYs 2014 and 2015. 
When we classified laboratory tests as OPPS packaged services in 2014, 
we increased the conversion factor to account for that change, which 
resulted in excess payment being built into the rates. The proposal to 
apply a -2.0 percent adjustment to the conversion factor is intended to 
address the effects of the OPPS classification changes on OPPS payments 
for CY 2016 that do not reflect real changes in service-mix. If we do 
not adjust the conversion factor, the excess payment built into the 
rates would carry through to the CY 2016 OPPS rates.
    Comment: A few commenters suggested that the proposed adjustment to 
the conversion factor was unfairly applied across the board to OPPS 
services. The commenters suggested that the adjustment should only 
apply to services that have packaged laboratory tests.
    Response: The proposed adjustment to reduce the conversion factor 
would apply to all OPPS services, but we also established relative 
weights in a manner that would target payment effects on services whose 
payment rates previously reflected excess packaged payment for 
laboratory services. In modeling the CY 2016 OPPS, we did not include 
costs for laboratory tests that were billed separately in CY 2014 for 
purposes of calculating the relative weights of all services. This 
means that services with excess payment due to packaged laboratory 
tests in CYs 2014 and 2015 would have had the additional weight for 
those laboratory services removed from their weight calculation for CY 
2016. With that weight removed, all other services would have a higher 
relative weight than they otherwise would if the costs for those 
packaged laboratory services had been included in the model. As a 
result, the proposed adjustment to the conversion factor in conjunction 
with the relative weights primarily affects the payment for services 
that previously included excess packaged payment for laboratory tests. 
Section 1833(t)(3)(C)(iii) of the Act authorizes the agency to adjust 
the conversion factor, and adjustments to payment rates such as this 
are often applied across the board to all services.
    Comment: One commenter questioned the legality of CMS using section 
1833(t)(3)(C)(iii) of the Act as the authority to make the conversion 
factor adjustment because the commenter viewed the 2.0 percent 
reduction as a correction to an error CMS made in CY 2014, not an 
adjustment for service-mix.
    Response: The commenter misunderstands the basis for the proposed 
adjustment. Section 1833(t)(3)(C)(iii) of the Act provides that, if the 
Secretary determines that adjustments for service-mix for a previous 
year resulted in (or are likely to result in) a change in aggregate 
payments 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 to eliminate the effect of such coding or classification changes. 
This authority applies to the proposed adjustment.
    The increase in aggregate OPPS payments for CY 2014 did not reflect 
real changes in the service-mix for CY 2014, but, rather, was 
attributable to classification changes relating to the packaging of 
laboratory tests in the OPPS.
    As we noted in the CY 2016 OPPS proposed rule (80 FR 39239), in our 
claims data, we did not observe a significant change in the overall 
volume of laboratory services being furnished in CY 2014. Because we 
did not observe such a change, and because these services that we 
packaged continued to be billed and paid separately, we concluded, and 
confirmed based on several analyses, that the changes in aggregate 
payments under the OPPS for CY 2014 were the result of classification 
changes and not real changes in service-mix. In addition, as stated 
above, the excess built into the rates for CY 2014 and CY 2015 would 
carry through to the CY 2016 OPPS rates in the absence of an 
adjustment. Accordingly, we determined that the classification changes 
relating to packaged laboratory services would likely result in a 
change in aggregate payments for CY 2016 that does not reflect real 
changes in service-mix. In accordance with section

[[Page 70355]]

1833(t)(3)(C)(iii) of the Act, our proposal to adjust the conversion 
factor was intended to eliminate the effect of the classification 
changes for CY 2016.
    The Secretary's adjustment is consistent with the statute, is 
reasonable, and is not arbitrary or capricious. We note that section 
1833(t)(12) of the Act precludes administrative and judicial review of 
the Secretary's calculations under section 1833(t)(3) of the Act, 
including adjustments under section 1833(t)(3)(C)(iii) of the Act.
    Comment: Some commenters suggested that CMS implement a transition 
period for the conversion factor adjustment so that the adjustment is 
phased in over several years.
    Response: We recognize that the adjustment to the conversion factor 
is significant for CY 2016, but we do not believe a transition period 
for the adjustment to the conversion factor is appropriate in this 
situation because it would allow the excess packaged payments built 
into the rates for CY 2014 and CY 2015 to continue into CY 2016. We 
believe it is appropriate to adjust for this excess packaged payment as 
soon as possible.
    Comment: Several commenters suggested that CMS present its analysis 
of the need for this adjustment to the Advisory Panel on Hospital 
Outpatient Payment (HOP) in the spring of 2016 before implementing this 
adjustment to allow the HOP Panel to opine on whether this adjustment 
is warranted.
    Response: As we indicated earlier, we believe it is appropriate to 
make this adjustment for the CY 2016 payment rates because otherwise 
the excess packaged payments built into the rates for CY 2014 and CY 
2015 would continue into CY 2016. If we waited to present this issue to 
the HOP Panel, we would not be able to implement this adjustment until 
the CY 2017 payment year.
    Comment: One commenter suggested that the increase in ``unrelated'' 
laboratory services paid under the CLFS in CY 2014 might be a 
continuation of the broader trend of inpatient services transitioning 
to outpatient services and might not be related to the laboratory 
packaging policy implemented in CY 2014.
    Response: Our actuaries' analyses included in conjunction with the 
proposed rule (80 FR 39239 and the ``Summary Analysis Supporting 
Adjustment for Excess Laboratory Packaging'' on the OPPS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1633-P.html) indicate that the total amount of laboratory 
services performed in the outpatient setting did not increase and that 
the number of laboratory services performed in the outpatient setting 
that were deemed ``unrelated'' to OPPS services in CY 2014 were greater 
than we had estimated they would be with the implementation of the 
laboratory services packaging policy. As a result, we believe that the 
higher than expected number of ``unrelated'' laboratory services is 
reflective of the classification changes related to the laboratory 
packaging policy and not due to services moving from the inpatient 
setting to the outpatient setting.
    Comment: Several commenters suggested that CMS not implement this 
adjustment because CMS had not specified in the CY 2014 OPPS final rule 
that $2.4 billion was being included in the CY 2014 OPPS payment rates 
to account for newly packaged laboratory services. The commentators 
indicated that CMS did not specify in the CY 2014 OPPS final rule or in 
the CY 2016 OPPS proposed rule whether CMS was excluding from the $2.4 
billion estimate ``unrelated'' laboratory services that under CMS' CY 
2014 policy would be separately paid.
    Response: The proposed adjustment to the conversion factor would 
affect OPPS payments for CY 2016, not CY 2014. In the CY 2014 OPPS/ASC 
final rule with comment period, we discussed the incorporation of the 
payment weights for outpatient laboratory tests previously paid at the 
CLFS payment rates (78 FR 74948 through 74949). The calculation of the 
OPPS relative weights and payment rates for CY 2014 reflects estimates 
attributable to packaged laboratory services. While we did not specify 
the estimated dollar amount ($2.4 billion) attributable to packaged 
laboratory services in the CY 2014 final rule with comment period, we 
did specify in the CY 2016 OPPS/ASC proposed rule that an estimated 
$2.4 billion was effectively added to the OPPS payment system to 
account for packaged laboratory services in the CY 2014 OPPS/ASC final 
rule with comment period. Insofar as hospitals may have received 
significant windfalls for CY 2014 and CY 2015, presumably commenters do 
not intend to challenge the payments for those years (at least with 
respect to the incorporation of packaged laboratory services). With 
respect to the OPPS ratesetting process for CY 2016, we referenced the 
$2.4 billion estimate in the CY 2016 OPPS/ASC proposed rule (as 
explained above) and thus commenters had notice of the estimate for 
purposes of commenting on the proposed adjustment in the CY 2016 OPPS/
ASC proposed rule.
    Comment: Several commenters suggested that CMS not implement this 
adjustment because the ``Summary Analysis Supporting Adjustment for 
Excess Laboratory Packaging,'' released with the CY 2016 OPPS/ASC 
proposed rule, included data that were not publicly available. The 
commenters indicated that this summary analysis included CY 2014 data 
processed through May 31, 2015, while the OPPS limited data set 
released with the proposed rule included data processed through 
December 31, 2014. In addition, the commenters noted that the summary 
analysis displayed monthly data that are not available in the OPPS 
limited data set. The commenters also noted that CMS did not detail 
every assumption made in calculating the proposed adjustment, and that 
without these details it would be difficult for commenters to replicate 
our actuaries' analysis.
    Response: The ``Summary Analysis Supporting Adjustment for Excess 
Laboratory Packaging'' was provided in conjunction with the proposed 
rule to give stakeholders/commenters additional information about our 
methodology for determining the amount of the proposed adjustment, even 
though the data used for purposes of the summary analysis were not the 
same exact data used for purposes of the proposed rule. For the 
supplemental summary analysis, we used the most recent data available 
to us, CY 2014 claims processed through May 31, 2015, which we 
estimated to be approximately 98 percent complete. The limited data set 
(LDS) used for the proposed rule was approximately 90 percent complete. 
While having 90 percent of claims, as opposed to 98 percent, may have 
made it difficult for stakeholders to exactly replicate our results, we 
note that the 90 percent LDS yielded very similar results to the 98 
percent dataset, and we believe it would have been sufficient to enable 
stakeholders to meaningfully comment on the proposed adjustment. 
Likewise, we provided the table in the supplemental analysis with the 
data presented by month because we believed it would help stakeholders 
better understand the proposed adjustment, even if these data are not 
replicable using the LDS. Specifically, we believed that the monthly 
breakdown of unrelated laboratory test billing would show that 
unrelated laboratory test billing was fairly consistent across CY 2014 
and that the mid-year change in billing methodology

[[Page 70356]]

did not affect billing of unrelated laboratory tests in CY 2014.
    We performed multiple analyses to better understand the effect of 
the classification changes relating to packaged laboratory services on 
aggregate payments, in order to determine the amount of the proposed 
adjustment described in the proposed rule (80 FR 39239 through 39240). 
As mentioned earlier in this section and explained in the proposed 
rule, in one analysis, we analyzed actual claims data for CY 2014 
(using data available for the CY 2016 proposed rule) to determine an 
estimate of the total dollar amount that ``should have been'' packaged 
into the OPPS for laboratory services in CY 2014 if we had had perfect 
information about billing patterns of unrelated services when making 
our original proposal for CY 2014. We first estimated how much we would 
have paid if all laboratory services were paid at CLFS NLA rates and 
had not been packaged under the OPPS. To do this, we began with the CY 
2014 claims data which we used for the CY 2016 proposed rule. We 
identified the number of billed laboratory services for each laboratory 
test and associated the CY 2014 CLFS NLA payment rate with that 
utilization to determine a total payment amount in CY 2014 for 
laboratory services at NLA payment rates. We would expect final CLFS 
payment to be less than total payment at NLA amounts because the CLFS 
pays the ``lesser of'' the fee schedule amount, the NLA, or changes 
(section 1833(a)(1)(D) of the Act). The NLA establishes a ceiling on 
possible payment. We estimated an overall adjustment factor of 0.88 
from the difference in total estimated NLA payment in CY 2012 rates and 
total final actual CLFS payment on the claims. We used that factor to 
adjust estimated total payment amounts for laboratory services at NLA 
payment rates in CY 2014 claims to better reflect what actual payment 
would have been in CY 2014 under CLFS payment methodologies. In 
addition, we adjusted the payment amounts to account for the difference 
between CY 2014 claims data and CY 2012 claims data and to account for 
the fact that the CY 2014 claims data was only 90 percent complete for 
the CY 2016 proposed rule. Using our standard methodology, we adjusted 
these data to account for what they would have shown had they been 
complete at the time of our analysis. We then examined actual CY 2014 
claims data to estimate how much was paid separately for laboratory 
services in CY 2014. The difference between these estimates reflects a 
reasonable approximation of the payment that would have been packaged 
into OPPS for laboratory services in CY 2014 if we had had perfect 
information about billing patterns of unrelated services when making 
our original proposal for CY 2014. This analysis indicates that we 
included a gross estimate of roughly $1 billion in packaged payment in 
the CY 2014 OPPS payment rates for laboratory tests that ultimately 
were paid separately in CY 2014 (that is, excess packaged payment for 
laboratory services).
    We also performed an analysis to assess the total payment for 
laboratory services that were billed on an OPPS claim, but were paid 
separately in CY 2014 because they were unrelated to the OPPS services. 
Specifically, using CY 2014 data processed through May 31, 2015, we 
observed that laboratory services billed on the 14X claim increased 
immediately beginning in January 2014 (as displayed in the ``Summary 
Analysis Supporting Adjustment for Excess Laboratory Packaging'' posted 
with the CY 2016 OPPS/ASC proposed rule) corresponding with use of the 
14X bill type to report ``unrelated'' laboratory services. Beginning in 
July 2014, corresponding with the change in billing policy to bill 
``unrelated'' laboratory services on a 13X bill type with the ``L1'' 
modifier, we observed most of the increase in 14X billing shifting to 
the 13X bill type with the ``L1'' modifier (again, as displayed in the 
``Summary Analysis Supporting Adjustment for Excess Laboratory 
Packaging'' posted with the CY 2016 OPPS/ASC proposed rule). Summing 
the total increase in 14X billing in CY 2014 (compared to CY 2013) and 
the total amount billed on 13X claims with an ``L1'' modifier in CY 
2014 resulted in a similar estimate of approximately $1 billion in 
``unrelated'' laboratory services. 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 stated that we believe 
that a prospective adjustment to remove this $1 billion from the OPPS 
would realign total aggregate OPPS payments to reflect the resources 
associated with OPPS services. We calculated the $1 billion as a 
percent of $50 billion (the approximate actual total spending for OPPS 
services in CY 2014), which is 2.0 percent. Therefore, based on our 
analysis of the effects of the classification changes for CY 2014, we 
proposed a 2.0 percent downward adjustment to the conversion factor for 
CY 2016. In addition to the proposed rule itself, we provided a 
significant amount of additional information in the ``Summary Analysis 
Supporting Adjustment for Excess Laboratory Packaging,'' including a 
description of our actuaries' details and methods for its analysis, the 
adjustment input quantities, and outpatient monthly unrelated 
laboratory test billing. We believe the detail included in the proposed 
rule and in conjunction with the proposed rule was sufficient for 
stakeholders to be able to understand CMS' methodology for determining 
the amount of the proposed adjustment.
    Comment: Several commenters suggested that CMS not implement this 
adjustment because the CY 2014 data year was an inappropriate base year 
for analysis of the laboratory packing proposal because of the changing 
methodology for reporting ``unrelated'' laboratory services during CY 
2014. Many of these commenters suggested that CMS should wait until CY 
2015 data are available before making an adjustment.
    Response: As noted in the proposed rule (80 FR 39239) and 
illustrated in the ``Outpatient Unrelated Lab Billing Shift 
Quantities'' chart in the ``Summary Analysis Supporting Adjustment for 
Excess Laboratory Packaging'' files released in conjunction with the CY 
2016 OPPS proposed rule, monthly total ``unrelated'' laboratory test 
billing was very consistent throughout CY 2014, with most ``unrelated'' 
laboratory test billing shifting from the 14X claim to the 13X claim 
with the ``L1'' modifier in July 2014. Because monthly total 
``unrelated'' billing was consistent over the CY 2014 payment year, we 
do not believe that the mid-year change in how providers were to bill 
for ``unrelated'' laboratory services led to an increase in billing for 
such services in CY 2014. We believe that the consistency in the CY 
2014 ``unrelated'' billing patterns across different billing 
instructions shows that the change in billing requirements for 
reporting unrelated laboratory services in CY 2014 did not cause a 
higher than expected amount of unrelated laboratory service payments in 
CY 2014. We continue to believe that the CY 2014 data regarding 
``unrelated'' billing are appropriate for purposes of determining 
whether an adjustment to the conversion factor is warranted for CY 2016 
and the amount of any adjustment. We will monitor ``unrelated'' 
laboratory test billing patterns in the CY 2015 OPPS claims data as we 
establish ratesetting for the CY 2017 OPPS payments to confirm this 
conclusion.
    Comment: Several commenters suggested that CMS not implement this 
adjustment because CMS did not specify

[[Page 70357]]

whether the proposed changes to laboratory test packaging policy in the 
CY 2016 OPPS/ASC proposed rule were factored into the -2.0 percent 
adjustment to the conversion factor to address excess packaged payment 
for laboratory services.
    Response: The proposed adjustment to the conversion factor for CY 
2016 is based on the effects of the OPPS classification changes 
implemented for CY 2014; the proposed adjustment is not based on the 
proposed classification changes for CY 2016. We did not propose an 
adjustment to the conversion factor based on classification changes for 
CY 2016, but we will monitor the effects of those changes. At this 
time, we do not believe that a separate adjustment to the conversion 
factor based on CY 2016 classification changes is warranted. Our 
analysis indicates that the estimated effect of the CY 2016 
classification changes on shifts between aggregate payments for 
laboratory tests paid separately using CLFS payment rates and those 
packaged under the OPPS is small and that, if we did make an adjustment 
to account for those changes, it would be a further reduction to OPPS 
payments. We will examine CY 2015 claims data when we set CY 2017 OPPS 
payment rates.
    After consideration of the public comments we received, we are 
finalizing our proposal to adjust the CY 2016 conversion factor by -2.0 
percent to eliminate the effects of classification changes on aggregate 
payments that do not reflect real changes in service-mix.
    In summary, for CY 2016, we are finalizing our proposal 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 using a reduced 
conversion factor of $72.251 in the calculation of payments for 
hospitals that fail to meet the Hospital OQR Program requirements (a 
difference of -$1.474 in the conversion factor relative to hospitals 
that meet the requirements).
    For CY 2016, we are continuing previously established policies for 
implementing the cancer hospital payment adjustment described in 
section 1833(t)(18) of the Act, as discussed in section II.F. of this 
final rule with comment period.
    As a result of these finalized policies, the OPD fee schedule 
increase factor for the CY 2016 OPPS is 1.7 percent (which is 2.4 
percent, the estimate of the hospital inpatient market basket 
percentage increase, less the 0.5 percentage point MFP adjustment, and 
less the 0.2 percentage point additional adjustment). For CY 2016, we 
are using a conversion factor of $73.725 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 OPD fee schedule increase factor of 1.7 percent for CY 2016, the 
required wage index budget neutrality adjustment of 0.9992, the cancer 
hospital payment adjustment of 0.9994, the -2.0 percent adjustment to 
the conversion factor to eliminate the effects of classification 
changes that would otherwise result in an increase in aggregate OPPS 
payments (due to excess packaged payment under the OPPS for laboratory 
tests), and the adjustment of -0.13 percentage point of projected OPPS 
spending for the difference in the pass-through spending result in a 
conversion factor for CY 2016 of $73.725.

C. Wage Index Changes

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

[[Page 70358]]

FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 
through 53370; for FY 2014, 78 FR 50590 through 50591; for FY 2015, 79 
FR 49971; and for FY 2016, 80 FR 49498.
    In addition to the changes required by the Affordable Care Act, we 
note that the 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 final rule (80 FR 49488 
through 49508) for a detailed discussion of all 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 final rule (80 FR 49488 
through 49513), 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.
    In the CY 2016 OPPS/ASC proposed rule, we proposed to use the 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 referred 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 proposed to continue this policy 
for CY 2016. The following is a brief summary of the major FY 2016 IPPS 
wage index policies and adjustments that we proposed to apply to these 
hospitals under the OPPS for CY 2016. We further refer readers to the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49508) for a 
detailed discussion of the final changes to the FY 2016 IPPS 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 proposed 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).
    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 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 final rule (80 FR 
49494 through 49496), 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 final rule with comment 
period, 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 extended the imputed floor 
policy (both the original methodology and alternative methodology) for 
another year, through September 30, 2016 (80 FR 49497 through 49498). 
For purposes of the CY 2016 OPPS, we also proposed 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 proposed 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.
    Comment: One commenter noted that the IPPS wage index does not 
account for the difficulty of recruiting health professionals to rural 
areas. The

[[Page 70359]]

commenter suggested that a higher wage index for rural areas would help 
these hospitals recruit professionals from other areas to underserved 
rural areas.
    Response: 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. We continue to believe that using the IPPS 
wage index as the source of the OPPS wage index is reasonable and 
logical, given the inseparable, subordinate status of the HOPD within 
the hospital. As we discussed in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49951), we believe that the IPPS wage index reflects the reality 
of population shifts and labor market conditions, and provides an 
accurate representation of geographic variation in wage levels.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue to use an 
OPPS labor-related share of 60 percent of the national OPPS payment for 
the CY 2016 OPPS. We also are finalizing the use of the final FY 2016 
IPPS post-reclassified wage index for urban and rural areas in its 
entirety, including the frontier State wage index floor, the rural 
floor, geographic reclassifications, and all other applicable wage 
index adjustments, as the final CY 2016 wage index for OPPS hospitals 
and CMHCs based on where the facility is located for both the OPPS 
payment rate and the copayment standardized amount, as discussed above 
and as set forth in the CY 2016 OPPS/ASC proposed rule (80 FR 39240 
through 39242). We refer readers to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49488 through 49508) and the final FY 2016 hospital wage 
index files posted on the CMS Web site. For non-IPPS hospitals under 
the OPPS, we are finalizing our proposal to continue 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 also are finalizing our proposal 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, which CMS has 
extended for an additional year under the IPPS in the FY 2016 IPPS/LTCH 
PPS final rule. In addition, we are finalizing our proposal 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 final rule (available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies 
counties eligible for the out-migration adjustment and IPPS hospitals 
that will receive the adjustment for FY 2016. (We note that the new FY 
2016 IPPS Table 2 consolidates information on counties eligible for the 
out-migration adjustment that was previously issued as Table 4J.) We 
are including the out-migration adjustment information from the new 
consolidated Table 2 from the FY 2016 IPPS/LTCH PPS final rule as 
Addendum L to this final rule with comment period with the addition of 
non-IPPS hospitals that will receive the section 505 out-migration 
adjustment under the CY 2016 OPPS. Addendum L is available via the 
Internet on the CMS Web site. With the exception of the out-migration 
wage adjustment table (Addendum L to this final rule with comment 
period, which is available via the Internet on the CMS Web site), which 
includes non-IPPS hospitals paid under the OPPS, we are not reprinting 
the final FY 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 final FY 2016 IPPS wage index tables and Addendum L.

D. Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. 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, hospitals that have not 
accepted assignment of an existing hospital's provider agreement, and 
hospitals that 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 final rule with comment period, as we proposed, we are 
updating 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39242), for CY 2016, 
we proposed to continue to use our standard methodology of calculating 
the statewide average default CCRs using the same hospital overall CCRs 
that we use to adjust charges to costs on claims data for setting the 
proposed CY 2016 OPPS relative payment weights. Table 11 published in 
the proposed rule (80 FR 39243) listed the proposed CY 2016 default 
urban and rural CCRs by State and compared them to the CY 2015 default 
CCRs. These proposed CCRs represented the ratio of total costs to total 
charges for those cost centers relevant to outpatient services from 
each hospital's most recently submitted cost report, weighted by 
Medicare Part B charges. We also proposed to adjust ratios from 
submitted cost reports to reflect the final settled status by applying 
the differential between settled to submitted overall CCRs for the cost 
centers relevant to outpatient services from the most recent pair of 
final settled and submitted cost reports. We then proposed to weight 
each hospital's CCR by the volume of separately paid line-items on 
hospital claims corresponding to the year of the majority of cost 
reports used to calculate the overall CCRs. We refer readers to the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66680 through 
66682) and prior OPPS rules for a more detailed discussion of our 
established methodology for calculating the statewide average default 
CCRs, including the hospitals used in our calculations and our trimming 
criteria.
    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

[[Page 70360]]

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.
    We did not receive any public comments on our CY 2016 proposal. 
Therefore, we are finalizing our proposal, without modification, to 
apply our standard methodology of calculating the statewide average 
default CCRs using the same hospital overall CCRs that we used to 
adjust charges to costs on claims data for setting the final CY 2016 
OPPS relative payment weights.
    Table 14 below lists the statewide average default CCRs for OPPS 
services furnished on or after January 1, 2016.

                                    TABLE 14--CY 2016 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                               Previous default
                    State                               Urban/rural               CY 2016      CCR (CY 2015 OPPS
                                                                                default CCR       final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA......................................  RURAL.........................           0.588               0.439
ALASKA......................................  URBAN.........................           0.269               0.294
ALABAMA.....................................  RURAL.........................           0.224               0.235
ALABAMA.....................................  URBAN.........................           0.168               0.186
ARKANSAS....................................  RURAL.........................           0.223               0.262
ARKANSAS....................................  URBAN.........................           0.218               0.239
ARIZONA.....................................  RURAL.........................           0.246               0.228
ARIZONA.....................................  URBAN.........................           0.170               0.181
CALIFORNIA..................................  RURAL.........................           0.179               0.178
CALIFORNIA..................................  URBAN.........................           0.190               0.196
COLORADO....................................  RURAL.........................           0.366               0.410
COLORADO....................................  URBAN.........................           0.208               0.219
CONNECTICUT.................................  RURAL.........................           0.366               0.339
CONNECTICUT.................................  URBAN.........................           0.257               0.273
DISTRICT OF COLUMBIA........................  URBAN.........................           0.298               0.299
DELAWARE....................................  URBAN.........................           0.308               0.314
FLORIDA.....................................  RURAL.........................           0.170               0.180
FLORIDA.....................................  URBAN.........................           0.150               0.156
GEORGIA.....................................  RURAL.........................           0.251               0.256
GEORGIA.....................................  URBAN.........................           0.199               0.211
HAWAII......................................  RURAL.........................           0.339               0.337
HAWAII......................................  URBAN.........................           0.313               0.307
IOWA........................................  RURAL.........................           0.305               0.321
IOWA........................................  URBAN.........................           0.256               0.269
IDAHO.......................................  RURAL.........................           0.337               0.353
IDAHO.......................................  URBAN.........................           0.459               0.463
ILLINOIS....................................  RURAL.........................           0.234               0.252
ILLINOIS....................................  URBAN.........................           0.208               0.217
INDIANA.....................................  RURAL.........................           0.314               0.334
INDIANA.....................................  URBAN.........................           0.237               0.262
KANSAS......................................  RURAL.........................           0.287               0.300
KANSAS......................................  URBAN.........................           0.209               0.231
KENTUCKY....................................  RURAL.........................           0.202               0.231
KENTUCKY....................................  URBAN.........................           0.203               0.212
LOUISIANA...................................  RURAL.........................           0.256               0.272
LOUISIANA...................................  URBAN.........................           0.202               0.209
MASSACHUSETTS...............................  RURAL.........................           0.324               0.326
MASSACHUSETTS...............................  URBAN.........................           0.330               0.333
MAINE.......................................  RURAL.........................           0.470               0.430
MAINE.......................................  URBAN.........................           0.395               0.432
MARYLAND....................................  RURAL.........................           0.277               0.296
MARYLAND....................................  URBAN.........................           0.234               0.244
MICHIGAN....................................  RURAL.........................           0.317               0.371
MICHIGAN....................................  URBAN.........................           0.319               0.320
MINNESOTA...................................  RURAL.........................           0.449               0.485
MINNESOTA...................................  URBAN.........................           0.377               0.347
MISSOURI....................................  RURAL.........................           0.238               0.267
MISSOURI....................................  URBAN.........................           0.253               0.274
MISSISSIPPI.................................  RURAL.........................           0.235               0.247
MISSISSIPPI.................................  URBAN.........................           0.169               0.181
MONTANA.....................................  RURAL.........................           0.480               0.501
MONTANA.....................................  URBAN.........................           0.403               0.386
NORTH CAROLINA..............................  RURAL.........................           0.229               0.280
NORTH CAROLINA..............................  URBAN.........................           0.235               0.246
NORTH DAKOTA................................  RURAL.........................           0.443               0.660
NORTH DAKOTA................................  URBAN.........................           0.355               0.395
NEBRASKA....................................  RURAL.........................           0.283               0.290
NEBRASKA....................................  URBAN.........................           0.238               0.255
NEW HAMPSHIRE...............................  RURAL.........................           0.306               0.362
NEW HAMPSHIRE...............................  URBAN.........................           0.306               0.280

[[Page 70361]]

 
NEW JERSEY..................................  URBAN.........................           0.194               0.202
NEW MEXICO..................................  RURAL.........................           0.280               0.296
NEW MEXICO..................................  URBAN.........................           0.290               0.294
NEVADA......................................  RURAL.........................           0.219               0.241
NEVADA......................................  URBAN.........................           0.146               0.149
NEW YORK....................................  RURAL.........................           0.311               0.333
NEW YORK....................................  URBAN.........................           0.298               0.340
OHIO........................................  RURAL.........................           0.295               0.317
OHIO........................................  URBAN.........................           0.212               0.222
OKLAHOMA....................................  RURAL.........................           0.255               0.282
OKLAHOMA....................................  URBAN.........................           0.192               0.203
OREGON......................................  RURAL.........................           0.265               0.287
OREGON......................................  URBAN.........................           0.341               0.352
PENNSYLVANIA................................  RURAL.........................           0.277               0.283
PENNSYLVANIA................................  URBAN.........................           0.195               0.197
PUERTO RICO.................................  URBAN.........................           0.590               0.577
RHODE ISLAND................................  URBAN.........................           0.290               0.297
SOUTH CAROLINA..............................  RURAL.........................           0.188               0.191
SOUTH CAROLINA..............................  URBAN.........................           0.197               0.207
SOUTH DAKOTA................................  RURAL.........................           0.367               0.286
SOUTH DAKOTA................................  URBAN.........................           0.224               0.214
TENNESSEE...................................  RURAL.........................           0.198               0.203
TENNESSEE...................................  URBAN.........................           0.177               0.188
TEXAS.......................................  RURAL.........................           0.238               0.251
TEXAS.......................................  URBAN.........................           0.179               0.203
UTAH........................................  RURAL.........................           0.493               0.481
UTAH........................................  URBAN.........................           0.325               0.335
VIRGINIA....................................  RURAL.........................           0.195               0.219
VIRGINIA....................................  URBAN.........................           0.233               0.241
VERMONT.....................................  RURAL.........................           0.434               0.439
VERMONT.....................................  URBAN.........................           0.336               0.353
WASHINGTON..................................  RURAL.........................           0.349               0.300
WASHINGTON..................................  URBAN.........................           0.308               0.330
WISCONSIN...................................  RURAL.........................           0.317               0.328
WISCONSIN...................................  URBAN.........................           0.296               0.294
WEST VIRGINIA...............................  RURAL.........................           0.276               0.312
WEST VIRGINIA...............................  URBAN.........................           0.294               0.300
WYOMING.....................................  RURAL.........................           0.433               0.429
WYOMING.....................................  URBAN.........................           0.311               0.262
----------------------------------------------------------------------------------------------------------------

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

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). 
Section 1833(t)(13) of the Act provided the Secretary the authority to 
make an adjustment to OPPS payments for rural hospitals, effective 
January 1, 2006, if justified by a study of the difference in costs by 
APC between hospitals in rural areas and hospitals in urban areas. Our 
analysis showed a difference in costs for rural SCHs. Therefore, for 
the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 
7.1 percent for all services and procedures paid 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 
Pub. L. 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 proposed to continue our policy of a 7.1 
percent payment adjustment that is done in a budget neutral manner for 
rural SCHs, including EACHs, for all services and procedures paid under 
the OPPS,

[[Page 70362]]

excluding separately payable drugs and biologicals, devices paid under 
the pass-through payment policy, and items paid at charges reduced to 
costs (80 FR 39244).
    Comment: Several commenters supported the proposed policy of a 7.1 
percent payment adjustment.
    Response: We appreciate the commenters' support.
    Comment: A few commenters suggested that CMS perform a new analysis 
to determine if a different rural adjustment amount is warranted. The 
commenters noted that they performed their own analysis which suggested 
that a higher adjustment was warranted for SCHs and that an adjustment 
was warranted for small rural hospitals that were not SCHs. One 
commenter suggested that CMS revisit its original analysis because an 
adjustment for rural SCHs may no longer be warranted.
    Response: We plan to review whether a revised analysis is warranted 
for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2016 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. 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 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'' and 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 hospitals 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. Payment Adjustment for Certain Cancer Hospitals for CY 2016
    For CY 2016, we proposed 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 were available at the time 
of the development of the CY 2016 OPPS/ASC proposed rule (80 FR 39245). 
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 the 
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

[[Page 70363]]

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 proposed that the payment 
amount associated with the cancer hospital payment adjustment to be 
determined at cost report settlement would be the additional payment 
needed to result in a PCR equal to 0.90 for each cancer hospital. Table 
12 published in the proposed rule indicated the proposed estimated 
percentage increase in OPPS payments to each cancer hospital for CY 
2016 due to the cancer hospital payment adjustment policy.
    We indicated that 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 noted 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.
    Comment: Several commenters supported the proposed cancer hospital 
payment adjustment for CY 2016.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposed methodology for calculating the cancer hospital 
payment adjustment for CY 2016. For this final rule with comment 
period, we are using the most recent cost report data through September 
30, 2015 to update the adjustment. This update yields a target PCR of 
0.92. We limited the dataset to the hospitals with CY 2014 claims data 
that we used to model the impact of the CY 2016 APC relative payment 
weights (3,781 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 2012 to 2015. We then 
removed the cost report data of the 49 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 11 
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 3,721 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 92 percent of reasonable cost 
(weighted average PCR of 0.92). Therefore, we are finalizing 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 PCR equal to 0.92 for each cancer 
hospital.
    Table 15 below indicates estimates in percentage terms of the CY 
2016 payment adjustment for each cancer hospital. 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.

  TABLE 15--Estimated CY 2016 Hospital-Specific Payment Adjustment for
        Cancer Hospitals to be Provided at Cost Report Settlement
------------------------------------------------------------------------
                                                   Estimated percentage
        Provider No.            Hospital name        increase in OPPS
                                                   payments for CY 2016
------------------------------------------------------------------------
050146.....................  City of Hope                           21.6
                              Comprehensive
                              Cancer Center.
050660.....................  USC Norris Cancer                      21.9
                              Hospital.
100079.....................  Sylvester                              25.1
                              Comprehensive
                              Cancer Center.
100271.....................  H. Lee Moffitt                         27.3
                              Cancer Center &
                              Research
                              Institute.
220162.....................  Dana-Farber Cancer                     51.1
                              Institute.
330154.....................  Memorial Sloan-                        46.9
                              Kettering Cancer
                              Center.
330354.....................  Roswell Park                           31.4
                              Cancer Institute.
360242.....................  James Cancer                           35.4
                              Hospital & Solove
                              Research
                              Institute.
390196.....................  Fox Chase Cancer                       23.7
                              Center.
450076.....................  M.D. Anderson                          50.9
                              Cancer Center.
500138.....................  Seattle Cancer                         57.3
                              Care Alliance.
------------------------------------------------------------------------

G. 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

[[Page 70364]]

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 estimate of total outlier payments as a 
percent of total CY 2014 OPPS payment, using CY 2014 claims available 
for this final rule with comment period and the revised OPPS 
expenditure estimate for the FY 2016 President's Budget Mid-Session 
Review, is approximately 0.9 percent of the total aggregated OPPS 
payments. Therefore, for CY 2014, we estimate that we paid 0.1 
percentage points 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 0.9 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 XXI. of this final rule 
with comment period. 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. Outlier Calculation
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39246), we proposed to 
continue our policy of estimating outlier payments to be 1.0 percent of 
the estimated aggregate total payments under the OPPS. We proposed 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 the proposed rule and this 
final rule with comment period, we proposed 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 the proposed rule and this final rule with comment 
period.
    To ensure that the estimated CY 2016 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when 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 the 
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 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 the 
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 proposed to apply the same CCR 
inflation adjustment factor that we proposed 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 proposed 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) and finalized in the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49784).
    To model hospital outlier payments for the 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 proposed 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

[[Page 70365]]

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 
proposed to continue the policy that we implemented in CY 2010 that the 
hospitals' costs will be compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. For more information on 
the Hospital OQR Program, we refer readers to section XIII. of this 
final rule with comment period.
    Comment: A few commenters suggested that the proposed outlier fixed 
dollar threshold of $3,650 was too high for CMS to pay the target 
aggregate outlier payment amount of 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. The 
commenters noted that 2014 and 2015 estimated outlier payments were 
below 1.0 percent, despite a lower fixed-dollar threshold.
    Response: As indicated earlier, we introduced a fixed-dollar 
threshold in order to better target outlier payments to those high-cost 
and complex procedures where a very costly service could present a 
hospital with significant financial loss. We maintain the target 
outlier percentage of 1.0 percent of estimated aggregate total payment 
under the OPPS and have a fixed-dollar threshold so that OPPS outlier 
payments are made only when the hospital would experience a significant 
loss for supplying a particular service. While the commenters expressed 
concern based on the assumption that OPPS outlier payments would 
decrease under an increased fixed-dollar threshold, we note that the 
threshold may increase or decrease from year to year, to maintain the 
1.0 percent outlier spending target. The methodology we use to 
calculate the fixed-dollar threshold for the prospective payment year 
factors is based on several data inputs that may change from prior 
payment years. For instance, updated hospital CCR data and changes to 
the OPPS payment methodology influence projected outlier payments in 
the prospective year. For this final rule with comment period, we used 
the same methodology for calculating the outlier fixed-dollar threshold 
that we used for the proposed rule but used updated data. However, 
these updated data inputs for this final rule with comment period do 
yield a lower threshold than for the proposed rule.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for outlier calculations. For CY 2016, 
we are applying the overall CCRs from the July 2015 OPSF file after 
adjustment (using the CCR inflation adjustment factor of 0.9701 to 
approximate CY 2016 CCRs) to charges on CY 2014 claims that were 
adjusted (using the charge inflation factor of 1.0766 to approximate CY 
2016 charges). These are the same CCR adjustment and charge inflation 
factors that were used to set the IPPS fixed-dollar thresholds for the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49784). 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 will 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 fixed-dollar threshold of $3,250, 
combined with the multiple threshold of 1.75 times the APC payment 
rate, will allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under either renumbered APC 5851 
(existing APC 0172) or renumbered APC 5852 (existing APC 0173), exceeds 
3.40 times the payment rate for renumbered APC 5852, the outlier 
payment will be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the renumbered APC 5852 payment rate.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2016 OPPS/ASC final rule 
with comment period, the payment rate for most services and procedures 
for which payment is made under the OPPS is the product of the 
conversion factor calculated in accordance with section II.B. of this 
final rule with comment period and the relative payment weight 
determined under section II.A. of this final rule with comment period. 
Therefore, the national unadjusted payment rate for most APCs contained 
in Addendum A to this final rule with comment period (which is 
available via the Internet on the CMS Web site) and for most HCPCS 
codes to which separate payment under the OPPS has been assigned in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
CY 2016 scaled weight for the APC by the 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 final rule with 
comment period.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39247 through 39249), 
we demonstrated 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,'' ``Q4,'' ``R,'' ``S,'' ``T,'' ``U,'' or 
``V'' (as defined in Addendum D1 to the proposed rule, which is 
available via the Internet on the CMS Web site), in a circumstance in

[[Page 70366]]

which the multiple procedure discount does not apply, the procedure is 
not bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements. We note that, 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 final rule with comment period. 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 final rule 
with comment period. In the CY 2016 OPPS/ASC proposed rule, we proposed 
to create new status indicator ``J2'' to reflect the new C-APC 8011 
(Comprehensive Observation Services) and new status indicator ``Q4'' to 
reflect conditionally packaged laboratory tests. In this CY 2016 OPPS/
ASC final rule with comment period, we are finalizing the new status 
indicators ``J2'' and ``Q4'' as proposed, as discussed in sections 
II.A.2.e.(2) and II.A.3.b.(3) of this final rule with comment period, 
respectively.
    We did not receive any public comments on these steps under the 
methodology that we included in the proposed rule to determine the APC 
payments for CY 2016. Therefore, we are using the steps in the 
methodology specified below, as we proposed, to demonstrate the 
calculation of the final CY 2016 OPPS payments using the same 
parameters.
    Individual providers interested in calculating the payment amount 
that they will receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this final 
rule with comment period (which are available via the Internet on the 
CMS Web site) should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the Hospital OQR Program as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet the requirements of the Hospital 
OQR Program as the ``reduced'' national unadjusted payment rate. The 
reduced national unadjusted payment rate is calculated by multiplying 
the reporting ratio of 0.980 times the ``full'' national unadjusted 
payment rate. The national unadjusted payment rate used in the 
calculations below is either the full national unadjusted payment rate 
or the reduced national unadjusted payment rate, depending on whether 
the hospital met its Hospital OQR Program requirements in order to 
receive the full CY 2016 OPPS fee schedule increase factor.
    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 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 final rule with comment period. The wage index values assigned to 
each area reflect the geographic statistical areas (which are based 
upon OMB standards) to which hospitals are assigned for FY 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 changes to the FY 2016 IPPS wage indexes, as applied 
to the CY 2016 OPPS, we refer readers to section II.C. of this final 
rule with comment period.) As we proposed, we are continuing to apply a 
wage index floor of 1.00 to frontier States, in accordance with section 
10324 of the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Pub. L. 
108-173. Addendum L to this final rule with comment period (which is 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2016 IPPS, which are listed in Table 2 in the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49326) 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.

[[Page 70367]]

    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 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 renumbered APC 5072 
(Level 2 Excision/Biopsy/Incision and Drainage) (previously APC 0019). 
The CY 2016 full national unadjusted payment rate for APC 5072 is 
approximately $480.64. The reduced national unadjusted payment rate for 
renumbered APC 5072 for a hospital that fails to meet the Hospital OQR 
Program requirements is approximately $471.03. This reduced rate is 
calculated by multiplying the reporting ratio of 0.980 by the full 
unadjusted payment rate for renumbered APC 5072.
    The FY 2016 wage index for a provider located in CBSA 35614 in New 
York is 1.2991. The labor-related portion of the full national 
unadjusted payment is approximately $374.64 (.60 * $480.64 * 1.2991). 
The labor-related portion of the reduced national unadjusted payment is 
approximately $367.15 (.60 * $471.03 * 1.2991). The nonlabor-related 
portion of the full national unadjusted payment is approximately 
$192.26 (.40 * $480.64). The nonlabor-related portion of the reduced 
national unadjusted payment is approximately $188.41 (.40 * $471.03). 
The sum of the labor-related and nonlabor-related portions of the full 
national adjusted payment is approximately $566.90 ($374.64 + $192.26). 
The sum of the portions of the reduced national adjusted payment is 
approximately $555.56 ($367.15 + $188.41).

I. Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure performed in a year to the amount of the inpatient 
hospital deductible for that year.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39249), for CY 2016, 
we proposed to determine copayment amounts for new and revised APCs 
using the same methodology that we implemented beginning in CY 2004. 
(We refer readers to the November 7, 2003 OPPS final rule with comment 
period (68 FR 63458).) In addition, we proposed to use the same 
standard rounding principles that we have historically used in 
instances where the application of our standard copayment methodology 
would result in a copayment amount that is less than 20 percent and 
cannot be rounded, under standard rounding principles, to 20 percent. 
(We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66687) in which we discuss our rationale for applying 
these rounding principles.) The proposed national unadjusted copayment 
amounts for services payable under the OPPS that would be effective 
January 1, 2016, were shown in Addenda A and B to the proposed rule 
(which are available via the Internet on the CMS Web site). As 
discussed in section XIII.E. of the proposed rule and this final rule 
with comment period, for CY 2016, the Medicare beneficiary's minimum 
unadjusted copayment and national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies will equal the 
product of the reporting ratio and the national unadjusted copayment, 
or the product of the reporting ratio and the minimum unadjusted 
copayment, respectively, for the service.
    We 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

[[Page 70368]]

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. 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 the proposed rule 
and finalized under section III.D. of this final rule with comment 
period hastens this movement toward copayments equal to 20 percent of 
an APC for reorganized APCs that previously had copayment percentages 
greater than 20 percent.
    We did not receive any comments on the copayment percentage. For 
the reasons set forth in this final rule with comment period, we are 
finalizing our proposed CY 2016 copayment methodology without 
modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using renumbered APC 5072 (previously APC 0019), $96.13 is 
approximately 20 percent of the full national unadjusted payment rate 
of $480.64. For APCs with only a minimum unadjusted copayment in 
Addenda A and B to this final rule with comment period (which are 
available via the Internet on the CMS Web site), the beneficiary 
payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.

B is the beneficiary payment percentage.

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

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

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

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through the OPPS quarterly update 
Change Requests (CRs). CMS releases new Level II HCPCS codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes can be reported on Medicare 
claims) outside of the formal rulemaking process via OPPS quarterly 
update CRs. Based on our review, we assign the new CPT and Level II 
HCPCS codes to interim status indicators (SIs) and APCs. 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

[[Page 70369]]

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 
final rule with comment period provides a discussion of the various 
status indicators used under the OPPS. Certain payment indicators 
provide separate payment while others do not.
    In Table 16 below, we summarize our comment process for updating 
codes through our OPPS quarterly update CRs, seeking public comments, 
and finalizing the treatment of these new codes under the OPPS.

                           Table 16--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS quarterly  update CR        Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 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 solicited public 
comments in the CY 2016 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this 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 
indicator 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 
are responding to public comments and finalizing our interim OPPS 
treatment of these codes in this CY 20165 OPPS/ASC final rule with 
comment period.
    Further, we received public comments on some new codes that were 
assigned to comment indicator ``NI'' in Addendum B of the CY 2015 OPPS/
ASC final rule with comment period. We also received public comments on 
new CPT codes that will be effective January 1, 2016, that were 
assigned to comment indicator ``NP'' in Addendum B of the CY 2016 OPPS/
ASC proposed rule. We respond to those comments in section III.C. of 
this CY 2016 OPPS/ASC final rule with comment period.
1. Treatment of New CY 2015 Level II HCPCS and CPT Codes Effective 
April 1, 2015 and July 1, 2015 for Which We Solicited Public Comments 
in the 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 of the CY 2016 proposed rule (80 
FR 39251), 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.
    In the CY 2016 OPPS/ASC proposed rule, we solicited public comments 
on the proposed APC and status indicator assignments for the Level II 
HCPCS codes implemented on April 1, 2015 and listed in Table 14 of the 
proposed rule (80 FR 39251). Specifically, we solicited public comments 
on 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. We indicated 
that the proposed payment rates for these codes, where applicable, 
could be found in Addendum B to the proposed rule (which is available 
via the Internet on the CMS Web site).
    For the CY 2016 update, the HCPCS Workgroup replaced the temporary 
drug HCPCS C-codes and Q-codes that were listed in Table 14 of the 
proposed rule with permanent HCPCS J-codes effective January 1, 2016. 
Because the replacement HCPCS J-codes describe the

[[Page 70370]]

same drugs with the same dosage descriptors as their predecessor HCPCS 
C-codes and Q-codes, they will continue to receive pass-through payment 
status in CY 2016. Therefore, we are assigning the replacement HCPCS J-
codes to the same APCs and status indicators as their predecessor HCPCS 
codes, as shown in Table 17 below.
    We did not receive any public comments on the proposed APC and 
status indicator assignments for the new Level II HCPCS codes 
implemented in April 2015. Therefore, we are finalizing the proposed 
APC assignments and status indicators for the new Level II HCPCS codes 
implemented in April 2015, as indicated in Table 17 below. The final 
payment rates for these codes, where applicable, can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site).

    Table 17--Final CY 2016 Status Indicators and APC Assignments for the New Level II HCPCS Codes That Were
                                            Implemented in April 2015
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2016
 CY 2015 CPT/HCPCS code    CY 2016 CPT/HCPCS code     CY 2016 long descriptor         status       Final CY 2016
                                                                                    indicator           APC
----------------------------------------------------------------------------------------------------------------
C2623...................  C2623...................  Catheter, transluminal                    H             2623
                                                     angioplasty, drug-coated,
                                                     non-laser.
C9445...................  J0596...................  Injection, c1 esterase                    G             9445
                                                     inhibitor (recombinant),
                                                     Ruconest, 10 units.
C9448 *.................  J8655...................  Netupitant 300 mg and                     G             9448
                                                     palonosetron 0.5 mg.
C9449...................  J9039...................  Injection, blinatumomab, 1                G             9449
                                                     microgram.
C9450...................  J7313...................  Injection, fluocinolone                   G             9450
                                                     acetonide intravitreal
                                                     implant, 0.01 mg.
C9451...................  J2547...................  Injection, peramivir, 1 mg.               G             9451
C9452...................  J0695...................  Injection, ceftolozane 50                 G             9452
                                                     mg and tazobactam 25 mg.
Q9975 **................  J7205...................  Injection, factor viii fc                 G             1656
                                                     fusion (recombinant), per
                                                     iu.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.
** HCPCS code C9136 (Injection, factor viii, fc fusion protein (recombinant), per i.u.) was deleted on March 31,
  2015 and replaced with HCPCS code Q9975.

    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 of the CY 2016 
proposed rule (80 FR 39252), 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. 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 proposed to assign 
the CPT code to the same APC and status indicator as its predecessor 
HCPCS C-code, as shown in Table 15 of the proposed rule.
    Table 15 of the proposed rule (89 FR 39252) listed 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 solicited public 
comments on the proposed APC and status indicator assignments.
    One commenter addressed CPT code 0392T which relates to 
gastrointestinal procedures and services and which replaced HCPCS code 
C9737. We have responded to this comment in section II.A.2.e. of this 
final rule with comment period. We did not receive any public comments 
on the proposed APC and status indicator assignments for Category III 
CPT code 0393T and Level II HCPCS codes C2613, C9453, C9454, C9455, 
Q9976, Q9977, and Q9978 for CY 2016.
    In this final rule with comment period, we are adopting as final, 
without modification, the proposed APC and status indicator assignments 
for CPT code 0393T and for Level II HCPCS codes C2613, C9453, C9454, 
C9455, Q9976, Q9977, Q9978. However, we are finalizing the APC and 
status indicator assignments for HCPCS code Q5101 (Zarxio) with 
modification. Specifically, we are assigning HCPCS code Q5101 to APC 
1822 and status indicator ``G'' (pass-through drugs and biologicals). 
We noted in the CY 2016 OPPS/ASC proposed rule (80 FR 39252) that 
Zarxio (the drug described by HCPCS code Q5101) was currently not being 
marketed. However, once pricing information was made available, the 
drug would be paid separately under the OPPS. Zarxio was marketed on 
September 3, 2015, and therefore, we began making separate payments 
under the OPPS beginning on this date. From September 3, 2015, through 
December 31, 2015, HCPCS code Q5101 is assigned status indicator ``K'' 
(Nonpass-through drugs and nonimplantable biologicals, including 
therapeutic radiopharmaceuticals). Because Zarxio has been approved for 
pass-through status beginning January 1, 2016, we are changing its OPPS 
status indicator from ``K'' to ``G'' beginning January 1, 2016.
    For the CY 2016 update, the HCPCS Workgroup replaced temporary 
HCPCS codes C9453, C9454, C9455, and Q9978 with permanent HCPCS J codes 
effective January 1, 2016. Because the replacement HCPCS J- codes 
describe the same drugs with the same dosage descriptors as their 
predecessor HCPCS C codes and Q codes, they will continue to receive 
pass-through payment status in CY 2016. Therefore, we are assigning the 
replacement HCPCS J-codes to the same APCs and status indicators as 
their predecessor HCPCS codes, as shown in Table 18 below. Table 18 
lists the final APCs and status indicator assignments for the new 
category III CPT and Level II HCPCS codes that were implemented on July 
1, 2015. The final payment rates for these codes, where applicable, can 
be found in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).

[[Page 70371]]



  Table 18--Final CY 2016 Status Indicators and APC Assignments for the New Category III CPT and Level II HCPCS
                                         Codes Implemented in July 2015
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2016
 CY 2015 CPT/HCPCS code    CY 2016 CPT/HCPCS code     CY 2016 long descriptor         status       Final CY 2016
                                                                                    indicator           APC
----------------------------------------------------------------------------------------------------------------
C2613...................  C2613...................  Lung biopsy plug with                     H             2613
                                                     delivery system.
C9453...................  J9299...................  Injection, nivolumab, 1 mg.               G             9453
C9454...................  J2502...................  Injection, pasireotide long               G             9454
                                                     acting, 1 mg.
C9455...................  J2860...................  Injection, siltuximab, 10                 G             9455
                                                     mg.
Q5101 *.................  Q5101*..................  Injection, Filgrastim (G-                 G             1822
                                                     CSF), Biosimilar, 1
                                                     microgram.
Q9976...................  J1443...................  Injection, ferric                         E              N/A
                                                     pyrophosphate citrate
                                                     solution, 0.1 mg of iron.
Q9977...................  Q9977 **................  Compounded Drug, Not                      D              N/A
                                                     Otherwise Classified.
Q9978...................  J8655...................  Netupitant 300 mg and                     G             9448
                                                     palonosetron 0.5 mg.
0392T...................  0392T...................  Laparoscopy, surgical,                   J1             5362
                                                     esophageal sphincter
                                                     augmentation procedure,
                                                     placement of sphincter
                                                     augmentation device (ie,
                                                     magnetic band).
0393T...................  0393T...................  Removal of esophageal                    Q2             5361
                                                     sphincter augmentation
                                                     device.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q5101, which described the drug Zarxio, was approved by the FDA on March 6, 2015. Separate payment
  for Zarxio was effective September 3, 2015, the date the drug was marketed.
** HCPCS code Q9977 will be deleted December 31, 2015, and a replacement code will not be established.

2. Process for New Level II HCPCS Codes That Became Effective October 
1, 2015 and New Level II HCPCS Codes That Will Be Effective January 1, 
2016 for Which We Are Soliciting Public Comments in This 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 October 1 and 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 through 
the October and January OPPS quarterly update CRs and via the CMS HCPCS 
Web site (for Level II HCPCS codes). For CY 2016, these codes are 
flagged with comment indicator ``NI'' in Addendum B to this OPPS/ASC 
final rule with comment period to indicate that we are assigning them 
an interim payment status which is subject to public comment. 
Specifically, the status indicators and the APC assignments for codes 
flagged with comment indicator ``NI'' are open to public comment in 
this final rule with comment period, and we will respond to these 
public comments in the OPPS/ASC final rule with comment period for the 
next year's OPPS/ASC update. In the CY 2016 OPPS/ASC proposed rule (80 
FR 39252 through 39253), we proposed to continue this process for CY 
2016. Specifically, for CY 2016, we proposed to include in Addendum B 
to the CY 2016 OPPS/ASC final rule with comment period the following 
new HCPCS codes:
     New Level II HCPCS codes effective October 1, 2015, that 
would be incorporated in the October 2015 OPPS quarterly update CR;
     New Level II HCPCS codes effective January 1, 2016, that 
would be incorporated in the January 2016 OPPS quarterly update CR.
    As stated above, the October 1, 2015 and January 1, 2016 codes are 
flagged with comment indicator ``NI'' in Addendum B to this 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 are 
inviting public comments on the interim status indicator and APC 
assignments and payment rates for these codes, if applicable, that will 
be finalized in the CY 2017 OPPS/ASC final rule with comment period.
3. Treatment of New and Revised CY 2016 Category I and III CPT Codes 
That Will Be Effective January 1, 2016, for Which We Solicited Public 
Comments in the 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 
noted 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 establishing HCPCS G codes and the resulting delay 
in utilization of the most current CPT codes. In addition, 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 the CY 2016 OPPS/ASC proposed rule. In the 
proposed rule (80 FR 39253), we indicated that the new and revised CY 
2016 Category I and III CPT codes can be found in OPPS Addendum B to 
the proposed rule and were 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

[[Page 70372]]

status indicator. We refer readers to section XI.B. of the CY 2016 
OPPS/ASC proposed rule for further discussion on the proposed new 
comment indicator ``NP.''
    Further, in the proposed rule, we reminded 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 included the long descriptors 
for the new and revised CY 2016 CPT codes in Addendum O to the proposed 
rule (which is available via the Internet on the CMS Web site) so that 
the public could 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 
stated that we developed alternative 5-character placeholder codes for 
the proposed rule. We indicated that 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 the proposed rule. We 
also indicated that the final CPT code numbers would be included in 
this CY 2016 OPPS/ASC final rule with comment period. We note that not 
every code listed in Addendum O of the proposed rule was subject to 
comment. For the new/revised Category I and III CPT codes, we requested 
public comments on only those codes that were assigned to comment 
indicator ``NP.'' We indicated that public comments would not be 
accepted for new Category I CPT laboratory codes that were not assigned 
to ``NP'' comment indicator in Addendum O to the proposed rule. We 
stated that comments to these codes must be submitted at the Clinical 
Laboratory Fee Schedule (CLFS) Public Meeting, which was scheduled for 
July 16, 2015.
    In summary, we solicited 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 the proposed rule with short 
descriptors only. We listed them again in Addendum O to the proposed 
rule with long descriptors. We also proposed 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.
    Commenters addressed several of the new CPT codes that were 
assigned to comment indicator ``NP'' in Addendum B of the CY 2016 OPPS/
ASC proposed rule. We respond to those comments in section III.D. of 
this CY 2016 OPPS/ASC final rule with comment period.
    The final status indicators, APC assignments, and payment rates for 
the new CPT codes that will be effective January 1, 2016 can be found 
in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).

B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
(OPD) 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 integral, ancillary, supportive, dependent, or 
adjunctive to a primary service. 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 
final rule with comment period.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. In the 
CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed 
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 were 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 
noted that, historically, we have proposed APC relative payment weights 
relative to the hospital costs of services included in existing APC 
0634. In the proposed rule, we proposed 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 proposed to delete existing APC 0634 and replace it 
with proposed renumbered APC 5012.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, 
we proposed 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 
(existing APC 0632).
    We did not receive any public comments on the proposed reassignment 
for HCPCS code G0463 from APC 0634 to proposed renumbered APC 5012. 
However, some commenters expressed concern about CMS' use of a single 
clinic visit code (HCPCS G0463) and a single APC payment for all clinic 
Evaluation and Management (E/M) visits. We refer readers to section 
VII. of this CY 2016 OPPS/ASC final rule with comment period for a 
discussion of public comments and our responses and our finalized 
policies on payments for hospital outpatient visits for CY 2016.
    In this final rule with comment period, we are finalizing our 
proposal, without modification, to assign HCPCS code G0463 to APC 5012 
and to delete existing APC 0634 because it will be replaced with APC 
5012, effective January 1, 2016.

[[Page 70373]]

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 the CY 2016 
OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed to make 
exceptions to this limit on the variation of costs within each APC 
group in unusual cases, such as low-volume items and services.
    For the CY 2016 OPPS, we identified the APCs with violations of the 
2 times rule. Therefore, we proposed changes to the procedure codes 
assigned to these APCs in Addendum B to the proposed rule. We noted 
that Addendum B does not appear in the printed version of the Federal 
Register as part of the 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/Hospital-Outpatient-Regulations-and-Notices.html. 
In these cases, to eliminate a violation of the 2 times rule or to 
improve clinical and resource homogeneity, we proposed 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 the 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 proposed changes to the status indicators for some 
procedure codes that were not specifically and separately discussed in 
the proposed rule. In these cases, we proposed 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 proposed to rename existing APCs or create 
new clinical APCs to complement the proposed procedure code 
reassignments. Addendum B to the CY 2016 OPPS/ASC proposed rule 
identified with a comment indicator ``CH'' those procedure codes for 
which we proposed 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/Hospital-Outpatient-Regulations-and-Notices.html). In contrast, Addendum B to this final rule with comment 
period (available via the Internet on the CMS Web site) identifies with 
the ``CH'' comment indicator the final CY 2016 changes compared to the 
HCPCS codes' status as reflected in the October 2015 Addendum B update.
3. APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we proposed 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 that were available for the CY 
2016 proposed rule, we identified three APCs with violations of the 2 
times rule. We applied the criteria as described above to identify the 
APCs that we proposed to make exceptions for under the 2 times rule for 
CY 2016. 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 had a proposed APC 
payment rate for a single service of $5,653.37. (We note that, in 
section II.A.2.e. of this final rule with comment period, we are 
converting renumbered APC 5881 to a comprehensive APC for CY 2016. 
However, the APC cost is still not relevant to determine whether there 
is a violation of the 2 times rule in that comprehensive APC.) 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 may 
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 the proposed rule (80 FR 39255) listed the three APCs 
that we proposed 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. We stated in the proposed rule that, for the 
final rule with comment period, we intended 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. For this final rule with comment period, after we reassigned 
some codes, a violation of the 2 times rule no longer exists in APCs 
5221 and 5673.
    We applied the criteria described earlier to determine whether to 
make exceptions to the 2 times rule for three APCs: APC 5165 (Level 5 
ENT Procedures); APC 5731 (Level 1 Minor

[[Page 70374]]

Procedures) and APC 5841 (Psychotherapy). Based on our analysis of the 
updated CY 2014 claims data available for this final rule with comment 
period (and consideration of any related finalized changes to APC 
assignments), we determined that APCs 5165, 5731 and 5841 meet the 
exceptions criteria because these APC groupings optimize resource and 
clinical homogeneity. Therefore, we are making these three APCs 
exceptions to the 2 times rule.
    Furthermore, although APC 5165 does not appear with a 2 times rule 
indicator in the 2 times rule document that is posted with the CY 2016 
OPPS/ASC final rule data files, an exception to the 2 times rule is 
required so that a complexity adjustment is not made for CPT 60252 from 
APC 5165 to APC 5166.
    After consideration of the public comments we received and our 
review of the CY 2014 costs from hospital claims and cost report data 
available for this final rule with comment period, we are finalizing 
three exceptions to the 2 times rule: APCs 5165, 5731 and 5841. We are 
not finalizing our proposal to make exceptions for APC 5221 and APC 
5673. Table 19 below lists the three APCs that we are excepting from 
the 2 times rule for CY 2016 based on the criteria above and a review 
of updated claims data. The geometric mean costs for hospital 
outpatient services for these and all other APCs that were used in the 
development of this final rule with comment period can be found on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

     Table 19--Final APC Exceptions to the 2 Times Rule for CY 2016
------------------------------------------------------------------------
            CY 2016 APC                       CY 2016 APC title
------------------------------------------------------------------------
5165..............................  Level 5 ENT Procedures.
5731..............................  Level 1 Minor Procedures.
5841..............................  Psychotherapy.
------------------------------------------------------------------------

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

C. New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to an appropriate clinical APC. This policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient data are available. It also allows us to retain a 
service in a New Technology APC for more than 2 years if sufficient 
data upon which to base a decision for reassignment have not been 
collected.
    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 did not propose to 
renumber the New Technology APCs in the CY 2016 OPPS/ASC 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 payment 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. 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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we 
proposed to expand the New Technology APC groups by adding 9 more 
levels, specifically, adding New Technology Levels 38 through 46. We 
proposed 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 
proposed to establish a new set of New Technology APCs 1575 through 
1583 (for Levels 38 through 46) with OPPS status indicator ``S'' and a

[[Page 70375]]

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 (status indicator ``T'') and the other set not 
subject to the multiple procedure payment reduction (status indicator 
``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 of the proposed rule included the 
complete list of the proposed additional 18 New Technology APCs for CY 
2016.
    Comment: One commenter noted that the inconsistency in the 
increment increases in the new levels for the New Technology APCs, 
specifically that Level 38 through Level 41 increased in increments of 
$5,000, while Level 42 through Level 46 increased in increments of 
$10,000. The commenter suggested that increments of $5,000 is more 
appropriate and provides more accurate payment for providers as well as 
consistency among payment levels beginning at Level 38.
    Response: As stated above, for CY 2015, 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.'' The cost bands for these New Technology APCs range from $0 to 
$50 in increments of $10, from $50 to $100 in increments of $50, from 
$100 to $2,000 in increments of $100, and from $2,000 to $10,000 in 
increments of $500. These cost bands identify the APCs to which new 
technology procedures and services with estimated service costs that 
fall within those cost bands are assigned under the OPPS. Payment for 
each APC is made at the mid-point of the APC's assigned cost band. For 
example, payment for New Technology APC 1530 (New Technology--Level 30 
($6,000-$6,500)) is made at $6,250. We believe that the increments for 
New Technology APC Levels 38 through 46 are appropriate because they 
maintain a similar proportionality to the total payment as the original 
New Technology APCs, and they allow us to price new technology 
procedures and services on a temporary basis with sufficient accuracy 
without an excessive and cumbersome number of cost bands. We will 
monitor these APCs during our annual review and establish New 
Technology APC cost bands in the future as warranted.
    Comment: Several commenters supported expanding the New Technology 
APCs by adding New Technology Levels 38 through 46. They believed that 
the addition of these new cost bands provides flexibility for CMS to 
properly assign qualifying services and technologies to the most 
appropriate payment level, as well as an opportunity for the collection 
of more accurate claims data to ensure appropriate payments when the 
procedures and services transition out of the New Technology APC cost 
bands to clinical APCs. The commenters also recommended revising the 
payment level descriptions for the New Technology APCs by adding one 
dollar to the lower end of the payment range (for example, Level 1502 
at $51-$100) for the various levels to avoid pricing overlap. In 
addition, the commenters suggested that CMS remain open to the idea of 
creating new payment band levels in the future, as needed, to 
accommodate the growing number of new procedures, services, and 
technologies that can be safely performed and delivered in the hospital 
outpatient setting.
    Response: We appreciate the commenters' support for our proposal to 
add New Technology Levels 38 through 46 for CY 2016. However, because 
the payment rate for each New Technology APC is at the midpoint of the 
specified range, we do not believe that revising the limits of these 
ranges for the New Technology APCs is necessary to eliminate what 
commenters believe is a pricing overlap. In addition, when we lack 
claims data (as we do for new services that have not be reported on 
hospital outpatient claims), our cost estimates typically suggest a 
range as represented by a New Technology APC cost band. These estimates 
are not so precise that they result in an exact dollar amount that 
would correspond to a dollar amount limit of a New Technology APC 
range. We typically estimate an approximate range that we believe 
corresponds to the approximate cost of the new service and match that 
range to the closest New Technology APC. Therefore, the overlap of the 
limits of the ranges of adjacent New Technology APCs makes no 
difference.
    We agree with the commenters that adding New Technology APC cost 
bands on an as needed basis is appropriate. In addition to the 
additional New Technology APCs that we proposed, we are establishing 
two additional New Technology APC levels (4 new APCs in total, for 
which two APCs are assigned status indicator ``S'' and two APCs are 
status indicator ``T''). These APCs are depicted in Table 20.

                              Table 20--Additional New Technology APCs for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                                      Status
                          APC No.                                         APC title                 indicator
----------------------------------------------------------------------------------------------------------------
1584.......................................................  New Technology--Level 47 ($80,000-               S
                                                              $90,000).
1585.......................................................  New Technology--Level 48 ($90,000-               S
                                                              $100,000).
1598.......................................................  New Technology--Level 47 ($80,000-               T
                                                              $90,000).
1599.......................................................  New Technology--Level 48 ($90,000-               T
                                                              $100,000).
----------------------------------------------------------------------------------------------------------------

    The explanation as to why we are creating these additional New 
Technology APCs is contained below in the discussion of the New 
Technology APC for the retinal prosthesis implant procedure.
    After consideration of the public comments we received, we are 
finalizing our proposal, with a modification, to add New Technology 
Levels 38 through 46 for CY 2016. We also are adding two additional 
levels, New Technology Levels 47 and 48. Table 21 below includes the 
final complete list of the additional 22 New Technology APC groups for 
CY 2016.

[[Page 70376]]



                           Table 21--Additional New Technology APC Groups for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2016
                      New CY 2016 APC                              CY 2016 APC group title            status
                                                                                                    indicator
----------------------------------------------------------------------------------------------------------------
1575.......................................................  New Technology--Level 38 ($10,000-               S
                                                              $15,000).
1576.......................................................  New Technology--Level 39 ($15,000-               S
                                                              $20,000).
1577.......................................................  New Technology--Level 40 ($20,000-               S
                                                              $25,000).
1578.......................................................  New Technology--Level 41 ($25,000-               S
                                                              $30,000).
1579.......................................................  New Technology--Level 42 ($30,000-               S
                                                              $40,000).
1580.......................................................  New Technology--Level 43 ($40,000-               S
                                                              $50,000).
1581.......................................................  New Technology--Level 44 ($50,000-               S
                                                              $60,000).
1582.......................................................  New Technology--Level 45 ($60,000-               S
                                                              $70,000).
1583.......................................................  New Technology--Level 46 ($70,000-               S
                                                              $80,000).
1584.......................................................  New Technology--Level 47 ($80,000-               S
                                                              $90,000).
1585.......................................................  New Technology--Level 48 ($90,000-               S
                                                              $100,000).
1589.......................................................  New Technology--Level 38 ($10,000-               T
                                                              $15,000).
1590.......................................................  New Technology--Level 39 ($15,000-               T
                                                              $20,000).
1591.......................................................  New Technology--Level 40 ($20,000-               T
                                                              $25,000).
1592.......................................................  New Technology--Level 41 ($25,000-               T
                                                              $30,000).
1593.......................................................  New Technology--Level 42 ($30,000-               T
                                                              $40,000).
1594.......................................................  New Technology--Level 43 ($40,000-               T
                                                              $50,000).
1595.......................................................  New Technology--Level 44 ($50,000-               T
                                                              $60,000).
1596.......................................................  New Technology--Level 45 ($60,000-               T
                                                              $70,000).
1597.......................................................  New Technology--Level 46 ($70,000-               T
                                                              $80,000).
1598.......................................................  New Technology--Level 47 ($80,000-               T
                                                              $90,000).
1599.......................................................  New Technology--Level 48 ($90,000-               T
                                                              $100,000).
----------------------------------------------------------------------------------------------------------------

    The final payment rates for New Technology APC groups 1575 through 
1598 (with status indicator ``S'') and APC groups 1585 through 1599 
(with status indicator ``T'') can be found in Addendum A to this final 
rule with comment period (which is available via the Internet on the 
CMS Web site).
3. 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, in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39256), for CY 2016, we proposed 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).
    We did not receive any public comments related to this proposal. 
Therefore, we are finalizing our CY 2016 proposal, without 
modification, to retain services within New Technology APCs until we 
gather sufficient claims data to assign the services to a clinically 
appropriate APC. Thus, a service can be assigned to a New Technology 
APC for more than 2 years if we have insufficient claims data to 
reassign the service to a clinical APC, or it could be reassigned to a 
clinical APC in less than 2 years if we have adequate claims data.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we proposed to 
assign two surgical procedures to New Technology APCs. Specifically, we 
proposed to continue to assign HCPCS code C9740 (Cystourethroscopy, 
with insertion of transprostatic implant; 4 or more implants) to New 
Technology APC 1564 (New Technology--Level 27 ($4,500-$5,000)) and to 
reassign CPT code 0100T (Placement of a subconjunctival retinal 
prosthesis receiver and pulse generator, and implantation of intra-
ocular retinal electrode array, with vitrectomy) from APC 0673 (Level 2 
Intraocular Procedures) to proposed newly established New Technology 
APC 1593 (New Technology--Level 46 ($70,000-$80,000) to pay 
appropriately for the procedures.
a. Transprostatic Urethral Implant Procedure
    Currently, in CY 2015, there is one procedure that is receiving 
payment through a New Technology APC. Specifically, the surgical 
procedure described by HCPCS code C9740 is assigned to New Technology 
APC 1564 (New Technology--Level 27 ($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, in 
the CY 2016 OPPS/ASC proposed rule, we proposed to maintain the 
assignment of HCPCS code C9740 to New Technology APC 1564 for CY 2016. 
As described in section IV.B. of the 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 was included in 
Addendum B to

[[Page 70377]]

the proposed rule (which is available via the Internet on the CMS Web 
site).
    Comment: Several commenters supported CMS' proposal to retain HCPCS 
code C9740 in New Technology APC 1564 for CY 2016. The commenters 
stated that retaining this surgical procedure in a new technology APC 
for another year will allow CMS to continue collecting the claims data 
necessary to identify an appropriate APC assignment for the procedure. 
The commenters also supported the proposed designation of APC 1564 as a 
device-intensive APC so that the procedure assigned to the APC can be 
performed and paid adequately in the ASC setting. However, one 
commenter disagreed with the APC assignment for HCPCS code C9740. The 
commenter believed that, based on the cost data, HCPCS code C9740 
should be assigned to New Technology APC 1567 (New Technology--Level 30 
($6,000-$6,500)), with a payment rate of approximately $6,250.
    Response: Based on the latest claims data used for this final rule 
with comment period, which is based on claims submitted between January 
1, 2014, and December 31, 2014, and processed on or before June 30, 
2015, we are reassigning HCPCS code C9740 from New Technology APC 1564 
to New Technology APC 1565 (New Technology--Level 28 ($5,000-$5,500)). 
Specifically, we found a geometric mean cost of approximately $5,627 
based on 130 single claims (out of 161 total claims) for HCPCS code 
C9740, which is comparable to the payment rate of $5,250 for New 
Technology APC 1565. We note that HCPCS code C9740 is the only code 
assigned to New Technology APC 1565. We do not believe HCPCS code C9740 
should be assigned to either New Technology APC 1566 (New Technology--
Level 29 ($5500-$6000)), with a payment rate of approximately $5,750 or 
New Technology APC 1567 (New Technology--Level 30 ($6000-$6500)), with 
a payment rate of approximately $6,250) because the payment rates for 
these APCs are significantly higher than the geometric mean cost of 
approximately $5,627 for HCPCS code C9740. Therefore, in this final 
rule with comment period, we are revising the APC assignment for HCPCS 
code C9740 to New Technology APC 1565 for CY 2016. We note that HCPCS 
code C9740 is the only procedure assigned to New Technology APC 1565, 
which is a device-intensive APC for CY 2016. We anticipate that the CY 
2015 claims data (which will be used for CY 2017 ratesetting) for HCPCS 
code C9740 will be sufficient for the assignment of the code to a 
clinical APC in CY 2017.
    Comment: One commenter suggested that CMS reassign HCPCS code C9739 
(Cystourethroscopy, with insertion of transprostatic implant; 1 to 3 
implants), from clinical APC 5374 (Level 4 Urology and Related 
Services) to C-APC 5375 (Level 5 Urology and Related Services). The 
commenter believed that, similar to HCPCS code C9740, HCPCS code C9739 
should be assigned to a device-intensive APC. In addition, the 
commenter believed that because both procedures describe an Urolift 
implant procedure and the only difference is that HCPCS code C9739 
involves 1 to 3 transprostatic implants while HCPCS code C9740 involves 
4 or more implants, both procedure codes should be assigned to device-
intensive APCs.
    Response: We agree with the commenter's suggestion to assign HCPS 
code C9739 to APC 5375. Analysis of the latest claims data used for 
this final rule revealed a geometric mean cost of approximately $4,263 
based on 53 single claims (out of 54 total claims) for HCPCS code 
C9739. We believe that the geometric mean cost for HCPCS code C9739 is 
similar to other procedures assigned to APC 5375, which has a geometric 
mean cost of approximately $3,551. Therefore, for CY 2016, we are 
reassigning HCPCS code C9739 to APC 5375.
    Comment: One commenter suggested that a device HCPCS C-code or 
HCPCS code L8699 (Prosthetic implant, not otherwise specified) should 
be required on all claims that report HCPCS code C9739 or C9740. The 
commenter reported that, based on the review of the CY 2016 OPPS/ASC 
proposed rule claims data, approximately 50 percent of the claims did 
not have a device code reported, thus making it impossible to determine 
the number of implants used. The commenter requested the establishment 
of device edits to ensure that implant costs are included in the claims 
to facilitate ratesetting.
    Response: We do not believe that we should establish device edits 
for every procedure code, including HCPCS code C9739 or C9740. We rely 
on hospitals to report procedures, services, and items accurately. As 
we have stated in previous final rules, it is extremely important that 
hospitals use all of the required HCPCS codes to report the performance 
of all services they furnish, consistent with the code descriptors, CPT 
and/or CMS instructions, and correct coding principles, whether payment 
for the services is made separately or packaged. The accuracy of the 
OPPS payment rates depends on the quality and completeness of the 
claims data that hospitals submit for the services they furnish to 
Medicare beneficiaries.
    However, in the CY 2016 OPPS/ASC proposed rule, we proposed to 
establish claims processing edits such that a device HCPCS code must be 
reported on the same claim form for any procedure code assigned to a 
device-intensive APC (80 FR 39268). We further stated that claims 
submitted with a procedure code requiring a device that is assigned to 
a device-intensive APC but without any device HCPCS code on the claim 
would be returned to the provider. We are finalizing this proposal for 
CY 2016. Specifically, only the procedures that require the 
implantation of a device that are assigned to a device-intensive APC 
will require a device code on the claim and claims processing edits 
will apply only to those APCs that are listed in Table 42 of this final 
rule with comment period. Further discussion of this final policy can 
be found in section IV.B. of this final rule with comment period. 
Because HCPCS code C9740 is assigned to a device-intensive APC for CY 
2016, we expect hospitals to report the appropriate device code with 
the implant procedure. In this case, we also would expect hospitals to 
report HCPCS code L8699 when reporting HCPCS code C9740. This will 
ensure that device costs are always reported on the claim and are 
appropriately captured in claims that CMS uses for ratesetting.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposals, with modification. Specifically, we 
are reassigning HCPCS code C9740 from New Technology APC 1564 to New 
Technology APC 1565, and reassigning HCPCS code C9739 from clinical APC 
5374 to APC 5375 for CY 2016. We note that the APC to which HCPCS code 
C9740 is assigned is designated as a device-intensive APC, which will 
require reporting the appropriate device code (in this case, HCPCS code 
L8699) when the surgical procedure describing HCPCS C9740 is reported 
on the claim. The final CY 2016 payment rates for HCPCS codes C9739 and 
C9740 are included in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
b. Retinal Prosthesis Implant Procedure
    CPT code 0100T describes the implantation of a retinal prosthesis. 
This surgical procedure is currently assigned to APC 0673, which 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,

[[Page 70378]]

includes all internal 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 final rule with comment period 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 the CY 2016 OPPS/ASC proposed rule 
showed 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, in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39257), we proposed 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)), 
with a payment of approximately $75,000 for CY 2016. We refer readers 
to section III.C.2. of the proposed rule and this final rule with 
comment period for a discussion of the proposed expansion of the New 
Technology APC levels. We stated in the proposed rule (80 FR 39257) 
that ``[w]e 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).'' In the proposed rule (80 FR 39257), we also stated that 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 similar to the payment for the same procedure 
provided in the hospital inpatient setting. Once we have more claims 
data, we indicated that we will reassess the APC placement of the 
retinal prosthesis implantation procedure in light of our standard rate 
setting methodology. We invited public comments on this proposal.
    Comment: Several commenters expressed concern over the proposed 
payment rate of $75,000 for CPT code 0100T. The commenters reported 
that the cost of the Argus II device is approximately $144,000 while 
the cost of the surgical procedure to implant the device is between 
approximately $5,000 and $10,000. The commenters urged CMS to establish 
a payment rate of approximately $150,000 to accurately pay hospitals 
for the full cost of providing the procedure and furnishing the device. 
Other commenters reported confusion about the proposed policy. Based on 
their reading of the proposal, the commenters believed that CMS is 
proposing to pay (1) $75,000 for New Technology APC 1593 plus (2) the 
IPPS New Technology payment amount of approximately $72,029, which 
would result in a total procedure payment of approximately $147,029. 
The commenters requested clarification on the proposed total procedure 
payment. Another commenter indicated that a total payment of $75,000 
for the device and surgical procedure is inappropriate and further 
disagreed with CMS' use of the IPPS new technology add-on payment as a 
proxy for the Argus II procedure cost because this add-on payment is 
set at 50 percent of costs of the new technology.
    Response: We appreciate the commenters' request for clarification. 
In the CY 2016 OPPS/ASC proposed rule, we proposed to pay for the 
surgical implant procedure including the retinal prosthesis device 
under newly proposed New Technology APC 1593. The following sentence in 
the proposed rule (80 FR 39257) may be the source of some commenters' 
confusion: ``[w]e 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.'' What we 
meant by that sentence is the payment amount of $75,000 for APC 1593 
would be comprised of the approximate sum of: (1) The payment amount 
for the procedure ($3,123, which is the CY 2015 payment rate for the 
procedure described by CPT code 0100T); and (2) the payment amount for 
the device ($72,028.75--the proposed IPPS payment amount for the 
device). That is, the approximate $75,000 payment for APC 1593 is the 
total payment amount, which includes payment for both the procedure and 
the device.
    The final rule claims data contain additional claims data for CPT 
code 0100T. There are 5 total claims (2 single claims) with a geometric 
mean cost of approximately $95,866. Although this remains a very low 
volume of claims, we prefer to base the cost estimate for this 
procedure (which include the cost of the device) on the hospital 
outpatient claims data rather than using the IPPS new technology add-on 
payment as a proxy for the procedure cost. However, we do not believe 
that there are a sufficient number of claims upon which to base a 
clinical APC for the retinal prosthesis procedure. Therefore, we are 
creating a New Technology APC (Level 48) for CPT code 0100T with the 
cost band range of $90,000 to $100,000 and a payment amount of $95,000. 
In addition, because the proposed additional New Technology APCs ended 
with Level 46 ($70,000-$80,000), we also are creating a New Technology 
Level 47 with the cost band range of $80,000 to $90,000 and a payment 
amount of $85,000 to fill in the gap between New Technology APC Level 
46 and Level 48.
    Comment: One commenter recommended the establishment of a HCPCS G-
code for the Argus implant procedure and the assignment of this G-code 
to a new technology APC with a payment rate of $150,000.
    Response: We disagree with establishing a HCPCS G-code and 
assigning it to a new technology APC with a payment rate of $150,000 
because CPT code 0100T accurately describes the procedure associated 
with implanting the Argus II device.
    Comment: One commenter recommended, as an alternative to the New 
Technology APC payment, that CMS continue to pay separately for CPT 
code 0100T and HCPCS code C1841. Specifically, the commenter requested 
that CMS pay separately for surgical procedure CPT code 0100T and also 
extend the pass-through status for the device HCPCS code C1841 through 
December 31, 2016 because of very limited claims data.
    Response: We stated in the CY 2016 OPPS/ASC proposed rule that 
pass-through payment status for device HCPCS code C1841 would expire on 
December 31, 2015 because it was approved for pass-through status 
effective October 1, 2013 (80 FR 39264). We also proposed to package 
and assign device HCPCS code C1841 to OPPS status indicator ``N'' to 
indicate that the payment for this code would be included in the 
surgical procedure CPT code 0100T. We do not agree that

[[Page 70379]]

extending the pass-through status would be appropriate because we 
believe it would be inconsistent with the statutory pass-through 
provision. 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.
    After consideration of the public comments we received, we are 
assigning CPT code 0100T to New Technology APC 1599, which has a final 
payment of $95,000 for CY 2016. This payment rate includes the payment 
for the retinal prosthesis system as well as all other items and 
supplies used in the surgical procedure to implant the device. Because 
payment for retinal prosthesis is included in CPT code 100T, we are 
finalizing our proposal to assign HCPCS code C1841 to OPPS status 
indicator ``N'' to indicate that this code is packaged under the 
hospital OPPS. We also are designating APC 1599 as a device-intensive 
APC because almost all of the cost of the implantation procedure is 
attributable to the cost of the device. Because CPT code 0100T is 
assigned to a device-intensive APC, a device HCPCS C-code will be 
required on claims with CPT code 0100T according to the device edit 
policy described in section IV. of this final rule with comment period.

D. 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, in the CY 2016 OPPS/ASC proposed rule (80 FR 
39257), we proposed 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 proposed 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 were 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 stated in the proposed rule that 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 did not propose to change the numbering of the composite 
APCs or the New Technology APCs for CY 2016.
    Comment: Several commenters expressed concern about the lack of 
detail in the proposed rule on the proposed consolidation and 
restructuring of the nine APC groups. The commenters stated that CMS 
provided few details in the proposed rule to enable commenters to 
adequately assess the full impact of the proposed APC reconfiguration, 
and requested a delay in the implementation of the proposal until more 
information is available. They also stated that CMS did not provide 
impact tables to show the projected impact that the proposed APC 
consolidation would have on Medicare payments by departments or 
specialties, or provide the rationale behind the decisions for each 
combination of APC groups, which they believed further complicated 
analysis of each proposed APC group. Some commenters indicated that 
they had difficulty analyzing the impact and interrelationship of the 
different proposed policies to adequately determine Medicare payments 
to hospitals. Several commenters requested that CMS not finalize the 
proposal and stated that the proposed APC groupings do not reflect 
clinical or resource homogeneity. Some commenters believed that CMS 
should develop and establish criteria before finalizing the 
reconfiguration of the nine APC groups.
    However, many other commenters supported the consolidation and 
restructuring of the nine clinical family APCs but requested 
modification to the APC groupings. In particular, the commenters 
requested the reassignment of several procedures and services to 
certain APCs for the final rule. In addition, several commenters 
requested further information in the final rule, and urged CMS to 
include a separate impact analysis for each restructured APC clinical 
family showing the distributional impact of the restructuring across 
CMS' usual categories (such as urban/rural location, bed size, type of 
ownership and teaching status).
    Response: Based on our experience with the existing APCs under the 
OPPS, we believe that establishing more inclusive categories of 
procedures and services is more appropriate for future ratesetting 
under the OPPS. Therefore, we believe that the proposed restructured 
APCs have a more clinically appropriate granularity, while improving 
resource similarity. We also

[[Page 70380]]

believe the proposed restructure and consolidation of APCs more 
appropriately categorizes all of the procedures and services within 
each of the nine APC groups such that the procedures and services 
within each proposed newly configured APC are more comparable with 
respect to clinical characteristics and resource use.
    In addition, we disagree that we should delay or not finalize the 
proposed consolidation and restructuring of the nine APC groups pending 
provision of the extensive data that the commenters requested. We make 
available a considerable amount of data for public analysis each year 
for both the proposed rule and the final rule. While we are not 
developing and providing the extensively detailed information that the 
commenters requested, we are providing the public use files of claims 
and a detailed narrative description of our data process that the 
public can use to perform any desired analyses (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
    We note that we included the impact of the CY 2016 OPPS proposals 
on payment to different classes of hospitals in Table 65 of the 
proposed rule (80 FR 39362 through 39363). We believe our estimate of 
the impact of these proposed changes provided valuable information to 
hospitals. We believe that it would be impractical and nonproductive to 
develop impact tables for each of the primary clinical families that 
were proposed to be reorganized. Hospitals generally do not perform a 
limited set of services confined to one clinical family. Therefore, we 
believe that impacts reflecting the interaction and collective effect 
of the proposed APC restructuring best depict how most hospitals will 
fare under the proposed reorganization. Many commenters submitted 
comments relating to particular services and were able to provide 
detailed analysis in their comments based on the data and other 
information provided with the proposed rule.
    Further, we do not agree that we should develop and establish 
additional criteria before finalizing the proposed consolidation and 
restructuring of the nine APC groups. The OPPS statute provides that 
procedures grouped in APCs must be similar clinically and in terms of 
resource use. In various sections of this final rule with comment 
period, we have applied those criteria and responded to many of the 
public comments we received, which included evaluations of the 
recommended changes to the APC assignments, based on those criteria. 
Each year, under the OPPS, we revise and make changes to the APC 
groupings based on the latest hospital outpatient claims data to 
appropriately place procedures and services in APCs based on clinical 
characteristics and resource similarity.
    Therefore, after consideration of the public comments we received, 
we are finalizing, with some modifications that are discussed below in 
the sections specific to each clinical family, the proposed 
consolidation and restructuring of the nine clinical families of APCs 
for CY 2016. Each of the nine clinical families, the public comments we 
received, and our responses on those families are discussed below. The 
final payment rates for the nine individual clinical family APCs are 
included in Addendum A to this final rule with comment period.
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. In the CY 2016 OPPS/ASC proposed 
rule (80 FR 39257), for CY 2016, we proposed 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 grouping 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 proposed to restructure and consolidate the APCs that include 
airway endoscopy procedures into a single APC grouping. Table 18 of the 
proposed rule listed the current CY 2015 APCs that contain the airway 
endoscopy procedures, and Table 19 of the proposed rule listed the 
proposed CY 2016 APCs that would result from our consolidation and 
restructuring of the current airway endoscopy procedure APCs into a 
single APC grouping. The proposed restructured/renumbered CY 2016 
airway endoscopy APCs were: Proposed APC 5151 (Level 1Airway 
Endoscopy); proposed APC 5152 (Level 2 Airway Endoscopy); proposed APC 
5153 (Level 3 Airway Endoscopy); proposed APC 5154 (Level 4 Airway 
Endoscopy); and proposed APC 5155 (Level 5 Airway Endoscopy.
    We invited public comments on this proposal.
    Comment: Several commenters supported the proposed restructuring of 
the airway endoscopy APCs. However, the commenters submitted a list of 
procedure codes (indicated in Table 22 below) that they requested CMS 
to reassign to higher-level APCs in the airway endoscopy grouping based 
on greater resource similarity of the procedures described by the codes 
listed by the commenters compared to the procedures described by the 
proposed codes assigned to the proposed APCs. In addition, the HOP 
Panel recommended that CMS reassign the procedures described by CPT 
codes 31652 and 31653 from proposed APC 5153 to proposed APC 5154 
because the Panel agreed with the presenter that the procedures 
described by these new codes are most similar to the procedures 
assigned to CPT code 31629, which is assigned to APC 5154. One 
commenter requested that CMS assign the procedure described by CPT code 
31652 to APC 5154 and the procedure described by CPT code 31653 to APC 
5155. Another commenter requested that CMS reassign the procedure 
described by CPT code 31515 from proposed APC 5152 to proposed APC 5154 
because the commenter believed that this procedure is more clinically 
similar to other procedures (described by CPT codes 31629 and 31645) 
assigned to proposed APC 5154. One commenter requested that CMS create 
a Level 6 Airway Endoscopy APC and assign the procedures described by 
CPT codes 31636, 31634, and 31647 to this newly APC because the costs 
of these procedures are not similar to the costs of other procedures 
assigned to APC 5155.
    Response: We agree in part with the commenters' requested code 
reassignments and with the Panel's recommendation. However, we do not 
believe that the procedure described by CPT code 31515 should be 
reassigned to proposed APC 5154, that the procedure described by CPT 
code 31653 should be assigned to proposed APC 5153 instead of proposed 
APC 5155, or that we should create a Level 6 Airway Endoscopy APC. We 
are reassigning seven of the eight recommended procedure codes (as 
listed in Table 22 below) to the next higher level airway endoscopy APC 
to improve the resource homogeneity of all the procedures assigned to 
the airway endoscopy APCs. We do not agree with the commenter

[[Page 70381]]

that the procedure described by CPT code 31515 should be assigned to 
the higher level APC 5154 instead of APC 5152. The geometric mean cost 
of the procedure described by CPT code 31515 is approximately $444, and 
the geometric mean cost of APC 5152 is approximately $393. The 
geometric mean cost of APC 5154 is approximately $2,084. We believe 
that, given the significant difference in resource use and similarity 
between the procedure described by CPT code 31515 and the procedures 
assigned to APC 5154, assigning the procedure described by CPT code 
31515 to APC 5154 would be an inappropriate APC assignment. We also 
believe that, based on the clinical characteristics of the new airway 
endoscopy procedure grouping described by CPT code 31653, the procedure 
is most appropriately assigned to APC 5154, which is one level higher 
than what was proposed. In addition, we do not believe it is necessary 
to create a sixth level to the Airway Endoscopy APC grouping to 
appropriately pay for the procedures described by CPT codes 31636, 
31634, and 31647. The procedures described by these CPT codes are low 
volume procedures, and even if the procedures represented a significant 
volume in the CY 2014 claims data, assigning these procedures to APC 
5155 would not result in a violation of the 2 times rule for the APC.
    Table 22 below shows the airway endoscopy procedure codes with the 
commenters' specific APC recommendations and the final CMS decisions, 
final APC assignment, and final status indicator assignment for CY 
2016.

                    Table 22--Airway Endoscopy Procedure Codes With Commenters' Specific APC Recommendations and Final CMS Decisions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Proposed CY  Proposed CY     Commenter                                   Final CY      Final CY
      CPT/HCPCS code             Short descriptor         2016 SI      2016 APC    requested APC         CMS  Decision            2016 SI      2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
31295.....................  Sinus endo w/balloon dil.            T          5154            5155  Agree......................            T          5155
31296.....................  Sinus endo w/balloon dil.            T          5154            5155  Agree......................            T          5155
31297.....................  Sinus endo w/balloon dil.            T          5154            5155  Agree......................            T          5155
31515.....................  Laryngoscopy for                     T          5152            5154  Disagree...................            T          5152
                             aspiration.
31626.....................  Bronchoscopy w/markers...            T          5154            5155  Agree......................            T          5155
31628.....................  Bronchoscopy/lung bx each            T          5153            5154  Agree......................            T          5154
31652 *...................  Bronch ebus samplng 1/2              T          5153            5154  Agree......................            T          5154
                             node.
31653 **..................  Bronch ebus samplng 3/>              T          5153            5154  Agree......................            T          5154
                             node.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CPT code 31652 will be effective January 1, 2016. This code was listed as code 3160A (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of
  the CY 2016 OPPS/ASC proposed rule.
** CPT code 31653 will be effective January 1, 2016. This code was listed as code 3160B (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of
  the CY 2016 OPPS/ASC proposed rule.

    Comment: One commenter requested that CMS assign status indicator 
``T'' (instead of status indicator ``N'') to new CY 2016 CPT codes 
0406T (Nasal endoscopy, surgical, ethmoid sinus, placement of drug 
eluting implant) and 0407T (Nasal endoscopy, surgical, ethmoid sinus, 
placement of drug eluting implant; with biopsy, polypectomy or 
debridement). (We note that CPT codes 0406T and 0407T were listed as 
040XF and 040XG, respectively, in Addendum B, O, and Q2 of the CY 2016 
OPPS/ASC proposed rule.) The commenter suggested, as an alternative, 
that these codes be assigned status indicator ``Q2'' (T-packaged). In 
addition, the commenter recommended that CMS assign CPT code 0406T to 
APC 5153 and CPT code 0407T to APC 5154. The commenter believed that 
these procedures should be paid separately under the OPPS because they 
are performed as standalone surgical procedures according to the code 
descriptors.
    Response: We disagree with the commenter that the procedures 
described by CPT codes 0406T and 0407T are performed as standalone 
procedures. We believe that procedures describing the placement of a 
drug-eluting sinus implant under the OPPS are performed as part of 
several more comprehensive and extensive endoscopic sinus surgical 
procedures. Therefore, we are finalizing our proposal to package 
payment for the procedures described by CPT codes 0406T and 0407T, and 
to assign these procedures to status indicator ``N'' for CY 2016.
    After consideration of the public comments we received, we are 
finalizing the proposed structure of the airway endoscopy APCs with the 
code reassignments shown in Table 22 above. Table 23 below lists the 
final CY 2016 APCs that result from our consolidation and restructuring 
of the current airway endoscopy procedure APCs into a single APC 
grouping. The procedures assigned to each APC are listed in Addendum B 
to this final rule with comment period, which is available via the 
Internet on the CMS Web site.

              Table 23--Final CY 2016 Airway Endoscopy APCs
------------------------------------------------------------------------
         Final CY 2016 APC                 CY 2016 APC group 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.
------------------------------------------------------------------------

2. Cardiovascular Procedures and Services
a. Cardiac Contractility Modulation (CCM) Therapy
    In Addendum B to the CY 2016 OPPS/ASC proposed rule, we proposed to 
assign 11 new CY 2016 cardiac contractility modulation (CCM) therapy 
system CPT codes to various APCs, which are listed in Table 24 below. 
We also assigned these codes to comment indicator ``NP'' in Addendum B 
to the proposed rule to indicate that the codes are new for CY 2016 
with a proposed APC assignment and that public comments would be 
accepted on their proposed APC assignments. We note these codes will be 
effective January 1, 2016. However, in the proposed rule, the codes 
were listed as 04XX1 through 04XX (the 5-digit CMS placeholder code) in 
Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.

[[Page 70382]]



     Table 24--Proposed CY 2016 OPPS APCs and Status Indicators for the Cardiac Contractility Modulation CPT
                                                 Procedure Codes
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed  CY
 CY 2016 OPPS/ASC proposed                                                          2016  OPPS     Proposed  CY
      rule 5-digit CMS             CY 2016 CPT code          Short descriptor         status      2016  OPPS APC
      placeholder code                                                              indicator
----------------------------------------------------------------------------------------------------------------
04XX1......................  0408T......................  Insj/rplc cardiac                  J1             5223
                                                           modulj sys.
04XX2......................  0409T......................  Insj/rplc cardiac                  J1             5223
                                                           modulj pls gn.
04XX3......................  0410T......................  Insj/rplc car modulj               J1             5222
                                                           atr elt.
04XX4......................  0411T......................  Insj/rplc car modulj               J1             5222
                                                           vnt elt.
04XX5......................  0412T......................  Rmvl cardiac modulj                J1             5222
                                                           pls gen.
04XX6......................  0413T......................  Rmvl car modulj                    Q2             5221
                                                           tranvns elt.
04XX7......................  0414T......................  Rmvl & rpl car modulj              J1             5224
                                                           pls gn.
04XX8......................  0415T......................  Repos car modulj                    T             5181
                                                           tranvns elt.
04XX9......................  0416T......................  Reloc skin pocket pls               T             5054
                                                           gen.
04X10......................  0417T......................  Prgrmg eval cardiac                Q1             5741
                                                           modulj.
04X11......................  0418T......................  Interro eval cardiac               Q1             5741
                                                           modulj.
----------------------------------------------------------------------------------------------------------------

    Comment: One commenter disagreed with CMS' proposed APC assignments 
for certain cardiac contractility modulation (CCM) Category III CPT 
codes that are new in CY 2016 and therefore do not have associated 
claims data available. Specifically, the commenter requested four CPT 
codes be reassigned to the following APCs:
     CPT code 408T (Insertion or replacement of permanent 
cardiac contractility modulation system, including contractility 
evaluation when performed, and programming of sensing and therapeutic 
parameters; pulse generator with transvenous electrodes) to APC 5232 
(Level 2 ICD and Similar Procedures);
     CPT code 0409T (Insertion or replacement of permanent 
cardiac contractility modulation system, including contractility 
evaluation when performed, and programming of sensing and therapeutic 
parameters; pulse generator only) to APC 5231 (Level 1 ICD and Similar 
Procedures);
     CPT code 0412T (Removal of permanent cardiac contractility 
modulation system; pulse generator only) to APC 5221 (Level 1 Pacemaker 
and Similar Procedures); and
     CPT code 0414T (Removal and replacement of permanent 
cardiac contractility modulation system pulse generator only) to APC 
5231 (Level 1 ICD and Similar Procedures).
    The commenter believed that the three codes for inserting or 
replacing the system or pulse generator are more similar clinically and 
in device complexity and resource use to implantable cardioverter-
defibrillators (ICD) procedures. In addition, the commenter stated that 
the procedure time and device costs for CCM procedures exceed those for 
pacemaker procedures. The commenter believed the recommended APC 
assignment for removal of the CCM pulse generator codes better aligns 
with other similar removal procedure codes.
    Response: We agree with the commenter that there would be greater 
homogeneity, both clinically and in terms of resource use, by 
reassigning CCM procedures for insertion and/or replacement of the CCM 
device (described by CPT code 0409T) from the pacemaker APCs to the ICD 
APCs. We also agree with the commenter that procedures for removal of 
the CCM device (described by CPT codes 0412T and 0414T) are more 
homogenous clinically and in terms of resource use with pacemaker 
procedures. Therefore, we are accepting the commenter's recommendation 
to reassign the procedures described by CPT codes 0409T and 0414T to 
APC 5231 and to reassign the procedures described by CPT code 0412T to 
APC 5221. However, we disagree with the commenter's recommendation to 
reassign the procedure described by CPT 0408T to APC 5232. Based on the 
latest available hospital claims data used for this final rule with 
comment period, we believe that the procedure described by CPT code 
0408T should be assigned to APC 5231 because of its clinical and 
resource homogeneity with other procedures assigned to APC 5231. Table 
24 below summarizes the commenter's requested APC assignment for each 
of the codes along with our decision and the final APC and status 
indicator assignments.

  Table 24--Cardiac Contractility Modulation Procedure Codes With Commenter's Recommended Specific APC Assigment, Final CMS Decision, and Final APC and
                                                               Status Indicator Assignment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Proposed CY   Proposed    Commenter                                   Final CY
       CPT/HCPCS code               Short descriptor       2016 status    CY 2016    requested           CMS  decision          2016 status   Final  CY
                                                             indicator      APC         APC                                      indicator    2016  APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
0408T.......................  Insj/rplc cardiac modulj             J1         5223         5232  Disagree....................           J1          5231
                               sys.
0409T.......................  Insj/rplc cardiac modulj             J1         5223         5231  Agree.......................           J1          5231
                               pls gn.
0412T.......................  Rmvl cardiac modulj pls gen          J1         5222         5221  Agree.......................           Q2          5221
0414T.......................  Rmvl & rpl car modulj pls            J1         5224         5231  Agree.......................           J1          5231
                               gn.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The final status indicator, APC assignment, and payment rate for 
these codes, where applicable, can be found in Addendum B to this final 
rule with comment period (which is available via the Internet on the 
CMS Web site).
b. Cardiac Rehabilitation
    Currently, there are four established CPT/HCPCS codes that describe 
cardiac rehabilitation services:

[[Page 70383]]

     CPT code 93797 (Physician or other qualified health care 
professional services for outpatient cardiac rehabilitation; without 
continuous ECG monitoring (per session));
     CPT code 93798 (Physician or other qualified health care 
professional services for outpatient cardiac rehabilitation; with 
continuous ECG monitoring (per session));
     HCPCS code G0422 (Intensive cardiac rehabilitation; with 
or without continuous ECG monitoring with exercise, per session); and
     HCPCS code G0423 (Intensive cardiac rehabilitation; with 
or without continuous ECG monitoring without exercise, per session).
    In CY 2015, we assigned all four of these codes to APC 0095 
(Cardiac Rehabilitation), which has a geometric mean cost of 
approximately $107. In the CY OPPS/ASC 2016 proposed rule, we discussed 
that the costs for the two intensive cardiac rehabilitation codes had 
increased, such that the geometric mean costs for the four cardiac 
rehabilitation codes that we calculated based on the CY 2014 hospital 
claims data available for the proposed rule were as follows: For CPT 
code 93797, the geometric mean cost was approximately $102. For CPT 
code 93798, the geometric mean cost was approximately $111. For HCPCS 
code G0422, the geometric mean cost was approximately $262). For HCPCS 
code G0423, the geometric mean cost was approximately $493. In the 
proposed rule, we stated that if we grouped all four of these codes 
into a single APC, a 2 times rule violation would result. Therefore, we 
proposed two levels of cardiac rehabilitation for CY 2016: APC 5771 
(Level 1 Cardiac Rehabilitation), which contained the two standard 
cardiac rehabilitation codes (CPT codes 93797 and 93798); and APC 5772 
(Level 2 Cardiac Rehabilitation), which contained the two intensive 
cardiac rehabilitation codes (HCPCS codes G0422 and G0423).
    Our analysis of the latest CY 2014 hospital claims data available 
for this final rule with comment period revealed that the geometric 
mean costs of the intensive cardiac rehabilitation codes have decreased 
to levels that are more consistent with the prior year's geometric mean 
costs for these codes. The geometric mean costs for the four codes, 
using the latest available final rule claims data, are as follows: For 
CPT code 93797, the geometric mean cost is approximately $100. For CPT 
code 93798, the geometric mean cost is approximately $109. For HCPCS 
code G0422, the geometric mean cost is approximately $149. For HCPCS 
code G0423, the geometric mean cost is approximately $158. Therefore, 
because the geometric mean costs for all four codes based on the latest 
available final rule data are relatively similar, we believe that the 
current CY 2015 single APC configuration for cardiac rehabilitation is 
more appropriate than the two levels we proposed for CY 2016 and 
ensures that the procedures assigned to the APC do not cause a 
violation of the 2 times rule. Analysis using the latest available 
final rule claims data showed that the 2 time rule violation that 
existed with the data for the proposed rule no longer exists. 
Therefore, for CY 2016, we are assigning all four of the cardiac 
rehabilitation codes (CPT codes 93797 and 93798 and HCPCS code G0422 
and G0423) to new APC 5771 (Cardiac Rehabilitation), with a geometric 
mean cost of approximately $109.
c. Cardiac Telemetry
    For CY 2016, we proposed to reassign the procedure described by CPT 
code 93229 (External mobile cardiovascular telemetry with 
electrocardiographic recording, concurrent computerized real time data 
analysis and greater than 24 hours of accessible ECG data storage 
(retrievable with query) with ECG triggered and patient selected events 
transmitted to a remote attended surveillance center for up to 30 days; 
technical support for connection and patient instructions for use, 
attended surveillance, analysis and transmission of daily and emergent 
data reports as prescribed by a physician or other qualified health 
care professional) from APC 0213 (Level 1 Extended EEG, sleep, and 
Cardiovascular Studies) to proposed APC 5722 (Level 2 Diagnostic Tests 
and Related Services), with a proposed payment rate of approximately 
$220.
    Comment: One commenter disagreed with the proposed APC assignment 
for the procedure described by CPT code 93229 to proposed APC 5722. The 
commenter stated that the proposed payment rate for APC 5722 does not 
accurately reflect the full cost of providing the service described by 
CPT code 93229. The commenter also stated that hospitals are miscoding 
the service, and as a result, the proposed payment for this service is 
significantly understated. The commenter noted that, based on its 
internal analysis, several hospitals reported costs under $100 for 
services described by CPT code 93229. The commenter stated that when 
this service is provided under the MPFS, the payment is valued at 
$680.05. The commenter believed that the true cost of providing this 
service is closer to $795, and recommended that CMS reassign the 
services described by CPT code 93229 to proposed APC 5724 (Level 4 
Diagnostic Tests and Related Services), with a proposed payment rate of 
approximately $880.
    Response: As we stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66847), CPT code 93229 became effective January 
1, 2009. We believe that 5 years is sufficient time for hospital coders 
to understand the procedure described by CPT code 93229 and how to 
appropriately report this service on hospital claims. Based on our 
analysis of the CY 2014 hospital outpatient claims data used for this 
final rule with comment period, we are unable to determine whether 
hospitals are miscoding the service described by CPT code 93229. It is 
generally not our policy to judge the accuracy of hospital coding and 
charging for purposes of ratesetting (75 FR 71838). We rely on 
hospitals to accurately report the use of HCPCS codes in accordance 
with their code descriptors and CPT and CMS instructions, as 
applicable, and to report services on claims and charges and costs for 
the services on their Medicare hospital cost report appropriately. 
However, we do not specify the methodologies that hospitals use to set 
charges for this or any other service.
    We acknowledge that payment under the MPFS is made separately for 
the procedure described by CPT code 93229. However, the MPFS and the 
OPPS are different payment systems with entirely different ratesetting 
methodologies. Each is established under a different set of regulatory 
and statutory principles and the policies established under the 
physician fee schedule do not have bearing on the payment policies 
under the OPPS. For example, the OPPS uses actual annual hospital 
claims data to calculate payment rates, while the MPFS relies on 
estimates of relative value units (RVUs) from the American Medical 
Association/Specialty Society Relative Value Update Committee (RUC).
    Furthermore, as has been our practice since the implementation of 
the OPPS in 2000, we review, on an annual basis, the APC assignments 
for the procedures and services paid under the OPPS. Based on the 
latest hospital outpatient claims data used for this final rule with 
comment period, our analysis does not support the assignment of the 
procedure described by CPT code 93229 to APC 5724. We examined the 
latest hospital outpatient claims data for CPT code 93229 for dates of 
service between January 1, 2014, and December 31, 2014, that were 
processed on or before June 30, 2014. Our analysis of the claims data

[[Page 70384]]

shows a geometric mean cost of approximately $170 for CPT code 93229 
based on 2,153 single claims (out of 3,554 total claims). We do not 
believe that it is appropriate to assign CPT code 93229 to APC 5724 
because its geometric mean cost is approximately $896, which is 
significantly higher than the geometric mean cost of approximately $170 
for CPT code 93229, and assigning CPT code 93229 to APC 5724 would 
result in an overpayment for the procedure. We believe that APC 5722 is 
the most appropriate APC assignment for the procedure described by CPT 
code 93229 based on its clinical and resource homogeneity to the other 
diagnostic tests and procedures assigned to this APC.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to reassign the 
procedure described by CPT code 93229 to APC 5722 for CY 2016. The 
final payment rate for CPT code 93229 can be found in Addendum B to 
this final rule with comment period, which is available via the 
Internet on the CMS Web site.
3. 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 proposed 
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 the 
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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39258), 
for CY 2016, we proposed 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 of the 
proposed rule listed the current CY 2015 APCs that contain nonimaging 
diagnostic tests, and Table 21 of the proposed rule listed the CY 2016 
APCs that would result from our proposed consolidation and 
restructuring of the current diagnostic test and related services APCs. 
We invited public comments on this proposal.
    Comment: A few commenters requested that CMS unpackage the payment 
for cochlear implant procedures described by CPT codes 92601 through 
92604, and the procedures for programming an auditory brainstem implant 
described by CPT code 92640, and to assign these procedure codes to 
status indicator ``S'' instead of status indicator ``Q1.'' The 
commenters stated that these services are independent evaluations that 
are generally not related to other diagnostic tests or therapeutic 
services. Instead, according to these commenters, these procedures are 
very specific services used in the treatment for a limited population 
of patients with cochlear implants. One commenter provided a summary of 
an analysis of the claims data that it believed supports the position 
that payment for these services are often packaged with other unrelated 
OPPS services. One commenter requested that CMS unpackage the payment 
for procedures described by CPT code 92557 (Comprehensive audiometry 
threshold evaluation and speech recognition (92553 and 92556)) because 
payments for these procedures are packaged with payment for other 
unrelated services a majority of the time.
    Response: We agree with the commenters regarding the cochlear 
implant procedures described by CPT codes 92601 through 92604 and CPT 
code 92640. After further review of the clinical context in which these 
services are performed in the HOPD, we believe that separate payment 
(identified by status indicator ``S'') for these services is more 
appropriate than a conditional packaged payment triggered by status 
indicator ``Q1.'' Therefore, we are changing the status indicator 
assignments for these five procedure codes from ``Q1'' to ``S'' for CY 
2016.
    With regard to the procedure described by CPT code 92557, we 
disagree with the commenter. We believe that audiometry is an ancillary 
diagnostic test that is appropriately conditionally packaged similar to 
many other diagnostic tests. Hearing loss has multiple potential 
etiologies and an evaluation of the auditory system is an important 
part of various diagnostic tests. It is not relevant that this service 
is performed by an audiologist because several different kinds of 
services are performed in the HOPD by various health care 
professionals, depending upon their area of expertise. In addition, the 
professional that performs the service is not a prerequisite for 
payment packaging determinations. We note that, under the hospital 
OPPS, when a conditionally packaged service is performed on a different 
date of service and separate from other services, it is paid 
separately.
    Comment: One commenter supported the proposed restructuring of the 
diagnostic test APCs. However, the commenter suggested that, because 
the procedures assigned to APC 5761 (Level 1 Audiometry) and APC 5762 
(Level 2 Audiometry) are diagnostic tests, these procedures should be 
assigned to either the newly reorganized diagnostic test APCs or to one 
of the minor procedure APCs to which similar procedure are assigned.
    Response: We agree, in principle, with the commenter that it would 
be consistent with the new diagnostic test APCs structure, which 
includes all forms of diagnostic tests except audiometry, to also 
assign the audiometry procedure codes in the two audiometry APCs to one 
of the diagnostic test APCs or, in some cases, to one of the minor 
procedure APCs. Therefore, for CY 2016, we are reassigning all of the 
procedures in APCs 5761 and 5762 as shown in Table 25 below. In 
addition, we are deleting APCs 5761 and 5762. In Table 25 below, we 
summarize the commenter's requested APC assignment for each of the 
procedure codes along with our decision and the final APC assignment.

                 Table 25--Reassignment of Codes Currently Assigned to Level 1 and 2 Audiometry
----------------------------------------------------------------------------------------------------------------
                              Proposed CY                                                          Final CY 2016
      CPT/HCPCS code           2016 APC      Commenter/requested APC          CMS decision              APC
----------------------------------------------------------------------------------------------------------------
0208T.....................            5761  No Recommendation........  N/A......................            5732
0209T.....................            5761  No Recommendation........  N/A......................            5732

[[Page 70385]]

 
0210T.....................            5761  No Recommendation........  N/A......................            5732
0211T.....................            5761  No Recommendation........  N/A......................            5732
0212T.....................            5762  No Recommendation........  N/A......................            5721
92550.....................            5762  5721.....................  Agree....................            5721
92552.....................            5762  5721.....................  Disagree.................            5734
92553.....................            5762  No Recommendation........  N/A......................            5721
92555.....................            5761  5732.....................  Agree....................            5732
92556.....................            5761  5732.....................  Agree....................            5732
92557.....................            5762  5721 or 5722.............  Agree....................            5721
92561.....................            5762  5734.....................  Agree....................            5734
92562.....................            5762  5721.....................  Agree....................            5721
92563.....................            5761  No Recommendation........  N/A......................            5732
92564.....................            5761  No Recommendation........  N/A......................            5732
92565.....................            5761  5732.....................  Agree....................            5732
92567.....................            5761  5732.....................  Agree....................            5732
92570.....................            5762  5721.....................  Agree....................            5721
92571.....................            5761  No Recommendation........  N/A......................            5732
92572.....................            5762  No Recommendation........  N/A......................            5721
92575.....................            5761  No Recommendation........  N/A......................            5732
92576.....................            5761  5732.....................  Agree....................            5732
92577.....................            5762  5721.....................  Disagree.................            5723
92579.....................            5762  5721.....................  Agree....................            5721
92582.....................            5762  5721.....................  Agree....................            5721
92583.....................            5761  5732.....................  Agree....................            5732
92596.....................            5761  5732.....................  Agree....................            5732
92601.....................            5762  5721 or 5722.............  Agree....................            5721
92602.....................            5762  5721 or 5722.............  Agree....................            5721
92603.....................            5762  5721 or 5722.............  Agree....................            5721
92604.....................            5762  5721 or 5722.............  Agree....................            5721
92620.....................            5762  5721.....................  Agree....................            5721
92625.....................            5762  5721.....................  Agree....................            5721
92626.....................            5762  5721.....................  Agree....................            5721
92640.....................            5762  5721or 5722..............  Agree....................            5721
92700.....................            5761  5732.....................  Disagree.................            5731
----------------------------------------------------------------------------------------------------------------

    We note that, for each of the procedure codes with which we 
disagree with the commenter's requested APC assignment, we believe that 
the final APC assignment is more appropriate based on the greater 
similarity of resource use.
    Comment: One commenter requested that CMS reassign the procedures 
described CPT codes 95909 (Nerve conduction studies; 5-6 studies) and 
95910 (Nerve conduction studies; 7-8 studies) from APC 5722 to APC 5723 
based on the procedures' similar resource use when compared to the 
resource use for the procedure described by CPT code 95961 (Functional 
cortical and subcortical mapping by stimulation and/or recording of 
electrodes on brain surface, or of depth electrodes, to provoke 
seizures or identify vital brain structures; initial hour of attendance 
by a physician or other qualified health care professional).
    Response: We disagree with the commenter. The procedure described 
by CPT code 95909 has a geometric mean cost of approximately $221 and 
the procedure described by CPT code 95910 has a geometric mean cost of 
approximately $275. The procedure described by CPT code 95961 has a 
geometric mean cost of approximately $2,143 based on 4 single claims. 
Based on the latest hospital outpatient claims data used for this final 
rule with comment period, the geometric mean costs of the procedures 
described by CPT codes 95909 and 95910 are not comparably similar to 
the geometric mean cost of the procedure described by CPT code 95961. 
Therefore, we are not reassigning the procedures described by CPT codes 
95909 and 95910 to APC 5723, as the commenter suggested.
    Comment: One commenter requested that the procedures described by 
CPT codes 95965 (Magnetoencephalography (MEG), recording and analysis; 
for spontaneous brain magnetic activity (e.g., epileptic cerebral 
cortex localization)) and 95966 (Magnetoencephalography (MEG), 
recording and analysis; for evoked magnetic fields, single modality 
(e.g., sensory, motor, language, or visual cortex localization)) be 
reassigned to an APC other than the proposed APC 5724. Although the 
commenter believed that MEG procedures are not clinically similar to 
the other procedures assigned to APC 5724, the commenter did not 
specify to which APC it believed these procedures should be assigned.
    Response: We disagree with the commenter. MEG procedures are 
neurological diagnostic tests and are assigned to an APC with other 
neurological diagnostic tests with comparably similar geometric mean 
costs. In addition, these procedures are currently assigned to the 
highest level APC, specifically APC 5724 (Level 4 Diagnostic Tests and 
Related Services), in the diagnostic tests APC series. We do not 
believe that there is a more appropriate APC assignment for MEG 
procedures. Therefore, we are finalizing our proposal to assign the MEG 
CPT codes 95965 and 95966 to APC 5724 for CY 2016.
    Comment: One commenter requested that CMS assign the procedures 
described by CPT codes 95800 (Sleep study, unattended, simultaneous 
recording; heart rate, oxygen saturation, respiratory analysis (e.g., 
by airflow or peripheral arterial tone), and sleep time) and 95806 
(Sleep study, unattended, simultaneous recording of, heart rate, oxygen 
saturation, respiratory airflow, and respiratory effort (e.g., 
thoracoabdominal movement) to APC

[[Page 70386]]

5722 (Level 2 Diagnostic Tests & Related Services), based on 
similarities in clinical characteristics and resource use to other 
procedures assigned to APC 5722. The commenter also requested that CMS 
assign CPT code 95801 (Sleep study, unattended, simultaneous recording; 
minimum of heart rate, oxygen saturation, and respiratory analysis 
(e.g., by airflow or peripheral arterial tone)) to APC 5721 (Level 1 
Diagnostic Tests & Related Services), based on similarity in clinical 
characteristics and resource use to other procedures assigned to APC 
5721. Other commenters requested that CMS assign the procedures 
described by CPT codes 95805 (Multiple sleep latency or maintenance of 
wakefulness testing, recording, analysis and interpretation of 
physiological measurements of sleep during multiple trials to assess 
sleepiness) and 95782 (Polysomnography; younger than 6 years, sleep 
staging with 4 or more additional parameters of sleep, attended by a 
technologist) to APC 5724 (Level 4 Diagnostic Tests & Related 
Services), based on similarities in clinical characteristics and 
resource use to the other procedures assigned to APC 5724.
    Response: We agree with the commenters' recommendation on the APC 
assignment of the procedures described by CPT codes 95805 and 95782. We 
believe that APC 5724 is a more appropriate APC group assignment for 
these codes based on similarities in clinical characteristics and 
resource use to the other procedures assigned to APC 5724 (as opposed 
to the proposed assignment to APC 5723). However, we disagree with the 
commenters' recommendation for the APC assignment for CPT codes 95800, 
95801, and 95806; we believe that the proposed APC assignments are most 
appropriate based on similarities in clinical characteristics and 
resource use.
    After consideration of the public comments we received, we are 
finalizing for CY 2016 the proposed APC structure for the diagnostic 
tests APCs, which is displayed in Table 26 below. The procedures 
assigned to each APC are listed in Addendum B to this final rule with 
comment period, which is available via the Internet on the CMS Web 
site.

      Table 26--CY 2016 Diagnostic Tests and Related Services APCs
------------------------------------------------------------------------
            CY 2016 APC                       CY 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.
------------------------------------------------------------------------

4. 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; and excision/biopsy 
procedures.
    Based on our evaluation of the current APC structure and the latest 
hospital outpatient claims data available for the CY 2016 OPPS/ASC 
proposed rule, in the proposed rule (80 FR 39259), we proposed to 
reconfigure the structure of 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 assigned to 
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 stated in the proposed rule that we believe 
that the proposed consolidation and restructuring of these APCs would 
more appropriately reflect a prospective payment system that is based 
on 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 paid under the hospital OPPS within clinical APCs that contain 
services with similar clinical attributes and resource costs. 
Therefore, for CY 2016, we proposed 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 of the proposed rule listed the current CY 2015 
APCs that contain the incision and drainage procedures and the 
excision/biopsy procedures, and Table 23 of the proposed rule listed 
the CY 2016 APCs that would result from the consolidating and 
restructuring of the APCs into a single APC series. We invited public 
comments on this proposal.
    Comment: Commenters generally supported the proposed APC 
reconfiguration and consolidation for the incision and drainage and 
excision/biopsy APCs. However, some commenters expressed concerns 
regarding the APC assignment for the procedures described by the 
following 19 CPT codes included in the proposed reconfiguration:
     CPT code 10080 (Incision and drainage of pilonidal cyst; 
simple);
     CPT code 10081 (Drainage of pilonidal cyst; complicated);
     CPT code 11603 (Excision, malignant lesion including 
margins, trunk, arms, or legs; excised diameter 2.1 to 3.0 cm);
     CPT code 11641 (Excision, malignant lesion including 
margins, face, ears, eyelids, nose, lips; excised diameter 0.6 to 1.0 
cm);
     CPT code 11642 (Excision, malignant lesion including 
margins, face, ears, eyelids, nose, lips; excised diameter 1.1 to 2.0 
cm);
     CPT code 11750 (Excision of nail and nail matrix, partial 
or complete (e.g., ingrown or deformed nail), for permanent removal);
     CPT code 15782 (Dermabrasion; regional, other than face;
     CPT code 15999 (Unlisted procedure, excision pressure 
ulcer);
     CPT code 21725 (Division of sternocleidomastoid for 
torticollis, open operation; with cast application);
     CPT code 21930 (Excision, tumor, soft tissue of back or 
flank, subcutaneous; less than 3 cm);
     CPT code 23931 (Incision and drainage, upper arm or elbow 
area; bursa);
     CPT code 35206 (Repair blood vessel lesion);
     CPT code 35226 (Repair blood vessel, direct; lower 
extremity);
     CPT code 38300 (Drainage of lymph node abscess or 
lymphadenitis, simple);
     CPT code 47399 (Unlisted procedure, liver);
     CPT code 48999 (Unlisted procedure, pancreas);
     CPT code 57022 (Incision and drainage of vaginal hematoma; 
obstetrical/postpartum);
     CPT code 62269 (Biopsy of spinal cord, percutaneous 
needle);and
     CPT code 69005 (Drain external ear, abscess or hematoma; 
complicated).
    The commenters recommended that CMS reassign these 19 procedure 
codes to a higher level APC based on similarity in clinical 
characteristics.

[[Page 70387]]

    Response: Based on our analysis of the latest hospital outpatient 
claims data used for this final rule with comment period, we agree with 
the commenters' recommendations for APC assignment for the procedures 
described by the following CPT codes: 11603; 21930; 23931; 57022; and 
62269. However, we do not agree with the commenters' recommendations to 
reassign the procedures described by the following CPT codes because 
our final rule claims data show that the resource costs of these 
procedures are not comparable to the resource costs of other procedures 
in the APCs recommended: 10080; 11641; 11642; 11750; 15999; 21725; 
35226; 47399; and 48999.
    As indicated above, several of the CPT codes recommended by the 
commenters describe unlisted procedures. We remind readers that, as a 
matter of established OPPS policy described in the CY 2005 OPPS final 
rule with comment period (69 FR 65724 through 65725), we assign all 
unlisted CPT/HCPCS codes, such as CPT codes 15999, 47399, and 48999, to 
the lowest level APC within the appropriate clinical category. By 
definition, ``unlisted,'' ``unclassified,'' ``not otherwise 
specified,'' or ``not otherwise classified'' codes do not describe the 
services being performed, and the services coded using ``unlisted'' 
codes vary over time as new CPT and HCPCS codes are developed. 
Therefore, it is impossible for any level of analysis of past hospital 
claims data to support appropriate assignment of the service for the 
upcoming year to an APC in which there is clinical and resource 
integrity of the groupings and relative weights. We continue to believe 
that the appropriate default APC assignment, in the absence of a code 
that describes the service being furnished, is the lowest level APC 
within the clinical category to which the unlisted code is assigned. 
The assignment of the unlisted codes to the lowest level APC in the 
clinical category provides a reasonable means for payment for the 
service until there is a code that specifically describes the procedure 
or service. In addition, we believe that this policy encourages the 
creation of codes where appropriate and ensures that overpayment for 
services that are not clearly identified on the claim does not occur. 
Our assignment of CPT codes 15999, 47399, and 48999 to APC 5071 (Level 
1 Excision/Biopsy/Incision and Drainage) is consistent with this 
policy. The hospital cost data for unlisted CPT/HCPCS codes are not 
used for ratesetting and, furthermore, the costs of unlisted CPT/HCPCS 
codes are not subject to the 2 times rule. For further information on 
the 2 times rule, we refer readers to sections III.B.2 and 3. of this 
final rule with comment period.
    Comment: One commenter specifically recommended that CMS assign the 
following CPT codes from APC 5071 to APC 5073 (Level 3 Excision/Biopsy/
Incision and Drainage): 15782 (Dermabrasion; regional, other than 
face); 38300 (Drainage of lymph node abscess or lymphadenitis; simple); 
and 69005 (Drainage external ear, abscess or hematoma; complicated).
    Response: As listed in the OPPS Addendum B of the proposed rule, we 
proposed to reassign the procedure described by CPT code 15782 to APC 
5072 (Level 2 Excision/Biopsy/Incision and Drainage), not to APC 5071 
as the commenter stated. In addition, as listed in the OPPS Addendum B 
of the proposed rule, we proposed to assign the procedures described by 
CPT codes 38300 and 69005 to APC 5071.
    Based on our analysis of the latest hospital outpatient claims data 
used for this final rule with comment period, we disagree with the 
commenter's suggested APC assignment. Our analysis of the latest 
hospital outpatient claims data used for this final rule reveal that 
these three procedures would be more appropriately reassigned to APC 
5074 (Level 4 Excision/Biopsy/Incision and Drainage), rather than APC 
5071, based on their clinical and resource homogeneity to the other 
procedures assigned to APC 5074. We note that APC 5074 is the highest 
level APC within this group. Consequently, we are finalizing our 
proposal, with modification, to reassign the procedures described by 
CPT codes 15782, 38300, and 69005 to APC 5074 for CY 2016.
    Comment: Some commenters specifically agreed with the proposed APC 
assignment for the excision/biopsy and incision and drainage procedures 
described by CPT codes10081 (Incision and drainage of pilonidal cyst; 
complicated) and 35206 (Repair blood vessel, direct; upper extremity), 
and requested that CMS finalize them for CY 2016.
    Response: We appreciate the commenters' support and are finalizing 
our proposed APC assignments for CPT codes 10081 and 35206 for CY 2016 
in this final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed APC reconfiguration for the excision/biopsy and 
incision and drainage APCs. In addition, we are finalizing the proposed 
APC assignments for the procedures within the excision/biopsy and 
incision and drainage APCs, with modifications to the APC assignment 
for CPT codes 11603, 15782, 21930, 23931, 38300, 57022, 62269, and 
69005. Table 27 below lists the 19 CPT codes, the commenters' requested 
APC assignments, CMS' final decision, the final status indicators, and 
the final APC assignments for CY 2016.

  Table 27--Excision/Biopsy and Incision and Drainage Procedure Codes With Commenters' Specific APC Recommendations, Final CMS Decisions, Final Status
                                                    Indicators, and Final APC Assignment for CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Proposed CY  Proposed CY    Commenters'                                  Final CY      Final CY
      CPT/HCPCS code             Short descriptor         2016 SI      2016 APC    requested APC          CMS decision            2016 SI      2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
10080.....................  Drainage of pilonidal                T          5071            5072  Disagree...................            T          5071
                             cyst.
10081.....................  Drainage of pilonidal                T          5072            5072  Agree......................            T          5072
                             cyst.
11603.....................  Exc tr-ext mal+marg 2.1-3            T          5072            5073  Agree......................            T          5073
                             cm.
11641.....................  Exc f/e/e/n/l mal+mrg 0.6-           T          5072            5073  Disagree...................            T          5072
                             1.
11642.....................  Exc f/e/e/n/l mal+mrg 1.1-           T          5072            5073  Disagree...................            T          5072
                             2.
11750.....................  Removal of nail bed......            T          5071            5072  Disagree...................            T          5071
15782.....................  Dermabrasion other than              T          5072            5073  Disagree...................            T          5074
                             face.
15999.....................  Removal of pressure sore.            T          5071            5074  Disagree...................            T          5071
21725.....................  Revision of neck muscle..            T          5071            5121  Disagree...................            T          5071
21930.....................  Exc back les sc <3 cm....            T          5073            5074  Agree......................            T          5074
23931.....................  Drainage of arm bursa....            T          5071            5074  Agree......................            T          5074
35206.....................  Repair blood vessel                  T          5182            5182  Agree......................            T          5182
                             lesion.
35226.....................  Repair blood vessel                  T          5072            5182  Disagree...................            T          5072
                             lesion.
38300.....................  Drainage lymph node                  T          5071            5073  Disagree...................            T          5074
                             lesion.

[[Page 70388]]

 
47399.....................  Liver surgery procedure..            T          5071            5074  Disagree...................            T          5071
48999.....................  Pancreas surgery                     T          5071            5074  Disagree...................            T          5071
                             procedure.
57022.....................  I & d vaginal hematoma pp            T          5071            5074  Agree......................            T          5074
62269.....................  Needle biopsy spinal cord            T          5071            5073  Agree......................            T          5073
69005.....................  Drain external ear lesion            T          5071            5073  Disagree...................            T          5074
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 28 below lists the CY 2016 APCs that result from the 
consolidating and restructuring of the APCs into a single APC series. 
The final payment rates for the specific CPT codes for incision and 
drainage procedures and excision/biopsy procedures are included in 
Addendum B to this final rule with comment period. The final payment 
rates for the specific APCs to which these procedures are assigned are 
included in Addendum A to this final rule with comment period. Both 
OPPS Addenda A and B are available via the Internet on the CMS Web 
site.

 Table 28--Final CY 2016 APCs for Excision/Biopsy/Incision and Drainage
                               Procedures
------------------------------------------------------------------------
            CY 2016 APC                    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.
------------------------------------------------------------------------

5. Eye Surgery and Other Eye-Related Procedures
a. Implantable Miniature Telescope (CPT Code 0308T)
    CPT code 0308T (Insertion of ocular telescope prosthesis including 
removal of crystalline lens or intraocular lens prosthesis) is a 
relatively new procedure. This code became effective in CY 2013. The 
procedure is a cataract (or IOL) extraction with the implantation of a 
special kind of IOL, the Implantable Miniature Telescope (IMT), which 
has the appearance of an IOL with a thick central optic. The payment 
rate for this procedure in CY 2014 was approximately $15,551, and in CY 
2015, the payment rate for this procedure is approximately $23,084. The 
proposed CY 2016 payment rate is approximately $11,680. CPT code 0308T 
is the only code assigned to APC 5494 (Level 4 Intraocular Procedures), 
which is a C-APC. In the latest final rule CY 2014 claims data, there 
are 40 total claims and 39 single claims. This is a low volume 
procedure, in part because most of the cases (like most cataract 
surgery) are performed in an ASC.
    Comment: One commenter believed that the significant payment rate 
decrease from CY 2015 to the proposed 2016 rate is due to some 
hospitals submitting miscoded claims that have relatively low 
associated costs. The commenter asserted that some hospitals are 
reporting CPT code 0308T for procedures other than IMT implantation, 
and that these miscoded claims have costs that are much lower than the 
cost of the procedure described by CPT code 0308T. The commenters 
stated that the evidence to support its assertion is the presence of 
non-macular degeneration diagnosis codes on these purportedly miscoded 
claims (geographic atrophy from end-stage macular degeneration is the 
indication for the IMT). The commenter also believed that the hospitals 
that submitted the miscoded claims do not perform any IMT surgery. The 
commenter requested that CMS exclude these miscoded claims from the 
claims data in calculating the CY 2016 payment rate for the procedure 
described by CPT code 0308T. Alternatively, the commenter requested 
that CMS invoke the equitable adjustment authority under section 
1833(t)(2)(E) of the Act and base the payment rate for the procedure 
described by CPT code 0308T on the median cost for all of the claims 
instead of the geometric mean cost. The commenter believed that, 
because the median cost is less sensitive to extreme observations (such 
as claims with very low cost or very high cost), the median cost should 
be used to calculate the payment rate for the procedure described by 
CPT code 0308T, which has a low total claims volume. The commenter 
stated that using the median cost instead of the geometric mean cost 
would dampen the negative effect of the claims with very low cost and 
mitigate the payment reduction from CY 2015 for the procedure described 
by CPT code 0308T.
    Response: We understand that when there are a very low volume of 
claims in the dataset, each claim has a greater effect on the geometric 
mean cost, as compared to a medium or large volume of claims in the 
dataset. Regarding the request that we exclude certain claims that the 
commenter argued are miscoded and contain inaccurate cost information, 
we reiterate our position on this matter in an earlier rule: ``Beyond 
our standard OPPS trimming methodology . . . that we apply to those 
claims that have passed various types of claims processing edits, it is 
not our general policy to judge the accuracy of hospital coding and 
charging for purposes of ratesetting'' (75 FR 71838). We generally do 
not remove claims from the claims accounting when stakeholders believe 
that hospitals included incorrect information on some claims. 
Therefore, we are not excluding claims from the ratesetting calculation 
for the procedure described by CPT code 0308T for CY 2016.
    However, we agree with the commenter that, given the very low 
volume of claims for this relatively high-cost device intensive 
surgical procedure (that is the only procedure assigned to APC 5494), 
the median cost would be a more appropriate measure of the central 
tendency for purposes of calculating the cost and the payment rate for 
the procedure described by CPT code 0308T. The median cost is impacted 
to a lesser degree than the geometric mean cost by more extreme 
observations. Therefore, for CY 2016, we are using our equitable 
adjustment authority under section 1833(t)(2)(E) of the Act to use the 
median cost to calculate the payment rate for the procedure described 
by CPT code 0308T, which is the only code assigned to APC 5494. The 
median cost of the procedure described by CPT code 0308Tis $18,365, and 
the geometric mean cost is $13,833. Unlike the retinal prosthesis 
procedure, the procedure

[[Page 70389]]

described by CPT code 0308T has a low volume of claims data upon which 
to base a payment rate. This procedure also differs from other 
procedures for which we have not taken further measures when 
stakeholders believe that incorrect hospital coding negatively affected 
payment rates, because it is not grouped to an APC with procedures that 
have robust claims data upon which an APC geometric mean cost can be 
calculated. In future rulemaking, we will consider proposing a general 
policy for the payment rate calculation for very low-volume device-
intensive APCs similar to APC 5494.
b. Other Ocular Procedures
    Comment: A few commenters were concerned that the current structure 
of APC 5492 (Level 2 Intraocular Procedures) results in inadequate 
payment for certain procedures assigned to APC 5492. In particular, 
these commenters were primarily concerned about the procedure described 
by CPT code 66180, which, beginning in CY 2015, represented an overall 
procedure that was formerly represented by two separate codes, one code 
for the shunt placement and one code for the graft placement. The 
commenters requested that CMS reexamine the intraocular procedures 
series of APCs and the code assignments and consider alternatives that 
would provide a payment that was more reflective of the costs of the 
higher cost procedures currently assigned to APC 5492. Two commenters 
requested that CMS create a new APC with a mean cost between that of 
APC 5492 and APC 5493, and assign the procedure described by CPT code 
66180 to this new APC.
    Response: We reexamined the procedure code assignments and latest 
claims data for the intraocular procedures series of four APCs. We do 
not agree that an additional APC level within this series is warranted. 
However, we do believe that reassigning some of the codes that were 
proposed to be assigned to APC 5492 into APC 5491 results in a more 
balanced APC 5491 (Level 1 Intraocular Procedures) and (Level 2 
Intraocular Procedures). Therefore, we are reassigning all procedures 
that were proposed to be assigned to Level 2 with a mean cost of less 
than $3,000 to Level 1. This reassignment of procedure codes results in 
a higher mean cost range for APC 5492 ($3,538 versus $3,438 in the 
proposed rule).
    Comment: One commenter requested that CMS reassign CPT code 0207T 
(Evacuation of meibomian glands, automated, using heat and intermittent 
pressure, unilateral) from APC 5732 (Level 2 Minor Procedures) to APC 
5502 (Level 2 Extraocular, Repair, and Plastic Eye Procedures). The 
commenter stated that the procedure described by CPT code 0207T is used 
for patients with meibomian gland dysfunction. The commenter pointed 
out that, for CY 2016, CPT code 0207T has nine single claims (29 total 
claims) with a mean cost of $82.20; APC 5732 has a mean cost of $31.93; 
and APC 5502 has a mean cost of $728.78. The commenter asserted that 
most of the small number of claims filed for the procedure described by 
CPT code 0207T was filed in error by a hospital that performed a 
different procedure with significantly lower costs than the procedure 
described by CPT code 0207T. The commenter requested that CMS exclude 
these claims in our ratesetting calculation because it believed that 
these claims were miscoded. The commenter believed that if CMS excluded 
these incorrectly coded claims, the mean cost of the procedure 
described by CPT code 0207T would be similar to the mean cost of the 
procedures assigned to APC 5502. The commenter also stated that the 
procedure described by CPT code 0207T is more appropriately assigned to 
APC 5502 because APC 5502 contains procedures that focus on the eyelids 
and ocular adnexa (as does the procedure described by CPT code like 
0207T), while APC 5732 contains a variety of minor procedures, many of 
which are not eye-related.
    Response: We agree in part with the commenter. We agree that APC 
5732 is not the most appropriate APC for the assignment of the 
procedure described by CPT code 0207T. However, we believe that, based 
on the mean cost of the claims for the procedure described by CPT code 
0207T, APC 5734 (Level 4 Minor Procedures) is more appropriate from a 
resource perspective than APC 5502 (with a mean cost of $728.78), which 
is what the commenter requested. APC 5734 has a mean cost of $95.47, 
which is close to the $82.20 mean cost of the procedure described by 
CPT code 0207T. Clinically, although APC 5502 does contain primarily 
eyelid procedures, these are surgical procedures assigned to the APC. 
The procedure described by CPT code 0207T is not a surgical procedure. 
The Minor Procedure series of four APCs (5731 through 5734) is not 
limited to a particular anatomical region of the body. This series 
contains some eye-related procedures as well as many other types of 
procedures. All of the procedures assigned to one of the Minor 
Procedure APCs are minor in nature and are relatively low cost.
    Regarding the request by the commenter that we not use a subset of 
claims in the claims ratesetting calculation for the procedure 
described by CPT code 0207T, we again reiterate our position: ``Beyond 
our standard OPPS trimming methodology . . . that we apply to those 
claims that have passed various types of claims processing edits, it is 
not our general policy to judge the accuracy of hospital coding and 
charging for purposes of ratesetting'' (75 FR 71838). Therefore, we are 
not excluding claims from the ratesetting calculation the procedure 
described by CPT code 0207T. For CY 2016, the procedure described by 
CPT code 0207T is assigned to APC 5734 (Level 4 Minor Procedures).
6. 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, in the CY OPPS/
ASC proposed rule, we proposed 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, in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39259 through 39260), for CY 2016, we proposed to 
restructure and consolidate the APCs that contain GI procedures. In the 
proposed rule, we stated that 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

[[Page 70390]]

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 of the proposed rule listed the current CY 
2015 APCs that contain GI procedures, and Table 25 of the proposed rule 
listed the CY 2016 APCs that would result from the proposed 
consolidation and restructuring of the current GI procedure APCs into a 
single APC series. We invited public comments on this proposal.
    Comment: Several commenters requested that CMS review the proposed 
APC assignment for new CPT code 43210 (Esophagogastroduodenoscopy, 
flexible, transoral; with esophagogastric fundoplasty, partial or 
complete, includes duodenoscopy when performed) (whose predecessor code 
was HCPCS code C9724). The commenters believed that the proposed 
assignment of CPT code 43210 to APC 5302 (Level 2 Upper GI Procedures) 
does not reflect the resources used to perform the procedure and that 
the proposed payment rate is not adequate to cover the cost of the 
equipment, ancillary supplies and other facility overhead to perform 
the procedure. The commenters requested that CMS assign CPT code 43210 
to one of the following APCs: (1) C-APC 5362 (Level 2 Laparoscopy), 
because of the clinical similarity of the procedure to the procedure 
described by HCPCS code 43280 (Laparoscopy, surgical, esophagogastric 
fundoplasty (e.g., Nissen, Toupet procedures); (2) a New technology 
APC; or (3) a new APC for transoral surgical procedures because of the 
uniqueness of the procedure described by CPT code 43210.
    Response: We agree in part with the commenters. We agree that APC 
5302 is not the most appropriate APC assignment for the procedure 
described by new CPT code 43210 or its predecessor code, HCPCS code 
C9724. However, we do not agree with the commenters' request to 
reassign CPT code 43210 to proposed C-APC 5362 (Level 2 Laparoscopy) 
based on its similar clinical purpose to the procedure described by 
HCPCS code 43280. While both of these procedures are surgical 
procedures used in the treatment of gastroesophageal reflux disease, 
unlike the procedures assigned to C-APC 5362, the procedure described 
by CPT code 43210 is not a laparoscopy procedure, and C-APC 5362 is 
limited to laparoscopy procedures. Therefore, the procedure described 
by CPT code 43210 is not sufficiently clinically similar to the other 
procedures assigned to C-APC 5362 to warrant reassignment to C-APC 
5362. We also disagree with the commenters' requests for reassignment 
to a new technology APC or the creation of a new APC for transoral 
surgical procedures. The procedure described by CPT code 43210 (and its 
predecessor HCPCS code C9724) is not new because HCPCS C9724 became 
effective in CY 2005. In addition, as we discuss below, we believe that 
there is an appropriate clinical APC to which CPT code 43210 can be 
assigned. Therefore, it is not appropriate to assign the code to a New 
Technology APC. Regarding the request for a new, dedicated APC for CPT 
code 43210, the volume of available claims for the predecessor code 
(HCPCS code C9724) is too low to warrant a separate, new APC for this 
procedure. Because CPT code 43210 is new for CY 2016, there are no CY 
2014 claims, and there is only one CY 2014 claim for HCPCS code C9724. 
We believe that HCPCS code 43210 is sufficiently similar to the 
procedures assigned to C-APC 5331 (Complex GI Procedures) in terms of 
resource utilization and clinical complexity. Therefore, we are 
assigning CPT code 43210 and its predecessor code, HCPCS code C9724, to 
C-APC 5331 for CY 2016. Because C-APC 5331 is a comprehensive APC, we 
are assigning CPT code 43210 to status indicator ``J1.''
    Comment: Some of the commenters who supported the restructuring of 
the gastrointestinal procedure APCs requested APC reassignments of 
several codes, which are listed in Table 29 below.
    Response: We agreed with some of the requests for reassignments of 
the codes to different APCs and disagreed with other requests. Our 
determinations for each code reassignment request are noted in Table 29 
below.

    Table 29--Gastrointestinal Procedure Codes With Specific Commenter APC Recommendations, Final CMS Decisions, and Final APC Assignments and Status
                                                                 Indicators for CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Proposed CY                                                              Final CY
      CPT/HCPCS code             Short descriptor       2016 status  Proposed CY     Commenter            CMS decision          2016 status    Final CY
                                                         indicator     2016 APC    requested APC                                 indicator     2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
43240.....................  Egd w/transmural drain               T          5303            5331  Disagree...................            T          5303
                             cyst.
44403.....................  Colonoscopy w/resection..            T          5312            5313  Disagree...................            T          5312
45349.....................  Sigmoidoscopy w/resection            T          5312            5313  Disagree...................            T          5312
45390.....................  Colonoscopy w/resection..            T          5312            5313  Disagree...................            T          5312
46608.....................  Anoscopy remove for body.            T          5312            5313  Disagree...................            T          5312
45303.....................  Proctosigmoidoscopy                  T          5312            5313  Disagree...................            T          5312
                             dilate.
45332.....................  Sigmoidoscopy w/fb                   T          5312            5313  Disagree...................            T          5312
                             removal.
45337.....................  Sigmoidoscopy &                      T          5312            5313  Disagree...................            T          5312
                             decompress.
45338.....................  Sigmoidoscopy w/tumr                 T          5312            5313  Disagree...................            T          5312
                             remove.
45346.....................  Sigmoidoscopy w/ablation.            T          5312            5313  Disagree...................            T          5312
44390.....................  Colonoscopy for foreign              T          5312            5313  Disagree...................            T          5312
                             body.
44394.....................  Colonoscopy w/snare......            T          5312            5313  Disagree...................            T          5312
44405.....................  Colonoscopy w/dilation...            T          5312            5313  Disagree...................            T          5312
44408.....................  Colonoscopy w/                       T          5312            5313  Disagree...................            T          5312
                             decompression.
45379.....................  Colonoscopy w/fb removal.            T          5312            5313  Disagree...................            T          5312
45386.....................  Colonoscopy w/balloon                T          5312            5313  Disagree...................            T          5312
                             dilat.
45388.....................  Colonoscopy w/ablation...            T          5312            5313  Disagree...................            T          5312
45393.....................  Colonoscopy w/                       T          5312            5313  Disagree...................            T          5312
                             decompression.
91110.....................  GI tract capsule                     T          5301    5211/New APC  Disagree...................            T          5301
                             endoscopy.
91111.....................  Esophageal capsule                   T          5301    5211/New APC  Disagree...................            T          5301
                             endoscopy.

[[Page 70391]]

 
91112.....................  GI wireless capsule                  T          5301    5211/New APC  Disagree...................            T          5301
                             measure.
91022.....................  Duodenal motility study..            S          5722            5723  Agree......................            S          5724
91037.....................  Esoph imped function test            S          5722            5723  Disagree...................            S          5722
91038.....................  Esoph imped funct test               S          5722            5723  Agree......................            T          5723
                             >1hr.
43753.....................  Tx gastro intub w/asp....           Q1          5734            5722  Agree......................            S          5722
43754.....................  Dx gastr intub w/asp spec           Q1          5734            5722  Agree......................            S          5722
43755.....................  Dx gastr intub w/asp                 S          5721            5722  Disagree...................            S          5721
                             specs.
43756.....................  Dx duod intub w/asp spec.           Q1          5522            5722  Disagree...................            S          5522
C9724.....................  Eps stomach plic.........            D          5303     New APC/New  Disagree...................            D          5331
                                                                                            Tech
43210.....................  Egd esophagogastrc                   T          5302     New APC/New  Disagree...................           J1          5331
                             fndoplsty.                                                     Tech
0336T.....................  Lap ablat uterine                   J1          5362            5352  Disagree...................           J1          5362
                             fibroids.
47370.....................  Laparo ablate liver tumor           J1          5362            5352  Disagree...................           J1          5362
                             rf.
47371.....................  Laparo ablate liver                 J1          5362            5352  Disagree...................           J1          5362
                             cryosurg.
50542.....................  Laparo ablate renal mass.           J1          5362            5352  Disagree...................           J1          5362
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We disagree with the commenters who requested that CPT code 43240 
(Esophagogastroduodenoscopy, flexible, transoral; with transmural 
drainage of pseudocyst (includes placement of transmural drainage 
catheter[s]/stent[s], when performed, and endoscopic ultrasound, when 
performed) be reassigned from proposed APC 5303 (Level 3 Upper GI 
Procedures) to C-APC 5331 (Complex GI Procedures). The geometric mean 
cost of the procedure described by CPT code 43240 is approximately 
$1,818, and the geometric mean cost of APC 5303 is approximately 
$2,072. The geometric mean cost of APC 5331 is approximately $3,781. We 
believe that, given the geometric mean costs of APCs 5303 and 5331, APC 
5303 is the more appropriate APC assignment for the procedure described 
by CPT code 43240.
    We also disagree with the commenters who requested that lower GI 
endoscopic mucosal resection CPT codes (CPT codes 44403, 45349, and 
45390) be reassigned from APC 5312 (Level 2 Lower GI Procedures) to APC 
5313 (Level 3 Lower GI Procedures) based on resource and clinical 
homogeneity. These three CPT codes became effective in CY 2015. We 
believe that the current APC assignment for these codes is appropriate 
based on similarity of clinical characteristics. Once we have claims 
data for these CPT codes. we will reevaluate their APC assignment in 
accordance with the yearly review of APC assignments and determine if a 
reassignment is appropriate based on the claims data.
    We also disagree with the commenters who requested reassignment of 
the CPT codes listed in Table 29 above that represent foreign body 
removal, ablation, and decompression of volvulus, colonoscopy through 
stoma and flexible sigmoidoscopy, specifically CPT codes 44608, 45332, 
45337, 45338, 45346, 44390, 44394, 44405, 44408, 45379, 45386, 45388, 
and 45393 from APC 5312 (Level 2 Lower GI Procedures) to APC 5313 
(Level 3 Lower GI Procedures). The commenters stated that the resource 
utilization for these codes is similar to resource utilization for 
procedures that employ similar techniques with proctoscopy that are 
assigned to APC 5313. A majority of the procedures that were requested 
to be reassigned to APC 5313 have geometric mean costs of approximately 
$880 or lower, which is significantly lower than the geometric mean 
cost of $1,739 for APC 5313. Therefore, we do not believe that 
reassignment of these codes would be appropriate.
    We do not agree with the commenters' request to reassign CPT codes 
91110, 91111, and 91112 from APC 5301 (Level 1 Upper GI Procedures) to 
APC 5211 (Level 1 Electrophysiologic Procedures) due to resource use 
and clinical dissimilarities with procedures assigned to APC 5301, 
which is limited to cardiac electrophysiology procedures. We also do 
not agree that these procedures are clinically dissimilar enough from 
other procedures in APC 5301 to require creation of a new APC dedicated 
to these procedures.
    We disagree with the commenters who requested that the procedure 
described by CPT code 91037 be reassigned to APC 5723 (Level 3 
Diagnostic Tests and Related Services) based on clinical and resource 
similarity. The geometric mean cost of the procedure described by CPT 
code 91037 is approximately $199, which is more similar to the 
geometric mean cost of APC 5722 (approximately $231) than the geometric 
mean cost of APC 5723 (approximately$415). In addition, assignment of 
the procedure described by CPT code 91037 to APC 5723 would result in a 
violation of the 2 times rule in APC 5723. However, we agree with the 
commenters that CPT code 91022 is more appropriately assigned to APC 
5724 (Level 4 Diagnostic Tests and Related Services) based on resource 
similarity to other services assigned to APC 5724.
    We disagree with the commenters who requested that CPT code 43755 
be reassigned from APC 5721 (Level 1Diagnostic Tests and Related 
Services) to APC 5722 (Level 2 Diagnostic Tests and Related Services). 
The geometric mean cost of the services described by CPT code 43755 is 
approximately $141, and the geometric mean cost of APC 5721 is 
approximately $136. The geometric mean cost of APC 5722 is 
approximately $231. We believe that, given the geometric mean cost of 
APCs 5721 and 5722, APC 5721 is the more appropriate APC assignment for 
the services described by CPT code 43755.
    We disagree with the commenters who requested that CPT codes 0336T, 
47370, 47371, and 50542 from C-APC 5362 (Level 2 Laparoscopy) be 
reassigned to APC 5352 (Level 2 Percutaneous Abdominal/Biliary 
Procedures and Related Procedures). These are laparoscopy procedures 
and are assigned to an APC to which other

[[Page 70392]]

clinically similar procedures are assigned.
    After consideration of the public comments we received, we are 
finalizing the proposed structure of the gastrointestinal procedures 
with the code reassignments shown in Table 29 above. Table 30 below 
lists the CY 2016 APCs that result from the 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 final rule with comment period, which is available via the 
Internet on the CMS Web site.

         Table 30--CY 2016 APCs for Gastrointestinal Procedures
------------------------------------------------------------------------
            CY 2016 APC                    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.
------------------------------------------------------------------------

    In the CY 2016 OPPS/ASC proposed rule (80 FR 39260), we proposed 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 of the proposed rule be moved from their 
currently assigned APC to C-APC 0384 (GI Procedures with Stents) (CPT 
codes 44384 (Ileoscopy, through stoma; with placement of endoscopic 
stent (includes pre- and post-dilation and guide wire passage, when 
performed), 44402 (Colonoscopy through stoma; with endoscopic stent 
placement (including pre- and post-dilation and guide wire passage, 
when performed), 45347 (Sigmoidoscopy, flexible; with placement of 
endoscopic stent (includes pre- and post-dilation and guide wire 
passage, when performed), and 45389 (Colonoscopy, flexible; with 
endoscopic stent placement (includes pre- and post-dilation and guide 
wire passage, when performed). 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 the proposed rule, we proposed to renumber and 
retitle C-APC 0384 as ``C-APC 5331 (Complex GI Procedures)'' for CY 
2016.)
    Comment: Commenters supported the proposal to assign CPT codes 
44384, 44402, 45347, and 45389 to C-APC 5331 (Complex GI Procedures).
    Response: We appreciate the commenters' support.
    We are finalizing our proposal to reassign CPT codes 44384, 44402, 
45347, and 45389 to C-APC 5331 (Complex GI Procedures).
7. Gynecologic Procedures and Services
    As listed in Addendum A to the CY 2016 OPPS/ASC proposed rule, we 
proposed to add another level to the existing gynecologic APCs, 
specifically, a Level 6 Gynecologic Procedures APC, and designated it 
as APC 5416.
    Comment: One commenter applauded CMS for revisiting the gynecologic 
procedure APCs and adding APC 5416 (Level 6 Gynecologic Procedures) for 
CY 2016. The commenter believed that expanding the number of APCs for 
the gynecologic procedures is a positive change and further suggested 
that CMS be open to reassignment of CPT codes within and across APCs as 
part of rulemaking in CY 2016 and in future years.
    Response: We appreciate the commenter's support. We believe that 
the addition of this new APC groups gynecologic procedures more 
appropriately based on their resource costs and clinical 
characteristics.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to add the Level 6 APC 
5416 to the existing gynecologic APC groups. The final CY 2016 payment 
rate for APC 5416 can be found in Addendum A to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
    The AMA Editorial Committee established new CPT code 0404T 
(Transcervical uterine fibroid(s) ablation with ultrasound guidance, 
radiofrequency), to be effective on January 1, 2016. In the CY 2016 
OPPS/ASC proposed rule, we proposed to assign this new code (which we 
listed as code 04XXD (the 5-digit CMS placeholder code) in Addendum B, 
O, and Q2 to the proposed rule) to APC 5415 (Level 5 Gynecologic 
Procedures), with a proposed payment rate of approximately $3,713. We 
also proposed to assign CPT code 0404T to comment indicator ``NP'' in 
Addendum B to the proposed rule to indicate that the code is new for CY 
2016 with a proposed APC assignment and that public comments would be 
accepted on the proposed APC assignment.
    Comment: One commenter disagreed with the proposed APC assignment 
for new CPT code 0404T for CY 2016, and requested that the procedure be 
reassigned to one of the following APCs: 5362 (Level 2 Laparoscopy); 
5192 (Level 2 Endovascular Procedures); or 5416 (Level 6 Gynecologic 
Procedures). The commenter believed that the procedure described by CPT 
code 0404T is similar, based on clinical characteristics and resource 
costs, to other procedures that are assigned to APCs 5362, 5192, and 
5416. In addition, the commenter stated that the facility cost to 
perform this procedure is approximately $4,850, which includes the 
$3,965 single-use kit.
    Response: Under the OPPS, we generally assign a payment rate to a 
new Category III CPT code based on input from a variety of sources, 
including, but not limited to, review of resource costs and clinical 
homogeneity of the service to existing procedures, input from our 
medical advisors, and other information available to us. Based on our 
understanding of the procedure, we agree with the commenter that CPT 
code 0404T would be more appropriately assigned to APC 5416 because its 
resource costs and clinical homogeneity is similar to the other 
procedures in APC 5416. Therefore, we are not adopting our proposal to 
assign CPT code 0404T to APC 5415 for CY 2016. Rather, we are assigning 
CPT code 0404T to APC 5416. The final CY 2016 payment rate for CPT code 
0404T can be found in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
8. 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 proposed 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

[[Page 70393]]

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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39261), for 
CY 2016, we proposed to restructure and consolidate the APCs that 
include radiology and nuclear medicine services. We stated that 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 accommodate and align new services into 
clinical APCs with similar resource costs. Table 27 of the proposed 
rule listed the current CY 2015 APCs that contain radiology and nuclear 
medicine services, and Table 28 of the proposed rule listed the 
proposed CY 2016 APCs that would result from the proposed consolidation 
and restructuring of the current radiology and nuclear medicine 
services APCs. We invited public comments on this proposal.
    Comment: Many commenters generally supported the proposed 
restructuring of the imaging-related APCs. However, several commenters 
generally disagreed with the proposed restructuring of the nuclear 
medicine and positron emission tomography (PET) APCs. The commenters 
acknowledged that CMS has recognized the clinical differences between 
the imaging modalities and maintained separate APCs for them since the 
implementation of the OPPS. However, the commenters opposed collapsing 
the current 17 nuclear medicine and PET APCs into three levels (Level 1 
through Level 3 Nuclear Medicine and Related Services) for CY 2016, and 
recommended that CMS maintain a distinct APC for all PET procedures. 
Several other commenters, including nonhospital imaging centers and the 
HOP Panel, recommended that CMS separate PET procedures from the non-
PET nuclear imaging tests in proposed APC 5593 (Level 3 Nuclear 
Medicine and Related Services). Commenters believed that grouping PET 
procedures with non-PET procedures (also referred to as SEPCT) would 
reduce the payment for PET procedures below the cost of PET tests 
because of the more significant capital equipment costs for PET. 
Further, commenters stated that the proposed APC grouping of PET 
procedures with non-PET procedures would result in underpayments, and 
imaging centers that provide PET-only services will not be able to 
offset the payment reduction by providing non-PET services, some of 
which CMS proposed to increase the payment rate in CY 2016.
    Response: We agree with the HOP Panel's and the commenters' 
recommendation to separate PET tests into a separate APC because PET 
imaging services involve higher resource costs and are of a clinically 
distinct imaging modality from non-PET or SPECT imaging services. 
Therefore, we are adding a fourth level to the nuclear medicine and 
related services APC group (APC 5594 (Level 4 Nuclear Medicine and 
Related Services), and are reassigning the PET procedures that were 
proposed to be assigned to APC 5593 (Level 3 Nuclear Medicine and 
Related Services) to APC 5594. While APC 5594 contains all of the PET 
scan procedures, it is not necessarily limited only to PET scan 
services. It is established as the fourth and highest level in the 
nuclear medicine APC grouping, and non-PET scan nuclear medicine tests 
may be assigned to this APC as appropriate.
    Comment: Some commenters urged CMS to maintain the existing, 
separately payable status indicators (that is, ``S'' or ``T'') for 
several codes within the proposed nine reconfigured APC groupings 
instead of assigning them to a conditional packaging status indicator 
(that is, ``Q1'' or ``Q2''). One commenter provided a list of 70 codes, 
and requested that CMS assign them to separately payable status 
indicators. Among the 70 codes are 34 imaging services codes that, as a 
result of the proposed APC restructuring, were proposed for CY 2016 to 
be assigned to one of the following APCs, which are all three 
conditionally packaged APCs: APC 5521 (Level 1 X-Ray and Related 
Services); APC 5522 (Level 2 X-Ray and Related Services); or APC 5531 
(Level 1 Ultrasound and Related Services).
    Response: Prior to developing our proposal, we reviewed all of the 
services associated with the proposed nine APC families. We believe 
that the procedures and services that we proposed to assign to a 
conditional packaging status indicator are ancillary and dependent in 
relation to the other procedures within the same family groupings with 
which they are most commonly furnished. Therefore, based on our review 
and input from CMS clinical staff, we believe that the codes that we 
proposed to conditionally package are appropriate. In addition, the 
APCs to which the 34 codes listed by the commenter are proposed to be 
assigned for CY 2016 are designated as conditionally packaged APCs. For 
example, APC 5521 (Level 1 X-Ray and Related Services) is the successor 
APC to CY 2015 APC 0260 (Level 1 X-Ray & Related Services), which was 
designated in CY 2015 as a conditionally packaged APC; APC 5522 (Level 
2 X-Ray and Related Services) is the successor APC to CY 2015 APC 0261 
(Level 2 X-Ray & Related Services), which was designated in CY 2015 as 
a conditionally packaged APC; and APC 5531 (Level 1 Ultrasound and 
Related Services) is the successor APC to CY 2015 APC 0265 (Level 1 
Ultrasound & Related Services), which was designated in CY 2015 as a 
conditionally packaged APC. Therefore, we believe that these 34 imaging 
services that are assigned to proposed new APCs 5521, 5522, and 5531 
are appropriately assigned a conditionally packaged status indicator. 
Further, based on the clinical nature of the services and our 
understanding of the procedures, we believe that assigning these 
services to a conditional packaging status indicator will create 
incentives for hospitals and their physician partners to work together 
to establish appropriate protocols that will eliminate unnecessary 
services where they exist and institutionalize approaches to providing 
necessary services more efficiently. Therefore, we are finalizing our 
proposal to assign the 34 imaging services procedure codes identified 
by the commenter status indicator ``Q1'' for CY 2016.
    Comment: A few commenters who supported the restructuring of the 
imaging-related procedure APCs requested APC reassignments of many 
specific codes, which are listed in Table 31 below.
    Response: We agree with some of the commenters' request for APC 
reassignments and/or status indicator reassignments of procedure codes 
describing imaging-related procedures.

[[Page 70394]]

Our decisions to accept or reject the recommended code assignments to 
APCs also are indicated in Table 31 below.

  Table 31--Imaging-Related Procedure Codes With Specific Commenters' Recommendations, Final CMS Decisions, Final APC Assignments, and Final APC Status
                                                                       Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Proposed CY                                                              Final CY
      CPT/HCPCS code             Short descriptor       2016 status  Proposed CY     Commenter            CMS decision          2016 status    Final CY
                                                         indicator     2016 APC    requested APC                                 indicator     2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
70370.....................  Throat x-ray &                      Q1          5521            5522  Disagree...................           Q1          5521
                             fluoroscopy.
71030.....................  Chest x-ray 4/> views....           Q1          5521            5522  Disagree...................           Q1          5521
72200.....................  X-ray exam si joints.....           Q1          5521            5522  Agree......................           Q1          5522
76496.....................  Fluoroscopic procedure...           Q1          5521            5522  Disagree...................           Q1          5521
72050.....................  X-ray exam neck spine 4/5           Q1          5522            5523  Disagree...................           Q1          5522
                             vws.
72110.....................  X-ray exam l-2 spine 4/>            Q1          5522            5523  Disagree...................           Q1          5522
                             vws.
72074.....................  X-ray exam thorac spine 4/          Q1          5522            5523  Disagree...................           Q1          5522
                             > vw.
77074.....................  X-rays bone survey                  Q1          5522            5523  Disagree...................           Q1          5522
                             limited.
74240.....................  X-ray upper gi delay w/o            Q1          5522            5523  Disagree...................           Q1          5522
                             kub.
76010.....................  X-ray nose to rectum.....           Q1          5522            5523  Agree......................           Q1          5523
72052.....................  X-ray exam neck spine 6/>           Q1          5522            5523  Disagree...................           Q1          5522
                             vws.
74246.....................  Contrst x-ray uppr gi               Q1          5522            5523  Disagree...................           Q1          5522
                             tract.
76120.....................  Cine/video x-rays........           Q1          5522            5523  Disagree...................           Q1          5522
74270.....................  Contrast x-ray exam of              Q1          5522            5523  Disagree...................           Q1          5522
                             colon.
74241.....................  X-rayupper gi delay w/kub           Q1          5522            5523  Disagree...................           Q1          5522
70371.....................  Speech evaluation complex           Q1          5522            5523  Disagree...................           Q1          5522
77075.....................  X-rays bone survey                  Q1          5522            5523  Disagree...................           Q1          5522
                             complete.
74247.....................  Contrst x-ray uppr gi               Q1          5522            5523  Disagree...................           Q1          5522
                             tract.
49465.....................  Fluoro exam of g/colon              Q1          5522            5523  Disagree...................           Q1          5522
                             tube.
73092.....................  X-ray exam of arm infant.           Q1          5522            5523  Disagree...................           Q1          5522
70320.....................  Full mouth x-ray of teeth           Q1          5522            5523  Agree......................           Q1          5523
74260.....................  X-ray exam of small bowel           Q1          5522            5523  Agree......................           Q1          5523
70310.....................  X-ray exam of teeth......           Q1          5522            5523  Agree......................           Q1          5523
74290.....................  Contrast x-ray                      Q1          5522            5523  Agree......................           Q1          5523
                             gallbladder.
74430.....................  Contrast x-ray bladder...           Q2          5523            5524  Disagree...................           Q2          5523
74450.....................  X-ray urethra/bladder....           Q2          5523            5524  Disagree...................           Q2          5523
74455.....................  X-ray urethra/bladder....           Q2          5523            5524  Agree......................           Q2          5524
74740.....................  X-ray female genital                Q2          5523            5524  Agree......................           Q2          5524
                             tract.
C9733.....................  Non-ophthalmic fva.......           Q2          5523            5524  Agree......................           Q2          5524
G0120.....................  Colon ca scrn; barium                S          5524            5525  Disagree...................            S          5524
                             enema.
74445.....................  X-ray exam of penis......           Q2          5524            5525  Disagree...................           Q2          5524
78457.....................  Venous thrombosis imaging            S          5524            5525  Disagree...................            S          5592
78456.....................  Acute venous thrombus                S          5525            5526  Disagree...................            S          5525
                             image.
75807.....................  Lymph vessel x-ray trunk.           Q2          5525            5526  Agree......................           Q2          5526
70190.....................  X-ray exam of eye sockets           Q1          5522            5521  Agree......................           Q1          5521
74210.....................  Contrst x-ray exam of               Q1          5522            5521  Disagree...................           Q1          5522
                             throat.
72040.....................  X-ray exam neck spine 2-3           Q1          5522            5521  Disagree...................           Q1          5522
                             vw.
76101.....................  Complex body section x-              S          5523            5522  Agree......................           Q1          5522
                             ray.
78458.....................  Ven thrombosis images                S          5524            5523  Disagree...................            S          5591
                             bilat.
74470.....................  X-ray exam of kidney                Q2          5525            5524  Agree......................           Q2          5524
                             lesion.
75898.....................  Follow-up angiography....           Q2          5526            5525  Agree......................           Q2          5525
75827.....................  Vein x-ray chest.........           Q2          5526            5525  Agree......................           Q2          5525
75872.....................  Vein x-ray skull epidural           Q2          5526            5525  Disagree...................           Q2          5526
70470.....................  Ct head/brain w/o & w/dye           Q3          5571            5572  Disagree...................           Q3          5571
70482.....................  Ct orbit/ear/fossa w/o &            Q3          5571            5572  Disagree...................           Q3          5571
                             w/dye.
70488.....................  Ct maxillofacial w/o & w/           Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
70492.....................  Ct sft tsue nck w/o & w/            Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
70496.....................  Ct angiography head......           Q3          5571            5572  Disagree...................           Q3          5571
70498.....................  Ct angiography neck......           Q3          5571            5572  Disagree...................           Q3          5571
71275.....................  Ct angiography chest.....           Q3          5571            5572  Disagree...................           Q3          5571
72127.....................  Ct neck spine w/o & w/dye           Q3          5571            5572  Disagree...................           Q3          5571
72130.....................  Ct chest spine w/o & w/             Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
72133.....................  Ct lumbar spine w/o & w/            Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
72191.....................  Ct angiograph pelv w/o &            Q3          5571            5572  Disagree...................           Q3          5571
                             w/dye.
72194.....................  Ct pelvis w/o & w/dye....           Q3          5571            5572  Disagree...................           Q3          5571
73202.....................  Ct uppr extremity w/o & w/          Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
73206.....................  Ct angio upr extrm w/o &            Q3          5571            5572  Disagree...................           Q3          5571
                             w/dye.
73702.....................  Ct lwr extremity w/o & w/           Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
73706.....................  Ct angio lwr extr w/o & w/          Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
74170.....................  Ct abdomen w/o & w/dye...           Q3          5571            5572  Disagree...................           Q3          5571
74175.....................  Ct angio abdom w/o & w/             Q3          5571            5572  Disagree...................           Q3          5571
                             dye.
75574.....................  Ct angio hrt w/3d image..            S          5571            5572  Disagree...................            S          5571
75635.....................  Ct angio abdominal                  Q2          5571            5572  Disagree...................           Q2          5571
                             arteries.
72126.....................  Ct neck spine w/dye......           Q3          5572            5571  Disagree...................           Q3          5572
73201.....................  Ct upper extremity w/dye.           Q3          5572            5571  Disagree...................           Q3          5572

[[Page 70395]]

 
74177.....................  Ct abd & pelv w/contrast.           Q3          5572            5571  Disagree...................           Q3          5572
70544.....................  Mr angiography head w/o             Q3          5581            5583  Disagree...................           Q3          5581
                             dye.
70547.....................  Mr angiography neck w/o             Q3          5581            5583  Disagree...................           Q3          5581
                             dye.
70545.....................  Mr angiography head w/dye           Q3          5582            5583  Disagree...................           Q3          5582
70546.....................  Mr angiograph head w/o &            Q3          5582            5583  Disagree...................           Q3          5582
                             w/dye.
70548.....................  Mr angiography neck w/dye           Q3          5582            5583  Disagree...................           Q3          5582
70549.....................  Mr angiograph neck w/o &            Q3          5582            5583  Disagree...................           Q3          5582
                             w/dye.
C8902.....................  Mra w/o fol w/cont, abd..           Q3          5582            5583  Disagree...................           Q3          5582
C8911.....................  Mra w/o fol w/cont, chest           Q3          5582            5583  Disagree...................           Q3          5582
C8914.....................  Mra w/o fol w/cont, lwr             Q3          5582            5583  Disagree...................           Q3          5582
                             ext.
C8920.....................  Mra w/o fol w/cont,                 Q3          5582            5583  Disagree...................           Q3          5582
                             pelvis.
C8933.....................  Mra, w/o & w/dye, spinal            Q3          5582            5583  Disagree...................           Q3          5582
                             canal.
C8936.....................  Mra, w/o & w/dye, upper             Q3          5582            5583  Disagree...................           Q3          5582
                             extr.
93979.....................  Vascular study...........           Q1          5531            5532  Agree......................           Q1          5532
76513.....................  Echo exam of eye water              Q1          5531            5532  Agree......................           Q1          5532
                             bath.
76536.....................  Us exam of head and neck.           Q1          5531            5532  Agree......................           Q1          5532
76815.....................  Ob us limited fetus(s)...           Q1          5531            5532  Agree......................           Q1          5532
76775.....................  Us exam abdo back wall              Q1          5531            5532  Agree......................           Q1          5532
                             lim.
76870.....................  Us exam scrotum..........           Q1          5531            5532  Agree......................           Q1          5532
76817.....................  Transvaginal us obstetric           Q1          5531            5532  Agree......................           Q1          5532
93890.....................  Tcd vasoreactivity study.           Q1          5531            5532  Agree......................           Q1          5532
76705.....................  Echo exam of abdomen.....           Q3          5532            5531  Disagree...................           Q3          5532
76801.....................  Ob us <14 wks single                 S          5532            5531  Disagree...................            S          5532
                             fetus.
76830.....................  Transvaginal us non-ob...            S          5532            5531  Disagree...................            S          5532
76872.....................  Us transrectal...........            S          5532            5531  Disagree...................            S          5532
76881.....................  Us xtr non-vasc complete.            S          5532            5531  Disagree...................            S          5532
93888.....................  Intracranial limited                 S          5532            5531  Disagree...................            S          5532
                             study.
93931.....................  Upper extremity study....            S          5532            5531  Disagree...................            S          5532
70559.....................  Mri brain w/o & w/dye....            S          5582            5526  Agree......................            S          5526
74261.....................  Ct colonography dx.......           Q3          5521            5570  Agree......................           Q3          5570
75572.....................  Ct hrt w/3d image........            S          5523            5571  Agree......................            S          5571
75559.....................  Cardiac mri w/stress img.           Q3          5581            5592  Agree......................           Q3          5592
75557.....................  Cardiac mri for morph....           Q3          5581            5593  Disagree...................           Q3          5581
50430.....................  Njx px nfrosgrm &/urtrgrm           Q2          5524            5373  Disagree...................           Q2          5372
50431.....................  Njx px nfrosgrm &/urtrgrm           Q2          5524            5372  Agree......................           Q2          5372
50434.....................  Convert nephrostomy                  T          5392            5372  Agree......................            T          5372
                             catheter.
50435.....................  Exchange nephrostomy cath            T          5392            5372  Agree......................            T          5372
73503.....................  X-ray exam hip uni 4/>              Q1          5521            5522  Agree......................           Q1          5522
                             views.
73522.....................  X-ray exam hips bi 3-4              Q1          5522            5523  Disagree...................           Q1          5522
                             views.
73523.....................  X-ray exam hips bi 5/>               S          5522            5523  Agree......................            S          5523
                             views.
72083.....................  X-ray exam entire spi 4/5            S          5522            5523  Agree......................            S          5523
                             vw.
72084.....................  X-ray exam entire spi 6/>            S          5522            5524  Disagree...................            S          5523
                             vw.
78266.....................  Gastric emptying imag                S          5591            5592  Agree......................            S          5592
                             study.
47532.....................  Injection for                       Q2          5525            5351  Agree......................           Q2          5351
                             cholangiogram.
47535.....................  Conversion ext bil drg               T          5392            5351  Agree......................            T          5351
                             cath.
47536.....................  Exchange biliary drg cath            T          5392            5351  Agree......................            T          5351
47537.....................  Removal biliary drg cath.           Q2          5391            5351  Disagree...................           Q2          5391
75563.....................  Card mri w/stress img &              S          5592            5593  Agree......................            S          5593
                             dye.
75571.....................  Ct hrt w/o dye w/ca test.           Q1          5731            5570  Disagree...................           Q1          5731
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We disagree with the commenters who requested that the procedures 
described by CPT codes 70370 (Radiologic examination; pharynx or 
larynx, including fluoroscopy and/or magnification technique), 71030 
(Radiologic examination, chest, complete, minimum of 4 views), and 
76496 be elevated from proposed APC 5521 to APC 5522 based on resource 
and clinical homogeneity. The procedure described by CPT code 70370 has 
a geometric mean unit cost of approximately $81 and the geometric mean 
cost of APC 5521 is approximately $64. Because the procedure described 
by CPT code 70370 is a low-volume procedure (49 single claims out of 66 
total claims) in APC 5521, it is unnecessary to reassign the procedure 
describing CPT code 70370 to APC 5522, which has a geometric mean unit 
cost of approximately $105. The procedure described by CPT code 71030 
is appropriately assigned to APC 5521 because of the similarity of 
clinical characteristics and resource use with other chest x-ray 
procedures assigned to APC 5521. CPT code 76496 is an unlisted 
fluoroscopic procedure code, and under our established policy, unlisted 
codes are assigned to the lowest level APC within a clinical family.
    We disagree with the commenters who requested that CPT codes 72050, 
72110, 72074, 77074, 74240, 72052, 74246, 76120, 74270, 74241, 70371, 
77075, 74247, 49465, and 73092 that were proposed to be assigned to 
proposed APC 5522 (Level 2 X-Ray and Related Services) be reassigned to 
APC

[[Page 70396]]

5523 (Level 3 X-Ray and Related Services) to improve resource 
homogeneity. The geometric mean cost of these codes range from 
approximately $129 to approximately $176, and the geometric mean cost 
of APC 5522 is approximately $105. The geometric mean cost of APC 5523 
is approximately $201. We believe that, given the geometric mean cost 
of APC 5522 and the clinical similarity of the procedures described by 
these codes compared to other procedures assigned to APC 5522, these 
codes are appropriately assigned to APC 5522.
    We disagree with the commenters who requested that CPT codes 74430 
(Cystography, minimum of 3 views, radiological supervision and 
interpretation) and 74450 (Urethrocystography, retrograde, radiological 
supervision and interpretation) that were proposed to be assigned to 
proposed APC 5523 (Level 3 X-Ray and Related Services) be reassigned to 
APC 5524 (Level 4 X-Ray and related Services). The geometric mean cost 
of CPT code 74430 is approximately $265. The geometric mean cost of CPT 
code 74450 is approximately $277. The geometric mean cost of APC 5523 
is approximately $201. The geometric mean cost of APC 5524 is 
approximately $368. We believe that, given the geometric mean costs of 
APC 5523 and APC 5524, APC 5523 is a more appropriate APC assignment 
for the procedures described by CPT codes 74430 and 74450.
    We disagree with the commenter who requested that the procedures 
described by CPT codes G0120 (Colorectal cancer screening) and 74445 
(X-Ray exam of penis) that were proposed to be assigned to proposed APC 
5524 (Level 4 X-Ray and Related Services) be reassigned to APC 5525 
(Level 5 X-Ray and Related Services). The geometric mean cost of the 
procedure described by CPT code G0120 is approximately $330. The 
geometric mean cost of the procedure described by CPT code 74445 is 
approximately $532. The geometric mean cost of APC 5524 is 
approximately $368. The geometric mean cost of APC 5525 is 
approximately $700. We believe that, given the geometric mean costs of 
APC 5524 and APC 5525, APC 5524 is the more appropriate APC assignment 
for the procedures described by CPT codes G0120 and 74445.
    We disagree with the commenter who requested that the procedure 
described by CPT code 78456 (Acute venous thrombosis imaging, peptide) 
that was proposed to be assigned to proposed APC 5525 (Level 5 X-Ray 
and Related Services) be reassigned to APC 5526 (Level 6 X-Ray and 
Related Services). Because the procedure described by CPT code 78456 is 
a nuclear medicine test, we are assigning it to APC 5593. We also 
disagree with the commenter who requested that CPT code 74210 and CPT 
code 72040 that were proposed to be assigned to APC 5522 (Level 2 X-Ray 
and Related Services) be reassigned to APC 5521 (Level 1 X-Ray and 
Related Services). The geometric mean cost of each of the CPT codes is 
approximately $90. The geometric mean cost of APC 5522 is approximately 
$105. The geometric mean cost of APC 5521 is approximately $64. We 
believe that, given the geometric mean cost of APCs 5521 and 5522, APC 
5522 is the more appropriate assignment for the procedures described by 
CPT codes 74210 and 72040, based on similarity in resource use in 
relation to other procedures in these APCs.
    We disagree with the commenters who requested that CPT code 75872 
(Venography, epidural, radiological supervision and interpretation), 
which was proposed to be assigned to APC 5526, be reassigned to APC 
5525. This procedure is a very low volume procedure and is assigned to 
APC 5526 based on similarity of the clinical test described by CPT code 
75872 to other clinical tests assigned to the APC.
    We disagree with the commenters who requested that CPT codes 70470; 
70482; 70488; 70492; 70496; 70498; 71275; 72127; 72130; 72133; 72191; 
72194; 73202; 73206; 73702; 73706; 74170; 74175; 75574; and 75635, 
which were proposed to be assigned to APC 5571 (Level 1 Computed 
Tomography with Contrast and Computed Tomography Angiography) be 
reassigned to APC 5572 (Level 2 Computed Tomography with Contrast and 
Computed Tomography Angiography). The geometric mean cost for these 
codes ranges from approximately $250 to approximately $284. The 
geometric mean cost of APC 5571 is approximately $248. The geometric 
mean cost of APC 5572 is approximately $364. We believe that, given the 
geometric mean cost of APC 5571 and 5572, APC 5571 is the more 
appropriate APC assignment for the procedures described by these codes.
    We disagree with the commenters who requested that CPT codes 72126, 
73201, and 74177, which were proposed to be assigned to APC 5572, be 
reassigned to APC 5571. The geometric mean cost for these codes range 
from approximately $325 to approximately $353. The geometric mean cost 
of APC 5572 is approximately $364. The geometric mean cost of APC 5571 
is approximately $248. We believe that, given the geometric mean cost 
of APCs 5571 and 5572, APC 5572 is the more appropriate assignment for 
the procedures described by these codes.
    We disagree with the commenters who requested that CPT codes 70544 
(Magnetic resonance angiography) and 70547 (Magnetic resonance 
angiography, neck; without contrast material(s)), which were proposed 
to be assigned to APC 5581 (Magnetic Resonance Imaging and Magnetic 
Resonance Angiography without Contrast), be reassigned to a requested 
new APC 5583 (Magnetic Resonance Imaging and Magnetic Resonance 
Angiography Without Contrast Followed by With Contrast). We do not 
believe that there is sufficient clinical or resource dissimilarity in 
the proposed APC groupings to warrant the creation of a third level.
    We disagree with the commenters who requested that CPT codes 70545, 
70546, 70548, 70549, C8902, C8911, C8914, C8920, C8933, and C8936, 
which were proposed to be assigned to APC 5582, be reassigned to a 
requested new APC 5583 (Magnetic Resonance Angiography [MRA] Without 
Contrast Followed by With Contrast). We do not believe it is necessary 
to separate MRA imaging services from MRI imaging services by creating 
an additional APC within this clinical family. The aforementioned MRA 
CPT codes do not represent clinically distinct imaging services from 
MRI CPT codes assigned to APC 5582 because MRA scans are often included 
with a MRI scan. Further, the resource costs of the aforementioned MRA 
CPT codes are not significantly different, but are very much in line 
with the resource costs of non-MRA imaging services.
    We disagree with the commenters who requested that CPT codes 76705, 
76801, 76830, 76872, 76881, 93888, and 93931, which were proposed to be 
assigned to APC 5532 (Level 2 Ultrasound and Related Services), be 
reassigned to APC 5531 (Level 1 Ultrasound and Related Services). The 
geometric mean cost of the procedures described by these codes ranges 
from approximately $122 to approximately $134. The geometric mean cost 
of APC 5532 is approximately $161. The geometric mean cost of 5531 is 
approximately $96. We believe that, given the geometric mean cost of 
APC 5531 and APC 5532, APC 5532 is the more appropriate assignment for 
the procedures described by these codes.
    We disagree with the commenters who requested that CPT code 75557 
(Cardiac magnetic resonance imaging for morphology and function without 
contrast material), which was proposed to be assigned to APC 5581 
(Magnetic

[[Page 70397]]

Resonance Imaging and Magnetic Resonance Angiography without Contrast), 
be reassigned to APC 5592 (Level 2 Nuclear Medicine and Related 
Services). The geometric mean cost for the procedure described by CPT 
code 75557 is approximately $283. The geometric mean cost for APC 5581 
is approximately $286. The geometric mean cost for APC 5592 is 
approximately $462. Based on the geometric mean costs of APC 5581 and 
APC 5592, we believe APC 5581 is the more appropriate assignment for 
the procedure described by CPT code 75557. We also disagree with the 
commenters regarding their requests for APC reassignment of CPT codes 
78457 and 78458. These two codes describe nuclear medicine tests and 
therefore are being assigned to APCs in that series.
    We disagree with the commenters who requested that we reassign the 
following new CY 2016 codes as indicated:
     CPT code 50430, which was proposed to be assigned to APC 
5524 and requested by the commenters to be reassigned to APC 5372;
     CPT code 73522, which was proposed to be assigned to APC 
5522 and requested by the commenters to be reassigned to APC 5523;
     CPT code 72084, which was proposed to be assigned to APC 
5522 and requested by the commenters to be reassigned to APC 5524; and
     CPT code 47537, which was proposed to be assigned to APC 
5391 and requested by the commenters to be reassigned to APC 5351.
    Under our established policy, for new codes, we determine APC 
assignment based on clinical and resource similarities to existing 
codes. Because the procedures for these codes are not reflected in 
available CY 2014 claims data because of their newness, we believe that 
the proposed APCs are appropriate. We will consider reassignment of 
these codes as claims data become available.
    Comment: One commenter requested that CMS reassign the procedure 
described by CPT code 91200 (Liver elastography, mechanically induced 
shear wave (e.g., vibration), without imaging, with interpretation and 
report) from proposed APC 5531 (Level 1 Ultrasound and Related 
Services) to proposed APC 5532 (Level II Ultrasound and Related 
Services). The commenter stated that the procedure described by this 
code is assigned to APC 0266 (Level II Diagnostic and Screening 
Ultrasound) for CY 2015. The commenter acknowledged that the CPT code 
is new for CY 2015 and that cost information is not reflected in our CY 
2014 claims data. Therefore, the commenter believed that, in the 
absence of claims data for CPT code 91200, it is inappropriate for CMS 
to propose assignment to a lower paying APC in CY 2016. In addition, 
the commenter requested that CMS change the proposed assigned status 
indicator of ``Q1'' to ``S'' because this procedure is not typically 
performed with other procedures of status indicator ``S,'' ``T,'' or 
``V'' and therefore should be a separately payable service.
    Response: We agree with the commenter. Therefore, for CY 2016, we 
are reassigning the procedure described by CPT code 91200 to APC 5532 
(Level II Ultrasound and Related Services) with status indicator ``S.''
    Comment: One commenter requested that CMS reassign CPT code 75571 
(Computed tomography, heart, without contrast material, with 
quantitative evaluation of coronary calcium) from proposed APC 5731 
(Level 1 Minor Procedures) to proposed APC 5570 (Computed Tomography 
without Contrast) because the commenter believed that the procedure 
described by CPT code 75571 is similar to the procedure described by 
CPT code 71250, which was proposed to be assigned to APC 5570.
    Response: Based on the latest available CY 2014 hospital claims 
data, the geometric mean cost of the procedure described by CPT code 
75571 is approximately $13, based on 4,225 single claims. Therefore, we 
believe that the procedure described by CPT code 75571 is appropriately 
assigned to APC 5731.
    After consideration of the public comments we received, we are 
finalizing our proposal, with modification, to reconfigure the imaging-
related procedures into 26 APCs. Table 32 below lists the final CY 2016 
APCs that result from the consolidation and restructuring of the 
current radiology and nuclear medicine services APCs. The final payment 
rates for the specific CPT imaging-related services are included in 
Addendum B to this final rule with comment period. The final payment 
rates for the specific APCs to which we are assigning the imaging-
related services are included in Addendum A to this final rule with 
comment period. Both OPPS Addenda A and B are available via the 
Internet on the CMS Web site.

            Table 32--CY 2016 Imaging-Related Procedures APCs
------------------------------------------------------------------------
          CY 2016 APC                    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.
5533...........................  Level 3 Ultrasound and Related
                                  Services.
5534...........................  Level 4 Ultrasound and Related
                                  Services.
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.
5594...........................  Level 4 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.
------------------------------------------------------------------------

9. 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 proposed 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

[[Page 70398]]

in the context of the OPPS. The current APCs for orthopedic-related 
procedures are primarily divided according to anatomy and the type of 
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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39262), for 
CY 2016, we proposed to restructure and consolidate the APCs for 
orthopedic surgery procedures. We stated in the proposed rule that 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 of the proposed rule listed 
the current CY 2015 APCs that contain orthopedic-related procedures, 
and Table 30 of the proposed rule listed the proposed CY 2016 APCs that 
would result from the proposed restructuring and consolidation of the 
current orthopedic-related procedures APCs. We invited public comments 
on this proposal.
    Comment: Some commenters generally concurred with the consolidation 
and reconfiguration of the orthopedic-related procedures APCs. However, 
many commenters expressed concern that the ranges of geometric mean 
costs for procedures assigned to the proposed orthopedic-related 
procedures APCs are too broad, resulting in payment misalignments for 
certain procedures. Many other commenters opposed the proposed 
restructuring of these APCs and asserted that the proposed revised 
reconfiguration is neither clinically homogeneous nor resource use 
homogeneous. Several of these commenters recommended that CMS either 
delay reconfiguration of the orthopedic-related procedures or maintain 
larger groupings based on anatomical region.
    Response: In our effort to improve the similarity in resource use 
and clinical characteristics within the orthopedic-related APC 
groupings, we proposed to revise the existing orthopedic-related 
procedures APCs for CY 2016. We believe that the proposed revised 
orthopedic-related procedures APCs more appropriately reflect the 
resource costs and clinical characteristics of the procedures within 
each APC. We do not agree that creating orthopedic-related procedures 
APCs based on the specific anatomical region treated by the procedure 
is necessary or appropriate. For example, an orthopedic surgeon might 
perform a 1-hour procedure on a patient's leg and then perform a 1-hour 
procedure using similar instruments and supplies, among others, on a 
different patient's arm, and the hospital resources consumed in both 
cases would be very similar, which would support assignment of these 
procedures in the same APC. There is no purpose to group the leg 
procedure in an APC dedicated to leg procedures and the arm procedure 
in an APC dedicated to arm procedures if they are both orthopedic 
surgeries that consume similar hospital resources. Likewise, we do not 
agree that it is either necessary or appropriate to create an APC for 
high-cost, very low volume orthopedic-related procedures. We believe 
that establishing more inclusive categories of the orthopedic-related 
procedures is more appropriate for future ratesetting under the OPPS 
because the restructured APCs have more clinically appropriate 
groupings, while improving resource similarity. However, we agree with 
the commenters who were concerned that the proposed four levels of 
musculoskeletal APCs resulted in extremely wide geometric mean cost 
ranges, and in response to their comments, we have added a fifth level 
to the musculoskeletal APC grouping. Several procedures that were 
proposed to be assigned to APC 5123 (Level 3 Musculoskeletal 
Procedures) are now reassigned APC 5124 (Level 4 Musculoskeletal 
Procedures) for CY 2016. Similarly, several procedures that were 
proposed to be assigned to APC 5124 (Level 4 Musculoskeletal 
Procedures) are now reassigned to new APC 5125 (Level 5 Musculoskeletal 
Procedures) for CY 2016.
    Comment: One commenter expressed concern with the proposed payment 
for the services described by CPT code 27279 (Sacroiliac join 
stabilization for arthrodesis, percutaneous or minimally invasive 
(indirect visualization), includes obtaining and applying autograft or 
allograft (structural or morselized) when performed, includes image 
guidance when performed (e.g., CT or fluoroscopic), which the commenter 
considered would result in an underpayment. The commenter stated that 
CPT code 27279 became effective January 1, 2015 and is the successor 
code to CPT code 0334T (Sacroiliac join stabilization for arthrodesis, 
percutaneous or minimally invasive (indirect visualization), includes 
obtaining and applying autograft or allograft (structural or 
morselized) when performed, includes image guidance when performed 
(e.g., CT or fluoroscopic)), and that the CY 2014 claims data for 
services described by CPT code 0334T is appropriate to use to set the 
CY 2016 payment rate for procedures described by CPT code 27279. The 
commenter stated that the proposed payment rate for procedures assigned 
to APC 5124 (Level 4 Musculoskeletal Procedures) is approximately 
$9,266, which is a rate that does not cover the cost of the procedure 
described by CPT code 27279, which had a proposed geometric mean cost 
of approximately $16, 816. The commenter requested that CMS reassign 
the procedure described by CPT code 27279 to an APC that has a payment 
rate that is comparable to the actual cost of the procedure.
    Response: As previously mentioned in response to commenters' 
concerns regarding the wide range of costs associated with the 
musculoskeletal procedures APC group, we revised the musculoskeletal 
procedures APC grouping by adding a fifth level, APC 5125 (Level 5 
Musculoskeletal Procedures). With the addition of APC 5125, we 
reassigned certain procedures from Level 4 (APC 5124) in the proposed 
rule to new Level 5 based on the geometric mean costs of the 
procedures. Therefore, in this final rule with comment period, for CY 
2015, we are revising the APC assignment for the procedure described by 
CPT 27279 from APC 5124 to APC 5125. The geometric mean cost of APC 
5125 is approximately $11,027, which is higher than the proposed 
geometric mean cost of APC 5124 of approximately $9,789.
    Comment: A few commenters disagreed with the proposed APC 
assignment for kyphoplasty CPT code 22513 (Percutaneous vertebral 
augmentation, including cavity creation (fracture reduction and bone 
biopsy included when performed) using mechanical device (e.g., 
kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, 
inclusive of all imaging guidance; thoracic) and CPT code 22514 
(Percutaneous vertebral augmentation, including cavity creation 
(fracture reduction and bone biopsy included

[[Page 70399]]

when performed) using mechanical device (e.g., kyphoplasty), 1 
vertebral body, unilateral or bilateral cannulation, inclusive of all 
imaging guidance; lumbar) to APC 5123 (Level 3 Musculoskeletal 
Procedures). Specifically, the commenters stated that these two 
kyphoplasty procedure codes are not clinically homogenous with the 
other procedures assigned to APC 5123 and that the proposed APC payment 
would underpay facilities for these procedures, thus negatively 
affecting beneficiary access.
    Response: We appreciate the stakeholders' concern that the proposed 
assignment of the procedures described by CPT codes 22513 and 22514 to 
APC 5123 will cause outpatient facilities to stop offering minimally 
invasive outpatient procedures for patients with vertebral compression 
fractures, forcing these patients toward more expensive alternatives. 
Because CPT codes 22513 and 22514 were established January 1, 2015, our 
CY 2014 hospital claims data do not include costs for these procedures. 
Therefore, we proposed the APC assignment for these two codes based on 
similarities in resource cost to former kyphoplasty CPT codes 22523 
through 22525. However, as discussed above, in this final rule with 
comment period, we are adding a fifth level to the musculoskeletal APC 
groupings (APC 5215) for CY 2016, and are reassigning the procedures 
described by CPT codes 22513 and 22514 from proposed APC 5124 (Level 4 
Musculoskeletal Procedures) to APC 5125. We believe that this 
reassignment will improve resource and clinically homogeneity. However, 
we will continue to monitor service utilization trends in the HOPD for 
kyphoplasty and other minimally invasive procedures for patients with 
vertebral compression and consider APC reassignment in future 
rulemaking.
    Comment: A few commenters believed that CMS used inaccurate CY 2014 
claims data for the following auditory osseointegrated system implant 
codes:
     CPT code 69714 (Auditory osseointegrated device 
implantation with attachment to sound processor, without 
mastoidectomy);
     CPT code 69715 (Auditory osseointegrated device 
implantation with attachment to sound processor, with mastoidectomy);
     CPT code 69717 (Removal and replacement of existing 
osseointegrated implant, with attachment to sound processor, without 
mastoidectomy); and
     CPT code 69718 (Removal and replacement of existing 
osseointegrated implant, with attachment to sound processor, with 
mastoidectomy).
    Specifically, the commenters expressed skepticism about the low 
volume of claims that reported the above codes and the underreporting 
of the device cost described by CPT code L8690 (Auditory 
osseointegrated device). The commenters recommended that CMS not reduce 
the APC payment for these procedures because of incorrectly coded 
claims.
    Response: As we described in section II.A. of this final rule with 
comment period on the OPPS ratesetting methodology, ``Beyond our 
standard OPPS trimming methodology . . . that we apply to those claims 
that have passed various types of claims processing edits, it is not 
our general policy to judge the accuracy of hospital coding and 
charging for purposes of ratesetting'' (75 FR 71838). We use the latest 
available hospital claims data for these procedures to assign these 
procedures to APCs. Based on that data, we are assigning the procedure 
described by CPT code 69714 (which has a geometric mean cost of 
approximately $9,483) and by CPT code 69715 (which has a geometric mean 
cost of approximately $11,337) to APC 5125 (which has a geometric mean 
cost of approximately $11,027). We are assigning the procedure 
described by CPT code 69717 (which has a geometric mean cost of 
approximately $5,923) to APC 5123 (which has a geometric mean cost of 
approximately $5,200). We are assigning the procedure described by CPT 
code 69718 (which has a geometric mean cost of approximately $6,858) to 
APC 5124 (which has a geometric mean cost of approximately $7,392).
    Comment: One commenter requested the reassignment of the procedure 
described by CPT code 23397 (Muscle transfer, any type, shoulder or 
upper arm; multiple) from proposed APC 5122 (Level 2 Musculoskeletal 
Procedures) to proposed APC 5123 (Level 3 Musculoskeletal Procedures) 
because of clinical and resource use homogeneity with the procedure 
described by CPT code 23395 (Muscle transfer, any type, shoulder or 
upper arm; single) that is assigned to APC 5123.
    Response: We believe that the procedure described by CPT code 23397 
is appropriately assigned to APC 5122 based on clinical and resource 
use homogeneity with other procedures in the APC. We disagree with the 
commenter's recommendation to reassign CPT code 23397 from APC 5122 to 
APC 5123. The geometric mean cost of the procedure described by CPT 
code 22397 is approximately $3,598 based on only one single claim (out 
of two total claims) and is higher than the APC geometric mean cost of 
APC 5122, which is approximately $2,507. However, the APC geometric 
mean cost for APC 5123 is approximately $5,200. Because of the very low 
claims volume for CPT code 23397, it is not appropriate at this time to 
reassign the procedure code to a higher paying APC.
    Comment: Several commenters requested that CMS reassign the 
services described by CPT codes 29580 (Strapping; Unna boot), 29581 
(Application of multi-layer compression system; leg (below knee), 
including ankle and foot), and 29450 (Application of clubfoot cast with 
molding or manipulation, long or short leg from proposed APC 5102 
(Level 2 Strapping and Cast Application) to proposed APC 5101 (Level 1 
Strapping and Cast Application) because the services described by these 
codes are neither clinically consistent nor similar in cost to other 
procedures assigned to APC 5102.
    Response: Based on our review of the clinical characteristics and 
resource costs of the services described by CPT codes 29580, 29581, and 
29450 that are reflected in the latest claims data, we agree with the 
commenters that it would be more appropriate to group the procedures 
described by these codes with similar procedures assigned to APC 5101. 
Therefore, we are reassigning the services described by CPT codes 
29580, 29581, and 29450 from proposed APC 5102 to APC 5101 for CY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal, with the modification of adding a Level 5 
Musculoskeletal APC, to reconfigure the orthopedic-related procedures 
into 10 APCs. Table 33 below lists the final CY 2016 APCs that result 
from the restructuring and consolidation of the current orthopedic-
related procedures APCs. The final payment rates for the specific CPT 
orthopedic-related procedure codes are included in Addendum B to this 
final rule with comment period. The final payment rates for the 
specific APCs to which we are assigning the orthopedic-related 
procedures codes are included in Addendum A to this final rule with 
comment period. Both OPPS Addenda A and B are available via the 
Internet on the CMS Web site.

          Table 33--CY 2016 Orthopedic-Related Procedures APCs
------------------------------------------------------------------------
          CY 2016 APC                    CY 2016 APC group title
------------------------------------------------------------------------
5101...........................  Level 1 Strapping and Cast Application.

[[Page 70400]]

 
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...........................  Level 1 Musculoskeletal Procedures.
5122...........................  Level 2 Musculoskeletal Procedures.
5123...........................  Level 3 Musculoskeletal Procedures.
5124...........................  Level 4 Musculoskeletal Procedures.
5125...........................  Level 5 Musculoskeletal Procedures.
------------------------------------------------------------------------

10. Pathology Services
    For CY 2016, we proposed to assign pathology services to one of the 
following APCs: APCs 5671, 5672, 5673, and 5674 (Levels 1 through 4 
Pathology, respectively); APC 5681 (Transfusion Laboratory Procedures); 
and APCs 5731, 5732, 5733, and 5734 (Levels 1 through 4 Minor 
Procedures, respectively). The packaging of payment for pathology 
services is discussed in section II.A.3. of this final rule with 
comment period.
    Comment: One commenter requested that CMS reassign the following 
CPT codes (that were new in CY 2015 and currently do not have available 
associated claims data) to APC 5673 (Level 3 Pathology):
     CPT code 88344 (Immunohistochemistry or 
immunocytochemistry, per specimen; each multiplex antibody stain 
procedure);
     CPT code 88366 (In situ hybridization (e.g., fish), per 
specimen; each multiplex probe stain procedure);
     CPT code 88374 (Morphometric analysis, in situ 
hybridization (quantitative or semi-quantitative), using computer-
assisted technology, per specimen; each multiplex probe stain 
procedure); and
     CPT code 88377 (Morphometric analysis, in situ 
hybridization (quantitative or semi-quantitative), manual, per 
specimen; each multiplex probe stain procedure).
    The commenter believed that these CPT codes should be assigned to 
the Level 3 Pathology APC (APC 5673) because these are multiplex codes 
and are inherently more resource intensive than the corresponding 
single antibody/single probe procedures, for example, CPT code 88342, 
which are currently assigned to APC 5673.
    Response: We agree with the commenters. Therefore, for CY 2016, we 
are reassigning CPT codes 88344, 88366, 88374, and 88377 to APC 5673.
    Comment: One commenter requested that CMS reassign CPT code 88121 
(Cytopathology, in situ hybridization (e.g., fish), urinary tract 
specimen with morphometric analysis, 3-5 molecular probes, each 
specimen; using computer-assisted technology) from APC 5672 to APC 5673 
because related CPT code 88120 (Cytopathology, in situ hybridization 
(e.g., fish), urinary tract specimen with morphometric analysis, 3-5 
molecular probes, each specimen; manual) is assigned to APC 5673, the 
Level 3 Pathology APC. The commenter asserted that, because the 
resources used for services described by CPT code 88121 are similar to 
the resources used for services described by CPT 88120, both of these 
two CPT codes should be assigned to APC 5673.
    Response: Analysis of the latest CY 2014 claims data used for this 
final rule with comment period shows the geometric mean cost of 
services described by CPT code 88121 is approximately $132, and the 
geometric mean cost of services described by CPT code 88120 is 
approximately $154. Calculation of the geometric mean costs for the 
services described by these codes resulted in CPT code 88121 being 
assigned to APC 5672 (Level 2 Pathology) and CPT code 88120 being 
assigned to APC 5673 (Level 3 Pathology). The geometric cost of CPT 
code 88121 is at the top of the range of costs services assigned to APC 
5672, and the geometric cost of CPT code 88120 is at the bottom of the 
range costs of services assigned to APC 5673. This situation sometimes 
occurs even for somewhat similar services because APC groupings by 
definition have boundaries that divide the levels within an APC series 
such as the four levels for pathology services. We believe that the 
services described by CPT code 88121 are appropriately assigned to APC 
5672. Therefore, for CY 2016, we are not reassigning the services 
described by CPT code 88121 from APC 5672 to APC 5673 as the commenter 
requested.
    Comment: Some commenters urged CMS to maintain the existing, 
separately payable status indicators (that is, ``S'' or ``T'') for a 
number of codes within the proposed nine reconfigured APC families 
instead of assigning them to a conditional packaging status indicator 
(that is, ``Q1'' or ``Q2''). One commenter provided a list of 70 codes 
and requested that CMS assign them to separately payable status 
indicators. Among the list of 70 codes provided by the commenter were 
14 pathology services codes that, as a result of the APC restructuring 
policy, were proposed for CY 2016 to be assigned to either APC 5681 
(Transfusion Laboratory Procedures) or to APC 5732 (Level 2 Minor 
Procedures) or APC 5733 (Level 3 Minor Procedures).
    Response: Prior to our proposal, we reviewed all of the services 
associated with the proposed nine families. We believe that the 
procedures and services that we proposed to assign to a conditional 
packaging status indicator are ancillary and dependent in relation to 
the other procedures within the same family groupings with which they 
are most commonly furnished. Based on our review and input from CMS 
clinical staff, we believe that the codes that we proposed to 
conditionally package are appropriate. In addition, the APC to which we 
proposed to assign most of the 14 pathology services codes for CY 2016, 
APC 5681 (Transfusion Laboratory Procedures), is the successor APC to 
CY 2015 APC 0345 (Level I Transfusion Laboratory Procedures). APC 0345 
was designated in CY 2015 as an APC for conditionally packaged 
ancillary services (79 FR 66822). In the proposed rule, 3 of the 14 
pathology codes in question were proposed to be assigned to either APC 
5732 (Level 2 Minor Procedures) or APC 5733 (Level 3 Minor Procedures). 
These APCs are the successor APCs to the CY 2015 APCs 0340 (Level II 
Minor Procedures) and 0420 (Level III Minor Procedures), which were 
also designated in CY 2015 as APCs for conditionally packaged ancillary 
services (79 FR 66822). Therefore, we believe that the services 
assigned to APCs 5681, 5732, and 5733 are appropriately assigned a 
conditionally packaged status indicator. Further, based on the clinical 
nature of the services and our understanding of the procedures, we 
believe that assigning them to a conditional packaging status indicator 
will create incentives for hospitals and their physician partners to 
work together to establish appropriate protocols that will eliminate 
unnecessary services where they exist and institutionalize approaches 
to providing necessary services more efficiently. Therefore, after 
consideration of the public comments we received, we are finalizing our 
proposal to assign the 14 pathology services codes in question status 
indicator ``Q1'' for CY 2016.

[[Page 70401]]

11. Radiology Oncology Procedures and Services
a. Therapeutic Radiation Treatment Preparation
(1) Teletherapy Planning
    For CY 2016, we proposed the following four-level configuration for 
the Therapeutic Radiation Treatment Preparation APCs:
     APC 5611 (Level 1 Therapeutic Radiation Treatment 
Preparation);
     APC 5612 (Level 2 Therapeutic Radiation Treatment 
Preparation);
     APC 5613 (Level 3 Therapeutic Radiation Treatment 
Preparation); and
     APC 5614 (Level 4 Therapeutic Radiation Treatment 
Preparation).
    Procedures described by CPT codes 77306 (Teletherapy isodose plan; 
simple (1 or 2 unmodified ports directed to a single area of interest), 
includes basic dosimetry calculation(s)) and 77307 (Teletherapy isodose 
plan; complex (multiple treatment areas, tangential ports, the use of 
wedges, blocking, rotational beam, or special beam considerations), 
includes basic dosimetry calculation(s)) were considered new codes for 
CY 2015 and assigned to APC 0304 (Level I Therapeutic Radiation 
Treatment Preparation) in the CY 2015 OPPS/ASC final rule with comment 
period. In the CY 2016 OPPS/ASC proposed rule, we proposed to reassign 
procedures described by CPT codes 77306 and 77307 to proposed new APC 
5611.
    Comment: One commenter who responded to the CY 2015 OPPS/ASC final 
rule with comment period and the CY 2016 OPPS/ASC proposed rule 
requested that CMS reassign procedures described by CPT codes 77306 and 
77307 to a higher level APC within the group of Therapeutic Radiation 
Treatment Preparation APCs. The commenter stated that the procedures 
described by these new codes have greater resource intensity than their 
predecessor codes because these procedures now include services that 
were formerly separately reportable.
    Response: We agree with the commenter. We also believe that it is 
likely that the procedures described by the complex code, CPT code 
77307, requires more resources than the procedures described by CPT 
code 77306. Therefore, for CY 2016, we are modifying our proposal and 
assigning the procedures described by CPT code 77306 to new APC 5612 
and the procedures described by CPT code 77307 to new APC 5613 for CY 
2016.
(2) Intensity Modulated Radiotherapy (IMRT) Planning
    In the CY 2016 OPPS/ASC proposed rule, we proposed to assign 
procedures described by CPT code 77301 (Intensity modulated 
radiotherapy plan, including dose-volume histograms for target and 
critical structure partial tolerance specifications) was assigned to 
new APC 5614. We proposed new APC 5614 as the highest level APC in the 
group of Therapeutic Radiation Treatment Preparation APCs.
    Since 2008, CMS has provided coding guidance for claims reporting 
CPT code 77301 in the Medicare Claims Processing Manual, Chapter 4, 
Section 200.3.2, which states the following: ``Payment for the services 
identified by CPT codes 77014, 77280-77295, 77305-77321, 77331, 77336, 
and 77370 is included in the APC payment for IMRT planning when these 
services are performed as part of developing an IMRT plan that is 
reported using CPT code 77301. Under those circumstances, these codes 
should not be billed in addition to CPT code 77301 for IMRT planning.''
    In addition to this CMS Manual guidance, there is National Correct 
Coding Initiative (NCCI) guidance in the NCCI Policy Manual for 
Medicare Services, Chapter 9, page IX-17, which states the following: 
``12. Intensity modulated radiotherapy (IMRT) plan (CPT code 77301) 
includes therapeutic radiology simulation-aided field settings. 
Simulation field settings for IMRT should not be reported separately 
with CPT codes 77280 through 77295. Although procedure-to-procedure 
edits based on this principle exist in NCCI for procedures performed on 
the same date of service, these edits should not be circumvented by 
performing the two procedures described by a code pair edit on 
different dates of service.''
    Comment: A few commenters requested that CMS clarify its coding 
guidance on reporting services involving IMRT planning on claims. 
Several commenters stated that the service described by CPT code 77290 
(Therapeutic radiology simulation-aided field setting; complex) should 
be separately reported from the services described by CPT code 77301 
for patients receiving IMRT planning. These commenters believed that 
the services described by CPT code 77290 are never performed as part of 
IMRT planning services and, therefore, should be allowed to be reported 
separately from the services described by CPT 77301. Another commenter 
stated that recent coding guidance issued by the American Society for 
Radiation Oncology (ASTRO) also has caused confusion for hospitals and 
requested that CMS clarify its reporting guidance for IMRT planning in 
light of the recent ASTRO coding guidance. The commenter referred to 
the ASTRO Coding Guidance Articles, Process of Care: Treatment 
Preparation, which is available on the ASTRO Web site at: https://
www.astro.org/Practice-Management/Radiation-Oncology-Coding/Coding-
Guidance/Articles/Process-of-Care_Treatment-Preparation.aspx. The 
ASTRO guidance states in part that ``[I]f IMRT is the chosen modality 
for treating the patient, a simulation code (e.g., CPT code 77290) 
cannot be reported separately prior to completion of the IMRT treatment 
plan, even if the two services are performed on separate days.'' The 
commenter further believed that ASTRO's guidance should only apply to 
physician billing and not to hospital outpatient billing.
    Response: We disagree with these commenters. We believe that the 
types of services included in IMRT treatment planning include 
simulation. Although the commenter believed that simulation is never 
included as part of IMRT planning services, we believe CMS' 
longstanding Manual and coding guidance issued in CY 2008 has been 
precise in conveying its policy and instructions regarding coding for 
IMRT services and that, generally, IMRT services have been properly 
reported by hospitals.
    It is our policy that payments for the services identified by CPT 
codes 77280 through 77295 are included in the APC payment for IMRT 
planning services, and that the services described by these CPT codes 
should not be reported separately from services described by CPT code 
77301, regardless of when the various services that comprise CPT code 
77301 are performed. If a hospital submits a claim that separately 
reports services described by one of these simulation CPT codes in 
addition to separately reporting IMRT planning services that are 
performed, we would consider this reporting to constitute unbundling of 
the APC payment, which is prohibited. We will revise and update the 
Medicare Claims Processing Manual and coding guidance in the near 
future to ensure that this policy is more directly stated. The 
clarified coding guidance will state the following:
    ``Payment for the services identified by CPT codes 77014, 77280 
through 77295, 77305 through 77321, 77331, and 77370 is included in the 
APC payment for CPT code 77301 (IMRT planning). These codes should not 
be reported in addition to CPT code 77301 (on either the same or a 
different date of service)

[[Page 70402]]

unless these services are being performed in support of a separate and 
distinct non-IMRT radiation therapy for a different tumor.''
    Comment: One commenter requested that CMS reassign the services 
described by CPT code 77301 to a higher level APC to reflect the 
additional resource utilization involved with CT simulation, in 
addition to the resource-intensive IMRT planning services included as 
services described by CPT code 77301.
    Response: We proposed to assign the service described by CPT code 
77301 to new proposed APC 5614, which is the highest level APC in the 
Therapeutic Radiation Treatment Preparation APC group. We believe that 
the service described by CPT code 77301 is a therapeutic radiation 
treatment preparation service and that it clinically aligns with other 
services within in the Therapeutic Radiation Treatment Preparation APC 
group. The final geometric mean cost of the services described by CPT 
code 77301 is approximately $1,125 based on 51,301 single claims (out 
of 52,016 total claims), which is comparable to the final geometric 
mean cost of approximately $1,074 for new APC 5614. We also believe 
that, given the close proximity of the geometric mean cost of services 
described by CPT code 77301 to the geometric mean cost of new APC 5614, 
this APC assignment is appropriate for CPT code 77301. As we do with 
all codes annually, next year we will examine the cost information on 
claims reporting services described by CPT code 77301 and determine if 
a change to the APC assignment is warranted. In addition, if the 
clarification of our coding guidance for IMRT planning services results 
in a significant change in the geometric mean cost of services 
described by CPT code 77301 in future years, we will consider an 
alternative APC assignment for the code other than APC 5614.
b. Radiation Therapy (Including Brachytherapy)
    In the CY 2016 OPPS/ASC proposed rule, we proposed the following 
five levels for the Radiation Therapy APC group:
     APC 5621 (Level 1 Radiation Therapy);
     APC 5622 (Level 2 Radiation Therapy);
     APC 5623 (Level 3 Radiation Therapy);
     APC 5624 (Level 4 Radiation Therapy); and
     APC 5625 (Level 5 Radiation Therapy).
    We also proposed to create two new APCs for CY 2016: APC 5631 
(Single Session Cranial Stereotactic Radiosurgery) and APC 5641 
(Brachytherapy). All of these proposed APCs describe various types of 
radiation therapy or radiation delivery.
    Comment: One commenter requested that CMS reassign the procedure 
described by CPT code 0394T (High dose rate electronic brachytherapy, 
skin surface application, per fraction, includes basic dosimetry, when 
Performed) from proposed APC 5622 to proposed APC 5623, and the 
procedure described by CPT code 0395T (High dose rate electronic 
brachytherapy, interstitial or intracavitary treatment, per fraction, 
includes basic dosimetry, when performed) from proposed APC 5641 to 
proposed APC 5624. The commenter believed that these codes should be 
assigned to these higher paying APCs because the procedures described 
by these new codes include procedures such as dosimetry that were 
formerly separately payable under the OPPS.
    Response: CPT codes 0394T and 0395T are new codes for CY 2016. The 
procedures described by these new codes were mapped to new proposed 
APCs 5622 and 5641 based on our best estimate of the likely resource 
costs for these procedures. We anticipate that we will have claims data 
for the procedures describing these new CPT codes for the CY 2018 OPPS 
rulemaking. At this time, we do not believe that we have sufficient 
information to support reassigning CPT codes 0394T and 0395T to the 
next higher level radiation therapy APC. Therefore, we are finalizing, 
as proposed, the APC assignments for procedures described by CPT codes 
0394T and 0395T.
    Comment: A few commenters requested that CMS reassign the procedure 
described by CPT code 77762 (Intracavitary radiation source 
application; intermediate) from proposed new APC 5622 to proposed new 
5623 because related CPT codes 77761 (Intracavitary radiation source 
application; simple) and 77763 (Intracavitary radiation source 
application; complex) were both proposed to be assigned to new proposed 
APC 5623 in the CY 2016 OPPS/ASC proposed rule. The commenters stated 
that, although CMS may lack sufficient claims data for the procedure 
described by CPT code 77762, the procedure (the intermediate level of 
this code series) is similar in terms of clinical characteristics and 
resource use to the procedures described by CPT codes 77761 and 77763 
and, therefore, the procedure described by CPT code 77762 should be 
assigned to the same APC as these other codes in the intracavitary 
radiation source application APC group.
    Response: We agree with the commenters that the procedure involving 
intermediate intracavitary radiation source application should not be 
assigned to a lower level APC than the simple version of this 
procedure. After examining claims data for the CPT codes in this APC 
group that reported intracavitary radiation source application, we 
found that, although the number of claims is relatively small, the 
geometric mean cost of the procedure described by CPT code 77763 is 
more similar to the geometric mean costs of procedures assigned to new 
APC 5624 than that of the procedures assigned to new APC 5623. 
Therefore, we are modifying our proposal and reassigning the procedure 
described by CPT code 77762 from proposed APC 5622 to APC 5623, and the 
procedure described by CPT code 77763 (the complex code) from new APC 
5623 to APC 5624 for CY 2016. We also believe that it is appropriate, 
for consistency and easy comprehension, to revise the title of some of 
the radiation therapy APCs. Depicted in Table 34 below is a listing of 
the finalized titles of the radiation therapy APCs. The revisions to 
the titles of these APCs do not affect the APC assignment of any of the 
codes.

                            Table 34--Final Radiation Therapy APC Titles for CY 2016
----------------------------------------------------------------------------------------------------------------
                                  Proposed CY 2016   Final CY 2016  APC
    Proposed CY 2016 APC No.          APC title              No.                 Final CY 2016 APC title
----------------------------------------------------------------------------------------------------------------
5621...........................  Level 1--Radiation  5621..............  Level 1--Radiation Therapy.
                                  Therapy.
5622...........................  Level 2--Radiation  5622..............  Level 2--Radiation Therapy.
                                  Therapy.
5623...........................  Level 3--Radiation  5623..............  Level 3--Radiation Therapy.
                                  Therapy.
5641...........................  Brachytherapy.....  5624..............  Level 4--Radiation Therapy.
5624...........................  Level 4--Radiation  5625..............  Level 5--Radiation Therapy.
                                  Therapy.
5625...........................  Level 5--Radiation  5626..............  Level 6--Radiation Therapy.
                                  Therapy.

[[Page 70403]]

 
5631...........................  Single Session      5627..............  Level 7--Radiation Therapy.
                                  Cranial
                                  Stereotactic
                                  Radiosurgery.
----------------------------------------------------------------------------------------------------------------

    In summary, for CY 2016, the simple and intermediate intracavitary 
radiation source application codes, CPT codes 77761 and 77762, are 
assigned to new APC 5623, and the complex intracavitary radiation 
source application code, CPT code 77763, is assigned to APC 5624.
    Comment: Several commenters requested that CMS estimate costs for 
the new CY 2016 high dose rate (HDR) brachytherapy codes (CPT codes 
77767 through 77772) to include the cost of the dose calculation, which 
is now a part of the services described by the HDR brachytherapy codes. 
The commenters believed that if CMS included these additional costs, 
the calculations would result in increased payment rates for the APCs 
to which the HDR brachytherapy codes are assigned.
    Response: We believe that these commenters may have misunderstood 
our ratesetting methodology as it applies to new codes. We generally do 
not model costs for new codes and incorporate modeled cost data into 
our payment rate calculations. Instead, we make an initial APC 
assignment for new codes based on predecessor code APC assignments and 
other information that allows for a suitable APC assignment until 
claims data is available for the new codes. We do not believe the 
commenters' suggested approach is appropriate under our established 
ratesetting methodology for new codes.
c. Fractionated Stereotactic Radiosurgery (SRS)
    For CY 2016, we proposed to reassign the services described by CPT 
code 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 APC 0066 (Level V Radiation) to 
APC 5625 (Level 5 Radiation Therapy), with a proposed payment rate of 
approximately $1,699.
    Comment: Several commenters disagreed with the proposed APC 
assignment of the services described by CPT code 77373 to APC 5625. In 
particular, the commenters were concerned that the proposed payment 
rate for the services described by CPT code 77373 equates to a 
reduction of 11 percent in payment when compared to the payment rate 
for CY 2015. The commenters believed that the proposed payment is not 
reflective of the actual costs of providing fractionated SRS services. 
The commenters also expressed concerns about the accuracy of the 
hospital cost data on fractionated SRS services used to set the 
proposed payment rate. They believed that hospitals have miscoded the 
service by reporting CPT code 77372 (Radiation treatment delivery, 
stereotactic radiosurgery (SRS), complete course of treatment of 
cranial lesion(s) consisting of 1 session; linear accelerator based) 
for the first fraction, and instead have reported the services 
described by CPT code 77373. Several commenters requested that CMS 
increase the proposed payment rate of approximately $1,699 for APC 5625 
by at least $630 to more accurately capture the costs of providing this 
therapy, or alternatively, assign services described by CPT code 77373 
to a stable APC, such as a new technology APC, for a period of 3 years 
to allow for the reporting of appropriate claims data to use to 
calculate a more appropriate payment. One commenter recommended that 
CMS reassign CPT code 77373 to New Technology--Level 25 ($3,500-
$4,000), with a payment rate of approximately $3,750.
    Response: We believe that we have adequate claims data for services 
described by CPT code 77373 because fractionated/multi-session SRS is 
not a new technology. For the CY 2016 ratesetting, there are 59,853 
single claims (out of 64,629 total claims) for the services described 
by CPT code 77373, which is an adequate volume for ratesetting 
purposes. Although CPT code 77373 was not recognized under the OPPS 
until January 1, 2014, the code has been in existence since January 1, 
2007. Hospital outpatient facilities have been reporting the SRS CPT 
codes to other payers since the codes were established in 2007. We 
believe that hospital outpatient facilities have had sufficient time to 
educate themselves on how to appropriately report the services 
described by CPT code 77373. We do not agree that assigning the 
services described by CPT code 77373 to a New Technology APC is 
appropriate, given the robust claims data we have from CY 2014. 
Miscoding of procedures and services by hospitals is generally not an 
area that we investigate or attempt to remedy by substituting other 
payment rates for the payment rate calculated from the claims data 
according to our standard methodology.
    We note that (as discussed above) the APC number and title for APC 
5625, the APC to which the services described by CPT code 77373 are 
assigned, have been changed to APC 5626 (Level 6 Radiation Therapy). In 
addition, as discussed in section III.D.15.b. of this final rule with 
comment period, because the procedure codes describing MRgFUS treatment 
are being reassigned to other APCs, CPT code 77373 is the only 
procedure code assigned to APC 5626.
    In summary, after consideration of the public comments we received, 
we are modifying our proposal and assigning the services described by 
CPT code 77373 to APC 5626 for CY 2016. The final CY 2016 payment rate 
for the services described by CPT code 77373 can be found in Addendum B 
to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
12. 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 hospital 
outpatient claims data available for the CY 2016 OPP/ASC proposed rule, 
we proposed to restructure all of the APCs for skin-related procedures 
by combining the debridement and skin procedures APCs to more 
appropriately reflect the resource costs and clinical characteristics 
of the procedures assigned to each APC. Clinically, the services 
assigned to the current debridement APC grouping are similar to the 
services assigned to the current skin procedures APCs. Therefore, we 
believe that the services assigned to these two APC groupings would be 
more appropriately represented by combining the services into a single 
APC grouping described as skin procedures and related services. We 
believe that the proposed consolidation and restructuring of these APCs 
more appropriately categorizes all of the skin procedures and related 
services with different resource use, such that the services within 
each proposed newly configured APC are comparable based on the 
homogeneity of clinical characteristics and resource costs.

[[Page 70404]]

Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39262 through 
39263), for CY 2016, we proposed to consolidate and restructure the 
skin and debridement APCs into a single APC grouping. Table 31 of the 
proposed rule listed the current CY 2015 APCs that contain skin and 
debridement procedures, and Table 32 of the proposed rule listed the 
proposed CY 2016 APCs that would result from the proposed consolidation 
and restructuring of the current skin procedures and related services 
APCs into a single APC grouping. We invited public comments on this 
proposal.
    We received several public comments related to the proposed APC 
assignments for certain skin-related services and procedures and one 
comment specifically relating to the proposed restructuring of the skin 
procedures APCs. A summary of the public comments and our responses are 
below.
    Comment: Some commenters expressed concern with CMS' proposal to 
consolidate the skin substitute and skin debridement APCs, and stated 
that the proposed reconfiguration reduces the clinical cohesiveness of 
the procedures assigned to the APC grouping and could negatively impact 
payments for these services. One commenter stated that the proposed 
reconfigured APC 5051 (Level 1 Skin Procedures) and APC 5053 (Level 3 
Skin Procedures) combine simple and complex procedures under the APCs 
that make no distinctions in the clinical characteristics and resource 
costs for certain procedures. The commenter requested that CMS 
reconsider its proposal and work with clinical experts to refine the 
structure of these APCs that reflects the clinical cohesiveness and 
resource use associated with these services. Another commenter 
disagreed with CMS' rationale that the proposed restructuring and 
consolidation of these APCs would more appropriately reflect the 
comparable costs and clinical characteristics of the procedures 
assigned to each APC and stated that combining the debridement and skin 
procedure APCs produces broad categories with wide payment variations, 
which creates inappropriate resource distinctions for certain 
procedures.
    Response: We disagree with the commenters. We believe that the 
reconfigured skin procedure APCs all include clinically similar 
procedures with similar resource costs. We also believe that the range 
of procedure costs in each of the skin procedure APCs is appropriate, 
and there are no violations of the 2 times rule within these APCs. The 
CY 2015 APC structure separated skin procedures from debridement and 
destruction procedures, which resulted in procedures that were 
otherwise similar skin procedures being assigned to different APCs (if 
the procedures also were debridement and destruction procedures). The 
CY 2015 structure resulted in similar procedures involving the skin 
procedure being assigned to different APCs based on a procedure being 
labelled either debridement/destruction or a skin procedure. 
Debridement of skin is a skin procedure; therefore, assignment to a 
skin procedure APC is appropriate. We do not believe this distinction 
is the most appropriate way to distinguish procedures involving the 
skin because debridement of skin is a skin procedure. Therefore, we 
believe that the services assigned to these two APC groups are more 
appropriately classified as skin procedures and related services in a 
single APC group. We believe that the proposed consolidation and 
restructuring of these APCs more appropriately categorizes all of the 
similar skin procedures and related services with different resource 
use, such that the services within each proposed newly configured APC 
are comparable based on the homogeneity of clinical characteristics and 
resource costs. We also believe that restructuring the APC groupings 
decreases overlapping cost ranges among APCs in a series and, 
consequently, allows CMS to pay for these procedures and services 
through a skin procedures APC series that is more clinically 
homogeneous and that contain procedures with similar costs.
    Comment: One commenter stated that the proposed payment rate for 
APC 5053 would result in substantial underpayment for procedures and 
services involving the low-cost skin substitute products compared to 
procedures and services involving the high-cost skin substitute 
products. Specifically, the commenter indicated that facilities using 
the low-cost skin substitute products would experience a reduction in 
payment between approximately $274 and $290 per treatment session. The 
commenter believed that the potential underpayment associated with the 
use of low-cost skin substitute products would ultimately incentivize 
the use of the high-cost skin products, and result in greater overall 
expenditures to the Medicare program. Therefore, the commenter 
recommended that CMS create a new APC level in addition to the APC 
Level 3 and APC Level 4 for the skin procedures and related services 
APC grouping to eliminate this perceived incentive and discrepancy.
    Response: We again reviewed all of the skin procedures and related 
services and the APC assignments for this final rule with comment 
period. Based on our evaluation of the latest hospital outpatient 
claims data used for this final rule with comment period, we are 
revising the proposed APC assignments for several skin procedures 
within the Skin Procedures APC grouping. Specifically, we are modifying 
our proposal by reassigning certain procedures from proposed APC 5053 
to APC 5052 (Level 2 Skin Procedures) to more appropriately reflect the 
homogeneity of the resource costs associated with the other procedures 
assigned to APC 5052. In light of this modification, we do not believe 
that creating a new level within the skin procedures and related 
services APC groupings is necessary. We believe that the reassignment 
of certain procedures results in improved clinical homogeneity and 
resource costs for all of the skin procedures within the skin 
procedures groups.
    Comment: Some commenters urged CMS to maintain the existing, 
separately payable status indicator assignments (that is, status 
indicators ``S'' or ``T'') for several procedure codes included within 
the proposed nine reconfigured APC grouping, instead of assigning these 
procedures to a status indicator that would generate a conditionally 
packaged payment (that is, either status indicator ``Q1'' or ``Q2''). 
One commenter provided a list of 70 procedure codes and requested that 
CMS reassign the listed procedures to status indicators that would 
generate separate payment for the services described by those procedure 
codes. Among the listed 70 procedure codes in the commenter's request, 
36 describe skin procedures that, as a result of the proposed APC 
restructuring and consolidation, were proposed for CY 2016 to be 
reassigned to APC 5051.
    Response: Prior to developing our proposal, we reviewed all of the 
procedures and services associated with the proposed reconfigured nine 
APCs skin procedures and related services groupings. Based on our 
review and input from CMS clinical staff, we believe that the proposed 
assignment of the procedures and services to a status indicator that 
indicates them as conditionally packaged is appropriate because these 
services are considered ancillary and dependent in relation to the 
other procedures with which they are most commonly furnished. In 
addition, the APC to which the 36 procedure codes listed by the

[[Page 70405]]

commenter were proposed to be assigned for CY 2016, APC 5051, is the 
successor APC to the CY 2015 APC 0012 (Level I Debridement & 
Destruction). APC 0012 was designated in CY 2015 as an APC containing 
procedures that are considered ancillary services for which payment is 
conditionally packaged. Therefore, we believe that the procedures and 
services proposed to be reassigned to APC 5051 also should be 
appropriately assigned to a status indicator that conditionally 
packages payment for these services. Further, based on the clinical 
nature of the services and our understanding of the procedures, we 
believe that the proposed assignments for these procedures and services 
to a status indicator indicating conditional packaging will create 
incentives for hospitals and their physician partners to work together 
to establish appropriate protocols that will eliminate providing 
unnecessary services where these instances exist and institutionalize 
approaches to providing necessary services more efficiently. Therefore, 
in this final rule with comment period, we are assigning status 
indicator ``Q1'' to the 36 skin procedure codes identified by the 
commenter in the nine reconfigured APC groupings for CY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal to restructure and consolidate the skin 
procedures and related services APCs, with one modification. We are 
revising the APC assignment for several procedures, which are listed in 
Addendum B to this final rule with comment period, by reassigning them 
from APC 5053 to APC 5052 to appropriately reflect the resource costs 
associated with the procedures. We also are assigning the 36 procedure 
codes describing skin procedure and related services identified by the 
commenter to status indicator ``Q1'' for CY 2016.
a. Negative Pressure Wound Therapy (NPWT) Services
    As listed in Addendum B to the CY 2016 OPPS/ASC proposed rule, we 
proposed to reassign the NPWT services to two separate APCs. 
Specifically, as listed in Table 35 below, we proposed to reassign the 
durable medical equipment (DME)-related NPWT CPT codes 97605 and 97606 
from APC 0012 (Level I Debridement & Destruction) and APC 0015 (Level 
II Debridement & Destruction), respectively, to proposed APC 5051 
(Level 1 Skin Procedures), with a proposed payment rate of 
approximately $120, and the disposable NPWT CPT codes 97607 and 97608 
from APC 0015 to proposed APC 5052 (Level 2 Skin Procedures), with a 
proposed payment rate of approximately $166.

                       Table 35--Proposed APC Assignment for the NPWT Services for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY
                                                            CY 2015 OPPS    CY 2015      2016 OPPS   Proposed CY
  CY 2015 CPT/HCPCS code            Long descriptor             status      OPPS APC      status      2016 OPPS
                                                              indicator                  indicator       APC
----------------------------------------------------------------------------------------------------------------
97605.....................  Negative pressure wound                  Q1          0012           Q1          5051
                             therapy (e.g., vacuum
                             assisted drainage
                             collection), including
                             topical application(s), wound
                             assessment, and
                             instruction(s) for ongoing
                             care, per session; total
                             wound(s) surface area less
                             than or equal to 50 square
                             centimeters.
97606.....................  Negative pressure wound                   T          0015           Q1          5051
                             therapy (e.g., vacuum
                             assisted drainage
                             collection), including
                             topical application(s), wound
                             assessment, and
                             instruction(s) for ongoing
                             care, per session; total
                             wound(s) surface area greater
                             than 50 square centimeters.
97607.....................  Negative pressure wound                   T          0015            T          5052
                             therapy, (e.g., vacuum
                             assisted drainage
                             collection), utilizing
                             disposable, non-durable
                             medical equipment including
                             provision of exudate
                             management collection system,
                             topical application(s), wound
                             assessment, and instructions
                             for ongoing care, per
                             session; total wound(s)
                             surface area less than or
                             equal to 50 square
                             centimeters.
97608.....................  Negative pressure wound                   T          0015            T          5052
                             therapy, (e.g., vacuum
                             assisted drainage
                             collection), utilizing
                             disposable, non-durable
                             medical equipment including
                             provision of exudate
                             management collection system,
                             topical application(s), wound
                             assessment, and instructions
                             for ongoing care, per
                             session; total wound(s)
                             surface area greater than 50
                             square centimeters.
----------------------------------------------------------------------------------------------------------------

    We note that the DME-related NPWT CPT codes 97605 and 97606 were 
effective January 1, 2005. The disposable NPWT CPT codes 97607 and 
97608 were effective January 1, 2015. However, the predecessor codes 
for the CY 2015 disposable NPWT procedure codes, specifically HCPCS 
codes G0456 and G0457, became effective January 1, 2013, and were 
deleted on December 31, 2014, when the NWPT replacement CPT codes 
became effective.
    Comment: Some commenters disagreed with CMS' proposal to assign the 
procedures described by DME-related NPWT CPT codes 97605 and 97606 to 
OPPS status indicator ``Q1.'' The commenters believed that these 
procedures should be treated as independent clinical procedures and not 
ancillary services, and requested that CMS not finalize its proposal to 
assign these procedures to OPPS status indicator ``Q1.''
    Response: We believe that the commenters may have misunderstood the 
meaning of OPPS status indicator ``Q1.'' Assigning a procedure to OPPS 
status indicator ``Q1'' indicates that payment for the service is 
conditionally packaged under the OPPS. A criterion under the 
conditional packaging policy is that payment for a service is packaged 
when it is provided in combination with a significant procedure on the 
same date of service, but the service is separately paid when it is 
reported on the claim without a significant procedure. Below is an 
excerpt from Addendum D1 to the CY 2016 OPPS/ASC proposed rule that 
shows the definition of status indicator ``Q1.''

[[Page 70406]]



    Addendum D1--Proposed OPPS Payment Status Indicators for CY 2016
------------------------------------------------------------------------
   Status indicator       Item/code/service       OPPS payment status
------------------------------------------------------------------------
Q1....................  STV-Packaged Codes...  Paid under OPPS; Addendum
                                                B displays APC
                                                assignments when
                                                services are separately
                                                payable.
                                               (1) Packaged APC payment
                                                if billed on the same
                                                date of service as a
                                                HCPCS code assigned
                                                status indicator ``S,''
                                                ``T,'' or ``V.''
                                               (2) In other
                                                circumstances, payment
                                                is made
                                               through a separate APC
                                                payment.
------------------------------------------------------------------------

    In the case of the procedures described by CPT codes 97605 and 
97606, payment for these procedures is included in the payment for the 
significant procedure when these procedures are reported in combination 
with HCPCS codes that are assigned to either status indicators ``S,'' 
``T,'' or ``V.'' Alternatively, the procedures are separately paid when 
performed alone, or when they are reported in combination with HCPCS 
codes that described procedures assigned to a status indicator other 
than ``S,'' ``T,'' or ``V.'' We believe that ``Q1'' is the most 
appropriate status indicator assignment for the DME-related NPWT CPT 
codes 97605 and 97606 because the services described by these codes are 
often provided in combination with other wound treatments and 
procedures.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign DME-related 
NPWT CPT codes 97605 and 97606 to OPPS status indicator ``Q1'' for CY 
2016. The complete list of the OPPS payment status indicators and their 
definitions for CY 2016 is displayed in Addendum D1 to this final rule 
with comment period, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html. 
In addition, we are finalizing our proposal, without modification, to 
reassign the DME-related NWPT CPT codes 97605 and 97606 from CY 2015 
APCs 0012 and 0015, respectively, to APC 5051 for CY 2016. The final CY 
2016 payment rate for the procedures described by CPT codes 97605 and 
97605 can be found in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    Comment: Several commenters opposed CMS' proposal to reassign the 
disposable NWPT procedures, specifically the procedures described by 
the disposable NWPT CPT codes 97607 and 97608 from CY 2015 APC 0015 to 
APC 5052 for CY 2016. The commenters believed that the claims data used 
to set the payment rates for these two procedures are flawed and do not 
reflect the actual costs incurred by hospitals for providing this 
treatment. The commenters opined that, because of the confusion related 
to the accurate coding of the procedures described by the predecessor 
HCPCS G-codes (HCPCS codes G0456 and G0457), hospitals have 
continuously miscoded this service in CY 2013 and CY 2014 by reporting 
charges for the DME-related NPWT CPT codes 97605 and 97606 instead of 
charges for the disposable NWPT CPT codes 97607 and 97608 when these 
services were actually provided. Some commenters stated that the 
resource costs associated with the disposable NPWT procedures, which 
require the use of disposable NPWT supplies, is significantly higher 
than the resource costs associated with the DME-related NPWT service, 
which requires the use of a device that is not paid for under the OPPS, 
but rather is paid based on the DMEPOS fee schedule. One commenter 
indicated that, based on its internal analysis, the costs of disposable 
NPWT devices may be as low as $200 and as high as over $800. Another 
commenter noted that if an average acquisition cost is approximately 
$194 for a particular disposable NPWT device, a provider may incur 
costs ranging from approximately $312 to $358 to provide this 
treatment. The commenters believed that the proposed payment rate for 
APC 5052 does not reflect the cost of the disposable NWPT supplies used 
in furnishing the service. Therefore, the commenters urged CMS not to 
finalize the proposed reassignment of these procedures to APC 5052 and, 
instead, reassign the procedures to APC 5053 (Level 3 Skin Procedures), 
which the commenters believed more appropriately compare to the actual 
resource costs associated with providing the service. Another commenter 
requested that CMS reassign the disposable NWPT CPT codes to an 
appropriate APC based on an estimated payment rate of $305.10 for the 
procedure. One commenter suggested that, if the alternative of 
reassigning the disposable NWPT CPT codes to APC 5053 was not 
achievable, CMS consider creating a sixth skin procedures APC that 
would be comprised of clinically homogenous wound care services 
proposed for reassignment to APCs 5052 and 5053. The commenter believed 
that creating this new APC would eliminate any potential violations of 
the 2 times rule within proposed APC 5052 or APC 5053.
    Response: As reflected in Table 16 of the CY 2016 OPPS/ASC proposed 
rule (80 FR 39258), there are no violations of the 2 times rule within 
APC 5052. For CY 2016, our analysis of the CY 2014 claims data 
available for the proposed rule did not show any violations of the 2 
times rule within APC 5052 (which included the proposed reassigned 
disposable NPWT procedures) because the lowest cost of a procedure 
described by a CPT code with significant claims data assigned to APC 
5052 was approximately $158 (for CPT code 36471), while the highest 
cost of a procedure described by a CPT code with significant claims 
data was approximately $277 (for CPT code 96913). We note that the 
geometric mean cost for the procedure described by HCPCS code G0456 
(which became CPT code 97607, effective January 1, 2015) was 
approximately $176 based on 6,655 single claims (out of 8,826 total 
claims) and approximately $203 for the procedure described by HCPCS 
G0457 (which became CPT code 97608, effective January 1, 2015) based on 
409 single claims (out of 779 total claims). The CY 2016 OPPS/ASC 
proposed rule claims data was based on claims submitted between January 
1, 2014, through December 31, 2014, and processed on or before December 
31, 2014.
    For this final rule with comment period, the claims data is based 
on the same CY 2014 claims data updated to include those claims that 
were processed on or before June 30, 2015. Our analysis of the final 
rule claims data initially showed a violation of the 2 times rule 
within APC 5053. To eliminate the violation of the 2 times rule, we 
reassigned some of the

[[Page 70407]]

procedures at the lower end of the cost range of APC 5053 to APC 5052. 
After modifying the proposed reassignment of a few codes from APC 5053 
to 5052, the disposable NPWT procedures remain appropriately assigned 
to APC 5052 based on the comparability of the geometric mean costs. 
Specifically, our final rule claims data show a geometric mean cost of 
approximately $174 for procedures described by HCPCS code G0456 based 
on 7,301 single claims (out of 9,699 total claims) and approximately 
$216 for procedures described by HCPCS code G0457 based on 449 single 
claims (out of 858 total claims). The lowest cost of a procedure 
described by a CPT code with significant claims data assigned to APC 
5052 is approximately $163 (for CPT code 36471), while the highest cost 
of a procedure described by a CPT code with significant claims data is 
approximately $299 (for CPT code 10120). The geometric mean costs of 
approximately $174 (for HCPCS code G0456) and $216 (for HCPCS code 
G0457) fall within this range without creating any violations of the 2 
times rule. However, if we modify our proposal and reassign the 
procedures described by HCPCS codes G0456 and G0457 to APC 5053, a 
violation of the 2 times rule would exist. In addition, we do not 
believe that it is appropriate or necessary to create a sixth level 
within the skin procedures APC groupings. The geometric mean cost of 
APC 5052 is approximately $236 and the geometric mean cost of APC 5053 
is approximately $449. We believe that these levels represent a 
meaningful separation between geometric mean costs without creating a 
wider range of costs between adjacent levels in an APC series.
    Regarding the commenters' assertions that hospitals are miscoding 
claims or are not appropriately charging for disposable NPWT services 
and supplies and their requests that we disregard the claims data, we 
repeat our general policy: ``Beyond our standard OPPS trimming 
methodology . . . that we apply to those claims that have passed 
various types of claims processing edits, it is not our general policy 
to judge the accuracy of hospital coding and charging for purposes of 
ratesetting'' (75 FR 71838). Therefore, because we do not judge the 
accuracy of hospital coding and charging, we will not disregard any 
claims data for services involving disposable NPWT procedures and 
supplies in calculating the payment rate for these procedures. In 
addition, it is not our policy to use any information (such as 
invoices, statements from companies who sell the medical devices used 
in the procedure, various reports from consultants, among others) other 
than hospital claims data for determining payment rates. As we do every 
year, we will reevaluate the APC assignment for the procedures 
involving disposable NPWT services and supplies in preparation for the 
CY 2017 rulemaking cycle. We remind hospitals that we review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification. Specifically, we are 
reassigning the disposable NWPT CPT codes 97607 and 97608 to APC 5052 
for CY 2016. Table 36 below lists the final OPPS status indicator and 
APC assignments for CPT codes 97605, 97606, 97607, and 97608 for CY 
2016. The final CY 2016 payment rates for these codes can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site).

                        Table 36--Final Apc Assignment for the NPWT Services for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                             Proposed CY                 Final CY
                                                              2016 OPPS   Proposed CY    2016 OPPS     Final CY
  CY 2016 CPT/HCPCS code            Long descriptor            status      2016 OPPS      status      2016 OPPS
                                                              indicator       APC        indicator       APC
----------------------------------------------------------------------------------------------------------------
97605.....................  Negative pressure wound                  Q1          5051           Q1          5051
                             therapy (e.g., vacuum
                             assisted drainage
                             collection), including
                             topical application(s), wound
                             assessment, and
                             instruction(s) for ongoing
                             care, per session; total
                             wound(s) surface area less
                             than or equal to 50 square
                             centimeters.
97606.....................  Negative pressure wound                  Q1          5051           Q1          5051
                             therapy (e.g., vacuum
                             assisted drainage
                             collection), including
                             topical application(s), wound
                             assessment, and
                             instruction(s) for ongoing
                             care, per session; total
                             wound(s) surface area greater
                             than 50 square centimeters.
97607.....................  Negative pressure wound                   T          5052            T          5052
                             therapy, (e.g., vacuum
                             assisted drainage
                             collection), utilizing
                             disposable, non-durable
                             medical equipment including
                             provision of exudate
                             management collection system,
                             topical application(s), wound
                             assessment, and instructions
                             for ongoing care, per
                             session; total wound(s)
                             surface area less than or
                             equal to 50 square
                             centimeters.
97608.....................  Negative pressure wound                   T          5052            T          5052
                             therapy, (e.g., vacuum
                             assisted drainage
                             collection), utilizing
                             disposable, non-durable
                             medical equipment including
                             provision of exudate
                             management collection system,
                             topical application(s), wound
                             assessment, and instructions
                             for ongoing care, per
                             session; total wound(s)
                             surface area greater than 50
                             square centimeters.
----------------------------------------------------------------------------------------------------------------

b. Platelet Rich Plasma (PRP)
    As listed in Addendum B to the CY 2016 OPPS/ASC proposed rule, we 
proposed to assign HCPCS code G0460 (Autologous platelet rich plasma 
for chronic wounds/ulcers, including phlebotomy, centrifugation, and 
all other preparatory procedures, administration and dressings, per 
treatment) to APC 5053 (Level 3 Skin Procedure), with a proposed 
payment rate of approximately $305.
    Comment: Some commenters disagreed with CMS' proposed assignment of 
HCPCS code G0460 to APC 5053 and recommended that CMS consider 
assigning the code to either APC 1511 (New Technology--Level 11 ($900-
$1000)) or 1548 (New Technology--Level 11 ($900-$1000)), with a 
proposed payment rate of approximately $950. One commenter stated that 
the proposed payment rate for APC 5053 is inadequate and does not

[[Page 70408]]

take into account the full components of providing the service 
described by HCPCS code G0460 and the Coverage with Evidence 
Development (CED) complexity associated with HCPCS code G0460. In 
addition, the commenter believed that a violation of the 2 times rule 
exists within APC 5053 when HCPCS code G0460 is assigned to this APC 
and, therefore, urged CMS to consider assigning HCPCS code G0460 to New 
Technology APC 1511 rather than APC 5053. Further, the commenter opined 
that the repeated payment adjustment for this service is causing 
significant confusion in the market place and hampering the success of 
Medicare's CED protocol. The commenter stated that assigning HCPCS code 
G0460 to either APC 1511 or APC 1548 would provide participating 
hospitals and sponsored sites predictability in payment levels for the 
service described by HCPCS code G0460.
    Response: Table 16 of the CY 2016 OPPS/ASC proposed rule (80 FR 
39255) listed the three APCs that violated the 2 times rule for 
ratesetting and which we proposed to except from the 2 times rule for 
CY 2016. APC 5053 does not appear on that list. For CY 2016, our 
analysis of the CY 2014 claims data available for the proposed rule 
showed that no violations of the 2 times rule existed within APC 5053 
because the geometric mean cost for the service described by HCPCS code 
G0460 did not fall outside of the acceptable significant costs range. 
For purposes of identifying significant HCPCS codes for examination 
under the 2 times rule, we consider those 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 policy of when a HCPCS code is 
considered significant for purposes of the 2 times rule was based on 
the premise that we believe a subset of 1,000 claims is negligible 
within the set of approximately 120 million single procedure or single 
session claims we use for establishing geometric mean costs. Similarly, 
procedures described by a HCPCS code for which there are fewer than 99 
single claims or which comprises less than 2 percent of the single 
major claims within an APC will have a negligible impact on the APC 
geometric mean cost.
    Based on our analysis of the claims data used for the proposed 
rule, there was no violation of the 2 times rule within APC 5053 when 
HCPCS code G0460 was assigned to this APC. Specifically, our data 
revealed that the lowest cost procedure with significant claims data 
($305 for CPT code 11042) and the highest cost procedure with 
significant claims data ($595 for HCPCS code C5271) met the 2 times 
rule for APC 5053 whose geometric mean cost was approximately $322.
    Section 1833(t)(9) of the Act requires the Secretary to review 
certain components of the OPPS not less often than annually, and to 
revise the groups, relative payment weights, and other adjustments that 
take into account changes in medical practices, changes in 
technologies, and the addition of new services, new cost data, and 
other relevant information and factors. Consistent with the 
requirements set forth in section 1833(t)(9), we annually review all 
the items and services within an APC group to determine, with respect 
to comparability of the use of resources, if the geometric mean cost of 
the highest cost item or service within an APC group is more than 2 
times greater than the geometric mean cost of the lowest cost item or 
service within that same group. In making this determination, we review 
our claims data and determine whether we need to make changes to the 
current APC assignments for the following year.
    We acknowledge the commenters' concerns. However, based on our 
analysis of the claims data available for this final rule with comment 
period, we believe that the services described by HCPCS code G0460 more 
appropriately align with the other services assigned to APC 5054 (Level 
4 Skin Procedures) than services assigned either to APC 1511 or APC 
1548. We note that the proposed rule claims data was based on claims 
submitted between January 1, 2014, through December 31, 2014, and 
processed on or before December 31, 2014. However, for this final rule 
with comment period, the cost data also includes claims that were 
processed on or before June 30, 2015. Specifically, our claims data 
show a geometric mean cost of approximately $1,579 based on 35 single 
claims (out of 52 total claims) for HCPCS code G0460. We believe that 
the geometric mean cost of the service described by HCPCS code G0460 
(approximately $1,579) is comparable to the geometric mean cost of APC 
5054.
    Therefore, after consideration of the public comments we received, 
we are finalizing our proposal to assign the service described by HCPCS 
code G0460 to one of the reconfigured skin procedure APCs, with one 
modification. We are assigning the service described by HCPCS code 
G0460 to APC 5054 (rather than proposed APC 5053) for CY 2016. The 
final CY 2016 payment rate for HCPCS code G0460 can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site). We remind the commenters that, 
as we do every year, we will again review the APC assignment for all 
items, procedures, and services, for the CY 2017 rulemaking cycle.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposed APC reconfiguration for the skin 
procedures and related services APCs, with the modifications described 
earlier. Table 37 below lists the final CY 2016 APCs that result from 
the consolidation and restructuring of the current skin procedures and 
related services APCs into a single APC grouping. The final payment 
rates for the specific CPT or Level II HCPCS skin procedure codes can 
be found in Addendum B to this final rule with comment period, while 
the final payment rates for the specific APCs to which the skin 
procedures and related services are assigned can be found in Addendum A 
to this final rule with comment period. Both OPPS Addenda A and B are 
available via the Internet on the CMS Web site.

          Table 37--CY 2016 APCs Assignment for Skin Procedures
------------------------------------------------------------------------
              CY 2016 APC                       CY 2016 APC 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.
------------------------------------------------------------------------

13. Urology and Related Services
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39263), for the CY 
2016 OPPS update, based on our evaluation of the latest hospital 
outpatient claims data used for the proposed rule, we proposed to 
revise all of the APCs for urology and related services APCs to more 
appropriately reflect the resource costs and clinical characteristics 
of the procedures assigned to each APC. Currently, several of the 
urology and related services APCs are differentiated based on resource 
costs of the procedures and services rather than the clinical 
similarity when compared to the other procedures and services assigned 
to the APC. We believe that establishing more inclusive categories of 
the urology and related services is more appropriate for future 
ratesetting under the OPPS because the proposed restructured APCs have 
a more clinically appropriate granularity, while improving the balance 
of resource similarities for all of the procedures

[[Page 70409]]

assigned to these APCs. In addition, we believe that this proposed 
revision and consolidation of APCs would more appropriately categorize 
all of the urology and related services within an APC grouping such 
that the services and procedures assigned to each proposed newly 
configured APC are most appropriately comparable with respect to 
clinical characteristics and resource use. Therefore, for CY 2016, we 
proposed to restructure and consolidate the urology and related 
services APCs into a single APC grouping. Table 33 of the proposed rule 
listed the CY 2015 urology and related services APCs and status 
indicator assignments, and Table 34 of the proposed rule listed the CY 
2016 APCs that would result from the proposed consolidation and 
restructuring of the current urology and related services APCs into a 
single APC grouping. We invited public comments on this proposal.
    Comment: Some commenters supported the proposed consolidation and 
reconfiguration of the urology and related services APCs, but expressed 
concern that the significant differences between the APC payment rates 
for the procedures and related services assigned to the proposed APCs 
are too broad, which could result in payment misalignments for certain 
procedures and services that utilize expensive supplies and equipment. 
Many other commenters disagreed with the proposed consolidation because 
they believed that the proposed APC reconfigurations and procedure 
reassignments are neither clinically or resource homogeneous. Several 
commenters stated that, although the existing urology APC 0163 (Level 
IV Cystourethroscopy and Other Genitourinary Procedures) is also 
diverse, similar to the proposed revised urology APCs, the procedures 
are based on expensive technology and single disease treatments. In 
addition, several commenters expressed concern with the proposed 
payment for the shockwave lithotripsy procedure described by CPT code 
50590 (Lithotripsy, extracorporeal shock wave). The commenters stated 
that shockwave lithotripsy is grouped in APC 5374 (Level 4 Urology and 
Related Services) with other procedures that are non-lithotripsy 
related and do not have the same capital expenditures. The commenters 
believed that assigning the shockwave lithotripsy procedure to the 
proposed reconfigured urology and related services APC 5374 would 
significantly underpay providers for the cost of the procedure and 
noted that the resources used to perform shockwave lithotripsy 
procedures are significantly greater than the resources used to perform 
many of the other procedures assigned to APC 5374. The commenters 
explained that the shockwave lithotripsy procedure involves the use of 
highly specialized capital equipment that cost approximately $50,000 
with an additional $80,000 to $100,000 per year contract maintenance, 
as well as the assistance of a certified technician. The commenters 
suggested that CMS consider modifying its proposal for restructuring 
and reconfiguring the urology and related services APCs by assigning 
the shockwave lithotripsy procedure to its own APC, separating APC 5374 
into two APCs and grouping the APCs based on disease process (for 
example, BPH and stone extraction, among others). The commenters 
believed that these changes would simplify the APC groupings and create 
an APC structure that is more rational. Another commenter recommended 
separating APC 5374 into two APCs: One APC that has lower cost/resource 
use, with a payment rate of approximately $2,150; and the other APC 
with higher cost/resource use, with a payment rate of approximately 
$3,091. The commenter believed that such a change to the structure and 
configuration of APC 5374 would improve the distribution of the urology 
and related services procedures assigned to this APC and reduce 
overpayments and underpayments for the services and procedures that are 
currently proposed to be assigned to the proposed APCs.
    Response: As part of our overall effort to improve the homogeneity 
of resource costs and clinical characteristic within the APC groupings, 
we proposed to revise the existing urology and related services APCs 
for CY 2016. We believe that the proposed restructuring and 
reconfiguration of the urology and related services APCs more 
appropriately reflect the homogeneity of resource costs and clinical 
characteristics of the procedures assigned within each APC.
    Although we do not agree with the commenters' suggestion that 
creating urology and related services APCs based on the specific 
disease treated by the procedure is necessary or appropriate, we 
understand some of the commenters' concerns. We continue to believe 
that establishing more inclusive categories of urology and related 
services is more appropriate for future ratesetting under the OPPS 
because the restructured APCs are comprised of more clinically 
appropriate groupings, while improving the balance of resource 
similarities for all of the procedures assigned to these APCs. However, 
in response to the concerns raised by the commenters, we are modifying 
our proposal by reassigning some of the procedures to APC 5374 to APC 
5373 (Level 3 Urology and Related Services) and APC 5375 (Level 5 
Urology and Related Services) rather than reassigning them to APC 5374. 
Specifically, the procedures that are being reassigned to APC 5375 are 
assigned status indicator ``J1'' because APC 5375 is a C-APC, and one 
of the procedures reassigned to APC 5375 is the shockwave lithotripsy 
procedure (described by CPT code 50590).
    Based on the commenters' feedback and our analysis of the latest 
hospital outpatient claims data used for this final rule with comment 
period, we believe that the procedure described by CPT code 50590 is 
more appropriately assigned to APC 5375 than APC 5374. The geometric 
mean cost for the procedure described by CPT code 50590 is 
approximately $3,243 based on 44,088 single claims (out of 44,403 total 
claims), which is comparable to the geometric mean cost of 
approximately $3,551 for APC 5375. Because we have modified our 
proposal and are reassigning certain procedures from APC 5374 to APCs 
5373 and 5375, we do not believe that it is necessary or appropriate to 
divide APC 5374 into two separate APCs. We believe that the 
modifications to our proposal to restructure and reconfigure APCs 5373, 
5374, and 5375 appropriately group the urology and related services 
based on the homogeneity of the clinical characteristics and resource 
use.
    Comment: One commenter requested that CMS reassign the following 
two laser vaporization procedures used to treat benign prostatic 
hyperplasia from APC 5374 to APC 5375:
     CPT code 52647 (Laser coagulation of prostate, including 
control of postoperative bleeding, complete (vasectomy, meatotomy, 
cystourethroscopy, urethral calibration and/or dilation, and internal 
urethrotomy are included if performed); and
     CPT code 52648 (Laser vaporization of prostate, including 
control of postoperative bleeding, complete (vasectomy, meatotomy, 
cystourethroscopy, urethral calibration and/or dilation, internal 
urethrotomy and transurethral resection of prostate are included if 
performed)).
    The commenter believed that these two procedures are similar to the 
procedure described by CPT code 52649 (Laser enucleation of the 
prostate with morcellation, including control of postoperative 
bleeding, complete (vasectomy, meatotomy, cystourethroscopy, urethral 
calibration

[[Page 70410]]

and/or dilation, internal urethrotomy and transurethral resection of 
prostate are included if performed)), which was proposed to be 
reassigned to APC 5375.
    Response: Based on input from our clinical advisors and analysis of 
the latest hospital outpatient claims data used for this final rule 
with comment period, we agree with the commenter that the procedures 
described by CPT codes 52647 and 52648 would be more appropriately 
reassigned to APC 5375. Our claims data show that the geometric mean 
cost of the procedure described by CPT code 52647 is approximately 
$3,296 based on 392 single claims (out of 393 total claims), and the 
geometric mean cost of the procedure described by CPT code 52648 is 
approximately $3,696 based on 20,813 single claims (out of 21,015 total 
claims). Based on our latest review, we believe that the geometric mean 
costs for procedures described by CPT codes 52647 and 52648 are similar 
to the geometric mean cost of other procedures assigned to APC 5375, 
whose geometric mean cost is approximately $3,551.
    Therefore, after consideration of the public comments received, we 
are finalizing our proposal, with modification, to reassign CPT codes 
52647 and 52648 to APC 5375. The final CY 2016 payment rates for the 
procedures described by CPT codes 52647, 52648, and 52649 can be found 
in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
    Comment: One commenter noted that, although the proposed 
reconfiguration of the urology and related services APCs would increase 
the payment rates for some services, the proposed reconfiguration would 
also decrease the payment rates for other procedures. In particular, 
the commenter expressed concern that the proposed reassignment would 
result in underpayment for the following CPT codes:
     51741 (Complex uroflowmetry (e.g., calibrated electronic 
equipment));
     55700 (Biopsy, prostate; needle or punch, single or 
multiple, any approach); and
     52000 (Cystourethroscopy (separate procedure)).
    The commenter stated that the proposed restructuring would decrease 
the payment rate for the procedure described by CPT code 51741 by 18 
percent within a single year. The commenter added that, similarly, 
payment rates for the procedures described by CPT codes 55700 and 52000 
would experience a decrease of 8 percent and 5 percent, respectively. 
The commenter expressed concern with the instability in payment rates, 
which the commenter suggested would hinder a hospital's ability to 
negotiate with suppliers and manufacturers on the purchase price of 
certain devices and services. Specifically, the commenter stated that, 
in order for hospitals to be able to forecast for the future and invest 
in technologies that are essential for providing high quality care, 
they need to be able to rely on stable and predictable payment rates.
    Response: We appreciate the commenter's input. Based on our review 
of the latest hospital outpatient claims data used for this final rule 
with comment period, we believe that reassigning CPT code 51741 to APC 
5721 (Level 1 Diagnostic Tests and Related Services) improves the 
homogeneity of resource use and clinical characteristics of the 
procedures in this APC. In addition, we believe that the proposed APC 
assignments for the procedures described by CPT codes 55700 and 52000 
are optimal. Our claims data reveal that CPT code 55700 has a geometric 
mean cost of approximately $1,475, which is comparable to the geometric 
mean cost of approximately $1,576 for APC 5373 (Level 3 Urology and 
Related Services). We also believe that the procedure described by CPT 
code 55700 is appropriately grouped in APC 5373 with clinically similar 
procedures. Further, we believe that CPT code 52000, whose geometric 
mean cost is approximately $574, is more appropriately assigned to APC 
5372 (Level 2 Urology and Related Services), whose geometric mean cost 
is approximately $549. We do not believe that we should assign CPT code 
52000 to the next higher level in the urology and related services APC, 
which is APC 5373 (Level 3 Urology and Related Services) and has a 
geometric mean cost of approximately $1,576, as this would result in a 
significant overpayment for the procedure. Moreover, reassigning CPT 
code 52000 from APC 5372 to APC 5373 would create a violation of the 2 
times rule within APC 5373.
    Overall, we believe that the proposed restructuring and 
reconfiguration of the urology and related services APCs appropriately 
reflect the similar resource costs and clinical characteristics of the 
procedures within each APC. We also believe that establishing broader 
categories of urology and related services APCs (as compared to CY 
2015) is more appropriate for future ratesetting under the OPPS because 
the restructured APCs support greater similarities in clinical 
characteristic and resource use of procedures assigned to APCs, while 
improving the homogeneity of the APC structure.
    In addition, section 1833(t)(9) of the Act requires the Secretary 
to review certain components of the OPPS not less often than annually, 
and to revise the groups, relative payment weights, and other 
adjustments that take into account changes in medical practices, 
changes in technologies, and the addition of new services, new cost 
data, and other relevant information and factors. Consistent with the 
requirements set forth in section 1833(t)(9) of the Act, we annually 
review all the items and services within an APC group to determine, 
with respect to comparability of the use of resources, if the geometric 
mean cost of the highest cost item or service within an APC group is 
more than 2 times greater than the geometric mean cost of the lowest 
cost item or service within that same group. In making this 
determination, we review our claims data and determine whether we need 
to make changes to the current APC assignments for the following year. 
Consequently, as we do every year for all services and procedures under 
the OPPS, we will again review the claims data for the procedures 
described by CPT codes 51741, 52000, and 55700 for the CY 2017 
rulemaking cycle.
    Therefore, after consideration of the public comments received, we 
are finalizing our proposal for CPT codes 55700 and 52000 to APC 5373 
and 5372, respectively. However, we are finalizing our proposal for CPT 
code 51741 with modification by reassigning this procedure from APC 
5734 to APC 5721 based on clinical and resource homogeneity within APC 
5721. The final CY 2016 payment rate for CPT codes 51741, 55700, and 
52000 can be found in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    Comment: One commenter expressed concern with the volume of 
procedures proposed to be reassigned to proposed APC 5374. In addition, 
the commenter was concerned that the proposed payment rates would 
result in underpayments for the following three CPT codes:
     50590 (Lithotripsy, extracorporeal shock wave);
     52601 (Transurethral electrosurgical resection of 
prostate, including control of postoperative bleeding, complete 
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or 
dilation, and internal urethrotomy are included); and
     52648 (Laser vaporization of prostate, including control 
of

[[Page 70411]]

postoperative bleeding, complete (vasectomy, meatotomy, 
cystourethroscopy, urethral calibration and/or dilation, internal 
urethrotomy and transurethral resection of prostate are included if 
performed).
    Response: As we discussed above, we are modifying our proposed APC 
assignments for the procedures described by CPT codes 50590 and 52648 
by reassigning the procedures from APC 5374 to APC 5375 for CY 2016, 
based on our evaluation of the latest hospital outpatient claims data 
used for this final rule with comment period. Similarly, we examined 
our latest claims data for CPT code 52601 and found that its geometric 
mean cost is comparable to that of APC 5375. Specifically, our claims 
data revealed that the procedure described by CPT code 52601 has a 
geometric mean cost of approximately $3,529 based on 27,568 single 
claims (out of 27,864 total claims), which is comparable to the 
geometric mean cost of approximately $3,551 for APC 5375.
    Therefore, after consideration of the public comments received, we 
are finalizing our proposal, with modification, by reassigning the 
procedures described by CPT codes 50590, 52601, and 52648 to APC 5375 
for CY 2016. The final CY 2016 payment rate for CPT codes 50590, 52601, 
and 52648 can be found in Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
    We are finalizing our proposal, with modification, to reconfigure 
the urology and related services into seven APCs. Table 38 below lists 
the final CY 2016 APCs that result from the consolidation and 
restructuring of the current urology procedures APCs into a single APC 
grouping. The final payment rates for the specific CPT or Level II 
HCPCS urology and related services codes are included in Addendum B to 
this final rule with comment period. The final payment rates for the 
specific APCs to which we are reassigning the urology and related 
services codes are included in Addendum A to this final rule with 
comment period. Both OPPS Addenda A and B are available via the 
Internet on the CMS Web site.

     Table 38--CY 2016 APCs Assigned to Urology and Related Services
------------------------------------------------------------------------
             CY 2016 APC                       CY 2016 APC 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.
------------------------------------------------------------------------

14. Vascular Procedures (Excluding Endovascular Procedures)
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39263 through 39264), 
for the CY 2016 OPPS update, based on our evaluation of the latest 
hospital outpatient claims data available for the proposed rule, we 
proposed 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 stated in the proposed rule that 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 of the 
CY 2016 OPPS/ASC proposed rule (80 FR 39263) lists the vascular 
procedures APCs for CY 2015, and Table 36 of the CY 2016 OPPS proposed 
rule (80 FR 39264) lists the proposed vascular procedures APCs for CY 
2016. We invited public comments on this proposal.
    Comment: One commenter noted that CPT code 93503 (Insertion and 
placement of flow directed catheter (e.g., Swan-Ganz) for monitoring 
purposes) and CPT code 93505 (Endomyocardial biopsy) are proposed to be 
assigned to APC 5181 (Level 1 Vascular Procedures), and stated that the 
codes are not clinically homogenous. The commenter believed that the 
APC assignment for these two codes could destabilize the APC and 
recommended a delay in implementation of these restructured APCs. In 
addition, the commenter stated that the procedures described by CPT 
codes 36818 (Arteriovenous anastomosis, open; by upper arm cephalic 
vein transposition), 36821 (direct, any site (e.g., Cimino type) 
(separate procedure)) and 36831 (Thrombectomy, open, arteriovenous 
fistula without revision, autogenous or nonautogenous dialysis graft 
(separate procedure)) are proposed to be assigned to APC 5182 (Level 2 
Vascular Procedures) but all of the procedures described by these codes 
have a significant volume of claims (that is, greater than 1,000) and 
would be substantially underpaid under their APC assignment relative to 
their geometric mean costs. For these codes, the commenter suggested a 
delay in implementation or reassignment to APC 5183 (Level 3 Vascular 
Procedures). Another commenter recommended that four cardiac procedures 
that were proposed to be assigned to APC 5181, specifically CPT 33215 
(Repositioning of previously implanted transvenous pacemaker or 
implantable defibrillator (right atrial or right ventricular) 
electrode), CPT 33226 (Repositioning of previously implanted cardiac 
venous system (left ventricular) electrode (including removal, 
insertion and/or replacement with existing generator)), CPT 93503, and 
CPT 93505, instead be assigned to APC 5188 (Diagnostic Cardiac 
Catheterization). The commenter also recommended the reassignment of 
the following CPT codes to APC 5183: CPT code 36222 (Selective catheter 
placement, common carotid or innominate artery, unilateral, any 
approach, with angiography of the ipsilateral extracranial carotid 
circulation and all associated radiological supervision and 
interpretation, includes angiography of the cervicocerebral arch, when 
performed); CPT code 36223 (Selective catheter placement, common 
carotid or innominate artery, unilateral, any approach, with 
angiography of the ipsilateral intracranial carotid circulation and all 
associated radiological supervision and interpretation, includes 
angiography of the extracranial carotid and cervicocerebral arch, when 
performed); and CPT code 36225 (Selective catheter placement, 
subclavian or innominate artery, unilateral, with angiography of the 
ipsilateral vertebral circulation and all associated radiological 
supervision and interpretation, includes angiography of the 
cervicocerebral arch, when performed). The commenter believed that 
these procedures, which were proposed to be assigned to APC 5526 (Level 
6 X-Ray and Related Services), would better align with the procedures 
assigned to APC 5183 because they are similar procedures with similar 
clinical characteristics.
    Another commenter suggested that the procedures described by CPT 
37799

[[Page 70412]]

(Unlisted procedure, vascular surgery), and CPT 93505 be reassigned 
from APC 5181 to 5182; that the procedure described by CPT 37501 
(Unlisted vascular endoscopy procedure) be reassigned from APC 5181 to 
APC 5183; and that the procedure described by CPT 36566 (Insertion of 
tunneled centrally inserted central venous access device, requiring 2 
catheters via 2 separate venous access sites; with subcutaneous 
port(s)) and CPT 36861 (External cannula declotting (separate 
procedure; with balloon catheter) be reassigned from APC 5182 to APC 
5183. The commenter believed that these suggested revisions would be 
more appropriate clinically and with respect to resource use.
    Response: We agree with some of the comments on the APC assignment 
change requests and disagree with others. Table 39 below lists all 
codes that were commented on and our decision on the final APC 
assignment.

      Table 39--Vascular Procedures With Specific Commenter Recommendations, Final CMS Decisions, Final APC Assignment and Final Status Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Proposed CY                                                              Final CY
                                                         2016 OPPS   Proposed CY     Commenter                                   2016 OPPS     Final CY
      CPT/HCPCS code             Short descriptor         status      2016 OPPS    requested APC          CMS decision            status      2016 OPPS
                                                         indicator       APC                                                     indicator       APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
33215.....................  Reposition pacing-defib              T          5181            5188  Disagree...................            T          5181
                             lead.
36222.....................  Place cath carotid/inom             Q2          5526            5183  Disagree...................           Q2          5526
                             art.
33226.....................  Reposition l ventric lead            T          5181            5188  Disagree...................            T          5182
36223.....................  Place cath carotid/inom              T          5526            5183  Agree......................           Q2          5183
                             art.
36225.....................  Place cath subclavian art           Q2          5526            5183  Disagree...................           Q2          5526
36566.....................  Insert tunneled cv cath..            T          5182            5183  Agree......................            T          5183
36818.....................  Av fuse uppr arm cephalic            T          5182            5183  Disagree...................            T          5182
36821.....................  Av fusion direct any site            T          5182            5183  Disagree...................            T          5182
36831.....................  Open thrombect av fistula            T          5182            5183  Disagree...................            T          5182
36861.....................  Cannula declotting.......            T          5182            5183  Agree......................            T          5183
37501.....................  Vascular endoscopy                   T          5181            5183  Disagree...................            T          5181
                             procedure.
37799.....................  Vascular surgery                     T          5181            5182  Disagree...................            T          5181
                             procedure.
93503.....................  Insert/place heart                   T          5181            5188  Disagree...................            T          5181
                             catheter.
93505.....................  Biopsy of heart lining...            T          5181    5182 or 5188  Agree with 5182............            T          5182
--------------------------------------------------------------------------------------------------------------------------------------------------------

    All of the APCs proposed for the codes listed in Table 39 above and 
all of the APCs suggested by commenters contain procedures involving 
the vascular system. For the codes with which we agree with the 
commenters, there is greater resource similarity between the procedure 
in question and the procedures in the APC requested by the commenter 
than the procedures in the proposed APC. In most cases where we 
disagree with the commenter in Table 39 above, the opposite is true, 
and resource similarity is greater for the proposed APC. By greater 
resource similarity, we mean that the geometric mean cost of the 
procedure is closer to the geometric mean cost of the APC to which we 
are assigning the code than it is to the APC to which the commenter 
requested assignment of the code.
    For CPT code 33215, we do not agree that the code should be 
reassigned from APC 5181to 5188. The final geometric mean cost of the 
procedure described by CPT code 33215 is approximately $1,575 and the 
final geometric mean cost of APC 5181 is approximately $903. The final 
geometric mean cost of APC 5188 is approximately $2,668. We believe 
that, given the significant resource dissimilarity between CPT code 
33215 and APC 5188, APC 5188 is not an appropriate APC assignment.
    For the procedure described by CPT code 36222, we do not agree that 
the procedure code should be reassigned from proposed APC 5526 to APC 
5183. The final geometric mean cost of the procedure described by CPT 
code 36222 is approximately $2,677, and the final geometric mean cost 
of APC 5526 is approximately $2,845. The final geometric mean cost of 
APC 5183 is approximately $3,971. We believe that, given the 
significant resource dissimilarity between CPT code 36222 and APC 5183, 
APC 5183 is not an appropriate APC assignment.
    For the procedure described by CPT code 33226, we do not agree that 
the procedure should be reassigned from proposed APC 5181 to APC 5188. 
The final geometric mean cost of the procedure described by CPT code 
33226 is approximately $2,190 and the final geometric mean cost of APC 
5181 is approximately $903. The final geometric mean cost of APC 5188 
is approximately $2,667. Upon further evaluation, based on resource use 
and clinical similarity to other assigned procedures, we believe that 
the appropriate APC assignment for CPT code 33226 is APC 5182, which 
has a final geometric mean cost of approximately $2,352.
    For the procedure described by CPT code 36225, we do not agree that 
it should be reassigned from proposed APC 5526 to APC 5183. The final 
geometric mean cost of the procedure described by CPT code 36225 is 
approximately $2,717 and the final geometric mean cost of APC 5526 is 
approximately $2,845. The final geometric mean cost of APC 5183 is 
approximately $3,971. We believe that, given the significant resource 
dissimilarity between the procedure described by CPT code 36225 and the 
procedures assigned to APC 5183, APC 5183 is not an appropriate APC 
assignment.
    For the procedure described by CPT code 36818, we do not agree that 
it should be reassigned from proposed APC 5182 to APC 5183. The final 
geometric mean cost of the procedure described by CPT code 36818 is 
approximately $2,960 and the final geometric mean cost of APC 5182 is 
approximately $2,352. The final geometric mean cost of APC 5183 is 
approximately $3,971. We believe that, given the significant resource 
dissimilarity between the procedure described by CPT code 36818 and the 
procedures assigned to APC 5183, APC 5183 is not an appropriate APC 
assignment.
    For the procedure described by CPT code 36821, we do not agree that 
it should be reassigned from proposed APC 5182 to APC 5183. The final

[[Page 70413]]

geometric mean cost of the procedure described by CPT code 36821 is 
approximately $2,880 and the final geometric mean cost of APC 5182 is 
approximately $2,352. The final geometric mean cost of APC 5183 is 
approximately $3,971. We believe that, given the significant resource 
dissimilarity between the procedure described by CPT code 36821 and the 
procedures assigned to APC 5183, APC 5183 is not an appropriate APC 
assignment.
    For the procedure described by CPT code 36831, we do not agree that 
it should be reassigned from proposed APC 5182 to APC 5183. The final 
geometric mean cost of the procedure described by CPT code 36831 is 
approximately $2,961 and the final geometric mean cost of APC 5182 is 
approximately $2,352. The final geometric mean cost of APC 5183 is 
approximately $3,971. We believe that, given the significant resource 
dissimilarity between the procedure described by CPT code 36831and the 
procedures assigned to APC 5183, APC 5183 is not an appropriate APC 
assignment.
    Regarding CPT codes 37799 and 37501, these are unlisted procedure 
codes, and according to our established policy, these codes are always 
assigned to the lowest level APC within a group.
    For the procedure described by CPT code 93503, we do not agree that 
it should be reassigned from proposed APC 5181 to APC 5188. The final 
geometric mean cost of the procedure described by CPT code 93503 is 
approximately $1,460 and the final geometric mean cost of APC 5181 is 
approximately $903. The final geometric mean cost of APC 5188 is 
approximately $2,667. We believe that, given the significant resource 
dissimilarity between the procedure described by CPT code 93503 and the 
procedures assigned to APC 5188, APC 5188 is not an appropriate APC 
assignment.
    After considering the public comments we received on the 
reorganization and restructuring of the vascular procedures APC family, 
we are finalizing the proposed APC structure depicted in Table 40 below 
and the proposed code assignments with the exception of those codes 
noted in Table 40 for which we are finalizing APC assignments that 
differ from the proposed rule in response to public comments. The final 
payment rates for the vascular procedure codes are included in Addendum 
B to this final rule with comment period (which is available via the 
Internet on the CMS Web site).

               Table 40--CY 2016 Vascular Procedures APCs
------------------------------------------------------------------------
             CY 2016 APC                    CY 2016 APC group title
------------------------------------------------------------------------
5181................................  Level 1 Vascular Procedures.
5182................................  Level 2 Vascular Procedures.
5183................................  Level 3 Vascular Procedures.
------------------------------------------------------------------------

15. Other Procedures and Services
a. Ear, Nose, Throat (ENT) Procedures
    For CY 2016, as a part of our review, restructuring, and 
reorganization of the OPPS APCs, we proposed to consolidate the APCs 
for ear, nose, and throat (ENT) procedures from seven levels in CY 2015 
to six levels for CY 2016.
    Comment: One commenter believed that the proposed consolidation of 
the ENT procedure APCs into six levels results in APC groups that 
contain a volume of procedures that is too large. The commenter 
requested that CMS add an APC grouping between proposed Level 4 and 
Level 5. The commenter did not provide any discussion regarding any 
problem caused by our proposed consolidation of the ENT APCs.
    Response: We disagree with the commenter that the ENT APC groups 
are too large. The cost ranges for the procedures within this APC 
series are within the 2 times rule limit. Moreover, many of the 
services assigned to these APC groups are low-volume services. 
Therefore, we do not believe that it is necessary to create a seventh 
level in the ENT procedures APC group for a small number of low-volume 
procedures. We will continue to monitor this APC grouping, and we will 
consider any adjustments as the need arises in the future.
b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)
    In the CY 2016 OPPS/ASC proposed rule, we proposed to assign new CY 
2016 CPT code 0398T (Magnetic resonance image guided high intensity 
focused ultrasound (MRgFUS), stereotactic ablation lesion, intracranial 
for movement disorder including stereotactic navigation and frame 
placement when performed) to APC 5625 (Level 5 Radiation Therapy), with 
a proposed payment of approximately $1,699. We also assigned CPT code 
0398T to comment indicator ``NP'' in Addendum B to indicate that the 
code is new for CY 2016 with a proposed APC assignment and that public 
comments would be accepted on the proposed APC assignment for the new 
code. The procedure described by CPT code 0398T involves treatment of 
an essential tremor using an MRgFUS procedure. We note that CPT code 
0398T will be effective January 1, 2016. However, this code was listed 
as 03XXA (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of 
the CY 2016 OPPS/ASC proposed rule. We invited public comments on our 
proposed APC assignment for CY 2016.
    In addition to proposing to assign the procedure described by CPT 
code 0398T to APC 5625, we also proposed to reassign the existing 
MRgFUS procedures to APC 5625, specifically the procedures described by 
following CPT/HCPCS codes:
     CPT code 0071T (Focused ultrasound ablation of uterine 
leiomyomata, including mr guidance; total leiomyomata volume less than 
200 cc of tissue);
     CPT code 0072T (Focused ultrasound ablation of uterine 
leiomyomata, including mr guidance; total leiomyomata volume greater or 
equal to 200 cc of tissue); and
     HCPCS code C9734 (Focused ultrasound ablation/therapeutic 
intervention, other than uterine leiomyomata, with magnetic resonance 
(mr) guidance).
    Comment: Commenters disagreed with the proposed assignment of the 
procedure described by CPT code 0398T to APC 5625, and requested that 
CMS not finalize the proposed APC assignment. The commenters believed 
that the resources associated with the procedure described by CPT code 
0398T are significantly different from the resources associated with 
MRgFUS procedures that are also being proposed for reassignment to APC 
5625. Specifically, the commenters stated that the resource costs 
associated with MRgFUS procedures for the treatment of essential tremor 
are significantly greater than the resource costs for the treatment of 
uterine fibroids (described by CPT codes 0071T and 0072T) or pain 
palliation for metastatic bone cancer (described by HCPCS code C9734) 
because procedures involving MRgFUS treatment for essential tremor 
requires additional unique resources that are not required with either 
uterine fibroids or pain palliation MRgFUS treatments. The commenters 
further explained that, while MRgFUS has been approved by the FDA for 
the treatment of uterine fibroids and pain palliation for metastatic 
bone cancer, it has not been approved for the treatment of essential 
tremor. The commenters also indicated that MRgFUS treatment for 
essential tremor is still in the clinical trial stage. Therefore, the 
commenters believed that it would be inappropriate to assign CPT code 
0398T to APC 5626, which is the same APC that the existing MRgFUS

[[Page 70414]]

procedures are being proposed to be reassigned.
    Furthermore, the commenters believed that CMS' proposal to assign 
the procedure described by CPT code 0398T to an APC without any 
available claims data could undervalue the payment for the procedure 
and ultimately prevent hospitals from furnishing the procedure to 
Medicare beneficiaries once it becomes FDA-approved. Another commenter 
noted that approval of the equipment associated with the MRgFUS 
procedure for the treatment of an essential tremor would not be 
approved by the FDA until the end of 2016. Therefore, the commenter 
stated that it would be unlikely that any Medicare beneficiaries would 
be eligible for the MRgFUS treatment for essential tremor before CY 
2017. To ensure an accurate APC assignment, the commenters requested 
that CMS not finalize an APC assignment for the procedure described by 
CPT code 0398T, and instead wait until additional data become available 
for ratesetting purposes Another commenter stated that assigning the 
procedure described by CPT code 0398T to APC 5625 is inappropriate 
because the APC's title, ``Level 5 Radiation Therapy'' indicates that 
procedures assigned to this APC describe procedures involving radiation 
therapies, and that MRgFUS procedures, including the procedure 
described by CPT code 0398T, do not involve the delivery of radiation 
or radiation therapy and, therefore, cannot be considered ``radiation 
therapies.''
    Response: We acknowledge that the FDA-approved indication for use 
and approval of the necessary equipment used in association with the 
procedure described by CPT code 0398T may not be granted during CY 
2016, and that there are no claims data available for ratesetting 
purposes. Therefore, we agree with the commenters that it would be more 
appropriate to not finalize the APC assignment for the procedure 
described by CPT code 0398T at this time. As a result, this procedure 
code will be assigned to OPPS status indicator ``E,'' effective January 
1, 2016, to indicate that the service is not paid by Medicare under the 
OPPS. Once the procedure and associated equipment involved with the 
MRgFUS treatment for essential tremor has received FDA approval and we 
have available claims data to use for ratesetting purposes, we will 
reevaluate the APC assignment for CPT code 0398T.
    Comment: One commenter believed that, based on the APC title, APC 
5625 describes procedures involving the delivery of radiation or 
radiation therapies, which does not adequately describe the procedures 
described by CPT codes 0071T and 0072T and HCPCS code C9734. 
Consequently, the commenter requested that CMS reassign CPT codes 0071T 
and 0072T to C-APC 5376 (Level 6 Urology and Related Services) and 
HCPCS code C9734 to C-APC 5124 (Level 4 Musculoskeletal Procedures). 
The commenter indicated that it performed its own internal analysis of 
the associated cost of providing these services and, based on its 
findings, believed that the resource use associated with these 
procedures (CPT codes 0071T and 0072T and HCPCS code C9734) is similar 
to the resource use associated with the procedures assigned to APC 5376 
and APC 5124.
    Response: CPT codes 0071T and 0072T became effective January 1, 
2005, and HCPCS code C9734 became effective April 1, 2013. Based on our 
analysis of the latest hospital outpatient claims data used for this 
final rule with comment period, which are claims submitted between 
January 1, 2014, and December 31, 2014, and processed on or before June 
30, 2015, we do not have any single claims that reported any of the 
three MRgFUS procedures. Therefore, we agree with the commenter that 
APC 5625 is not the most appropriate APC assignment for these three 
MRgFUS procedures based on clinical characteristics because these three 
MRgFUS procedures do not involve the delivery of radiation or radiation 
therapy. In addition, given the lack of single claims data for the 
procedures described by CPT codes 0071T and 0072T and HCPCS code C9734, 
we do not agree with the commenters' suggested APC assignments for 
these procedures. We believe that the clinical characteristics of the 
three MRgFUS procedures are significantly similar to the clinical 
characteristics of the procedures assigned to APCs 5414 (Level 4 
Gynecologic Procedures) and 5122 (Level 2 Musculoskeletal Procedures). 
Therefore, we are reassigning the procedures described by CPT codes 
0071T and 0072T to APC 5414, and the procedures described by HCPCS code 
C9734 to APC 5122.
    After consideration of the public comments we received, we are 
modifying our proposals and reassigning the procedures described by CPT 
codes 0071T and 0072T to APC 5414 and the procedures described by HCPCS 
code C9734 to APC 5122. In addition, we are not finalizing our proposed 
APC assignment for the procedure described by CPT code 0398T because 
the equipment associated with the performance of the procedure has not 
received FDA approval. As we previously stated, CPT code 0398T is 
assigned to OPPS status indicator ``E'' (Not paid by Medicare when 
submitted on outpatient claims (any outpatient bill type), effective 
January 1, 2016, to indicate that the service is not paid by Medicare 
under the OPPS. Once the procedure involving MRgFUS treatment for 
essential tremor receives FDA approval and we have available claims 
data for ratesetting purposes, we will reevaluate the APC assignment 
for CPT code 0398T. The final CY 2016 payment rate for CPT codes 
0071Tand 0072T and HCPCS code C9734 can be found in Addendum B to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
c. Stem Cell Transplant
    For CY 2016, we proposed to continue to pay for stem cell 
transplant procedures as we have done for many years through APCs 5271 
(Blood Product Exchange) and 5281 (Apheresis and Stem Cell Procedures). 
Specifically, we proposed to assign the procedure described by CPT code 
38240 (Hematopoietic progenitor cell (HPC); allogenic transplantation 
per donor) to APC 5281 (Apheresis/Stem Cell and Related Services), for 
which we proposed a CY 2016 geometric mean cost of approximately 
$3,217.
    Comment: Commenters opposed the proposed payment rate for the 
procedure described by CPT code 38240. The commenters stated that the 
current CY 2015 outpatient payment rate does not provide adequate 
payment for the total cost of an hematopoietic cell transplants (HCT), 
particularly donor cell acquisition costs. Commenters asked that CMS 
consider changing its payment methodology for donor cell acquisition 
costs and made the following specific requests of CMS to: (1) Create a 
separate, dedicated cost center line for HCT, similar to how it 
established the cost center line for Implantable Devices, MRIs, CT 
Scans, and Cardiac Catheterizations; (2) work with the NUBC to release 
a new, dedicated revenue code for providers to use when reporting their 
HCT donor search and cell acquisition charges; (3) create payment 
parity for the donor search and cell acquisition component of HCT 
between the inpatient and outpatient settings; (4) recognize the search 
and procurement costs associated with HCT transplant and develop a 
reasonable cost basis solution for HCT that mimics the acquisition cost 
procedures for solid organ transplantation; (5) if CMS chooses not to 
consider number (4) request, find a

[[Page 70415]]

way to incorporate the donor search and cell acquisition charges 
reported through revenue code 819 into the overall outpatient 
transplant APC rate (The commenters suggested that CMS could 
incorporate this suggested change by creating a Composite APC whereby 
it identifies the allogenic transplant CPT code and a revenue code 0819 
and creates an appropriate payment rate, or that CMS could study 
applying the C-APC concept to HCT.); (6) require transplant centers to 
submit their actual cost information on the UB-04s for patients 
receiving both allogeneic related and unrelated transplants; and (7) 
instruct providers to report their actual cost on the revenue code 0819 
claim line item in order for CMS to apply a default CCR of 1.0 for 
claims reporting outpatient allogeneic HCT procedures (This would be 
defined by the presence of an outpatient allogeneic CPT procedure 
code.). In addition, one commenter asked that CMS describe clearly in 
the preamble to the final rule that it is incumbent on hospitals to 
report their entire donor search and cell acquisition charges on the 
recipient's transplant claim.
    Response: We continue to believe that the procedure described by 
CPT code 38240 is appropriately assigned to APC 5281 because its 
geometric mean cost and clinical characteristics are similar to other 
procedures assigned to APC 5281. We note the commenters' concerns that 
donor acquisition cost is not appropriately captured in the current 
payment methodology for HCT procedures. As we have previously stated, 
allogeneic harvesting procedures, which are performed not on the 
beneficiary but on a donor, cannot be paid separately under the OPPS 
because hospitals may bill and receive payment only for services 
provided to the Medicare beneficiary who is the recipient of the HCT 
procedure, and whose illness is being treated with the transplant. We 
stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60575) and in section 231.11 of Chapter 4 of the Medicare Claims 
Processing Manual (Pub. 100-04) that payment for allogeneic stem cell 
acquisition services (such as harvesting procedures and donor 
evaluation) is packaged into the payment for the transplant procedure 
(either the Medicare Severity Diagnosis Related Group (MS-DRG) when the 
transplant is performed on an inpatient basis, or the APC when the 
transplant is performed on an outpatient basis). Hospitals should 
report all allogeneic outpatient HCT procedure acquisition charges on 
the recipient's outpatient claim as uncoded charges under revenue code 
0819.
    In response to comments concerning the creation of a dedicated cost 
center and/or revenue code for HCT procedures, payment parity for the 
donor search and cell acquisition component of HCT procedures between 
the inpatient and outpatient settings, requiring transplant centers to 
submit their actual cost information on the UB-04s for both allogeneic 
related and unrelated transplant patients, and applying a default CCR 
of 1.0 for outpatient allogeneic HCT claims, we note that we did not 
make any such proposals in the CY 2016 OPPS/ASC proposed rule. 
Therefore, we consider these comments outside the scope of the proposed 
rule and are not responding to them in this final rule with comment 
period. We will take these suggestions into consideration for future 
rulemaking.
    While converting the outpatient stem cell transplant APCs to 
composite APCs or C-APCs would reduce to a small degree the 
differential between the OPPS payment rate and the costs as represented 
in the public comment we received, it would only provide a relatively 
modest increase in payment, consistent with our previous data studies 
on this issue. We believe that we need to further examine the costs 
associated with outpatient stem cell transplant services and how their 
costs could best be captured for ratesetting purposes in the OPPS. 
These transplant services remain low-volume in the HOPD. However, we 
will continue to monitor this issue and the volume of outpatient 
allogeneic transplant services.
    After consideration of the public comments we received, we are 
finalizing our CY 2016 proposal, and continuing to assign the services 
described by CPT code 38240 to APC 5281, for which the final CY 2016 
geometric mean cost is approximately $3,155.

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    Section 1833(t)(6)(B)(iii) of the Act 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. 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, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39264), we proposed, beginning with CY 
2016, 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.
    We stated in the proposed rule that 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).
    We did not receive any public comments on this proposal. Therefore,

[[Page 70416]]

we are finalizing our proposal to expire device pass-through payments 
for the device described by HCPCS code C1841, effective January 1, 
2016.
2. 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 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 another 
appropriate FDA exemption; (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 to 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 to be included in the category 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.
    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 previous 
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, in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39265), for CY 2016, we proposed changes to the 
OPPS device pass-through payment application process to help achieve 
the goals of increased transparency and stakeholder input. We proposed 
to align a portion of the OPPS device pass-through payment application 
process with the already established Hospital 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

[[Page 70417]]

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 proposed for the transitional medical device pass-through 
payment application process under the OPPS in the section below.
b. Revisions to the Application Process for Device Pass-Through 
Payments
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39265), we proposed, 
beginning in CY 2016, to add a rulemaking component to the current 
quarterly device pass-through payment application process. That is, we 
proposed 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 proposed that 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's 
proposed rule, assuming that the device would still be considered new, 
as described in the section below. A summary description of 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. The information requested in the device pass-
through payment application itself would not change as a result of the 
proposed process changes.
    For applications that we deny during the quarterly review process, 
we proposed 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 has been in place prior to CY 2016 for denied applications, we 
would only provide opportunity to reconsider applications that are 
denied through the rulemaking process. We proposed 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 approve or deny an application for device pass-through 
payments under the OPPS.
    Currently, the deadline for device pass-through payment application 
submission 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 invited 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.
    Comment: Commenters generally supported the addition of an annual 
rulemaking process, while maintaining a quarterly submission process. 
The commenters, in particular, supported the increased transparency and 
stakeholder input that would occur with an annual rulemaking component 
because it would increase both equity and predictability in the 
process. In addition, the commenters supported providing the industry 
with necessary information regarding approval standards and the 
opportunity for Medicare beneficiaries to have access to this important 
information.
    Response: We appreciate the commenters' support. We agree that our 
proposal to add a rulemaking element to the device pass-through process 
will increase transparency and stakeholder input in the device pass-
through process. We also believe that seeking public comment through 
rulemaking on pass-through applications will allow for a more rigorous 
review of applications and will enable prospective applicants to gain 
insights to help with the development of their applications.
    Comment: Some commenters suggested that CMS publicize all final 
decisions and their rationale on a quarterly basis, in addition to the 
yearly rulemaking process.
    Response: Under our current quarterly review process, we include 
information about proper coding for applications that are approved for 
pass-through payment in the quarterly transmittals called ``change 
requests'' (CRs). We do not currently publish any information about 
applications that are not approved. We do not believe it is necessary 
to notify the public of submitted applications and our decisions 
outside of the annual rulemaking process. That is, we believe that 
notifying the public annually of applications under review for 
rulemaking and, ultimately our decisions on pass-through payment

[[Page 70418]]

status in the final rule, provides sufficient transparency and is 
consistent with most other payment determinations. However, we will 
continue to publish coding information for applications approved on a 
quarterly basis through our quarterly CRs. In addition, we are 
finalizing in this final rule with comment period a policy that 
applicants whose applications are not approved through the quarterly 
review process may elect to withdraw their application from 
consideration in the next applicable rulemaking cycle.
    Comment: Several commenters expressed concern that, under the 
proposed process with respect to applications that are denied upon 
quarterly review, the ability of submitters to have their applications 
reconsidered in a timely manner is limited. In addition, the commenters 
believed that having a reconsideration process moved to annual 
rulemaking (instead of having opportunity on a quarterly basis) would 
lead to lengthy gaps between receipt of a denial and the ability to 
submit additional documentation. The commenters were particularly 
concerned about timeliness in light of the proposal to more strictly 
define ``newness'' for device pass-through applications. One commenter 
also believed that there was potential for a backlog of applications by 
moving to an annual decision-making process. One commenter suggested 
that CMS evaluate reconsiderations quarterly for cases in which new 
data became available and allow for a 60-day public comment period 
through a separate Federal Register publication process, outside of the 
annual rulemaking process.
    Response: We are sensitive to the commenters' concern about the 
timeliness of review of denied quarterly applicants. However, we do not 
believe that a quarterly reconsideration process with a 60-day comment 
period in addition to notice-and-comment rulemaking is necessary. As 
noted earlier, the public has been supportive of the benefits of having 
device pass-through payment applications go through a public rulemaking 
process. While we appreciate the comment about a potential backlog of 
applications, we do not anticipate a backlog based on the prior and 
current volume of applications received.
    In response to the commenters' concerns about applications that are 
denied upon quarterly review not having the ability to be reconsidered 
on a quarterly basis, we note that, as described in the section below, 
the proposed newness period only applies to the date upon which an 
application must be submitted through the quarterly application 
process. Therefore, a quarterly denial should not impact the ability of 
an application from being considered through the next applicable annual 
rulemaking cycle, so long as the quarterly application was submitted 
within 3 years of the initial FDA approval or clearance. Nonetheless, 
in response to comments articulating concerns about applications that 
receive a denial upon quarterly review, we are modifying our proposal 
in this final rule with comment period. Specifically, rather than 
denying an application based on quarterly review, for applications that 
we do not approve based upon the evidence available during the 
quarterly review process, we will instead seek public comment on the 
application in the next applicable rulemaking cycle. No special 
reconsideration process would be necessary, as no decision would be 
made until the rulemaking process is complete. Applicants could submit 
new data, such as clinical trial results published in a peer-reviewed 
journal, for consideration in advance of the following year's proposed 
rule and during the public comment period under the rulemaking process.
    Comment: Several commenters expressed concern about the possibility 
of quarterly approvals being reversed through the rulemaking process. 
The commenters emphasized that there should be a high bar to reversing 
quarterly approved applications and believed that such a reversal would 
cause disruption for Medicare beneficiaries who may anticipate 
utilizing the device. One commenter suggested that, if a quarterly 
approved device pass-through applicant is denied in the final rule, CMS 
should consider any subsequent reapplication for that application on a 
quarterly basis.
    Response: As we stated in our proposed rule, we expect that it 
would be a rare case where an application that was approved for device 
pass-through payment under the quarterly review process is reversed in 
the annual rulemaking process. However, we will consider all public 
comments on each application, including clinical evidence that may not 
have been available upon the quarterly review of the application. 
Individuals, including the manufacturers of devices under review for 
device pass-through payment, also would be able to submit public 
comments demonstrating how the device meets the device pass-through 
payment criteria. As stated previously in this section, we do not 
believe that a quarterly reconsideration process in addition to notice-
and-comment rulemaking is necessary. We note that, in the 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 a new quarterly application that provides new 
information, in advance of the following year's proposed rule, assuming 
that the device is still new, which would be the case if the new 
quarterly application is submitted within 3 years of the initial FDA 
approval or clearance.
    After consideration of the public comments we received, we are 
finalizing our proposal for processing applications for new device 
pass-through payments with one modification. Specifically, beginning in 
CY 2016, we are adopting a policy that all device pass-through payment 
applications submitted through the quarterly subregulatory process will 
be subject to notice-and-comment rulemaking in the next applicable OPPS 
annual rulemaking cycle. However, rather than denying an application 
based on quarterly review, for applications that we do not approve 
based upon the evidence available during the quarterly review process, 
we will instead seek public comment on the application in the next 
applicable annual rulemaking cycle. Under this final policy, all 
applications that are approved upon quarterly review will automatically 
be included in the next applicable OPPS annual rulemaking cycle, while 
submitters of applications that are not approved upon quarterly review 
will have the option of being included in the next applicable OPPS 
annual rulemaking cycle or withdrawing their application from 
consideration entirely. No special reconsideration process would be 
necessary, as no denial decision would be made except through the 
annual rulemaking process. Applicants will be able to submit new data, 
such as clinical trial results published in a peer-reviewed journal, 
for consideration during the public comment process for the proposed 
rule. This process allows those applications that we are able to 
determine meet all the criteria for device pass-through payment under 
the quarterly review process to receive timely pass-through payment 
status, while still allowing for a transparent, public review process 
for all applications.
c. Criterion for Newness
    Since the inception of transitional pass-through payments for 
medical devices on April 7, 2000, we have not had any specific criteria 
to evaluate the newness of the device for purposes of determining 
eligibility and receiving

[[Page 70419]]

device pass-through payment under the OPPS. We believe that one 
consideration in determining whether a new category is warranted should 
be whether or not the device seeking such new category status is itself 
new. We believe that transitional pass-through payments for devices 
under the OPPS are intended as an interim measure to allow for adequate 
payment for new innovative technology while we collect 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 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. 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 U.S. market for several 
years. We do not believe that this is consistent with the intent of the 
regulation. Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 
39266), we proposed 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 submitted on or after January 1, 2016, CMS 
will consider only applications for a medical device submitted within 3 
years from the date of the initial FDA approval or clearance. That is, 
we proposed to add a requirement to ensure that medical devices falling 
under Sec.  419.66(b)(1) and seeking device pass-through payment must 
be ``new.'' This proposed adjustment also would 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 proposed to reflect in Sec.  419.66(b)(1) that, 
beginning with applications submitted 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 or initial 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 invited public comments on 
this proposal.
    Comment: Some commenters supported the proposed newness criterion. 
They believed that the proposed newness criterion would provide greater 
certainty for applicants and that it would more closely align with the 
IPPS new technology add-on criteria.
    Response: We appreciate the commenters' support. We agree that this 
criterion will provide additional clarity for device pass-through 
applicants.
    Comment: Several commenters opposed the proposed addition of the 
newness criterion. They believed that the criterion was unnecessary. 
Other commenters offered alternative proposals for defining newness 
that mirror the FDA approval processes. Specifically, some commenters 
suggested that any application that was approved by the FDA under the 
510(k) or PMA process should be considered new, and some commenters 
suggested that any technology, for which the FDA establishes a new 
product code, be considered ``new'' for purposes of device pass-through 
payments. In addition, the commenters who opposed the newness criterion 
stated that it may have unforeseen and unintended consequences that 
could result in limiting beneficiary access to beneficial new 
technologies, with specific concern about delay in availability on the 
U.S. market or to limited sales that would prevent generation of 
adequate claims data.
    Response: We believe that the payment adjustment for transitional 
pass-through payments for devices under the OPPS is intended as an 
interim measure to allow for adequate payment of a new innovative 
technology while we collect the necessary data to incorporate the costs 
for these devices into the base APC rate (66 FR 55861). We believe that 
instituting a newness criterion will help to ensure that only those 
devices that are truly new and that could not have already been 
sufficiently reflected in our claims data are eligible to receive these 
enhanced payments. In our experience, we have received applications for 
devices that received FDA approval several years prior to the 
submission of the pass-through payment application. Sometimes these 
devices have not been well-adopted by the medical community due to 
issues such as changes in device ownership or difficulties with coding 
and payment. However, we believe that the primary intent of 
transitional pass-through payments is to address dissemination of new 
technology. We believe that adopting a newness criterion will help 
ensure that applications that represent devices newly available on the 
market that have not had time to be incorporated into the OPPS claims 
data will be considered for the additional pass-through payments.
    In response to suggestions to use the FDA definitions for newness, 
although FDA approval or clearance is required for a device pass-
through payment application to be considered (unless the device is 
exempt, as described in Sec.  419.66(b)(1)), we do not believe that a 
new product code from the FDA, which is used by FDA to classify and 
track a medical device, is relevant in CMS' consideration of whether 
the device is new for the purposes of device pass-through payment. A 
new device, as designated by the FDA, may be substantially similar to 
an existing technology. That is, even if a technology receives a new 
FDA approval, it may not be necessarily considered ``new'' for purposes 
of device pass-through payments under the OPPS because a substantially 
similar product has been approved by the FDA and has been on the U.S. 
market for more than 2 to 3 years. Given the length of time that a 
substantially similar product has been on the U.S. market, its costs 
would already be incorporated into the base APC rate. Lastly, we note 
that the newness criterion only applies to the 3-year window in which 
an applicant can apply for device pass-through payments and does not 
affect the amount of time that a new device would be eligible for pass-
through payments should it be approved.

[[Page 70420]]

    Comment: One commenter suggested that, similar to the IPPS new 
technology add-on payment process, CMS should follow a timeline for FDA 
approval of a device by a date that coincides with the ability to 
include the application in the proposed rule. Specifically, the 
commenter suggested that applicants be required to have received FDA 
approval by no later than the first business day in June, in order to 
be considered in that calendar year rulemaking process.
    Response: We proposed to supplement the quarterly device pass-
through review process by adding a yearly rulemaking process. Under 
this proposed policy, which we are finalizing in this final rule with 
comment period, all applicants will have already undergone a quarterly 
review process prior to consideration in the annual rulemaking. Under 
existing policy, devices are already required to have FDA approval or 
clearance, with exceptions as noted at Sec.  419.66(b)(1), before a 
review can be completed. Therefore, we do not believe that FDA approval 
or clearance by a June 1 date is necessary for the annual rulemaking 
process.
    We wish to clarify that we specified ``initial'' FDA clearance or 
approval in Sec.  419.66(b)(1) because, in some cases, the FDA will 
provide supplemental approvals or clearances for a device after the 
initial approval or clearance. We intended to convey that the 3-year 
timeframe for submitting a device pass-through payment application 
would be triggered by the FDA initial approval or clearance, and not by 
any subsequent FDA approvals or clearances.
    Comment: Some commenters noted that new products frequently 
experience delays in approval by FDA before these technologies are 
available on the U.S. market and recommended that the period of newness 
begin with the date of first sale. One commenter opposed the proposed 
newness criterion but requested that, if the agency finalized the 
proposal, CMS develop necessary exceptions to the newness criterion for 
situations in which the 3-year newness window would be 
``unreasonable.''
    Response: We understand the commenters' concerns about delays in 
approved devices being available on the U.S. market. We also note that 
the IPPS new technology add-on process recognizes a date later than the 
FDA approval as the appropriate starting date for ``newness'' if there 
is a documented delay in market availability (69 FR 49002 through 
49003). For the OPPS, we believe that the payment adjustment for 
transitional pass-through payments for devices is intended as an 
interim measure to allow for adequate payment of new innovative 
technology while we collect 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. 
However, we recognize that, in some cases, FDA approval or clearance 
may not correspond to the date upon which the device becomes available 
on the U.S. market. That is, we recognize that there may be cases where 
the product initially is unavailable to Medicare beneficiaries 
following FDA approval, such as in cases of a delay in bringing the 
product to the U.S. market (for instance, manufacturing issues or other 
Federal regulatory issues, such as a national coverage determination of 
noncoverage in the Medicare population). Therefore, we are modifying 
our proposal and will consider newness to begin on the later of initial 
FDA approval or clearance date or U.S. market availability if there is 
a documented, verifiable delay in market availability.
    Comment: One commenter suggested that CMS delay the newness 
criterion until CY 2017 rulemaking to allow for more information and 
clarity.
    Response: We believe that we have received useful stakeholder input 
on this proposal, and we are modifying our proposal in response to 
concerns raised by a number of commenters. We do not agree that there 
is a need for delay in implementation.
    After consideration of the public comments we received, we are 
finalizing our proposal to add a newness criterion (under the 
regulations at Sec.  419.66(b)(1)) for CY 2016 for approval of new 
device pass-through payments, with a modification that newness will 
begin on the later of the initial FDA approval or clearance date or 
U.S. market availability if there is a documented, verifiable delay in 
market availability.
3. 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 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-

[[Page 70421]]

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. CY 2016 Policy
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39267), we proposed 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 proposed to 
continue our established policies for calculating and setting the 
device APC offset amounts for each device category eligible for pass-
through payment. In addition, we proposed to continue to review each 
new device category on a case-by-case basis to determine whether device 
costs associated with the new category are already packaged into the 
existing APC structure. If device costs that are packaged into the 
existing APC structure are associated with the new category, we 
proposed to deduct the device APC offset amount from the pass-through 
payment for the device category. As stated earlier, these device APC 
offset amounts also would be used in order to evaluate whether the cost 
of a device in an application for a new device category for pass-
through payment is not insignificant in relation to the APC payment 
amount for the service related to the category of devices (Sec.  
419.66(d)).
    In addition, we proposed 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.
    In response to the CY 2016 OPPS/ASC proposed rule, we received a 
few public comments that related to aspects of the pass-through device 
policy on which we did not propose changes. The comments addressed 
highly technical and operational matters and pertained to matters that 
are addressed in subregulatory guidance. Therefore, we believe these 
public comments are outside of the scope of the proposed rule, and we 
are not addressing them in this final rule with comment period. We note 
that the public may contact us via other means to discuss these types 
of issues.
    In this final rule with comment period, we are finalizing the 
proposed pass-through device policy for reducing transitional pass-
through payments to offset costs packaged into APC groups, without 
modification.

B. 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 of 
the procedures within the APC are calculated and the geometric mean 
device offset of all of 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 final rule with 
comment period. 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. Changes to the Device Edit Policy
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66795), 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 41 (the formerly 
device-dependent APCs) is reported on the claim.

Table 41--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 41 that are not device-intensive 
APCs; that is, their device offsets do not exceed 40 percent. As 
discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39267), we do 
not believe that we should continue to require device codes on claims 
for procedures that are not assigned to device-intensive APCs because 
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. We noted 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, as stated in the CY 2016 
OPPS/ASC proposed rule (80 FR 39268), 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

[[Page 70422]]

procedures assigned to all device-intensive APCs because these are the 
APCs with significant device costs. Therefore, for CY 2016, we proposed 
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 was listed in Table 38 of 
the CY 2016 OPPS/ASC proposed rule (80 FR 39268).
    In the CY 2016 OPPS/ASC proposed rule, we proposed 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 of the 
proposed rule (80 FR 39268), would satisfy the edit. Claims submitted 
with a procedure code requiring a device assigned to an APC listed in 
Table 38 of the proposed rule, but without any device code reported on 
the claim, would be returned to the provider.
    Comment: A number of commenters supported CMS' proposal to apply 
device code reporting requirements to procedures that require the 
implantation of a device and that are assigned to a device-intensive 
APC. One commenter who supported the proposal recommended that CMS 
continue to monitor claims to evaluate the need to reinstate all device 
edits. Other commenters urged CMS to reinstate device-to-procedure 
edits. One commenter expressed concern that removal of procedure-to-
device code edits could potentially cause device-to-procedure code 
mismatches in the CY 2015 claims data, which, ultimately, could result 
in incorrect APC payment rates. One commenter requested that CMS 
require device coding for any procedure that has a device offset of 
greater than 40 percent, regardless of whether the procedure is 
assigned to a device-intensive APC. A few commenters requested that CMS 
remove APC 5221 from the ``device intensive'' APC list because the 
procedures described by the HCPCS codes assigned to APC 5221 represent 
procedures for device removal, revision, and repair, which do not 
require or include the device itself.
    Response: We appreciate the commenters' support. We will continue 
to monitor the claims data to ensure that hospitals continue reporting 
appropriate device codes on the claims for device-intensive APCs. We 
continue to believe that the elimination of device-to-procedure edits 
and procedure-to-device edits is appropriate due to the experience 
hospitals now have in coding and reporting these claims fully. For the 
more costly devices, we believe the C-APCs will reliably reflect the 
cost of the device if charges for the device are included anywhere on 
the claim. We remind the commenters that, under our proposed policy, 
hospitals would still be expected to adhere to the guidelines of 
correct coding and append the correct device code to the claim when 
applicable. We also remind the commenters that, as with all other items 
and services recognized under the OPPS, we expect hospitals to code and 
report their device costs appropriately, regardless of whether there 
are claims processing edits in place. We do not believe that our 
proposed policy will result in device-to-procedure code mismatches, 
which would require miscoding by hospitals. We continue to expect 
hospitals to use an appropriate device code consistent with correct 
coding in order to ensure that device costs are always reported on the 
claim and that costs are appropriately captured in claims that CMS uses 
for ratesetting.
    In response to the commenter's request that CMS require device 
coding for any procedure that has a device offset of greater than 40 
percent, regardless of whether the procedure is assigned to a device-
intensive APC, we note that we did not propose such a policy change. 
However, we will take this comment into consideration for future 
rulemaking. We also note that APC 5221 does not have a final device 
offset of greater than 40 percent. Therefore, we are not finalizing it 
as a device-intensive APC for CY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, that, beginning in CY 
2016, only the procedures that require the implantation of a device 
that are assigned to a device-intensive APC will require a device code 
on the claim. We also are finalizing, without modification, our 
proposal 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 42 below will satisfy the edit.
    Table 42 below lists the CY 2016 device-intensive APCs.

                 Table 42--CY 2016 Device-Intensive APCs
------------------------------------------------------------------------
      Renumbered CY 2016 APC                  CY 2016 APC title
------------------------------------------------------------------------
1565..............................  New Technology--Level 28 ($5,000-
                                     $5,500).
1599..............................  New Technology--Level 48 ($90,000-
                                     $100,000).
5125..............................  Level 5 Musculoskeletal Procedures.
5166..............................  Level 6 ENT Procedures.
5192..............................  Level 2 Endovascular Procedures.
5193..............................  Level 3 Endovascular Procedures.
5222..............................  Level 2 Pacemaker and Similar
                                     Procedures.
5223..............................  Level 3 Pacemaker and Similar
                                     Procedures.
5224..............................  Level 4 Pacemaker and Similar
                                     Procedures.
5231..............................  Level 1 ICD and Similar Procedures.
5232..............................  Level 2 ICD and Similar Procedures.
5377..............................  Level 7 Urology and Related
                                     Services.
5462..............................  Level 2 Neurostimulator and Related
                                     Procedures.
5463..............................  Level 3 Neurostimulator and Related
                                     Procedures.
5464..............................  Level 4 Neurostimulator and Related
                                     Procedures.
5471..............................  Implantation of Drug Infusion
                                     Device.
5493..............................  Level 3 Intraocular Procedures.
5494..............................  Level 4 Intraocular Procedures.
------------------------------------------------------------------------

3. 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 device 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

[[Page 70423]]

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. Policy for CY 2016
    For CY 2016 and subsequent years, in the CY 2016 OPPS/ASC proposed 
rule (80 FR 39268), we proposed 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 proposed to continue to reduce the OPPS 
payment, for the device-intensive APCs listed in Table 38 of the 
proposed rule (80 FR 39268), 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 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. As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 
39269), 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 CY 
2015 policy, the actual amount of the device credit can be 
appropriately reported in the amount portion of value code ``FD'' and 
deducted from the 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 
proposed 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 proposed 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, in the CY 2016 OPPS/ASC proposed 
rule (80 FR 39269), we also proposed to continue using the three 
criteria established in the CY 2007 OPPS/ASC final rule with comment 
period for determining the APCs to which 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.
    Comment: A number of commenters supported CMS' proposed policy. One 
commenter recommended that CMS continue to provide lists of both the 
device-intensive APCs and the device HCPCS codes for which a credit 
would need to be reported.
    Response: We appreciate the commenters' support. As stated in the 
proposed rule (80 FR 39269), we no longer believe it is necessary to 
restrict the application of this policy to a specific list of costly 
devices as was necessary under the ``FB''/``FC'' modifier payment 
adjustment policy. Therefore, we no longer believe it is necessary to 
specify a list of devices to which the OPPS payment adjustment for no 
cost/full credit and partial credit devices would apply.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to reduce 
the OPPS payment, for the device-intensive APCs (listed in Table 42 of 
this final rule with comment period), by the full or partial credit a 
provider receives for a replaced device. We also are finalizing our 
proposal, without modification, 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 and instead, apply this APC payment 
adjustment to all replaced devices furnished in conjunction with a 
procedure assigned

[[Page 70424]]

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. In addition, we are finalizing our proposal, without 
modification, to continue using the three criteria established in the 
CY 2007 OPPS/ASC final rule with comment period for determining the 
APCs to which the CY 2016 device intensive policy will apply.
    As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39269), 
we examined the offset amounts calculated from the CY 2016 claims data 
and the clinical characteristics of the CY 2016 APCs to determine which 
APCs meet the criteria for CY 2016. The full list of device-intensive 
APCs to which the payment adjustment policy for no cost/full credit and 
partial credit devices would apply in CY 2016 is included in Table 42 
of this final rule with comment period.
4. Adjustment to OPPS Payment for Discontinued Device-Intensive 
Procedures
    It has been our longstanding policy to instruct hospitals to use an 
appropriate modifier on a claim to report when a procedure is 
discontinued, partially reduced, or canceled. 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 
block(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 
block(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, in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39269 through 39270), we proposed that, for 
procedures involving implantable devices that are assigned to a device-
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 
proposed 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. We did not propose 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 solicited 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. In 
addition, we proposed to amend the existing regulations at 42 CFR 
419.44(b) accordingly.
    Comment: Commenters generally opposed the proposal. The commenters 
disagreed with CMS' assumption that devices involved in discontinued 
procedures were able to be used for another case. One commenter noted, 
for example, that a nurse may unpack and breach the sterility of 
implantable devices and other sterile supplies prior to the decision to 
proceed with the surgery and before the administration of anesthesia. 
The commenters also noted that companies do not routinely provide 
information on how to resterilize the devices after the packaging has 
been opened. The commenters urged CMS not to finalize the proposals, 
absent a study or evidence that showed that devices remain sterile in 
discontinued procedures.
    Response: We note that the commenters did not provide a clinical 
reason for why an implantable device would need to be opened in advance 
of a procedure. Although we acknowledge that some hospitals may choose 
to open devices prior to the start of the surgery, we do not believe 
that this practice is necessary. We continue to believe that, in the 
majority of cases, supplies for a procedure can be arrayed in advance 
of the procedure, and that implantable devices that are assigned to a 
device-

[[Page 70425]]

intensive APC could be opened when ready for insertion. Further, in the 
case of a device that became unsterile but was not ultimately used in a 
procedure, in addition to information that is already available from 
the FDA about resterilizing reusable medical devices, we note that the 
manufacturer may provide information on how to ``resterilize'' such a 
device. We would expect that the hospital would take necessary steps to 
avoid having to throw away an unused device, especially in 
circumstances involving expensive devices.
    Comment: Some commenters supported CMS' existing policy to reduce 
the APC payment for procedures that were discontinued, but requested 
that CMS not reduce any of the device cost associated with the 
procedure. Specifically, the commenters requested that CMS: (1) Reduce 
the full APC payment amount by the device offset; (2) apply the 
discontinued procedure reduction; and (3) add back to the full device 
offset amount the reduced payment rate to arrive a payment rate that 
incorporates the cost of the discarded device and supplies related to 
the procedure.
    Response: We continue to believe that device costs are not incurred 
when the device remains unopened and sterile. While there may be some 
scenarios under which a device is opened prior to the decision to 
cancel the procedure, the OPPS is based on a system of averages, and we 
believe that, overall, those instances will be balanced by those cases 
where the device that would have been used is not opened prior to the 
decision to cancel the procedure. As discussed later in this section, 
we are not finalizing our proposal with respect to cases for which 
anesthesia is not planned (modifier ``52''). Accordingly, the device 
offset amount will not be deducted from device-intensive procedures 
involving modifier ``52.''
    Comment: Several commenters urged CMS to review the use of revenue 
code 0278 for claims that included modifier ``52'' or ``73.'' One 
commenter noted that, because the OPPS is a system based on averages, 
if the number of discontinued procedures under Medicare is small, 
payment for device costs associated with such procedures where the 
device is opened but unused is likely to be balanced out by other cases 
involving the device.
    Another commenter stated that, in the absence of a study or other 
evidence that demonstrated that devices remain sterile in procedures 
with modifiers ``52'' and ``73'' appended to the claim, it is 
inappropriate to implement the proposed payment reductions. Several 
commenters cited to an external analysis of 1,500 claims that had a 
device-intensive procedure code reporting either modifier ``52'' or 
``73'' where approximately two-thirds of the time, these claims also 
contained a charge using revenue code 0278. Some commenters requested 
that CMS conduct a more detailed analysis of the proposed policy to 
better understand whether devices can be used for another case. One 
commenter requested that CMS provide information in the final rule on 
the number of claims for device-intensive procedures on which modifier 
``52'' or ``73'' is appended.
    Another commenter suggested that a hospital could apply a token 
charge for the device as a mechanism to note that the device was opened 
on a canceled procedure because the use of modifier ``52'' or ``73'' 
does not provide specific information on whether or not the device was 
opened. The commenter believed that the token charge would provide a 
mechanism for gathering information that would inform whether the use 
of these modifiers should reduce the overall APC payment by the full 
offset amount and the 50-percent reduction in payment.
    Some commenters noted that, because the APC payment is based on the 
average cost of all cases, the APC weights should already reflect a 
reduced cost for the unused device based on the mechanics of CMS' 
costing methodology and, therefore, this policy may penalize the 
hospital twice.
    Response: In response to commenters' request, we analyzed Medicare 
claims data from CY 2014. We found that, among those claims that 
contained modifier ``52'' or ``73,'' charges under revenue code 0278 
(Implantable Device) for device-intensive procedures were rare. 
Specifically, we found that, for device-intensive procedures, there 
were 597 claims on which modifier ``52'' was appended, and 116 claims 
on which modifier ``73'' was appended. Based on a total of 527,138 
device-intensive procedures performed in CY 2014, we determine that 
approximately 0.14 percent of device-intensive procedures are canceled 
prior to anesthesia or do not require anesthesia.
    In response to the comments regarding use of revenue code 0278, we 
remind the commenters that a charge under revenue code 0278 should only 
be posted when the cost associated with an implantable device is 
incurred. With respect to the suggestion to require a token charge for 
devices that were compromised in canceled procedures, we note that we 
are already able to gather information regarding canceled procedures 
through the use of revenue code 0278 on claims that also contain 
modifier ``52,'' ``73,'' or ``74.'' Therefore, we disagree that there 
is a need to add a token charge for the purpose of identifying when a 
device was opened on a canceled procedure.
    With respect to the comment that the APC relative weights already 
reflect the cost of canceled procedures, we note that, to the extent 
that a device is unused for the canceled procedure and is instead used 
on another case, the APC payment rate may be inappropriately inflated 
because the cost of the unused device may be included in the canceled 
procedure case (as evidenced by charges on the claim for the device). 
Therefore, we continue to believe that it is appropriate to deduct the 
device offset for discontinued procedures reported on claims to which 
modifier ``73'' is appended. As discussed below, we are not finalizing 
our proposal to deduct the device offset amount from the APC payment 
amount for device procedures for which modifier ``52'' is appended to 
the claim.
    Comment: One commenter asked CMS to clarify the use of modifier 
``52'' on claims for device-intensive procedures because the commenter 
believed it would be a rare occurrence that an implantable device would 
be used for a procedure for which anesthesia was not planned.
    Response: Our analysis of CY 2014 Medicare claims data confirms 
that modifier ``52,'' which is used for procedures for which anesthesia 
was not planned, is rarely appended with a device-intensive procedure. 
We agree with the commenter that it would be rare that an implantable 
device would be used for procedures for which anesthesia was not 
planned because anesthesia is commonly used in procedures that involve 
surgically implanting a device. Accordingly, we are not finalizing our 
proposal to deduct the device offset amount from device-intensive APC 
payment amounts for discontinued procedures involving modifier ``52.''
    Comment: Commenters supported CMS' decision not to include the use 
of modifier ``74'' under the proposed policy. The commenters stated 
that, in cases in which the device implantation is canceled after 
receipt of anesthesia, it was likely that sterile devices would have 
been opened and rendered useless for another patient and the facility 
will have incurred the full cost of the device.
    Response: We appreciate the insights offered in response to our 
solicitation for comment on whether to deduct the device offset amount 
when a device procedure case is canceled after

[[Page 70426]]

administration of anesthesia (modifier ``74'').
    After consideration of the public comments we received, we are 
finalizing our proposed policy, with modification, under the regulation 
at Sec.  419.44(b). Specifically, for procedures involving implantable 
devices that are assigned to a device-intensive APC (defined as those 
APCs with a device offset greater than 40 percent), we will reduce the 
APC payment amount for discontinued device-intensive procedures, where 
anesthesia has not been administered to the patient (as evidenced by 
the presence of modifier ``73''), by 100 percent of the device offset 
amount prior to applying the additional payment adjustments that apply 
when the procedure is discontinued. As discussed earlier in this 
section, we are not finalizing this policy for procedures for which 
anesthesia is not planned and the procedure is discontinued (as 
evidenced by the presence of modifier ``52'').

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout this final rule with comment period, the 
term ``biological'' is used because this is the term that appears in 
section 1861(t) of the Act. ``Biological'' as used in this final rule 
with comment period 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. CY 2016 pass-through drugs and biologicals and 
their designated APCs are assigned status indicator ``G'' in Addenda A 
and B to this final rule with comment period, which are available via 
the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. If the drug or biological is covered under 
a competitive acquisition contract under section 1847B of the Act, the 
pass-through payment amount is determined by the Secretary to be equal 
to the average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. However, we note that the 
Part B drug 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 final rule with 
comment period, the term ``ASP methodology'' and ``ASP-based'' are 
inclusive of all data sources and methodologies described therein. 
Additional information on the ASP methodology can be found on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2015
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39270), we proposed 
that the pass-through status of 12 drugs and biologicals would expire 
on December 31, 2015, as listed in Table 39 of the proposed rule (80 FR 
39271). 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, 2014. 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 $100 for CY 2016), as discussed further in section 
V.B.2. of the proposed rule and this final rule with comment period. If 
the estimated per day cost for the drug or biological is less than or 
equal to the applicable OPPS drug packaging threshold, we proposed to 
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 proposed to provide separate payment at the 
applicable relative ASP-based payment amount (which is ASP+6 percent 
for CY 2016, as discussed further in section V.B.3. of the proposed 
rule and this final rule with comment period).
    Comment: A few commenters recommended that CMS continue pass-

[[Page 70427]]

through payment status for new drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, for a full 3 years. The 
commenters asserted that providing pass-through payment status for 3 
years would help provide a more current and accurate data set on which 
to base payment amounts of the procedure when the diagnostic 
radiopharmaceutical or contrast agent is subsequently packaged. The 
commenters further recommended that CMS expire pass-through payment 
status for drugs and biologicals on a quarterly as opposed to an annual 
basis.
    Response: We appreciate the commenters' recommendation that we 
authorize OPPS pass-through payment for new drugs, including contrast 
agents and diagnostic radiopharmaceuticals, for 3 full years and that 
we expire pass-through status on a quarterly basis. While we are not 
accepting this recommendation for CY 2016, we will take it under 
consideration as we review our OPPS pass-through payment policy for CY 
2017.
    However, for CY 2016, as we stated in the CYs 2012 through 2015 
OPPS/ASC final rules with comment period (76 FR 74287; 77 FR 68363; 78 
FR 75010; and 79 FR 66875, respectively), and as described in section 
V.A. of this final rule with comment period, section 
1833(t)(6)(c)(i)(II) of the Act permits CMS to make pass-through 
payments for a period of at least 2 years, but not more than 3 years, 
after the product's first payment as a hospital outpatient service 
under the OPPS. We continue to believe that this period of payment 
appropriately facilitates dissemination of these new products into 
clinical practice and facilitates the collection of sufficient hospital 
claims data reflective of their costs for future OPPS ratesetting. Our 
longstanding practice has been to provide pass-through payment for a 
period of 2 to 3 years, with expiration of pass-through payment status 
proposed and finalized through the annual rulemaking process. Each 
year, when proposing to expire the pass-through payment status of 
certain drugs and biologicals, we examine our claims data for these 
products. We observe that hospitals typically have incorporated these 
products into their chargemasters based on the utilization and costs 
observed in our claims data. Under the existing pass-through payment 
policy, we begin pass-through payment on a quarterly basis, depending 
on when applications are submitted to us for consideration. We are 
confident that the period of time for which drugs, biologicals, 
contrast agents, and radiopharmaceuticals receive pass-through payment 
status, which is at least 2 but no more than 3 years, is appropriate 
for CMS to collect the sufficient amount of data to make a packaging 
determination.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to expire the pass-
through payment status of the 12 drugs and biologicals listed in Table 
43 below. Table 43 lists the drugs and biologicals for which pass-
through payment status will expire on December 31, 2015, the status 
indicators, and the assigned APCs for CY 2016.

  Table 43--Drugs and Biologicals for Which Pass-Through Payment Status
                        Expires December 31, 2015
------------------------------------------------------------------------
                                          Final CY 2016
 CY 2016 HCPCS code     CY 2016 long          status       Final CY 2016
                         descriptor         indicator           APC
------------------------------------------------------------------------
A9520..............  Technetium Tc 99m                N              N/A
                      tilmanocept,
                      diagnostic, up to
                      0.5 millicuries.
C9132..............  Prothrombin                      K             9132
                      complex
                      concentrate
                      (human), Kcentra,
                      per i.u. of
                      Factor IX
                      activity.
J1556..............  Injection, immune                K             9130
                      globulin
                      (Bivigam), 500 mg.
J3060..............  Injection,                       K             9294
                      taliglucerase
                      alfa, 10 units.
J7315..............  Mitomycin,                       N              N/A
                      ophthalmic, 0.2
                      mg.
J7316..............  Injection,                       K             9298
                      Ocriplasmin,
                      0.125mg.
J9047..............  Injection,                       K             9295
                      carfilzomib, 1 mg.
J9262..............  Injection,                       K             9297
                      omacetaxine
                      mepesuccinate,
                      0.01 mg.
J9354..............  Injection, ado-                  K             9131
                      trastuzumab
                      emtansine, 1 mg.
J9400..............  Injection, Ziv-                  K             9296
                      Aflibercept, 1 mg.
Q4122..............  Dermacell, per                   N              N/A
                      square centimeter.
Q4127..............  Talymed, per                     N              N/A
                      square centimeter.
------------------------------------------------------------------------

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Payment Status in CY 2016
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39271), we proposed 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, were 
listed in Table 40 of the proposed rule (80 FR 39272). The APCs and 
HCPCS codes for these drugs and biologicals approved for pass-through 
status through July 1, 2015 were assigned status indicator ``G'' in 
Addenda A and B to the proposed rule. Addenda A and B to the proposed 
rule are available via the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. Payment for drugs and biologicals with pass-through 
status under the OPPS is currently made at the physician's office 
payment rate of ASP+6 percent. We stated in the proposed rule that we 
believe it is consistent with the statute to propose to continue to 
provide payment for drugs and biologicals with pass-through status at a 
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 proposed to pay for pass-through drugs 
and biologicals at ASP+6 percent, equivalent to the rate these drugs 
and biologicals would receive in the physician's office setting in CY 
2016. We proposed 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 was proposed at ASP+6 percent, and the 
portion of the

[[Page 70428]]

otherwise applicable OPD fee schedule that the Secretary determines is 
appropriate, which was 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 
proposed 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 proposed 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 proposed 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 proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which was proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC+6 percent, the 
equivalent payment provided to pass-through drugs and biologicals 
without ASP information. If WAC information also is not available, we 
proposed to provide payment for the pass-through radiopharmaceutical at 
95 percent of its most recent AWP.
    Comment: Several commenters supported CMS' proposal to provide 
payment at ASP+6 percent for drugs, biologicals, contrast agents, and 
radiopharmaceuticals that are granted pass-through payment status. A 
few commenters requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through payment status.
    Response: As discussed above, the statute provides that mandated 
pass-through payment for pass-through drugs and biologicals for CY 2015 
equals the amount determined under section 1842(o) of the Act minus the 
portion of the otherwise applicable APC payment that CMS determines is 
associated with the drug or biological. Therefore, the pass-through 
payment is determined by subtracting the otherwise applicable payment 
amount under the OPPS (ASP+6 percent for CY 2015) from the amount 
determined under section 1842(o) of the Act (ASP+6 percent).
    Regarding the commenters' request that CMS provide an additional 
payment for radiopharmaceuticals that are granted pass-through payment 
status, we note that, for CY 2016, consistent with our CY 2015 payment 
policy for diagnostic and therapeutic radiopharmaceuticals, we proposed 
to provide payment for both diagnostic and therapeutic 
radiopharmaceuticals with pass-through payment status based on the ASP 
methodology. As stated above, the ASP methodology, as applied under the 
OPPS, uses several sources of data as a basis for payment, including 
the ASP, the WAC if the ASP is unavailable, and 95 percent of the 
radiopharmaceutical's most recent AWP if both the ASP and WAC are 
unavailable. For purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
payment status during CY 2016, we proposed to follow the standard ASP 
methodology to determine its pass-through payment rate under the OPPS 
to account for the acquisition and pharmacy overhead costs, including 
compounding costs. We continue to believe that a single payment is 
appropriate for diagnostic radiopharmaceuticals with pass-through 
payment status in CY 2016, and that the payment rate of ASP+6 percent 
(or WAC or AWP if ASP is not available) is appropriate to provide 
payment for both a radiopharmaceutical's acquisition cost and any 
associated nuclear medicine handling and compounding costs. We refer 
readers to section V.B.3. of this final rule with comment period for 
further discussion of payment for therapeutic radiopharmaceuticals 
based on ASP information submitted by manufacturers. We also refer 
readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1633-P.html.
    After consideration of the public comments we received, we are 
finalizing our proposal to provide payment for drugs, biologicals, 
diagnostic and therapeutic radiopharmaceuticals, and contrast agents 
that are granted pass-through payment status based on the ASP 
methodology. If a diagnostic or therapeutic radiopharmaceutical 
receives pass-through payment status during CY 2016, we will follow the 
standard ASP methodology to determine the pass-through payment rate 
that drugs receive under section 1842(o) of the Act, which is ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
will provide pass-through payment at WAC+6 percent, the equivalent 
payment provided to pass-through drugs and biologicals without ASP 
information. If WAC information also is not available, we will provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    As discussed in more detail in section II.A.3. of the proposed rule 
and this final rule with comment period, we implemented a policy 
whereby payment for the following nonpass-through items is packaged 
into payment for the associated procedure: Policy-packaged drugs that 
include drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure (including but not 
limited to contrast agents, stress agents, and diagnostic 
radiopharmaceuticals), anesthesia drugs; and drugs and biologicals that 
function as supplies when used in a surgical procedure (for example, 
skin substitutes). As stated earlier, pass-through payment is the 
difference between the amount authorized under section 1842(o) of the 
Act and the portion of the otherwise applicable OPD fee schedule that 
the Secretary determines is associated with the drug or biological. 
Because payment for a drug that is policy-packaged would otherwise be 
packaged if the product did not have pass-through 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 final rule with comment period. 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

[[Page 70429]]

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. Section 1833(t)(8)(E) of the Act provides that 
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 
proposed 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 proposed to continue to have pass-through 
payment status for CY 2016 or have been granted pass-through payment 
status as of July 2015 were shown in Table 40 of the proposed rule (80 
FR 39272).
    Comment: Commenters supported the proposal to continue to set to 
zero the associated copayment amounts for pass-through diagnostic 
radiopharmaceuticals and contrast agents that would otherwise be 
packaged if the product did not have pass-through payment status for CY 
2016. The commenters noted that this policy is consistent with 
statutory requirements and provides cost-saving benefits to Medicare 
beneficiaries.
    Response: We appreciate the commenters' support. As discussed in 
the CY 2016 OPPS/ASC proposed rule (80 FR 39271 through 39272), we 
believe that, for drugs and biologicals that are ``policy-packaged,'' 
the copayment for the nonpass-through payment portion of the total OPPS 
payment for this subset of drugs and biologicals is accounted for in 
the copayment of the associated clinical APC in which the drug or 
biological is used. Section 1833(t)(8)(E) of the Act provides that the 
amount of copayment associated with pass-through items is equal to the 
amount of copayment that would be applicable if the pass-through 
adjustment was not applied. Therefore, we believe that the copayment 
amount should be zero for drugs and biologicals that are ``policy-
packaged,'' including diagnostic radiopharmaceuticals and contrast 
agents. We also believe that the copayment amount should be zero for 
pass-through anesthesia drugs that would otherwise be packaged if the 
item did not have pass-through payment status.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to set the 
associated copayment amount for pass-through diagnostic 
radiopharmaceuticals, contrast agents, and anesthesia drugs that would 
otherwise be packaged if the item did not have pass-through payment 
status to zero for CY 2016 and for future years. The 38 drugs and 
biologicals that continue pass-through payment status for CY 2016 or 
have been granted pass-through payment status as of January 2016 are 
shown in Table 44 below.

                   Table 44--Drugs and Biologicals With Pass-Through Payment Status in CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                 CY 2016  status
   CY 2015 HCPCS code        CY 2016 HCPCS code       CY 2016 long descriptor        indicator     CY 2016  APC
----------------------------------------------------------------------------------------------------------------
A9586...................  A9586...................  Florbetapir f18,                          G             1664
                                                     diagnostic, per study
                                                     dose, up to 10 millicuries.
C9025...................  J9035...................  Injection, ramucirumab, 5                 G             1488
                                                     mg.
C9026...................  J3380...................  Injection, vedolizumab, 1                 G             1489
                                                     mg.
C9027...................  C9027...................  Injection, pembrolizumab, 1               G             1490
                                                     mg.
C9349...................  C9349...................  PuraPly, and PuraPly                      G             1657
                                                     Antimicrobial, any type,
                                                     per square centimeter.
C9442...................  J9032...................  Injection, belinostat, 10                 G             1658
                                                     mg.
C9443...................  J0875...................  Injection, dalbavancin, 5                 G             1659
                                                     mg.
C9444...................  J2407...................  Injection, oritavancin, 10                G             1660
                                                     mg.
C9445...................  J0596...................  Injection, c-1 esterase                   G             9445
                                                     inhibitor (human),
                                                     Ruconest, 10 units.
C9446...................  J3090...................  Injection, tedizolid                      G             1662
                                                     phosphate, 1 mg.
C9447...................  C9447...................  Injection, phenylephrine                  G             1663
                                                     and ketorolac, 4 ml vial.
C9449...................  J9039...................  Injection, blinatumomab, 1                G             9449
                                                     mcg.
C9450...................  J7313...................  Injection, fluocinolone                   G             9450
                                                     acetonide intravitreal
                                                     implant, 0.01 mg.
C9451...................  J2547...................  Injection, peramivir, 1 mg.               G             9451
C9452...................  J0695...................  Injection, ceftolozane 50                 G             9452
                                                     mg and tazobactam 25 mg.
C9453...................  J9299...................  Injection, nivolumab, 1 mg.               G             9453
C9454...................  J2502...................  Injection, pasireotide long               G             9454
                                                     acting, 1 mg.
C9455...................  J2860...................  Injection, siltuximab, 10                 G             9455
                                                     mg.
C9497...................  C9497...................  Loxapine, inhalation                      G             9497
                                                     powder, 10 mg.
C9022...................  J1322...................  Injection, elosulfase alfa,               G             1480
                                                     1mg.
Q9970...................  J1439...................  Injection, ferric                         G             9441
                                                     carboxymaltose, 1 mg.
J1446...................  J1446...................  Injection, TBO-Filgrastim,                G             1477
                                                     5 micrograms.
C9023...................  J3145...................  Injection, testosterone                   G             1487
                                                     undecanoate, 1 mg.
C9134...................  J7181...................  Factor XIII (antihemophilic               G             1746
                                                     factor, recombinant),
                                                     Tretten, per i.u.
C9133...................  J7200...................  Factor ix (antihemophilic                 G             1467
                                                     factor, recombinant),
                                                     Rixubus, per i.u.
C9135...................  J7201...................  Factor ix (antihemophilic                 G             1486
                                                     factor, recombinant),
                                                     Alprolix, per i.u.
J7508...................  J7508...................  Tacrolimus, Extended                      G             1465
                                                     Release, Oral, 0.1 mg.
C9021...................  J9301...................  Injection, obinutuzumab, 10               G             1476
                                                     mg.
J9371...................  J9371...................  Injection, Vincristine                    G             1466
                                                     Sulfate Liposome, 1 mg.
Q4121...................  Q4121...................  Theraskin, per square                     G             1479
                                                     centimeter.
Q9975...................  J7205...................  Injection, factor viii, fc                G             1656
                                                     fusion protein,
                                                     (recombinant), per i.u.
Q9978...................  J8655...................  Netupitant (300mg) and                    G             9448
                                                     palonosetron (0.5 mg).
C9456...................  J1833...................  Injection, isavuconazonium                G             9456
                                                     sulfate, 1 mg.
C9457...................  Q9950...................  Injection, sulfur                         G             9457
                                                     hexafluoride lipid
                                                     microsphere, per ml.
N/A.....................  C9458...................  Florbetaben F18,                          G             9458
                                                     diagnostic, per study
                                                     dose, up to 8.1
                                                     millicuries.
N/A.....................  C9459...................  Flutemetamol F18,                         G             9459
                                                     diagnostic, per study
                                                     dose, up to 5 millicuries.
N/A.....................  C9460...................  Injection, cangrelor, 1 mg.               G             9460
Q5101...................  Q5101...................  Injection, Filgrastim (G-                 G             1822
                                                     CSF), Biosimilar, 1
                                                     microgram.
----------------------------------------------------------------------------------------------------------------


[[Page 70430]]

4. 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 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. 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 proposed to continue to apply the diagnostic radiopharmaceutical 
offset policy to payment for pass-through diagnostic 
radiopharmaceuticals. In the proposed rule, we indicated that, for CY 
2016, there will be three diagnostic radiopharmaceuticals with pass-
through payment status under the OPPS: (1) HCPCS code A9586 
(Florbetapir f18, diagnostic, per study dose, up to 10 millicuries); 
(2) HCPCS code C9458 (Florbetaben F18, diagnostic, per study dose, up 
to 8.1 millicuries); and (3) HCPCS code C9459 (Flutemetamol F18, 
diagnostic, per study dose, up to 5 millicuries). We currently apply 
the established radiopharmaceutical payment offset policy to pass-
through payment for these products.
    Table 41 of the proposed rule (80 FR 39273) displayed 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.
    We did not receive any public comments on our proposed policy. 
Therefore, we are finalizing our proposal, without modification, to 
continue to apply the diagnostic radiopharmaceutical offset policy to 
payment for pass-through diagnostic radiopharmaceuticals. We will 
continue to reduce the payment amount for procedures in the APCs listed 
in Table 45 in this final rule with comment period by the full policy-
packaged offset amount appropriate for diagnostic radiopharmaceuticals. 
Table 45 below displays the APCs to which nuclear medicine procedures 
are assigned in CY 2016 and for which an APC offset may be applicable 
in the case of diagnostic radiopharmaceuticals with pass-through 
status.

 Table 45--APCs to Which A Diagnostic Radiopharmaceutical Offset May Be
                          Applicable In CY 2016
------------------------------------------------------------------------
           CY 2016  APC                       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.
5594..............................  Level 4 Nuclear Medicine and Related
                                     Services.
------------------------------------------------------------------------

c. Payment Offset Policy for Contrast Agents
    Section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
and the otherwise applicable OPD fee schedule amount. 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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39273), we 
proposed to multiply the policy packaged drug offset fraction

[[Page 70431]]

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 proposed 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 and the 
CY 2016 OPPS/ASC proposed rule (80 FR 39273) for the proposed CY 2016 
policy).
    There is currently one contrast agent with pass-through payment 
status under the OPPS. HCPCS code Q9950 (Injection, sulfur hexafluoride 
lipid microsphere, per ml) was granted pass-through payment status 
beginning October 1, 2015. We currently apply the established pass-
through payment offset policy to pass-through payment for this product. 
For CY 2016, we proposed to identify procedural APCs for which we 
expect a contrast offset could be applicable in the case of a pass-
through contrast agent as any procedural APC with a policy-packaged 
drug amount greater than $20 that is not a nuclear medicine APC 
identified in Table 41 of the proposed rule, and these APCs were 
displayed in Table 42 of the proposed rule. 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 proposed to continue to recognize that when a 
contrast agent with pass-through status is billed with any procedural 
APC listed in Table 42 of the proposed rule (80 FR 39273 through 
39274), a specific offset based on the procedural APC would be applied 
to payment for the contrast agent to ensure that duplicate payment is 
not made for the contrast agent.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal for CY 2016 without modification. We 
will continue to recognize that when a contrast agent with pass-through 
payment status is billed with any procedural APC listed in Table 46 
below, a specific offset based on the procedural APC will be applied to 
the payment for the contrast agent to ensure that duplicate payment is 
not made for the contrast agent.

 Table 46--APCs to Which a Contrast Agent Payment Offset Are Applicable
                               for CY 2016
------------------------------------------------------------------------
           CY 2016  APC                       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.
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.
5352..............................  Level 2 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.
------------------------------------------------------------------------

d. 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). In the CY 
2016 OPPS/ASC

[[Page 70432]]

proposed rule (80 FR 39274), for CY 2016, as we did in CY 2015, we 
proposed to continue to apply the skin substitute and stress agent 
offset policy to payment for pass-through skin substitutes and stress 
agents.
    In the proposed rule, we indicated that, 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 of the CY 2016 OPPS/ASC proposed rule (80 FR 39274) displayed 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 of the CY 2016 OPPS/ASC 
proposed rule (80 FR 39274) displayed 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.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our proposal, without modification, to 
recognize that when a skin substitute with pass-through payment status 
is billed with any procedural APC listed in Table 47 below, a specific 
offset based on the procedural APC will be applied to the payment for 
the skin substitute to ensure that duplicate payment is not made for 
the skin substitute. In addition, when a stress agent with pass-through 
payment status is billed with any procedural APC listed in Table 48 
below, a specific offset based on the procedural APC will be applied to 
the payment for the stress agent to ensure that duplicate payment is 
not made for the stress agent.

 Table 47--APCs to Which a Skin Substitute Payment Offset Are Applicable
                               for CY 2016
------------------------------------------------------------------------
            CY 2016 APC                       CY 2016 APC title
------------------------------------------------------------------------
5054..............................  Level 4 Skin Procedures.
5055..............................  Level 5 Skin Procedures.
------------------------------------------------------------------------


Table 48--APCs to Which a Stress Agent Payment Offset Are Applicable for
                                 CY 2016
------------------------------------------------------------------------
            CY 2016 APC                       CY 2016 APC title
------------------------------------------------------------------------
5722..............................  Level 2 Diagnostic Tests and Related
                                     Services.
5593..............................  Level 3 Nuclear Medicine and Related
                                     Services.
------------------------------------------------------------------------

    As we proposed, we will continue to post annually on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset 
amounts that will be used for that year for purposes of both evaluating 
cost significance for candidate pass-through device categories and 
drugs and biologicals and establishing any appropriate APC offset 
amounts. Specifically, the file will continue to provide the amounts 
and percentages of APC payment associated with packaged implantable 
devices, policy-packaged drugs, and threshold packaged drugs and 
biologicals for every OPPS clinical APC.

B. 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. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this final rule with comment 
period, in accordance with section 1833(t)(16)(B) of the Act, the 
threshold for establishing separate APCs for payment of drugs and 
biologicals was set to $50 per administration during CYs 2005 and 2006. 
In CY 2007, we used the four quarter moving average Producer Price 
Index (PPI) levels for Pharmaceutical Preparations (Prescription) to 
trend the $50 threshold forward from the third quarter of CY 2005 (when 
the Pub. L. 108-173 mandated threshold became effective) to the third 
quarter of CY 2007. We then rounded the resulting dollar amount to the 
nearest $5 increment in order to determine the CY 2007 threshold amount 
of $55. Using the same methodology as that used in CY 2007 (which is 
discussed in more detail in the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 68085 through 68086)), we set the packaging 
threshold for establishing separate APCs for drugs and biologicals at 
$95 for CY 2015 (79 FR 66882).
    Following the CY 2007 methodology, for the CY 2016 OPPS/ASC 
proposed rule (80 FR 39275), 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 proposed 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).
    Following the CY 2007 methodology, for this CY 2016 OPPS/ASC final 
rule with comment period, we used the most recently available four 
quarter moving averaging PPI levels to trend the $50

[[Page 70433]]

threshold forward from the third quarter of CY 2005 to the third 
quarter of CY 2015 and rounded the resulting dollar amount ($97.22) 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) series code WPUSI07003) 
from CMS' Office of the Actuary (OACT). Therefore, for this CY 2016 
OPPS/ASC final rule with comment period, using the CY 2007 OPPS 
methodology, we are establishing a packaging threshold for CY 2016 of 
$100.
b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39275), 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 the proposed rule, or for the following policy-
packaged items that we proposed 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 proposed for separately payable drugs and biologicals for CY 2016, 
as discussed in more detail in section V.B.3.b. of the 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 proposed 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 the proposed rule (which 
are available via the Internet on the CMS Web site) because these were 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 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 proposed 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 HCPCS codes that were 
reported to the CY 2015 HCPCS codes that we displayed in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site) for proposed payment in CY 2016.
    Comment: The majority of the commenters opposed the continuation of 
the OPPS packaging threshold of $100 for CY 2016. The commenters 
believed that, over several years, CMS has rapidly increased the 
packaging threshold, which contradicts congressional intent. As such, 
the commenters recommended that CMS eliminate the packaging threshold 
and provide separate payment for all drugs with HCPCS codes or freeze 
the packaging threshold at the current level ($95).
    Response: The commenters did not specify how they believed our 
policy is inconsistent with congressional intent. However, as we stated 
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), 
we believe that packaging certain items is a fundamental component of a 
prospective payment system, that updating the packaging threshold of 
$50 for the CY 2005 OPPS is consistent with industry and government 
practices, and that the PPI for Prescription Drugs is an appropriate 
mechanism to gauge Part B drug inflation. Therefore, because packaging 
is a fundamental component of a prospective payment system that 
continues to provide important flexibility and efficiency in the 
delivery of high quality hospital outpatient services, we are not 
adopting commenters' recommendations to pay separately for all drugs, 
biologicals, and radiopharmaceuticals for CY 2016, or to eliminate the 
packaging threshold, or to freeze the packaging threshold at $95.
    After consideration of the public comments we received, and 
consistent with our methodology for establishing the packaging 
threshold using the most recent PPI forecast data, we are adopting a CY 
2016 packaging threshold of $100.
    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 final 
rule with comment period, we used 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 used these data for budget 
neutrality estimates and impact analyses for this CY 2016 OPPS/ASC 
final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B to this final rule with comment 
period are based on ASP data from the third quarter of CY 2015. These 
data are the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP 
methodology, effective July 1, 2015. These payment rates will 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

[[Page 70434]]

have an ASP-based payment rate, we recalculated their mean unit cost 
from all of the CY 2014 claims data and updated cost report information 
available for this 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 the 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 this CY 2016 
OPPS/ASC final rule with comment period. Under such circumstances, we 
proposed to continue to follow the established policies initially 
adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably 
pay for those drugs whose cost fluctuates relative to the proposed CY 
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 proposed to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2015 and that were 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 were 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 
proposed 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.
    We did not receive any public comments on our proposed policy to 
apply the established policies initially adopted for the CY 2005 OPPS 
(69 FR 65780) in order to more equitably pay for those drugs whose cost 
fluctuates relative to the CY 2016 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2016. 
Therefore, we are finalizing our proposal, without modification, for CY 
2016.
c. 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-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.

[[Page 70435]]

    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. As discussed in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39277), 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 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. The file is available on the CMS Web site at: 
https://www.cms.gov/apps/ama/license.asp?file=/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CMS-1633-P-OPPS-Skin-Substitute.zip.
    For CY 2016, based on these calculations, we proposed to determine 
the high/low cost status for each skin substitute product based on 
either a product's geometric MUC exceeding the geometric MUC threshold 
or the product's PDC exceeding the PDC threshold. As discussed in the 
CY 2016 OPPS/ASC proposed rule (80 FR 39277), 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 noted that the majority of high cost products remain high 
cost under both methodologies. The products shifting to the high-cost 
category from the low-cost category varied in size. Observing fairly 
consistent results with both methodologies, we stated in the proposed 
rule that we believe that, together, both thresholds constitute a more 
robust methodology for identifying high cost skin substitute products.
    We indicated in the CY 2016 OPPS/ASC proposed rule (80 FR 39277) 
that 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 geometric 
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 proposed 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 proposed to remove for 
the skin cost group were identified in Table 45 of the CY 2016 OPPS/ASC 
proposed rule (80 FR 39277). Implantable biologicals are treated as 
packaged surgical supplies under the OPPS, which are captured under 42 
CFR 419.2(b)(4).
    Comment: Several commenters supported CMS' proposal to revise the 
methodology used to establish the high/low cost threshold from using 
only a geometric mean unit cost methodology (GMUC) to using either a 
GMUC methodology or a per day cost (PDC) methodology for all skin 
substitutes using CY 2014 claims data. The commenters agreed that 
either methodology would promote stability of assignment to the high 
and low cost categories and not disadvantage skin substitute products 
that are sold in large sizes. Commenters also supported using available 
pricing data for skin substitutes without claims data.
    Response: We appreciate the commenters' support. We believe that 
adopting a policy of using either a GMUC methodology or a PDC 
methodology will stabilize cost group assignment.
    Comment: A few commenters supported CMS' proposal to remove 
implantable biologicals from the skin substitute cost group list. 
However, one commenter asked that CMS not remove HCPCS code Q4107 
(GraftJacket) because, while this code describes an implantable 
biological, the biological does have dual usage as a skin substitute.
    Response: Based on information provided by the commenter on the 
duality of use for GraftJacket, we agree that HCPCS code Q4107 should 
remain on the skin substitute list.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the implantable biological products 
(excluding the proposed removal of HCPCS code Q4107 included in the 
proposed rule) identified in Table 49 below from the skin substitute 
cost group list for CY 2016.

 Table 49--Implantable Biologicals for Removal From Skin Substitute Cost
                               Group List
------------------------------------------------------------------------
                                                          CY 2016 status
     CY 2016 HCPCS code       CY 2016 short descriptor      indicator
------------------------------------------------------------------------
C9358......................  SurgiMend, fetal..........               N

[[Page 70436]]

 
C9360......................  SurgiMend, neonatal.......               N
Q4125......................  Arthroflex................               N
Q4130......................  Strattice TM..............               N
Q4142......................  Xcm biologic tiss matrix                 N
                              1cm.
------------------------------------------------------------------------

    Table 46 of the CY 2016 OPPS/ASC proposed rule (80 FR 39278) showed 
the proposed CY 2016 high cost/low cost status for each product based 
on our combined threshold methodology. As noted earlier, for the 
proposed rule we 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. We stated in the proposed rule that, for 
this CY 2016 OPPS/ASC final rule with comment period, we would update 
the MUC and PDC threshold amounts using the most recently available CY 
2014 claims data and CY 2015 pricing information. The final CY 2016 
high cost/low cost status for each skin substitute product is based on 
a weighted average geometric mean unit cost threshold of $26, and a 
weighted average per day cost threshold of $773.
    We proposed that a skin substitute that is assigned to the high 
cost group in CY 2015 and exceeds either the MUC or PDC in the 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 this CY 2016 final 
rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the high/low cost APC structure for 
skin substitute procedures in CY 2016, and our proposal to revise the 
current methodology used to establish the high/low cost threshold with 
methodology based on either the geometric mean unit cost or a per day 
cost. We also are finalizing our proposal that, for CY 2016, skin 
substitutes with pass-through payment status will be assigned to the 
high cost category. Skin substitutes with pricing information but 
without claims data to calculate an MUC will 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 will use WAC+6 percent or 95 
percent of AWP to assign a product to either the high cost or low cost 
category. We also are finalizing our proposal 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 2016 threshold. 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 OPPS update and designated as included in the 
high cost group, verifiable pricing information must be provided to CMS 
no later than April 15. Table 50 below shows the skin substitute 
assignments to high cost and low cost groups for CY 2016.

               Table 50--Skin Substitute Assignments to High Cost and Low Cost Groups for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                                CY 2016 high/low
                      CY 2016 Short                         CY 2016 status   CY 2015 high/low   status based on
CY 2016 HCPCS code      descriptor      HCPCS Code dosage     indicator      status based on    weighted MUC or
                                                                               weighted MUC       weighted PDC
----------------------------------------------------------------------------------------------------------------
C9349 *...........  PuraPly, PuraPly   1 cm\2\...........               G   High.............  High.
                     antimic.
C9363.............  Integra Meshed     1 cm\2\...........               N   High.............  High.
                     Bil Wound Mat.
Q4100.............  Skin Substitute,   1 cm\2\...........               N   Low..............  Low.
                     NOS.
Q4101.............  Apligraf.........  1 cm\2\...........               N   High.............  High.
Q4102.............  Oasis Wound        1 cm\2\...........               N   Low..............  Low.
                     Matrix.
Q4103.............  Oasis Burn Matrix  1 cm\2\...........               N   Low..............  High.
Q4104.............  Integra BMWD.....  1 cm\2\...........               N   High.............  High.
Q4105.............  Integra DRT......  1 cm\2\...........               N   High.............  High.
Q4106.............  Dermagraft.......  1 cm\2\...........               N   High.............  High.
Q4107.............  GraftJacket......  1 cm\2\...........               N   High.............  High.
Q4108.............  Integra Matrix...  1 cm\2\...........               N   High.............  High.
Q4110.............  Primatrix........  1 cm\2\...........               N   High.............  High.
Q4111.............  Gammagraft.......  1 cm\2\...........               N   Low..............  Low.
Q4115.............  Alloskin.........  1 cm\2\...........               N   Low..............  Low.
Q4116.............  Alloderm.........  1 cm\2\...........               N   High.............  High.
Q4117.............  Hyalomatrix......  1 cm\2\...........               N   Low..............  Low.
Q4119.............  Matristem Wound    1 cm\2\...........               N   Low..............  Low.
                     Matrix.
Q4120.............  Matristem Burn     1 cm\2\...........               N   Low..............  High.
                     Matrix.
Q4121 *...........  Theraskin........  1 cm\2\...........               G   High.............  High.
Q4122.............  Dermacell........  1 cm\2\...........               N   High.............  High.
Q4123.............  Alloskin.........  1 cm\2\...........               N   High.............  High.
Q4124.............  Oasis Tri-layer    1 cm\2\...........               N   Low..............  Low.
                     Wound Matrix.
Q4126.............  Memoderm/derma/    1 cm\2\...........               N   High.............  High.
                     tranz/integup.
Q4127.............  Talymed..........  1 cm\2\...........               N   High.............  High.

[[Page 70437]]

 
Q4128.............  Flexhd/            1 cm\2\...........               N   High.............  High.
                     Allopatchhd/
                     Matrixhd.
Q4129.............  Unite Biomatrix..  1 cm\2\...........               N   High.............  Low.
Q4131.............  Epifix...........  1 cm\2\...........               N   High.............  High.
Q4132.............  Grafix Core......  1 cm\2\...........               N   High.............  High.
Q4133.............  Grafix Prime.....  1 cm\2\...........               N   High.............  High.
Q4134.............  hMatrix..........  1 cm\2\...........               N   High.............  Low.
Q4135.............  Mediskin.........  1 cm\2\...........               N   Low..............  Low.
Q4136.............  Ezderm...........  1 cm\2\...........               N   Low..............  Low.
Q4137.............  Amnioexcel or      1 cm\2\...........               N   High.............  High.
                     Biodexcel, 1cm.
Q4138.............  Biodfence          1 cm\2\...........               N   High.............  High.
                     DryFlex, 1cm.
Q4140.............  Biodfence 1cm....  1 cm\2\...........               N   High.............  High.
Q4141.............  Alloskin ac, 1cm.  1 cm\2\...........               N   High.............  High.
Q4143.............  Repriza, 1cm.....  1 cm\2\...........               N   Low..............  Low.
Q4146.............  Tensix, 1CM......  1 cm\2\...........               N   Low..............  Low.
Q4147.............  Architect ecm,     1 cm\2\...........               N   High.............  High.
                     1cm.
Q4148.............  Neox 1k, 1cm.....  1 cm\2\...........               N   High.............  High.
Q4150.............  Allowrap DS or     1 cm\2\...........               N   High.............  High.
                     Dry 1 sq cm.
Q4151.............  AmnioBand,         1 cm\2\...........               N   Low..............  Low.
                     Guardian 1 sq cm.
Q4152.............  Dermapure 1        1 cm\2\...........               N   High.............  Low.
                     square cm.
Q4153.............  Dermavest 1        1 cm\2\...........               N   High.............  High.
                     square cm.
Q4154.............  Biovance 1 square  1 cm\2\...........               N   High.............  Low.
                     cm.
Q4156.............  Neox 100 1 square  1 cm\2\...........               N   High.............  Low.
                     cm.
Q4157.............  Revitalon 1        1 cm\2\...........               N   Low..............  Low.
                     square cm.
Q4158.............  MariGen 1 square   1 cm\2\...........               N   Low..............  Low.
                     cm.
Q4159.............  Affinity 1 square  1 cm\2\...........               N   High.............  High.
                     cm.
Q4160.............  NuShield 1 square  1 cm\2\...........               N   High.............  High.
                     cm.
Q4161 **..........  Bio-Connekt per    1 cm\2\...........               N   N/A..............  Low.
                     square cm.
Q4162 **..........  Amnio bio and      1 cm\2\...........               N   N/A..............  Low.
                     woundex flow.
Q4163 **..........  Amnion bio and     1 cm\2\...........               N   N/A..............  Low.
                     woundex sq cm.
Q4164 **..........  Helicoll, per      1 cm\2\...........               N   N/A..............  Low.
                     square cm.
Q4165 **..........  Keramatrix, per    1 cm\2\...........               N   N/A..............  Low.
                     square cm.
----------------------------------------------------------------------------------------------------------------
*Pass-through status in CY 2016.
**New HCPCS code for CY 2016.

d. 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, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39279), we proposed to continue our 
policy to make packaging determinations on a drug-specific basis, 
rather than a HCPCS code-specific basis, for those HCPCS codes that 
describe the same drug or biological but different dosages in CY 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 
the 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

[[Page 70438]]

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 was displayed in 
Table 47 of the CY 2016 OPPS/ASC proposed rule (80 FR 39279 through 
39280).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2016 proposal, without modification, to 
continue to make packaging determinations on a drug-specific basis, 
rather than a HCPCS code-specific basis, for those HCPCS codes that 
describe the same drug or biological but different dosages. Table 51 
below displays the packaging status of each drug and biological HCPCS 
code to which our methodology applies for CY 2016.

   Table 51--HCPCS Codes to Which the CY 2016 Drug-Specific Packaging
                    Determination Methodology Applies
------------------------------------------------------------------------
     CY 2016 HCPCS code        CY 2016 Long descriptor      CY 2016 SI
------------------------------------------------------------------------
C9257......................  Injection, bevacizumab,                  K
                              0.25 mg.
J9035......................  Injection, bevacizumab, 10               K
                              mg.
J1020......................  Injection,                               N
                              methylprednisolone
                              acetate, 20 mg.
J1030......................  Injection,                               N
                              methylprednisolone
                              acetate, 40 mg.
J1040......................  Injection,                               N
                              methylprednisolone
                              acetate, 80 mg.
J1070......................  Injection, testosterone                  N
                              cypionate, up to 100 mg.
J1080......................  Injection, testosterone                  N
                              cypionate, 1 cc, 200 mg.
J1460......................  Injection, gamma globulin,               N
                              intramuscular, 1 cc.
J1560......................  Injection, gamma globulin,               N
                              intramuscular over 10 cc.
J1642......................  Injection, heparin sodium,               N
                              (heparin lock flush), per
                              10 units.
J1644......................  Injection, heparin sodium,               N
                              per 1000 units.
J1850......................  Injection, kanamycin                     N
                              sulfate, up to 75 mg.
J1840......................  Injection, kanamycin                     N
                              sulfate, up to 500 mg.
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, hyaluronidase,                N
                              ovine, preservative free,
                              per 1 usp unit (up to 999
                              usp units).
J3472......................  Injection, hyaluronidase,                N
                              ovine, preservative free,
                              per 1000 usp units.
J7050......................  Infusion, normal saline                  N
                              solution , 250 cc.
J7040......................  Infusion, normal saline                  N
                              solution, sterile (500 ml
                              = 1 unit).
J7030......................  Infusion, normal saline                  N
                              solution , 1000 cc.
J7515......................  Cyclosporine, oral, 25 mg.               N
J7502......................  Cyclosporine, oral, 100 mg               N
J8520......................  Capecitabine, oral, 150 mg               K
J8521......................  Capecitabine, oral, 500 mg               K
J9250......................  Methotrexate sodium, 5 mg.               N
J9260......................  Methotrexate sodium, 50 mg               N
------------------------------------------------------------------------

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

[[Page 70439]]

payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39280), we proposed to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    Since CY 2006, we have attempted to establish a drug payment 
methodology that reflects hospitals' acquisition costs for drugs and 
biologicals while taking into account relevant pharmacy overhead and 
related handling expenses. We have attempted to collect more data on 
hospital overhead charges for drugs and biologicals by making several 
proposals that would require hospitals to change the way they report 
the cost and charges for drugs. None of these proposals were adopted 
due to significant stakeholder concern, including that hospitals stated 
that it would be administratively burdensome to report hospital 
overhead charges. We established a payment policy for separately 
payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642 
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 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. CY 2016 Payment Policy
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39281), for CY 2016 
and subsequent years, we proposed 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 proposed that the ASP+6 percent payment amount for 
separately payable drugs and biologicals requires no further adjustment 
and represents the combined acquisition and pharmacy overhead payment 
for drugs and biologicals. We also proposed that payments for 
separately payable drugs and biologicals are included in the budget 
neutrality adjustments, under the requirements in section 1833(t)(9)(B) 
of the Act, and that the budget neutral weight scaler is not applied in 
determining payments for these separately paid drugs and biologicals.
    Comment: Commenters supported CMS' proposal to pay for separately 
payable drugs and biologicals based on the statutory default rate of 
ASP+6 percent. A few commenters supported CMS' proposal, but 
recommended that CMS examine ways to compensate hospitals for the 
unique, higher overhead and handling costs associated with therapeutic 
radiopharmaceuticals.
    Response: We appreciate the commenters' support. We continue to

[[Page 70440]]

believe that ASP+6 percent based on the statutory default is 
appropriate for hospitals for CY 2016 and that this percentage amount 
includes payment for acquisition and overhead cost. We see no evidence 
that an additional overhead adjustment is required for separately 
payable drugs, biologicals, and therapeutic radiopharmaceuticals for CY 
2016.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 
percent payment amount for separately payable drugs and biologicals 
requires no further adjustment and represents the combined acquisition 
and pharmacy overhead payment for drugs and biologicals for CY 2016. In 
addition, we are finalizing our proposal that payment for separately 
payable drugs and biologicals be included in the budget neutrality 
adjustments, under the requirements of section 1833(t)(9)(B) of the 
Act, and that the budget neutral weight scaler is not applied in 
determining payment of these separately paid drugs and biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period 
(available via the Internet on the CMS Web site), which illustrate the 
final 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 October 1, 2015, or WAC, AWP, or mean unit 
cost from CY 2014 claims data and updated cost report information 
available for this final rule with comment period. In general, these 
published payment rates are not reflective of actual January 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 fourth quarter of 2015 (October 1, 2015 through December 31, 
2015) are used to set the payment rates that are released for the 
quarter beginning in January 2016 near the end of December 2015. In 
addition, payment rates for drugs and biologicals in Addenda A and B to 
this final rule with comment period for which there was no ASP 
information available for October 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 final rule with comment period 
(reflecting October 2015 ASP data) that do not have ASP information 
available for the quarter beginning in January 2016. These drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2014 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2016 
payment purposes and are only illustrative of the CY 2016 OPPS payment 
methodology using the most recently available information at the time 
of issuance of this final rule with comment period.
4. Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 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, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39281), we proposed 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 proposed 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 were included in Addenda A and 
B to the proposed rule (which are available via the Internet on the CMS 
Web site).
    Comment: Several commenters supported CMS' proposal to pay for 
separately payable therapeutic radiopharmaceuticals under the statutory 
default payment rate of ASP+6 percent if ASP data are submitted to CMS.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for therapeutic radiopharmaceuticals 
based on ASP or mean unit cost if ASP information is not available 
would provide appropriate payment for these products. When ASP data are 
not available, we believe that paying for therapeutic 
radiopharmaceuticals using mean unit cost will appropriately pay for 
the average hospital acquisition and associated handling costs of 
nonpass-through separately payable therapeutic radiopharmaceuticals. As 
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60523), although using mean unit cost for payment for therapeutic 
radiopharmaceuticals when ASP data are not available is not the usual 
OPPS process (the usual process relies on alternative data sources such 
as WAC or AWP when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data), we 
continue to believe that WAC or AWP is not an appropriate proxy to 
provide OPPS payment for average therapeutic radiopharmaceutical 
acquisition cost and associated handling costs when manufacturers are 
not required to submit ASP data. Payment based on WAC or AWP under the 
established OPPS methodology for payment of separately payable drugs 
and biologicals is usually temporary for a calendar quarter until a 
manufacturer is able to submit the required ASP data in accordance with 
the quarterly ASP submission timeframes for reporting under section 
1847A of the Act. Because ASP reporting for OPPS payment of

[[Page 70441]]

separately payable therapeutic radiopharmaceuticals is not required, a 
manufacturer's choice to not submit ASP could result in payment for a 
separately payable therapeutic radiopharmaceutical based on WAC or AWP 
for a full year, a result that we believe would be inappropriate.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to pay all 
nonpass-through, separately payable therapeutic radiopharmaceuticals at 
ASP+6 percent. We also are finalizing our proposal to continue 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. The CY 2016 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are 
included in Addenda A and B to this final rule with comment period 
(which are available via the Internet on the CMS Web site).
5. Payment 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 by CY 2017. 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 the 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 reassessed this payment for CY 2016 and did not identify any new 
information that would cause us to modify payment. Therefore, in the CY 
2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016, we proposed to 
continue to provide an additional $10 payment for radioisotopes 
produced by non-HEU sources.
    Comment: A few commenters requested that CMS extend payment for 
HCPCS code Q9969 to CY 2017 and beyond.
    Response: We stated in our CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68316) that our expectation was that the transition to 
non-HEU sourced Mo-99 would be completed within 4 to 5 years and that 
there might be a need to make differential payments for a period of 4 
to 5 years. We further stated that we would reassess, and propose if 
necessary, on an annual basis whether such an adjustment continued to 
be necessary and whether any changes to the adjustment were warranted. 
We reassessed this payment for CY 2016 and have not identified any new 
information that would cause us to modify payment at this time. We are 
continuing the policy of providing an additional $10 payment for 
radioisotopes produced by non-HEU sources for CY 2016. 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.
6. 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016, 
we proposed to pay for blood clotting factors at ASP+6 percent, 
consistent with our proposed payment policy for other nonpass-through, 
separately payable drugs and biologicals, and to continue our policy 
for payment of the furnishing fee using an updated amount. Our policy 
to pay for a furnishing fee for blood clotting factors under the OPPS 
is consistent with the methodology applied in the physician office and 
inpatient hospital setting. These methodologies were first articulated 
in the CY 2006 OPPS final rule with comment period (70 FR 68661) and 
later discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66765). The proposed furnishing fee update was based on the 
percentage increase in the Consumer Price Index (CPI) for medical care 
for the 12-month period ending with June of the previous year. Because 
the Bureau of Labor Statistics releases the applicable CPI data after 
the MPFS and OPPS/ASC proposed rules are published, we were not able to 
include the actual updated furnishing fee in the proposed rules. 
Therefore, in accordance with our policy, as finalized in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66765), we proposed to 
announce the actual figure for the percent change in the applicable CPI 
and the updated furnishing fee calculated based on that figure through 
applicable program instructions and posting on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/

[[Page 70442]]

McrPartBDrugAvgSalesPrice/index.html.
    Comment: Commenters supported CMS' proposal to continue to apply 
the furnishing fee for blood clotting factors provided in the OPD. The 
commenters also supported CMS' proposal to pay for separately payable 
drugs at ASP+6 percent based on the statutory default for CY 2016.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to provide payment for 
blood clotting factors under the same methodology as other separately 
payable drugs and biologicals under the OPPS and to continue payment of 
an updated furnishing fee. We will announce the actual figure of the 
percent change in the applicable CPI and the updated furnishing fee 
calculation based on that figure through the applicable program 
instructions and posting on the CMS Web site.
7. 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016, 
we proposed to continue this policy and provide payment for new drugs, 
biologicals, and therapeutic radiopharmaceuticals that do not have 
pass-through status at ASP+6 percent, consistent with the proposed CY 
2016 payment methodology for other separately payable non-pass-through 
drugs, biologicals, and therapeutic radiopharmaceuticals, which was 
proposed to be ASP+6 percent as discussed earlier in this section. We 
stated that 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 proposed to continue to package payment for 
all new nonpass-through policy-packaged products (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) 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 final rule with 
comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2016 and subsequent years, we proposed to continue our 
policy of using the WAC for the product to establish the initial 
payment rate for new nonpass-through drugs and biologicals with HCPCS 
codes, but which are without OPPS claims data. However, we noted that 
if the WAC is also unavailable, we would make payment at 95 percent of 
the product's most recent AWP. We also proposed to assign status 
indicator ``K'' (Separately paid nonpass-through drugs and biologicals, 
including therapeutic radiopharmaceuticals) to HCPCS codes for new 
drugs and biologicals without OPPS claims data and for which we have 
not granted pass-through status. With respect to new nonpass-through 
drugs and biologicals for which we do not have ASP data, we proposed 
that once their ASP data become available in later quarterly 
submissions, their payment rates under the OPPS would be adjusted so 
that the rates would be based on the ASP methodology and set to the 
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 proposed to continue to base the initial payment for 
new therapeutic radiopharmaceuticals with HCPCS codes, but which do not 
have pass-through status and are without claims data, on the WACs for 
these products if ASP data for these therapeutic radiopharmaceuticals 
are not available. If the WACs also are unavailable, we proposed to 
make payment for new therapeutic radiopharmaceuticals at 95 percent of 
the products' most recent AWP because we would not have mean costs from 
hospital claims data upon which to base payment. As we proposed with 
new drugs and biologicals, we proposed to continue our policy of 
assigning status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, for CY 2016, we proposed 
to announce any changes to the payment amounts for new drugs and 
biologicals in this 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

[[Page 70443]]

the new CY 2016 HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals were not available at the time of development of 
the proposed rule. However, these drugs, biologicals, and therapeutic 
radiopharmaceuticals are included in Addendum B to this CY 2016 OPPS/
ASC final rule with comment period (which is available via the Internet 
on the CMS Web site), where they are assigned comment indicator ``NI.'' 
This comment indicator reflects that their interim final OPPS treatment 
is open to public comment in this CY 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 the proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. In order to determine the packaging status of these 
products for CY 2016, we proposed to continue our policy to calculate 
an estimate of the per day cost of each of these items by multiplying 
the payment rate of each product based on ASP+6 percent, similar to 
other nonpass-through drugs and biologicals paid separately under the 
OPPS, by an estimated average number of units of each product that 
would typically be furnished to a patient during 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 proposed to package items for which we estimated the per day 
administration cost to be less than or equal to $100 and to pay 
separately for items for which we estimated 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 
proposed to continue to package regardless of cost) in CY 2016. We also 
proposed 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 proposed to 
use the WAC for the product to establish the initial payment rate and, 
if the WAC is also unavailable, we would make payment at 95 percent of 
the most recent AWP available. The proposed estimated units per day and 
status indicators for these items were displayed in Table 48 of the 
proposed rule (80 FR 39284).
    Finally, there were 33 drugs and biologicals, shown in Table 49 of 
the proposed rule (80 FR 39284), 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 the CY 2016 OPPS/ASC proposed rule. For CY 
2010, we finalized a policy to assign status indicator ``E'' (Not paid 
by Medicare when submitted on outpatient claims [any outpatient bill 
type]) whenever we lacked claims data and pricing information and were 
unable to determine the per day cost of a drug or biological. In 
addition, we noted that we would provide separate payment for these 
drugs and biologicals if pricing information reflecting recent sales 
became available mid-year for the ASP methodology.
    For CY 2016, as we finalized in CY 2015 (79 FR 66894), we proposed 
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 were assigned status 
indicator ``E'' on this basis at the time of the proposed rule for CY 
2016 were displayed in Table 49 of the proposed rule (80 FR 39284). We 
also proposed 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.
    We did not receive any specific public comments regarding our 
proposed payment for nonpass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims 
data. Many commenters supported our proposal to pay for separately 
payable drugs at ASP+6 percent under the statutory default. However, 
these comments were not specific to new drugs and biologicals with 
HCPCS codes but without OPPS claims data.
    After consideration of the public comments we received, we are 
finalizing our CY 2016 proposal without modification, including our 
proposal to assign drug or biological products status indicator ``K'' 
and pay for them separately for the remainder of CY 2015 if pricing 
information becomes available. Table 52 below shows the drugs and 
biologicals without CY 2014 claims data. Table 53 shows the drugs and 
biologicals without CY 2014 claims data and without pricing information 
for the ASP methodology.

                           Table 52--Drugs and Biologicals Without CY 2014 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                    Estimated
                                                                 average number   CY 2016 status
       CY 2016 HCPCS code            CY 2016 long descriptor      of units per      indicator       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 mg..              29               K             1633
J0630..........................  Injection, calcitonin salmon,                2               K             1433
                                  up to 400 units.
J1324..........................  Injection, enfuvirtide, 1 mg..             169               K             1361
J1556..........................  Inj, Imm Glob Bivigam, 500mg..              78               K             9130
J2670..........................  Tolazoline hcl injection......               1               K             1457
J3060..........................  Inj, Taliglucerace Alfa 10 u..             479               K             9294
J3355..........................  Injection, urofollitropin, 75                2               K             1741
                                  IU.
J3489..........................  Injection, Zoledronic Acid,                  4               K             1356
                                  1mg.
J7191..........................  Factor VIII (porcine).........           8,500               K             1464
J7196..........................  Injection, antithrombin                    268               K             1332
                                  recombinant, 50 IU.
J7316..........................  Inj, Ocriplasmin, 0.125 mg....               3               K             9298
J7513..........................  Daclizumab, parenteral........               5               K             1612
J8650..........................  Nabilone, oral, 1 mg..........               4               K             1424

[[Page 70444]]

 
J9047..........................  Injection, carfilzomib, 1 mg..              57               K             9295
J9262..........................  Inj, omacetaxine mep, 0.01mg..             481               K             9297
J9306..........................  Injection, pertuzumab, 1 mg...             450               K             1471
J9354..........................  Inj, Ado-trastuzumab Emt 1mg..             262               K             9131
J9400..........................  Inj, ziv-aflibercept, 1mg.....             326               K             9296
Q2050..........................  Injection, Doxorubicin                       7               K             7046
                                  Hydrochloride, Liposomal, Not
                                  Otherwise Specified, 10 mg.
Q3027..........................  Injection, Interferon Beta-1a,               3               K             1472
                                  1 mcg For Intramuscular Use.
----------------------------------------------------------------------------------------------------------------


 Table 53--Drugs and Biologicals Without CY 2014 Claims Data and Without
               Pricing Information for the ASP Methodology
------------------------------------------------------------------------
                                                          CY 2016 status
     CY 2016 HCPCS code        CY 2016 long descriptor      indicator
------------------------------------------------------------------------
90296......................  Diphtheria antitoxin,                    E
                              equine, any route.
90477......................  Adenovirus vaccine, type                 E
                              7, live, for oral use.
90681......................  Rotavirus vaccine, human,                E
                              attenuated, 2 dose
                              schedule, live, for oral
                              use.
J0190......................  Injection, biperiden                     E
                              lactate, per 5 mg.
J0205......................  Injection, alglucerase,                  E
                              per 10 units.
J0350......................  Injection, anistreplase,                 E
                              per 30 units.
J0365......................  Injection, aprotonin,                    E
                              10,000 kiu.
J0395......................  Injection, arbutamine hcl,               E
                              1 mg.
J0710......................  Injection, cephapirin                    E
                              sodium, up to 1 gm.
J0888......................  Epoetin Beta, non-esrd....               E
J1180......................  Injection, dyphylline, up                E
                              to 500 mg.
J1433......................  Inj Ferric Pyrophosphate                 E
                              Cit.
J1435......................  Injection, estrone, per 1                E
                              mg.
J1452......................  Injection, fomivirsen                    E
                              sodium, intraocular, 1.65
                              mg.
J1562......................  Injection, immune globulin               E
                              (vivaglobin), 100 mg.
J1655......................  Injection, tinzaparin                    E
                              sodium, 1000 iu.
J1835......................  Injection, itraconazole,                 E
                              50 mg.
J2513......................  Injection, pentastarch,                  E
                              10% solution, 100 ml.
J2725......................  Injection, protirelin, per               E
                              250 mcg.
J2940......................  Injection, somatrem, 1 mg.               E
J3320......................  Injection, spectinomycin                 E
                              dihydrochloride, up to 2
                              gm.
J3400......................  Injection, triflupromazine               E
                              hcl, up to 20 mg.
J7505......................  Muromonab-cd3, parenteral,               E
                              5 mg.
J8562......................  Fludarabine phosphate,                   E
                              oral, 10 mg.
J9160......................  Injection, denileukin                    E
                              diftitox, 300 micrograms.
J9215......................  Injection, interferon,                   E
                              alfa-n3, (human leukocyte
                              derived), 250,000 iu.
J9300......................  Injection, gemtuzumab                    E
                              ozogamicin, 5 mg.
Q0515......................  Injection, sermorelin                    E
                              acetate, 1 microgram.
Q9980......................  Hyaluronan or derivative,                E
                              GenVisc 850, for intra-
                              articular injection, 1 mg.
------------------------------------------------------------------------

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. In the CY 2016 OPPS/ASC 
proposed rule (80 FR 39285), we proposed 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 proposed 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''.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposed technical correction to Sec.  410.29 to 
amend the description of self-administered drugs and biologicals to 
more appropriately reflect the statutory language.

D. 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

[[Page 70445]]

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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we 
stated that by the end of 2015, we anticipated 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. 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, 
in the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we proposed 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 to 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 proposed 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 proposed that nonpass-through biosimilar biological products would 
be subject to our threshold-packaged policy as described in section 
V.B.2. of the proposed rule and this final rule with comment period.
    Consistent with our established OPPS drug, biological, and 
radiopharmaceutical payment policy, we proposed that HCPCS coding and 
modifiers for biosimilar biological products will be based on policy 
established under the CY 2016 MPFS rule. We stated in the proposed rule 
that public comments on HCPCS codes and modifiers for biosimilar 
biological products should be submitted in response to the CY 2016 MPFS 
proposed rule.
    We received several public comments on the proposed HCPCS coding 
and modifiers for biosimilar biological products. As proposed, under 
the OPPS, we will use the HCPCS codes and modifiers for biosimilar 
biological products based on policy established under the CY 2016 MPFS 
final rule with comment period. Therefore, we are considering the 
public comments received on biosimilar biological product HCPCS coding 
and modifiers in response to the CY 2016 OPPS/ASC proposed rule to be 
outside the scope to the proposed rule and we are not addressing them 
in this CY 2016 OPPS/ASC final rule with comment period. We refer 
readers to the CY 2016 MPFS final rule with comment period.
    We are finalizing our proposal, without modification, 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 finalizing our proposal, without modification, to subject nonpass-
through biosimilar biological products to our annual threshold-packaged 
policy.
3. 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, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39285), we proposed 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we solicited 
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.
    Comment: Commenters supported our proposed policy to extend pass-
through payment eligibility to biosimilar biological products.
    Response: We appreciate the commenters' support. We clarify that 
pass-through payment will be made to the first eligible biosimilar 
biological product to a reference product. Subsequent biosimilar 
biological products to a reference product will not meet the newness 
criterion at 42 CFR 419.64, and therefore will be ineligible for pass-
through payment.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to extend pass-through 
payment eligibility to biosimilar biological products and to establish

[[Page 70446]]

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.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate prorata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
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) use the device pass-through process and payment 
methodology (74 FR 60476). As has been our past practice (76 FR 74335), 
in the CY 2016 OPPS/ASC proposed rule (80 FR 39286), for CY 2016, we 
proposed 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 proposed to include an estimate of any 
skin substitutes and similar products in our estimate of pass-through 
spending for devices.
    We did not receive any public comments on our proposed methodology 
or the proposed estimate for pass-through spending for devices. 
Therefore, we are finalizing our proposal to base the pass-through 
estimate for devices on our established methodology, as described 
above.
    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 reinstated for CY 2016. 
Because, as we proposed 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 the proposed rule and this final 
rule with comment period, which represents the otherwise applicable fee 
schedule amount associated with most pass-through drugs and 
biologicals, and because, as we proposed to pay for CY 2016 pass-
through drugs and biologicals at ASP+6 percent, as we discussed in 
section V.A. of the 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 final rule with comment period. In the CY 2016 OPPS/ASC 
proposed rule (80 FR 39286), we proposed 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 
final rule with comment period, 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 proposed 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

[[Page 70447]]

pass-through payment, we proposed 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 CY 2016 pass-through estimates for these two groups of drugs and 
biologicals equals the total CY 2016 pass-through spending estimate for 
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

    In the CY 2016 OPPS/ASC proposed rule (80 FR 39286), we proposed 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 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 estimated in the proposed rule 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 estimated 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 estimated 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, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39287), we proposed an estimate for the first 
group of devices of $126.8 million.
    We did not receive any public comments on our proposed estimate for 
the first group of devices that included HCPCS codes C2624, C2623 and 
C2613. Therefore, we are finalizing the proposed estimate for this 
first group of devices of $126.8 million for CY 2016.
    In estimating our proposed CY 2016 pass-through spending for device 
categories in the second group, we included: Additional device 
categories that we estimated 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. In the CY 
2016 OPPS/ASC proposed rule (80 FR 39287), we proposed to use the 
general methodology described in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66778), while also taking into account recent 
OPPS experience in approving new pass-through device categories. For 
the proposed rule, the estimate of CY 2016 pass-through spending for 
this second group of device categories was $10 million.
    We did not receive any public comments on our proposed estimate for 
the second group of devices. Therefore, we are finalizing the proposed 
estimate for this second group of devices of $10 million for CY 2016.
    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 proposed 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 
proposed 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 the 
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.
    We did not receive any public comments on our proposed methodology 
for calculating the spending estimate for the first group of drugs and 
biologicals.
    For this final rule with comment period, using the methodology 
described above, we calculated a final CY 2016 spending estimate for 
the first group of drugs and biologicals of approximately $12.8 
million.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39287), we also 
estimated 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 the proposed rule were newly 
eligible for pass-through payment in CY 2016, additional drugs and 
biologicals that we estimated 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 proposed to use utilization estimates 
from pass-through applicants, pharmaceutical industry data, clinical 
information, recent trends in the per unit ASPs of hospital outpatient 
drugs, and projected annual changes in service volume and intensity as 
our basis for making the CY 2016 pass-through payment estimate. We also 
proposed 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

[[Page 70448]]

drugs, we calculated a proposed spending estimate for this second group 
of drugs and biologicals of approximately $4.6 million.
    We did not receive any public comments on our proposed methodology 
for calculation of the spending estimate of the second group of drugs 
and nonimplantable biologicals, and therefore are finalizing its use in 
this final rule with comment period for CY 2016.
    For this final rule with comment period, using our finalized 
methodology for estimating CY 2016 pass-through payments for this 
second group of drugs, we calculated a spending estimate for this 
second group of drugs and biologicals of approximately $11.2 million. 
Our CY 2016 estimate for total pass-through spending for drugs and 
biologicals (spending for the first group of drugs and biologicals 
($12.8 million) plus spending for the second group of drugs and 
biologicals ($11.2 million)) equals approximately $24 million.
    In summary, in accordance with the methodology described above in 
this section, for this final rule with comment period, we estimate that 
total pass-through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2016 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2016 will be 
approximately $160.8 million (approximately $136.8 million for device 
categories and approximately $24 million for drugs and biologicals), 
which represents 0.26 percent of total projected OPPS payments for CY 
2016. Therefore, we estimate that pass-through spending in CY 2016 will 
not amount to 2.0 percent of total projected OPPS CY 2016 program 
spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. 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 does 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 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39287 through 39288), 
for CY 2016, we proposed 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 proposed to reassign 
HCPCS code G0463 from existing APC 0634 to renumbered APC 5012 (Level 2 
Examinations and Related Services), formerly APC 0632. 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 proposed to use CY 2014 claims 
data to develop the CY 2016 OPPS payment rate 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.
    Comment: A few commenters requested that CMS discontinue the single 
HCPCS G-code for reporting clinic visits and return to a reporting 
structure that recognizes differences in clinical acuity and resource 
utilization. The commenters expressed concern that CMS' clinic visit 
coding policy creates a payment bias that unfairly penalizes certain 
providers, such as cancer hospitals, which provide care for more 
severely ill Medicare beneficiaries. One commenter believed that 
utilization of the single HCPCS G-code for reporting clinic visits does 
not provide a distinction between new and established patients and is 
administratively burdensome, as HCPCS G-codes are only recognized by 
Medicare.
    Response: We believe that the spectrum of hospital resources 
provided during an outpatient hospital clinic visit is appropriately 
captured and reflected in the single level payment for clinic visits. 
We believe the proposed payment rate for APC 5012 represents an 
appropriate payment for clinic visits as it is based on the geometric 
mean costs of all visits. Although the cost for any given clinic visit 
may be higher or lower than the geometric mean cost of APC 5012, the 
payment remains appropriate to the hospital delivering a variety of

[[Page 70449]]

clinic visits. The high volume of claims used for ratesetting for HCPCS 
code G0463 allows us to have accurate data upon which to develop 
appropriate payment rates. With regard to specific concerns for 
hospitals that treat patients with a more complex case-mix, we note 
that the relatively low estimated cost of clinic visits overall would 
result in lesser underpayment or overpayment for hospitals that may 
serve a population with a more complex case-mix. In addition, past 
stakeholder and commenter support for eliminating distinctions for new 
and established patients (78 FR 75040 through 75041) suggests that 
hospitals prefer the administrative ease of not tracking new or 
established patients. Consistent with our longstanding practice, we 
will continue to monitor clinic visit costs under the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to use HCPCS 
code G0463 (for hospital use only) to represent any and all clinic 
visits under the OPPS for CY 2016. In addition, we are finalizing our 
proposal to reassign HCPCS code G0463 from existing APC 0634 to 
renumbered APC 5012 and to use CY 2014 claims data to develop the CY 
2016 OPPS payment rate 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. We note again that, 
as we established in the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75042), we no longer have 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39288), we did 
not propose any change in ED visit coding. Rather, for CY 2016, we 
proposed 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 
stated that we may propose changes to the coding and APC assignments 
for ED visits in future rulemaking.
    Comment: Commenters supported CMS' proposal to continue its current 
methodology to recognize the existing five CPT codes for Type A ED 
visits, as well as the five HCPCS codes for Type B ED visits for CY 
2016, and to establish the associated CY 2016 OPPS payment rates using 
its standard process. One commenter urged CMS to develop standard ED 
visit guidelines for a 5-level E/M system for the ED.
    Response: We appreciate the commenters' support. As we have in the 
past (76 FR 74345 through 74346), we acknowledge that it would be 
desirable to many hospitals to have national ED visit guidelines for a 
5-level E/M system for the ED. However, we also understand that it 
would be disruptive and administratively burdensome to other hospitals 
that have successfully adopted internal guidelines to have to implement 
new national guidelines, particularly while we address the problems 
that would inevitably arise with the implementation of a new set of 
guidelines being applied by thousands of hospitals.
    Comment: One commenter recommended, as an alternative to our 
proposed policy, that CMS develop, on a short-term basis, a set of 
three trauma[hyphen]specific HCPCS codes for all trauma patients for 
whom a trauma team is activated. The commenter also recommended that 
CMS consider a long-term restructuring of payment for trauma care, 
developed by specifically taking the following steps:
     CMS should rigorously evaluate historical trauma cases 
data to better understand the precise nature of trauma care and how it 
is reimbursed.
     Armed with this understanding, CMS should develop a 
complete value-based reimbursement model for trauma care, distinct from 
the fee-for-service reimbursement for ED visits, based on the 
conceptual framework of the Trauma Center Association of America 
(TCAA).
     CMS should test its value-based reimbursement model 
through a pilot program or simulation to ensure that it accurately 
compensates trauma centers for providing an appropriate level of care.
     CMS should incorporate its restructured model into the 
hospital OPPS as expeditiously as possible.
    Response: We appreciate the alternatives presented by the 
commenter. We will take this recommendation into consideration as we 
continue to study and fully consider the most appropriate payment 
structure for Type A and Type B ED visits.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, to 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 CY 2016 OPPS payment rates using our established 
standard process. We intend to further explore the issues described 
above related to ED visits, including concerns about excessively costly 
patients, such as trauma patients. We note that we may propose changes 
to the coding and APC assignments for ED visits in the future 
rulemaking.

B. 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

[[Page 70450]]

services is appropriate. Therefore, in the CY 2016 OPPS/ASC proposed 
rule (80 FR 39288), for CY 2016 and subsequent years, we proposed 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 proposed to 
continue to implement claims processing edits that conditionally 
package payment for the ancillary services that are reported on the 
same date of service as critical care services in order to avoid 
overpayment.
    Comment: One commenter opposed the claims processing edits 
conditionally packaging payment for the ancillary services that are 
reported on the same date of service as critical care services. The 
commenter also encouraged CMS to use recent data in setting the rates 
for critical care.
    Response: As we stated in the proposed rule (80 FR 39288), 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. We note that CY 
2014 claims data used for CY 2016 ratesetting represents the most 
recent complete year of available claims data.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, to continue our policy 
to recognize the existing CPT codes for critical care services and 
establish a payment rate based on historical claims data, and 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. 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. (We note that in the CY 2016 OPPS/ASC proposed rule (80 FR 
39288), for CY 2016 and subsequent years, we proposed 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 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 services described by 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 for services 
described by 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 the services described by 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 (79 FR 67721). 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, in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39289), for CY 2016 and subsequent years, we proposed additional 
requirements for hospitals to bill and receive OPPS payment for CMM 
services described by CPT code 99490. These proposed requirements, 
discussed below, are in addition to those already required under the 
OPPS for billing for services described by CPT code 99490 in CY 2015.
    In accordance with the CPT code descriptor for CPT code 99490, a 
hospital can only bill CMM services described by 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 CMM services described by CPT code 99490. 
Therefore, for CY 2016 and subsequent years, we proposed 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 because they are providing 
CCM services described by CPT code 99490 to patients for whom they 
already provide care and treatment. However, we proposed 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

[[Page 70451]]

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 proposed to adopt analogous 
requirements for billing services described by CPT code 99490 under the 
OPPS. Specifically, we proposed, 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 
proposed 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 the 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 proposed, for the OPPS 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).
    Comment: Commenters generally supported CMS' proposed policy to 
adopt billing requirements for CMM services described by CPT code 99490 
analogous to those required for billing under the MPFS for CY 2016 and 
subsequent years. A few commenters encouraged CMS to continue to 
actively work with stakeholders to ensure that the implementation of 
these codes will not be administratively burdensome. Another commenter 
requested that CMS clarify in the final rule whether one hospital (paid 
under OPPS) and one practitioner (paid under the MPFS) may furnish and 
be paid for services described by CPT code 99490 during a calendar 
month, or whether only one provider across all care settings may be 
paid for the service. One commenter requested that CMS amend the 
hospital claim form so that the ``place of service'' code can be noted 
to permit better data capture and monitoring of the settings in which 
CCM services are provided.
    Response: We appreciate commenters' support for our proposal. We 
look forward to hearing from stakeholders about the administrative 
requirements associated with hospital billing of CMM services described 
by CPT code 99490.
    We reiterate that one hospital (paid under the OPPS) and one 
practitioner (paid under the MPFS) may furnish and be paid for services 
described by CPT code 99490 during a calendar month when CCM services 
are furnished by a physician in an HOPD to an eligible patient. 
Specifically, in this scenario, the physician or nonphysician 
practitioner may bill Medicare for services described by CPT code 99490 
under the MPFS and report the hospital outpatient setting as the place 
of service. The hospital also may bill for the services described by 
CPT code 99490 under the OPPS. The physician or nonphysician 
practitioner would be paid under the MPFS at the facility rate, and the 
hospital would be paid under the OPPS.
    Comment: With respect to the proposed requirement that a patient 
must have either been admitted to the hospital as an inpatient or have 
been a registered outpatient of the hospital and received therapeutic 
services from the hospital within the last 12 months, one commenter 
requested that CMS permit a hospital to bill for services described by 
CPT 99490 if the physician or nonphysician practitioner providing 
general supervision previously furnished CCM services for the 
beneficiary, but the physician's or nonphysician practitioner's 
practice was subsequently acquired by a hospital that does not have an 
established relationship with the patient.
    Response: Because only one hospital may furnish CCM services to a 
patient during a billing period and the patient's consent to have such 
services furnished must be documented in the medical record, we believe 
it is necessary for the hospital to have an established relationship 
with the patient, as we proposed. We note that a physician or other 
qualified nonphysician practitioner who previously billed CCM services 
for a patient under the MPFS at the nonfacility rate could continue to 
do so (assuming that all requirements for billing under the MPFS are 
met). However, if the place of service becomes a hospital outpatient 
department, payment under the MPFS would be made. We also believe, 
given that patients who receive CCM services have multiple chronic 
conditions, patients would be likely to have an established 
relationship with the hospital. Accordingly, we do not believe that we 
should modify this requirement at this time.
    Comment: Commenters requested that CMS: (1) Classify the services 
described by CPT code 99490 as a preventive service; and (2) allow for 
billing and separate payment of complex chronic care codes (CPT 99487 
and 99489) at similar rates to the AMA Relative Value Scale Update 
Committee's (RUC's) recommended values.
    Response: The services described by CPT code 99490 are not 
preventive services because they do not have a USPSTF rating of A or B, 
nor are they explicitly defined as a preventive service in the statute. 
In addition, the complex CCM services described by CPT codes 99487 and 
99489 are currently eligible to be reported when performed in the 
outpatient hospital setting and are assigned status indicator ``N,'' 
which indicates that payment is packaged for these services. We may 
consider separate payment for complex CMM services described by CPT 
codes 99497 and 99489 in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to require hospitals, in 
order to bill and receive OPPS payment for CMM services described by 
CPT code 99490, 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 requiring 
hospitals furnishing and billing for the CCM services described by CPT 
code 99490 under the OPPS to have

[[Page 70452]]

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. In addition, only one hospital under the OPPS (in addition to 
only one practitioner under the MPFS) can furnish and be paid for 
services described by CPT code 99490 during the calendar month service 
period.
    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, in the CY 
2016 OPPS/ASC proposed rule (80 FR 39289 through 39290), we proposed to 
require analogous scope of service elements for the CCM services, 
listed below, to be met in order for hospitals to bill and receive OPPS 
payment for furnishing CCM services described by CPT code 99490. 
Specifically, we proposed 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 qualified 
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-based and community-based clinical 
service providers required to support the patient's psychosocial needs 
and functional deficits. Communication to and from home-based 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 proposed 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 proposed 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 proposed, 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 proposed 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 the 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.
    Comment: One commenter urged CMS to avoid placing overly burdensome 
requirements for billing and payment for services described by CPT code 
99490. The commenter recommended that CMS eliminate the requirement for 
use of certified EHRs because current certified EHRs do not include 
standards and capabilities supporting chronic care management that are 
core services for CCM. Another commenter asked that CMS end its tacit 
acceptance of information blocking in Federal programs. The commenter 
encouraged CMS to create demand side pressure on vendors by limiting 
billing for the CCM services to only those providers who use systems 
that do not limit information exchange as defined in the ONC report to 
Congress. Some commenters encouraged CMS to allow the care plan to be 
shared with community providers through facsimile methods when 
electronic options are not available.
    Response: We disagree with the commenter's assertion that the 
requirement for use of a certified EHR

[[Page 70453]]

when performing CCM services is overly burdensome and reiterate our 
belief that the use of certified health IT is an important tool for 
delivering several core elements of CCM services. We recognize that 
certified health IT does not currently possess all of the capabilities 
needed to deliver CCM services, and accordingly, we have restricted 
requirements around the use of certified EHRs to a narrow set of 
elements. We also have provided flexibility with respect to the 
technology needed to support elements such as the transmission of 
clinical summaries created using certified health IT.
    We appreciate the comments regarding the challenges that 
information blocking is likely to pose to providers furnishing CCM 
services that are required to deliver care coordination services for 
beneficiaries. While we did not include any proposal to tie the ability 
to bill for CCM services to information blocking in the proposed rule, 
we may consider such action in the future. For further information, we 
refer readers to ONC's April 2015 Report to Congress on health 
information blocking, which is available on the Web site at: http://www.healthit.gov/sites/default/files/reports/info_blocking_040915.pdf.
    We believe it is important that providers furnishing CCM services 
are able to share care plan information electronically with other 
providers to support robust care coordination. We note that we did not 
identify any specific electronic tool or format for sharing care plan 
information, and we encourage providers furnishing CCM services to 
explore a range of innovative solutions in this area. In the future, we 
may consider issuing subregulatory guidance providing an exception to 
the requirement to transmit clinical summaries and care plan 
information electronically by a means other than facsimile, when the 
receiving practitioner or provider is not billing Medicare for the CCM 
service and is only able or willing to receive the required information 
by facsimile.
    Comment: One commenter asked CMS to clarify whether the required 
EHR system used for CCM is one that has been certified as an inpatient 
EHR or as an ambulatory EHR. The commenter also asked CMS to clarify 
whether the required EHR system must be able to generate a specific 
form of the clinical summary (such as that specified for the 
Transitions of Care--create and transmit transition of care/referral 
summaries certification criterion--at 45 CFR 170.314(b)(2)) or if there 
is discretion for a hospital to use a different format for and the 
content of the clinical summary other than a summary that contains any 
particular structured content. The commenter asked if there was any 
particular prescription for the content and specification of the 
clinical summary, including whether such are limited to those required 
for certification under Sec.  170.314(b)(2).
    Response: In the proposed rule, we did not identify a specific type 
of certification for the system used by a provider furnishing CCM 
services. We are clarifying that the technology certified for either 
the inpatient setting or the outpatient setting may be used to furnish 
CCM services, provided it meets the relevant requirements. Furthermore, 
we proposed that providers must support care transitions using 
electronic transmission of a clinical summary created using certified 
health IT, but we did not identify the specific certification criteria 
that provider technology must meet. We are clarifying that, as long as 
the clinical summary has been created using certified health IT and is 
electronically transmitted, providers can meet the CCM requirements. 
For instance, the clinical summaries currently generated by EHR systems 
in accordance with the 2014 Edition certification criterion for 
inpatient settings at Sec.  170.314(b)(2) of the regulations would meet 
the requirements to bill for CCM services.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to require analogous 
scope of service elements for the CCM services to be met in order for 
hospitals to bill and receive OPPS payment for furnishing CCM services 
described by CPT code 99490.

VIII. Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. Section 1861(ff)(1) of the Act defines partial hospitalization 
services as the items and services described in paragraph (2) 
prescribed by a physician and provided under a program described in 
paragraph (3) under the supervision of a physician pursuant to an 
individualized, written plan of treatment established and periodically 
reviewed by a physician (in consultation with appropriate staff 
participating in such program), which sets forth the physician's 
diagnosis, the type, amount, frequency, and duration of the items and 
services provided under the plan, and the goals for treatment under the 
plan. Section 1861(ff)(2) of the Act describes the items and services 
included in partial hospitalization services. Section 1861(ff)(3)(A) of 
the Act specifies that a PHP is a program furnished by a hospital to 
its outpatients or by a 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 CMHC for purposes of this benefit.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, under 
42 CFR 419.21, that payments under the OPPS will be made for partial 
hospitalization services furnished by CMHCs as well as Medicare Part B 
services furnished to hospital outpatients designated by the Secretary, 
which include partial hospitalization services (65 FR 18444 through 
18445).
    Section 1833(t)(2)(C) of the Act, in pertinent part, requires the 
Secretary to establish relative payment weights for covered OPD 
services (and any groups of such services described in subparagraph 
(B)) based on median (or, at the election of the Secretary, mean) 
hospital costs using data on claims from 1996 and data from the most 
recent available cost reports. In pertinent part, subparagraph (B) 
provides that the Secretary may establish groups of covered OPD 
services, within a classification system developed by the Secretary for 
covered OPD services, so that services classified within each group are 
comparable clinically and with respect to the use of resources. In 
accordance with these provisions, we have developed the PHP APCs. 
Section 1833(t)(9)(A) of the Act requires the Secretary to review, not 
less often than annually, and revise the groups, the relative payment 
weights, and the wage and other adjustments described in paragraph (2) 
to take into account changes in medical practice, changes in 
technology, the addition of new services, new cost data, and other 
relevant information and factors.
    Because a day of care is the unit that defines the structure and 
scheduling of partial hospitalization services, we established a per 
diem payment methodology for the PHP APCs, effective for services 
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the

[[Page 70454]]

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 
1 Partial Hospitalization) and a higher amount for days with 4 or more 
services under APC 0173 (Level 2 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 1 and Level 2 services) and two for 
hospital-based PHPs (for Level 1 and Level 2 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, CMHC PHP APCs Level 1 and Level 
2 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

[[Page 70455]]

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).
    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. PHP APC Update for CY 2016

1. PHP APC Geometric Mean per Diem Costs
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39290 through 39299), 
for CY 2016, we proposed 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 proposed to compute 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 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 were shown in Tables 50 and 51 
of the CY 2016 OPPS/ASC proposed rule (80 FR 39295). To prevent 
confusion, we referred to the per diem information listed in Tables 50 
and 51 of the CY 2016 OPPS/ASC 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 the CY 2016 OPPS/
ASC proposed rule as the proposed PHP APC per diem payment rates or the 
proposed PHP APC geometric mean per diem

[[Page 70456]]

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 the CY 2016 OPPS/ASC 
proposed rule and this final rule with comment period.
    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 impacted 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 were 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 were excessive. In addition, 
we found some CMHCs had very low costs per day (less than $25 per day). 
We stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39293) that 
without using a trimming process, the data from these providers would 
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 was $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 for CMHCs suggested skewing. 
Further analysis of the data confirmed that there were a few providers 
with extreme cost per day values, which led us to propose using a 
2 standard deviation trim.
    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 the CY 2016 
OPPS/ASC 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39293), we stated that 
we are concerned that including aberrant data in the calculation of the 
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 noted 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 was 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 were 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, in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39293), we proposed 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 
proposed to 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. 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 APCs), and affects both CMHC payment tiers. For 
example, based on our CY 2014 claims data used for the proposed 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 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 proposed 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 stated that 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, we stated that 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.
    In the proposed rule, we applied the 2 standard 
deviation trim to the geometric mean costs per day at the CMHC level. 
This application would exclude those CMHCs with costs per

[[Page 70457]]

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. We believe that removing aberrant data from modeling 
helps prevent inappropriate fluctuations in the payment rates. The 
resulting proposed 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 stated that 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 propose 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 proposed ratesetting process, we identified only one CMHC that 
had a CCR>1. This 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 proposed 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 remained for some 
hospital-based PHPs. Therefore, for hospital-based PHPs, we proposed to 
apply a trim on hospital service days when the 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. 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 did not propose this alternative because we believe that 
establishing such a cap would not specifically target aberrant data 
from a minority of providers, which was 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 
proposed may need refinement. We stated in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39294) that 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 proposed 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 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 were $105.82 for Level 1 (3 
services per day) CMHC PHP services, and were $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 were 
$195.73 for Level 1 (3 services per day) hospital-based PHP services, 
and were $218.93 for Level 2 (4 or more services per day) hospital-
based PHP services. As we stated in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39295), 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

[[Page 70458]]

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 were shown in Tables 50 and 51 of the 
CY 2016 OPPS/ASC proposed rule (80 FR 39295). We noted that Tables 50 
and 51 of the proposed rule displayed the proposed PHP APC renumbering 
that is part of the proposed reorganization of OPPS APCs described in 
section III.D. of the proposed rule. Specifically, we proposed 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 referred readers to Addendum A to the proposed rule 
(which is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html) for the proposed PHP APC payment rates. We invited 
public comments on these proposals.
    Comment: Commenters supported the proposed increase in the PHP 
payment rates based on the geometric mean per diem costs calculated 
using CY 2014 claims data. One commenter validated the accuracy of the 
payment rates by replicating CMS' cost calculations using the CY 2014 
claims data. The commenter agreed with the proposed trimming 
methodologies to remove aberrant data and believed that these 
methodologies would help mitigate inappropriate fluctuations in payment 
rates which have occurred in recent years. One commenter noted that 
service utilization seems to have stabilized after several years of 
decrease, and thanked CMS for the work it has done on PHP payment 
policies. Another commenter supported removing aberrant data, but 
believed that the same trims should have been used for determining the 
geometric mean per diem costs for both CMHCs and hospital-based PHPs.
    Response: We appreciate the commenters' support of the proposed PHP 
APC payment rates based on the geometric mean per diem costs calculated 
using the most recent claims and cost report data and the proposed 
trimming methodologies. As discussed below, we are finalizing our 
proposed trimming methodologies without modification for CY 2016 and 
subsequent years. We also are finalizing our methodology for 
calculating the two CMHC PHP APC geometric mean per diem costs without 
modification, but are finalizing our methodology for calculating the 
two hospital-based PHP APC geometric mean per diem costs with 
modification so that we pay a higher payment rate for the PHP APC for 
Level 2 services than the PHP APC for Level 1 services, as discussed 
below.
    We agree with the commenter that PHP utilization has stabilized, 
and that the trimming methodologies we proposed and are finalizing in 
this final rule with comment period may help to stabilize the PHP APC 
payment rates by mitigating fluctuations in payment rates caused by 
extremely low or high costs that inappropriately skew the geometric 
mean per diem costs. We believe that our inclusion of the detailed PHP 
ratesetting methodology in the CY 2016 OPPS/ASC proposed rule (80 FR 
39295 through 39299) and in this final rule with comment period will 
lead to greater accuracy in provider reporting of claims and cost data, 
and thereby lead to greater accuracy in ratesetting and more stability 
in the PHP APC per diem costs. We encourage all PHP providers to review 
their accounting and billing processes to ensure that their costs are 
included in the data used for PHP ratesetting.
    With regard to the commenter's concern that the same trims should 
be used for both CMHCs and hospital-based PHPs, in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39293), we proposed to use a 2 
standard deviation trim for CMHCs and to apply a CCR>5 hospital service 
day trim for hospital-based PHP providers for CY 2016 and subsequent 
years. As noted in section VIII.B.2. of this final rule with comment 
period, there are differences in the ratesetting process between 
hospital-based PHPs and CMHCs, which are largely due to differences 
between the hospital cost reports and the CMHC cost reports, and we 
believe that having different trims more appropriately targets aberrant 
data for each provider type. We did not propose the CCR>5 service day 
trim for CMHCs because the longstanding PHP OPPS methodology defaults 
any CMHC CCR>1 to the statewide hospital ancillary CCR, and hospital 
statewide CCRs have been less than 1. In our CY 2016 final ratesetting 
process, we identified only one CMHC that had a CCR>1. This 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. 
However, as stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39294), 
the 2 standard deviation trim would have removed 25 
hospital-based PHP providers with aberrant data out of 387 hospital-
based PHP providers. Using updated data for this final rule with 
comment period, this 2 standard deviation trim would have 
removed 22 hospital-based PHP providers with aberrant data out of 388 
hospital-based PHP providers. We are concerned about removing data from 
that many providers, and the alternative we proposed and are finalizing 
allows for use of more data from hospital-based providers. We believe 
the trim on CCRs will be more effective in removing aberrant data and 
will allow for the use and retention of more data. For these reasons, 
we continue to believe the trims that we proposed and are finalizing in 
this final rule with comment period are appropriate and effective for 
each provider type. We plan to review the trims annually, and would 
propose any changes to the trimming methodologies in future rulemaking 
as needed.
    For this CY 2016 OPPS/ASC final rule with comment period, we used 
updated claims and cost data from the final June 2015 update of the CY 
2014 Standard Analytic File (SAF) outpatient claims, the June 2015 
update of the HCRIS (for development of hospital and statewide CCRs), 
and the July 2015 update of the OPSF (for development of CMHC CCRs). 
There were 66 CMHCs based on updated CY 2014 claims data in these 
files, and all 66 of these providers had CCR data reported in the July 
2015 OPSF. We used each CMHC's most recent CCR from the OPSF. As stated 
previously, only one CMHC was defaulted to its statewide ancillary CCR 
because it had a CCR greater than 1. Two CMHCs were excluded from 
modeling because their CCRs failed the OPPS-wide 3 standard 
deviation trim. These two providers had CCRs that were extremely low 
(CCRs of 0.001 and 0).
    The CMHC per diem cost calculations were based upon the actual 
charges CMHCs reported on their claims, multiplied by the CCRs 
calculated from the actual costs reported on their cost reports. The 
data showed that there were some extreme costs per day that ranged from 
a low of $10.50 per day to a high of $2,213.83 per day. The 2 standard deviation trim removed CMHCs with costs below $39.47 
per day or above $640.29 per day from the cost calculations, resulting 
in the exclusion of two CMHCs. In addition, three CMHCs were removed 
because all of these CMHCs' service days had zero payments reported. 
The final CY 2016 geometric mean per diem costs are

[[Page 70459]]

$98.88 for CMHCs Level 1 PHP services and $149.64 for CMHC Level 2 PHP 
services, after we apply the 2 standard deviation trim and 
follow the existing OPPS ratesetting procedures.
    For this CY 2016 OPPS/ASC final rule with comment period, there 
were 400 hospital-based PHPs based on updated claims and cost data. We 
used the CCRs calculated at the departmental level from the most recent 
hospital cost reports, following the revenue-code-to-cost-center 
crosswalk described in section VIII.B.2 of the CY 2016 OPPS/ASC 
proposed rule and of this final rule with comment period. Hospital-
based PHPs without a valid CCR calculated from costs in the primary, 
secondary, or tertiary cost centers of the crosswalk were defaulted to 
their hospital's overall ancillary CCR. Ninety-eight hospital-based 
PHPs had at least one PHP revenue center CCR defaulted to the overall 
ancillary CCR. We excluded service days for 6 hospital-based PHPs that 
failed the proposed CCR>5 trim (before the trim, the CCRs ranged 
between 0.0116 and 19.9996), which resulted in excluding all of these 6 
providers' service days. We also excluded service days for 2 hospital-
based PHPs that failed the longstanding OPPS trim based on service days 
with costs per day greater than 3 standard deviations from 
the geometric mean. Again, this resulted in excluding all the service 
days for 2 hospital-based PHPs. Finally, 12 hospital-based PHPs were 
excluded because all their service days had zero payments reported, 
reducing the total population by 20 providers. As a result, 380 total 
hospital-based PHPs were used for modeling.
    The hospital-based PHP per diem cost calculations were based upon 
the actual charges hospital-based PHPs reported on their claims, 
multiplied by the CCRs calculated from the actual costs reported on 
their cost reports, after applying the proposed trim based on service 
days with a CCR>5 and following the usual OPPS ratesetting procedures. 
Using the most updated data, the resulting hospital-based PHP geometric 
mean per diem costs showed an inversion, with the hospital-based PHP 
Level 1 geometric mean per diem costs equaling $218.46 and the 
hospital-based PHP Level 2 geometric mean per diem costs equaling 
$198.43. While our proposed trim of service days with a CCR>5 was 
effective in removing service days associated with aberrant CCRs, it 
does not address low or high costs per day that result when a non-
aberrant CCR is multiplied by low or high charges. The inverted 
geometric mean per diem costs were influenced by two large-volume 
hospital-based PHP providers of Level 2 PHP services, which had low 
costs of $93 per day, and three large-volume hospital-based PHP 
providers of Level 1 PHP services, which had high costs ranging between 
$631 and $1,732 per day. We evaluated the hospital-based Level 1 and 
Level 2 service day utilization to determine if Level 1 services 
included more individual therapy, which is more costly than group 
therapy, and which could explain higher Level 1 costs in spite of 
providing fewer services. However, based on updated data, we found that 
hospital-based PHP Level 2 services had a slightly higher percentage of 
more costly individual therapy days than hospital-based PHP Level 1 
services. The percentage of hospital-based PHP Level 1 group therapy 
days was nearly identical to the percentage of hospital-based PHP Level 
2 group therapy days. Therefore, we believe that the inversion is due 
to the influence of a few large volume providers.
    We also examined the data without applying any trim and after 
applying the 2 standard deviation trim to the updated 
hospital-based PHP data as we did for CMHCs. Under both of these 
scenarios, the inversion existed. When we did not apply any trim, we 
continued to have a problem with aberrant data significantly skewing 
the geometric mean per diem costs. When we applied the 2 
standard deviation trim, the resulting geometric mean per diem costs 
were not as extreme, but the trim would have removed 22 hospital-based 
PHPs from the data, which we believe would have removed too many 
providers. Further, the five large volume providers discussed above 
with low or high costs were still present in the data after these 
adjustments had been made.
    Therefore, we believe that our proposed CCR>5 trim is the most 
appropriate and effective methodology for removing aberrant data while 
allowing for the use and retention of data from hospital-based PHP 
providers. Although the inversion in the rates exists with this trim, 
we believe it was due to five hospital-based PHPs that had costs per 
day that were either low or high relative to other providers, but these 
costs are not what we would consider aberrant. Therefore, we are 
finalizing this policy without modification. We encourage all hospital-
based PHP providers to review the revenue to cost-center crosswalk to 
ensure accurate recording of their PHP costs and to ensure that the 
relationship between hospital-based PHP charges and hospital-based PHP 
costs is accurately reflected in the hospital-based PHP CCRs.
    However, we are concerned about the PHP APC geometric mean per diem 
costs, which are the basis for the PHP APC payment rates, being lower 
for the provision of more services. As such, we are making an 
adjustment to the hospital-based PHP APC geometric mean per diem costs 
to more equitably and appropriately pay for hospital-based PHP 
services. Section 1833(t)(2)(E) of the Act states that the Secretary 
shall establish, in a budget neutral manner, other adjustments as 
determined to be necessary to ensure equitable payments. The authority 
granted to the Secretary under this provision is broad. We believe that 
it is not appropriate or equitable to pay a lower payment rate for the 
hospital-based PHP APC for Level 2 services, under which 4 or more 
services are provided, than for the hospital-based PHP APC for Level 1 
services, under which 3 PHP services are provided. Using the authority 
set forth in section 1833(t)(2)(E) of the Act, we are making an 
equitable adjustment to correct the inversion in the data for CY 2016.
    While we considered various methods to equitably adjust these 
rates, we ultimately decided to adjust the inverted per diem costs by 
first calculating the average percent difference between Level 1 and 
Level 2 per diem costs for the last 3 years. The method we chose is 
equitable in that it adjusts the inverted Level 1 and Level 2 per diem 
costs by the same factor, to result in a percent difference between 
these two per diem costs that is the same as the historical 3-year 
average. To make the adjustment, we first calculated the average 
percent difference between the hospital-based PHP APC per diem costs 
for Level 1 and Level 2 services from CY 2013 to CY 2015. We believe a 
3-year timeframe is sufficient to reflect recent cost trends. We 
calculated the percent difference in hospital-based per diem costs for 
Level 1 and for Level 2 services using the per diem costs presented in 
the CY 2013, CY 2014, and CY 2015 OPPS/ASC final rules with comment 
period. For each of these 3 calendar years, we subtracted the hospital-
based PHP Level 1 per diem cost from the hospital-based PHP Level 2 per 
diem cost, and then divided that result by the hospital-based PHP Level 
1 per diem cost to calculate the percent difference. We then took the 
average of these three percent differences, which equaled 15.96 
percent, based on the CY 2013 to CY 2015 final per diem costs. We then 
decreased the actual CY 2016 hospital-based PHP APC geometric mean per 
diem costs for Level 1 and increased the actual CY 2016 hospital-

[[Page 70460]]

based PHP APC geometric mean per diem costs for Level 2 hospital-based 
by the same factor, to result in a 15.96 percent difference.
    To equitably adjust the inverted per diem costs, we calculate this 
unknown factor by which to increase or decrease the inverted per diem 
costs to result in a 15.96 percent difference between those per diem 
costs. We used the following formula to solve for this factor:
[GRAPHIC] [TIFF OMITTED] TR13NO15.000

    When we use the above formula with the hospital-based PHP APC 
geometric mean per diem costs with the inversion and the equitable 
adjustment factor ``x'' to correct the inversion, the formula and 
resulting calculation become:
[GRAPHIC] [TIFF OMITTED] TR13NO15.001

    We then solve for the value of ``x'' using algebra, to result in a 
factor of 12.1525 percent. If we increase the CY 2016 inverted 
hospital-based PHP APC geometric mean per diem costs for Level 2 
services by 12.1525 percent, and decrease the CY 2016 hospital-based 
PHP hospital-based PHP APC geometric mean per diem costs for Level 1 
services by 12.1525 percent, the resulting CY 2016 hospital-based PHP 
APC per diem cost for Level 1 services is $191.91 and the resulting CY 
2016 hospital-based PHP APC per diem cost for Level 2 services is 
$222.54. The percentage difference between these two equitably adjusted 
per diem costs is 15.96 percent. We are finalizing these equitably 
adjusted hospital-based PHP APC per diem costs for CY 2016.
    Comment: One commenter was concerned about the small sample size of 
CMHCs and data used for calculating the geometric mean per diem costs, 
and noted that CMHCs with annual revenues of less than $100,000 are not 
required to file a full cost report. The commenter also stated that CMS 
does not collect salary information from CMHCs on their cost reports. 
One commenter believed that CMHCs are being unfairly penalized for 
providing more cost effective services than hospital-based PHPs. 
Another commenter expressed concern regarding the continued 
establishment of CMHC payment rates at levels that are below average 
geometric mean costs.
    Response: As discussed previously in this final rule with comment 
period, there were 66 CMHCs based on updated CY 2014 claims data in 
these files, and all 66 of these providers had entries with CCR data 
reported in the July 2015 OPSF. We used each CMHC's most recent CCR 
from the OPSF. As stated previously, only one CMHC was defaulted to its 
statewide ancillary CCR because it had a CCR greater than 1. Two CMHCs 
were excluded from modeling because their CCRs failed the OPPS-wide 
3 standard deviation trim. These two providers had CCRs 
that were extremely low (CCRs of 0.001 and 0). The 2 
standard deviation trim removed CMHCs with costs below $39.47 per day 
or above $640.29 per day from the cost calculations, resulting in the 
exclusion of two CMHCs. In addition, three CMHCs were removed because 
all of the CMHCs' service days had zero payments reported. Therefore, 
we removed a total of seven CMHCs from the ratesetting modeling. We do 
not believe that the exclusion of these seven providers with aberrant 
data excessively reduced the CMHC population, but rather it allowed for 
the per diem cost determination to be based upon reasonable costs from 
nearly all CMHCs. Further, only two of these CMHCs were excluded based 
on the 2 standard deviation trim; the others were removed 
under our current policies.
    We acknowledge that, although all facilities must file a cost 
report, MACs have established thresholds that they use in determining a 
facility's eligibility to file less than a full cost report. MACs may 
authorize a CMHC to file less than a full cost report when they 
experience low or no Medicare utilization in a reporting period and 
receive correspondingly low interim payment which, in the aggregate, 
appears to justify making a final settlement for that period based on 
less than a normally required full cost report. In these instances, the 
MAC will require the CMHC to furnish the applicable information in 
accordance with 42 CFR 413.24(h) and Section 110, Chapter 1 of the 
Provider Reimbursement Manual--Part 2 (CMS Pub. 15-2). However, because 
CMHC geometric mean per diem costs are the basis for CMHC ratesetting, 
we encourage any CMHC that has been authorized by its MAC to file less 
than a full cost report to instead file a full cost report.
    In response to the comment that CMHCs are being unfairly penalized 
for providing more cost effective services than hospital-based PHPs, we 
disagree. We consider the effects of exclusions on the modeling 
population for both CMHCs and hospital-based PHPs, and we review the 
data that we receive to ensure that we pay appropriately for PHP 
services furnished by both types of providers. We do not favor either 
provider type. Our cost determinations are based upon the data provided 
by hospitals and CMHCs using objective mathematical methods. The PHP 
APC per diem rates based on PHP APC per diem costs, and because CMHC 
PHP APC costs are lower than hospital-based PHP APC costs, CMHC 
geometric mean per diem rates are lower than hospital-based PHP 
geometric mean per diem rates.
    With respect to the commenters' concerns that the CMHC per diem 
payment rates are below the geometric mean per diem costs, the CMHC 
calculated per diem rates are based on the actual reported costs of 
CMHCs used in modeling. Those actual reported costs are used to 
calculate the CMHC CCRs, which are applied to the charges CMHCs report 
on their claims, and that result in estimated CMHC costs. Therefore, 
the rates reflect the data provided by CMHCs. Those costs should 
include allowable salary costs. The commenter who stated that CMS does 
not collect salary costs on CMHC cost reports is mistaken. The CMHC 
cost report provides a column for salaries for the following 
categories: Drugs & Biologicals; Occupational Therapy; Psychiatric/
Psychological Services; Individual Therapy; Group Therapy; 
Individualized Activity Therapies; Family Counseling; Diagnostic 
Services; Patient Training & Education; and Other. These categories may 
include salaries for a nurse or social worker, but we do not identify 
these specific

[[Page 70461]]

practitioners with their own cost centers. However, the CMHC cost 
report must not include the professional services of physicians, 
physician assistants, or clinical psychologists if those services are 
separately billable. CMHCs should review the cost reporting 
instructions, which are available online in CMS Pub. 15-2, Chapter 18, 
at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals.html.
    Our review of the updated data for calculating the final geometric 
mean per diem costs highlights the importance of all PHPs following the 
cost reporting and claims accounting procedures discussed in section 
VIII.B.2. of this final rule with comment period. CMHCs that do not 
include allowable salary costs in their cost reports are inadvertently 
removing appropriate costs from the ratesetting process. Likewise, 
hospital-based PHPs that do not follow the revenue-code-to-cost-center 
crosswalk when determining their costs may inadvertently remove 
appropriate costs from the ratesetting process, as the OPPS modeling 
for hospitals follows the crosswalk hierarchy. Finally, we note that 
errors in revenue and HCPCS coding on claims, which occurred almost 
exclusively on hospital-based PHP claims, also may result in removing 
appropriate costs from ratesetting. We estimate that, overall, 
hospital-based PHP costs were approximately $1.50 per day less than the 
costs would have been if PHP providers had used the proper coding as 
specified in the Claims Processing Manual.
    Comment: Several commenters expressed concern regarding beneficiary 
access to PHP services. One commenter questioned whether the proposed 
changes would ensure continued beneficiary access and strengthen the 
PHP benefit when most CMHCs have ceased providing PHP services and many 
CMHCs have ceased doing business altogether. Two commenters stated that 
CMS' expressed concern for paying hospital-based PHPs at a lower rate 
than their cost structure could lead to closures and possible access 
problems. These two providers stated that CMS statement about hospital-
based PHPs offering the widest access to PHP services because they are 
located throughout the country implies a strong bias on behalf of 
hospitals and a discriminatory stance towards CMHCs.
    Response: We acknowledge the commenters' concerns regarding 
beneficiary access to PHP services. The final PHP APC per diem costs 
for CY 2016 reflect the costs of what providers expend to maintain such 
programs, as reported on their claims and cost reports. In comparison 
to the CY 2015 geometric mean per diem costs, the final CY 2016 
geometric mean per diem costs decreased by 1.3 percent for Level 1 PHP 
services provided by CMHCs. However, only 5 percent of CMHC service 
days are billed as Level 1 PHP services. The final CY 2016 geometric 
mean per diem costs increased substantially for Level 2 PHP services 
provided by CMHCs, by 26.2 percent. Compared to the CY 2015 geometric 
mean per diem costs for hospital-based PHPs, the final CY 2016 
equitably adjusted hospital-based PHP per diem costs increased by 3.2 
percent for Level 1 PHP services, and increased by 9.6 percent for 
Level 2 PHP services. We believe that these per diem costs, which are 
the basis for the payment rates, support continued beneficiary access 
and strengthen the PHP benefit. Our PHP methodology provides for a 
stable rate structure, and we do not believe that it favors one 
provider type over another or diminishes access to PHP services. While 
we recognize that CMHCs and hospital-based PHPs provide the same 
services, our payment methodology requires that we make payments based 
upon provider costs. Hospital-based PHPs have higher costs than CMHCs, 
as evidenced by their cost report data, which is the reason hospital-
based PHPs have higher geometric mean per diem costs than CMHCs.
    We disagree with the commenters who believed CMS is demonstrating 
bias against CMHCs with respect to access to PHP services by 
referencing CMS' language in the proposed rule regarding hospital-based 
PHPs offering the widest access to care because they are located across 
the country. While it is true that hospital-based PHPs offer the widest 
access to PHP services because they are located across the country, we 
greatly value the access to PHP services provided by CMHCs as well. We 
want to ensure that CMHCs remain a viable option as providers of mental 
health care. We are concerned if any payment rate would contribute to 
providers ceasing operations. We have demonstrated our commitment to 
stabilize and ensure accuracy in payment for PHP services in part by 
our extensive analysis of the PHP payment data, and our publishing a 
detailed review of the PHP payment methodology for both CMHCs and 
hospital-based PHPs. We appreciate the services that all PHPs provide 
to those individuals with mental health issues, and remain committed to 
strengthening access to both CMHC PHP services and hospital-based PHP 
services.
    Comment: One commenter expressed concern and objections regarding 
the continuing use of four PHP APC per diem payment rates based on 
geometric mean per diem costs for each provider type, and the adverse 
impact the proposed rates for CY 2016 will have again on few remaining 
CMHC providers across the country.
    Response: The OPPS system pays for outpatient services provided, 
such as and including partial hospitalization services. This system 
bases payment on the geometric mean costs of providing services using 
provider data from claims and cost reports. We calculate the PHP APC 
per diem payment rates based on the data provided for each type of 
provider in order to pay for services. We believe this system provides 
appropriate payment for partial hospitalization services based on 
provider costs. The final PHP APC per diem costs for CY 2016 reflect 
the costs of what providers expend to maintain such programs, as 
reported on their claims and cost reports. With regard to CMHC rates 
specifically, as stated previously, in comparison to the CY 2015 
geometric mean per diem costs, the final CY 2016 geometric mean per 
diem costs decreased by 1.3 percent for Level 1 PHP services provided 
by CMHCs. However, only 5 percent of CMHC service days are billed as 
Level 1 PHP services. The final CY 2016 geometric mean per diem costs 
increased substantially for Level 2 PHP services provided by CMHCs, by 
26.2 percent. Therefore, we believe that the CY 2016 rates will be 
viewed positively by CMHCs across the country.
    With respect to the continued use of four PHP APC per diem payment 
rates, we refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71991 through 71994) where we implemented this policy. 
Because the cost of providing PHP services differs significantly by 
site of service, we implemented differing PHP payment rates for 
hospital-based PHPs and CMHCs. The resulting rates reflect the cost of 
what providers expend to maintain such programs based on data provided 
by these types of providers, which we believe is an improvement over 
the two-tiered methodology calculated using only hospital-based data.
    With respect to rates based on geometric mean per diem costs, we 
refer readers to the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68406 through 68412) where we established the geometric mean 
rather than the median as the measure upon which to

[[Page 70462]]

base the relative payment weights that underpin the OPPS APCs, 
including the four PHP APCs. We believe that the use of geometric mean 
costs represents an improvement to our cost estimation process compared 
to the median. The geometric mean compared to the median allows 
inclusion of some extreme but not aberrant observations in developing 
the relative payment weights and captures a wider range of service 
costs, which we believe leads to more accurate relative payment 
weights. In addition to better incorporating those cost values that 
surround the median and, therefore, describing a broader range of cost 
patterns, basing the relative payment weight on geometric mean costs 
also may promote better stability in the payment system by making OPPS 
payments more reflective of the range of costs associated with 
providing services. Further, applying the geometric mean to the PHP 
APCs helps ensure that the relativity of the OPPS payment weights is 
properly aligned.
    Comment: One commenter suggested that CMS consider paying PHPs 
using a quality-based payment system, and that CMS use value-based 
purchasing.
    Response: We responded to a similar public comment in the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66906) and refer readers 
to a summary of that comment and our response. Sections 1833(t)(2) and 
1833(t)(9) of the Act set forth the requirements for establishing and 
adjusting OPPS rates, which include PHP rates. Section 1833(t)(17) of 
the Act authorizes the Hospital OQR Program, which applies a payment 
reduction to subsection (d) hospitals that fail to meet program 
requirements. In the CY 2015 OPPS/ASC proposed rule (79 FR 41040), we 
considered future inclusion of, and requested comments on, the 
following quality measures addressing PHP issues that would apply in 
the hospital outpatient setting: (1) 30-Day Readmissions; (2) Group 
Therapy; and (3) No Individual Therapy. We refer readers to the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66957 through 66959) for 
a more detailed discussion of PHP measures considered for inclusion in 
the Hospital OQR Program in future years. The Hospital OQR Program does 
not apply to CMHCs. Further, currently, there is no statutory language 
explicitly authorizing a value-based purchasing program for PHPs.
    After consideration of the public comments we received, we are 
finalizing our proposals to update the four PHP APC per diem costs and 
payment rates based on geometric mean cost levels calculated using the 
most recent claims and cost data for each provider type. However, for 
hospital-based PHP APCs, we are making an equitable adjustment to the 
actual geometric mean per diem costs by increasing the Level 2 per diem 
costs and decreasing the Level 1 per diem costs by the same factor, to 
result in a percentage difference equal to the average percent 
difference between hospital-based PHP Level 1 and Level 2 services from 
CY 2013 through CY 2015. For CY 2016 and subsequent years, we also are 
finalizing the proposed trimming methodologies. Specifically, we are 
excluding any CMHC when the CMHC's costs per day are more than 2 standard deviations from the geometric mean cost per day (Level 
1 and Level 2), and excluding hospital-based PHP service days when a 
CCR>5 is used to calculate costs for at least one of their component 
services (Level 1 and Level 2). We plan to review the trims annually, 
and would propose any changes to the trimming methodologies in future 
rulemaking as needed.
    The CMHC PHP Level 1 geometric mean per diem costs are $98.88, and 
the CMHC PHP Level 2 geometric mean per diem costs are $149.64, after 
applying the 2 standard deviation trim to CMHCs. The 
equitably adjusted hospital-based PHP Level 1 per diem costs are 
$191.91, and the equitably adjusted hospital-based PHP Level 2 per diem 
costs are $222.54, after applying the CCR>5 trim to affected service 
days.
    Table 54 below displays the final CY 2016 PHP APC geometric mean 
per diem costs for CMHC PHP services, and Table 55 below displays the 
final PHP APC equitably adjusted geometric mean per diem costs for 
hospital-based PHP services.

  Table 54--CY 2016 PHP APC Geometric Mean per Diem Costs for CMHC PHP
                                Services
------------------------------------------------------------------------
                                                              PHP APC
                                                             geometric
   Renumbered CY 2016 APC            Group title          mean per  diem
                                                               costs
------------------------------------------------------------------------
5851.......................  Level 1 Partial                      $98.88
                              Hospitalization (3
                              services) for CMHCs.
5852.......................  Level 2 Partial                      149.64
                              Hospitalization (4 or more
                              services) for CMHCs.
------------------------------------------------------------------------


  Table 55--CY 2016 PHP APC Equitably Adjusted Geometric Mean per Diem
                  Costs for Hospital-Based PHP Services
------------------------------------------------------------------------
                                                              PHP APC
                                                             equitably
                                                             adjusted
   Renumbered CY 2016 APC            Group title             geometric
                                                          mean per  diem
                                                               costs
------------------------------------------------------------------------
5861.......................  Level 1 Partial                     $191.91
                              Hospitalization (3
                              services) for hospital-
                              based PHPs.
5862.......................  Level 2 Partial                      222.54
                              Hospitalization (4 or more
                              services) for hospital-
                              based PHPs.
------------------------------------------------------------------------

2. PHP Ratesetting Process
    While PHP services are part of the OPPS, PHP ratesetting has some 
unique aspects. To foster understanding and transparency, as we did in 
the CY 2016 OPPS/ASC proposed rule (80 FR 39295 through 39299), 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 the proposed rule and this final rule with

[[Page 70463]]

comment period 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 the CY 2016 OPPS/ASC proposed rule 
and this final rule with comment period, 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 the CY 2016 OPPS/ASC proposed rule or the final 
rule with comment period 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 payment 
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 PHP services, 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 per 
diem 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 
explained in further detail in section II.A.2.a. of this final rule 
with comment period.
    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 the CY 2016 OPPS/ASC 
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. For this final rule with comment period, we used 
the final CY 2014 SAF outpatient claims as of June 2015, the June 2015 
update of HCRIS (for development of hospital and statewide CCRs), and 
the July 2015 update of the OPSF (for the development of CMHC CCRs).
    As noted in section II.A.2.c. of the CY 2016 OPPS/ASC proposed rule 
and this final rule with comment period 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 identified the PHP claims that are 
appropriate and available to use to calculate PHP APC geometric mean 
per diem costs. These claims include data on dates of service, revenue 
codes, HCPCS codes for services provided, charges, and the payments 
Medicare made (the PHP APC geometric mean 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 data required for claims and 
cost reports for these two types of PHP providers. We encourage PHP 
providers to review section II.A.1.c. of the CY 2016 OPPS/ASC proposed 
rule and this final rule with comment period 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 the CY 2016 OPPS/ASC proposed rule 
and this final rule with comment period 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 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 existing 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

[[Page 70464]]

the end of this process, we 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 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 the CY 2016 OPPS/ASC proposed rule and this final rule 
with comment period and in the OPPS Claims Accounting narrative, by 
applying the existing 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 
56 below (Table 52 of the proposed rule). 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 from ratesetting.
    For example, for revenue code 0900, 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 
0900, 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 56--Revenue-to-Cost Center Crosswalk for PHP Allowable Revenue Codes
----------------------------------------------------------------------------------------------------------------
                                                                                    Secondary
                                                 Primary  cost   Primary  cost     cost center   Secondary  cost
         Revenue code            Description    center  source    center  name     source  for     center name
                                                    for CCR                            CCR
----------------------------------------------------------------------------------------------------------------
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 final rule with comment period 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. The allowable 
revenue and PHP HCPCS codes 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 57 below (Table 53 of the proposed rule, 80 FR 39297):

[[Page 70465]]



             Table 57--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 56 above are those which are used in 
the four renumbered PHP APCs 5851, 5852, 5861, and 5862 (existing APCs 
0172, 0173, 0175, and 0176), 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 final rule with 
comment period, as we proposed, we are finalizing our proposal to 
renumber some of the OPPS APCs, and have shown both the 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.
d. Determination of PHP APC Per Diem Costs
    The PHP CCRs described in section VIII.B.2.b. of this final rule 
with comment period are applied to the PHP claim charges described in 
section VIII.B.2.c. of this final rule with comment period 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 
final rule with comment period). 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 57 above (Table 53 of the proposed rule (80 FR 39297)).
e. Development of Service Days and Cost Modeling
    Only the claims service lines containing PHP allowable HCPCS codes 
(shown in Table 57 above; Table 53 of the proposed rule (80 FR 39297)) 
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 rate, 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 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 the CY 2016 OPPS/ASC proposed 
rule and this final rule with comment period, there were several PHP 
providers with aberrant data. As such, we proposed and are finalizing a 
trimming methodology 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. This trim excluded from the 
ratesetting process any CMHCs with extreme costs per day. We also 
proposed and are finalizing a trimming methodology 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, we excluded 
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 of the proposed rule (80 FR 
39297); Table 57 of this final rule with comment period) are assigned 
to Level 1 or Level 2 PHP APCs as follows: (We note that we are 
finalizing our proposal to renumber some of the OPPS APCs, and are 
showing both the renumbered APCs and the existing APCs for partial 
hospitalization services below.)
     Level 1 Partial Hospitalization, renumbered APC 5851 
(existing APC 0172): CMHC service days with exactly 3 service units;
     Level 2 Partial Hospitalization, renumbered APC 5852 
(existing APC 0173): CMHC service days with 4 or more service units;
     Level 1 Partial Hospitalization, renumbered APC 5861 
(existing APC 0175): hospital-based PHP service days with exactly 3 
service units; and
     Level 2 Partial Hospitalization, 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.
    For CY 2016, we also made an equitable adjustment to the hospital-
based PHP geometric mean per diem costs, to remove an inversion in the 
per diem costs. The finalized PHP APC geometric mean per diem costs or 
PHP APC equitably adjusted 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 discussed in 
section II.A. of the CY 2016 OPPS/ASC proposed rule and this final rule 
with comment period, OPPS APC geometric mean per diem costs

[[Page 70466]]

(including PHP APC geometric mean per diem costs) are divided by the 
geometric mean per diem costs for 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 the CY 2016 OPPS/ASC 
proposed rule and this final rule with comment period, we compared the 
estimated aggregated weight using the CY 2015 scaled relative payment 
weights to the estimated aggregate weight using the 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 final rule with comment period for more 
information on scaling the weights, and for details on the final steps 
of the process that lead to PHP APC per diem payment rates.
f. Issues Regarding Correct Coding and Reasonable Charges
    PHP claims with revenue codes other than those listed as allowable 
in Table 57 above (Table 53 of the proposed rule (80 FR 39297)), 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 that are not allowable 
for ratesetting purposes. In reviewing CY 2013 and CY 2014 claims, we 
noticed CMHCs were using correct revenue coding for nearly all claims, 
but hospital-based PHPs were occasionally 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 2 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 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. We received one comment regarding the ratesetting process.
    Comment: One commenter supported the CMS recommendation that CMHCs 
and hospital-based PHPs review their accounting and billing processes 
to ensure that they are following procedures properly, with the goal of 
obtaining greater accuracy in setting PHP payment rates. The commenter 
committed to working with its members to help ensure correct recording 
of costs and claims coding.
    Response: We appreciate the commenter's support and commitment.

C. 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 the 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39299), we proposed 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. In the CY 2016 OPPS/ASC proposed rule, we stated that 
CMHCs are projected to receive 0.04 percent of total OPPS payments in 
CY 2016, excluding outlier payments. Therefore, we proposed to 
designate 0.49 percent of the estimated 1.0 percent outlier

[[Page 70467]]

target amount for CMHCs, and establish a threshold to achieve that 
level of outlier payment. Based on our simulations of CMHC payments for 
CY 2016, in the CY 2016 OPPS/ASC proposed rule (80 FR 39299), we 
proposed to continue to set the threshold for CY 2016 at 3.40 times the 
highest CMHC PHP APC payment rate (that is, 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 proposed to continue to apply the same outlier 
payment percentage that applies to hospitals. Therefore, for CY 2016, 
we proposed to continue to pay 50 percent of CMHC APC geometric mean 
per diem costs over the threshold. In section II.G. of the CY 2016 
OPPS/ASC proposed rule, for the hospital outpatient outlier payment 
policy, we proposed to set a dollar threshold in addition to an APC 
multiplier threshold. Because the PHP APCs are the only APCs for which 
CMHCs may receive payment under the OPPS, we would not expect to 
redirect outlier payments by imposing a dollar threshold. Therefore, we 
did not propose to set a dollar threshold for CMHC outlier payments.
    In summary, in the CY 2016 OPPS/ASC proposed rule, we proposed to 
establish that if a CMHC's cost for partial hospitalization services, 
paid under either renumbered APC 5851 (existing APC 0172) or renumbered 
APC 5852 (existing APC 0173), exceeds 3.40 times the payment rate for 
renumbered APC 5852, the outlier payment is calculated as 50 percent of 
the amount by which the cost exceeds 3.40 times the renumbered APC 5852 
payment rate. We invited public comments on these proposals.
    We did not receive any public comments on our proposed outlier 
policy. Therefore, we are finalizing our proposal for CY 2016 to set a 
separate outlier threshold for CMHCs without modification. As discussed 
in section II.G. of this final rule with comment period, using more 
recent data for this final rule with comment period, we set the target 
for hospital outpatient outlier payments at 1.00 percent of total 
estimated OPPS payments. We allocated a portion of the 1.00 percent, an 
amount equal to 0.36 percent of outlier payments, or 0.0036 percent of 
total estimated OPPS payment, to CMHCs for PHP outlier payments. For CY 
2016, as proposed, we are setting the CMHC outlier threshold at 3.40 
multiplied by renumbered APC 5852 (existing APC 0173) payment rate and 
the CY 2016 outlier percentage applicable to costs in excess of the 
threshold at 50 percent. In other words, if a CMHC's cost for partial 
hospitalization services paid under either renumbered APC 5851 
(existing APC 0172) or APC 5852 (existing APC 0173) exceeds 3.40 times 
the payment rate for renumbered APC 5852 (existing APC 0173), the 
outlier payment will be calculated as 50 percent of the amount by which 
the cost exceeds 3.40 times the renumbered APC 5852 (existing APC 0173) 
payment rate.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74352 through 74353) for a full historical discussion of 
our longstanding policies on how we identify procedures that are 
typically provided only in an inpatient setting (referred to as the 
inpatient 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. Changes to the Inpatient Only List

    In the CY 2016 OPPS/ASC proposed rule (80 FR 39299 through 39300), 
for the CY 2016 OPPS, we proposed to use the same methodology 
(described in the November 15, 2004 final rule with comment period (69 
FR 65834)) 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.
    Using this methodology, for the proposed rule, we identified seven 
procedures that could potentially be removed from the inpatient only 
list for CY 2016. We reviewed the clinical characteristics and related 
evidence for these procedures for removal from the inpatient only list 
and found them to be appropriate candidates.
    In the CY 2016 OPPS/ASC proposed rule, for CY 2016, we proposed 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 that we proposed to remove from the inpatient 
only list for CY 2016 and their CPT codes, long descriptors, proposed 
APC assignments, and proposed status indictors were displayed in Table 
54 of the proposed rule (80 FR 39300). We invited public comments on 
the proposed removal of these seven procedures from the inpatient only 
list.
    Comment: Several commenters supported CMS' proposal to remove CPT 
codes 0312T, 20936, 20937, 20938,

[[Page 70468]]

22552, 54411, and 54417 from the inpatient only list.
    Response: We appreciate the commenters' support.
    Comment: One commenter requested that the procedures described by 
CPT codes 27477 (Arrest, epiphyseal, any method (e.g., epiphysiodesis); 
tibia and fibula, proximal) and 27485 (Arrest, hemiepiphyseal, distal 
femur or proximal tibia or fibula (e.g., genu varus or valgus)) also be 
removed from the inpatient only list based on the similarity of these 
procedures to CPT codes 27475 (Arrest, epiphyseal, any method (e.g., 
epiphysiodesis); distal femur) and 27479 (Arrest, epiphyseal, any 
method (e.g., epiphysiodesis); combined distal femur, proximal tibia 
and fibula), which are not on the inpatient only list.
    Response: We agree with the commenter that procedures described by 
CPT codes 27477 and 27485 are similar to the procedures described by 
CPT codes 27475 and 27479. CPT codes 27477 and 27485 also describe 
procedures that stop leg growth. However, these procedures either are 
performed on a different part of the leg (CPT code 27477) or utilize a 
variation of the surgical method used to perform this type of procedure 
(CPT code 27485). The differences between these two procedures do not 
prevent either of the procedures from being performed safely in the 
outpatient setting. Therefore, we agree with the commenter that the 
procedures described by CPT codes 27477 and 27485 meet the criterion of 
being a procedure that is related to codes that we have already removed 
from the inpatient only list (criterion 3 listed above) and are 
removing these two codes from the inpatient only list for CY 2016.
    Comment: Another commenter requested that the procedures described 
by CPT codes 22630 (Arthrodesis, posterior interbody technique, 
including laminectomy and/or discectomy to prepare interspace (other 
than for decompression), single interspace; lumbar), 22633 
(Arthrodesis, combined posterior or posterolateral technique with 
posterior interbody technique including laminectomy and/or discectomy 
sufficient to prepare interspace (other than for decompression), single 
interspace and segment; lumbar), and 63267 (Laminectomy for excision or 
occlusion of arteriovenous malformation of spinal cord; lumber) be 
removed from the inpatient only list. The commenter stated that, based 
on its experience with these three procedures, the three procedures can 
be safely performed in the outpatient setting and therefore should be 
removed from the inpatient only list.
    Response: While the commenters asserted that the procedures can be 
safely performed in the outpatient setting, we are not confident that 
an inpatient hospitalization would not be required for these 
procedures. We examined the clinical characteristics of the procedures 
described by CPT codes 63267, 22630, and 22633 and compared them to 
other procedures both included on the inpatient only list and not 
included on the inpatient only list. For the procedures described by 
CPT codes 22630 and 22633, the interbody technique is more extensive 
than the posterior or posterolateral described by CPT code 22612, which 
is not on the inpatient only list. We believe that the associated 
recovery and monitoring would also be more extensive for procedures 
described by CPT codes 22630 and 22633 than for the procedure described 
by CPT code 22612 and, therefore, the procedures described by CPT codes 
22630 and 22633 should be retained on the inpatient only list for CY 
2016. For the procedure described by CPT code 63267, we believe that 
patients would likely require inpatient monitoring for possible 
postoperative bleeding in the spinal canal, which could result in 
paralysis (a devastating complication). We examined recent Medicare 
utilization data for these codes by site of service. Based on our 
examinations, we have determined that these three procedures do not 
meet any of the criteria listed above for removal from the inpatient 
only list. Therefore, we are not removing them from the inpatient only 
list for CY 2016.
    Comment: One commenter opposed the removal of the procedures 
described by CPT codes 54411 and 54417 from the inpatient only list 
based on the indication of the presence of an ``infected field'' in the 
code description and the commenter's belief that patients on which 
these procedures are performed will require close monitoring and a 
period of IV antibiotics, and will likely need cultures obtained at the 
time of surgery that require a minimum of 48 hours to return with the 
sensitivity report to know the appropriate IV antibiotic(s). The 
commenter believed that, for patient safety, the procedures described 
by these two codes should not be performed in the outpatient setting.
    Response: We disagree with the commenter that the procedures 
described by CPT codes 54411 and 54417 should be retained on the 
inpatient only list. After consulting with physicians who routinely 
perform these procedures, we believe that properly trained surgeons can 
safely perform these procedures in the outpatient setting. In addition, 
the term ``infected field'' as used in the code descriptors encompasses 
a range of infections from mild to severe. We remind the commenter and 
the public that removal of a code from the inpatient only list does not 
mean that all procedures described by the code or even a majority of 
procedures must or should be performed in the outpatient setting. 
Removal of a procedure from the inpatient only list only means that the 
procedure is no longer precluded from being paid under the OPPS if it 
is performed in the outpatient setting. Not all procedures described by 
a code are the same, and we want to afford physicians and hospitals the 
maximum flexibility in choosing the most clinically appropriate site of 
service for the procedure, as long as the characteristics of the 
procedure are consistent with the criteria listed above. In the case of 
the procedures described by CPT codes 54411 and 54417, we believe that 
it is possible for surgeons to perform them in the less severe cases in 
the HOPD.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove procedures described by CPT codes 
0312T, 20936, 20937, 20938, 22552, 54411, and 54417 from the inpatient 
only list for CY 2016. In addition, we are removing the procedures 
described by CPT codes 27477 and 27485 from the inpatient only list for 
CY 2016, as recommended by the commenter. The nine procedures and their 
CPT codes, long descriptors, APC assignments, and status indictors for 
CY 2016 are displayed in Table 58 below.
    The complete list of codes that will be paid by Medicare in CY 2016 
only as inpatient procedures is included as Addendum E to this final 
rule with comment period (which is available via the Internet on the 
CMS Web site).

[[Page 70469]]



  Table 58--Procedures Removed From the Inpatient Only List for CY 2016
------------------------------------------------------------------------
                                           CY 2016 APC   CY 2016  status
  CPT/HCPCS code      Long descriptor      assignment        indicator
------------------------------------------------------------------------
0312T............  Vagus nerve blocking            5464              J1
                    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              N/A               N
                    surgery only
                    (includes
                    harvesting the
                    graft); local
                    (e.g., ribs,
                    spinous process, or
                    laminar fragments)
                    obtained from same
                    incision.
20937............  Autograft for spine              N/A               N
                    surgery only
                    (includes
                    harvesting the
                    graft); morselized
                    (through separate
                    skin or fascial
                    incision).
20938............  Autograft for spine              N/A               N
                    surgery only
                    (includes
                    harvesting the
                    graft); structural
                    bicortical or
                    tricortical
                    (through separate
                    skin or fascial
                    incision).
22552............  Arthrodesis,                     N/A               N
                    anterior interbody,
                    including disc
                    space preparation,
                    discectomy,
                    osteophytectomy and
                    decompression of
                    spinal cord and/or
                    nerve roots;
                    cervical below C2,
                    each additional
                    interspace.
27477............  Arrest epiphyseal,              5122               T
                    any method (e.g.,
                    epiphysiodesis);
                    tibia and fibula,
                    proximal.
27485............  Arrest,                         5122               T
                    hemiepiphyseal,
                    distal femur or
                    proximal tibia or
                    fibula (e.g., genu
                    varus or valgus).
54411............  Removal and                     5377              J1
                    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                     5377              J1
                    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.
------------------------------------------------------------------------

X. Nonrecurring Policy Changes

A. Advance Care Planning Services

    For CY 2015, the CPT Editorial Panel created two new codes 
describing advance care planning (ACP) services: CPT code 99497 
(Advance care planning including the explanation and discussion of 
advance directives such as standard forms (with completion of such 
forms, when performed), by the physician or other qualified health 
professional; first 30 minutes, face-to-face with the patient, family 
member(s) and/or surrogate) and an add-on CPT code 99498 (Advance care 
planning including the explanation and discussion of advance directives 
such as standard forms (with completion of such forms, when performed), 
by the physician or other qualified health professional; each 
additional 30 minutes (List separately in addition to code for primary 
procedure)). In Addendum B of the CY 2015 OPPS/ASC final rule with 
comment period, we assigned CPT codes 99497 and 99498 an OPPS interim 
final status indicator of ``N'' (Paid under OPPS; payment is packaged 
into payment for other services. Therefore, there is no separate APC 
payment.). In Addendum B of the CY 2016 OPPS/ASC proposed rule (which 
is available via the Internet on the CMS Web site), we also proposed to 
continue assignment of status indicator ``N'' to CPT codes 99497 and 
99498 for CY 2016.
    Comment: Several commenters asked that separate OPPS payment be 
made for the services described by CPT codes 99497 and 99498 when these 
services are provided in the HOPD by auxiliary hospital staff. The 
commenters noted that separate payment for services described by these 
codes was proposed under the MPFS for CY 2016 (80 FR 41773). The 
commenters believed that nurses and other medical staff currently 
provide these services to hospital outpatients and that separate OPPS 
payment is warranted because the hospital incurs additional costs when 
it provides this counseling. The commenters also reported that some 
hospitals are currently coding this service with HCPCS code G0463 
(Hospital outpatient clinic visit for the assessment and management of 
a patient). In addition, the Panel recommended at its summer 2015 
meeting that CMS separately pay for advance care planning in the OPPS 
and assign the service to an APC. The Panel agreed with a presenter 
that if hospitals are providing this service to patients, separate 
payment for the service is warranted.
    Response: We agree in part with the commenters that separate OPPS 
payment should be made for the service described by CPT code 99497, but 
only under limited circumstances. We believe that payment for the 
service described by CPT code 99497 is appropriately packaged in the 
OPPS except when the service is the only service provided to the 
patient. Therefore, we are modifying our proposal to unconditionally 
package payment for CPT code 99497 and instead are conditionally 
packaging payment for the service described by this code and assign it 
status indicator ``Q1'' (instead of status indicator ``N''). The 
service described by CPT code 99497 is assigned to APC 5011 (Level 1 
Examinations and Related Services) based on expected similarity in 
resource use to other services assigned to this APC. CPT code 99498 is 
an add-on code and therefore payment for the service described by this 
code is unconditionally packaged (assigned status indicator ``N'') in 
the OPPS in accordance with 42 CFR 419.2(b)(18). We also note that the 
CPT code descriptors for CPT code 99497 and 99498 describe advance care 
planning as services provided by a ``physician or other qualified 
health professional.'' Therefore, based on the code descriptors, we 
expect that physicians or qualified nonphysician practitioners (as 
defined at 42 CFR 410.27(g)) will be involved (beyond just providing 
direct supervision of hospital staff) in providing these services to 
patients in the hospital outpatient setting.
    In the CY 2016 MPFS final rule, advance care planning (described by 
CPT codes 99497 and 99498) is being added as an optional element of the 
Annual Wellness Visit (AWV). We refer readers to the CY 2016 MPFS final 
rule with comment period for a discussion of this policy. Payment for 
the AWV, and the advance care planning described by CPT codes CPT codes 
99497 and 99498 when furnished as a part of the AWV, is excluded under 
the OPPS in accordance with 42 CFR 419.22(t). However, payment for the 
AWV, and the advance care planning described by CPT codes 99497 and 
99498 when furnished as a part of the AWV, is made under the MPFS when 
these services are furnished in a hospital outpatient

[[Page 70470]]

department (75 FR 72016). (We refer readers to section 1833(a)(2)(H) of 
the Act.)

B. 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, 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.'' 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 an HOPD that indicates 
whether an applicable CT service was furnished using equipment 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 hospitals under section 
1865(a) of the Act. Section 218(a)(2) of the PAMA made 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, in the CY 2016 OPPS/ASC proposed rule 
(80 FR 39300 through 39301), we proposed to establish a new modifier to 
be used on claims that include CT services furnished using equipment 
that does not meet each of the attributes of the NEMA Standard XR-29-
2013. We proposed that, beginning January 1, 2016, hospitals and 
suppliers would be required to use this modifier on claims for CT scans 
described by any of the HCPCS codes identified above (and any successor 
codes) that are furnished on non-NEMA Standard XR-29-2013-compliant CT 
scans. We stated that the use of the proposed modifier would result in 
the applicable payment reduction for the CT service, as specified under 
section 1834(p) of the Act.
    We invited public comments on our proposal.
    Comment: Many commenters endorsed the use of quality incentives to 
improve patient safety and optimize the use of radiation when providing 
CT diagnostic imaging services. Several commenters supported CMS' 
proposal to establish a modifier to identify services furnished using 
equipment that does not meet each of the attributes of the NEMA 
Standard XR-29-2013.
    Response: We appreciate the commenters' support.
    Comment: Several commenters asked that CMS delay implementation of 
section 1834(p)(2) of the Act to allow hospitals additional time to 
comply with the statutory provision before the payment reduction 
becomes effective.
    Response: The statutory provision under section 1834(p)(2) of the 
Act refers to computed tomography services that are furnished on or 
after January 1, 2016. Given this statutory date, we believe that we 
must implement this provision beginning January 1, 2016. Health care 
providers have identified radiation overdose from CT scanners as a 
public health problem. The payment reduction is 5 percent in CY 2016 
and increases to 15 percent in subsequent years. Hospitals providing 
services that are noncompliant as of January 1, 2016, will be subject 
to a 5-percent payment reduction for those services during CY 2016, and 
have the opportunity to upgrade their CT scanners before the 15-percent 
reduction takes effect in CY 2017.
    Comment: Several commenters requested clarification regarding the 
reduction in the payment amount for CT services furnished with 
equipment that does not meet the CT equipment standard. Commenters 
specifically inquired about the application of the payment reduction to 
CT services that are packaged into comprehensive or composite APCs.
    Response: We will be applying the payment reduction to the services 
described by the CT scan CPT codes (and any successor codes) listed in 
the statutory provision when the modifier is included on the claim. We 
cannot apply the payment reduction when the service described by an 
applicable CT scan code is packaged because there is no payment amount 
associated with the packaged CT scan code. Therefore, the payment 
reduction will only be applied when the service for a code is paid 
separately.
    Comment: One commenter cited section 1834 (p)(4) of the Act, which 
specifies that, through rulemaking, the Secretary may apply successor 
standards for CT equipment and requested that CMS develop successor 
standards that exempt CT scans performed on cone beam CT (CBCT) 
scanners that are FDA cleared only for imaging of the head from the 
requirement for Automatic Exposure Control (AEC) capability. The 
commenter indicated that its request was based on the fact that AEC 
capability is unavailable on CBCT scanners.
    Response: Section 1834(p) of the Act is a new provision. Our 
proposal was for the initial implementation of the NEMA Standard XR-29-
2013. We would like to gain some experience with the statutory standard 
before adopting a successor standard. Therefore, we are not currently 
planning to adopt a successor standard to the NEMA Standard XR-29-2013.
    After consideration of the public comments we received, we are 
finalizing the establishment of the new CT modifier. This 2-digit 
modifier will be added to the HCPCS annual file as of January 1, 2016, 
with the label ``CT'' and the long descriptor ``Computed tomography 
services furnished using equipment that does not meet each of the 
attributes of the National Electrical Manufacturers Association (NEMA) 
XR-29-2013 standard''.
    Beginning January 1, 2016, hospitals and suppliers will be required 
to report the ``CT'' modifier on claims for CT scans described by any 
of the HCPCS codes identified above (and any successor codes) that are 
furnished on non-NEMA Standard XR-29-2013-compliant CT scanners. The 
use of this modifier will result in the applicable payment reduction 
for the CT service, as specified under section 1834(p) of the Act.

C. 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.

[[Page 70471]]

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 G0296 
(Counseling visit to discuss need for lung cancer screening (LDCT) 
using low dose CT scan (service is for eligibility determination and 
share decision making)) (listed as HCPCS code GXXX1 in the proposed 
rule) and HCPCS code G0297 (Low dose CT scan (LDCT) for lung cancer 
screening) (listed as HCPCS code GXXX2 in the proposed rule). In the CY 
2016 OPPS/ASC proposed rule (80 FR 39301), for the CY 2016 OPPS, we 
proposed to assign HCPCS code G0296 to APC 5822 (Level 2 Health and 
Behavior Services) and HCPCS code G0297 to APC 5570 (Computed 
Tomography without Contrast).
    Comment: Commenters supported CMS' February 2015 NCD regarding 
coverage of lung cancer screening with LDCT and the counseling visit to 
discuss the need for lung cancer screening using LDCT, as well as CMS' 
proposal to establish HCPCS codes for payment of these services under 
the OPPS. However, the majority of the commenters recommended that CMS 
make the new HCPCS G-codes for lung cancer screening effective on 
February 5, 2015 (the effective date of the NCD) and extend the 1-year 
claims filing deadline by at least an additional quarter in CY 2016 to 
allow hospitals adequate time to file the claims.
    One commenter supported CMS' proposed assignment of HCPCS code 
G0297 to APC 5570. Other commenters believed that the proposed payment 
rate amounts for the counseling visit and for LDCT lung cancer 
screening were insufficient to cover the costs of this new preventive 
health service. One commenter recommended that CMS assign the services 
described by HCPCS code G0296 to APC 5012 (Level 2 Examinations and 
Related Services), similar to the APC assignment of the services 
described by HCPCS code G0402 (Initial preventive exam, 30 minute 
intra-serve time).
    Response: We appreciate the commenters' support. We agree that new 
HCPCS codes G0296 and G0297 should be effective for services furnished 
on or after the February 5, 2015 NCD effective date. We believe that 
hospitals will have sufficient time to file claims prior to the 1-year 
deadline.
    We also appreciate the commenter's support of our proposed 
assignment of HCPCS code G0297 to APC 5570, and continue to believe 
that HCPCS codes G0296 and G0297 are appropriately assigned to APCs 
5822 and 5570, respectively, based on clinical and expected resource 
similarity with the procedures currently assigned to those APCs. As is 
our standard practice, when claims data become available for these two 
codes, we will evaluate the claims data in relation to the APC 
assignment for services described by these codes and will propose a 
different APC through future rulemaking if such a change is warranted 
based on the claims data.
    Comment: A few commenters asked CMS to clarify that a medically 
necessary evaluation and management (E/M) service on the same day as a 
shared counseling visit for lung cancer screening with LDCT is allowed 
when it is clinically appropriate. Another commenter urged CMS to 
clarify that, similar to the policy that cost-sharing does not apply to 
lung cancer screening, the policy on cost-sharing will not apply to the 
shared decision-making discussion on screening.
    Response: We note that a medically necessary E/M service on the 
same day as a shared counseling visit for lung cancer screening with 
LDCT is allowed when it is clinically appropriate and the same day E/M 
service should be separately reportable with modifier ``25'' to 
identify a significant, separately identifiable E/M service on the same 
day. We also note that OPPS cost-sharing (that is, the coinsurance or 
deductible) does not apply to either the lung cancer screening with 
LDCT or the counseling visit to discuss the need for lung cancer 
screening using LDCT.
    Comment: A few commenters also addressed issues on the following 
subject-matter areas: Telemedicine; post-payment review; acceptable 
provider types; practitioners who can provide the counseling services; 
frequency limitations; and documentation requirements.
    Response: These comments pertain to issues for which we did not 
include any proposals in the proposed rule. Therefore, we believe these 
comments are outside the scope of the proposed rule, and we are not 
addressing them in this final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign HCPCS code G0296 (Counseling visit to 
discuss need for lung cancer screening (LDCT) using low dose CT scan 
(service is for eligibility determination and shared decision making)), 
to APC 5822 (Level 2 Health and Behavior Services) and HCPCS code G0297 
(Low dose CT scan (LDCT) for lung cancer screening), to APC 5570 
(Computed Tomography without Contrast). These new codes and APC 
assignments are effective as of the February 5, 2015 NCD effective date 
and may be billed under the OPPS beginning January 1, 2016. A waiver of 
the coinsurance and deductible applies to HCPCS codes G0296 and G0297 
because the services described by these codes are identified as 
additional preventive services, as stated in the NCD.

D. Payment for Procurement of Corneal Tissue Used in Procedures 
Performed in the HOPD and the ASC

1. Background
    We have a longstanding policy of making separate payment for the 
acquisition or procurement of corneal tissue used in procedures 
performed in both the HOPD and the ASC. When corneal tissue is used in 
procedures performed 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). When corneal tissue is used in procedures 
performed in the ASC, we pay separately for corneal tissue procurement 
as a covered ancillary service when it is furnished 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 the 
acquisition or procurement of corneal tissue used in procedures 
performed 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. When corneal tissue is used in procedures in the HOPD, we 
have stated that we will make separate payment, based on the hospital's 
reasonable costs incurred to acquire

[[Page 70472]]

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). Section 419.2(c)(8) of the 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. 
For corneal tissue used in procedures performed 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 furnished integral 
to the performance of an ASC covered surgical procedure and pay 
separately for this service. Therefore, 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 procedure, 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 (using CPT code 66180) or revision (using 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 disagreed with 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. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD and the 
ASC
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39301 through 39302), 
for CY 2016, we proposed to limit the separate payment policy for 
acquisition costs of corneal tissue used in procedures performed in the 
HOPD and the ASC to only corneal tissue that is used in a corneal 
transplant procedure. Under our proposal, the acquisition costs for 
corneal tissue used in procedures performed in the HOPD setting 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). 
We proposed that corneal tissue procurement for use in procedures 
performed in the ASC would be included as a covered ancillary service 
only when it is furnished integral to the performance of a corneal 
transplant procedure that is an ASC covered surgical procedure, and we 
pay separately for covered ancillary services under the ASC payment 
system. We also stated that we would provide 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 through change 
requests. We stated that this would mean that, for corneal tissue used 
in procedures performed in the HOPD and the ASC, we would not make 
separate payment for corneal tissue when it is used in any 
nontransplant procedure (payment for the corneal tissue in that 
instance would be packaged with the surgical procedure). We also stated 
that we would make packaged payment for all tissues used as patch 
grafts in glaucoma shunt surgery. We did not propose to change any 
other aspect of the policy for payment for corneal tissue used in 
procedures performed in either the HOPD or the ASC.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), we stated that 
we believe 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 by 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 but not for 
scleral patch grafting.
     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.
    In the proposed rule, we also proposed 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 invited public comments on these proposals.
    Comment: Many commenters supported the proposals. The commenters 
believed that the payment for the glaucoma surgery described by HCPCS 
code 66180 (Aqueous shunt to extraocular equatorial plate reservoir, 
external approach; with graft) with any/all of the various grafting 
materials (corneal tissue, sclera, or pericardium) that is packaged 
into the payment for the surgery is adequate for payment for procedures 
performed in both the HOPD and the ASC.
    Response: We appreciate the commenters' support.
    Comment: Several other commenters opposed the proposals. The 
commenters urged CMS to continue separate payment for corneal tissue. 
They believed that, without separate payment for corneal tissue for use 
as a graft in glaucoma surgery, ASCs would not permit glaucoma surgeons 
to perform this procedure in the ASC because the total cost of the 
procedure, including the shunt and the grafting material, would exceed 
the payment (if any or all grafting materials are packaged into the 
surgical procedure).
    Response: We disagree with these commenters. We believe that the 
total payment for the procedure described by HCPCS 66180 (with any or 
all grafting materials packaged) is adequate when procedures are 
performed in both the HOPD and the ASC. Therefore, for CY 2016, we are 
packaging payment for corneal tissue used in all applicable procedures 
except when used in corneal transplant surgery. In addition, we believe 
that our reassignment of some of

[[Page 70473]]

the intraocular procedures from APC 5492 (Level 2 Intraocular 
Procedures) to APC 5491 (Level 1 Intraocular Procedures), as described 
in section III.D.5 of this final rule with comment period, should help 
alleviate the concerns of the commenters relating to the sufficiency of 
payment for glaucoma surgery with patch grafting because this change 
will result in an increase in the payment for this procedure.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification. Under the ASC payment 
system, procurement or acquisition of corneal tissue for use in 
procedures performed in the ASC will be included as a covered ancillary 
service only when it is furnished integral to the performance of a 
corneal transplant procedure that is an ASC covered surgical procedure. 
Under the OPPS, procurement or acquisition of corneal tissue will be 
paid separately only when it is used in corneal transplant procedures. 
Specifically, corneal tissue will be separately paid when used in 
procedures performed in the HOPD and the ASC only when the corneal 
tissue is used in a corneal transplant procedure described by one of 
the following CPT codes: 65710 (Keratoplasty (corneal transplant); 
anterior lamellar); 65730 (Keratoplasty (corneal transplant); 
penetrating (except in aphakia or pseudophakia)); 65750 (Keratoplasty 
(corneal transplant); penetrating (in aphakia)); 65755 (Keratoplasty 
(corneal transplant); penetrating (in pseudophakia)); 65756 
(Keratoplasty (corneal transplant); endothelial); 65765 (Keratophakia); 
65767 (Epikeratoplasty); and any successor code or new code describing 
a new type of corneal transplant procedure that uses eye banked corneal 
tissue. This list of corneal transplant procedures with which corneal 
tissue is separately payable also will appear in the January 2016 OPPS 
and ASC updates through change requests. We also are finalizing the 
proposed changes to Sec. Sec.  416.164(b)(3) and 419.2(c)(8) of the 
regulations, without modification.

XI. CY 2016 OPPS Payment Status and Comment Indicators

A. 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 for CY 2016 is 
displayed in Addendum D1 to this final rule with comment period, which 
is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The 
CY 2016 payment status indicator assignments for APCs and HCPCS codes 
are shown in Addendum A and Addendum B, respectively, to this final 
rule with comment period, which are available on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), for CY 2016, 
we proposed to create two new status indicators:
     ``J2'' to identify certain combinations of services that 
we proposed to pay through new proposed C-APC 8011 (Comprehensive 
Observation Services). We refer readers to section II.A.2.e. of this 
final rule with comment period for a detailed discussion of this change 
and any public comments that we received.
     ``Q4'' to identify conditionally packaged laboratory 
tests. We refer readers to section II.A.3. of this final rule with 
comment period for a detailed discussion of this new status indicator 
and any public comments that we received.
    We note that, as discussed in sections II.A.2.e. and II.A.3. of 
this final rule with comment period, we are finalizing the two new 
status indicators ``J2'' and ``Q4''.

B. CY 2016 Comment Indicator Definitions

    In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), for the CY 
2016 OPPS, we proposed to use three comment indicators. Two comment 
indicators, ``CH'' and ``NI,'' which were in effect in CY 2015, would 
continue in CY 2016. In the proposed rule, we proposed 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 would 
also 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 has 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 proposed to use the ``CH'' comment indicator in the 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 stated that 
we believe using the ``CH'' indicator in the proposed rule would 
facilitate the public's review of the changes that we proposed for CY 
2016. We proposed 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, would 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 proposed 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 
(80 FR 39302). 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 proposed to use comment indicator ``NI'' to indicate that 
these HCPCS codes would 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 would respond to public comments and 
finalize their OPPS treatment in the CY 2017 OPPS/ASC final rule with 
comment period.

[[Page 70474]]

    In accordance with our usual practice, we proposed 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 proposed that CPT codes that are new for CY 2016 and any 
existing HCPCS codes with substantial revisions to the code descriptors 
for CY 2016 compared to the CY 2015 descriptors that were included in 
Addendum B to the CY 2016 OPPS/ASC proposed rule would be labeled with 
new comment indicator ``NP'' in Addendum B to indicate that these CPT 
codes would be open for comment as part of the CY 2016 OPPS/ASC 
proposed rule. We would respond to public comments and finalize their 
OPPS assignment in the CY 2016 OPPS/ASC final rule with comment period.
    Comment: One commenter did not believe the comment indicator ``NP'' 
was necessary because CMS has already been using comment indicator 
``NI.'' The commenter suggested that the two comment indicators were 
redundant. Moreover, the commenter recommended that CMS pare back the 
number of status and comment indicators, given the complexity that they 
add to the claims process.
    Response: We appreciate the commenter's recommendation to simplify 
the claims process. However, we disagree that comment indicators ``NP'' 
and ``NI'' are redundant and complicate claims processing. The ``NP'' 
comment indicator was proposed to be used in OPPS Addendum B, which 
also includes the proposed APC assignment of the code, to identify a 
new code or an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to current calendar 
year. The ``NP'' comment indicator is intended to notify the public in 
the proposed rule that public comments will be accepted on the proposed 
APC assignment for the new code and considered in that year's final 
rule. On the other hand, comment indicator ``NI'' is only used in the 
OPPS final rule with comment period Addendum B to identify a new code 
or existing code with substantial revision to its code descriptor in 
the next calendar year interim APC assignment for which comments will 
be accepted on the interim APC assignment for the new code. We believe 
that the creation of comment indicator ``NP'' will simplify the process 
of identification of new codes added in time for the proposed rule, as 
opposed to those that are new or substantially revised in the final 
rule with comment period.
    After consideration of the public comments we received, we are 
finalizing, without modification, the proposed new comment indicator 
``NP'' for CY 2016.
    The CY 2015 definitions of comment indicators ``CH'' and ``NI'' 
continue to be appropriate, and we are continuing to use them for CY 
2016.
    The definitions of the OPPS comment indicators for CY 2016 are 
listed in Addendum D2 to this final rule with comment period, which is 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    For further discussion on the treatment of new CY 2016 CPT codes 
that will be effective January 1, 2016, for which we solicited public 
comments in the CY 2016 OPPS/ASC proposed rule, we refer readers to 
section III. of this final rule with comment period.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to 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 procedures in the CPT surgical range that we have determined 
do not pose a significant safety risk, that we would not expect to 
require an overnight stay when performed in ASCs, and that are 
separately paid under the OPPS (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 provided 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

[[Page 70475]]

42535). We base ASC payment and policies for most 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 and 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. 
These updates implement newly created and revised Level II HCPCS and 
Category III CPT codes for ASC payment and 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 are implemented only 
through the January quarterly CR update. New and revised Category I CPT 
vaccine codes are released twice a year and are implemented through the 
January and July quarterly CR 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 many covered surgical procedures and covered ancillary 
services under the revised ASC payment system. This joint update 
process ensures that the ASC updates occur in a regular, predictable, 
and timely manner.

B. 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 the CY 2016 OPPS/ASC 
proposed rule and this final rule with comment period.
    We have separated our discussion below based on when the codes are 
released and whether we proposed to solicit public comments in the 
proposed rule (and respond to those comments in this CY 2016 OPPS/ASC 
final rule with comment period) or whether we will be soliciting public 
comments in this 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. In the proposed 
rule (80 FR 39304), we stated that we will respond to public comments 
and finalize the treatment of these codes under the ASC payment system 
in this CY 2016 OPPS/ASC final rule with comment period.
2. Treatment of New and Revised Level II HCPCS Codes and Category III 
CPT Codes Implemented in April 2015 and July 2015 for Which We 
Solicited Public Comments in the CY 2016 OPPS/ASC 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 of the CY 2016 OPPS/ASC proposed 
rule (80 FR 39304) listed 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 of the CY 2016 OPPS/ASC proposed 
rule (80 FR 39305) listed 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 the 
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

[[Page 70476]]

codes as ASC covered surgical procedures, effective July 1, 2015. These 
codes are listed in Table 57 of the CY 2016 OPPS/ASC proposed rule (80 
FR 39305), along with their proposed payment indicators. The proposed 
payment rates for these new Category III CPT codes can be found in 
Addendum AA to the proposed rule (which is available via the Internet 
on the CMS Web site).
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39304), we invited 
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 of the 
proposed rule. We proposed to finalize their payment indicators and 
their payment rates in this CY 2016 OPPS/ASC final rule with comment 
period.
    We did not receive any public comments regarding the proposed ASC 
payment indicators and payment rates. Therefore, we are adopting as 
final the CY 2016 proposed ASC payment indicators and payment rates for 
the ASC covered surgical procedures and covered ancillary services 
described by the new Level II HCPCS codes implemented in April 2015 and 
July 2015 through the quarterly update CRs as shown below, in Tables 
59, 60 and 61, respectively. The final CY 2016 ASC payment rates for 
these codes can be found in ASC Addendum AA and BB of this OPPS/ASC 
final rule with comment period.

 Table 59--New Level II HCPCS Codes for Covered Surgical Procedures or Covered Ancillary Services Implemented in
                                                   April 2015
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2016
       CY 2015 HCPCS code              CY 2016 HCPCS code           CY 2016 Long descriptor          payment
                                                                                                    indicator
----------------------------------------------------------------------------------------------------------------
C2623...........................  C2623.......................  Catheter, transluminal                       J7
                                                                 angioplasty, drug-coated, non-
                                                                 laser.
C9445...........................  J0596.......................  Injection, c1 esterase                       K2
                                                                 inhibitor (recombinant),
                                                                 Ruconest, 10 units.
C9448 *.........................  J8655.......................  Netupitant 300 mg and                        K2
                                                                 palonosetron 0.5 mg.
C9449...........................  J9039.......................  Injection, blinatumomab, 1                   K2
                                                                 microgram.
C9450...........................  J7313.......................  Injection, fluocinolone                      K2
                                                                 acetonide intravitreal
                                                                 implant, 0.01 mg.
C9451...........................  J2547.......................  Injection, peramivir, 1 mg.....              K2
C9452...........................  J0695.......................  Injection, ceftolozane 50 mg                 K2
                                                                 and tazobactam 25 mg.
Q9975...........................  J7205.......................  Injection, factor viii fc                    K2
                                                                 fusion (recombinant), per iu.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9448 was deleted June 30, 2015 and replaced with HCPCS code Q9978 effective July 1, 2015.


           Table 60--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2015
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2016
       CY 2015 HCPCS code              CY 2016 HCPCS code           CY 2016 Long descriptor          payment
                                                                                                    indicator
----------------------------------------------------------------------------------------------------------------
C2613...........................  C2613.......................  Lung biopsy plug with delivery               J7
                                                                 system.
C9453...........................  J9299.......................  Injection, nivolumab, 1 mg.....              K2
C9454...........................  J2502.......................  Injection, pasireotide long                  K2
                                                                 acting, 1 mg.
C9455...........................  J2860.......................  Injection, siltuximab, 10 mg...              K2
Q9978 *.........................  J8655.......................  Netupitant 300 mg and                        K2
                                                                 palonosetron 0.5 mg.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q9978 replaced HCPCS code C9448 effective July 1, 2015.


 Table 61--New Category III CPT Codes for Covered Surgical Procedures or Covered Ancillary Services Implemented
                                                  in July 2015
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2016
        CY 2015 CPT code                CY 2016 CPT code            CY 2016 Long descriptor          payment
                                                                                                    indicator
----------------------------------------------------------------------------------------------------------------
0392T...........................  0392T.......................  Laparoscopy, surgical,                       G2
                                                                 esophageal sphincter
                                                                 augmentation procedure,
                                                                 placement of sphincter
                                                                 augmentation device (ie,
                                                                 magnetic band).
0393T...........................  0393T.......................  Removal of esophageal sphincter              G2
                                                                 augmentation device.
----------------------------------------------------------------------------------------------------------------

3. 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

[[Page 70477]]

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. Modification of the Current Process for Accepting Comments on New 
and Revised Category I and III CPT Codes That Are Effective January 1
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39305 through 39307), 
we proposed 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 revisions under the 
MPFS and the OPPS for establishing payment indicators for new and 
revised CPT codes that take effect each January 1. Because we are 
following this new process for the OPPS where 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 
needed to propose a corresponding process for 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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39305 
through 39307), we proposed that we would include new and revised 
Category I and III CPT codes that we receive from the AMA CPT Editorial 
Panel in time for the proposed rule and their proposed ASC payment 
indicators in the OPPS/ASC proposed rule and finalize the ASC payment 
indicator assignments in the OPPS/ASC final rule with comment period. 
We proposed that, for new and revised Category I and III CPT codes that 
can be cross-walked to current codes for which ASC payment assignments 
are already established 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 these 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 proposed to adopt these conforming coding and payment 
policies (by creating G codes that mirror existing codes that are the 
predecessor codes to the untimely new and revised CPT codes) 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. 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 and APC unless a policy change was being 
proposed for the codes. 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 
interim 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 descriptor 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. 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 optimistic based on what 
has occurred in CY 2015 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 OPPS/ASC 
proposed rule.
    As stated previously, for new or revised codes, including new codes 
that describe wholly new services, 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

[[Page 70478]]

include proposed ASC payment indicator assignments in the proposed rule 
for a year, we would establish interim ASC payment indicator 
assignments for the initial year. We proposed 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 proposed 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 proposed 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 that can be cross-walked to 
current codes for which ASC payment assignments are already established 
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. 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 which we do not receive 
timely information from the AMA, we proposed to establish interim ASC 
payment indicators in that year's OPPS/ASC final rule with comment 
period, as is our current process, and to follow our current process to 
respond to public comments and finalize the ASC payment indicator 
assignments in the OPPS/ASC final rule with comment period for the 
subsequent year. 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 invited public comment on these proposals.
    As stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39306), for 
the CY 2016 ASC update, we received the CY 2016 Category I and III CPT 
codes from the AMA in time for inclusion in the CY 2016 OPPS/ASC 
proposed rule. The new and revised CY 2016 Category I and III CPT codes 
were included in ASC Addenda AA and BB to the CY 2016 OPPS/ASC proposed 
rule (which are available via the Internet on the CMS Web site) and 
were 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. In the CY 2016 OPPS/ASC proposed rule, we solicited 
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.
    Comment: One commenter recommended that CMS refrain from creating 
temporary HCPCS G-codes when CPT codes are available in order to avoid 
confusion and parallel coding inconsistencies. The commenter further 
recommended that CMS rely solely on the use of CPT codes for procedures 
and services under both the OPPS and the ASC payment system.
    Response: We appreciate the commenter's recommendations. However, 
we do not agree that we should refrain from creating temporary HCPCS G-
codes when CPT codes are available or that we should rely solely on the 
use of CPT codes for procedures and services under both the OPPS and 
the ASC payment system. We intend to the extent possible to include new 
and revised Category I and III CPT codes and their proposed payment 
indicators in a proposed rule and finalize the payment indicators in 
the final rule with comment period for the same year. We will delay the 
adoption of new and revised Category I and III CPT codes that can be 
cross-walked to current codes for which ASC payment assignments are 
already established that are available too late for a current proposed 
rule for a year. Instead, we will use G-codes that mirror the 
predecessor CPT codes that are scheduled for deletion in the upcoming 
year to maintain the existing ASC payment indicators until the 
following year. In the following year, we will include proposed 
assignments for these new and revised Category I and III CPT codes in 
the OPPS/ASC proposed rule, and finalize the payment indicators for 
these codes in the OPPS/ASC final rule with comment period. In the case 
of a new Category I or III 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 which we do 
not receive timely information from the AMA, we will establish interim 
ASC payment indicators in that year's OPPS/ASC final rule with comment 
period, as is our current process, and follow our current process to 
respond to public comments and finalize the ASC payment indicator 
assignments in the OPPS/ASC final rule with comment period for the 
subsequent year. We believe this new process aligns the reporting 
requirements for the same codes under all three payment systems: MPFS, 
OPPS, and the ASC payment system. This creates coding consistency and 
less confusion amongst all three Medicare payment systems.
    Comment: Some commenters supported and commended CMS for proposing 
a comment period for new CPT codes before they are used for payment 
purposes under the ASC payment system. The commenters stated that 
requesting public input prior to use of new and revised codes will 
encourage reliable and accurate payments. One commenter believed that 
the inclusion of new and revised CPT codes in the proposed rule 
represents a significant improvement. The commenters requested that CMS 
adopt its proposal to allow for comments on new and revised CPT codes 
prior to usage for payment purposes.
    Response: We appreciate the commenters support for our proposal. We 
believe that publishing our proposed ASC payment indicators for the new 
and revised Category I and III CPT codes prior to their implementation 
on January 1 whenever possible will help ensure that correct ASC 
payment indicators for new and revised codes are effective January 1, 
and that ASCs are paid appropriately when the codes are implemented.
    After consideration of the public comments we received, we are 
finalizing our proposal without any modification. First, for new and 
revised Category I and III CPT codes that we receive timely from the 
AMA CPT Editorial Panel, we are finalizing our proposal to include 
these codes that will be effective January 1 in the OPPS/ASC proposed 
rules with proposed ASC payment indicators, and finalize their 
assignments in the OPPS/ASC final rules with comment period. Secondly, 
for those new and revised Category I and III CPT codes that can be 
cross-walked to current codes for which ASC payment assignments are 
already established that cannot be included in the OPPS/ASC proposed 
rules, we are finalizing our proposal to delay adoption of these codes 
for a year while

[[Page 70479]]

using methods, including creating G-codes that describe the predecessor 
codes, to maintain the existing ASC payment indicators as interim ASC 
payment indicator assignments until the following year when we will 
include proposed payment indicator assignments for the codes in the 
OPPS/ASC proposed rule, and finalize these payment indicator 
assignments in the OPPS/ASC final rule with comment period. We note 
that we will assign the HCPCS G-codes to interim ASC payment indicator 
assignments for one year, and assign the Category I and III CPT codes 
to ASC payment indicator ``B5'' to indicate that another HCPCS code 
should be reported to Medicare. However, if certain Category I and III 
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 
will use these revised codes and continue to assign those codes to 
their current ASC payment indicator and APC unless a policy change was 
being proposed for the codes. Thirdly, for Category I and III CPT codes 
that describe wholly new services that have not previously been 
addressed under the ASC payment system for which we do not receive 
timely information from the AMA, we will establish interim ASC payment 
indicators for these CPT codes for the initial year in the OPPS/ASC 
final rule with comment period in which we will solicit public comments 
on these interim payment indicators, and respond to those comments and 
finalize the ASC payment indicator assignments in the subsequent year 
OPPS/ASC final rule with comment period, as is our current practice.
4. Process for New and Revised Level II HCPCS Codes That Are Effective 
October 1, 2015 and January 1, 2016 for Which We Are Soliciting Public 
Comments in This CY 2016 OPPS/ASC Final Rule With Comment Period
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39307), although we 
proposed to revise our process for requesting public comments on the 
new and revised Category I and III CPT codes, we did not propose 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39307), we proposed 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 
also stated that 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 62 below, we summarize the CY 2016 process described in 
section XII.B. of the 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 62--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 1, 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 invited public comments on this proposed process. We did not 
receive any public comments related to our proposal. Therefore, we are 
finalizing our proposal to assign the Level II HCPCS codes that will be 
effective October 1, 2015 and January 1, 2016 to comment indicator 
``NI'' in Addendum AA and BB of this CY 2016 OPPS/ASC

[[Page 70480]]

final rule with comment period to indicate that we have assigned the 
codes an interim ASC payment indicator for CY 2016. We note that 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.

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

1. Covered Surgical Procedures
a. 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 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) Changes for CY 2016 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the CY 2016 OPPS/ASC 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 proposed to permanently designate as office-based are 
listed in Table 59 of the CY 2016 OPPS/ASC proposed rule (80 FR 39308).
    We invited public comment on this proposal.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal, without modification, to designate the 
procedures described by CPT codes 43197 and 43198 as permanently 
office-based for CY 2016, as set forth in Table 63 below.

       Table 63--ASC Covered Surgical Procedures Newly Designated as Permanently Office-Based for CY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed CY
                                                                 CY 2015 ASC        2016 ASC      Final CY 2016
       CY 2016 CPT code            CY 2016 long descriptor         payment          payment        ASC payment
                                                                  indicator        indicator       indicator *
----------------------------------------------------------------------------------------------------------------
43197.........................  Esophagoscopy, flexible,                   G2               P3               P3
                                 transnasal; diagnostic,
                                 including collection of
                                 specimen(s) by brushing or
                                 washing, when performed
                                 (separate procedure).
43198.........................  Esophagoscopy, flexible,                   G2               P3               P3
                                 transnasal; with biopsy,
                                 single or multiple.
----------------------------------------------------------------------------------------------------------------
* Final payment indicators are based on a comparison of the final rates according to the ASC standard
  ratesetting methodology and the MPFS final 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 final rule
  with comment period.

    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

[[Page 70481]]

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, in the CY 
2016 OPPS/ASC proposed rule (80 FR 39308 through 39309) we proposed to 
maintain the temporary office-based designations for these five codes 
for CY 2016. We listed all of these codes in Table 60 of the proposed 
rule (80 FR 39309), 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 of the proposed rule (80 FR 39309) reflected 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 proposed 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 
were displayed in Table 60 of the proposed rule. The procedures for 
which the proposed office-based designations for CY 2016 are temporary 
also are indicated by asterisks in Addendum AA to the proposed rule 
(which is available via the Internet on the CMS Web site).
    We invited public comment of these proposals.
    Comment: One commenter supported CMS' proposal to designate HCPCS 
code C9800 as temporarily rather than permanently office-based, 
allowing for additional utilization data to be collected.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, for CY 2016 
we are finalizing our proposal, without modification, to designate the 
four procedures listed in Table 64 as temporarily office-based and one 
procedure listed in Table 64 as permanently office-based.

 Table 64--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
----------------------------------------------------------------------------------------------------------------
                                                                                  CY 2015 ASC      CY 2016 ASC
           CY 2016 CPT code                     CY 2016 long descriptor             payment          payment
                                                                                   indicator       indicator **
----------------------------------------------------------------------------------------------------------------
0299T.................................  Extracorporeal shock wave for                     R2 *             R2 *
                                         integumentary wound healing, high
                                         energy, including topical application
                                         and dressing care; initial wound.
C9800.................................  Dermal injection procedure(s) for                 R2 *             R2 *
                                         facial lipodystrophy syndrome (LDS)
                                         and provision of Radiesse or Sculptra
                                         dermal filler, including all items
                                         and supplies.
10030.................................  Image-guided fluid collection drainage            P2 *             P2 *
                                         by catheter (e.g., abscess, hematoma,
                                         seroma, lymphocele, cyst), soft
                                         tissue (e.g., extremity abdominal
                                         wall, neck), percutaneous.
64617.................................  Chemodenervation of muscle(s); larynx,            P3 *               P3
                                         unilateral, percutaneous (e.g., for
                                         spasmodic dysphonia), includes
                                         guidance by needle electromyography,
                                         when performed.
67229.................................  Treatment of extensive or progressive             R2 *             R2 *
                                         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.
** Final payment indicators are based on a comparison of the final rates according to the ASC standard
  ratesetting methodology and the MPFS final 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 final rule
  with comment period.

    For CY 2016, we also proposed to designate certain new CY 2016 
codes for ASC covered surgical procedures as temporary office-based, 
displayed in Table 61 of the proposed rule (80 FR 39309). 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 proposed that the 
office-based designations be 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 the 
proposed rule (which is available via the Internet on the CMS Web 
site).
    We invited public comment on these proposals.
    We did not receive any public comment on our proposal. Therefore, 
for CY 2016, we are finalizing our proposal without modification to 
designate the four procedures listed in Table 65 as temporarily office-
based.

[[Page 70482]]



 Table 65--CY 2016 Payment Indicators for New CY 2016 CPT Codes for ASC
   Covered Surgical Procedures Designated as Temporarily Office-Based
------------------------------------------------------------------------
 Final CY 2016 OPPS/
 ASC  Proposed Rule     CY 2016  CPT     Final CY 2016    Final CY 2016
    5-digit  CMS            code        long descriptor    ASC payment
placeholder code ***                                       indicator **
------------------------------------------------------------------------
6446A...............  64461...........  Paravertebral              P3 *
                                         block (PVB)
                                         (paraspinous
                                         block),
                                         thoracic;
                                         single
                                         injection site
                                         (includes
                                         imaging
                                         guidance, when
                                         performed).
6446C...............  64463...........  Paravertebral              P3 *
                                         block (PVB)
                                         (paraspinous
                                         block),
                                         thoracic;
                                         continuous
                                         infusion by
                                         catheter
                                         (includes
                                         imaging
                                         guidance, when
                                         performed).
03XXB...............  0402T...........  Collagen cross-            R2 *
                                         linking of
                                         cornea
                                         (including
                                         removal of the
                                         corneal
                                         epithelium and
                                         intraoperative
                                         pachymetry
                                         when
                                         performed).
657XG...............  65785...........  Implantation of            R2 *
                                         intrastromal
                                         corneal ring
                                         segments.
------------------------------------------------------------------------
* If designation is temporary.
** Final payment indicators are based on a comparison of the final rates
  according to the ASC standard ratesetting methodology and the MPFS
  final 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 final rule with comment period.
*** New CPT codes (with CMS 5-digit placeholder codes) that will be
  effective January 1, 2016. The final 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 Finalized 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 comprehensive APC policy 
under the OPPS under which we created C-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 C-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 C-APCs continue to be separately paid under the ASC payment 
system instead of being packaged into the payment for the C-APC as 
under the OPPS. To avoid duplicating payment, we provided that the CY 
2015 ASC payment rates for these C-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 
C-APCs for purposes of identifying device-intensive procedures and to 
calculate payment rates for device-intensive procedures assigned to C-
APCs. Because we implemented the C-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) Changes to List of ASC Covered Surgical Procedures Designated as 
Device-Intensive for CY 2016
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39310), for CY 2016, 
we proposed to continue our CY 2015 policies. Specifically, for CY 
2016, we proposed to update the ASC list of covered surgical procedures 
that are eligible for payment according to our device-intensive 
procedure payment methodology, consistent with 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 proposed 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 of the 
proposed rule (80 FR 39311 through 39314). The CPT code, the CPT code 
short descriptor, the proposed CY 2016 ASC payment indicator, the 
proposed CY 2016 OPPS

[[Page 70483]]

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 of the 
proposed rule. All of these procedures are included in Addendum AA to 
the proposed rule (which is available via the Internet on the CMS Web 
site).
    We invited public comment on these proposals.
    Comment: One commenter requested that CMS make ASC payment for CPT 
code 19296 (Placement of radiotherapy afterloading expandable catheter 
(single or multichannel) into the breast for interstitial radioelement 
application following partial mastectomy, includes imaging guidance; on 
date separate from partial mastectomy) under a device-intensive 
designation. The commenter noted that the code, due to prior 
designation as an office-based procedure, continued to be assigned an 
office-based ASC payment indicator, even though the other procedures 
assigned to the same OPPS APC would qualify for device-intensive status 
in CY 2016. The commenter further requested that codes that qualify for 
both device-intensive and office-based status be designated as device-
intensive prior to application of the office-based payment comparison.
    Response: Our current policy, as described in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74409), is for the device-
intensive status to supersede the assignment of the office-based 
designation. Therefore, CPT code 19296 will be a device-intensive 
procedure and will be assigned ASC payment indicator ``J8'' (device-
intensive procedure; paid at adjusted rate) for CY 2016 under the ASC 
payment system.
    Comment: Commenters supported CMS' assignment of the procedure 
described by CPT code C9740 (Cystourethroscopy, with insertion of 
transprostatic implant; 4 or more implants) to a device-intensive APC, 
which they believed would lead to more appropriate payment. One 
commenter also requested that the procedure described by CPT code C9739 
be designated a device-intensive procedure.
    Response: We appreciate the commenters' support. An ASC device-
intensive procedure is a procedure that is 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. CPT code C9739 is not assigned to an APC 
with a device offset percentage greater than 40 percent based on the 
standard OPPS APC ratesetting methodology. Therefore, it will not be 
considered a device-intensive procedure for CY 2016 under the ASC 
payment system. For a more detailed discussion of these codes, we refer 
readers to section III.D.13. of this final rule with comment period.
    Comment: Commenters noted that APC 0105 (Level 1 Pacemaker and 
Similar Procedures), which was proposed to be renumbered to APC 5221, 
was designated as a device-intensive APC even though the APC only 
consists of device removal, revision, or repair procedures and, 
therefore, would not necessarily include a device. The commenters 
believed that the designation was inaccurately applied because it would 
inaccurately apply edits for device codes to procedures that would not 
require them. The commenters requested that the device designation for 
the APC and its procedure be removed.
    Response: As stated previously, an ASC device-intensive procedure 
is a procedure that is 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. 
For the CY 2016 OPPS/ASC proposed rule, APC 5221 had a device offset 
percentage greater than 40 percent. Using CY 2016 OPPS/ASC final rule 
claims and cost report data, APC 5221 does not have a final device 
offset percentage of greater than 40 percent. Therefore, any procedure 
assigned to APC 5221 will not be an ASC device-intensive procedure. For 
a discussion of device-intensive procedures under the OPPS, we refer 
readers to section IV.B. of this final rule with comment period.
    After consideration of the public comments we received, we are 
designating the ASC covered surgical procedures displayed in Table 66 
below as device-intensive and subject to the device-intensive procedure 
payment methodology for CY 2016. The CPT code, the CPT code short 
descriptor, the final CY 2016 ASC payment indicator (PI), the final CY 
2016 OPPS APC assignment, the final CY 2016 OPPS APC device offset 
percentage, and an indication if the full credit/partial credit (FB/FC) 
device adjustment policy will apply also are listed in Table 66 below. 
All of these procedures are included in Addendum AA to this final rule 
with comment period (which is available via the Internet on the CMS Web 
site).
(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 
noncomprehensive 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 (non-device) 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39310), in response to 
stakeholder concerns regarding the situation where procedures with 
high-cost devices are not classified as device-

[[Page 70484]]

intensive under the ASC payment system, we solicited public comments 
for alternative methodologies for establishing device-intensive status 
for ASC covered surgical procedures.
    Comment: Several commenters requested that CMS calculate device 
intensity at the HCPCS level. The commenters believed that designating 
device intensity at the HCPCS level would be appropriate because the 
current method of calculating device intensity at the APC level does 
not take into account device similarity within an APC. Other commenters 
requested that CMS adopt additional changes to the device-intensive 
policy to encourage the migration of services to ASCs from other 
settings. Another commenter requested that CMS lower the threshold for 
device intensity such that the estimated device cost of 30 percent or 
greater of the procedural cost. One commenter suggested that correctly 
coded claims be used to calculate device intensity, codes assigned to 
New Tech APCs be allowed designation of an interim device-intensity 
percentage, and comments be solicited on codes with fluctuations of 
greater than 10 percent in device intensity from year-to-year as 
measured by the estimated device cost relative to the estimated APC 
cost.
    Response: We appreciate the thoughtful comments that stakeholders 
have provided and will take them into consideration for future 
rulemaking.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost/full credit or partial credit, as set forth in Sec.  
416.179, is consistent with the OPPS policy 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 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. 
In the CY 2014 OPPS/ASC final rule with comment period, 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 
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 in the CY 2014 OPPS/ASC final rule 
with comment period 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39310 through 39314), 
we proposed 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 of the 
proposed rule (80 FR 39311 through 39314) displayed the ASC covered 
device-intensive procedures that we proposed would be subject to the no 
cost/full credit or partial credit device adjustment policy for CY 
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 proposed to reduce the payment for 
implantation procedures listed in Table 62 of the proposed rule that 
are subject to the no cost/full credit or partial credit device 
adjustment policy by one-half of the device offset amount that would be 
applied if a device was provided at no cost or with full credit, if the 
credit to the ASC is 50 percent or more (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 invited public comment on these proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our proposals without modification. 
Specifically, we will apply our FB/FC

[[Page 70485]]

policy to all device-intensive procedures in CY 2016. The device-
intensive procedures for CY 2016 are listed in Table 66 below. For CY 
2016, we will reduce the payment for the procedures listed in Table 66 
by the full device offset amount if a device is furnished without cost 
or with full credit. ASCs must append the HCPCS modifier ``FB'' to the 
HCPCS code for a surgical procedure listed in Table 66 below when the 
device is furnished without cost or with full credit. In addition, for 
CY 2016, we will reduce the payment for the procedures listed in Table 
66 below by one-half of the device offset amount if a device is 
provided with partial credit, if the credit to the ASC is 50 percent or 
more (but less than 100 percent) of the device cost. The ASC must 
append the HCPCS ``FC'' modifier to the HCPCS code for a surgical 
procedure listed in Table 66 when the facility receives a partial 
credit of 50 percent or more (but less than 100 percent) of the cost of 
a device.

   Table 66--ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2016, Including ASC Covered
   Surgical Procedures for Which the No Cost/Full Credit or Partial Credit Device Adjustment Policy Will Apply
----------------------------------------------------------------------------------------------------------------
                                               Final CY 2016                     Final CY 2016     Final FB/FC
      HCPCS code          Short descriptor      ASC payment     Final CY 2016    device offset     policy will
                                                 indicator         OPPS APC        percentage         apply
----------------------------------------------------------------------------------------------------------------
0100T................  Prosth retina                      J8             1599            91.62                Y
                        receive&gen.
0171T................  Lumbar spine proces                J8             5125            53.97                Y
                        distract.
0238T................  Trluml perip athrc                 J8             5193            60.36                Y
                        iliac art.
0282T................  Periph field stimul                J8             5462            56.19                Y
                        trial.
0283T................  Periph field stimul                J8             5464            86.79                Y
                        perm.
0302T................  Icar ischm mntrng sys              J8             5223            68.66                Y
                        compl.
0303T................  Icar ischm mntrng sys              J8             5222            73.05                Y
                        eltrd.
0304T................  Icar ischm mntrng sys              J8             5222            73.05                Y
                        device.
0308T................  Insj ocular telescope              J8             5494            84.55                Y
                        prosth.
0316T................  Replc vagus nerve pls              J8             5464            86.79                Y
                        gen.
0387T................  Leadless c pm ins/rpl              J8             5193            60.36                Y
                        ventr.
0408T *..............  Insj/rplc cardiac                  J8             5231            77.67                Y
                        modulj sys.
0409T *..............  Insj/rplc cardiac                  J8             5231            77.67                Y
                        modulj pls gn.
0410T *..............  Insj/rplc car modulj               J8             5222            73.05                Y
                        atr elt.
0411T *..............  Insj/rplc car modulj               J8             5222            73.05                Y
                        vnt elt.
0414T *..............  Rmvl & rpl car modulj              J8             5231            77.67                Y
                        pls gn.
19296................  Place po breast cath               J8             5093            40.84                Y
                        for rad.
19298................  Place breast rad tube/             J8             5093            40.84                Y
                        caths.
19325................  Enlarge breast with                J8             5093            40.84                Y
                        implant.
19342................  Delayed breast                     J8             5093            40.84                Y
                        prosthesis.
19357................  Breast reconstruction              J8             5093            40.84                Y
20696................  Comp multiplane ext                J8             5125            53.97                Y
                        fixation.
21243................  Reconstruction of jaw              J8             5125            53.97                Y
                        joint.
22551................  Neck spine fuse&remov              J8             5125            53.97                Y
                        bel c2.
22554................  Neck spine fusion....              J8             5125            53.97                Y
23616................  Treat humerus                      J8             5125            53.97                Y
                        fracture.
24361................  Reconstruct elbow                  J8             5125            53.97                Y
                        joint.
24362................  Reconstruct elbow                  J8             5125            53.97                Y
                        joint.
24363................  Replace elbow joint..              J8             5125            53.97                Y
24366................  Reconstruct head of                J8             5125            53.97                Y
                        radius.
24370................  Revise reconst elbow               J8             5125            53.97                Y
                        joint.
24371................  Revise reconst elbow               J8             5125            53.97                Y
                        joint.
24410................  Revision of humerus..              J8             5125            53.97                Y
24435................  Repair humerus with                J8             5125            53.97                Y
                        graft.
24545................  Treat humerus                      J8             5125            53.97                Y
                        fracture.
24546................  Treat humerus                      J8             5125            53.97                Y
                        fracture.
24587................  Treat elbow fracture.              J8             5125            53.97                Y
25441................  Reconstruct wrist                  J8             5125            53.97                Y
                        joint.
25442................  Reconstruct wrist                  J8             5125            53.97                Y
                        joint.
25444................  Reconstruct wrist                  J8             5125            53.97                Y
                        joint.
25446................  Wrist replacement....              J8             5125            53.97                Y
27279................  Arthrodesis                        J8             5125            53.97                Y
                        sacroiliac joint.
27356................  Remove femur lesion/               J8             5125            53.97                Y
                        graft.
27438................  Revise kneecap with                J8             5125            53.97                Y
                        implant.
27440................  Revision of knee                   J8             5125            53.97                Y
                        joint.
27441................  Revision of knee                   J8             5125            53.97                Y
                        joint.
27442................  Revision of knee                   J8             5125            53.97                Y
                        joint.
27446................  Revision of knee                   J8             5125            53.97                Y
                        joint.
27870................  Fusion of ankle joint              J8             5125            53.97                Y
                        open.
28420................  Treat/graft heel                   J8             5125            53.97                Y
                        fracture.
28705................  Fusion of foot bones.              J8             5125            53.97                Y
28715................  Fusion of foot bones.              J8             5125            53.97                Y
28735................  Fusion of foot bones.              J8             5125            53.97                Y
29889................  Knee arthroscopy/                  J8             5125            53.97                Y
                        surgery.
33206................  Insert heart pm                    J8             5223            68.66                Y
                        atrial.
33207................  Insert heart pm                    J8             5223            68.66                Y
                        ventricular.
33208................  Insrt heart pm atrial              J8             5223            68.66                Y
                        & vent.

[[Page 70486]]

 
33210................  Insert electrd/pm                  J8             5222            73.05                Y
                        cath sngl.
33211................  Insert card                        J8             5222            73.05                Y
                        electrodes dual.
33212................  Insert pulse gen sngl              J8             5222            73.05                Y
                        lead.
33213................  Insert pulse gen dual              J8             5223            68.66                Y
                        leads.
33214................  Upgrade of pacemaker               J8             5223            68.66                Y
                        system.
33216................  Insert 1 electrode pm-             J8             5222            73.05                Y
                        defib.
33217................  Insert 2 electrode pm-             J8             5222            73.05                Y
                        defib.
33221................  Insert pulse gen mult              J8             5224            72.72                Y
                        leads.
33224................  Insert pacing lead &               J8             5223            68.66                Y
                        connect.
33227................  Remove&replace pm gen              J8             5222            73.05                Y
                        singl.
33228................  Remv&replc pm gen                  J8             5223            68.66                Y
                        dual lead.
33229................  Remv&replc pm gen                  J8             5224            72.72                Y
                        mult leads.
33230................  Insrt pulse gen w/                 J8             5231            77.67                Y
                        dual leads.
33231................  Insrt pulse gen w/                 J8             5232            80.72                Y
                        mult leads.
33233................  Removal of pm                      J8             5222            73.05                Y
                        generator.
33240................  Insrt pulse gen w/                 J8             5231            77.67                Y
                        singl lead.
33249................  Insj/rplcmt defib w/               J8             5232            80.72                Y
                        lead(s).
33262................  Rmvl& replc pulse gen              J8             5231            77.67                Y
                        1 lead.
33263................  Rmvl & rplcmt dfb gen              J8             5231            77.67                Y
                        2 lead.
33264................  Rmvl & rplcmt dfb gen              J8             5232            80.72                Y
                        mlt ld.
33270................  Ins/rep subq                       J8             5232            80.72                Y
                        defibrillator.
33271................  Insj subq impltbl dfb              J8             5222            73.05                Y
                        elctrd.
33282................  Implant pat-active ht              J8             5222            73.05                Y
                        record.
37221................  Iliac revasc w/stent.              J8             5192            50.76                Y
37225................  Fem/popl revas w/                  J8             5192            50.76                Y
                        ather.
37226................  Fem/popl revasc w/                 J8             5192            50.76                Y
                        stent.
37227................  Fem/popl revasc stnt               J8             5193            60.36                Y
                        & ather.
37228................  Tib/per revasc w/tla.              J8             5192            50.76                Y
37229................  Tib/per revasc w/                  J8             5193            60.36                Y
                        ather.
37230................  Tib/per revasc w/                  J8             5193            60.36                Y
                        stent.
37231................  Tib/per revasc stent               J8             5193            60.36                Y
                        & ather.
37236................  Open/perq place stent              J8             5192            50.76                Y
                        1st.
37238................  Open/perq place stent              J8             5192            50.76                Y
                        same.
37241................  Vasc embolize/occlude              J8             5192            50.76                Y
                        venous.
37242................  Vasc embolize/occlude              J8             5192            50.76                Y
                        artery.
37243................  Vasc embolize/occlude              J8             5192            50.76                Y
                        organ.
50080................  Removal of kidney                  J8             5376            53.73                Y
                        stone.
50081................  Removal of kidney                  J8             5376            53.73                Y
                        stone.
50557................  Kidney endoscopy &                 J8             5376            53.73                Y
                        treatment.
53440................  Male sling procedure.              J8             5376            53.73                Y
53444................  Insert tandem cuff...              J8             5376            53.73                Y
53445................  Insert uro/ves nck                 J8             5377            69.61                Y
                        sphincter.
53447................  Remove/replace ur                  J8             5377            69.61                Y
                        sphincter.
54112................  Treat penis lesion                 J8             5376            53.73                Y
                        graft.
54400................  Insert semi-rigid                  J8             5376            53.73                Y
                        prosthesis.
54401................  Insert self-contd                  J8             5377            69.61                Y
                        prosthesis.
54405................  Insert multi-comp                  J8             5377            69.61                Y
                        penis pros.
54410................  Remove/replace penis               J8             5377            69.61                Y
                        prosth.
54416................  Remv/repl penis                    J8             5377            69.61                Y
                        contain pros.
55873................  Cryoablate prostate..              J8             5376            53.73                Y
61885................  Insrt/redo neurostim               J8             5463            85.68                Y
                        1 array.
61886................  Implant neurostim                  J8             5464            86.79                Y
                        arrays.
61888................  Revise/remove                      J8             5462            56.19                Y
                        neuroreceiver.
62360................  Insert spine infusion              J8             5471            80.14                Y
                        device.
62361................  Implant spine                      J8             5471            80.14                Y
                        infusion pump.
62362................  Implant spine                      J8             5471            80.14                Y
                        infusion pump.
63650................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
63655................  Implant                            J8             5463            85.68                Y
                        neuroelectrodes.
63663................  Revise spine eltrd                 J8             5462            56.19                Y
                        perq aray.
63664................  Revise spine eltrd                 J8             5462            56.19                Y
                        plate.
63685................  Insrt/redo spine n                 J8             5464            86.79                Y
                        generator.
64553................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
64555................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
64561................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
64565................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
64568................  Inc for vagus n elect              J8             5464            86.79                Y
                        impl.
64569................  Revise/repl vagus n                J8             5462            56.19                Y
                        eltrd.
64575................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.

[[Page 70487]]

 
64580................  Implant                            J8             5463            85.68                Y
                        neuroelectrodes.
64581................  Implant                            J8             5462            56.19                Y
                        neuroelectrodes.
64590................  Insrt/redo pn/gastr                J8             5463            85.68                Y
                        stimul.
69714................  Implant temple bone w/             J8             5125            53.97                Y
                        stimul.
69715................  Temple bne implnt w/               J8             5125            53.97                Y
                        stimulat.
69930................  Implant cochlear                   J8             5166            83.04                Y
                        device.
C9740................  Cysto impl 4 or more.              J8             1565            65.18                Y
----------------------------------------------------------------------------------------------------------------
* New CPT codes that will be effective January 1, 2016.

d. Adjustment to ASC Payments for Discontinued Device-Intensive 
Procedures
    As discussed in section IV.B.4. of this final rule with comment 
period, we proposed to modify the calculation of OPPS payment when 
modifiers on the claim indicate that the procedure was discontinued. 
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, it would be appropriate to remove the estimated cost 
of the device because the device would have presumably not been used.
    We believe these same issues exist in the ASC setting. Therefore, 
in the CY 2016 OPPS/ASC proposed rule (80 FR 39314 through 39315), we 
proposed 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 payment system 
beginning in CY 2016, with modifiers ``52'' (reduced services) and 
``73'' (Discontinued outpatient procedure prior to anesthesia 
administration). These are the same modifiers proposed for use 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 proposed 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 cost would not constitute a significant portion of the total 
payment rate.
    Similar to the OPPS, we did not propose 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 are no longer sterile 
and could not be restocked and used for another case. However, we 
solicited 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 proposed to 
revise 42 CFR 416.172 to reflect this proposal.
    We invited public comment on this proposal and this proposed 
codification.
    Comment: Commenters generally disagreed with the proposal to modify 
the calculation of payment when device intensive procedures with 
modifiers ``52'' and ``73.'' The commenters suggested that the current 
calculation or alternatives such as full payment of the device cost 
were preferable. One commenter also questioned the magnitude of the 
issue, noting that removing the estimated cost of the device would 
incentivize the continuation of a procedure at possible risk to the 
beneficiaries.
    Response: We have a longstanding policy of appending modifiers to 
track discontinued procedures and reducing payment. We believe that the 
payment adjustment that we proposed for these discontinued device 
intensive procedures is appropriate for expenses incurred in these 
cases. While we note that these occur in special circumstances and 
therefore the frequency with which they occur is limited, we would 
expect that providers who furnish services to Medicare beneficiaries 
would not expose beneficiaries to health risk due to financial 
incentives related to this policy. We believe that the ASC payment 
adjustment we have proposed better represents the estimated cost of 
these procedures.
    However, in the case of procedures involving modifier ``52'' where 
anesthesia is not planned, we now believe that it would be rare that an 
implantable device would be used based on the feedback commenters have 
provided and an examination of the claims data. Accordingly, we are not 
finalizing our proposal to remove the device offset from services 
furnished in the ASC that are billed with modifier ``52.''
    After consideration of the public comments we received, we are 
finalizing our proposed policy with modification. For device-intensive 
procedures (defined as those APCs with a device offset greater than 40 
percent), we will reduce the ASC payment amount for discontinued 
device-intensive procedures billed with modifier ``73,'' where 
anesthesia is planned but is discontinued after the patient is prepared 
for surgery and taken to the room where the procedure is to be 
performed but before anesthesia is induced, by 100 percent of the 
device offset amount prior to application of any additional payment 
adjustments associated with discontinued procedures. We are revising 42 
CFR

[[Page 70488]]

416.172 to reflect this policy. We also note that we inadvertently used 
the word ``copayment'' instead of ``coinsurance'' in the proposed 
codification of 42 CFR 416.172(f)(2) and have made this technical 
change to the final regulation.
e. 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 proposed 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 proposed to include them on the list of 
ASC covered surgical procedures for CY 2016.
    The 11 procedures that we proposed to add to the ASC list of 
covered surgical procedures, including their HCPCS code long 
descriptors and proposed CY 2016 payment indicators, were displayed in 
Table 63 of the proposed rule (80 FR 39315).
    We invited public comment on this proposal.
    Comment: Several commenters supported the proposal to add 11 
procedures to the CY 2016 list of ASC covered surgical procedures.
    Response: We appreciate the commenters' support. As indicated later 
in this section, we are finalizing our proposal to add these procedure 
codes to the list of ASC covered procedures in addition to six other 
procedure codes requested by commenters.
    Comment: One commenter requested that CMS include all surgical and 
ancillary procedures that are currently paid in the HOPD setting on the 
ASC covered surgical procedures list.
    Response: We are not adopting this commenter's request. As stated 
in our final policy, which is discussed in detail in the August 2, 2007 
final rule (72 FR 42476 through 42486; 42 CFR 416.2 and 416.166), we 
believe that it is inappropriate to exclude only those surgical 
procedures on the OPPS inpatient list from ASC payment and have 
established criteria to determine whether a procedure should be 
excluded from the ASC covered surgical procedures list (42 CFR 416.2 
and 416.166). Including all of the procedures that are currently paid 
in the HOPD setting on the ASC covered surgical procedures list is 
inconsistent with our goal of only excluding those procedures from ASC 
payment that are unsafe for performance in ASCs or are expected to 
require an overnight stay. Typically, HOPDs are able to provide much 
higher acuity care than ASCs. ASCs have neither patient safety 
standards consistent with those in place for hospitals, nor are they 
required to have the trained staff and equipment needed to provide the 
breadth and intensity of care that hospitals are required to maintain. 
Therefore, there are some procedures that we believe may be 
appropriately provided in the HOPD setting that are unsafe for the 
performance in ASCs. Thus, we did not adopt a final policy to exclude 
only those surgical procedures on the OPPS inpatient list from ASC 
payment under the ASC payment system.
    Comment: Some commenters requested that CMS include several 
additional CPT/HCPCS codes on the list of ASC covered surgical 
procedures that were not proposed to be added to the list. The 
commenters stated that codes that describe instrumentation and bone 
grafting are key components of many spine procedures that have been 
added to the ASC covered surgical procedures list in recent years and 
requested that those codes be added to the list as well. The commenters 
also stated that some of the procedures described by these codes were 
performed on non-Medicare patients in the ASC setting with positive 
outcomes. Some commenters believed that, because Medicare makes 
facility payments for unlisted CPT codes under the OPPS, CMS should 
also allow ASCs to use unlisted CPT codes to report procedures. The 
list of codes that commenters requested to be added in addition to 
those that were proposed to be added is shown in Table 67 below.

 Table 67--Procedures Requested for Addition to the CY 2016 List of ASC
                       Covered Surgical Procedures
------------------------------------------------------------------------
       CY 2016 CPT/HCPCS code                  Short descriptor
------------------------------------------------------------------------
17999...............................  Skin tissue procedure.
19307...............................  Mast mod rad.
20999...............................  Muscoskeletal surgery.
22840*..............................  Insert spine fixation device.
22842*..............................  Insert spine fixation device.
22845*..............................  Insert spine fixation device.
22851...............................  Apply spine prosth device.
22856...............................  Cerv artific diskectomy.
23470...............................  Reconstruct shoulder joint.
23473...............................  Revis reconst shoulder joint.
28805...............................  Amputation thru metatarsal.
28899...............................  Foot/toes surgery procedure.
29799...............................  Casting/strapping procedure.
29868...............................  Meniscal trnspl knee w/scpe.
29999...............................  Arthroscopy of joint.
31599...............................  Larynx surgery procedure.
31600...............................  Incision of windpipe.
32551...............................  Insertion of chest tube.
33244...............................  Remove eltrd transven.
35045...............................  Repair defect of arm artery.
35471...............................  Repair arterial blockage.
35903...............................  Excision graft extremity.
37191...............................  Ins endovas vena cava filtr.
37193...............................  Rem endovas vena cava filter.
37241...............................  Vasc embolize/occlude venous.
37242...............................  Vasc embolize/occlude artery.
37243...............................  Vasc embolize/occlude organ.
37799...............................  Vascular surgery procedure.
38207...............................  Cyropreserve stem cells.
38214...............................  Volume deplete of harvest.
38999...............................  Blood/lymph system procedure.
39400...............................  Mediastinoscopy incl biopsy.
41899...............................  Dental surgery procedure.
43280...............................  Laparoscopy fundoplasty.
43281...............................  Lap paraesophag hern repair.
43499...............................  Esophagus surgery procedure.
43770...............................  Lap place gastr adj device.
43999...............................  Stomach surgery procedure.
44180...............................  Lap enterolysis.
44799...............................  Unlisted px small intestine.
44970...............................  Laparoscopy appendectomy.
49659...............................  Laparo proc hernia repair.
46999...............................  Anus surgery procedure.
47379...............................  Laparoscope procedure liver.
49329...............................  Laparo proc abdm/per/oment.
49406...............................  Image cath fluid peri/retro.
49999...............................  Abdomen surgery procedure.
53899...............................  Urology surgery procedure.
54332...............................  Revise penis/urethra.
54336...............................  Revise penis/urethra.
54535...............................  Extensive testis surgery.
54650...............................  Orchiopexy (Fowler-Stephens).
55899...............................  Genital surgery procedure.
57282...............................  Colpopexy intraperitoneal.
57283...............................  Colpopexy extraperitoneal.
57425...............................  Laparoscopy surg colpopexy.
60252...............................  Removal of thyroid.
60260...............................  Repeat thyroid surgery.
60271...............................  Removal of thyroid.
63011...............................  Removal of spinal lamina.
63012...............................  Removal of spinal lamina.
63015...............................  Removal of spinal lamina.
63016...............................  Removal of spinal lamina.
63017...............................  Removal of spinal lamina.
63035...............................  Spinal disk surgery add-on.
63040...............................  Laminotomy single cervical.
63046...............................  Remove spine lamina 1 thrc.
63048...............................  Remove spinal lamina add-on.
63055...............................  Decompress spinal cord thrc.
63057...............................  Decompress spine cord add-on.

[[Page 70489]]

 
63064...............................  Decompress spinal cord thrc.
63075...............................  Neck spine disk surgery.
63076...............................  Neck spine disk surgery.
64999...............................  Nervous system surgery.
66999...............................  Eye surgery procedure.
------------------------------------------------------------------------
*CPT codes on the OPPS inpatient list for CY 2015

    We reviewed all of the codes that commenters requested for addition 
to the ASC list of covered surgical procedures. Of the 75 codes 
requested for addition to the ASC list, we did not consider the three 
procedures that are reported by CPT codes (22840, 22842, and 22845) 
that are on the inpatient-only list (identified with one asterisk in 
Table 67). The three codes that are currently on the inpatient-only 
list are not eligible for addition to the ASC list of covered surgical 
procedures (72 FR 42476 through 42486; 42 CFR 416.166). We have, 
however, evaluated these three codes for removal from the inpatient-
only list, and we do not believe that any of the codes meet the 
criteria to be safely performed in the hospital outpatient setting.
    Of the remaining 72 procedures described by codes in Table 67 that 
commenters requested be added to the list of ASC covered surgical 
procedures, there are procedures described by six codes (CPT codes 
37241, 37242, 37243, 49406, 63046, and 63055) that we agree should be 
added to the list for CY 2016. These procedures are similar to other 
procedures that we have previously added to the ASC list and are 
described below.
    We are adding the procedures described by: (1) CPT code 37241 
(Vascular embolization or occlusion, inclusive of all radiological 
supervision and interpretation, intraprocedural roadmapping, and 
imaging guidance necessary to complete the intervention; venous, other 
than hemorrhage (e.g., congenital or acquired venous malformations, 
venous and capillary hemangiomas, varices, varicoceles)); (2) CPT code 
37242 (Vascular embolization or occlusion, inclusive of all 
radiological supervision and interpretation, intraprocedural 
roadmapping, and imaging guidance necessary to complete the 
intervention; arterial, other than hemorrhage or tumor (e.g., 
congenital or acquired arterial malformations, arteriovenous 
malformations, arteriovenous fistulas, aneurysms, pseudoaneurysms)); 
and (3) CPT code 37243 (Vascular embolization or occlusion, inclusive 
of all radiological supervision and interpretation, intraprocedural 
roadmapping, and imaging guidance necessary to complete the 
intervention; for tumors, organ ischemia, or infarction) to the ASC 
list of covered procedures for CY 2016. The procedures described by 
these codes are similar to the stent placement procedures described by 
codes in the CPT code 372XX series that are payable in the ASC setting. 
We are adding the procedure described by CPT code 49406 (Image-guided 
fluid collection drainage by catheter (e.g., abscess, hematoma, seroma, 
lymphocele, cyst); peritoneal or retroperitoneal, percutaneous) because 
of this procedure's similarity to the procedure described by CPT code 
49407 (Image-guided fluid collection drainage by catheter (e.g., 
abscess, hematoma, seroma, lymphocele, cyst); peritoneal or 
retroperitoneal, transvaginal or transrectal), which is included on the 
ASC list of covered surgical procedures. We also believe that the 
procedure described by CPT code 63046 (Laminectomy, facetectomy, and 
foraminotomy (unilateral or bilateral with decompression of spinal 
cord, cauda equine and/or nerve root(s), eg spinal or lateral recess 
stenosis, single vertebral segment; thoracic) should be included on the 
ASC list of covered surgical procedures. This procedure described by 
this code is similar to the procedures described by CPT code 63045 
(Laminectomy, facetectomy and foraminotomy (unilateral or bilateral 
with decompression of spinal cord, cauda equina and/or nerve root[s], 
[e.g., spinal or lateral recess stenosis]), single vertebral segment; 
cervical) and CPT code 63047 (Laminectomy, facetectomy and foraminotomy 
(unilateral or bilateral with decompression of spinal cord, cauda 
equina and/or nerve root[s], [e.g., spinal or lateral recess 
stenosis]), single vertebral segment; lumbar), which are on the ASC 
covered procedures list. We also believe that the procedure described 
by CPT code 63055 (Transpedicular approach with decompression of spinal 
cord, equine and/or nerve root(s) (e.g., herniated intervertebral 
disc), single segment; thoracic) should be added to the ASC list of 
covered surgical procedures because this procedure is similar to the 
procedure described by CPT code 63056 (Transpedicular approach with 
decompression of spinal cord, equina and/or nerve root(s) (e.g., 
herniatedintervertebral disc), single segment; lumbar (including 
transfacet, or lateral extraforaminal approach) (e.g., far lateral 
herniated intervertebral disc)), which is on the ASC covered procedures 
list.
    Regarding the comment about unlisted codes being noncovered in the 
ASC, we have a longstanding ASC policy that procedures described by all 
unlisted codes are noncovered in the ASC because we are unable to 
determine (due to the nondescript nature of unlisted procedure codes) 
if a procedure that would be reported with an unlisted code 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. We continue to believe it would not be appropriate to 
provide ASC payment for procedures described by unlisted CPT codes in 
the surgical range, even if payment may be provided under the OPPS. 
ASCs do not possess the breadth and intensity of services that 
hospitals must maintain to care for patients of higher acuity, and we 
would have no way of knowing what specific procedures reported by 
unlisted CPT codes were provided to patients in order to ensure that 
they are safe for ASC performance. Therefore, we are not adding the 
procedures describe by the 22 unlisted CPT codes requested to the ASC 
list of covered surgical procedures.
    We do not agree that any of the 44 remaining procedures described 
by these codes should be added to the list of ASC covered surgical 
procedures because they do not meet our criteria for inclusion on this 
list. Under 42 CFR 416.2 and 416.166, 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 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. The criteria used 
under the revised ASC payment system to identify procedures that would 
be expected to pose a significant safety risk when performed in an ASC 
include, but are not limited to, those procedures that: Generally 
result in extensive blood loss; require major or prolonged invasion of 
body cavities; directly involve major blood vessels; are generally 
emergent or life threatening in nature; commonly require systemic 
thrombolytic therapy; are designated as requiring inpatient care under 
42 CFR 419.22(n); can only be reported using a CPT unlisted surgical 
procedure code; or are otherwise excluded under 42 CFR 411.15 (we refer

[[Page 70490]]

readers to 42 CFR 416.166). Procedures that do not meet the criteria 
set forth in Sec.  416.166 would not be added to the list of ASC 
covered surgical procedures. We note that we have evaluated many of 
these procedures in previous years (79 FR 66918 through 66921; 78 FR 
75067 through 75070) and did not add the procedures to the ASC list due 
to similar concerns regarding beneficiary safety. The commenters 
provided no specific information regarding the safety of these 
procedures in the ASC setting.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the 11 procedures that we proposed to 
add to the ASC list of covered surgical procedures. In addition, we are 
adding six procedures recommended by commenters as discussed above. The 
HCPCS code long descriptors and CY 2016 payment indicators for these 
codes are displayed in Table 68.

 Table 68--Additions to the List of ASC Covered Surgical Procedures for
                                 CY 2016
------------------------------------------------------------------------
                                                          Final CY 2016
  Final CY 2016 HCPCS code       Final CY 2016 long        ASC payment
                                     descriptor             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.
37241......................  Vascular embolization or                J8
                              occlusion, inclusive of
                              all radiological
                              supervision and
                              interpretation,
                              intraprocedural
                              roadmapping, and imaging
                              guidance necessary to
                              complete the
                              intervention; venous,
                              other than hemorrhage
                              (e.g., congenital or
                              acquired venous
                              malformations, venous and
                              capillary hemangiomas,
                              varices, varicoceles).
37242......................  Vascular embolization or                J8
                              occlusion, inclusive of
                              all radiological
                              supervision and
                              interpretation,
                              intraprocedural
                              roadmapping, and imaging
                              guidance necessary to
                              complete the
                              intervention; arterial,
                              other than hemorrhage or
                              tumor (e.g., congenital
                              or acquired arterial
                              malformations,
                              arteriovenous
                              malformations,
                              arteriovenous fistulas,
                              aneurysms,
                              pseudoaneurysms).
37243......................  Vascular embolization or                J8
                              occlusion, inclusive of
                              all radiological
                              supervision and
                              interpretation,
                              intraprocedural
                              roadmapping, and imaging
                              guidance necessary to
                              complete the
                              intervention; for tumors,
                              organ ischemia, or
                              infarction.
49406......................  Image-guided fluid                      G2
                              collection drainage by
                              catheter (e.g., abscess,
                              hematoma, seroma,
                              lymphocele, cyst);
                              peritoneal or
                              retroperitoneal,
                              percutaneous.
57120......................  Colpocleisis (Le Fort                   G2
                              type).
57310......................  Closure of urethrovaginal               G2
                              fistula.
58260......................  Vaginal hysterectomy, for               G2
                              uterus 250 g or less.
58262......................  Vaginal hysterectomy, for               G2
                              uterus 250 g or less;
                              with removal of tube(s),
                              and/or ovary(s).
58543......................  Laparoscopy, surgical,                  G2
                              supracervical
                              hysterectomy, for uterus
                              greater than 250 g.
58544......................  Laparoscopy, surgical,                  G2
                              supracervical
                              hysterectomy, for uterus
                              greater than 250 g; with
                              removal of tube(s) and/or
                              ovary(s).
58553......................  Laparoscopy, surgical,                  G2
                              with vaginal
                              hysterectomy, for uterus
                              greater than 250 g.
58554......................  Laparoscopy, surgical,                  G2
                              with vaginal
                              hysterectomy, for uterus
                              greater than 250 g; with
                              removal of tube(s) and/or
                              ovary(s).
58573......................  Laparoscopy, surgical,                  G2
                              with total hysterectomy,
                              for uterus greater than
                              250 g; with removal of
                              tube(s) and/or ovary(s).
63046......................  Laminectomy, facetectomy,               G2
                              and foraminotomy
                              (unilateral or bilateral
                              with decompression of
                              spinal cord, cauda equine
                              and/or nerve root(s), eg
                              spinal or lateral recess
                              stenosis, single
                              vertebral segment;
                              thoracic.
63055......................  Transpedicular approach                 G2
                              with decompression of
                              spinal cord, equine and/
                              or nerve root(s) (e.g.,
                              herniated intervertebral
                              disc), single segment;
                              thoracic.
------------------------------------------------------------------------

f. ASC Treatment of Surgical Procedures That Are Removed 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-only list for possible inclusion on the ASC list of covered 
surgical procedures. We evaluated each of the seven procedures we 
proposed to remove from the OPPS inpatient-only list for CY 2016 
according to the criteria for exclusion from the list of covered ASC 
surgical procedures. The CPT codes for these seven procedures and their 
long descriptors are listed in Table 64 of the proposed rule (80 FR 
39315 through 39316). We invited public comment on the continued 
exclusion of these codes from the ASC list of covered surgical 
procedures. Based on commenters' requests, we are also removing CPT 
codes 27477 and 27485 found in Table 69 below from the CY 2016 
inpatient-only list. We believe that these nine 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.
    Comment: Some commenters requested that CMS add CPT codes 0312T, 
20936, 20937, 20938, 22552, 54411, and 54417 that were proposed to be 
removed from the inpatient-only list for CY 2016 to the CY 2016 list of 
ASC covered surgical procedures to allow these procedures to be 
performed in the ASC setting as well as the hospital outpatient 
setting. One commenter stated that the procedure described by CPT code 
0312T can be compared to other laparoscopic procedures allowed to be 
performed in an ASC such as laparoscopic cholecystectomy (CPT 47562 or 
47563) or laparoscopic adjustable gastric band placement (CPT 43770). 
In addition, the commenter mentioned that the majority of patients who 
participated in clinical trials of the device used in the procedure 
were discharged the same day they received their implant.
    Response: We are not adding these CPT codes to the list of ASC 
covered surgical procedures. Under 42 CFR 416.2 and 416.166, subject to 
certain exclusions, covered surgical procedures in an ASC are surgical 
procedures that

[[Page 70491]]

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 
would not be expected to require active medical monitoring and care of 
the beneficiary at midnight following the procedure. Although we 
believe that the procedures proposed to be removed from the inpatient-
only list for CY 2016 may be appropriately provided in the HOPD setting 
based on ability of HOPDs to provide extended monitoring and higher 
acuity care for the management of complications, based on our 
evaluation of these codes, we maintain the belief that these procedures 
are unsafe for performance in ASCs. Also, although the commenter noted 
that patients who participated in clinical trials of the device used in 
CPT code 0312T were discharged the same day they received their 
implant, this has not been replicated outside of the experimental 
setting. Further, CPT codes 20936, 20937, 20938, and 22552 are not 
separately payable under the OPPS, which also makes these procedures 
ineligible for payment under the ASC payment system.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification to continue to exclude 
these codes from the ASC list of covered surgical procedures.

   Table 69--Procedures Excluded From the ASC List of Covered Surgical
 Procedures for CY 2016 That Are Removed From the CY 2016 OPPS Inpatient
                                  List
------------------------------------------------------------------------
              CPT code                         Long descriptors
------------------------------------------------------------------------
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 (e.g., 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.
27477..............................  Arrest epiphyseal, any method
                                      (e.g., epiphysiodesis); tibia and
                                      fibula, proximal.
27485..............................  Arrest, hemiepiphyseal, distal
                                      femur or proximal tibia or fibula
                                      (e.g., genu varus or valgus.
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. List of Covered Ancillary Services
    Consistent with the established ASC payment system policy, in the 
CY 2016 OPPS/ASC proposed rule (80 FR 39316), we proposed 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 proposed that these 
services also would be packaged under the ASC payment system for CY 
2016. We proposed to continue this reconciliation of packaged status 
for subsequent calendar years. Comment indicator ``CH,'' discussed in 
section XII.F. of the proposed rule, is used in Addendum BB to the 
proposed rule (which is available via the Internet on the CMS Web site) 
to indicate covered ancillary services for which we proposed a change 
in the ASC payment indicator to reflect a proposed change in the OPPS 
treatment of the service for CY 2016.
    All ASC covered ancillary services and their proposed payment 
indicators for CY 2016 were included in Addendum BB to the proposed 
rule. We invited public comment on this proposal.
    Comment: Commenters expressed appreciation for CMS' adding the 
service described by CPT code 91035 (Esophagus, gastroesophageal reflux 
test; with mucosal attached telemetry pH electrode placement, 
recording, analysis and interpretation) to the list of covered 
ancillary services. The commenters also requested that pass-through 
payment status be granted to this device.
    Response: We appreciate the commenters' support. The code is not a 
pass-through device under the OPPS and, therefore, is not assigned ASC 
payment indicator ``J7'' (OPPS pass-through device paid separately when 
provided integral to a surgical procedure on ASC list; payment 
contractor-priced). The designation of a device as having pass-through 
status only applies in the OPPS. We note that there is a process for 
applying for pass-through device payment under the OPPS, which is 
described in detail in section IV.A.2. of this final rule with comment 
period.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to update the ASC list 
of covered ancillary services to reflect the payment status for the 
services under the OPPS. All CY 2016 ASC covered ancillary services and 
their final payment indicators are included in Addendum BB to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
b. Exclusion of Corneal Tissue Procurement from the Covered Ancillary 
Services List When Used for Nontransplant Procedures
    We refer readers to section X.D. of this final rule with comment 
period for a discussion of our final policy regarding the inclusion of 
corneal tissue procurement as a covered ancillary service only when it 
is provided integral to the performance of a corneal transplant 
procedure that is an ASC covered surgical procedure.
c. Removal of Certain Services from the Covered Ancillary Services List 
That Are Not Used as Ancillary and Integral To A Covered Surgical 
Procedure
    As stated in 42 CFR 416.2 and 416.164(b), covered ancillary 
services

[[Page 70492]]

are ancillary items and services that are integral to a covered 
surgical procedure performed in an ASC for which separate payment may 
be made. It has come to our attention that we include codes for 
services on our covered ancillary services list that are not provided 
as ancillary and integral to an ASC covered 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 as integral 
and ancillary to an ASC covered surgical procedure. Several radiation 
therapy treatment services, including Co-60 stereotactic radiosurgery 
(SRS), are most frequently provided in the hospital outpatient setting 
and paid through the OPPS and also are furnished, but also somewhat 
less frequently, in freestanding radiation therapy centers and paid 
under the PFS. Only four claims for SRS treatment services were 
included in the CY 2014 ASC claims data. Two of these four claims were 
denied and the other two claims were paid in error. SRS delivery is a 
stand-alone radiation treatment and is not furnished integral and 
ancillary to an ASC covered surgical procedure. Thus, in the CY 2016 
OPPS/ASC proposed rule (80 FR 39316), we proposed to remove radiation 
treatment codes for SRS treatment services from the list of ASC covered 
ancillary services. Specifically, we proposed 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 invited public comment on this proposal.
    Comment: Commenters requested that CMS include the stereotactic 
radiosurgery codes on the covered ancillary services list, with one 
commenter specifically focusing on CPT code 77371. One commenter noted 
that several ASCs provide the service and requested that CMS reevaluate 
available data to confirm that the service was being provided in the 
ASC setting.
    Response: We reviewed the available claims data and, as stated 
previously, only four claims for SRS treatment services were included 
in the CY 2014 ASC claims data--two of which were denied and two of 
which were paid in error. Based on these claims data, we continue to 
believe that SRS delivery is a standalone radiation treatment and is 
not furnished integral and ancillary to an ASC covered surgical 
procedure. Therefore, SRS treatment services should not be on the list 
of ASC covered ancillary services. With respect CPT code 77371, 
clinically, it is not performed integral to an ASC covered surgical 
procedure. It is a stand-alone form of radiation therapy. Therefore, it 
should not be on the ASC covered ancillary services list.
    After consideration of the public comments we received, we are 
finalizing our proposed policy without modification to remove CPT codes 
77371, 77372, and 77373 from the ASC covered ancillary services list 
for CY 2016 and subsequent years.

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

1. ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, 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 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 payment for 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. Under the OPPS, device removal procedures are 
conditionally packaged and, therefore, would be packaged under the ASC 
payment

[[Page 70493]]

system. There would be no Medicare payment 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. Update to ASC Covered Surgical Procedure Payment Rates for CY 2016
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39317), we proposed 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 proposed to continue to use the amount calculated under the ASC 
standard ratesetting methodology for procedures assigned payment 
indicators ``A2'' and ``G2.''
    We proposed that payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
(payment indicator ``J8'') be calculated according to our established 
policies and, for device-intensive procedures, using our established 
modified definition of device-intensive procedures, as discussed above. 
Therefore, we proposed 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 would be 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 proposed to continue our policy for device removal procedures such 
that payment for 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 invited public comment on these proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our proposed policies, without 
modification, to calculate the CY 2016 payment rates for ASC covered 
surgical procedures according to our established methodologies using 
the modified definition of device-intensive procedures. For those 
covered surgical procedures where the payment rate is the lower of the 
final rates under the ASC standard ratesetting methodology and the MPFS 
final rates, the final payment indicators and rates set forth in this 
final rule with comment period are based on a comparison using the MPFS 
rates effective January 1, 2016. For a discussion of the MPFS rates, we 
refer readers to the CY 2016 MPFS final rule with comment period.
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 did not propose 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 final rule with 
comment period (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 (e.g., for upgrade to dual 
chamber system) (list separately in addition to code for primary 
procedure)) and 33249 (Insertion or replacement of permanent pacing 
cardioverter-defibrillator system with transvenous lead(s), single or 
dual chamber) are performed on the same date of service in an ASC.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66931), we finalized our proposals under the OPPS that the services 
described by CPT code 33249, the primary code for CRT-D services, 
continue to be assigned to APC 0108 (Level II ICD and Similar 
Procedures), and that payment for the services described by CPT code 
33225 be packaged under the OPPS. We also finalized our proposals under 
the ASC payment system that services described by CPT code 33249, the 
primary code for CRT-D services, will continue to be assigned to APC 
0108, and payment for services described by CPT code 33225 will be 
packaged into the payment for the primary covered surgical procedure 
(for example, CPT code 33249). In the CY 2016 OPPS/ASC proposed rule 
(80 FR 39317 through 39318), we did not propose any changes to our ASC 
payment policies for cardiac resynchronization therapy services for CY 
2016. However, we note that, in the proposed rule, we proposed to 
renumber APC 0108 as APC 5232 (Level 2 ICD and Similar Procedures).
    We did not receive any public comments on our proposal to renumber 
APC 0108 as APC 5232, and therefore as discussed in section II.A. of 
this final rule with comment period, are finalizing

[[Page 70494]]

the renumbering for the APC beginning in CY 2016.
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 the 
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 the 
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). In the CY 2016 OPPS/
ASC proposed rule (80 FR 39318), we did not propose any changes to our 
current policy regarding ASC payment for LDR prostate brachytherapy 
services for CY 2016. We did not receive any public comments on our 
proposal to renumber APC 0162 as APC 5374, and therefore as discussed 
in section II.A. of this final rule with comment period, are finalizing 
the renumbering for the APC beginning in CY 2016.
2. Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged or 
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'') 
under the OPPS. In the CY 2013 OPPS/ASC 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 (except for device removal codes as discussed in section 
XII.D.1.a. of this final rule with comment period). 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 using the ASC standard ratesetting methodology 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.
    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

[[Page 70495]]

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. Payment for Covered Ancillary Services for CY 2016
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39319 through 39320), 
for CY 2016 and subsequent years, we proposed 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 proposed 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 
proposed 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 made this same proposal for subsequent years. For CY 2016 and 
subsequent years, we also proposed 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 the 
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 proposed 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 using the ASC standard ratesetting methodology (rather 
than the MPFS nonfacility PE RVU-based amount, regardless of which is 
lower) and, therefore, will include the cost for the diagnostic 
radiopharmaceutical. We proposed to continue this modification to the 
payment methodology for CY 2016 and subsequent years and, therefore, 
proposed 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 using the 
ASC standard ratesetting methodology and, therefore, will include the 
cost for the contrast agent. We proposed to continue this modification 
to the payment methodology for CY 2016 and subsequent years and, 
therefore, proposed to assign the payment indicator ``Z2'' to radiology 
services that use contrast agents.
    We proposed 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 the 
proposed rule and section X.D. of this final rule with comment period. 
We proposed, 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 proposed 
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 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

[[Page 70496]]

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 proposed 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 proposed 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 provided 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 
provided 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 proposed 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 the proposed rule (which is available 
via the Internet on the CMS Web site).
    We discuss our OPPS and ASC payment policies for nontransplant 
corneal tissue in section X.D. of this final rule with comment period.
    We did not receive public comments on our policy proposals 
regarding payment for covered ancillary services (other than on the 
corneal tissue procurement policy, which we discuss and finalize in 
section X.D. of this final rule with comment period), and therefore are 
finalizing these policies as proposed for CY 2016 and subsequent years. 
For those covered ancillary services where the payment rate is the 
lower of the final rates under the ASC standard ratesetting methodology 
and the MPFS final rates, the final payment indicators and rates set 
forth in this final rule with comment period are based on a comparison 
using the MPFS rates effective January 1, 2016. For a discussion of the 
MPFS rates, we refer readers to the CY 2016 MPFS final rule with 
comment period.

E. New Technology Intraocular Lenses (NTIOLs)

    New Technology Intraocular Lenses (NTIOLs) are intraocular lenses 
that replace a patient's natural lens that has been removed in cataract 
surgery and that also meet the requirements listed in 42 CFR 416.195.
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 did not propose to revise the payment adjustment amount for CY 2016.
4. 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, in the CY 2016 OPPS/ASC proposed rule (80 FR 39320), we 
proposed that, beginning in CY 2016,

[[Page 70497]]

any application for a new NTIOL class must fulfill an additional 
criterion. Specifically, we proposed 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 
proposed to revise Sec.  416.195(a)(1) of the regulations to reflect 
this proposal. We invited public comments on this proposal.
    Comment: Two commenters supported the proposed newness criterion 
for NTIOL candidate lenses.
    Response: We appreciate the commenters' support.
    Comment: One commenter believed that the current regulations are 
sufficient and that this proposal was not necessary.
    Response: We disagree with the commenter. Without the proposed 
newness criterion, old IOLs that have been on the market for many years 
could apply for NTIOL status. Furthermore, a lack of recent NTIOL 
applications does not obviate the need for this new regulation.
    After consideration of the public comments we received, we are 
finalizing our proposal to establish a newness criterion for NTIOL 
applications. Beginning January 1, 2016, an NTIOL application will only 
be evaluated by CMS for a new NTIOL class if the IOL has received 
initial FDA approval within the 3 years prior to the NTIOL application 
submission date. We are revising 42 CFR 416.195 to reflect this change, 
and in this final rule with comment period we are deleting the 
unnecessary phrase ``under this provision'' from the proposed revised 
regulation text.
5. Announcement of CY 2016 Deadline for Submitting Requests for CMS 
Review of Applications for a New Class of NTIOLs
    In accordance with 42 CFR 416.185(a) of our regulations, CMS 
announces that in order to be considered for payment effective 
beginning in CY 2017, requests for review of applications for a new 
class of new technology IOLs must be received at CMS by 5 p.m. EST, on 
March 1, 2016. Send requests to ASC/NTIOL, Division of Outpatient Care, 
Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 
Security Boulevard, Baltimore, MD 21244-1850. To be considered, 
requests for NTIOL reviews must include the information requested on 
the CMS Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy 
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC list of 
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services, including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new codes for the next calendar 
year for which the interim payment indicator assigned is subject to 
comment. The comment indicator ``NI'' 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). We 
indicated that 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 the 
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. ASC Payment and Comment Indicators
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39321), for CY 2016 
and subsequent years, we proposed 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 proposed 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 the 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 the CY 2016 OPPS/
ASC proposed rule. Proposed new comment indicator ``NP'' means 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; comments will be accepted on the proposed ASC 
payment indicator for the new code.
    For the CY 2016 update, we also proposed to add ASC payment 
indicator ``B5'' (Alternative code may be available; no payment made) 
to ASC Addendum DD1 to the 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 proposed 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 the proposed rule 
regarding

[[Page 70498]]

our proposed process for accepting comments on new and revised Category 
I and III CPT codes that are effective January 1. We stated that we 
would 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 the 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.
    We did not receive any public comments on the ASC payment and 
comment indicators and therefore are finalizing their use as proposed 
without modification.

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

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

[[Page 70499]]

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). (In other situations, where 
there are no IPPS hospitals located in a relevant labor market area, we 
will continue our current policy of calculating an urban or rural 
area's wage index by calculating the average of the wage indexes for 
CBSAs (or metropolitan divisions where applicable) that are contiguous 
to the area with no wage index.)
    Comment: Several commenters made the same recommendation that was 
made in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), CY 2012 (76 
FR 74446), CY 2013 (77 FR 68463), and CY 2014 (78 FR 75086) 
rulemakings--that is, that CMS adopt for the ASC payment system the 
same wage index values used for hospital payment under the OPPS.
    Response: We have responded to this comment in the past, and 
believe our prior rationale for using unadjusted wage indexes is still 
a sound one. We continue to believe that the unadjusted hospital wage 
indexes, which are updated yearly and are used by almost all Medicare 
payment systems, appropriately account for geographic variance in labor 
costs for ASCs. We refer readers to our response to this comment in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72059). We 
discuss our budget neutrality adjustment for changes to the wage 
indices below in section XII.G.2.b. of this final rule with comment 
period.
2. 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). In the CY 2016 OPPS/ASC proposed 
rule (80 FR 39322 through 39323), consistent with our established 
policy, we proposed 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 proposed 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 proposed 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 budget neutrality 
adjustments. At the time of this final rule with comment period, 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 the proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2016 ASC payment system and 
subsequent years, we proposed to calculate and apply a budget 
neutrality adjustment to the ASC conversion factor for supplier level 
changes in wage index values for the upcoming year, just as the OPPS 
wage index budget neutrality adjustment is calculated and applied to 
the OPPS conversion factor. For CY 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

[[Page 70500]]

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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39323 through 39324), 
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 was projected to 
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 was 
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

[[Page 70501]]

proxy series in the CY 2016 OPPS/ASC proposed rule and in this final 
rule with comment period, 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 invited public comment on these proposals.
    Comment: Some commenters suggested that CMS replace the CPI-U as 
the update mechanism for ASC payments with the hospital market basket. 
The commenters stated that the CPI-U measures inflation in a basket of 
consumer goods atypical of what ASCs purchase. In addition, the 
commenters stated that the Affordable Care Act requires CMS to reduce 
the update by a measure of productivity gains, which inappropriately 
subjects ASCs to two productivity adjustments: Improvements reflected 
in the price of consumer purchased goods; and the additional 
statutorily required reduction. While the commenters maintained that 
the hospital market basket would be the most appropriate update for 
ASCs, they suggested that there are various alternatives within the 
CPI-U that CMS could explore that more accurately reflect the economic 
climate in the ASC environment. MedPAC acknowledged that there may be a 
burden associated with requiring ASCs to submit cost reports, but 
recommended that CMS collect some sort of ASC cost data, to determine 
whether an existing Medicare index is a good proxy or if there should 
be an ASC specific market basket.
    Response: As we have stated in response to similar comments in the 
past (for example, 77 FR 68465; 78 FR 75088 through 75089; 79 FR 
66939), we continue to believe that, while commenters argued that the 
items included in the CPI-U index may not adequately measure inflation 
for the goods and services provided by ASCs, the hospital market basket 
does not align with the cost structures of ASCs. Hospitals provide a 
much wider range of services, such as room and board and emergency 
services, and the costs associated with providing these services are 
not part of the ASC cost structure. Therefore, at this time, we do not 
believe that it is appropriate to use the hospital market basket for 
the ASC annual update. We recognize that the CPI-U is an output price 
index that accounts for productivity. However, section 1833(i)(2)(D)(v) 
of the Act requires the agency to reduce the annual update factor by 
the MFP adjustment. For the reasons stated above, we do not believe 
that the hospital market basket appropriately reflects the cost 
structures of ASCs, and because we do not have cost data on ASCs, we 
are continuing to use the CPI-U which we believe provides a reasonable 
approximation of the price increases facing ASCs. We will continue to 
explore the feasibility of collecting ASC cost data. However, based on 
our past experience, we do not believe that collecting such data 
through surveys would be productive. We appreciate the commenter's 
suggestion to adjust the CPI-U, for productivity and will take this 
suggestion into consideration if we propose changes to the ASC update 
factor in the future.
    After consideration of the public comments we received, we are 
applying our established methodology for determining the final CY 2016 
ASC conversion factor. Using more complete CY 2014 data for this final 
rule with comment period than were available for the proposed rule, we 
calculated a wage index budget neutrality adjustment of 0.9997. Based 
on IGI's 2015 third quarter forecast, the CPI-U for the 12-month period 
ending with the midpoint of CY 2016 is now projected to be 0.8 percent, 
while the MFP adjustment (as finalized in the CY 2012 MPFS final rule 
with comment period (76 FR 73300 through 73301) and revised as 
discussed above) is 0.5 percent, resulting in an MFP-adjusted CPI-U 
update factor of 0.3 percent for ASCs that meet the quality reporting 
requirements. The final ASC conversion factor of $44.177, for ASCs that 
meet the quality reporting requirements, is the product of the CY 2015 
conversion factor of $44.058 multiplied by the wage index budget 
neutrality adjustment of 0.9997 and the MFP-adjusted CPI-U payment 
update of 0.3 percent. For ASCs that do not meet the quality reporting 
requirements, we are reducing the CPI-U update of 0.8 percent by 2.0 
percentage points and then we are applying the 0.5 percentage point MFP 
reduction, resulting in a -1.7 percent quality reporting/MFP-adjusted 
CPI-U update factor. The final ASC conversion factor of $43.296 for 
ASCs that do not meet the quality reporting requirements is the product 
of the CY 2015 conversion factor of $44.058 multiplied by the wage 
index budget neutrality adjustment of 0.9997 and the quality reporting/
MFP-adjusted CPI-U payment update of -1.7 percent.
3. Display of CY 2016 ASC Payment Rates
    Addenda AA and BB to this CY 2016 OPPS/ASC final rule with comment 
period (which are available via the Internet on the CMS Web site) 
display the final updated ASC payment rates for CY 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 final rates under the ASC standard 
ratesetting methodology and the MPFS final rates, the payment 
indicators and rates set forth in this rule are based on a comparison 
using the MPFS rates that effective January 1, 2016. For a discussion 
of the MPFS rates, we refer readers to the CY 2016 MPFS final rule with 
comment period.
    The payment rates included in these addenda reflect the full ASC 
payment update and not the reduced payment

[[Page 70502]]

update used to calculate payment rates for ASCs not meeting the quality 
reporting requirements under the ASCQR Program. These addenda contain 
several types of information related to the CY 2016 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``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 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 payment indicator assignments for the new 
code.
    The values displayed in the column titled ``CY 2016 Payment 
Weight'' are the relative payment weights for each of the listed 
services for CY 2016. The 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 CY 2016 payment rate displayed in the ``CY 2016 
Payment Rate'' column, each ASC payment weight in the ``CY 2016 Payment 
Weight'' column was multiplied by the CY 2016 conversion factor of 
$44.177. The conversion factor includes a budget neutrality adjustment 
for changes in the wage index values and the annual update factor as 
reduced by the productivity adjustment (as discussed in section 
XII.G.2.b. of this final rule with comment period).
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2016 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2016 Payment'' column displays the CY 
2016 national unadjusted ASC payment rates for all items and services. 
The 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 October 2015.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are 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.
    While we did not propose any changes, we received a comment on the 
general principles we outlined above.
    Comment: One commenter supported CMS' mission to promote higher 
quality and more efficient health care for Medicare beneficiaries 
through the alignment of various quality reporting programs for 
multiple care settings, including the quality reporting program for 
hospital outpatient care.

[[Page 70503]]

    Response: We thank the commenter for its support. We will continue 
to seek opportunities, as appropriate, to align our 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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39325), we did 
not propose any changes to our measure selection policy. However, we 
received several comments on the priorities we consider for the 
Hospital OQR Program quality measure selection.
    Comment: Many commenters urged CMS to streamline and refocus the 
measure set for the Hospital OQR Program to ensure alignment with 
concrete national priority areas for improvement across the entire 
healthcare system. The commenters also expressed concern that program 
measures have proliferated in the Hospital OQR Program without a well-
articulated link to national priorities or goals. The commenters 
recommended that CMS consider adopting the recommendations outlined in 
the Institute of Medicine's (IOM) Vital Signs Report \1\ for 
streamlining and focusing national quality measurement efforts.
---------------------------------------------------------------------------

    \1\ Institute of Medicine. Vital Signs: Core Metrics for Health 
and Health Care Progress. April 2015. https://
iom.nationalacademies.org/~/media/Files/Report%20Files/2015/
Vital_Signs/VitalSigns_RB.pdf.
---------------------------------------------------------------------------

    Response: We thank the commenters for their suggestions and will 
take them under consideration. We disagree that Hospital OQR Program 
measures are not streamlined or aligned with concrete national priority 
areas for improvement across the entire healthcare system. Guided by 
NQS priorities,\2\ we focus on measures appropriate to HOPDs that 
reflect the level of care and the most important areas of service and 
measures for that provider category. In future rulemaking, we may 
consider strategies outlined in the IOM's Vital Signs Report \3\ for 
streamlining and focusing national quality measurement efforts as well. 
We continuously work with stakeholders to improve and revise the 
Hospital OQR Program measure set to develop and implement measures that 
appropriately measure quality of care with the goal of improving health 
outcomes. Furthermore, to the extent feasible, we adopt measures that 
are appropriate for multiple care settings to promote alignment across 
programs.
---------------------------------------------------------------------------

    \2\ National Strategy for Quality Improvement in Health Care. 
March 2011. http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.pdf.
    \3\ Institute of Medicine. Vital Signs: Core Metrics for Health 
and Health Care Progress. April 2015. https://
iom.nationalacademies.org/~/media/Files/Report%20Files/2015/
Vital_Signs/VitalSigns_RB.pdf.
---------------------------------------------------------------------------

    Comment: One commenter generally expressed concern that the 
proposed rule lacked sufficient detail, analysis, and rationale for a 
complete understanding of the policies and its impact such that 
hospitals would not be ready to implement many of the changes.
    Response: We disagree with the commenter; we believe that the 
proposals were fully articulated such that they can be implemented by 
HOPDs. However, we will continue to contact hospitals through our 
outreach and education programs to ensure hospitals are ready to comply 
with the Hospital OQR Program's requirements.
    Comment: Another commenter urged CMS to reexamine its approach in 
selecting measures for adoption into the Hospital OQR Program.
    Response: We strive to select measures that are appropriate for the 
Hospital OQR Program that further our goals under the NQS and CMS 
Quality Strategy, and we welcome specific feedback from stakeholders on 
ways we can improve this process. As stated above, we focus on measures 
appropriate to HOPDs that reflect the level of care and the most 
important areas of service and measures for that provider category. We 
continuously work with stakeholders to improve and revise the Hospital 
OQR Program measure set to develop and implement measures that 
appropriately measure quality of care with the goal of improving health 
outcomes.
    Comment: A few commenters recommended that additional measures 
considered for adoption be endorsed by the National Quality Forum (NQF) 
or identified by national consensus building entities to assure that 
CMS achieves its goal of aligning national quality measures across 
reporting programs, improving patient safety, and supporting the NQS 
goals.
    Response: To the extent practical and feasible, we propose and 
adopt measures endorsed by NQF or other consensus-based entities, but 
are not required to do so under section 1833(t)(17)(C)(i) of the Act. 
We believe that consensus among affected parties can be achieved by 
means other than endorsement by a national consensus building entity, 
including through the measure development process, through stakeholder 
input via Technical Expert Panel (TEP), through broad acceptance and 
use of the measure(s), and through public comment. It is our priority 
to ensure that all of our measures achieve CMS and NQS goals.
    Comment: One commenter recommended that CMS use quality measures 
that can be used for both the Hospital OQR and ASCQR Programs.
    Response: We thank the commenter for the recommendation to adopt 
measures that are applicable to both the Hospital OQR and ASCQR 
Programs. Because outpatient surgical services are provided in both 
settings and in order to foster alignment among quality reporting 
programs, to the extent feasible, we aim to adopt measures that are 
also appropriate for the ASC setting and can be proposed for the ASCQR 
Program. However, under section 1833(t)(17)(C)(i) of the Act, we have a 
statutory obligation to develop measures that the Secretary determines 
to be appropriate for the measurement of the quality of care (including 
medication errors) furnished by hospitals in outpatient settings and 
that reflect consensus among affected parties and, to the extent 
feasible and practicable, shall include measures set forth by one or 
more national consensus building entities. We have a responsibility to 
measure quality in the OPD setting according to this standard, and 
measures may not always overlap with the ASC setting.
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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39325 through 
39326), we did not propose any changes to our retention policy for 
previously adopted measures.

[[Page 70504]]

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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39326), we did 
not propose 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39326), we did not 
propose any changes to our measure removal policy. However, we received 
two general comments about removing measures.
    Comment: One commenter recommended that CMS holistically examine 
the quality measurement portfolio and remove measures that are overly 
burdensome for hospitals and focus on measures that provide the most 
value for both patients and hospitals.
    Response: We focus on measures appropriate for HOPDs that reflect 
the level of care and the most important areas of service for that 
provider category. At this time, we continue to believe there is value 
in collecting and reporting on each of the measures in the Hospital OQR 
Program measure set. Moreover, as is currently done, we will 
continuously evaluate the utility of the measures as we engage in 
future rulemaking. As stated above, we evaluate measures based on many 
factors. We also consider the burden on hospitals and the value for 
both patients and hospitals associated with every measure adopted.
    Comment: One commenter suggested that when NQF removes its 
endorsement of a measure, that measure should be considered for removal 
from the Hospital OQR Program, in order that the full set of Hospital 
OQR Program measures does not become unwieldy.
    Response: Regarding removal of measures to the Hospital OQR Program 
based upon NQF endorsement, section 1833(t)(17)(C)(i) of the Act 
requires the Secretary to develop measures that the Secretary 
determines to be appropriate for the measurement of the quality of care 
(including medication errors) furnished by hospitals in outpatient 
settings and that reflect consensus among affected parties and, to the 
extent feasible and practicable, shall include measures set forth by 
one or more national consensus building entities.
    Although NQF endorsement is a significant consideration in the 
selection of measures for the Hospital OQR Program, this provision does 
not require that the measures we adopt be endorsed by any particular 
entity. In some cases, we believe that consensus among affected parties 
can be achieved by other means, including through the measure 
development process, through stakeholder input via TEPs, through broad 
acceptance and use of the measure(s), and through public comment. 
Therefore, loss of NQF endorsement would not necessitate removal of a 
measure. However, we will consider loss of NQF endorsement in the 
ongoing evaluation of adopted measures for the Hospital OQR Program.
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). In the CY 2016 OPPS/ASC proposed rule (80 
FR 39326), we did not propose any changes to our ``topped-out'' 
criteria policy. However, we received one comment on our current 
``topped-out'' measure policy.
    Comment: One commenter suggested that hospitals should not be 
penalized for not reporting ``topped-out'' measures under the Hospital 
OQR Program, but these measures should continue to be separately 
reported until CMS deems it likely that quality care is not being 
sacrificed in the absence of incentive payments.
    Response: We expect hospitals to always follow appropriate 
standards-of care and clinical guidelines, regardless of whether a 
quality measure exists. We believe that HOPDs are committed to 
providing quality care to patients, and we do not have any indication 
that HOPDs will stop doing so when measures are removed. However, we 
must balance the burdens and costs of continued monitoring of a 
successful measure with high levels of performance with the adoption of 
other measures where there are opportunities for improvement in 
clinical quality. We will consider the need for refinement of the 
criteria for removal of ``topped-out'' measures for the Hospital OQR 
Program and, if we determine changes are necessary, we will propose 
such changes in future rulemaking.
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.

[[Page 70505]]



   Hospital OQR Program Measure Set Previously Adopted for the CY 2017
               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.
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.
** Measure we proposed 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).

    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 (NQF #2539) (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.

   Hospital OQR Program Measure Set Previously Adopted 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.
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.

[[Page 70506]]

 
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
** Measure we proposed 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).

    We note that we proposed one new measure for the CY 2018 payment 
determination and subsequent years in section XIII.B.6.a. of the CY 
2016 OPPS/ASC proposed rule (80 FR 39328).
    A number of commenters expressed views on previously adopted 
Hospital OQR Program measures.
    Comment: Some commenters supported previously adopted measures, and 
some commenters recommended changing measure specifications for some 
measures. Other commenters requested that CMS consider removing 
previously added measures from the Hospital OQR Program, specifically, 
OP-1 and OP-20, noting that these two chart-abstracted measures look at 
processes of care and not clinical outcomes of care, which the 
commenters believed should be CMS' main focus. A few commenters urged 
CMS to remove OP-4, OP-5, OP-9, OP-10, OP-14, OP-20, OP-22, OP-25 from 
the Hospital OQR Program because these measures are no longer NQF-
endorsed, are not recommended by the MAP, or are, the commenters 
believed, unsuitable for public reporting. A few commenters did not 
support the continued inclusion of OP-32 in the Hospital OQR Program, 
stating concerns related to the validity, reliability, and necessity of 
the measure.
    Response: We thank the commenters for their suggestions. At this 
time, we are not removing or modifying any of the measures suggested by 
the commenters. There is no scientific evidence that continued use of 
the measures as specified raises patient safety concerns that would 
require immediate removal of the measures based on our established 
policies. We refer readers to the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66941 through 66942) for more information about 
those policies. We continue to believe there is value in collecting and 
reporting these measures; however, we will consider these comments in 
developing policy for future rulemaking.
    Comment: A few commenters recommended that the Influenza 
Vaccination Coverage among Healthcare Personnel measure (NQF #0431) 
should be maintained in the Hospital OQR Program for the CY 2018 
payment determination and subsequent years.
    Response: As previously discussed, in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68471), we finalized a policy that, 
beginning CY 2013, when we adopt measures for the Hospital OQR Program, 
these measures are automatically adopted for all subsequent years' 
payment determinations, unless we propose to remove, suspend, or 
replace the measures. The OP-27: Influenza Vaccination Coverage among 
Healthcare Personnel (HCP) measure (NQF #0431) was finalized for the 
Hospital OQR Program in the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75097 through 75099). Therefore, OP-27 continues to be 
adopted in the Hospital OQR Program measure set for all subsequent 
years' payment determinations, unless we propose to remove, suspend, or 
replace the measure.
    Comment: One commenter suggested that, for OP-29 and OP-30, CMS 
provide specifications in a manner and format consistent with other 
chart-abstracted measures including defined initial patient population, 
acceptable sampling methods, measure algorithms complete with 
exclusions, and defined alpha data dictionary with abstraction 
guidelines.
    Response: We thank the commenter for the suggestion. However, we 
believe our measure specifications are sufficiently detailed to 
facilitate reporting that is feasible for most HOPD settings. While 
other chart-abstracted measures (for example, OP-18: Median Time from 
ED Arrival to ED Departure for Discharged ED Patients (NQF #0496) and 
OP-20: Door to Diagnostic Evaluation by a Qualified Medical 
Professional (76 FR 74481 through 74482)) utilize the CMS Abstraction 
and Reporting Tool for Outpatient Department measures (CART-OPD) or 
third-party vendors for data submission, both OP-29 and OP-30 use a CMS 
Web-based Tool (QualityNet Web site). Thus, data must be abstracted 
from charts, aggregated, and submitted via the QualityNet Web site. 
Because the data for measures submitted via a Web-based tool are 
reported in aggregate, measure algorithms complete with exclusions and 
defined alpha data dictionary with abstraction guidelines are not 
currently provided. However, sampling approaches and specifications 
defining initial patient populations are included. We refer readers to 
our Specifications Manual and the ``Template for Collecting OP-29 and 
OP-30 Endoscopy and Polyp Surveillance Data'' located at: http://www.qualityreportingcenter.com/wp-content/uploads/2015/02/OQR_Template-for-Collecting-OP29-and-OP30-Data_FINAL.pdf. Because the data for OP-29 
and OP-30 are reported in aggregate and submitted via a Web-based tool, 
specifications as listed by commenter are not provided by CMS as is 
consistent with other chart-abstracted measures submitted via a Web-
based tool, such as OP-22 ED- Patient Left Without Being Seen (76 FR 
74457 through 74458).
    Comment: One commenter urged CMS to consider developing a cloud-
based registry for measures OP-29 and OP-30 to grant providers faster 
access to data.
    Response: The National Institute of Standards and Technology (NIST) 
defines cloud computing as, ``a model for enabling ubiquitous, 
convenient, on-demand network access to a shared pool of configurable 
computing resources (e.g., networks, servers, storage, applications, 
and services) that can be rapidly provisioned and released with minimal 
management effort or service provider interaction.'' \4\ Based upon 
this

[[Page 70507]]

definition, we interpret ``cloud-based registry'' to mean an on-demand 
network providing access to a shared pool of measure data. At this 
time, we are operationally unable to develop a cloud-based registry for 
measure data, but we may consider this in the future.
---------------------------------------------------------------------------

    \4\ Special Publication 800-145: The NIST Definition of Cloud 
Computing. Recommendations of the National Institute of Standards 
and Technology. September, 2011. Available at: http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf.
---------------------------------------------------------------------------

5. Hospital OQR Program Quality Measure Removed for the CY 2017 Payment 
Determination and Subsequent Years
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39327 through 39328), 
we proposed 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, we have 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 
proposed to remove OP-15 for the CY 2017 payment determination and 
subsequent years.
    Based on our analysis, OP-15 meets the following criterion (iii) 
for removal: 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 scans.\5\ 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.\6\ Based upon 
guidelines for use of CT scans published in peer-reviewed literature, 
we believe that OP-15,\7\ as currently adopted in the Hospital OQR 
Program, does not align with the most updated clinical guidelines or 
practice, satisfying removal criterion (iii).
---------------------------------------------------------------------------

    \5\ Available at: http://www.acepnow.com/article/proposed-measures-ct-scans-cause-concern/2/.
    \6\ Ibid.
    \7\ 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 proposed to remove the OP-15: Use 
of Brain Computed Tomography (CT) in the Emergency Department for 
Atraumatic Headache measure from the Hospital OQR Program beginning 
with the CY 2017 payment determination.
    We invited public comment on this proposal.
    Comment: Commenters supported removal of OP-15, stating that the 
measure does not align with the most updated clinical guidelines or 
practice and it is not NQF-endorsed. In addition, the commenters 
observed that removing this measure would simplify and reduce 
administrative burden.
    Response: We thank the commenters for their support.
    Comment: One commenter noted that there should be a focus on the 
incorporation of other measures for which the evidence regarding 
appropriate use of CTs is much more robust.
    Response: We thank the commenter for the suggestion. We will 
consider incorporating other measures focused on CTs in future 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing the removal of the OP-15: Use of Brain Computed Tomography 
(CT) in the Emergency Department for Atraumatic Headache measure for 
the CY 2017 payment determination and subsequent years as proposed. Set 
out in the table below is the measure we are removing for the CY 2017 
payment determination and subsequent years.

      Hospital OQR Program Measure Removal for the CY 2017 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
           NQF #                               Measure
------------------------------------------------------------------------
N/A.......................  OP-15: Use of Brain Computed Tomography (CT)
                             in the Emergency Department for Atraumatic
                             Headache.
------------------------------------------------------------------------

6. New Hospital OQR Program Quality Measures for the CY 2018 and CY 
2019 Payment Determinations and Subsequent Years
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39328 through 39334), 
we proposed 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. 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.\8\ EBRT is a widely used modality \9\ to

[[Page 70508]]

provide pain relief in 50 to 80 percent of patients with painful bone 
metastases.\10\ 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.\11\ Despite the 
recommendations, the actual doses applied for EBRT continue to include 
dosing schedules as high as 25 fractions.\12\ 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.\13\ 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.\14\ 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.\15\
---------------------------------------------------------------------------

    \8\ Coleman RE. Metastatic bone disease: Clinical features, 
pathophysiology and treatment strategies. Cancer Treat Rev. 
2001;27:165-176.
    \9\ 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.
    \10\ 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.
    \11\ Ibid.
    \12\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
    \13\ 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.
    \14\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
    \15\ 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 proposed 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.'' \16\ 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 measure may be found at: https://www.qualityforum.org/QPS/1822. We note that this measure is currently 
undergoing an annual update. 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.
---------------------------------------------------------------------------

    \16\ 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 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.\17\
---------------------------------------------------------------------------

    \17\ 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.'' \18\ The Measure Applications 
Partnership, 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.'' \19\
---------------------------------------------------------------------------

    \18\ ``List of Measures under Consideration for December 1, 
2014.'' Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \19\ ``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.'' \20\
---------------------------------------------------------------------------

    \20\ 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 invited public comment on the proposal to include this measure 
in the Hospital OQR Program for the CY 2018 payment determination and 
subsequent years.
    Comment: Most commenters supported adoption of this measure because 
doing so supports alignment across hospital quality reporting programs 
(since the measure was previously adopted by the PCHQR Program), and 
because the measure targets the important topic of unnecessary 
radiation exposure.
    Response: We thank the commenters for their support.
    Comment: Several commenters expressed concern that the measure 
should be subject to additional testing prior to nationwide 
implementation and recommended that CMS delay implementation until 
additional data

[[Page 70509]]

becomes available from the PCHQR Program to avoid issues through 
lessons learned from that program. One commenter urged CMS to ensure 
that data collection for this measure is feasible in the HOPD setting, 
stating that CMS should further test the measure in HOPDs to determine 
whether facilities are able to capture all of the exclusions called for 
in the measure.
    Response: Because unnecessary radiation exposure is such an 
important topic, as outlined above, we believe that it is of 
sufficiently broad scope and priority to merit inclusion in the 
Hospital OQR Program beginning with the CY 2018 payment determination, 
and we do not that believe we should delay adopting this measure. 
However, we will work with the PCHQR Program to simultaneously identify 
any lessons learned as the measure is implemented. Furthermore, we do 
not believe the measure requires further testing to determine whether 
facilities are able to capture all of the exclusions called for in the 
measure; rather, we believe this measure is specified for immediate 
implementation. This measure has been rigorously tested, is NQF-
endorsed, and is supported by the MAP for implementation in the HOPD 
setting. For more specifics on the testing of OP-33 (for example, 
specifically in reference to best practices, dosing outliers, and 
validation of medical records), we refer readers to the measure 
specifications for evidence and supporting documents for quality 
improvement purposes at: http://www.qualityforum.org/QPS/1822. This 
measure was last updated on October 2, 2014, and as stated above, we 
note that it is currently undergoing an annual update. The measure 
steward has maintained this specific measure to address best clinical 
practices.
    Comment: Some commenters urged CMS to reassess whether this measure 
addresses an issue of sufficiently broad scope and priority to merit 
inclusion in the Hospital OQR Program. One commenter stated that this 
measure is insufficient to drive meaningful quality improvement for 
cancer care in the outpatient setting.
    Response: We believe that the measure is sufficiently broad in 
scope, because it was tested in outpatient settings and not limited to 
only cancer hospitals. In addition, the measure was supported by the 
MAP for implementation in the outpatient setting and endorsed by the 
NQF. Furthermore, as stated in the measure description above, we 
believe that this is a priority area as the measure would reduce the 
rate of EBRT services overuse, support our commitment to promoting 
patient safety, and support the NQS priority of Making Care Safer. 
Specifically, OP-33 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 supports patient 
preferences for shorter EBRT schedules, as well as ensures 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.\21\ We 
believe that adoption of a national quality measure will encourage 
hospitals and physicians to be more cognizant of and to reevaluate 
their current EBRT dosing schedules. For these reasons, we believe the 
measure would be sufficient to drive meaningful quality improvement for 
cancer care in the outpatient setting.
---------------------------------------------------------------------------

    \21\ Measure Submission and Evaluation Worksheet. Available at: 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concern that the measure 
specifications are not sufficiently detailed to assess impact on 
resources to collect and report data on the measure and recommended 
delaying data collection until details of the specifications are 
published to allow hospitals adequate time to shift resources to 
collect and report data on the measure. Other commenters asserted that 
measures should apply to a unique patient population that is easily 
defined and believed that this measure includes vague terminology and 
exclusions.
    Response: We believe that this measure, as currently specified, is 
sufficiently detailed and can assess impact on resources to collect and 
report data on the measure. We believe that the measure is ready for 
immediate implementation in the outpatient setting. We have been 
collaborating closely and frequently with the measure steward (American 
Society for Radiation Oncology) in implementing this measure for the 
PCHQR Program. For more details of the EBRT algorithm and acceptable 
dosing please refer to the measure steward's specifications manual as 
well as to the specifications that PCHQR program has adopted: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287744
79863.
    In addition, measure specification 2a1.34-35 \22\ indicates that 
this measure was specified and tested for the following settings: 
Ambulatory Care: Clinician Office, Hospital/Acute Care Facility. The 
testing results indicated that the facilities had sufficient resources 
to collect and report the data. The average number of patients at the 
testing facilities ranged between 250 and 1,000 patients per month. 
Therefore, this measure has been and continues to be specified for and 
tested in both the Hospital outpatient setting and the cancer hospital 
setting. Furthermore, the measure was supported by the MAP for 
implementation in the outpatient setting and endorsed by the NQF. We 
believe that this measure applies to a unique patient population that 
is easily defined, and we disagree that this measure includes vague 
terminology and exclusions. For detailed specifications, we refer 
readers to the specifications posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287744
79863.
---------------------------------------------------------------------------

    \22\ Measure Submission and Evaluation Worksheet. Available at: 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

    Comment: One commenter cautioned against utilization of uniform 
fractionation schemes for all patients with bone metastases called for 
by this measure, because personalized treatment plans allow for more 
appropriate balancing of the risks and benefits associated with EBRT.
    Response: Although we agree that all treatment plans should be 
decided within the context of the provider-patient relationship and 
tailored to each patient, testing of the measure and many studies as 
cited in the NQF Measure Evaluation Form,\23\ support the

[[Page 70510]]

conclusion that, in general, shorter EBRT schedules produce similar 
pain relief outcomes with fewer side effects when compared to longer 
EBRT schedules.\24\
---------------------------------------------------------------------------

    \23\ Nine randomized studies were included in the body of 
evidence in the guideline. These studies compared single fraction 
(8Gy/1) with multiple fractionation schemes. References: 1. Jeremic 
B, Shibamoto Y, Acimovic L, et al. A randomized trial of three 
single-dose radiation therapy regimens in the treatment of 
metastatic bone pain. Int J Radiat Oncol Biol Phys 1998;42:161-167. 
NQF #1822 External Beam Radiotherapy for Bone Metastases See 
Guidance for Definitions of Rating Scale: H=High; M=Moderate; L=Low; 
I=Insufficient; NA=Not Applicable 6 2. Bone Pain Trial Working 
Party. 8 Gy single fraction radiotherapy for the treatment of 
metastatic skeletal pain: Randomized comparison with a multifraction 
schedule over 12 months of patient follow-up. Radiother Oncol 
1999;52:111-121. 3. Roos D, Turner S, O'Brien P, et al. Randomized 
trial of 8 Gy in 1 versus 20 Gy in 5 fractions of radiotherapy for 
neuropathic pain due to bone metastases (Trans-Tasman Radiation 
Oncology Group, TROG 96.05). Radiother Oncol 2005;75: 54-63. 4. 
Hartsell W, Konski A, Scott C, et al. Randomized trial of short 
versus long-course radiotherapy for palliation of painful bone 
metastases. J Natl Cancer Inst 2005;97:798-804. 5. Kaasa S, Brenne 
E, Lund J-A, et al. Prospective randomized multicentre trial on 
single fraction radiotherapy (8Gy/1) versus multiple fractions (3Gy/
10) in the treatment of painful bone metastases. Radiother Oncol 
2006;79:278-284. 6. Foro A, Fontanals A, Galceran J, et al. 
Randomized clinical trial with two palliative radiotherapy regimens 
in painful bone metastases: 30 Gy in 10 fractions compared with 8 Gy 
in single fraction. Radiother Oncol 2008;89:150-155. 7. Sande T, 
Ruenes R, Lund J, et al. Long-term follow-up of cancer patients 
receiving radiotherapy for bone metastases: Results from a 
randomised multicentre trial. Radiother Oncol 2009;91:261-266. 8. 
Nielsen O, Bentzen S, Sandberg E, et al. Randomized trial of single 
dose versus fractionated palliative radiotherapy of bone metastases. 
Radiother Oncol 1998;47:233-240. 9. Steenland E, Leer J, van 
Houwelingen, et al. The effect of a single fraction compared to 
multiple fractions on painful bone metastases: A global analysis of 
the Dutch Bone Metastasis Study. Radiother Oncol 1999;52:101-109.
    \24\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing the adoption of the OP-33: External Beam Radiotherapy for 
Bone Metastases (NQF #1822) measure for the CY 2018 payment 
determination and subsequent years as proposed with a modification to 
the manner of data submission. We refer readers to section XIII.D.4.b. 
of this final rule with comment period for detailed data submission 
requirements, including the modification. The table below sets forth 
the measure we are finalizing in this final rule with comment period 
for the CY 2018 payment determination and subsequent years.

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

    The complete list of finalized measures for the CY 2018 payment 
determination and subsequent years are listed below.

 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.
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-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 ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=119628
  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 for the CY 2018 payment determination and subsequent
  years.


[[Page 70511]]

    In the CY 2016 OPPS/ASC proposed rule, OP-4: Aspirin at Arrival 
(NQF #0286) was inadvertently omitted from tables for the CY 2018 and 
CY 2019 Payment Determination and Subsequent Years (80 FR 39329 and 80 
FR 39334). We would like to clarify that OP-4 has not been removed from 
the Hospital OQR Program measure set and data for OP-4 should be 
submitted for the CY 2018 payment determination and subsequent years as 
previously finalized.
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)
    In the proposed rule, we proposed to adopt OP-34: Emergency 
Department Transfer Communication (EDTC) (NQF #0291) to address 
concerns associated with care transitions when patients are transferred 
from Emergency Departments to other facilities.
    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.\25\ In addition, 
information deficits frequently result when patients transfer between 
hospitals and primary care physicians in the community \26\ and between 
hospitals and long-term care facilities.\27\ According to patient 
safety studies,\28\ the highest percentage of preventable and negligent 
adverse events within a hospital occurs in the Emergency 
Department.\29\ The prevention of medical errors in the Emergency 
Department setting is gaining attention throughout the nation,\30\ but 
performance measures for Emergency Department care are lacking.\31\
---------------------------------------------------------------------------

    \25\ Available at: http://www.jointcommission.org/Improving_Americas_Hospitals_The_Joint_Commissions_Annual_Report_on_Quality_and_Safety_-_2007/.
    \26\ 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.
    \27\ 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.
    \28\ 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.
    \29\ 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.
    \30\ Schenkel, S. Promoting Patient Safety and Preventing 
Medical Error in Emergency Departments. Academic Emergency Medicine 
7:1204-1222, 2000.
    \31\ 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.\32\
---------------------------------------------------------------------------

    \32\ 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 proposed 
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 proposed 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 3 to 6 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.'' \33\ 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.\34\ The measure 
has been rigorously peer reviewed and extensively tested with field 
tests from 2004 to 2014 across 16 States in 249 hospitals.\35\
---------------------------------------------------------------------------

    \33\ Available at: http://www.qualityforum.org/QPS/0291.
    \34\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \35\ 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 27 
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. 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 70512]]

 
    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 proposed 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
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.
 

[[Page 70513]]

 
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
    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.
------------------------------------------------------------------------


[[Page 70514]]

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

    \36\ U.S. 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 
Consideration for December 1, 2014.'' \37\ 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.'' \38\
---------------------------------------------------------------------------

    \37\ ``List of Measures under Consideration for December 1, 
2014.'' Available at: www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \38\ 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.'' \39\ In addition, as stated above, the 
proposed measure addresses the NQS priority of Communication and Care 
Coordination.
---------------------------------------------------------------------------

    \39\ 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 invited 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 payment
           NQF #                 determination and subsequent years
------------------------------------------------------------------------
0291......................  OP-34: Emergency Department Transfer
                             Communication Measure.
------------------------------------------------------------------------

    The public comments we received on the EDTC measure and our 
responses are set forth below.
    Comment: Commenters supported the concept of improving care 
transitions, but the majority of commenters did not support the 
adoption of this measure for three primary reasons. First, commenters 
asserted that this measure overlaps significantly with the EHR 
Incentive Program Meaningful Use Stage 2 Core Objective--Transition of 
Care Requirements since 20 of the 27 elements in OP-34 are also 
collected as part of the Stage 2 Eligible Hospital and Critical Access 
Hospital (CAH) Meaningful Use Core Objectives. Second, many commenters 
expressed concern that chart-abstraction for this measure would be 
overly burdensome on hospitals, and particularly burdensome on 
hospitals that do not have fully operational Electronic Health Records 
(EHRs). Lastly, other commenters also had concerns that the scoring 
methodology relied upon overly complex calculations and set an 
unrealistically stringent standard. As a result, a few commenters 
expressed concern that implementation of this measure should be delayed 
beyond the CY 2019 payment determination because additional time and 
training would be necessary to develop new systems and processes to 
ensure the measure was correctly documented.
    Response: The EHR Incentive Program Health Information Exchange 
Objective for 2015 through 2017 (80 FR 62806) requires that the 
Eligible Professional (EP), eligible hospital, or Critical Access 
Hospital (CAH) who transitions their patient to another setting of care 
or provider of care or refers their patient to another provider of care 
provides a summary care record for each transition of care or referral 
in order to successfully demonstrate meaningful use. For this 
objective, CMS is also maintaining the requirements for the data 
elements included in the summary of care documents at 80 FR 62805. We 
recognize the proposed OP-34 would require hospitals to evaluate 
elements that would indeed overlap with information already collected 
as part of the EHR Incentive Program \40\ The overlapping elements, as 
defined by the measure steward, during measure development can be found 
in the OP-34 measure specifications at Appendix C: Emergency Department 
Transfer Communication Measures: Crosswalk with Meaningful Use Stage 
Two Requirements (http://www.stratishealth.org/documents/ED_Transfer_Data_Collection_Guide_Specifications.pdf).
---------------------------------------------------------------------------

    \40\ Stage 2 Eligible Hospital and Critical Access Hospital 
(CAH) Meaningful Use Core and Menu Objectives Table of Contents. 
October 2015. http://www.gpo.gov/fdsys/pkg/FR-2015-10-16/pdf/2015-25595.pdf.

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

[[Page 70515]]

    We note that this document, Appendix C: Emergency Department 
Transfer Communication Measures: Crosswalk with Meaningful Use Stage 
Two Requirements, was developed prior to publication of The EHR 
Incentive Program Health Information Exchange Objective for 2015 
through 2017 summary of care documents (80 FR 62805). The overlapping 
data elements found in the OP-34 measure specifications were based upon 
standards set forth in The EHR Incentive Program Meaningful Use Stage 2 
Core Objective--Transition of Care (77 FR 53970). However, the data 
elements submitted under the transition of care standards as part of 
the Meaningful Use Stage Two Requirements remain unchanged in The EHR 
Incentive Program Health Information Exchange Objective for 2015 
through 2017 summary of care documents (80 FR 62805). Therefore, the 
overlapping data elements found in the OP-34 measure specifications 
remain the same.
    Currently, 95 percent of hospitals attest to successful electronic 
clinical quality measure reporting under the EHR Incentive Program (80 
FR 49694). As a result, we agree that adopting OP-34 would 
significantly overlap with the Meaningful Use Stage 2 requirements 
diverting attention and resources away from another CMS priority and 
potentially adding additional costs to hospitals in order to re-specify 
EHR systems to comply with both programs' requirements.
    Also, we recognize that the burden associated with chart-
abstracting for 27 elements associated with this measure presents a 
significant burden for hospitals and that the scoring methodology is 
complex and sets a very high standard. Initially, we intended that 
delaying implementation of this measure until the CY 2019 payment 
determination would allow facilities additional time to implement the 
proposed measure (that is, to put the necessary processes and 
procedures in place), to familiarize themselves with the implementation 
protocol, tools, and scoring methodology related to the EDTC measure, 
and to make associated improvements prior to the first reporting 
deadline. However, in light of these comments, delayed implementation 
may not sufficiently address these concerns. In general though, we do 
not agree that hospitals without fully operational EHRs would be 
disadvantaged in chart-abstracting data for measures compared to 
hospitals with operational EHRs. Other measures in the Hospital OQR 
Program also require chart abstraction and do not distinguish between 
hospitals with fully operational EHRs versus those without.
    Therefore, after considering the comments and for the reasons 
discussed above, we are not finalizing our proposal to adopt OP-34 for 
the CY 2019 payment determination and subsequent years as proposed.
    Comment: Some commenters questioned whether the measure is 
necessary and asked if there is evidence that hospitals are failing to 
sufficiently report and transfer patient data. One commenter stated 
that the references cited in the proposed rule that indicate that the 
highest percentage of preventable and negligent adverse events 
occurring within hospital emergency departments are inaccurate and 
based on limited and outdated data.
    Response: As stated in the measure background 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. More timely communication of vital information 
results in better care, reduction of systemic medical errors, and 
improved patient outcomes. We believe that an EDTC measure would 
increase the quality of care provided to patients, reduce avoidable 
readmissions, and increase patient safety. In addition, we believe that 
a transfer communication measure would 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.'' Critically, the availability of the transfer record to the 
next level provider supports more effective care coordination and 
patient safety, since a delay in communication can result in medication 
or treatment errors. Furthermore, the MAP supported this measure, 
stating that, ``[t]his 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.'' In addition, 
we believe that references cited are accurate as of the time of measure 
development and the proposed rule. However, as discussed above, we are 
not finalizing this measure, but will take these comments into 
consideration in developing future policy.
    Comment: Several commenters suggested that CMS consider adopting 
this measure as an eCQM.
    Response: We did not propose this measure as an eCQM because it is 
not currently electronically specified. However, because we believe 
care coordination in the emergency department setting is an important 
aspect for quality measurement, if the measure is electronically 
specified in the future, we may consider proposing it or a similar 
electronic measure addressing this topic in future rulemaking.
    Comment: A few commenters supported adopting the measure as 
proposed. One commenter suggested that CMS include at least one 
companion, NQF-endorsed measure that captures communication of 
medication information. This commenter also recommended that CMS 
include OP-17: Tracking Clinical Results between Visits (former NQF 
measure #0491; NQF endorsement removed April 8, 2014) in patient care 
plans, noting that this measure is significant and very important to 
patient safety and clinical outcomes.
    Response: We thank the commenters for their support. However, for 
the reasons stated above, we have decided not to finalize this measure. 
We will consider these suggestions if we decide to propose a similar 
measure in future rulemaking.
    Comment: Many commenters requested clarification on various 
technical aspects of the measure, such as the definition of 
``communication'' and how to report data for John/Jane Doe patients, 
patients that are unresponsive, or information that is otherwise 
unknown.
    Response: In the CY 2016 OPPS/ASC proposed rule (80 FR 39334), we 
directed readers to the following Web site for a complete listing of 
the measure specifications: http://www.qualityforum.org/QPS/0291. 
Documents available on this Web site provide detailed definition of 
``communication'' and answers to the commenter's concerns regarding how 
to report data for John/Jane Doe patients, patients that are 
unresponsive, or information that is otherwise unknown. According to 
the measure specifications, a hospital would not be penalized for 
missing information as long as information, even if the information for 
a particular element is documented as ``unknown,'' is transferred to 
the receiving facility. However, as discussed above, we are not 
finalizing this measure but will take these comments into consideration 
in developing future policy.

[[Page 70516]]

    After considering the public comments we received, we are not 
finalizing the OP-34: Emergency Department Transfer Communication 
(EDTC) measure (NQF #0291) for the CY 2019 payment determination and 
subsequent years as proposed.
    The finalized measures for the CY 2019 payment determination and 
subsequent years are listed below.

 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.
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-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 ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=119628
  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 for the CY 2018 payment determination and subsequent
  years.

    As stated above, we reiterate that in the CY 2016 OPPS/ASC proposed 
rule, OP-4: Aspirin at Arrival (NQF #0286) was inadvertently omitted 
from tables for the CY 2018 and CY 2019 Payment Determination and 
Subsequent Years (80 FR 39329 and 80 FR 39334). We would like to 
clarify that OP-4 has not been removed from the Hospital OQR Program 
measure set and data for OP-4 should be submitted for the CY 2018 
payment determination and subsequent years as previously finalized.
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. 
In the CY 2016 OPPS/ASC proposed rule (80 FR 39335), we stated that 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 (NQF #0496) 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.\41\ 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.
---------------------------------------------------------------------------

    \41\ HHS August 2013 Statement, ``Principles and Strategies for 
Accelerating Health Information Exchange.'' Available at: http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf.

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

[[Page 70517]]

    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, at a minimum, to 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 final rule (80 FR 49698), the Hospital IQR Program 
finalized a policy to make reporting of electronic clinical quality 
measures required rather than voluntary. Under that finalized policy, 
hospitals will be required to submit only one quarter of data for 
either Q3 (July 1-September 30) or Q4 (October 1-December 31) of 2016 
for at least 4 electronic clinical quality measures.
    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.
    The same measure, 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 policies for the 
Hospital IQR Program (80 FR 50319 through 50321). Therefore, we stated 
in the CY 2016 OPPS/ASC proposed rule (80 FR 39335) that we are 
considering proposing a policy in future rulemaking that would give 
hospitals an option to voluntarily submit data for this measure 
electronically for the Hospital OQR Program 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 invited public comment on our intention to make this proposal in 
the future.
    Comment: Most commenters supported voluntary electronic submission 
of data for OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients beginning with the CY 2019 payment 
determination. In addition to voluntary electronic submission of OP-18, 
one commenter suggested that CMS transition OP-20 to electronic 
reporting in order to align ED through-put measures. A few commenters 
urged that proposed reporting requirements for eCQMs be aligned with 
the requirements and timelines as much as possible with other eCQM 
initiatives across care settings, specifically, the Medicare EHR 
Incentive Program clinical quality data reporting criteria for 
demonstrating Meaningful Use of EHRs. With respect to voluntary 
submission of data for OP-18 as an eCQM, one commenter requested 
clarification on three points: (1) Whether the latest version of the 
measure specification would be required as is the case for other 
electronically reported measures; (2) whether measure reporting would 
count toward the hospital's reporting requirements for the EHR 
Incentive Program; and (3) whether CMS could provide a more detailed 
description of the timeframe for voluntary reporting (for example, 
calendar year, quarters, etc.). This commenter also suggested that 
submission timeframes be consistent between EHR Incentive Program 
Meaningful Use requirements and the Hospital IQR Program.
    Response: We thank the commenters for their support and will take 
these comments into consideration for future rulemaking. Ideally, we 
would aim to align the Hospital OQR Program timeframes with those for 
the EHR Incentive Program and the Hospital IQR Program in order to 
reduce burden for hospitals. We are evaluating eCQM implementation in 
the Hospital IQR Program and will take any lessons learned, including 
those related to aligned requirements across CMS programs, submission 
timeframes, and general overlap with the EHR Incentive Program, into 
consideration in crafting policy for the Hospital OQR Program. We aim 
to ease the transition to reporting of electronic clinical quality 
measures, but any policies regarding the specific timelines and 
requirements related to the voluntary submission of data for OP-18: 
Median Time from ED Arrival to ED Departure for Discharged ED Patients 
as an eCQM would be proposed in future rulemaking.
    Comment: Some commenters did not support the option to report eCQMs 
in quality reporting programs, because they believed that such 
requirement might create a duplicative penalty for hospitals unable to 
meet Meaningful Use Requirements. Several commenters urged CMS to not 
require eCQM reporting for OP-18, noting that hospitals should have the 
option to continue to submit data via chart abstraction if they 
determine this method to be more feasible.
    Response: As we stated in the CY 2016 OPPS/ASC proposed rule (80 FR 
39335), we are considering proposing a

[[Page 70518]]

policy in future rulemaking that would give hospitals an option to 
voluntarily submit data for OP-18 electronically beginning with the CY 
2019 payment determination. Hospitals that chose not to submit 
electronically would still have the option of submitting data though 
chart abstraction. As a voluntary option, no penalty would be incurred 
by hospitals choosing not to submit data for OP-18 electronically. 
However, we have observed the successes of hospitals meeting the 
Meaningful Use requirements and our data show that 95 percent of 
hospitals already attest to successful eCQM reporting under the EHR 
Incentive Program.
    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 believe it is important to 
encourage providers to submit measures electronically, and we expect 
that, if proposed and finalized, the option to voluntarily submit data 
for OP-18 electronically beginning with the CY 2019 payment 
determination will begin the gradual transition toward electronic 
reporting on measures. As noted above, if we choose to allow voluntary 
electronic submission of OP-18, we will propose this policy in future 
rulemaking.
    Comment: One commenter supported CMS' commitment to eCQMs, but 
cautioned that disparate information systems and conflicting data 
elements may result in potentially inconsistent data that fail to 
accurately reflect care. Another commenter suggested that no 
electronically reported measures be used for public reporting of data 
or for determinations in financial incentive/disincentive programs 
until the issues of comparability, completeness, and accuracy are fully 
addressed. A few commenters stated that there is currently no 
validation process in place to confirm the accuracy of eCQM data and 
urged CMS to develop a validation process for eCQMs that will allow for 
future public reporting of these measures. One commenter recommended 
continued reporting of manually abstracted measures in parallel with 
eCQMs and simultaneous expansion of the eCQM pilot process, using 
manually abstracted measures as a control, to allow for evidence-based 
comparison data, in order to address concerns that removal of manual 
measures in favor of immature eCQM technology might yield poor quality 
performance.
    Response: We thank the commenters for their suggestions. Similar 
concerns about disparate information systems and conflicting data 
elements resulting in issues of comparability, completeness, and 
accuracy of eCQM data were also expressed by commenters in the FY 2016 
IPPS/LTCH PPS final rule under the Hospital IQR Program (80 FR 49695 
through 49698). We anticipate that as EHR technology evolves and more 
health IT infrastructure is operational, in cooperation with the 
efforts of the ONC Health IT Certification Program, data elements and 
information systems requirements will become more standardized. 
Reliable, accurate data and electronic reporting are all important 
priorities to us. We believe that, with the advancement of technology 
and the use of electronic measures, even more precise, accurate, and 
reliable data will be captured for analysis. We are working diligently 
toward this goal.
    The development of a validation process for eCQMs is also a 
suggestion we will consider if we decide to move forward with the 
proposal to allow OP-18 to be electronically reported in future 
rulemaking. We note that a validation pilot is currently under way in 
the Hospital IQR Program and the results of that pilot are pending, as 
described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50269 through 
50273). We will take into consideration lessons learned in the Hospital 
IQR Program before developing Hospital OQR Program policies. In regard 
to the suggestion of a simultaneous expansion of the eCQM pilot 
process, using manually abstracted measures as a control, to allow for 
evidence-based comparison data, we will consider these recommendations 
if we decide to move forward with the proposal in future rulemaking.
    Comment: While supporting the concept of using data collected from 
electronic health records, one commenter expressed concern that CMS 
might have direct access to a facility's EHR for data abstraction, 
adding that requirements for electronic submission of data may be 
premature and there is little confidence that health care providers are 
prepared to do so with great accuracy.
    Response: We thank the commenter for its support. Matters of 
patient privacy and medical record integrity are of utmost importance, 
and we will give those issues serious consideration prior to proposing 
any electronic reporting in future rulemaking. However, we note that it 
is extremely unlikely that we would propose to access a facility's EHR 
system directly for data abstraction purposes.
    We also received several general comments regarding future measures 
for the Hospital OQR Program.
    Comment: Several commenters suggested the inclusion of more 
outcome-based measures into the Hospital OQR Program measure set. 
Another commenter expressed concern that outcome-based measures 
unfairly penalize HOPDs because most follow-up care is not provided by 
HOPDs.
    Response: We will consider adopting more outcome-based measures in 
the future, and in doing so, we will be mindful of the concerns the 
commenters have about these measures.
    Comment: A few commenters suggested that CMS include additional 
immunization performance measures in the Hospital OQR Program to help 
ensure vaccines are routinely offered and administered to patients in 
the outpatient setting.
    Response: We thank the commenters for their suggestion. We will 
take this suggestion into consideration for future rulemaking.
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=11962899
81244.
    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 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). In the CY 
2016 OPPS/ASC proposed rule (80 FR 39335 through 39336), we did not 
propose 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

[[Page 70519]]

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). In the CY 2016 OPPS/ASC proposed rule 
(80 FR 39336), we did not propose any changes to our public display 
policy. However, we received one comment on these policies.
    Comment: While stating support for the public display of outpatient 
quality data on Hospital Compare, one commenter expressed concerns 
about the outpatient categories on the Web site, noting that while 
these particular categories may be meaningful to health care providers 
and others with a professional interest in health care services, health 
care policy, or health care economics, the categories are less 
meaningful to the average consumer/patient.
    Response: We thank the commenter for its observation. To the extent 
feasible and practical, we work with as many stakeholders as possible 
to ensure data are accurately reported and displayed on Hospital 
Compare and other CMS Web sites. In the future, we will continue 
working with stakeholders to improve the display of data in such a way 
that is more accessible and meaningful to the public.

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). In the CY 2016 OPPS/ASC proposed rule (80 FR 39336), we did 
not propose any changes to these requirements.
2. 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 procedural requirements at 42 CFR 
419.46(b).
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39336), we proposed 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=11928045
25137.
    We proposed 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 change to the withdrawal deadline is consistent with the ASCQR 
Program withdrawal deadline described in section XIV.C.2. of this final 
rule with comment period and in 42 CFR 416.305(b). We believe aligning 
deadlines across programs will reduce provider burden by streamlining 
processes and procedures.
    In addition, as we discussed in section XIII.D.1. of the CY 2016 
OPPS/ASC proposed rule (80 FR 39336 through 39337) and finalized in 
section XIII.D.1. of this final rule with comment period, we proposed 
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 proposed 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 invited public comment on our proposals to change the withdrawal 
deadline and to revise 42 CFR 419.46(b) to reflect this change.
    Comment: One commenter supported the proposed change of the 
withdrawal deadline from the Hospital OQR Program from November 1 to 
August 31, noting that this change fosters alignment and consistency 
with the ASCQR Program.
    Response: We thank the commenter for its support.
    After consideration of the public comment we received, we are 
finalizing our proposals to change the withdrawal deadline for the 
Hospital OQR Program from November 1 to August 31 and to revise 42 CFR 
419.46(b) to reflect this change as proposed.

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

1. 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=12054420
58760.
    The data submission requirements document, Hospital OQR Quality 
Measures and Timelines for CY 2016 and Subsequent Payment 
Determinations,\42\ explains that the chart-abstracted data on which we 
base APU determinations 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.
---------------------------------------------------------------------------

    \42\ 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, in the CY 2016 
OPPS/ASC

[[Page 70520]]

proposed rule (80 FR 39336 through 39337), we proposed to change the 
timeframe on which we base APU determinations for the Hospital OQR 
Program. As stated above, 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 proposed 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=12287587
29356.
    To facilitate this process, we proposed to transition to the newly 
proposed timeframe for the CY 2018 payment determination and subsequent 
years and use only three quarters of data for determining the CY 2017 
payment determination as illustrated in the tables below. However, we 
noted 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
                Patient encounter quarter                   submission
                                                             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
                Patient encounter quarter                   submission
                                                             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.6. of the CY 2016 OPPS/ASC 
proposed rule (80 FR 39339) (inadvertently referenced in the proposed 
rule as section XIII.D.8.), where we proposed to update our validation 
processes to also reflect these changes. In addition, we refer readers 
to section XIII.D.6. of this final rule with comment period where those 
proposals are finalized.
    We invited public comment on our proposals.
    Comment: Most commenters supported the proposed change to the 
timeframe for APU determinations for the Hospital OQR Program, noting 
that the change will ease the burden on hospitals and allow them 
additional time to review APU determinations prior to their impact on 
payments.
    Response: We thank the commenters for their support.
    Comment: One commenter expressed concern about the inherent 2-year 
gap between the reporting and payment adjustment periods for claims-
based measures because the delay limits the effectiveness of measures 
as a tool for quality improvement. Alternatively, the commenter 
encouraged CMS to incorporate more measures based on clinical and 
registry data.
    Response: We thank the commenter for its suggestion. 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. The timeframe required to finalize 
claims is about 4 months. Processing and matching of claims takes 
several months as well. A majority of claims are processed within the 
full year allowed for timely filing under the OPPS (78 FR 75111). For 
the current claims-based measures for example, the reporting period is 
July 1, 2013 through June 30, 2014. Using this timeframe, these data 
affect the CY 2016 payment determination and are publicly reported in 
July 2015. Payment adjustments for the Hospital OQR Program are based 
on the calendar year. Thus, if there is any overlap into another year, 
the payment has to be applied to the following year. Furthermore, 
testing and preview time for public reporting require additional time. 
Therefore, because of the time required for: (1) Claims data to be 
finalized; (2) data analysis; and (3) the preview period prior to 
public reporting, operationally, we are not able to close the gap 
between reporting and payment adjustment. However, we will take these 
comments into consideration in developing future policy. We may also 
consider incorporating more measures based on clinical and registry 
data in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to shift the quarters upon which the Hospital 
OQR Program APU determinations are based as proposed.
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); and
     OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke 
or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 
45 Minutes of Arrival (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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39337), we did not 
propose any changes to these policies.

[[Page 70521]]

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 final rule with comment period, we are removing 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. Therefore, for the CY 2017 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 (NQF #2539).
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39337), we did not 
propose any changes to our claims-based measure data submission 
requirements.
4. 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 2018 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) (NQF #0431).
    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).
    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=12054421
25082) 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39337 through 39338), 
we proposed 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 
proposed 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 proposed this new data submission period to be consistent with 
the data submission deadlines proposed by the ASCQR Program in section 
XIV.D.3. of the CY 2016 OPPS/ASC proposed rule (80 FR 39345) 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 invited public comment on our proposal to change the data 
submission period for measures submitted via the CMS Web-based tool.
    Comment: One commenter supported the change in the deadline for the 
measures that are reported via the CMS Web-based tool (QualityNet Web 
site) to conform to the deadline for the National Healthcare Safety 
Network (NHSN) measure reporting, noting that the change will help 
avoid confusion resulting from multiple reporting dates.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concern over competing data 
submission requirements in the first part of the year with other 
quality reporting programs as well as the current timing for the 
release of measurement specifications and updates for OP-26.
    Response: While we acknowledge that hospitals will no longer have 
deadlines spread over a wider period of time for measures submitted via 
a Web-based tool, we believe that aligning these data submission 
deadlines will ultimately streamline and reduce administrative burden 
on hospitals. The release of measure specifications and updated CPT 
(Current Procedural Terminology) codes for OP-26 was delayed for the CY 
2017 payment determination. Ideally, we planned to release CPT codes 
for the CY 2017 payment determination prior to

[[Page 70522]]

the beginning of CY 2015. CPT codes were published in the 
Specifications Manual 8.0a supplemental document posted on QualityNet 
on April 1, 2015 and are available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287745
92819. However, we do not anticipate future delays. Future releases of 
measure specifications and updated codes for OP-26 are anticipated to 
be made available in November for the subsequent program year. 
Therefore, we do not believe that hospitals will have difficulty 
submitting these data by May 15.
    Comment: One commenter expressed concerns about ongoing issues with 
access and functionality of the NHSN Web site for reporting CMS-
required measures, adding that CMS should work to ensure that the NHSN 
has the resources it needs to maintain the proper infrastructure to 
support the growing role it plays in quality reporting.
    Response: We appreciate the commenter's concerns. The NHSN Web site 
is not maintained by CMS. However, we will share these concerns with 
the CDC NHSN program.
    Comment: One commenter recommended that measures submitted via a 
Web-based tool be subject to a validation process.
    Response: We thank the commenter for the suggestion. Due to limited 
resources and the time needed to update our systems, at this time, 
operationally we are not able to validate measures submitted through 
the Web-based tool. We will take this recommendation into consideration 
in developing future policy.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the deadline for the measures that 
are reported via the CMS Web-based tool (QualityNet Web site) to 
conform to the deadline for the NHSN measure reporting as proposed. The 
deadline for these measures beginning with the CY 2017 payment 
determination will be May 15 of the year prior to the payment 
determination. We note that the ASCQR Program is not finalizing the May 
15 deadline in section XIV.D.3. of this final rule with comment period 
due to commenters' concerns specific to the ASC setting. However, we 
believe that aligning with the NHSN measure submission deadline serves 
our goals of streamlining hospital submissions, earlier public 
reporting of measure data, and reduced administrative burden associated 
with tracking multiple submission deadlines for these measures.
b. 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 the CY 2016 OPPS/ASC 
proposed rule (80 FR 39328 through 39330), we proposed 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). As discussed in section XIII.B.6.a. of this final rule 
with comment period, we are finalizing this measure.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39338), for data 
submission for the CY 2018 payment determination and subsequent years, 
we proposed 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 in section XIII.D.4.a. of 
the CY 2016 OPPS/ASC proposed rule (80 FR 39337 through 39338); 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 \43\) for this measure through a 
vendor (via QualityNet infrastructure) containing aggregated data at 
the hospital level. The aggregate data file would combine all patient 
information, rather than reporting individual patient level data. The 
data submission deadline for either method would be May 15. We stated 
our belief that giving hospitals the option to submit data via vendors 
would 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=11912558
79384.
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    \43\ Data Submission Requirements will be available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287
75181731.
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    We invited public comment on our proposal.
    Comment: Some commenters expressed concern that chart-abstracted 
quality measures submitted via a CMS Web-based tool impose a heavy 
administrative burden on providers. One commenter suggested that CMS 
consider limiting data collection to radiation oncology sites. In 
addition, this commenter noted that an abundance of data is readily 
available through Tumor Registry services and suggested that CMS should 
consider using this source for needed data, rather than implementing 
another manually abstracted measure.
    Response: While we understand the commenters' concerns about the 
additional administrative burden of reporting data for the new measure, 
we have weighed any associated burden of reporting this data against 
the benefit of having data. We believe that OP-33 provides valuable 
data that will enable us to address concerns associated with 
unnecessary exposure to radiation and a desire for shorter and less 
painful treatment options sufficient to justify its adoption into the 
Hospital OQR Program measure set. In addition, as noted in section 
XIII.B.6.a. of this final rule with comment period, because unnecessary 
radiation exposure is such an important topic, we believe that this 
measure is of sufficiently broad scope and priority to merit inclusion 
in the Hospital OQR Program and not be limited to only radiation 
oncology sites. Furthermore, we note that the MAP supported this 
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.'' \44\
---------------------------------------------------------------------------

    \44\ Ibid.
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    However, we will take into consideration commenters' suggestions 
for future rulemaking and may consider using data available through 
registry services as a source of data for the Hospital OQR Program 
provided there are no associated costs for data submission or 
membership.
    Comment: One commenter requested clarification regarding whether 
this is a chart-abstracted measure or if data will be collected by 
other means. The commenter suggested that, if this measure is a chart-
abstracted measure, CMS provide specifications in a manner and format 
consistent with other chart-abstracted measures including defined 
initial patient population, acceptable sampling methods, measure 
algorithms complete with exclusions, and defined alpha data dictionary 
with abstraction guidelines.
    Response: In previous rulemaking (77 FR 68483 and 77 FR 68530), we 
have referred to measures in which data are submitted via a Web-based 
tool on a CMS Web site under our quality data

[[Page 70523]]

reporting programs as structural measures (measures concerned with 
attributes of where care occurs, such as material resources, human 
resources, and organizational structures).\45\ For example, OP-12: The 
Ability for Providers with HIT to Receive Laboratory Data 
Electronically Directly into their ONC-Certified EHR System as Discrete 
Searchable Data, is a structural measure. However, because measures for 
which data are submitted via a Web-based tool on a CMS Web site may or 
may not, in fact, be structural (for example, the Hospital IQR Program 
chart abstracted, process of care measure PC-01: Elective Delivery 
Prior to 39 Completed Weeks Gestation (NQF #0469) is submitted via a 
Web-based tool, but measures quality-of-care rather than structural 
elements (79 FR 50059)), we clarified our terminology to refer to the 
mode of data submission as Web-based (78 FR 75112).
---------------------------------------------------------------------------

    \45\ Maintz, J. Defining and Classifying Clinical Indicators for 
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530).
---------------------------------------------------------------------------

    In particular, the source of the data for OP-33: External Beam 
Radiotherapy (EBRT) for Bone Metastases is via charts gathered by 
chart-abstraction. However, unlike some other chart-abstracted measures 
in the Hospital OQR Program (OP-18: Median Time from ED Arrival to ED 
Departure for Discharged ED Patients (NQF #0496) and OP-20: Door to 
Diagnostic Evaluation by a Qualified Medical Professional (76 FR 74481 
through 74482)) which utilize either the CART-OPD or third-party 
vendors for data submission, for OP-33, the data submission method will 
be via a CMS Web-based Tool (QualityNet Web site). Thus, data must be 
abstracted from charts, aggregated, and submitted via the QualityNet 
Web site. Because the data for measures submitted via a Web-based tool 
are reported in aggregate, measure algorithms complete with exclusions, 
and defined alpha data dictionary with abstraction guidelines are not 
currently provided. However, sampling approaches and specifications 
defining initial patient population are included. We refer readers to 
our Specifications Manual at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=11962899
81244.
    Comment: One commenter suggested that patient-level data be 
collected for this measure as opposed to aggregate-level data.
    Response: We thank the commenter for its suggestion. At this time, 
we believe it is less burdensome for hospitals to report aggregate-
level data as opposed to patient-level data. In addition, for this 
particular measure, we are not aware of any quality improvement 
benefits that collecting patient-level data would provide. If we 
determine that it would be beneficial to collect patient-level data for 
this measure, weighed against the associated burden, we may consider 
proposing to do so in future rulemaking.
    Furthermore, as discussed above, we proposed to allow hospitals to 
submit these data through a vendor because we believed this submission 
method would further decrease burden. After analyzing this option 
further, we do not believe that we will be able to accept data 
operationally using this method for CY 2018 as our IT systems cannot 
feasibly collect and provide hospitals timely and relevant submission 
and measure rate feedback. If operationally we are able to accept data 
through vendors in the future, we may propose to do so through 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing a modified version of our proposals. We are finalizing that 
hospitals 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. However, we are not finalizing our second proposal that 
hospitals can submit an aggregate data file for this measure through a 
vendor (via the QualityNet infrastructure) containing aggregated data 
at the hospital level for reasons discussed above.
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 the CY 2016 OPPS/ASC 
proposed rule (80 FR 39330 through 39334), we proposed one new Web-
based measure for the CY 2019 payment determination and subsequent 
years, OP-34: Emergency Department Transfer Communication (EDTC) 
Measure (NQF #0291). In the CY 2016 OPPS/ASC proposed rule (80 FR 
39338), for data submission for the CY 2019 payment determination and 
subsequent years, we proposed 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 
in section XIII.D.4.a. of the proposed rule (80 FR 39337 through 
39338); 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 \46\) 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 stated our belief 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=11912558
79384.
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    \46\ Data Submission Requirements will be available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287
75181731.
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    We invited public comment on our proposals.
    Comment: Many commenters expressed concern that the proposed manner 
of data submission for this measure would be overly burdensome for 
hospital abstractors. Several commenters suggested that patient-level 
data be collected for this measure as opposed to aggregate-level data, 
specifically through using a CART-OPD module. One commenter recommended 
that the required data elements be tailored based on the patient's 
clinical presentation, noting that not all elements are relevant to all 
individual patients.
    Response: As proposed, the EDTC measure does not require hospitals 
to submit patient data on each of the 27 elements listed. Rather, 
hospitals would be required to answer yes or no as to whether these 
clinical indicators were recorded and communicated. Initially, we 
intended that delaying implementation of this measure until the CY 2019 
payment determination would allow facilities additional time to 
implement the proposed measure (that is, to put the necessary processes 
and procedures in place), to familiarize themselves with the 
implementation protocol, tools, and scoring methodology related to the 
EDTC measure, and to make associated improvements prior to the first 
reporting deadline. However, in light of commenters' concerns, we 
acknowledge that delayed implementation may not

[[Page 70524]]

sufficiently address these concerns. We refer readers to section 
XIII.B.6.b. of this final rule with comment period, for our discussion 
regarding not finalizing the EDTC measure for the CY 2019 payment 
determination and subsequent years. Regardless, we will take these 
comments into consideration in developing future policy.
    After consideration of the public comments we received, we are not 
finalizing the data submission methods for the EDTC measure as 
proposed, because we are not finalizing the EDTC measure, as discussed 
in section XIII.B.6.b. of this final rule with comment period.
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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39338), we did not 
propose 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 
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 in section XIII.D.1. of the CY 2016 OPPS/ASC proposed 
rule (80 FR 39336 through 39337), we proposed 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 proposed that validation be based on three quarters 
of data (validation quarter 2, validation quarter 3, and validation 
quarter 4 of 2015). In addition, for the CY 2018 payment determination 
and subsequent years, we proposed 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=12287587
29356.
    Finally, we also proposed to make one editorial correction to 42 
CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term 
``calendar year.''
    We invited public comment on our proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing changes to our validation scoring process 
to reflect changes in the APU determination timeframes and correcting 
42 CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term 
``calendar year'' as proposed.
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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39339), we proposed to 
fix a typographical error to correct the name of this process from 
extension and exception to extension and exemption (inadvertently 
presented as a process name change). We also proposed to make 
corresponding typographical error corrections (inadvertently presented 
as a name change) to the regulation text at 42 CFR 419.46(d). These 
proposed corrections align the Hospital OQR Program policies with those 
of the Hospital IQR Program (79 FR 50101) and ASCQR Program (79 FR 
66987). We would like to clarify that we are not renaming this process, 
but rather we are proposing to fix a typographical error to correct the 
name of this process from extension and exception to extension and 
exemption. We invited public comment on our proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing the correction of this typographical error 
at 42 CFR 419.46(d) to extension and exemption as proposed.
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). In the CY 2016 OPPS/ASC proposed rule (80 FR 39339), we 
proposed 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 proposed this new reconsideration submission deadline to be 
consistent with the proposed ASCQR Program reconsideration submission 
deadline in section XIV.D.8. of the CY 2016 OPPS/ASC proposed rule (80 
FR 39347) and finalized in section XIV.D.8. of this final rule with 
comment period. As stated above, we believe that aligning deadlines 
across programs leads to decreased provider burden by streamlining 
processes and procedures.
    We also proposed to make a conforming change to 42 CFR 419.46(f)(1) 
to reflect the above change in submission deadline 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 proposed to make an editorial correction to 42 CFR 
419.46(f)(1) to replace the term ``fiscal year'' with the term 
``calendar year.''
    We invited public comment on these proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing these policies as proposed.

[[Page 70525]]

E. 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 the 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 proposed 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 final rule with comment 
period. Payment for all services assigned to these status indicators 
will be subject to the reduction of the 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 final rule with 
comment period.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2016
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39340), we proposed to 
continue our established policy of applying the reduction of the OPD 
fee schedule increase factor through the use of a reporting ratio for 
those hospitals that fail to meet the Hospital OQR Program requirements 
for the full CY 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 proposed to continue to apply the 
reporting ratio to all services calculated using the OPPS conversion 
factor. For the CY 2016 OPPS, we proposed 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,''

[[Page 70526]]

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 
proposed to continue to exclude services paid under New Technology 
APCs. We proposed to continue to apply the reporting ratio to the 
national unadjusted payment rates and the minimum unadjusted and 
national unadjusted copayment rates of all applicable services for 
those hospitals that fail to meet the Hospital OQR Program reporting 
requirements. We also proposed to continue to apply all other 
applicable standard adjustments to the OPPS national unadjusted payment 
rates for hospitals that fail to meet the requirements of the Hospital 
OQR Program. Similarly, we proposed to continue to calculate OPPS 
outlier eligibility and outlier payment based on the reduced payment 
rates for those hospitals that fail to meet the reporting requirements.
    We invited public comments on these proposals.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our proposal to apply the Hospital OQR 
Program reduction in the manner described above. We also are finalizing 
our proposal to reflect the CY 2016 OPPS status indicators to which the 
adjustment would apply. For the CY 2016 OPPS, the final reporting ratio 
is 0.980, calculated by dividing the final reduced conversion factor of 
$72.251 by the final full conversion factor of $73.725.

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 final rule with 
comment period 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 (79 FR 66966 through 
66987) for subsequently enacted policies.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39340), we proposed to 
establish a new Subpart H under 42 CFR part 416 to codify many of the 
administrative policies regarding the ASCQR Program. We proposed 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 invited public comment on our proposals to codify the scope and 
basis for the ASCQR Program.
    Comment: Several commenters supported CMS' proposals to codify the 
scope and basis for the ASCQR Program. Some commenters expressed 
concerns that codification was not warranted for a program that was 
still under development and that codification could make program 
changes in the future more difficult.
    Response: We thank the commenters that supported our proposals to 
codify the scope and basis for the ASCQR Program. While some commenters 
believe codification could make program changes in the future more 
difficult, we assure these commenters that future program changes to 
codified ASCQR Program regulatory text is not more difficult than 
updating non-codified regulatory policies. Codified regulatory text can 
be and is modified through the rulemaking process, which for the ASCQR 
Program, occurs on an annual basis.
    After consideration of the public comments we received, we are 
finalizing our proposals to establish a new Subpart H under 42 CFR part 
416 to codify many of the administrative policies regarding the ASCQR 
Program, and to codify the scope and basis of the ASCQR Program in 42 
CFR 416.300.

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. In 
the CY 2016 OPPS/ASC proposed rule (80 FR 39341), we did not propose 
any changes to this policy. However, we received several comments on 
our priorities for measure selection.
    Comment: One commenter stated that outcome reporting is the most 
direct way to measure clinical improvements in the quality of care 
provided to patients and expressed support for the ASCQR Program's use 
of outcome measures.
    Response: We thank the commenter for its support. We also believe 
that outcome measures are important and are a direct way to measure 
clinical improvement.
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). In the CY 2016 OPPS/ASC 
proposed rule (80 FR 39341), we did not propose any changes to this 
policy. However, we proposed 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

[[Page 70527]]

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. In the CY 2016 OPPS/ASC proposed 
rule (80 FR 39341), we did not propose any changes to this process. 
However, we proposed 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 as specified raises patient 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.
    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 (79 FR 66968 through 66969). In 
the CY 2016 OPPS/ASC proposed rule (80 FR 39341), we did not propose 
any changes to this process for measure removal, suspension, or 
replacement. However, we proposed to codify this measure removal 
criterion at proposed new 42 CFR 416.320(c).
    We invited public comment on our proposals to codify these existing 
policies.
    We did not receive any public comments on the proposals to codify 
our policies for the retention and removal of quality measures from the 
ASCQR Program and, therefore, are finalizing them as proposed in 42 CFR 
416.320.
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 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 7-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).\47\ 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 \48\ and the measure steward 
will be continuing to support the measure.\49\ 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.
---------------------------------------------------------------------------

    \47\ Available at: http://www.qualityforum.org/Publications/2015/02/NQF-Endorsed_Measures_for_Surgical_Procedures.aspx.
    \48\ 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.
    \49\ Available at: 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 #                    NQF #             Measure name
------------------------------------------------------------------------
ASC-1.........................  0263.............  Patient Burn.

[[Page 70528]]

 
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 cid=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 #                    NQF #             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 cid=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 7-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 FY 66970 through 66979).

    Several commenters expressed views on previously adopted ASCQR 
Program measures.
    Comment: Some commenters supported previously adopted measures, and 
some commenters recommended changing measure specifications for some 
measures. Other commenters requested that CMS consider removing 
previously added measures from the ASCQR Program, specifically ASC-5, 
ASC-9, ASC-10, and ASC-12, because these measures are no longer NQF-
endorsed, and the commenters believed that they are inappropriate for 
ASCs due to concerns about measure reliability or validity, or are too 
burdensome for ASCs. Some of these commenters expressed ongoing 
concerns about the ASC-12 measure. They requested that CMS conduct 
additional analyses of the reliability and validity of the measure as 
specified for the ASCQR Program and implemented during the dry run, and 
provide those results to the ASC community.
    Response: We thank the commenters for their suggestions. At this 
time, we have not made any proposals to remove or modify any of the 
measures suggested by commenters. Further, there is no evidence that 
continued use of the measures as specified raises patient

[[Page 70529]]

safety concerns that would require immediate removal of the measures 
based on the process we finalized in the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66967 through 66969). However, we will take 
these suggestions into consideration in future years using our measure 
removal criteria. We continue to believe there is value in collecting 
and reporting these measures. We thank commenters for these suggestions 
regarding the current ASCQR Program measures and will share them with 
the measure stewards.
4. ASCQR Program Quality Measures for the CY 2018 Payment Determination 
and Subsequent Years
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39343), we did not 
propose to adopt any additional measures for the ASCQR Program for the 
CY 2018 payment determination and subsequent years.
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 VBP 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. We 
did not propose any changes to this policy. However, we received one 
comment on our priorities for measure selection.
    Comment: One commenter supported alignment of the ASCQR Program 
with the NQS, the CMS Strategic Plan, and other quality reporting and 
value-based purchasing programs. The commenter also recommended that 
CMS focus on the NQS and CMS Quality Strategy measure domains of: (1) 
Make care safer, (2) strengthen person and family engagement, and (3) 
promote effective communication and coordination of care, because these 
domains fall within the scope of an ASC's accountability. This 
commenter asserted that the remaining three domains (promote effective 
prevention and treatment; work with communities to promote best 
practices of healthy living; and make care affordable) are more the 
responsibility of the primary care provider, not ASCs.
    Response: We thank the commenter for these suggestions. We seek to 
align our programs as much as possible, and we believe that it is 
important to have measures that encompass each of the NQS priority 
areas. We have and will continue to consider whether our current and 
future measures are actionable by ASCs.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39343), we also 
invited 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; \50\ surgical site infections; \51\ impaired 
coagulation; \52\ and colligation of drug effects.\53\ When 
intraoperative normothermia is maintained, patients experience fewer 
adverse outcomes and their overall care costs are lower.\54\ This 
measure is also 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.\55\ It also addresses the 
MAP-identified priority measure area for the ASCQR Program of 
anesthesia-related complications.\56\
---------------------------------------------------------------------------

    \50\ Frank SM, Fleisher LA, Breslow MJ, et al. Perioperative 
maintenance of normothermia reduces the incidence of morbid cardiac 
events: A randomized clinical trial. JAMA. 1997;277(14): 1127-1134.
    \51\ Kurz A, Sessler DI, 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.
    \52\ Rajagopalan S, Mascha E, Na J, Sessler DI. The effects of 
mild hypothermia on blood loss and transfusion requirements during 
total hip arthroplasty. Lancet. 1996;347(8997):289-292.
    \53\ Kurz A. Physiology of thermoregulation. Best Pract Res Clin 
Anaesthesiol.2008;22(4):627-644.
    \54\ Mahoney CB, Odom J. Maintaining intraoperative 
normothermia: A meta-analysis of outcomes with costs. AANA Journal. 
1999;67(2): 155-164.
    \55\ MAP Hospital Workgroup Transcript.
    \56\ 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.\57\ 
Each year, approximately 1.5 million patients undergo cataract surgery 
to improve their vision.\58\ 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.\59\ 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.\60\ 
It also addresses the MAP-identified priority measure area of procedure

[[Page 70530]]

complications for the ASCQR Program.\61\
---------------------------------------------------------------------------

    \57\ National Eye Institute. ``Cataracts.'' Cataracts. National 
Institutes of Health, n.d. Available at: https://www.nei.nih.gov/eyedata/cataract#1.
    \58\ ``Measure Application Partnership Hospital Workgroup'', 
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
    \59\ Chen M, Lamattina KC, 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.
    \60\ ``Measure Application Partnership Hospital Workgroup'', 
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
    \61\ 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 invited public comment on the possible inclusion of these 
measures in the ASCQR Program measure set in the future. As stated 
previously, we did not propose to adopt any new measures for the CY 
2018 payment determination or subsequent years in the CY 2016 OPPS/ASC 
proposed rule.
    Comment: Many commenters supported future adoption of the 
Normothermia Outcome measure in the ASCQR Program, because it would 
help promote quality care in ASCs and because public reporting of these 
data would serve as a key measure to assist patients, policymakers, and 
researchers in comparing quality among ASCs. One commenter noted that 
the measure's reliability testing in the ASC setting was very strong, 
and that the measure is already in use in the ASC Quality 
Collaboration's quarterly public reporting program, which is a 
voluntary reporting program that collects data from ASCs and provides 
quarterly aggregated performance data for ASC facility-level quality 
measures developed by the ASC Quality Collaboration. One commenter 
recommended that CMS adopt the Normothermia Outcome measure in the 
future and retire the measure once there is validation of sustained 
normothermia among ASCs. Another commenter noted that the NQF's 2015 
Surgical Standing Committee recently approved a change in the 
definition of normothermia from 96.8 degrees Fahrenheit (36 degrees 
Celsius) to 95.9 degrees Fahrenheit (35.5 degrees Celsius) and urged 
CMS to ensure that any future measure on normothermia adopt this 
updated definition in order to maintain uniformity in anesthesia 
quality improvement efforts across programs.
    A number of commenters did not support future adoption of the 
Normothermia Outcome measure for the ASCQR Program. The commenters 
asserted that the measure implementation guide states there is no 
evidence of a performance gap in hypothermia for ASC providers. Other 
commenters requested that CMS provide additional information regarding 
the gap or variation in care that justifies future adoption of the 
Normothermia Outcome measure, the risk adjustment methodology used 
under the measure, and the measure's reliability testing data. The 
commenters recommended CMS perform reliability and field testing of the 
Normothermia Outcome measure, submit the measure to NQF for 
endorsement, and resubmit the measure to the MAP for review before 
proposing to add this measure to the ASCQR Program measure set.
    Some commenters requested additional information regarding the 
Normothermia Outcome measure. One commenter requested additional 
information regarding the volume of postoperative hypothermia events 
captured under the Normothermia Outcome measure, how CMS intends to 
collect data for the measure, and how CMS will calculate this measure.
    Response: We thank the commenters for sharing their comments and 
recommendations regarding future inclusion of the Normothermia Outcome 
measure in the ASCQR Program. We will take these suggestions and 
concerns into consideration if we propose to adopt the Normothermia 
Outcome measure in the future.
    Comment: The majority of commenters supported future adoption of 
the Unplanned Anterior Vitrectomy measure for the ASCQR Program. One 
commenter noted that the measure's reliability testing in the ASC 
setting was very strong, and that the measure is already in use in the 
ASC Quality Collaboration's public reporting program. The commenter 
further stated the measure does not require NQF endorsement because the 
requirement of the ASCQR Program to reflect consensus among affected 
parties has been met through the measure developer's collaboration with 
the ASC industry. Some commenters recommended CMS perform reliability 
and field testing of the Unplanned Anterior Vitrectomy measure, submit 
the measure to NQF for endorsement, and resubmit the measure to the MAP 
for review before proposing to add this measure to the ASCQR Program 
measure set. One commenter requested additional information regarding 
the volume of unplanned anterior vitrectomies captured under the 
Unplanned Anterior Vitrectomy measure, how CMS intends to collect data 
on the measures, and how CMS will calculate this measure.
    Response: We thank the commenters for their comments and 
recommendations regarding future inclusion of the Unplanned Anterior 
Vitrectomy measure in the ASCQR Program. We will take these comments 
and recommendations into consideration if we propose to adopt the 
Unplanned Anterior Vitrectomy measure for the ASCQR Program in the 
future.
    Comment: One commenter recommended that CMS consider the measure 
topic of Equipment Reprocessing (for patient safety, high-level 
disinfection and sterilization, with a particular emphasis on endoscope 
reprocessing) for the ASCQR Program.
    Response: We thank the commenter for this recommendation and will 
consider this measure topic for the ASCQR Program in future years.
    Comment: One commenter recommended CMS consider including 
additional quality measures covering vaccine preventable disease for 
the ASCQR Program.
    Response: We thank the commenter for this recommendation. We agree 
that quality measures covering vaccine preventable disease are 
important; the ASCQR Program currently contains one measure on 
influenza immunizations, ASC-8: Influenza Vaccination Coverage among 
Healthcare Personnel (NQF #0431). We will consider adopting additional 
measures in this measure topic for the ASCQR Program in future years.
    Comment: One commenter expressed concern about the MAP, 
specifically the public comment process and the practice of submitting 
measure concepts for consideration.
    Response: We thank the commenter for expressing this concern. As we 
stated in the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66980) in response to similar concerns, we invite the commenter to 
submit its MAP-specific concerns directly to the NQF, which convenes 
the MAP.
    Comment: One commenter recommended that, to the extent feasible, 
CMS adopt measures that can be used for both the Hospital OQR and ASCQR 
Programs.
    Response: We thank the commenter for the recommendation to adopt 
measures that are applicable to both the Hospital OQR and ASCQR 
Programs. We agree that because outpatient surgical services are 
provided in both

[[Page 70531]]

settings, measures that apply to both settings should be adopted to the 
extent feasible. We note that we have adopted the following for both 
settings: ASC-6/OP-25 Safe Surgery Checklist Use; ASC-7/OP-26 ASC/
Hospital Outpatient Volume on Selected ASC/Outpatient Surgical 
Procedures; ASC-8/OP-27 Influenza Vaccination Coverage among Healthcare 
Personnel (NQF #0431); ASC-9/OP-29 Endoscopy/Polyp Surveillance: 
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk 
Patients (NQF #0658); ASC-10/OP-30 Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous Polyps-
Avoidance of Inappropriate Use (NQF #0659); ASC-11/OP-31 Cataracts: 
Improvement in Patient's Visual Function within 90 Days Following 
Cataract Surgery (NQF #1536); and ASC-12/OP-32 Facility 7-Day Risk-
Standardized Hospital Visit Rate after Outpatient Colonoscopy (NQF 
#2539).
    Comment: One commenter stated that it would welcome opportunities 
to work with CMS to explore alternative reporting options for measures 
that cut across CMS quality reporting programs, particularly measures 
that are included in both the ASCQR Program and PQRS.
    Response: We thank the commenter for the offer to collaborate with 
us on alternative reporting options. We will continue to look for 
opportunities to work with ASC community stakeholders to continuously 
improve the ASCQR Program, including alternate reporting options for 
cross-cutting measures.
    Comment: One commenter expressed support for the establishment of a 
VBP program for ASCs, and recommended that the Secretary seek 
legislative authority from Congress to implement an ASC VBP program. 
The commenter noted that the ASCQR Program could lay the foundation for 
a future ASC VBP program if modifications were made to the existing 
measure set.
    Response: We thank the commenter for these recommendations.
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 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=12287724
75754.
    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 are necessary. We will 
continue to use rulemaking to adopt substantive updates to measures in 
the ASCQR Program. In the CY 2016 OPPS/ASC proposed rule (80 FR 39343 
through 39344), we did not propose any changes to these policies. 
However, we proposed 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 but will 
continue to post this information on QualityNet for the ASCQR Program.
    We invited public comment on our proposal to codify our existing 
policies.
    Comment: One commenter expressed concern that, moving forward, CMS 
will only post technical specifications on the QualityNet Web site, 
asserted that many ASCs are more comfortable accessing the CMS Web 
site, and, therefore, recommended that CMS continue to post information 
about the ASCQR Program technical specifications on both the CMS and 
QualityNet Web sites.
    Response: We thank the commenter for this recommendation. However, 
we believe that ASCs should be comfortable accessing the QualityNet Web 
site because they currently use the QualityNet Web site's secure portal 
to submit data under the ASCQR Program. Furthermore, we believe the 
commenter's concerns regarding the use of a single Web site to post 
technical specifications are outweighed by the benefits--providing this 
information on a single site is a more efficient process; it could 
prevent potential inconsistencies associated with accessing multiple 
sites for information; and it reduces burden.
    After consideration of the public comments we received, we are not 
displaying the technical specifications for the ASCQR Program on the 
CMS Web site but will continue to display the technical specifications 
for the ASCQR Program on the QualityNet Web site. In addition, we are 
finalizing our proposal to codify our policies regarding the 
maintenance of technical specifications for the ASCQR Program at 42 CFR 
416.325.
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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we 
proposed 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

[[Page 70532]]

OPPS/ASC final rule with comment period (76 FR 74514 through 74515). 
However, in the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we 
proposed 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 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 proposed 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 help ASCs to better 
understand their performance on measures collected under the ASCQR 
Program. We also proposed, 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 Healthcare Personnel Vaccination Module, 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 proposed to codify 
this proposal at proposed new 42 CFR 416.315.
    We invited 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.
    Comment: Some commenters did not support CMS' proposal to assign 
all NPIs associated with a CCN the CCN's value when the data are 
submitted by CCN for that reporting. These commenters asserted that 
doing so is not statistically valid and may misrepresent an individual 
ASC's performance. The commenters recommended that CMS instead publicly 
report data using the identifier it is reported under; that is, by NPI 
when the data are submitted by NPI, and by CCN when data are submitted 
by CCN.
    Response: We thank the commenters for their recommendation. We 
recognize that attributing data reported under a CCN to all NPIs 
associated with that CCN has the potential to misrepresent ASC's 
performance on a quality measure. For this reason, we are not 
finalizing the proposal to assign all NPIs associated with a CCN the 
CCN's value for reporting when data are submitted by CCN. Instead, as 
proposed, beginning with any public reporting that occurs on or after 
January 1, 2016, we will publicly report data under the identifier used 
to submit that data; that is, reporting by NPI when the data are 
submitted by NPI, and reporting by CCN when the data are submitted by 
CCN. However, we are not finalizing our proposal to assign the CCN's 
value to all NPIs associated with that CCN when data are submitted by 
CCN.
    Comment: Some commenters supported allowing ASCs to report data for 
the ASCQR Program by either their NPI or CCN, depending upon the 
collection requirements of the measure.
    Response: We thank the commenters for their support. However, we 
note that our proposal was to attribute data submitted at the CCN level 
to all NPIs associated with that CCN, not just to report data by CCN 
when the data are submitted by CCN. As discussed above, we are not 
finalizing this proposed policy because of the potential unintended 
negative effects of attributing the CCN's data to all NPIs associated 
with that CCN.
    Comment: One commenter recommended that CMS work toward collecting 
all facility data under the facility NPI because reporting at this 
level would ensure that consumers can distinguish performance at the 
individual facility level and thereby better inform consumer decision-
making. Specifically, the commenter recommended that CMS work with the 
CDC to modify the reporting tools for ASC-8, the only current ASCQR 
Program measure collected by CCN, to allow facilities to report data 
using their NPI for future payment determinations. The commenter 
further stated that, because the public reporting policy should be 
revised to allow ASCs to report all data by NPI, the current public 
reporting policy should not be codified at this time.
    Response: We thank the commenter for the recommendation to modify 
ASC-8 to allow facilities to report data for this measure using their 
NPI in the future. We will take this recommendation into consideration 
as we continue to refine the public reporting policies for the ASCQR 
Program so that data accuracy and transparency are maximized to the 
extent possible.
    We also thank the commenter for sharing its concerns regarding the 
codification of our current public reporting policy when changes may be 
made to this policy in future rulemaking. Again, we assure the 
commenter that making future program changes to codified ASCQR Program 
regulatory text is not more difficult. Codified regulatory text can be 
and is modified through the rulemaking process, which, for the ASCQR 
Program, occurs on an annual basis. In addition, for some users, 
codified regulatory text is both easier to access and easier to 
understand than programmatic policies found only in preamble text. 
Thus, we believe it is appropriate to codify our currently public 
reporting policy at this time and incorporate any future changes to 
this policy after they are finalized through notice-and-comment 
rulemaking.
    Comment: Commenters encouraged CMS to make ASC data publicly 
available as soon as possible to help patients, policymakers, and 
researchers compare quality among facilities. The commenters also urged 
CMS to ensure that the public reporting Web site for ASCQR Program data 
is developed for use by the average consumer or patients.
    Response: We thank the commenters for these comments. We agree that 
it is important to make data collected under the ASCQR Program publicly 
available and are working to do so. In addition, we are working to 
ensure that the data publicly reported for the ASCQR Program will be 
presented in a format that is easily understood by consumers and 
patients and is user-friendly.
    Comment: One commenter urged CMS to further specify its policies 
regarding the public reporting of ASCQR Program data through future 
rulemaking. Specifically, the commenter recommended that CMS provide 
ASCs with more notice of the preview period; provide ASCs with more 
time in which to review their data; and establish a means either for 
ASCs to correct erroneous data or for CMS to suppress clearly incorrect 
data. In the absence of a correction or suppression process, this 
commenter further recommended that CMS make preview reports available 
to ASCs well in advance of the withdrawal deadline for the ASCQR 
Program so that an ASC with erroneous data has sufficient opportunity 
to determine if it would like to withdraw from the

[[Page 70533]]

ASCQR Program, because, it stated, this would be its only recourse to 
avoid publication of incorrect quality data.
    Response: We thank the commenters for their comments and 
recommendations, and will take these recommendations into consideration 
during future policy development efforts. We note that ASCs can edit 
any measure data submitted via an online data submission tool until the 
data submission deadline for that measure. In addition, although we 
understand that ASCs cannot currently change claims-based data 
submitted for the ASCQR Program once submitted, or edit measure quality 
data submitted via an online data submission tool after the submission 
deadline for the measure has passed, we believe it is the 
responsibility of each ASC to ensure that its data, as reported to CMS, 
are accurate. We will continue looking for ways to address any data 
inaccuracies in the future. Regarding the length of time available to 
preview data prior to public release, we agree that sufficient time to 
do so is important and will consider proposals for this in future 
rulemaking.
    Comment: One commenter urged CMS to maintain its established 
practice of reporting data as ``Not Available'' for ASCs with 
denominators greater than 0 and less than 11 for a given measure when 
publicly reporting data for the ASCQR Program.
    Response: We thank the commenter for its comment. We note that, 
consistent with the CMS Policy for Privacy Act Implementation & Breach 
Notification, 2007, CMS, statistical, aggregate, or summarized 
information created as a result of analysis conducted using 
identifiable CMS data obtained under CMS-approved projects/studies may 
only be disclosed if the data are not individual-specific and the data 
are aggregated to a level where no data cells contain 10 or fewer 
individuals (https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-Information-Technology/SystemLifecycleFramework/downloads/privacypolicy.pdf). Thus, when case numbers are at issue, we will 
publicly report data only for those measures for which an ASC had a 
numerator greater than or equal to 11. However, this data reporting 
requirement does not apply to data expressed as a rate or percentage.
    After consideration of the public comments we received, we are 
finalizing our proposal to publicly display data by the NPI when the 
data are submitted by the NPI and to publicly display data by the CCN 
when the data are submitted by the CCN, but are not finalizing our 
proposal to attribute data submitted by the CCN to all NPIs associated 
with the CCN. We are finalizing our proposal to codify the CCN and NPI 
display policy at 42 CFR 416.315, with the modification discussed 
above. We also are finalizing without modification our proposal to 
codify our existing policies at 42 CFR 416.315.

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. In 
the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we did not propose 
any changes to these policies. We proposed to codify these existing 
requirements at proposed new 42 CFR 416.310(c)(1)(i).
    We invited public comment on our proposal to codify our existing 
requirements.
    We did not receive any public comments on the proposal to codify 
the administrative requirements regarding maintenance of a QualityNet 
account and security administrator for the ASCQR Program and, 
therefore, are finalizing it as proposed at 42 CFR 416.310(c)(1)(i).
2. Requirements Regarding Participation Status
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through 
53640), we 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 4 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. In 
the CY 2016 OPPS/ASC proposed rule (80 FR 39344 through 39345), we did 
not propose any changes to these policies. However, we proposed 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

[[Page 70534]]

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 did not 
propose any changes to these existing requirements. However, we 
proposed to codify these existing requirements at proposed new 42 CFR 
416.305(c).
    We invited public comment on our proposal to codify our existing 
policies.
    We did not receive any public comments on the proposals to codify 
the requirements regarding participation status for the ASCQR Program 
and, therefore, are finalizing them as proposed at 42 CFR 416.305(a), 
(b), and (c).

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

    We received public comments on alternate methods for submitting 
data for the ASCQR Program.
    Comment: One commenter recommended that CMS allow ASCs to meet the 
requirements of the ASCQR Program using registry-based reporting, 
noting that using a registry is an option under the PQRS and that other 
registries are already in existence. The commenter also recommended 
that ASCs should have the option of submitting quality data to CMS 
through an EHR-based reporting mechanism, as there are ASCs that have 
implemented this technology and could benefit from this option.
    Response: We thank the commenter for these suggestions, and agree 
that it could reduce burden to have a registry-based mechanism for data 
submission because a registry would enable ASCs to contract with a 
vendor that would collect and report quality data on the ASC's behalf. 
We have not proposed a registry-based reporting option because, 
currently, there is not a registry in place that is collecting 
information on the quality measures that we have adopted for this 
program. If registry-based reporting of the ASC quality measures 
adopted for the ASCQR Program becomes available in the future, we will 
explore further the viability of incorporating a registry-based 
reporting mechanism in the ASCQR Program.
    Regarding the use of EHR systems for reporting quality data, we 
agree that reporting by this method could reduce reporting burden. 
However, we are not aware of quality measures for ASCs that have been 
specified for electronic reporting. If such measures do exist, we would 
need to understand the level of EHR adoption and capabilities of ASCs 
to utilize this method at that time before proposing their adoption in 
the ASCQR Program. As we discussed in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75124 through 75126), in a recent 
environmental scan, which included an assessment of the readiness of 
ASCs to electronically report quality data, we found evidence of low 
levels of EHR use by ASCs. We believe that ASCs continue to be slow to 
adopt EHRs because many of these facilities are small and the cost of 
EHRs may pose a barrier to adoption.
    Comment: One commenter requested a batch-processing data submission 
option for entities that own multiple ASCs.
    Response: We thank the commenter for this request. We agree that a 
batch submission approach, which would allow ASCs to report data for 
multiple facilities at once using their preexisting or a new 
information technology infrastructure, has merit, especially for 
entities that own multiple ASCs, and are considering how to implement 
this capability into our data submission process. In the event this 
method can be available for data submission, we would issue proposals 
through future rulemaking for ASCQR Program implementation.
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 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39345), we did not propose 
any changes to these existing requirements. However, we proposed to 
codify these existing requirements at proposed new 42 CFR 416.310(a)(1) 
and (2).
    We invited public comment on our proposal to codify our existing 
policies.
    We did not receive any public comments on the proposal to codify 
the requirements regarding data processing and collection periods for 
claims-based measures using QDCs for the ASCQR Program and, therefore, 
are finalizing it as proposed at 42 CFR 416.310(a)(1) and (2).
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 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. In the CY 2016 
OPPS/ASC proposed rule (80 FR 39345), we did not propose any changes to 
these existing requirements. However, we proposed to codify these 
existing requirements at proposed new 42 CFR 416.310(a)(3).
    We invited public comment on our proposal to codify our existing 
policies.
    Comment: One commenter recommended that CMS raise the 50-percent 
threshold for claims meeting measure specifications containing QDCs, 
noting that many of the issues in the early years of the program that 
led to this standard have been resolved. In addition, the commenter did 
not support codifying the current 50-percent threshold for claims 
meeting measure specifications containing QDCs because, the commenter 
stated, CMS has previously expressed its intent to modify this 
threshold and, the commenter stated, regulatory text should be reserved 
for permanent policies.
    Response: We thank the commenter for the recommendation. While we 
did not propose any changes to our QDC use

[[Page 70535]]

threshold in this rulemaking, we will consider this comment as we move 
forward with program planning as ASCs now have experience in submitting 
data in this manner. We note that the threshold is a minimum and 
holding at this level can enable an ASC that encounters reporting 
issues during the year to recover and still meet requirements.
    We also thank the commenter for sharing its concerns about the 
ASCQR Program's proposal to codify this policy in regulatory text. 
However, we note that codified regulatory text is regularly revised to 
reflect changes in policy or position on a given issue. In addition, 
for some users, codified text is both easier to access and easier to 
understand than programmatic policies found only in preamble text. 
Therefore, we believe it is appropriate to codify programmatic 
policies, such as the minimum data threshold, and incorporate any 
future changes to those policies when they are finalized through 
notice-and-comment rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to codify our policies regarding the minimum 
threshold and data completeness for claims-based measures using QDCs 
for the ASCQR Program at 42 CFR 416.310(a)(3). We codified our policy 
regarding the minimum case volume at 42 CFR 416.305(c), as discussed it 
in section XIV.C.2. of this final rule with comment period.
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).
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39345 through 39346), 
we proposed to implement a May 15 submission deadline for all data 
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).\62\ 
Therefore, we proposed 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 proposed 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.
---------------------------------------------------------------------------

    \62\ We note that ASC-11 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.
---------------------------------------------------------------------------

    We also proposed to codify these proposed and existing requirements 
at proposed new 42 CFR 416.310(c)(1)(ii) and (2).
    We invited 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.
    Comment: Commenters did not support CMS' proposal to implement a 
May 15 submission deadline for all data submitted via a CMS online data 
submission tool. The commenters asserted that a May 15 deadline would 
increase ASC administrative burden by giving ASCs less time to collect 
and report data. The commenters also noted that the current August 15 
deadline was extended for the CY 2016 payment determination due to 
technical issues, and expressed concern that similar issues may arise 
each time new measures are added in the future. For these same reasons, 
the commenters did not support CMS' proposal to codify the May 15 
submission deadline for all data submitted via a CMS online data 
submission tool. The commenters recommended that, if CMS wishes to 
align the deadlines for submission of the Web-based measures, it use an 
August 15 deadline instead.
    Response: We thank the commenters for their comments regarding the 
increased administrative burden associated with changing the submission 
deadline for all data submitted via an online data submission tool from 
August 15 to May 15. We seek to reduce the administrative burden of 
participation in the ASCQR Program on ASCs where feasible and 
practicable. For this reason, we have decided not to finalize the 
proposal to change the deadline at this time. We will instead maintain 
the August 15 submission deadline for all measures submitted via a CMS 
online data submission tool.
    However, we note that we are not changing the May 15 submission 
deadline for ASC-8, which is submitted via a non-CMS online data 
submission tool. As stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66986), we finalized a submission deadline of May 
15 for ASC-8 in order to enable ASCs to use data summarizing the 
results of their previous influenza vaccination campaign to set targets 
and make plans for the next influenza season; to enable us to post and 
for the public to review the summary data before the start of the next 
influenza season; and to align this measure's submission deadline with 
the Hospital IQR and OQR Programs. We continue to believe that the May 
15 submission deadline is appropriate for ASC-8, and therefore are not 
changing the submission deadline for this measure to August 15 at this 
time. We will consider whether there is another way to reduce ASC 
burden and expedite public reporting of these data in the future.
    After consideration of the public comments we received, we are not 
finalizing the proposal to implement a

[[Page 70536]]

May 15 submission deadline for data submitted using a CMS online data 
submission tool. Instead, the ASCQR Program will continue to use the 
currently adopted submission deadlines for these measures; that is, the 
August 15 submission deadline for ASC-6, ASC-7, ASC-9, ASC-10, and ASC-
11. The ASCQR Program also will continue to use the currently adopted 
May 15 submission deadline for ASC-8, which is submitted via a non-CMS 
online data submission tool (the CDC's NHSN Web site). Furthermore, 
consistent with the policy we are finalizing above regarding the August 
15 submission deadline, we are codifying our policies for quality 
measures for which data are submitted via a CMS online data submission 
tool with the August 15 submission deadline at 42 CFR 416.310(c)(1)(ii) 
instead of May 15 as originally proposed. In addition, we are 
finalizing our proposal to codify our existing policies regarding the 
data collection time periods for measures involving online data 
submission and the deadline for data submission via a non-CMS online 
data submission tool at 42 CFR 416.310(c)(2). However, we proposed to 
include the word ``calendar'' in the proposed codification of this 
policy at 42 CFR 416.310(c)(2). This word was not part of the finalized 
policy and we believe this word is unnecessary. We have made a 
technical change to not include this word in the final regulation.
4. Claims-Based Measure Data Requirements for the ASC-12: Facility 7-
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 fee-for-service (FFS) claims 
from the calendar year 2 years before the payment determination year. 
In the CY 2016 OPPS/ASC proposed rule (80 FR 39346), we proposed 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 
proposed 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 proposed to codify this policy at proposed new 42 CFR 
416.310(b).
    We invited public comment on our proposal regarding the paid claims 
to be included in the data used for ASC-12 beginning with the CY 2018 
payment determination, and our proposal to codify this proposal and our 
existing policies.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our policy regarding paid claims to be 
included in the calculation for claims-based measures not using QDCs, 
and codifying this proposal and our existing policies at 42 CFR 
416.310(b). We inadvertently did not include the word ``paid'' in the 
proposed codification of this policy at 42 CFR 416.310(b) and have made 
this technical change to the final regulation.
5. Indian Health Service (IHS) Hospital Outpatient Departments Not 
Considered ASCs for the Purpose 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39346), we proposed 
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 proposed 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 proposed to codify this proposal at proposed new 42 
CFR 416.305(d).
    We invited public comment on this proposal and our proposal to 
codify it.
    We did not receive any public comments on the proposal not to 
consider IHS hospital outpatient departments ASCs for the purposes of 
the ASCQR Program or the proposal to codify this policy and, therefore, 
are finalizing and codifying this policy as proposed at 42 CFR 
416.305(d).
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 70537]]

Program. In the CY 2016 OPPS/ASC proposed rule (80 FR 39346 through 
39347), we did not propose 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.\63\ 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:
---------------------------------------------------------------------------

    \63\ 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 
``Extraordinary Circumstances Extensions or Exemptions'' process 
rather than the ``Extraordinary Circumstances Extensions or 
Waivers'' process.
---------------------------------------------------------------------------

    (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 the CY 2016 OPPS/ASC proposed rule (80 FR 39347), we did not 
propose any changes to these requirements. However, we proposed to 
codify these existing procedures at proposed new 42 CFR 416.310(d). We 
invited public comment on our proposal to codify our existing policies.
    We did not receive any public comments on the proposal to codify 
our policies regarding extraordinary circumstances extensions or 
exceptions in the ASCQR Program and, therefore, are finalizing it as 
proposed at 42 CFR 416.310(d).
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 timely 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39347), we proposed 
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 proposed 
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 
proposed to codify these existing procedures and the proposed change to 
the deadline at proposed new 42 CFR 416.330.
    We invited public comment on our proposal to change the 
reconsideration request submission deadline and our proposal to codify 
our existing policies.
    We did not receive any public comments on the proposal to change 
the reconsideration request submission deadline for the ASCQR Program 
or the proposal to codify this policy and our existing reconsideration 
policies and, therefore, are finalizing them at 42 CFR 416.330. We are 
making a technical change to add the word ``timely'' at 42 CFR 
416.330(d) to clarify that the reconsideration determination is the 
final ASCQR Program payment determination for an ASC that submits a 
timely reconsideration request.

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

[[Page 70538]]

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 final rule with comment period.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 
through 68500), in order to implement the requirement to reduce the 
annual update for ASCs that fail to meet the ASCQR Program 
requirements, we finalized our proposal that we would calculate two 
conversion factors: a full update conversion factor and an ASCQR 
Program reduced update conversion factor. We finalized our proposal to 
calculate the reduced national unadjusted payment rates using the ASCQR 
Program reduced update conversion factor that would apply to ASCs that 
fail to meet their quality reporting requirements for that calendar 
year payment determination. We finalized our proposal that application 
of the 2.0 percentage point reduction to the annual update may result 
in the update to the ASC payment system being less than zero prior to 
the application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to this final rule with comment period, which are available 
via the Internet on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,'' 
and ``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 coinsurance 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 coinsurance 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 the CY 2016 OPPS/ASC proposed rule 
(80 FR 39347 through 39348), we did not propose 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.

[[Page 70539]]

    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 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 are not 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 either as 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 medically 
responsive 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 factors such 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.
    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 because 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

[[Page 70540]]

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 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 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 newly initiated mechanical 
ventilation (when medically necessary and 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 a ``Probe and Educate'' 
process 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 prohibited 
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 Inpatient Probe and Educate process through March 31, 2015. The 
same law also extended the prohibition on Recovery Auditor reviews of 
inpatient hospital patient status for claims with dates of admission 
through March 31, 2015, absent evidence of systematic gaming, fraud, 
abuse, or delays in the provision of care by a provider of services. 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 
MAC hospital Probe and Educate process for inpatient claims through 
September 30, 2015, and extended the prohibition of Recovery Auditor 
reviews of inpatient hospital patient status for claims with dates of 
admission through September 30, 2015. CMS announced in August 2015 that 
it will not approve Recovery Auditors to conduct patient status reviews 
for dates of admission of October 1, 2015 through December 31, 2015. 
(We refer readers to the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html for 
more information on this announcement.) MACs have completed the first 
and second rounds of probe reviews and provider education and were 
instructed to complete a third round of probe reviews 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 as a result of probe reviews was effective in 
promoting a better understanding of the policy.
    In response to industry feedback, including suggestions to alter 
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 
changed 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 established incrementally applied Additional Documentation 
Request (ADR) limits for providers that are new to Recovery Auditor 
reviews and will establish limits on ADRs that are based on a 
hospital's compliance with Medicare rules and that are diversified 
across all claim types of a facility. We also indicated that we plan to 
establish 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 plan to require Recovery Auditors to wait 30 days before 
sending a claim to the MAC for adjustment to allow the provider to 
submit a discussion period request to the Recovery Auditor before the 
MAC makes any payment adjustments. We plan to complete implementation 
of these changes through modifications to the current Recovery Auditor 
contracts.

B. 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

[[Page 70541]]

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. 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, in the CY 2016 OPPS/ASC proposed 
rule (80 FR 39350 through 39351), we proposed 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 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 noted 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 stated our belief that 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, and that such circumstances should be determined on a case-
by-case basis. We proposed a revised policy under which, for purposes 
of Medicare payment, an inpatient admission would 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 proposed 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 proposed 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. We noted that, 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. However, we acknowledged 
that the patient can be unexpectedly discharged or transferred to 
another hospital and not actually use a hospital bed overnight. We 
proposed that cases for which the physician determines that an 
inpatient admission is necessary, but that do not span at least 1 
midnight, would be prioritized for medical review. In addition to the 
proposed substantive changes discussed earlier in this section, we also 
proposed 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 did not propose 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 did not 
propose 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. The 
proposed change would also 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 benchmark, 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. Consistent with our current practices, 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

[[Page 70542]]

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 invited 
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 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 another 
longstanding policy, recognizing 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 stated in the proposed rule that we will 
monitor the number of these types of admissions and plan to prioritize 
these types of cases for medical review.
    Comment: Several commenters expressed appreciation for CMS' 
proposal and stated their belief that the proposal is more reflective 
of the agency's longstanding policy that recognizes the important role 
of physician judgment and individual patient needs in the hospital 
admission decision-making process. Commenters in support of the 
proposed policy also expressed appreciation that CMS did not propose a 
change to the 2-midnight presumption, which maintains the certainty 
that patient stays of 2 midnights or longer after admission are 
presumptively appropriate as inpatient cases.
    Response: We appreciate the commenters' support and agree that our 
proposed policy continues to recognize the important role of physician 
judgment and individual patient needs in the hospital admission 
decision-making process while also maintaining the certainty that 
patient stays of 2 midnights or longer after admission are generally 
appropriate for payment under Medicare Part A and will generally only 
be selected for review in circumstances of fraud or gaming.
    Comment: A number of commenters who supported the proposal 
requested that CMS provide hospitals with the important details, tools, 
and time necessary to effectively implement changes to the 2-midnight 
policy the agency may finalize. Some commenters making this request 
specifically asked that CMS consider a March 31, 2016 enforcement date, 
for potential changes to the 2-midnight policy. A few commenters who 
supported the proposal asked CMS to clarify in the final rule if this 
proposal means CMS intends to return to its policy position prior to 
the implementation of the 2-midnight rule, with the exception of cases 
where the patient stays 2 midnights after admission and is presumed to 
be a medically necessary inpatient.
    Response: Consistent with our annual rulemaking process, we believe 
that there is sufficient time between the date the final rule becomes 
available (on or before November 1, 2015) to the public and the 
effective date of the policy (January 1, 2016) for hospitals to become 
familiar with and adopt any changes necessitated by the final policies 
outlined in this final rule with comment period, including adoption of 
our proposed changes to the 2-midnight rule, and therefore do not see a 
reason to delay the effective date of this policy beyond January 1, 
2016. We also believe that the details pertinent to the final policy on 
2-midnights are sufficiently set forth in this final rule with comment 
period and its supporting documents and guidance and that all tools 
necessary for the effective implementation of the final policy have 
been made available to hospitals, physicians and other stakeholders.
    In response to comments requesting that we clarify whether the 
proposed policy is a return to the policy that was in effect prior to 
the implementation of the 2-midnight rule (with the exception of cases 
where the patient stays 2 midnights and is presumed to be a medically 
necessary inpatient), we explicitly note that our proposal is not a 
return to the policy prior to the adoption of the 2-midnight rule. The 
proposed policy continued to employ the 2-midnight rule (both the 2-
midnight benchmark and the 2-midnight presumption) and proposed to 
allow for greater flexibility in determining when an admission that 
does not meet the 2-midnight benchmark should nonetheless be payable. 
This is distinct from the policy that was in effect prior to the 
adoption of the 2-midnight rule in the form of manual guidance 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.
    Comment: Several commenters, including MedPAC and the American 
Medical Association (AMA), recommended that CMS rescind the 2-midnight 
rule in its entirety. Some of the commenters stated that any time-based 
admission policy would interfere

[[Page 70543]]

with physician judgment. In addition, MedPAC expressed concern that the 
2-midnight rule may provide hospitals with an incentive to lengthen 
hospital stays in order to avoid scrutiny and that longer stays 
generally increase costs and expose Medicare beneficiaries to greater 
physical risk while also conflicting with the general incentives of the 
prospective payment system to reduce hospital lengths of stay. MedPAC 
also stated that the Commission recommended that CMS withdraw the 2-
midnight rule because it becomes redundant in light of MedPAC 
recommendations related to the Recovery Audit Program. The AMA 
expressed concern that the 2-midnight rule places considerable burden 
on the admitting physician and erodes the ability of physicians and 
providers to improve health outcomes through personalized, evidence-
based clinical care because it detracts from admission criteria that 
depend upon clinical judgment.
    Response: We appreciate this comment from MedPAC and others but we 
do not believe that rescinding the 2-midnight rule is the best course 
of action at this time. Specifically, we continue to believe that it is 
prudent and essential to continue to maintain the 2-midnight 
presumption whereby cases with an actual length of stay of at least 2 
midnights after admission would generally not be selected for medical 
review. We note that stakeholders and commenters in support of the 
proposed policy, including several major hospital associations, have 
cited their support for maintaining the 2-midnight presumption because 
it affords hospitals and physicians some certainty that inpatient 
admissions spanning at least 2 midnights after admission will generally 
be considered to be appropriate for Medicare payment under Part A and 
will not be selected for medical review, absent evidence of systematic 
gaming, abuse, or delays in the provision of care. This provision of 
the 2-midnight rule would no longer be valid if the 2-midnight rule was 
rescinded in entirety. We understand MedPAC's concern that hospitals 
may lengthen hospital stays to avoid scrutiny and will continue to 
monitor the claims data to detect any shifts in hospital practices 
pertaining to beneficiaries' length of stay, or any evidence of 
systematic gaming, abuse, or delays in the provision of care in an 
attempt to qualify for the 2-midnight presumption. We are cognizant of 
concerns related to unnecessarily elongated hospital admissions, and 
will be monitoring for such patterns of systematic delays indicative of 
fraud or abuse. If a hospital is unnecessarily holding beneficiaries to 
qualify for the 2- midnight presumption, CMS and/or its contractors may 
conduct review on any of its inpatient claims, including those which 
surpassed 2 midnights after admission. In addition, as we have stated 
above, the 2-midnight rule 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. We 
also believe that the documentation requirements for admitting 
physicians are not overly burdensome because they are consistent with 
Medicare's longstanding documentation requirements, which predated the 
adoption of the 2-midnight rule.
    With respect to MedPAC's comment that the 2-midnight rule may not 
be necessary in light of its recommended changes to the Recovery Audit 
Program, we believe that the planned changes to the Recovery Audit 
Program will help reduce provider concerns within this arena, but 
should be accompanied by the outlined changes to the 2-midnight policy.
    Comment: Several commenters asked that CMS not adopt any changes to 
the 2-midnight rule. Many of these commenters expressed concern that 
further changes to the existing policy would cause confusion. Many 
commenters requested that CMS not adopt the ``physician judgment'' 
exception to the 2-midnight rule without explicit instructions and 
detailed case examples to help them understand when physician judgment 
can override the 2-midnight expectation. Another commenter believed 
that the proposed policy will likely be used by the QIOs and RACs as a 
way to deny appropriate inpatient claims, thus increasing the 
administrative burden on providers and worsening the appeals backlog. 
One commenter expressed concern that the proposed policy could create 
an opportunity for gaming by creating a market for independent parties 
to create and sell ``exception'' letters to hospitals that could be 
used to inappropriately ``document'' case-by-case exceptions to the 2-
midnight rule.
    Response: While we understand commenters' desire to not have CMS 
adopt any changes to the current 2-midnight rule and recognize that the 
proposed policy allows for added discretion in determining when 
inpatient admission is appropriate for payment under Medicare Part A, 
we believed it was appropriate to address concerns raised by hospital 
and physician stakeholders that the current policy potentially had the 
unintended consequence of interfering with the practice of medicine. We 
maintain that neither our current policy nor the policy being adopted 
in this final rule interferes with the practice of medicine, but rather 
both policies address Medicare payment and medical review for purposes 
of Medicare payment. We believe that allowing greater flexibility for 
determining when an admission that does not meet the benchmark should 
nonetheless be payable is appropriate and is supported by several 
hospital organizations.
    In response to the commenter who suggested that the proposed policy 
will likely be used by the QIOs and Recovery Auditors as a way to deny 
appropriate inpatient claims, we note that, under the proposed 
modification to the existing exceptions policy, we would allow Medicare 
Part A payment on a case-by-case basis for inpatient admissions that do 
not satisfy the 2-midnight benchmark, to acknowledge other patient-
specific circumstances where certain admissions may nonetheless be 
appropriate for Medicare Part A payment. We would expect such 
circumstances to be supported in the medical documentation, which would 
be subject to medical review. Further, 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. We do not believe that the 
proposed policy will be used by any medical review contractors as a way 
to deny appropriate inpatient claims. Contractors are instructed to 
issue claim decisions that are consistent and compliant with all 
applicable policies and instructions, including the 2-midnight 
regulations.
    In addition, we intend to educate all medical review entities, 
including the QIOs (who assumed responsibility of patient status 
reviews as of October 1, 2015), CERT contractor, Recovery Auditors, 
MACs, Supplemental Medical Review Contractor, and appeals contractors, 
of final policy changes and anticipate that the new policy will be 
interpreted consistently. CMS typically provides this type of education 
to its contractors through the use of interactive calls/clinical 
discussions or, as appropriate, technical direction. We also intend to 
continue to monitor our contractors through both internal and 
independent third party ``accuracy

[[Page 70544]]

reviews'' of the medical review decisions and will provide education to 
the review entities if areas of inconsistency in medical review 
decision-making or policy interpretation are identified.
    In response to comments about the proposed policy increasing the 
appeals backlog, we believe the additional flexibility provided by the 
proposed policy could potentially result in fewer denials and therefore 
fewer appeals. The proposed policy would allow for claims that may have 
been denied under the previous rule to be paid if certain criteria are 
met, despite not meeting the 2-midnight benchmark. However, we do not 
anticipate a significant impact on the volume of appeals as a result of 
the proposed policy.
    In response to the commenters' concern that the proposed policy 
would create an opportunity for gaming, we will continue to monitor 
hospital admission practices and look for any evidence of gaming. In 
the event that evidence of gaming is found, CMS will take appropriate 
action against that provider.
    Comment: A number of commenters supported a proposal for a 1-
midnight rule under which any Medicare beneficiary who required 
overnight hospital care (other than a patient in the ED or routine 
recovery following surgery or a procedure) would be admitted and the 
hospital paid by diagnosis related group (DRG) under Medicare Part A. 
The ``1-midnight rule'' proposal also called for the creation of an 
``extended outpatient evaluation'' APC to replace outpatient 
observation, and for admission orders to become effective at midnight 
on the day the order was given, except in the case of late ED arrivals, 
for which the order would not be effective until the second midnight. 
These commenters also suggested that the admission order should not be 
required to be authenticated prior to discharge and instead recommended 
that it be authenticated prior to the claim being submitted. In 
addition, the ``1-midnight'' proposal suggested that the inpatient only 
list would no longer be necessary because any surgical patient who 
required a medically necessary overnight stay following routine 
recovery would be admitted and those patients who were stable before 
midnight post-surgery would be billed as outpatients. In addition, 
these commenters suggested that, in order to address more beneficiaries 
paying the inpatient deductible amount under the suggested 1-midnight 
rule, the inpatient deductible could be reduced such that a beneficiary 
would pay one-third of the deductible for the first night, two-thirds 
for two nights and the full inpatient deductible for three nights or 
more.
    Response: While we appreciate this alternative policy option put 
forth by the commenters, we believe that a ``1-midnight rule'' would 
present several challenges. Generally, patients who are seen and 
appropriately treated and discharged without requiring an overnight 
stay in the hospital represent the lowest acuity patients receiving 
treatment in an HOPD. We are concerned that a ``1-midnight rule,'' as 
outlined by the commenters, could potentially create a negative 
incentive for hospitals to hold such low acuity patients in the 
hospital longer to receive higher inpatient payment under Medicare Part 
A and could be prone to gaming, especially in light of the suggested 
comments that would make changes to the inpatient order requirements. 
We believe that the ``1-midnight'' rule, as put forth by the 
commenters, would create opportunities for relatively low acuity 
patients who would otherwise not appropriately qualify for Medicare 
Part A payment, to potentially be eligible for Medicare Part A payment. 
We note that this is additionally troublesome due to the high volume of 
the aforementioned relatively low acuity patients currently treated in 
the hospital outpatient setting that could potentially be held in the 
hospital longer to receive higher inpatient payment under Medicare Part 
A.
    In addition, this proposal could result in additional costs to the 
Medicare program as all overnight hospital stays (other than a patient 
in the ED or routine recovery following surgery or a procedure) would 
be newly eligible for Part A payment. In order to account for the 
additional costs that the program would incur under this approach, we 
might determine that it would be appropriate to make an even greater 
downward adjustment to payment rates than the original -0.2 percent 
adjustment currently in effect. We are not prepared to propose a 
further adjustment at this time, as we are still evaluating claims data 
to determine the impact of the original -0.2 percent adjustment. In 
addition, due to statutory differences in cost sharing under Medicare 
Part A versus Part B, the substantial influx of cases that would be 
newly eligible for Part A payment under this ``1-midnight rule'' 
proposal would potentially subject Medicare beneficiaries to greater 
cost-sharing requirements, as the inpatient deductible could be higher 
than the Part B copayment that would be applied if the services had 
been billed as outpatient services under Part B. The commenter's 
suggested fractional deduction of the inpatient deductible (one-third 
for 1 night, two-thirds for 2 nights, and the full deductible for a 
stay of 3 nights or more) is not permitted under existing statute.
    In light of all of the challenges associated with this proposal for 
a 1-midnight rule, we are not accepting this alternative to our 
proposal. Moreover, as we did not propose any changes to our existing 
policy requiring a physician's order for hospital admission, the 
changes to that policy prescribed in this ``1-midnight rule'' proposal 
are outside the scope of the proposed rule.
    Comment: Other commenters presented individual alternatives to the 
proposal such as: (1) CMS could eliminate the classification of 
hospital stays into observation or inpatient days and classify all 
medically necessary hospital stays on a hospital floor as inpatient 
stays; (2) CMS could automatically deem any beneficiary in a hospital 
setting, including emergency room or observation, an inpatient after 24 
hours and cap beneficiary liability at the Part A inpatient deductible 
amount; (3) CMS could automatically deem any beneficiary in observation 
greater than 72 hours an inpatient and pay hospitals an MS-DRG payment; 
and (4) CMS could define an inpatient as a patient who requires a bed 
in a hospital beyond the normal recovery time or for extended testing 
that cannot be safely performed in a lower level of care outside the 
hospital, and could make certain related payment adjustments.
    Response: While we appreciate the various alternatives to our 
proposal presented by the commenters, we note that all four of the 
alternative proposals would allow for an inpatient hospital admission 
without a signed physician order. It is our current policy that a 
hospital admission must be initiated by a signed physician order to 
admit the patient as an inpatient. We did not propose nor are we 
finalizing any changes to that policy at this time. Therefore, we are 
not accepting any of the individual alternatives to our proposal 
suggested by the commenters.
    Comment: One commenter suggested that CMS (1) clarify that 
inpatient hospital admissions with expected lengths of stay less than 2 
midnights are neither rare nor unusual; (2) reemphasize that inpatient 
care and observation services are not the same level of care and, 
therefore, inpatient hospital admissions are not appropriate as a 
substitute for lengthy (greater than 2 midnights) outpatient hospital 
stays; (3) allow the 2-midnight benchmark to serve exclusively as a 
medical review

[[Page 70545]]

threshold to determine the general appropriateness for claim payment; 
and (4) realign its policy with existing guidance by asserting that, 
regardless of the expected length of stay, documentation of the medical 
necessity as well as the need for inpatient hospital care is the 
requisite component of every inpatient admission appropriately paid 
under Medicare Part A.
    Response: In light of this comment, we would like to clarify that 
our proposed modification to the current exceptions process does not 
define inpatient hospital admissions with expected lengths of stay less 
than 2 midnights as rare and unusual. Rather, it modifies our current 
``rare and unusual'' exceptions policy to allow Medicare Part A payment 
on a case-by-case basis for inpatient admissions that do not satisfy 
the 2-midnight benchmark. This modification acknowledges other patient-
specific circumstances where certain cases may nonetheless be 
appropriate for Part A payment, in addition to continuing to provide an 
opportunity for Part A payment in ``rare and unusual'' circumstances 
for which there is a national exception.
    In addition, as previously stated in this final rule, we continue 
to 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, and thus 
such admissions will be prioritized for medical review.
    With respect to the comment about hospital level of care, we note 
that while we do not refer to ``level of care'' in guidance regarding 
hospital inpatient admission decisions, but, rather, have consistently 
provided physicians with the aforementioned time-based guidelines 
regarding when an inpatient hospital admission is payable under Part A, 
we do note that, by definition, there are differences between 
observation services furnished in the outpatient setting and services 
furnished to hospital inpatients. Specifically, observation services, 
as defined in Section 290 of Chapter 4 of the Medicare Claims 
Processing Manual, are a well-defined set of specific, clinically 
appropriate services, which include ongoing short-term treatment, 
assessment, and reassessment, that are furnished while a decision is 
being made, regarding whether patients will require further treatment 
as hospital inpatients or if they are able to be discharged from the 
hospital.
    In response to the request that the 2-midnight benchmark be used 
exclusively for determining the appropriateness of Part A payment, we 
note that we continue to believe that the 2-midnight benchmark and the 
2-midnight presumption are effective tools in determining general 
appropriateness for Medicare Part A payment and whether a claim should 
be subject to medical review, respectively. As stated earlier, we also 
believe that there may be other patient-specific circumstances where 
certain cases may nonetheless be appropriate for Part A payment, and, 
therefore, we will allow 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.
    In response to the commenter's request that CMS realign its policy 
with existing guidance by asserting that regardless of the expected 
length of stay, documentation of the medical necessity, as well as the 
need for inpatient hospital care, are the requisite components of every 
inpatient admission appropriately paid under Medicare Part A, we note 
that, consistent with our longstanding policy, all inpatient admissions 
must be medically reasonable and necessary and be supported by 
documentation in the patient's medical record.
    Comment: Commenters also commented on the following subject areas 
in their comments: Self-administered drugs; long observation stays; 
hospital admission orders; outpatient observation notice; and the 3-day 
inpatient stay requirement for Medicare skilled nursing facility (SNF) 
coverage.
    Response: We did not include any proposals relating to these areas 
in the proposed rule. Therefore, we consider these comments to be 
outside the scope of the proposed rule and are not addressing them in 
this final rule.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to revise our previous 
``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. Accordingly, we also are finalizing 
our proposal to revise Sec.  412.3(d) to reflect the above policy 
modification and to increase clarity.

C. Announcement Regarding Change in Medical Review Responsibilities

    Shortly after adopting the 2-midnight rule, we instructed the MACs 
to engage in a Probe and Educate process under the 2-midnight rule from 
October 2013 through September 2015. We indicated in the CY 2016 OPPS/
ASC proposed rule that, regardless of whether we finalize the policy 
proposals outlined under section XV.B. of this final rule with comment 
period, no later than October 1, 2015, we would be changing the medical 
review strategy and planned to have QIO contractors, rather than the 
MACs, conduct these reviews of short inpatient stays. 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

[[Page 70546]]

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, 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. 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. 
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.
    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 monitoring and 
oversight of the BFCC-QIO case review activities.
    Under the new short-stay inpatient medical review process that we 
adopted beginning on October 1, 2015, BFCC-QIOs began to transition to 
reviewing a sample of post-payment claims and making 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.
    BFCC-QIOs have begun to conduct post-payment reviews of claims and 
refer findings to the MACs for payment adjustments. Providers' appeals 
of denied claims will be addressed under the provisions of section 1869 
of the Act and procedures in 42 CFR part 405. BFCC-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 
medical review.
    In addition to the formal QIO medical review process mentioned 
above, we intend to continuously monitor and evaluate the 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 of the revised policy 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 
extended the prohibition on Recovery Auditor patient status reviews for 
claims with dates of admission of 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. CMS announced in 
August 2015 that it will not approve Recovery Auditors to conduct 
patient status reviews for dates of admission of October 1, 2015 
through December 31, 2015. (We refer readers to the CMS Web site at: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html for more information on this 
announcement.) As announced in the proposed rule, the Recovery Auditors 
will conduct patient status reviews focused on those providers that are 
referred from the QIOs based on their 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 stated in the proposed rule that we 
would adopt this new medical review strategy

[[Page 70547]]

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 did not propose 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 
absent evidence of systematic gaming, abuse, or delays in the provision 
of care.
    Comment: In response to whether CMS should adopt specific national 
criteria for medical review of inpatient hospital admissions, and what 
those criteria tools should be, several commenters stated that they 
would support criteria that took into consideration the severity of the 
signs and symptoms exhibited by the patient and other evidence that 
would be relevant in determining whether an inpatient admission that 
was shorter than 2 midnights would nonetheless be appropriate for Part 
A payment.
    Several commenters did not believe that CMS should adopt national 
medical review standards at this time, given the differences in 
clinical presentation and individualized treatments for patients 
requiring hospital care. Other commenters suggested that medical review 
tools, such as InterQual or Milliman, were useful for documenting a 
patient's vital signs and condition at a moment in time, but would not 
be useful for retrospective review of the appropriateness of a hospital 
admission. The commenters also noted that these tools were expensive 
and proprietary for hospitals to use and that selection of one tool 
over another would impose administrative burdens on hospital 
facilities.
    Some commenters recommended that QIO review criteria take into 
consideration special populations of patients, treatment locations 
within the hospital facility, or specific clinical situations generally 
considered to be at higher risk for adverse patient outcomes.
    Response: We appreciate the thoughtful comments submitted in 
response to our comment solicitation on medical review criteria. 
However, even among those commenters who stated that they would support 
the adoption of national medical review criteria, we note that no 
commenters recommended specific national criteria that could be applied 
to medical review of all short-stay hospital cases. We agree with the 
commenters that, given the unique clinical circumstances of Medicare 
beneficiaries who require hospital care, it is difficult to adopt a set 
of clinical standards that are universally applicable based on 
diagnostic conditions and may be appropriately utilized on a 
retrospective basis. While we acknowledge that some providers may 
consider this type of commercial product useful in clinical practice, 
we are not adopting such guidelines as binding policy for medical 
review purposes. Rather, we believe that the 2-midnight benchmark 
captures the individualities and clinical conditions of Medicare 
beneficiaries, by focusing on the physician's medical judgment in 
forecasting an expected plan of care and corresponding hospital 
duration. Accordingly, we are not adopting national medical review 
criteria at this time.
    QIOs will conduct ``Revised Determination Reviews'' (42 CFR 
405.980) on hospital short-stay Medicare Part A claims. QIOs will 
conduct patient status reviews to determine the appropriateness of 
Medicare Part A payment for these short-stay inpatient hospital 
admissions, in accordance with section 1862(a)(1)(A) of the Act. In 
conducting these reviews, QIOs will use the information documented in 
the patient's medical record, and may use evidence-based guidelines and 
other relevant clinical decision support materials as components of 
their review activity (we refer readers to 42 CFR 476.100 relating to 
setting standards for QIO reviews).
    Comment: One commenter suggested that CMS create a tracking 
mechanism, such as a condition code, to allow hospitals to attest that 
they used nationally recognized criteria (such as InterQual or 
Milliman) to determine that inpatient admission was warranted. 
Alternatively, one commenter proposed that CMS adopt an identifier to 
append to the claim which would alert the medical reviewers that an 
inpatient only procedure had been performed.
    Response: We appreciate the thoughtful claims processing 
recommendations. Because we are not adopting a national set of criteria 
at this time, we do not believe a tracking mechanism to identify use of 
criteria tools would be helpful for hospitals or review entities. We 
acknowledge the difficulties in identifying inpatient only procedures 
during medical review (because inpatient only procedures are identified 
by the national code set used by hospital outpatient departments 
whereas inpatient claims are billed using a separate code set) and will 
consider the proposed resolution in the future.
    Comment: Several commenters supported the QIO medical review 
strategy. However, many commenters urged CMS to delay QIO medical 
review activity until January 1, 2016, or later, to align with the new 
policy that would be adopted for CY 2016. Other commenters expressed 
concern whether the QIOs had the needed operational resources, such as 
review staff qualifications and experience, training, electronic record 
transfer capability, and MAC points of contact, to competently conduct 
the reviews. One commenter stated the need for timeliness measures 
associated with the review process.
    Response: As stated in the proposed rule, we announced that the 
QIOs would begin to conduct medical review on October 1, 2015, 
regardless of whether we finalized the policy proposals articulated in 
the proposed rule. Accordingly, QIOs assumed responsibility for medical 
review activities on October 1, 2015, as it relates to the 2-midnight 
rule that is currently in effect. We anticipate that it will take time 
for QIOs to transition and they will incrementally increase their 
review activities to be fully operational with regard to these reviews 
early next year. Beginning January 1, 2016, QIOs will conduct medical 
review of short hospital stay claims under the revised 2-midnight 
policy adopted in this final rule with comment period.
    Comment: Several commenters stated the need for transparency and 
for more detailed information regarding the types of claims that would 
be subject to QIO review, claim sample sizes, the frequency of reviews, 
the claim look back periods, ADR limits, and administrative burden.
    Response: We will address the technical medical review questions 
posed by commenters in subregulatory guidance. We expect to release 
this information on the CMS Web site at: https://www.cms.gov/Medicare/
Quality-Initiatives-Patient-Assessment-Instruments/
QualityImprovementOrgs/

[[Page 70548]]

index.html?redirect=/qualityimprovementorgs/ no later than December 31, 
2015.
    Comment: Several commenters recommended that CMS provide education 
and detailed information regarding the revised medical review criteria 
and documentation requirements. One commenter recommended mandatory 
documentation instruction for physicians in residency programs because 
Medicare funds graduate medical education programs.
    Response: QIOs have a longstanding history of provider education 
and engagement, through the use of provider meetings, learning and 
action networks, provider discussion forums, and posting educational 
materials to their Web sites. QIOs may use these and other methods to 
educate providers about the review process. We will address technical 
medical review questions posed by commenters in subregulatory guidance. 
We expect to release this information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no later than December 31, 2015.
    Comment: Some commenters recommended that the QIOs provide a 
discussion period prior to making referral to the MACs or Recovery 
Auditors.
    Response: After conducting medical review, QIOs will evaluate 
provider performance and provide interventions that are aligned with 
those outcomes. Every provider will receive written claim-specific 
information and any corresponding denial reasons that will give the 
provider the opportunity to review the QIO's claim decision. The 
written notification will include a specific phone number and/or point 
of contact for use by providers to request or schedule a QIO education 
session.
    Through the QIO education session, providers will have the 
opportunity to have one-on-one telephonic conferences to ask questions 
and receive feedback with a QIO clinician knowledgeable of the reviewed 
claims. After the education session, the QIO will provide a final 
results letter to the provider. At the completion of these activities, 
the QIO will refer any denied claims to the MAC for payment adjustment 
and, when appropriate, make a referral to the Recovery Auditors for 
those providers requiring further review.
    Comment: Several commenters supported transitioning hospital 
patient status reviews to the QIOs, while directing Recovery Auditors 
to limit their patient status reviews to those providers with ``high 
denial rates.'' Tailoring the scope of Recovery Auditor reviews aligns 
with MedPAC's recommendation in its June 2015 report, which suggested 
that the extent of audits be correlated with a hospital's excessive use 
of short inpatient stays.
    Other commenters expressed concerns that the standard to which 
claims would be assessed was unclear, and that the Recovery Audit 
Program's contingency fee payment structure could potentially 
incentivize inappropriate claim denials, making such referrals 
inappropriate.
    Many commenters stated the need for transparency in the medical 
review process and requested additional information regarding clinical 
decision-making, as well as QIO operations and the process for 
identifying providers deemed to be appropriate for Recovery Auditor 
referral.
    Response: We will address technical medical review questions posed 
by the commenters in subregulatory guidance. We expect to release this 
information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no 
later than December 31, 2015.
    Comment: A few commenters suggested that, in the QIO's assessment 
and measurement of provider denial rates, factors such as the number of 
short-stay inpatient admissions occurring within a given hospital and 
the acuity of populations served by the hospital be taken into 
consideration. One commenter recommended that QIOs implement or use a 
review test period in order to any identify national trends in provider 
denials.
    Response: We will address technical medical review questions posed 
by the commenters in subregulatory guidance. We expect to release this 
information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no 
later than December 31, 2015.
    After consideration of the public comments we received, we are not 
adopting national medical review criteria at this time. As announced in 
the proposed rule, QIOs assumed medical review responsibilities of 
short hospital stay claims on October 1, 2015 based on the existing 2-
midnight policy in effect for 2015. Beginning on January 1, 2016, QIOs 
will conduct these medical reviews based on the revised 2-midnight 
policy adopted in this final rule with comment period. In conducting 
these reviews, QIOs will use the information documented in the 
patient's medical record, and may use evidence-based clinical 
guidelines, and other relevant clinical decision support materials as 
components of their review activity in order to determine whether an 
inpatient admission where the patient stay is expected to be less than 
2 midnights is nonetheless appropriate for Medicare Part A payment.
    As mentioned previously, 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. We received numerous comments about the Recovery Audit Program 
and have summarized and included our responses to them below.
    Comment: Several commenters responded to the proposed rule's 
announcements related to the changes to be implemented in the Recovery 
Audit Program and the Recovery Auditor's role in conducting patient 
status reviews of those providers referred by the QIOs for having high 
denial rates associated with hospital short stay claims for payment. 
Several commenters also provided additional recommendations for 
programmatic improvement or requested more information regarding the 
operational details of the Recovery Audit medical review processes. In 
addition, some commenters recommended delays in the proposed timeframe 
for Recovery Auditors to begin conducting patient status reviews.
    Response: We note that, while we consider these public comments to 
be outside the scope of the proposed rule, we appreciate the thoughtful 
feedback provided for our consideration. Providers wishing to provide 
any additional suggestions or feedback may do so by emailing them to 
[email protected]. Any future changes or additional information related 
to the Recovery Audit Program would be identified through subregulatory 
instruction and posted on the Recovery Audit Program Web site at: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/.
    Comment: Some commenters recommended that enforcement of the 2-
midnight provision remain under the purview of the Recovery Auditors, 
as it is a payment provision, rather than a quality improvement 
activity.
    Response: We consider these public comments to be outside the scope 
of the

[[Page 70549]]

proposed rule because we neither proposed nor sought comments on the 
announced changes in medical review activities. However, we point out 
that QIOs have previous experience in hospital reviews, and we believe 
their positive working relationships with hospitals will be beneficial 
in helping to educate providers on how to comply with the revised 2-
midnight rule guidance. Recovery Auditors will review those providers 
that fail to comply with CMS' payment policy and, as appropriate, send 
claims to the MAC for adjustment.
    Comment: One commenter mentioned the positive experiences it has 
had with the Provider Relations Coordinator established by CMS in June 
2014, and suggested that the role of the coordinator would be well-
suited to assist providers in the implementation of the new referral 
structure.
    Response: We consider this comment to be outside the scope of the 
proposed rule. However, we appreciate the suggestion and will consider 
the feedback in the future. We encourage providers to utilize the 
Provider Relations Coordinator and support expanding this role 
throughout the medical review process.

D. Comment Solicitation on Potential Short-Stay Payment Policies

    We again welcomed stakeholder comments on potential short-stay 
payment policies. The most frequent comment received in response to the 
proposed rule was that a 1-midnight policy would eliminate the need for 
a short-stay payment policy. Comments on the issue of short stay 
payment policies ranged from paying the IPPS amount to paying an amount 
in between the IPPS and OPPS payment to paying the OPPS amount. Most 
commenters did not provide specifics as to how the payment amount 
should be determined. As in past comment solicitations on this issue, 
there was again no consensus among the commenters who chose to respond.
    We have requested public comment on three different occasions on 
issues related to when services are appropriately billed and paid under 
Medicare Part A as inpatient services or under Medicare Part B as 
outpatient services, including potential payment policy options to 
address this issue. The public comment process has not produced any 
consensus on a recommended payment policy.
    We again thank the commenters for their suggestions on the issue of 
short-stay payment policies. We did not propose any short-stay payment 
policy, but will take these comments into account in any potential 
future rulemaking on the issue.

XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals 
(MDHs) 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).
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50022), 
under prior law, as specified in section 5003(a) of Pub. L. 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, provided 
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 replacing it with 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 (when the new OMB delineations became effective), included New 
Jersey, Delaware, and Rhode Island. Currently, the all-urban States 
continue to be 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

[[Page 70550]]

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 extended to expire effective October 
1, 2017 by section 205 of the MACRA, we stated in the CY 2016 OPPS/ASC 
proposed rule (80 FR 39354) that 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.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39354), we proposed 
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 proposed 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 proposed 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. Beginning FY 2018, that is, for 
discharges occurring on or after October 1, 2017, we proposed that 
these former MDHs would be paid solely based on the Federal rate. 
Payment based on 100 percent of the Federal rate beginning October 1, 
2017 would align with the statutory expiration of the MDH program on 
October 1, 2017.
    We stated in the proposed rule that 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 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 invited public comments on our proposal.
    Comment: Commenters supported the proposed payment transition for 
former MDHs in all-urban States. One commenter stated that CMS' 
proposal would provide a much needed transition period for hospitals 
losing MDH status due to location in all-urban States and would be 
consistent with longstanding CMS policy to adopt transition periods to 
mitigate significant payment impacts accompanying policy changes.
    Response: We appreciate the commenters' support of our proposal.
    Comment: One commenter who supported the proposed transition urged 
CMS to also provide such a transition to all hospitals that lost MDH 
status as a result of implementation of the new OMB delineations which, 
for reasons other than location in an all-urban State, were ineligible 
for reclassification. The commenter noted that only one MDH was located 
in an all-urban State following implementation of the new OMB 
delineations, and that being in an all-urban State is only one reason 
why a hospital cannot qualify for reclassification under Sec.  412.103 
of the regulations. The commenter stated that the other hospitals that 
cannot reclassify under Sec.  412.103, if not provided with a 
transition period, face the same circumstances that CMS is proposing to 
allow other identically situated hospitals to avoid. The commenter 
argued that providing payment transition exclusively for that one 
hospital and not for all hospitals that are similarly unable to 
reclassify to a rural area to maintain MDH status is arbitrary and 
capricious. The commenter also questioned why CMS did not provide 
similar protection for FY 2015 for MDHs repositioned from rural to 
urban areas as a result of implementation of the new OMB delineations 
that could not qualify for reclassification under Sec.  412.103 when 
that protection was requested in public comments submitted in response 
to the FY 2015 IPPS/LTCH PPS proposed rule.
    Response: Our rationale behind our proposal to allow for 
transitional payment to former MDHs that are located in all-urban 
States due to the adoption of the OMB delineations in FY 2015 was that 
these hospitals did not have the option to reclassify from urban to 
rural under the regulations at Sec.  412.103 due to the lack of a rural 
area in their States into which they could reclassify. This is in 
contrast to other hospitals that lost MDH status due to becoming urban 
and are located in States with both urban and rural areas in that these 
hospitals have the option to apply for rural reclassification under 
Sec.  412.103. We acknowledge that, in response to the FY 2015 IPPS/
LTCH PPS proposed rule, this same commenter requested that hospitals 
losing MDH status as a result of becoming urban under the new OMB 
delineations be afforded the 2-year transition period of deemed rural 
status provided for CAHs. In the FY 2015 IPPS/LTCH PPS final rule, we 
explained that we did not believe that applying a 2-year transition 
period of deemed rural status was necessary for provider types other 
than CAHs (79 FR 49983). While we agreed that there were potential 
payment consequences for a CAH, SCH, or MDH located in an urban area as 
a result of the new OMB delineations, we considered the payment 
consequences to be greater for CAHs because, unlike SCHs and MDHs, CAHs 
are entirely excluded from the IPPS and generally receive payments 
based on 101 percent of reasonable cost. We stated that, in addition, 
given the different conditions of participation (CoPs) for CAHs, and 
that it would be generally more difficult for a CAH to have to meet the 
hospital CoPs instead of the CAH CoPs, only a CAH also faces the 
potential loss of its ability to continue to participate in the 
Medicare and Medicaid programs. Furthermore, we note that, at the time 
of the FY 2015 IPPS/LTCH PPS final rule, the MDH program was set to 
expire halfway through FY 2015, on March 31, 2015. However, after 
consideration of this public comment and due to the fact that the MDH 
program has been extended through FY 2017, we believe it is appropriate 
to apply a transition payment to all newly urban, former MDHs. We 
recognize that, regardless of whether the option to apply for 
reclassification is available to a hospital that lost MDH status as a 
result of becoming urban due to implementation of the new OMB 
delineations in FY 2015, a hospital that cannot reclassify from urban 
to rural for any reason may face financial hardship as a result of 
losing MDH status. This would be the case if the hospital was in an 
all-urban State without a rural area into which it could reclassify or 
if the hospital could not meet the requirements for rural 
reclassification under Sec.  412.103. We also note that the regulations 
for rural

[[Page 70551]]

reclassification under Sec.  412.103 do not allow MDHs, in contrast to 
rural referral centers (RRCs) and SCHs, to be approved for 
reclassification by virtue of meeting the requirements for MDH status 
other than being located in a rural area. For these reasons, and after 
consideration of the public comments we received, we are finalizing our 
proposed payment transition to former MDHs with a modification. We are 
providing for a transition for all former MDHs now located in an urban 
area as a result of implementation of the new OMB delineations in FY 
2015 and that have not reclassified to a rural area under the 
regulations at Sec.  412.103 by January 1, 2016. We believe that this 
expanded payment transition will help ensure financial stability and 
uninterrupted patient care for all hospitals that lost MDH status due 
to implementation of the new OMB delineations.
    Comment: One commenter supported CMS' proposal for transition 
payments for MDHs but encouraged CMS to retroactively extend the 
transition payments for the entire FY 2016 rather than beginning 
January 1, 2016. The commenter pointed to the various extensions of the 
MDH program as examples of situations where CMS has implemented the law 
retroactively.
    Response: We appreciate the commenter's request to extend the 
transition period to include all of FY 2016. However, we note that the 
various extensions of the MDH program referred to by the commenter as 
an example of a retroactive implementation are distinguishable from our 
proposal because the MDH extensions were mandated by statute. 
Therefore, we are finalizing the time period for the transition as 
proposed, beginning January 1, 2016.
    Comment: One commenter questioned the impact estimate of $9 million 
for the proposed transition payments and requested clarification of 
CMS' methodology.
    Response: After further examination of the data and the methodology 
upon which we based our impact estimate, we found that the $9 million 
estimated cost of the proposed transition payments included in the 
proposed rule was overstated because we did not account for the fact 
that the transition period would be effective beginning the second 
quarter of FY 2016 (that is, on January 1, 2016), and would not include 
12 months of transition payments. We refer the reader to section 
XXI.A.4.g. of this final rule with comment period for an updated 
estimated impact that reflects 9 months of MDH transition payments in 
the first year of the transition, as finalized above, and a description 
of the methodology used to calculate that estimate.
    In summary, after consideration of the public comments we received, 
we are finalizing a policy that, effective January 1, 2016, payments to 
hospitals that (1) lost their MDH status because they are no longer in 
a rural area due to the implementation of the new OMB delineations in 
FY 2015 and (2) have not reclassified from urban to rural under the 
regulations at Sec.  412.103 before January 1, 2016, will transition 
from payments based, in part, on the hospital-specific rate to payments 
based entirely on the Federal rate. For discharges occurring on or 
after January 1, 2016, and before October 1, 2016, these former MDHs 
will receive the Federal rate plus two-thirds of 75 percent of the 
amount by which the Federal rate payment is exceeded by the hospital's 
hospital-specific rate payment. For FY 2017, that is, for discharges 
occurring on or after October 1, 2016, and before October 1, 2017, 
these former MDHs will 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, 2017, these former MDHs 
will be paid based solely on the Federal rate.

XVII. Final Rule: Appropriate Claims in Provider Cost Reports; 
Administrative Appeals by Providers and Judicial Review

A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS Proposed Rule

    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28206 through 
28217; CMS-1607-P), we proposed to revise the Medicare cost reporting 
regulations in 42 CFR part 413, subpart B, by requiring a provider to 
include an appropriate claim for a specific item in its Medicare cost 
report in order to receive or potentially qualify for Medicare payment 
for the specific item. If the provider's cost report does not include 
an appropriate claim for a specific item, we proposed that payment for 
the item will not be included in the notice of program reimbursement 
(NPR) issued by the Medicare administrative contractor (MAC) (formerly 
known as fiscal intermediary and herein referred to as ``contractor'') 
or in any decision or order issued by a reviewing entity (as defined in 
42 CFR 405.1801(a)) in an administrative appeal filed by the provider. 
In addition, we proposed to revise the appeals regulations in 42 CFR 
part 405, subpart R, by eliminating the requirement that a provider 
must include an appropriate claim for a specific item in its cost 
report in order to meet the dissatisfaction requirement for 
jurisdiction before the Provider Reimbursement Review Board (Board). 
The proposal also specified the procedures for Board review of whether 
the provider's cost report meets the proposed substantive reimbursement 
requirement of an appropriate cost report claim for a specific item. We 
also proposed technical revisions to other Board appeals regulations to 
conform those regulations to the main revisions (described above) to 
the cost reporting regulations and the provider appeals regulations, 
and proposed similar revisions to the Part 405, Subpart R regulations 
for appeals before the contractor hearing officers.
    We received numerous public comments in response to our proposals 
to revise the Medicare cost reporting and provider appeals regulations. 
Commenters raised concerns about the breadth of the proposed provisions 
and questioned the interpretations we provided in the preamble to the 
FY 2015 IPPS/LTCH proposed rule. To allow us proper time to evaluate 
and respond to most of these public comments, in the FY 2015 IPPS/LTCH 
PPS final rule, we decided to finalize only certain related general 
provisions and to address the more specific public comments at a later 
time, in a subsequent rulemaking document, as appropriate. In section 
XVII.B. of this final rule, we summarize the changes we made in the FY 
2015 IPPS/LTCH PPS final rule. In section XVII.C. of this final rule, 
we discuss the various provisions of the FY 2015 IPPS/LTCH PPS proposed 
rule that we did not include in the FY 2015 IPPS/LTCH PPS final rule, 
present summaries of the public comments we received and our responses 
to those comments, and specify our finalized policies.

B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH PPS 
Final Rule

    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through 
50201), we made related revisions to the provider appeals regulations 
that were, or were not, included in the FY 2015 IPPS/LTCH PPS proposed 
rule (79 FR 28206 through 28217), as follows:
     In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to 
conform the terminology in Part 405, Subpart R and all subparts of Part 
413 from ``intermediary'' or ``fiscal intermediary'' to ``contractor'' 
pursuant to sections 1816, 1874A and 1878 of the Act. We did not 
receive any public comments on our proposal. Therefore, we finalized

[[Page 70552]]

our proposal in the FY 2015 IPPS/LTCH PPS final rule.
     We revised Sec.  405.1835 of the regulations to eliminate 
provider dissatisfaction as a requirement for Board jurisdiction over 
appeals based on untimely contractor reimbursement determinations. This 
revision was simply a technical correction to amend Sec.  405.1835 to 
conform the regulations to the provisions in section 1878(a)(1)(B) of 
the Act for Board appeals based on an untimely contractor 
determination. In effect, this amendment to Sec.  405.1835 restored the 
full conformity of the regulations with the statutory requirements for 
Board jurisdiction over appeals based on untimely contractor 
determinations--a conformity that obtained before a 2008 final rule (73 
FR 30190) inadvertently imposed a provider dissatisfaction requirement 
for Board appeals based on untimely contractor determinations. 
Moreover, in order to maintain consistency between the regulations for 
Board appeals and the rules for contractor hearing officer appeals, we 
also revised Sec.  405.1811 of the regulations to eliminate provider 
dissatisfaction as a requirement for contractor hearing officer 
jurisdiction over appeals based on untimely contractor determinations.
    We found good cause to waive notice-and-comment rulemaking 
requirements under section 553(b) of the Administrative Procedure Act 
(APA) (5 U.S.C. 553(b)) for these revisions because the revisions were 
simply technical corrections that brought Sec.  405.1835 of the Board 
appeals regulations into full conformity with section 1878(a)(1)(B) of 
the Act, and maintained consistency between Sec.  405.1811 of the 
contractor hearing officer appeals regulations and Sec.  405.1835 of 
the Board appeals regulations. The revisions did not represent changes 
in policy, nor did they have a substantive effect, and the public 
interest was best served by timely correction of these technical 
errors.
    The technical correction to Sec.  405.1835 of the Board appeals 
regulations and the corresponding revision to Sec.  405.1811 of the 
contractor hearing officer appeals regulations apply to appeals, based 
on an untimely contractor determination, that were pending or filed on 
or after the October 1, 2014 effective date of the FY 2015 IPPS/LTCH 
PPS final rule. These revisions also apply, subject to the rules of 
administrative finality and reopening in Sec.  405.1807 and Sec.  
405.1885 of the regulations, to appeals pending or filed on or after 
the August 21, 2008 effective date of the 2008 final rule (73 FR 
30190). We determined that fixing the applicability date, subject to 
the rules of administrative finality and reopening in Sec.  405.1807 
and Sec.  405.1885 of the regulations, of these amendments by reference 
to the August 21, 2008 effective date of the 2008 final rule, was not 
impermissibly retroactive in effect because the amendments simply 
corrected and clarified longstanding agency policy and practice, and 
were procedural in nature. We explained that if the above-described 
amendments to Sec.  405.1811 and Sec.  405.1835 were deemed a 
retroactive application of a substantive change to a regulation, 
section 1871(e)(1)(A) of the Act permits retroactive application of a 
substantive change to a regulation if the Secretary determines that 
such retroactive application is necessary to comply with statutory 
requirements or that failure to apply the change retroactively would be 
contrary to the public interest. We determined that any retroactive 
application of these amendments to Sec.  405.1811 and Sec.  405.1835 
was necessary to ensure full compliance with the statutory provisions 
for Board appeals based on untimely contractor determinations (under 
section 1878(a)(1)(B) of the Act), and that it was in the public 
interest to apply these amendments, subject to the rules of 
administrative finality and reopening in Sec.  405.1807 and Sec.  
405.1885 of the regulations, to Board appeals and contractor hearing 
officer appeals that were initiated or pending on or after the August 
21, 2008 effective date of the 2008 final rule.

C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed Rule

    We have completed our consideration of the public comments on the 
proposed revisions to the cost reporting regulations and the provider 
appeals regulations in the FY 2015 IPPS/LTCH PPS proposed rule cited in 
section XVII.A. of this final rule. Below we present appropriate 
background for and summaries of each proposed provision, respond to the 
public comments on those proposals, and explain our finalized policies 
for the revisions that we are adopting in this final rule. We refer 
readers to the specified sections of the FY 2015 IPPS/LTCH proposed 
rule for a more extensive description of the proposals that were 
contained in the proposed rule.
1. Background for Payments and Cost Reporting Requirements
    For cost reporting years beginning before October 1, 1983, all 
providers were reimbursed on a reasonable cost basis for Medicare Part 
A (hospital insurance) covered items and services that were furnished 
to Medicare beneficiaries. Reasonable cost is defined at section 
1861(v)(1)(A) of the Act and implementing regulations at 42 CFR part 
413. In the Social Security Amendments of 1983 (Pub. L. 98-21), 
Congress added section 1886(d) to the Act, which, effective with cost 
reporting periods beginning on or after October 1, 1983, changed the 
payment method for inpatient hospital services furnished by short-term 
acute care hospitals to a prospective payment system (PPS). In 
accordance with section 1886(d) of the Act and implementing regulations 
at 42 CFR part 412, a PPS payment is made at a predetermined specific 
rate for each hospital discharge (classified according to a list of 
diagnosis-related groups (DRGs)), excluding certain costs that are paid 
on a reasonable cost basis.
    Later statutory amendments expanded the types of providers and 
services that are subject to a PPS. The various PPSs for inpatient 
hospital services are summarized in Sec.  412.1 of the regulations. 
Other PPSs for different types of providers and services are summarized 
in Sec. Sec.  413.170, 413.300, 413.330, and 419.1 of the regulations. 
As explained in Sec.  413.1(b) of the regulations, if a service is not 
subject to a PPS when it is furnished, the provider is paid on the 
basis of reasonable cost. (For ease of reference, we will use the terms 
``reimbursement'' and ``payment'' interchangeably unless a particular 
context calls for the use of one of these terms instead of the other.)
    Before October 1, 2005, payments to providers were ordinarily made 
through private organizations known as fiscal intermediaries, under 
contracts with the Secretary. Section 1874A of the Act, as enacted by 
section 911 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, authorized the Secretary to enter into 
contracts with entities known as MACs. After a 6-year transition period 
(Sec.  421.400(a)), the claims processing and payment functions of the 
fiscal intermediaries are now performed by MACs, under contracts with 
the Secretary.
    For covered items and services paid on a reasonable cost basis, the 
contractor pays a provider during its cost reporting period interim 
payments that approximate the provider's actual costs. Under a PPS, 
providers are generally paid for each patient discharge after a bill is 
submitted.
    Sections 1815(a) and 1833(e) of the Act provide that no payments 
will be made to a provider unless it has furnished the information, 
requested by the Secretary, needed to determine the amount of payments 
due the provider under the Medicare program. In general,

[[Page 70553]]

providers submit this information through annual cost reports that 
cover a 12-month period of time.
    All providers participating in the Medicare program are required 
under Sec.  413.20(a) to maintain sufficient financial records and 
statistical data for proper determination of costs. Moreover, providers 
must use standardized definitions and follow accounting, statistical, 
and reporting practices that are widely accepted in the hospital and 
related fields. Under the provisions of Sec. Sec.  413.20(b) and 
413.24(f), providers are required to submit cost reports annually, with 
the reporting period based on the provider's accounting year. For cost 
years beginning on or after October 1, 1989, section 1886(f)(1) of the 
Act and Sec.  413.24(f)(4) of the regulations require hospitals to 
submit cost reports in a standardized electronic format, and the same 
requirement was later imposed for other types of providers. In 
addition, Sec.  412.52 of the regulations requires all PPS hospitals to 
meet the recordkeeping and cost reporting requirements of Sec. Sec.  
413.20 and 413.24, which include the requirement that the provider must 
submit a cost report that generally covers a 12-month period of the 
provider's operations.
2. Background for Administrative Appeals by Providers and Judicial 
Review
    Upon receipt of a provider's cost report, the contractor reviews or 
audits the cost report, makes any necessary adjustments to the 
provider's Medicare reimbursement for the cost reporting period, and 
finally determines the total amount of payment due the provider. This 
year-end reconciliation of Medicare payment for the provider's cost 
reporting period constitutes a contractor determination, as defined in 
Sec.  405.1801(a). Under Sec. Sec.  405.1801(a)(1) and (a)(2) and 
405.1803, the contractor must give the provider written notice of the 
final contractor determination for the cost period in a notice of the 
total amount of program reimbursement. This notice, the NPR, is an 
appealable determination, and the contractor determination is final and 
binding unless it is revised on appeal or reopening (Sec.  405.1807).
    Under section 1878(a) of the Act, a provider that has submitted a 
timely cost report may appeal to the Board a final determination of 
program reimbursement made by a contractor, as well as certain final 
determinations by the Secretary involving payment under the IPPS. The 
Secretary's delegate, the Administrator of CMS, may review certain 
Board decisions under section 1878(f)(1) of the Act and Sec.  405.1875 
of the regulations. The final decision of the Board or the 
Administrator is subject to judicial review under section 1878(f)(1) of 
the Act and Sec.  405.1877 of the regulations. In addition, by 
regulation, providers are given the right to appeal to the Board or to 
contractor hearing officers certain other determinations. A CMS 
reviewing official may review some contractor hearing officer decisions 
under Sec.  405.1834 of the regulations, but there is no judicial 
review of decisions by contractor hearing officers or a CMS reviewing 
official.
    Under section 1878(a)(1)(A), (a)(2), and (a)(3) of the Act, and 
Sec.  405.1835(a) of the regulations, a provider may obtain a Board 
hearing on a final contractor or Secretary determination if: (1) The 
provider is ``dissatisfied'' with a final determination of the 
contractor or the Secretary; (2) the amount in controversy is at least 
$10,000; and (3) the provider files a request for a hearing to the 
Board within 180 days of notice of the final determination of the 
contractor or the Secretary. The same jurisdictional requirements 
govern provider appeals to contractor hearing officers under Sec.  
405.1811(a) of the regulations, except that the amount in controversy 
requirement is at least $1,000 but less than $10,000. Under section 
1878(a)(1)(A), (a)(3), and (b) of the Act and Sec. Sec.  405.1835(a) 
and 405.1837(a) of the regulations, the same jurisdictional 
requirements also apply to group appeals to the Board, except the 
amount in controversy for a group appeal is at least $50,000.
    However, as explained in section XVII.B. of this final rule, the 
statutory requirements for Board jurisdiction are somewhat different if 
the provider does not receive a final determination of the contractor 
on a timely basis. Under sections 1878(a)(1)(B), (a)(2), (a)(3), and 
(b) of the Act, a provider may obtain a Board hearing if: (1) The 
provider does not receive a final determination of the contractor on a 
timely basis, after the provider filed a cost report that complied with 
the cost reporting regulations; (2) the amount in controversy is at 
least $10,000 (at least $50,000 for a group appeal); and (3) the 
provider files a request for a hearing to the Board within 180 days 
after notice of the contractor's final determination would have been 
received if such contractor determination had been issued on a timely 
basis. Moreover, Sec.  405.1835(c)(1) of the regulations (as amended in 
the FY 2015 IPPS/LTCH PPS final rule) provides that a contractor 
determination is not timely if it is not issued, through no fault of 
the provider, within 12 months of the contractor's receipt of the 
provider's perfected cost report or amended cost report (as specified 
in Sec.  413.24(f) of the regulations). The same jurisdictional 
requirements govern provider appeals to contractor hearing officers, 
based on an untimely contractor determination, under Sec.  405.1811(c) 
(as amended in the final FY 2015 IPPS/LTCH PPS final rule), except that 
the amount in controversy requirement is at least $1,000 but less than 
$10,000.
3. Background for Appropriate Claims in Provider Cost Reports
    Under longstanding Medicare policy as set forth in Sec.  413.24 of 
the regulations and Section 115 of the Provider Reimbursement Manual 
(PRM), Part 2 (CMS Pub. 15-2), a provider must make an appropriate cost 
report claim for a specific item in order to be reimbursed for the 
item, whether through the NPR issued by the contractor or as the result 
of an administrative appeal or judicial review. For example, as set 
forth in Sec.  413.24, providers receiving payment on the basis of 
reimbursable cost are required to provide adequate cost data to the 
contractor to support payments made for services furnished to 
beneficiaries. In addition, as set forth in Section 115 of the PRM, 
Part 2, we require that providers make a specific claim for an item in 
its cost report, in order to meet the dissatisfaction requirement for 
Board jurisdiction. The Medicare cost report has always included 
particular ``lines'' for specific allowable costs such as interest 
expense and depreciation. If a provider makes a cost report claim for a 
cost that is allowable, and reimbursement is claimed in accordance with 
Medicare payment policy, the NPR will include appropriate reimbursement 
for the cost. (For ease of reference, we use the terms ``specific 
item'' or ``item'' to refer to a particular aspect of reasonable cost-
based payment or a specific aspect of payment under a PPS unless a 
particular context calls for the use of more specific terms (for 
example, the term ``allowable cost'' as used in determining reasonable 
cost-based payment).)
    If the NPR does not include reimbursement for a specific item 
claimed in the cost report or if the provider believes it should have 
received more reimbursement for the item, the provider can request a 
hearing before the Board (if the amount in controversy is at least 
$10,000) or the contractor hearing officers (if the amount in 
controversy is at least $1,000 but less than $10,000). However, our 
longstanding policy is that an appropriate cost report claim is a

[[Page 70554]]

jurisdictional requirement for an appeal to the Board or the contractor 
hearing officers. As explained earlier, section 1878(a)(1)(A) of the 
Act provides for a hearing before the Board if the provider has filed a 
timely cost report with the contractor, and the provider is 
``dissatisfied'' with a final determination of the contractor or the 
Secretary. Our view has been that, in order for a provider to be 
dissatisfied with a specific aspect of the contractor determination, 
the provider must have included an appropriate cost report claim for 
the specific item so that the contractor can respond to the provider's 
claim in the NPR and thereby potentially produce a specific 
reimbursement result about which the provider is dissatisfied.
    Thus, under our policy for Board jurisdiction, a provider has to 
make a specific claim for an item in its cost report and not be paid in 
accordance with that claim in order to meet the dissatisfaction 
requirement for Board jurisdiction. Previously, we did not permit a 
provider to ``self-disallow'' a specific item, even if the Medicare 
contractor had no discretion to award payment for the item. (In self-
disallowing an item, the provider submits a cost report that complies 
with Medicare policy for the item and then appeals the item to the 
Board; the contractor's NPR then would not include any disallowance of 
the item, and therefore the provider would effectively self-disallow 
the item.) However, the Supreme Court rejected our longstanding policy 
in Bethesda Hospital Association v. Bowen, 485 U.S. 399 (1988). The 
Court held that, despite the providers' failure to claim all the 
reimbursement they believed should have been made, the plain language 
of the dissatisfaction requirement in section 1878(a)(1)(A) of the Act 
supported Board jurisdiction because the contractor had no authority to 
award reimbursement in excess of a regulation by which it was bound, 
and thus it would have been futile for the providers to try to persuade 
the contractor otherwise. The Court also stated in dicta, however, that 
the dissatisfaction requirement might not be met if providers were to 
``bypass a clearly prescribed exhaustion requirement or . . . fail to 
request from the intermediary reimbursement for all costs to which they 
are entitled under applicable rules'' (Bethesda Hospital Association v. 
Bowen, 485 U.S. at 404-05).
    Following the Bethesda decision, we no longer required providers to 
make a cost report claim for reimbursement of items for which the 
contractor did not have the discretion to award payment due to a 
regulation or manual provision. However, consistent with the dicta in 
the Bethesda decision, we continued to require providers to include 
cost report claims for allowable costs. Our policy, as revised in 
response to the Bethesda decision, was also challenged in the courts, 
and a ``circuit split'' resulted. Compare Little Co. of Mary Hosp. v. 
Shalala, 165 F.3d 1162 (7th Cir. 1999) (sustaining our interpretation 
of the statutory dissatisfaction requirement for Board jurisdiction) 
with Loma Linda Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065 (9th Cir. 
2007) (rejecting our interpretation of the dissatisfaction 
requirement); Maine General Med. Ctr. v. Shalala, 205 F.3d 493 (1st 
Cir. 2000) (same).
    In response to the Supreme Court's Bethesda decision and the 
ensuing circuit split, we then addressed the dissatisfaction 
requirement in notice-and-comment rulemaking. In a 2008 final rule, we 
revised Sec.  405.1811(a)(1) and Sec.  405.1835(a)(1) for contractor 
and Board hearings, respectively (73 FR 30190, 30195 through 30200, 
30244 through 30245, and 30249 through 30250). Under the revised 
regulations, in order to preserve its appeal rights, a provider must 
either claim an item in its cost report where it is seeking 
reimbursement that it believes to be in accordance with Medicare 
policy, or self-disallow the item if it is seeking reimbursement that 
it believes may not comport with Medicare policy (for example, where 
the contractor does not have the discretion to award the reimbursement 
sought by the provider). In order to self-disallow an item, the 
provider must follow the applicable procedures for filing a cost report 
under protest, which are contained currently in Section 115 of the PRM, 
Part 2.
    As explained in the preamble to the 2008 final rule, we believe the 
revised dissatisfaction policy set forth in Sec.  405.1835(a)(1) is a 
reasonable interpretation of the dissatisfaction requirement for Board 
jurisdiction in section 1878(a)(1)(A) of the Act (73 FR 30195 through 
30200). The dissatisfaction requirement in Sec.  405.1835(a)(1) 
comports with the Supreme Court's statement (discussed above) that the 
statutory dissatisfaction requirement might not be met if a provider 
bypassed a clearly prescribed exhaustion requirement or failed to ask 
the contractor for reimbursement of all costs to which it is entitled 
under applicable rules (Bethesda Hospital Association v. Bowen, 485 
U.S. at 404-05; see also Little Co. of Mary Hosp. v. Shalala, 165 F.3d 
1162 (7th Cir. 1999) (sustaining our interpretation of the statutory 
dissatisfaction requirement for Board jurisdiction on the basis of the 
forgoing statements by the Supreme Court); Little Co. of Mary Hosp. v. 
Shalala, 24 F.3d 984 (7th Cir. 1994) (same)).
    Upon further reflection, however, we determined that the 
requirement that a provider either claim reimbursement for a specific 
cost, or expressly self-disallow the cost, in its cost report is more 
appropriately treated as a cost reporting requirement under sections 
1815(a) and 1833(e) of the Act, as the agency cannot make payments to a 
provider without sufficient information on all claims for which the 
provider believes it should be paid. Indeed, it is eminently reasonable 
for the Secretary to require a provider to make an appropriate cost 
report claim for a specific item if the provider wants to be paid for 
the item. As we explain in detail in the next section, requiring a cost 
report claim for full reimbursement or an express self-disallowance of 
the cost enables the contractor to review and audit the claim, make any 
adjustments that seem appropriate, and include any final payment for 
the cost as part of the NPR. Accordingly, in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28209 through 28212 and 28306 through 28307), we 
proposed to revise the cost reporting regulations in Part 413, Subpart 
B by adding the substantive reimbursement requirement that a provider 
must include an appropriate claim for an item in its cost report. We 
proposed that the failure to account appropriately for the item in the 
provider's cost report would foreclose payment for the item in the NPR 
issued by the contractor and in any decision, order, or other action by 
a reviewing entity (as defined in Sec.  405.1801(a) of the regulations) 
in an administrative appeal filed by the provider.
    However, as explained in the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28208), we recognized that the proposed addition to the cost 
reporting regulations of the substantive reimbursement requirement of 
an appropriate cost report claim for a specific item would be 
potentially duplicative of the existing jurisdictional requirement in 
the Board appeals regulations of an appropriate cost report claim. In 
order to avoid such duplication, we also proposed in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28212 through 28213 and 28297) to revise 
the appeals regulations in Part 405, Subpart R by eliminating the 
requirement that a provider must include an appropriate claim for an 
item in its cost report in order to meet the

[[Page 70555]]

dissatisfaction requirement for Board jurisdiction.
    As explained in section XVII.B. of this final rule, we subsequently 
included, in the FY 2015 IPPS/LTCH PPS final rule, a technical 
correction to Sec.  405.1835 of the regulations, in which we eliminated 
provider dissatisfaction as a requirement for Board jurisdiction over 
appeals based on untimely contractor reimbursement determinations. As a 
result of this final revision to Sec.  405.1835, the proposed revisions 
to this Board appeals regulation in the FY 2015 IPPS/LTCH PPS proposed 
rule have effectively been pared down. Under that proposed rule, the 
Board jurisdiction requirement of an appropriate cost report claim, 
which now applies only to appeals of a final contractor determination 
(under Sec.  405.1835(a) of the regulations), would be eliminated. The 
FY 2015 IPPS/LTCH PPS proposed rule further provided that our 
longstanding requirement of an appropriate cost report claim would be 
made a substantive reimbursement requirement in the cost reporting 
regulations. These proposed revisions to the cost reporting regulations 
and the provider appeals regulations would apply, on a prospective only 
basis, to provider cost reporting periods beginning on or after the 
effective date of a final rule.

D. Addition to the Cost Reporting Regulations of the Substantive 
Reimbursement Requirement of an Appropriate Cost Report Claim

1. Proposed Provisions (New Sec.  413.24(j))
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28209 through 
28212, 28306 through 28307), we proposed to add a new paragraph (j) to 
Sec.  413.24 of the regulations. Proposed paragraph (j)(1) of Sec.  
413.24 provided that in order to receive or potentially qualify for 
payment for a specific item, the provider must include in its cost 
report an appropriate claim for the specific item. In order to make an 
appropriate claim for an item in its cost report, the provider must 
either claim payment for the item in its cost report where it is 
seeking payment that it believes is consistent with Medicare policy, or 
self-disallow the item if the provider is seeking payment that it 
believes may not comport with Medicare policy (for example, where the 
contractor does not have the authority or discretion to award the 
payment sought by the provider). In order to self-disallow a specific 
item, the provider would have to follow the applicable procedures for 
filing a cost report under protest, which are now contained in Section 
115 of the PRM, Part 2 and were included in proposed paragraph (j)(2) 
of Sec.  413.24. Specifically, the provider would have to include an 
estimated payment amount for each self-disallowed item in the 
``protested amount'' line of the cost report, and attach a worksheet 
explaining why a self-disallowance is necessary (instead of claiming 
payment for the item in its cost report) and describing how it 
determined the estimated payment amount for each self-disallowed item.
    Proposed paragraph (j)(3) of Sec.  413.24 specified the procedures 
for determining whether there is an appropriate cost report claim for a 
specific item. The default rule is that the question of whether the 
provider's cost report includes an appropriate claim for the specific 
item must be determined by reference to the cost report that the 
provider submits originally to, and is accepted by, the contractor, 
unless one of three exceptions applies. The first exception is that if 
the provider submits an amended cost report that is accepted by the 
contractor, the question of whether there is an appropriate cost report 
claim for the specific item must be determined by reference to such 
amended cost report, unless one of the two remaining exceptions 
applies. The second exception is that if the contractor adjusts the 
provider's cost report, as submitted originally by the provider and 
accepted by the contractor or as amended by the provider and accepted 
by the contractor, whichever is applicable, with respect to the 
specific item, the question of whether there is an appropriate cost 
report claim for the specific item must be determined by reference to 
the provider's cost report, as such cost report is adjusted for the 
specific item in the contractor's final determination (as defined in 
Sec.  405.1801(a)), unless the remaining exception applies. The third 
exception is that if the contractor reopens either the final contractor 
determination for the provider's cost reporting period (in accordance 
with Sec.  405.1885) or a revised contractor determination for such 
period (issued in accordance with Sec.  405.1889) and adjusts the 
provider's cost report with respect to the specific item, the question 
of whether there is an appropriate cost report claim for the specific 
item must be determined by reference to the provider's cost report, as 
such cost report is adjusted for the specific item in the contractor's 
most recent revised contractor determination for such period.
    In the proposed rule, we stated that providers should make every 
effort to comply with the default rule set forth in proposed paragraph 
(j)(3) of Sec.  413.24, even though one of the exceptions to the 
default rule might come into play later. In order to ensure compliance 
with the substantive requirement of an appropriate cost report claim 
for a specific item, we stated that the provider should either claim 
full payment for, or properly self-disallow, the item in the cost 
report that the provider submits originally to the contractor. However, 
we indicated that failure to include an appropriate claim for the 
specific item in the provider's original ``as submitted'' cost report 
would not necessarily foreclose any further opportunity to meet the 
requirement of an appropriate cost report claim for the specific item. 
Under the first exception to the default rule under proposed paragraph 
(j)(3), the provider could include an appropriate cost report claim for 
the specific item in an amended cost report, but the contractor has 
discretion whether to accept an amended cost report by the provider. 
Under the second and third exceptions to the default rule under 
proposed paragraph (j)(3), the requirement of an appropriate cost 
report claim could be met through the contractor's adjustment of the 
provider's cost report, either in the contractor's final determination 
for the provider's cost reporting period (as defined in Sec.  
405.1801(a)) or, if the final contractor determination is reopened, in 
the contractor's revised determination. However, in preparing the final 
contractor determination for a provider's cost reporting period, the 
contractor would have the discretion as to whether to adjust the 
provider's cost report with respect to the specific item and, if so, 
how to adjust the cost report for such item. Similarly, after the final 
contractor determination is issued, the contractor would have the 
discretion as to whether to reopen the final contractor determination 
and, if the specific item is reopened, whether to adjust the cost 
report for such item and how to make any such adjustment.
    In order to exemplify the workings of proposed paragraph (j)(3) of 
Sec.  413.24, we included the following in the proposed rule: Consider 
a hospital that seeks a Medicare DSH payment adjustment that, on the 
provider's view, should be calculated on the basis of 2,000 Medicaid-
eligible patient days in the numerator of the DSH Medicaid fraction (42 
CFR 412.106(b)(4)). If the hospital's as submitted cost report claimed 
only 1,000 Medicaid-eligible patient days for the numerator of the DSH 
Medicaid fraction, and the number of Medicaid-eligible patient days was 
not changed in an amended cost report

[[Page 70556]]

by the provider or through adjustments to the cost report by the 
contractor, the hospital would have made an appropriate cost report 
claim for only 1,000 Medicaid-eligible patient days (instead of 2,000 
such days). However, if the provider submitted, and the contractor 
accepted, an amended cost report that claimed a total of 1,500 
Medicaid-eligible patient days, the provider would have made a valid 
cost report claim for 1,500 Medicaid-eligible patient days (instead of 
2,000 such days). However, if the hospital asked the contractor, during 
the contractor's review and settlement of the provider's cost report, 
to count 250 more Medicaid-eligible patient days, and the contractor 
agreed to consider those days in the contractor's final determination, 
the provider would have made a valid cost report claim of 1,750 
Medicaid-eligible patient days (instead of 2,000 such days). Finally, 
if the provider next requested, or the contractor initiated on its own 
motion, the reopening of the final contractor determination on the 
specific issue of the number of Medicaid-eligible patient days for the 
DSH Medicaid fraction's numerator, and the contractor did reopen for 
that specific issue and it agreed to consider still another 250 
Medicaid-eligible patient days in the contractor's revised 
determination, the provider would have a valid cost report claim of 
2,000 Medicaid-eligible patient days.\64\ At that juncture, the 
hospital would have met the requirement of an appropriate cost report 
claim for all of the 2,000 Medicaid-eligible patient days, which is the 
number of such days that the provider believed from the outset should 
be used in determining the numerator of the DSH Medicaid fraction.
---------------------------------------------------------------------------

    \64\ In the preamble of the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28209 through 28210), this sentence inadvertently omitted the 
additional point regarding the contractor's acceptance of an 
additional 250 Medicaid-eligible patient days through a reopening 
and revised final contractor determination that finally resulted in 
the provider claiming a total of 2,000 Medicaid-eligible patient 
days.
---------------------------------------------------------------------------

    We stated in the proposed rule our belief that proposed paragraph 
(j)(3) of Sec.  413.24 appropriately reflects the usual process in 
which a cost report claim that is first made in the cost report that is 
submitted originally to, and accepted by, the contractor, might be 
altered through an amended cost report by the provider (if the amended 
cost report is accepted by the contractor) or through adjustments of 
the provider's cost report claim that are made in the contractor's 
final determination or, in the event of a reopening, in the 
contractor's revised final determination. This process enables a 
provider to ensure compliance with the substantive requirement of an 
appropriate cost report claim for a specific item, by including in the 
cost report that the provider submits originally to, and is accepted 
by, the contractor, either a full claim for payment for a specific item 
or a proper self-disallowance of the item. In addition, this process 
gives a provider additional opportunities to meet the requirement of an 
appropriate cost report claim through an amended cost report by the 
provider (if the amended cost report is accepted by the contractor) and 
adjustments to the provider's cost report claim that are included in 
the contractor's final contractor determination or, if there is a 
reopening, in the revised final contractor determination. Unlike with 
the provider's original as submitted cost report, however, the 
contractor has discretion whether to accept an amended cost report; 
whether to include particular cost report claim adjustments in the 
final contractor determination and, if so, how to determine such 
adjustments; and whether to reopen a contractor determination and, if 
there is a reopening, how to determine any cost report claim 
adjustments that may be included in the revised final contractor 
determination. We stated that this ``back and forth'' process between 
the provider and the contractor, which is reflected in proposed 
paragraph (j)(3) of Sec.  413.24, facilitates appropriate 
determinations of program payment and enhances administrative 
efficiency. Each of the Medicare contractors has substantial experience 
in reviewing and auditing cost reports and in properly determining 
payment amounts. The back and forth process between the provider and 
the contractor eliminates, or minimizes and sharpens, potential 
disagreements, which obviates the need to file some administrative 
appeals or narrows the issues in many cases.
    In addition, proposed paragraph (j)(4) of Sec.  413.24 included a 
provision that, to the extent a provider fails to claim a specific item 
appropriately in its cost report, the final contractor determination 
(as defined in Sec.  405.1801(a)) may not include payment for the item. 
However, if the contractor determines that the provider made an 
appropriate cost report claim for a specific item but the contractor 
disagrees with material aspects of the provider's claim for the item, 
the contractor must make appropriate adjustments to the provider's cost 
report and include payment for the specific item in the final 
contractor determination in accordance with the contractor's 
adjustments to the cost report and to the extent permitted by program 
policy.
    We proposed under proposed paragraph (j)(5) of Sec.  413.24 that if 
a party to an administrative appeal questions whether the provider's 
cost report included an appropriate claim for the specific item under 
appeal, the reviewing entity (as defined in Sec.  405.1801(a)) must 
follow the procedures (which we discuss in detail below) that are set 
forth in proposed Sec.  405.1873 (if the appeal was filed originally 
with the Board), or the procedures in Sec.  405.1832 (if the appeal was 
filed initially with the contractor), for review of whether the 
substantive reimbursement requirement of an appropriate cost report 
claim for the specific item is satisfied. Those regulations require the 
reviewing entity to follow the procedures (discussed above) that are 
set forth in paragraph (j)(3) of this section for determining whether 
the provider's cost report included an appropriate claim for the 
specific item under appeal. Also, the reviewing entity may permit 
payment for the specific item under appeal solely to the extent 
authorized by Sec.  405.1873(f) (if the appeal was filed originally 
with the Board) or by Sec.  405.1832(f) (if the appeal was filed 
initially with the contractor).
2. Statutory Authority and Rationale for Proposed Sec.  413.24(j)
    In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we 
believe the Medicare statute provides ample authority for the proposal 
(described in the preceding section of this final rule) to add a new 
paragraph (j) to Sec.  413.24 of the regulations. This proposal is well 
within the Secretary's general rulemaking authority under sections 1102 
and 1871 of the Act. Moreover, proposed Sec.  413.24(j) is an 
appropriate exercise of the Secretary's broad authority under sections 
1815(a), 1833(e), and 1886(f)(1) of the Act to require providers to 
furnish the information needed to determine the amount of payment due a 
provider under the Medicare program. As described above, we have relied 
on these particular statutory provisions in adopting regulations that 
require providers to submit annual cost reports; specify the requisite 
contents of cost reports; and impose various procedural requirements 
for cost reports (such as time periods for timely submission of cost 
reports and certification requirements for cost reports). Moreover, we 
have invoked the same statutory provisions in requiring

[[Page 70557]]

providers to report other specific information as a condition for 
Medicare payment; we refer readers to, for example, Community Hospital 
of Monterey Peninsula v. Thompson, 323 F.3d 782, 790, 795-800 (9th Cir. 
2003) (sustaining Medicare's policy that providers must bill 
``crossover bad debts'' to the State Medicaid agency because 42 U.S.C. 
1395g(a) (that is, section 1815(a) of the Act) specifically granted the 
Secretary broad discretion as to what information to require as a 
condition of payment to providers under the Medicare program; see also 
Maine Med. Ctr. v. Burwell, 775 F.3d 470, 480 (1st Cir. 2015) (the 
Secretary is authorized by 42 U.S.C. 1395g(a) (that is, section 1815(a) 
of the Act) to require a provider to furnish such information as the 
agency may request). Indeed, as explained above, the Secretary's broad 
discretion with respect to cost reporting requirements is also 
reflected in the Board appeals provisions of section 1878(a) of the 
Act, which makes provider compliance with cost reporting requirements a 
prerequisite of Board jurisdiction.
    In addition to the plainly sufficient statutory authority for 
proposed Sec.  413.24(j), we believe there are sound policy reasons for 
requiring a provider to include an appropriate claim for an item in its 
cost report by either claiming payment for the item (where the provider 
believes such claim would comport with Medicare policy), or by self-
disallowing the item (if the provider is seeking payment that it 
believes may not be consistent with Medicare policy). This proposal has 
three main parts, each of which we addressed in the proposed rule.
    First, we believe that if a cost is allowable and the provider does 
not disagree with how Medicare determines payment for the cost, the 
provider's cost report should include a claim for full payment of the 
cost in accordance with the program's payment policy. In such cases, a 
cost report claim for full payment of the cost enables the contractor 
to review the claim, make any adjustments that seem appropriate, and 
include final payment for the cost as part of the NPR. Requiring a cost 
report claim for full payment of allowable costs (where the provider 
does not disagree with how Medicare determines payment for the cost) 
facilitates the contractor's discharge of some of its principal 
responsibilities, which include using the contractor's expertise and 
experience to review and audit payment claims, making any necessary 
adjustments, and including final payment for the cost in the NPR. 
Absent some misstep by the contractor in reviewing such a cost report 
claim and determining final payment for the item, there would be no 
need for the provider to later request reopening or to file an 
administrative appeal regarding the item. Even if the provider 
disagreed with some aspect of the contractor's payment determination 
for the specific item, any such disagreement would be narrowed and 
delineated more precisely because our proposal, to require a full cost 
report claim for payment of allowable costs, will give the contractor 
an opportunity to review and audit the claim and determine the extent 
to which (if at all) to include payment for the claim in the NPR. 
Therefore, we believe that the interests of administrative finality and 
efficiency will be advanced if providers are required to include a cost 
report claim for full payment of allowable costs.
    The proposed requirement under proposed Sec.  413.24(j) of a cost 
report claim for full payment of allowable cost also comports with the 
division of responsibilities between the contractors and the Board and 
the other reviewing entities (as defined in Sec.  405.1801(a)). At 
present, there are 12 contractors, each of which has a fairly large 
staff with substantial experience and expertise in reviewing and 
auditing cost reports and determining final payment in accordance with 
Medicare policy. By contrast, the Board has only five members and a 
relatively small staff. We believe it is a waste of scarce resources 
and very inefficient for a provider to first raise a clearly allowable 
cost in an appeal to the Board when the contractor could have 
considered and finally determined payment for such an allowable cost in 
the NPR, if the provider had simply made a timely cost report claim for 
full payment of the allowable cost. As indicated by the very name of 
the Provider Reimbursement Review Board, it is a ``review board'' or 
administrative appeals tribunal, not the Medicare program's front line 
auditors charged with making the final determination of program 
reimbursement for such allowable costs.
    Second, there are also sound policy reasons for proposing, under a 
new paragraph (j) in Sec.  413.24, that a provider must self-disallow a 
specific item if it is seeking payment that it believes may not comport 
with Medicare policy (for example, because the provider believes the 
contractor does not have the discretion to make the payment sought by 
the provider), by following the applicable procedures for filing a cost 
report under protest (procedures that, as explained above, are now 
contained in Section 115 of the PRM, Part 2, and would be set forth in 
proposed paragraph (j)(2) of Sec.  413.24). When a provider self-
disallows an item by accounting for it appropriately in the ``protested 
amount'' line of the cost report (instead of claiming payment for the 
item), the contractor has an opportunity to correct any misconceptions 
that the provider may have had about the item. For example, the 
contractor could determine, contrary to the provider's apparent 
understanding in self-disallowing a specific item, that the item in 
question is actually an allowable cost that is reimbursable in 
accordance with program policy. Another example would be that the 
contractor might determine, despite the provider's understanding of 
Medicare policy and its concomitant self-disallowance, that program 
policy has changed and the item is now an allowable cost or a new 
payment policy now applies that permits the payment methodology used by 
the provider in support of its self-disallowance of the item; we refer 
readers to, for example, 75 FR 50275 through 50286 (discussing CMS 
Ruling 1498-R, which revised Medicare DSH payment policy in response to 
adverse judicial precedent, and made such revisions applicable to open 
cost reports and certain pending administrative appeals). In such 
cases, the contractor's extensive expertise and experience and its 
resources can be brought to bear in reviewing self-disallowed items, 
making any necessary corrections, and finally allowing payment for 
corrected items in the NPR. Indeed, these kinds of contractor actions 
comport with section 1874A(a)(4) of the Act and Sec.  413.20(b) of the 
regulations, which require the contractors to furnish providers with 
consultative services, education, training, information and 
instructions, and technical assistance regarding the interpretation and 
application of payment principles and other program policies; be 
available to address provider questions and problems on a daily basis; 
and facilitate communication between the agency and providers. 
Accordingly, we believe our proposed addition of a self-disallowance 
requirement to the cost reporting regulations will facilitate 
exhaustion of administrative remedies through the contractor's review 
and final settlement of the provider's cost report, and when the 
contractor corrects errors in a provider's self-disallowance, the need 
to appeal to the Board or request reopening could be obviated; we refer 
readers to Little Co. of Mary Hospital v. Shalala, 165 F.3d 1162, 1165 
(7th Cir. 1999) (the Secretary's requirement of an appropriate cost 
report claim for an item

[[Page 70558]]

ensures that the contractor will have the ``first shot'' at determining 
any reimbursement for the item, before any appeal to the Board need be 
filed).
    By requiring the self-disallowance of items that providers believe 
may not comport with Medicare policy, proposed Sec.  413.24(j) also 
would contribute importantly to other aspects of program 
administration. For example, we believe that this proposal would 
facilitate provider compliance with the existing requirements in Sec.  
413.24(f) that each provider submit a complete, accurate, and timely 
cost report, and that the provider's administrator or chief financial 
officer certify that the submitted cost report is complete and 
accurate. We believe our proposed self-disallowance requirement also 
would enhance CMS' ability to accurately estimate the program's 
potential liabilities (for example, for purposes of the agency's 
preparation of required financial statements). Similarly, we believe 
that this proposal would improve the contractors' ability to establish 
audit and other workload priorities. In addition, we believe that the 
proposed addition of a self-disallowance requirement (for items that 
providers believe may not comport with Medicare policy) to the cost 
reporting regulations would enable us to better monitor Medicare policy 
and potentially adjust our policies in response to a pattern of 
provider self-disallowances of a given item. Indeed, the importance of 
requiring complete and accurate cost report information is highlighted 
by the fact that we use cost report data for a wide variety of purposes 
such as setting and refining prospective payment rates; establishing 
hospital market basket weights; calculating Medicare and total facility 
margins; determining payment for graduate medical education (GME) and 
indirect medical education (IME); creating projections for the 
President's annual budget and for the annual Medicare Trustees Report; 
for various research projects; and for responding to requests from the 
public, the Congress, OMB, and other parts of the Administration.
    Third, we believe there also are sound reasons for our proposal 
that, under a new Sec.  413.24(j), if a provider fails to account 
appropriately for an item in its cost report (by making a full claim 
for payment for the item or self-disallowing the item if the provider 
believes a payment claim would not comport with Medicare policy), the 
NPR issued by the contractor may not include payment for the item and 
payment also may not be permitted in any decision, order, or other 
action by a reviewing entity (as defined in Sec.  405.1801(a)) in an 
administrative appeal filed by the provider. Under existing Sec. Sec.  
405.1835(a)(1) and 405.1840(b)(3), the consequence of not making an 
appropriate cost report claim for an item is that the Board would not 
have jurisdiction over the provider's appeal of the item. (Similarly, 
under Sec. Sec.  405.1811(a)(1) and 405.1814(b)(3), the contractor 
hearing officers would lack jurisdiction for an item if the provider 
did not make an appropriate cost report claim for the item.) As 
explained below, however, we proposed the elimination of the 
jurisdictional requirement of an appropriate cost report claim in 
existing Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3) for Board appeals 
(and the corresponding jurisdictional requirement in Sec. Sec.  
405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer 
appeals), because we believe it is a requirement more appropriately 
placed in the cost reporting regulations. Given our longstanding policy 
of requiring an appropriate cost report claim for an item, proposed 
paragraph (j) of Sec.  413.24 is a natural place to spell out the 
consequences of not abiding by this cost reporting requirement. In this 
regard, we note that the proposed addition of a new paragraph (j) to 
Sec.  413.24 is like the existing paragraph (e) in Sec.  413.20, which 
provides for the suspension of Medicare payments if a provider fails to 
maintain the records necessary for proper determination of Medicare 
reimbursement. Similarly, if a provider fails to include an appropriate 
claim for an item in its cost report, the NPR issued by the contractor 
will not include payment for the item and payment also will not be 
permitted in any decision, order, or other action by a reviewing entity 
(as defined in Sec.  405.1801(a)) in an administrative appeal filed by 
the provider.
3. Summary of Public Comments, CMS Responses, and Statement of 
Finalized Policies for Sec.  413.24(j)
    The following public comments were received in response to the FY 
2015 IPPS/LTCH PPS proposed rule (79 FR 28206 through 28217). As 
explained below, we are finalizing various revisions to the cost 
reporting regulations and the provider appeals regulations. These final 
revisions will apply, on a prospective only basis, to provider cost 
reporting periods beginning on or after the effective date of this 
final rule, and to provider appeals regarding provider cost reporting 
periods that begin on or after the effective date of this final rule.
    Comment: Several commenters questioned the legitimacy of CMS' 
policy justifications. The commenters stated that the agency's policy 
justifications do not constitute a rational basis for the proposed new 
cost report requirements.
    Response: As explained in the proposed rule (and as discussed 
earlier in this final rule), we believe there are several compelling 
policy justifications for the requirement in proposed Sec.  413.24(j) 
that a provider include an appropriate claim for an item in its cost 
report by either claiming payment for the item (where the provider 
believes such claim would comport with Medicare policy), or by self-
disallowing the item (if the provider is seeking payment that it 
believes may not be consistent with Medicare policy).
    First, we believe that requiring a cost report claim for full 
payment of an allowable cost advances the agency's interest in 
administrative finality and efficiency. If a cost is allowable and the 
provider does not disagree with how Medicare determines payment for the 
item, the requirement of an appropriate cost report claim facilitates 
the contractor's settlement of the claim. The requirement of a cost 
report claim for full payment of an allowable cost also helps preserve 
the distinct roles of the contractor and the Board, and conserves Board 
resources by avoiding Board appeals involving claims that could have 
been considered and settled by the contractor, if the provider had 
simply made a timely cost report claim for full payment of the 
allowable cost in the cost report.
    We also believe that the requirement in proposed Sec.  413.24(j), 
that a provider self-disallow a specific item if it is seeking payment 
that it believes may not comport with Medicare policy, will facilitate 
exhaustion of administrative remedies. It has been our experience that 
providers are sometimes mistaken in their belief that payment is not 
allowable. This could occur, for example, where the provider 
misinterprets the applicable payment policies, where the policies have 
changed without the provider's knowledge, or where the provider has 
some other reason to believe (albeit erroneously) that a particular 
payment will be deemed not allowable. We believe that requiring a 
provider to self-disallow a specific item if it is seeking payment that 
it believes may not comport with Medicare policy ensures that the 
contractor will have the opportunity to employ its expertise and 
correct any misconceptions in the first instance, potentially avoiding 
unnecessary appeals and narrowing the issues in dispute. Even if the 
provider is correct in its belief that payment is

[[Page 70559]]

not allowable, the contractor may still facilitate resolution of the 
provider's claim through consultation, discussion, and education about 
the applicable Medicare policies.
    In addition, we believe that the addition of a self-disallowance 
requirement to the cost reporting regulations will advance other 
aspects of program administration by facilitating provider compliance 
with other cost report requirements, enhancing the agency's ability to 
estimate potential liabilities, improving contractors' ability to 
establish audit and other workload priorities, and allowing the agency 
to better monitor Medicare policy and potentially adjust policy in 
response to a pattern of provider self-disallowances.
    Lastly, as explained in the proposed rule, we believe the 
requirement of an appropriate cost report claim is more appropriately 
placed in the cost report regulations than in its current inclusion in 
the provider appeals regulations. We believe that proposed Sec.  
413.24(j) reflects our longstanding policy of requiring an appropriate 
cost report claim for items and that this provision is the natural 
place to spell out the consequences of not abiding by this cost 
reporting requirement.
    Comment: Several commenters questioned whether the ``back and 
forth'' process between the provider and the contractor as described in 
the proposed rule reflects the reality of the cost report process. 
Commenters also questioned whether contractors are equipped and 
prepared to engage in the type of back and forth process described in 
the proposed rule.
    Response: We believe that the back and forth process between the 
provider and contractor, as described in the proposed rule (79 FR 28209 
through 28210), does reflect the reality of the cost report process, 
and contractors regularly engage in the type of back and forth process 
described in the proposed rule. In addition to claims processing 
functions, contractors regularly engage with providers to furnish 
consultative services, education, training, information and 
instructions, and technical assistance regarding the interpretation and 
application of payment principles and other program policies. 
Contractors also address providers' questions and problems on a daily 
basis and facilitate communication between the agency and providers. We 
selected the specific scenario involving a hospital seeking a Medicare 
DSH adjustment based on additional Medicaid-eligible patient days to 
exemplify the commonplace interaction between the provider and 
contractor. As several commenters acknowledged, contractors frequently 
engage with providers in determining whether to accept amended cost 
reports or requests for reopening under this specific circumstance. The 
regularity of this interaction between the contractor and the provider 
is reflected by the sheer volume of cost report amendments and 
reopening requests accepted by contractors. Contractors accepted 76 
percent of requests from providers to amend cost reports during FY 2014 
and 77 percent during FY 2013. In addition, as a result of a contractor 
reopening, 2,311 revised NPRs were issued during FY 2014 and 3,636 
revised NPRs were issued during FY 2013.
    Comment: Several commenters questioned whether contractors would 
work with providers to identify situations in which a hospital may have 
mistakenly claimed an item under protest, instead of affirmatively 
claiming payment for that item through the cost report. The commenters 
stated that if a contractor determines that a hospital may have 
mistakenly claimed an item under protest instead of affirmatively 
claiming payment for that item, because there is no CMS requirement 
directing the contractor to add that item to the allowable claims in 
the hospital's cost report, the contractor is free to use that error 
against the hospital by not reimbursing the hospital for the item in 
question and opposing any subsequent appeal on the ground that the 
protest was not proper.
    Response: Contractors have been directed to work with providers to 
identify self-disallowed items that may actually be reimbursable in 
accordance with program policy. If a provider seeks payment that it 
mistakenly believes may not comport with Medicare policy, and follows 
the procedures for self-disallowing the specific item as set forth in 
proposed paragraph (j)(2) of Sec.  413.24 by accounting for it 
appropriately in the ``protested amount'' line of the cost report, the 
provider has fulfilled the substantive reimbursement requirement of an 
appropriate cost report claim and may receive or potentially qualify 
for reimbursement for the specific item. If the item in question is an 
allowable cost that is reimbursable in accordance with Medicare policy, 
the contractor has the obligation to pay the provider accurately. We 
believe that the contractor's correction of errors in the provider's 
self-disallowance would obviate the need for the provider to request a 
contractor reopening or Board hearing. If the contractor does not 
correct the error, the provider could seek relief through the 
administrative appeals process.
    Comment: Several commenters stated that the proposed rule assumes a 
cost reporting and appeal structure that does not reflect the reality 
of the hospital reimbursement process. The commenters alleged that the 
proposed rule ignores that providers often lack access to the 
information necessary to complete their cost reports in a timely 
fashion or otherwise may be unaware of a payment error, through no 
fault of their own, when the cost report is filed.
    Response: We respectfully disagree with the commenters' 
characterization of the proposed rule. Providers have ample time, 5 
months after the close of the cost reporting period, to submit cost 
reports with appropriate cost report claims. In most cases, the 
information a provider needs to make appropriate cost report claims is 
easily ascertainable and may be found in the provider's own records. 
Therefore, in most instances, providers should not have any difficulty 
obtaining the information necessary to complete and submit a cost 
report with appropriate claims for each specific item.
    We have identified only one circumstance where a provider may have 
difficulty obtaining sufficient information to make an appropriate cost 
report claim within the allotted time for cost report submission. This 
circumstance may occur if a hospital experiences difficulty obtaining 
sufficient information from State agencies for the purpose of claiming 
DSH Medicaid-eligible patient days. Therefore, as explained below in 
our response to the next comment, we will instruct contractors, in this 
limited circumstance, that they must accept one amended cost report 
submitted within a 12-month period after the hospital's cost report due 
date, solely for the specific purpose of revising a claim for DSH by 
using updated Medicaid-eligible patient days, after a hospital receives 
updated Medicaid eligibility information from the State.
    Moreover, for situations in which a provider may be unaware of a 
payment error when its cost report is submitted, we believe that 
proposed Sec.  413.24(j)(3) offers providers several opportunities to 
meet the requirement of an appropriate cost report claim. As detailed 
in proposed paragraph (j)(3) of Sec.  413.24, a provider may satisfy 
the requirement of an appropriate cost report claim through submission 
of an amended cost report (if the amended cost report is accepted by 
the contractor), through adjustments of the cost report claim that are 
made in the contractor's final determination or, in the event of a 
reopening, through cost report adjustments made in the contractor's 
revised determination.

[[Page 70560]]

Moreover, proposed Sec.  413.24(j)(5) provides for Board review of 
provider compliance with the appropriate cost report claim requirement 
in accordance with the procedures set forth in new proposed Sec.  
405.1873.
    Comment: Commenters recommended that the proposed rule include an 
exception for hospitals that rely on information from State agencies 
regarding Medicaid-eligible patient days, for the purpose of 
calculating DSH payments. The commenters stated that hospitals are not 
able to determine a final and complete count of Medicaid-eligible 
patient days until well after the deadline for submission of the cost 
report to the contractor because of State delays in providing such 
information. Several commenters cited retroactive State eligibility 
determinations and Medicaid expansion populations as complicating 
factors beyond a hospital's control that could substantially impact DSH 
payments. The commenters also pointed out that CMS has not promulgated 
any standards affirmatively requiring States to make Medicaid 
eligibility information available to hospitals for the purpose of 
completing the cost report, or requiring States to make this 
information available within any specific timeframe. One commenter 
stated that the proposal does not provide for an alternative of 
requiring States to provide accurate, timely and complete information 
to enable hospitals to include the Medicaid-eligible patient days in 
their timely submitted cost reports.
    Many commenters pointed out that acceptance of an amended cost 
report or a reopening for the purpose of adding additional Medicaid-
eligible patient days to calculate DSH payments is at the discretion of 
the contractor. Several commenters observed that currently, contractors 
typically exercise their discretion in favor of accepting amended cost 
reports. However, commenters also claimed that the exercise of 
contractor discretion under the proposal may keep a hospital from 
receiving the appropriate amount of payment for DSH and impede its 
right to appeal contractor DSH payment determinations that 
inappropriately omit some Medicaid-eligible patient days for a cost 
reporting period.
    Another commenter expressed concern that the proposal may also 
affect payments for uncompensated care by skewing the distribution of 
the pool of insured low income days if additional DSH Medicaid-eligible 
patient days were in the calculation for some hospitals but not for 
other hospitals due to the sole discretion of the contractor.
    Response: In claiming DSH payments, hospitals use State eligibility 
determinations and reporting for the purpose of calculating Medicaid-
eligible patient days. In calculating the number of Medicaid-eligible 
patient days, the hospital must determine whether the patient was 
eligible for Medicaid under a State plan approved under Title XIX of 
the Act on the day of service by using the State's informational 
retrieval systems used in the administration of Title XIX of the Act, 
as required by CMS to provide timely and accurate data (42 CFR part 
433, subpart C). The responsibility for collecting, verifying, and 
reporting Medicaid eligibility as part of the cost reporting process 
lies solely with providers. States are obligated to provide this 
information, although hospitals bear the burden of proof with respect 
to DSH Medicaid-eligible patient days claimed on the cost report. 
Hospitals cannot claim Medicaid-eligible patient days that have not 
been verified by State records. We believe that it is reasonable to 
continue to place the burden of furnishing the information necessary to 
prove eligibility for each Medicaid patient day for DSH calculation 
purposes on hospitals because they are best situated to provide and 
verify Medicaid eligibility information. Because the hospital has 
provided inpatient care for which they billed the relevant payers, 
including State Medicaid plans, they will necessarily already be in 
possession of much of the required information. We continue to believe 
that the mechanisms currently in place enable hospitals to obtain 
Medicaid-eligible patient days necessary to calculate DSH payments. In 
addition, we believe there is no need to modify State Medicaid plan 
regulations to require that State plans verify Medicaid eligibility for 
hospitals within a certain time period.
    However, we recognize that, in certain limited circumstances, when 
the hospital submits the Medicare cost report, it may not possess 
sufficient information from a State agency for the purpose of reporting 
the total number of Medicaid-eligible patient days due to factors 
beyond that hospital's control. In such situations, as one commenter 
observed, contractors usually accept amended cost reports to account 
for delays a provider may have experienced in obtaining requisite 
information from State agencies. We will continue to afford providers 
the opportunity to submit amended cost reports and will instruct 
contractors, with new instructions in CMS Pub. 100-6, Chapter 8, that 
they must accept one amended cost report submitted within a 12-month 
period after the hospital's cost report due date, solely for the 
specific purpose of revising Medicaid-eligible patient days in order to 
calculate DSH payments after a hospital receives updated Medicaid-
eligible patient days from the State. Furthermore, as we anticipate 
that, under this process, providers will be able to more accurately 
account for Medicaid-eligible patient days on their cost reports, there 
is little risk that the distribution pool of insured low-income days 
will become skewed and payments for uncompensated care will not be 
affected.
    Comment: Several commenters pointed out that the 2008 final rule 
(73 FR 30190) indicated that necessary information is not always 
available to providers when they submit their cost reports. The 
commenters characterized the existing regulations as explicitly 
recognizing the provider's right to appeal based on information that 
was not available or was not known to the provider until after its cost 
report was submitted. The commenters stated that when the Board appeal 
regulations were revised in 2008, the agency acknowledged that there 
may be situations where a provider is uncertain about whether Medicare 
payment is correct because it does not have access to necessary 
information (for example, Medicaid eligibility information from a State 
agency) (73 FR 30194). The commenters stated that this admission in the 
2008 rule is incompatible with the new cost report requirements in 
proposed Sec.  413.24(j), which would limit reimbursement to only those 
items for which an ``appropriate claim'' or ``protest'' is included on 
the cost report.
    Response: We do not see any inconsistency between our statements in 
the 2008 final rule and the cost report claim requirement in proposed 
Sec.  413.24(j). In the 2008 rule, we stated that there may be 
instances where a provider does not have access to underlying data (for 
example, Medicaid eligibility information from a State agency) 
sufficient to ascertain whether Medicare payment (for example, the DSH 
payment) is incorrect. Consistent with the 2008 rule, we have 
acknowledged in this final rule the one circumstance where hospitals 
must rely on information from State agencies about Medicaid eligibility 
in order to make an appropriate DSH payment adjustment claim in its 
cost report. To address this limited circumstance, as discussed above, 
we will instruct contractors that they must accept one amended cost 
report submitted within a 12-month period after the hospital's original 
cost report due date, solely for

[[Page 70561]]

the specific purpose of revising and making an appropriate cost report 
claim for DSH Medicaid-eligible patient days after a hospital receives 
updated information about Medicaid-eligible patient days from the 
State.
    Comment: Commenters expressed concern that the SSI fraction of the 
DSH payment determination, which is calculated by CMS, is not released 
until after the cost report is filed.
    Response: The proposal will not have any effect on the process that 
CMS uses to calculate SSI fractions for acute care hospitals. CMS and 
its contractors will continue to use the data matching process that was 
referred to in CMS Ruling 1498-R and finalized at 75 FR 50275 through 
50286, including all relevant provisions regarding the timing of the 
match process, to calculate relevant SSI fractions for acute care 
hospitals. Moreover, while relevant Federal fiscal year SSI ratios may 
not be published until after a cost report is filed, providers may use, 
and Medicare contractors must accept, the latest available SSI ratios 
that have been published to process claims, submit cost reports, and 
make tentative settlements (42 CFR 412.106(b)(2) and 413.64(e) and 
(f)), until CMS publishes the relevant Federal fiscal year SSI ratio 
which shall be used to issue a final determination in an NPR. In 
addition, the hospital could seek relief by requesting a reopening of 
the final contractor determination or by filing an administrative 
appeal.
    Comment: Several commenters stated that the time period of 5 months 
between the end of a hospital's fiscal year and its cost report due 
date is too short for a hospital to capture all data necessary for 
direct GME and IME payments. One commenter expressed concern that 
direct GME or IME full-time equivalent (FTE) data relating to a prior 
year and/or penultimate year could be excluded from a hospital's 
calculation of GME or IME payments under the requirement of an 
appropriate cost report claim in proposed Sec.  413.24(j). This 
commenter suggested that, under the proposal, if the FTE residents in a 
prior year's cost report are changed upon the audit or reopening of a 
cost report, and the current year cost report is filed using the 
original prior year FTE count in the IME and direct GME calculations, 
the 3-year rolling average and the prior year resident to bed ratio 
would be impacted. The commenter stated that if the contractor does not 
correct the current year's incorrect number upon the audit or reopening 
of a cost report, under the proposal, a hospital would have no recourse 
through the Board.
    Response: We respectfully disagree with the commenters' assertion 
that the time period of 5 months between the end of a hospital's fiscal 
year and its cost report due date is too short for a hospital to 
capture all data necessary for GME and IME payments. Under the proposed 
rule, direct GME or IME FTE data relating to a prior year and/or 
penultimate year would not be excluded from a hospital's calculation of 
direct GME or IME payments. A hospital would be able to successfully 
resolve this issue with the contractor without needing to seek recourse 
through the Board.
    Because 42 CFR 412.52 specifies that all hospitals participating in 
the prospective payment systems must meet the recordkeeping and cost 
reporting requirements of Sec. Sec.  413.20 and 413.24, hospitals are 
required to maintain sufficient financial records and statistical data 
for proper determination of costs payable under the Medicare program, 
which would include direct GME and IME payments. Accordingly, such 
information should be maintained by the hospital and be easily 
ascertainable. With regard to determining FTE counts, hospitals should 
be able to determine FTE counts for the cost reporting year that just 
ended based on predetermined rotation schedules for each approved 
residency training program. In addition, bed counts for the IME payment 
and Medicare utilization for the direct GME payment are available to 
the hospital based on a combination of its own patient census records 
and on the Provider Statistical and Reimbursement System, which the 
hospital uses to complete its Medicare cost report after each fiscal 
year end. Therefore, we believe that hospitals have all the information 
necessary to accurately complete worksheets E, Part A, and E-4 of the 
Medicare cost report within the 5-month time period between the end of 
a hospital's fiscal year and its cost report due date.
    Furthermore, if a contractor makes an adjustment to a direct GME or 
IME payment on a cost report for a given year, the contractor should 
bring forward the audit adjustment made in the prior cost year 
prospectively to the current cost year and make the adjustment in the 
NPR for the current cost year. If the hospital learned of the 
adjustment to the prior year shortly after filing its cost report, it 
could submit an amended cost report based on the contractor's 
adjustment. Although the acceptance of the amended cost report would 
ultimately be at the discretion of the contractor, such an amendment 
reflecting a prior year adjustment by the contractor should be 
accepted, as it is the contractor's responsibility to ensure that the 
prior year adjustment is applied prospectively. If the hospital 
receives an NPR where the prior adjustment is not reflected in the 
current cost year, it could request that the NPR be reopened. Although 
requests for reopening are also at the discretion of the contractor, 
such a request resulting from an adjustment proposed by the contractor 
to a prior cost report should be granted, given the contractor's 
responsibility to ensure that the prior year adjustment be applied 
prospectively. Also, the hospital could seek relief by filing an 
administrative appeal.
    Comment: Commenters stated that the time period of 5 months between 
the end of a provider's fiscal year and its cost report due date is too 
short for a provider to capture all data necessary for bad debt 
payments. Several of these commenters stated that providers may not 
know all of their bad debt accounts at the time they initially file 
their cost reports and they rely on the ability to file cost report 
amendments to ensure accurate reimbursement.
    Response: We respectfully disagree with the commenters' assertions 
that the time period of 5 months between the end of a provider's fiscal 
year and its cost report due date is too short for a provider to 
capture all data necessary to claim payment for bad debts. Medicare 
``bad debts'' arise from uncollectible accounts and notes receivable 
that are created or acquired in the process of providing services to a 
Medicare patient (42 CFR 413.89). These uncollectible deductibles and 
coinsurance amounts are recognized as allowable bad debts in the 
reporting period in which the debts are determined to be worthless. 
Because bad debts are uncollectible accounts receivable and notes 
receivable, the provider should have the usual accounts receivable 
records (ledger cards and source documents) to support its claim for a 
bad debt for each account included in the cost report. Examples of the 
types of information to be retained by a provider may include, but are 
not limited to, the beneficiary's name and health insurance number; 
admission/discharge dates for Medicare Part A bills and dates of 
services for Medicare Part B bills; date of bills; date of write-off; 
and a breakdown of the uncollectible amount by deductible and 
coinsurance amounts. This type of information should be easily 
ascertainable by the provider because it is expected to be maintained 
by the provider in the course of normal business in accordance with 
Sec.  413.20. Because uncollectible deductibles and coinsurance amounts 
are recognized as allowable bad debts in

[[Page 70562]]

the cost reporting period in which the debts are determined to be 
worthless by providers under Sec.  413.89, by definition providers 
should have sufficient information to claim reimbursement for bad debts 
for a particular cost report year within that cost report year, and 
thus well within the 5-month time period between the close of the cost 
reporting year and the providers' cost report submission date. If all 
information needed to establish that a debt is worthless is not 
available within a given cost year, the account may not properly be 
claimed as a Medicare debt within that period, but might qualify as a 
bad debt in a later year.
    The same is true for bad debts of dually eligible beneficiaries 
whose Medicaid eligibility is determined upon submission of a bill by 
the provider. In that situation, a provider is required to obtain a 
remittance advice from the State to document the liability of a State's 
Medicaid program for the unpaid deductible and coinsurance before a 
claim for bad debt can be submitted to Medicare. In this regard, 
providers should have the information to claim reimbursement for bad 
debts for a dually eligible beneficiary for a particular cost report 
year within the 5-month time period between the close of the cost 
reporting year and the providers' cost report submission date. In all 
situations, if for some reason the provider learns of bad debt that 
should have been claimed on its cost report after cost report 
submission, the provider may still follow the existing procedures for 
submitting an amended cost report to the contractor or submitting a 
request for reopening to the contractor. The acceptance of an amended 
cost report and granting of the request for reopening remain at the 
discretion of the contractor. However, the provider could also seek 
relief by filing an administrative appeal.
    Comment: Many commenters asserted that the proposed rule would 
inappropriately limit providers' capacity to file appeals based on the 
discretion of the contractor. The commenters observed that, under the 
proposal, the question of whether the provider's cost report includes 
an appropriate claim for a specific item must be determined by 
reference to the cost report that the provider submits originally to, 
and is accepted by, the contractor, unless one of three exceptions 
apply. Noting the three exceptions in Sec.  413.24(j)(3) of the 
proposed rule, several commenters stated that, under the proposal, a 
provider's right to appeal is dependent on the contractor's exercise of 
nonreviewable discretion. The commenters pointed out that the 
acceptance of an amended cost report or the issuance of a reopening is 
entirely at the discretion of the contractor under current Medicare 
regulations and a contractor's rejection of an amended cost report or a 
reopening request is not subject to judicial review. As a result, the 
commenters criticized the proposal as vesting contractors with overly 
broad authority and discretion over hospitals' right to appeal items on 
the cost report.
    Several commenters also asserted that the proposed rule would 
prevent providers from correcting items on their cost reports. The 
commenters noted that if a hospital does not correctly list an item on 
its cost report, its only avenue for correction would be to file an 
amended report or request reopening and hope that the contractor 
accepts the amended cost report or reopening request. The commenters 
stated that if the contractor rejects the amended cost report or 
reopening request, the hospital would have no further administrative 
remedy under the proposed rule. The commenters stated that contractors 
routinely decline to accept amended cost reports or requests for 
reopening, often based on workload and resources. The commenters were 
concerned with the exercise of contractor discretion under the proposal 
and recommended that CMS develop clear and uniform standards for 
contractors to use in determining whether to accept an amended cost 
report or issue a reopening. In addition, the commenters recommended 
that CMS explain how it will monitor and enforce the contractors' 
exercise of authority to make such decisions about providers' requests 
to amend or reopen cost reports to ensure that the contractors are 
fairly and consistently applying the standards for all providers. The 
commenters also recommended that the proposal include an exception for 
instances where a provider later discovers information that should have 
been reported on the cost report.
    Response: We acknowledge the commenters' concerns. However, as we 
explain in detail below in section XVII.E.1. of this final rule, we do 
not agree that the exercise of contractor discretion under the proposed 
rule would limit a provider's right to file an administrative appeal. 
The proposed rule eliminates the jurisdictional requirement in 
Sec. Sec.  405.1835(a) and 405.1811(a) of an appropriate cost report 
claim, which makes it easier for a provider to meet the jurisdictional 
requirements for an appeal to the Board or the contractor, 
respectively. While the proposed Sec.  413.24(j) imposes the 
requirement of an appropriate cost report claim as a general 
substantive requirement for payment, Sec.  413.24(j) does not impose 
any limitations on a provider's administrative appeal rights. On the 
contrary, proposed Sec.  413.24(j)(5) specifically addresses 
administrative appeals where a party questions provider compliance with 
the substantive reimbursement requirement of an appropriate cost report 
claim.
    We proposed to require that providers include an appropriate claim 
for a specific item in their Medicare cost reports in order to receive 
or potentially qualify for Medicare payment for the specific item. In 
most situations, at the time of filing, the provider should possess all 
information needed to file an appropriate claim. We believe that, for 
the most part, providers should not have any significant difficulty 
identifying items that they believe should be paid by Medicare. 
Therefore, under this proposal, the question of whether the provider's 
cost report includes an appropriate claim for a specific item will be 
determined by reference to the cost report that the provider submits 
originally to, and is accepted by, the contractor. There may be 
instances where a provider learns of new and material information or 
needs to correct an error after filing the cost report, and in such 
situations, the provider may submit an amended cost report or request 
that the cost report be reopened. Therefore, the proposal in Sec.  
413.24(j)(3) includes exceptions where the contractor accepts an 
amended cost report or reopens the cost report.
    We recognize that the acceptance of amended cost reports and 
requests for reopening is at the discretion of the contractor and not 
reviewable (Sec. Sec.  413.24(f) and 405.1885(a)(6)). Accordingly, we 
understand the commenters' concerns about the potential effects of 
contractor discretion under the proposed rule. However, we believe that 
the contractors currently exercise discretion with regard to the 
acceptance of amended cost reports and reopening requests in an 
equitable and consistent manner. We respectfully disagree that 
contractors routinely reject amended cost reports and reopening 
requests based on workload and resources. This is reflected by the 
sheer volume of cost report amendments and reopening requests accepted 
by contractors. Contractors accepted 1,828 amended cost reports during 
FY 2014 and 1,725 amended cost reports during FY 2013. In addition, as 
a result of a contractor reopening, 2,311 revised NPRs were issued 
during FY 2014 and 3,636 revised NPRs were issued during FY 2013. We 
anticipate that the contractors will continue to exercise

[[Page 70563]]

discretion in an equitable and consistent manner under this proposal. 
Therefore, we see no reason to develop any new standards beyond the 
current guidance we provide to contractors. We also do not see a need 
to increase monitoring of contractor activity beyond the current 
monitoring that is performed as part of annual contract reviews.
    Comment: One commenter alleged that the proposed rule prevents 
contractors from making positive adjustments to cost reports and 
eliminates a provider's ability to receive payments for claims that the 
provider may fail to include in its cost report.
    Response: The proposed rule does not include any provision that 
would prevent a contractor from making a positive adjustment to a cost 
report if such an adjustment is warranted. On the contrary, proposed 
paragraph (j)(4) of Sec.  413.24 provides that if the contractor 
determines that the provider made an appropriate cost report claim for 
a specific item and that all other substantive reimbursement 
requirements for the specific item are satisfied, the final contractor 
determination must include reimbursement for the item to the extent 
permitted by Medicare policy. Similarly, if the contractor finds an 
appropriate cost report claim but it disagrees with material aspects of 
the provider's claim for the item, the contractor must make appropriate 
adjustments to the provider's cost report and include payment for the 
specific item in the final contractor determination in accordance with 
the contractor's adjustment to the cost report and to the extent 
permitted by program policy. Such adjustments could be monetarily 
favorable, unfavorable, or have no reimbursement effect for the 
provider.
    Proposed paragraph (j)(4) of Sec.  413.24 also provides that, to 
the extent a provider fails to claim a specific item appropriately in 
its cost report, the final contractor determination may not include 
payment for the item. However, a provider's failure to include an 
appropriate claim for a specific item in the provider's original ``as 
submitted'' cost report does not necessarily foreclose any further 
opportunity for the provider to meet the requirement of an appropriate 
cost report claim. A provider could seek to remedy such an omission by 
submitting an amended cost report, if the amended cost report is 
accepted at the discretion of the contractor. The requirement of an 
appropriate cost report claim could also be met through the 
contractor's adjustment of the provider's cost report, either in the 
final contractor determination for the provider's cost reporting period 
or, if the final contractor determination is reopened at the discretion 
of the contractor, in the contractor's revised final determination. 
Moreover, the provider could seek relief by filing an administrative 
appeal.
    Comment: Commenters stated that the proposed rule would prohibit 
providers from pursuing appeals in order to correct errors by CMS that 
are not known at the time the provider files the cost report. The 
commenters recommended that the proposal include an exception for 
situations in which errors in CMS calculations, which are previously 
unknown to the provider, are subsequently discovered after filing of 
the cost report.
    Response: We respectfully disagree with commenters' statement that 
the proposed rule prohibits providers from pursuing appeals to correct 
errors that CMS may make in payment calculations. Assuming for the sake 
of argument that the agency made an error, and that such error was not 
known or discoverable until after the provider submitted its cost 
report, the proposed rule would not curtail the provider's right to 
file an appeal to the Board. On the contrary, proposed paragraph (j)(5) 
of Sec.  413.24 provides for Board review of such an alleged CMS error 
in accordance with the procedures in proposed Sec.  405.1873. The 
provider could first seek Board review of whether its cost report 
included an appropriate claim for the specific item under proposed 
Sec.  405.1873(a). Proposed Sec.  405.1873(b)(1) provides that the 
parties to the appeal must be given an adequate opportunity to submit 
factual evidence and legal argument on the question of whether the 
provider complied with the general reimbursement requirement of an 
appropriate cost report claim; the Board must make findings of fact and 
conclusions of law regarding that question; and those findings and 
conclusions of the Board must be included in the administrative record 
and they must be included in certain overall Board decisions regarding 
the appeal.
    As the question of whether a provider made an appropriate cost 
report claim for a specific payment item is a mixed question of law and 
fact, it is well within the Board's decisional authority. However, the 
provider in this situation might also be raising a facial challenge to 
the lawfulness of a governing regulation for the payment item, in which 
case the Board would have no authority to decide that legal question. 
As a result, the provider could request expedited judicial review (EJR) 
of its facial challenge to the lawfulness of the specific payment 
regulation. Under proposed Sec.  405.1873(d)(2), if the Board grants 
EJR regarding a question of law that is relevant to the matters at 
issue, its EJR decision must include the Board's findings of fact and 
conclusions of law (if any) about whether the provider's cost report 
included an appropriate claim for the matter at issue, and any such 
findings and conclusions are subject to the same provisions in Sec.  
405.1842(g)(1), (g)(2), (h)(1), and (h)(3) (regarding further review 
and finality) as ``apply to the other parts of the Board's EJR 
decision.'' Similarly, proposed Sec.  405.1873(f)(2) addresses the 
potential reimbursement effects of an EJR decision that both grants EJR 
regarding a question of law that is relevant to the matters at issue, 
and also includes the Board's findings of fact and conclusions of law 
(if any) about whether the provider's cost report included an 
appropriate claim for the matter at issue.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to amend Sec.  413.24 by 
reserving paragraph (i) and adding new paragraph (j). New Sec.  
413.24(j) requires a provider to include an appropriate claim for a 
specific item in its Medicare cost report in order to receive or 
potentially qualify for Medicare payment for the specific item. In 
order to make an appropriate claim for an item in its cost report, the 
provider must either claim payment for the item in its cost report if 
it is seeking payment that it believes is consistent with Medicare 
policy, or self-disallow the item if the provider is seeking payment 
that it believes may not comport with Medicare policy. If the 
provider's cost report does not include an appropriate claim for a 
specific item, payment for the item will not be included in the NPR 
issued by the contractor or in any decision or order issued by a 
reviewing entity (as defined in 42 CFR 405.1801(a)) in an 
administrative appeal filed by the provider.
    We have identified only one circumstance where a provider may have 
difficulty obtaining sufficient information to make an appropriate cost 
report claim. This circumstance may exist when a hospital experiences 
difficulty obtaining sufficient information from State agencies about 
Medicaid-eligible patient days, which is necessary to claim a DSH 
payment adjustment. Of course, providers have the right to submit 
amended cost reports. Moreover, in this limited circumstance, we will 
instruct contractors, through new instructions in CMS Pub. 100-6, 
Chapter 8, that they

[[Page 70564]]

must accept one amended cost report submitted within 12 months after 
the due date for the hospital's cost report (which is 5 months after 
the last day of the hospital's fiscal year), solely for the specific 
purpose of revising the number of Medicaid-eligible patient days (after 
a hospital receives updated Medicaid-eligible patient days from the 
State) in order to make an appropriate cost report claim for a DSH 
payment adjustment. In our experience, we believe an additional 12 
months is sufficient time for States to make Medicaid eligibility 
determinations and for hospitals to revise its number of Medicaid-
eligible patient days in order to make an appropriate cost report claim 
for a DSH payment adjustment. In submitting such an amended cost 
report, the hospital must include: (1) The number of additional 
Medicaid-eligible patient days that the hospital is seeking to include 
in the DSH calculation; (2) a description of the process that the 
hospital used to identify and accumulate the Medicaid-eligible patient 
days that were reported and filed in the hospital's Medicare cost 
report at issue; and (3) an explanation of why the additional Medicaid-
eligible patient days at issue could not be verified by the State by 
the time the hospital's cost report was submitted.

E. Revisions to the Provider Reimbursement Appeals Regulations

1. Elimination of the Jurisdictional Requirement of an Appropriate Cost 
Report Claim
a. Proposed Revisions to Sec. Sec.  405.1835 and 405.1840
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28212 through 
28213, and 28297 through 28298), we proposed to eliminate the 
requirement in existing Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3) of 
the regulations that a provider must include an appropriate claim for 
an item in its cost report in order to meet the dissatisfaction 
requirement for Board jurisdiction. We explained that there is a sound 
basis in law and policy for this proposal. We stated that our proposal 
to eliminate an appropriate cost report claim as a requirement for 
Board jurisdiction is well within the Secretary's general rulemaking 
authority under sections 1102 and 1871 of the Act. Moreover, we 
explained that this specific proposal is a reasonable interpretation of 
the ``dissatisfied'' provision in section 1878(a)(1)(A) of the Act. In 
our view, this statutory provision is ambiguous and the interpretation 
in the existing appeals regulations, which requires providers to make 
appropriate cost report claims in order to meet the dissatisfaction 
prerequisite of Board jurisdiction with respect to a specific item, is 
a permissible interpretation of the statute. As described above, 
however, providers have challenged our interpretation of the statutory 
dissatisfaction provision in litigation spanning more than 30 years, 
and in public comments on existing Sec. Sec.  405.1835(a)(1) and 
405.1840(b)(3) of the regulations that were adopted in the 2008 final 
rule (73 FR 30195 through 30200; CMS' response to public comments on 
the proposed Board appeals regulations, which were based on our 
interpretation of the statutory dissatisfaction provision). Providers 
have maintained throughout this litigation and in the referenced public 
comments that the statutory dissatisfaction provision does not support 
our policy of requiring an appropriate cost report claim as a 
prerequisite of Board jurisdiction. We continue to disagree with this 
view of the statute, and still believe that the existing regulations 
for Board appeals of timely final contractor or Secretary 
determinations are based on a permissible interpretation of the 
statutory dissatisfaction provision in section 1878(a)(1)(A) of the 
Act. As explained above, existing Sec.  405.1835(a)(1) comports with 
the Supreme Court's statement that the statutory dissatisfaction 
requirement might not be met if a provider bypassed a clearly 
prescribed exhaustion requirement or failed to ask the contractor for 
payment of all costs to which it is entitled under applicable rules 
(Bethesda Hospital Association v. Bowen, 485 U.S. at 404-405). 
Furthermore, the U.S. Court of Appeals for the Seventh Circuit has 
twice sustained our interpretation of the statutory dissatisfaction 
provision, on the basis of the foregoing statements by the Supreme 
Court (Little Co. of Mary Hosp., 165 F.3d 1162; Little Co. of Mary 
Hosp., 24 F.3d 984). Nonetheless, we believe our proposal, to eliminate 
Sec.  405.1835(a)(1)'s jurisdictional requirement of an appropriate 
cost report claim, certainly does not conflict with the 
``dissatisfied'' provision in section 1878(a)(1)(A) of the Act.
    Moreover, as we stated in the proposed rule, this particular 
proposal is supported by section 1878(a)(1)(B) of the Act, which 
authorizes certain Board appeals if the provider does not receive a 
final contractor reimbursement determination on a timely basis. 
(Section 405.1835(c) of the existing regulations specifies the time 
period and other conditions for Board appeals where the provider does 
not receive a final contractor determination on a timely basis.) 
Section 1878(a)(1)(B) of the Act does not include a dissatisfaction 
provision. Indeed, as explained earlier in section XVII.B. of this 
final rule, this was a basis for our revision of Sec.  405.1835 of the 
regulations in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 
through 50201 and 50350 through 50351) to eliminate provider 
dissatisfaction as a requirement for Board jurisdiction over appeals 
based on untimely contractor reimbursement determinations. This 
revision was simply a technical correction inasmuch as the amendment to 
Sec.  405.1835 conformed the regulations to the provisions in section 
1878(a)(1)(B) of the Act for Board appeals based on an untimely 
contractor determination. In effect, this amendment to Sec.  405.1835 
restored the full conformity of the regulations with the statutory 
requirements for Board jurisdiction over appeals based on untimely 
contractor determinations--a conformity that obtained before the 2008 
final rule (73 FR 30195 through 30199) inadvertently imposed a provider 
dissatisfaction requirement for Board appeals based on untimely 
contractor determinations.
    As a result of our elimination, in the FY 2015 IPPS/LTCH PPS final 
rule, of the dissatisfaction requirement for Board jurisdiction over 
appeals based on untimely contractor reimbursement determinations, 
providers no longer have to submit an appropriate cost report claim as 
a requirement for Board jurisdiction over such appeals. Our proposal to 
eliminate the requirement under Sec.  405.1835(a)(1) of an appropriate 
cost report claim in order to meet the ``dissatisfied'' jurisdictional 
provision in section 1878(a)(1)(A) of the Act would make uniform this 
aspect of Board jurisdiction over both appeals of timely final 
contractor and Secretary determinations and appeals based on untimely 
final contractor determinations. Specifically, an appropriate cost 
report claim would no longer be required for Board jurisdiction over 
appeals of timely final contractor and Secretary determinations just as 
the same jurisdictional requirement, of an appropriate cost report 
claim, was previously eliminated (in the FY 2015 IPPS/LTCH PPS final 
rule) for appeals based on untimely final contractor determinations.
    We stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28212) 
that, in addition to the sufficient statutory authority for our 
proposed elimination of an appropriate cost report claim as a 
requirement for Board jurisdiction, there

[[Page 70565]]

are sound policy reasons for this proposal. As explained in section 
XVII.D. of this final rule, we believe that, by requiring appropriate 
cost report claims in proposed Sec.  413.24(j), complete and accurate 
determinations of provider reimbursement will be facilitated as will 
many other important aspects of program administration. Thus, because 
we would require an appropriate cost report claim in proposed Sec.  
413.24(j), it is reasonable to eliminate the Board jurisdiction 
requirement in existing Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3) of 
an appropriate cost report claim. We note that once this amendment to 
the Board appeals regulations becomes effective, this proposal will 
facilitate an orderly end to any litigation regarding the Board 
jurisdiction requirement of an appropriate cost report claim.
    As explained above, our proposed revisions to the cost reporting 
regulations and the provider appeals regulations would apply on a 
prospective only basis, to provider cost reporting periods beginning on 
or after the effective date of this final rule. Until these proposed 
regulations take effect, however, the requirement of an appropriate 
cost report claim in Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3) of 
the regulations will continue to be a requirement for Board 
jurisdiction over appeals of timely final contractor reimbursement 
determinations. Thus, until the proposed regulations become effective, 
the Board and the Administrator of CMS will continue to determine Board 
jurisdiction over appeals of timely final contractor determinations by 
reference to the appropriate cost report claim requirements of 
Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3), along with other 
applicable jurisdictional provisions of section 1878 of the Act and 
Sec. Sec.  405.1835 and 405.1840 of the regulations. We believe that, 
because it is essential to require appropriate cost report claims for 
the various reasons that we discussed above, it is necessary and proper 
to continue to require an appropriate cost report claim as a 
prerequisite of Board jurisdiction under Sec. Sec.  405.1835(a)(1) and 
405.1840(b)(3) over appeals of timely final contractor determinations 
until the proposed addition to the cost reporting regulations, of the 
substantive reimbursement requirement of an appropriate cost report 
claim, takes effect.
b. Summary of Public Comments and Our Responses and Finalized Policies
    Comment: Some commenters stated that the proposed revisions to 
Sec.  405.1835 are contrary to section 1878(a)(1)(B) of the Act, which 
provides for appeals to the Board if a final contractor determination 
is not issued timely (as specified in the Secretary's regulations at 
Sec.  405.1835 (c) and (d)) and all jurisdictional requirements are 
satisfied. The commenters further stated that this statutory provision 
does not require provider dissatisfaction for appeals based on untimely 
final contractor determinations, and the Secretary has conceded this 
point in litigation.
    Response: We do not believe the FY 2015 IPPS/LTCH PPS proposed rule 
is inconsistent with section 1878(a)(1)(B) of the Act. Under this 
statutory provision, a provider may appeal to the Board if a final 
contractor determination is not issued timely (as specified in the 
Secretary's regulations) and all jurisdictional requirements are 
satisfied. Section 1878(a)(1)(B) of the Act does not make provider 
dissatisfaction a jurisdictional requirement for Board appeals based on 
untimely final contractor determinations. By contrast, section 
1878(a)(1)(A) of the Act does impose a provider dissatisfaction 
requirement for Board jurisdiction over appeals of a timely final 
contractor or Secretary determination.
    As explained in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50200), 
a provider dissatisfaction jurisdictional requirement, for appeals 
based on untimely final contractor determinations, was inadvertently 
added to the Board appeals regulations in a 2008 final rule (73 FR 
30190)--not, as the commenters asserted, in the FY 2015 IPPS/LTCH PPS 
proposed rule. Instead, based on the FY 2015 IPPS/LTCH PPS proposed 
rule and this final rule, we are eliminating our longstanding 
interpretation of the statutory dissatisfaction requirement for Board 
jurisdiction over appeals of a timely final contractor or Secretary 
determination, an interpretation that required the provider to 
establish its dissatisfaction by submitting an appropriate cost report 
claim. Under the FY 2015 IPPS/LTCH PPS proposed rule and this final 
rule, we are making an appropriate cost report claim a general 
substantive requirement for Medicare payment (in new Sec.  413.24(j)), 
in addition to eliminating (in Sec.  405.1835(a)) an appropriate cost 
report claim as a prerequisite of Board jurisdiction over appeals of a 
timely final contractor or Secretary determination under section 
1878(a)(1)(A) of the Act.
    In effect, the FY 2015 IPPS/LTCH PPS final rule addressed the 
commenters' concerns here about whether the regulations for Board 
appeals based on untimely final contractor determinations are 
consistent with section 1878(a)(1)(B) of the Act. As explained in 
section XVII.B. of this final rule, in the FY 2015 IPPS/LTCH PPS final 
rule, we made a technical correction to Sec.  405.1835 of the Board 
appeals regulations that eliminated the dissatisfaction jurisdictional 
requirement for appeals based on untimely final contractor 
determinations. Under paragraph (c) of Sec.  405.1835, provider 
dissatisfaction is no longer required for appeals based on untimely 
final contractor determinations. As a result of this technical 
correction, the regulations for Board appeals based on untimely final 
contractor determinations are consistent with section 1878(a)(1)(B) of 
the Act. Furthermore, given the amendments to Sec.  405.1835(a)(1) in 
this final rule and the prior technical correction that added paragraph 
(c) to Sec.  405.1835, an appropriate cost report claim is no longer 
required for Board jurisdiction over any appeal.
    Comment: Commenters asserted that the proposed elimination of the 
dissatisfaction requirement for Board jurisdiction is inconsistent with 
section 1878(a)(1)(A) of the Act, which provides for appeals of a 
timely final contractor or Secretary determination if all 
jurisdictional requirements are satisfied. The commenters stated that 
the Supreme Court held in Bethesda Hospital Association v. Bowen, 485 
U.S. 399 (1988) that provider dissatisfaction is a jurisdictional 
requirement for Board appeals based on 42 U.S.C. 1395oo(a)(1)(A) (that 
is, section 1878(a)(1)(A) of the Act).
    Response: We did not propose in the FY 2015 IPPS/LTCH PPS proposed 
rule, and we are not effectuating in this final rule, the elimination 
of provider dissatisfaction as a requirement for Board jurisdiction 
over appeals of a timely final contractor or Secretary determination 
under section 1878(a)(1)(A) of the Act. As the Supreme Court held in 
Bethesda Hospital Association, section 1878(a)(1)(A) of the Act plainly 
makes provider dissatisfaction a requirement for Board jurisdiction. 
Also, this statutory prerequisite of Board jurisdiction over appeals of 
a timely final contractor or Secretary determination is clearly 
reiterated in the existing text of paragraph (a)(1) of Sec.  405.1835, 
and in the preambles for both the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28207 through 28208 and 28212 through 28213) and the technical 
correction provision in the

[[Page 70566]]

FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through 50200).
    While we are not eliminating the provider dissatisfaction 
requirement for Board jurisdiction over appeals of a timely final 
contractor or Secretary determination, we nonetheless can see some 
potential for confusion about this matter due to the specific text of 
proposed Sec.  405.1835. In the FY 2015 IPPS/LTCH PPS proposed rule (79 
FR 28297), paragraph (a) of Sec.  405.1835 retains (and renumbers the 
current paragraphs for) the amount in controversy and timely filing 
requirements for Board jurisdiction, but the statutory dissatisfaction 
requirement was not stated in paragraph (a). This does not mean, 
however, that we proposed to eliminate the provider dissatisfaction 
requirement for Board jurisdiction over appeals of a timely final 
contractor or Secretary determination. As explained above, the preamble 
for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28207 through 28208 
and 28212 through 28213) plainly states that provider dissatisfaction 
is a prerequisite for Board jurisdiction. Also, under that proposed 
rule (79 FR 28297), paragraph (b)(2) of Sec.  405.1835 requires the 
provider to explain why it ``disagrees with'' specific aspects of the 
final contractor or Secretary determination. We believe the reference 
in paragraph (b)(2) to ``disagrees with'' is synonymous with the 
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the 
Act. Moreover, proposed paragraph (b)(2)(iii) (79 FR 28297) would 
require the provider's cost report to include specific details about 
each specific item that ``the provider self-disallows.'' Under our 
prior interpretation of the statutory dissatisfaction requirement for 
Board jurisdiction (existing paragraph (a)(1) of Sec.  405.1835), a 
provider must include a self-disallowance in its cost report for a 
specific item that it believes may not be allowable under Medicare 
payment policy.
    Although we did not propose the elimination of the provider 
dissatisfaction requirement for Board jurisdiction over appeals of a 
timely final contractor or Secretary determination in the FY 2015 IPPS/
LTCH PPS proposed rule, we have concluded, based on consideration of 
the public comments we received, that technical revisions to the 
proposed text of paragraph (a) of Sec.  405.1835 are warranted in order 
to avoid potential confusion about this matter. Accordingly, in this 
final rule, we are revising the proposed introductory text of paragraph 
(a) of Sec.  405.1835 (79 FR 28297) by eliminating the proposed 
reference to items ``claimed in its cost report,'' a technical revision 
that further clarifies our proposed elimination of an appropriate cost 
report claim as a requirement for Board jurisdiction. Moreover, we are 
revising the proposed text of paragraph (a)(1) of Sec.  405.1835 (79 FR 
28297) by revising the dissatisfaction provision in the existing text 
of paragraph (a)(1) so that the provider dissatisfaction requirement 
for Board jurisdiction over appeals of a timely final contractor or 
Secretary determination in Sec.  405.1835(a)(1) will track closely the 
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the 
Act. As a result of these technical revisions to the proposed 
introductory text of paragraph (a) of Sec.  405.1835 and to the 
proposed text of paragraph (a)(1), Sec.  405.1835(a) will state that 
the provider has a right to a Board hearing with respect to a final 
contractor or Secretary determination if the provider is dissatisfied 
with the contractor's final determination of the total amount of 
reimbursement due the provider, as set forth in the contractor's 
written notice under Sec.  405.1803, and the other requirements for 
Board jurisdiction (discussed below) are also satisfied.
    We also are adding paragraph (a)(1)(i) to Sec.  405.1835, which is 
a technical conforming amendment to the revised dissatisfaction 
provision in Sec.  405.1835(a)(1). Under paragraph (a)(1), a provider 
could be dissatisfied with any number of the specific aspects of 
Medicare payment that are finally determined in the contractor's 
original NPR under Sec.  405.1803. However, under our longstanding 
``issue specific'' interpretation of the reopening regulations, Board 
jurisdiction over an appeal involving a reopening is limited under 
Sec. Sec.  405.1887(d) and 405.1889(b) to the specific matters that 
were reopened and revised in the contractor's revised NPR. We refer 
readers, for example, to HCA Health Services of Oklahoma v. Shalala, 27 
F.3d 614 (D.C. Cir. 1994) (the reopening regulations are based on the 
Secretary's general rulemaking authority, and the issue specific 
interpretation of the reopening rules is reasonable and supportive of 
administrative finality). As a technical conforming amendment to the 
revised dissatisfaction provision in Sec.  405.1835(a)(1), the issue 
specific reopening regulations are cross-referenced in paragraph 
(a)(1)(i) of Sec.  405.1835, to specify that if a final contractor 
determination is reopened under Sec.  405.1885, any review by the Board 
must be limited solely to those matters that are specifically revised 
in the contractor's revised final determination (Sec. Sec.  405.1887(d) 
and 405.1889(b), and the ``Exception'' under proposed Sec.  
405.1873(c)(2)(i)). The referenced ``Exception'' in Sec.  
405.1873(c)(2)(i) is a similar cross-reference in new Sec.  405.1873, 
which is addressed in section XVII.E.2.a. of this final rule.
    However, we are not finalizing the proposed revisions (79 FR 28297) 
to paragraphs (a)(2) and (a)(3) of Sec.  405.1835. First, our adoption 
of the above-described technical revision to the dissatisfaction 
jurisdictional requirement in current paragraph (a)(1) of Sec.  
405.1835, obviates any need to renumber either the amount in 
controversy jurisdictional requirement in current paragraph (a)(2) or 
the timely filing jurisdictional requirement in paragraph (a)(3). 
Second, similarly unnecessary are the proposed revisions to the text of 
current paragraph (a)(3), which would have reiterated (in proposed 
Sec.  405.1835(a)(2)(ii)) our longstanding policy for determining 
whether a final contractor determination was issued timely for purposes 
of a Board appeal based on section 1878(a)(1)(B) of the Act. This 
policy is now stated appropriately in Sec.  405.1835(c), a regulation 
we adopted in the technical correction provisions of the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50350 through 50351).
    Comment: One commenter stated that proposed Sec.  
405.1835(a)(2)(ii) conflicts with the Medicare contractor manual 
instructions in CMS Pub. 100-6, chapter 8, sections 10.3 and 90. The 
commenter stated that proposed Sec.  405.1835(a)(2)(ii) includes a 12-
month period for issuance of a timely NPR by the contractor, but the 
two manual sections together instruct the Medicare contractor to issue 
an NPR within a 13-month period. The commenter recommended that CMS 
revise the proposed rule by adopting the same 13-month period for 
determining the timeliness of the contractor's NPR. The commenter also 
suggested an alternative approach that would change the proposed rule's 
beginning date for the 12-month period for determining the timeliness 
of the contractor's NPR.
    Response: We respectfully disagree with the commenter's assertion 
that the two manual sections require the Medicare contractor to issue 
an NPR within a 13-month period. Our longstanding policy is that if the 
contractor does not issue an NPR within 12 months after the date of its 
receipt of the provider's perfected or amended cost report, the 
provider may appeal to the Board within 180 days after the expiration 
of the 12-month period for

[[Page 70567]]

timely issuance of the NPR. As explained in our response to the 
immediately preceding comment, this policy is now stated appropriately 
in Sec.  405.1835(c), a regulation we adopted in the technical 
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50350 through 50351). Accordingly, we do not see any reason to make any 
of the revisions suggested by the commenter.
    Comment: A number of commenters stated that the proposed rule 
conflicts with section 1878(d) of the Act, which authorizes the Board 
to address the full range of reimbursement matters covered by a 
provider's cost report regardless of whether the Medicare contractor 
considered a particular matter in its final determination. The 
commenters asserted that the proposal of making an appropriate cost 
report claim a substantive prerequisite of reimbursement imposes a new 
limit on both the Board's authority and providers' appeal rights that 
is contrary to the Medicare statute.
    Response: We respectfully disagree with the commenters for three 
reasons. First, based on the FY 2015 IPPS/LTCH PPS proposed rule and 
this final rule, we are eliminating our longstanding interpretation of 
the statutory dissatisfaction requirement for Board jurisdiction over 
appeals of a timely final contractor or Secretary determination, an 
interpretation that required the provider to establish its 
dissatisfaction by submitting an appropriate cost report claim. As 
explained above, the elimination of our prior interpretation of the 
dissatisfaction prerequisite of Board jurisdiction under section 
1878(a)(1)(A) of the Act, as requiring an appropriate cost report 
claim, will make it easier for a provider to establish that it meets 
the requirements for Board jurisdiction under section 1878(a) of the 
Act. The Supreme Court held in Bethesda Hospital Association that the 
Board's powers under section 1878(d) of the Act are contingent on the 
provider first meeting the threshold requirements for Board 
jurisdiction as set forth in section 1878(a) of the Act. We see no 
reason why the Board's contingent powers under section 1878(d) of the 
Act would somehow be narrowed by our making it easier for a provider to 
meet the threshold jurisdictional requirements imposed by section 
1878(a) of the Act.
    Second, in the preamble to the 2008 final rule (73 FR 30225 through 
30226), we addressed the Supreme Court's holding in Bethesda Hospital 
Association that the Board's powers under section 1878(d) of the Act 
are contingent on the provider first meeting all the requirements for 
Board jurisdiction in section 1878(a) of the Act. We also revised Sec.  
405.1869 of the regulations (73 FR 30261) to track closely the Supreme 
Court's interpretation of section 1878(d) in the Bethesda Hospital 
Association decision. However, we did not propose any revisions to 
Sec.  405.1869 in the FY 2015 IPPS/LTCH PPS proposed rule, and we did 
not receive public comments suggesting specific revisions to that 
regulation. We believe that if there were a serious question about 
whether this final rule would somehow narrow the Board's contingent 
powers under section 1878(d) of the Act, commenters presumably would 
have suggested specific revisions to Sec.  405.1869 in order to address 
any concerns about the purported effect of the FY 2015 IPPS/LTCH PPS 
proposed rule on the Board's powers under section 1878(d) of the Act. 
Given that this final rule does not narrow the Board's powers under 
section 1878(d) of the Act, we do not believe that revisions to Sec.  
405.1869 are necessary.
    Third, as discussed below, we are adopting a new Sec.  405.1873, 
which addresses in detail Board review of a provider's compliance with 
the general reimbursement requirement of an appropriate cost report 
claim (as prescribed in new Sec.  413.24(j)). Section 405.1873 does not 
narrow the Board's powers under either section 1878(d) of the Act or 
the corresponding provisions of Sec.  405.1869, which is not referenced 
in Sec.  405.1873. Section 405.1873 provides for full review by the 
Board of a provider's compliance with the general reimbursement 
requirement of an appropriate cost report claim. Paragraph (a) of Sec.  
405.1873 provides for such Board review if any party to an appeal 
questions whether the provider's cost report included an appropriate 
claim for a specific item. Under paragraph (b)(1) of Sec.  405.1873, 
the parties must be given an adequate opportunity to submit factual 
evidence and legal argument on the question of whether the provider 
complied with the general reimbursement requirement of an appropriate 
cost report claim; the Board must make findings of fact and conclusions 
of law regarding that question; and those findings and conclusions of 
the Board must be included in the administrative record and they must 
be included in certain overall Board decisions regarding the appeal. 
Moreover, assuming that the provider's appeal meets the requirements 
for Board jurisdiction under section 1878(a) of the Act and Sec.  
405.1835 of the regulations, there is no indication in Sec.  405.1873 
that the Board's contingent powers under section 1878(d) of the Act and 
Sec.  405.1869 of the regulations would somehow not apply fully for 
purposes of Board review of whether the provider complied with the 
general reimbursement requirement of an appropriate cost report claim.
    Comment: Several commenters stated that the proposed rule is 
inconsistent with section 1878(f)(1) of the Act, which authorizes EJR 
if the requirements for Board jurisdiction are satisfied and the Board 
lacks the authority to decide a question of law that is relevant to a 
matter at issue in the provider's appeal. The commenters stated that 
the purpose of the EJR statute is to avoid unnecessary delay in 
adjudicating payment disputes where the Board and the Medicare 
contractor lack the power to decide the matter at issue. The commenters 
further stated that, to the extent the Board and the contractor lack 
the power to decide a relevant legal question, it is arbitrary and 
capricious to require the provider to protest the matter in its cost 
report in order to preserve its statutory right to obtain expedited 
judicial review.
    Response: We respectfully disagree with these comments for a number 
of reasons. The FY 2015 IPPS/LTCH PPS proposed rule did not propose to 
require a provider to protest a matter in its cost report in order to 
preserve its statutory right to request EJR. Under section 1878(f)(1) 
of the Act and Sec.  405.1842 of the regulations, the Board must have 
jurisdiction over the provider's appeal before EJR can be granted as to 
a legal question that is relevant to a matter at issue but is beyond 
the Board's decisional authority. We are now eliminating our 
longstanding interpretation of the statutory dissatisfaction 
requirement for Board jurisdiction, an interpretation that required the 
provider to establish its dissatisfaction by submitting an appropriate 
cost report claim. As explained above, this revision makes it easier 
for a provider to demonstrate that it meets the requirements for Board 
jurisdiction. Given that Board jurisdiction must be established before 
EJR can be granted, we see no reason why the elimination of our prior 
interpretation of the statutory dissatisfaction requirement for Board 
jurisdiction (as requiring an appropriate cost report claim) would 
somehow impede or constrain a provider's right to seek EJR. We believe 
that the elimination of our prior interpretation of the statutory 
dissatisfaction requirement for Board jurisdiction (as requiring an 
appropriate cost report claim) should facilitate a provider's exercise 
of its

[[Page 70568]]

right to seek EJR because this final rule makes it easier for a 
provider to meet the threshold Board jurisdiction prerequisite of any 
request for EJR.
    We also do not believe that the FY 2015 IPPS/LTCH PPS proposed rule 
would undermine the purpose of the EJR statute by causing improper 
delay in the adjudication of payment disputes where the Board lacks the 
authority to decide a relevant legal question. Under section 1878(f)(1) 
of the Act and Sec.  405.1842 of the regulations, a grant of EJR does 
not necessarily resolve the entire Board appeal. Rather, section 
1878(f)(1) of the Act authorizes EJR if the requirements for Board 
jurisdiction are satisfied, and the provider's appeal ``involves a 
question of law or regulations relevant to the matters in controversy'' 
and the Board determines ``that it is without authority to decide the 
question.'' While the Board might lack the authority to decide one 
legal question ``relevant to the matters at issue,'' the Board could 
also have full decisional authority over other questions that are also 
relevant to the matters at issue. For example, the Board has no 
authority to decide a facial challenge to the lawfulness of a provision 
of a payment regulation (42 CFR 405.1867), but the Board can decide the 
separate question of whether other undisputed provisions of the same 
payment regulation were applied properly by the contractor. The latter 
issue (that is, whether the payment regulation was applied properly) is 
a mixed question of law and fact that is within the Board's decisional 
authority, even though the Board lacks the authority to decide the 
former question of whether a provision of the same payment rule is 
lawful.
    As discussed below, we are adopting as final the proposed new Sec.  
405.1873, which addresses Board review of a provider's compliance with 
the general reimbursement requirement of an appropriate cost report 
claim (as prescribed in new Sec.  413.24(j)). The question of whether a 
provider made an appropriate cost report claim for a specific payment 
item is a mixed question of law and fact that is well within the 
Board's decisional authority. If the provider's appeal also raises a 
facial challenge to the lawfulness of the governing regulation for the 
same payment item, the Board has no authority to decide that legal 
question. However, the mixed question of law and fact (that is, whether 
the provider made an appropriate cost report claim for the specific 
payment item at issue), which is plainly within the Board's decisional 
authority, is just as ``relevant to the matters in controversy'' 
(section 1878(f)(1) of the Act) as the question of law (that is, 
whether the payment regulation is lawful) that is beyond the Board's 
decisional authority. Thus, the provider's statutory right to request 
EJR of its facial challenge to the lawfulness of the specific payment 
regulation is not improperly impeded or delayed by the Board's 
discharge of its authority to review and decide the mixed question of 
law and fact of whether the provider complied with the general 
reimbursement requirement of an appropriate cost report claim for the 
same payment item (as prescribed in new Sec.  413.24(j)).
    Indeed, the foregoing principles are clearly reflected in new Sec.  
405.1873. Under paragraph (d)(2) of Sec.  405.1873, if the Board grants 
EJR regarding a question of law that is relevant to the matters at 
issue, its EJR decision must include the Board's findings of fact and 
conclusions of law (if any) about whether the provider's cost report 
included an appropriate claim for the matter at issue, and any such 
findings and conclusions are subject to the same provisions in Sec.  
405.1842(g)(1), (g)(2), (h)(1), and (h)(3) (regarding further review 
and finality) as ``apply to the other parts of the Board's EJR 
decision.'' Similarly, paragraph (f)(2) of Sec.  405.1873 addresses the 
potential reimbursement effects of an EJR decision that both grants EJR 
regarding a question of law that is relevant to the matters at issue, 
and also includes the Board's findings of fact and conclusions of law 
(if any) about whether the provider's cost report included an 
appropriate claim for the matter at issue.
    Comment: One commenter asserted that the proposed rule interferes 
with a provider's right to introduce evidence in a hearing before the 
Board.
    Response: We respectfully disagree with this comment. Under section 
1878(c) of the Act, a provider may be represented by counsel at a Board 
hearing, and introduce evidence and examine and cross-examine witnesses 
at such hearing. The regulations elaborate on these hearing rights 
(Sec. Sec.  405.1845 through 405.1851, 405.1859, and 405.1861) and 
establish additional rights to pre-hearing discovery and subpoenas 
(Sec. Sec.  405.1853 and 405.1857). We do not believe the FY 2015 IPPS/
LTCH PPS proposed rule interferes with a provider's right to introduce 
evidence in a Board hearing or with any of the provider's Board 
procedural rights that are elaborated on, or established in, the above-
referenced regulations.
    None of the foregoing Board procedural regulations is mentioned in 
revised Sec.  405.1835 or in new Sec.  405.1873. As explained above, 
the elimination (in Sec.  405.1835(a)) of our longstanding 
interpretation of the statutory dissatisfaction requirement for Board 
jurisdiction (an interpretation that required the provider to establish 
its dissatisfaction by submitting an appropriate cost report claim) 
makes it easier for a provider to demonstrate that it meets the 
requirements for Board jurisdiction. We believe this revision to Sec.  
405.1835(a), which makes it easier for the provider to establish Board 
jurisdiction, has no bearing on a provider's Board procedural rights 
under section 1878(c) of the Act or the above-referenced regulations. 
More specifically, we see no reason why revisions to the regulations 
that make it easier for a provider to establish Board jurisdiction 
would somehow interfere with the provider's Board procedural rights 
under section 1878(c) of the Act or the above-referenced regulations.
    We believe the same is true of our adoption of new Sec.  405.1873, 
which addresses in detail Board review of a provider's compliance with 
the general reimbursement requirement of an appropriate cost report 
claim (as prescribed in new Sec.  413.24(j)). Far from interfering with 
a provider's right to introduce evidence in a Board hearing (under 
section 1878(c) of the Act) or with any of the provider's Board 
procedural rights that are elaborated on, or established in, the 
regulations, Sec.  405.1873 provides for full review by the Board of 
provider compliance with the general reimbursement requirement of an 
appropriate cost report claim (as prescribed in new Sec.  413.24(j)). 
Under paragraph (b)(1) of Sec.  405.1873, the parties must be given an 
adequate opportunity to submit factual evidence and legal argument on 
the question of whether the provider complied with the general 
reimbursement requirement of an appropriate cost report claim; the 
Board must make findings of fact and conclusions of law regarding that 
question; and those findings and conclusions of the Board must be 
included in both the administrative record and in certain overall Board 
decisions regarding the appeal. Thus, given the broad scope of the 
Board's review under new Sec.  405.1873, we see no reason to believe 
that this regulation would somehow interfere with a provider's right to 
introduce evidence in a Board hearing or with any of the provider's 
Board procedural rights that are elaborated on, or established in, the 
above-referenced regulations.
    Comment: Commenters asserted that shifting the dissatisfaction 
provision from a Board jurisdiction requirement (in Sec.  405.1835) to 
a cost reporting requirement (in new Sec.  413.24) is

[[Page 70569]]

inconsistent with the PPS payment provisions of section 1886 of the 
Act. The commenters stated that most Board appeals now raise PPS 
issues, which do not involve cost-based reimbursement. The commenters 
further stated that the documentation of costs in provider cost reports 
is not relevant to PPS payment, which is set without regard to a 
provider's costs.
    Response: We did not propose shifting the dissatisfaction provision 
from a Board jurisdiction requirement to a cost reporting requirement, 
and we are not adopting such provisions in this final rule. As 
explained above, the Supreme Court held in Bethesda Hospital 
Association that section 1878(a)(1)(A) of the Act clearly makes 
provider dissatisfaction a requirement for Board jurisdiction. This 
statutory prerequisite of Board jurisdiction over appeals of a timely 
final contractor or Secretary determination is plainly stated in the 
current text of paragraph (a)(1) of Sec.  405.1835, and in the 
preambles for both the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28207 
through 28208 and 28212 through 28213) and the technical correction 
provision in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through 
50200). Moreover, in this final rule, we are making a technical 
revision to the dissatisfaction provision in current paragraph (a)(1) 
of Sec.  405.1835 so that the provider dissatisfaction requirement for 
Board jurisdiction over appeals of a timely final contractor or 
Secretary determination in this regulation will track closely the 
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the 
Act.
    Based on the provisions of the FY 2015 IPPS/LTCH PPS proposed rule 
and this final rule, we are eliminating (in Sec. Sec.  405.1835(a)(1) 
and 405.1840(b)(3)) an appropriate cost report claim as a prerequisite 
of Board jurisdiction over appeals of a timely final contractor or 
Secretary determination under section 1878(a)(1)(A) of the Act. 
Furthermore, we are making an appropriate cost report claim a general 
substantive requirement for Medicare payment (in new Sec.  413.24(j)).
    We understand that many Board appeals now present payment issues 
under a PPS. Also, many PPS payments are determined without reference 
to a provider's own costs. However, we respectfully disagree that the 
adoption of an appropriate cost report claim as a general substantive 
requirement for Medicare payment (in new Sec.  413.24(j)) is improper 
simply because some PPS appeals are filed with the Board and some PPS 
payments are determined without reference to a provider's own costs. 
This notion is at odds with the statute and regulations, and with the 
actual workings of the Medicare program.
    In accordance with 42 CFR 412.52, our longstanding policy is that 
hospitals subject to a PPS must meet the cost reporting and 
recordkeeping requirements of Sec. Sec.  413.20 and 413.24. This policy 
fully comports with the Medicare statute. Section 1815(a) of the Act 
generally provides that no payments shall be made to any provider 
unless it has furnished such information as the Secretary may request. 
In addition, section 1878(a) of the Act makes Board appeal rights 
generally contingent on the provider having filed a required cost 
report within the time specified in regulations. More specifically, 
section 1878(a)(1)(A)(ii) of the Act provides that if a hospital 
receives payment under subsection (b) and (d) of section 1886 of the 
Act (that is, the PPS statute) and it submits such reports as the 
Secretary may require, the hospital may obtain a Board hearing with 
respect to such payment.
    Contrary to the commenters' assertion, some payments to PPS 
hospitals are determined on a reasonable cost basis. For example, PPS 
hospitals are reimbursed on a reasonable cost basis for organ 
acquisition services (Sec.  412.113(d)). Because PPS hospitals receive 
both prospectively determined payments and cost-based payments, the 
requisite annual cost report accounts for both types of payment. Upon 
reviewing the hospital's cost report, the contractor's final 
determination is issued in a written NPR. The definition of 
``contractor determination'' (in Sec.  405.1801(a)) and the 
requirements for the NPR (in Sec.  405.1803(a)) each refer specifically 
to both PPS payments and cost-based payments. Given the above-described 
systematic integration of PPS payments and cost-based payments under 
the statute and regulations and in the actual workings of the Medicare 
program, we believe it is entirely reasonable to make the general 
substantive payment requirement of an appropriate cost report claim (in 
new Sec.  413.24(j)) apply to PPS payments as well as cost-based 
payments.
    Comment: Some commenters stated that the proposed rule should only 
apply to appeals of a final contractor determination in an NPR, and not 
to challenges of final payment determinations by the Secretary such as 
those published in the Federal Register. The commenters cited IPPS rate 
determinations as an example, stating their belief that the statute 
provides a separate avenue of appeal for the Secretary's IPPS 
determinations under section 1886(d) of the Act, and the proposed rule 
should not apply to appeals from a notice of an IPPS rate 
determination. The commenters further stated that the U.S. Court of 
Appeals for the District of Columbia Circuit ruled in Washington 
Hospital Center v. Bowen, 795 F.2d 139 (D.C. Cir. 1986) that the filing 
of a cost report is not required for Board jurisdiction over an appeal 
of an IPPS rate determination.
    Response: We respectfully disagree with these comments. First, the 
proposed rule does not impose new requirements for Board jurisdiction 
or otherwise impede Board jurisdiction. On the contrary, the propose 
rule eliminates our longstanding interpretation (in Sec. Sec.  
405.1835(a)(1) and 405.1840(b)(3)) of the dissatisfaction prerequisite 
of Board jurisdiction, as requiring an appropriate cost report claim, 
which makes it easier for providers to meet the requirements for Board 
jurisdiction. Moreover, our elimination of this interpretation of the 
dissatisfaction requirement for Board jurisdiction applies to PPS 
appeals based on clause (ii) of section 1878(a)(1)(A) of the Act, as 
well as other appeals under clause (i) of that statutory provision. 
Also, we are establishing an appropriate cost report claim as a general 
substantive requirement for payment (in new Sec.  413.24(j)), but this 
regulation does not pertain to the requirements for Board jurisdiction.
    Second, for the reasons set forth in our response to the 
immediately preceding comment, we do not believe that the general 
substantive payment requirement of an appropriate cost report claim (in 
new Sec.  413.24(j)) should apply solely to cost-based payments but not 
PPS payments. By definition (in Sec.  405.1801(a)), a final contractor 
determination encompasses both PPS payments and cost-based payments, 
and the term ``contractor determination'' is synonymous with the 
phrases ``intermediary's final determination'' and ``Secretary's final 
determination'' in clauses (i) and (ii), respectively, of section 
1878(a)(1)(A) of the Act. Similarly, the requirements for the NPR (in 
Sec.  405.1803(a)) include specific information about PPS payments as 
well as information regarding cost-based payments. These regulations 
comport with the actual workings of the Medicare program inasmuch as 
PPS hospitals receive some payments that are determined on a reasonable 
cost basis (Sec.  412.113(b)), in addition to receiving prospectively 
determined payments.
    Third, we recognize that clause (ii) of section 1878(a)(1)(A) of 
the Act provides

[[Page 70570]]

for appeal to the Board of the Secretary's final determination of PPS 
payment, but this does not mean that the general substantive payment 
requirement of an appropriate cost report claim (in new Sec.  
413.24(j)) should not apply to PPS payments. Clause (ii) provides for a 
Board hearing with respect to the Secretary's final determination of 
PPS payment, but such Board hearings are contingent on the hospital's 
submission of ``such reports within such time as the Secretary may 
require in order to make payment under such section'' (that is, under 
the PPS statute). Under Sec.  412.52, hospitals subject to PPS must 
satisfy the same cost reporting and recordkeeping requirements as apply 
to other providers pursuant to Sec. Sec.  413.20 and 413.24. Moreover, 
the substantive payment requirement of an appropriate cost report claim 
(in new Sec.  413.24(j)) is especially well-suited for some PPS 
payments. For example, the PPS payment adjustment for hospitals that 
serve a significantly disproportionate share of low income patients is 
determined on the basis of information about patients' eligibility for 
Medicaid benefits and their entitlement to Supplemental Security Income 
(SSI) benefits (Sec.  412.106(b)), but the requisite Medicaid and SSI 
information is not available until after the close of the hospital's 
cost reporting period and so this information is properly included in 
the hospital's cost report for such period.
    Fourth, in the Washington Hospital Center decision, the U.S. Court 
of Appeals for the District of Columbia Circuit held that a hospital 
could appeal its target amount (or hospital-specific rate) to the Board 
under clause (ii) of section 1878(a)(1)(A) of the Act. The court 
reasoned that because the hospital received notice of the target amount 
before its cost reporting period began, it could appeal that notice 
under clause (ii) without waiting for the end of its fiscal period; 
submission of its cost report; and receipt of the contractor's NPR. 
However, the target amount applied during the short transition period 
from cost-based reimbursement to IPPS. As explained above, hospitals 
subject to PPS are still paid on a reasonable cost basis for some items 
such as the direct medical education costs of interns and residents in 
an approved program (Sec.  412.113(b)). Under PPS, hospitals can also 
receive certain payments that are determined on the basis of 
information that is not available until after the close of the 
hospital's cost reporting period and so such information is properly 
included in the hospital's cost report for such period (Sec.  
412.106(b); determination of the payment adjustment for PPS hospitals 
that serve a significantly disproportionate share of low income 
patients is based on information about patients' eligibility for 
Medicaid benefits and their entitlement to SSI benefits but such 
information is not available until after the end of the hospital's cost 
reporting period).
    Fifth, we understand that other PPS payment matters could arise 
where a hospital believes that, as with the target amount notice in 
Washington Hospital Center, it should be allowed to appeal to the Board 
under clause (ii) of section 1878(a)(1)(A) of the Act without awaiting 
the end of its fiscal year, submission of its cost report, and receipt 
of the contractor's NPR. However, we believe that, instead of trying to 
identify specific PPS payment matters that are arguably similar to the 
target amount notice in Washington Hospital Center, it is more 
efficient for the Board to review disputes about whether there was an 
appropriate cost report claim for a specific PPS item in accordance 
with the procedures established in new Sec.  405.1873. Under Sec.  
405.1873, if a party to an appeal questions whether there was an 
appropriate cost report claim for a specific PPS item, the Board must 
take evidence and argument on that question; issue findings of fact and 
conclusions of law on such matter; and include those findings and 
conclusions in both the administrative record and certain types of 
overall Board decisions.
    Comment: One commenter questioned whether the proposed rule would 
foreclose repayment for a claim that, based on a post-payment review, 
was deemed an overpayment and recouped by a contractor, but, on appeal, 
there was a full reversal of the overpayment determination. The 
commenter stated that it is a provider that is reimbursed under the 
periodic interim payment (PIP) method. The commenter further stated 
that specific claims were denied by a Medicare recovery audit 
contractor (RAC), and the MAC then recouped the overpayments for such 
claims by withholding future Medicare payments that otherwise would 
have been paid to the provider. The commenter also stated that when 
specific claim denials and overpayment determinations were reversed as 
a result of its administrative appeals, the MAC then reprocessed the 
specific claims but it did not repay the provider for the overpayment 
amounts on the claim denials because it is a PIP provider. The 
commenter stated that in order to obtain repayment of the overpayment 
amounts, its only option is to appeal the matter to the Board. The 
commenter further stated that, due to the time necessary for 
administrative review and reversal of the specific claim denials and 
overpayment determinations, it would be too late for the provider to 
make an appropriate claim in its cost report for repayment of the 
overpayment amounts on the specific claims, and so the proposed rule 
would foreclose any repayment of the specific claims. The commenter 
also stated that the proposed rule should be revised to facilitate 
payment pursuant to a prior decision in an appeal and, if necessary, 
the filing of a Board appeal.
    Response: We do not agree that the proposed rule would foreclose 
repayment for a claim that, based on a post-payment review, was deemed 
an overpayment and recouped by the MAC, but, on appeal, there was a 
full reversal of the overpayment determination. The situation described 
by the commenter involved individual claims for Medicare benefits, 
which are subject to a separate system of claims determination 
procedures and administrative and judicial review under section 1869 of 
the Act and Subpart I of 42 CFR part 405. Under this Medicare 
administrative appeals process, the MAC issues an initial determination 
regarding coverage and any payment for a claim for Medicare benefits. 
If the provider is dissatisfied with the initial determination, the 
provider may pursue the Medicare administrative appeals process and 
judicial review of any final agency decision (Sec.  405.904(a)(2)). The 
initial determination is final and binding unless changed through an 
appeal (Sec.  405.928). Similarly, each decision in the administrative 
appeals process is final and binding unless altered through further 
administrative or judicial review (Sec. Sec.  405.958, 405.978, 
405.1048, and 405.1130).
    The situation described by the commenter apparently involved the 
reopening of initial determinations for specific benefit claims; review 
and denial of the specific claims by a RAC; issuance by the MAC of 
revised determinations for the specific claims and demands for 
repayment of the overpayment for each claim (Sec. Sec.  405.980 and 
405.982). The commenter stated that after the overpayment amounts were 
recouped from the provider, the overpayment determinations for the 
specific claims were reversed at some stage of the administrative 
appeals process (Sec.  405.984).
    When an overpayment determination for a specific claim is reversed 
in full through the Medicare administrative appeals process, the 
contractor must implement the binding and final appeals decision in 
accordance with the Medicare statute and regulations. In

[[Page 70571]]

situations like those described by the commenter, the contractor would 
revise the overpayment determination and credit the provider for the 
total overpayment amount plus interest (if any) that was recouped 
previously from the provider (Sec.  405.379(d)(8)). When crediting the 
provider, the contractor would not necessarily repay the provider at 
that time. For example, if the provider had not repaid or successfully 
appealed an overpayment determination for a second, different 
individual benefit claim, the overpayment amount for the first claim 
(that is, the overpayment determination that was completely reversed 
through the administrative appeals process) would be applied against 
the unpaid overpayment amount and accrued interest (if any) that might 
be owing for the second claim, before any excess amount is released to 
the provider (Sec. Sec.  405.378(j) and 405.379(g)(1)(i) and (g)(4)). 
Thus, because the provider would receive this full credit for the 
recouped overpayment amount and interest (if any) that was later 
reversed in full through the administrative appeals process for 
individual benefit claims (under section 1869 of the Act and Subpart I 
of 42 CFR part 405), the provider would not need to appeal to the Board 
(under section 1878 of the Act and Subpart R of 42 CFR part 405) in 
order to receive full credit for the overpayment determination that had 
already been reversed in full through the separate appeals process for 
individual benefit claims.
    Moreover, there are strong incentives for the contractor to 
promptly give the provider full credit for the previously recouped 
overpayment amount and interest (if any) after the overpayment 
determination is reversed in full through the administrative appeals 
process. For example, interest might accrue on the overpayment amount 
(Sec.  405.378(b) and (j)). Also, the contractor's performance review 
under its contract with CMS could be affected negatively (Sec. Sec.  
421.120(a) and 421.122(a)).
    We recognize that a provider in the situation described by the 
commenter still might appeal to the Board in order to ensure that the 
provider will receive full credit for the recouped overpayment amount 
and interest (if any) that was reversed in full through the Medicare 
administrative appeals process for individual benefit claims pursuant 
to section 1869 of the Act and Subpart I of 42 CFR part 405. However, 
we believe that our proposed new Sec.  405.1873 and other Board appeals 
regulations are sufficient for Board review and decision in such 
appeals. Under proposed new Sec.  405.1873, if a party to such a Board 
appeal were to question the provider's compliance with the general 
substantive reimbursement requirement of an appropriate cost report 
claim (under new Sec.  413.24(j)), the Board would have to receive 
factual evidence and legal argument on such question; issue specific 
findings of fact and conclusions of law on that matter; and include 
those findings and conclusions in the administrative record and in any 
hearing decision or EJR decision (if EJR is granted) regarding the 
matter at issue.
    As explained above, the statute and regulations require Medicare 
contractors to fully credit the provider for any previously recouped 
overpayment amount and interest (if any) that is later reversed in full 
through the separate appeals process for individual benefit claims, and 
we see no reason why a contractor would not comply with these 
requirements. As a result, we do not believe the provider would need to 
appeal to the Board in order to receive such credit, and our proposed 
new Sec.  405.1873 and other Board appeals regulations are sufficient 
for Board review and decision in such appeals. Moreover, we note that 
the Subpart R regulations address these kinds of issues in the context 
of cost reports and NPRs, similarly to how the above-described 
provisions in the Subpart I regulations apply to individual benefit 
claim determinations and appeals. Specifically, Sec.  405.1803(d) 
provides that, for each final administrative appeal decision or final 
judicial judgment on the merits of a reimbursement issue that stems 
from a cost report and NPR, the contractor must determine the effect of 
the final administrative or judicial decision on program reimbursement 
for the fiscal period at issue; issue any revised final contractor 
determination; and make any additional payment or recoup or offset any 
program payment that might be due for the fiscal year at issue.
    We believe that, given the similar requirements (discussed above) 
for contractor implementation of final administrative decisions on 
individual benefit claims, there is no need for a provider to appeal to 
the Board in order to receive full credit for an earlier final decision 
on such specific claims. However, if the provider still appealed to the 
Board, we believe our proposed new Sec.  405.1873 and other Board 
appeals regulations would be sufficient for Board review and decision 
in such appeals.
    Comment: One commenter questioned CMS' decision to continue 
enforcement of the Board jurisdictional requirement (in current 
Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3)) of an appropriate cost 
report claim until the effective date of a final rule that makes an 
appropriate cost report claim a general substantive reimbursement 
requirement.
    Response: In the preambles for both the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28207 through 28208 and 28212 through 28213) and 
this final rule, we have explained at length the importance of 
requiring an appropriate cost report claim for each payment matter. 
Under this final rule, we are establishing (in new Sec.  413.24(j)) an 
appropriate cost report claim as a general substantive reimbursement 
requirement that will apply to each specific payment item. However, 
that general reimbursement requirement will not apply until the 
prospective effective date of this final rule. In order to maintain our 
longstanding policy of requiring an appropriate cost report claim, our 
only recourse is to continue enforcement of the Board jurisdictional 
requirement (in current Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3)) 
of an appropriate cost report claim until this final rule takes effect.
    After consideration of the public comments we received, we are 
finalizing our proposals as follows. We are adopting our proposal to 
eliminate our interpretation (in Sec. Sec.  405.1835(a)(1) and 
405.1840(b)(3)) that a provider must make an appropriate cost report 
claim for an item in order to meet the dissatisfaction requirement for 
Board jurisdiction over appeals of a timely final contractor 
determination or Secretary determination. More specifically, we are 
adopting technical revisions to the proposed introductory text for 
paragraph (a) of Sec.  405.1835 and to proposed paragraph (a)(1) of 
Sec.  405.1835 so that the dissatisfaction requirement in the 
regulations will more closely track the text of the dissatisfaction 
requirement in section 1878(a)(1)(A) of the Act for Board jurisdiction 
over appeals of a timely final contractor determination or Secretary 
determination. We also are adding a new conforming amendment (that is, 
paragraph (a)(1)(i)) to Sec.  405.1835), which is a necessary cross-
reference to certain reopening regulations (Sec. Sec.  405.1887(d) and 
405.1889(b)) and to a provision in new Sec.  405.1873 (that is, 
paragraph (c)(2)(i)) that cross-references the same reopening 
regulations. In addition, we are finalizing without modification our 
proposal (79 FR 28298) to amend Sec.  405.1840 by removing paragraph 
(b)(3).
    We are not adopting the proposed revisions (79 FR 28297) to either 
of the other two requirements for Board jurisdiction over appeals of a 
timely

[[Page 70572]]

final contractor or Secretary determination. Our adoption of the above-
described technical revision to proposed paragraph (a)(1) of Sec.  
405.1835 obviates any need to renumber the amount in controversy 
jurisdictional requirement in current paragraph (a)(2) or the timely 
filing jurisdictional requirement in current paragraph (a)(3). The 
proposed revisions to the text of current paragraph (a)(3) of Sec.  
405.1835 are not necessary because the essential provisions of such 
proposal are now contained appropriately in Sec.  405.1835(c), a 
regulation we adopted in the technical correction provisions of the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
    We are finalizing without modification the proposed revisions (79 
FR 28297) to paragraphs (b)(1), (b)(2) introductory text, and 
(b)(2)(iii) of Sec.  405.1835. Also, we are adopting a technical 
conforming revision to current paragraph (b)(3) of Sec.  405.1835. 
Specifically, we are adding the term ``final'' before the phrase 
``contractor or Secretary determination'' in paragraph (b)(3). This 
technical revision is necessary to conform paragraph (b)(3) of Sec.  
405.1835 to our revision in this final rule of the definition of 
``contractor determination'' in Sec.  405.1801(a) (discussed in section 
XVII.E.4.b. of this final rule).
    We also are adopting, in paragraphs (e)(1) and (e)(2) of Sec.  
405.1835, the same text that we proposed (79 FR 28297) as revisions to 
paragraphs (c)(1) and (c)(2) of Sec.  405.1835. When the proposed rule 
was published, paragraph (c) of Sec.  405.1835 addressed the addition 
of issues to a pending Board appeal. However, paragraph (c) was later 
redesignated as paragraph (e) of Sec.  405.1835 in the technical 
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50350 through 50351). Accordingly, we are adopting the text of the 
proposed amendments (to paragraphs (c)(1) and (c)(2) of Sec.  405.1835) 
in paragraphs (e)(1) and (e)(2) of Sec.  405.1835 which now addresses 
the addition of issues to a pending Board appeal. However, we are not 
finalizing the proposed revision (79 FR 28297) to paragraph (c)(3) of 
Sec.  405.1835, because the essential provisions of such proposal are 
now contained appropriately in Sec.  405.1835(e)(3), a regulation we 
adopted in the technical correction provisions of the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50350 through 50351).
2. Board Review of Compliance With Cost Report Claim Requirements Under 
Sec.  413.24(j)
a. Proposed Addition of New Sec.  405.1873
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28213 through 
28215 and 28298 through 28300), we proposed to add a new Sec.  405.1873 
to the Board appeals regulations, which would address how the Board 
should proceed when any party to an appeal questions whether a provider 
made an appropriate cost report claim (as required by proposed Sec.  
413.24(j)) for a specific item under appeal. We explained that this new 
regulation is necessary to forestall potential confusion about how the 
substantive reimbursement requirement in proposed Sec.  413.24(j) of an 
appropriate cost report claim for a specific item will pertain to Board 
appeals of the same item.
    Under paragraph (b)(1) of proposed new Sec.  405.1873, the Board 
would consider timely submitted factual evidence and legal argument on, 
and then prepare written specific findings of fact and conclusions of 
law regarding, the question of whether the provider's cost report 
complied with proposed Sec.  413.24(j). The Board would give these 
written specific factual findings and legal conclusions to each party 
to the appeal, and they must be included in the record of 
administrative proceedings for the appeal. Paragraph (b)(2) of proposed 
Sec.  405.1873 provides that, upon giving the parties to the appeal the 
Board's written factual findings and legal conclusions on the question 
of whether the provider's cost report included an appropriate cost 
claim for the specific item under appeal, the Board then must proceed 
to issue one of four types of overall decisions with respect to such 
item. As discussed below, paragraph (d) of proposed Sec.  405.1873 
provides that, if the Board issues either of two types of overall Board 
decisions regarding the specific item under appeal (that is, a hearing 
decision or an expedited judicial review (EJR) decision where EJR is 
granted), the Board's written specific factual findings and legal 
conclusions (reached under proposed Sec.  405.1873(b)) about whether 
there was an appropriate cost report claim for the item, must be 
included in such overall Board decision regarding the specific item, 
along with the other matters that are already required for a Board 
hearing decision or a Board EJR decision where EJR is granted. However, 
under paragraph (e) of proposed Sec.  405.1873, if the Board issues 
either of two other types of overall Board decisions regarding the 
specific item under appeal (that is, a jurisdictional dismissal 
decision or an EJR decision where EJR is denied), the Board's written 
specific factual findings and legal conclusions (pursuant to proposed 
Sec.  405.1873(b)) must not be included in the overall Board decision 
regarding the specific item. In any event, the Board's factual findings 
and legal conclusions about whether there was an appropriate cost 
report claim for the item must be included in the record of 
administrative proceedings for the appeal in accordance with Sec.  
405.1865 of the regulations.
    We believe that, in order to ensure full and appropriate 
implementation of both the addition of the substantive reimbursement 
requirement of an appropriate cost report claim (in proposed Sec.  
413.24(j)) and the elimination of the Board jurisdiction requirement of 
an appropriate cost report claim (in existing Sec. Sec.  405.1835(a)(1) 
and 405.1840(b)(3)), it is necessary to foreclose certain types of 
Board decisions, orders, and other actions. Accordingly, in order to 
give full force and effect to our proposed elimination of the Board 
jurisdiction requirement of an appropriate cost report claim, paragraph 
(c)(1) of new Sec.  405.1873 would prohibit a denial of jurisdiction, a 
declination to exercise jurisdiction, the imposition of a sanction, and 
various other actions by the Board, if any such jurisdictional 
decision, order, sanction, or other specified action is based on (in 
whole or in part) the Board's determination that the provider's cost 
report did not meet the proposed substantive reimbursement requirement 
under proposed Sec.  413.24(j) of an appropriate cost report claim for 
the specific item.
    In some cases, the Board jurisdiction requirement of an appropriate 
cost report claim has been addressed in different but related terms. 
For example, Board jurisdiction has been denied based on the absence, 
in the final contractor determination or Secretary determination under 
appeal, of an adjustment, revision, correction, or other change to the 
specific item under appeal. Another example is that Board jurisdiction 
also has been denied due to the lack of a particular determination by 
the contractor or the Secretary regarding the specific item under 
appeal, in the final contractor determination or Secretary 
determination under appeal. We believe that, in order to give full 
force and effect to the proposed elimination of the Board jurisdiction 
requirement of an appropriate cost report claim, it is also necessary 
to address related terms such as the absence of specific adjustments 
and the lack of particular determinations

[[Page 70573]]

regarding the specific item under appeal. Accordingly, paragraph (c)(2) 
of proposed new Sec.  405.1873 would prohibit a denial of jurisdiction, 
a declination to exercise jurisdiction, the imposition of a sanction, 
and various other actions by the Board, if any such jurisdictional 
decision, sanction, or other specified action is based on (in whole or 
in part) the absence, in the final contractor determination or 
Secretary determination under appeal, of an adjustment, revision, 
correction, or other change to the specific item under appeal, or the 
lack of a particular determination by the contractor or the Secretary 
regarding the specific item in the final contractor determination or 
Secretary determination under appeal. However, paragraph (c)(2)(i) of 
proposed new Sec.  405.1873 includes an important exception: if the 
provider's appeal of the specific item is based on the reopening of 
such item (under Sec.  405.1885 of the regulations) where the specific 
item is not revised, adjusted, corrected, or otherwise changed in a 
revised final contractor determination or Secretary determination, the 
Board must deny jurisdiction over the specific item under appeal (as 
specified in Sec. Sec.  405.1887(d) and 405.1889(b) of the 
regulations). The reopening regulations are an exercise of the 
Secretary's general rulemaking authority under sections 1102 and 1872 
of the Act, and we believe this exception (in proposed Sec.  
405.1873(c)(2)(i)) is necessary to ensure consistency with the above-
referenced reopening regulations, our longstanding ``issue specific'' 
interpretation of the reopening regulations, and the interests of 
administrative finality and efficiency. We refer readers, for example, 
to HCA Health Services of Oklahoma v. Shalala, 27 F.3d 614 (D.C. Cir. 
1994) (the reopening regulations are based on the Secretary's general 
rulemaking authority, and the issue specific interpretation of the 
reopening rules is reasonable and supportive of administrative 
finality).
    Under paragraph (d) of proposed Sec.  405.1873, there are two types 
of Board decisions that must include any specific findings of fact and 
conclusions of law by the Board (reached under paragraph (b) of 
proposed Sec.  405.1873), on the question of whether the provider's 
cost report included an appropriate claim for the specific item under 
appeal. First, paragraph (d)(1) of proposed Sec.  405.1873 provides 
that, if the Board issues a hearing decision on the specific item under 
appeal (under Sec.  405.1871 of the regulations), the Board's specific 
findings of fact and conclusions of law about whether there was an 
appropriate cost report claim for the specific item, must be included 
in such a hearing decision along with the other matters prescribed in 
existing Sec.  405.1871(a). A Board hearing decision addresses whether 
the provider has established that it should receive relief on the 
matter at issue (as specified in Sec.  405.1871(a)(3)). Under proposed 
Sec.  413.24(j), the requirement of an appropriate cost report claim is 
a substantive prerequisite of any payment for the specific item, which 
applies in addition to other payment requirements for the particular 
item (for example, the specific requirements for payment of interest 
expense under Sec.  413.153 of the regulations). We believe that, 
because a Board hearing decision addresses whether the provider has 
established that it meets the substantive requirements for payment of 
the item under appeal whereas an appropriate cost report claim is a 
substantive prerequisite of any payment for the specific item (under 
proposed Sec.  413.24(j)), any factual findings and legal conclusions 
about whether there was an appropriate cost report claim should be 
included in any hearing decision that might be issued by the Board 
regarding the specific item. In addition, we note that if the Board 
elects to issue a hearing decision that also includes factual findings 
and legal conclusions about whether the other payment requirements for 
the specific item were satisfied (in addition to the Board's findings 
and conclusions about whether there was an appropriate cost report 
claim for the item), such a hearing decision (addressing all the 
substantive reimbursement requirements for the specific item) will 
safeguard against piecemeal proceedings before the Board and 
potentially before the Administrator of CMS and a Federal court. 
However, paragraph (d)(1)(ii) of proposed Sec.  405.1873 provides that, 
if the Board determines that the provider's cost report did not include 
an appropriate claim for the specific item under appeal, the Board has 
discretion whether or not to address in its hearing decision whether 
the other substantive reimbursement requirements for the specific item 
are also satisfied.
    Second, paragraph (d)(2) of proposed Sec.  405.1873 provides that, 
if the Board issues an EJR decision where EJR is granted regarding the 
specific item under appeal (as provided for under Sec.  405.1842(f)(1) 
of the regulations), any specific findings of fact and conclusions of 
law by the Board (reached under paragraph (b) of proposed Sec.  
405.1873) about whether there was an appropriate cost report claim for 
the specific item, must be included in such an EJR decision. Section 
1878(f)(1) of the Act and Sec.  405.1842 of the regulations authorize 
EJR if the requirements for Board jurisdiction over a specific item are 
satisfied, and the Board determines that it lacks the authority to 
decide a legal question that is relevant to the specific item under 
appeal. The Administrator of CMS may review the Board's determination 
as to whether there is Board jurisdiction over the specific item, but 
the Administrator may not review the Board's determination as to 
whether it has the authority to decide a relevant legal question. We 
believe that paragraph (d)(2) of proposed Sec.  405.1873 will also 
safeguard against piecemeal proceedings before the Board, the 
Administrator of CMS, and a Federal court. By requiring a Board EJR 
decision that grants EJR to include any factual findings and legal 
conclusions (reached under proposed Sec.  405.1873(b)) about whether 
there was an appropriate cost report claim for the specific item under 
appeal, along with the Board's determinations that the two requirements 
for EJR were satisfied (that is, a finding of Board jurisdiction plus 
the Board's determination that it lacks the authority to decide a legal 
question relevant to the specific item under appeal), piecemeal 
proceedings would be minimized or eliminated because the Board EJR 
decision will encompass both the question of whether there was an 
appropriate cost report claim for the specific item and the relevant 
legal question for which EJR was granted (and for which the Board 
determined that it has no authority to decide such legal question). 
Piecemeal proceedings before the Administrator of CMS would also be 
minimized or eliminated because, under proposed Sec.  405.1875(a)(2)(v) 
(which we discuss separately below), if the Administrator reviews and 
issues an EJR decision on the question of whether there is Board 
jurisdiction over the specific item under appeal, the Administrator 
will also review, and any decision will address, the Board's specific 
findings of fact and conclusions of law about whether there was an 
appropriate cost report claim for the specific item. In turn, our 
proposal to require an EJR decision that grants EJR to include any 
specific factual findings and legal conclusions under proposed Sec.  
405.1873(b) would ensure that when a Federal court exercises its EJR 
authority under section 1878(f)(1) of the Act and Sec.  405.1842 of the 
regulations by reviewing a relevant legal question (for which the Board 
determined it has no decisional authority), the court's review

[[Page 70574]]

can also potentially encompass the final specific findings of fact and 
conclusions of law by the Board or the Administrator, as applicable, 
about whether there was an appropriate cost report claim for the 
specific item. If it is determined, in a final EJR decision that grants 
EJR, that there was an appropriate cost report claim for the specific 
item under appeal, the court may have no occasion to review the final 
specific findings of fact and conclusions of law on the question of 
whether there was an appropriate cost report claim for the specific 
item. However, if it is instead determined, in a final EJR decision 
that grants EJR, that the provider's cost report did not include an 
appropriate claim for the specific item under appeal, the court can 
potentially review in one proceeding the final specific findings of 
fact and conclusions of law about whether there was an appropriate cost 
report claim for the specific item, along with the relevant legal 
question for which EJR was granted (and for which the Board determined 
that it has no authority to decide such legal question).
    However, paragraph (e) of proposed new Sec.  405.1873 would provide 
that there are two other types of Board decisions that must not include 
any specific findings of fact and conclusions of law by the Board 
(reached under proposed Sec.  405.1873(b)), on the question of whether 
the provider's cost report included an appropriate claim for the 
specific item under appeal. On the one hand, paragraph (e)(1) of 
proposed new Sec.  405.1873 would provide that if the Board issues a 
jurisdictional dismissal decision on the specific item under appeal 
(under Sec.  405.1840(c)), the Board's specific findings of fact and 
conclusions of law about whether there was an appropriate cost report 
claim for the specific item must not be included in such a 
jurisdictional dismissal decision. When the Board issues a 
jurisdictional dismissal decision on a specific item under appeal, the 
Board's denial of jurisdiction obviates any need to address the 
question of whether the substantive reimbursement requirements that are 
specific to the particular item (for example, the specific requirements 
for payment for certain depreciation under Sec.  413.134) are 
satisfied. Because the requirement of an appropriate cost report claim 
for each specific item is also a substantive prerequisite of any 
payment for the specific item (as prescribed in proposed Sec.  
413.24(j)), a denial of jurisdiction over the specific item also 
obviates any need to address the substantive reimbursement requirement 
of an appropriate cost report claim in the Board's jurisdictional 
dismissal decision.
    Similarly, under paragraph (e)(2) of proposed new Sec.  405.1873, 
if the Board issues an EJR decision where EJR is denied on the specific 
item under appeal (under Sec.  405.1842(f)(2)), the Board's specific 
findings of fact and conclusions of law (reached under paragraph (b) of 
proposed new Sec.  405.1873) about whether there was an appropriate 
cost report claim for the specific item, must not be included in such 
an EJR decision. If EJR is denied solely because the Board determines 
that it does have the authority to decide the legal question relevant 
to the specific item under appeal, the Board would conduct further 
proceedings and issue another decision (as specified in Sec.  
405.1842(h)(2)(i)). If such further decision is a hearing decision, 
under proposed Sec.  405.1873(d)(1), the Board's factual findings and 
legal conclusions (under proposed Sec.  405.1873(b)) about whether 
there was an appropriate cost report claim must be included in the 
Board's hearing decision; if the Board elects to also include in the 
hearing decision its factual findings and legal conclusions about 
whether the other reimbursement requirements for the specific item are 
satisfied, piecemeal proceedings before the Board and potentially 
before the Administrator of CMS and a Federal court would be minimized 
or eliminated. However, if EJR is denied because the Board lacked 
jurisdiction over the specific item under appeal, the Board's factual 
findings and legal conclusions about whether there was an appropriate 
cost report claim must not be included in such an EJR decision; as 
explained above regarding Board jurisdictional dismissal decisions, the 
denial of Board jurisdiction in such an EJR decision obviates the need 
to address the substantive reimbursement requirement of an appropriate 
cost report claim, just as there is no need to consider other payment 
requirements for the particular item under appeal.
    Paragraph (f) of proposed new Sec.  405.1873 addresses the various 
effects of the Board's factual findings and legal conclusions (reached 
under paragraph (b) of proposed Sec.  405.1873) regarding whether there 
was an appropriate cost report claim in the two types of Board 
decisions where such factual findings and legal conclusions must be 
included--Board hearing decisions, and Board EJR decisions where EJR is 
granted. An appropriate cost report claim for a specific item is a 
necessary, but not sufficient, condition for Medicare payment for the 
specific item. This is because the requirement of an appropriate cost 
report claim for each specific item is a substantive prerequisite of 
any payment for the specific item (as prescribed in proposed Sec.  
413.24(j)), but all other payment requirements (for example, the 
particular requirements for payment for certain bad debts under Sec.  
413.89) also must be satisfied. Accordingly, under paragraph (f)(1) of 
proposed new Sec.  405.1873, if the Board determines, as part of a 
final hearing decision, that the provider's cost report included an 
appropriate claim for the specific item under appeal (as prescribed in 
Sec.  413.24(j)), payment for the specific item would be made in 
accordance with Medicare policy, but only if the Board further 
determines in such hearing decision that all the other substantive 
reimbursement requirements for the specific item are also satisfied. 
Conversely, if the Board determines, in a final hearing decision, that 
the cost report lacked an appropriate claim for the specific item under 
appeal, payment for the specific item would not be made, regardless of 
whether the Board further determines in such hearing decision that the 
other substantive reimbursement requirements for the specific item are 
satisfied.
    Similarly, paragraph (f)(2) of proposed new Sec.  405.1873 provides 
that, if the Board or the Administrator of CMS (as applicable) 
determines, as part of a final EJR decision where EJR is granted, the 
provider's cost report included an appropriate claim for the specific 
item under appeal (as prescribed in Sec.  413.24(j)), payment for the 
specific item would be made in accordance with Medicare policy, but 
only to the extent permitted by the final decision of a Federal court 
under the EJR provisions of section 1878(f)(1) of the Act (see also 
Sec. Sec.  405.1842 and 405.1877) regarding the legal question that is 
relevant to the specific item (but for which the Board determined it 
has no decisional authority). By contrast, if the Board or the 
Administrator of CMS (as applicable) determines, in a final EJR 
decision where EJR is granted, that the cost report lacked an 
appropriate claim for the specific item under appeal, payment for the 
specific item would not be made unless: (i) The specific factual 
findings and legal conclusions by the Board or the Administrator of 
CMS, as applicable, about whether there was an appropriate cost report 
claim for the specific item are reversed or modified by the final 
decision of a Federal court (in accordance with section 1878(f)(1) of 
the Act and Sec.  405.1877 of the regulations)); and (ii) only to the 
extent permitted by the final decision of a

[[Page 70575]]

Federal court under the EJR provisions of section 1878(f)(1) of the Act 
(see also Sec. Sec.  405.1842 and 405.1877 of the regulations) 
regarding the legal question that is relevant to the specific item (but 
for which the Board determined it has no decisional authority).
b. Summary of Public Comments and Our Responses and Finalized Policies
    Following are summaries of public comments that were received in 
response to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28206 
through 28217).
    Comment: One commenter stated that the proposed addition of Sec.  
405.1873 would result in an inappropriate intrusion into the Board's 
decision making process. The commenter stated that proposed Sec.  
405.1873 would hamper the Board's ability to serve an independent role 
by imposing strict requirements on the scope and content of Board 
review.
    Response: We respectfully disagree with this comment. Section 
405.1873 authorizes full Board review of provider compliance with the 
general substantive reimbursement requirement of an appropriate cost 
report claim (as prescribed in new Sec.  413.24(j)). The criteria for 
Board review of such matters are set forth in Sec.  413.24(j), but this 
is no different than the Board having to review a specific 
reimbursement claim by reference to the particular standards set forth 
in the pertinent payment regulation. For example, the Board must apply 
the specific requirements for reimbursement of interest expense 
pursuant to Sec.  413.153, in order to fully consider and decide 
whether the specific requirements for interest expense reimbursement 
are satisfied. New Sec.  413.24(j) adds the general substantive 
reimbursement requirement of an appropriate cost report claim, which 
also must be satisfied for reimbursement of interest expense or any 
other item. While the Board must review questions about compliance with 
the general substantive reimbursement requirement of an appropriate 
cost report claim in accordance with the procedures in proposed Sec.  
405.1873, the other provisions of section 1878 of the Act and 42 CFR 
part 405, subpart R also generally apply to Board review of questions 
about whether there was an appropriate cost report claim just as those 
other statutory and regulatory provisions generally apply to Board 
review of the specific reimbursement requirements for a particular item 
like interest expense.
    Paragraph (b)(1) of proposed Sec.  405.1873 does not impose 
specific limitations on the Board's findings of fact and conclusions of 
law regarding the provider's compliance with the general substantive 
reimbursement requirement of an appropriate cost report claim (as 
prescribed in new Sec.  413.24(j)). However, after the Board reaches 
such factual findings and legal conclusions, paragraph (c) of proposed 
Sec.  405.1873 would impose certain limits on the Board's actions with 
respect to those findings and conclusions. However, the restrictions on 
the Board's actions in paragraph (c) are simply aimed at ensuring that 
the requirement of an appropriate cost report claim (as prescribed in 
new Sec.  413.24(j)) is applied as a general substantive reimbursement 
requirement instead of as a jurisdictional requirement that might 
otherwise underlie a potential jurisdictional dismissal decision or a 
declination of the exercise of jurisdiction by the Board.
    The foregoing point is underscored by paragraph (e)(1) of proposed 
Sec.  405.1873, which states that if the Board issues a jurisdictional 
dismissal decision, such a decision must not include the Board's 
findings of fact and conclusions of law regarding the provider's 
compliance with the general substantive reimbursement requirement of an 
appropriate cost report claim. We believe that proposed paragraph 
(e)(1) should further ensure that the requirement of an appropriate 
cost report claim (as prescribed in Sec.  413.24(j)) is applied as a 
general substantive reimbursement requirement instead of as a 
jurisdictional requirement that might otherwise underlie a potential 
jurisdictional dismissal decision or a declination of the exercise of 
jurisdiction by the Board.
    Comment: Some commenters stated that if a provider does not include 
an appropriate claim for a specific item in its cost report, it would 
not receive payment for that item and it also would lose the ability to 
appeal that item to the Board. The commenters stated that the Board 
should maintain the ability to make final determinations regarding 
claims disagreements.
    Response: We believe that proposed new Sec.  413.24(j) and proposed 
new Sec.  405.1873 clearly state that a provider can appeal a specific 
item to the Board, even if the contractor previously determined that 
the cost report did not include an appropriate claim for the particular 
item. Also, under proposed Sec.  405.1873(f)(1)(i), reimbursement for 
the specific item would be supported if the Board issues a hearing 
decision on the merits of the provider's appeal, and the Board rules 
that the provider complied with Sec.  413.24(j) and all the specific 
requirements for payment of the particular item.
    As discussed above, Sec.  413.24(j)(4) states that if a provider's 
cost report does not include an appropriate claim for a specific item, 
the final contractor determination should not include payment for the 
item. However, Sec.  413.24(j)(5) states that if the provider appeals a 
specific item to the Board and any party then questions the provider's 
compliance with the general substantive reimbursement requirement of an 
appropriate cost report claim for the item, the Board should review 
such questions in accordance with the procedures set forth in Sec.  
405.1873.
    Paragraph (d)(1) of proposed Sec.  405.1873 provides that if the 
Board issues a hearing decision on the merits of the provider's appeal, 
the hearing decision must include the Board's factual findings and 
legal conclusions regarding compliance with the general substantive 
reimbursement requirement of an appropriate cost report claim. 
Moreover, paragraph (f)(1)(i) of proposed Sec.  405.1873 states that if 
the Board determines in such hearing decision that the provider's cost 
report included an appropriate claim for the specific item at issue, 
and that the provider satisfied all the other substantive reimbursement 
requirements for such item, the specific item at issue is reimbursable 
in accordance with Medicare policy. Thus, a Board hearing decision can 
support reimbursement for a specific item, even if the final contractor 
determination did not include reimbursement for the item because the 
contractor determined that an appropriate cost report claim was not 
made.
    Comment: One commenter stated that Board jurisdiction over the 
appeal of an item would depend on whether the contractor accepted the 
provider's specific reporting of the item in its cost report.
    Response: We respectfully disagree with this comment. As a result 
of our revisions to Sec.  405.1835(a)(1) and removal of Sec.  
405.1840(b)(3), an appropriate cost report claim for a specific item is 
no longer a jurisdictional requirement for Board appeals. Moreover, as 
explained in our response to the preceding comment, we believe that, 
under new Sec.  413.24(j) and new Sec.  405.1873, a provider can appeal 
a specific item to the Board, even if the contractor previously 
determined that an appropriate cost report claim for the item was not 
made. Indeed, proposed Sec.  405.1873(f)(1)(i) provides that 
reimbursement for the specific item would be supported if the Board 
issues a hearing decision on the merits of the

[[Page 70576]]

provider's appeal, and concludes that there was an appropriate cost 
report claim for the item at issue and that all the specific 
reimbursement requirements for the particular item were satisfied.
    Comment: Some commenters stated that the procedures in proposed 
Sec.  405.1873 for Board review of compliance with the general 
substantive reimbursement requirement of an appropriate cost report 
claim would promote piecemeal litigation instead of avoiding it.
    Response: We continue to believe that proposed Sec.  405.1873 would 
facilitate the avoidance of piecemeal litigation. Under paragraph (d) 
of Sec.  405.1873, the Board's factual findings and legal conclusions 
about compliance with the general substantive reimbursement requirement 
of an appropriate cost report claim under new Sec.  413.24(j) must be 
included in any hearing decision or EJR decision where EJR is granted. 
Hearing decisions, and EJR decisions where EJR is granted, end the 
Board's consideration of the specific item at issue (Sec. Sec.  
405.1842(h)(1) and 405.1871(b)(1)). Moreover, if the Administrator of 
CMS reviews the Board's hearing decision or the Board jurisdiction 
component of the two-part EJR decision (Sec.  405.1875(a)(2)), the 
Administrator's decision ends the administrative appeals proceedings 
regarding the specific item unless the matter is remanded to the Board 
for further proceedings (Sec.  405.1875(e)(4)(iii)). In any event, 
piecemeal litigation would be avoided.
    Paragraph (e) of Sec.  405.1873 provides that if the Board issues a 
jurisdictional dismissal decision, or an EJR decision where EJR is 
denied, regarding the specific matter at issue, the Board's factual 
findings and legal conclusions about compliance with the general 
substantive reimbursement requirement of an appropriate cost report 
claim under new Sec.  413.24(j) must not be included in the 
jurisdictional dismissal decision or the EJR decision where EJR is 
denied. A jurisdictional dismissal decision regarding the specific item 
is final and binding unless the decision is reversed or modified by the 
CMS Administrator or a Federal court (Sec.  405.1840(c)(3)). If the 
Board's jurisdictional dismissal decision were reversed or modified on 
review, the matter would typically be remanded for further proceedings 
on the merits of the reimbursement matter at issue. This comports with 
the general administrative law principle that a remand is the usual 
remedy when one issue is finally resolved on administrative or judicial 
review, but other issues still must be decided in the same case.
    If the Board denies EJR on jurisdictional grounds, our statements 
in the preceding paragraph about jurisdictional dismissal decisions 
would also apply to EJR decisions where EJR is denied on jurisdictional 
grounds. If EJR is denied because the Board determines that it has the 
requisite authority to decide all aspects of the matter at issue, the 
denial of EJR is an interlocutory decision (Sec.  405.1842(h)(2)). If 
the Board later issues a hearing decision on the specific item, its 
factual findings and legal conclusions regarding compliance with the 
general substantive reimbursement requirement of an appropriate cost 
report claim under new Sec.  413.24(j) must be included in the hearing 
decision. As explained above, a Board hearing decision or a final 
decision by the CMS Administrator, as applicable, would end the 
administrative appeals proceedings regarding the specific item. In any 
event, piecemeal litigation would be avoided.
    Comment: One commenter stated that it is not clear whether the 
Board's specific findings of fact and conclusions of law relating to 
Sec.  413.24(j) are subject to judicial review.
    Response: We believe that, under proposed Sec.  405.1873, the 
Board's specific findings of fact and conclusions of law regarding 
compliance with Sec.  413.24(j) are subject to judicial review. First, 
Sec.  405.1873(b)(1) provides that the Board's factual findings and 
legal conclusions must be included in the administrative record. 
Judicial review of a final agency decision would be based on the 
administrative record under section 1878(f)(1) of the Act, which 
incorporates the ``whole record'' provision for judicial review under 
the Administrative Procedure Act (APA) (5 U.S.C. 706).
    As explained above, the Board's specific findings of fact and 
conclusions of law regarding compliance with Sec.  413.24(j) must be 
included in any hearing decision or EJR decision where EJR is granted. 
In either case, the final agency decision of the Board or the CMS 
Administrator, as applicable, is subject to judicial review under 
section 1878(f)(1) of the Act (Sec.  405.1877(a)).
    Under proposed Sec.  405.1873(e), the Board's specific findings of 
fact and conclusions of law regarding compliance with the general 
substantive reimbursement requirement of an appropriate cost report 
claim (under new Sec.  413.24(j)) must not be included in a 
jurisdictional dismissal decision or an EJR decision where EJR is 
denied. However, a final jurisdictional dismissal decision by the Board 
or the CMS Administrator, as applicable, is subject to judicial review. 
If a Federal court reverses or modifies a final jurisdictional 
dismissal decision, the merits of the specific payment item at issue 
would be remanded. If such remand proceedings were to end with a final 
hearing decision or an EJR decision where EJR is granted, the Board's 
specific findings of fact and conclusions of law regarding compliance 
with Sec.  413.24(j) would be included in such hearing decision or EJR 
decision under proposed Sec.  405.1873(d). A final hearing decision or 
a final EJR decision where EJR is granted, including the Board's 
factual findings and legal conclusions regarding compliance with Sec.  
413.24(j), would be subject to judicial review under section 1878(f)(1) 
of the Act (Sec.  405.1877(a)).
    After consideration of the public comments we received, we are 
finalizing new Sec.  405.1873 as proposed without modification.
3. Related Revisions to Sec.  405.1875 Regarding Administrator Review
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28215 through 
28216 and 28300), we proposed two revisions to Sec.  405.1875 of the 
regulations, which provides for review by the Administrator of CMS of 
certain Board decisions, orders, and other actions. We believe these 
revisions will facilitate the full and appropriate implementation of 
our proposals (discussed above) to add the substantive reimbursement 
requirement of an appropriate cost report claim (in proposed Sec.  
413.24(j)), to eliminate the Board jurisdiction requirement of an 
appropriate cost report claim (in existing Sec. Sec.  405.1835(a)(1) 
and 405.1840(b)(3)), and to add specific procedures for Board review of 
questions about compliance with the substantive reimbursement 
requirement of an appropriate cost report claim (in proposed new Sec.  
405.1873).
    First, under existing Sec.  405.1875(a)(2) of the regulations, the 
Administrator may review a Board hearing decision, a Board dismissal 
decision, the Board's jurisdictional determination in an EJR decision 
(but not the Board's determination, in an EJR decision, of whether it 
has the authority to decide a relevant legal question), and any other 
Board decision or action deemed to be final by the Administrator. We 
proposed to add a new paragraph (a)(2)(v) to Sec.  405.1875, which 
would provide that if the Administrator reviews a Board hearing 
decision, or the jurisdictional component of a Board EJR decision where 
EJR is granted, regarding a

[[Page 70577]]

specific item, the Administrator's review of such a hearing decision or 
such an EJR decision, as applicable, will include, and any decision 
issued by the Administrator under Sec.  405.1875(e) of the regulations 
will address, the Board's specific findings of fact and conclusions of 
law in such hearing decision or EJR decision (as prescribed in proposed 
Sec.  405.1873(b) and (d)) on the question of whether the provider's 
cost report included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j)). We explained that this 
proposed revision to Sec.  405.1875(a)(2) is an important additional 
safeguard against piecemeal proceedings in the administrative appeals 
process and potentially before a Federal court. As explained above with 
respect to proposed Sec.  405.1873(d)(1), if the Board elects to issue 
a hearing decision that also includes factual findings and legal 
conclusions about whether the other payment requirements for the 
specific item were satisfied (in addition to the Board's findings and 
conclusions about whether there was an appropriate cost report claim 
for the item), all of the payment requirements for the specific item 
would be presented in one Board hearing decision for purposes of any 
review by the Administrator (under proposed Sec.  405.1875(a)(2)(v)) 
and a Federal court. Moreover, for the specific reasons set forth above 
regarding proposed Sec.  405.1873(d)(2), our proposal to require that 
the Board's factual findings and legal conclusions about whether there 
was an appropriate cost report claim for the item be included in an EJR 
decision where EJR is granted would also minimize or eliminate 
piecemeal proceedings before the Board and, given the proposed addition 
of Sec.  405.1875(a)(2)(v), before the Administrator of CMS and a 
Federal court.
    Second, existing Sec.  405.1875(a) requires the Board to promptly 
send copies of hearing decisions and EJR decisions to the Office of the 
Attorney Advisor. Although the Board often (perhaps typically) sends 
copies of dismissal decisions to the Office of the Attorney Advisor, 
the Board is not required to so. We proposed to amend the last sentence 
of paragraph (a) of Sec.  405.1875 by requiring the Board to promptly 
send copies of dismissal decisions to the Office of the Attorney 
Advisor. We stated that this proposed revision will facilitate the 
Administrator's exercise of his discretion under Sec.  
405.1875(a)(2)(ii) as to whether to review specific Board dismissal 
decisions. Also, given our proposals to eliminate the Board 
jurisdiction requirement of an appropriate cost report claim (in 
current Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3)) and to add 
procedures for Board review of compliance with the substantive 
reimbursement requirement of an appropriate cost report claim (in new 
Sec.  405.1873)), we stated that our further proposal to require the 
Board to promptly send copies of dismissal decisions to the Office of 
the Attorney Advisor will enhance the Administrator's ability to ensure 
full and appropriate implementation of our proposed revisions to the 
Board appeals regulations.
    We did not receive any public comments on our proposed revisions to 
Sec.  405.1875. Accordingly, we are finalizing our proposed revisions 
to Sec.  405.1875 without modification.
4. Conforming Changes to the Board Appeals Regulations and 
Corresponding Revisions to the Contractor Hearing Regulations
a. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts 
of 42 CFR Part 413
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216 through 
28217), we proposed a number of technical revisions and conforming 
changes to various provisions in part 405, subpart R and part 413. We 
proposed a general technical revision of certain terminology that 
recurs throughout 42 CFR part 405 subpart R and all subparts of 42 CFR 
part 413. Specifically, we proposed to conform the terminology in 42 
CFR part 405 subpart R and all subparts of 42 CFR part 413, by 
replacing the term ``intermediary'' and its various permutations with 
the term ``contractor'' and its own permutations, in accordance with 
sections 1816, 1874A, and 1878 of the Act. We did not receive any 
public comments on this proposal. Accordingly, we adopted this proposal 
as final in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 and 
50351).
b. Technical Corrections and Conforming Changes to Sec. Sec.  405.1801 
and 405.1803
    In accordance with the above-described general technical revision 
proposal (that is, to replace the term ``intermediary'' and its various 
permutations with the term ``contractor'' and its own permutations 
throughout 42 CFR part 405 subpart R and all subparts of 42 CFR part 
413), we specifically proposed (79 FR 28216) to replace the term 
``intermediary determination'' in Sec.  405.1801(a) with the term 
``contractor determination.'' As a result of our ensuing adoption in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 and 50351) of the 
above-described general technical revision in terminology, the term 
``intermediary determination'' has been replaced by the term 
``contractor determination'' in both Sec.  405.1801(a) and Sec.  
405.1803(a).
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216), we also 
proposed to revise the definition of ``intermediary determination'' 
(now called ``contractor determination'') in Sec.  405.1801(a), to 
clarify that such contractor determinations are final as set forth in 
section 1878(a) of the Act. Moreover, we proposed to revise the cross-
reference in Sec.  405.1801(b), from the existing Sec.  413.24(f) to 
Sec.  413.24 generally, a revision that we believe is appropriate due 
to the proposed addition of paragraph (j) to Sec.  413.24. We also 
proposed to revise Sec.  405.1803(a) to refer to the final contractor 
(instead of intermediary) determination as set forth in Sec.  
405.1801(a).
    We did not receive any public comments on any of the above-
described proposals. Accordingly, in this final rule, we are adopting 
as final the proposal to revise the definition of ``intermediary 
determination'' (now called ``contractor determination'') in Sec.  
405.1801(a), to clarify that such contractor determinations are final 
as set forth in section 1878(a) of the Act. Also, in this final rule, 
we are adopting as final the proposal to revise Sec.  405.1801(b) to 
include a cross-reference to Sec.  413.24 generally. Moreover, in this 
final rule, we are adopting as final the proposal to revise Sec.  
405.1803(a) to refer to the final contractor determination as set forth 
in Sec.  405.1801(a).
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216 and 28295), 
we proposed to revise the first cross-reference in Sec.  405.1803(a) 
from paragraph (a)(3) of Sec.  405.1835 to proposed paragraph 
(a)(2)(ii) of Sec.  405.1835. Although we did not receive any public 
comments on this proposal, we are not adopting the proposal in this 
final rule.
    As explained in section XVII.E.1.b. of this final rule, we are not 
finalizing proposed Sec.  405.1835(a)(2)(ii), which would have 
reiterated our longstanding policy for determining whether a final 
contractor determination was issued timely for purposes of a Board 
appeal based on section 1878(a)(1)(B) of the Act. This policy is now 
stated appropriately in Sec.  405.1835(c), a regulation we adopted in 
the technical correction provisions of the FY 2015

[[Page 70578]]

IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
    However, we are adopting in this final rule a conforming amendment 
to Sec.  405.1803(a). Specifically, we are revising the first cross-
reference in current Sec.  405.1803(a) from paragraph (a)(3) of Sec.  
405.1835 to current paragraph (c)(1) of Sec.  405.1835.
c. Technical Corrections and Conforming Changes to Sec. Sec.  405.1811, 
405.1813, and 405.1814
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216), we also 
proposed revisions to the existing regulations for contractor hearing 
officer appeals, which are similar to the proposed revisions to the 
Board appeals regulations. Specifically, we proposed to eliminate an 
appropriate cost report claim as a jurisdictional requirement for 
contractor hearing officer appeals (in existing Sec. Sec.  
405.1811(a)(1) and 405.1814(b)(3)). As discussed in the next section, 
we also proposed to add a new Sec.  405.1832 that (like new Sec.  
405.1873 for Board appeals) would detail the procedures for contractor 
hearing officer review of compliance with the substantive reimbursement 
requirement of an appropriate cost report claim (as prescribed in 
proposed Sec.  413.24(j)). In addition, we proposed a technical 
revision to the existing cross-references in Sec.  405.1813(a) and (b), 
in order to reflect the proposed revisions to Sec.  405.1811. As 
explained in the proposed rule, the above-described revisions to the 
regulations for contractor hearing officer appeals comport with our 
usual practice of adopting similar regulations for both Board appeals 
and for contractor hearing officer appeals unless there is a sufficient 
reason to do otherwise.
    We did not receive any public comments on these technical 
correction proposals to the existing regulations for contractor hearing 
officer appeals. In this final rule, we are revising the contractor 
hearing provisions of Sec. Sec.  405.1811 and 405.1814 to track very 
closely the revisions we are adopting (in section XVII.E.1. of this 
final rule) to the Board hearing provisions of Sec. Sec.  405.1835 and 
405.1840. Accordingly, we are adopting our proposal to eliminate our 
interpretation (in Sec. Sec.  405.1811(a)(1) and 405.1814(b)(3)) that a 
provider must make an appropriate cost report claim for an item in 
order to meet the dissatisfaction requirement for contractor hearing 
officer jurisdiction over appeals of a timely final contractor 
determination or Secretary determination. More specifically, we are 
adopting technical revisions to the proposed introductory text for 
paragraph (a) of Sec.  405.1811 and to proposed paragraph (a)(1) of 
Sec.  405.1811 for contractor hearing officer appeals that will closely 
track our technical revisions to the proposed introductory text for 
paragraph (a) of Sec.  405.1835 and to proposed paragraph (a)(1) of 
Sec.  405.1835 for Board appeals. Also, as with our adoption of the 
conforming amendment in paragraph (a)(1)(i) of Sec.  405.1835 for Board 
appeals, we are adopting a very similar conforming amendment in 
paragraph (a)(1)(i) of Sec.  405.1811. As with the corresponding 
technical revisions and conforming changes in the proposed introductory 
text for paragraph (a) of Sec.  405.1835 and to proposed paragraphs 
(a)(1) and (a)(1)(i) of Sec.  405.1835(a), these technical revisions 
and conforming amendment to Sec.  405.1811(a) will dispel potential 
confusion about the dissatisfaction jurisdictional requirement for 
contractor hearing officer appeals of a timely final contractor or 
Secretary determination.
    In addition, we are finalizing without modification our proposal to 
amend Sec.  405.1814 by removing paragraph (b)(3), just as we are 
removing paragraph (b)(3) of Sec.  405.1840 for Board appeals.
    In this final rule, we are similarly revising various other 
contractor hearing officer regulations to track very closely the 
revisions we are adopting (in section XVII.E.1. of this final rule) to 
the Board appeals regulations. We are not adopting the proposed 
revisions (79 FR 28295) to either of the other two requirements for 
contractor hearing officer jurisdiction over appeals of a timely final 
contractor or Secretary determination. Our adoption of the above-
described technical revision to proposed paragraph (a)(1) of Sec.  
405.1811 obviates any need to renumber the amount in controversy 
jurisdictional requirement in current paragraph (a)(2) or the timely 
filing jurisdictional requirement in current paragraph (a)(3). The 
proposed revisions to the text of current paragraph (a)(3) of Sec.  
405.1811 are not necessary because the essential provisions of such 
proposal are now contained appropriately in Sec.  405.1811(c), a 
regulation we adopted in the technical correction provisions of the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
    We are finalizing without modification the proposed revisions (79 
FR 28297) to paragraphs (b)(1), (b)(2) introductory text, and 
(b)(2)(iii) of Sec.  405.1811. Moreover, as with our adoption of a 
technical revision to current paragraph (b)(3) of Sec.  405.1835, we 
are adding the term ``final'' before the phrase ``contractor or 
Secretary determination'' in paragraph (b)(3) of Sec.  405.1811.
    We also are adopting, in paragraphs (e)(1) and (e)(2) of Sec.  
405.1811, the same text that we proposed (79 FR 28295) as revisions to 
paragraphs (c)(1) and (c)(2) of Sec.  405.1811. When the proposed rule 
was published, paragraph (c) of Sec.  405.1811 addressed the addition 
of issues to a pending contractor hearing officer appeal. However, 
paragraph (c) was later redesignated as paragraph (e) of Sec.  405.1811 
in the technical correction provisions of the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50349 through 50350). Accordingly, we are adopting 
the text of the proposed amendments (to paragraphs (c)(1) and (c)(2) of 
Sec.  405.1811) in paragraphs (e)(1) and (e)(2) of Sec.  405.1811 which 
now addresses the addition of issues to a pending contractor hearing 
officer appeal. However, we are not finalizing the proposed revision 
(79 FR 28295) to paragraph (c)(3) of Sec.  405.1811, because the 
essential provisions of such proposal are now contained appropriately 
in Sec.  405.1811(e)(3), a regulation we adopted in the technical 
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50349 through 50350).
d. Addition of New Sec.  405.1832
    In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to add new 
Sec.  405.1832, which would detail the procedures for contractor 
hearing officer review of compliance with the substantive reimbursement 
requirement of an appropriate cost report claim (as prescribed in 
proposed Sec.  413.24(j)). We did not receive any public comments on 
this proposal. Accordingly, in order to maintain uniformity with our 
adoption in new Sec.  405.1873 of similar procedures for Board appeals, 
we are adopting in this final rule proposed new Sec.  405.1832 as final 
without modification.
e. Revisions to Sec.  405.1834
    In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to amend 
current Sec.  405.1834, which provides for review of contractor hearing 
officer decisions by the CMS reviewing official. Specifically, in 
accordance with proposed new paragraph (b)(2)(iii) of Sec.  405.1834, 
the CMS reviewing official will review, and address in any decision, 
the specific factual findings and legal conclusions of contractor 
hearing officers regarding compliance with the substantive requirement 
of an appropriate cost report claim (as prescribed in proposed Sec.  
413.24(j)), as part of the CMS reviewing official's review of a 
contractor hearing decision.
    We did not receive any public comments on this proposal. 
Accordingly, in this final rule, we are

[[Page 70579]]

adopting as final the proposed addition of new paragraph (b)(2)(iii) to 
Sec.  405.1834.
f. Technical Corrections and Conforming Changes to Sec. Sec.  405.1836, 
405.1837, and 405.1839
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28217 and 28297), 
we proposed technical corrections and conforming changes to the Board 
appeals regulations at Sec. Sec.  405.1836, 405.1837, and 405.1839. We 
explained that these technical revisions are necessary and appropriate 
to maintain consistency with our principal proposals (discussed above) 
to add the substantive reimbursement requirement of an appropriate cost 
report claim (in proposed Sec.  413.24(j)); eliminate the Board 
jurisdiction requirement of an appropriate cost report claim (in 
existing Sec. Sec.  405.1835(a)(1) and 405.1840(b)(3)); and add 
procedures for Board review of compliance with the substantive 
reimbursement requirement of an appropriate cost report claim (in 
proposed Sec.  405.1873)).
    We did not receive any public comments on the proposed revisions to 
Sec. Sec.  405.1836 and 405.1839, which would revise the cross-
references in each of these rules to Sec.  405.1835. However, we are 
not adopting either of those proposals. As explained above, we are 
adopting a technical revision and a conforming change to existing 
paragraph (a)(1) of Sec.  405.1835, in order to avoid any potential 
confusion about the dissatisfaction jurisdictional requirement for 
Board appeals of a timely final contractor or Secretary determination. 
Because we are revising the provider dissatisfaction requirement in 
existing paragraph (a)(1) of Sec.  405.1835, we are not adopting the 
proposed renumbering (79 FR 28297) of the amount in controversy and 
timely filing requirements in existing paragraphs (a)(2) and (a)(3), 
respectively. As a result, it is not necessary to revise the existing 
cross-references in Sec.  405.1836(a) and (b) to the timely filing 
provisions of Sec.  405.1835(a)(3), and thus we are not adopting the 
proposed revisions to Sec.  405.1836(a) and (b).
    For the same reason, it is not necessary to revise the cross-
references in Sec.  405.1839(a)(1) to the amount in controversy 
provisions in existing Sec.  405.1835(a)(2) (for Board appeals) and 
Sec.  405.1811(a)(2) (for contractor hearing officer appeals).
    However, we believe other technical revisions to the cross-
references in Sec. Sec.  405.1836 and 405.1839 are necessary. As 
explained in section XVII.B. of this final rule, the FY 2015 IPPS/LTCH 
PPS final rule included a technical correction to the Board appeals 
regulations (79 FR 50199 and 50351) that eliminated the jurisdictional 
requirement of provider dissatisfaction for appeals based on untimely 
final contractor or Secretary determinations pursuant to section 
1878(a)(1)(B) of the Act. We added paragraphs (c) and (d) to Sec.  
405.1835, which govern Board appeals based on untimely final contractor 
or Secretary determinations. The good cause extensions provisions of 
Sec.  405.1836 and the amount in controversy provisions of Sec.  
405.1839 apply to Board appeals based on untimely final contractor or 
Secretary determinations (under paragraphs (c) and (d) of Sec.  
405.1835) as well as appeals of timely final contractor or Secretary 
determinations (under paragraphs (a) and (b) of Sec.  405.1835). 
Accordingly, we believe it is necessary to add, in Sec.  405.1836(a) 
and (b), cross-references to the timely filing provisions of Sec.  
405.1835(c)(2), in addition to the corresponding cross-references to 
Sec.  405.1835(a)(3). For the same reason, we believe it is necessary 
to add, in Sec.  405.1839(a)(1), cross-references to the amount in 
controversy provisions in existing Sec.  405.1835(c)(3) (for Board 
appeals) and Sec.  405.1811(c)(3) (for contractor hearing officer 
appeals), in addition to the corresponding cross-references to Sec.  
405.1835(a)(2) and Sec.  405.1811(a)(2).
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28217 and 28297 
through 28298), we also proposed technical corrections and conforming 
changes to the Board group appeal provisions of Sec.  405.1837.
    Comment: Two commenters questioned the proposed revision to 
paragraph (a)(1) of Sec.  405.1837, which states that, in order to 
participate in a group appeal, a provider must satisfy individually the 
requirements for a Board hearing under Sec.  405.1835(a)(1). The 
commenters noted that, under the proposed revisions to Sec.  405.1835, 
the $10,000 amount in controversy requirement for a single provider 
appeal would be renumbered as paragraph (a)(1) (instead of its existing 
designation as paragraph (a)(2)). However, section 1878(b) of the Act 
states that the amount in controversy requirement for a single provider 
appeal of $10,000 or more does not apply to group appeals; instead, the 
amount in controversy requirement for a group appeal is $50,000 or more 
in the aggregate.
    Response: We agree that, under section 1878(b) of the Act, the 
amount in controversy requirement for a single provider appeal of 
$10,000 or more does not apply to each group member individually; 
rather, the amount in controversy requirement for a group appeal is 
$50,000 or more in the aggregate. Therefore, in this final rule, we are 
not adopting the proposed revision to paragraph (a)(1) of Sec.  
405.1837. Moreover, we believe that existing paragraphs (a)(1) and 
(a)(3) of Sec.  405.1837 track the amount in controversy provisions for 
group appeals in section 1878(b) of the Act, and therefore no revision 
to paragraphs (a)(1) and (a)(3) of Sec.  405.1837(a) is necessary.
    However, we believe a technical conforming revision to the 
introductory text of paragraph (a) of Sec.  405.1837 (for group 
appeals) is warranted in order to conform this provision to our 
technical revision to the proposed introductory text of paragraph (a) 
of Sec.  405.1835 (for single provider appeals). As explained above in 
section XVII.E.1. of this final rule, we are revising the proposed 
introductory text of paragraph (a) of Sec.  405.1835 (79 FR 28297) by 
eliminating the reference to items ``claimed in its cost report,'' a 
technical revision that further clarifies our elimination of an 
appropriate cost report claim as a requirement for Board jurisdiction. 
We are making a technical conforming revision to the introductory text 
of paragraph (a) of Sec.  405.1837 by eliminating its similar reference 
to items ``claimed for a cost reporting period,'' which we believe is 
necessary to further clarify that our elimination of an appropriate 
cost report claim as a requirement for Board jurisdiction applies to 
group appeals just like single provider appeals. Under paragraph (a)(1) 
of Sec.  405.1837, the jurisdictional requirements for a group appeal 
are the same as the jurisdictional requirements for a single provider 
appeal, except for the different amount in controversy requirements for 
the two types of Board appeals. Thus, our technical revision to the 
proposed text of paragraph (a)(1) of Sec.  405.1835(a), which will now 
state that the provider has a right to a Board hearing with respect to 
a final contractor or Secretary determination if the provider is 
dissatisfied with the contractor's final determination of the total 
amount of reimbursement due the provider, applies to group appeals as 
with single provider appeals. We believe that conforming the 
introductory text of paragraph (a) of Sec.  405.1837 (for group 
appeals) to the introductory text of paragraph (a) of Sec.  405.1835 
(for single provider appeals) will further clarify that our elimination 
of an appropriate cost report claim as a Board jurisdiction requirement 
applies to group appeals as well as single provider appeals.

[[Page 70580]]

    In addition, we believe a technical revision to a cross-reference 
in the text of proposed paragraphs (a)(1) and (e)(4) of Sec.  405.1837 
is necessary. As explained in section XVII.B. of this final rule, the 
FY 2015 IPPS/LTCH PPS final rule included a technical correction to the 
Board appeals regulations (79 FR 50199 and 50351) that eliminated the 
jurisdictional requirement of provider dissatisfaction for appeals 
based on untimely final contractor or Secretary determinations pursuant 
to section 1878(a)(1)(B) of the Act. We added paragraphs (c) and (d) to 
Sec.  405.1835, which govern Board appeals based on untimely final 
contractor or Secretary determinations. However, the group appeal 
provisions of Sec.  405.1837 apply to Board appeals based on untimely 
final contractor or Secretary determinations (under paragraphs (c) and 
(d) of Sec.  405.1835) as well as appeals of timely final contractor or 
Secretary determinations (under paragraphs (a) and (b) of Sec.  
405.1835). Accordingly, in this final rule, we are adding, in 
paragraphs (a)(1) and (e)(4) of Sec.  405.1837, a cross-reference to 
Sec.  405.1835(c), in addition to the current cross-reference to Sec.  
405.1835(a).

F. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C 3501 through 3521).

G. Impact of Requiring Appropriate Claims in Provider Cost Reports and 
Eliminating That Requirement for Administrative Appeals by Providers

    In section VIII. of the preamble to the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28206 through 28217), we discussed our proposal to 
revise the Medicare cost report regulations by requiring a provider to 
include an appropriate claim for an item in its cost report, which 
would be a general substantive requirement for payment in the Medicare 
contractor's final determination and in any decision by a reviewing 
entity in an administrative appeal. We also discussed our proposal to 
revise the Medicare provider appeals regulations by eliminating the 
requirement of an appropriate cost report claim in order to meet the 
dissatisfaction requirement for Provider Reimbursement Review Board 
jurisdiction. In Appendix A of the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28369), we set out our analyses of the impact of these 
proposals.
    As discussed in section XVII.D. and XVII.E. of this final rule, we 
are finalizing our proposals to revise the Medicare cost report 
regulations by requiring a provider to include an appropriate claim for 
an item in its cost report, and to eliminate an appropriate cost report 
claim as a requirement for Provider Reimbursement Review Board 
jurisdiction. There is no impact to the provider resulting from these 
finalized revisions.

XVIII. 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 final rule with comment 
period pertaining to 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-FC'' from the list of regulations. All 
OPPS Addenda to this final rule with comment period are contained in 
the zipped folder entitled ``2016 OPPS 1633-FC Addenda'' at the bottom 
of the page. To view the Addenda to this final rule with comment period 
pertaining to the 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-FC'' from the list of regulations. All ASC 
Addenda to this final rule with comment period are contained in the 
zipped folders entitled ``Addendum AA, BB, DD1, DD2, and EE''.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39253, 39211, and 
39354), we proposed to add new Addenda as supporting documents for the 
ease of readers in comprehending the changes we were proposing: 
Addendum O, which listed the new and revised CY 2016 Category I and III 
CPT codes and their proposed assignment 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 would be accepted on the 
proposed APC assignment and status indicator (80 FR 39253); and 
Addendum Q, which included a crosswalk from the existing CY 2015 APC 
numbers to the proposed new CY 2016 APC numbers (80 FR 39354). However, 
we now do not believe that Addenda O and Q are necessary for this CY 
2016 OPPS/ASC final rule with comment period. Therefore, we are not 
including them in the files available on the CMS Web site for this 
final rule with comment period.

XIX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and to solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the CY 2016 OPPS/ASC proposed rule (80 FR 39355 through 39358), 
we solicited 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 the CY 2016 OPPS/ASC proposed rule, we made reference to 
proposed associated information collection requirements that were not 
discussed in the regulation text contained in the proposed rule. The 
following is a discussion of those proposed requirements, any public 
comments we received, and our responses to those public comments.
1. Hospital OQR Program
    As we stated in section XIV. of the CY 2012 OPPS/ASC final rule 
with comment period, the Hospital OQR Program has been generally 
modeled after the quality data reporting program for the Hospital IQR 
Program (76 FR 74451). We refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72111 through 72114), the

[[Page 70581]]

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 final rule with comment period.
a. Estimated Burden of Hospital OQR Program Finalized Policies for the 
CY 2017 Payment Determination and Subsequent Years
    In section XIII. of this final rule with comment period, we are 
finalizing the adoption of several changes to the Hospital OQR Program 
for the CY 2017 payment determination and subsequent years. 
Specifically, we are finalizing our proposals 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 to August 31 
and revise 42 CFR 419.46(b) to reflect this change; (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) to January 1 through May 15; (5) fix a 
typographical error to correct the name of our extension and exception 
policy to extension and exemption policy; (6) change the deadline for 
submitting a reconsideration request to the first business day on or 
after March 17 of the affected payment year and make a conforming 
change to 42 CFR 419.46(f)(1) to reflect this change; 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 will increase burden, as further discussed below.
    In addition, we are finalizing conforming changes to our validation 
scoring process to reflect proposed changes in the APU determination 
timeframes. For the CY 2017 payment determination, we are finalizing 
that validation will 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 will be 
reduced by 25 percent because hospitals will submit validation data for 
three quarters instead of four.
(1) Measure Removed for the CY 2017 Payment Determination and 
Subsequent Years
    As discussed in section XIII.B.5. of this final rule with comment 
period, we are finalizing our proposal to remove the OP-15: Use of 
Brain Computed Tomography (CT) in the Emergency Department for 
Atraumatic Headache measure 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''). Therefore, we estimate that there will be no change in 
burden based on finalizing the removal of this measure.
(2) Changes to Reporting Requirements for the CY 2017 Payment 
Determination and Subsequent Years
    In section XIII.E. of this final rule with comment period, we are 
finalizing the adoption of several changes to the reporting 
requirements for the Hospital OQR Program. Specifically, we are 
finalizing our proposals to: (1) Change the deadline for withdrawing 
from the program to up to and including August 31 and revise 42 CFR 
419.46(b) to reflect this change; (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) 
to January 1 through May 15; (4) fix a typographical error to correct 
the name our extension and exception policy to extension and exemption 
policy; and (5) change the deadline for submitting a reconsideration 
request to the first business day on or after March 17 of the affected 
payment year and make a conforming change to 42 CFR 419.46(f)(1) to 
reflect this change. Although we are finalizing the adoption of our 
proposals 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 will remain the same.
    In addition, we are finalizing the adoption of conforming changes 
to our validation scoring process to reflect changes in the APU 
determination timeframes. 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. For the CY 2017 payment determination, we are 
transitioning to a new payment determination timeframe; as a result, 
only three quarters of data will be used for determining the CY 2017 
payment determination, as opposed to four quarters as previously 
required. Specifically, for the CY 2017 payment determination, 
validation is based on data from validation quarter 2, validation 
quarter 3, and validation quarter 4 of 2015. Therefore, we estimate 
that data submission for three quarters reduces the number of hours 
required by 25 percent (from 12 hours to 9 hours per hospital). 
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. 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. This is a reduction of 1,500 hours and $45,000 across 
all hospitals from last year's estimate attributable to changes in our 
validation scoring process.
b. Estimated Burden of Hospital OQR Program Finalized Policies for the 
CY 2018 Payment Determination and Subsequent Years
    For the CY 2018 payment determination and subsequent years, we are 
finalizing the adoption of two new proposals, with a modification to 
the manner of data submission for one proposal. First, in section 
XIII.B.6.a. of this final rule with comment period, we are finalizing 
the adoption of one new measure for the CY 2018 payment determination 
and subsequent years: OP-33: External Beam Radiotherapy

[[Page 70582]]

(EBRT) for Bone Metastases (NQF #1822). In the CY 2016 OPPS/ASC 
proposed rule (80 FR 39338), we proposed that hospitals could either: 
(1) Report aggregate-level data for OP-33 submitted via a CMS Web-based 
tool (QualityNet Web site); or (2) submit an aggregate data file for 
OP-33 through a vendor (via the QualityNet infrastructure). As we 
further explain in section XIII.D.4.b. of this final rule with comment 
period, we are finalizing only one mode of data submission for this 
measure: data for OP-33 may only be submitted at an aggregate-level via 
a CMS Web-based tool (QualityNet Web site).
    Consistent with prior years (78 FR 75171), we believe that 
submitting a measure through a CMS Web-based tool has two burden 
components: First, the time required to abstract the measure data; and 
second, the time required to enter these data into a CMS 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 previously estimated (35 minutes) by the number of 
measures (12 measures). Therefore, we estimated 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 will submit 48 cases per year for OP-33. Therefore, we 
believe that the average hospital will 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 will spend 10 
minutes (0.167 hours) per measure per year to collect and submit the 
data via a CMS Web-based tool. Therefore, we estimate that, in total, 
the proposed measure will 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 will participate in the 
Hospital OQR Program for the CY 2018 payment determination. Therefore, 
we estimate a total increase in burden across all participating 
hospitals of approximately 8,312.7 hours (2.519 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 these data. Therefore, we estimate 
a total financial increase in burden to be $75.57 per hospital (2.519 
hours x $30/hour) or $249,381 (8,312.7 hours x $30/hour) across all 
participating hospitals as a result of adopting OP-33 for the CY 2018 
payment determination and subsequent years.
    Second, for the CY 2018 payment determination and subsequent years, 
we are finalizing 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 the data validation 
process 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 because we will be sampling four quarters, as 
we had in prior years, instead of three quarters.
    Therefore, we estimate a total financial increase in burden of 
$89.21 (2.97 hours x $30/hour) per hospital or $294,390 (9,813 hours x 
$30/hour) across all participating hospitals as a result of the 
proposals that we are finalizing for the CY 2018 payment determination 
and subsequent years.
c. Estimated Burden of Hospital OQR Program Finalized Policies for the 
CY 2019 Payment Determination and Subsequent Years
    We are not finalizing the adoption of any new proposals for the CY 
2019 payment determination and subsequent years. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39330), we proposed to add one new measure for 
the CY 2019 payment determination and subsequent years: OP-34: 
Emergency Department Transfer Communication (EDTC) (NQF #0291). As 
stated in section XIII.B.6.b. of this final rule with comment period, 
we are not finalizing that proposed measure. Thus, because we are not 
finalizing any changes specifically for the CY 2019 payment 
determination and subsequent years, we expect the burden to be 
unchanged for the CY 2019 payment determination as compared to the CY 
2018 payment determination and subsequent years as discussed above.
    We invited public comment on the burden associated with the 
proposed information collection requirements which we are finalizing. 
We did not receive any public comments on these 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 Finalized Effective Beginning With the CY 2017 
Payment Determination
    We are finalizing our proposals 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 finalized 
policy proposals discussed below. For existing policies for which we 
are finalizing 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.
    We are not finalizing our proposal 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. Instead, 
we are maintaining the previously finalized August 15 submission 
deadline for 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

[[Page 70583]]

Cataract Surgery (NQF #1536). We note that ASC-8: Influenza Vaccination 
Coverage among Healthcare Personnel (NQF #0431) will continue under the 
May 15 submission deadline previously finalized for this measure. We do 
not anticipate additional burden because the data collection and 
submission requirements have not changed.
    We are finalizing our proposal, 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 final 
policy will 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 finalizing our proposal to make 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 will 
be any additional burden because the materials to be submitted are 
unchanged and the deadline does not result in reduced time to submit a 
reconsideration request.
    We are finalizing our proposal to publicly display data by the NPI 
when the data are submitted by the NPI and to publicly display data by 
the CCN when the data are submitted by the CCN, but are not finalizing 
our proposal to attribute data submitted by the CCN to all NPIs 
associated with the CCN. We are codifying this new revised policy at 42 
CFR 416.315. Again, we do not anticipate any additional burden because 
this final policy does not alter the administrative or reporting 
requirements governing an ASC's participation in the ASCQR Program.
    Finally, we are finalizing our proposal, 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 final policy affecting the CY 2017 payment determination or 
subsequent years because it does not alter the administrative or 
reporting requirements governing an 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 7-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, 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 will be nominal. We do not anticipate that 
ASC-12 will 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 
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 will be 1,757 hours (5,260 ASCs x 2 
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 will 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 will 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

[[Page 70584]]

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). In the CY 2016 OPPS/ASC 
proposed rule (80 FR 39347), we did not propose to make any changes to 
this process.
f. Reconsideration
    In section XIV.D.8. of this final rule with comment period, we are 
finalizing our proposal to make a minor change to the reconsideration 
request deadline to ensure our deadline for these requests will always 
fall on a business day. We do not anticipate that there will be any 
additional burden because the materials to be submitted are unchanged 
and the deadline does not result in reduced time to submit a 
reconsideration request. We also are finalizing our proposal 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 invited public comments on the burden associated with these 
information collection requirements. We did not receive any public 
comments on these requirements.

XX. Response to Comments

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

XXI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this final rule with comment 
period, as required by Executive Order 12866 on Regulatory Planning and 
Review (September 30, 1993), Executive Order 13563 on Improving 
Regulation and Regulatory Review (January 18, 2011), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the Contract 
with America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C. 
804(2)). This section of the final rule with comment period contains 
the impact and other economic analyses for the provisions that we are 
finalizing 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 final rule with comment period has been designated as 
an economically significant rule under section 3(f)(1) of Executive 
Order 12866 and a major rule under the Contract with America 
Advancement Act of 1996 (Pub. L. 104-121). Accordingly, this final rule 
with comment period has been reviewed by the Office of Management and 
Budget. We have prepared a regulatory impact analysis that, to the best 
of our ability, presents the costs and benefits of this final rule with 
comment period. We solicited comments on the regulatory impact analysis 
in the CY 2016 OPPS/ASC proposed rule (80 FR 39359), and we address the 
public comments we received in this section below and in other sections 
of this final rule with comment period as appropriate.
2. Statement of Need
    This final rule with comment period is necessary to update the 
Medicare hospital OPPS rates. It is necessary to make changes to the 
payment policies and rates for outpatient services furnished by 
hospitals and CMHCs in CY 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 revising 
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 June 30, 2015, and updated cost report 
information.
    This final rule with comment period also is necessary to update 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 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 
changes in this final rule with comment period will be approximately 
$133 million. Taking into account our estimated changes in enrollment, 
utilization, and case-mix, we estimate, based on the Midsession Review 
of the President's FY 2016 Budget, that gross Federal Government OPPS 
expenditures for CY 2016 will be approximately $4.1 billion higher 
relative to expenditures in CY 2015. This estimate reflects changes in 
enrollment, utilization, and case-mix, but does not include the 2.0 
percent reduction to the conversion factor to

[[Page 70585]]

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 final rule with comment period, or other payment 
changes implemented in this final rule with comment period. Because 
this final rule with comment period 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 70 
displays the distributional impact of the CY 2016 changes in OPPS 
payment to various groups of hospitals and for CMHCs.
    We estimate that the update to the conversion factor and other 
adjustments (not including the effects of outlier payments, the pass-
through estimates, and the application of the frontier State wage 
adjustment for CY 2016) will decrease total OPPS payments by 0.3 
percent in CY 2016. The changes to the APC weights, the changes to the 
wage indexes, the continuation of a payment adjustment for rural SCHs, 
including EACHs, and the payment adjustment for cancer hospitals will 
not increase OPPS payments because these changes to the OPPS are budget 
neutral. However, these updates will change the distribution of 
payments within the budget neutral system. We estimate that the total 
change in payments between CY 2015 and CY 2016, considering all 
payments, including the adjustment to the conversion factor to address 
the inflation in OPPS payment rates resulting from excess packaged 
payment under the OPPS for laboratory tests, changes in estimated total 
outlier payments, pass-through payments, and the application of the 
frontier State wage adjustment outside of budget neutrality, in 
addition to the application of the OPD fee schedule increase factor 
after all adjustments required by sections 1833(t)(3)(F), 
1833(t)(3)(G), and 1833(t)(17) of the Act, will decrease total 
estimated OPPS payments by 0.4 percent.
    We estimate the total increase (from changes to the ASC provisions 
in this final rule with comment period as well as from enrollment, 
utilization, and case-mix changes) in Medicare expenditures under the 
ASC payment system for CY 2016 compared to CY 2015 to be approximately 
$128 million. Because the provisions for the ASC payment system are 
part of a final rule with comment period that is economically 
significant as measured by the $100 million threshold, we have prepared 
a regulatory impact analysis of the changes to the ASC payment system 
that, to the best of our ability, presents the costs and benefits of 
this portion of this final rule with comment period. Table 71 and Table 
72 of this final rule with comment period display the redistributive 
impact of the 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 of OPPS Changes in This Final Rule With Comment Period
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2016 policy changes on various hospital groups. As we did for 
the proposed rule, we post on the CMS Web site our hospital-specific 
estimated payments for CY 2016 with the other supporting documentation 
for this final rule with comment period. To view the hospital-specific 
estimates, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the Web site, select ``regulations and notices'' from 
the left side of the page and then select ``CMS-1633-FC'' from the list 
of regulations and notices. The hospital-specific file layout and the 
hospital-specific file are listed with the other supporting 
documentation for this final rule with comment period. We show 
hospital-specific data only for hospitals whose claims were used for 
modeling the impacts shown in Table 70 below. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We 
refer readers to section II.A. of this final rule with comment period 
for a discussion of the hospitals whose claims we do not use for 
ratesetting and impact purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
have not made adjustments for future changes in variables such as 
service volume, service-mix, or number of encounters. In the CY 2016 
OPPS/ASC proposed rule (80 FR 39360), we solicited public comment and 
information about the anticipated effects of our proposed changes on 
providers and our methodology for estimating them. Any public comments 
that we received are addressed in the applicable sections of the final 
rule with comment period that discuss the specific policies.
(2) Estimated Effects of OPPS Changes on Hospitals
    Table 70 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the change in payments to all facilities, has 
always included cancer and children's hospitals, which are held 
harmless to their pre-BBA amount. We also include CMHCs in the first 
line that includes all providers. We now include a second line for all 
hospitals, excluding permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 70, 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 finalizing our proposal to 
continue to pay CMHCs under renumbered APC 5851 (existing APC 0172) 
(Level 1 Partial Hospitalization (3 services) for CMHCs) and renumbered 
APC 5852 (existing APC 0173) (Level 2 Partial Hospitalization (4 or 
more services) for CMHCs). We also are finalizing our proposal to pay 
hospitals for partial hospitalization services under 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). 
However, as discussed in section VIII.B.1. of this final rule with 
comment period, we are making an equitable adjustment to the actual 
geometric mean per diem costs so that we pay a higher payment rate for 
Level 2 services than Level 1 services. We also are finalizing our 
proposal to use a 2 standard deviation trim for CMHCs and 
to apply a CCR greater than 5 (CCR>5) hospital service day trim for 
hospital-based PHP providers for CY 2016 and subsequent years.
    The estimated decrease in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor under the 
statutory methodology and the 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

[[Page 70586]]

section II.B. of this final rule with comment period. Section 
1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule 
increase factor is equal to the market basket percentage increase 
applicable under section 1886(b)(3)(B)(iii) of the Act, which we refer 
to as the IPPS market basket percentage increase. The IPPS market 
basket percentage increase for FY 2016 is 2.4 percent (80 FR 49510). 
Section 1833(t)(3)(F)(i) of the Act reduces that 2.4 percent by the 
multifactor productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is 0.5 percentage point for FY 
2016 (which is also the MFP adjustment for FY 2016 in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49510)); 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 OPD fee 
schedule increase factor of 1.7 percent. We are using the OPD fee 
schedule increase factor of 1.7 percent in the calculation of the CY 
2016 OPPS conversion factor. We also are applying a 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 70.
    To illustrate the impact of the 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 70 
shows the estimated redistribution of the 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 APC reconfiguration 
and recalibration changes between CY 2015 and CY 2016 (Column 2); the 
wage indexes and the provider adjustments (Column 3); the combined 
impact of all of the changes described in the preceding columns plus 
the 1.7 percent OPD fee schedule increase factor update to the 
conversion factor and the -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 payments for CY 2016 
relative to all payments for CY 2015, including the impact of changes 
in estimated outlier payments, the frontier State wage adjustment, and 
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 finalizing our proposal to 
maintain the current adjustment percentage for CY 2016. Because the 
updates to the conversion factor (including the update of the OPD fee 
schedule increase factor), the estimated cost of the rural adjustment, 
and the estimated cost of projected pass-through payment for CY 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 wage index changes on the hospital. However, total 
payments made under this system and the extent to which this final rule 
with comment period will redistribute money during implementation also 
will depend on changes in volume, practice patterns, and the mix of 
services billed between CY 2015 and CY 2016 by various groups of 
hospitals, which CMS cannot forecast.
    For hospital-based PHP APCs, the per diem rates calculated from the 
equitable adjustment will be budget neutral within all of the OPPS. 
Section 1833(t)(2)(E) of the Act states that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments. The authority granted to 
the Secretary under this provision is broad. It would not be 
appropriate or equitable to pay a lower payment rate for the PHP APC 
for Level 2 services, under which 4 or more services are provided, than 
for the PHP APC for Level 1 services, under which 3 PHP services are 
provided. As a result, we included the equitably adjusted hospital-
based PHP APC Level 1 per diem cost of $191.91, and the equitably 
adjusted hospital-based PHP APC Level 2 per diem cost of $222.54 in the 
budget neutrality process. The CMHC PHP APC Level 1 geometric mean per 
diem costs are $98.88, and the CMHC PHP APC Level 2 geometric mean per 
diem costs are $149.64.
    Overall, we estimate that the rates for CY 2016 will decrease 
Medicare OPPS payments by an estimated 0.4 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 an estimated 0.4 percent decrease in 
Medicare payments to all other hospitals. These estimated payments will 
not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 70 shows the total number of 
facilities (3,953), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2014 hospital 
outpatient and CMHC claims data to model CY 2015 and 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 CY 2016 payment and entities that are not paid 
under the OPPS. The latter entities include CAHs, all-inclusive 
hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
final rule with comment period. At this time, we are unable to 
calculate a disproportionate share 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 
(3,830), 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 57 CMHCs at the bottom of the impact table and 
discuss that impact separately below.
Column 2: APC Recalibration--All Changes
    Column 2 shows the estimated effect of APC recalibration. Column 2 
also reflects any changes in multiple procedure discount patterns or 
conditional packaging that occur as a result of the changes in the 
relative magnitude of payment weights. As a result of APC 
recalibration, we estimate that urban hospitals will experience no

[[Page 70587]]

change, with the impact ranging from an increase of 0.3 percent to a 
decrease of 0.6 percent, depending on the number of beds. Rural 
hospitals will experience a 0.1 percent increase, with the impact 
ranging from an increase of 0.5 percent to a decrease of 0.1 percent, 
depending on the number of beds. Major teaching hospitals will 
experience an increase of 0.4 percent overall.
Column 3: New Wage Indexes and the Effect of the Provider Adjustments
    Column 3 demonstrates the combined budget neutral impact of the APC 
recalibration; the updates for the wage indexes with the fiscal year 
(FY) 2016 IPPS post-reclassification wage indexes; the cancer hospital 
adjustment and the rural adjustment. We modeled the independent effect 
of the budget neutrality adjustments and the OPD fee schedule increase 
factor by using the relative payment weights and wage 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 updated wage 
indexes, including the application of budget neutrality for the rural 
floor policy on a nationwide basis. This column excludes the effects of 
the frontier State wage index adjustment, which is not budget neutral 
and is included in Column 5. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs because we are finalizing 
our proposal to continue the rural payment adjustment of 7.1 percent to 
rural SCHs for CY 2016, as described in section II.E. of this final 
rule with comment period.
    We modeled the independent effect of updating the wage indexes by 
varying only the wage indexes, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the CY 2016 
scaled weights and a CY 2015 conversion factor that included a budget 
neutrality adjustment for the effect of the changes to the wage indexes 
between CY 2015 and CY 2016. The FY 2016 wage policy results in modest 
redistributions.
    We are finalizing the CY 2016 cancer hospital payment adjustment 
methodology as proposed. Using updated data, the payment-to-cost ratio 
target is 0.92. This results in a 0.1 decrease to the ``all hospitals'' 
category, because IPPS-exempt cancer hospitals are not included in the 
all hospitals category.
Column 4: All Budget Neutrality Changes Combined With the Market Basket 
Update and the Adjustment To Address Excess Packaged Payment for 
Laboratory Tests
    Column 4 demonstrates the combined impact of all of the changes 
previously described, the update to the conversion factor of 1.7 
percent, and the 2.0 percent reduction due to the 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 changes will decrease payments to urban hospitals 
by 0.4 percent and to rural hospitals by 0.6 percent. Most classes of 
hospitals will receive a decrease in line with the 0.4 percent overall 
decrease after the update and the adjustment to the conversion factor 
to address excess packaged payment for laboratory tests are applied to 
the budget neutrality adjustments.
Column 5: All Changes for CY 2016
    Column 5 depicts the full impact of the CY 2016 policies on each 
hospital group by including the effect of all of the 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 OPD 
fee schedule increase; the impact of the frontier State wage index 
adjustment; the impact of estimated OPPS outlier payments as discussed 
in section II.G. of this final rule with comment period; the change in 
the Hospital OQR Program payment reduction for the small number of 
hospitals in our impact model that failed to meet the reporting 
requirements (discussed in section XIII. of this final rule with 
comment period); and the difference in total OPPS payments dedicated to 
transitional pass-through payments.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2015 update (and assumed, for 
modeling purposes, to be the same number for CY 2016), we included 59 
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 changes for CY 2016 will decrease payments to all facilities by 
0.4 percent for CY 2016. We modeled the independent effect of all of 
the changes in Column 5 using the final relative payment weights for CY 
2015 and the relative payment weights for CY 2016. We used the final 
conversion factor for CY 2015 of $74.173 and the CY 2016 conversion 
factor of $73.725 discussed in section II.B. of this final rule with 
comment period.
    Column 5 contains simulated outlier payments for each year. We used 
the 1-year charge inflation factor used in the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49783 through 49784) of 3.7 percent (1.037616) to 
increase individual costs on the CY 2014 claims, and we used the most 
recent overall CCR in the July 2015 Outpatient Provider-Specific File 
(OPSF) to estimate outlier payments for CY 2015. Using the CY 2014 
claims and a 3.7 percent charge inflation factor, we currently estimate 
that outlier payments for CY 2015, using a multiple threshold of 1.75 
and a fixed-dollar threshold of $2,775 will be approximately 0.9 
percent of total payments. The estimated current outlier payments of 
0.9 percent are incorporated in the comparison in Column 5. We used the 
same set of claims and a charge inflation factor of 7.7 percent 
(1.076647) and the CCRs in the July 2015 OPSF, with an adjustment of 
0.9701, to reflect relative changes in cost and charge inflation 
between CY 2014 and CY 2016, to model the CY 2016 outliers at 1.0 
percent of estimated total payments using a multiple threshold of 1.75 
and a fixed-dollar threshold of $3,250. The charge inflation and CCR 
inflation factors are discussed in detail in the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49783 through 49784).
    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 will be negligible. Overall, we estimate that facilities 
will experience a decrease of 0.4 percent under this final rule with 
comment period in CY 2016 relative to total spending in CY 2015. This 
projected decrease (shown in Column 5) of Table 70 reflects the 1.7 
percent OPD fee schedule increase factor, less 2.0 percent for the 
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 0.13 percent for the change in the pass-through 
estimate between CY 2015 and CY 2016, plus 0.1 percent for the 
difference in estimated outlier payments between CY 2015 (0.9 percent) 
and CY 2016 (1.0 percent). We estimate that the combined effect of all 
of the changes for CY 2016 will decrease payments to urban hospitals by 
0.4 percent. Overall, we estimate that rural hospitals will experience 
a 0.6 percent decrease as a result of the combined effects of all of 
the changes for CY 2016, with the greater decrease relative to urban

[[Page 70588]]

hospitals primarily a result of wage index changes in CY 2016.
    Among hospitals by teaching status, we estimate that the impacts 
resulting from the combined effects of all changes will result in an 
increase of 0.1 percent for major teaching hospitals and a decrease of 
0.7 percent for nonteaching hospitals. Minor teaching hospitals will 
experience an estimated decrease of 0.5 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience a decrease of 0.3 percent, proprietary hospitals will 
experience a decrease of 1.1 percent, and governmental hospitals will 
experience a decrease of 0.3 percent.

                        Table 70--Estimated Impact of the CY 2016 Changes for the Hospital Outpatient Prospective Payment System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              All budget
                                                                                                                           neutral changes
                                                                                                                           (combined cols.
                                                                                                                          2, 3) with market
                                                                        Number of           APC          New wage index   basket update and
                                                                        hospitals      recalibration      and provider      adjustment to    All changes
                                                                                       (all changes)      adjustments       address excess
                                                                                                                           packaged payment
                                                                                                                            for laboratory
                                                                                                                                tests
                                                                                (1)               (2)                (3)                (4)          (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *...................................................           3,953               0.0                0.0               -0.3         -0.4
ALL HOSPITALS (excludes hospitals permanently held harmless and               3,830               0.0               -0.1               -0.4         -0.4
 CMHCs)............................................................
URBAN HOSPITALS....................................................           2,980               0.0                0.0               -0.4         -0.4
    LARGE URBAN (GT 1 MILL)........................................           1,641               0.0                0.0               -0.3         -0.3
    OTHER URBAN (LE 1 MILL.).......................................           1,339              -0.1                0.0               -0.5         -0.5
RURAL HOSPITALS....................................................             850               0.1               -0.4               -0.6         -0.6
    SOLE COMMUNITY.................................................             380               0.1               -0.4               -0.6         -0.6
    OTHER RURAL....................................................             470               0.0               -0.4               -0.7         -0.7
BEDS (URBAN):
    0-99 BEDS......................................................           1,054              -0.6               -0.4               -1.2         -1.3
    100-199 BEDS...................................................             847              -0.3                0.0               -0.6         -0.6
    200-299 BEDS...................................................             458              -0.2                0.1               -0.4         -0.4
    300-499 BEDS...................................................             406               0.0                0.0               -0.3         -0.3
    500 + BEDS.....................................................             215               0.3                0.0               -0.1         -0.1
BEDS (RURAL):
    0-49 BEDS......................................................             338               0.5               -0.5               -0.3         -0.2
    50-100 BEDS....................................................             311               0.0               -0.3               -0.6         -0.6
    101-149 BEDS...................................................             113              -0.1               -0.3               -0.8         -0.7
    150-199 BEDS...................................................              48               0.1               -0.4               -0.6         -0.7
    200 + BEDS.....................................................              40               0.1               -0.6               -0.9         -1.0
REGION (URBAN):
    NEW ENGLAND....................................................             150               0.6               -0.7               -0.4         -0.4
    MIDDLE ATLANTIC................................................             349              -0.2                0.4               -0.1          0.0
    SOUTH ATLANTIC.................................................             472              -0.1                0.0               -0.5         -0.6
    EAST NORTH CENT................................................             481              -0.1                0.1               -0.4         -0.4
    EAST SOUTH CENT................................................             185              -0.1               -0.5               -0.9         -1.0
    WEST NORTH CENT................................................             185               0.1               -0.5               -0.8         -0.7
    WEST SOUTH CENT................................................             530               0.0               -0.4               -0.7         -0.8
    MOUNTAIN.......................................................             200               0.0                0.0               -0.4         -0.5
    PACIFIC........................................................             379              -0.2                0.7                0.2          0.3
    PUERTO RICO....................................................              49              -2.5               -1.3               -4.0         -4.1
REGION (RURAL):
    NEW ENGLAND....................................................              22               0.9               -0.6               -0.1          0.1
    MIDDLE ATLANTIC................................................              56               0.3               -1.0               -1.1         -0.7
    SOUTH ATLANTIC.................................................             125              -0.3                0.3               -0.3         -0.4
    EAST NORTH CENT................................................             121              -0.2               -0.2               -0.7         -0.7
    EAST SOUTH CENT................................................             163               0.1               -0.6               -0.9         -1.0
    WEST NORTH CENT................................................             103               0.3               -0.7               -0.7         -0.5
    WEST SOUTH CENT................................................             176               0.1               -1.3               -1.6         -1.7
    MOUNTAIN.......................................................              60               0.3                0.0                0.0         -0.3
    PACIFIC........................................................              24              -0.1                1.0                0.5          0.5
TEACHING STATUS:
    NON-TEACHING...................................................            2781              -0.3               -0.1               -0.7         -0.7
    MINOR..........................................................             718              -0.1                0.0               -0.4         -0.5
    MAJOR..........................................................             331               0.4                0.0                0.1          0.1
DSH PATIENT PERCENT:
    0..............................................................              20              -1.3                0.1               -1.5         -1.6
    GT 0-0.10......................................................             341              -0.6                0.0               -1.0         -1.0
    0.10-0.16......................................................             299              -0.2               -0.1               -0.6         -0.6
    0.16-0.23......................................................             661              -0.3               -0.1               -0.7         -0.7
    0.23-0.35......................................................            1120               0.0               -0.1               -0.4         -0.5
    GE 0.35........................................................             806               0.2                0.1                0.0          0.0

[[Page 70589]]

 
    DSH NOT AVAILABLE **...........................................             583               4.5               -0.2                3.9          3.6
URBAN TEACHING/DSH:
    TEACHING & DSH.................................................             954               0.1                0.0               -0.2         -0.2
    NO TEACHING/DSH................................................            1453              -0.4               -0.1               -0.8         -0.8
    NO TEACHING/NO DSH.............................................              19              -1.3                0.1               -1.5         -1.6
    DSH NOT AVAILABLE **...........................................             554               4.3               -0.1                3.9          3.5
TYPE OF OWNERSHIP:
    VOLUNTARY......................................................            2010               0.0                0.0               -0.3         -0.3
    PROPRIETARY....................................................            1304              -0.3               -0.3               -1.0         -1.1
    GOVERNMENT.....................................................             516               0.2               -0.1               -0.3         -0.3
CMHCs..............................................................              57              24.5               -0.6               23.4         23.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) includes all 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 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 0.9994 because the payment-to-cost ratio is 0.92 for the CY 2016 OPPS.
Column (4) shows the impact of all budget neutrality adjustments and the addition of the 1.7 percent OPD fee schedule update factor (2.4 percent reduced
  by 0.5 percentage points for the 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 -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 3,953 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 OPPS Changes on CMHCs
    The last line of Table 70 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) (renumbered APC 5851 for CY 2016) and existing APC 0173 (Level 2 
Partial Hospitalization (4 or more services) for CMHCs) (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) (renumbered APC 5861 for CY 2016) 
and existing APC 0176 (Level 2 Partial Hospitalization (4 or more 
services) for hospital-based PHPs) (renumbered APC 5862 for CY 2016). 
We use our standard ratesetting methodology to derive the 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 finalizing our 
proposal 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 will continue to provide the same number of days of PHP 
care, with each day having either 3 services or 4 or more services, as 
seen in the CY 2014 claims data used for this final rule with comment 
period. We excluded days with 1 or 2 services because our policy only 
pays a per diem rate for partial hospitalization when 3 or more 
qualifying services are provided to the beneficiary. We estimate that 
CMHCs will experience an overall 23.1 percent increase in payments from 
CY 2015 (shown in Column 5). We note that this includes the trimming 
methodology described in section VIII.B. of this final rule with 
comment period.
    Column 3 shows that the estimated impact of adopting the FY 2016 
wage index values will result in a small decrease of 0.6 percent to 
CMHCs. Column 4 shows that combining this OPD fee schedule increase 
factor, 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 changes in APC policy for CY 2016 and the 
FY 2016 wage index updates, will result in an estimated increase of 
23.4 percent. Column 5 shows that adding the changes in outlier and 
pass-though payments will result in a total 23.1 percent increase in 
payment for CMHCs. This reflects all changes to CMHCs for CY 2016.
(4) Estimated Effect of OPPS Changes on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment will 
increase for services for which the OPPS payments will rise and will 
decrease for services for which the OPPS payments will fall. For 
further discussion on the calculation of the national unadjusted 
copayments and minimum unadjusted copayments, we refer readers to 
section II.I. of this final rule with comment period. In all cases, 
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 
will

[[Page 70590]]

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 recalibration of the APC relative payment 
weights, APC reorganization, change in the portion of OPPS payments 
dedicated to pass-through payments, and the CY 2016 comprehensive APC 
payment policy discussed in section II.A.2.e. of this final rule with 
comment period.
(5) Estimated Effects of OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs as discussed in section XII. 
of this final rule with comment period. No types of providers or 
suppliers other than hospitals, CMHCs, and ASCs will be affected by the 
changes in this final rule with comment period.
(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid 
Programs
    The effect on the Medicare program is expected to be a decrease of 
$133 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 XXI.A. of this final rule with 
comment period.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are finalizing and the reasons 
for our selected alternatives are discussed throughout this final rule 
with comment period. 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 final rule with 
comment period 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 final rule with comment 
period 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 finalizing the policy as 
proposed, but instead are finalizing to only apply the policy to device 
intensive procedures with modifier 73 (Discontinued procedure prior to 
anesthesia administration).
b. Estimated Effects of 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 final rule with comment period, we are 
setting the CY 2016 ASC relative payment weights by scaling the CY 2016 
OPPS relative payment weights by the ASC scaler of 0.9332. The 
estimated effects of the updated relative payment weights on payment 
rates are varied and are reflected in the estimated payments displayed 
in Tables 71 and 72 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 CY 2016 ASC conversion factor by adjusting the 
CY 2015 ASC conversion factor by 0.9997 to account for changes in the 
pre-floor and pre-reclassified hospital wage indexes between CY 2015 
and CY 2016 and by applying the CY 2016 MFP-adjusted CPI-U update 
factor of 0.3 percent (projected CPI-U update of 0.8 percent minus a 
projected productivity adjustment of 0.5 percentage point). The CY 2016 
ASC conversion factor is $44.177.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the 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 CY 2016 changes will be small in the 
aggregate for all ASCs. However, surgical specialty groups may be 
affected differently as ASCs continue to provide services to 
beneficiaries under the ASC payment system. We are unable to accurately 
project such changes at a disaggregated level. Clearly, individual ASCs 
will experience changes in payment that differ from the aggregated 
estimated impacts presented below.
(2) Estimated Effects of ASC Payment System Policies on ASCs
    Some ASCs are multispecialty facilities that perform a wide range 
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 of the update to 
the CY 2016 payments on an individual ASC will depend on a number of 
factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the CY 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 71 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 CY 2016 
payments, and Table 72 shows a comparison of estimated CY 2015 payments 
to estimated CY 2016 payments for procedures that we estimate will 
receive the most Medicare payment in CY 2015.
    Table 71 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

[[Page 70591]]

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 71.
     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 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 updates to ASC payment rates for CY 2016 
compared to CY 2015.
    As seen in Table 71, for the six specialty groups that account for 
the most ASC utilization and spending, we estimate that the update to 
ASC rates for CY 2016 will result in a 1-percent increase in aggregate 
payment amounts for eye and ocular adnexa procedures, a 2-percent 
increase in aggregate payment amounts for digestive system procedures, 
a 1-percent decrease in aggregate payment amounts for nervous system 
procedures, a 4-percent decrease in aggregate payment amounts for 
musculoskeletal system procedures, a 1-percent increase in aggregate 
payment amounts for genitourinary system procedures, and a 2-percent 
increase in aggregate payment amounts for integumentary system 
procedures.
    Also displayed in Table 71 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. We estimate 
that aggregate payments for these items and services will remain at $21 
million for CY 2016.

   Table 71--Estimated Impact of the CY 2016 Update to the ASC Payment
    System on Aggregate CY 2016 Medicare Program Payments by Surgical
             Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
                                           Estimated CY
                                             2015 ASC      Estimated CY
        Surgical specialty group           payments  (in   2016 percent
                                             millions)        change
(1)                                                  (2)             (3)
------------------------------------------------------------------------
Total...................................          $3,893               0
Eye and ocular adnexa...................           1,534               1
Digestive system........................             807               2
Nervous system..........................             617              -1
Musculoskeletal system..................             485              -4
Genitourinary system....................             176               1
Integumentary system....................             135               2
Respiratory system......................              55               3
Cardiovascular system...................              42               0
Ancillary items and services............              21               2
Auditory system.........................              14               5
Hematologic & lymphatic systems.........               6              -5
------------------------------------------------------------------------

    Table 72 below shows the estimated impact of the 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 CY 2016 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2015 and 
the estimated payment for CY 2016 based on the update.

  Table 72--Estimated Impact of the 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)....................................  ..............             (4)
----------------------------------------------------------------------------------------------------------------
66984..................................  Cataract surg w/iol 1 stage............          $1,092               2
43239..................................  Egd biopsy single/multiple.............             177               2
45380..................................  Colonoscopy and biopsy.................             181              -3
45385..................................  Colonoscopy w/lesion removal...........             117              -3

[[Page 70592]]

 
66982..................................  Cataract surgery complex...............              95               2
64483..................................  Inj foramen epidural l/s...............              94             -11
62311..................................  Inject spine lumbar/sacral.............              75             -11
45378..................................  Diagnostic colonoscopy.................              69              -4
66821..................................  After cataract laser surgery...........              65               1
64493..................................  Inj paravert f jnt l/s 1 lev...........              53              25
G0105..................................  Colorectal scrn; hi risk ind...........              46              17
64635..................................  Destroy lumb/sac facet jnt.............              50              -3
63650..................................  Implant neuroelectrodes................              52               4
G0121..................................  Colon ca scrn not hi rsk ind...........              43              17
64590..................................  Insrt/redo pn/gastr stimul.............              44              -7
15823..................................  Revision of upper eyelid...............              33               2
63685..................................  Insrt/redo spine n generator...........              54               2
29827..................................  Arthroscop rotator cuff repr...........              50               5
64721..................................  Carpal tunnel surgery..................              30               3
29881..................................  Knee arthroscopy/surgery...............              28              14
29824..................................  Shoulder arthroscopy/surgery...........              21             -44
29880..................................  Knee arthroscopy/surgery...............              24              14
43235..................................  Egd diagnostic brush wash..............              24               2
62310..................................  Inject spine cerv/thoracic.............              23             -11
29823..................................  Shoulder arthroscopy/surgery...........              13             -44
52000..................................  Cystoscopy.............................              22              -3
G0260..................................  Inj for sacroiliac jt anesth...........              22             -11
45384..................................  Colonoscopy w/lesion removal...........              20              -3
67042..................................  Vit for macular hole...................              22               5
26055..................................  Incise finger tendon sheath............              21              21
----------------------------------------------------------------------------------------------------------------

(3) Estimated Effects of ASC Payment System Policies on Beneficiaries
    We estimate that the CY 2016 update to the ASC payment system will 
be generally positive for beneficiaries with respect to the new 
procedures that we are adding to the ASC list of covered surgical 
procedures and for those that we are designating as office-based for CY 
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 designating as office-based in CY 2016, the beneficiary coinsurance 
amount under the ASC payment system generally will 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 final rule with 
comment period 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. We proposed 
that this would apply to device-intensive procedures in the ASC payment 
system beginning in CY 2016 with modifier ``52'' (reduced services) and 
modifier ``73'' (discontinued outpatient procedure prior to anesthesia 
administration). As discussed in that section, we considered finalizing 
the policy as proposed, but, based on stakeholder comments, are 
finalizing the policy to only apply to device-intensive procedures with 
modifier ``73.''
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 
final rule with comment period. The first accounting statement, Table 
73 below, illustrates the classification of expenditures for the CY 
2016 estimated hospital OPPS incurred benefit impacts associated with 
the CY 2016 OPD fee schedule increase, based on the Midsession Review 
of the President's FY 2016 Budget, and the adjustment to the conversion 
factor to address the

[[Page 70593]]

inflation in OPPS payment rates resulting from excess packaged payment 
under the OPPS for laboratory tests. The second accounting statement, 
Table 74 below, illustrates the classification of expenditures 
associated with the 0.3 percent CY 2016 update to the ASC payment 
system, based on the provisions of this final rule with comment period 
and the baseline spending estimates for ASCs in the Midsession Review 
of the President's FY 2016 Budget. Lastly, the tables classify most 
estimated impacts as transfers.

     Table 73--Accounting Statement: CY 2016 Estimated Hospital OPPS
 Transfers From CY 2015 to CY 2016 Associated With the CY 2016 Hospital
   Outpatient OPD Fee Schedule Increase and the Adjustment To Address
              Excess Packaged Payment for Laboratory Tests
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$133 million
From Whom to Whom......................  Federal Government to
                                          outpatient hospitals and other
                                          providers who receive payment
                                          under the hospital OPPS.
                                        --------------------------------
    Total..............................  -$133 million.
------------------------------------------------------------------------


  Table 74--Accounting Statement: Classification of Estimated Transfers
  From CY 2015 to CY 2016 as a Result of the CY 2016 Update to the ASC
                             Payment System
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $10 million.
From Whom to Whom......................  Federal Government to Medicare
                                          Providers and Suppliers.
------------------------------------------------------------------------
    Total..............................  $10 million.
------------------------------------------------------------------------

d. Effects of 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 previously finalized OPPS 
changes on hospitals for the CY 2017 payment determination. In section 
XIII. of this final rule with comment period, we are finalizing the 
adoption of 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 
(79 FR 67018). 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 will not 
receive the full OPD fee schedule increase factor for the CY 2018 
payment determination and subsequent years.
    In section XIII. of this final rule with comment period, we are 
finalizing the adoption of our proposals to make several changes to the 
Hospital OQR Program for the CY 2017 payment determination and 
subsequent years and the CY 2018 payment determination and subsequent 
years. For the CY 2017 payment determination and subsequent years, we 
are finalizing our proposals 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 to August 31 and revise 42 CFR 
419.46(b) to reflect this change; (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) 
to January 1 through May 15; (5) fix a typographical error to correct 
the name of our extension and exception policy to extension and 
exemption policy; (6) change the deadline for submitting a 
reconsideration request to the first business day on or after March 17 
of the affected payment year and make a conforming change to 42 CFR 
419.46(f)(1) to reflect this change; 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 finalizing will increase burden, as further discussed below.
    In addition, we are finalizing the adoption of our proposals to 
make conforming changes to our validation scoring process to reflect 
changes in the APU determination timeframes. For the CY 2017 payment 
determination, we are finalizing our proposal that validation be based 
on three quarters of data (validation quarter 2, validation quarter 3, 
and validation quarter 4 of 2015), as opposed to four quarters as 
previously required. For the CY 2017 transition year, we estimate that 
the burden associated with validation reporting will be reduced by 25 
percent because hospitals will submit validation data for three 
quarters instead of four quarters. 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 
will reduce the number of hours required by 25 percent (from 12 hours 
to 9 hours per hospital). 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. 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. This is a reduction of 1,500 hours 
and $45,000 across all hospitals from last year's estimate attributable 
to changes in our validation scoring process.
    For the CY 2018 payment determination and subsequent years, we are 
finalizing two changes to the program. First, we are finalizing the 
adoption of one new measure: OP-33: External Beam Radiotherapy (EBRT) 
for

[[Page 70594]]

Bone Metastases (NQF #1822). As we further explain in section 
XIII.D.4.b. of this final rule with comment period, we are finalizing 
only one mode of data submission for this measure: data for OP-33 may 
only be submitted at an aggregate-level via a CMS Web based tool 
(QualityNet Web site). As discussed in section XIX.B.1.b. of this final 
rule with comment period, we believe that this measure will result in a 
total increase in burden across all participating hospitals of 8,312.7 
hours or $249,381 per year. Second, for the CY 2018 payment 
determination and subsequent years, we are finalizing 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 increase in burden associated with the 
validation process is 1,500 hours and $45,000 across all hospitals from 
the CY 2017 estimate because we will be sampling four quarters, as we 
had in prior years, instead of three quarters.
    For the CY 2019 payment determination and subsequent years, we are 
not making any changes to the program. We are not finalizing the 
proposed adoption of OP-34: Emergency Department Transfer Communication 
(EDTC) (NQF #0291). Thus, because we have not adopted any new measures 
or policy changes for the CY 2019 payment determination and subsequent 
years, we expect the burden to be unchanged for the CY 2019 payment 
determination as compared to the CY 2018 payment determination and 
subsequent years as discussed above.
    We refer readers to the information collection requirements in 
section XIX.B.1. of this final rule with comment period for a detailed 
discussion of the financial and hourly burden of the additional 
requirements for submitting data to the Hospital OQR Program.
e. Effects of Requirements for the ASCQR Program
    As discussed in section XIV. of this final rule with comment 
period, we are finalizing our proposals 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 adding 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 will 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 finalizing in this final rule 
with comment period will increase the number of ASCs that do not 
receive a full annual payment update for the CY 2018 payment 
determination. We expect a reduction in the number of ASCs that do not 
receive a full annual payment update for the CY 2018 payment 
determination due to our finalizing our proposal that IHS hospital 
outpatient departments billing as ASCs will no longer be considered 
ASCs for the purposes of the ASCQR Program. Thus, because 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 will 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 we are finalizing in this final rule with comment 
period, 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 \65\ (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.
---------------------------------------------------------------------------

    \65\ 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 XIX.B.2. of this final rule with comment period for a detailed 
discussion of the financial and hourly burden of the ASCQR Program's 
current and newly finalized requirements.
    We invited public comment on the burden associated with these 
proposals. We did not receive any public comments on these proposals.
f. Impact of the Policy Change for Medical Review of Inpatient Hospital 
Admissions Under Medicare Part A
    As discussed in section XV. of this final rule with comment period, 
we are finalizing 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 policy 
change described in section XV. of this final rule with comment period.
    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 we 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.

[[Page 70595]]

    In the CY 2016 OPPS/ASC proposed rule (80 FR 39369 through 39370), 
we discussed our actuaries' estimate that overall IPPS expenditures 
would not be significantly different under our proposed policy change 
for the medical review of inpatient hospital admissions under Medicare 
Part A. For example, our actuaries did not assume any significant 
additional shifts between the inpatient setting and the outpatient 
setting as a result of the proposed policy change relative to the 
shifts that had been modeled for the original -0.2 percent estimate nor 
did they assume any change in the assumption regarding the 30-percent 
outpatient/inpatient payment differential.
    Although we received many public comments questioning the validity 
of the original -0.2 percent estimate and some commenters asserted that 
we should remove the -0.2 percent adjustment in light of the proposed 
policy change, none of these public comments specifically addressed the 
issue of whether or not the proposed policy change that we are adopting 
for the medical review of inpatient hospital admissions under Medicare 
Part A described in section XV. of this final rule with comment period 
would have a differential impact on expenditures compared to the 
original policy.
    As a result, after consideration of the public comments we 
received, our actuaries do not assume any significant additional shifts 
between the inpatient setting and the outpatient setting as a result of 
the policy change we are adopting for the medical review of inpatient 
hospital admissions under Medicare Part A described in section XV. of 
this final rule with comment period. In addition, after reviewing the 
public comments we received, our actuaries determined that there is no 
change in the assumption regarding the 30-percent outpatient/inpatient 
payment differential at the current time. Therefore, our actuaries 
continue to estimate that overall IPPS expenditures would not be 
significantly different under the policy change we are adopting, and we 
are not changing the -0.2 percent adjustment at this time.
    Regarding the public comments we received questioning the validity 
of the original -0.2 percent estimate, we note that this issue has been 
the subject of continuing litigation in Shands v. Burwell, No. 14-263 
(D.D.C.) and consolidated cases. Since the CY 2016 OPPS/ASC proposed 
rule was published, the court in Shands has remanded the issue of the 
validity of the original -0.2 percent estimate to the Agency for 
further proceedings. Those proceedings will include publication of a 
notice with comment period, consideration of public comments, and 
publication of a final notice. As a result, we will soon be addressing 
the same issues regarding the validity of the original -0.2 percent 
adjustment in the Shands remand proceedings that we discussed in the 
proposed rule and on which we invited public comments. We do not 
believe it is efficient to separately respond to two sets of public 
comments on essentially the same issue--once now and then once again as 
part of the Shands remand proceedings. Therefore, we will respond to 
all public comments regarding the validity of the original -0.2 percent 
adjustment that we received in response to the proposed rule as part of 
the Shands remand proceedings. Commenters are invited to submit public 
comments as part of the Shands remand proceedings if they wish, whether 
or not they submitted public comments in response to the CY 2016 OPPS/
ASC proposed rule. Commenters do not need to resubmit public comments 
regarding the validity of the original -0.2 percent adjustment in the 
Shands remand proceedings that they submitted in response to the 
proposed rule. Again, we will respond to all such public comments, in 
addition to public comments submitted in the Shands remand proceedings, 
as part of those proceedings.
    As we indicated in the CY 2016 OPPS/ASC proposed rule, our 
actuaries will continue to review the claims experience under the 2-
midnight rule, and we will take those reviews into account during 
future rulemaking, including potential future rulemaking on the issue 
of whether or not the proposed policy change that we are adopting for 
the medical review of inpatient hospital admissions under Medicare Part 
A described in section XV. of this final rule with comment period would 
have a differential impact on expenditures compared to the original 
policy.
g. Impact of Transition for Former MDHs Under the IPPS
    In section XVI. of this final rule with comment period, we are 
finalizing, with modification, our proposed policy relating to a 
transition period under the IPPS for hospitals that lost their MDH 
status because they are no longer in a rural area as a result of the 
implementation of the new OMB labor market area delineations. A 
hospital is eligible for designation as an MDH only if it is either 
physically located in a rural area or has been reclassified to a rural 
area under 42 CFR 412.103. In the CY 2016 OPPS/ASC proposed rule (80 FR 
39354), we proposed to provide a transition period only 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. After consideration of the 
public comments we received, in this final rule with comment period, we 
are finalizing a policy that, effective January 1, 2016, payments to 
hospitals that (1) lost their MDH status because they are no longer in 
a rural area due to the implementation of the new OMB delineations in 
FY 2015 and (2) have not reclassified from urban to rural under the 
regulations at Sec.  412.103 before January 1, 2016, will transition 
from payments based, in part, on the hospital-specific rate to payments 
based entirely on the Federal rate. For discharges occurring on or 
after January 1, 2016, and before October 1, 2016, these former MDHs 
will receive the Federal rate plus two-thirds of 75 percent of the 
amount by which the Federal rate payment is exceeded by the hospital's 
hospital-specific rate payment. For FY 2017, that is, for discharges 
occurring on or after October 1, 2016, and before October 1, 2017, 
these former MDHs will 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 payment. For FY 2018, that is, 
for discharges occurring on or after October 1, 2017, these former MDHs 
will be paid based solely on the Federal rate.
    We are aware of eight providers that were classified as MDHs prior 
to the implementation of the new OMB delineations on October 1, 2014, 
that did not reclassify as rural under the regulations at Sec.  
412.103. In order to estimate the cost associated with the transition 
period for these eight providers, we used 12 months of FY 2014 MedPAR 
claims data and the FY 2016 payment rates. We estimated two sets of 
payments for affected hospitals, one calculated with MDH status in 
which payment is calculated based on the Federal rate plus 75 percent 
of the amount by which the Federal rate payment is exceeded by the 
hospital-specific payment (referred to as the hospital-specific payment 
add-on) and the other without MDH status where payment is based solely 
on the Federal rate. We then took the difference between these two 
payments to arrive at the FY 2016 hospital-specific payment add-on, 
that is, 75 percent of the amount by which the Federal rate payment is 
exceeded by the hospital-specific rate payment. For the first year of 
the

[[Page 70596]]

transition, we multiplied the hospital-specific payment add-on amount 
by three-quarters because the payment transition is only effective for 
three-quarters of FY 2016. We then multiplied that product by two-
thirds to calculate the MDH transition payment for discharges on or 
after January 1, 2016, and before October 1, 2016. For the second year 
of the transition, we multiplied the hospital-specific payment add-on 
amount by one-third to calculate the MDH transition payment for 
discharges on or after October 1, 2016, and before October 1, 2017. We 
then added the transition payments from the first and second year to 
arrive at the total estimate of the costs associated with the 
transition period for affected former MDHs. We estimate the costs to 
the Government associated with the transition period for these 
hospitals 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 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 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this final 
rule with comment period may have a significant impact on approximately 
649 small rural hospitals. Therefore, we have prepared a regulatory 
impact analysis that includes the effects of the rule on small rural 
hospitals. The full impact analysis is reflected in Table 70 under 
section XXI.A. of this final rule with comment period.
    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 final rule with 
comment period does not mandate any requirements for State, local, or 
tribal governments, or for the private sector.

D. Conclusion

    The changes we are making in this final rule with comment period 
will affect all classes of hospitals paid under the OPPS and will 
affect both CMHCs and ASCs. We estimate that most classes of hospitals 
paid under the OPPS will experience a modest increase or a minimal 
decrease in payment for services furnished under the OPPS in CY 2015. 
Table 70 demonstrates the estimated distributional impact of the OPPS 
budget neutrality requirements that would result in a 0.4 percent 
decrease in payments for all services paid under the OPPS in CY 2016, 
after considering all of the changes to APC reconfiguration and 
recalibration, as well as the OPD fee schedule increase factor, 
adjustment to the conversion factor to address the inflation in OPPS 
payment rates resulting from excess packaged payment under the OPPS for 
laboratory tests, wage index changes, including the frontier State wage 
index adjustment, estimated payment for outliers, and changes to the 
pass-through payment estimate. However, some classes of providers that 
are paid under the OPPS would experience more significant gains or 
losses in OPPS payments in CY 2016.
    The updates to the ASC payment system for CY 2016 will affect each 
of the approximately 5,300 ASCs currently approved for participation in 
the Medicare program. The effect on an individual ASC will depend on 
its mix of patients, the proportion of the ASC's patients who are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the ASC payment system, 
and the extent to which the ASC provides a different set of procedures 
in the coming year. Table 71 demonstrates the estimated distributional 
impact among ASC surgical specialties of the MFP-adjusted CPI-U update 
factor of 0.3 percent for CY 2016.

XXII. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications. We have examined the OPPS and ASC provisions included in 
this final rule with comment period in accordance with Executive Order 
13132, Federalism, and have determined that they will not have a 
substantial direct effect on State, local or tribal governments, 
preempt State law, or otherwise have a Federalism implication. As 
reflected in Table 70 of this final rule with comment period, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) would decrease payment by 0.3 percent 
under this final rule with comment period. While we do not know the 
number of ASCs or CMHCs with government ownership, we anticipate that 
it is small. The analyses we have provided in this section of this 
final rule with comment period, in conjunction with the remainder of 
this document, demonstrate that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Order 12866, the RFA, and section 1102(b) of the Act.
    This final rule with comment period would affect payments to a 
substantial number of small rural hospitals and a small number of rural 
ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some 
effects may be significant.

List of Subjects

42 CFR Part 405

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

42 CFR Part 410

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

42 CFR Part 412

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

[[Page 70597]]

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, 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 amending 42 CFR Chapter IV as set 
forth below:

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

Subpart R--Provider Reimbursement Determinations and Appeals

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

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


0
2. Section 405.1801 is amended by--
0
a. Amending paragraph (a) by revising the definition of ``Contractor 
determination''.
0
b. Revising paragraph (b)(1).
    The revisions read as follows:


Sec.  405.1801  Introduction.

    (a) * * *
    Contractor determination means the following:
    (1) With respect to a provider of services that has filed a cost 
report under Sec. Sec.  413.20 and 413.24 of this chapter, the term 
means a final determination of the amount of total reimbursement due 
the provider, pursuant to Sec.  405.1803 following the close of the 
provider's cost reporting period, for items and services furnished to 
beneficiaries for which reimbursement may be made on a reasonable cost 
basis under Medicare for the period covered by the cost report.
    (2) With respect to a hospital that receives payments for inpatient 
hospital services under the prospective payment system (part 412 of 
this chapter), the term means a final determination of the total amount 
of payment due the hospital, pursuant to Sec.  405.1803 following the 
close of the hospital's cost reporting period, under that system for 
the period covered by the final determination.
    (3) For purposes of appeal to the Provider Reimbursement Review 
Board, the term is synonymous with the phrases ``intermediary's final 
determination,'' ``final determination of the organization serving as 
its fiscal intermediary,'' ``Secretary's final determination'' and 
``final determination of the Secretary,'' as those phrases are used in 
section 1878(a) of the Act, and with the phrases ``final contractor 
determination'' and ``final Secretary determination'' as those phrases 
are used in this subpart.
    (4) For purposes of Sec.  405.376 concerning claims collection 
activities, the term does not include an action by CMS with respect to 
a compromise of a Medicare overpayment claim, or termination or 
suspension of collection action on an overpayment claim, against a 
provider or physician or other supplier.
* * * * *
    (b) * * *
    (1) Providers. In order to be paid for covered services furnished 
to Medicare beneficiaries, a provider must file a cost report with its 
contractor as specified in Sec.  413.24 of this chapter. For purposes 
of this subpart, the term ``provider'' includes a hospital (as 
described in part 482 of this chapter), hospice program (as described 
in Sec.  418.3 of this chapter), critical access hospital (CAH), 
comprehensive outpatient rehabilitation facility (CORF), renal dialysis 
facility, Federally qualified health center (FQHC), home health agency 
(HHA), rural health clinic (RHC), skilled nursing facility (SNF), and 
any other entity included under the Act. (FQHCs and RHCs are providers, 
for purposes of this subpart, effective with cost reporting periods 
beginning on or after October 1, 1991).
* * * * *

0
3. Section 405.1803 is amended by revising the paragraph (a) 
introductory text to read as follows:


Sec.  405.1803  Contractor determination and notice of amount of 
program reimbursement.

    (a) General requirement. Upon receipt of a provider's cost report, 
or amended cost report where permitted or required, the contractor must 
within a reasonable period of time (as specified in Sec.  
405.1835(c)(1)), furnish the provider and other parties as appropriate 
(see Sec.  405.1805) a written notice reflecting the contractor's final 
determination of the total amount of reimbursement due the provider. 
The contractor must include the following information in the notice, as 
appropriate:
* * * * *

0
4. Section 405.1811 is amended by revising paragraphs (a), (b)(1), 
(b)(2) introductory text, (b)(2)(iii), (b)(3), (e)(1), and (e)(2), to 
read as follows:


Sec.  405.1811  Right to contractor hearing; contents of, and adding 
issues to, hearing request.

    (a) Right to hearing on final contractor determination. A provider 
(but no other individual, entity, or party) has a right to a contractor 
hearing, as a single provider appeal, with respect to a final 
contractor or Secretary determination for the provider's cost reporting 
period, if--
    (1) The provider is dissatisfied with the contractor's final 
determination of the total amount of reimbursement due the provider, as 
set forth in the contractor's written notice pursuant to Sec.  
405.1803. Exception: If a final contractor determination is reopened 
under Sec.  405.1885, any review by the contractor hearing officer must 
be limited solely to those matters that are specifically revised in the 
contractor's revised final determination (Sec. Sec.  405.1887(d), 
405.1889(b), and the ``Exception'' in Sec.  405.1832(c)(2)(i)).
    (2) The amount in controversy (as determined in accordance with 
Sec.  405.1839) must be at least $1,000 but less than $10,000.
    (3) Unless the provider qualifies for a good cause extension under 
Sec.  405.1813, the date of receipt by the contractor of the provider's 
hearing request must be no later than 180 days after the date of 
receipt by the provider of the final contractor or Secretary 
determination.
    (b) * * *
    (1) A demonstration that the provider satisfies the requirements 
for a contractor hearing as specified in paragraph (a) of this section, 
including a specific identification of the final contractor or 
Secretary determination under appeal.
    (2) For each specific item under appeal, a separate explanation of 
why, and a description of how, the provider is dissatisfied with the 
specific aspects of the final contractor or Secretary determination 
under appeal, including an account of all of the following:
* * * * *
    (iii) If the provider self-disallows a specific item (as specified 
in Sec.  413.24(j) of this chapter), an explanation of the nature and 
amount of each self-disallowed item, the reimbursement sought for the 
item, and why the provider self-disallowed the item instead of claiming 
reimbursement for the item.
    (3) A copy of the final contractor or Secretary determination under 
appeal and any other documentary evidence the provider considers 
necessary to satisfy the hearing request requirements

[[Page 70598]]

of paragraphs (b)(1) and (b)(2) of this section.
* * * * *
    (e) * * *
    (1) The request to add issues complies with the requirements of 
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as 
to each new specific item at issue.
    (2) The specific items raised in the initial hearing request and 
the specific items identified in subsequent requests to add issues, 
when combined, satisfy the amount in controversy requirements of 
paragraph (a)(2) or paragraph (c)(3) of this section.
* * * * *


Sec.  405.1813  [Amended]

0
5. In Sec.  405.1813, paragraphs (a) and (b) are amended by removing 
the cross-reference ``Sec.  405.1811(a)(3) of this subpart'' and adding 
in its place the cross-reference ``Sec.  405.1811(a)(3) or Sec.  
405.1811(c)(2)''.


Sec.  405.1814  [Amended]

0
6. Section 405.1814 is amended by removing paragraph (b)(3).
0
7. A new Sec.  405.1832 is added to read as follows:


Sec.  405.1832  Contractor hearing officer review of compliance with 
the substantive reimbursement requirement of an appropriate cost report 
claim.

    (a) General. In order to receive or potentially qualify for 
reimbursement for a specific item, the provider must include in its 
cost report an appropriate claim for the specific item (as prescribed 
in Sec.  413.24(j) of this chapter). If the provider files an appeal to 
the contractor seeking reimbursement for a specific item and any party 
to such appeal questions whether the provider's cost report included an 
appropriate claim for the specific item, the contractor hearing 
officer(s) must address such questions in accordance with the 
procedures set forth in this section.
    (b) Summary of procedures--(1) Preliminary steps. The contractor 
hearing officer(s) must give each party to the appeal an adequate 
opportunity to submit factual evidence and legal argument regarding the 
question of whether the provider's cost report included an appropriate 
claim for the specific item under appeal. Upon receipt of timely 
submitted factual evidence and legal argument (if any), the contractor 
hearing officer(s) must review such evidence and argument, and prepare 
written specific findings of fact and conclusions of law on the 
question of whether the provider's cost report complied with, for the 
specific item under appeal, the cost report claim requirements 
prescribed in Sec.  413.24(j) of this chapter. In reaching such 
specific factual findings and legal conclusions, the contractor hearing 
officer(s) must follow the procedures set forth in Sec.  413.24(j)(3) 
of this chapter for determining whether the provider's cost report 
included an appropriate claim for the specific item under appeal. The 
contractor hearing officer(s) must promptly give a copy of such written 
specific factual findings and legal conclusions to each party to the 
appeal, and such factual findings and legal conclusions must be 
included in the record of administrative proceedings for the appeal (as 
prescribed in Sec.  405.1827).
    (2) Limits on contractor hearing officer(s) actions. The contractor 
hearing officer(s)'s specific findings of fact and conclusions of law 
(in accordance with paragraph (b)(1) of this section) must not be 
invoked or relied on by the contractor hearing officer(s) as a basis to 
deny, or decline to exercise, jurisdiction over a specific item or take 
any other of the actions specified in paragraph (c) of this section. 
Upon giving the parties to the appeal the contractor hearing 
officer(s)'s written specific factual findings and legal conclusions 
(pursuant to paragraph (b)(1) of this section) on the question of 
whether the provider's cost report included an appropriate cost report 
claim for the specific item under appeal, the contractor hearing 
officer(s) must proceed to issue one of the two types of overall 
decisions specified in paragraphs (d) and (e) of this section with 
respect to the specific item. If the contractor hearing officer(s) 
issues an overall contractor hearing decision (as specified in 
paragraph (d) of this section) regarding the specific item under 
appeal, the contractor hearing officer(s)'s written specific factual 
findings and legal conclusions (in accordance with paragraph (b)(1) of 
this section) must be included in such overall contractor hearing 
decision regarding the specific item, along with the other matters that 
are required by the regulations for an overall contractor hearing 
decision. However, if the contractor hearing officer(s) issues an 
overall jurisdictional dismissal decision (as specified in paragraph 
(e) of this section) regarding the specific item under appeal, the 
contractor hearing officer(s)'s written specific factual findings and 
legal conclusions (in accordance with paragraph (b)(1) of this section) 
must not be included in the overall jurisdictional dismissal decision 
regarding the specific item. The contractor hearing officer(s) may 
permit reimbursement for the specific item under appeal, as part of an 
overall contractor hearing decision, but such reimbursement may be 
permitted only to the extent authorized by paragraph (f) of this 
section.
    (c) Prohibition of certain types of decisions, orders, and other 
actions. (1) If the contractor hearing officer(s) determines, in its 
findings of fact and conclusions of law (as prescribed by paragraph 
(b)(1) of this section), that the provider's cost report did not 
include an appropriate claim for the specific item under appeal, the 
contractor hearing officer(s) may not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the contractor hearing officer(s)'s factual 
findings and legal conclusions (reached under paragraph (b)(1) of this 
section);
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the contractor hearing 
officer(s)'s factual findings and legal conclusions (reached under 
paragraph (b)(1) of this section); or
    (iii) Impose any sanction or take any other action against the 
interests of any party to the appeal except as provided in paragraph 
(f) of this section, based on (in whole or in part) the contractor 
hearing officer(s)'s factual findings and legal conclusions (in 
accordance with paragraph (b)(1) of this section).
    (2) Regardless of whether the contractor hearing officer(s) 
determines, in its findings of fact and conclusions of law (as 
prescribed by paragraph (b)(1) of this section), that the provider's 
cost report did or did not include an appropriate claim for the 
specific item under appeal, the contractor hearing officer(s) may not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the absence, in the final contractor or Secretary 
determination under appeal, of an adjustment, revision, correction, or 
other change to the specific item under appeal, or the lack of a 
particular determination by the contractor or the Secretary regarding 
the specific item. Exception: If the provider's appeal of the specific 
item is based on a reopening of such item (pursuant to Sec.  405.1885) 
where the specific item is not revised, adjusted, corrected, or 
otherwise changed in a revised final contractor or Secretary 
determination, the contractor must deny jurisdiction over the specific 
item under appeal (as prescribed in Sec. Sec.  405.1887(d) and 
405.1889(b));
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the

[[Page 70599]]

absence, in the final contractor or Secretary determination under 
appeal, of an adjustment, revision, correction, or other change to the 
specific item under appeal, or the lack of a particular determination 
by the contractor or the Secretary regarding the specific item; or
    (iii) Impose any sanction or take any other action against the 
interests of any party to the appeal except as provided in paragraph 
(f) of this section, based on (in whole or in part) the absence, in the 
final contractor or Secretary determination under appeal, of an 
adjustment, revision, correction, or other change to the specific item 
under appeal, or the lack of a particular determination by the 
contractor or the Secretary regarding the specific item.
    (d) Contractor hearing decision must include any factual findings 
and legal conclusions under paragraph (b)(1) of this section. If the 
contractor hearing officer(s) issues a hearing decision regarding the 
specific item under appeal (pursuant to Sec.  405.1831), any specific 
findings of fact and conclusions of law by the contractor hearing 
officer(s) (reached under paragraph (b)(1) of this section), on the 
question of whether the provider's cost report included an appropriate 
claim for the specific item, must be included in such hearing decision 
along with the other matters prescribed by Sec.  405.1831. The 
contractor hearing officer(s)'s factual findings and legal conclusions 
(in accordance with paragraph (b)(1) of this section) about whether 
there was an appropriate cost report claim for the specific item under 
appeal are subject to the provisions of Sec.  405.1833 just as those 
provisions apply to the other parts of the contractor hearing decision. 
If the contractor hearing officer(s) determines that the provider's 
cost report--
    (1) Included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j) of this chapter), the 
contractor hearing decision also must address whether the other 
substantive reimbursement requirements for the specific item are also 
satisfied; or
    (2) Did not include an appropriate claim for the specific item 
under appeal, the contractor hearing officer(s) has discretion whether 
or not to address in the contractor hearing decision whether the other 
substantive reimbursement requirements for the specific item are also 
satisfied.
    (e) Contractor jurisdictional dismissal decision must not include 
factual findings and legal conclusions under paragraph (b)(1) of this 
section. If the contractor hearing officer(s) issues a jurisdictional 
dismissal decision regarding the specific item under appeal (in 
accordance with Sec.  405.1814(c)), the contractor hearing officer(s)'s 
specific findings of fact and conclusions of law (in accordance with 
paragraph (b)(1) of this section) on the question of whether the 
provider's cost report included an appropriate claim for the specific 
item must not be included in such jurisdictional dismissal decision.
    (f) Effects of the contractor hearing officer(s)'s factual findings 
and legal conclusions under paragraph (b)(1) of this section when part 
of a final contractor hearing decision. If the contractor hearing 
officer(s) determines, as part of a final and binding contractor 
hearing decision (pursuant to Sec.  405.1833 and paragraphs (b)(1) and 
(d) of this section), that the provider's cost report--
    (1) Included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j) of this chapter), the specific 
item is reimbursable in accordance with Medicare policy, but only if 
the contractor hearing officer(s) further determines in such final 
contractor hearing decision that all the other substantive 
reimbursement requirements for the specific item are also satisfied; or
    (2) Did not include an appropriate cost report claim for the 
specific item under appeal, the specific item is not reimbursable, 
regardless of whether the contractor hearing officer(s) further 
determines in such final contractor hearing decision that the other 
substantive reimbursement requirements for the specific item are or are 
not satisfied.

0
8. Section 405.1834 is amended by adding a new paragraph (b)(2)(iii) to 
read as follows:


Sec.  405.1834  CMS reviewing official procedure.

* * * * *
    (b) * * *
    (2) * * *
    (iii) If the CMS reviewing official reviews a contractor hearing 
decision regarding a specific item, then the CMS reviewing official's 
review of such a contractor hearing decision will include, and any 
decision issued by the CMS reviewing official (under paragraph (e) of 
this section) will address, the contractor hearing officer(s)'s 
specific findings of fact and conclusions of law in such contractor 
hearing decision (as specified in Sec.  405.1832(b)(1) and (d)) on the 
question of whether the provider's cost report included an appropriate 
claim for the specific item under appeal (as specified in Sec.  
413.24(j) of this chapter).
* * * * *

0
9. Section 405.1835 is amended by revising paragraphs (a), (b)(1), 
(b)(2) introductory text, (b)(2)(iii), (b)(3), (e)(1), and (e)(2), to 
read as follows:


Sec.  405.1835  Right to Board hearing; contents of, and adding issues 
to, hearing request.

    (a) Right to hearing on final contractor determination. A provider 
(but no other individual, entity, or party) has a right to a Board 
hearing, as a single provider appeal, with respect to a final 
contractor or Secretary determination for the provider's cost reporting 
period, if--
    (1) The provider is dissatisfied with the contractor's final 
determination of the total amount of reimbursement due the provider, as 
set forth in the contractor's written notice specified under Sec.  
405.1803. Exception: If a final contractor determination is reopened 
under Sec.  405.1885, any review by the Board must be limited solely to 
those matters that are specifically revised in the contractor's revised 
final determination (Sec. Sec.  405.1887(d), 405.1889(b), and the 
``Exception'' in Sec.  405.1873(c)(2)(i)).
    (2) The amount in controversy (as determined in accordance with 
Sec.  405.1839) must be $10,000 or more.
    (3) Unless the provider qualifies for a good cause extension under 
Sec.  405.1836, the date of receipt by the Board of the provider's 
hearing request must be no later than 180 days after the date of 
receipt by the provider of the final contractor or Secretary 
determination.
    (b) * * *
    (1) A demonstration that the provider satisfies the requirements 
for a Board hearing as specified in paragraph (a) of this section, 
including a specific identification of the final contractor or 
Secretary determination under appeal.
    (2) For each specific item under appeal, a separate explanation of 
why, and a description of how, the provider is dissatisfied with the 
specific aspects of the final contractor or Secretary determination 
under appeal, including an account of all of the following:
* * * * *
    (iii) If the provider self-disallows a specific item (as specified 
in Sec.  413.24(j) of this chapter), an explanation of the nature and 
amount of each self-disallowed item, the reimbursement sought for the 
item, and why the provider self-disallowed the item instead of claiming 
reimbursement for the item.
    (3) A copy of the final contractor or Secretary determination under 
appeal and any other documentary evidence the provider considers 
necessary to satisfy the hearing request requirements

[[Page 70600]]

of paragraphs (b)(1) and (b)(2) of this section.
* * * * *
    (e) * * *
    (1) The request to add issues complies with the requirements of 
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as 
to each new specific item at issue.
    (2) The specific items raised in the initial hearing request and 
the specific items identified in subsequent requests to add issues, 
when combined, satisfy the amount in controversy requirements of 
paragraph (a)(2) or paragraph (c)(3) of this section.
* * * * *


Sec.  405.1836  [Amended]

0
10. In Sec.  405.1836, paragraph (a) is amended by removing the cross-
reference ``Sec.  405.1835(a)(3) of this subpart'' and adding in its 
place the cross-reference ``Sec.  405.1835(a)(3) or Sec.  
405.1835(c)(2)''; and paragraph (b) is amended by removing the cross-
reference ``Sec.  405.1835(a)(3)'' and adding in its place the cross-
reference ``Sec.  405.1835(a)(3) or Sec.  405.1835(c)(2)''.

0
11. Section 405.1837 is amended by revising paragraphs (a) introductory 
text, (a)(1), (c)(2) introductory text, (c)(2)(iii), (c)(3), and (e)(4) 
to read as follows:


Sec.  405.1837  Group appeals.

    (a) Right to Board hearing as part of a group appeal: Criteria. A 
provider (but no other individual, entity, or party) has a right to a 
Board hearing, as part of a group appeal with other providers, with 
respect to a final contractor or Secretary determination for the 
provider's cost reporting period, only if--
    (1) The provider satisfies individually the requirements for a 
Board hearing under Sec.  405.1835(a) or Sec.  405.1835(c), except for 
the $10,000 amount in controversy requirement in Sec.  405.1835(a)(2) 
or Sec.  405.1835(c)(3).
* * * * *
    (c) * * *
    (2) An explanation (for each specific item at issue) of each 
provider's dissatisfaction with the final contractor or Secretary 
determination under appeal, including an account of--
* * * * *
    (iii) If the provider self-disallows a specific item (as specified 
in Sec.  413.24(j) of this chapter), an explanation of the nature and 
amount of each self-disallowed item, the reimbursement sought for the 
item, and why the provider self-disallowed the item instead of claiming 
reimbursement for the item.
    (3) A copy of each final contractor or Secretary determination 
under appeal, and any other documentary evidence the providers consider 
to satisfy the hearing request requirements of paragraphs (c)(1) and 
(c)(2) of this section, and a precise description of the one question 
of fact or interpretation of law, regulations, or CMS Rulings that is 
common to the particular matter at issue in the group appeal.
* * * * *
    (e) * * *
    (4) A provider may submit a request to the Board to join a group 
appeal any time before the Board issues one of the decisions specified 
in Sec.  405.1875(a)(2). By submitting a request, the provider agrees 
that, if the request is granted, the provider is bound by the Board's 
actions and decision in the appeal. If the Board denies a request, the 
Board's action is without prejudice to any separate appeal the provider 
may bring in accordance with Sec.  405.1811, Sec.  405.1835, or this 
section. For purposes of determining timeliness for the filing of any 
separate appeal and for the adding of issues to such appeal, the date 
of receipt of the provider's request to form or join the group appeal 
is considered the date of receipt for purposes of meeting the 
applicable 180-day period prescribed in Sec.  405.1835(a)(3) or Sec.  
405.1835(c)(2).
* * * * *


Sec.  405.1839  [Amended]

0
12. In Sec.  405.1839, paragraph (a)(1) is amended by removing the 
cross-reference ``Sec.  405.1811(a)(2) of this subpart'' and adding in 
its place the cross-reference ``Sec.  405.1811(a)(2) or Sec.  
405.1811(c)(3)''; and by removing the cross-reference ``Sec.  
405.1835(a)(2) of this subpart'' and adding in its place the cross-
reference ``Sec.  405.1835(a)(2) or Sec.  405.1835(c)(3)''.


Sec.  405.1840  [Amended]

0
13. Section 405.1840 is amended by removing paragraph (b)(3).

0
14. A new Sec.  405.1873 is added to read as follows:


Sec.  405.1873  Board review of compliance with the reimbursement 
requirement of an appropriate cost report claim.

    (a) General. In order to receive or potentially receive 
reimbursement for a specific item, the provider must include in its 
cost report an appropriate claim for the specific item (as prescribed 
in Sec.  413.24(j) of this chapter). If the provider files an appeal to 
the Board seeking reimbursement for the specific item and any party to 
such appeal questions whether the provider's cost report included an 
appropriate claim for the specific item, the Board must address such 
question in accordance with the procedures set forth in this section.
    (b) Summary of procedures--(1) Preliminary steps. The Board must 
give the parties an adequate opportunity to submit factual evidence and 
legal argument regarding the question of whether the provider's cost 
report included an appropriate claim for the specific item under 
appeal. Upon receipt of timely submitted factual evidence or legal 
argument (if any), the Board must review such evidence and argument and 
prepare written specific findings of fact and conclusions of law on the 
question of whether the provider's cost report complied with, for the 
specific item under appeal, the cost report claim requirements 
prescribed in Sec.  413.24(j) of this chapter. In reaching such 
specific factual findings and legal conclusions, the Board must follow 
the procedures set forth in Sec.  413.24(j)(3) of this chapter for 
determining whether the provider's cost report included an appropriate 
claim for the specific item under appeal. The Board must promptly give 
a copy of such written specific factual findings and legal conclusions 
to each party to the appeal, and such factual findings and legal 
conclusions must be included in the record of administrative 
proceedings for the appeal (as prescribed in Sec.  405.1865).
    (2) Limits on Board actions. The Board's specific findings of fact 
and conclusions of law (pursuant to paragraph (b)(1) of this section) 
must not be invoked or relied on by the Board as a basis to deny, or 
decline to exercise, jurisdiction over a specific item or take any 
other of the actions specified in paragraph (c) of this section. Upon 
giving the parties to the appeal the Board's written specific factual 
findings and legal conclusions (pursuant to paragraph (b)(1) of this 
section) on the question of whether the provider's cost report included 
an appropriate cost report claim for the specific item under appeal, 
the Board must proceed to issue one of the four types of overall 
decisions specified in paragraphs (d) and (e) of this section with 
respect to the specific item. If the Board issues either of two types 
of overall Board decisions (as specified in paragraph (d) of this 
section) regarding the specific item under appeal, the Board's written 
specific factual findings and legal conclusions (pursuant to paragraph 
(b)(1) of this section) must be included in such overall Board decision 
regarding the specific item, along with the other matters that are 
required by the regulations for the pertinent type of

[[Page 70601]]

overall Board decision. However, if the Board issues either of two 
other types of overall Board decisions (as specified in paragraph (e) 
of this section) regarding the specific item under appeal, the Board's 
written specific factual findings and legal conclusions (pursuant to 
paragraph (b)(1) of this section) must not be included in the overall 
Board decision regarding the specific item. The Board may permit 
reimbursement for the specific item under appeal, as part of one of the 
two types of overall Board decisions that are specified in paragraph 
(d) of this section, but such reimbursement may be permitted only to 
the extent authorized by paragraph (f) of this section.
    (c) Prohibition of certain types of decisions, orders, and other 
actions. (1) If the Board determines, in its findings of fact and 
conclusions of law (as prescribed by paragraph (b)(1) of this section), 
that the provider's cost report did not include an appropriate claim 
for the specific item under appeal, the Board may not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the Board's factual findings and legal 
conclusions (reached under paragraph (b)(1) of this section);
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the Board's factual findings and 
legal conclusions (reached under paragraph (b)(1) of this section); or
    (iii) Take any of the actions set forth in Sec.  405.1868(b), (c), 
or (d), impose any sanction, or take any other action against the 
interests of any party to the appeal, except as provided in paragraph 
(f) of this section, based on (in whole or in part) the Board's factual 
findings and legal conclusions (reached under paragraph (b)(1) of this 
section).
    (2) Regardless of whether the Board determines, in its findings of 
fact and conclusions of law (as prescribed by paragraph (b)(1) of this 
section), that the provider's cost report did or did not include an 
appropriate claim for the specific item under appeal, the Board may 
not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the absence, in the final contractor 
determination or Secretary determination under appeal, of an 
adjustment, revision, correction, or other change to the specific item 
under appeal, or the lack of a particular determination by the 
contractor or the Secretary regarding the specific item. Exception: If 
the provider's appeal of the specific item is based on a reopening of 
such item (pursuant to Sec.  405.1885) where the specific item is not 
revised, adjusted, corrected, or otherwise changed in a revised final 
contractor or Secretary determination, the Board must deny jurisdiction 
over the specific item under appeal (as prescribed in Sec. Sec.  
405.1887(d) and 405.1889(b));
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the absence, in the final 
contractor determination or Secretary determination under appeal, of an 
adjustment, revision, correction, or other change to the specific item 
under appeal, or the lack of a particular determination by the 
contractor or the Secretary regarding the specific item; or
    (iii) Take any of the actions set forth in Sec.  405.1868(b), (c), 
or (d), impose any sanction, or take any other action against the 
interests of any party to the appeal, except as provided in paragraph 
(f) of this section, based on (in whole or in part) the absence, in the 
final contractor determination or Secretary determination under appeal, 
of an adjustment, revision, correction, or other change to the specific 
item under appeal, or the lack of a particular determination by the 
contractor or the Secretary regarding the specific item.
    (d) Two types of Board decisions that must include any factual 
findings and legal conclusions under paragraph (b)(1) of this section--
(1) Board hearing decision. If the Board issues a hearing decision 
regarding the specific item under appeal (pursuant to Sec.  405.1871), 
any specific findings of fact and conclusions of law by the Board (in 
accordance with paragraph (b)(1) of this section), on the question of 
whether the provider's cost report included an appropriate claim for 
the specific item, must be included in such hearing decision along with 
the other matters prescribed by Sec.  405.1871(a). The Board's factual 
findings and legal conclusions (reached under paragraph (b)(1) of this 
section), about whether there was an appropriate cost report claim for 
the specific item under appeal, are subject to the provisions of Sec.  
405.1871(b) just as those provisions apply to the other parts of the 
Board's hearing decision. If the Board determines that the provider's 
cost report--
    (i) Included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j) of this chapter), the Board's 
hearing decision must also address whether the other substantive 
reimbursement requirements for the specific item are also satisfied; or
    (ii) Did not include an appropriate claim for the specific item 
under appeal, the Board has discretion whether or not to address in the 
Board's hearing decision whether the other substantive reimbursement 
requirements for the specific item are also satisfied.
    (2) Board expedited judicial review (EJR) decision, where EJR is 
granted. If the Board issues an EJR decision where EJR is granted 
regarding a legal question that is relevant to the specific item under 
appeal (in accordance with Sec.  405.1842(f)(1)), the Board's specific 
findings of fact and conclusions of law (reached under paragraph (b)(1) 
of this section), on the question of whether the provider's cost report 
included an appropriate claim for the specific item, must be included 
in such EJR decision along with the other matters prescribed by Sec.  
405.1842(f)(1). The Board's factual findings and legal conclusions (in 
accordance with paragraph (b)(1) of this section) about whether there 
was an appropriate cost report claim for the specific item under appeal 
are subject to the provisions of Sec.  405.1842(g)(1), (g)(2), (h)(1), 
and (h)(3) in the same manner as those provisions apply to the other 
parts of the Board's EJR decision.
    (e) Two other types of Board decisions that must not include the 
Board's factual findings and legal conclusions under paragraph (b)(1) 
of this section--(1) Board jurisdictional dismissal decision. If the 
Board issues a jurisdictional dismissal decision regarding the specific 
item under appeal (pursuant to Sec.  405.1840(c)), the Board's specific 
findings of fact and conclusions of law (in accordance with paragraph 
(b)(1) of this section), on the question of whether the provider's cost 
report included an appropriate claim for the specific item, must not be 
included in such jurisdictional dismissal decision.
    (2) Board expedited judicial review (EJR) decision, where EJR is 
denied. If the Board issues an EJR decision where EJR is denied 
regarding a legal question that is relevant to the specific item under 
appeal (in accordance with Sec.  405.1842(f)(2)), the Board's specific 
findings of fact and conclusions of law (in accordance with paragraph 
(b)(1) of this section), on the question of whether the provider's cost 
report included an appropriate claim for the same item, must not be 
included in such EJR decision. If the Board conducts further 
proceedings and issues another decision (as specified in Sec.  
405.1842(h)(2)(i)), the Board's specific findings of fact and 
conclusions of law (in accordance with paragraph (b)(1) of this 
section)--
    (i) Must be included in any further hearing decision or EJR 
decision where EJR is granted regarding the specific item under appeal 
(as specified in paragraph (d) of this section); but
    (ii) Must not be included in any further jurisdictional dismissal 
decision or EJR decision where EJR is denied

[[Page 70602]]

regarding the specific item under appeal (as prescribed in paragraph 
(e) of this section).
    (f) Effects of the Board's factual findings and legal conclusions 
under paragraph (b)(1) of this section in two types of final 
decisions--(1) When part of a final hearing decision. If the Board 
determines, or the Administrator of CMS determines (pursuant to Sec.  
405.1875(a)(2)(v)), as applicable, in a final and binding hearing 
decision (in accordance with Sec.  405.1871(b) and paragraphs (b)(1) 
and (d)(1) of this section), that the provider's cost report--
    (i) Included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j) of this chapter), the specific 
item is reimbursable in accordance with Medicare policy, but only if 
the Board further determines in such final hearing decision that all 
the other substantive reimbursement requirements for the specific item 
are also satisfied; or
    (ii) Did not include an appropriate cost report claim for the 
specific item under appeal, the specific item is not reimbursable, 
regardless of whether the Board further determines in such final 
hearing decision that the other substantive reimbursement requirements 
for the specific item are or are not satisfied.
    (2) When part of a final EJR decision that grants EJR. If the Board 
determines or the Administrator of CMS determines (pursuant to Sec.  
405.1875(a)(2)(v)), as applicable, in a final and binding EJR decision 
that grants EJR regarding a legal question that is relevant to the 
specific item under appeal (in accordance with Sec.  405.1842(g)(1) and 
paragraphs (b)(1) and (d)(2) of this section), that the provider's cost 
report--
    (i) Included an appropriate claim for the specific item under 
appeal (as prescribed in Sec.  413.24(j) of this chapter), the specific 
item is reimbursable in accordance with Medicare policy, but only to 
the extent permitted by the final decision of a Federal court pursuant 
to the EJR provisions of section 1878(f)(1) of the Act (refer also to 
Sec. Sec.  405.1842 and 405.1877); or
    (ii) Did not include an appropriate claim for the specific item 
under appeal, the specific item is not reimbursable, unless--
    (A) The specific factual findings and legal conclusions (in 
accordance with paragraph (b)(1) of this section) of the Board or the 
Administrator, as applicable, on the question of whether the provider's 
cost report included an appropriate claim for the specific item under 
appeal, are reversed or modified by the final decision of a Federal 
court (in accordance with section 1878(f)(1) of the Act and Sec.  
405.1877); and
    (B) Only to the extent otherwise permitted by the final decision of 
a Federal court pursuant to the EJR provisions of section 1878(f)(1) of 
the Act (refer also to Sec. Sec.  405.1842 and 405.1877) and by 
Medicare policy.

0
15. Section 405.1875 is amended by revising the last sentence of 
paragraph (a) introductory text and adding a new paragraph (a)(2)(v) to 
read as follows:


Sec.  405.1875  Administrator review.

    (a) * * * The Board is required to send to the Office of the 
Attorney Advisor a copy of each decision specified in paragraphs 
(a)(2)(i), (ii), and (iii) of this section upon issuance of the 
decision.
* * * * *
    (2) * * *
    (v) If the Administrator reviews a Board hearing decision regarding 
a specific item, or for a Board EJR decision the question of whether 
there is Board jurisdiction over a specific item, the Administrator's 
review of such a hearing decision or EJR decision, as applicable, will 
include, and any decision issued by the Administrator (under paragraph 
(e) of this section) will address, the Board's specific findings of 
fact and conclusions of law in such hearing decision or EJR decision 
(as prescribed in Sec.  405.1873(b)(1) and (d)) on the question of 
whether the provider's cost report included an appropriate claim for 
the specific item under appeal (as prescribed in Sec.  413.24(j) of 
this chapter).
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
16. 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
17. 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
18. 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.


0
19. 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

[[Page 70603]]

medical record in order to be granted consideration.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
20. The authority citation for Part 413 continues to read as follows:

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), 
and (n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security 
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and 
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of 
Pub. L. 106-113 (113 Stat. 1501A-332), sec. 3201 of Pub. L. 112-96 
(126 Stat. 156), sec. 632 of Pub. L. 112-240 (126 Stat. 2354), and 
sec. 217 of Pub. L. 113-93.


0
21. Section 413.24 is amended by adding and reserving paragraph (i), 
and adding a new paragraph (j), to read as follows:


Sec.  413.24  Adequate cost data and cost finding.

* * * * *
    (i) [Reserved]
    (j) Substantive reimbursement requirement of an appropriate cost 
report claim--(1) General requirement. In order for a provider to 
receive or potentially qualify for reimbursement for a specific item 
for its cost reporting period, the provider's cost report, whether 
determined on an as submitted, as amended, or as adjusted basis (as 
prescribed in paragraph (j)(3) of this section), must include an 
appropriate claim for the specific item, by either--
    (i) Claiming full reimbursement in the provider's cost report for 
the specific item in accordance with Medicare policy, if the provider 
seeks payment for the item that it believes comports with program 
policy; or
    (ii) Self-disallowing the specific item in the provider's cost 
report, if the provider seeks payment that it believes may not be 
allowable or may not comport with Medicare policy (for example, if the 
provider believes the contractor lacks the authority or discretion to 
award the reimbursement the provider seeks for the item), by following 
the procedures (set forth in paragraph (j)(2) of this section) for 
properly self-disallowing the specific item in the provider's cost 
report as a protested amount.
    (2) Self-disallowance procedures. In order to properly self-
disallow a specific item, the provider must--
    (i) Include an estimated reimbursement amount for each specific 
self-disallowed item in the protested amount line (or lines) of the 
provider's cost report; and
    (ii) Attach a separate work sheet to the provider's cost report for 
each specific self-disallowed item, explaining why the provider self-
disallowed each specific item (instead of claiming full reimbursement 
in its cost report for the specific item) and describing how the 
provider calculated the estimated reimbursement amount for each 
specific self-disallowed item.
    (3) Procedures for determining whether there is an appropriate cost 
report claim. Whether the provider's cost report for its cost reporting 
period includes an appropriate claim for a specific item (as prescribed 
in paragraph (j)(1) of this section) must be determined by reference to 
the cost report that the provider submits originally to, and was 
accepted by, the contractor for such period, provided that none of the 
following exceptions applies:
    (i) If the provider submits an amended cost report for its cost 
reporting period and such amended cost report is accepted by the 
contractor, then whether there is an appropriate cost report claim for 
the specific item must be determined by reference to such amended cost 
report, provided that neither of the exceptions set forth in paragraphs 
(j)(3)(ii) and (iii) of this section applies;
    (ii) If the contractor adjusts the provider's cost report, as 
submitted originally by the provider and accepted by the contractor or 
as amended by the provider and accepted by the contractor, whichever is 
applicable, with respect to the specific item, then whether there is an 
appropriate cost report claim for the specific item must be determined 
by reference to the provider's cost report, as such cost report claim 
is adjusted for the specific item in the final contractor determination 
(as defined in Sec.  405.1801(a) of this chapter) for the provider's 
cost reporting period, provided that the exception set forth in 
paragraph (j)(3)(iii) of this section does not apply;
    (iii) If the contractor reopens either the final contractor 
determination for the provider's cost reporting period (pursuant to 
Sec.  405.1885 of this chapter) or a revised final contractor 
determination for such period (issued pursuant to Sec.  405.1889 of 
this chapter) and the contractor adjusts the provider's cost report 
with respect to the specific item, then whether there is an appropriate 
cost report claim for the specific item must be determined by reference 
to the provider's cost report, as such cost report claim is adjusted 
for the specific item in the most recent revised final contractor 
determination for such period.
    (4) Reimbursement effects of contractor's determination of whether 
there is an appropriate cost report claim. If the contractor determines 
that the provider's cost report included an appropriate claim for a 
specific item (as specified in paragraphs (j)(1), (2), and (3) of this 
section) and that all the other substantive reimbursement requirements 
for the specific item are also satisfied, the final contractor 
determination (as defined in Sec.  405.1801(a) of this chapter) must 
include reimbursement for the specific item to the extent permitted by 
Medicare policy. If the contractor determines that the provider made an 
appropriate cost report claim for a specific item but the contractor 
disagrees with material aspects of the provider's claim for the 
specific item, the contractor must make appropriate adjustments to the 
provider's cost report and include reimbursement for the specific item 
in the final contractor determination in accordance with such cost 
report adjustments and to the extent permitted by program policy. If 
the contractor determines that the provider did not make an appropriate 
cost report claim for a specific item, the final contractor 
determination must not include any reimbursement for the specific item, 
regardless of whether the other substantive reimbursement requirements 
for the specific item are or are not satisfied.
    (5) Administrative review of whether there is an appropriate cost 
report claim. If the provider files an administrative appeal (pursuant 
to Part 405, Subpart R of this chapter) seeking reimbursement for a 
specific item and any party to such appeal questions whether the 
provider's cost report included an appropriate claim for the specific 
item under appeal (as specified in paragraphs (j)(1), (2), (3), and (4) 
of this section), the reviewing entity (as defined in Sec.  405.1801(a) 
of this chapter) must follow the procedures prescribed in Sec.  
405.1873 of this chapter (if the appeal was filed originally with the 
Board), or the procedures set forth in Sec.  405.1832 of this chapter 
(if the appeal was filed initially with the contractor), for review of 
whether the substantive reimbursement requirement of an appropriate 
cost report claim for the specific item under appeal is satisfied. The 
reviewing entity must follow the procedures set forth in paragraph 
(j)(3) of this section in determining whether the provider's cost 
report included an appropriate claim for the specific item under 
appeal. The reviewing entity may permit reimbursement for the specific

[[Page 70604]]

item under appeal solely to the extent authorized by Sec.  405.1873(f) 
of this chapter (if the appeal was filed originally with the Board) or 
by Sec.  405.1832(f) of this chapter (if the appeal was filed initially 
with the contractor).

PART 416--AMBULATORY SURGICAL SERVICES

0
22. 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
23. 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
24. 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 the ASC device-
intensive procedure is removed prior to determining the Medicare 
program payment amount and the beneficiary coinsurance amount 
identified in paragraph (f)(1)(ii) of this section.
* * * * *

0
25. 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. 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
26. 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 
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

[[Page 70605]]

(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 
paid 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 are submitted via a CMS online data 
submission tool is for services furnished during the calendar year 2 
years prior to the payment determination year. Data collected must be 
submitted during the time period of January 1 to August 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 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 publicly 
display ASC data by the National Provider Identifier (NPI) when data 
are submitted by the NPI. CMS will publicly display ASC data by the CMS 
Certification Number (CCN) when data are submitted by the CCNs.


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:
    (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.

[[Page 70606]]

    (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 timely 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
27. 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
28. 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
29. 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
30. 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 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 
paragraph (b)(1)(ii) of this section.

0
31. 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.
* * * * *

[[Page 70607]]

    (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
32. 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 for premarket approval or clearance. 
Under this provision, the pass-through payment application for a 
medical device must be submitted within 3 years from the date of the 
initial FDA approval or clearance, if required, unless there is a 
documented, verifiable delay in U.S. market availability after FDA 
approval or clearance is granted, in which case CMS will consider the 
pass-through payment application if it is submitted within 3 years from 
the date of market availability.
* * * * *

    Dated: October 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare and Medicaid Services.
    Dated: October 26, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-27943 Filed 10-30-15; 4:15 pm]
 BILLING CODE 4120-01-P