[Federal Register Volume 83, Number 225 (Wednesday, November 21, 2018)]
[Rules and Regulations]
[Pages 58818-59179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24243]



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Vol. 83

Wednesday,

No. 225

November 21, 2018

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 416 and 419





Medicare Program: Changes to Hospital Outpatient Prospective Payment 
and Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Rules

Federal Register / Vol. 83 , No. 225 / Wednesday, November 21, 2018 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 416 and 419

[CMS-1695-FC]
RIN 0938-AT30


Medicare Program: Changes to Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2019 to 
implement 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. In addition, we are updating the Hospital Consumer Assessment 
of Healthcare Providers and Systems (HCAHPS) Survey measure under the 
Hospital Inpatient Quality Reporting (IQR) Program by removing the 
Communication about Pain questions; and retaining two measures that 
were proposed for removal, the Catheter-Associated Urinary Tract 
Infection (CAUTI) Outcome Measure and Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure, in the PPS-Exempt 
Cancer Hospital Quality Reporting (PCHQR) Program beginning with the FY 
2021 program year.

DATES: 
    Effective date: This final rule with comment period is effective on 
January 1, 2019.
    Comment period: To be assured consideration, comments on the 
payment classifications assigned to the interim APC assignments and/or 
status indicators of new or replacement Level II HCPCS codes in 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 
3, 2018.

ADDRESSES: In commenting, please refer to file code CMS-1695-FC when 
commenting on the issues in this final rule with comment period. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    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-1695-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-1695-FC, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    340B Drug Payment Policy to Nonexcepted Off-Campus Departments of a 
Hospital, contact Juan Cortes via email Juan.Cortes@cms.hhs.gov or at 
410-786-4325.
    Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact 
the HOP Panel mailbox at APCPanel@cms.hhs.gov.
    Ambulatory Surgical Center (ASC) Payment System, contact Scott 
Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia via email Anita.Bhatia@cms.hhs.gov or at 410-786-7236.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Measures, contact Vinitha Meyyur via email Vinitha.Meyyur@cms.hhs.gov 
or at 410-786-8819.
    Blood and Blood Products, contact Josh McFeeters via email 
Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.
    Cancer Hospital Payments, contact Scott Talaga via email 
Scott.Talaga@cms.hhs.gov or at 410-786-4142.
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver via email Chuck.Braver@cms.hhs.gov or at 410-786-6719.
    CPT Codes, contact Marjorie Baldo via email 
Marjorie.Baldo@cms.hhs.gov or at 410-786-4617.
    Collecting Data on Services Furnished in Off-Campus Provider-Based 
Emergency Departments, contact Twi Jackson via email 
Twi.Jackson@cms.hhs.gov or at 410-786-1159.
    Control for Unnecessary Increases in Volume of Outpatient Services, 
contact Elise Barringer via email Elise.Barringer@cms.hhs.gov or at 
410-786-9222.
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Elise Barringer via email Elise.Barringer@cms.hhs.gov or at 
410-786-9222.
    Comprehensive APCs (C-APCs), contact Lela Strong-Holloway via email 
Lela.Strong@cms.hhs.gov or at 410-786-3213.
    Expansion of Clinical Families of Services at Excepted Off-Campus 
Departments of a Provider, contact Juan Cortes via email 
Juan.Cortes@cms.hhs.gov or at 410-786-4325.
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Anita Bhatia via email 
Anita.Bhatia@cms.hhs.gov or at 410-786-7236.
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Vinitha Meyyur via email Vinitha.Meyyur@cms.hhs.gov or at 410-
786-8819.
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Twi Jackson via email 
Twi.Jackson@cms.hhs.gov or at 410-786-1159.
    Inpatient Only (IPO) Procedures List, contact Lela Strong-Holloway 
via email Lela.Strong@cms.hhs.gov or at 410-786-3213.
    New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga 
via email

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Scott.Talaga@cms.hhs.gov or at 410-786-4142.
    No Cost/Full Credit and Partial Credit Devices, contact Twi Jackson 
via email Twi.Jackson@cms.hhs.gov or at 410-786-1159.
    OPPS Brachytherapy, contact Scott Talaga via email 
Scott.Talaga@cms.hhs.gov or at 410-786-4142.
    OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier 
Payments, and Wage Index), contact Erick Chuang via email 
Erick.Chuang@cms.hhs.gov or at 410-786-1816, Steven Johnson via email 
Steven.Johnson@cms.hhs.gov or at 410-786-3332, or Scott Talaga via 
email Scott.Talaga@cms.hhs.gov or at 410-786-4142.
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov 
or at 410-786-9732.
    OPPS New Technology Procedures/Services, contact the New Technology 
APC email at NewTechAPCapplications@cms.hhs.gov.
    OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo via 
email Marjorie.Baldo@cms.hhs.gov or at 410-786-4617.
    OPPS Packaged Items/Services, contact Lela Strong-Holloway via 
email Lela.Strong@cms.hhs.gov or at 410-786-3213.
    OPPS Pass-Through Devices, contact the Device Pass-Through email at 
DevicePTapplications@cms.hhs.gov.
    OPPS Status Indicators (SI) and Comment Indicators (CI), contact 
Marina Kushnirova via email Marina.Kushnirova@cms.hhs.gov or at 410-
786-2682.
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at 
PHPPaymentPolicy@cms.hhs.gov.
    PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 
measures, contact Nekeshia McInnis via email 
Nekeshia.McInnis@cms.hhs.gov.
    Rural Hospital Payments, contact Josh McFeeters via email 
Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.
    Skin Substitutes, contact Josh McFeeters via email 
Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.
    All Other Issues Related to Hospital Outpatient and Ambulatory 
Surgical Center Payments Not Previously Identified, contact Marjorie 
Baldo via email Marjorie.Baldo@cms.hhs.gov or 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 website as soon as possible after they have been 
received: http://www.regulations.gov/. Follow the search instructions 
on that website to view public comments.

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 Publishing Office. This database can be 
accessed via the internet at https://www.gpo.gov/fdsys/.

Addenda Available Only Through the Internet on the CMS Website

    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 website. The Addenda relating to the OPPS are 
available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the 
ASC payment system are available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Current Procedural Terminology (CPT) Copyright Notice

    Throughout this final rule with comment period, we use CPT codes 
and descriptions to refer to a variety of services. We note that CPT 
codes and descriptions are copyright 2018 American Medical Association. 
All Rights Reserved. CPT is a registered trademark of the American 
Medical Association (AMA). Applicable Federal Acquisition Regulations 
(FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

Table of Contents

I. Summary and Background
    A. Executive Summary of This Document
    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)
    F. Public Comments Received in Response to the CY 2019 OPPS/ASC 
Proposed Rule
    G. Public Comments Received in Response to the CY 2018 OPPS/ASC 
Final Rule With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default Cost-to-Charge Ratios (CCRs)
    E. Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act
    F. Payment Adjustment for Certain Cancer Hospitals for CY 2019
    G. Hospital Outpatient Outlier Payments
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    B. OPPS Changes--Variations Within APCs
    C. New Technology APCs
    D. OPPS APC-Specific Policies
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    B. 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
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Payment Status
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 and Critical Care 
Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2019
    C. Outlier Policy for CMHCs
    D. Proposed Update to PHP Allowable HCPCS Codes
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient Only (IPO) List
X. Nonrecurring Policy Changes
    A. Collecting Data on Services Furnished in Off-Campus Provider-
Based Emergency Departments
    B. Method To Control Unnecessary Increases in the Volume of 
Outpatient Services
    C. Application of the 340B Drug Payment Policy to Nonexcepted 
Off-Campus Departments of a Hospital
    D. Expansion of Clinical Families of Services at Excepted Off-
Campus Departments of a Provider

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XI. CY 2019 OPPS Payment Status and Comment Indicators
    A. CY 2019 OPPS Payment Status Indicator Definitions
    B. CY 2019 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    B. Treatment of New and Revised Codes
    C. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    E. New Technology Intraocular Lenses (NTIOLs)
    F. ASC Payment and Comment Indicators
    G. Calculation of the ASC Payment Rates and the ASC Conversion 
Factor
XIII. Requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program
    A. Background
    B. Hospital OQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2019 Payment 
Determination
XIV. Requirements for the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
    A. Background
    B. ASCQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the ASCQR 
Program
    E. Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements
XV. Comments Received in Response to Requests for Information (RFIs)
    A. Comments Received in Response to Request for Information on 
Promoting Interoperability and Electronic Health Care Information 
Exchange Through Possible Revisions to the CMS Patient Health and 
Safety Requirements for Hospitals and Other Medicare-Participating 
and Medicaid-Participating Providers and Suppliers
    B. Comments Received in Response to Request for Information on 
Price Transparency: Improving Beneficiary Access to Provider and 
Supplier Charge Information
    C. Comments Received in Response to Request for Information on 
Leveraging the Authority for the Competitive Acquisition Program 
(CAP) for Part B Drugs and Biologicals for a Potential CMS 
Innovation Center Model
XVI. Additional Hospital Inpatient Quality Reporting (IQR) Program 
Policies
XVII. Additional PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program Policies
    A. Background
    B. Retention and Removal of Previously Finalized Quality 
Measures for PCHs Beginning With the FY 2021 Program Year
    C. Public Display Requirements
XVIII. Files Available to the Public via the Internet
XIX. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
    D. ICRs for the Update to the HCAHPS Survey Measure in the 
Hospital IQR Program
    E. Total Reduction in Burden Hours and in Costs
XX. Response to Comments
XXI. Economic Analyses
    A. Statement of Need
    B. Overall Impact for the Provisions of This Final Rule With 
Comment Period
    C. Detailed Economic Analyses
    D. Effects of the Update to the HCAHPS Survey Measure in the 
Hospital IQR Program
    E. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program
    F. Regulatory Review Costs
    G. Regulatory Flexibility Act (RFA) Analysis
    H. Unfunded Mandates Reform Act Analysis
    I. Reducing Regulation and Controlling Regulatory Costs
    J. Conclusion
XXII. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this final rule with comment period, we are updating the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments (HOPDs) and ambulatory 
surgical centers (ASCs), beginning January 1, 2019. 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 the wage 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. This final rule with comment period also includes additional 
policy changes made in accordance with our experience with the OPPS and 
the ASC payment system. We describe these and various other statutory 
authorities in the relevant sections of this final rule with comment 
period. 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.
    In this final rule with comment period, two quality reporting 
policies that impact inpatient hospitals are updated due to their time 
sensitivity. In the Hospital IQR Program, we are updating the HCAHPS 
Survey measure by removing the Communication about Pain questions from 
the HCAHPS Survey, which are used to assess patients' experiences of 
care, effective with October 2019 discharges for the FY 2021 payment 
determination and subsequent years. This policy addresses public health 
concerns about opioid overprescribing through patient pain management 
questions that were recommended for removal in the President's 
Commission on Combating Drug Addiction and the Opioid Crisis report. In 
addition, we are finalizing that we will not publicly report any data 
collected from the Communication Abut Pain questions--a modification 
from what we proposed. We also are retaining two measures that we 
proposed for removal in the PCHQR Program beginning with the FY 2021 
program year, the Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure and Central Line-Associated Bloodstream Infection 
(CLABSI) Outcome Measure. This policy impacts infection measurement and 
public reporting for PPS-exempt cancer hospitals and was deferred to 
this rule from the CY 2019 IPPS/LTCH PPS final rule published in August 
2018.
2. Improving Patient Outcomes and Reducing Burden Through Meaningful 
Measures
    Regulatory reform and reducing regulatory burden are high 
priorities for CMS. To reduce the regulatory burden on the healthcare 
industry, lower health care costs, and enhance patient care, in October 
2017, we launched the Meaningful Measures Initiative.\1\ This 
initiative is one component of our agency-wide Patients Over Paperwork 
Initiative,\2\ which is aimed at evaluating and streamlining 
regulations with a goal

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to reduce unnecessary cost and burden, increase efficiencies, and 
improve beneficiary experience. The Meaningful Measures Initiative is 
aimed at identifying the highest priority areas for quality measurement 
and quality improvement in order to assess the core quality of care 
issues that are most vital to advancing our work to improve patient 
outcomes. The Meaningful Measures Initiative represents a new approach 
to quality measures that fosters operational efficiencies, and will 
reduce costs including, collection and reporting burden, while 
producing quality measurement that is more focused on meaningful 
outcomes.
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    \1\ Meaningful Measures web page: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
    \2\ Remarks by Administrator Seema Verma at the Health Care 
Payment Learning and Action Network (LAN) Fall Summit, as prepared 
for delivery on October 30, 2017. Available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html.
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    The Meaningful Measures framework has the following objectives:
     Address high-impact measure areas that safeguard public 
health;
     Patient-centered and meaningful to patients;
     Outcome-based where possible;
     Fulfill each program's statutory requirements;
     Minimize the level of burden for health care providers;
     Significant opportunity for improvement;
     Address measure needs for population based payment through 
alternative payment models; and
     Align across programs and/or with other payers.
    In order to achieve these objectives, we have identified 19 
Meaningful Measures areas and mapped them to six overarching quality 
priorities, as shown in the table below.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR21NO18.000

BILLING CODE 4120-01-C
    By including Meaningful Measures in our programs, we believe that 
we can also address the following cross-cutting measure criteria:
     Eliminating disparities;
     Tracking measurable outcomes and impact;
     Safeguarding public health;
     Achieving cost savings;
     Improving access for rural communities; and
     Reducing burden.
    We believe that the Meaningful Measures Initiative will improve 
outcomes for patients, their families, and health care providers while 
reducing burden and costs for clinicians and providers as well as 
promoting operational efficiencies.
    We received numerous comments from stakeholders regarding the 
Meaningful Measures Initiative and the impact of its implementation in 
CMS' quality programs. Many of these comments pertained to specific 
program proposals, and are discussed in the appropriate program-
specific sections of this final rule with comment period. However, 
commenters also provided insights and recommendations for the ongoing 
development of the Meaningful Measures Initiative generally, including: 
ensuring transparency in public reporting and usability of publicly 
reported data; evaluating the benefit of individual measures to 
patients via use in quality programs weighed against the burden to 
providers of collecting and

[[Page 58822]]

reporting that measure data; and identifying additional opportunities 
for alignment across CMS quality programs. We look forward to 
continuing to work with stakeholders to refine and further implement 
the Meaningful Measures Initiative, and will take commenters' insights 
and recommendations into account moving forward.
3. Summary of the Major Provisions
     OPPS Update: For CY 2019, we are increasing the payment 
rates under the OPPS by an outpatient department (OPD) fee schedule 
increase factor of 1.35 percent. This increase factor is based on the 
final hospital inpatient market basket percentage increase of 2.9 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.8 percentage point, and minus a 0.75 percentage 
point adjustment required by the Affordable Care Act. Based on this 
update, we estimate that total payments to OPPS providers (including 
beneficiary cost-sharing and estimated changes in enrollment, 
utilization, and case-mix) for CY 2019 will be approximately $74.1 
billion, an increase of approximately $5.8 billion compared to 
estimated CY 2018 OPPS payments.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals failing to meet the hospital 
outpatient quality reporting requirements, by applying a reporting 
factor of 0.980 to the OPPS payments and copayments for all applicable 
services.
     Comprehensive APCs: For CY 2019, we are creating three new 
comprehensive APCs (C-APCs). These new C-APCs include ears, nose, and 
throat (ENT) and vascular procedures. This increases the total number 
of C-APCs to 65.
     Changes to the Inpatient Only List: For CY 2019, we are 
removing four procedures from the inpatient only list and adding one 
procedure to the list.
     Method to Control Unnecessary Increases in Volume of 
Outpatient Services: To the extent that similar services are safely 
provided in more than one setting, it is not prudent for the OPPS to 
pay more for such services because that leads to an unnecessary 
increase in the number of those services provided in the OPPS setting. 
We believe that capping the OPPS payment at the Physician Fee Schedule 
(PFS)-equivalent rate is an effective method to control the volume of 
the unnecessary increases in certain services because the payment 
differential that is driving the site-of-service decision will be 
removed. In particular, we believe this method of capping payment will 
control unnecessary volume increases both in terms of numbers of 
covered outpatient department services furnished and costs of those 
services. Therefore, as we proposed, we are using our authority under 
section 1833(t)(2)(F) of the Act to apply an amount equal to the site-
specific PFS payment rate for nonexcepted items and services furnished 
by a nonexcepted off-campus provider-based department (PBD) of a 
hospital (the PFS payment rate) for the clinic visit service, as 
described by HCPCS code G0463, when provided at an off-campus PBD 
excepted from section 1833(t)(21) of the Act. We will be phasing in the 
application of the reduction in payment for code G0463 in this setting 
over 2 years. In CY 2019, the payment reduction will be transitioned by 
applying 50 percent of the total reduction in payment that would apply 
if these departments were paid the site-specific PFS rate for the 
clinic visit service. In other words, these departments will be paid 70 
percent of the OPPS rate for the clinic visit service in CY 2019. In CY 
2020 and subsequent years, these departments will be paid the site-
specific PFS rate for the clinic visit service. That is, these 
departments will be paid 40 percent of the OPPS rate for the clinic 
visit in CY 2020 and subsequent years. In addition to this proposal, we 
solicited public comments on how to expand the application of the 
Secretary's statutory authority under section 1833(t)(2)(F) of the Act 
to additional items and services paid under the OPPS that may represent 
unnecessary increases in OPD utilization. The public comment we 
received will be considered for future rulemaking.
     Expansion of Clinical Families of Services at 
Excepted Off-Campus Provider-Based Departments (PBDs) of a Hospital: 
For CY 2019, we proposed that if an excepted off-campus PBD furnished 
items and services from a clinical family of services from which it did 
not furnish items and services (and subsequently bill for those items 
and services) during a baseline period, services from the new clinical 
family of services would not be covered OPD services. Instead, services 
in the new clinical family of services would be paid under the PFS. 
While we are not finalizing this proposal at this time, we intend to 
monitor the expansion of services in excepted off-campus PBDs.
     Application of 340B Drug Payment Policy to 
Nonexcepted Off-Campus Provider-Based Departments of a Hospital: For CY 
2019, as we proposed, we are paying the average sales price (ASP) minus 
22.5 percent under the PFS for separately payable 340B-acquired drugs 
furnished by nonexcepted, off-campus provider-based departments (PBDs) 
of a hospital. This is consistent with the payment methodology adopted 
in CY 2018 for 340B-acquired drugs furnished in hospital departments 
paid under the OPPS.
     Payment Policy for Biosimilar Biological 
Products without Pass-Through Status That Are Acquired under the 340B 
Program: For CY 2019, we are making payment for nonpass-through 
biosimilars acquired under the 340B program at ASP minus 22.5 percent 
of the biosimilar's own ASP rather than ASP minus 22.5 percent of the 
reference product's ASP.
     Payment of Drugs, Biologicals, and 
Radiopharmaceuticals If Average Sales Price (ASP) Data Are Not 
Available: For CY 2019, we are making payment for separately payable 
drugs and biologicals that do not have pass-through payment status and 
are not acquired under the 340B Program at wholesale acquisition cost 
(WAC)+3 percent instead of WAC+6 percent if ASP data are not available. 
If WAC data are not available for a drug or biological product, we are 
continuing our policy to pay for separately payable drugs and 
biologicals at 95 percent of the average wholesale price (AWP). Drugs 
and biologicals that are acquired under the 340B Program will continue 
to be paid at ASP minus 22.5 percent, WAC minus 22.5 percent, or 69.46 
percent of AWP, as applicable.
     Device-Intensive Procedure Criteria: For CY 2019, we are 
modifying the device-intensive criteria to allow procedures that 
involve single-use devices, regardless of whether or not they remain in 
the body after the conclusion of the procedure, to qualify as device-
intensive procedures. We also are allowing procedures with a device 
offset percentage of greater than 30 percent to qualify as device-
intensive procedures.
     Device Pass-Through Payment Applications: For CY 2019, we 
evaluated seven applications for device pass-through payments and based 
on public comments received, we are approving one of these applications 
for device pass-through payment status.
     New Technology APC Payment for Extremely Low-Volume 
Procedures: For CY 2019 and future years, we are establishing a 
different payment methodology for services assigned to New Technology 
APCs with fewer than 100 claims using our equitable adjustment 
authority under section 1833(t)(2)(E) of the Act. We will use a 
``smoothing methodology'' based on multiple years of claims data to

[[Page 58823]]

establish a more stable rate for services assigned to New Technology 
APCs with fewer than 100 claims per year under the OPPS. Under this 
policy, we will calculate the geometric mean costs, the median costs, 
and the arithmetic mean costs for these procedures and adopt through 
our annual rulemaking the most appropriate payment rate for the service 
using one of these methodologies. We will use this approach to 
establish a payment rate for each low-volume service both for purposes 
of assigning the service to a New Technology APC and to a clinical APC 
at the conclusion of payment for the service through a New Technology 
APC. In addition, we are excluding services assigned to New Technology 
APCs from bundling into C-APC procedures.
     Cancer Hospital Payment Adjustment: For CY 2019, 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. However, section 16002(b) of the 21st Century Cures Act requires 
that this weighted average PCR be reduced by 1.0 percentage point. 
Based on the data and the required 1.0 percentage point reduction, we 
are providing that a target PCR of 0.88 will be used to determine the 
CY 2019 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 0.88 for each cancer 
hospital.
     Rural Adjustment: For 2019 and subsequent years, we are 
continuing the 7.1 percent adjustment to OPPS payments for certain 
rural SCHs, including essential access community hospitals (EACHs). We 
intend to continue the 7.1 percent adjustment for future years in the 
absence of data to suggest a different percentage adjustment should 
apply.
     Ambulatory Surgical Center (ASC) Payment Update: For CYs 
2019 through 2023, we are updating the ASC payment system using the 
hospital market basket update instead of the CPI-U. However, during 
this 5-year period, we intend to examine whether such adjustment leads 
to a migration of services from other settings to the ASC setting. 
Using the hospital market basket methodology, for CY 2019, we are 
increasing payment rates under the ASC payment system by 2.1 percent 
for ASCs that meet the quality reporting requirements under the ASCQR 
Program. This increase is based on a hospital market basket percentage 
increase of 2.9 percent minus a MFP adjustment required by the 
Affordable Care Act of 0.8 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 2019 will be 
approximately $4.85 billion, an increase of approximately $200 million 
compared to estimated CY 2018 Medicare payments to ASCs. We note that 
the CY 2019 ASC payment update, under our prior policy, would have been 
1.8 percent, based on a projected CPI-U update of 2.6 percent minus a 
MFP adjustment required by the Affordable Care Act of 0.8 percentage 
point. In addition, we will continue to assess the feasibility of 
collaborating with stakeholders to collect ASC cost data in a minimally 
burdensome manner for future policy development.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2019, we are revising our definition of ``surgery'' in the ASC 
payment system to account for certain ``surgery-like'' procedures that 
are assigned codes outside the Current Procedural Terminology (CPT) 
surgical range. In addition, as we proposed, we are adding 12 cardiac 
catheterization procedures, and, in response to public comments, an 
additional 5 related procedures to the ASC covered procedures list. At 
this time, we are not finalizing our proposal to establish an 
additional review of recently added procedures to the ASC covered 
procedures list.
     Payment for Non-Opioid Pain Management Therapy: For CY 
2019, in response to the recommendation from the President's Commission 
on Combating Drug Addiction and the Opioid Crisis, we are changing the 
packaging policy for certain drugs when administered in the ASC setting 
and providing separate payment for non-opioid pain management drugs 
that function as a supply when used in a surgical procedure when the 
procedure is performed in an ASC.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are making changes effective with this 
final rule with comment period and for the CY 2019, CY 2020, and CY 
2021 payment determinations and subsequent years. Effective on the 
effective date of this final rule with comment period, we are codifying 
several previously established policies: to retain measures from a 
previous year's Hospital OQR Program measure set for subsequent years' 
measure sets at 42 CFR 419.46(h)(1); to use the rulemaking process to 
remove a measure for circumstances for which we do not believe that 
continued use of a measure raises specific patient safety concerns at 
42 CFR 419.46(h)(3); and to immediately remove measures as a result of 
patient safety concerns at 42 CFR 419.46(h)(2). Effective on the 
effective date of this final rule with comment period, we also are 
updating measure removal Factor 7; adding a new removal Factor 8; and 
codifying our measure removal policies and factors. We also are 
providing clarification of our criteria for ``topped-out'' measures. 
These changes align the Hospital OQR Program measure removal factors 
with those used in the ASCQR Program.
    Beginning with CY 2019, we are updating the frequency with which we 
will release a Hospital OQR Program Specifications Manual, such that it 
will occur every 12 months--a modification from what we proposed.
    For the CY 2020 payment determination and subsequent years, we are 
updating the participation status requirements by removing the Notice 
of Participation (NOP) form; extending the reporting period for the OP-
32: Facility Seven-Day Risk-Standardized Hospital Visit Rate after 
Outpatient Colonoscopy measure to 3 years; and removing the OP-27: 
Influenza Vaccination Coverage Among Healthcare Personnel measure.
    Beginning with the CY 2021 payment determination and subsequent 
years, we are removing the following seven measures: OP-5: Median Time 
to ECG; OP-9: Mammography Follow-up Rates; OP-11: Thorax CT Use of 
Contrast Material; OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into Their Qualified/Certified 
EHR System as Discrete Searchable Data; OP-14: Simultaneous Use of 
Brain Computed Tomography (CT) and Sinus CT; OP-17: Tracking Clinical 
Results between Visits; and OP-30: Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous 
Polyps--Avoidance of Inappropriate Use. We are not finalizing our 
proposals to remove the OP-29 or OP-31 measures.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are making changes in policies 
effective with this final rule with comment period and for the CY 2019, 
CY 2020, and CY 2021 payment determinations and subsequent years. 
Effective on the effective date of this final rule with comment period, 
we are removing one measure removal factor; adding two new measure 
removal factors; and updating the regulations to better reflect our 
measure removal policies. We also are making one clarification to 
measure removal Factor

[[Page 58824]]

1. These changes align the ASCQR Program measure removal factors with 
those used in the Hospital OQR Program.
    Beginning with the CY 2020 payment determination and subsequent 
years, we are extending the reporting period for the ASC-12: Facility 
Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient 
Colonoscopy measure to 3 years; and removing the ASC-8: Influenza 
Vaccination Coverage Among Healthcare Personnel measure.
    Beginning with the CY 2021 payment determination and subsequent 
years, we are removing the ASC-10: Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous 
Polyps--Avoidance of Inappropriate Use measure. We are not finalizing 
our proposals to remove the following measures: ASC-9: Endoscopy/Polyp 
Surveillance Follow-up Interval for Normal Colonoscopy in Average Risk 
Patients and ASC-11: Cataracts--Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery. We also are not 
finalizing our proposals to remove the following measures: ASC-1: 
Patient Burn; ASC-2: Patient Fall; ASC-3: Wrong Site, Wrong Side, Wrong 
Patient, Wrong Procedure, Wrong Implant; and ASC-4: All-Cause Hospital 
Transfer/Admission, but are retaining these measures in the ASCQR 
Program and suspending data collection for them until further action in 
rulemaking with the goal of revising the measures.
     Hospital Inpatient Quality Reporting (IQR) Program Update: 
In this final rule with comment period, we are finalizing a 
modification of our proposals to update the HCAHPS Survey measure by 
finalizing the removal of the Communication About Pain questions from 
the HCAHPS Survey for the Hospital IQR Program, effective with October 
2019 discharges for the FY 2021 payment determination and subsequent 
years. In addition, instead of publicly reporting the data from October 
2020 until October 2022 and then subsequently discontinuing reporting 
as proposed, we are finalizing that we will not publicly report any 
data collected from the Communication About Pain questions.
4. Summary of Costs and Benefits
    In sections XXI. and XXII. of this CY 2019 OPPS/ASC 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 All OPPS Changes
    Table 62 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 2019 compared to all estimated 
OPPS payments in CY 2018. We estimate that the policies in this final 
rule with comment period will result in a 0.6 percent overall increase 
in OPPS payments to providers. We estimate that total OPPS payments for 
CY 2019, including beneficiary cost-sharing, to the approximately 3,840 
facilities paid under the OPPS (including general acute care hospitals, 
children's hospitals, cancer hospitals, and CMHCs) will increase by 
approximately $360 million compared to CY 2018 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 we adopted 
beginning in CY 2011, and basing payment fully on the type of provider 
furnishing the service, we estimate a 15.1 percent decrease in CY 2019 
payments to CMHCs relative to their CY 2018 payments.
b. Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the FY 
2019 IPPS final rule wage indexes will result in no estimated payment 
change for urban hospitals under the OPPS and an estimated decrease of 
0.2 percent for rural hospitals. These wage indexes include the 
continued implementation of the OMB labor market area delineations 
based on 2010 Decennial Census data, with updates, as discussed in 
section II.C. of this final rule with comment period.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2019 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 hospital payment adjustments. While 
we are implementing the required reduction to the cancer hospital 
payment adjustment required by section 16002 of the 21st Century Cures 
Act for CY 2019, the target payment-to-cost ratio (PCR) for CY 2019 
remains the same as in CY 2018 and therefore does not impact the budget 
neutrality adjustments.
d. Impacts of the OPD Fee Schedule Increase Factor
    For the CY 2019 OPPS/ASC, we are establishing an OPD fee schedule 
increase factor of 1.35 percent and applying that increase factor to 
the conversion factor for CY 2019. As a result of the OPD fee schedule 
increase factor and other budget neutrality adjustments, we estimate 
that rural and urban hospitals will experience an increase of 
approximately 1.4 percent for urban hospitals and 1.3 percent for rural 
hospitals. Classifying hospitals by teaching status, we estimate 
nonteaching hospitals will experience an increase of 1.4 percent, minor 
teaching hospitals will experience an increase of 1.3 percent, and 
major teaching hospitals will experience an increase of 1.5 percent. We 
also classified hospitals by the type of ownership. We estimate that 
hospitals with voluntary ownership, hospitals with proprietary 
ownership, and hospitals with government ownership will all experience 
an increase of 1.4 percent in payments.
e. Impacts of the Policy To Control for Unnecessary Increases in the 
Volume of Outpatient Services
    In section X.B. of this CY 2019 OPPS/ASC final rule with comment 
period, we discuss our CY 2019 proposal and finalized policies to 
control for unnecessary increases in the volume of outpatient service 
by paying for clinic visits furnished at an off-campus PBD of a 
hospital at a PFS-equivalent rate under the OPPS rather than at the 
standard OPPS rate. As a result of this finalized policy, we estimated 
decreases of 0.6 percent to urban hospitals, and estimated decreases of 
0.6 percent to rural hospitals, with the estimated effect for 
individual groups of hospitals depending on the volume of clinic visits 
provided at the hospitals' off-campus PBDs.
f. 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 2019 payment 
rates, compared to estimated CY 2018 payment rates, generally ranges 
between an increase of 1 and 3 percent, depending on the service, with 
some exceptions. We estimate the impact of applying the hospital market 
basket update to ASC payment rates will increase payments by $80 
million under the ASC payment system in CY 2019,

[[Page 58825]]

compared to an increase of $60 million if we had applied an update 
based on CPI-U.
c. Impact of the Changes to the Hospital OQR Program
    Across 3,300 hospitals participating in the Hospital OQR Program, 
we estimate that our requirements will result in the following changes 
to costs and burdens related to information collection for the Hospital 
OQR Program compared to previously adopted requirements: (1) No change 
in the total collection of information burden or costs for the CY 2020 
payment determination; (2) a total collection of information burden 
reduction of 681,735 hours and a total collection of information cost 
reduction of approximately $24.9 million for the CY 2021 payment 
determination due to the removal of four measures: OP-5, OP-12, OP-17, 
and OP-30.
    Further, we anticipate that the removal of a total of eight 
measures will result in a reduction in costs unrelated to information 
collection. For example, it may be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. Also, when measures are in multiple programs, maintaining the 
specifications for those measures, as well as the tools we need to 
collect, validate, analyze, and publicly report the measure data may 
result in costs to CMS. In addition, beneficiaries may find it 
confusing to see public reporting on the same measure in different 
programs.
d. Impact of the Changes to the ASCQR Program
    Across 3,937 ASCs participating in the ASCQR Program, we estimate 
that our requirements will result in the following changes to costs and 
burdens related to information collection for the ASCQR Program, 
compared to previously adopted requirements: (1) No change in the total 
collection of information burden or costs for the CY 2020 payment 
determination; (2) a total collection of information burden reduction 
of 62,008 hours and a total collection of information cost reduction of 
approximately $2,268,244 for the CY 2021 payment determination due to 
the removal of ASC-10.
    Further, we anticipate that the removal of ASC-10 will result in a 
reduction in costs unrelated to information collection. For example, it 
may be costly for health care providers to track the confidential 
feedback, preview reports, and publicly reported information on a 
measure where we use the measure in more than one program. Also, when 
measures are in multiple programs, maintaining the specifications for 
those measures as well as the tools we need to collect, analyze, and 
publicly report the measure data may result in costs to CMS. In 
addition, beneficiaries may find it confusing to see public reporting 
on the same measure in different programs.

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; the Medicare Access and CHIP Reauthorization 
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the 
Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2, 
2015; the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), 
enacted on December 18, 2015, the 21st Century Cures Act (Pub. L. 114-
255), enacted on December 13, 2016, the Consolidated Appropriations 
Act, 2018 (Pub. L. 115-141), enacted on March 23, 2018, and the 
Substance Use-Disorder Prevention that Promotes Opioid Recovery and 
Treatment for Patients and Communities Act (Pub. L. 115-271), enacted 
on October 24, 2018.
    Under the OPPS, we generally 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)(B) of the Act, subject 
to certain exceptions, items and services within an APC group cannot be 
considered comparable with respect to

[[Page 58826]]

the use of resources if the highest median cost (or mean cost, if 
elected by the Secretary) for an item or service in the APC group is 
more than 2 times greater than the lowest median cost (or mean cost, if 
elected by the Secretary) for an item or service within the same APC 
group (referred to as the ``2 times rule''). In implementing this 
provision, we generally use the cost of the item or service assigned to 
an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
clinical information and cost data to appropriately assign them to a 
clinical APC group, we have established special APC groups based on 
costs, which we refer to as New Technology APCs. These New Technology 
APCs are designated by cost bands which allow us to provide appropriate 
and consistent payment for designated new procedures that are not yet 
reflected in our claims data. Similar to pass-through payments, an 
assignment to a New Technology APC is temporary; that is, we retain a 
service within a New Technology APC until we acquire sufficient data to 
assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. It 
also excludes screening mammography, diagnostic mammography, and 
effective January 1, 2011, an annual wellness visit providing 
personalized prevention plan services. The Secretary exercises the 
authority granted under the statute to also exclude from the OPPS 
certain services that are paid under fee schedules or other payment 
systems. Such excluded services include, for example, the professional 
services of physicians and nonphysician practitioners paid under the 
Medicare Physician Fee Schedule (MPFS); certain laboratory services 
paid under the Clinical Laboratory Fee Schedule (CLFS); services for 
beneficiaries with end-stage renal disease (ESRD) that are paid under 
the ESRD prospective payment system; and services and procedures that 
require an inpatient stay that are paid under the hospital IPPS. In 
addition, section 1833(t)(1)(B)(v) of the Act does not include 
applicable items and services (as defined in subparagraph (A) of 
paragraph (21)) that are furnished on or after January 1, 2017 by an 
off-campus outpatient department of a provider (as defined in 
subparagraph (B) of paragraph (21). 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 the wage 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 website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.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, 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 Public Health 
Service 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 HOP 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 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) who review clinical data and advise 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--
     May advise on the clinical integrity of Ambulatory Payment 
Classification (APC) groups and their associated weights;
     May advise on the appropriate supervision level for 
hospital outpatient services;
     Continues to be technical in nature;
     Is governed by the provisions of the FACA;

[[Page 58827]]

     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 Panel's charter 
was also amended on November 6, 2014 (80 FR 23009), and the number of 
members was revised from up to 19 to up to 15 members. The Panel's 
current charter was approved on November 21, 2016, for a 2-year period 
(81 FR 94378).
    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 website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held many meetings, with the last meeting taking 
place on August 20, 2018. 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, to announce new members and 
to announce any other changes of which the public should be aware. 
Beginning in CY 2017, we have transitioned to one meeting per year (81 
FR 31941). Further information on the 2018 summer meeting can be found 
in the meeting notice titled ``Medicare Program: Announcement of the 
Advisory Panel on Hospital Outpatient Payment (the Panel) Meeting on 
August 20-21, 2018'' (83 FR 19785).
    In addition, 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 
include the following:
     APC Groups and Status Indicator Assignments Subcommittee, 
which advises the Panel on 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, as 
well as the appropriate APC assignment of HCPCS codes regarding 
services for which separate payment is made;
     Data Subcommittee, which is responsible for studying the 
data issues confronting the Panel and for recommending options for 
resolving them; and
     Visits and Observation Subcommittee, which reviews and 
makes recommendations to the Panel on all technical issues pertaining 
to observation services and hospital outpatient visits paid under the 
OPPS.
    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 20, 2018 meeting that the subcommittees 
continue. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
August 20, 2018 Panel meeting, namely CPT codes and a comprehensive APC 
for autologous hematopoietic stem cell transplantation, OPPS payment 
for outpatient clinic visits and restrictions to service line 
expansions, and packaging policies, were discussed in the CY 2019 OPPS/
ASC proposed rule (83 FR 37138 through 37143) or 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 website mentioned earlier in this 
section, and the FACA database at http://facadatabase.gov.

F. Public Comments Received in Response to the CY 2019 OPPS/ASC 
Proposed Rule

    We received over 2,990 timely pieces of correspondence on the CY 
2019 OPPS/ASC proposed rule that appeared in the Federal Register on 
July 31, 2018 (83 FR 37046). We note that we received some public 
comments that were outside the scope of the CY 2019 OPPS/ASC proposed 
rule. Out-of-scope public comments are not addressed in this CY 2019 
OPPS/ASC final rule with comment period. Summaries of those 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.

G. Public Comments Received on the CY 2018 OPPS/ASC Final Rule With 
Comment Period

    We received over 125 timely pieces of correspondence on the CY 2018 
OPPS/ASC final rule with comment period that appeared in the Federal 
Register on December 14, 2017 (82 FR 59216), some of which contained 
comments on the interim APC assignments and/or status indicators of new 
or replacement Level II HCPCS codes (identified with comment indicator 
``NI'' in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that 
final rule). Summaries of the public comments are set forth in the CY 
2019 proposed rule and this final rule with comment period under the 
appropriate subject matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37055), for CY 2019, 
we proposed to recalibrate the APC relative payment weights for 
services furnished on or after January 1, 2019, and before January 1, 
2020 (CY 2019), using the same basic methodology that we described in 
the CY 2018 OPPS/ASC final rule with comment period (82 FR 52367 
through 52370), using updated CY 2017 claims data. That is, as we 
proposed, we 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.
    For the purpose of recalibrating the APC relative payment weights 
for CY 2019, we began with 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, 2017, and before January 1, 2018, before applying our 
exclusionary criteria and other methodological adjustments. After the 
application of those data processing changes, we used approximately 86 
million final action claims to develop the proposed CY 2019 OPPS 
payment weights. For exact numbers of claims used and additional 
details on the claims accounting process, we refer readers to the 
claims accounting narrative under supporting documentation for the CY 
2019 OPPS/ASC proposed rule on the CMS website at: http://www.cms.gov/
Medicare/

[[Page 58828]]

Medicare-Fee-for-Service-Payment/Hospital>OutpatientPPS/index.html.
    Addendum N to the proposed rule (which is available via the 
internet on the CMS website) included the proposed list of bypass codes 
for CY 2019. The proposed list of bypass codes contained codes that 
were reported on claims for services in CY 2017 and, therefore, 
included codes that were in effect in CY 2017 and used for billing, but 
were deleted for CY 2018. We retained these deleted bypass codes on the 
proposed CY 2019 bypass list because these codes existed in CY 2017 and 
were covered OPD services in that period, and CY 2017 claims data were 
used to calculate CY 2019 payment rates. Keeping these deleted bypass 
codes on the bypass list potentially allows us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that are members of the proposed multiple imaging 
composite APCs were identified by asterisks (*) in the third column of 
Addendum N to the proposed rule. HCPCS codes that we proposed to add 
for CY 2019 were identified by asterisks (*) in the fourth column of 
Addendum N.
    In the CY 2019 OPPS/ASC proposed rule, we did not propose to remove 
any codes from the CY 2019 bypass list.
    We did not receive any public comments on our general proposal to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for HOPD services or on our proposed bypass code 
process. Therefore, we are adopting as final the proposed ``pseudo'' 
single claims process and the final CY 2019 bypass list of 169 HCPCS 
codes, as displayed in Addendum N to this final rule with comment 
period (which is available via the internet on the CMS website). For 
this final rule with comment period, for purposes of recalibrating the 
final APC relative payment weights for CY 2019, we used approximately 
91 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, 2017 and before January 1, 
2018. For exact numbers of claims used and additional details on the 
claims accounting process, we refer readers to the claims accounting 
narrative under supporting documentation for this CY 2019 OPPS/ASC 
final rule with comment period on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
b. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2019, in the CY 2019 OPPS/ASC proposed rule (83 FR 37055), 
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 CY 2019 APC payment 
rates are based, we calculated hospital-specific overall ancillary CCRs 
and hospital-specific departmental CCRs for each hospital for which we 
had CY 2017 claims data by comparing these claims data to the most 
recently available hospital cost reports, which, in most cases, are 
from CY 2016. For the proposed CY 2019 OPPS payment rates, we used the 
set of claims processed during CY 2017. 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 website 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 2017 
(the year of claims data we used to calculate the proposed CY 2019 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2017 Data 
Specifications Manual.
    In accordance with our longstanding policy, we calculate CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculate CCRs is 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.a.(1) of the proposed rule and this final rule with 
comment period.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74840 
through 74847), we finalized our policy of creating new cost centers 
and distinct CCRs for implantable devices, magnetic resonance imaging 
(MRIs), computed tomography (CT) scans, and cardiac catheterization. 
However, in response to the CY 2014 OPPS/ASC proposed rule, commenters 
reported that some hospitals currently use an imprecise ``square feet'' 
allocation methodology for the costs of large moveable equipment like 
CT scan and MRI machines. They indicated that while CMS recommended 
using two alternative allocation methods, ``direct assignment'' or 
``dollar value,'' as a more accurate methodology for directly assigning 
equipment costs, industry analysis suggested that approximately only 
half of the reported cost centers for CT scans and MRIs rely on these 
preferred methodologies. In response to concerns from commenters, we 
finalized a policy for the CY 2014 OPPS to remove claims from providers 
that use a cost allocation method of ``square feet'' to calculate CCRs 
used to estimate costs associated with the APCs for CT and MRI (78 FR 
74847). Further, we finalized a transitional policy to estimate the 
imaging APC relative payment weights using only CT and MRI cost data 
from providers that do not use ``square feet'' as the cost allocation 
statistic. We provided that this finalized policy would sunset in 4 
years to provide a sufficient time for hospitals to transition to a 
more accurate cost allocation method and for the related data to be 
available for ratesetting purposes (78 FR 74847). Therefore, beginning 
CY 2018, with the sunset of the transition policy, we would estimate 
the imaging APC relative payment weights using cost data from all 
providers, regardless of the cost allocation statistic employed. 
However, in the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59228 and 59229), we finalized a policy to extend the transition policy 
for 1 additional year and continued to remove claims from providers 
that use a cost allocation method of ``square feet'' to calculate CT 
and MRI CCRs for the CY 2018 OPPS.
    As we discussed in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59228), some stakeholders have raised concerns regarding 
using claims from all providers to calculate CT and MRI CCRs, 
regardless of the cost allocations statistic employed (78 FR 74840 
through 74847). Stakeholders noted that providers continue to use the 
``square feet'' cost allocation method and that including claims from 
such providers would cause significant

[[Page 58829]]

reductions in the imaging APC payment rates.
    Table 1 below demonstrates the relative effect on imaging APC 
payments after removing cost data for providers that report CT and MRI 
standard cost centers using ``square feet'' as the cost allocation 
method by extracting HCRIS data on Worksheet B-1. Table 2 below 
provides statistical values based on the CT and MRI standard cost 
center CCRs using the different cost allocation methods.

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    [GRAPHIC] [TIFF OMITTED] TR21NO18.002
    
    Our analysis shows that since the CY 2014 OPPS in which we 
established the transition policy, the number of valid MRI CCRs has 
increased by 17.5 percent to 2,177 providers and the number of valid CT 
CCRs has increased by 15.1 percent to 2,251 providers. However, as 
shown in Table 1 above, nearly all imaging APCs would see an increase 
in payment rates for CY 2019 if claims from providers that report using 
the ``square feet'' cost allocation method were removed. This can be 
attributed to the generally lower CCR values from providers that use a 
cost allocation method of ``square feet'' as shown in Table 2 above.
    In response to provider concerns and to provide added flexibility 
for hospitals to improve their cost allocation methods, for the CY 2019 
OPPS, in the CY 2019 OPPS/ASC proposed rule (83 FR 37056), we proposed 
to extend our transition policy and remove claims from providers that 
use a cost allocation method of ``square feet'' to calculate CCRs used 
to estimate costs with the APCs for CT and MRI identified in Table 2 
above. We stated in the proposed rule that this proposed extension 
would mean that CMS would now be providing 6 years for providers to 
transition from a ``square feet'' cost allocation method to another 
cost allocation method. We stated in the proposed rule that we do not 
believe

[[Page 58830]]

another extension in CY 2020 will be warranted and expect to determine 
the imaging APC relative payment weights for CY 2020 using cost data 
from all providers, regardless of the cost allocation method employed.
    Comment: Some commenters supported CMS' proposal to extend its 
transition policy an additional year and determine imaging APC relative 
payment weights for CY 2020 using cost data from all providers.
    Response: We thank the commenters for their support.
    Comment: Some commenters recommended that CMS discontinue the use 
of CT and MRI cost centers for developing CT and MRI CCRs and use a 
single diagnostic radiology CCR instead. One commenter suggested that 
CCRs for CT and MRI are inaccurate, too low, and equalize the payment 
rates for advanced and nonadvanced imaging. This commenter also noted 
that if CMS were to use CCRs from all cost allocation methods, 
including ``square feet,'' such a change would impact technical 
payments under the Medicare Physician Fee Schedule because OPPS 
payments for imaging services would fall below the technical payments 
for such services under the Medicare Physician Fee Schedule and would 
require a reduction as required by section 1848(b)(4) of the Act.
    Further, the commenter noted that a significant number of CT and 
MRI CCRs are close to zero. The commenter suggested that this probably 
reflects that the costs of the equipment and dedicated space for these 
services are likely spread across to other departments of hospitals. 
The commenter also suggested that hospitals have standard accounting 
practices for high-cost moveable equipment and that it would be 
burdensome and inconsistent to apply a different standard for costs 
associated with CT and MRI.
    Response: We appreciate the comments regarding the use of standard 
CT and MRI cost center CCRs. As we stated in prior rulemaking, we 
recognize the concerns with regard to the application of the CT and MRI 
standard cost center CCRs and their use in OPPS ratesetting in lieu of 
the previously used single diagnostic radiology CCR. As compared to the 
IPPS, there is greater sensitivity to the cost allocation method being 
used on the cost report forms for these relatively new standard imaging 
cost centers under the OPPS due to the limited size of the OPPS payment 
bundles and because the OPPS applies the CCRs at the departmental level 
for cost estimation purposes. However, we note that since the time we 
initially established the transition policy in the OPPS, we have made 
changes toward making the OPPS more of a prospective payment system, 
including greater packaging and the development of the comprehensive 
APCs. As we have made changes to package a greater number of items and 
services with imaging payments under the OPPS, and CT and MRI 
procedures are not solely based on the CCR applied to each procedure, 
we believe there is less sensitivity to imaging payments that is 
attributable to the cost allocation method being used on the cost 
report forms.
    Table 3 and Table 4 below display the largest and smallest CT and 
MRI CCRs based on the cost allocation method, respectively. 
Specifically, Tables 3 and 4 display the minimum, 5th percentile, 10th 
percentile, 90th percentile, 95th percentile, and maximum CCRs based on 
the cost allocation method. While we note that there are differences in 
CT and MRI CCR values by the cost allocation method, we also note that 
the CT CCR distributions and MRI CCR distributions are largely similar 
across the cost allocation method. As stated in past rulemaking, we 
also note that our current trimming methodology excludes CCRs that are 
+/-3 standard deviations from the geometric mean. While we acknowledge 
the commenter's concern that a number of CCRs, particular those CT CCRs 
from hospitals that use a cost allocation method of ``square feet,'' 
are below 0.0100, we do not believe it would be appropriate to modify 
our standard trimming methodology because it is not our general policy 
to judge the accuracy of hospital charging and hospital cost reporting 
practices for purposes of ratesetting.
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[[Page 58831]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.004

BILLING CODE 4120-01-C
    In addition, as we stated in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74845), we have noted the potential impact the CT 
and MRI CCRs may have on other payment systems. We understand that 
payment reductions for imaging services under the OPPS could have 
significant payment impacts under the Physician Fee Schedule where the 
technical component payment for many imaging services is capped at the 
OPPS payment amount. We will continue to monitor OPPS imaging payments 
in the future and consider the potential impacts of payment changes to 
other payment systems.
    Over the past several years, we have encouraged hospitals to use 
more precise cost reporting methods through cost reporting instructions 
and communication with Medicare contractors regarding the approval of 
hospitals' request to switch from the square feet statistical 
allocation method. While we have not seen a substantial decline in the 
number of hospitals that use the square feet cost allocation method, 
and we acknowledge that there are costs and challenges with 
transitioning to a different accounting method for CT and MRI costs, we 
continue to believe that adopting CT and MRI cost center CCRs fosters 
more specific cost reporting and improves the data contained in the 
electronic cost report data files and, therefore, the accuracy of our 
cost estimation process for the OPPS relative weights. Therefore, for 
CY 2019, after consideration of the public comments we received, for CY 
2019, we are finalizing our proposal to extend our transition policy 
for 1 additional year and continue to remove claims from providers that 
use a ``square feet'' cost allocation method to calculate CT and MRI 
CCRs for the CY 2019 OPPS.
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 2019. The 
Hospital OPPS page on the CMS website on which this final rule is 
posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used 
in the development of the final payment rates. That accounting provides 
additional detail regarding the number of claims derived at each stage 
of the process. In addition, below in this section we discuss the file 
of claims that comprises the data set that is available upon payment of 
an administrative fee under a CMS data use agreement. The CMS website, 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about obtaining 
the ``OPPS Limited Data Set,'' which now includes the additional 
variables previously available only in the OPPS Identifiable Data Set, 
including ICD-10-CM diagnosis codes and revenue code payment amounts. 
This file is derived from the CY 2017 claims that were used to 
calculate the final payment rates for this CY 2019 OPPS/ASC final rule 
with comment period.
    Previously, the OPPS established the scaled relative weights, on 
which payments are based using APC median costs, 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. In 
the CY 2019 OPPS/ASC proposed rule (83 FR 37057), we proposed to 
continue to use geometric mean costs to calculate the relative weights 
on which the CY 2019 OPPS payment rates are based.
    Comment: One commenter believed that revenue code 0815 (Allogeneic 
Stem Cell Acquisition Services) was inadvertently excluded from the 
packaged revenue code list for use in the OPPS ratesetting. The 
commenter stated that this would primarily have an impact on APC 5244 
(Level 4 Blood Product Exchange and Related Services) which would 
potentially include those packaged costs. The commenter requested that 
CMS include revenue code 0815 on the packaged revenue code list in 
order to be consistent with the C-APC ratesetting approach from prior 
years.
    Response: We thank the commenter for bringing this omission to our 
attention. As discussed in the CY 2018 OPPS/ASC final rule with comment 
period (81 FR 79586), beginning in CY 2017, we would include the 
revenue code for purposes of identifying costs associated with stem 
cell transplants. We agree that the revenue code was inadvertently not 
included on the packaged revenue code list and therefore have included 
it in this final rule with comment period for the CY 2019 OPPS 
ratesetting.
    After consideration of the public comment on the proposed process 
we received, we are adding revenue code 0815 to the packaged revenue 
code list and are finalizing our proposed methodology for calculating 
geometric mean costs for purposes of creating relative payment weights 
and subsequent APC payment rates for the CY 2019 OPPS. For more 
information

[[Page 58832]]

regarding the stem cell transplants, we refer readers to section 
II.A.2.b. of this final rule with comment period. We used the 
methodology described in sections II.A.2.a. through II.A.2.c. 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 2019 shown in Addenda A and B to this final rule 
with comment period (which are available via the internet on the CMS 
website). We refer readers to section II.A.4. of this final rule with 
comment period for a discussion of the conversion of APC costs to 
scaled payment weights.
    We note that this is the first year in which claims data containing 
lines with the modifier ``PN'' are available, which indicate 
nonexcepted items and services furnished and billed by off-campus 
provider-based departments (PBDs) of hospitals. Because nonexcepted 
services are not paid under the OPPS, in the CY 2019 OPPS/ASC proposed 
rule (83 FR 37057), we proposed to remove those claim lines reported 
with modifier ``PN'' from the claims data used in ratesetting for the 
CY 2019 OPPS and subsequent years.
    Comment: One commenter requested that CMS not finalize the removal 
of claims with modifier ``PN'' from the CY 2019 OPPS and future 
ratesetting. The commenter believed that this could result in unfair 
adjustments against hospital outpatient departments with large off-
campus PBD presence and that CMS should perform ratesetting with and 
without the modifier in CY 2020 and continue to gather stakeholder 
input until the impact of removing those lines is fully understood.
    Response: While we generally attempt to obtain more information 
from the claims and cost data available to us, we do so to obtain 
accurate cost information for OPPS services. As discussed in the 
proposed rule, we do not believe that lines with modifier ``PN'' should 
be included as part of the OPPS ratesetting process because they are 
paid under the otherwise applicable payment system, rather than the 
OPPS (83 FR 37056 and 37057). We note that the impact of removing these 
modifier ``PN'' lines has only a nominal effect on the APC geometric 
mean costs due to the relatively low number of claims reported with 
modifier ``PN''.
    After consideration of the public comment we received, we are 
finalizing the policy of removing lines with the ``PN'' modifier as 
proposed.
    For details of the claims process used in this final rule with 
comment period, we refer readers to the claims accounting narrative 
under supporting documentation for this CY 2019 OPPS/ASC final rule 
with comment period on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
a. 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 2019 OPPS/ASC proposed rule (83 FR 37057 through 37058), 
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 proposed CY 2019 payment rates for blood and blood products are 
based using the actual blood-specific CCR for hospitals that reported 
costs and charges for a blood cost center and a hospital-specific, 
simulated blood-specific CCR for hospitals that did not report costs 
and charges for a blood cost center.
    We continue to believe that the hospital-specific, simulated blood-
specific, CCR methodology better responds to the absence of a blood-
specific CCR for a hospital than alternative methodologies, such as 
defaulting to the overall hospital CCR or applying an average blood-
specific CCR across hospitals. Because this methodology takes into 
account the unique charging and cost accounting structure of each 
hospital, we believe that it yields more accurate estimated costs for 
these products. We stated in the proposed rule that we continue to 
believe that this methodology in CY 2019 would result in costs for 
blood and blood products that appropriately reflect the relative 
estimated costs of these products for hospitals without blood cost 
centers and, therefore, for these blood products in general.
    We note that, as discussed in section II.A.2.b. of the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59234 through 59239), we 
defined a comprehensive APC (C-APC) as a classification for the 
provision of a primary service and all adjunctive services provided to 
support the delivery of the primary service. Under this policy, we 
include the costs of blood and blood products when calculating the 
overall costs of these C-APCs. In the CY 2019 OPPS/ASC proposed rule 
(83 FR 37057 through 37058), we proposed to continue to apply the 
blood-specific CCR methodology described in this section when 
calculating the costs of the blood and blood products that appear on 
claims with services assigned to the C-APCs. Because the costs of blood 
and blood products would be reflected in the overall costs of the C-
APCs (and, as a result, in the payment rates of the C-APCs), we 
proposed to not make separate payments for blood and blood products 
when they appear on the same claims as services assigned to the C-APCs 
(we refer readers to the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66796)).
    We also referred readers to Addendum B to the CY 2019 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website) 
for the proposed CY 2019 payment rates for blood and blood products 
(which are identified with status indicator ``R''). For a more detailed 
discussion of the blood-specific CCR methodology, we refer readers to 
the CY 2005 OPPS proposed rule (69 FR 50524 through

[[Page 58833]]

50525). For a full history of OPPS payment for blood and blood 
products, we refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66807 through 66810).
    We did not receive any public comments for these proposals. 
Therefore, we are finalizing our proposals, without modification, to 
continue to apply the blood-specific CCR methodology described in this 
section when calculating the costs of the blood and blood products that 
appear on claims with services assigned to the C-APCs and to not make 
separate payments for blood and blood products when they appear on the 
same claims as services assigned to the C-APCs for CY 2019.
(b) Pathogen-Reduced Platelets Payment Rate
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70322 
through 70323), we reiterated that 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 HCPCS code P9072 (Platelets, pheresis, 
pathogen reduced or rapid bacterial tested, each unit), the predecessor 
code to HCPCS code P9073 (Platelets, pheresis, pathogen-reduced, each 
unit), was new for CY 2016, there were no claims data available on the 
charges and costs for this blood product upon which to apply our blood-
specific CCR methodology. Therefore, we established an interim payment 
rate for HCPCS code P9072 based on a crosswalk to existing blood 
product HCPCS code P9037 (Platelets, pheresis, leukocytes reduced, 
irradiated, each unit), which we believed provided the best proxy for 
the costs of the new blood product. In addition, we stated that once we 
had claims data for HCPCS code P9072, we would calculate its payment 
rate using the claims data that should be available for the code 
beginning in CY 2018, which is our practice for other blood product 
HCPCS codes for which claims data have been available for 2 years.
    We stated in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59232) that, although our standard practice for new codes 
involves using claims data to set payment rates once claims data become 
available, we were concerned that there may have been confusion among 
the provider community about the services that HCPCS code P9072 
described. That is, as early as 2016, there were discussions about 
changing the descriptor for HCPCS code P9072 to include the phrase ``or 
rapid bacterial tested'', which is a less costly technology than 
pathogen reduction. In addition, effective January 2017, the code 
descriptor for HCPCS code P9072 was changed to describe rapid bacterial 
testing of platelets and, effective July 1, 2017, the descriptor for 
the temporary successor code for HCPCS code P9072 (HCPCS code Q9988) 
was changed again back to the original descriptor for HCPCS code P9072 
that was in place for 2016.
    Based on the ongoing discussions involving changes to the original 
HCPCS code P9072 established in CY 2016, we believed that claims from 
CY 2016 for pathogen reduced platelets may have potentially reflected 
certain claims for rapid bacterial testing of platelets. Therefore, we 
decided to continue to crosswalk the payment amount for services 
described by HCPCS code P9073 to the payment amount for services 
described by HCPCS P9037 for CY 2018 (82 FR 59232), as had been done 
previously, to determine the payment rate for services described by 
HCPCS code P9072. In the CY 2019 OPPS/ASC proposed rule (83 FR 37058), 
for CY 2019, we discussed that we had reviewed the CY 2017 claims data 
for the two predecessor codes to HCPCS code P9073 (HCPCS codes P9072 
and Q9988), along with the claims data for the CY 2017 temporary code 
for pathogen test for platelets (HCPCS code Q9987), which describes 
rapid bacterial testing of platelets.
    We found that there were over 2,200 claims billed with either HCPCS 
code P9072 or Q9988. Accordingly, we believe that there are a 
sufficient number of claims to use to calculate a payment rate for 
HCPCS code P9073 for CY 2019. We also performed checks to estimate the 
share of claims that may have been billed for rapid bacterial testing 
of platelets as compared to the share of claims that may have been 
billed for pathogen-reduced, pheresis platelets (based on when HCPCS 
code P9072 was an active procedure code from January 1, 2017 to June 
30, 2017). First, we found that the geometric mean cost for pathogen-
reduced, pheresis platelets, as reported by HCPCS code Q9988 when 
billed separately from rapid bacterial testing of platelets, was 
$453.87, and that over 1,200 claims were billed for services described 
by HCPCS code Q9988. Next, we found that the geometric mean cost for 
rapid bacterial testing of platelets, as reported by HCPCS code Q9987 
on claims, was $33.44, and there were 59 claims reported for services 
described by HCPCS code Q9987, of which 3 were separately paid.
    These findings imply that almost all of the claims billed for 
services reported with HCPCS code P9072 were for pathogen-reduced, 
pheresis platelets. In addition, the geometric mean cost for services 
described by HCPCS code P9072, which may contain rapid bacterial 
testing of platelets claims, was $468.11, which is higher than the 
geometric mean cost for services described by HCPCS code Q9988 of 
$453.87, which should not have contained claims for rapid bacterial 
testing of platelets. Because the geometric mean for services described 
by HCPCS code Q9987 is only $33.44, it would be expected that if a 
significant share of claims billed for services described by HCPCS code 
P9072 were for the rapid bacterial testing of platelets, the geometric 
mean cost for services described by HCPCS code P9072 would be lower 
than the geometric mean cost for services described by HCPCS code 
Q9988. Instead, we found that the geometric mean cost for services 
described by HCPCS code Q9988 is higher than the geometric mean cost 
for services described by HCPCS code P9072.
    Based on our analysis of claims data, we stated in the CY 2019 
OPPS/ASC proposed rule that we believed there were sufficient claims 
available to establish a payment rate for pathogen-reduced pheresis 
platelets without using a crosswalk. Therefore, we proposed to 
calculate the payment rate for services described by HCPCS code P9073 
in CY 2019 and in subsequent years using claims payment history, which 
is the standard methodology used by the OPPS for HCPCS and CPT codes 
with at least 2 years of claims history. We referred readers to 
Addendum B of the proposed rule for the proposed payment rate for 
services described by HCPCS code P9073 reportable under the OPPS. 
Addendum B is available via the internet on the CMS website.
    Comment: Several commenters opposed the proposal to use claims 
history to calculate the payment rate for services described by HCPCS 
code P9073. Instead, the commenters requested that CMS calculate the 
payment rate for services described by HCPCS code P9072 based on a 
crosswalk to existing blood product HCPCS code P9037 through either CY 
2019 or CY 2020. The commenters stated that the acquisition cost for 
pathogen-reduced platelets is over $600, which is substantially higher 
than the proposed payment rate for services described by HCPCS code 
P9073 found in Addendum B to the proposed rule

[[Page 58834]]

and closer to the payment rate for services described by HCPCS code 
P9073. Some commenters indicated that the cost for pathogen-reduced 
platelets is higher than the cost of leukocytes reduced and irradiated 
platelets, the product covered by HCPCS code P9073, the crosswalked 
code. Several of the commenters believed the claim costs for pathogen-
reduced platelets were lower than actual costs because of coding errors 
by providers, providers who did not use pathogen-reduced platelets 
billing the service, and confusion over whether to use the hospital CCR 
or the blood center CCR to report charges for pathogen-reduced 
platelets. One commenter also stated that a provider that billed 
several claims for pathogen-reduced platelets believed that CMS 
assigned an unusually low CCR to its claims, leading the provider to 
report lower than actual costs for the service.
    Response: We appreciate the concerns of the commenters. Pathogen-
reduced platelets (HCPCS code P9073) are a relatively new service. As 
we noted in the CY 2019 OPPS/ASC proposed rule (83 FR 37058), there 
were many changes to the procedure code billed for pathogen-reduced 
platelets, as well as with the services covered by the procedure codes 
for pathogen-reduced platelets and the code descriptors. We had 
concerns that all of these coding changes could lead to billing 
confusion. The comments we received from providers, stakeholder groups, 
and the developer of the pathogen-reduced technology support that there 
indeed may have been confusion about billing that has led to 
aberrancies in the data we have available for ratesetting.
    After consideration of the public comments we received, we are not 
finalizing our proposal to calculate the payment rate for services 
described by HCPCS code P9073 in CY 2019 using claims payment history. 
Instead, for CY 2019 (that is, for one more year), we are establishing 
the payment rate for services described by HCPCS code P9073 by 
performing a crosswalk from the payment amount for services described 
by HCPCS code P9073 to the payment amount for services described by 
HCPCS P9037. We refer readers to Addendum B to this final rule with 
comment period for the final payment rate for services described by 
HCPCS code P9073 reportable under the OPPS. Addendum B is available via 
the internet on the CMS website.
(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 2016 OPPS/ASC final rule with comment period (80 FR 70323 
through 70325) for further discussion of the history of OPPS payment 
for brachytherapy sources.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37059), for CY 2019, 
we proposed to use the costs derived from CY 2017 claims data to set 
the proposed CY 2019 payment rates for brachytherapy sources because CY 
2017 is the same year of data we proposed to use to set the proposed 
payment rates for most other items and services that would be paid 
under the CY 2019 OPPS. We proposed to base the payment rates for 
brachytherapy sources on the geometric mean unit costs for each source, 
consistent with the methodology that we proposed for other items and 
services paid under the OPPS, as discussed in section II.A.2. of the 
proposed rule. 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 (Brachytherapy source, 
stranded, not otherwise specified, per source) and C2699 (Brachytherapy 
source, non-stranded, not otherwise specified, per source), 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). 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). Specifically, this 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 2019 payment rates for brachytherapy sources were 
included in Addendum B to the proposed rule (which is available via the 
internet on the CMS website) and were identified with status indicator 
``U''. For CY 2019, we proposed to continue to assign status indicator 
``U'' (Brachytherapy Sources, Paid under OPPS; separate APC payment) to 
HCPCS code C2645 (Brachytherapy planar source, palladium-103, per 
square millimeter) and to use external data (invoice prices) and other 
relevant information to establish the proposed APC payment rate for 
HCPCS code C2645. Specifically, we proposed to set the payment rate at 
$4.69 per mm\2\, the same rate that was in effect for CYs 2017 and 
2018.
    We note that, for CY 2019, we proposed to assign status indicator 
``E2'' (Items and Services for Which Pricing Information and Claims 
Data Are Not Available) to HCPCS code C2644 (Brachytherapy cesium-131 
chloride) because this code was not reported on CY 2017 claims. 
Therefore, we were unable to calculate a proposed payment rate based on 
the general OPPS ratesetting methodology described earlier. Although 
HCPCS code C2644 became effective July 1, 2014, there are no CY 2017 
claims reporting this code. Therefore, we proposed to assign new 
proposed status indicator ``E2'' to HCPCS code C2644 in the CY 2019 
OPPS.

[[Page 58835]]

    Comment: One commenter expressed concern regarding CMS' policy to 
establish prospective payment rates for brachytherapy sources using the 
general OPPS methodology, which uses costs based on claims data to set 
the relative payment weights for hospital outpatient services. The 
commenter stated that, as a result of use of these cost data from 
claims, payments for low-volume brachytherapy sources have fluctuated 
significantly under the OPPS.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74161) when we established a prospective payment 
for brachytherapy sources, the OPPS relies on the concept of averaging, 
where the payment may be more or less than the estimated cost of 
providing a service for a particular patient; however, with the 
exception of outlier cases, we believe that such a prospective payment 
is adequate to ensure access to appropriate care. We acknowledge that 
payment for brachytherapy sources based on geometric mean costs from a 
small set of claims may be more variable on a year-to-year basis when 
compared to geometric mean costs for brachytherapy sources from a 
larger claims set. However, as illustrated in Table 5 below, we believe 
that payment for currently payable brachytherapy sources has been 
relatively consistent over the years and that a prospective payment for 
brachytherapy sources based on geometric mean costs is appropriate and 
provides hospitals with the greatest incentives for efficiency in 
furnishing brachytherapy treatment. For CY 2019 OPPS payment rates for 
the brachytherapy sources listed in Table 5, we refer readers to 
Addendum B of this final rule with comment period (which is available 
via the internet on the CMS website).
BILLING CODE 4120-01-P

[[Page 58836]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.005

BILLING CODE 4120-01-C

    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. We also are finalizing our proposal to assign status 
indicator ``U'' (Brachytherapy Sources, Paid under OPPS; separate APC 
payment) to HCPCS code C2645 (Brachytherapy planar source, palladium-
103, per square millimeter) and to use external data (invoice prices) 
and other relevant information to establish the APC payment rate for 
HCPCS code C2645 for CY 2019.
    Lastly, because we were unable to calculate a payment rate for 
HCPCS code C2644 (Brachytherapy cesium-131 chloride) based on the 
general OPPS ratesetting methodology, we are finalizing our proposal to 
assign HCPCS code C2644 status indicator ``E2'' (Items and Services for 
Which Pricing Information and Claims Data Are Not Available) for CY 
2019.
    The final CY 2019 payment rates for brachytherapy sources are 
included in Addendum B to this final rule with comment period (which is 
available via the internet on the CMS website) and are identified with 
status indicator ``U''.
    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

[[Page 58837]]

directed to the Division of Outpatient Care, Mail Stop C4-01-26, 
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.
b. Comprehensive APCs (C-APCs) for CY 2019
(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). In the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70332), we finalized 10 additional C-APCs to be 
paid under the existing C-APC payment policy and added one additional 
level to both the Orthopedic Surgery and Vascular Procedures clinical 
families, which increased the total number of C-APCs to 37 for CY 2016. 
In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79584 
through 79585), we finalized another 25 C-APCs for a total of 62 C-
APCs. In the CY 2018 OPPS/ASC final rule with comment period, we did 
not change the total number of C-APCs from 62.
    Under this policy, we designate a service described by a HCPCS code 
assigned to a C-APC as the primary service when the service is 
identified by OPPS status indicator ``J1''. When such a primary service 
is reported on a hospital outpatient claim, taking into consideration 
the few exceptions that are discussed below, we make payment for all 
other items and services reported on the hospital outpatient claim as 
being integral, ancillary, supportive, dependent, and adjunctive to the 
primary service (hereinafter collectively referred to as ``adjunctive 
services'') and representing components of a complete comprehensive 
service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services 
are packaged into the payments for the primary services. This results 
in a single prospective payment for each of the primary, comprehensive 
services based on the costs of all reported services at the claim 
level.
    Services excluded from the C-APC policy under the OPPS 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 to be separately paid. This includes certain mammography and 
ambulance services that are not 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 payment 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). A list of services excluded 
from the C-APC policy is included in Addendum J to this final rule with 
comment period (which is available via the internet on the CMS 
website).
    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 beginning 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.
    In the CY 2016 OPPS/ASC final rule with comment period, we expanded 
the C-APC payment methodology to qualifying extended assessment and 
management encounters through the ``Comprehensive Observation 
Services'' C-APC (C-APC 8011). Services within this APC are assigned 
status indicator ``J2''. Specifically, we make a payment through C-APC 
8011 for a claim that:
     Does 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;
     Contains 8 or more units of services described by HCPCS 
code G0378 (Hospital observation services, per hour);
     Contains 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 
admission of patient for hospital observation care) on the same date of 
service as HCPCS code G0378; 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
     Does not contain services described by a HCPCS code to 
which we have assigned status indicator ``J1''.
    The assignment of status indicator ``J2'' to a specific combination 
of services performed in combination with each other allows for all 
other OPPS payable services and items reported on the claim (excluding 
services that are

[[Page 58838]]

not covered OPD services or that cannot by statute be paid for under 
the OPPS) 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 (80 FR 70333 through 70336).
    Services included under the C-APC payment packaging policy, that 
is, services that are typically adjunctive to the primary service and 
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 (78 FR 74865 and 79 FR 
66800).
    In addition, payment for hospital 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 are deemed not to 
be 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 hospital 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 hospital 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. We refer readers to the July 2016 OPPS Change Request 
9658 (Transmittal 3523) for further instructions on reporting these 
services in the context of a C-APC service.
    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 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.
    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). Line 
item charges for services included on the C-APC claim are converted to 
line item costs, which are then summed to develop the estimated APC 
costs. These claims are then assigned one unit of the service with 
status indicator ``J1'' and later used to develop the geometric mean 
costs for the C-APC relative payment weights. (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, 
which exclude 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 its comprehensive geometric mean 
costs. For the minority of claims reporting more than one primary 
service assigned to status indicator ``J1'' or units thereof, 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 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 paired ``J1'' service 
code combinations or paired 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 the next higher paying C-APC in the same clinical family 
of C-APCs. We apply this type of complexity adjustment when the paired 
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 in the originating C-APC 
(cost threshold).
    These criteria identify paired code combinations that occur 
commonly and exhibit materially greater resource requirements than the 
primary service. The CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79582) included a revision to the complexity adjustment 
eligibility criteria. Specifically, we finalized a policy to 
discontinue the requirement that a code combination (that qualifies for 
a complexity adjustment by satisfying the frequency and cost criteria 
thresholds described above) also not create a 2 times rule violation in 
the higher level or receiving APC.
    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

[[Page 58839]]

there are paired code combinations that meet the complexity adjustment 
criteria. For a new HCPCS code, we determine initial C-APC assignment 
and qualification for a complexity adjustment using the best available 
information, crosswalking the new HCPCS code to a predecessor code(s) 
when appropriate.
    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 claim including 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 
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 claim including a 
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. As noted in the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70331), all add-on codes that can be 
appropriately reported in combination with a base code that describes a 
primary ``J1'' service are evaluated for a complexity adjustment.
    To determine which combinations of primary service codes reported 
in conjunction with an add-on code may qualify for a complexity 
adjustment for CY 2019, in the CY 2019 OPPS/ASC proposed rule (83 FR 
37061), we proposed to 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 for the primary ``J1'' service. 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 (based on meeting the criteria outlined above), we make a 
complexity adjustment for the code combination; that is, we reassign 
the primary service code reported in conjunction with the add-on code 
to the next higher cost C-APC within the same clinical family of C-
APCs. As previously stated, we package payment for add-on codes into 
the C-APC payment rate. If any add-on code reported in conjunction with 
the ``J1'' primary service code does not qualify for a complexity 
adjustment, payment for the add-on service continues to be packaged 
into the payment for the primary service and is not reassigned to the 
next higher cost C-APC. We listed the complexity adjustments proposed 
for ``J1'' and add-on code combinations for CY 2019, along with all of 
the other proposed complexity adjustments, in Addendum J to the CY 2019 
OPPS/ASC proposed rule (which is available via the internet on the CMS 
website).
    Addendum J to the proposed rule included the cost statistics for 
each code combination that would qualify for a complexity adjustment 
(including primary code and add-on code combinations). Addendum J to 
the proposed rule also contained summary cost statistics for each of 
the paired code combinations that describe a complex code combination 
that would qualify for a complexity adjustment and were proposed to be 
reassigned to the next higher cost C-APC within the clinical family. 
The combined statistics for all proposed reassigned complex code 
combinations were represented by an alphanumeric code with the first 4 
digits of the designated primary service followed by a letter. For 
example, the proposed geometric mean cost listed in Addendum J for the 
code combination described by complexity adjustment assignment 3320R, 
which is assigned to C-APC 5224 (Level 4 Pacemaker and Similar 
Procedures), includes all paired code combinations that were proposed 
to be reassigned to C-APC 5224 when CPT code 33208 is the primary code. 
Providing the information contained in Addendum J to the proposed rule 
allowed stakeholders the opportunity to better assess the impact 
associated with the proposed reassignment of claims with each of the 
paired code combinations eligible for a complexity adjustment.
    Comment: Several commenters requested that CMS alter the C-APC 
complexity adjustment eligibility criteria to allow additional code 
combinations to qualify for complexity adjustments. The commenters 
requested that CMS consider clusters of ``J1'' and add-on codes, rather 
than only code pairs, and also consider code combinations of ``J1'' 
codes and devices such as drug-coated balloons and drug-eluting stents. 
The commenters also requested that CMS eliminate the 25-claim frequency 
threshold. Another commenter requested that CMS consider patient 
complexity and procedures assigned to status indicator ``S'' or ``T'' 
when evaluating procedures for a complexity adjustment. One commenter 
suggested that procedures initially eligible for a complexity 
adjustment by meeting the applicable requirements in a year maintain 
that complexity adjustment for a total period of 3 years, regardless of 
whether they continue to meet the criteria after the first year.
    In terms of payment for complexity adjustments, one commenter 
requested that CMS promote the qualifying code combination to two APC 
levels higher than the originating APC rather than to the next higher 
paying C-APC. Another commenter suggested that CMS pay the geometric 
mean cost of the highest ranking procedure in the qualifying code 
combination at 100 percent, and then each secondary procedure at 50 
percent of the geometric mean cost of the secondary procedure.
    Other commenters also requested an explanation of how the geometric 
mean costs of the code combinations evaluated for complexity 
adjustments are calculated, stating that the geometric mean cost of 
certain code combinations represented in Addendum J were lower than the 
geometric mean costs of the primary service when the service is billed 
without an additional ``J1'' or ``J1'' add-on procedure. Commenters 
also requested that CMS establish complexity adjustments for the 
specific code combinations listed in Table 6 below.
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    Response: We appreciate these comments. However, at this time, we 
do not believe changes to the C-APC complexity adjustment criteria are 
necessary or that we should make exceptions to the criteria to allow 
claims with the code combinations suggested by the commenters to 
receive complexity adjustments. As stated previously (81 FR 79582), we 
continue to believe that the complexity adjustment criteria, which 
require a frequency of 25 or more claims reporting a code combination 
and a violation of the 2 times rule in the originating C-APC in order 
to receive payment in the next higher cost C-APC within the clinical 
family, are adequate to determine if a combination of procedures 
represents a complex, costly subset of the primary service. If a code 
combination meets these criteria, the combination receives payment at 
the next higher cost C-APC. Code combinations that do not meet these 
criteria receive the C-APC payment rate associated with the primary 
``J1'' service. A minimum of 25 claims is already very low for a 
national payment system. Lowering the minimum of 25 claims further 
could lead to unnecessary complexity adjustments for service 
combinations that are rarely performed. The complexity adjustment cost 
threshold compares the code combinations to the lowest cost-significant 
procedure assigned to the APC. If the cost of the code combination does 
not exceed twice the cost of the lowest cost-significant procedure 
within the APC, no complexity adjustment is made. Lowering or 
eliminating this threshold could remove so many claims from the 
accounting for the primary ``J1'' service that the geometric mean costs 
attributed to the primary procedure could be skewed.
    With regard to the specific complexity adjustments requested by 
commenters listed in Table 6 above, we note that we did not propose 
that claims with these code combinations would receive complexity 
adjustments because they did not meet the cost and frequency criteria 
for the adjustment. Therefore, we do not believe it is appropriate to 
change the complexity adjustment criteria at this time, and because the 
suggested code combinations do not meet the existing criteria, we do 
not believe it is appropriate to establish complexity adjustments for 
these code combinations at this time.
    Regarding the request for a code combination that qualified for a 
complexity adjustment in a year to continue to qualify for the 
adjustment for the next 2 years for a total period of 3 years, we note 
that we evaluate code combinations each year against our complexity 
adjustment criteria using the latest available data. At this time, we 
do not believe it is necessary to expand the ability for code 
combinations to meet the complexity adjustment criteria in this manner 
because we believe that the existing criteria that were already 
established sufficiently reflect those combinations of procedures that 
are commonly billed together and are costly enough to merit a 
complexity adjustment. Further, we believe that code combinations 
should be evaluated each year to determine if they meet the criteria 
based on the latest hospital billing and utilization data. We also do 
not believe that it is necessary to provide payment for claims 
including qualifying code combinations at two APC levels higher than 
the originating APC or for CMS to pay based on the geometric mean cost 
of the highest ranking procedure in the qualifying code combination at 
100 percent, and then each secondary procedure based on 50 percent of 
the geometric mean cost of the secondary procedure. We believe that 
payment at the next higher paying C-APC is adequate for code 
combinations that exhibit materially greater resource requirements than 
the primary service and that, in many cases, paying the rate assigned 
to two levels higher may lead to a significant overpayment. As 
mentioned previously, 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. The highest payment for any claim including a 
code combination for services assigned to a C-APC would be the highest 
paying C-APC in the clinical family (79 FR 66802). Therefore, a policy 
to pay for claims with qualifying code combinations at two C-APC levels 
higher than the originating APC is not always feasible. Likewise, while 
paying 100 percent of the highest ranking procedure and paying 50 
percent of the

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secondary procedure is the established payment policy under the 
multiple procedure payment reduction policy that applies to services 
assigned to status indicator ``T,'' we continue to believe that the 
established C-APC complexity adjustment policy is appropriate for 
services assigned to status indicator ``J1'' or ``J2'', and we do not 
believe that it should be replaced with a multiple procedure payment 
reduction payment methodology.
    In response to the request for an explanation of the cost 
statistics for the paired ``J1'' code combinations or paired code 
combinations of ``J1'' services and certain add-on codes evaluated for 
complexity adjustments, the geometric mean costs of these code 
combinations shown in Addendum J are calculated using only claims that 
include these code pairings. As stated previously, the cost of the code 
combination must exceed twice the cost of the lowest cost-significant 
procedure within the APC in order for the combination to qualify for a 
complexity adjustment.
    Lastly, as stated in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59238), we do not believe that it is necessary to adjust 
the complexity adjustment criteria to allow claims that include a drug 
or device code, more than two ``J1'' procedures, or procedures 
performed at certain hospitals to qualify for a complexity adjustment. 
As mentioned earlier, we believe the current criteria are adequate to 
determine if a combination of procedures represents a complex, costly 
subset of the primary service.
    After consideration of the public comments we received on the 
proposed complexity adjustment policy, we are finalizing the C-APC 
complexity adjustment policy for CY 2019, as proposed, without 
modification.
(2) Additional C-APCs for CY 2019
    For CY 2019 and subsequent years, in the CY 2019 OPPS/ASC proposed 
rule (83 FR 37062), we proposed to continue to apply the C-APC payment 
policy methodology made effective in CY 2015 and updated with the 
implementation of status indicator ``J2'' in CY 2016. We refer readers 
to the CY 2017 OPPS/ASC final rule with comment period (81 FR 79583) 
for a discussion of the C-APC payment policy methodology and revisions.
    Each year, in accordance with section 1833(t)(9)(A) of the Act, we 
review and revise the services within each APC group and the APC 
assignments under the OPPS. As a result of our annual review of the 
services and the APC assignments under the OPPS, in the proposed rule 
(83 FR 37062), we proposed to add three C-APCs under the existing C-APC 
payment policy beginning in CY 2019: Proposed C-APC 5163 (Level 3 ENT 
Procedures); proposed C-APC 5183 (Level 3 Vascular Procedures); and 
proposed C-APC 5184 (Level 4 Vascular Procedures). These APCs were 
selected to be included in this proposal because, similar to other C-
APCs, these APCs include primary, comprehensive services, such as major 
surgical procedures, that are typically reported with other ancillary 
and adjunctive services. Also, similar to other APCs that have been 
converted to C-APCs, there are higher APC levels within the clinical 
family or related clinical family of these APCs that have previously 
been assigned to a C-APC. Table 3 of the proposed rule listed the 
proposed C-APCs for CY 2019. All C-APCs were displayed in Addendum J to 
the proposed rule (which is available via the internet on the CMS 
website). Addendum J to the proposed rule also contained all of the 
data related to the C-APC payment policy methodology, including the 
list of proposed complexity adjustments and other information.
    Comment: Several commenters supported the proposals. Other 
commenters, including device manufacturer associations, expressed 
ongoing concerns that the C-APC payment rates may not adequately 
reflect the costs associated with the services and requested that CMS 
not establish any additional C-APCs. These commenters also requested 
that CMS provide an analysis of the impact of the C-APC policy on 
affected procedures.
    Response: We appreciate the commenters' responses. We continue to 
believe that the proposed C-APCs for CY 2019 are appropriate to be 
added to the existing C-APC payment policy. We also note that, in the 
CY 2018 OPPS/ASC final rule with comment period (82 FR 59246), we 
conducted an analysis of the effects of the C-APC policy. The analysis 
looked at data from CY 2016 OPPS/ASC final rule with comment period, 
the CY 2017 OPPS/ASC final rule with comment period, and the CY 2018 
OPPS/ASC proposed rule, which involved claims data from CY 2014 (before 
C-APCs became effective) to CY 2016. We looked at separately payable 
codes that were then assigned to C-APCs and, overall, we observed an 
increase in claim line frequency, units billed, and Medicare payment 
for those procedures, which suggest that the C-APC payment policy did 
not adversely affect access to care or reduce payments to hospitals.
    Comment: Several commenters requested that CMS discontinue the C-
APC payment policy for several brachytherapy insertion procedures and 
single session stereotactic radiosurgery procedures, stating concerns 
that the C-APC methodology does not account for the complexity of 
delivering radiation therapy and fails to capture appropriately coded 
claims. The commenters also requested that CMS continue to make 
separate payments for the 10 planning and preparation codes related to 
stereotactic radiosurgery (SRS) and include the HCPCS code for IMRT 
planning (77301) on the list of planning and preparation codes, stating 
that the service has become more common in single fraction radiosurgery 
treatment planning.
    Response: At this time, we do not believe that it is necessary to 
discontinue the C-APCs that include brachytherapy insertion procedures 
and single session SRS procedures. We continue to believe that the C-
APC policy is appropriately applied to these surgical procedures for 
the reasons cited when this policy was first adopted and note that the 
commenters did not provide any empirical evidence to support their 
claims that the existing C-APC policy does not adequately pay for these 
procedures. Also, we will continue in CY 2019 to pay separately for the 
10 planning and preparation services (HCPCS codes 70551, 70552, 70553, 
77011, 77014, 77280, 77285, 77290, 77295, and 77336) adjunctive to the 
delivery of the SRS treatment using either the Cobalt-60-based or LINAC 
based technology when furnished to a beneficiary within 1 month of the 
SRS treatment for CY 2019 (82 FR 59242 and 59243).
    Comment: Several commenters representing stem cell transplant 
organizations requested that CMS also establish a new C-APC for 
autologous stem cell transplants for CY 2019. These commenters stated 
that the C-APC methodology will allow CMS to better capture the costs 
of additional services, such as laboratory tests, provided with the 
autologous transplant. The Advisory Panel on Hospital Outpatient 
Payment (HOP Panel) also recommended that CMS study the appropriateness 
of creating a comprehensive APC for autologous hematopoietic stem cell 
transplantation.
    Response: We appreciate these comments and may consider the 
creation of a C-APC for autologous stem cell transplants for future 
rulemaking as recommended by the HOP Panel.
    Comment: Two manufacturers of drugs used in ocular procedures 
requested that CMS discontinue the C-APC payment policy for existing C-
APCs that include procedures involving

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their drugs and instead provide separate payment for the drugs. The 
manufacturer commenters, as well as several physicians, believed that 
the C-APC packaging policy, which packages payment for certain drugs 
that are adjunctive to the primary service, results in underpayment for 
the drugs.
    Response: We continue to believe that the procedures assigned to 
the proposed C-APCs, including the procedures involving the drugs used 
in ocular procedures mentioned by the commenters, are appropriately 
paid through a comprehensive APC and the costs of drugs (as well as 
other items or services furnished with the procedures) are reflected in 
hospital billing, and therefore the rates that are established for the 
ocular procedures. As stated in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79584), procedures assigned to C-APCs are primary 
services (mostly major surgical procedures) that are typically the 
focus of the hospital outpatient stay. In addition, with regard to the 
packaging of the drugs based on the C-APC policy, as stated in previous 
rules (78 FR 74868 through 74869 and 74909 and 79 FR 66800), items 
included in the packaged payment provided with the primary ``J1'' 
service include all drugs, biologicals, and radiopharmaceuticals 
payable under the OPPS, regardless of cost, except those drugs with 
pass-through payment status.
    After consideration of the public comments we received, we are 
finalizing the proposed C-APCs for CY 2019. Table 7 below lists the 
final C-APCs for CY 2019. All C-APCs are displayed in Addendum J to 
this final rule with comment period (which is available via the 
internet on the CMS website). Addendum J to this final rule with 
comment period also contains all of the data related to the C-APC 
payment policy methodology, including the list of complexity 
adjustments and other information for CY 2019.

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(3) Exclusion of Procedures Assigned to New Technology APCs From the C-
APC Policy
    Services that are assigned to New Technology APCs are typically new 
procedures that do not have sufficient claims history to establish an 
accurate payment for the procedures. 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 (82 FR 59277).
    The C-APC payment policy packages payment for adjunctive and 
secondary items, services, and procedures into the most costly primary 
procedure under the OPPS at the claim level. When a procedure assigned 
to a New Technology APC is included on the claim with a primary 
procedure, identified by OPPS status indicator ``J1'', payment for the 
new technology service is typically packaged into the payment for the 
primary procedure. Because the new technology service is not separately 
paid in this scenario, the overall number of single claims available to 
determine an appropriate clinical APC for the new service is reduced. 
This is contrary to the objective of the New Technology APC payment 
policy, which is to gather sufficient claims data to enable us to 
assign the service to an appropriate clinical APC.
    For example, for CY 2017, there were seven claims generated for 
HCPCS code 0100T (Placement of a subconjunctival retinal prosthesis 
receiver and pulse generator, and implantation of intraocular retinal 
electrode array, with vitrectomy), which involves the use of the 
Argus[supreg] II Retinal Prosthesis System. However, several of these 
claims were not available for ratesetting because HCPCS code 0100T was 
reported with a ``J1'' procedure and, therefore, payment was packaged 
into the associated C-APC payment. If these services had been 
separately paid under the OPPS, there would be at least two additional 
single claims available for ratesetting. As mentioned previously, the 
purpose of the new technology APC policy is to ensure that there are 
sufficient claims data for new services, which is particularly 
important for services with a low volume such as procedures described 
by HCPCS code 0100T. Another concern is the costs reported for the 
claims when payment is not packaged for a new technology procedure may 
not be representative of all of the services included on a claim that 
is generated, which may also affect our ability to assign the new 
service to the most appropriate clinical APC.
    To address this issue and help ensure that there is sufficient 
claims data for services assigned to New Technology APCs, in the CY 
2019 OPPS/ASC proposed rule (83 FR 37063), we proposed to exclude 
payment for any procedure that is assigned to a New Technology APC 
(APCs 1491 through 1599 and APCs 1901 through 1908) from being packaged 
when included on a claim with a ``J1'' service assigned to a C-APC. 
This issue is also addressed in section III.C.3.b. of the proposed rule 
and this final rule with comment period.
    Comment: Numerous commenters supported the proposal.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal, without modification, to exclude payment for 
any procedure that is assigned to a New Technology APC (APCs 1491 
through 1599 and APCs 1901 through 1908) from being packaged when 
included on a claim with a ``J1'' service assigned to a C-APC.
c. 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

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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 mental health services and multiple imaging 
services. (We note that, in the CY 2018 OPPS/ASC final rule with 
comment period, we finalized a policy to delete the composite APC 8001 
(LDR Prostate Brachytherapy Composite) for CY 2018 and subsequent 
years.) We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66611 through 66614 and 66650 through 66652) for 
a full discussion of the development of the composite APC methodology, 
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) 
and the CY 2018 OPPS/ASC final rule with comment period (82 FR 59241 
through 59242 and 59246 through 52950) for more recent background.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37064), for CY 2019 
and subsequent years, we proposed to continue our composite APC payment 
policies for mental health services and multiple imaging services, as 
discussed below. In addition, as discussed in section II.A.2.b.(3) and 
II.A.2.c. of the CY 2018 OPPS/ASC proposed rule and final rule with 
comment period (82 FR 33577 through 33578 and 59241 through 59242 and 
59246, respectively), in the CY 2019 proposed rule, we proposed to 
continue to assign CPT code 55875 (Transperineal placement of needles 
or catheters into prostate for interstitial radioelement application, 
with or without cystoscopy) to status indicator ``J1'' and to continue 
to assign the services described by CPT code 55875 to C-APC 5375 (Level 
5 Urology and Related Services) for CY 2019. We did not receive any 
public comments on these proposed assignments. Therefore, for CY 2019, 
we are continuing to assign CPT code 55875 to status indicator ``J1'' 
and to assign services described by CPT code 55875 to C-APC 5375.
(1) Mental Health Services Composite APC
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37064), 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.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79588 
through 79589), we finalized a policy to combine the existing Level 1 
and Level 2 hospital-based PHP APCs into a single hospital-based PHP 
APC, and thereby discontinue APCs 5861 (Level 1 Partial Hospitalization 
(3 services) for Hospital-Based PHPs) and 5862 (Level 2 Partial 
Hospitalization (4 or more services) for Hospital-Based PHPs) and 
replace them with APC 5863 (Partial Hospitalization (3 or more services 
per day)).
    In the CY 2018 OPPS/ASC proposed rule and final rule with comment 
period (82 FR 33580 through 33581 and 59246 through 59247, 
respectively), we proposed and finalized the policy for CY 2018 and 
subsequent years that, when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single 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 paid through composite APC 
8010 (Mental Health Services Composite). In addition, we set the 
payment rate for composite APC 8010 for CY 2018 at the same payment 
rate that will be paid for APC 5863, which is the maximum partial 
hospitalization per diem payment rate for a hospital, and finalized a 
policy that the hospital will continue to be paid the payment rate for 
composite APC 8010. Under this policy, the I/OCE will continue to 
determine whether to pay for these specified mental health services 
individually, or to make a single payment at the same payment rate 
established for APC 5863 for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program at a hospital represent the most 
resource intensive of all outpatient mental health services. Therefore, 
we do not believe that we should pay more for mental health services 
under the OPPS than the highest partial hospitalization per diem 
payment rate for hospitals.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37064), for CY 2019, 
we proposed that when the aggregate payment for specified mental health 
services provided by one hospital to a single beneficiary on a single 
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 paid through composite APC 
8010 for CY 2019. In addition, we proposed to set the proposed payment 
rate for composite APC 8010 at the same payment rate that we proposed 
for APC 5863, which is the maximum partial hospitalization per diem 
payment rate for a hospital, and that the hospital continue to be paid 
the proposed payment rate for composite APC 8010.
    Comment: One commenter supported equalizing payments between the 
outpatient APC rate and the PHP per diem rate. The commenter also 
supported the increase in the proposed CY 2019 payment rates from the 
CY 2018 payment rates.
    Response: We appreciate the commenter's support.
    After consideration of the public comment we received, we are 
finalizing our CY 2019 proposal, without modification, that when the 
aggregate payment for specified mental health services provided by one 
hospital to a single beneficiary on a single 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 paid through composite APC 8010 for CY 2019. In addition, we 
are finalizing our CY 2019 proposal, without modification, to set the 
payment rate for composite APC 8010 at the same payment rate as APC 
5863, 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 composite APC 8010.
(2) 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

[[Page 58849]]

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
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment 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 2019 OPPS/ASC proposed rule (83 FR 37065), we proposed, 
for CY 2019 and subsequent years, 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 
would reflect and promote the efficiencies hospitals can achieve when 
performing multiple imaging procedures during a single session.
    The proposed CY 2019 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 2017 
claims available for the CY 2019 OPPS/ASC 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 have used to calculate the geometric 
mean costs for these composite APCs since CY 2014, 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 CY 2019 OPPS/ASC proposed rule (which is available 
via the internet on the CMS website) and were discussed in more detail 
in section II.A.1.b. of the CY 2019 OPPS/ASC proposed rule.
    For the CY 2019 OPPS/ASC proposed rule, we were able to identify 
approximately 638,902 ``single session'' claims out of an estimated 1.7 
million potential claims for payment through composite APCs from our 
ratesetting claims data, which represents approximately 37 percent of 
all eligible claims, to calculate the proposed CY 2019 geometric mean 
costs for the multiple imaging composite APCs. Table 4 of the CY 2019 
OPPS/ASC 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 2019.
    We did not receive any public comments on these proposals. However, 
in the CY 2019 OPPS/ASC proposed rule (83 FR 37065), we inadvertently 
omitted the new CPT codes that will be effective January 1, 2019 from 
Table 4. We did include these codes in Addendum M to the proposed rule 
(which was available via the internet on the CMS website). Therefore, 
new Category I CPT codes that will be effective January 1, 2019 are 
flagged with comment indicator ``NI'' in Addendum M to this CY 2019 
OPPS/ASC final rule with comment period to indicate that we have 
assigned the codes an interim APC assignment for CY 2019. We are 
inviting public comments in this CY 2019 OPPS/ASC final rule with 
comment period on the interim APC assignments and payment rates for the 
new codes in Addendum M that will be finalized in the CY 2020 OPPS/ASC 
final rule with comment period.
    Table 8 below lists the HCPCS codes that will be subject to the 
multiple imaging composite APC policy and their respective families and 
approximate composite APC final geometric mean costs for CY 2019.
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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 payments

[[Page 58854]]

for multiple interrelated items and services into a single payment to 
create incentives for hospitals to furnish services most efficiently 
and to manage their resources with maximum flexibility. Our packaging 
policies support our strategic goal of using larger payment bundles in 
the OPPS to maximize hospitals' incentives to provide care in the most 
efficient manner. For example, where there are a variety of devices, 
drugs, items, and supplies that could be used to furnish a service, 
some of which are more 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 
occurs 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 payments 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), the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66817), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70343), the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79592), and the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59250). 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, categories of items and 
services currently packaged in the OPPS are listed in 42 CFR 419.2(b). 
Our overarching goal is to make payments for all services 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 2019, we 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) and outpatient 
hospital billing patterns 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 the CY 2019 OPPS/ASC proposed rule (83 37067 
through 37071), for CY 2019, we proposed to conditionally package the 
costs of selected newly identified ancillary services into payment with 
a primary service where we believe that the 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 proposed and finalized changes to the packaging 
policies beginning in CY 2019.
b. CY 2019 Packaging Policy for Non-Opioid Pain Management Treatments
    In the CY 2018 OPPS/ASC proposed rule (82 FR 33588), within the 
framework of existing packaging categories, such as drugs that function 
as supplies in a surgical procedure or diagnostic test or procedure, we 
requested stakeholder feedback on common clinical scenarios involving 
currently packaged items and services described by HCPCS codes that 
stakeholders believe should not be packaged under the OPPS. We also 
expressed interest in stakeholder feedback on common clinical scenarios 
involving separately payable HCPCS codes for which payment would be 
most appropriately packaged under the OPPS. Commenters expressed a 
variety of views on packaging under the OPPS. In the CY 2018 OPPS/ASC 
final rule with comment period, we summarized the comments received in 
response to our request (82 FR 59255). The comments ranged from 
requests to unpackage most items and services that are either 
conditionally or unconditionally packaged under the OPPS, including 
drugs and devices, to specific requests for separate payment for a 
specific drug or device. We stated in the CY 2018 OPPS/ASC final rule 
with comment period that CMS would continue to explore and evaluate 
packaging policies under the OPPS and consider these policies in future 
rulemaking.
    In addition to stakeholder feedback regarding OPPS packaging 
policies, the President's Commission on Combating Drug Addiction and 
the Opioid Crisis (the Commission) recently recommended that CMS 
examine payment policies for certain drugs that function as a supply, 
specifically non-opioid pain management treatments. The Commission was 
established in 2017 to study ways to combat and treat drug abuse, 
addiction, and the opioid crisis. The Commission's report \3\ included 
a recommendation for CMS to ``. . . review and modify ratesetting 
policies that discourage the use of non-opioid treatments for pain, 
such as certain bundled payments that make alternative treatment 
options cost prohibitive for hospitals and doctors, particularly those 
options for treating immediate postsurgical pain. . . .'' \4\ With 
respect to the packaging policy, the Commission's report states that 
``. . . the current CMS payment policy for `supplies' related to 
surgical procedures creates unintended incentives to prescribe opioid 
medications to patients for postsurgical pain instead of administering 
non-opioid pain medications. Under current policies, CMS provides one 
all-inclusive bundled payment to hospitals for all `surgical supplies,' 
which includes hospital-administered drug products intended to manage 
patients' postsurgical pain. This policy results in the hospitals 
receiving the same fixed fee from Medicare whether the surgeon

[[Page 58855]]

administers a non-opioid medication or not.'' \5\ HHS also presented an 
Opioid Strategy in April 2017 \6\ that aims in part to support cutting-
edge research and advance the practice of pain management. On October 
26, 2017, the opioid crisis was declared a national public health 
emergency under Federal law \7\ and this determination was renewed on 
April 20, 2018.\8\
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    \3\ President's Commission on Combating Drug Addiction and the 
Opioid Crisis, Report (2017). Available at: https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Final_Report_Draft_11-1-2017.pdf.
    \4\ Ibid, at page 57, Recommendation 19.
    \5\ Ibid.
    \6\ Available at: https://www.hhs.gov/about/leadership/secretary/speeches/2017-speeches/secretary-price-announces-hhs-strategy-for-fighting-opioid-crisis/index.html.
    \7\ Available at: https://www.hhs.gov/about/news/2017/10/26/hhs-acting-secretary-declares-public-health-emergency-address-national-opioid-crisis.html.
    \8\ Available at: https://www.phe.gov/emergency/news/healthactions/phe/Pages/default.aspx.
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    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37068 
through 37071), in response to stakeholder comments on the CY 2018 
OPPS/ASC proposed rule and in light of the recommendations regarding 
payment policies for certain drugs, we recently evaluated the impact of 
our packaging policy for drugs that function as a supply when used in a 
surgical procedure on the utilization of these drugs in both the 
hospital outpatient department and the ASC setting. Currently, as noted 
above, drugs that function as a supply are packaged under the OPPS and 
the ASC payment system, regardless of the costs of the drugs. The costs 
associated with packaged drugs that function as a supply are included 
in the ratesetting methodology for the surgical procedures with which 
they are billed and the payment rate for the associated procedure 
reflects the costs of the packaged drugs and other packaged items and 
services to the extent they are billed with the procedure. In our 
evaluation, we used currently available data to analyze the utilization 
patterns associated with specific drugs that function as a supply over 
a 5-year time period (CYs 2013 through 2017) to determine whether this 
packaging policy has reduced the use of these drugs. If the packaging 
policy discouraged the use of drugs that function as a supply or 
impeded access to these products, we would expect to see a significant 
decline in utilization of these drugs over time, although we note that 
a decline in utilization could also reflect other factors, such as the 
availability of alternative products. We did not observe significant 
declines in the total number of units used in the hospital outpatient 
department for a majority of the drugs included in our analysis.
    In fact, under the OPPS, we observed the opposite effect for 
several drugs that function as a supply, including Exparel (HCPCS code 
C9290). Exparel is a liposome injection of bupivacaine, an amide local 
anesthetic, indicated for single-dose infiltration into the surgical 
site to produce postsurgical analgesia. In 2011, Exparel was approved 
by the FDA for administration into the postsurgical site to provide 
postsurgical analgesia.\9\ Exparel had pass-through payment status from 
CYs 2012 through 2014 and was separately paid under both the OPPS and 
the ASC payment system during this 3-year period. Beginning in CY 2015, 
Exparel was packaged as a surgical supply under both the OPPS and the 
ASC payment system. Exparel is currently the only non-opioid pain 
management drug that is packaged as a drug that functions as a supply 
when used in a surgical procedure under the OPPS and the ASC payment 
system.
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    \9\ Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2011/022496s000lbl.pdf.
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    From CYs 2013 through 2017, there was an overall increase in the 
OPPS Medicare utilization of Exparel of approximately 229 percent (from 
2.3 million units to 7.7 million units) during this 5-year time period. 
The total number of claims reporting Exparel increased by 222 percent 
(from 10,609 claims to 34,183 claims) over this time period. This 
increase in utilization continued, even after the 3-year drug pass-
through payment period ended for this product in 2014, with 18 percent 
overall growth in the total number of units used from CYs 2015 through 
2017 (from 6.5 million units to 7.7 million units). The number of 
claims reporting Exparel increased by 21 percent during this time 
period (from 28,166 claims to 34,183 claims).
    Thus, we have not found evidence to support the notion that the 
OPPS packaging policy has had an unintended consequence of discouraging 
the use of non-opioid treatment for postsurgical pain management in the 
hospital outpatient department. Therefore, based on this data analysis, 
we stated in the CY 2019 OPPS/ASC proposed rule that we did not believe 
that changes were necessary under the OPPS for the packaged drug policy 
for drugs that function as a surgical supply when used in a surgical 
procedure in this setting at this time.
    In terms of Exparel in particular, we have received several 
requests to pay separately for the drug rather than packaging payment 
for it as a surgical supply. In the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66874 and 66875), in response to comments from 
stakeholders requesting separate payment for Exparel, we stated that we 
considered Exparel to be a drug that functions as a surgical supply 
because it is indicated for the alleviation of postoperative pain. We 
also stated that we consider all items related to the surgical outcome 
and provided during the hospital stay in which the surgery is 
performed, including postsurgical pain management drugs, to be part of 
the surgery for purposes of our drug and biological surgical supply 
packaging policy. In the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59345), we reiterated our position with regard to payment 
for Exparel, stating that we believed that payment for this drug is 
appropriately packaged with the primary surgical procedure. In 
addition, we have reviewed recently available literature with respect 
to Exparel, including a briefing document \10\ submitted for the FDA 
Advisory Committee Meeting held February 14-15, 2018, by the 
manufacturer of Exparel that notes that ``. . . Bupivacaine, the active 
pharmaceutical ingredient in Exparel, is a local anesthetic that has 
been used for infiltration/field block and peripheral nerve block for 
decades'' and that ``since its approval, Exparel has been used 
extensively, with an estimated 3.5 million patient exposures in the 
US.'' \11\ On April 6, 2018, the FDA approved Exparel's new indication 
for use as an interscalene brachial plexus nerve block to produce 
postsurgical regional analgesia.\12\ Therefore, we also stated in the 
CY 2019 OPPS/ASC proposed rule that, based on our review of currently 
available OPPS Medicare claims data and public information from the 
manufacturer of the drug, we did not believe that the OPPS packaging 
policy had discouraged the use of Exparel for either of the drug's 
indications. Accordingly, we continue to believe it is appropriate to 
package payment for Exparel as we do with other postsurgical pain 
management drugs when it is furnished in a hospital outpatient 
department. However, we invited public comments on whether separate 
payment would nonetheless further incentivize appropriate use of 
Exparel in the hospital outpatient setting and peer-reviewed evidence 
that such increased utilization would lead to a decrease in

[[Page 58856]]

opioid use and addiction among Medicare beneficiaries.
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    \10\ Food and Drug Administration, Meeting of the Anesthetic and 
Analgesic Drug Products Advisory Committee Briefing Document (2018). 
Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/AnestheticAndAnalgesicDrugProductsAdvisoryCommittee/UCM596314.pdf.
    \11\ Ibid, page 9.
    \12\ Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2018/022496s009lbledt.pdf.
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    Comment: Several commenters, including hospital associations, 
medical specialty societies, and drug manufacturers, requested that CMS 
pay separately for Exparel in the hospital outpatient setting. Some of 
these commenters noted that Exparel is used more frequently in this 
setting and the use of non-opioid pain management treatments should 
also be encouraged in the hospital outpatient department. The 
manufacturer of Exparel, Pacira Pharmaceuticals, stated that since the 
drug became packaged in 2015, utilization of the drug in the hospital 
outpatient department has remained flat while the opioid crisis has 
continued to worsen. The manufacturer suggested that, to address the 
opioid crisis among Medicare beneficiaries, CMS should promote 
``increased penetration of non-opioid therapies in the HOPD setting--or 
in other words, higher rates of usage of non-opioid treatments for the 
same number of surgical procedures.''
    Response: While these commenters advocated paying separately for 
Exparel in the hospital outpatient setting, we do not believe that 
there is sufficient evidence that non-opioid pain management drugs 
should be paid separately in the hospital outpatient setting at this 
time. The commenters submitted some peer-reviewed studies, discussed in 
further detail below, that showed that the use of Exparel could lead to 
a decrease in opioid use in the treatment of acute post-surgical pain 
among Medicare beneficiaries. However, the commenters did not provide 
evidence that the OPPS packaging policy for Exparel (or other non-
opioid drugs) creates a barrier to use of Exparel in the hospital 
setting. Further, while we received some public comments suggesting 
that, as a result of using Exparel in the OPPS setting, providers may 
prescribe fewer opioids for Medicare beneficiaries, we do not believe 
that the OPPS payment policy presents a barrier to use of Exparel or 
affects the likelihood that providers may prescribe fewer opioids in 
the HOPD setting. Several drugs are packaged under the OPPS and payment 
for such drugs is included in the payment for the associated primary 
procedure. We were not persuaded by the anecdotal information supplied 
by commenters suggesting that some providers avoid use of non-opioid 
alternatives (including Exparel) solely because of the OPPS packaged 
payment policy. Finally, while the rate of growth for Exparel use in 
the HOPD setting has declined over recent years, such trend might be 
expected because absolute utilization tends to be smaller in the 
initial period when a drug first comes available on the U.S. market. 
Additionally, we observed that the total number of providers billing 
for Exparel under the OPPS has increased each year from 2012 to 2017. 
Therefore, we do not believe that the current OPPS payment methodology 
for Exparel and other non-opioid pain management drugs presents a 
barrier to their use.
    In addition, higher use in the hospital outpatient setting not only 
supports the notion that the packaged payment for Exparel is not 
causing an access to care issue, but also that the payment rate for 
primary procedures in the HOPD using Exparel adequately reflects the 
cost of the drug. That is, because Exparel is commonly used and billed 
under the OPPS, the APC rates for the primary procedures reflect such 
utilization. Therefore, the higher utilization in the OPPS setting 
should mitigate the need for separate payment. We remind readers that 
the OPPS is a prospective payment system, not a cost-based system and, 
by design, is based on a system of averages whereby payment for certain 
cases may exceed the costs incurred, while for others, it may not. As 
stated earlier in this section, the OPPS packages payments 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. We will continue to analyze the evidence and monitor 
utilization of non-opioid alternatives in the OPD and ASC settings for 
potential future rulemaking.
    We also stated in the proposed rule that, although we found 
increases in utilization for Exparel when it is paid under the OPPS, we 
did notice different effects on Exparel utilization when examining the 
effects of our packaging policy under the ASC payment system. In 
particular, during the same 5-year period of CYs 2013 through 2017, the 
total number of units of Exparel used in the ASC setting decreased by 
25 percent (from 98,160 total units to 73,595 total units) and the 
total number of claims reporting Exparel decreased by 16 percent (from 
527 claims to 441 claims). In the ASC setting, after the pass-through 
payment period ended for Exparel at the end of CY 2014, the total 
number of units of Exparel used decreased by 70 percent (from 244,757 
units to 73,595 units) between CYs 2015 and 2017. The total number of 
claims reporting Exparel also decreased during this time period by 62 
percent (from 1,190 claims to 441 claims). However, there was an 
increase of 238 percent (from 98,160 total units to 331,348 total 
units) in the total number of units of Exparel used in the ASC setting 
during the time period of CYs 2013 and 2014 when the drug received 
pass-through payments, indicating that the payment rate of ASP+6 
percent for Exparel may have had an impact on its usage in the ASC 
setting. The total number of claims reporting Exparel also increased 
during this time period from 527 total claims to 1,540 total claims, an 
increase of 192 percent.
    While several variables may contribute to this difference in 
utilization and claims reporting between the hospital outpatient 
department and the ASC setting, one potential explanation is that, in 
comparison to hospital outpatient departments, ASCs tend to provide 
specialized care and a more limited range of services. Also, ASCs are 
paid, in aggregate, approximately 55 percent of the OPPS rate. 
Therefore, fluctuations in payment rates for specific services may 
impact these providers more acutely than hospital outpatient 
departments, and therefore, ASCs may be less likely to choose to 
furnish non-opioid postsurgical pain management treatments, which are 
typically more expensive than opioids, as a result. Another possible 
contributing factor is that ASCs do not typically report packaged items 
and services and, accordingly, our analysis may be undercounting the 
number of Exparel units utilized in the ASC setting.
    In light of the results of our evaluation of packaging policies 
under the OPPS and the ASC payment system, which showed decreased 
utilization for certain drugs that function as a supply in the ASC 
setting in comparison to the hospital outpatient department setting, as 
well as the Commission's recommendation to examine payment policies for 
non-opioid pain management drugs that function as a supply, we stated 
in the proposed rule that we believe a change in how we pay for non-
opioid pain management drugs that function as surgical supplies may be 
warranted. In particular, we stated that we believe it may be 
appropriate to pay separately for evidence-based non-opioid pain 
management drugs that function as a supply in a surgical procedure in 
the ASC setting to address the decreased utilization of these drugs and 
to encourage use of these types of drugs rather than prescription 
opioids. Therefore, we proposed in section XII.D.3. of the CY 2019 
OPPS/ASC

[[Page 58857]]

proposed rule to unpackage and pay separately for the cost of non-
opioid pain management drugs that function as surgical supplies when 
they are furnished in the ASC setting for CY 2019 (83 FR 37065).
    We have stated previously (82 FR 59250) that our packaging policies 
are designed to support our strategic goal of using larger payment 
bundles in the OPPS to maximize hospitals' incentives to provide care 
in the most efficient manner. The packaging policies established under 
the OPPS also typically apply when services are provided in the ASC 
setting, and the policies have the same strategic goals in both 
settings. While the CY 2019 proposal is a departure from our current 
ASC packaging policy for drugs (specifically, non-opioid pain 
management drugs) that function as a supply when used in a surgical 
procedure, we stated in the proposed rule that we believe that the 
proposed change will incentivize the use of non-opioid pain management 
drugs and is responsive to the Commission's recommendation to examine 
payment policies for non-opioid pain management drugs that function as 
a supply, with the overall goal of combating the current opioid 
addiction crisis. As previously noted, a discussion of the CY 2019 
proposal for payment of non-opioid pain management drugs in the ASC 
setting was presented in further detail in section XII.D.3. of the 
proposed rule, and we refer readers to section XII.D.3. of this CY 2019 
OPPS/ASC final rule with comment period for further discussion of the 
final policy for CY 2019. We also stated in the CY 2019 OPPS/ASC 
proposed rule that we were interested in peer-reviewed evidence that 
demonstrates that use of non-opioid alternatives, such as Exparel, 
furnished in the outpatient setting actually does lead to a decrease in 
prescription opioid use and addiction and invited public comments 
containing evidence that demonstrate whether and how such non-opioid 
alternatives affect prescription opioid use during or after an 
outpatient visit or procedure.
    Comment: Several commenters, including individual stakeholders, 
hospital and physician groups, national medical associations, drug 
rehabilitation specialists, device manufacturers, and groups 
representing the pharmaceutical industry, supported the proposal to 
unpackage and pay separately for the cost of non-opioid pain management 
drugs that function as surgical supplies, such as Exparel, in the ASC 
setting for CY 2019. These commenters believed that packaged payment 
for non-opioid alternatives presents a barrier to care and that 
separate payment for non-opioid pain management drugs would be an 
appropriate response to the opioid drug abuse epidemic.
    Other commenters, including MedPAC, did not support this proposal 
and stated that the policy was counter to the OPPS packaging policies 
created to encourage efficiencies and could set a precedent for 
unpackaging services. One commenter stated that Exparel is more costly, 
but not more effective than bupivacaine, a less costly non-opioid 
alternative. Other commenters expressed concerns that the proposal may 
have the unintended consequence of limiting access to opioid 
prescriptions for beneficiaries for whom an opioid prescription would 
be appropriate. The commenters noted that some non-opioid pain 
management treatments may pose other risks for patients and patient 
safety.
    Response: This comment and other comments specific to packaging 
under the ASC payment system are addressed in section XII.D.3. of this 
final rule with comment period.
    In addition, as noted in section XII.D.3. of the proposed rule (83 
FR 37065 through 37068), we sought comments on whether the proposed 
policy would decrease the dose, duration, and/or number of opioid 
prescriptions beneficiaries receive during and following an outpatient 
visit or procedure (especially for beneficiaries at high-risk for 
opioid addiction) as well as whether there are other non-opioid pain 
management alternatives that would have similar effects and may warrant 
separate payment. For example, we stated we were interested in 
identifying whether single post-surgical analgesic injections, such as 
Exparel, or other non-opioid drugs or devices that are used during an 
outpatient visit or procedure are associated with decreased opioid 
prescriptions and/or reduced cases of associated opioid addiction 
following such an outpatient visit or procedure. We also requested 
comments that provide evidence (such as published peer-reviewed 
literature) we could use to determine whether these products help to 
deter or avoid prescription opioid use and addiction as well as 
evidence that the current packaged payment for such non-opioid 
alternatives presents a barrier to access to care and, therefore, 
warrants separate payment under either or both the OPPS and the ASC 
payment system. We stated that any evidence demonstrating the reduction 
or avoidance of prescription opioids would be the criterion we use to 
determine whether separate payment is warranted for CY 2019. We also 
stated that if evidence changes over time, we would consider whether a 
reexamination of any policy adopted in the final rule would be 
necessary.
    Comment: With regard to whether the proposed policy would decrease 
the dose, duration, and/or number of opioid prescriptions beneficiaries 
receive during and following an outpatient visit or procedure and 
supportive evidence of these reductions, one commenter, the 
manufacturer of Exparel, submitted studies that claimed that the use of 
Exparel by Medicare patients undergoing total knee replacement 
procedures reduced prescription opioid consumption by 90 percent 
compared to the control group measured at 48 hours post-surgery.\13\ 
The manufacturer submitted additional studies claiming statistically 
significant reductions in opioid use with the use of Exparel for 
various surgeries, including laparotomy, shoulder replacement, and 
breast reconstruction.
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    \13\ Michael A. Mont et al., Local Infiltration Analgesia With 
Liposomal Bupivacaine Improves Pain Scores and Reduces Opioid Use 
After Total Knee Arthroplasty: Results of a Randomized Controlled 
Trial. J. of Arthroplasty (2018).
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    Several commenters identified other non-opioid pain management 
drugs that they believe decrease the dose, duration, and/or number of 
opioid prescriptions beneficiaries receive during and following an 
outpatient visit or procedure (especially for beneficiaries at high-
risk for opioid addiction) and may warrant separate payment for CY 
2019. Commenters from the makers of other packaged non-opioid pain 
management drugs, including a non-opioid intrathecal infusion drug 
indicated for the management of severe chronic pain, submitted 
supporting studies which claimed that the drug reduced opioid use in 
patients with chronic pain.
    Several commenters, from hospitals, hospital associations, and 
clinical specialty organizations, requested separate payment for IV 
acetaminophen, IV ibuprofen, and epidural steroid injections. In 
addition, one commenter, the manufacturer of a non-opioid analgesic 
containing bupivacaine hcl not currently approved by FDA, requested 
clarification regarding whether the proposal would also apply to this 
drug once it receives FDA approval. Several commenters requested 
separate payment for a drug that treats postoperative pain after 
cataract surgery, currently has drug pass-through payment status, and 
therefore is not packaged under the OPPS or the ASC payment system. The 
commenters requested that CMS explicitly state that this drug will also 
be paid for separately in the ASC setting after pass-through

[[Page 58858]]

payment status ends for the drug in 2020. Lastly, one commenter, the 
makers of a diagnostic drug that is not a non-opioid, requested 
separate payment.
    Response: We appreciate these comments. After reviewing the studies 
provided by the commenters, we continue to believe the separate payment 
is appropriate for Exparel in the ASC setting. At this time, we have 
not found compelling evidence for other non-opioid pain management 
drugs described above to warrant separate payment under the ASC payment 
system for CY 2019. Also, with regard to the requests for CMS to 
confirm that the proposed policy would also apply in the future to 
certain non-opioid pain management drugs, we reiterate that the 
proposed policy is for CY 2019 and is applicable to non-opioid pain 
management drugs that are currently packaged under the policy for drugs 
that function as a surgical supply when used in the ASC setting, which 
currently is only Exparel. To the extent that other non-opioid pain 
management drugs become available on the U.S. market in 2019, this 
policy would also apply to those drugs.
    As noted above, we stated in the proposed rule that we were 
interested in comments regarding other non-opioid treatments besides 
Exparel that might be affected by our OPPS and ASC packaging policies, 
including alternative, non-opioid pain management treatments, such as 
devices or therapy services that are not currently separable payable. 
We stated that we were specifically interested in comments regarding 
whether CMS should consider separate payment for items and services for 
which payment is currently packaged under the OPPS and the ASC payment 
system that are effective non-opioid alternatives as well as evidence 
that demonstrates such items and services lead to a decrease in 
prescription opioid use and/or addiction during or after an outpatient 
visit or procedure in order to determine whether separate payment may 
be warranted. As previously stated, we intended to examine the evidence 
submitted to determine whether to adopt a final policy in this final 
rule with comment period that incentivizes use of non-opioid 
alternative items and services that have evidence to demonstrate an 
associated decrease in prescription opioid use and/or addiction 
following an outpatient visit or procedure. We stated that some 
examples of evidence that may be relevant could include an indication 
on the product's FDA label or studies published in peer-reviewed 
literature that such product aids in the management of acute or chronic 
pain and is an evidence-based non-opioid alternative for acute and/or 
chronic pain management. We indicated in the proposed rule that we also 
were interested in evidence relating to products that have shown 
clinical improvement over other alternatives, such as a device that has 
been shown to provide a substantial clinical benefit over the standard 
of care for pain management. We stated that this could include, for 
example, spinal cord stimulators used to treat chronic pain, such as 
the devices described by HCPCS codes C1822 (Generator, neurostimulator 
(implantable), high frequency, with rechargeable battery and charging 
system), C1820 (Generator, neurostimulator (implantable), with 
rechargeable battery and charging system), and C1767 (Generator, 
neurostimulator (implantable), nonrechargeable) which are primarily 
assigned to APCs 5463 and 5464 (Levels 3 and 4 Neurostimulator and 
Related Procedures) with proposed CY 2019 payment rates of $18,718 and 
$27,662, respectively, that have received pass-through payment status 
as well as other similar devices.
    Currently, all devices are packaged under the OPPS and the ASC 
payment system unless they have pass-through payment status. However, 
we stated in the proposed rule that, in light of the Commission's 
recommendation to review and modify ratesetting policies that 
discourage the use of non-opioid treatments for pain, we were 
interested in comments from stakeholders regarding whether, similar to 
the goals of the proposed payment policy for non-opioid pain management 
drugs that function as a supply when used in a surgical procedure, a 
policy of providing separate payment (rather than packaged payment) for 
these products, indefinitely or for a specified period of time, would 
also incentivize the use of alternative non-opioid pain management 
treatments and improve access to non-opioid alternatives, particularly 
for innovative and low-volume items and services.
    We also stated that we were interested in comments regarding 
whether we should provide separate payment for non-opioid pain 
management treatments or products using a mechanism such as an 
equitable payment adjustment under our authority at section 
1833(t)(2)(E) of the Act, which states that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments. For example, we stated in 
the proposed rule that we were considering whether an equitable payment 
adjustment in the form of an add-on payment for APCs that use a non-
opioid pain management drug, device, or service would be appropriate. 
We indicated that, to the extent that commenters provided evidence to 
support this approach, we would consider adopting a final policy in 
this final rule with comment period, which could include regulatory 
changes that would allow for an exception to the packaging of certain 
nonpass-through devices that represent non-opioid alternatives for 
acute or chronic pain that have evidence to demonstrate that their use 
leads to a decrease in opioid prescriptions and/or opioid abuse or 
misuse during or after an outpatient visit or procedure to effectuate 
such change.
    Comment: Several commenters, manufacturers of spinal cord 
stimulators (SCS), stated that separate payment was also warranted for 
these devices because they provide an alternative treatment option to 
opioids for patients with chronic, leg, or back pain. One of the 
manufacturers of a high-frequency SCS device provided supporting 
studies which claimed that patients treated with their device reported 
a statistically significant average decrease in opioid use compared to 
the control group.\14\ This commenter also submitted data that showed a 
decline in the mean daily dosage of opioid medication taken and that 
fewer patients were relying on opioids at all to manage their pain when 
they used the manufacturer's device.\15\ Another commenter, a SCS 
manufacturer, stated that there are few peer-reviewed studies that 
evaluate opioid elimination and/or reduction following SCS and that 
there is a need for more population-based research with opioid 
reduction or elimination as a study endpoint. However, this commenter 
believed that current studies suggest that opioid use may be reduced 
following SCS therapy.
---------------------------------------------------------------------------

    \14\ Kapural L, Yu C, Doust MW, Gliner BE, Vallejo R, Sitzman 
BT, Amirdelfan K, Morgan DM, Brown LL, Yearwood TL, Bundschu R, 
Burton AW, Yang T, Benyamin R, Burgher AH. Novel 10-kHz high-
frequency therapy (HF10 therapy) is superior to traditional low-
frequency spinal cord stimulation for the treatment of chronic back 
and leg pain: The SENZA-RCT randomized controlled trial, 
Anesthesiology. 2015 Oct;123(4):851-60.
    \15\ Al-Kaisy A, Van Buyten JP, Smet I, Palmisani S, Pang D, 
Smith T. Sustained effectiveness of 10 kHz high-frequency spinal 
cord stimulation for patients with chronic, low back pain: 24-month 
results of a prospective multicenter study. Pain Med. 2014 Mar; 
15(3):347-54.
---------------------------------------------------------------------------

    Commenters representing various stakeholders requested separate 
payments for various non-opioid pain management treatments, such as

[[Page 58859]]

continuous nerve blocks (including a disposable elastomeric pump that 
delivers non-opioid local anesthetic to a surgical site or nerve), 
cooled thermal radiofrequency ablation for nonsurgical, chronic nerve 
pain, and physical therapy services. These commenters, including 
national hospital associations, recommended that while ``certainly not 
a solution to the opioid epidemic, unpackaging appropriate non-opioid 
therapies, like Exparel, is a low-cost tactic that could change long-
standing practice patterns without major negative consequences.'' This 
same commenter suggested that Medicare consider separate payment for 
Polar ice devices for postoperative pain relief after knee procedures. 
The commenter also noted that therapeutic massage, topically applied 
THC oil, acupuncture, and dry needling procedures are very effective 
therapies for relief of both postoperative pain and long-term and 
chronic pain.
    Commenters suggested various mechanisms through which separate 
payment or a higher-paying APC assignment for the primary service could 
be made. Commenters offered reports, studies, and anecdotal evidence of 
varying degrees to support why the items or services about which they 
were writing offered an alternative to or reduction of the need for 
opioid prescriptions.
    Response: We appreciate the detailed responses to our solicitation 
for comments on this topic. We plan to take these comments and 
suggestions into consideration for future rulemaking. We agree that 
providing incentives to avoid and/or reduce opioid prescriptions may be 
one of several strategies for addressing the opioid epidemic. To the 
extent that the items and services mentioned by the commenters are 
effective alternatives to opioid prescriptions, we encourage providers 
to use them when medically necessary. We note that some of the items 
and services mentioned by commenters are not covered by Medicare, and 
we do not intend to establish payment for noncovered items and 
services. We look forward to working with stakeholders as we further 
consider suggested refinements to the OPPS and the ASC payment system 
that will encourage use of medically necessary items and services that 
have demonstrated efficacy in decreasing opioid prescriptions and/or 
opioid abuse or misuse during or after an outpatient visit or 
procedure.
    Comment: One commenter suggested that CMS provide separate payment 
for HCPCS code A4306 (Disposable drug delivery system, flow rate of 
less than 50 ml per hour) in the hospital outpatient department setting 
and the ASC setting following a post-surgery procedure. This commenter 
explained that if a patient needs additional pain relief 3 to 5 days 
post-surgery, a facility cannot receive payment for providing a 
replacement disposable drug delivery system (HCPCS code A4306) unless 
the entire continuous nerve block procedure is performed. This 
commenter believed that CMS should allow for HCPCS code A4306 to be 
dispensed to the patient as long as the patient is in pain, the pump is 
empty, and the delivery catheters are still in place. The commenter 
believed that the drug delivery system should incentivize the continued 
use of non-opioid alternatives when needed. In addition, several 
commenters stated that CMS should use an equitable payment adjustment 
under our authority at section 1833(t)(2)(E) of the Act to establish 
add-on payments for packaged devices used as non-opioid alternatives.
    Response: We appreciate the commenter's suggestion. We acknowledge 
that use of these items may help in the reduction of opioid use 
postoperatively. However, we note that packaged payment of such an item 
does not prevent the use of these items. We remind readers that payment 
for packaged items is included in the payment for the primary service. 
We share the commenter's concern about the need to reduce opioid use 
and will take the commenter's suggestion into consideration for future 
rulemaking.
    After reviewing the non-opioid pain management alternatives 
suggested by the commenters as well as the studies and other data 
provided to support the request for separate payment, we have not 
determined that separate payment is warranted at this time for any of 
the non-opioid pain management alternatives discussed above.
    We also invited public comments on whether a reorganization of the 
APC structure for procedures involving non-opioid products or 
establishing more granular APC groupings for specific procedure and 
device combinations to ensure that the payment rate for such services 
is aligned with the resources associated with procedures involving 
specific devices would better achieve our goal of incentivizing 
increased use of non-opioid alternatives, with the aim of reducing 
opioid use and subsequent addiction. For example, we stated we would 
consider finalizing a policy to establish new APCs for procedures 
involving non-opioid pain management packaged items or services if such 
APCs would better recognize the resources involved in furnishing such 
items and services and decrease or eliminate the need for prescription 
opioids. In addition, given the general desire to encourage provider 
efficiency through creating larger bundles of care and packaging items 
and services that are integral, ancillary, supportive, dependent, or 
adjunctive to a primary service, we also invited comments on how such 
alternative payment structures would continue to balance the goals of 
incentivizing provider efficiencies with encouraging the use of non-
opioid alternatives to pain management.
    Furthermore, because patients may receive opioid prescriptions 
following receipt of a non-opioid drug or implantation of a device, we 
stated that we were interested in identifying any cost implications for 
the patient and the Medicare program caused by this potential change in 
policy. We also stated that the implications of incentivizing use of 
non-opioid pain management drugs available for postsurgical acute pain 
relief during or after an outpatient visit or procedure are of 
interest. The goal is to encourage appropriate use of such non-opioid 
alternatives. As previously stated, this comment solicitation is also 
discussed in section XII.D.3. of this final rule with comment period 
relating to the ASC payment system.
    Comment: Regarding APC reorganization, one commenter suggested that 
CMS restructure the two-level Nerve Procedure APCs (5431 and 5432) to 
provide more payment granularity for the procedures included in the 
APCs by creating a third level.
    Response: This comment is addressed in section III.D.17. of this 
final rule with comment period. As stated in that section, we believe 
that the current two-level APCs for the Nerve Procedures provide an 
appropriate distinction between the resource costs at each level and 
provide clinical homogeneity. We will continue to review this APC 
structure to determine if additional granularity is necessary for this 
APC family in future rulemaking. In addition, we believe that more 
analysis of such groupings is necessary before adopting such change.
    In addition, in the proposed rule, we invited the public to submit 
ideas on regulatory, subregulatory, policy, practice, and procedural 
changes to help prevent opioid use disorders and improve access to 
treatment under the Medicare program. We stated that we were interested 
in identifying barriers that may inhibit access to non-opioid 
alternatives for pain treatment and management or access to opioid use 
disorder treatment, including those barriers related to payment 
methodologies or coverage. In addition, consistent with our ``Patients 
Over

[[Page 58860]]

Paperwork'' Initiative, we stated that we were interested in 
suggestions to improve existing requirements in order to more 
effectively address the opioid epidemic.
    Comment: Several commenters addressed payment barriers that may 
inhibit access to non-opioid pain management treatments previously 
discussed throughout this section. With regard to barriers related to 
payment methodologies or coverage, one commenter, a clinical specialty 
society, suggested that CMS support multi-modal pain management and 
enhanced recovery after surgery (ERAS) and encourage patient access to 
certified registered nurse anesthetist (CRNA) pain management. One 
commenter also suggested that CMS reduce cost-sharing and eliminate the 
need for prior authorization for non-opioid pain management strategies.
    Response: We appreciate the various, insightful comments we 
received from stakeholders regarding barriers that may inhibit access 
to non-opioid alternatives for pain treatment and management in order 
to more effectively address the opioid epidemic. Many of these comments 
have been previously addressed throughout this section.
    After consideration of the public comments that we received, we are 
finalizing the proposed policy, without modification, to unpackage and 
pay separately at ASP+6 percent for the cost of non-opioid pain 
management drugs that function as surgical supplies when they are 
furnished in the ASC setting for CY 2019. We will continue to analyze 
the issue of access to non-opioid alternatives in the OPD and the ASC 
settings as we implement section 6082 of the Substance Use-Disorder 
Prevention that Promotes Opioid Recovery and Treatment for Patients and 
Communities Act (Pub. L. 115-271 enacted on October 24, 2018. This 
policy is also discussed in section XII.D.3 of this final rule with 
comment period.
4. Calculation of OPPS Scaled Payment Weights
    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 to 
calculate relative payment weights under the OPPS. In the CY 2018 OPPS/
ASC final rule with comment period (82 FR 59255 through 59256), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2018 that were shown in Addenda A and B to that final 
rule with comment period (which were made available via the internet on 
the CMS website) using the APC costs discussed in sections II.A.1. and 
II.A.2. of that final rule with comment period. For CY 2019, as we did 
for CY 2018, in the CY 2019 OPPS/ASC proposed rule (83 FR 37071), we 
proposed to continue to apply the policy established in CY 2013 and 
calculate relative payment weights for each APC for CY 2019 using 
geometric mean-based APC costs.
    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 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 CY 2016, we deleted APC 0634 and reassigned the outpatient 
clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and 
Related Services) (80 FR 70372). For CY 2019, as we did for CY 2018, we 
proposed to continue to standardize all of the relative payment weights 
to APC 5012. 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 
2019, as we did for CY 2018, we proposed to assign APC 5012 a relative 
payment weight of 1.00 and to divide the geometric mean cost of each 
APC by the geometric mean cost for APC 5012 to derive the unscaled 
relative payment weight for each APC. The choice of the APC on which to 
standardize the relative payment weights does not affect payments made 
under the OPPS because we scale the weights for budget neutrality.
    We did not receive any public comments on our proposal to continue 
to use the geometric mean cost of APC 5012 to standardize relative 
payment weights for CY 2019. Therefore, we are finalizing our proposal 
and assigning APC 5012 the relative payment weight of 1.00, and using 
the relative payment weight for APC 5012 to derive the unscaled 
relative payment weight for each APC for CY 2019.
    We note that, in section X.B. of the OPPS/ASC proposed rule (83 FR 
37137 through 37138) and of this final rule with comment period, we 
discuss our CY 2019 proposal and established final policy to control 
for unnecessary increases in the volume of covered outpatient 
department services by paying for clinic visits furnished at excepted 
off-campus provider-based department (PBD) at an amount of 70 percent 
of the OPPS rate for a clinic visit service in CY 2019, rather than at 
the standard OPPS rate. While the volume associated with these visits 
is included in the impact model, and thus used in calculating the 
weight scalar, the proposal and final policy have only a negligible 
effect on the scalar. Specifically, under the proposed and final 
policy, there is no change to the relativity of the OPPS payment 
weights because the adjustment is made at the payment level rather than 
in the cost modeling. Further, under our proposed and final policy, the 
savings that will result from the change in payments for these clinic 
visits will not be budget neutral. Therefore, the impact of the 
proposed and final policy will generally not be reflected in the budget 
neutrality adjustments, whether the adjustment is to the OPPS relative 
weights or to the OPPS conversion factor. We refer readers to section 
X.B. of this CY 2019 OPPS/ASC final rule with comment period for 
further discussion of this final policy.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2019 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, in the CY 2019 OPPS/ASC proposed rule (83 
FR 37071 through 37072), we proposed to compare the estimated aggregate 
weight using the CY 2018 scaled relative payment weights to the 
estimated aggregate weight using the proposed CY 2019 unscaled relative 
payment weights.
    For CY 2018, we multiplied the CY 2018 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2017 claims to calculate the total relative 
payment weight for

[[Page 58861]]

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 2019, we proposed to apply the same process 
using the estimated CY 2019 unscaled relative payment weights rather 
than scaled relative payment weights. We proposed to calculate the 
weight scalar by dividing the CY 2018 estimated aggregate weight by the 
unscaled CY 2019 estimated aggregate weight.
    For a detailed discussion of the weight scalar calculation, we 
refer readers to the OPPS claims accounting document available on the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Click on the CY 2019 OPPS 
final rule link and open the claims accounting document link at the 
bottom of the page.
    We proposed to compare the estimated unscaled relative payment 
weights in CY 2019 to the estimated total relative payment weights in 
CY 2018 using CY 2017 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 2019 unscaled 
relative payment weights for purposes of budget neutrality. We proposed 
to adjust the estimated CY 2019 unscaled relative payment weights by 
multiplying them by a proposed weight scalar of 1.4553 to ensure that 
the proposed CY 2019 relative payment weights are scaled to be budget 
neutral. The proposed CY 2019 relative payment weights listed in 
Addenda A and B to the proposed rule (which are available via the 
internet on the CMS website) 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.2. of this final rule with 
comment period) is included in the budget neutrality calculations for 
the CY 2019 OPPS.
    We did not receive any public comments on the proposed weight 
scalar calculation. Therefore, we are finalizing our proposal to use 
the calculation process described in the proposed rule, without 
modification, for CY 2019. Using updated final rule claims data, we are 
updating the estimated CY 2019 unscaled relative payment weights by 
multiplying them by a weight scalar of 1.4574 to ensure that the final 
CY 2019 relative payment weights are scaled to be budget neutral.
    The final CY 2019 relative payments weights listed in Addenda A and 
B to this final rule with comment period (which are available via the 
internet on the CMS website) were scaled and incorporate the 
recalibration adjustments discussed in sections II.A.1. and II.A.2. of 
this final rule with comment period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. As stated in the CY 2019 OPPS/
ASC proposed rule, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20381), consistent with current law, based on IHS Global, Inc.'s fourth 
quarter 2017 forecast of the FY 2019 market basket increase, the 
proposed FY 2019 IPPS market basket update was 2.8 percent. However, 
sections 1833(t)(3)(F) and 1833(t)(3)(G)(v) 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 2019.
    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, and then revised this methodology as 
discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the 
CY 2019 OPPS/ASC proposed rule (83 FR 37072), the proposed MFP 
adjustment for FY 2019 was 0.8 percentage point.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37072), 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 2019 market 
basket update and the MFP adjustment, which are components in 
calculating the OPD fee schedule increase factor under sections 
1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in this CY 2019 OPPS/
ASC final rule with comment period.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that, 
for each of years 2010 through 2019, the OPD fee schedule increase 
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the 
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2019, 
section 1833(t)(3)(G)(v) of the Act provides a 0.75 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)(v) of the Act, in the CY 2019 OPPS/
ASC proposed rule, we proposed to apply a 0.75 percentage point 
reduction to the OPD fee schedule increase factor for CY 2019.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we are applying an OPD fee schedule increase factor of 1.35 
percent for the CY 2019 OPPS (which is 2.9 percent, the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.8 percentage point MFP adjustment, and less the 0.75 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

[[Page 58862]]

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 2019 OPPS/ASC proposed rule, we proposed to amend 42 CFR 
419.32(b)(1)(iv)(B) by adding a new paragraph (10) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2019, 
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)(v) 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 0.75 percentage point for CY 2019.
    To set the OPPS conversion factor for the CY 2019 OPPS/ASC proposed 
rule, we proposed to increase the CY 2018 conversion factor of $78.636 
by 1.25 percent (83 FR 37073). In accordance with section 1833(t)(9)(B) 
of the Act, we proposed further to adjust the conversion factor for CY 
2019 to ensure that any revisions made to the wage index and rural 
adjustment were made on a budget neutral basis. We proposed to 
calculate an overall budget neutrality factor of 1.0004 for wage index 
changes by comparing proposed total estimated payments from our 
simulation model using the proposed FY 2019 IPPS wage indexes to those 
payments using the FY 2018 IPPS wage indexes, as adopted on a calendar 
year basis for the OPPS.
    For the CY 2019 OPPS/ASC proposed rule, we proposed to maintain the 
current rural adjustment policy, as discussed in section II.E. of the 
proposed rule and this final rule with comment period. Therefore, the 
proposed budget neutrality factor for the rural adjustment was 1.0000.
    For the CY 2019 OPPS/ASC 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 the proposed rule and this final rule 
with comment period. We proposed to calculate a CY 2019 budget 
neutrality adjustment factor for the cancer hospital payment adjustment 
by comparing estimated total CY 2019 payments under section 1833(t) of 
the Act, including the proposed CY 2019 cancer hospital payment 
adjustment, to estimated CY 2019 total payments using the CY 2018 final 
cancer hospital payment adjustment as required under section 
1833(t)(18)(B) of the Act. The CY 2019 proposed estimated payments 
applying the proposed CY 2019 cancer hospital payment adjustment were 
the same as estimated payments applying the CY 2018 final cancer 
hospital payment adjustment. Therefore, we proposed to apply a budget 
neutrality adjustment factor of 1.0000 to the conversion factor for the 
cancer hospital payment adjustment. In accordance with section 16002(b) 
of the 21st Century Cures Act, we stated in the proposed rule that we 
are applying a budget neutrality factor calculated as if the proposed 
cancer hospital adjustment target payment-to-cost ratio was 0.89, not 
the 0.88 target payment-to-cost ratio we are applying as stated in 
section II.F. of the proposed rule.
    For the CY 2019 OPPS/ASC proposed rule, we estimated that proposed 
pass-through spending for drugs, biologicals, and devices for CY 2019 
would equal approximately $126.7 million, which represented 0.17 
percent of total projected CY 2019 OPPS spending. Therefore, the 
proposed conversion factor would be adjusted by the difference between 
the 0.04 percent estimate of pass-through spending for CY 2018 and the 
0.17 percent estimate of proposed pass-through spending for CY 2019, 
resulting in a proposed decrease for CY 2019 of 0.13 percent. Proposed 
estimated payments for outliers would remain at 1.0 percent of total 
OPPS payments for CY 2019. We estimated for the proposed rule that 
outlier payments would be 1.02 percent of total OPPS payments in CY 
2018; the 1.00 percent for proposed outlier payments in CY 2019 would 
constitute a 0.02 percent increase in payment in CY 2019 relative to CY 
2018.
    For the CY 2019 OPPS/ASC 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 -0.75 percent (that is, 
the proposed OPD fee schedule increase factor of 1.25 percent further 
reduced by 2.0 percentage points). This would result in a proposed 
reduced conversion factor for CY 2019 of $77.955 for hospitals that 
fail to meet the Hospital OQR Program requirements (a difference of -
1.591 in the conversion factor relative to hospitals that met the 
requirements).
    In summary, for CY 2019, we proposed to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (10) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2019 to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(v) of the Act. We proposed to use a reduced 
conversion factor of $77.955 in the calculation of payments for 
hospitals that fail to meet the Hospital OQR Program requirements (a 
difference of -1.591 in the conversion factor relative to hospitals 
that met the requirements).
    For CY 2019, we proposed to use a conversion factor of $79.546 in 
the calculation of the national unadjusted payment rates for those 
items and services for which payment rates are calculated using 
geometric mean costs; that is, the proposed OPD fee schedule increase 
factor of 1.25 percent for CY 2019, the required proposed wage index 
budget neutrality adjustment of approximately 1.0004, the proposed 
cancer hospital payment adjustment of 1.0000, and the proposed 
adjustment of -0.13 percentage point of projected OPPS spending for the 
difference in pass-through spending that resulted in a proposed 
conversion factor for CY 2019 of $79.546.
    We invited public comments on these proposals. However, we did not 
receive any public comments. Therefore, we are finalizing these 
proposals without modification. For CY 2019, we proposed to continue 
previously established policies for implementing the cancer hospital 
payment adjustment described in section 1833(t)(18) of the Act 
(discussed in section II.F. of this final rule with comment period). 
Based on the final rule updated data used in calculating the cancer 
hospital payment adjustment in section II.F. of this final rule with 
comment period, the target payment-to-cost ratio for the cancer 
hospital payment adjustment, which was 0.88 for CY 2018, is 0.88 for CY 
2019. As a result, we are applying a budget neutrality adjustment 
factor of 1.0000 to the conversion factor for the cancer hospital 
payment adjustment.
    As a result of these finalized policies, the OPD fee schedule 
increase factor for the CY 2019 OPPS is 1.35 percent (which reflects 
the 2.9 percent final estimate of the hospital inpatient market basket 
percentage increase, less the final 0.8 percentage point MFP 
adjustment, and less the 0.75 percentage point additional adjustment). 
For CY 2019, we are using a conversion factor of $79.490 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 1.35 
percent for CY 2019, the required wage index budget neutrality 
adjustment of

[[Page 58863]]

approximately 0.9984, and the adjustment of -0.10 percentage point of 
projected OPPS spending for the difference in pass-through spending 
that results in a conversion factor for CY 2019 of $79.490.

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). In the CY 2019 OPPS/ASC proposed rule (83 
FR 37073), we proposed to continue this policy for the CY 2019 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.
    We did not receive any public comments on this proposal. Therefore, 
for the reasons discussed above and in the CY 2019 OPPS/ASC proposed 
rule (83 FR 37073), we are finalizing our proposal, without 
modification, to continue this policy as discussed above for the CY 
2019 OPPS.
    As discussed in the claims accounting narrative included with the 
supporting documentation for this final rule with comment period (which 
is available via the internet on the CMS website), for estimating APC 
costs, we standardize 60 percent of estimated claims costs for 
geographic area wage variation using the same FY 2019 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 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 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 at Sec.  419.43(c)(2) and (c)(3) of our regulations. For 
the CY 2019 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, the rural floor, and 
rural floor budget neutrality) is less than 1.00 (as discussed below 
and in the CY 2019 OPPS/ASC proposed rule (83 FR 37074 through 37076), 
we proposed not to extend the imputed floor under the OPPS for CY 2019 
and subsequent years, consistent with our proposal in the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20362 and 20363) not to extend the 
imputed floor under the IPPS for FY 2019 and subsequent fiscal years). 
Because the HOPD receives a wage index based on the geographic location 
of the specific inpatient hospital with which it is associated, we 
stated that the frontier State wage index adjustment applicable for the 
inpatient hospital also would apply for any associated HOPD. In the CY 
2019 OPPS/ASC proposed rule (83 FR 37074), we referred readers to the 
FY 2011 through FY 2018 IPPS/LTCH PPS final rules for discussions 
regarding this provision, including our methodology for identifying 
which areas meet the definition of ``frontier States'' as provided for 
in section 1886(d)(3)(E)(iii)(II) of the Act: For FY 2011, 75 FR 50160 
through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 
77 FR 53369 through 53370; for FY 2014, 78 FR 50590 through 50591; for 
FY 2015, 79 FR 49971; for FY 2016, 80 FR 49498; for FY 2017, 81 FR 
56922; and for FY 2018, 82 FR 38142.
    We did not receive any public comments on this proposal. Therefore, 
for the reasons discussed above and in the CY 2019 OPPS/ASC proposed 
rule (83 FR 37074), we are finalizing our proposal to implement the 
frontier State floor under the OPPS in the same manner as we have since 
CY 2011.
    In addition to the changes required by the Affordable Care Act, we 
note that the FY 2019 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 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 
2019 IPPS/LTCH PPS proposed rule (83 FR 20353 through 20377) and final 
rule (83 FR 41362 through 41390) for a detailed discussion of all 
proposed and final changes to the FY 2019 IPPS wage indexes. We note 
that, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20362 through 
20363), we proposed not to apply the imputed floor to the IPPS wage 
index computations for FY 2019 and subsequent fiscal years. Consistent 
with this, we proposed in the CY 2019 OPPS/ASC proposed rule (83 FR 
37074) not to extend the imputed floor policy under the OPPS beyond 
December 31, 2018 (the date the imputed floor policy is set to expire 
under the OPPS). In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41376 
through 41380), we finalized our proposal to not extend the imputed 
floor policy under the IPPS. We refer readers to the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41376 through 41380) for a detailed discussion of 
our rationale for discontinuing the imputed floor under the IPPS.
    Summarized below are the comments we received regarding our 
proposal to discontinue the imputed floor under the OPPS, along with 
our response.
    Comment: Several commenters agreed with the proposal not to extend 
the imputed floor policy under the OPPS beyond December 31, 2018.
    Response: We appreciate the commenters' support.

[[Page 58864]]

    After consideration of the public comments we received, for the 
reasons discussed above and in the CY 2019 OPPS/ASC proposed rule (83 
FR 37074), consistent with the FY 2019 IPPS/LTCH PPS final rule, we are 
finalizing our proposal not to extend the imputed floor policy under 
the OPPS beyond December 31, 2018.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963) and in each subsequent IPPS/LTCH PPS final rule, 
including the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 
41363), 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: 
https://obamawhitehouse.archives.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 
through 49985), for purposes of the IPPS, we adopted the use of the OMB 
statistical area delineations contained in OMB Bulletin No. 13-01, 
effective October 1, 2014. For purposes of the OPPS, in the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66826 through 66828), we 
adopted the use of the OMB statistical area delineations contained in 
OMB Bulletin No. 13-01, effective January 1, 2015, beginning with the 
CY 2015 OPPS wage indexes. In the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56913), we adopted revisions to statistical areas contained in OMB 
Bulletin No. 15-01, issued on July 15, 2015, which provided updates to 
and superseded OMB Bulletin No. 13-01 that was issued on February 28, 
2013. For purposes of the OPPS, in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79598), we adopted the revisions to the OMB 
statistical area delineations contained in OMB Bulletin No. 15-01, 
effective January 1, 2017, beginning with the CY 2017 OPPS wage 
indexes. We believe that it is important for the OPPS to use the latest 
labor market area delineations available as soon as is reasonably 
possible in order to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions.
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provide detailed information on the update to the statistical areas 
since July 15, 2015, and are based on the application of the 2010 
Standards for Delineating Metropolitan and Micropolitan Statistical 
Areas to Census Bureau population estimates for July 1, 2014 and July 
1, 2015. In OMB Bulletin No. 17-01, OMB announced that one Micropolitan 
Statistical Area now qualifies as a Metropolitan Statistical Area. The 
new urban CBSA is as follows:
     Twin Falls, Idaho (CBSA 46300). This CBSA is comprised of 
the principal city of Twin Falls, Idaho in Jerome County, Idaho and 
Twin Falls County, Idaho.
    The OMB Bulletin No. 17-01 is available on the OMB website at 
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20354), we noted that we did not have sufficient time to include this 
change in the computation of the proposed FY 2019 IPPS wage index, 
ratesetting, and Tables 2 and 3 associated with the FY 2019 IPPS/LTCH 
PPS proposed rule. We stated that this new CBSA may affect the IPPS 
budget neutrality factors and wage indexes, depending on whether the 
area is eligible for the rural floor and the impact of the overall 
payments of the hospital located in this new CBSA. As we did in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20354), in the CY 2019 OPPS/ASC 
proposed rule (83 FR 37075), we provided an estimate of this new area's 
wage index based on the average hourly wages for new CBSA 46300 and the 
national average hourly wages from the wage data for the proposed FY 
2019 IPPS wage index (described in section III.B. of the preamble of 
the FY 2019 IPPS/LTCH PPS proposed rule). Currently, provider 130002 is 
the only hospital located in Twin Falls County, Idaho, and there are no 
hospitals located in Jerome County, Idaho. Thus, the proposed wage 
index for CBSA 46300 was calculated using the average hourly wage data 
for one provider (provider 130002).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37075), we provided 
the proposed FY 2019 IPPS unadjusted and occupational mix adjusted 
national average hourly wages and the estimated CBSA average hourly 
wages. Taking the estimated average hourly wage of new CBSA 46300 and 
dividing by the proposed national average hourly wage resulted in the 
estimated wage indexes shown in the table in the proposed rule (83 FR 
37075), which is also provided below.
[GRAPHIC] [TIFF OMITTED] TR21NO18.016

    As we stated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41363), 
for the FY 2019 IPPS wage indexes, we used the OMB delineations that 
were adopted beginning with FY 2015 to calculate the area wage indexes, 
with updates as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01, 
and incorporated the revision from OMB Bulletin No. 17-01 in the final 
FY 2019 IPPS wage index, ratesetting, and tables. Similarly, in the CY 
2019 OPPS/ASC proposed rule (82 FR 37075), for the proposed CY 2019 
OPPS wage indexes, we proposed to use the OMB

[[Page 58865]]

delineations that were adopted beginning with CY 2015 to calculate the 
area wage indexes, with updates as reflected in OMB Bulletin Nos. 13-
01, 15-01, and 17-01, and stated that we would incorporate the revision 
from OMB Bulletin No. 17-01 in the final CY 2019 OPPS wage index, 
ratesetting, and tables.
    We did not receive any public comments on our proposals. 
Accordingly, for the reasons discussed above and in the CY 2019 OPPS/
ASC proposed rule (83 FR 37074 through 37075), we are finalizing the 
proposal, without modification, to use the OMB delineations that were 
adopted beginning with CY 2015 to calculate the area wage indexes, with 
updates as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01, and 
have incorporated the revision from OMB Bulletin No. 17-01 in the final 
CY 2019 OPPS wage index, ratesetting, and tables.
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. The FY 
2018 IPPS/LTCH PPS final rule (82 FR 38130) discussed the two different 
lists of codes to identify counties: Social Security Administration 
(SSA) codes and Federal Information Processing Standard (FIPS) codes. 
Historically, CMS listed and used SSA and FIPS county codes to identify 
and crosswalk counties to CBSA codes for purposes of the IPPS and OPPS 
wage indexes. However, the SSA county codes are no longer being 
maintained and updated, although the FIPS codes continue to be 
maintained by the U.S. Census Bureau. The Census Bureau's most current 
statistical area information is derived from ongoing census data 
received since 2010; the most recent data are from 2015. In the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38130), for purposes of crosswalking 
counties to CBSAs for the IPPS wage index, we finalized our proposal to 
discontinue the use of the SSA county codes and begin using only the 
FIPS county codes. Similarly, for the purposes of crosswalking counties 
to CBSAs for the OPPS wage index, in the CY 2018 OPPS/ASC final rule 
with comment period (82 FR 59260), we finalized our proposal to 
discontinue the use of SSA county codes and begin using only the FIPS 
county codes for the purposes of crosswalking counties to CBSAs for the 
OPPS wage index.
    The Census Bureau maintains a complete list of changes to counties 
or county equivalent entities on the website at: https://www.census.gov/geo/reference/county-changes.html. In our transition to 
using only FIPS codes for counties for the IPPS wage index, in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38130), we updated the FIPS codes 
used for crosswalking counties to CBSAs for the IPPS wage index 
effective October 1, 2017, to incorporate changes to the counties or 
county equivalent entities included in the Census Bureau's most recent 
list. We included these updates to calculate the area IPPS wage indexes 
in a manner that is generally consistent with the CBSA-based 
methodologies finalized in the FY 2005 IPPS final rule and the FY 2015 
IPPS/LTCH PPS final rule. In the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59261), we finalized our proposal to implement 
these FIPS code updates for the OPPS wage index effective January 1, 
2018, beginning with the CY 2018 OPPS wage indexes.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37075), we proposed to 
use the FY 2019 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 2019. Therefore, we stated in the proposed 
rule that any adjustments for the FY 2019 IPPS post-reclassified wage 
index would be reflected in the final CY 2019 OPPS wage index. (We 
refer readers to the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20353 
through 20377) and final rule (83 FR 41362 through 41390), and the 
proposed and final FY 2019 hospital wage index files posted on the CMS 
website.) We stated in the CY 2019 OPPS/ASC proposed rule (83 FR 37075) 
that 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.
    Summarized below are the comments we received regarding this 
proposal, along with our response.
    Comment: Several commenters opposed applying a budget neutrality 
adjustment for the rural floor under the OPPS on a national basis. The 
commenters believed applying budget neutrality on a national basis 
disadvantages hospitals in most States while benefiting hospitals in a 
few States that have taken advantage of the system where a rural 
hospital has a wage index higher than most or all urban hospitals in a 
State. The commenters stated that rural floor budget neutrality 
currently requires all wage indexes for hospitals throughout the Nation 
to be reduced. However, the commenters added, hospitals in those States 
that have higher wage indexes because of the rural floor are not 
substantially affected by the wage index reductions. One of the 
commenters supported calculating rural floor budget neutrality under 
the OPPS for each individual State.
    Response: We appreciate these comments. As we stated in the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59259), we acknowledge 
that the application of the wage index and applicable wage index 
adjustments to OPPS payment rates may create distributional payment 
variations, especially within a budget neutral system. However, we 
continue to believe it is reasonable and appropriate to continue the 
current policy of applying budget neutrality for the rural floor under 
the OPPS on a national basis, consistent with the IPPS. We believe that 
hospital inpatient and outpatient departments are subject to the same 
labor cost environment, and therefore, the wage index and any 
applicable wage index adjustments (including the rural floor and rural 
floor budget neutrality) should be applied in the same manner under the 
IPPS and OPPS. Furthermore, we believe that applying the rural floor 
and rural floor budget neutrality in the same manner under the IPPS and 
OPPS is reasonable and logical, given the inseparable, subordinate 
status of the HOPD within the hospital overall. In addition, we believe 
the application of different wage indexes and wage index adjustments 
under the IPPS and OPPS would add a level of administrative complexity 
that is overly burdensome and unnecessary. Therefore, we are continuing 
the current policy of applying budget neutrality for the rural floor 
under the OPPS on a national basis, consistent with the IPPS.
    After consideration of the public comments we received, for the 
reasons discussed above and in the CY 2019 OPPS/ASC proposed rule (83 
FR 37075), we are finalizing our proposal, without modification, to use 
the FY 2019 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 2019. Therefore, any adjustments for the FY 
2019 IPPS post-reclassified wage index are reflected in the final CY 
2019 OPPS wage index. As stated earlier, we continue to believe that 
using the final fiscal year IPPS post-reclassified wage index, 
inclusive of any adjustments, as the wage index for the OPPS to 
determine the wage adjustments for both the OPPS payment rate and the 
copayment standardized amount is reasonable and logical, given the

[[Page 58866]]

inseparable, subordinate status of the HOPD within the hospital 
overall.
    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. In the CY 2019 OPPS/ASC proposed 
rule (83 FR 37075), we proposed to continue this policy for CY 2019, 
and included a brief summary of the major proposed FY 2019 IPPS wage 
index policies and adjustments that we proposed to apply to these 
hospitals under the OPPS for CY 2019, which we have summarized below. 
We invited public comments on these proposals. We refer readers to the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41390) for a 
detailed discussion of the changes to the FY 2019 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 are 
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 applies if the hospital were paid under the 
IPPS. For CY 2019, 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).
    We did not receive any public comments on these proposals. 
Therefore, for the reasons discussed above and in the CY 2019 OPPS/ASC 
proposed rule (83 FR 37075 through 37076), we are finalizing these 
proposals without modification.
    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 maintained the wage 
index of the CBSA in which they were physically located for FY 2014 for 
3 calendar years (until December 31, 2017). Because this 3-year 
transition ended at the end of CY 2017, it was not applied beginning in 
CY 2018.
    In addition, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20362 through 20363), we proposed not to extend the imputed floor 
policy under the IPPS for FY 2019 and subsequent fiscal years, and in 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41376 through 41380), we 
finalized this proposal. Similarly, in the CY 2019 OPPS/ASC proposed 
rule, we proposed not to extend the imputed floor policy under the OPPS 
beyond December 31, 2018 (the date the policy is set to expire). The 
comments we received on this proposal, along with our response, are 
summarized above. As discussed earlier, consistent with the FY 2019 
IPPS/LTCH PPS final rule, in this CY 2019 OPPS/ASC final rule with 
comment period, we are finalizing our proposal not to extend the 
imputed floor policy under the OPPS beyond December 31, 2018.
    For CMHCs, for CY 2019, 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, for CMHCs previously located in urban CBSAs that were 
designated as rural under the revised OMB labor market area 
delineations in OMB Bulletin No. 13-01, 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). Because this 3-year transition ended at the end of CY 2017, it 
was not applied beginning in CY 2018. We proposed that the wage index 
that would apply to CMHCs for CY 2019 would include the rural floor 
adjustment, but would not include the imputed floor adjustment because, 
as discussed above, we proposed to not extend the imputed floor policy 
beyond December 31, 2018. Also, we proposed that the wage index that 
would apply to CMHCs would not include the out-migration adjustment 
because that adjustment only applies to hospitals.
    We did not receive any public comments on these proposals. 
Therefore, for the reasons discussed above and in the CY 2019 OPPS/ASC 
proposed rule (83 FR 37076), we are finalizing these proposals without 
modification.
    Table 2 associated with the FY 2019 IPPS/LTCH PPS final rule 
(available via the internet on the CMS website 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 2019. We are 
including the out-migration adjustment information from Table 2 
associated with the FY 2019 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 2019 OPPS. Addendum L is available via the internet on the 
CMS website. We refer readers to the CMS website 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 2019 IPPS wage index tables and Addendum L.

D. Statewide Average Default Cost-to-Charge Ratios (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 earlier 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-

[[Page 58867]]

inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), 
Chapter 4, Section 10.11).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37076), we proposed to 
update the default ratios for CY 2019 using the most recent cost report 
data. We discussed our policy for using default CCRs, including setting 
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599) in the context of 
our adoption of an outlier reconciliation policy for cost reports 
beginning on or after January 1, 2009. For detail on our process for 
calculating the statewide average CCRs, we referred readers to the CY 
2019 OPPS proposed rule Claims Accounting Narrative that is posted on 
the CMS website. Table 5 published in the proposed rule (83 FR 37076 
through 37078) listed the proposed statewide average default CCRs for 
OPPS services furnished on or after January 1, 2019, based on proposed 
rule data.
    We did not receive any public comments on our proposal to use 
statewide average default CCRs if a MAC cannot calculate a CCR for a 
hospital and to use these CCRs to adjust charges to costs on claims 
data for setting the final CY 2019 OPPS relative payment weights. 
Therefore, we are finalizing our proposal without modification.
    Table 9 below lists the statewide average default CCRs for OPPS 
services furnished on or after January 1, 2019, based on final rule 
data.

BILLING CODE 4120-01-P

[[Page 58868]]

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[[Page 58869]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.018


[[Page 58870]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.019

BILLING CODE 4120-01-C

E. Adjustment for Rural Sole Community Hospitals (SCHs) and Essential 
Access Community Hospitals (EACHs) Under Section 1833(t)(13)(B) of the 
Act for CY 2019

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural sole community hospitals 
(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

[[Page 58871]]

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 essential access 
community hospitals (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 2018. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37078), for the CY 
2019 OPPS, we proposed to continue the current 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. We invited public comment on our proposal.
    In addition, we proposed to maintain this 7.1 percent payment 
adjustment for the years after CY 2019 until we identify data in the 
future that would support a change to this payment adjustment. We 
invited public comments on our proposal.
    Comment: Several commenters supported the proposal to continue the 
7.1 percent payment adjustment for rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS, excluding separately 
payable drugs and biologicals, devices paid under the pass-through 
payment policy, and items paid at charges reduced to costs. A few 
commenters explicitly supported the part of the proposal that would 
allow the adjustment to continue after CY 2019 until CMS identifies 
data that would cause CMS to reassess the adjustment. These commenters 
approved of having more certainty about whether the rural SCH 
adjustment would be in effect on an ongoing basis, because it would 
help hospitals covered by the adjustment improve their budget 
forecasting based on expected revenues.
    Response: We appreciate the commenters' support.
    Comment: One commenter suggested that CMS further examine whether 
the payment adjustment for rural SCHs, including EACHs, should continue 
to be 7.1 percent. The commenter noted the rate of the payment 
adjustment was based on data analyses that are more than 10 years old.
    Response: While the data for the initial analyses are more than 10 
years old, we periodically review the calculations used to generate the 
rural SCHs and EACHs adjustment. For any given year, the level of 
increased costs experienced by rural SCH and EACH may be higher or 
lower than the current 7.1 percent adjustment. Since being established 
in CY 2008, we believe the payment increase of 7.1 percent has 
continued to reasonably reflect the increased costs that rural SCHs and 
EACHs face when providing outpatient hospital services based on 
regression analyses performed on the claims data.
    Comment: Some commenters requested that CMS expand the payment 
adjustment for rural SCHs and EACHs to additional types of hospitals. 
One commenter requested that the payment adjustment apply to include 
urban SCHs because, according to the commenter, urban SCHs care for 
patient populations similar to rural SCHs and EACHs, face similar 
financial challenges to rural SCHs and EACHs, and act as safety net 
providers for rural areas despite their designation as urban providers. 
Another commenter requested that the payment adjustment also apply to 
Medicare-dependent hospitals (MDHs) because, according to the 
commenter, these hospitals face similar financial challenges to rural 
SCHs and EACHs, and MDHs play a similar safety net role to rural SCHs 
and EACHs, especially for Medicare. One commenter requested that 
payment rates for OPPS services for all rural hospitals be increased to 
reduce financial vulnerability for rural hospitals related to the high 
share of Medicare and Medicaid beneficiaries they serve.
    Response: We thank the commenters for their comments. However, the 
analysis we did to compare costs of urban providers to those of rural 
providers did not support an add-on adjustment for providers other than 
rural SCHs and EACHs, and our follow-up analyses performed in recent 
years have not shown differences in costs for all services for any of 
the additional types of providers mentioned by the commenters. 
Accordingly, we do not believe we currently have a basis to expand the 
payment adjustment to any other providers other than rural SCHs and 
EACHs.
    After consideration of the public comments we received, we are 
implementing our proposals, without modification, to continue the 
current 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. In addition, we will 
maintain this 7.1 percent payment adjustment for the years after CY 
2019 until our data support a change to this payment adjustment.

F. Payment Adjustment for Certain Cancer Hospitals for CY 2019

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,''

[[Page 58872]]

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 higher than those of other 
hospitals, 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 recently 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. For CY 2016, the target PCR was 
0.92, as discussed in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70362 through 70363). For CY 2017, the target PCR was 
0.91, as discussed in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79603 through 79604). For CY 2018, the target PCR was 
0.88, as discussed in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59265 through 59266).
2. Policy for CY 2019
    Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255) 
amended section 1833(t)(18) of the Act by adding subparagraph (C), 
which requires that in applying 42 CFR 419.43(i) (that is, the payment 
adjustment for certain cancer hospitals) for services furnished on or 
after January 1, 2018, the target PCR adjustment be reduced by 1.0 
percentage point less than what would otherwise apply. Section 16002(b) 
also provides that, in addition to the percentage reduction, the 
Secretary may consider making an additional percentage point reduction 
to the target PCR that takes into account payment rates for applicable 
items and services described under section 1833(t)(21)(C) of the Act 
for hospitals that are not cancer hospitals described under section 
1886(d)(1)(B)(v) of the Act. Further, in making any budget neutrality 
adjustment under section 1833(t) of the Act, the Secretary shall not 
take into account the reduced expenditures that result from application 
of section 1833(t)(18)(C) of the Act.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37079), for CY 2019, 
we proposed 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 proposed rule, reduced 
by 1.0 percentage point, to comply with section 16002(b) of the 21st 
Century Cures Act. We invited public comment on our proposal.
    We did not propose an additional reduction beyond the 1.0 
percentage point reduction required by section 16002(b) for CY 2019. To 
calculate the proposed CY 2019 target PCR, we used the same extract of 
cost report data from HCRIS, as discussed in section II.A. of the 
proposed rule and this final rule with comment period, used to estimate 
costs for the CY 2019 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 2017 claims 
data that we used to model the impact of the proposed CY 2019 APC 
relative payment weights (3,676 hospitals) because it is appropriate to 
use the same set of hospitals that are being used to calibrate the 
modeled CY 2019 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2014 to 2017. We then removed the cost report data of the 43 
hospitals located in Puerto Rico from our dataset because we did not 
believe their cost structure reflected 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 3,615 
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 were approximately 89 percent of reasonable cost 
(weighted average PCR of 0.89). Therefore, after applying the

[[Page 58873]]

1.0 percentage point reduction, as required by section 16002(b) of the 
21st Century Cures Act, we proposed that the payment amount associated 
with the cancer hospital payment adjustment to be determined at cost 
report settlement would be the additional payment needed to result in a 
proposed target PCR equal to 0.88 for each cancer hospital.
    We did not receive any public comments on our proposals. Therefore, 
we are finalizing our proposed cancer hospital payment adjustment 
methodology without modification. For this final rule with comment 
period, we are using the most recent cost report data through June 30, 
2018 to update the adjustment. This update yields a target PCR of 0.89. 
We limited the dataset to the hospitals with CY 2017 claims data that 
we used to model the impact of the CY 2019 APC relative payment weights 
(3,696 hospitals) because it is appropriate to use the same set of 
hospitals that we are using to calibrate the modeled CY 2019 OPPS. The 
cost report data for the hospitals in the dataset were from cost report 
periods with fiscal year ends ranging from 2010 to 2018. We then 
removed the cost report data of the 46 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 22 
hospitals because these hospitals had cost report data that were not 
complete (missing aggregate OPPS payments, missing aggregate cost data, 
or missing both), so that all cost reports in the study would have both 
the payment and cost data necessary to calculate a PCR for each 
hospital, leading to an analytic file of 3,628 hospitals with cost 
report data.
    Using this smaller dataset of cost report data, we estimated a 
target PCR of 0.89. Therefore, after applying the 1.0 percentage point 
reduction as required by section 16002(b) of the 21st Century Cures 
Act, we are finalizing that the payment amount associated with the 
cancer hospital payment adjustment to be determined at cost report 
settlement will be the additional payment needed to result in a PCR 
equal to 0.88 for each cancer hospital. Table 10 below shows the 
estimated percentage increase in OPPS payments to each cancer hospital 
for CY 2019, due to the cancer hospital payment adjustment policy. The 
actual amount of the CY 2019 cancer hospital payment adjustment for 
each cancer hospital will be determined at cost report settlement and 
will depend on each hospital's CY 2019 payments and costs. We note that 
the requirements contained in section 1833(t)(18) of the Act do not 
affect the existing statutory provisions that provide for TOPs for 
cancer hospitals. The TOPs will be assessed, as usual, after all 
payments, including the cancer hospital payment adjustment, have been 
made for a cost reporting period.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR21NO18.020


[[Page 58874]]


BILLING CODE 4120-01-C

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 2018, the outlier 
threshold was met when the hospital's cost of furnishing a service 
exceeded 1.75 times (the multiplier threshold) the APC payment amount 
and exceeded the APC payment amount plus $4,150 (the fixed-dollar 
amount threshold) (82 FR 59267 through 59268). 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 OPPS. Our estimate of total outlier payments as a percent of 
total CY 2017 OPPS payments, using CY 2017 claims available for the CY 
2019 OPPS/ASC proposed rule (83 FR 37080 through 37081), was 
approximately 1.0 percent of the total aggregated OPPS payments. 
Therefore, for CY 2017, we estimated that we paid the outlier target of 
1.0 percent of total aggregated OPPS payments. Using an updated claims 
dataset for this CY 2019 OPPS final rule with comment period, we 
estimate that we paid approximately 1.12 percent of the total 
aggregated OPPS payments in outliers for CY 2017.
    For the CY 2019 OPPS/ASC proposed rule, using CY 2017 claims data 
and CY 2018 payment rates, we estimate that the aggregate outlier 
payments for CY 2018 would be approximately 1.02 percent of the total 
CY 2018 OPPS payments. We provided estimated CY 2019 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 website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Outlier Calculation for CY 2019
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37080 through 37081), 
for CY 2019, 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 less than 0.01 percent of outlier payments (or 0.0001 
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.C. of the CY 2019 OPPS/ASC proposed rule (83 FR 37134 through 
37136), we proposed to continue our longstanding policy that if a 
CMHC's cost for partial hospitalization services, paid under APC 5853 
(Partial Hospitalization for CMHCs), exceeds 3.40 times the payment 
rate for proposed APC 5853, the outlier payment would be calculated as 
50 percent of the amount by which the cost exceeds 3.40 times the 
proposed APC 5853 payment rate.
    For further discussion of CMHC outlier payments, we refer readers 
to section VIII.C. of the proposed rule and this final rule with 
comment period.
    To ensure that the estimated CY 2019 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 $4,600.
    We calculated the proposed fixed-dollar threshold of $4,600 using 
the standard methodology most recently used for CY 2018 (82 FR 59267 
through 59268). For purposes of estimating outlier payments for the 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2018 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 2019 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2017 claims using the 
same inflation factor of 1.085868 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20581). We used an inflation factor of 1.04205 to estimate 
CY 2018 charges from the CY 2017 charges reported on CY 2017 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 20581). 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 is 
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 2019 
IPPS outlier calculation to the CCRs used to simulate the proposed CY 
2019 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2019, we proposed to apply an adjustment factor of 
0.987842 to the CCRs that were in the April 2018 OPSF to trend them 
forward from CY 2018 to CY 2019. The methodology for calculating the 
proposed adjustment is discussed in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20582).
    To model hospital outlier payments for the proposed rule, we 
applied the overall CCRs from the April 2018 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.987842 to 
approximate CY 2019 CCRs) to charges on CY 2017 claims that were 
adjusted (using the proposed charge inflation factor of 1.085868 to 
approximate CY 2019 charges). We simulated aggregated CY 2019 hospital 
outlier payments using these costs for several different fixed-dollar 
thresholds, holding the 1.75 multiplier threshold

[[Page 58875]]

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 2019 OPPS 
payments. We estimated that a proposed fixed-dollar threshold of 
$4,600, combined with the proposed multiplier 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 APC 5853, 
exceeds 3.40 times the payment rate for APC 5853, the outlier payment 
would be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the APC 5853 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, as 
we proposed, we are continuing 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 referred readers to section 
XIII. of this final rule with comment period.
    Comment: One commenter expressed concern that, due to the increase 
in the proposed fixed-dollar threshold to $4,600 relative to the 
previous CY 2018 fixed-dollar outlier threshold of $4,150, the drastic 
reduction in outlier payments would have an adverse effect on access to 
services for Medicare beneficiaries. Therefore, the commenter requested 
that the threshold be transitioned over a 3-year period.
    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 furnishing a particular service. 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.
    We do not believe that it is appropriate to transition towards 
implementation of the CY 2019 OPPS fixed-dollar outlier threshold in 
the manner described by the commenter. The fixed-dollar outlier 
threshold is specifically developed in order to best estimate aggregate 
outlier payments of 1 percent of the OPPS. In addition, transitioning 
in this suggested manner would remove the consideration of updated 
data, which is critical in best estimating the fixed-dollar threshold 
that would result in total OPPS outliers being 1 percent of aggregate 
OPPS payments. Finally, we note that the increase in the fixed-dollar 
outlier threshold does not necessarily result in a decrease in 
aggregate OPPS outlier payments. Rather, it ensures that the aggregate 
pool remains at 1 percent and that outlier payments are directed 
towards the high cost and complex procedures associated with potential 
financial risk.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue our policy 
of estimating outlier payments to be 1.0 percent of the estimated 
aggregate total payments under the OPPS and to use our established 
methodology to set the OPPS outlier fixed-dollar loss threshold for CY 
2019.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for outlier calculations. For CY 2019, 
we are applying the overall CCRs from the October 2018 OPSF file after 
adjustment (using the CCR inflation adjustment factor of 0.9813 to 
approximate CY 2019 CCRs) to charges on CY 2017 claims that were 
adjusted using a charge inflation factor of 1.0434 to approximate CY 
2019 charges. These are the same CCR adjustment and charge inflation 
factors that were used to set the IPPS fixed-dollar thresholds for the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41722). We simulated aggregated 
CY 2019 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 
payment equaled 1.0 percent of aggregated estimated total CY 2019 OPPS 
payments. We estimate that a fixed-dollar threshold of $4,825 combined 
with the multiple threshold of 1.75 times the APC payment rate, will 
allocated the 1.0 percent of aggregated total OPPS payments to outlier 
payments.
    For CMHCs, if a CMHC's cost for partial hospitalization services, 
paid under PAC 5853, exceeds 3.40 times the payment rate the outlier 
payment will be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times APC 5853.

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 2019 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 website) 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 website) was calculated by multiplying the CY 2019 
scaled weight for the APC by the CY 2019 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

[[Page 58876]]

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 2019 OPPS/ASC proposed rule (83 FR 37082), we 
demonstrated the steps 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 website), in a circumstance in which the multiple 
procedure discount does not apply, the procedure is not bilateral, and 
conditionally packaged services (status indicator of ``Q1'' and ``Q2'') 
qualify for separate payment. We noted 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 did not receive any public comments specific to the steps under 
the methodology that we included in the proposed rule to determine the 
APC payments for CY 2019. Therefore, we are finalizing use of the steps 
in the methodology specified below, as we proposed, to demonstrate the 
calculation of the final CY 2019 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 website) 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 2019 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 2019 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 2019 under 
the IPPS, reclassifications through the Metropolitan Geographic 
Classification Review Board (MGCRB), section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations, and hospitals designated 
as urban under section 601(g) of Public Law 98-21. For further 
discussion of the changes to the FY 2019 IPPS wage indexes, as applied 
to the CY 2019 OPPS, we refer readers to section II.C. of this final 
rule with comment period. 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 Public Law 
108-173. Addendum L to this final rule with comment period (which is 
available via the internet on the CMS website) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2019 IPPS, which are listed in Table 2 associated with the FY 2019 
IPPS/LTCH PPS final rule available via the internet on the CMS website 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. (Click on the link on the left side of 
the screen titled ``FY 2019 IPPS Final Rule Home Page'' and select ``FY 
2019 Final Rule Tables.'') 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

[[Page 58877]]

attributable to labor, and the adjusted payment for the specific 
service.

Y is the nonlabor-related portion of the national unadjusted payment 
rate.
Y = .40 * (national unadjusted payment rate).
Adjusted Medicare Payment = Y + Xa.

    Step 6. If a provider is an SCH, as set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an SCH under 
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural 
area, as defined in Sec.  412.64(b), or is treated as being located in 
a rural area under Sec.  412.103, multiply the wage index adjusted 
payment rate by 1.071 to calculate the total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.

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

    We are providing examples below of the calculation of both the 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 APC 5071 (Level 1 
Excision/Biopsy/Incision and Drainage). The CY 2019 full national 
unadjusted payment rate for APC 5071 is approximately $579.34. The 
reduced national unadjusted payment rate for APC 5071 for a hospital 
that fails to meet the Hospital OQR Program requirements is 
approximately $567.75. This reduced rate is calculated by multiplying 
the reporting ratio of 0.980 by the full unadjusted payment rate for 
APC 5071.
    The FY 2019 wage index for a provider located in CBSA 35614 in New 
York is 1.2853. The labor-related portion of the full national 
unadjusted payment is approximately $446.77 (.60 * $579.34 * 1.2853). 
The labor-related portion of the reduced national unadjusted payment is 
approximately $437.84 (.60 * 567.75 * 1.2853). The nonlabor-related 
portion of the full national unadjusted payment is approximately 
$231.74 (.40 * $579.34). The nonlabor-related portion of the reduced 
national unadjusted payment is approximately $227.10 (.40 * $567.75). 
The sum of the labor-related and nonlabor-related portions of the full 
national adjusted payment is approximately $678.51 ($446.77 + $231.74). 
The sum of the portions of the reduced national adjusted payment is 
approximately $664.94 ($437.84 + $227.10).

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 (including items such as drugs and biologicals) 
performed in a year to the amount of the inpatient hospital deductible 
for that year.
    Section 4104 of the Affordable Care Act eliminated the Medicare 
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 2019 OPPS/ASC proposed rule (83 FR 37083), for CY 2019, 
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, 2019 were included in Addenda A and B to the proposed rule 
(which are available via the internet on the CMS website).
    As discussed in section XIII.E. of the proposed rule and this final 
rule with comment period, for CY 2019, 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

[[Page 58878]]

coinsurance percentage of the codes comprising the new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a decrease in the coinsurance 
percentage for the reconfigured APC, the copayment amount would not 
change (unless retaining the copayment amount would result in a 
coinsurance rate less than 20 percent).
     If HCPCS codes are added to an APC and, after 
recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in an increase in the coinsurance 
percentage for the reconfigured APC, the copayment amount would be 
calculated as the product of the payment rate of the reconfigured APC 
and the lowest coinsurance percentage of the codes being added to the 
reconfigured APC.
    We noted in the 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 achieves 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).
    Comment: One commenter supported the beneficiary copayment limit 
that may be collected for certain drugs to the amount of the inpatient 
hospital deductible for that year.
    Response: We appreciate the commenter's support. We note that 
section 1833(t)(8)(C)(i) of the Act requires us to limit the amount of 
beneficiary copayment that may be collected for a procedure (including 
items such as drugs and biologicals) performed in a year to the amount 
of the inpatient hospital deductible for that year.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 5071, $115.87 is approximately 20 percent of the 
full national unadjusted payment rate of $579.34. 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 
website), 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 
will be effective January 1, 2019, are shown in Addenda A and B to this 
final rule with comment period (which are available via the internet on 
the CMS website). 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 CY 2019 OPD fee schedule increase factor 
discussed in section II.B. of this final rule with comment period.
    In addition, as noted earlier, 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 CMS. 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

[[Page 58879]]

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 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. Those items, 
procedures, or services not paid separately under the hospital OPPS are 
assigned to appropriate status indicators. Certain payment status 
indicators provide separate payment, while other payment status 
indicators do not. Section XI. of this final rule with comment period 
discusses the various status indicators used under the OPPS.
    In Table 11 below, we summarize our current process for updating 
codes through our OPPS quarterly update CRs, seeking public comments, 
and finalizing the treatment of these new codes under the OPPS.
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[[Page 58880]]


1. Treatment of New HCPCS Codes That Were Effective April 1, 2018 for 
Which We Solicited Public Comments in the CY 2019 OPPS/ASC Proposed 
Rule
    Through the April 2018 OPPS quarterly update CR (Transmittal 4005, 
Change Request 10515, dated March 20, 2018), we made effective nine new 
Level II HCPCS codes for separate payment under the OPPS. In the CY 
2019 OPPS/ASC proposed rule (83 FR 37085), we solicited public comments 
on the proposed APC and status indicator assignments for these Level II 
HCPCS codes, which were listed in Table 8 of the proposed rule.
    We received some public comments related to HCPCS code C9749 
(Repair of nasal vestibular lateral wall stenosis with implant(s)), 
which we address in section III.D.16. of this final rule with comment 
period. With the exception of HCPCS code C9749, we did not receive any 
public comments on the proposed OPPS APC and status indicator 
assignments for the new Level II HCPCS codes implemented in April 2018. 
Therefore, we are finalizing the proposed APC and status indicator 
assignments for these codes, as indicated in Table 12 below. We note 
that several of the HCPCS C-codes have been replaced with HCPCS J-
codes, effective January 1, 2019. Their replacement codes are listed in 
Table 12. The final 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 website). In addition, the status indicator 
meanings can be found in Addendum D1 to this final rule with comment 
period (which is available via the internet on the CMS website).
[GRAPHIC] [TIFF OMITTED] TR21NO18.022

    In addition, there were several new laboratory CPT Multianalyte 
Assays with Algorithmic Analyses (MAAA) codes (M-codes) and Proprietary 
Laboratory Analyses (PLA) codes (U-codes) that were effective April 1, 
2018, but were too late to include in the April 2018 OPPS Update. 
Because these codes were released on the American Medical Association's 
(AMA) CPT website in February 2018, they were too late for us to 
include in the April 2018 OPPS Update CR and in the April 2018 
Integrated Outpatient Code Editor (IOCE) and, consequently, were 
included in the July 2018 OPPS Update with an effective date of April 
1, 2018. These CPT codes were listed in Table 9 of the CY 2019 OPPS/ASC 
proposed rule (83 FR 37086). In the proposed rule, we solicited public 
comments on the proposed APC and status indicator assignments for these 
CPT codes. The proposed payment rates for these codes, where 
applicable, were included in Addendum B to the proposed rule (which is 
available via the internet on the CMS website).
    Comment: One commenter stated that the test described by CPT code 
0037U (Targeted genomic sequence analysis, solid organ neoplasm, DNA 
analysis of 324 genes, interrogation for sequence variants, gene copy 
number amplifications, gene rearrangements, microsatellite instability 
and tumor mutational burden) specifically, FoundationOne 
CDxTM, is a human DNA tumor mutation profiling test that is 
covered by Medicare and has been designated as an Advanced Diagnostic 
Laboratory Test (ADLT) under the Clinical Laboratory Fee Schedule 
(CLFS). The commenter supported the proposed OPPS status indicator 
assignment of ``A'' (Not paid under OPPS. Paid by MACs under a fee 
schedule or payment system other than OPPS) for CPT code 0037U.
    Response: We thank the commenter for the feedback. CPT code 0037U,

[[Page 58881]]

which is covered by Medicare, met the criteria for classification as a 
new ADLT and received its ADLT status in May 2018. Under the OPPS, 
codes that receive ADLT status under section 1834A(d)(5)(A) of the Act 
are assigned to status indicator ``A''. Therefore, we are finalizing 
the OPPS status indicator ``A'' for CPT code 0037U as proposed.
    After consideration of the public comment we received, we are 
finalizing the proposed status indicator assignments for the new MAAA 
and PLA CPT codes effective April 1, 2018. The final status indicator 
assignments for the CPT codes are listed in Table 13 below. The status 
indicator meanings can be found in Addendum D1 (OPPS Payment Status 
Indicators for CY 2019) to this final rule with comment period (which 
is available via the internet on the CMS website).

[[Page 58882]]

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[[Page 58883]]


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2. Treatment of New HCPCS Codes That Were Effective July 1, 2018 for 
Which We Solicited Public Comments in the CY 2019 OPPS/ASC Proposed 
Rule
    Through the July 2018 OPPS quarterly update CR (Transmittal 4075, 
Change Request 1078, dated June 15, 2018), we made 4 new Category III 
CPT codes and 10 Level II HCPCS codes effective July 1, 2018 (14 codes 
total), and assigned them to appropriate interim OPPS status indicators 
and APCs. As listed in Table 10 of the CY 2019 OPPS/ASC proposed rule 
(83 FR 37086 through 37087), 13 of the 14 HCPCS codes are separately 
payable under the OPPS while 1 HCPCS code is not. Specifically, HCPCS 
code Q9994 is assigned to status indicator ``E1'' to indicate that the 
item is not payable by Medicare. In addition, we note that HCPCS code 
C9469 was deleted June 30, 2018, and replaced with HCPCS code Q9993 
effective July 1, 2018. Because HCPCS code Q9993 describes the same 
drug as HCPCS code C9469, we proposed to continue the drug's pass-
through payment status and to assign HCPCS code Q9993 to the same APC 
and status indicators as its predecessor HCPCS code C9469, as shown in 
Table 10 of the proposed rule.
    In the CY 2019 OPPS/ASC proposed rule, we solicited public comments 
on the proposed APC and status indicator assignments for CY 2019 for 
the CPT and Level II HCPCS codes implemented on July 1, 2018, all of 
which were listed in Table 10 of the proposed rule. The proposed 
payment rates and status indicators for these codes, where applicable, 
were included in Addendum B to the proposed rule (which is available 
via the internet on the CMS website).
    We did not receive any public comments on the proposed APC and 
status indicator assignments for the new Category III CPT codes and 
Level II HCPCS codes implemented in July 2018. Therefore, we are 
finalizing the proposed APC and status indicator assignments for these 
codes, as indicated in Table 14 below. We note that several of the 
HCPCS C and Q-codes have been replaced with HCPCS J-codes effective 
January 1, 2019. Their replacement codes are listed in Table 14 below. 
The final 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 website). In addition, the status indicator 
meanings can be found in Addendum D1 (OPPS Payment Status Indicators 
for CY 2019) to this final rule with comment period (which is available 
via the internet on the CMS website).

[[Page 58884]]

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[[Page 58885]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.026

    In addition, there are several new PLA codes (U-codes) that were 
effective July 1, 2018, but were too late to include in the July 2018 
OPPS Update. Consequently, the codes were included in the October 2018 
OPPS Update with an effective date of July 1, 2018. The CPT codes were 
listed in Table 11 of the CY 2019 OPPS/ASC proposed rule along with the 
proposed APC and status indicator assignments for these CPT codes. In 
the CY 2019 OPPS/ASC proposed rule (83 FR 37087), we solicited public 
comments on the proposed APC and status indicator assignments for the 
CPT codes. The proposed payment rates for these codes, where 
applicable, were included in Addendum B to the proposed rule (which is 
available via the internet on the CMS website).
    We did not receive any public comments on the proposed status 
indicator assignments for the PLA codes effective July 1, 2018. 
Therefore, we are finalizing the proposed status indicator assignments 
for these codes, as indicated in Table 15 below. We note that the 
status indicator meanings can be found in Addendum D1 (OPPS Payment 
Status Indicators for CY 2019) to this final rule with comment period 
(which is available via the internet on the CMS website).

[[Page 58886]]

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[[Page 58887]]


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[[Page 58888]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.029

BILLING CODE 4120-01-C
3. Process for New Level II HCPCS Codes That Are Effective October 1, 
2018 or Will Be Effective on January 1, 2019 for Which We Are 
Soliciting Public Comments in This CY 2019 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, as displayed in Table 11 of this final rule 
with comment period. These codes are released to the public through the 
October and January OPPS quarterly update CRs and via the CMS HCPCS 
website (for Level II HCPCS codes). For CY 2019, 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 interim status indicator and 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 2019 OPPS/ASC proposed rule (83 FR 37088), we proposed to 
continue this process for CY 2019. Specifically, for CY 2019, we 
proposed to include in Addendum B to the CY 2019 OPPS/ASC final rule 
with comment period the following new HCPCS codes:
     New Level II HCPCS codes effective October 1, 2018, that 
would be incorporated in the October 2018 OPPS quarterly update CR; and
     New Level II HCPCS codes effective January 1, 2019, that 
would be incorporated in the January 2019 OPPS quarterly update CR.
    As stated above, the October 1, 2018 and January 1, 2019 codes are 
flagged with comment indicator ``NI'' in Addendum B to this CY 2019 
OPPS/ASC final rule with comment period to indicate that we have 
assigned these codes an interim OPPS payment status for CY 2019. We are 
inviting public comments on the interim status indicator and APC 
assignments for these codes, if applicable, that will be finalized in 
the CY 2020 OPPS/ASC final rule with comment period.
4. Treatment of New and Revised CY 2019 Category I and III CPT Codes 
That Will Be Effective January 1, 2019 for Which We Solicited Public 
Comments in the CY 2019 OPPS/ASC Proposed Rule
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 
through 66844), we finalized a revised process of assigning APC and 
status indicators for new and revised Category I and III CPT codes that 
would be effective January 1. Specifically, for the new/revised CPT 
codes that we receive in a timely manner from the AMA's CPT Editorial 
Panel, we finalized our proposal to include the codes that would be 
effective January 1 in the OPPS/ASC proposed rules, along with proposed 
APC and status indicator assignments for them, and to finalize the APC 
and status indicator assignments in the OPPS/ASC final rules beginning 
with the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We note 
that even if we find that we need to create HCPCS G-codes in place of 
certain CPT codes for the PFS 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 annual 
proposed rule, and to avoid the resort to HCPCS G-codes and the 
resulting delay in utilization of the most current CPT codes. Also, we 
finalized our proposal to make interim APC and status indicator 
assignments for CPT codes that are not available in time for the 
proposed rule and that describe wholly new services (such as new 
technologies or new surgical procedures), solicit public comments, and 
finalize the specific APC and status indicator assignments for those 
codes in the following year's final rule.
    For the CY 2019 OPPS update, we received the CY 2019 CPT codes from 
AMA in time for inclusion in the CY 2019 OPPS/ASC proposed rule. The 
new, revised, and deleted CY 2019 Category I and III CPT codes were 
included in Addendum B to the proposed rule (which is available via the 
internet on the CMS website). We noted in the proposed rule that the 
new and revised codes are assigned to new comment indicator ``NP'' to 
indicate that the code is new for the next calendar year or the code is 
an existing

[[Page 58889]]

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 and 
status indicator assignments.
    Further, 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 5-digit placeholder codes and their 
long descriptors for the new and revised CY 2019 CPT codes in Addendum 
O to the proposed rule (which is available via the internet on the CMS 
website) so that the public could adequately comment on the proposed 
APCs and status indicator assignments. The 5-digit placeholder codes 
were included in Addendum O, specifically under the column labeled ``CY 
2019 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code,'' to the 
proposed rule. We noted that the final CPT code numbers will be 
included in this CY 2019 OPPS/ASC final rule with comment period. We 
also noted that not every code listed in Addendum O is subject to 
public comment. For the new and revised Category I and III CPT codes, 
we requested public comments on only those codes that are assigned to 
comment indicator ``NP''.
    In summary, in the CY 2019 OPPS/ASC proposed rule, we solicited 
public comments on the proposed CY 2019 status indicator and APC 
assignments for the new and revised Category I and III CPT codes that 
will be effective January 1, 2019. The CPT codes were 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 2019 OPPS/ASC 
final rule with comment period. The proposed status indicator and APC 
assignments for these codes were included in Addendum B to the proposed 
rule (which is available via the internet on the CMS website).
    Commenters addressed several of the new CPT codes that were 
assigned to comment indicator ``NP'' in Addendum B to the CY 2019 OPPS/
ASC proposed rule. We have responded to those public comments in 
sections II.A.2.b. (Comprehensive APCs), III.D. (OPPS APC-Specific 
Policies), IV.B. (Device-Intensive Procedures) and XII. (Updates to the 
ASC Payment System) of this CY 2019 OPPS/ASC final rule with comment 
period.
    The final status indicators, APC assignments, and payment rates for 
the new CPT codes that are effective January 1, 2019 can be found in 
Addendum B to this final rule with comment period (which is available 
via the internet on the CMS website). In addition, the status indicator 
meanings can be found in Addendum D1 (OPPS Payment Status Indicators 
for CY 2019) to this final rule with comment period (which is available 
via the internet on the CMS website).

B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in regulations at 42 CFR[thinsp]419.31. We use Level I and Level II 
HCPCS codes to identify and group the services within each APC. The 
APCs are organized such that each group is homogeneous both clinically 
and in terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices that are 
not packaged into the payment for the procedure.
    We have packaged into the payment for each procedure or service 
within an APC group the costs associated with those items and services 
that are typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and, in those cases, are an integral part of the 
primary service they support. Therefore, we do not make separate 
payment for these packaged items or services. In general, packaged 
items and services include, but are not limited to, the items and 
services listed in regulations at 42 CFR 419.2(b). 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 covered 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 2019 OPPS/ASC proposed rule (83 FR 37089), for CY 
2019, 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 APC 5012 (Clinic Visits and 
Related Services). The APC relative payment weights are scaled to 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.
2. Application of the 2 Times Rule
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and revise the APC 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. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights. We note that the HOP 
Panel recommendations for specific services for the CY 2019 OPPS update 
are discussed in the relevant specific sections throughout this CY 2019 
OPPS/ASC final rule with comment period.
    In addition, section 1833(t)(2) of the Act provides that, subject 
to certain exceptions, the items and services within an APC group 
cannot be considered comparable with respect to the use of resources if 
the highest cost for an item or service in the group is more than 2 
times greater than the lowest cost for an item or service within the 
same group (referred to as the ``2 times rule''). The statute 
authorizes the Secretary to make exceptions to the 2 times rule in 
unusual cases, such as low-volume items and services (but the Secretary 
may not make such an exception in the case of a drug or biological that 
has been designated as an orphan drug under section 526 of the Federal 
Food, Drug, and Cosmetic Act). 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

[[Page 58890]]

the 2 times rule, we consider procedure codes that have more than 1,000 
single major claims or procedure codes that both have more 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 or fewer 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 that comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC cost (75 FR 71832). In the CY 2019 OPPS/
ASC proposed rule (83 FR 37089), for CY 2019, we proposed to make 
exceptions to this limit on the variation of costs within each APC 
group in unusual cases, such as for certain low-volume items and 
services.
    For the CY 2019 OPPS update, in the CY 2019 OPPS/ASC proposed rule, 
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 
2019 OPPS/ASC proposed rule. Rather, it is published and made available 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To 
eliminate a violation of the 2 times rule and 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 2019 included in the proposed rule were related 
to changes in costs of services that were observed in the CY 2017 
claims data newly available for CY 2019 ratesetting. Addendum B to the 
CY 2019 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, 2018 OPPS Addendum B Update (available via the internet 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates.html).
3. APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we proposed to make for CY 
2019 in the CY 2019 OPPS/ASC proposed rule, 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 2017 claims data available for the CY 2019 proposed 
rule, we found 16 APCs with violations of the 2 times rule. We applied 
the criteria as described above to identify the APCs for which we 
proposed to make exceptions under the 2 times rule for CY 2019, and 
found that all of the 16 APCs we identified met the criteria for an 
exception to the 2 times rule based on the CY 2017 claims data 
available for the proposed rule. We did not include in that 
determination those APCs where a 2 times rule violation was not a 
relevant concept, such as APC 5401 (Dialysis), which only has two HCPCS 
codes assigned to it that have a similar geometric mean costs and do 
not create a 2 time rule violation. Therefore, we only identified those 
APCs, including those with criteria-based costs, such as device-
dependent CPT/HCPCS codes, with violations of the 2 times rule.
    We note that, for cases in which a recommendation by the HOP Panel 
appears to result in or allow a violation of the 2 times rule, we may 
accept the HOP 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 12 of the proposed rule listed the 16 APCs that we proposed 
to make an exception for under the 2 times rule for CY 2019 based on 
the criteria cited above and claims data submitted between January 1, 
2017, and December 31, 2017, and processed on or before December 31, 
2017. In the proposed rule, we stated that, for the final rule with 
comment period, we intend to use claims data for dates of service 
between January 1, 2017, and December 31, 2017, that were processed on 
or before June 30, 2018, and updated CCRs, if available.
    Based on the updated final rule CY 2017 claims data used for this 
CY 2019 final rule with comment period, we were able to remedy 1 APC 
violation out of the 16 APCs that appeared in Table 12 of the CY 2019 
OPPS/ASC proposed rule. Specifically, APC 5735 (Level 5 Minor 
Procedures) no longer met the criteria for exception to the 2 times 
rule in this final rule with comment period. In addition, based on our 
analysis of the final rule claims data, we found a total of 17 APCs 
with violations of the 2 times rule. Of these 17 total APCs, 15 were 
identified in the proposed rule and 2 are newly identified APCs. 
Specifically, we found the following 15 APCs that were identified for 
the proposed rule that continued to have violations of the 2 times rule 
for this final rule with comment period:
     APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage);
     APC 5113 (Level 3 Musculoskeletal Procedures);
     APC 5521 (Level 1 Imaging without Contrast);
     APC 5522 (Level 2 Imaging without Contrast);
    APC 5523 (Level 3 Imaging without Contrast);
     APC 5571 (Level 1 Imaging with Contrast);
     APC 5612 (Level 2 Therapeutic Radiation Treatment 
Preparation);
     APC 5691 (Level 1 Drug Administration);
     APC 5692 (Level 2 Drug Administration);
     APC 5721 (Level 1 Diagnostic Tests and Related Services);
     APC 5724 (Level 4 Diagnostic Tests and Related Services);
     APC 5731 (Level 1 Minor Procedures);
     APC 5732 (Level 2 Minor Procedures);
     APC 5822 (Level 2 Health and Behavior Services); and
     APC 5823 (Level 3 Health and Behavior Services).
    In addition, we found that the following two additional APCs 
violated the 2 times rule using the final rule with comment period 
claims data:
     APC 5193 (Level 3 Endovascular Procedures); and
     APC 5524 (Level 4 Imaging without Contrast).
    After considering the public comments we received on proposed APC 
assignments and our analysis of the CY 2017 costs from hospital claims 
and cost report data available for this CY 2019 final rule with comment 
period, we are finalizing our proposals, with some modifications. 
Specifically, we are

[[Page 58891]]

finalizing our proposal to except 15 of the 16 proposed APCs from the 2 
times rule for CY 2019 and also excepting 2 additional APCs (APCs 5193 
and 5524). As noted above, we were able to remedy one of the proposed 
rule 2 time rule violations in this final rule with comment period (APC 
5735).
    Table 16 below lists the 17 APCs that we are excepting from the 2 
times rule for CY 2019 based on the criteria described earlier and a 
review of updated claims data for dates of service between January 1, 
2017 and December 31, 2017, that were processed on or before June 30, 
2018, and updated CCRs, if available. We note that, for cases in which 
a recommendation by the HOP Panel appears to result in or allow a 
violation of the 2 times rule, we generally accept the HOP Panel's 
recommendation because those recommendations are based on explicit 
consideration of resource use, clinical homogeneity, site of service, 
and the quality of the claims data used to determine the APC payment 
rates. The geometric mean costs for hospital outpatient services for 
these and all other APCs that were used in the development of this 
final rule with comment period can be found on the CMS website at: 
http://www.cms.gov.
[GRAPHIC] [TIFF OMITTED] TR21NO18.030

C. New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period in which a service can be 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.
    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.
    For CY 2018, there were 52 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 1908 (New 
Technology--Level 52 ($145,001-$160,000)). We note that the cost bands 
for the New Technology APCs, specifically, APCs 1491 through 1599 and 
1901 through 1908, vary with increments ranging from $10 to $14,999. 
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 7 ($501-$600)) is made at 
$550.50.
    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

[[Page 58892]]

believe that our payment rates generally reflect the costs that are 
associated with providing care to Medicare beneficiaries. Furthermore, 
we believe that our payment rates are adequate to ensure access to 
services (80 FR 70374).
    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. Medicare does not, and we believe 
should not, assume responsibility for more than its share of the costs 
of procedures based on projected utilization for Medicare beneficiaries 
and does not set its payment rates based on initial projections of low 
utilization for services that require expensive capital equipment. For 
the OPPS, we rely on hospitals to make informed business decisions 
regarding the acquisition of high-cost capital equipment, taking into 
consideration their knowledge about their entire patient base (Medicare 
beneficiaries included) and an understanding of Medicare's and other 
payers' payment policies. (We refer readers to the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68314) for further discussion 
regarding this payment policy.)
    We note that, in a budget neutral system, payments may not fully 
cover hospitals' costs in a particular circumstance, including those 
for the purchase and maintenance of capital equipment. We rely on 
hospitals to make their decisions regarding the acquisition of high-
cost equipment with the understanding that the Medicare program must be 
careful to establish its initial payment rates, including those made 
through New Technology APCs, for new services that lack hospital claims 
data based on realistic utilization projections for all such services 
delivered in cost-efficient hospital outpatient settings. As the OPPS 
acquires claims data regarding hospital costs associated with new 
procedures, we regularly examine the claims data and any available new 
information regarding the clinical aspects of new procedures to confirm 
that our OPPS payments remain appropriate for procedures as they 
transition into mainstream medical practice (77 FR 68314). For CY 2019, 
we included the proposed payment rates for New Technology APCs 1491 to 
1599 and 1901 through 1908 in Addendum A to the CY 2019 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website). 
The final payment rates for these New Technology APCs are included in 
Addendum A to the CY 2019 OPPS/ASC final rule with comment period 
(which is available via the internet on the CMS website).
2. Establishing Payment Rates for Low-Volume New Technology Procedures
    Procedures that are assigned to New Technology APCs are typically 
new procedures that do not have sufficient claims history to establish 
an accurate payment for the procedures. One of the objectives of 
establishing New Technology APCs is to generate sufficient claims data 
for a new procedure so that it can be assigned to an appropriate 
clinical APC. Some procedures that are assigned to New Technology APCs 
have very low annual volume, which we consider to be fewer than 100 
claims. We consider procedures with fewer than 100 claims annually as 
low-volume procedures because there is a higher probability that the 
payment data for a procedure may not have a normal statistical 
distribution, which could affect the quality of our standard cost 
methodology that is used to assign services to an APC. In addition, 
services with fewer than 100 claims per year are not generally 
considered to be a significant contributor to the APC ratesetting 
calculations and, therefore, are not included in the assessment of the 
2 times rule. For these low-volume procedures, we are concerned that 
the methodology we use to estimate the cost of a procedure under the 
OPPS by calculating the geometric mean for all separately paid claims 
for a HCPCS procedure code from the most recent available year of 
claims data may not generate an accurate estimate of the actual cost of 
the procedure.
    In accordance with section 1833(t)(2)(B) of the Act, services 
classified within each APC must be comparable clinically and with 
respect to the use of resources. As described earlier, assigning a 
procedure to a new technology APC allows us to gather claims data to 
price the procedure and assign it to the APC with services that use 
similar resources and are clinically comparable. However, where 
utilization of services assigned to a New Technology APC is low, it can 
lead to wide variation in payment rates from year to year, resulting in 
even lower utilization and potential barriers to access to new 
technologies, which ultimately limits our ability to assign the service 
to the appropriate clinical APC. To mitigate these issues, we believe 
that it is appropriate to utilize our equitable adjustment authority at 
section 1833(t)(2)(E) of the Act to adjust how we determine the costs 
for low-volume services assigned to New Technology APCs. We have 
utilized our equitable adjustment authority at section 1833(t)(2)(E) of 
the Act, which states that the Secretary shall establish, in a budget 
neutral manner, other adjustments as determined to be necessary to 
ensure equitable payments, to estimate an appropriate payment amount 
for low-volume new technology procedures in the past (82 FR 59281). 
Although we have used this adjustment authority on a case-by-case basis 
in the past, we believe that it is appropriate to adopt an adjustment 
for low-volume services assigned to New Technology APCs in order 
mitigate the wide payment fluctuations that can occur for new 
technology services with fewer than 100 claims and to provide more 
predictable payment for these services.
    For purposes of this adjustment, we believe that it is appropriate 
to use up to 4 years of claims data in calculating the applicable 
payment rate for the prospective year, rather than using solely the 
most recent available year of claims data, when a service assigned to a 
New Technology APC has a low annual volume of claims, which, for 
purposes of this adjustment, we define as fewer than 100 claims 
annually. We consider procedures with fewer than 100 claims annually as 
low-volume procedures because there is a higher probability that the 
payment data for a procedure may not have a normal statistical 
distribution, which could affect the quality of our standard cost 
methodology that is used to assign services to an APC. For these low-
volume procedures, we are concerned that the methodology we use to 
estimate the cost of a procedure under the OPPS by calculating the 
geometric mean for all separately paid claims for a HCPCS procedure 
code from the most recent available year of claims data may not 
generate an accurate estimate of the actual cost of the procedure. 
Using multiple years of claims data will potentially allow for more 
than 100 claims to be used to set the payment rate, which would, in 
turn, create a more statistically reliable payment rate.
    In addition, to better approximate the cost of a low-volume service 
within a New Technology APC, we believe that using the median or 
arithmetic mean rather than the geometric mean (which

[[Page 58893]]

``trims'' the costs of certain claims out) may be more appropriate in 
some circumstances, given the extremely low volume of claims. Low claim 
volumes increase the impact of ``outlier'' claims; that is, claims with 
either a very low or very high payment rate as compared to the average 
claim, which would have a substantial impact on any statistical 
methodology used to estimate the most appropriate payment rate for a 
service. We believe that having the flexibility to utilize an 
alternative statistical methodology to calculate the payment rate in 
the case of low-volume new technology services would help to create a 
more stable payment rate. Therefore, in the CY 2019 OPPS/ASC proposed 
rule (83 FR 37091 through 37092), we proposed that, in each of our 
annual rulemakings, we would seek public comments on which statistical 
methodology should be used for each low-volume New Technology APC. In 
the preamble of each annual rulemaking, we stated that we will present 
the result of each statistical methodology and solicit public comment 
on which methodology should be used to establish the payment rate for a 
low-volume new technology service. In addition, we will use our 
assessment of the resources used to perform a service and guidance from 
the developer or manufacturer of the service, as well as other 
stakeholders, to determine the most appropriate payment rate. Once we 
identify the most appropriate payment rate for a service, we would 
assign the service to the New Technology APC with the cost band that 
includes its payment rate.
    Accordingly, in the CY 2019 OPPS/ASC proposed rule (83 FR 37091 
through 37092), for CY 2019, we proposed to establish a different 
payment methodology for services assigned to New Technology APCs with 
fewer than 100 claims using our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act. Under this proposal, we proposed to 
use up to 4 years of claims data to establish a payment rate for each 
applicable service both for purposes of assigning a service to a New 
Technology APC and for assigning a service to a regular APC at the 
conclusion of payment for the service through a New Technology APC. The 
goal of such a policy is to promote transparency and stability in the 
payment rates for these low-volume new technology procedures and to 
mitigate wide variation from year to year for such services. We also 
proposed to use the geometric mean, the median, or the arithmetic mean 
to calculate the cost of furnishing the applicable service, present the 
result of each statistical methodology in our annual rulemaking, and 
solicit public comment on which methodology should be used to establish 
the payment rate. We stated that the geometric mean may not be 
representative of the actual cost of a service when fewer than 100 
claims are present because the payment amounts for the claims may not 
be distributed normally. We stated that, under this proposal, we would 
have the option to use the median payment amount or the arithmetic mean 
to assign a more representative payment for the service. Once we 
identify the payment rate for a service, we would assign the service to 
the New Technology APC with the cost band that includes its payment 
rate.
    Comment: One commenter requested that CMS expand the proposal to 
cover all low-volume procedures with fewer than 100 claims annually in 
the OPPS rather than only those procedures assigned to New Technology 
APCs. The commenter noted the issues cited for establishing the low-
volume policy, including data not having a normal statistical 
distribution, excessive influence of outliers, and the quality of 
claims data affect all low-volume procedures, and not just those 
procedure assigned to a New Technology APC.
    Response: We disagree with the commenter's request. The fact that a 
procedure has been assigned to a clinical APC means we have some idea 
of the resources used for a low-volume procedure and what the cost of 
the procedure should be. Concerns over the appropriate APC assignment 
for an individual procedure may be addressed on a case-by-case basis 
through our annual rulemaking. We remind commenters that they can 
submit public comments on the appropriate APC assignment for a 
particular code during that process. We believe reviewing each 
procedure assigned to a clinical APC annually to determine if the 
arithmetic mean, geometric mean, or median of the claims data should be 
used to determine the procedure cost is both unnecessary and 
operationally infeasible. The low-volume policy instead is intended 
only for those procedures assigned to New Technology APCs with such 
limited claims data that we are not able to assign them to clinical 
APCs and need as much available data to determine the payment rate for 
a procedure.
    Comment: One commenter asked that CMS use the equitable adjustment 
authority under section 1833(t)(2)(E) of the Act in other instances not 
covered by the proposed low-volume policy where a procedure that has 
recently been introduced to the outpatient setting has inconsistent 
payment data due to small number of claims.
    Response: We retain the ability to use our equitable adjustment 
authority under section 1833(t)(2)(E) of the Act when we determine that 
it is needed.
    Comment: Several commenters supported the proposal to use up to 4 
years of claims data and to have flexibility to use the geometric mean, 
arithmetic mean, or median of claims data to establish a payment rate 
for low-volume procedures assigned to a New Technology APC.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposed policy to establish payment rates for low-
volume procedures with fewer than 100 claims per year that are assigned 
to New Technology APCs, without modification. We may use up to 4 years 
of claims data to establish a payment rate for each applicable service 
both for purposes of assigning a service to a New Technology APC and 
for assigning a service to a regular APC at the conclusion of payment 
for the service through a New Technology APC. We will use the geometric 
mean, the median, or the arithmetic mean to calculate the cost of 
furnishing the applicable service, present the result of each 
statistical methodology in our annual rulemaking, and solicit public 
comment on which methodology should be used to establish the payment 
rate. Once we identify the payment rate for a service, we would assign 
the service to the New Technology APC with the cost band that includes 
its payment rate.
3. Procedures Assigned to New Technology APC Groups for CY 2019
    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.
    In addition, 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), where we 
obtain new information that was not available at the time of our 
initial New Technology APC assignment, 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

[[Page 58894]]

different New Technology APC that more appropriately reflects its cost 
(66 FR 59903).
    Consistent with our current policy, for CY 2019, in the CY 2019 
OPPS/ASC proposed rule (83 FR 37092), 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).
a. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 
1537, 5114, and 5414)
    Currently, there are four CPT/HCPCS codes that describe magnetic 
resonance image-guided, high-intensity focused ultrasound (MRgFUS) 
procedures, three of which we proposed to continue to assign to 
standard APCs, and one that we proposed to reassign to a different New 
Technology APC for CY 2019. These codes include CPT codes 0071T, 0072T, 
and 0398T, and HCPCS code C9734. CPT codes 0071T and 0072T describe 
procedures for the treatment of uterine fibroids, CPT code 0398T 
describes procedures for the treatment of essential tremor, and HCPCS 
code C9734 describes procedures for pain palliation for metastatic bone 
cancer.
    As shown in Table 13 of the CY 2019 OPPS/ASC proposed rule, and as 
listed in Addendum B to the CY 2019 OPPS/ASC proposed rule, we proposed 
to continue to assign the procedures described by CPT codes 0071T and 
0072T to APC 5414 (Level 4 Gynecologic Procedures), with a proposed 
payment rate of approximately $2,410 for CY 2019. We also proposed to 
continue to assign the APC to status indicator ``J1'' (Hospital Part B 
services paid through a comprehensive APC) to indicate that payment for 
all covered Part B services reported on the claim are packaged with the 
payment for the primary ``J1'' service for the claim, except for 
services assigned to OPPS status indicator ``F'', ``G'', ``H'', ``L'', 
and ``U''; ambulance services; diagnostic and screening mammography; 
all preventive services; and certain Part B inpatient services. In 
addition, we proposed to continue to assign the services described by 
HCPCS code C9734 (Focused ultrasound ablation/therapeutic intervention, 
other than uterine leiomyomata, with magnetic resonance (mr) guidance) 
to APC 5115 (Level 5 Musculoskeletal Procedures), with a proposed 
payment rate of approximately $10,936 for CY 2019. We also proposed to 
continue to assign HCPCS code C9734 to status indicator ``J1''.
    For procedures described by CPT code 0398T, we have only identified 
one paid claim for a procedure in CY 2016 and two paid claims in CY 
2017, for a total of three paid claims. We note that the procedures 
described by CPT code 0398T were first assigned to a New Technology APC 
in CY 2016. Accordingly, there are only 2 years of claims data 
available for the OPPS ratesetting purposes. The payment amounts for 
the claims varied widely, with a cost of $29,254 for the sole CY 2016 
claim and a geometric mean cost of $4,647 for the two CY 2017 claims. 
In the proposed rule, we expressed concerned that the reported 
geometric mean cost for CY 2017, which we would normally use to 
determine the proposed payment rate for the procedures described by CPT 
code 0398T, was significantly lower than the reported cost of the claim 
received in CY 2016, as well as the payment rate for the procedures for 
CY 2017 ($9,750.50) and for CY 2018 ($17,500.50). In accordance with 
section 1833(t)(2)(B) of the Act, we must establish that services 
classified within each APC are comparable clinically and with respect 
to the use of resources.
    Therefore, as mentioned in section III.C.2. of the proposed rule, 
we proposed to use our equitable adjustment authority under section 
1833(t)(2)(E) of the Act, which states that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments, to establish a payment 
rate that is more likely to be representative of the cost of the 
procedures described by CPT code 0398T, despite the low geometric mean 
costs for procedures described by CPT code 0398T available in the 
claims data used for the proposed rule. We stated that we continue to 
believe that this situation for the procedures described by CPT code 
0398T is unique, given the very limited number of claims for the 
procedures and the high variability for the cost of the claims which 
makes it challenging to determine a reliable payment rate for the 
procedures.
    Our analysis found that the arithmetic mean of the three claims is 
$12,849.11, the geometric mean of the three claims is $8,579.91 
(compared to $4,646.56 for CY 2017), and the median of the claims is 
$4,676.77. Consistent with what we stated in section III.C.2. of the 
proposed rule, we presented the result of each statistical methodology 
in this preamble, and we sought public comments on which method should 
be used to establish payment for the procedures described by CPT code 
0398T. We believe that the arithmetic mean is the most appropriate 
representative cost of the procedures described by CPT code 0398T, 
which gives consideration to the payment rates established for the 
procedures in CY 2017 and CY 2018, without any trimming. The arithmetic 
mean also gives consideration to the full range in cost for the three 
paid claims, which represent 2 years of claims data for the procedures. 
We proposed to estimate the proposed payment rate for the procedures 
described by CPT code 0398T by calculating the arithmetic mean of the 
three paid claims for the procedures in CY 2016 and CY 2017, and 
assigning the procedures described by CPT code 0398T to the New 
Technology APC that includes the estimated cost. Accordingly, we 
proposed to reassign the procedures described by CPT code 0398T from 
APC 1576 (New Technology--Level 39 ($15,001-$20,000)) to APC 1575 (New 
Technology--Level 38 ($10,001-$15,000)), with a proposed payment rate 
of $12,500.50 for CY 2019. We refer readers to Addendum B to the 
proposed rule for the proposed payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.
    Comment: Several commenters opposed the proposed reassignment of 
CPT code 0398T to APC 1575 (New Technology--Level 38 ($10,001-
$15,000)), which has a payment rate of $12,500.50. These commenters 
asked CMS to maintain the CY 2018 assignment of CPT code 0398T to APC 
1576 (New Technology--Level 39 ($15,001-$20,000)). The commenters 
believed the cost of the services described by CPT code 0398T is more 
than the proposed payment rate of $12,500.50, and reducing payment 
would discourage use of this new technology. One commenter, the 
developer of the procedure, stated that the reduced payment rate would 
be particularly problematic as it would take effect just as MACs are 
issuing local coverage determinations to allow the procedure to be 
covered more widely by Medicare. This commenter also believed the two 
claims from CY 2017 with a geometric mean cost of $4,647 had too low of 
a payment rate and submitted additional payment data to CMS to support 
that position.

[[Page 58895]]

    Response: Since the proposed rule was issued, there have been 
several more claims for services described by CPT code 0398T that were 
paid in CY 2017. Currently, there are 11 paid claims for services 
described by CPT code 0398T for CY 2017, and these 11 claims have an 
estimated cost of between $4,186.51 and $5,153.28. We performed our 
low-volume new technology process for CPT code 0398T for all available 
claims from CY 2017 and included the one claim of $29,254 from CY 2016. 
The results of our analysis found that for claims billed with CPT code 
0398T, the geometric mean cost was $5,360.99, the arithmetic mean cost 
was $6,654.68, and the median cost was $4,581.45.
    We have concerns about using the claims data available for this 
final rule with comment period to set the payment rate for CPT code 
0398T for CY 2019. The payment rate for CPT code 0398T for CY 2018 was 
$17,500.50, and in the CY 2019 proposed rule (83 FR 37093), we proposed 
a payment rate of $12,500.50. However for this final rule with comment 
period, the highest payment rate using the most recent available claims 
data and the newly adopted smoothing methodology for low-volume New 
Technology APCs is $6,750.50, which is the mid-point of New Technology 
APC 1531. New Technology APC 1531 is the cost band for the arithmetic 
mean cost of CPT code 0398T. A payment rate of $6,750.50 would be the 
result of a $10,750 reduction in the payment rate in a period of just 1 
year, or a payment rate reduction of over 60 percent. In addition, this 
payment reduction would be based on a total of 14 claims that have been 
billed for CPT code 0398T since we first received claims for this 
procedure in CY 2016. We believe that it is important to mitigate 
significant payment differences, especially payment differences that 
result in shifts of over $10,000 in a single year, while also basing 
payment rates on available costs information and claims data. We are 
concerned that these large changes in payment could potentially create 
an access to care issue for services described by CPT code 0398T; 
especially, when the procedure is starting to receive local coverage 
determinations from MACs allowing more Medicare beneficiaries to use 
the procedure. While the proposed payment rate of $12,500.50 is also a 
decrease from the current payment rate, we believe that it would be 
appropriate to finalize the proposed rate to mitigate a much sharper 
decline in payment from one year to the next.
    In accordance with section 1833(t)(2)(B) of the Act, we must 
establish that services classified within each APC are comparable 
clinically and with respect to the use of resources. Accordingly, we 
are using our equitable adjustment authority under section 
1833(t)(2)(E) of the Act, which states that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments, to maintain the proposed 
rate for this procedure, despite the lower geometric mean, arithmetic 
mean, and median costs calculated from the claims data used for this 
final rule with comment period. As stated earlier, we believe that this 
situation is unique, given the large reduction in payment this would 
represent for CPT code 0398T and the very limited number of claims 
reported for the procedure. Therefore, for CY 2019, we are reassigning 
CPT code 0398T from APC 1576 to APC 1575 (New Technology--Level 38 
($10,001-$15,000)). This APC assignment will establish a payment rate 
for CPT code 0398T of $12,500.50, which was the proposed payment rate 
for the procedure in the CY 2019 OPPS/ASC proposed rule. As we do each 
year, we acquire claims data regarding hospital costs associated with 
new procedures. We regularly examine the claims data and any available 
new information regarding the clinical aspects of new procedures to 
confirm that our OPPS payments remain appropriate for procedures like 
CPT code 0398T as they transition into mainstream medical practice (77 
FR 68314).
    Comment: One commenter supported the proposed increase in Medicare 
payment for MRI-guided high intensity focused ultrasound procedures 
described by CPT codes 0071T and 0072T.
    Response: We appreciate the commenter's support.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposal for the APC assignment of CPT code 
0398T. Specifically, we are reassigning this code to New Technology APC 
1575 (New Technology--Level 38 ($10,001-$15,000)), with a payment rate 
of $12,500.50, for CY 2019 through use of our equitable adjustment 
authority. In addition, we are finalizing our proposal, without 
modification, to assign HCPCS code C9734 to APC 5114. We also are 
finalizing our proposal to continue to assign CPT codes 0071T and 0072T 
to APC 5414, without modification. Table 17 below lists the final CY 
2018 status indicator and APC assignments for MRgFUS procedures. We 
refer readers to Addendum B of this final rule with comment period for 
the final payment rates for all codes reportable under the OPPS. 
Addendum B is available via the internet on the CMS website.

BILLING CODE 4120-01-P

[[Page 58896]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.031


[[Page 58897]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.032

BILLING CODE 4120-01-C
b. Retinal Prosthesis Implant Procedure
    CPT code 0100T (Placement of a subconjunctival retinal prosthesis 
receiver and pulse generator, and implantation of intra-ocular retinal 
electrode array, with vitrectomy) describes the implantation of a 
retinal prosthesis, specifically, a procedure involving the use of the 
Argus[supreg] II Retinal Prosthesis System. This first retinal 
prosthesis was approved by the Food and Drug Administration (FDA) in 
2013 for adult patients diagnosed with severe to profound retinitis 
pigmentosa. Pass-through payment status was granted for the 
Argus[supreg] II device under HCPCS code C1841 (Retinal prosthesis, 
includes all internal and external components) beginning October 1, 
2013, and this status expired on December 31, 2015. We note that after 
pass-through payment status expires for a medical device, the payment 
for the device is packaged into the payment for the associated surgical 
procedure. Consequently, for CY 2016, the device described by HCPCS 
code C1841 was assigned to OPPS status indicator ``N'' to indicate that 
payment for the device is packaged and included in the payment rate for 
the surgical procedure described by CPT code 0100T. For CY 2016, the 
procedure described by CPT code 0100T was assigned to New Technology 
APC 1599, with a payment rate of $95,000, which was the highest paying 
New Technology APC for that year. This payment includes both the 
surgical procedure (CPT code 0100T) and the use of the Argus[supreg] II 
device (HCPCS code C1841). However, stakeholders (including the device 
manufacturer and hospitals) believed that the CY 2016 payment rate for 
the procedure involving the Argus[supreg] II System was insufficient to 
cover the hospital cost of performing the procedure, which includes the 
cost of the retinal prosthesis at the retail price of approximately 
$145,000.
    For CY 2017, analysis of the CY 2015 OPPS claims data used for the 
CY 2017 final rule with comment period showed 9 single claims (out of 
13 total claims) for the procedure described by CPT code 0100T, with a 
geometric mean cost of approximately $142,003 based on claims submitted 
between January 1, 2015, through December 31, 2015, and processed 
through June 30, 2016. Based on the CY 2015 OPPS claims data available 
for the final rule with comment period and our understanding of the 
Argus[supreg] II procedure, we reassigned the procedure described by 
CPT code 0100T from New Technology APC 1599 to New Technology APC 1906, 
with a final payment rate of $150,000.50 for CY 2017. We noted that 
this payment rate included the cost of both the surgical procedure (CPT 
code 0100T) and the retinal prosthesis device (HCPCS code C1841).
    For CY 2018, the reported cost of the Argus[supreg] II procedure 
based on CY 2016 hospital outpatient claims data used for the CY 2018 
OPPS/ASC final rule with comment period was approximately $94,455, 
which was more than $55,000 less than the payment rate for the 
procedure in CY 2017. We noted that the costs of the Argus[supreg] II 
procedure are extraordinarily high compared to many other procedures 
paid under the OPPS. In addition, the number of claims submitted has 
been very low and has not exceeded 10 claims within a single year. We 
believed that it is important to mitigate significant payment 
differences, especially shifts of several tens of thousands of dollars, 
while also basing payment rates on available cost information and 
claims data. In CY 2016, the payment rate for the Argus[supreg] II 
procedure was $95,000.50. The payment rate increased to $150,000.50 in 
CY 2017. For CY 2018, if we had established the payment rate based on 
updated final rule claims data, the payment rate would have decreased 
to $95,000.50 for CY 2018, a decrease of $55,000 relative to CY 2017. 
We were concerned that these large changes in payment could potentially 
create an access to care issue for the Argus[supreg] II procedure, and 
we wanted to establish a payment rate to mitigate the potential sharp 
decline in payment from CY 2017 to CY 2018.
    In accordance with section 1833(t)(2)(B) of the Act, we must 
establish that services classified within each APC are comparable 
clinically and with respect to the use of resources. Therefore, we used 
our equitable adjustment authority under section 1833(t)(2)(E) of the 
Act, which states that the Secretary shall establish, in a budget 
neutral manner, other adjustments as determined to be necessary to 
ensure equitable payments, to maintain the payment rate for this 
procedure, despite the lower geometric mean costs available in the 
claims data used for the final rule with comment period. For CY 2018, 
we reassigned the Argus[supreg] II procedure to APC 1904 (New 
Technology--Level 50 ($115,001-$130,000)), which established a payment 
rate for the Argus[supreg] II procedure of $122,500.50, which was the 
arithmetic mean of the payment rates for the procedure for CY 2016 and 
CY 2017.
    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37093 
through 37094), for CY 2019, the reported cost of the Argus[supreg] II 
procedure based on CY 2017 hospital outpatient claims data used for the 
CY 2019 OPPS/ASC proposed rule was approximately $152,021, which was 
$29,520 more than the payment rate for the procedure for CY 2018. In 
the proposed rule, we continued to note that the costs of the 
Argus[supreg] II procedure are extraordinarily high compared to many 
other procedures paid under the OPPS. In

[[Page 58898]]

addition, the number of claims submitted has been very low and did not 
exceed 10 claims for CY 2017. We stated that we continue to believe 
that it is important to mitigate significant payment differences, 
especially shifts of several tens of thousands of dollars, while also 
basing payment rates on available cost information and claims data 
because we are concerned that large decreases in the payment rate could 
potentially create an access to care issue for the Argus[supreg] II 
procedure. In addition, we indicated that we wanted to establish a 
payment rate to mitigate the potential sharp increase in payment from 
CY 2018 to CY 2019, and potentially ensure a more stable payment rate 
in future years.
    In accordance with section 1833(t)(2)(B) of the Act, we must 
establish that services classified within each APC are comparable 
clinically and with respect to the use of resources. Therefore, as 
discussed in section III.C.2. of the proposed rule, we proposed to use 
our equitable adjustment authority under section 1833(t)(2)(E) of the 
Act, which states that the Secretary shall establish, in a budget 
neutral manner, other adjustments as determined to be necessary to 
ensure equitable payments, to establish a payment rate that is more 
representative of the likely cost of the service. We stated that we 
believe the likely cost of the Argus[supreg] II procedure is lower than 
the geometric mean cost calculated from the CY 2017 claims data used 
for the proposed rule and closer to the CY 2018 payment rate.
    We analyzed claims data for the Argus[supreg] II procedure using 
the last 3 years of available data from CY 2015 through CY 2017. These 
data included claims from the last year (CY 2015) that the 
Argus[supreg] II received transitional device pass-through payments and 
the first 2 years since device pass-through payment status for the 
Argus[supreg] II expired. We found the geometric mean for the procedure 
to be $129,891 (compared to $152,021 in CY 2017 alone), the arithmetic 
mean to be $134,619, and the median to be $133,679. As indicated in our 
proposal in section III.C.2. of the proposed rule (83 FR 37091 through 
37092), we presented the result of each statistical methodology in the 
preamble of the proposed rule, and requested public comment on which 
methodology should be used to establish a payment rate. We proposed to 
use the arithmetic mean, which generates the highest payment rate of 
the three statistical methodologies, to estimate the cost of the 
Argus[supreg] II procedure as a means to balance the fluctuations in 
the costs of the procedure that have occurred from CY 2015 through CY 
2017, while acknowledging the higher payment rates for the procedure in 
CY 2015 and CY 2017. Therefore, for CY 2019, we proposed to reassign 
the Argus[supreg] II procedure from APC 1904 (New Technology--Level 50 
($115,001-$130,000)) to APC 1906 (New Technology--Level 51 ($130,001-
$145,000)), which resulted in a proposed payment rate for the 
Argus[supreg] II procedure of $137,500.50.
    As we do each year, we acquired claims data regarding hospital 
costs associated with new procedures. We regularly examine the claims 
data and any available new information regarding the clinical aspects 
of new procedures to confirm that our OPPS payments remain appropriate 
for procedures like the Argus[supreg] II procedure as they transition 
into mainstream medical practice (77 FR 68314). We noted that the 
proposed payment rate included both the surgical procedure (CPT code 
0100T) and the use of the Argus[supreg] II device (HCPCS code C1841).
    Comment: Several commenters requested that CMS reassign CPT code 
0100T to APC 1908 (New Technology--Level 52 ($145,001-$160,000)) with a 
payment rate of $152,500.50. The commenters were concerned that the 
proposed assignment of APC 1906 (New Technology--Level 51 ($130,001-
$145,000)) with a payment rate of $137,500.50 will not cover all of the 
costs of the procedure.
    Response: We have updated our payment rate for CPT code 0100T. We 
analyzed claims data for the Argus[supreg] II procedure using the last 
3 years of available data from CY 2015 through CY 2017, which was 
updated with additional claims from CY 2017. These data included claims 
from the last year (CY 2015) that the Argus[supreg] II received 
transitional device pass-through payments and the first 2 years since 
device pass-through payment status for the Argus[supreg] II expired. We 
found the updated geometric mean cost for the procedure to be $145,808 
(compared to $129,891 in the proposed rule), the arithmetic mean cost 
to be $151,367, and the median cost to be $151,266. All three of these 
methods of calculating the cost of the Argus[supreg] II procedure map 
to the cost band associated with APC 1908 (New Technology--Level 52 
($145,001-$160,000)), which has a payment rate of $152,500.50.
    After reviewing the comments we received and updating our data 
analysis, we are reassigning the Argus[supreg] II procedure (CPT code 
0100T) to APC 1908 (New Technology--Level 52 ($145,001-$160,000)) with 
a payment rate of $152,500.50 for CY 2019.
    We discussed in the CY 2019 OPPS/ASC proposed rule that the most 
recent claims data available have shown another payment issue with 
regard to the Argus[supreg] II procedure. We have found that payment 
for the Argus[supreg] II procedure is sometimes bundled into the 
payment for another procedure. We identified two possible instances in 
the CY 2017 claims data in which this may have occurred. The bundling 
of payment for the Argus[supreg] II procedure occurs when the procedure 
is reported with other eye procedures assigned to a comprehensive APC 
(C-APC). A C-APC bundles payment for all services related to the 
primary service into one payment rate. We stated in the proposed rule 
that we were concerned that when payment for new technology services is 
bundled into the payment for comprehensive procedures, there is not 
complete claims information to estimate accurately the cost of these 
services to allow their assignment to clinical APCs. Therefore, we 
proposed to exclude payment for all procedures assigned to New 
Technology APCs from being bundled into the payment for procedures 
assigned to a C-APC. This action would allow for separate payment for 
the Argus[supreg] II procedure even when it is performed with another 
comprehensive service, which would provide more cost information 
regarding the procedure. This proposal was also discussed in section 
II.A.2.c. of the proposed rule.
    Comment: A number of commenters supported the proposal.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to exclude payment for all procedures assigned 
to New Technology APCs from being bundled into the payment for 
procedures assigned to a C-APC for CY 2019.
c. Bronchoscopy With Transbronchial Ablation of Lesion(s) by Microwave 
Energy
    CMS has established HCPCS code C9751 (Bronchoscopy, rigid or 
flexible, transbronchial ablation of lesion(s) by microwave energy, 
including fluoroscopic guidance, when performed, with computed 
tomography acquisition(s) and 3-D rendering, computer-assisted, image-
guided navigation, and endobronchial ultrasound (EBUS) guided 
transtracheal and/or transbronchial sampling (e.g., aspiration[s]/
biopsy[ies]) and all mediastinal and/or hilar lymph node stations or 
structures and therapeutic

[[Page 58899]]

intervention(s)), effective January 1, 2019. This microwave ablation 
procedure utilizes a flexible catheter to access the lung tumor via a 
working channel and may be used as an alternative procedure to a 
percutaneous microwave approach. Based on our review of the New 
Technology APC application for this service and the service's clinical 
similarity to existing services paid under the OPPS, we estimated the 
likely cost of the procedure to be between $8,001 and $8,500. 
Therefore, we are assigning the procedure described by HCPCS code C9751 
to New Technology APC 1571 (New Technology--Level 34 ($8,001-$8,500)), 
with a payment rate of $8,250.50 for CY 2019. Details regarding HCPCS 
code C9751 are shown in Table 18.
[GRAPHIC] [TIFF OMITTED] TR21NO18.033

D. OPPS APC-Specific Policies

1. Benign Prostatic Hyperplasia Treatments (APCs 5373 and 5374)
    For the CY 2019 OPPS update, the CPT Editorial Panel established 
new CPT code 53854 to describe the Rezum Therapy procedure, which is 
also known as steam therapy or water vapor therapy, for the treatment 
of benign prostatic hyperplasia. Prior to January 1, 2019, the Rezum 
Therapy procedure was described by HCPCS code C9748, which was assigned 
to APC 5373 (Level 3 Urology and Related Services) when the code was 
established effective January 1, 2018. HCPCS code C9748 will be deleted 
on December 31, 2018 because it will be replaced with new CPT code 
53854, effective January 1, 2019. We note that Table 19 below lists the 
long descriptors for both HCPCS code C9748 and CPT code 53854.
    As displayed in Table 19 below, and in Addendum B to the CY 2019 
OPPS/ASC proposed rule, we proposed to delete HCPCS code C9748 and 
assign the code to status indicator ``D'' to indicate that the code 
would be deleted for the January 2019 OPPS update. We also proposed to 
assign the new replacement code, CPT code 53854, to APC 5373, with a 
proposed payment rate of approximately $1,731. We note that the 
predecessor HCPCS code for CPT code 53854 (HCPCS code C9748) was also 
assigned to APC 5373. In addition, we note that CPT code 53854 was 
listed as code 538X3 (the 5-digit CMS placeholder code) in Addendum B, 
with the short descriptor, and in Addendum O, with the long descriptor, 
to the CY 2019 OPPS/ASC proposed rule. We also assigned CPT code 53854 
to comment indicator ``NP'' in Addendum B to indicate that the code is 
new for CY 2019 with a proposed APC assignment.
    Comment: Several commenters addressed the proposed APC assignment 
for the Rezum Therapy procedure (CPT code 53854), as well as the APC 
assignments for the following other benign prostatic hyperplasia 
treatment procedures:
     Transurethral microwave therapy (TUMT) procedure, which is 
described by CPT code 53850, and which we proposed to continue to 
assign to APC 5374 (Level 4 Urology and Related Services), with a 
proposed payment rate of approximately $2,756;
     Transurethral needle ablation procedure (TUNA), which is 
described by CPT 53852, and which we proposed to continue to assign to 
APC 5375 (Level 5 Urology and Related Services) with a proposed payment 
rate of approximately $3,776.
    We note that Table 19 lists the long descriptors for the Rezum 
Therapy, TUMT, and TUNA procedures.
    One commenter disagreed with the proposed assignment for the Rezum 
Therapy procedure described by CPT code 53854 to APC 5373, and 
indicated that APC 5373 does not contain other procedures that are 
similar clinically or in resource costs. The commenter stated that the 
Rezum Therapy procedure is comparable to the TUMT procedure, which is 
proposed to be assigned to APC 5374, and the TUNA procedure, which is 
proposed to be assigned to APC 5375. Therefore, the commenter requested 
that CPT code 53854, which describes the Rezum Therapy procedure, be 
assigned to APC 5375 instead of APC 5373. In addition, the commenter 
requested that the TUMT procedure described by CPT code 53850 be 
reassigned from APC 5374 to APC 5375. The commenter further stated that 
all three benign prostatic hyperplasia treatment procedures are 
comparable and suggested that they be assigned to APC 5375 based on 
clinical homogeneity and resource costs. Another commenter also 
believed that the Rezum Therapy procedure described by CPT code 53854 
should be assigned to APC 5375.
    Response: Review of our claims data used for this final rule with 
comment period, which is based on claims submitted between January 1, 
2017 and December 31, 2017, and processed through June 30, 2018, 
reveals that the resource costs for these three benign prostatic 
hyperplasia treatment procedures are significantly different.
    Our analysis shows that the geometric mean cost for CPT code 53850 
(the TUMT procedure) is approximately

[[Page 58900]]

$3,272 (based on 107 single claims out of 107 total claims) compared to 
CPT code 53852 (the TUNA procedure) whose geometric mean cost is 
approximately $2,989 (based on 408 single claims out of 410 total 
claims). In addition, in September 2017, CMS received a New Technology 
APC application requesting a new HCPCS code for the Rezum Therapy 
procedure because, according to the applicant, the only available CPT 
code to report the procedure was CPT code 53899 (Unlisted procedure, 
urinary system). Based on our review of the application, assessment of 
the procedure, and input from our clinical advisors, we established 
HCPCS code C9748, effective January 1, 2018, and assigned the code to 
APC 5373, with a payment rate of approximately $1,696. We announced 
this new HCPCS C-code and APC assignment in the CY 2018 OPPS/ASC final 
rule with comment period (82 FR 59320) and stated that we believed the 
Rezum Therapy procedure shares similar resource costs and clinical 
homogeneity to the other procedures assigned to APC 5373.
    Further, because of the public comments received on the Rezum 
Therapy procedure, we conducted a preliminary claims review for HCPCS 
code C9748, and found that, based on 73 claims that were processed on 
or before July 27, 2018, the geometric mean cost for the procedure is 
approximately $1,711, which is significantly lower than the geometric 
mean cost for either CPT code 53850 (TUMT procedure) at approximately 
$3,272 or CPT code 53852 (TUNA procedure) at approximately $2,989.
    In addition, a presenter at the August 20, 2018 HOP Panel meeting 
requested that the HOP Panel recommend that CMS reassign placeholder 
CPT code 538X3 (CPT code 53854) to APC 5374 or 5375 based on clinical 
similarity to the procedures described by CPT codes 53850 and 53852. 
Based on the information presented at the meeting, the HOP Panel made 
no recommendation to revise the APC assignment for the Rezum Therapy 
procedure. However, based on the public comments received for the 
reassignment for all three benign prostatic hyperplasia treatment 
procedures, we reviewed the procedures assigned to the family of 
Urology APCs for this final rule with comment period and made some 
modifications to more appropriately reflect the resource costs and 
clinical characteristics of the services within each APC grouping. 
Specifically, we revised the APC assignment of the procedures assigned 
to the family of Urology APCs to 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. Based on our review and modification, we revised the APC 
assignment for CPT code 53852 (the TUNA procedure) from APC 5375 (Level 
5 Urology and Related Services) to APC 5374 (Level 4 Urology and 
Related Services) based on its clinical and resource homogeneity to the 
other procedures in the APC 5374. Specifically, our claims data show 
that the geometric mean cost for CPT code 53852 is approximately 
$2,989, which is comparable to the geometric mean cost of approximately 
$2,952 for APC 5374, rather than the geometric mean cost of 
approximately $4,055 for APC 5375. We believe that this modification to 
the proposed assignment of CPT code 53852 to APC 5374 is appropriate.
    In addition, based on our latest claims data used for the final 
rule with comment period, we believe that CPT codes 53850 (the TUMT 
procedure) and 53852 (the TUNA procedure) are appropriately assigned to 
APC 5374. We also believe that, based on our assessment of the Rezum 
Therapy procedure and its cost, as reported in the CMS New Technology 
application, and based on our preliminary claims review for HCPCS code 
C9748 (which is the predecessor code for CPT code 53854), the Rezum 
Therapy procedure continues to be appropriately assigned to APC 5373 
based on its clinical and resource homogeneity to the other procedures 
in the APC.
    Comment: One commenter agreed with the proposed continued APC 
assignment for CPT code 53852 (the TUNA procedure) to APC 5375. The 
commenter also contended that, while the presenter at the August 20, 
2018 HOP Panel meeting recommended an assignment of APC 5374 or APC 
5375 for the procedure, the Rezum Therapy procedure is less costly to 
perform than the TUNA procedure, and also noted that the HOP Panel made 
no recommendation to CMS to change the APC assignment for either 
procedure.
    Response: Based on our comprehensive review of the procedures 
assigned to the Urology APCs, and analysis of the latest claims data, 
we do not agree that that we should continue to assign the procedure 
described by CPT code 58352 (the TUNA procedure) to APC 5375 because 
the geometric mean cost of the procedure of approximately $2,989 is 
significantly less than the geometric mean cost of approximately $4,055 
for APC 5375. We believe that the geometric mean cost of approximately 
$2,989 for the procedure described by CPT code 53852 is more comparable 
to the geometric mean cost of approximately $2,952 for APC 5374. 
Therefore, for this final rule with comment period, we are revising the 
proposed APC assignment for the procedure described by CPT code 58352 
and assigning the procedure to APC 5374 for CY 2019.
    After consideration of the public comments we received, and based 
on the information presented above, as well as our evaluation of the 
latest claims data for the TUMT, TUNA, and Rezum Therapy procedures, we 
are finalizing the proposed APC assignment for the procedures described 
by CPT code 53850 and CPT code 53854, and revising the APC assignment 
for the procedure described by CPT code 53852 to APC 5374 (instead of 
APC 5375). The final APC and status indicator assignments are listed in 
Table 19 below. We refer readers to Addendum B to this final rule with 
comment period for the final payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.

[[Page 58901]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.034

2. Cardiac Contractility Modulation (CCM) Therapy (APC 5231)
    For CY 2019, we proposed to continue to assign the procedure 
described by CPT code 0408T (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 5231 
(Level 1 ICD and Similar Procedures) with a proposed payment rate of 
approximately $22,242.
    Comment: One commenter disagreed with the proposed APC assignment 
of the procedure described by CPT code 0408T to APC 5231 and requested 
that CMS assign the procedure to APC 5232 (Level 2 ICD and Similar 
Procedures), which had a proposed payment rate of approximately 
$30,862. The commenter stated that the proposed payment rate for APC 
5231 does not accurately reflect the cost or clinical characteristics 
of the procedure and technology. The commenter added that while the 
procedure code has had an extremely low volume of OPPS claims, the 
number of claims reporting this procedure code is expected to increase 
in the future after the completion of a large, prospective multicenter 
study to evaluate CCM and its impact on the quality of life and long-
term mortality in patients with moderate to severe heart failure. The 
commenter stated that the cost of the complete CCM system is 
approximately $25,000, which is comparable to the cost of an ICD system 
($20,000) and CRT-D system ($30,000) whose procedure codes are assigned 
to APC 5232. Moreover, the commenter noted that, under the IPPS, the 
procedures describing the insertion of the complete system are assigned 
to one MS-DRG, and suggested that CMS adopt this same methodology under 
the OPPS. Specifically, the commenter recommended that CMS assign the 
procedure describing the insertion of the complete systems for the CCM, 
ICD, and CRT-D systems to APC 5232.
    Response: The commenter suggested that we assign the procedures 
describing the insertion of the complete CCM, ICD, and CRT-D to one APC 
but did not provide the specific CPT codes associated with the ICD and 
CRT-D systems. Based on the information provided, we believe that the 
commenter is requesting that we assign to APC 5232 the following codes:
     Cardiac contractility modulation (CCM): CPT code 0408T 
(which we proposed in APC 5231 (Level 1 ICD and Similar Procedures));
     Implantable cardioverter-defibrillator (ICD): CPT code 
33249 (which we proposed in APC 5232 (Level 2 ICD and Similar 
Procedures)); and
     Cardiac Resynchronization Therapy Defibrillator (CRT-D): 
CPT codes 33249 (which we proposed to assign to APC 5232 (Level 2 ICD 
and Similar Procedures) and 33225 (which we proposed to package payment 
because this is an add-on code), or CPT code 33270 (which we proposed 
to assign to APC 5232 (Level 2 ICD and Similar Procedures)).
    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 procedures describing the insertion of the complete 
CCM systems (described by CPT code 0408T) to APC 5232. We examined the 
latest hospital outpatient claims data for CPT code 0408T for dates of 
service between January 1, 2017, and December 31, 2017, that were 
processed on or before June 30, 2018. Our analysis of the claims data 
show a geometric mean cost of approximately $15,131 for CPT code 0408T, 
based on 2 single claims (out of 2 total claims). We do not believe 
that it is appropriate

[[Page 58902]]

to assign the procedure described by CPT code 0408T to APC 5232 because 
its geometric mean cost is approximately $30,921, which is 
significantly higher than the geometric mean cost of approximately 
$15,131 for CPT code 0408T. Therefore, assigning the procedure 
described by CPT code 0408T to APC 5232 would result in an overpayment 
for the procedure. We believe that APC 5231 is the most appropriate APC 
assignment for the procedure described by CPT code 0408T based on its 
clinical and resource homogeneity to the other procedures assigned to 
this APC.
    We also analyzed the latest hospital outpatient claims data for the 
procedure for the insertion of the complete systems for ICD and CRT-D. 
The insertion of a complete ICD system is described by CPT code 33249, 
and our analysis reveals that the geometric mean cost of approximately 
$33,384 for CPT code 33249 based on 29,451 single claims (out of 29,867 
total claims) is significantly higher than that of CPT code 0408T whose 
geometric mean cost is approximately $15,131. The insertion of a 
complete CRT-D system is described by either CPT code 33249 or 33270. 
Similar to the procedure described by CPT code 33249, our findings 
reveal that the geometric mean cost for the procedure described by CPT 
code 33270 is approximately $35,361 based on 1,011 single claims (out 
of 1,023 total claims), which is significantly greater than that of CPT 
code 0408T. Based on our claims data, we do not believe that we should 
reassign the procedure described by CPT code 0408T (the insertion of 
the complete CCM systems) to APC 5232, which is the APC assignment for 
the insertion of the complete ICD and CRT-D systems. We believe that 
the geometric mean cost of approximately $15,131 for CPT code 0408T is 
comparable to the geometric mean cost of about $22,187 for APC 5231. We 
also believe that the geometric mean cost of approximately $33,384 for 
CPT code 33249, and the geometric mean cost of approximately $35,361 
for CPT code 33270 are comparable to the geometric mean cost of 
approximately $30,921 for APC 5232.
    Therefore, after consideration of the public comment we received, 
we are finalizing our proposal, without modification, to assign CPT 
code 0408T to APC 5231, and to continue to assign CPT code 33249 and 
33270 to APC 5232 for CY 2019. The final CY 2019 payment rate for the 
code can be found in Addendum B to this final rule with comment period 
(which is available via the internet on the CMS website).
    As we do every year, we will reevaluate the APC assignment for CPT 
codes 0408T, 33249, and 33270 for the next rulemaking cycle. We remind 
hospitals that we review, on an annual basis, the APC assignments for 
all items and services paid under the OPPS.
3. Cardiac Resynchronization Therapy (APCs 5221, 5222, 5231, 5731, and 
5741)
    In Addendum B to the CY 2019 OPPS/ASC proposed rule, we proposed to 
assign eight new CY 2019 cardiac resynchronization therapy CPT codes to 
various APCs, which are listed in Table 20 below. The codes were listed 
as 06X5T, 06X6T, 06X7T, 06X8T, 06X9T, 07X2T, 06X0T, and 07X0T (the 5-
digit CMS placeholder codes) in Addendum B with short descriptors and 
in Addendum O with long descriptors to the CY 2019 OPPS/ASC proposed 
rule. 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 2019 with proposed APC assignments and that public comments would be 
accepted on their proposed APC assignments. We note that these codes 
will be effective January 1, 2019.
[GRAPHIC] [TIFF OMITTED] TR21NO18.035

    Comment: One commenter disagreed with CMS' proposed APC assignments 
for certain cardiac resynchronization Category III CPT codes that are 
new for CY 2019 and therefore do not have associated claims data 
available. Specifically, the commenter requested that five of the eight 
new CPT codes be reassigned to the following APCs:
     CPT code 0515T (Insertion of wireless cardiac stimulator 
for left ventricular pacing, including device interrogation and 
programming, and imaging supervision and interpretation

[[Page 58903]]

when performed; complete system (includes electrode and generator 
[transmitter and battery]))--from the proposed assignment to APC 5222 
(Level 2 Pacemaker and Similar Procedures) to APC 5231 (Level 1 ICD and 
Similar Procedures);
     CPT code 0516T (Insertion of wireless cardiac stimulator 
for left ventricular pacing, including device interrogation and 
programming, and imaging supervision and interpretation when performed; 
electrode only)--from the proposed assignment to APC 5221 (Level 1 
Pacemaker and Similar Procedures) to APC 5194 (Level 4 Endovascular 
Procedures);
     CPT code 0517T (Insertion of wireless cardiac stimulator 
for left ventricular pacing, including device interrogation and 
programming, and imaging supervision and interpretation when performed; 
pulse generator component(s) only (battery and/or transmitter))--from 
the proposed assignment to APC 5221 to APC 5222 (Level 2 Pacemaker and 
Similar Procedures);
     CPT code 0520T (Removal and replacement of wireless 
cardiac stimulator for left ventricular pacing; pulse generator 
component(s) (battery and/or transmitter) including placement of a new 
electrode)--from the proposed assignment to APC 5221 to APC 5231; and
     CPT code 0521T (Interrogation device evaluation (in 
person) with analysis, review and report, includes connection, 
recording, and disconnection per patient encounter, wireless cardiac 
stimulator for left ventricular pacing)--from the proposed assignment 
to APC 5731 (Level 1 Minor Procedures) to APC 5741 (Level 1 Electronic 
Analysis of Devices)
    First, the commenter stated that CPT codes 0515T and 0520T describe 
the implantation or removal/replacement of the complete system and, 
consequently, these procedures should be assigned to APC 5231. Second, 
the commenter stated that the resources associated with the procedure 
described by CPT 0516T are similar to those procedures described by CPT 
code 33274 (Transcatheter insertion or replacement of permanent 
leadless pacemaker, right ventricular, including imaging guidance 
(e.g., fluoroscopy, venous ultrasound, ventriculography, femoral 
venography) and device evaluation (e.g., interrogation or programming), 
when performed), which is assigned to APC 5194, and, therefore, this 
new code should also be assigned to the same APC. In addition, the 
commenter indicated that the procedure described by CPT code 0517T 
shares the same clinical and resource homogeneity as the procedure 
described by CPT code 33212 (Insertion of pacemaker pulse generator 
only; with existing single lead), which is assigned to APC 5222, and 
the procedure described by CPT code 33213 (Insertion of pacemaker pulse 
generator only; with existing dual leads), which is assigned to APC 
5223 ((Level 3 Pacemaker and Similar Procedures). Further, the 
commenter stated that the resources associated with the procedure 
described by CPT code 0521T are similar to those for the procedures 
described by existing CPT codes 93261 (Interrogation device evaluation 
(in person) with analysis, review and report by a physician or other 
qualified health care professional, includes connection, recording and 
disconnection per patient encounter; implantable subcutaneous lead 
defibrillator system), CPT codes 93288 (Interrogation device evaluation 
(in person) with analysis, review and report by a physician or other 
qualified health care professional, includes connection, recording and 
disconnection per patient encounter; single, dual, or multiple lead 
pacemaker system), 93289 (Interrogation device evaluation (in person) 
with analysis, review and report by a physician or other qualified 
health care professional, includes connection, recording and 
disconnection per patient encounter; single, dual, or multiple lead 
transvenous implantable defibrillator system, including analysis of 
heart rhythm derived data elements), 93290 (Interrogation device 
evaluation (in person) with analysis, review and report by a physician 
or other qualified health care professional, includes connection, 
recording and disconnection per patient encounter; implantable 
cardiovascular monitor system, including analysis of 1 or more recorded 
physiologic cardiovascular data elements from all internal and external 
sensors), and 93292 (Interrogation device evaluation (in person) with 
analysis, review and report by a physician or other qualified health 
care professional, includes connection, recording and disconnection per 
patient encounter; wearable defibrillator system), which are all 
assigned to APC 5741, and, consequently, the procedure described by CPT 
code 0521T also should be assigned to this same APC.
    Response: Based on our clinical review, we agree with the commenter 
that there is greater homogeneity, both clinically and in terms of 
resource use, by assigning CPT codes 0515T and 0520T to APC 5231. We 
also agree with the commenter that CPT code 0517T is more homogenous 
clinically and in terms of resource use with the procedures assigned to 
APC 5222. However, we disagree with the commenter's recommendation to 
assign the procedure described by CPT 0516T to APC 5194. Based on our 
review of the procedure, we believe that CPT code 0516T is 
appropriately assigned to APC 5222 because of its clinical and resource 
homogeneity to the other procedures assigned to this APC. We also 
disagree with the commenter's suggestion to assign the procedure 
described by CPT code 0521T to APC 5741 because the resources required 
in performing this procedure are not as intensive as those required for 
the procedure described by CPT code 0522T, which we proposed to assign 
to APC 5741. We believe that the procedure described by CPT code 0521T 
is appropriately assigned to APC 5731 because of its clinical and 
resource homogeneity to the other procedures assigned to this APC. 
Table 21 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.
    In summary, after consideration of the public comment we received, 
we are finalizing our proposal to assign the procedures described by 
CPT codes 0518T, 0519T, 0521T, and 0522T to the final APCs listed in 
Table 21 below. We are modifying our proposed APC assignment of the 
procedures described by CPT codes 0515T, 0516T, 0517T, and 0520T, and 
these modifications are reflected in the final APCs listed in Table 21 
below. The final CY 2019 payment rate for CPT codes 0515T through 0521T 
can be found in Addendum B to this final rule with comment period 
(which is available via the internet on the CMS website).
BILLING CODE 4120-01-P

[[Page 58904]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.036

BILLING CODE 4120-01-C
4. Chimeric Antigen Receptor T-Cell (CAR T) Therapy (APCs 5694, 9035, 
and 9094)
    Chimeric Antigen Receptor (CAR) T-cell therapy is a cell-based gene 
therapy in which T-cells are collected and genetically engineered to 
express a chimeric antigen receptor that will bind to a certain protein 
on a patient's cancerous cells. The CAR T-cells are then administered 
to the patient to attack certain cancerous cells and the individual is 
observed for potential serious side effects that would require medical 
intervention.
    Two CAR T-cell therapies received FDA approval in 2017. 
KYMRIAH[supreg] (manufactured by Novartis Pharmaceuticals Corporation) 
was approved for use in the treatment of patients up to 25 years of age 
with B-cell precursor acute lymphoblastic leukemia (ALL) that is 
refractory or in second or later relapse. In May 2018, KYMRIAH[supreg] 
received FDA approval for a second indication, treatment of adult 
patients with relapsed or refractory large B-cell lymphoma after two or 
more lines of systemic therapy, including diffuse large B-cell lymphoma 
(DLBCL), high grade B-cell lymphoma, and DLBCL arising from follicular 
lymphoma. YESCARTA[supreg] (manufactured by Kite Pharma, Inc.) was 
approved for use in the treatment of adult patients with relapsed or 
refractory large B-cell lymphoma and who have not responded to or who 
have relapsed after at least two other kinds of treatment.
    As indicated in the CY 2019 OPPS/ASC proposed rule (83 FR 37114), 
the HCPCS code to describe the use of KYMRIAH[supreg] (HCPCS code 
Q2040) has been active since January 1, 2018 for OPPS, and the HCPCS 
code to describe the use of YESCARTA[supreg] (HCPCS code Q2041) has 
been active since April, 1, 2018 for OPPS. The HCPCS coding for the 
currently approved CAR T-cell therapies include leukapheresis and dose 
preparation procedures because these services are included in the 
manufacturing of these biologicals. Both of these CAR T-cell therapies 
were approved for transitional pass-through payment status, effective 
April 1, 2018. The HCPCS codes that describe the use of these CAR T-
cell therapies were assigned status indicator ``G'' in Addenda A and B 
to the CY 2019 OPPS/ASC proposed rule.
    As discussed in section V.A.4. (Drugs, Biologicals, and 
Radiopharmaceuticals with New or Continuing Pass-Through Payment Status 
in CY 2019) of this final rule with comment period, we are finalizing 
our proposal to continue pass-through payment status for HCPCS code 
Q2040 (which is being deleted and replaced with HCPCS code Q2042, 
effective January 1, 2019) and HCPCS code Q2041 for CY 2019. In section 
V.A.4. of this final rule with comment period, we also are finalizing 
our proposal to determine the pass-through payment rate following the 
standard ASP methodology, updating pass-through payment rates on a 
quarterly basis if applicable information indicates that adjustments to 
the payment rates are necessary.
    The AMA created four Category III CPT codes that are related to CAR 
T-cell therapy, effective January 1, 2019. As listed in Addendum B of 
the CY 2019 OPPS/ASC proposed rule, we proposed to assign procedures 
described by these CPT codes, 0537T, 0538T, 0539T, and 0540T, to status 
indicator ``B'' (Codes that are not recognized by OPPS when submitted 
on an outpatient hospital Part B bill type (12x and 13x)) to indicate 
that the services are not paid under the OPPS. We note that, these 
codes were listed as placeholder CPT codes 05X1T, 05X2T, 05X3T, and 
05X4T in both Addendum B and O to the CY 2019

[[Page 58905]]

OPPS/ASC proposed rule. Addendum B listed the short descriptor, with 
the proposed status indicator of ``B'', while Addendum O listed the 
complete long descriptors under placeholder CPT codes 05X1T, 05X2T, 
05X3T, and 05X4T. The final CPT codes and long descriptors, with their 
respective proposed OPPS status indicators, are listed in Table 23 at 
the end of this section.
    At the summer 2018 meeting of the HOP Panel, the HOP Panel 
recommended that CMS reassign the status indicator for procedures 
described by these specific CPT codes from ``B'' to ``S''. The Panel 
further recommended that CMS assign the procedures described by CPT 
code 0537T and CPT code 0540T to APC 5242 (Level 2 Blood Product 
Exchange and Related Services), and the procedures described by CPT 
code 0538T and CPT code 0539T to APC 5241 (Level 1 Blood Product 
Exchange and Related Services).
    Comment: Some commenters disagreed with the proposed status 
indicator assignment of ``B'' for the procedures described by CPT codes 
0537T, 0538T, 0539T, and 0540T, and requested that CMS recognize these 
procedures and the services described by the CPT codes under the OPPS 
and pay separately for them. Some of these commenters urged CMS to 
accept and finalize the HOP Panel's recommendations for assignment of 
these CPT codes. Commenters stated that providers may currently use the 
unlisted code (38999) to bill for the services described by the new CPT 
codes because the currently available CPT codes fail to accurately 
describe the procedure being rendered. The commenters indicated that 
these services are similar to stem cell transplant services, and 
suggested that the similarities between various codes, including 
similarities between the procedures described by CPT code 05X1T (0537T) 
and CPT code 38206 (Blood-derived hematopoietic progenitor cell 
harvesting for transplantation, per collection; autologous), which is 
assigned to APC 5242 (Level 2 Blood Product Exchange and Related 
Services); CPT code 05X2T (0538T) and CPT code 38207 (Transplant 
preparation of hematopoietic progenitor cells; cryopreservation and 
storage), which is assigned to APC 5241 (Level 1 Blood Product Exchange 
and Related Services); CPT code 05X3T (0539T) and CPT code 38208 
(Transplant preparation of hematopoietic progenitor cells; 
cryopreservation and storage; thawing of previously frozen harvest, 
without washing, per donor), which is assigned to APC 5241 (Level 1 
Blood Product Exchange and Related Services), and finally CPT code 
05X4T (0540T) and CPT code 38241(Hematopoietic progenitor cell (hpc); 
autologous transplantation), which is assigned to APC 5242 (Level 2 
Blood Product Exchange and Related Services), be validly recognized and 
considered when determining applicable policy and assignments.
    A few commenters believed that there are possible similarities 
between the CAR T-cell procedure CPT code 0540T and chemotherapy codes, 
in general. However, other commenters asserted that CAR T-cell services 
were distinct from the services associated with chemotherapy and stem 
cell transplant codes, but noted that the codes suggested were the best 
available approximations for payment at present and could provide 
useful benchmarks of resource utilization. Some commenters also 
supported the creation of a new Autologous HCT C-APC to adequately 
compensate providers for providing CAR T-cell related services. Some 
commenters requested that the existing Q-codes for CAR T-cell therapies 
be revised to reference only the CAR T-cell products, and that 
leukapheresis and other services related to the preparation, collection 
and treatment be separately coded and paid.
    A few commenters referenced the National Coverage Decision (NCD) 
for apheresis (effective 1992), which provides coverage only under 
limited conditions for therapeutic apheresis, and asked CMS to clarify 
whether it applies to harvesting blood-derived T-lymphocytes for 
development of genetically modified autologous CAR T-cells. Some 
commenters referenced the ongoing National Coverage Analysis (NCA) for 
CAR T-cells, and asked CMS to provide guidance in the interim on how to 
bill for CAR T-cells and its therapies' administration.
    The commenters also suggested additional modifications to HCPCS 
codes Q2040 and Q2041, such as adopting HCPCS J-codes instead of HCPCS 
Q-codes. Some commenters requested guidance on how to bill for specific 
services, incomplete services, or partial services related to CAR T-
cell therapy, including but not limited to, billing for pre-infusion 
steps, billing for services provided a number of days before the 
infusion, billing if the CAR T-cell product is not infused, and billing 
if services are provided at different facilities, such as both 
inpatient and outpatient facilities.
    Finally, another commenter supported the proposal not to pay 
separately for procedures described by CPT codes 0537T, 0538T and 0539T 
because the commenters maintained that payment for these CPT codes and 
the performance of the services describe various steps of the 
manufacturing process and, therefore, are appropriately included and 
conveyed in the descriptors of and the existence of Q-codes for CAR T-
cell therapies. The commenter supported the appropriateness of 
including these steps in the payment for the drug as a means to ensure 
the manufacturer can preserve the integrity of the process and to 
maximize the quality of therapy. Finally, one commenter believed that 
separate payments for leukapheresis would increase beneficiary cost-
sharing.
    Response: We do not believe that separate payment under the OPPS is 
necessary for procedures described by CPT codes 0537T, 0538T, and 
0539T. The existing CAR T-cell therapies on the market were approved as 
biologics and, therefore, provisions of the Medicare statute providing 
for payment for biologicals apply. The procedures described by CPT 
codes 0537T, 0538T, and 0539T describe various steps required to 
collect and prepare the genetically modified T-cells, and Medicare does 
not generally pay separately for each step used to manufacture a drug 
or biological. We note that the HCPCS coding for the currently approved 
CAR T-cell therapy drugs, HCPCS codes Q2040 and Q2041, includes 
leukapheresis and dose preparation procedures because these services 
are included in the manufacturing of these biologicals. We also note 
that, for OPPS billing purposes, the Q-codes are treated in the same 
manner as J-codes, and a procedure assignment conversion to a J-code 
for payment classification purposes would not affect payment by 
Medicare. Q-codes can be updated quarterly, which allows for greater 
frequency of modifications and, therefore, we believe are appropriate 
for these new therapies. HOPDs can bill Medicare for reasonable and 
necessary services that are otherwise payable under the OPPS, and we 
believe that the comments in reference to payment for services provided 
in settings not payable under OPPS are outside the scope of the 
proposed rule.
    With respect to NCD 110.14 for apheresis (Therapeutic Pheresis) 
(https://www.cms.gov/medicare-coverage-database/details/ncd-details.aspx?NCDId=;82&ncdver=1&bc=AAAAgAAAAAAA&), we note that it 
refers only to therapeutic treatments where blood is taken from the 
patient, processed, and returned to the patient as

[[Page 58906]]

part of a continuous procedure and is distinguished from situations 
where a patient is transfused at a later date. With respect to comments 
referencing the ongoing NCA for CAR T-cells, we remind readers that 
coverage analysis and determination do not determine what code or 
payment is assigned a particular item or service, but information on 
this NCA and process may be found at: https://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=291. 
Accordingly, we are not revising the existing Q-codes for CAR T-cell 
therapies to remove leukapheresis and dose preparation procedures, and 
we are not accepting the HOP Panel's recommendations for procedures 
described by CPT codes 0537T, 0538T and 0539T.
    In regard to comments concerning CPT code 0540T, we were persuaded 
by commenters that the administration of CAR T-cell services would be 
more specifically described by CPT code 0540T. Because CPT code 0540T 
is a new code for CY 2019, we do not have any claims data on which to 
base our proposed payment rate. In the absence of claims data, we 
reviewed the clinical characteristics of the procedures to determine 
whether they are similar to existing procedures. After reviewing 
information from public commenters and input from our medical advisors, 
we believe that new CPT code 0540T is clinically similar to the 
services assigned to APC 5694 (Level IV Drug Administration), with a 
proposed payment rate of approximately $291, such as the procedure 
described by CPT code 96413 (Chemotherapy administration, intravenous 
infusion technique; up to 1 hour, single or initial substance/drug). We 
acknowledge commenters' supporting data and indications that CAR T-cell 
service is complex, distinct from chemotherapy, and has the potential 
for highly adverse reactions. However, we note that CPT's prefatory 
language for the ``Chemotherapy and Other Highly Complex Drug or Highly 
Complex Biologic Agent Administration'' section in which the procedure 
described by CPT code 96413, and some other services assigned to APC 
5694 are listed, describes these procedures as administration of highly 
complex drugs or biologic agents with greater incidence of severe 
adverse patient reaction. We also note that the unique toxicities 
associated with CAR T-cell therapies tend not to occur at time of 
infusion, and services to monitor or treat adverse reactions on a 
subsequent day would not be included in the procedure described by CPT 
code 0540T. Therefore, we are accepting the HOP Panel's recommendation 
and the commenters' request to reassign the status indicator assignment 
of the procedure described by CPT code 0540T from ``B'' to ``S.'' 
However, we are not accepting the HOP Panel's recommendation and the 
commenters' request to assign the procedure described by CPT code 0540T 
to APC 5242 (Level 2 Blood Product Exchange and Related Services), but 
instead are assigning the procedure described by CPT code 0540T to APC 
5694 (Level IV Drug Administration) for CY 2019. We remind hospitals 
that every year, we review the APC assignments for all services and 
items paid under the OPPS, and we will reevaluate the APC assignment 
for the procedures described by CPT code 0540T once sufficient claims 
data for this code become available.
    Comment: Some commenters suggested that separately paying for the 
services described by new CPT codes for CAR T-cell therapy under the 
OPPS would allow Medicare and others to track utilization and cost data 
of these specific services. Some commenters also noted that the 
National Uniform Billing Committee (NUBC) established two new revenue 
codes and a value code related to CAR T-cell therapy, and expressed 
support for CMS' creation of a new CAR T-cell-related cost center (or 
centers) to assist with tracking CAR T-cell-related costs.
    Response: The existing HCPCS codes for CAR T-cell therapies include 
both leukapheresis and dose-preparation procedures, and for the reasons 
stated previously, there is no separate payment by Medicare for these 
steps in the manufacturing process. However, it will be possible for 
Medicare to track utilization and cost data from hospitals reporting 
these services, even for codes reported for services in which no 
separate payment is made. The CAR T-cell related revenue codes and 
value code established by the NUBC will be reportable on HOPD claims, 
and will be available for tracking utilization and cost data, effective 
for claims received on or after April 1, 2019. At this time, we do not 
believe that the additional creation by CMS of a new cost center is 
necessary as the currently established methods for tracking CAR T-cell 
related costs are sufficient. However, we will monitor for this issue 
to determine if a distinct cost center should be established in the 
future.
    Comment: Some commenters noted that HCPCS code Q2040 describes 
doses of ``up to 250 million'' cells, and requested guidance on how to 
bill for an adult indication that may require doses of ``up to 600 
million cells.''
    Response: HCPCS code Q2040 (which is being replaced by HCPCS code 
Q2042, effective January 1, 2019) is billed only once per infusion. For 
CY 2019, we revised the descriptor for HCPCS code Q2042 to describe 
doses ``up to 600 million cells . . . per therapeutic dose.'' For CY 
2019, we also revised the descriptor for HCPCS code Q2041, in order to 
maintain consistency in the HCPCS coding for CAR T-cells.
    In summary, after consideration of the public comments we received, 
we are adopting as final, without modification, the proposal to assign 
status indicator ``B'' to CPT codes 0537T, 0538T, and 0539T for CY 
2019. We are revising our proposal and finalizing the policy to assign 
status indicator ``S'' to CPT code 0540T and to assign CPT code 0540T 
to APC 5694 for CY 2019. Additionally, for CY 2019, we are assigning 
status indicator ``D'' to CPT code Q2040, status indicator ``G'' to 
HCPCS code Q2041, and status indicator ``G'' to HCPCS code Q2042, as 
summarized in Table 22 below. We refer readers to Addendum B to this 
final rule with comment period for the payment rates for all codes 
reportable under the OPPS. Addendum B is available via the internet on 
the CMS website. In addition, we refer readers to Addendum D1 to this 
final rule with comment period for the complete list of the OPPS 
payment status indicators and their definitions for CY 2019.
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5. Drug-Eluting Implant (APC 5733)
    For CY 2019, we proposed to continue to assign CPT code 0356T 
(Insertion of drug-eluting implant (including punctal dilation and 
implant removal when performed) into lacrimal canaliculus, each) to APC 
5733 (Level 3 Minor Procedures) with a proposed payment rate of 
approximately $57. We also proposed to continue to assign the CPT code 
to status indicator ``Q1'' to indicate one of the following with 
regards to payment:
     Packaged APC payment if billed on the same claim as a 
HCPCS code assigned status indicator ``S'', ``T'', or ``V''; or
     Composite APC payment if billed with specific combinations 
of services based on OPPS composite-specific payment criteria. Payment 
is packaged into a single payment for specific combinations of 
services; or
     In other circumstances, payment is made through a separate 
APC payment.
    Comment: Several commenters disagreed with the proposed 
continuation of the status indicator assignment of ``Q1'' for CPT code 
0356T and recommended an assignment to a significant procedure status 
indicator instead of a conditionally packaged status indicator. One 
commenter indicated that the procedure described by CPT code 0356T 
represents a nonsurgical, independent procedure that is not based on 
any other primary procedure, and believed that a status indicator 
reassignment would ensure proper claims processing for providers.
    Response: As indicated above and in OPPS Addendum D1 of the CY 2019 
OPPS/ASC proposed rule, status indicator ``Q1'' represents one of three 
potential payment assignments. Depending on the claim submitted, and 
whether the procedure described by CPT code 0356T is performed with any 
other surgeries or services on the same day, the procedure described by 
CPT code 0356T may be paid separately through an APC (in this case APC 
5733) or paid as part of a payment when included in the more 
significant procedure that is reported on the claim. Based on the 
nature of this procedure, which may be performed by itself or with 
other procedures on the same day, we believe that the continued 
assignment of status indicator ``Q1'' is appropriate for the procedure 
described by CPT code 0356T.
    After consideration of the public comments we received, we are 
finalizing our proposal, without

[[Page 58909]]

modification, to assign CPT code 0356T to status indicator ``Q1'' for 
CY 2019. The final CY 2019 payment rate for the CPT code can be found 
in Addendum B to this final rule with comment period (which is 
available via the internet on the CMS website).
6. Endovascular Procedures (APCs 5191 Through 5194)
    At the annual meeting for the HOP Panel held on August 21, 2017, 
the HOP Panel recommended that, for CY 2018, CMS examine the number of 
APCs for endovascular procedures. The HOP Panel also recommended that 
the appropriate Panel subcommittee review the APCs for endovascular 
procedures to determine whether more granularity (that is, more APCs) 
is warranted.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59293 
through 59294), we stated that we believed that the current C-APC 
levels for the Endovascular Procedures C-APC family provide an 
appropriate distinction between the resource costs at each level and 
clinical homogeneity. We also stated that we would continue to review 
the C-APC structure for endovascular procedures to determine if any 
additional granularity is necessary for this C-APC family.
    Using the most recent data available for the CY 2019 OPPS/ASC 
proposed rule, we analyzed the four existing levels of the Endovascular 
Procedures C-APCs. We did not observe any violations of the 2 times 
rule within the current Endovascular Procedures C-APC structure. Some 
stakeholders have suggested that for certain procedures, such as 
angioplasty procedures involving the use of a drug-coated balloon in 
addition to a nondrug-coated balloon, resource costs are significantly 
higher than the geometric mean cost (and associated C-APC payment) for 
all of the angioplasty procedures combined. We stated in the proposed 
rule that we recognize that the costs of a given procedure, involving 
additional devices, will be higher than the costs of the procedure when 
it does not involve such additional devices. However, the OPPS is a 
prospective payment system based on a system of averages in which the 
costs of some cases within an APC will be more costly than the APC 
payment rate, while the costs of other cases will be less costly. While 
we believe that there is sufficient granularity within the existing 
Endovascular Procedures C-APC structure and at least one stakeholder 
agrees, we stated that we have also received input from other 
stakeholders who have suggested alternative structures for this C-APC 
family that include a five-level structure and a six-level structure. 
An illustration of these proposed C-APC structure levels was displayed 
in Table 15 and Table 16, respectively, of the proposed rule. Because 
interested stakeholders have suggested a variety of options for the 
endovascular procedures C-APC structure, including keeping the existing 
C-APC structure, in the CY 2019 OPPS/ASC proposed rule, we proposed to 
maintain the existing four-level structure for this C-APC family listed 
in Table 14 of the proposed rule. However, we invited public comments 
on our proposal, as well as the stakeholder-requested five-level and 
six-level structures displayed in the Tables 15 and 16 of the proposed 
rule. We noted that the approximate geometric mean costs associated 
with the suggested five-level and six-level C-APC structures shown in 
Tables 15 and 16 of the proposed rule were only estimates and, if 
either of the suggested structure levels were adopted, they would be 
subject to change, depending on the final rule with comment period data 
and the particular services that are assigned to each C-APC.
    Comment: Several commenters supported CMS' proposal to continue 
with a four-level APC structure, along with the proposed CPT code 
assignments to each of the endovascular APCs as described in the CY 
2019 OPPS/ASC proposed rule. These commenters stated that adding 
additional APCs to the endovascular series could result in some APCs 
containing very few procedures, and further believed that this policy 
change would also be contrary to the concept of broader APC groupings 
under the OPPS. Another commenter requested that CMS provide greater 
detail about future proposals in order for stakeholders to be able to 
provide fully informed comments and recommendations.
    Other commenters also agreed with CMS' assessment that the four-
level APC structure and the assignment of the procedures to these APCs 
does not result in any 2 times rule violations, and believed that the 
current granularity within the existing Endovascular Procedures C-APCs' 
structure sufficiently represents resource cost and clinical 
homogeneity.
    Response: We appreciate the commenters' input and support. At this 
time, we believe that the current APC structure levels for the 
Endovascular Procedures C-APC family provide an appropriate distinction 
between resource costs at each level and clinical homogeneity.
    Comment: Several commenters believed that the current structure of 
the Endovascular Procedures APCs violates the 2 times rule when certain 
code combinations, such as the procedures described by CPT 37224 
(Revascularization, endovascular, open or percutaneous, femoral, 
popliteal artery(s), unilateral; with transluminal angioplasty) and 
HCPCS code C2623 (Catheter, transluminal angioplasty, drug-coated, non-
laser), are reported in combination. As a result, the commenters 
requested that CMS make a complexity adjustment for CY 2019 by 
assigning cases for the procedures described by CPT code 37224 and 
HCPCS code C2623 when reported in combination with one another to APC 
5193.
    Some of these commenters believed that the current structure of the 
Endovascular Procedures APCs is insufficiently granular, and noted that 
the current APC structure has significant differentials in payments of 
over $5,000 between the current procedures assigned to Level 2 (APC 
5192) and between the procedures assigned to Level 3 and Level 4 (APC 
5194). These commenters further contended that the large numbers of 
procedures assigned to each level of APC, coupled with the high total 
volume of procedures assigned to each level within each APC, prevent 
technology costs from being adequately and accurately reflected in the 
OPPS payment rates. As a result, these commenters requested that CMS 
create a six-level structure Endovascular Procedure APC reflecting the 
following cost bands:

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    Some of these commenters also specifically suggested that the 
procedures described by CPT code 37224 (Revascularization, 
endovascular, open or percutaneous, femoral, popliteal artery(s), 
unilateral; with transluminal angioplasty) and HCPCS code C2623 
(Catheter, transluminal angioplasty, drug-coated, non-laser); and CPT 
code 37726 (Revascularization, endovascular, open or percutaneous, 
femoral, popliteal artery(s), unilateral; with transluminal stent 
placement(s), includes angioplasty within the same vessel, when 
performed) and HCPCS code C1874 (Stent, coated/covered, with delivery 
system) be assigned to the newly leveled structure within APC 5193 and 
APC 5195, respectively, in order to take into consideration the 
performance of and utilization of procedures involving drug-coated 
balloons and drug eluting stents that are required for these 
procedures.
    Several of these same commenters requested that CMS create new 
HCPCS code modifiers to take into account the performance of the 
procedures described by CPT code 37724 when reported in combination 
with HCPCS code C2623, and CPT code 37226 when reported in combination 
with HCPCS code C1874. The commenters provided that CMS could model the 
costs for these cases using CY 2017 and CY 2018 claims data when these 
codes are reported in combination with one another. The commenters 
further believed that the creation of new HCPCS code modifiers are 
necessary in order to differentiate drug-coated device procedures from 
non-drug-coated device procedures, and will provide the granularity in 
HCPCS and APC coding that will allow CMS to collect data for the CPT/
HCPCS codes to appropriately calculate payment rates within the APCs. 
Another commenter further stated that these procedures should be 
assigned to the newly created APC 5193 and APC 5195, respectively.
    Response: We appreciate the commenters' suggestion. As noted in the 
proposed rule, we understand that some stakeholders have suggested that 
when certain procedures, such as those described by CPT code 37224 and 
HCPCS code C2623 are reported in combination, a 2 times rule violation 
occurs. However, we recognize that the costs of a given procedure, 
involving additional devices, will be higher than the costs of the 
procedure when it does not involve such additional devices, and we do 
not believe that these types of 2 times rule violations are avoidable, 
given the nature of a prospective payment system (83 FR 37095).
    Using the most recent data available for this final rule with 
comment period, we analyzed the various alternative suggestions for the 
recommended HCPCS code placements, including maintaining the CY 2018 
APC groupings, creating a six-level APC, and reconfiguring significant 
HCPCS code placements within the current structure. We note that, when 
we modeled the creation of a six-level structure APC and modeled a 
reconfiguration of significant HCPCS code placements, we noticed 
significant downward payment fluctuations for several services, some as 
high as a $2,500 decrease relative to the payment rate in CY 2018. 
Furthermore, based on these findings, we are still not convinced that 
we should pay for a complexity adjustment for the procedure described 
by CPT code 37224 when reported in combination with HCPCS code C2623 or 
for the procedure described by CPT code 37226 when reported in 
combination with HCPCS code C1874. As noted above and as provided in 
the proposed rule, the OPPS is a prospective payment system based on a 
system of averages in which the costs of some cases within an APC will 
be more costly than the APC payment rate, while the costs of other 
cases will be less costly and in these particular procedures we believe 
that if a complexity adjustment would be applied it would adversely 
affect the APC payment (83 FR 37095). Additionally, at this time, we do 
not support the creation of any new HCPCS codes for inclusion in the 
Endovascular Procedures APCs. Specifically, we do not believe that we 
have the needed evidence and data to support combining payment for 
either the procedure described by CPT code 37724 when reported in 
combination with HCPCS code C2623 or the procedure described by CPT 
code 37226 when reported in combination with HCPCS code C1874 because 
we believe that payment for these services are currently adequate.
    However, we do share similar concerns with the commenters regarding 
the significant differential payments between the procedures assigned 
within the current four-level structure of the Endovascular Procedures 
APCs and intend to revisit this particular issue in future rulemaking. 
Therefore, after consideration of the public comments and suggestions 
we received, we are maintaining the CY 2018 APC structure of four 
levels for the Endovascular Procedures APCs. We understand the 
importance of payment stability for providers and believe that 
continuation of the four levels within the Endovascular Procedures APCs 
will minimize fluctuation in payment rates from CY 2018 to CY 2019. As 
displayed in the ``Two Times Listing'' file to this final rule with 
comment period, which is available via the internet on the CMS website, 
the APC geometric mean costs for APCs 5521 through 5524 are consistent 
with the CY 2018 APC geometric mean costs for the same APCs, indicating 
the relative weights that are used to calculate payment are stable.
    We will continue to review this APC structure to determine if 
additional granularity is necessary for this C-APC family, including if 
additional HCPCS codes should be created in future rulemaking. We refer 
readers to Addendum B to this final rule with comment period for the 
payment rates for all codes reported under the OPPS. Additionally, we 
refer readers to Addendum A to this final rule with comment period for 
the complete list of APCs and their payment rates under the OPPS. Both 
Addendum A and Addendum B are available via the internet on the CMS 
website.

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7. Fine Needle Aspiration Biopsy (APC 5071)
    As displayed in Table 25 below and in Addendum B to the CY 2019 
OPPS/ASC proposed rule, we proposed to assign CPT codes 10009 and 10011 
to APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage), with a 
proposed payment rate of approximately $582. The codes were listed as 
10X16 and 10X18 (the 5-digit CMS placeholder codes), respectively, in 
Addendum B with the short descriptors and in Addendum O with the long 
descriptors to the CY 2019 OPPS/ASC proposed rule. We also assigned 
these codes to comment indicator ``NP'' in Addendum B to indicate that 
the codes are new for CY 2019, with proposed APC assignments, and that 
public comments would be accepted on their proposed APC assignments. We 
note that these codes will be effective January 1, 2019.
    Comment: One commenter disagreed with the proposed assignment of 
the procedure described by CPT code 10009 to APC 5071 and suggested 
that APC 5072 (Level 2 Excision/Biopsy/Incision and Drainage), with a 
proposed payment rate of approximately $1,370, is more appropriate 
because the resource cost of the CT guidance used in the procedure is 
higher than the resource cost of ultrasound or fluoroscopy. The 
commenter disagreed with the proposed assignment of the procedure 
described by CPT code 10011 to APC 5071 and recommended that APC C-5373 
(Level 3 Urology and Related Services), with a proposed payment rate of 
approximately $1,731, is more appropriate because the cost of the MRI 
guidance used in the procedure is clinically similar to the other 
services in this APC.
    Response: Because CPT codes 10009 and 10011 are new codes for CY 
2019, we do not have claims data on which to base the payment rates. 
However, in the absence of claims data, we reviewed the clinical 
characteristics of the procedures described by CPT codes 10009 and 
10011 to determine whether they are similar to existing procedures. 
After reviewing information from the public commenter and input from 
our medical advisors, we believe that the procedures described by new 
CPT codes 10009 and 10011 are clinically similar to those procedures 
assigned to APC 5071. We are unclear of the rationale for the 
commenter's suggestion of recommending a Urology APC assignment (C-APC 
5373) for the procedure described by CPT code 10011 when this procedure 
describes a fine needle aspiration biopsy, which is not a urology-
specific procedure. Therefore, we are not accepting the commenter's 
recommendation. In addition, we remind hospitals that, every year, we 
review the APC assignments for all services and items paid under the 
OPPS. We will reevaluate the APC assignment for the procedures 
described by CPT codes 10009 and 10011 once we have claims data for the 
codes.
    After consideration of the public comment received, we are 
finalizing our proposal, without modification, to assign the procedures 
described by CPT codes 10009 and 10011 to APC 5071 for CY 2019. The 
final APC and status indicator assignments are listed in Table 25 
below. We refer readers to Addendum B of this final rule with comment 
period for the final payment rates for all codes reportable under the 
OPPS. Addendum B is available via the internet on the CMS website.
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[[Page 58912]]


8. Fluorescence In Situ Hybridization (FISH) Assays (APCs 5672 and 
5673)
    As displayed in Table 26 below and in Addendum B to the CY 2019 
OPPS/ASC proposed rule, we proposed to assign the procedures described 
by CPT codes 88364 through 88377 to status indicator ``N'' to indicate 
a packaged payment status, or status indicators ``Q1'' and ``Q2'' to 
indicate a conditionally packaged payment status, with APC assignments 
to either APC 5672 (Level 2 Pathology), with a proposed payment rate of 
approximately $145, or APC 5673 (Level 3 Pathology), with a proposed 
payment rate of approximately $273.
    Comment: One commenter urged CMS to exclude certain FISH assays 
from the OPPS packaging policy. Specifically, the commenter stated that 
the technical component of services that are associated with the 
services described by CPT codes 88364, 88365, 88366, 88367, 88368, 
88369, 88373, 88374, and 88377 have unique clinical utilization that is 
distinct from conventional laboratory tests, and suggested that the 
services described by these codes be excluded from the OPPS payment 
packaging policy. The commenter further stated that these tests are 
utilized in both the hospital outpatient and hospital inpatient setting 
similar to molecular pathology tests and advanced diagnostic laboratory 
tests (ADLTs).
    Response: As stated in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79593), payment for most laboratory tests is packaged 
under OPPS. Under our current policy, payment for certain clinical 
diagnostic laboratory tests that are listed on the Clinical Laboratory 
Fee Schedule (CLFS) is packaged in the OPPS as integral, ancillary, 
supportive, dependent, or adjunctive to the primary service or services 
provided in the hospital outpatient setting (81 FR 79593 and 42 CFR 
419.2(b)(17)). However, we have established exceptions to the OPPS 
laboratory test packaging policy for molecular pathology tests, certain 
ADLTs, and preventive laboratory tests. Specifically, we exclude from 
packaging the following laboratory tests:
     Molecular pathology tests, because these relatively new 
tests may have a different pattern of clinical use than more 
conventional laboratory tests, 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 are packaged (80 FR 70348 
through 70350);
     ADLTs, as designated under the CLFS, that meet the 
criteria of section 1834A(d)(5)(A) of the Act (81 FR 79593 through 
79594), and
     Preventive laboratory tests that are listed in Section 
1.2, Chapter 18 of the Medicare Claims Processing Manual (Pub. 100-04) 
(80 FR 70349).
    We note that laboratory tests also are paid separately when they 
are the only services provided to a beneficiary on a claim (81 FR 
79593). When payment for laboratory tests is not packaged under the 
OPPS, and the tests are listed on the CLFS, the payment is made at the 
CLFS payment rates, outside the OPPS, under Medicare Part B.
    With regard to the services described by CPT codes 88364, 88369, 
and 88373, we proposed to continue to assign these add-on services to 
status indicator ``N'' because, under the OPPS, payment for services 
described by add-on codes are packaged in accordance with the 
regulations at Sec.  419.2(b)(18).
    In addition, with regard to the services described by CPT codes 
88365, 88366, 88374, and 88377, we proposed to continue to assign these 
codes to status indicator ``Q1'' to indicate that these services are 
separately payable when not billed on the same claim as a HCPCS code 
assigned status indicator ``S'', ``T'', or ``V''. Further, with regard 
to the services described by CPT codes 88367 and 88368, we proposed to 
continue to assign these codes to status indicator ``Q2'' to indicate 
that payment for these services will be packaged in the APC payment if 
billed on the same date of service as a HCPCS code assigned to status 
indicator ``T'', but in all other circumstances, separate APC payment 
for the services would be made. Based on the nature of these services, 
we believe the payment for the services described by CPT codes 88365, 
88366, 88367, 88368, 88374, and 88377 should continue to be 
conditionally packaged under the OPPS because these laboratory tests 
may be performed with other procedures on the same day.
    In summary, because the services described by CPT codes 88364, 
88365, 88366, 88367, 88368, 88369, 88373, 88374, and 88377 are not 
molecular pathology laboratory tests, ADLTs, or preventive laboratory 
tests as stated in the above response, we believe that we should 
continue to package the payment for these services under the OPPS. 
Therefore, after consideration of the public comment received, we are 
finalizing our proposal, without modification, to assign the services 
described by CPT codes 88364, 88365, 88366, 88367, 88368, 88369, 88373, 
88374, and 88377 to the final APCs and status indicator assignments 
listed in Table 26 below. We refer readers to Addendum B of this final 
rule with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website. In addition, we refer readers to Addendum D1 of this final 
rule with comment period for the complete list of the OPPS payment 
status indicators and their definitions for CY 2019.
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9. Immediate Breast Implant Following Mastopexy/Mastectomy (C-APC 5092)
    For CY 2019, we proposed to continue to assign the procedures 
described by CPT code 19340 (Immediate insertion of breast prosthesis 
following mastopexy, mastectomy or in reconstruction) to C-APC 5092 
(Level 2 Breast/Lymphatic Surgery and Related Procedures), with a 
proposed payment rate of approximately $4,960.
    Comment: Some commenters disagreed with the proposed continued APC 
assignment for the procedure described by CPT code 19340 to C-APC 5092 
and suggested instead a reassignment to C-APC 5093 (Level 3 Breast/
Lymphatic Surgery and Related Procedures), with a proposed payment rate 
of approximately $7,432. One commenter believed that the procedure 
described by CPT code 19340 shares similar clinical and resource 
characteristics as the procedures described by CPT codes 19325 
(Mammaplasty, augmentation; with prosthetic implant) and 19342 (Delayed 
insertion of breast prosthesis following mastopexy, mastectomy or in 
reconstruction), which are assigned to C-APC 5093. Another commenter 
requested a review and reconfiguration of C-APCs 5092 and 5093, and 
believed

[[Page 58914]]

that the cost of performing the procedure described by CPT code 19340 
is similar to the surgical procedures assigned to C-APC 5093.
    Response: Analysis of the hospital outpatient claims data used for 
this final rule with comment period, which is based on claims submitted 
between January 1, 2017 and December 31, 2017, and processed through 
June 30, 2018, do not support a reassignment of the procedure described 
by CPT code 19340 to C-APC 5093. Specifically, our claims data show a 
geometric mean cost of approximately $5,341 for the procedure described 
by CPT code 19340 based on 1,187 single claims (out of 1,203 total 
claims), which is comparable to the geometric mean cost of 
approximately $4,958 for C-APC 5092. In contrast, our claims data show 
a higher geometric mean cost for the procedures described by CPT codes 
19325 (approximately $6,326 based on 209 single claims out of 210 total 
claims) and 19342 (approximately $6,232 based on 1,190 single claims 
out of 1,202 total claims) that is comparable to the geometric mean 
cost of approximately $7,513 for C-APC 5093. Based on our analysis, we 
believe that the procedure described by CPT code 19340 is appropriately 
assigned to C-APC 5092 based on resource and clinical homogeneity to 
the other procedures in the APC. We note that all of the procedures 
described by CPT codes assigned to this Breast/Lymphatic Surgery and 
Related Procedures C-APC are clinically similar and that the resource 
similarity is based on the geometric mean costs derived from claims 
submitted by hospitals performing these procedures.
    After consideration of the public comments we received and based on 
our analysis of the latest hospital outpatient claims data for the 
procedures described by CPT codes 19340, 19325, and 19342, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 19340 to C-APC 5092. We refer readers to Addendum B of this 
final rule with comment period for the payment rates for all codes 
reportable under the OPPS. Addendum B is available via the internet on 
the CMS website.
10. Intracardiac Ischemia Monitoring (APCs 5221, 5222, 5223, and 5741)
    In Addendum B to the CY 2019 OPPS/ASC proposed rule, we proposed to 
assign eight new intracardiac ischemia monitoring CPT codes to various 
APCs, which are listed in Table 27 below. The codes were listed as 
00X0T through 00X7T (the 5-digit CMS placeholder codes) in Addendum B 
with short descriptors and in Addendum O with long descriptors to the 
CY 2019 OPPS/ASC proposed rule. 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 2019, with proposed APC assignments, and that 
public comments would be accepted on their proposed APC assignments. We 
note these codes will be effective January 1, 2019. Although the codes 
are new for CY 2019, the services associated with intracardiac ischemia 
monitoring were previously described by CPT codes 0302T through 0307T, 
which were deleted on December 31, 2017.
[GRAPHIC] [TIFF OMITTED] TR21NO18.043

    Comment: One commenter disagreed with CMS' proposed APC assignment 
for the new intracardiac ischemia monitoring Category III CPT code 
0525T (Insertion or replacement of intracardiac ischemia monitoring 
system, including testing of the lead and monitor, initial system 
programming, and imaging supervision and interpretation; complete 
system (electrode and implantable monitor)) and requested assignment to 
APC 5224 (Level 4 Pacemaker and Similar Procedures) instead of APC 
5223. The commenter suggested that the procedure described by CPT code 
0525T be assigned to APC 5224, which is the same APC that was assigned 
to its predecessor CPT code 0302T (Insertion or removal and replacement 
of intracardiac ischemia monitoring system including imaging 
supervision and interpretation when performed and intra-operative 
interrogation and programming when performed; complete system (includes 
device and electrode)) when the code was active during CY 2017. The 
commenter also stated that the procedure described by CPT code 0525T is 
more complex and requires significantly more resources than the other 
procedures assigned to APC 5223. The commenter further indicated that 
the cost of the Guardian System alone, which is related to the CPT 
codes of concern, is between $8,000 to $8,700, while the overall cost 
for the insertion of the complete system is between $15,700 and 
$16,400.

[[Page 58915]]

    Response: For CY 2018, CMS received a New Technology APC 
application requesting a new HCPCS code for the insertion of an 
intracardiac ischemia monitoring system because no current CPT code 
existed to describe the procedure, and because its predecessor CPT code 
0302T was deleted on December 31, 2017. Based on our review of the 
application, evaluation of the procedure, and input from our clinical 
advisors, we agreed that no existing code appropriately describes the 
insertion of an intracardiac ischemia monitoring system and, therefore, 
established HCPCS code C9750 (Insertion or removal and replacement of 
intracardiac ischemia monitoring system including imaging supervision 
and interpretation and peri-operative interrogation and programming; 
complete system (includes device and electrode)), effective October 1, 
2018. For the October 2018 OPPS update, we assigned HCPCS code C9750 to 
APC 5223 (Level 3 Pacemaker and Similar Procedures) with a payment rate 
of approximately $9,748. We announced this new HCPCS code and APC 
assignment in the October 2018 OPPS quarterly update CR (Transmittal 
4123, Change Request 10923, dated August 24, 2018). Because the 
procedure described by CPT code 0525T is the same procedure described 
by HCPCS code C9750, we proposed to assign CPT code 0525T to APC 5223.
    In addition, we reviewed our claims data for the predecessor CPT 
code 0302T that were submitted during CY 2012 through CY 2017. We note 
that predecessor CPT code 0302T became effective July 1, 2012 and was 
deleted on December 31, 2017. Our analysis of the claims data for CPT 
code 0302T revealed no single claim submitted for CY 2017, CY 2016, CY 
2014, CY 2013, or CY 2012. We did find one claim that was submitted 
during CY 2015 with a geometric mean cost of approximately $4,619. 
However, based on cost information submitted to CMS in the New 
Technology APC application, we believe that APC 5223, whose geometric 
mean cost is approximately $9,964, is the appropriate APC assignment 
for the procedure described by CPT code 0525T. We believe that the 
procedure described by CPT code 0525T shares similar resource and 
clinical homogeneity to the other procedures currently assigned to APC 
5223. Consequently, we did not assign the code to a New Technology APC 
because the services assigned to APC 5223 are clinically similar to the 
service described by CPT code 0525T. Therefore, we believe that APC 
5223 is the more appropriate APC assignment for the procedure described 
by CPT code 0525T.
    Comment: One commenter also disagreed with the proposed assignment 
of the service described by CPT code 0528T to APC 5741, and requested 
that the service be assigned to APC 5743 (Level 3 Electronic Analysis 
of Devices) instead. The commenter stated that the service generally 
takes about 60 minutes to perform, which is similar to the following 
services assigned to APC 5743:
     CPT code 0462T (Programming device evaluation (in person) 
with iterative adjustment of the implantable mechano-electrical skin 
interface and/or external driver to test the function of the device and 
select optimal permanent programmed values with analysis, including 
review and report, implantable aortic counterpulsation ventricular 
assist system, per day);
     CPT code 0463T (Interrogation device evaluation (in 
person) with analysis, review and report, includes connection, 
recording and disconnection per patient encounter, implantable aortic 
counterpulsation ventricular assist system, per day); and
     CPT code 0472T (Device evaluation, interrogation, and 
initial programming of intraocular retinal electrode array (e.g., 
retinal prosthesis), in person, with iterative adjustment of the 
implantable device to test functionality, select optimal permanent 
programmed values with analysis, including visual training, with review 
and report by a qualified health care professional).
    Response: Based on our review of the predecessor CPT codes for the 
intracardiac ischemia monitoring systems that were in existence from 
July 1, 2012 through December 31, 2017, we found that the service 
described by CPT code 0528T (Programming device evaluation (in person) 
of intracardiac ischemia monitoring system with iterative adjustment of 
programmed values, with analysis, review, and report) was previously 
described by predecessor CPT code 0305T (Programming device evaluation 
(in person) of intracardiac ischemia monitoring system with iterative 
adjustment of programmed values, with analysis, review, and report). 
Similar to predecessor CPT code 0302T, predecessor CPT code 0305T 
became effective July 1, 2012 and was deleted on December 31, 2017. Our 
analysis of the claims data for the service described by CPT code 0305T 
revealed no single claim submitted during CY 2012 through CY 2017. 
Based on input from our medical advisors and our APC assignment for 
predecessor CPT code 0305T to APC 5741, we believe that APC 5741 is the 
appropriate APC assignment for the service described by CPT code 0528T, 
based on similar programming device evaluation codes assigned to this 
APC.
    In summary, after consideration of the public comment we received, 
we are finalizing our proposal, without modification, to assign the 
services described by CPT codes 0525T through 0532T to the final APCs 
listed in Table 28 below. We note that HCPCS code C9750 will be deleted 
December 31, 2018, because it will be replaced with CPT code 0525T, 
effective January 1, 2019. The final CY 2019 payment rate for CPT codes 
0525T through 0532T can be found in Addendum B to this final rule with 
comment period (which is available via the internet on the CMS 
website).
BILLING CODE 4120-01-P

[[Page 58916]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.044

11. Intraocular Retinal Electrode Programming and Reprogramming (APCs 
5742 and 5743)
    As noted in Table 29 below, for CY 2019, we proposed to continue to 
assign the procedure described by CPT code 0472T to APC 5743 (Level 3 
Electronic Analysis of Devices), with a proposed payment rate of 
approximately $280. We also proposed to continue to assign the 
procedure described by CPT code 0473T to APC 5742 (Level 2 Electronic 
Analysis of Devices), with a proposed payment rate of approximately 
$115.
    Comment: One commenter supported CMS' proposal to continue to 
assign the programming services for Argus II, which are described by 
CPT codes

[[Page 58917]]

0472T and 0473T, to APCs 5743 and 5742.
    Response: We appreciate the commenter's support. Based on input 
from our medical advisors, we believe that CPT codes 0472T and 0473T 
are appropriately assigned to APCs 5743 and 5742, respectively, based 
on clinical and resource homogeneity to the other services assigned to 
these APCs.
    Therefore, after consideration of the public comment received, we 
are finalizing our proposal, without modification, to continue to 
assign the procedures described by CPT codes 0472T and 0473T to APCs 
5743 and APC 5742, respectively, for CY 2019. The final APC and status 
indicator assignments are listed in Table 29 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 website).
[GRAPHIC] [TIFF OMITTED] TR21NO18.045

BILLING CODE 4120-01-C
12. Kidney Dilation of Tract (C-APC 5373)
    In Addendum B to the CY 2019 OPPS/ASC proposed rule, we proposed to 
assign the procedure described by CPT code 50436 (Dilation of existing 
tract, percutaneous, for an endourologic procedure including imaging 
guidance (e.g., ultrasound and/or fluoroscopy) and all associated 
radiological supervision and interpretation, with postprocedure tube 
placement, when performed) to C-APC 5373 (Level 3 Urology and Related 
Services), with a proposed payment rate of approximately $1,731. This 
code was listed as 50X39 (the 5-digit CMS placeholder code) in Addendum 
B, with the short descriptor, and in Addendum O, with the long 
descriptor, to the CY 2019 OPPS/ASC proposed rule. We also proposed to 
assign this code to comment indicator ``NP'' in Addendum B to indicate 
that the code is new for CY 2019 with a proposed APC assignment and 
that public comments would be accepted on the proposed APC assignment. 
We note that this code will be effective January 1, 2019.
    Comment: One commenter disagreed with the proposed assignment of 
CPT code 50436 to C-APC 5373 and instead recommended assignment to C-
APC 5374 (Level 3 Urology and Related Services), with a proposed 
payment rate of approximately $2,755, because of the higher resource 
costs associated with the procedure.
    Response: Because CPT code 50436 is a new code for CY 2019, we do 
not have claims data on which to base a payment rate. However, in the 
absence of claims data, we reviewed the clinical characteristics of the 
procedure to determine whether the surgical procedure is similar to 
existing procedures. After review of the procedure and input from our 
clinical advisors, we believe that the procedure described by new CPT 
code 50436 is clinically similar to those procedures assigned to C-APC 
5373. We will reevaluate the APC assignment for the procedure described 
by CPT code 50436 once claims data for this procedure become available. 
We note that as we do every year, we review the APC assignments for all 
services and items paid under the OPPS.
    After consideration of the public comment we received, we are 
finalizing our proposal to assign the procedure described by CPT code 
50436 to C-APC 5373. We refer readers to Addendum B of this final rule 
with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.
13. Intraocular Procedures (APC 5494)
    In prior years, the procedure described by CPT code 0308T 
(Insertion of ocular telescope prosthesis including removal of 
crystalline lens or intraocular lens prosthesis) has been assigned to 
the APC 5495 (Level 5

[[Page 58918]]

Intraocular Procedures) based on its estimated costs. In addition, its 
relative payment weight has been based on its median under our payment 
policy for low-volume device-intensive procedures established in the CY 
2016 OPPS because the APC contained a low volume of claims. The low-
volume device-intensive procedures policy is discussed in more detail 
in section III.C.2. of the proposed rule and this final rule with 
comment period.
    In reviewing the claims data available for the proposed rule for CY 
2019 OPPS ratesetting, we found that there were only two claims 
containing procedures described by CPT code 0308T, with a geometric 
mean of $5,438.99 and a median of $8,237.56. Based on those two claims, 
APC 5495 would have had a proposed geometric mean of $5,438.99 and a 
proposed median of $8,237.56. However, based on its estimated costs in 
the most recently available claims data, we stated in the proposed rule 
that we believe that the procedure described by CPT code 0308T is more 
appropriately placed in the APC 5493, which has a geometric mean cost 
of $9,821.47, which is more comparable to that of the procedure 
described by CPT code 0308T. Therefore, for CY 2019, we proposed to 
reassign the procedure described by CPT code 0308T from APC 5495 to APC 
5493 (Level 3 Intraocular Procedures) and to delete APC 5495. We stated 
that we would continue to monitor the volume of claims reporting a 
procedure described by CPT code 0308T available to us for future 
ratesetting.
    Comment: One commenter requested that the procedure described by 
CPT code 0308T be assigned to a New Technology APC based on the 
proposed low-volume New Technology policy, without requesting a 
specific New Technology APC or cost band. The commenter believed that 
the reasons for developing the low volume New Technology policy are 
consistent with issues related to the procedure described by CPT code 
0308T, including the quality and volume of claims data, and resulting 
cost fluctuation. The commenter noted that because those issues facing 
low-volume procedures would be the same, regardless of whether the 
procedures are assigned to a New Technology or clinical APC, it would 
be appropriate to assign the procedure described by CPT code 0308T to a 
New Technology APC. However, the commenter requested that, if that 
change were not to be made, CMS instead assign the procedure described 
by the CPT code to APC 5495, which was previously for ``Level 5 
Intraocular Procedures'' and that the same smoothing methodology for 
low volume New Technology procedures, which includes use of multiple 
years of claims data, apply to the procedure described by CPT code 
0308T, given its low volume.
    Response: In previous years, the procedure described by CPT code 
0308T was assigned to APC 5495 (Level 5 Intraocular Procedures) using a 
median-based weight under the low-volume device intensive policy. Based 
on the CY 2017 claims data available for ratesetting, in the CY 2019 
OPPS/ASC proposed rule, we proposed to assign the procedure described 
by CPT code 0308T to APC 5493, noting that we would continue to monitor 
the data. In the CY 2019 OPPS final rule claims data, the estimated 
cost of the single claim with CPT code 0308T as the primary service is 
approximately $12,939.75.
    While we appreciate the stakeholder's comments regarding changes in 
estimated costs based on the claims data available for ratesetting, we 
have concerns with establishing a New Technology APC methodology for a 
clinical APC especially in the absence of a New Technology application, 
which is used to evaluate new technology APC requests. We also note 
that the procedure described by CPT code 0308T has historically been 
assigned to a clinical APC beginning with the CY 2013 OPPS.
    Recognizing the estimated cost based on the final rule claims data 
and the commenter's concerns, we believe that the procedure described 
by CPT code 0308T is appropriate for assignment to clinical APC 5494 
(Level 4 Intraocular Procedures). CPT code 0308T has device-intensive 
status based on its device offset percentage and the fact that the APC 
to which the procedure is assigned has fewer than 100 total claims. 
Therefore, the low-volume device intensive policy of using the median 
cost for OPPS ratesetting would apply.
    After consideration of the public comment we received, we are 
modifying our proposal to assign the procedure described by CPT code 
0308T to APC 5493 and instead are assigning the procedure described by 
CPT code 0308T to APC 5494 (Level 4 Intraocular Procedures) for CY 
2019.
14. Magnetocardiography
    As displayed in Table 30 below and in Addendum B to the CY 2019 
OPPS/ASC proposed rule, we proposed to assign the services described by 
CPT codes 0541T and 0542T to status indicator ``E1'' to indicate that 
these codes are not payable by Medicare when submitted on outpatient 
claims (any outpatient bill type) because the services associated with 
these codes are either not covered by any Medicare outpatient benefit 
category, statutorily excluded by Medicare, or not reasonable and 
necessary. The codes were listed as 0X01T and 0X02T (the 5-digit CMS 
placeholder codes), respectively, in Addendum B, with the short 
descriptors, and in Addendum O, with the long descriptors, to the CY 
2019 OPPS/ASC proposed rule. We also assigned these codes to comment 
indicator ``NP'' in Addendum B to indicate that the codes are new for 
CY 2019 and that public comments would be accepted on their proposed 
status indicator assignments. We note that these codes will be 
effective January 1, 2019.
    Comment: One commenter disagreed with the proposed status indicator 
assignment of ``E1'' for CPT codes 0541T and 0542T, and stated that the 
technology was approved by the FDA. The commenter explained that these 
codes describe magnetocardiography (MCG), which is a ``high-fidelity 
biomagnetic imaging technique that utilizes highly sensitive 
magnetometers and a compact shield in order to measure, image and 
analyze the repolarization patterns of the heart.'' The commenter also 
indicated that MCG may be used to replace or avoid the need for 
additional cardiac stress and related testing, myocardial perfusion 
imaging, and/or PET procedures, and rapidly triage patients who present 
to the ED with chest pain or other symptoms of cardiac ischemia.
    Because the technology has been approved by the FDA, the commenter 
requested that CMS assign the procedures described by both CPT codes to 
APC 5593 (Level 3 Nuclear Medicine) or APC 5724 (Level 4 Diagnostic 
Tests and Related Services). Although the commenter requested an 
assignment to either APC 5593 or 5724, the commenter also noted that 
the services described by CPT codes 0541T and 0542T are clinically 
comparable to the services that are assigned to the following three 
APCs:
     APC 5593 (Level 3 Nuclear Medicine), with a proposed 
payment rate of approximately $1,228, which includes--
    [cir] CPT code 78451 (Myocardial perfusion imaging); and
    [cir] CPT code 78452 (Myocardial perfusion imaging)
     APC 5594 (Level 4 Nuclear Medicine), with a proposed 
payment rate of approximately $1,386, which includes--

[[Page 58919]]

    [cir] CPT code 78491 (Positron Emission Tomography (PET) myocardial 
functional imaging); and
    [cir] CPT code 78492 (Positron Emission Tomography (PET) myocardial 
functional imaging)
     APC 5724 (Level 4 Diagnostic Tests and Related Services), 
with a proposed payment rate of approximately $918, which includes--
    [cir] CPT code 95965 (Magnetoencephalography (MEG)); and
    [cir] CPT code 95966 (Magnetoencephalography (MEG))
    In addition to the requested APC assignment, the commenter 
requested that CMS assign the codes status indicator ``S'' (Procedure 
or Service, Not Discounted When Multiple. Paid under OPPS; separate APC 
payment), instead of status indicator ``E1'', similar to the status 
indicator assignment for the comparable codes in APCs 5593, 5594, and 
5724.
    Response: Based on our understanding of the procedure, we found 
that the service associated with these codes are currently in clinical 
trial (Study Title: ``Magnetocardiography Using a Novel Analysis System 
(Cardioflux) in the Evaluation of Emergency Department Observation Unit 
Chest Pain Patients''; ClinicalTrials.gov Identifier: NCT03255772). 
Further review of the clinical trial revealed that the clinical study 
has not yet met CMS' standards for coverage, nor does it appear on the 
CMS Approved IDE List, which can be found at this CMS website: https://www.cms.gov/Medicare/Coverage/IDE/Approved-IDE-Studies.html. Moreover, 
based on our review associated with the technology, we have not found 
evidence of FDA approval or clearance of the Cardioflux System as it 
appears that an application is pending with FDA, even though predicate 
devices have already been approved and are on the market. Because this 
specific MCG technology has not been approved for Medicare coverage or 
cleared by the FDA, we believe that we should continue to assign the 
procedures described by CPT codes 0541T and 0542T to status indicator 
``E1'' for CY 2019. If this technology later meets CMS' standards for 
coverage, we will reassess the APC assignment for the codes in a future 
quarterly update and/or rulemaking cycle.
    Therefore, after consideration of the public comment received, we 
are finalizing our proposal, without modification, for the assignment 
of status indicator ``E1'' to the procedures described by CPT codes 
0541T and 0542T. The final status indicator assignment for both codes 
is listed in Table 30 below. We refer readers to Addendum D1 of this 
final rule with comment period for the complete list of the OPPS 
payment status indicators and their definitions for CY 2019. Addendum 
D1 is available via the internet on the CMS website.
BILLING CODE 4120-01-P

[[Page 58920]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.046

BILLING CODE 4120-01-C
15. Musculoskeletal Procedures (APCs 5111 Through 5116)
    Prior to the CY 2016 OPPS, payment for musculoskeletal procedures 
was primarily divided according to anatomy and the type of 
musculoskeletal procedure. As part of the CY 2016 reorganization to 
better structure the OPPS payments towards prospective payment 
packages, we consolidated those individual APCs so that they became a 
general Musculoskeletal Procedures APC series (80 FR 70397 through 
70398).
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59300), we continued to apply a six-level structure for the 
Musculoskeletal APCs because doing so provided an appropriate 
distinction for resource costs at each level and to provide clinical 
homogeneity. However, we also indicated that we would continue to 
review the structure of these APCs to determine whether additional 
granularity would be necessary.
    While we did not propose any changes to the 2019 OPPS structure of 
the Musculoskeletal Procedures APC series in the CY 2019 OPPS/ASC 
proposed rule, we stated that we recognize that commenters have 
previously expressed concerns regarding the granularity of the current 
APC levels and requested establishment of additional APC levels. 
Therefore, we solicited public comments on the creation of a new APC 
level between the current Level 5 and Level 6 within the 
Musculoskeletal Procedures APC series.

[[Page 58921]]

Table 18 of the proposed rule listed the Musculoskeletal Procedures 
APCs, the HCPCS codes assigned to the APCs, and the proposed APC 
geometric mean cost.
    Comment: Many commenters requested that CMS maintain the current 
six-level APC structure. Some of these commenters stated that the 
current structure provides sufficient granularity in the APCs, while 
other commenters suggested that, because Medicare previously made 
changes to create additional APCs in the Musculoskeletal Procedures APC 
series in the CY 2016 and CY 2017 OPPS, CMS delay any additional 
changes. Some commenters requested that CMS create additional levels 
and assign specific codes to either the new levels or existing levels 
within the relative structure. One commenter requested CMS maintain the 
procedure described by CPT code 27279 (Arthrodesis sacroiliac joint) at 
the highest level APC based on its geometric mean cost, if any 
additional high cost APC level above the current Level 6 were created. 
Another commenter requested that CMS create additional intermediate 
levels between the existing APC Levels 4 and 5 and between Levels 5 and 
6, and assign the procedures described by CPT code 28740 (Fusion of 
foot bones) and CPT code 28297 (Correction hallux valgus) to the new 
APC level between Levels 4 and 5. One commenter requested that, if a 
level were to be created between the current Levels 5 and 6, the 
procedure described by CPT code 27447 (Total knee arthroplasty) be 
assigned to that APC level. Other commenters requested that total knee 
arthroplasty be assigned to APC 1575 (New Technology--Level 38 
($10,001-$15,000)) for CY 2019, which has a payment rate at $12,500 
based on their analysis of the costs of the procedure for only those 
claims that reported certain device costs, rather than using all claims 
to calculate the geometric mean costs of the service.
    Response: We appreciate the commenters' support for maintaining the 
current APC structure. While we have previously stated that we believe 
that the six level APC structure for the Musculoskeletal Procedures APC 
series remains appropriate in providing distinction between resource 
costs at each level and clinical homogeneity (82 FR 59300), in the CY 
2019 proposed rule, we solicited comment on whether additional levels 
might be appropriate based on stakeholder concerns (83 FR 37096). Based 
on that stakeholder input, we will maintain the existing six level 
Musculoskeletal Procedures APC structure for the CY 2019 OPPS. While we 
are not creating additional APC levels in this final rule with comment 
period, we reviewed the APC assignment of individual HCPCS codes that 
commenters requested be reassigned if additional APC levels were 
created to confirm whether their current assignment was appropriate. We 
believe that the APC assignment of CPT code 27279 (Arthrodesis 
sacroiliac joint) to APC 5116, and CPT codes 28740 (Fusion of foot 
bones) and 28297 (Correction hallux valgus) to APC 5114 remain 
appropriate based on their geometric mean costs.
    With regards to the placement of the total knee arthroplasty 
procedure in APC 5115 (Level 5 Musculoskeletal Procedures), we continue 
to believe that C-APC 5115 is an appropriate APC assignment for the 
procedures described by CPT code 27447, which has an estimated 
geometric mean cost of $9,997.45. Further, we note that the 50th 
percentile IPPS payment for total knee arthroplasty procedures without 
major complications or comorbidities (MS-DRG 470) is approximately 
$11,550 for FY 2019. We note that the final CY 2019 payment for New 
Technology APC 1575 is $12,500.50. As previously stated in the CY 2018 
OPPS/ASC final rule with comment period (82 FR 58394 through 59385), we 
would expect that beneficiaries selected for outpatient total knee 
arthroplasty procedures would generally be expected to be less complex 
than those treated as hospital inpatients. Therefore, we do not believe 
that it would be appropriate for the OPPS payment rate to exceed the 
IPPS payment rate for total knee arthroplasty procedures without major 
complications/comorbidities because IPPS cases would generally be 
expected to be more complicated and complex than those performed in the 
hospital outpatient setting.
    We note that we rely on hospitals to bill all HCPCS codes 
accurately in accordance with their code descriptors and CPT and CMS 
instructions, as applicable, and to report charges on claims and 
charges and costs on their Medicare hospital cost reports appropriately 
(77 FR 68324). As we do every year, we will review and evaluate the APC 
groupings based on the latest available data in the next rulemaking 
cycle.
    After consideration of the public comments we received, we are 
finalizing the six level Musculoskeletal Procedures APC structure. We 
also are finalizing the proposed assignments of the procedures 
described by CPT codes 27279 (Arthrodesis sacroiliac joint) to APC 
5116, the procedures described by CPT codes 28740 (Fusion of foot 
bones) and 28297 (Correction hallux valgus) to APC 5114, and the 
procedures described by CPT code 27447 (Total knee arthroplasty) to APC 
5115.
[GRAPHIC] [TIFF OMITTED] TR21NO18.047


[[Page 58922]]


16. Nasal Airway Obstruction Treatment (APC 5164)
    For CY 2019, we proposed to continue to assign the procedures 
described by HCPCS code C9749 (Repair of nasal vestibular lateral wall 
stenosis with implant(s)) to APC 5164 (Level 4 ENT Procedures) with a 
proposed payment rate of approximately $2,241. We note that HCPCS code 
C9749 describes the Latera absorbable implant procedure for nasal 
airway obstruction.
    Comment: One commenter disagreed with the proposed APC assignment 
of the procedure described by HCPCS code C9749 to APC 5164 and 
requested that CMS assign the procedure to New Technology APC 1523 (New 
Technology--Level 23 ($2,501-$3,000)), which had a proposed payment 
rate of approximately $2,751. The commenter stated that the cost for a 
pair of the Latera implants is $1,325, and that the proposed payment 
rate for APC 5164 does not cover the cost of performing the procedure. 
The commenter further stated that information from clinical experts and 
medical directors suggests that the complexity and resources to perform 
the Latera implant procedure are similar to those associated with 
procedures assigned to APC 5165 (Level 5 ENT Procedures).
    Response: In December 2017, CMS received a New Technology APC 
application requesting a new HCPCS code for the Latera implant because, 
according to the applicant, the only available CPT code to report the 
procedure is CPT code 30999 (Unlisted procedure, nose). Based on our 
review of the application, assessment of the procedure, and input from 
our clinical advisors, we established HCPCS code C9749 effective April 
1, 2018. For the April 2018 OPPS Update, we assigned HCPCS code C9749 
to APC 5164 with a payment rate of approximately $2,199. We announced 
this new HCPCS code and APC assignment in the April 2018 OPPS quarterly 
update change request (Transmittal 4005, Change Request 10515, dated 
March 20, 2018). Based on cost information submitted to CMS in the New 
Technology APC application, we assigned the procedure to APC 5164 
rather than New Technology APC 1523. However, based on further 
assessment on the nature of the procedure, and input from public 
commenters and our clinical advisors, we believe that HCPCS code C9749 
should be reassigned to APC 5165 (Level 5 ENT Procedures) to more 
appropriately reflect the resource costs and clinical characteristics 
associated with the Latera implant procedure.
    Therefore, after consideration of the public comment we received, 
we are finalizing our proposal, without modification, to assign the 
procedure described by HCPCS code C9749 from APC 5164 to APC 5165. The 
final payment rate for HCPCS code C9749 can be found in Addendum B to 
this final rule with comment period (which is available via the 
internet on the CMS website).
17. Nerve Procedures and Services (APCs 5431 Through 5432)
    For CY 2019, we proposed to continue the existing two-level 
structure of the Nerve Procedures APCs (APC 5431 through 5432), as 
displayed in Table 32 below and in Addendum A to the CY 2019 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website).
[GRAPHIC] [TIFF OMITTED] TR21NO18.048

    Comment: One commenter requested that CMS create a new modifier to 
identify the performance of continuous nerve block procedures that are 
performed as a secondary procedure, and to allow payment for the 
performance of such procedures, for example, the procedure described by 
CPT code 64416 (Injection, anesthetic agent; brachial plexus, 
continuous infusion by catheter (including catheter placement)), not to 
be packaged if reported in combination with the procedure described by 
CPT code 29827 (Arthroscopy, shoulder, surgical; with rotator cuff 
repair). Instead, the commenter suggested a modifier to allow for 
payment at a full OPPS rate. The commenter noted that continuous nerve 
block procedure codes are assigned to status indicator ``T,'' which 
further provides that payment for the procedures are currently packaged 
when reported in combination with procedures that are assigned to C-
APCs and, therefore, are not separately paid. The commenter stated that 
packaging payment for the certain procedures discourages hospitals from 
using non-opioid postsurgical pain alternative approaches, such as a 
continuous nerve block procedure.
    The commenter further believed that CMS should create a new HCPCS 
code modifier in order to track, research, and identify the use of non-
opioid pain management alternatives that are resulting in positive 
beneficiary health care impacts and outcomes, which are reducing opioid 
use and combatting the opioid crisis. Additionally, the commenter 
included a list of applicable continuous nerve block procedure codes 
(shown in the table below) to which the commenter suggested that a 
HCPCS modifier could be appended to indicate that the procedure would 
receive separate payment.

[[Page 58923]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.049

    Response: We appreciate the commenter's suggestion to create a new 
HCPCS modifier to identify the continuous nerve block procedures when 
performed as a secondary procedure, as well as recommending the list of 
CPT codes that should be considered for such inclusion for separate 
payment. However, payment for these continuous nerve block procedures 
is currently packaged under the OPPS because they are adjunctive to the 
primary service rendered and, therefore, represent components of a 
complete service. Therefore, at this time we will continue to package 
payment for these services, and consider the creation of a new HCPCS 
modifier and separate payment for such non-opioid alternatives 
approaches in future rulemaking.
    Comment: One commenter suggested that CMS restructure the two-level 
Nerve Procedure APCs (APCs 5431 and 5432) to provide more payment 
granularity for the types of procedures included in the APCs by 
creating a third level. The commenter believed that there is a 
substantial payment differential between the procedures assigned to 
Level 1 Nerve Procedures APC 5431 and Level 2 Nerve Procedures APC 
5432, and that the current payment for some of these procedures does 
not adequately cover the cost of providing the services. The commenter 
further stated that, as an example, the procedures described by CPT 
codes 64633 (Destruction by neurolytic agent, paravertebral facet joint 
nerve(s), with imaging guidance (fluoroscopy or CT); cervical or 
thoracic, single facet joint) and 64635 (destruction by neurolytic 
agent paravertebral facet joint nerve(s), with imaging guidance 
(fluoroscopy or CT); lumbar or sacral, single facet joint), which are 
assigned to APC 5431 with a proposed payment rate of approximately 
$1,644, while the geometric means for each of the procedures described 
by CPT codes 64633 and 64635 are $1,482 and $1,729, respectively. The 
commenter recommended a potential geometric mean cost for a potential 
three-level APC structure within the Nerve Procedures APCs and 
submitted a three-level APC structure, along with estimated payment 
rates, which is shown in the table below.
[GRAPHIC] [TIFF OMITTED] TR21NO18.050

    The commenter also recommended that CMS develop two new HCPCS G-
codes to describe the performance of radiofrequency nerve ablation 
procedures. The commenter suggested that one of the G-codes could be 
created to describe procedures involving the genicular nerve, and the 
other G-code could be created to describe procedures

[[Page 58924]]

involving the sacroiliac joint. The commenter further recommended that 
both of these G-codes be created to describe procedures describing non-
opioid treatment alternatives for chronic pain management, and to 
assign both of these newly created G-codes to Level 2 Nerve Procedures 
APC 5232 based on its recommended three-level APC structure, with an 
estimated payment rate of $2,431. The commenter was aware that Category 
I CPT codes are in development, but will not be ready for release until 
CY 2020 at the earliest. Therefore, the commenter requested that CMS 
create such G-codes in order to allow for physicians and hospitals to 
report the performance of the procedures and use of the approach, and 
to be paid for utilization of these procedures in the interim. The 
commenter supplied a suggested descriptor for the G-code for the 
genicular nerve as: Radiofrequency nerve ablation; genicular nerves, 
including imaging guidance, when performed. The commenter also supplied 
a suggested descriptor for the G-code for the sacroiliac joint as: 
Radiofrequency never ablation; sacroiliac joint, including imaging 
guidance, when performed.
    Response: We appreciate the commenter's suggestions. However, at 
this time, we believe that the current two-level structure Nerve 
Procedures APCs provide an appropriate distinction between the resource 
costs at each level and clinical homogeneity. We will continue to 
review the APCs' structure to determine if additional granularity is 
necessary for this APC family in future rulemaking. In addition, we 
believe that more analysis of such groupings is necessary before 
adopting such change.
    With regard to the request to establish new HCPCS G-codes, although 
new CPT codes are in development for release for the CY 2020 update, we 
note that it does not appear that a request for new temporary Category 
III codes was made for CY 2019. Nonetheless, we intend to take the 
commenter's request for new HCPCS G-codes under advisement.
    Therefore, after consideration of the public comment received, we 
are finalizing our CY 2019 Nerve Procedures APCs two-level structure, 
as proposed. We refer readers to Addendum A to this final rule with 
comment period for the complete list of APCs and their payment rates. 
In addition, we refer readers to Addendum B to this final rule with 
comment period for the payment rates for all codes reported under the 
OPPS. Both Addendum A and Addendum B are available via the internet on 
the CMS website.
18. Radiology and Procedures and Services
a. Imaging Procedures and Services (APCs 5521 Through 5524 and 5571 
Through 5573)
    Section 1833(t)(2)(G) of the Act requires the Secretary to create 
additional groups of covered OPD services that classify separately 
those procedures that utilize contrast agents from those procedures 
that do not utilize contrast agents. In CY 2016, as a part of our 
comprehensive review of the structure of the APCs and procedure code 
assignments, we restructured the APCs that contain imaging services (80 
FR 70392). The purpose of this restructuring was to more appropriately 
reflect the resource costs and clinical characteristics of the services 
classified within the Imaging APCs. The restructuring of the Imaging 
APCs resulted in broader groupings that removed the excessive 
granularity of grouping imaging services according to organ or 
physiologic system, which did not necessarily reflect either 
significant differences in resources or how these services are 
delivered in the hospital outpatient setting. In CY 2017, in response 
to public comments on the CY 2017 OPPS/ASC proposed rule, we further 
consolidated the Imaging APCs from 17 APCs in CY 2016 to 7 APCs in CY 
2017 (81 FR 79633). These included four Imaging without Contrast APCs 
and three Imaging with Contrast APCs.
    For CY 2018, we proposed to establish a new Level 5 Imaging without 
Contrast APC to more appropriately group certain imaging services with 
higher resource costs and stated that our latest claims data supported 
splitting the CY 2017 Level 4 Imaging without Contrast APC into two 
APCs such that the Level 4 Imaging without Contrast APC would include 
high frequency, low-cost services and the proposed Level 5 Imaging 
without Contrast APC would include low frequency, high-cost services. 
Therefore, for CY 2018, we proposed to add a fifth level within the 
Imaging without Contrast APCs (82 FR 33608). However, based on public 
comments, we did not finalize this proposal. In general, commenters 
disagreed with CMS' proposal to add a fifth level within the Imaging 
without Contrast APC series because they believed that the addition of 
a fifth level would reduce payment for several imaging services, 
including vascular ultrasound procedures (82 FR 59309 through 59311). 
Commenters also noted that the lower payment rates under the OPPS would 
also apply under the PFS.
    For the CY 2019 OPPS/ASC proposed rule (83 FR 37096 through 37097), 
we reviewed the services assigned to the seven imaging APCs listed in 
Table 17 of the proposed rule. Specifically, we evaluated the resource 
costs and clinical coherence of the procedures associated with the four 
levels of Imaging without Contrast APCs and the three levels of Imaging 
with Contrast APCs, as well as identified for correction any 2 times 
rule violations, to the extent feasible. Based on the geometric mean 
cost for each APC, which was listed in Table 17 of the proposed rule, 
for CY 2019, we proposed to maintain the seven Imaging APCs, which 
consist of four levels of Imaging without Contrast APCs and three 
levels of Imaging with Contrast APCs, and to make minor reassignments 
to the HCPCS codes within this series to resolve or mitigate any 
violations of the 2 times rule, or both.
    We invited public comments on our proposal. Moreover, we 
specifically expressed an interest in receiving public comments and 
recommendations on the proposed HCPCS code reassignments associated 
with each of the seven Imaging APCs. We referred readers to Addendum B 
to the proposed rule (which is available via the internet on the CMS 
website) for the proposed list of specific codes that would be 
reassigned to each Imaging APC.
    Comment: Commenters generally agreed with CMS' proposal to maintain 
the Imaging APCs: Four levels of Imaging without Contrast APCs and 
three levels of Imaging with Contrast APCs. The commenters stated that 
maintaining the current Imaging APC structure would provide more 
stability for these services and would allow for cost trends to be 
assessed over time. Several of these commenters believed that the cost 
data for the procedures within these APCs have been consistent for many 
years and cautioned CMS against changing payment for services assigned 
to these APCs. Commenters recommended that if CMS believes any revision 
to the current APCs is necessary, the revisions be considered for 
future rulemaking and be subject to review and comment from 
stakeholders, in order to continue to maintain stability and sufficient 
payment and in order for hospitals to be able to continue to provide 
these services.
    Response: We appreciate the commenters' support for maintaining the 
seven Imaging APCs consisting of four levels of Imaging without 
Contrast APCs and three levels of Imaging with Contrast APCs.
    Comment: One commenter supported CMS' proposal to maintain the 
Level 3 Imaging with Contrast APC (APC 5573) as proposed for CY 2019. 
The commenter further stated that the

[[Page 58925]]

proposed payment rate for services in this APC appropriately reflects 
use of contrast agents and that a lower payment rate may lead to lower 
utilization of medically necessary contrast agents and may lead to use 
of more costly advanced imaging modalities such as cardiac MRI and 
nuclear perfusion studies, which will increase overall cost.
    Response: As noted in the CY 2019 OPPS/ASC proposed rule (83 FR 
37096 through 37097), we reviewed the resource costs and clinical 
coherence of the procedures associated with the four levels of Imaging 
without Contrast APCs and the three levels of Imaging with Contrast 
APCs, as well as reviewed any 2 times rule violations. Based on this 
review, we decided to maintain the seven Imaging APCs structure based 
on the clinical similarities and resource costs and in light of 
commenters' support of this proposal.
    Comment: One commenter noted the lack of payment stability for the 
procedure described by CPT code 93307 (Echocardiography, transthoracic, 
real-time with image documentation (2d), includes M-mode recording, 
when performed, complete, without spectral or color Doppler 
echocardiography). The commenter noted that CMS proposed to reassign 
the procedure described by CPT code 93307 to APC 5523, and that, in CY 
2018, this code was assigned to APC 5524. The commenter stated that the 
reassignment of CPT code 93307 to APC 5523 is inappropriate because it 
is not similar to the other procedures in that APC in regard to either 
clinical or resource use, and would result in a 52-percent decrease in 
payment for CY 2019 compared to the CY 2018 payment rate.
    Response: We acknowledge the commenter's concern. However, we 
believe that the assignment of the procedure described by CPT code 
93307 to APC 5523 is more appropriate based on clinical similarities 
and resource use. Specifically, we note that, based on the data 
available for this final rule with comment period, the lowest 
significant procedure geometric mean cost within APC 5523 is HCPCS code 
76000 (Fluoroscopy (separate procedure), up to 1 hour physician or 
other qualified health care professional time), with a geometric mean 
of $174.34, and the highest significant procedure cost within APC 5523 
is HCPCS code 74455 (Urethrocystography, voiding, radiological 
supervision and interpretation), with a geometric mean cost of $358.11. 
The geometric mean cost of CPT 93307 is $352.15, which is similar to 
that of other procedures assigned to APC 5523.
    Furthermore, the highest significant cost for a procedure within 
APC 5524 is for the procedure described by HCPCS 93312 
(Echocardiography, transesophageal, real-time with image documentation 
(2d) (with or without m-mode recording); including probe placement, 
image acquisition, interpretation and report), which has a geometric 
mean cost of $854.45. This proposed reassignment would have a greater 
impact on the 2 times violation by being over the violation limit by 
approximately $138, compared to the assignment of the CPT code to APC 
5523, which also has a 2 times violation, but to a lesser extent (that 
is, approximately $31). Therefore, based on this information, we are 
finalizing the proposed structure of APC 5523, with assignment of the 
CPT codes as proposed in the CY 2019 OPPS/ASC proposed rule. We will 
continue to monitor clinical homogeneity and resource costs within 
these APCs to identify any payment changes that may be warranted in 
future rulemaking.
    Comment: One commenter disagreed with the proposal to maintain the 
procedure described by HCPCS code G0297 (Low dose CT for lung cancer 
screening) in APC 5521 and believed the calculation of the geometric 
mean using the CT cost center does not sufficiently estimate costs, 
although CMS has 61,505 single claims to calculate the geometric mean 
cost for the procedure described by HCPCS code G0297. Based on its 
analysis, the commenter believed that using the diagnostic radiology 
cost center, which would result in estimated costs of $96.55 for the 
service, is more appropriate than the geometric mean cost of using the 
CT cost center, which is $37.96. The commenter believed that use of the 
CT cost centers is depressing payment for imaging services and believed 
all imaging studies should use the diagnostic radiology cost centers 
instead.
    Response: We believe that the procedure described by HCPCS code 
G0297 is appropriately assigned to APC 5521, based on its estimated 
cost relative to that of the other procedures in the APC. We believe 
that the manner in which we establish the geometric mean for estimating 
service costs for the Imaging APCs is appropriate. As part of changes 
to establish more accurate cost reporting, we developed the CT, MRI, 
and Cardiac Catherization cost centers in the CMS 2552-10 form. Since 
the CY 2014 OPPS, in which we first included those cost centers for 
ratesetting, we have included a methodology that removes cost data from 
providers reporting the standard CT and MRI cost centers using ``square 
feet'' as the cost allocation statistic. We continue to believe this is 
appropriate as discussed in section II.A.1.b. of this final rule with 
comment period. However, we will continue to monitor payment for these 
imaging services and will consider the most appropriate methodology for 
ratesetting for such services in future rulemaking.
    Additionally, we refer readers to the Medicare CY 2019 OPPS Final 
Rule Claims Accounting narrative for additional details regarding the 
calculation of the geometric mean costs.
    Comment: One commenter expressed concern regarding payment 
stability for cardiac magnetic imaging with contrast services, 
specifically cardiac magnetic resonance imaging (MRI) for morphology 
with dye (the procedure described by CPT code 75561 within APC 5572). 
The commenter was concerned that the proposed payment for this service 
is set to decline by 15 percent from the CY 2018 payment rate and 
believed that this would threaten hospitals' ability to maintain 
equipment, supplies, and agents used for these services. The commenter 
requested that CMS continue to monitor payment for cardiac MR services, 
specifically the procedure described by CPT code 75561. The commenter 
suggested that CMS study how best to assign low volume procedures to an 
APC.
    Response: Our analysis of the final rule updated claims data 
revealed a geometric mean cost of approximately $416.84 for CPT code 
75561 based on 8,248 single claims out of 15,022 total claims. The 
geometric mean cost for APC 5572 is approximately $390. After reviewing 
the procedures assigned to APC 5572, we believe that the geometric mean 
cost for the procedure described by CPT code 75561 indicates that it is 
appropriately assigned to APC 5572 based on its clinical homogeneity 
and resource costs. As we do each year, we will continue to review the 
APC assignments for all services and items paid under the OPPS.
    Comment: One commenter expressed concern regarding the payment 
amount for the procedure described by CPT code 75574 (Computed 
tomographic angiography, heart, coronary arteries and bypass grafts 
(when present), with contrast material, including 3d image 
postprocessing (including evaluation of cardiac structure and 
morphology, assessment of cardiac function, and evaluation of venous 
structures, if performed)) within APC 5571. Specifically, the commenter 
noted a 20-percent reduction from CY 2018 to CY 2019 within this APC. 
The commenter stated that the procedure described by

[[Page 58926]]

CPT code 75574 should be considered a low-volume service compared to 
other services within the APC and that high-volume codes within this 
APC are diluting the effect of the procedure described by CPT code 
75574 on the APC payment rate. As a result, the commenter requested 
that CMS study how the APC structure could be modified to define low 
volume services and foster payment adequacy for low-volume codes such 
as CPT code 75574.
    Response: We acknowledge the commenter's concerns regarding payment 
for CPT code 75574. At this point, we do not believe we have the 
necessary data to finalize a change based on the lack of information 
that the payment is insufficient. However, we will take under 
advisement and consider studying the impact of the APC structures on 
services that make up lower volume HCPCS and CPT codes in comparison to 
other services in higher volume HCPCS and CPT codes within an APC in 
future rulemaking. We remind hospitals that every year, we review the 
APC assignments for all services and items paid under the OPPS. We will 
reevaluate the APC assignment for the service described by CPT code 
75574 for next year's rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the existing levels of the Imaging 
APCs, which consist of four levels of Imaging without Contrast APCs and 
three levels of Imaging with Contrast APCs. Table 33 below compares the 
CY 2018 and CY 2019 geometric mean costs for the imaging APCs. We refer 
readers to Addendum B to this final rule with comment period for the 
payment rates for all codes reported under the OPPS. In addition, we 
refer readers to Addendum D1 to this final rule with comment period for 
the status indicator meanings for all codes reported under the OPPS. 
Both Addendum B and Addendum D1 are available via the internet on the 
CMS website.
[GRAPHIC] [TIFF OMITTED] TR21NO18.051

b. Non-Ophthalmic Fluorescent Vascular Angiography (APC 5572)
    As listed in Addendum B of the CY 2019 OPPS/ASC proposed rule, we 
proposed to continue to assign the procedure described by HCPCS code 
C9733 to APC 5523 (Level 3 Imaging without Contrast) with a proposed 
payment rate of approximately $232. We also proposed to maintain the 
status indicator assignment of ``Q2'' (T-packaged) to indicate that 
payment for the service is conditionally packaged when performed in 
conjunction with other procedures on the same day but paid separately 
when performed as a stand-alone service.
    Comment: One commenter stated that HCPCS code C9733 describes a 
procedure that includes disposable components and a contrast agent 
(indocyanine green) that cost hospitals approximately $455. 
Consequently, the commenter disagreed with the proposed APC assignment 
of this service to APC 5523 because the APC payment rate only covers 50 
percent of the hospital costs for the procedure. In addition, the 
commenter believed that hospitals are underreporting the costs for the 
procedure described by HCPCS code C9733 based on its review of the CMS 
cost file which showed a geometric mean cost of $252.43, which is below 
the cost of the supplies associated with this procedure. The commenter 
suggested that hospitals may not be reporting this code when performed 
with an outpatient visit because payment for the service described by 
HCPCS code C9733 is conditionally packaged. Because of the perceived 
underreporting, the commenter requested that CMS provide instructions 
to hospitals in an upcoming MLN Matters article on appropriate billing 
for the procedure described by HCPCS code C9733.
    Response: Based on our review of the CY 2019 final rule claims 
data, the procedure described by HCPCS code C9733 has a geometric mean 
cost of approximately $250 based on 173 single claims (out of 982 total 
claims). Because this procedure involves the use of a contrast agent, 
we believe that a reassignment to one of the existing Imaging with 
Contrast APCs would be more appropriate for HCPCS code C9733. 
Specifically, we believe that a reassignment to APC 5572 (Level 2 
Imaging with Contrast), with a geometric mean cost of approximately 
$389 is appropriate. We believe this reassignment will improve clinical 
homogeneity and align the resource costs of the service described by 
HCPCS code C9733 with those of imaging with contrast procedures 
assigned to APC 5572.
    In addition, with regard to the comment that hospitals underreport 
the procedure described by HCPCS code C9733, based on our analysis of 
the CY 2019 hospital outpatient claims data used for this final rule 
with comment period, we are unable to determine whether hospitals are 
underreporting the procedure. It is generally not our policy to judge 
the accuracy of hospital coding and charging for purposes of 
ratesetting. We rely on hospitals to accurately report the use of HCPCS 
codes in accordance with their code descriptors and CPT and CMS 
instructions, and to report services on

[[Page 58927]]

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. In addition, we state in Chapter 4 of the Medicare Claims 
Processing Manual that ``it is extremely important that hospitals 
report all HCPCS codes consistent with their descriptors; CPT and/or 
CMS instructions and correct coding principles, and all charges for all 
services they furnish, whether payment for the services is made 
separately paid or is packaged'' to enable CMS to establish future 
ratesetting for OPPS services.''
    After consideration of the public comment received, we are 
finalizing our proposal with modification. Specifically, we are 
reassigning the procedure described by HCPCS code C9733 to APC 5572 
instead of APC 5523, based on its clinical and resource homogeneity to 
the other procedures assigned to APC 5572. We refer readers to Addendum 
B to this final rule with comment period for the payment rates for all 
codes reportable under the OPPS. Addendum B is available via the 
internet on the CMS website.
19. Remote Physiologic Monitoring (APCs 5012 and 5741)
    As displayed in Table 34 below and in Addendum B to the CY 2019 
OPPS/ASC proposed rule, we proposed to assign the procedure described 
by CPT code 99453 to APC 5012 (Clinic Visits and Related Services) with 
a proposed payment rate of approximately $116. We also proposed to 
assign the procedure described by CPT code 99454 to APC 5741 (Level 1 
Electronic Analysis of Devices) with a proposed payment rate of 
approximately $37. The long descriptors for CPT codes 99453 and 99454 
can be found in Table 34 below. The codes were listed as 990X0 and 
990X1 (the 5-digit CMS placeholder codes), respectively, in Addendum B, 
with short descriptors, and in Addendum O, with long descriptors, to 
the CY 2019 OPPS/ASC proposed rule. 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 2019 with proposed APC assignments, and 
that public comments would be accepted on their proposed APC 
assignments. We note that these codes will be effective January 1, 
2019.
    Comment: One commenter supported the APC assignments for both CPT 
codes 99453 and 99454 and requested that CMS finalize the APC 
assignments for CY 2019.
    Response: We appreciate the commenter's support. Based on input 
from our medical advisors, we believe that procedures described by CPT 
codes 99453 and 99454 are appropriately assigned in APCs 5012 and 5741, 
respectively, based on clinical and resource homogeneity to the other 
services assigned to these APCs.
    Therefore, after consideration of the public comment received, we 
are finalizing our proposal without modification for the procedures 
described by CPT codes 99453 and 99454. The final APC and status 
indicator assignments are listed in Table 34 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 website).
[GRAPHIC] [TIFF OMITTED] TR21NO18.052


[[Page 58928]]


20. Sclerotherapy (APC 5054)
    As displayed in Table 35 below and in Addendum B of the CY 2019 
OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 
36465 and 36466 to APC 5054 (Level 4 Skin Procedures), with a proposed 
payment rate of approximately $1,565.
    Comment: One commenter disagreed with the proposed assignment of 
the procedures described by CPT codes 36465 and 36466 to APC 5054 and 
requested a reassignment to APC 5183 (Level 3 Vascular Procedures), 
which had a proposed payment rate of approximately $2,648. The 
commenter stated that the per-procedure cost for the Varithena foam 
sclerosant used in the procedure is $1,064. The commenter stated that 
APC 5183 is more clinically appropriate and reflects the resources 
required to perform the procedure. Specifically, the commenter 
indicated that the procedures described by CPT codes 36465 and 36466 
share similar clinical and resource characteristics to the following 
surgical procedures that are assigned to APC 5183:
     CPT code 36473 (Endovenous ablation therapy of incompetent 
vein, extremity, inclusive of all imaging guidance and monitoring, 
percutaneous, mechanochemical; first vein treated);
     CPT code 36475 (Endovenous ablation therapy of incompetent 
vein, extremity, inclusive of all imaging guidance and monitoring, 
percutaneous, radiofrequency; first vein treated); and
     CPT code 36478 (Endovenous ablation therapy of incompetent 
vein, extremity, inclusive of all imaging guidance and monitoring, 
percutaneous, laser; first vein treated).
    Response: Based on input from our clinical advisors, we believe 
that the procedures described by CPT codes 36465 and 36466 are 
clinically similar to the procedures assigned to APC 5054. We do not 
believe that the resources used for the procedures described by CPT 
codes 36465 and 36466 are comparable to the procedures described by CPT 
codes 36473, 36475, and 36478, which are assigned to C-APC 5183. 
Consequently, we believe that APC 5054 appropriately reflects the 
resources and clinical characteristics associated with the procedures 
described by CPT codes 36465 and 36466. We note that the geometric mean 
cost for APC 5054 is approximately $1,562, which exceeds the cost of 
the Varithena foam sclerosant (as reported by the commenter) used in 
the procedure.
    Therefore, after consideration of the public comment received, we 
are finalizing our proposal without modification for assignment of the 
procedures described by CPT codes 36465 and 36466 to APC 5054. The 
final APC and status indicator assignments are listed in Table 35 
below. As we do every year, we review the APC assignments for all 
services and items paid under the OPPS. We will reassess the APC 
assignment for the procedures described by CPT codes 36465 and 36466 
for the CY 2020 rulemaking. We refer readers to Addendum B to this 
final rule with comment period for the payment rates for all codes 
reportable under the OPPS. Addendum B is available via the internet on 
the CMS website.
[GRAPHIC] [TIFF OMITTED] TR21NO18.053


[[Page 58929]]



IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    Under section 1833(t)(6)(B)(iii) of the Act, the period for which a 
device category eligible for transitional pass-through payments under 
the OPPS can be in effect is at least 2 years but not more than 3 
years. Prior to CY 2017, our regulation at 42 CFR 419.66(g) provided 
that this pass-through payment eligibility period began on the date CMS 
established a particular transitional pass-through category of devices, 
and we based the pass-through status expiration date for a device 
category on the date on which pass-through payment was effective for 
the category. In the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79654), in accordance with section 1833(t)(6)(B)(iii)(II) of the 
Act, we amended Sec.  419.66(g) to provide that the pass-through 
eligibility period for a device category begins on the first date on 
which pass-through payment is made under the OPPS for any medical 
device described by such category.
    In addition, prior to CY 2017, our policy was to propose and 
finalize the dates for expiration of pass-through status for device 
categories as part of the OPPS annual update. This means that device 
pass-through status would expire at the end of a calendar year when at 
least 2 years of pass-through payments have been made, regardless of 
the quarter in which the device was approved. In the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79655), we changed our policy to 
allow for quarterly expiration of pass-through payment status for 
devices, beginning with pass-through devices approved in CY 2017 and 
subsequent calendar years, to afford a pass-through payment period that 
is as close to a full 3 years as possible for all pass-through payment 
devices. We refer readers to the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79648 through 79661) for a full discussion of the 
changes to the device pass-through payment policy. 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).
b. Expiration of Transitional Pass-Through Payments for Certain Devices
    As stated earlier, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2 years, but not more 
than 3 years. There currently are no device categories eligible for 
pass-through payment.
2. New Device Pass-Through Applications
a. Background
    Section 1833(t)(6) of the Act provides for pass-through payments 
for devices, and section 1833(t)(6)(B) of the Act requires CMS to use 
categories in determining the eligibility of devices for pass-through 
payments. 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 (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 meet 
another appropriate FDA exemption; and the pass-through payment 
application 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; (2) the device is determined to be 
reasonable and necessary for the diagnosis or treatment of an illness 
or injury or to improve the functioning of a malformed body part, as 
required by section 1862(a)(1)(A) of the Act; and (3) the device is an 
integral part of the service furnished, is used for one patient only, 
comes in contact with human tissue, and is surgically implanted or 
inserted (either permanently or temporarily), or applied in or on a 
wound or other skin lesion. In addition, according to Sec.  
419.66(b)(4), a device is not eligible to be considered for device 
pass-through payment if it is any of the following: (1) 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 (2) 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 new category of pass-through payment 
devices should be established. The device to be included in the new 
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.  419.66(d) by 
demonstrating: (1) The estimated average reasonable costs of devices in 
the category exceeds 25 percent of the applicable APC payment amount 
for the service related to the category of devices; (2) the estimated 
average reasonable cost of the devices in the category exceeds the cost 
of the device-related portion of the APC payment amount for the related 
service by at least 25 percent; and (3) the difference between the 
estimated average reasonable cost of the devices in the category and 
the portion of the APC payment amount for the device exceeds 10 percent 
of the APC payment amount for the related service (with the exception 
of brachytherapy and temperature-monitored cryoblation, which are 
exempt from the cost requirements as specified at Sec.  419.66(c)(3) 
and (e)); 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

[[Page 58930]]

devices in a previously established category or other available 
treatment.
    Beginning in CY 2016, we changed our device pass-through evaluation 
and determination process. Device pass-through applications are still 
submitted to CMS through the quarterly subregulatory process, but the 
applications will be subject to notice-and-comment rulemaking in the 
next applicable OPPS annual rulemaking cycle. Under this process, all 
applications that are preliminarily 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. Under this notice-and-comment process, 
applicants may submit new evidence, such as clinical trial results 
published in a peer-reviewed journal or other materials 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 (80 FR 70417 through 70418).
    More details on the requirements for device pass-through payment 
applications are included on the CMS website in the application form 
itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the 
``Downloads'' section. In addition, CMS is amenable to meeting with 
applicants or potential applicants to discuss research trial design in 
advance of any device pass-through application or to discuss 
application criteria, including the substantial clinical improvement 
criterion.
b. Applications Received for Device Pass-Through Payment for CY 2019
    We received seven applications by the March 1, 2018 quarterly 
deadline, which was the last quarterly deadline for applications to be 
received in time to be included in the CY 2019 OPPS/ASC proposed rule. 
We received four of the applications in the second quarter of 2017, one 
of the applications in the third quarter of 2017, and two of the 
applications in the first quarter of 2018. None of the seven 
applications were approved for device pass-through payment during the 
quarterly review process.
    Applications received for the later deadlines for the remaining 
2018 quarters (June 1, September 1, and December 1), if any, will be 
presented in the CY 2020 OPPS/ASC proposed rule. We note that the 
quarterly application process and requirements have not changed in 
light of the addition of rulemaking review. Detailed instructions on 
submission of a quarterly device pass-through payment application are 
included on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf. A 
discussion of the seven applications received by the March 1, 2018 
deadline is presented below, as detailed in the CY 2019 OPPS/ASC 
proposed rule (83 FR 37098 through 37107).
(1) AquaBeam System
    PROCEPT BioRobotics Corporation submitted an application for a new 
device category for transitional pass-through payment status for the 
AquaBeam System. The AquaBeam System is intended for the resection and 
removal of prostate tissue in males suffering from lower urinary tract 
symptoms (LUTS) due to benign prostatic hyperplasia (BPH). The 
applicant stated that this is a very common condition typically 
occurring in elderly men. The clinical symptoms of this condition can 
include diminished urinary stream and partial urethral obstruction.\16\ 
According to the applicant, the AquaBeam system resects the prostate to 
relieve symptoms of urethral compression. The resection is performed 
robotically using a high velocity, nonheated sterile saline water jet 
(in a procedure called Aquablation). The applicant stated that the 
AquaBeam System utilizes real-time intra-operative ultrasound guidance 
to allow the surgeon to precisely plan the surgical resection area of 
the prostate and then the system delivers Aquablation therapy to 
accurately resect the obstructive prostate tissue without the use of 
heat. The materials submitted by the applicant state that the AquaBeam 
System consists of a disposable, single-use handpiece as well as other 
components that are considered capital equipment.
---------------------------------------------------------------------------

    \16\ Chungtai B. Forde JC. Thomas DDM et al. Benign Prostatic 
Hyperplasia. Nature Reviews Disease Primers 2 (2016) article 16031.
---------------------------------------------------------------------------

    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the AquaBeam System is integral to the 
service provided, is used for one patient only, comes in contact with 
human skin, and is surgically implanted or inserted (either permanently 
or temporarily). The applicant also claimed the AquaBeam System meets 
the device eligibility requirements of Sec.  419.66(b)(4) because it is 
not an instrument, apparatus, implement, or items for which 
depreciation and financing expenses are recovered, and it is not a 
supply or material furnished incident to a service. However, in the CY 
2000 interim final rule with comment period (65 FR 67804 through 
67805), we explained how we interpreted Sec.  419.43(e)(4)(iv). We 
stated that we consider a device to be surgically implanted or inserted 
if it is surgically inserted or implanted via a natural or surgically 
created orifice, or inserted or implanted via a surgically created 
incision. We also stated that we do not consider an item used to cut or 
otherwise create a surgical opening to be a device that is surgically 
implanted or inserted. We consider items used to create incisions, such 
as scalpels, electrocautery units, biopsy apparatuses, or other 
commonly used operating room instruments, to be supplies or capital 
equipment, not eligible for transitional pass-through payments. We 
stated that we believe the function of these items is different and 
distinct from that of devices that are used for surgical implantation 
or insertion. Finally, we stated that, generally, we would expect that 
surgical implantation or insertion of a device occurs after the surgeon 
uses certain primary tools, supplies, or instruments to create the 
surgical path or site for implanting the device. In the CY 2006 final 
rule with comment period (70 FR 68629 and 68630), we adopted as final 
our interpretation that surgical insertion or implantation criteria 
include devices that are surgically inserted or implanted via a natural 
or surgically created orifice, as well as those devices that are 
inserted or implanted via a surgically created incision. We reiterated 
that we maintain all of the other criteria in Sec.  419.66 of the 
regulations, namely, that we do not consider an item used to cut or 
otherwise create a surgical opening to be a device that is surgically 
implanted or inserted. We invited public comments on whether the 
AquaBeam System meets the eligibility criteria at Sec.  419.66(b).
    Comment: Commenters, including the manufacturer of AquaBeam and 
stakeholders, believed that the AquaBeam System met the eligibility 
criteria at Sec.  419.66(b).
    Response: We appreciate the commenters' input. However, we do not 
believe that the AquaBeam device meets

[[Page 58931]]

the eligibility criteria described at Sec.  419.66(b). Specifically, we 
do not believe that the device is surgically implanted or inserted. As 
stated earlier, we have described in previous rulemaking (65 FR 67804 
through 67805 and 70 FR 68329 through 68630) how we interpret the 
surgical insertion or implantation criteria, and we do not believe that 
the use of the Aquabeam device is consistent with that interpretation; 
namely, that we do not consider an item used to cut or otherwise create 
a surgical opening to be a device that is surgically implanted or 
inserted (70 FR 68630). Because we have determined that the AquaBeam 
device does not meet the basic eligibility criterion for transitional 
pass-through payment status, we have not evaluated this product to 
determine whether it meets the other criteria required for transitional 
pass-through payment for devices; that is the newness criterion, the 
substantial clinical improvement criterion, and the cost criterion.
    After consideration of the public comments we received, we are not 
approving device pass-through payment status for the AquaBeam System 
for CY 2019.
(2) BioBag[supreg] (Larval Debridement Therapy in a Contained Dressing)
    BioMonde US, LLC resubmitted an application for a new device pass-
through category for the BioBag[supreg] (larval debridement therapy in 
a contained dressing), hereinafter referred to as the BioBag[supreg]. 
The application submitted contained similar information to the previous 
application received in March 2016 that was evaluated in the CY 2017 
OPPS/ASC final rule with comment period (81 FR 79650). The only new 
information provided by the applicant were additional studies completed 
since the original application addressing the substantial clinical 
improvement criterion.
    According to the applicant, the BioBag[supreg] is a biosurgical 
wound treatment (``maggot therapy'') consisting of disinfected, living 
larvae (Lucilia sericata) in a polyester net bag; the larvae remove 
dead tissue from wounds. The BioBag[supreg] is indicated for 
debridement of nonhealing necrotic skin and soft tissue wounds, 
including pressure ulcers, venous stasis ulcers, neuropathic foot 
ulcers, and nonhealing traumatic or postsurgical wounds. Debridement, 
which is the action of removing devitalized tissue and bacteria from a 
wound, is required to treat or prevent infection and to allow the wound 
to progress through the healing process. This system contains 
disinfected, living larvae that remove the dead tissue from wounds and 
leave healthy tissue undisturbed. The larvae are provided in a sterile 
polyester net bag, available in different sizes. The only other similar 
product is free-range (that is, uncontained) larvae. Free-range larvae 
are not widely used in the United States because application is time 
consuming, there is a fear of larvae escaping from the wound, and there 
are concerns about proper and safe handling of the larvae. The total 
number of treatment cycles depends on the characteristics of the wound, 
the response of the wound, and the aim of the therapy. Most ulcers are 
completely debrided within 1 to 6 treatment cycles.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received FDA clearance for the BioBag[supreg] through the 
premarket notification section 510(k) process on August 28, 2013, and 
the first U.S. sale of the BioBag[supreg] occurred in April 2015. The 
June 1, 2017 application is more than 3 years after FDA clearance but 
less than 3 years after its first U.S. sale. We invited public comments 
on whether the BioBag[supreg] meets the newness criterion.
    Comment: The manufacturer stated that, although the BioBag[supreg] 
received its 510(k) clearance in 2013, BioBag[supreg] was not 
commercially available in the United States until its American-based 
production facility was established in 2015 to make the product 
available on the market.
    Response: We appreciate the additional clarification from the 
manufacturer regarding the availability of the BioBag[supreg]. Based on 
this clarification, we have determined that BioBag[supreg] meets the 
newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
the applicant claimed that the BioBag[supreg] is an integral part of 
the wound debridement, is used for one patient only, comes in contact 
with human skin, and is applied in or on a wound. In addition, the 
applicant stated that the BioBag[supreg] meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, or item for which depreciation and financing expenses are 
recovered. We also had determined in the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79650) that the BioBag[supreg] is not a 
material or supply furnished incident to a service. We invited public 
comments on whether the BioBag[supreg] meets the eligibility criterion.
    Comment: The manufacturer presented several reasons why the 
BioBag[supreg] is not a medical supply, but instead is a treatment for 
wound debridement, including the specialized nature of the product, 
that the product is not purchased in bulk, and that it provides a 
treatment outcome for non-healing wounds.
    Response: We appreciate the additional information provided by the 
manufacturer to demonstrate that the BioBag[supreg] is not a material 
or medical supply. Based on this information, we have determined that 
the BioBag[supreg] meets the eligibility criterion.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any existing categories or 
by any category previously in effect, and was not being paid for as an 
outpatient service as of December 31, 1996. With respect to the 
existence of a previous pass-through device category that describes the 
BioBag[supreg], the applicant suggested a category descriptor of 
``Contained medicinal larvae for the debridement of necrotic non-
healing skin and soft tissue wounds.'' We have not identified an 
existing pass-through payment category that describes the 
BioBag[supreg].
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With respect to the substantial clinical 
improvement criterion, the applicant provided substantial evidence that 
larval therapy may improve outcomes compared to other methods of wound 
debridement. However, given the existence of the Medical 
Maggots[supreg], another form of larval therapy that has been on the 
market since 2004, the relevant comparison is between the 
BioBag[supreg] and the Medical Maggots[supreg]. There are many reasons 
to suspect that the BioBag[supreg] could improve outcomes and be 
preferable to the Medical Maggots[supreg]. In essence, with the latter, 
the maggots are directly placed on the wound, which may result in 
escape, leading to infection control issues as well as dosing 
variability. In addition, there are the issues with patient comfort. 
With the Biobag[supreg], the maggots are in a sealed container so 
escape is not an issue. The applicant cited a study showing large 
decreases in maggot escape with the BioBag[supreg] as opposed to the 
Medical Maggots[supreg]. However, the applicant did

[[Page 58932]]

not provide any data that clinical outcomes are improved using the 
BioBag[supreg] as opposed to the Medical Maggots[supreg]. Based on the 
studies presented, we believe there are insufficient data to determine 
whether the BioBag[supreg] offers a substantial clinical improvement 
over other treatments for wound care. We invited public comments on 
whether the BioBag[supreg] meets the substantial clinical improvement 
criterion.
    Comment: The manufacturer identified four items to indicate that 
the BioBag[supreg] may provide substantial clinical improvement over 
other available treatments. These items include debridement of wounds 
infected with MRSA, removing more tissue than loose maggots, the ease 
of use of the BioBag[supreg] over loose maggots, and less pain during 
debridement. The commenter stated that these items were supported by 
journal citations.
    Several other commenters discussed the benefits of the 
BioBag[supreg], and a few commenters discussed the benefits of larval 
debridement of wounds more generally. The commenters cited benefits 
that included that the BioBag[supreg] debrides only dead tissue, that 
BioBag[supreg] makes it easier to apply and remove maggots from wounds, 
and that BioBag[supreg] is a lower-cost and less-invasive treatment 
than surgical debridement. The commenters did not provide any support 
of these benefits by medical studies.
    Response: We have reviewed these public comments and the additional 
journal citations and believe that most of the information provided by 
commenters reenforced our discussion in the proposed rule that stated 
that there are many reasons why the BioBag[supreg] may be preferable to 
treatment from loose maggots. However, we have not been provided with 
sufficient support from clinical studies to determine that the 
BioBag[supreg] meets the substantial clinical improvement criterion. 
Each of the three clinical studies cited by the manufacturer did 
identify possible benefits from the use of the BioBag[supreg] over 
treatment from loose maggots, hydrogel, or other surgical debridement 
methods. However, the findings had only marginal clinical significance, 
and did not reflect sufficient clinical support to reach the threshold 
of demonstrating significant clinical improvement.
    For example, the study of debridement through containment,\17\ was 
done in vitro (that is, in a laboratory setting) and not in vivo (that 
is, through testing on human subjects). Therefore, we are uncertain how 
the study findings would extrapolate to a patient receiving treatment. 
Second, we did not find that the clinical evidence fully supported the 
commenters' claimed benefits. For instance, a commenter, the 
manufacturer provided data comparing the amount of material debrided by 
the BioBag[supreg] at 4 days to free larvae at 3 days from the same 
study of debridement through containment.\18\ To help demonstrate 
substantial clinical improvement, we believe that the commenter should 
have compared the amount of material debrided by both treatment methods 
over a similar time period. When similar time periods are compared 
between both treatment methods, the study found the amount of material 
debrided by the BioBag[supreg] and the free larvae is similar. In 
another study cited by the commenter discussing the prevalence of pain 
during maggot debridement therapy,\19\ the share of study patients 
experiencing pain was similar for people receiving treatment using a 
BioBag[supreg] device when compared to people receiving maggot 
debridement therapy from free larvae kept in a cage-like dressing.
---------------------------------------------------------------------------

    \17\ Blake, F. et al. The biosurgical wound debridement: 
Experimental investigation of efficiency and practicability. Wound 
Rep Reg, 2007: 15; 756-761. 3.
    \18\ Ibid. Blake, F. et al.
    \19\ Mumcuoglu, K. et al. Pain related to maggot debridement 
therapy. J Wound Care. 2012;21(8): 400-405.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we have 
determined that the BioBag[supreg] does not meet the significant 
clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of a device is not 
insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. With 
respect to the cost criterion, the applicant stated that the 
BioBag[supreg] would be reported with CPT code 97602 (Removal of 
devitalized tissue from wound(s), non-selective debridement, without 
anesthesia (e.g., wet-to-moist dressings, enzymatic, abrasion, larval 
therapy), including topical application(s), wound assessment, and 
instruction(s) for ongoing care, per session). CPT code 97602 is 
assigned to APC 5051 (Level 1 Skin Procedures), with a payment rate of 
$153.12, and a device offset of $0.02. The price of the BioBag[supreg] 
varies with the size of the bag ($375 to $435 per bag), and bag size 
selection is based on the size of the wound.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
reasonable cost of $435 for the BioBag[supreg] exceeds the applicable 
APC amount for the service related to the category of devices of 
$153.12 by 284.09 percent ($435/$153.12 x 100 = 284.09 percent). Thus, 
we determined that the BioBag[supreg] appears to meet the first cost 
significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of devices in the category 
must exceed the cost of the device-related portion of the APC payment 
amount by at least 25 percent, which means the device cost needs to be 
at least 125 percent of the device offset amount (the device-related 
portion of the APC found on the offset list). The estimated average 
reasonable cost of $435 for the BioBag[supreg] exceeds the proposed 
device-related portion of the APC amount for the related service of 
$0.02 by 2,175,000 percent ($435/$0.02 x 100 = 2,175,000 percent). 
Thus, we determined that the BioBag[supreg] appears to meet the second 
cost significance test.
    Section 419.66(d)(3), the third cost significance test, requires 
that the difference between the estimated average reasonable cost of 
the devices in the category and the portion of the APC payment amount 
determined to be associated with the device exceeds 10 percent of the 
APC payment amount for the related service. The difference between the 
estimated average reasonable cost of $435 for the BioBag[supreg] and 
the portion of the proposed APC payment for the device of $0.02 exceeds 
10 percent at 284.08 percent (($435-$0.02)/$153.12 x 100 = 284.08 
percent). Thus, we determined that the BioBag[supreg] appears to meet 
the third cost significance test and satisfies the cost significance 
criterion. We invited public comments on whether the BioBag[supreg] 
meets the device pass-through payment criteria discussed in this 
section, including all three cost criteria.
    We did not receive any public comments on the cost criteria for the 
BioBag[supreg]. Therefore, we have determined that the BioBag[supreg] 
does meet all three cost criteria.
    After consideration of the public comments we received and our 
review of the criteria necessary to receive device pass-through 
payment, we are not approving the application for the BioBag[supreg] to 
receive device pass-through payment status in CY 2019 because the 
BioBag[supreg] does not meet the substantial clinical improvement 
criterion.

[[Page 58933]]

(3) BlastX\TM\ Antimicrobial Wound Gel
    Next Science\TM\ has submitted an application for a new device 
category for transitional pass-through payment status for BlastX\TM\. 
According to the manufacturer, BlastX\TM\ is a PEG-based aqueous 
hydrogel which contains citric acid, sodium citrate, and benzalkonium 
chloride, buffered to a pH of 4.0 at 2.33 osmolarity. BlastX\TM\ 
received a 510(k) clearance from the FDA on March 6, 2017. BlastX\TM\ 
is indicated for the management of wounds such as Stage I-IV pressure 
ulcers, partial and full thickness wounds, diabetic foot and leg 
ulcers, postsurgical wounds, first and second degree burns, and grafted 
and donor sites.
    The manufacturer stated in its application for transitional pass-
through payment status that BlastX\TM\ works by disrupting the biofilm 
matrix in a wound and eliminating the bacteria absorbed within the gel. 
The manufacturer asserted that disrupting and eliminating the biofilm 
removes a major barrier to wound healing. The manufacturer also 
asserted that BlastX\TM\ is not harmful to host tissue and stated that 
BlastX\TM\ is applied to the wound every other day as a thin layer 
throughout the entire wound healing process. When used as an adjunct to 
debridement, BlastX\TM\ is applied immediately after debridement to 
eliminate any remaining biofilm and prevent the growth of new biofilm.
    Based on the evidence provided in the manufacturer's application, 
BlastX\TM\ is not a skin substitute and cannot be considered for 
transitional pass-through payment status as a device. To be considered 
a device for purposes of the medical device pass-through payment 
process under the OPPS, a skin substitute needs to be applied in or on 
a wound or other skin lesion based on 42 CFR 419.66(b)(3). It should be 
a product that is primarily used in conjunction with the skin graft 
procedures described by CPT codes 15271 through 15278 or HCPCS codes 
C5271 through C5278 (78 FR 74937). The skin substitute should only be 
applied a few times during a typical treatment episode. BlastX\TM\, 
according to the manufacturer, may be used in many other procedures 
other than skin graft procedures, including several debridement and 
active wound care management procedures. The manufacturer also stated 
that BlastX\TM\ would be used in association with any currently 
available skin substitute product and that the product should be 
applied every other day, which is not how skin substitute products for 
skin graft procedures are used to heal wounds. BlastX\TM\ is not a 
required component of the skin graft service, and is used as a supply 
that may assist with the wound healing process that occurs primarily 
because of the use of a sheet skin substitute product in a skin graft 
procedure.
    Therefore, with respect to the eligibility criterion at Sec.  
419.66(b)(3), in the proposed rule, we determined that BlastX\TM\ is 
not integral to the service provided (which is a skin graft procedure 
using a sheet skin substitute), is a material or supply furnished 
incidentally to a service, and is not surgically inserted into a 
patient. BlastX\TM\ does not meet the eligibility criterion to be 
considered a device for transitional pass-through payment. Therefore, 
we did not evaluate the product on the other criteria required for 
transitional pass-through payment for devices, including the newness 
criterion, the substantial clinical improvement criterion, and the cost 
criterion. We invited public comments on the eligibility of BlastX\TM\ 
for transitional pass-through payment for devices.
    We did not receive any public comments regarding the eligibility of 
BlastX\TM\ for transitional pass-through payment for devices. 
Therefore, we are not approving BlastX\TM\ for transitional pass-
through payment status for CY 2019 because the product does not meet 
the eligibility criterion to be considered a device.
(4) EpiCord[supreg]
    MiMedx[supreg] submitted an application for a new OPPS device 
category for transitional pass-through payment status for 
EpiCord[supreg], a skin substitute product. According to the applicant, 
EpiCord[supreg] is a minimally manipulated, dehydrated, devitalized 
cellular umbilical cord allograft for homologous use that provides a 
protective environment for the healing process. According to the 
applicant, EpiCord[supreg] is comprised of the protective elements of 
the umbilical cord with a thin amnion layer and a thicker Wharton's 
Jelly mucopolysaccharides component. The Wharton's Jelly contains 
collagen, hyaluronic acid, and chondroitin sulfate, which are the 
components principally responsible for its mechanical properties.
    The applicant stated that EpiCord[supreg] is packaged as an 
individual unit in two sizes, 2 cm x 3 cm and 3 cm x 5 cm. The 
applicant asserted that EpiCord[supreg] is clinically superior to other 
skin substitutes because it is much thicker than dehydrated amnion/
chorion allografts, which allows for application over exposed bone, 
tendon, nerves, muscle, joint capsule and hardware. According to the 
applicant, due to its unique thicker, stiffer structure, clinicians are 
able to apply or suture EpiCord[supreg] for deep, tunneling wounds 
where other products cannot fill the entire wound bed or dead spaces.
    With respect to the newness criterion at Sec.  419.66(b)(1), 
EpiCord[supreg] was added to the MiMedx[supreg] registration for human 
cells, tissues, and cellular and tissue-based products (HCT/Ps) on 
December 31, 2015. In adding EpiCord, MiMedx[supreg] asserted that 
EpiCord[supreg] conformed to the requirements for HCT/Ps regulated 
solely under section 361 of the Public Health Service Act and the 
regulations at 21 CFR part 1271. For these products, FDA requires that 
the manufacturer register and list its HCT/Ps with the FDA's Center for 
Biologics Evaluation and Research (CBER) within 5 days after beginning 
operations and update its registration annually, and MiMedx[supreg] 
provided documentation verifying that EpiCord[supreg] had been 
registered. However, no documentation regarding an FDA determination 
that EpiCord[supreg] is appropriate for regulation solely under section 
361 of the Public Health Service Act had been submitted. According to 
the applicant, December 31, 2015 was the first date of sale within the 
United States for EpiCord[supreg]. Therefore, it appears that market 
availability of EpiCord[supreg] is within 3 years of this application.
    We note that a product that is regulated solely under section 361 
of the Public Health Service Act and the regulations in 21 CFR part 
1271, as asserted by the manufacturer of Epicord[supreg], is not 
regulated as a device under the Federal Food, Drug, and Cosmetic Act. 
The regulations at 21 CFR 1271.20 state that ``If you are an 
establishment that manufactures an HCT/P that does not meet the 
criteria set out in Sec.  1271.10(a) [for regulation solely under 
section 361 of the Public Health Service Act and the regulations in 
part 1271], and you do not qualify for any of the exceptions in Sec.  
1271.15, your HCT/P will be regulated as a drug, device, and/or 
biological product. . . .'' The Federal Food, Drug, and Cosmetic Act 
requires that manufacturers of devices that are not exempt obtain 
marketing approval or clearance for their products from FDA before they 
may offer them for sale in the United States. We did not receive 
documentation from the applicant that EpiCord[supreg] is regulated as a 
device by FDA in accordance with Medicare regulations at 42 CFR 
419.66(b)(1). We invited public comments on whether EpiCord[supreg] 
meets the newness criterion.

[[Page 58934]]

    Comment: The manufacturer believed that EpiCord[supreg] meets the 
newness criterion. The manufacturer stated that HCT/P products are 
regulated by the FDA through a registration process and have been paid 
by CMS for many years under the current regulatory structure. The 
manufacturer believed the newness criterion requirement for FDA 
approval for a product should only apply when FDA approval is required 
for that product. The manufacturer stated that FDA approval does not 
apply to EpiCord[supreg] because of its HCT/P status. The manufacturer 
stated that the pass-through payment application for EpiCord[supreg] 
was submitted within 3 years of EpiCord[supreg] being introduced onto 
the U.S. market. Finally, the manufacturer noted that the Medicare 
statute requires that biologicals be included in the category of 
products that can be considered for pass-through payment status and 
stated that, if HCT/Ps cannot be considered for transitional pass-
through payment through the device pathway, the HCT/P products should 
be returned to the drug and biological transitional pass-through 
pathway.
    Response: To be able to determine whether a product meets the 
newness criterion, we need to determine a date when a product could 
first be used in the United States. Generally, we use the FDA clearance 
or approval date. We also have a provision in the newness criterion to 
use the date of first United States sale of the product rather than the 
FDA approval date, to accommodate the rare cases where a device 
receives FDA approval but the manufacturer experiences a significant 
delay establishing a manufacturing and distribution capacity for the 
new device. We agree that FDA approval cannot be required to be used 
for the newness criterion when there is no requirement for a new 
product to receive FDA approval. However, we still need some means to 
determine whether a product has been able for use in the United States 
for 3 years or less. The best alternative that we can identify to 
establish the date a product is considered new is to rely on 
registration to the FDA HCT/P registry, which indicates the existence 
of a new product.
    Comment: One commenter did not believe that EpiCord[supreg] meets 
the newness criterion. The commenter asserted that EpiCord[supreg] is 
considered to be the same product as EpiFix[supreg] that was introduced 
onto the U.S. market in 2011, and that the application for pass-through 
payment status for EpiCord[supreg] was submitted after the 3-year 
timeframe for a new product to apply for pass-through payment status. 
The commenter cited a HCPCS Workgroup decision in 2016 that assigned 
the use of EpiCord[supreg] to HCPCS code Q4131, which, until December 
31, 2018, was the identifying HCPCS code for the use of EpiFix[supreg]. 
The commenter also asserted that EpiFix[supreg] may also receive pass-
through payments, which the commenter believed should not occur, 
because it will be difficult to determine whether HCPCS code Q4131 is 
being billed for the use of EpiFix[supreg] or EpiCord[supreg].
    Response: We disagree with the commenter's assertion that 
EpiFix[supreg] and EpiCord[supreg] are the same product. On December 
31, 2015, MiMedx, the manufacturer of EpiCord[supreg], submitted a 
filing to the FDA HCT/P registry representing EpiCord[supreg] as a new 
product that is a separate product from EpiFix[supreg]. In addition, 
the HCPCS Workgroup has made a decision, effective on January 1, 2019, 
to designate separate HCPCS codes for EpiFix[supreg] (Q4186) and 
EpiCord[supreg] (Q4187) that also demonstrates EpiCord[supreg] is a 
separate product from EpiFix[supreg]. We believe that EpiCord[supreg] 
is a separate product from EpiFix[supreg].
    After consideration of the public comments we received, we have 
determined that EpiCord[supreg] meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, EpiCord[supreg] is a skin substitute 
product that is integral to the service provided, is used for one 
patient only, comes in contact with human tissue, and is surgically 
inserted into the patient. The applicant also claimed EpiCord[supreg] 
meets the device eligibility requirements of Sec.  419.66(b)(4) because 
EpiCord[supreg] is not an instrument, apparatus, implement, or item for 
which depreciation and financing expenses are recovered, and it is not 
a supply or material. We invited public comments on whether 
EpiCord[supreg] meets these eligibility criteria.
    We did not receive any public comments regarding whether 
EpiCord[supreg] meets the eligibility criterion. Based on the 
information we have received, we have determined that EpiCord[supreg] 
meets the eligibility criterion.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through category that describes 
EpiCord[supreg]. There are no present or previously established device 
categories for pass-through status that describe minimally manipulated, 
lyophilized, nonviable cellular umbilical membrane allografts regulated 
solely under section 361 of the Public Health Service Act and the 
regulations at 21 CFR part 1271. MiMedx[supreg] suggested a new device 
category descriptor of ``Dehydrated Human Umbilical Cord Allografts'' 
for EpiCord[supreg].
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With regard to the substantial clinical 
improvement criterion, the applicant asserted that EpiCord[supreg] 
reduces the mortality rate with use of the device; reduces the rate of 
device-related complications; decreases the rate of subsequent 
diagnostic or therapeutic interventions; decreases the number of future 
hospitalizations or physician visits; provides more rapid beneficial 
resolution of the disease process treated because of the use of the 
device; decreases pain, bleeding, or other quantifiable symptom; and 
reduces recovery time.
    To determine if the product meets the substantial improvement 
criterion, we compared EpiCord[supreg] to other skin substitute 
products. Compared to NEOX CORD 1K Wound Allograft, EpiCord[supreg] has 
half the levels of Vascular Endothelial Growth Factor (VEGF) and 
insulin-like growth factor binding protein-4 (IGFBP-4) and lower levels 
of Glial Cell Line Derived Neurotrophic Factor (GDNF) and Epidermal 
Growth Factor (EGF). Despite EpiCord[supreg] having higher levels of 
other growth factors, the cumulative effect of these differences has 
not been sufficiently demonstrated in the application. Moreover, most 
professional opinions do not compare EpiCord[supreg] to specific 
alternative skin substitutes; the few that do are, for the most part, 
of limited specificity (in terms of foci of superiority to other skin 
substitutes). Studies demonstrated 41 percent higher relative rates 
(4.1 percent higher absolute rates) of severe complications for 
EpiCord[supreg] compared to standard of care. Additionally, the control 
group was moist dressings and offloading (instead of another umbilical 
or biologic product). Furthermore, 38 percent of EpiCord[supreg] 
patients in the study were smokers versus 58 percent of

[[Page 58935]]

control patients (smoking impairs wound healing; thus, this important 
dissimilarity between intervention and study populations casts doubt on 
attributing observed benefit to the intervention).
    Based on the evidence submitted with the application, we had 
insufficient evidence that EpiCord[supreg] provides a substantial 
clinical improvement over other treatments for wound care. We invited 
public comments on whether EpiCord[supreg] meets the substantial 
clinical improvement criterion.
    Comment: The manufacturer responded to several statements regarding 
EpiCord[supreg] and substantial clinical improvement in the CY 2019 
OPPS/ASC proposed rule. The analysis in the proposal rule noted that 
the pass-through application for EpiCord[supreg] stated that 
EpiCord[supreg] had higher levels of some growth factors and lower 
levels of other growth factors than NEOX CORD 1K Allograft. However the 
original application did not clarify what the overall effect the 
differences in growth factors had on the effectiveness of 
EpiCord[supreg] for wound care and the proposed rule text expressed 
concern regarding comparisons to individual skin substitute products. 
The manufacturer asserted that the findings in the application, which 
were updated by the manufacturer, show that the combination of growth 
factors and proteins working together does improve wound healing in a 
complex environment. Also, the manufacturer stated that EpiCord[supreg] 
is the only umbilical cord wound product with a published multi-center, 
prospective, randomized-controlled, comparative parallel study.
    The manufacturer responded to a statement in the proposed rule that 
noted 41 percent higher relative rates of severe complications for 
EpiCord[supreg] compared to the standard of care, and concerns the 
control group in the studies were moist dressings and offloading 
instead of a biologic product. The manufacturer indicated that the 
studies include adverse events from all causes and a new study in 
progress will show no adverse events directly related to 
EpiCord[supreg] or alginate dressings. The manufacturer also stated 
that many wound experts do not attempt to compare new products to each 
other because of the high variability of the composition of products, 
how they are applied, and the dynamics of how different products work.
    The manufacturer replied to a statement in the CY 2019 OPPS/ASC 
proposed rule questioning the substantial higher amount of smokers in 
the control group for the primary study compared to the group of 
EpiCord[supreg] patients. The manufacturer noted that the concern is 
that smoking impairs wound healing, and the presence of a higher number 
of smokers in the control group casts doubt on the conclusion that the 
difference in outcomes between the control group and the 
EpiCord[supreg] group was because of the use of EpiCord[supreg]. The 
manufacturer performed statistical analyses and the manufacturer 
reported that it found the effect of the higher proportion of smokers 
in the control group was not statistically significant.
    Finally, the manufacturer asserted that EpiCord[supreg] meets the 
substantial clinical improvement criterion as a result of the published 
multi-center randomized controlled study showing an 81-percent healing 
rate within 12 weeks, which increases to a 96-percent healing rate when 
adequate debridement is performed.
    Response: We appreciate the detailed response to the questions we 
had regarding the study the manufacturer submitted as evidence that 
EpiCord[supreg] would have substantial clinical improvement over 
comparable wound care treatments. However, this study on its own is not 
sufficient to establish substantial clinical improvement. First, 
independent replication of the findings of the study has not been 
performed. The study indicates beneficial effects from the use of 
EpiCord[supreg]; however, it is not clear if the findings can be 
reproduced. Multiple studies with similar conditions, and a more 
equitable distribution of smokers in the control and intervention 
groups, would be a first step to determine if the findings are valid. 
Second, more comparisons need to be done with different classes of 
biological skin substitute products. Given the number of skin 
substitute products on the U.S. market, it is not possible to compare 
EpiCord[supreg] to each product. However, we believe that studies 
comparing the product against products made with epithelial tissue, 
other human-sourced products, and animal-sourced products could provide 
more evidence demonstrating the clinical superiority of 
EpiCord[supreg].
    Comment: Multiple commenters supported granting EpiCord[supreg] 
transitional pass-through payment status. Many of the commenters 
discussed the strength of the structure of EpiCord[supreg], the high 
levels of human growth factors found in the product, and its ability to 
heal complex wounds, but did not provide support by studies or other 
clinical research.
    Response: We appreciate the additional information that the 
commenters provided on the performance and the benefits of 
EpiCord[supreg]. However, many skin substitute products can be used to 
heal complex wounds. In addition, none of the commenters provided 
clinical evidence of how the high levels of human growth factors led to 
EpiCord[supreg] having a superior performance to other skin substitute 
products.
    After consideration of the public comments we received, we have 
determined that EpiCord[supreg] does not meet the substantial clinical 
improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. EpiCord[supreg] would be reported with CPT 
code 15271 or 15275. CPT code 15271 describes the application of skin 
substitute graft to trunk, arms, legs, total wound surface area up to 
100 sq cm; first 25 sq cm or less wound surface area. CPT code 15275 
describes the application of skin substitute graft to face, scalp, 
eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or 
multiple digits, total wound surface area up to 100 sq cm; first 25 sq 
cm or less wound surface area. Both codes are assigned to APC 5054 
(Level 4 Skin Procedures). CPT codes 15271 through 15278 are assigned 
to either APC 5054 (Level 4 Skin Procedures), with a payment rate of 
$1,427.77 and a device offset of $4.70, or APC 5055 (Level 5 Skin 
Procedures), with a payment rate of $2,504.69 and a device offset of 
$35.01. The price of EpiCord[supreg] is $1,595 for the 2 cm x 3 cm and 
$3,695 for the 3 cm x 5 cm product size.
    To meet the cost criterion for device pass-through payment, a 
device must pass all three tests of the cost criterion for at least one 
APC. Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $3,695 for the 3 cm x 5 cm product exceeds 
the applicable APC amount for the service related to the category of 
devices of $1,427.77 by 258.80 percent ($3,695/$1427.77 x 100 percent = 
258.80 percent). Therefore, it appears that EpiCord[supreg] meets the 
first cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the

[[Page 58936]]

devices in the category must exceed the cost of the device-related 
portion of the APC payment amount for the related service by at least 
25 percent, which means that the device cost needs to be at least 125 
percent of the offset amount (the device-related portion of the APC 
found on the offset list). The estimated average reasonable cost of 
$3,695 for the 3 cm x 5 cm product exceeds the device-related portion 
of the APC payment amount for the related service of $4.70 by 78,617.02 
percent ($3,695/$4.70 x 100 percent = 78,617.02 percent). Therefore, it 
appears that EpiCord[supreg] meets the second cost significance test.
    Section 419.66(d)(3), the third cost significance test, requires 
that the difference between the estimated average reasonable cost of 
the devices in the category and the portion of the APC payment amount 
for the device must exceed 10 percent of the APC payment amount for the 
related service. The difference between the estimated average 
reasonable cost of $3,695 for the 3 cm x 5 cm product and the portion 
of the APC payment amount for the device of $4.70 exceeds 10 percent at 
258.47 percent (($3,695-$4.70)/$1,427.77) x 100 percent = 258.47 
percent). Therefore, it appears that EpiCord[supreg] meets the third 
cost significance test. Based on the costs submitted by the applicant 
and the calculations noted earlier, it appears that EpiCord[supreg] 
meets the cost criterion at Sec.  419.66(c)(3) for new device 
categories. We invited public comments on whether EpiCord[supreg] meets 
the cost criterion for device pass-through payment.
    We did not receive any public comments regarding the cost criteria 
for EpiCord[supreg]. Based on the information that we received, we have 
determined that EpiCord[supreg] meets the cost criteria.
    After consideration of the public comments and additional 
information we have received, we are not approving EpiCord[supreg] for 
transition pass-through payment status in CY 2019 because the product 
does not meet the substantial clinical improvement criterion.
(5) remed[emacr][supreg] System Transvenous Neurostimulator
    Respicardia, Inc. submitted an application for a new device 
category for transitional pass-through payment status for the 
remed[emacr][supreg] System Transvenous Neurostimulator. According to 
the applicant, the remed[emacr][supreg] System is an implantable 
phrenic nerve stimulator indicated for the treatment of moderate to 
severe central sleep apnea (CSA) in adult patients. The applicant 
stated that the remed[emacr][supreg] System is the first and only 
implantable neurostimulator to use transvenous sensing and stimulation 
technology. The applicant also stated that the remed[emacr][supreg] 
System consists of an implantable pulse generator, a transvenous lead 
to stimulate the phrenic nerve and a transvenous sensing lead to sense 
respiration via transthoracic impedance. Lastly, the applicant stated 
that the device stimulates a nerve located in the chest (phrenic nerve) 
that is responsible for sending signals to the diaphragm to stimulate 
breathing to restore normal sleep and respiration in patients with 
moderate to severe central sleep apnea (CSA).
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received a Category B Investigational Device Exemption (IDE) 
from FDA on April 18, 2013. Subsequently, the applicant received 
approval of its premarket approval (PMA) application from FDA on 
October 6, 2017. The application for a new device category for 
transitional pass-through payment status for the remed[emacr][supreg] 
System was received on May 31, 2017, which is within 3 years of the 
date of the initial FDA approval or clearance. We invited public 
comments on whether the remed[emacr][supreg] System meets the newness 
criterion.
    Comment: The manufacturer believed that that the 
remed[emacr][supreg] System meets the newness criterion.
    Response: We appreciate the commenter's input.
    After consideration of the public comments we received, we believe 
that the remed[emacr][supreg] System meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the remed[emacr][supreg] System is integral 
to the service provided, is used for one patient only, comes in contact 
with human skin, and is applied in or on a wound or other skin lesion. 
The applicant also claimed the remed[emacr][supreg] System meets the 
device eligibility requirements of Sec.  419.66(b)(4) because it is not 
an instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through payment category that describes the 
remed[emacr][supreg] System. The applicant proposed a category 
descriptor for the remed[emacr][supreg] System of ``generator, 
neurostimulator (implantable), non-rechargeable, with transvenous 
sensing and stimulation.'' We invited public comments on this issue.
    Comment: The manufacturer of the device indicated that there is no 
an existing pass-through payment category that describes the 
remed[emacr][supreg] System.
    Response: We appreciate the manufacturer's input.
    After consideration of the public comments we received, we believe 
that the remed[emacr][supreg] System meets the eligibility criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With respect to this criterion, the applicant 
submitted several journal articles that discussed the health effects of 
central sleep apnea (CSA) which include fatigue, decreased mental 
acuity, myocardial ischemia, and dysrhythmias. The applicant stated 
that patients with CSA may suffer from poor clinical outcomes, 
including myocardial infarction and congestive heart failure.\20\
---------------------------------------------------------------------------

    \20\ Costanzo, M.R., et al., Mechanisms and Clinical 
Consequences of Untreated Central Sleep Apnea in Heart Failure. 
Journal of the American College of Cardiology, 2015. 65(1): p. 72-
84.
---------------------------------------------------------------------------

    The applicant claims that the remed[emacr][supreg] System has been 
found to significantly improve apnea-hypopnea index (AHI), which is an 
index used to indicate the severity of sleep apnea. AHI is represented 
by the number of apnea and hypopnea events per hour of sleep and was 
used as the primary effectiveness endpoint in the remed[emacr][supreg] 
System pivotal trial. The applicant noted that the remed[emacr][supreg] 
System was shown to improve AHI in small, self-controlled studies as 
well as in larger trials.
    The applicant reported that in the pivotal study, a large, 
multicenter, randomized controlled trial of CSA patients, intention-to-
treat analysis found that 51 percent (35/68) of CSA patients using the 
remed[emacr][supreg] System had greater than 50 percent reduction of 
apnea-hypopnea index (AHI) from baseline at 6 months compared to 11 
percent (8/73) of the control group (p<0.0001). Per-protocol analysis 
found that 60 percent (35/58) of remed[emacr][supreg] System patients 
had a greater than 50

[[Page 58937]]

percent reduction of AHI and in 74 percent (26/35) of these patients 
AHI dropped to <20.\21\
---------------------------------------------------------------------------

    \21\ Costanzo, M.R., et al. (2016). Transvenous neurostimulation 
for central sleep apnoea: a randomised controlled trial. The Lancet, 
388(10048): p. 974-982.
---------------------------------------------------------------------------

    According to the applicant, an exploratory post-hoc analysis of 
patients with CSA and congestive heart failure (CHF) in the Pivotal 
trial found that, at 6 months, the remed[emacr][supreg] System group 
had a greater percentage of patients with >=50 percent reduction in AHI 
compared to control group (63 percent versus 4 percent, p< 0.001).\22\
---------------------------------------------------------------------------

    \22\ Goldberg, L.R., et al. (2017). In Heart Failure Patients 
with CSA, Stimulation of the Phrenic Nerve Improves Sleep and 
Quality of Life. Journal of Cardiac Failure, 23(8): p. S15.
---------------------------------------------------------------------------

    The applicant noted that patient symptoms and quality of life were 
improved with the remed[emacr][supreg] System therapy. The mean Epworth 
Sleepiness Scale (ESS) score significantly decreased in 
remed[emacr][supreg] System patients, indicating less daytime 
sleepiness.\23\
---------------------------------------------------------------------------

    \23\ Costanzo, M.R., et al. (2016). Transvenous neurostimulation 
for central sleep apnoea: a randomised controlled trial. The Lancet, 
388(10048): p. 974-982.
---------------------------------------------------------------------------

    Adverse events associated with remed[emacr][supreg] System 
insertion and therapy included lead dislodgement/dislocation, hematoma, 
migraine, atypical chest pain, pocket perforation, pocket infection, 
extra-respiratory stimulation, concomitant device interaction, and 
elevated transaminases.\24\ There were no patient deaths that were 
related to the device implantation or therapy.
---------------------------------------------------------------------------

    \24\ Costanzo, M.R., et al. (2016). Transvenous neurostimulation 
for central sleep apnoea: a randomised controlled trial. The Lancet, 
388(10048): p. 974-982.
---------------------------------------------------------------------------

    One concern regarding the remed[emacr][supreg] System is the 
potential for complications in patients with coexisting cardiac 
devices, such as pacemakers or ICDs, given that the 
remed[emacr][supreg] System device requires lead placement and 
generation of electric impulses. Another concern with the evidence of 
substantial clinical improvement is that there is limited long-term 
data on patients with remed[emacr][supreg] System implants. The pivotal 
trial included only 6 months of follow-up. Also, while the applicant 
reported a reduction in AHI in the treatment group, the applicant did 
not establish that that level of change was biologically meaningful in 
the population(s) being studied. The applicant did not conduct a power 
analysis to determine the necessary size of the study population and 
the necessary duration of the study to detect both early and late 
events.
    In addition, patients in the pivotal study were not characterized 
by the use of cardiac devices. Cardiac resynchronization therapy (CRT), 
in particular, is known to improve chronic sleep apnea in addition to 
its primary effects on heart failure, and central apnea is a marker of 
the severity of the congestive heart failure. The applicant did not 
conduct subset analyses to assess the impact of cardiac 
resynchronization therapy.
    Lastly, while evaluation of AHI and quality of life metrics show 
improvement with the remed[emacr][supreg] System, the translation of 
those effects to mortality benefit is yet to be determined. Further 
studies of the remed[emacr][supreg] System are likely needed to 
determine long-term effects of the device, and as well as its efficacy 
compared to existing treatments of CPAP or medications.
    Based on the evidence submitted with the application, we had 
insufficient evidence that the remed[emacr][supreg] System provides a 
substantial clinical improvement over other similar products and 
invited public comments on whether the remed[emacr][supreg] System 
meets the substantial clinical improvement criterion.
    Comment: The manufacturer of the remed[emacr][supreg] System 
believed that this device meets the substantial clinical improvement 
criterion and provided additional data to support this assertion. The 
manufacturer noted that the primary endpoint of the pivotal study was a 
reduction of at least 50 percent in the apnea-hyponea index that is 
used to classify apnea severity and has been used as a common endpoint 
in predicate studies testing apnea therapy in sleep literature. The 
manufacturer further indicated that the remed[emacr][supreg] System 
significantly improves secondary endpoints. Patients had improved 
oxygenation, reduced hypoxia, and 79 percent of treatment group 
subjects reported improved quality of life as assessed through the 
Patient Global Assessment. The manufacturer asserted that the study 
cited was the first randomized study in central sleep apnea to 
demonstrate improvements in REM sleep and arousals. Further, the 
manufacturer noted that the treatment group experienced a 3.7 
percentage point improvement in the Epworth sleepiness scale, meaning 
these patients were less sleepy than the control group. The 
manufacturer indicated, in response to CMS' questions, that its 
clinical trials were not designed to establish a clinical improvement 
in mortality from this device. However, the manufacturer asserted that 
post-trial analysis indicated some improvement in left ventricular 
ejection fraction, which is associated with reduced mortality, and 
increased time to first hospitalization for New York Heart Association 
heart failure patients with reduced ejection fraction. The manufacturer 
also indicated that reductions in the Apnea Hypopnea Index for trial 
participants that received the remed[emacr][supreg] System was now 
greater at 12 months than it was at 6 months.
    In response to CMS' question regarding why an untreated control 
group was used in the pivotal trial, as opposed to a direct comparison 
with CPAP or other treatments, the manufacturer presented several 
reasons, such as considerable controversy about CPAP in CSA patients 
with heart failure due to CPAP patients with an ejection fraction less 
than 40 percent having higher mortality, and a dearth of prospective, 
randomized clinical data on the safety and efficacy of using CPAP, ASV, 
or medications to treat patients with non-heart failure CSA.
    Regarding CMS' question of why no power analysis was performed to 
determine the necessary size of the study population and the necessary 
duration of the study to detect both early and late events, the 
manufacturer noted that it worked directly with clinical experts and 
consulted with the FDA in designing the clinical trial, which the 
manufacturer maintains was effective and well-rounded. The manufacturer 
noted that the rationale was that the remed[emacr][supreg] System would 
be evaluated on a continuum of efficacy versus safety, but noted that 
had they determined to power the study for a primary safety endpoint 
based on the threshold of other implantable cardiac devices, the 
pivotal trial would have been adequately powered based on the study 
design (132 patients needed versus 151 enrolled).
    In response to CMS' question regarding potential complications in 
patients with coexisting cardiac devices, the manufacturer noted that 
it was understood that many CSA patients would likely have other 
cardiac devices already implanted and that this led to the design of 
both implant and testing procedures that accommodated concomitant 
devices. The manufacturer noted that the remed[emacr][supreg] System is 
typically placed on the right side of the chest to leave room for 
patients to have a cardiac device, which are typically placed on the 
left side, and that, in the pivotal trial, implantation of the 
remed[emacr][supreg] System in patients with a concomitant device did 
not demonstrate any increased risk. Further, the manufacturer noted 
that key metrics of implant duration, use of contrast dye, and 
fluoroscopy time were similar between patients with and without a

[[Page 58938]]

concomitant cardiac device. Regarding specific study results, the 
manufacturer noted that 42 percent (64 of 151) of patients in the 
pivotal trial had a concomitant device and 98 percent (63 of 64) of 
patients with a concomitant cardiac device were successfully implanted, 
as compared to 96 percent (81 of 84) of patients with no concomitant 
device. The manufacturer believed that there is no increased risk at 
the time of implant for patients with a coexisting cardiac device. With 
regard to safety post[hyphen]procedure, the commenter noted there was 
no difference in related SAEs between the groups with and without a 
concomitant cardiac device.
    Regarding CMS' question about whether the impact of cardiac 
resynchronization therapy (CRT) drove improvement for heart failure 
patient with a concomitant CRT device, the manufacturer noted limited 
literature available on this topic, but stated that the literature that 
does exist suggests that CRT may improve the apnea hypopnea index in 
some patients, which may be due to an improvement in ejection fraction. 
However, the manufacturer noted that all CRT patients in the 
remed[emacr][supreg] System pivotal trial had their CRT devices for a 
minimum of nine months and that despite having CRT for a significant 
duration, still had severe CSA at baseline. Accordingly, the 
manufacturer believed that it is unlikely that significant CSA 
improvements were based on CRT rather than the remed[emacr][supreg] 
System. The manufacturer noted that statistically significant subgroup 
analysis on CRT was difficult, but believed that the CRT subgroup did 
not lead to the overall results on the primary endpoint because the CRT 
subgroup ``underperformed'' relative to the non-CRT subgroup.
    Finally, with respect to CMS' question regarding whether the 
clinical results and patient response were durable and sustainable over 
time, the manufacturer asserted that it continues to collect 
effectiveness data beyond the 6-month endpoints of the pivotal IDE 
trial and that 12-month follow-up results on the pivotal IDE trial were 
recently published, demonstrating a trend towards increasing benefit 
for the treatment group at 12 months. Specifically, the commenter 
stated that, at 12 months, 91 percent of patients saw a reduction of 
AHI and with 67 percent achieving a 50 percent or greater reduction in 
AHI (compared to 60 percent at 6 months).
    Several commenters, individual physicians who have treated CSA 
patients with the remed[emacr][supreg] System, stated that, for these 
patients, traditional types of positive pressure ventilation did not 
work and the remed[emacr][supreg] System is the only treatment 
available.
    Response: We appreciate the commenters' input. After reviewing the 
additional information provided during the public comment period, we 
agree that the remed[emacr][supreg] System has been shown to improve 
patients symptoms of central sleep apnea, improve quality of life, 
requires minimal patient compliance compared to other treatments, and 
has a low adverse event profile. However, with regard to our questions 
about impacts on mortality, the applicant did note that its studies 
were not powered to demonstrate a mortality benefit.
    Commenters have adequately addressed the clinical concerns that we 
outlined in the proposed rule with additional evidence, longer follow-
up from the pivotal IDE trial, the interplay of the 
remed[emacr][supreg] System and a concomitant cardiac device, and 
information about power calculations and other data summarized above. 
Further, we believe that the remed[emacr][supreg] System offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, treatment involving currently available options. That 
is, those patients who have been diagnosed with moderate to severe CSA 
have no other available treatment options than the remed[emacr][supreg] 
System. Accordingly, we have determined that the remed[emacr][supreg] 
System has demonstrated substantial clinical improvement relative to 
existing treatment options for patients diagnosed with moderate to 
severe CSA.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that the 
remed[emacr][supreg] System would be reported with CPT code 0424T. CPT 
code 0424T is assigned to APC 5464 (Level 4 Neurostimulator and Related 
Procedures). To meet the cost criterion for device pass-through 
payment, a device must pass all three tests of the cost criterion for 
at least one APC. For our calculations, we used APC 5464, which had a 
CY 2017 payment rate of $27,047.11 at the time the application was 
received. Beginning in CY 2017, we calculate the device offset amount 
at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT 
code 0424T had a device offset amount of $11,089 at the time the 
application was received. According to the applicant, the cost of the 
remed[emacr][supreg] System was $34,500.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $34,500 for the remed[emacr][supreg] System 
exceeds 127 percent of the applicable APC payment amount for the 
service related to the category of devices of $27,047.11 ($34,500/
$27,047.11 x 100 = 127.5 percent). Therefore, we believe the 
remed[emacr][supreg] System meets the first cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means that the device cost needs to be at least 125 percent of the 
offset amount (the device-related portion of the APC found on the 
offset list). The estimated average reasonable cost of $34,500 for the 
remed[emacr][supreg] System exceeds the cost of the device-related 
portion of the proposed APC payment amount for the related service of 
$11,089 by 311 percent ($34,500-$11,089) x 100 = 311 percent). 
Therefore, we believe that the remed[emacr][supreg] System meets the 
second cost significance test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that the difference between the estimated average reasonable cost of 
the devices in the category and the portion of the APC payment amount 
for the device must exceed 10 percent of the APC payment amount for the 
related service. The difference between the estimated average 
reasonable cost of $34,500 for the remed[emacr][supreg] System and the 
portion of the proposed APC payment amount for the device of $11,089 
exceeds the APC payment amount for the related service of $27,047.11 by 
87 percent (($34,500/11,089)/$27,047.11 x 100 = 86.6 percent). 
Therefore, we believe that the remed[emacr][supreg] System meets the 
third cost significance test.
    We invited public comments on whether the remed[emacr][supreg] 
System meets the device pass-through payment criteria discussed in this 
section, including the cost criteria for device pass-through payment.
    Comment: The manufacturer of the remed[emacr][supreg] System 
believed that the remed[emacr][supreg] System meets the cost criterion 
for device pass-through payment status.

[[Page 58939]]

    Response: We appreciate the manufacturer's input.
    After consideration of the public comments we received, we are 
approving the remed[emacr][supreg] System for device pass-through 
payment status for CY 2019.
(6) Restrata[supreg] Wound Matrix
    Acera Surgical, Inc. submitted an application for a new device 
category for transitional pass-through payment status for 
Restrata[supreg] Wound Matrix. Restrata[supreg] Wound Matrix is a 
sterile, single-use product intended for use in local management of 
wounds. According to the applicant, Restrata[supreg] Wound Matrix is a 
soft, white, conformable, nonfriable, absorbable matrix that works as a 
wound care management product by acting as a protective covering for 
wound defects, providing a moist environment for the body's natural 
healing process to occur. Restrata[supreg] Wound Matrix is made from 
synthetic biocompatible materials and was designed with a nanoscale 
nonwoven fibrous structure with high porosity, similar to native 
extracellular matrix. Restrata[supreg] Wound Matrix allows for cellular 
infiltration, new tissue formation, neovascularization, and wound 
healing before completely degrading via hydrolysis. The product permits 
the ingress of cells and soft tissue formation in the defect space/
wound bed. Restrata[supreg] Wound Matrix can be used to manage wounds, 
including: Partial and full-thickness wounds, pressure sores/ulcers, 
venous ulcers, diabetic ulcers, chronic vascular ulcers, tunneled/
undermined wounds, surgical wounds (for example, donor site/grafts, 
post-laser surgery, post-Mohs surgery, podiatric wounds, wound 
dehiscence), trauma wounds (for example, abrasions, lacerations, 
partial thickness burns, skin tears), and draining wounds.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, Restrata[supreg] Wound Matrix is a product 
that is integral to the service provided, is used for one patient only, 
comes in contact with human skin, and is surgically inserted into the 
patient. The description of Restrata[supreg] Wound Matrix shows the 
product meets the device eligibility requirements of Sec.  419.66(b)(4) 
because Restrata[supreg] Wound Matrix is not an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and it is not a supply or material. We invited public 
comment on whether Restrata[supreg] Wound Matrix meets the eligibility 
criteria.
    We did not receive any public comments on whether Restrata[supreg] 
Wound Matrix meets the eligibility criteria. However, after the CY 2019 
OPPS/ASC proposed rule was released, CMS determined that 
Restrata[supreg] Wound Matrix is an alginate dressing described with 
the HCPCS code series A6196 through A6198 (Alginate or other fiber 
gelling dressing, wound cover, sterile). Alginate dressings are not 
skin substitute products and are considered to be a supply. According 
to the eligibility criterion, a supply or material is not eligible to 
receive device pass-through payment. Based on this determination, we 
were required to reassess our initial view on whether or not 
Restrata[supreg] Wound Matrix meets the eligibility criterion for 
device pass-through payment status.
    After consideration of all of the information we have received, we 
have determined that Restrata[supreg] Wound Matrix is an alginate 
dressing and is a supply, and the product does not meet the eligibility 
criterion for device pass-through payment status. Because we have 
determined that Restrata[supreg] Wound Matrix does not meet the basic 
eligibility criterion for transitional pass-through payment status, we 
have not evaluated this product to determine whether it meets the other 
criteria required for transitional pass-through payment for devices; 
that is, the newness criterion, the substantial clinical improvement 
criterion, and the cost criterion.
    After consideration of the public comments we received, we are not 
approving device pass-through payment status for Restrata[supreg] Wound 
Matrix for CY 2019.
(7) SpaceOAR[supreg] System
    Augmenix, Inc. submitted an application for a new device category 
for transitional pass-through payment status for the SpaceOAR[supreg] 
System. According to the applicant, the SpaceOAR[supreg] System is a 
polyethylene glycol hydrogel spacer that temporarily positions the 
anterior rectal wall away from the prostate to reduce the radiation 
delivered to the anterior rectum during prostate cancer radiotherapy 
treatment. The applicant stated that the SpaceOAR[supreg] System 
reduces some of the side effects associated with radiotherapy, which 
are collectively known as ``rectal toxicity'' (diarrhea, rectal 
bleeding, painful defecation, and erectile dysfunction, among other 
conditions). The applicant stated that the SpaceOAR[supreg] is 
implanted several weeks before radiotherapy; the hydrogel maintains 
space between the prostate and rectum for the entire course of 
radiotherapy and is completely absorbed by the patient's body within 6 
months.
    With respect to the newness criterion at Sec.  419.66(b)(1), FDA 
granted a De Novo request classifying the SpaceOAR[supreg] System as a 
class II device under section 513(f)(2) of the Federal Food, Drug, and 
Cosmetic Act on April 1, 2015. We received the application for a new 
device category for transitional pass-through payment status for the 
SpaceOAR[supreg] System on June 1, 2017, which is within 3 years of the 
date of the initial FDA approval or clearance. We invited public 
comments on whether the SpaceOAR[supreg] System meets the newness 
criterion.
    Comment: The manufacturer of SpaceOAR[supreg] System believed this 
device meets the eligibility criteria for device pass-through payment, 
but did not specifically comment on the newness criterion.
    Response: We appreciate the manufacturer's input.
    After consideration of the public comments we received, we believe 
that the SpaceOAR[supreg] System meets the newness criterion for device 
pass-through payment status.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the SpaceOAR[supreg] System is integral to 
the service provided, is used for one patient only, comes in contact 
with human skin, and is applied in or on a wound or other skin lesion. 
The applicant also claimed the SpaceOAR[supreg] System meets the device 
eligibility requirements of Sec.  419.66(b)(4) because it is not an 
instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through payment category that describes the 
SpaceOAR[supreg] System. The applicant suggested a category descriptor 
for the SpaceOAR[supreg] System of ``Absorbable perirectal spacer''. We 
invited public comments on this issue.
    Comment: The manufacturer of the SpaceOAR[supreg] System believed 
that this device meets the eligibility criteria for device pass-through 
payment status, but did not specifically comment on whether a current 
pass-through payment

[[Page 58940]]

category appropriately describes this device.
    Response: We appreciate the manufacturer's input.
    After consideration of the public comments we received, we believe 
that there is no existing pass-through payment category that 
appropriately describes the SpaceOAR[supreg] System and that the 
SpaceOAR[supreg] System meets the eligibility criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With respect to this criterion, the applicant 
submitted studies which discussed the techniques for using hydrogel 
spacers to limit radiation exposure to the rectum in prostate 
radiotherapy. In support of its assertion that SpaceOAR is a 
substantial clinical improvement, the applicant submitted several 
studies that examined the effect that the SpaceOAR[supreg] System had 
on outcomes such as rectal dose, radiation toxicity, and quality of 
life declines after image guided intensity modulated radiation therapy 
for prostate cancer. Articles by Mariados et al.\25\ and Hamstra et 
al.\26\ discussed the results of a single-blind phase III trial of 
image guided intensity modulated radiation therapy with 15 months and 3 
years of follow-up, respectively. In the studies, a total of 222 men 
were randomized 2:1 to the spacer or control group and received 79.2 Gy 
in 1.8-Gy fractions to the prostate with or without the seminal 
vesicles.
---------------------------------------------------------------------------

    \25\ Mariados N, et al. (2015). Hydrogel Spacer Prospective 
Multicenter Randomized Controlled Pivotal Trial: Dosimetric and 
Clinical Effects of Perirectal Spacer Application in Men Undergoing 
Prostate Image Guided Intensity Modulated Radiation Therapy. Int J 
Radiat Oncol Biol Phys.92(5):971-977. Epub 2015 Apr 23. PMID: 
26054865.
    \26\ Hamstra DA, et al. (2017). Continued Benefit to Rectal 
Separation for Prostate Radiation Therapy: Final Results of a Phase 
III Trial. Int J Radiat Oncol Biol Phys. Apr 1;97(5):976-985. Epub 
2016 Dec 23. PMID:28209443.
---------------------------------------------------------------------------

    The results of this study \27\ showed that after 3 years, compared 
with the control group, the participants who received the 
SpaceOAR[supreg] System injection had a statistically significant 
smaller volume of the rectum receiving a threshold radiation exposure, 
which was the primary effectiveness endpoint. The results also showed 
that in an extended follow up period, the control group experienced 
larger declines in bowel and urinary quality of life compared to 
participants who received the SpaceOAR[supreg] System treatment. 
Lastly, in an extended follow-up period, the probability of grade >=1 
rectal toxicity was decreased in the SpaceOAR[supreg] System arm (9 
percent control group, 2 percent SpaceOAR[supreg] System group, p <.03) 
and no >= grade 2 rectal toxicity was observed in the SpaceOAR[supreg] 
System arm. However, the control arm had low rates of rectal toxicity 
in general. The results of this 3-year follow-up of these participants 
showed that the differences identified in the 15-month follow-up study 
were maintained or increased.\28\
---------------------------------------------------------------------------

    \27\ Ibid.
    \28\ Ibid.
---------------------------------------------------------------------------

    The applicant also included a secondary analysis of the phase III 
trial data which showed that participants who received lower radiation 
doses to the penile bulb, associated with the SpaceOAR[supreg] System 
injection, reported similar erectile function compared with the control 
group based on patient-reported sexual quality of life.\29\ A 2017 
retrospective cohort study by Pinkawa et al.\30\ evaluated quality of 
life changes up to 5 years after RT for prostate cancer with the 
SpaceOAR[supreg] System and showed that 5 years after radiation 
therapy, no patients who received the SpaceOAR[supreg] System reported 
moderate/big problems with bowel urgency, losing control of stools, or 
with bowel habits overall. However, there were no statistically 
significant differences in mean score changes for urinary, bowel, or 
sexual bother between the percentage of participants in the 
SpaceOAR[supreg] System and control groups at either 1\1/2\ years or 5 
years postradiation therapy. CMS had concerns regarding the phase III 
trial include inclusion of only low to moderate risk prostate cancer in 
the study population and failing to use a clinical outcome as a primary 
endpoint, although the purpose of the spacer is to reduce the side 
effects of undesired radiation to the rectum including bleeding, 
diarrhea, fistula, pain, and/or stricture. Notwithstanding 
acknowledgement that rectal complications may be reduced using 
biodegradable biomaterials placed to increase the distance between the 
rectum and the prostate, it is not clear that the SpaceOAR[supreg] 
System is superior to existing alternative biodegradable biomaterials 
currently utilized for spacing in the context of prostate radiotherapy.
---------------------------------------------------------------------------

    \29\ Hamstra, DA et al. (2018) Sexual quality of life following 
prostate intensity modulated radiation therapy (IMRT) with a rectal/
prostate spacer: Secondary analysis of a phase 3 trial. Practical 
Radiation Oncology, 8, e7-e15.
    \30\ Pinkawa, M. et al. (2017). Quality of Life after Radiation 
Therapy for Prostate Cancer With a Hydrogel Spacer: Five Year 
Results. Int J Radiat Oncol Biol Phys., Vol. 99, No. 2, pp. 374e377.
---------------------------------------------------------------------------

    Based on the evidence submitted with the application, we have 
insufficient evidence that the SpaceOAR[supreg] System provides a 
substantial clinical improvement over other similar products. We 
invited public comments on whether the SpaceOAR[supreg] System meets 
the substantial clinical improvement criterion.
    Comment: The manufacturer of the SpaceOAR[supreg] System identified 
several points which supported this device meeting the substantial 
clinical improvement criterion. In response to the statement in the 
proposed rule that the control arm of the phase III trial had low rates 
of rectal toxicity in general, the manufacturer noted that the low 
rates of rectal toxicity in the control arm of the study were due to: 
(1) The radiation plans in both the treatment and control groups were 
evaluated and approved by an independent core laboratory for compliance 
to protocol guidelines, which led to low toxicity in the control group 
relative to standard practice; and (2) all study dose plans used CT and 
MRI image fusion to improve plan accuracy, while typical plans only use 
CT imaging. The manufacturer noted that patients in the 
SpaceOAR[supreg] System group still had statistically significant 
reductions in rectal toxicity and improvements in quality of life in 
comparison to the control group.
    The manufacturer disagreed with a statement in the proposed rule 
where CMS indicated that the SpaceOAR[supreg] System patients 
``reported similar erectile function compared with the control group 
based on patient-reported sexual quality of life.'' The commenter noted 
that the patient reported quality of life analysis of baseline potent 
men at three years found that men treated with the SpaceOAR[supreg] 
System had improved scores on ``erections sufficient for intercourse'' 
as well as better scores on seven of the 13 items regarding sexual 
function.\31\
---------------------------------------------------------------------------

    \31\ Hamstra, DA et al. (2018) Sexual quality of life following 
prostate intensity modulated radiation therapy (IMRT) with a rectal/
prostate spacer: Secondary analysis of a phase 3 trial. Practical 
Radiation Oncology, 8, e7-e15.
---------------------------------------------------------------------------

    In response to the statement in the proposed rule that the 
submitted studies included only low to moderate risk prostate cancer in 
the study population and failed to use a clinical outcome as a primary 
endpoint, the manufacturer noted that the phase III trial design 
specifically selected a low and

[[Page 58941]]

intermediate risk prostate cancer population to better allow for a 
safety determination. The manufacturer also noted that the significant 
reductions in late rectal toxicity and improvements in quality of life 
at 3 years demonstrate that the clinical benefits of this device are 
better than anticipated when the study was originally developed.
    In response to the statement in the proposed rule that it was 
unclear that the SpaceOAR[supreg] System was superior to existing 
alternative spacers used for prostate radiotherapy, the manufacturer 
noted that the SpaceOAR[supreg] System is the only prostate-rectum 
spacer authorized for marketing by the FDA for use in prostate 
radiotherapy. The manufacturer indicated that the closest comparable 
product is the endorectal balloon, and that a study comparing the 
rectal-spacing capabilities of these two products during prostate 
cancer stereotactic body radiation therapy found significantly less 
rectal radiation dose in the patients who received the SpaceOAR 
System[supreg].\32\ The manufacturer noted a study of these two 
products during proton radiotherapy found that, with the 
SpaceOAR[supreg] System, a larger area around the prostate could be 
radiated while still significantly reducing the rectum radiation 
dose.\33\ The manufacturer indicated that several studies found that 
prostate stability was comparable using these two 
products.34 35 36 The manufacturer also noted that 
reductions in placement error and patient comfort favors the 
SpaceOAR[supreg] System compared to endorectal balloons.\37\ The 
manufacturer asserted that the combined impacts of these results make 
the SpaceOAR[supreg] System a substantial clinical improvement over 
endorectal balloons.
---------------------------------------------------------------------------

    \32\ Jones, RT et al. Oosimetric comparison of rectal-
sparingcapabilities of rectal balloon vs inje ctab:e spacer gelin 
stereotactic body radiation therapy forprostate cancer: lessons 
learned from prospective trials. Medical Dosimetry, Volume 42, Issue 
4, winter 2017, Pages 341-347.
    \33\ Fagundes MA et al, Evolving Rectal Sparing In Flducfal 
 BasedImage Guided Proton Therapy for Localized Prostate 
Cancer. International Journal of Radiation Oncology 
 Biology  Physics, Vol. 96, 
Issue 2, E279, 2016.
    \34\ Hedrick SG et al. A comparison between hydrogel spacer and 
endorectal balloon: An analysis of lntrafraction prostate motion 
during proton therapy. J. Appl. Clln. Med. Phys., Vol. 18, pp. 106-
112, 2017.
    \35\ Su Z et al. Hvdrogel Spacer Or Gas Release Rectal Balloon, 
a Comparative Study of Prostate lntrafraction Motion in Proton 
Therapy. Med Phys. 201S;45(6):el 4l.
    \36\ Rendall R. Comparison of hydrogel spacer and rectal 
immobilization on Intra-fraction motion efficiency using Image 
guidance prostate proton therapy. PTCOG 55,PS02, May 27, 2016.
    \37\ EI-Bassiounl et al. Target motion variability and on-line 
positioning accuracy during external beam radiation therapy of 
prostate cancer with an endorectal balloon device. Strahlenther 
Onkol. 2006 Sep;1S2(9):53l[middot]6.
---------------------------------------------------------------------------

    Several commenters, representing various oncological and urologic 
specialty societies, believed that the SpaceOAR[supreg] System meets 
the substantial clinical improvement criterion. These commenters noted 
that there were no other alternative biodegradable biomaterials with 
FDA marketing authorization currently utilized for spacing in the 
context of prostate radiotherapy and that this device provided 
physicians with an option to help ensure patients are provided with the 
best clinical outcomes with the fewest adverse effects.
    Response: We appreciate the manufacturer's and the commenters' 
input. We reviewed these comments and the associated literature on this 
topic and found that the application did not support that the 
SpaceOAR[supreg] System demonstrated a substantial clinical improvement 
as a prostate-rectum spacer for men receiving prostate radiotherapy 
treatment. While the studies provided by the applicant do indicate that 
the device provides a dose reduction at the rectum during IMRT for 
prostate cancer, we found the clinical results of these studies were 
equivocal and did not provide definitive evidence of substantial 
clinical improvement of radiation toxicity and quality of life scores 
after radiation therapy.
    In response to our concern that the control arm of the study had 
very low rates of rectal toxicity (the manufacturers quoted rates of 
late rectal toxicity of between 14 and 25 percent for studies without 
the use of the SpaceOAR[supreg] System), the commenter responded that 
the low rates of rectal toxicity in the control arm of the study were 
due to (1) the radiation plans in both the treatment group and the 
control group were evaluated and approved by an independent core 
laboratory for compliance with protocol guidelines, which led to low 
toxicity in the control group relative to standard practice, and (2) 
all study dose plans used CT and MRI image fusion to improve plan 
accuracy, while typical plans only use CT imaging. The commenter 
further noted that, despite low rates of rectal toxicity in the control 
arm of the phase III trial, patients in the SpaceOAR[supreg] System 
group still had statistically significant reductions in rectal toxicity 
and improvements in quality of life in comparison to the control group. 
We are still concerned that the low rates of rectal toxicity 
demonstrated in the control group may not support claims of substantial 
clinical improvement of the SpaceOAR[supreg] System. For example, the 
rates of late grade one or higher rectal toxicity in the control 
population in the clinical trials submitted by the applicant were 7 
percent \38\ and 9.2 percent,\39\ respectively. The rates of late grade 
one or higher rectal toxicity in the SpaceOAR[supreg] System groups in 
the clinical trials submitted by the applicant were 2 percent in both 
studies.40 41 We note that image guided radiation therapy 
has drastically improved radiation dose effects, and conventional 
radiotherapy is well tolerated by the vast majority of patients.\42\ It 
remains unclear if further reduction in radiation dose effects with the 
SpaceOAR[supreg] System translates to a substantial clinical 
improvement that is maintained over time when compared to patients who 
did not receive the SpaceOAR[supreg] System. The applicant's 
explanation that all study dose plans used CT and MRI image fusion to 
improve plan accuracy, while typical plans only use CT imaging is not 
supported in the literature, which states that IMRT is considered the 
standard of care in RT treatment centers; in both the United States and 
Europe, it has largely replaced older forms of 3D-CRT.43 44 
The response that the radiation plans in both the treatment group and 
the control group were evaluated and approved by an independent core 
laboratory for compliance to protocol guidelines, which led to low 
toxicity in the control group relative to standard practice, further 
calls into question the direct role of the SpaceOAR[supreg] System in 
reducing toxicity versus more precise planning

[[Page 58942]]

protocols and the importance of adhering to guidance protocols.
---------------------------------------------------------------------------

    \38\ Mariados N, et al. (2015). Hydrogel Spacer Prospective 
Multicenter Randomized Controlled Pivotal Trial: Dosimetric and 
Clinical Effects of Perirectal Spacer Application in Men Undergoing 
Prostate Image Guided Intensity Modulated Radiation Therapy. Int J 
Radiat Oncol Biol Phys. 92(5):971-977. Epub 2015 Apr 23. PMID: 
26054865.
    \39\ Hamstra DA, et al. (2017). Continued Benefit to Rectal 
Separation for Prostate Radiation Therapy: Final Results of a Phase 
III Trial. Int J Radiat Oncol Biol Phys. Apr 1;97(5):976-985. Epub 
2016 Dec 23. PMID:28209443.
    \40\ Ibid.
    \41\ Ibid.
    \42\ Uhl et al. (2014). Absorbable hydrogel spacer use in men 
undergoing prostate cancer radiotherapy: 12 month toxicity and 
proctoscopy results of a prospective multicenter phase II trial. 
Radiation Oncology, 9:96.
    \43\ Sheets NC, Goldin GH, Meyer AM, Wu Y, Chang Y, St[uuml]rmer 
T, Holmes JA, Reeve BB, Godley PA, Carpenter WR, Chen RC. (2012). 
Intensity-modulated radiation therapy, proton therapy, or conformal 
radiation therapy and morbidity and disease control in localized 
prostate cancer. JAMA.; 307(15):1611.
    \44\ Bauman G, Rumble RB, Chen J, Loblaw A, Warde P, Members of 
the IMRT Indications Expert Panel.(2012). Intensity-modulated 
radiotherapy in the treatment of prostate cancer. Clin Oncol (R Coll 
Radiol), Sep;24(7):461-73. Epub 2012 Jun 4.
---------------------------------------------------------------------------

    As discussed further below, we continue to have concerns regarding 
the applicant's claims that the statistically significant reduction in 
late rectal toxicity as well as the improvements in QOL scores lend to 
substantial clinical improvement, despite the relatively low rates of 
rectal toxicity in the control group. We note that the data showing 
reduction in rectal toxicity and improvements in quality are from 
studies that were not designed with primary clinical outcomes to show 
superiority, but rather were designed primarily to evaluate the 
threshold of radiation exposure to the rectum and adverse events 
related to the procedure. Consequently, the studied clinical outcomes 
have many differences that did not meet statistical significance or 
were not sustained over time.
    In the pivotal trial,\45\ no differences in acute rectal or urinary 
toxicity from the time of the procedure through the 3-month visit were 
observed between the SpaceOAR[supreg] System group and the control 
group. In this study,\46\ there was a statistically significant 
difference noted between the SpaceOAR[supreg] System group and the 
control group in late rectal toxicity (3 to 15 months after the 
procedure). In the SpaceOAR[supreg] System group, 2 percent of the 
patients (n=3) experienced late rectal toxicity, while 7 percent of 
patients in the control group (n=5) experienced late rectal toxicity. 
There was one incidence of the more clinically serious (grade 3) late 
rectal toxicity reported in the control group and no incidence of grade 
4 rectal toxicity in either group.
---------------------------------------------------------------------------

    \45\ Mariados N, et al. (2015). Hydrogel Spacer Prospective 
Multicenter Randomized Controlled Pivotal Trial: Dosimetric and 
Clinical Effects of Perirectal Spacer Application in Men Undergoing 
Prostate Image Guided Intensity Modulated Radiation Therapy. Int J 
Radiat Oncol Biol Phys. 92(5):971-977. Epub 2015 Apr 23. PMID: 
26054865.
    \46\ Ibid.
---------------------------------------------------------------------------

    Even at 3 years after the procedure, the control arm had very low 
rates of rectal toxicity. The 3-year incidence of grade >=1 rectal 
toxicity was 9.2 percent (approximately 4 patients) in the control 
group versus 2.0 percent (approximately 2 patients) in the 
SpaceOAR[supreg] System group. The cumulative rate of grade >=2 rectal 
bowel toxicity was 6 percent at 3 years in the control arm, with no 
cases of grade >=2 rectal toxicity in the SpaceOAR[supreg] System 
group.\47\
---------------------------------------------------------------------------

    \47\ Hamstra DA, et al. (2017). Continued Benefit to Rectal 
Separation for Prostate Radiation Therapy: Final Results of a Phase 
III Trial. Int J Radiat Oncol Biol Phys. Apr 1;97(5):976-985. Epub 
2016 Dec 23. PMID:28209443.
---------------------------------------------------------------------------

    With regard to corresponding improvements in quality of life, the 
pivotal trial,\48\ at 3 months, showed there was no statistically 
significant difference between the SpaceOAR[supreg] System group and 
the control group in mean changes in bowel and urinary quality of life 
domains. Although, at 6, 12, and 15 months, a lower percentage of 
patients in the SpaceOAR[supreg] System group reported declines in 
bowel quality of life compared to those in the control group, at 15 
months, 11.6 percent and 21.4 percent of the SpaceOAR[supreg] System 
patients and the control group patients, respectively, experienced 10-
point declines in bowel quality of life. However, this difference was 
not statistically significant. In terms of urinary quality of life at 6 
months, a higher percentage of patients in the control group (22.2 
percent) had 10-point urinary declines in comparison to the the 
SpaceOAR[supreg] System group (8.8 percent). However, again the 
durability of these improvements disappeared over time because there 
was no difference between the SpaceOAR[supreg] System group and the 
control group in urinary quality of life decline at 12 and 15 months 
follow-ups.\49\
---------------------------------------------------------------------------

    \48\ Ibid.
    \49\ Ibid.
---------------------------------------------------------------------------

    The commenter claimed that when followed up at 3 years, patients in 
the phase III trial receiving the SpaceOAR[supreg] System prior to 
their prostate cancer radiotherapy demonstrated significant rectal 
(bowel), urinary, and sexual benefit. However, we found the data to be 
inconsistent and unreliable to support this claim. Specifically, in the 
study including 3 years of follow-up data,\50\ quality of life was 
examined using the Expanded Prostate Cancer Index Composite (EPIC) 
questionnaire, a comprehensive instrument designed to evaluate patient 
function and bother after prostate cancer treatment. For the average 
bowel summary score, both the SpaceOAR[supreg] System group and the 
control group had similar acute declines in bowel quality of life 
between enrollment and 3 months after treatment. Also, at 3 months 
after treatment, there were no patients in the control group that 
reported acute bowel pain while 6.8 percent of the SpaceOAR[supreg] 
System patients reported acute bowel pain.
---------------------------------------------------------------------------

    \50\ Hamstra DA, et al. (2017). Continued Benefit to Rectal 
Separation for Prostate Radiation Therapy: Final Results of a Phase 
III Trial. Int J Radiat Oncol Biol Phys. Apr 1;97(5):976-985. Epub 
2016 Dec 23. PMID:28209443.
---------------------------------------------------------------------------

    In this study, the proportion of patients with measurable changes 
in bowel quality of life meeting the minimally important difference 
(MID) threshold (5 points) or twice that threshold (10 points) was 
evaluated. According to the authors, these thresholds give an idea of 
when patient-reported symptoms are likely to be clinically meaningful 
to prostate cancer patients, with a 10-point decline indicating a more 
serious clinical effect. From 6 months through 3 years, more men in the 
control group had a MID in bowel quality of life meeting the threshold 
of 5 points, but no difference was found for a 10-point decline. At 3 
years, the SpaceOAR[supreg] System group patients were less likely than 
the control group patients to have a detectable decline in bowel 
quality of life for both MID thresholds (5-point: 41 percent (control) 
versus 14 percent (the SpaceOAR[supreg] System; 10-point: 21 percent 
(control) versus 5 percent (the SpaceOAR[supreg] System).\51\ However, 
more than 30 percent of the patients in both the SpaceOAR[supreg] 
System group (n=55) and the control group (n=27) were lost by the 3-
year follow-up and the follow-up data were taken from volunteer centers 
that decided to continue in the study. It is unclear if the differences 
observed at 3 years are due to the large number of respondents who did 
not participate at year 3, resulting in a smaller sample size and more 
unreliable data. For example, regarding urinary quality of life, when 
averaged over the entire follow-up duration, no significant difference 
was found in the mean urinary quality of life between the two groups. 
However, at the 3-year point, a statistically significant difference 
was found in urinary quality of life favoring the SpaceOAR[supreg] 
System group compared with the control group.
---------------------------------------------------------------------------

    \51\ Ibid.
---------------------------------------------------------------------------

    The researchers in this study also assessed the percent of patients 
with moderate or big problems in quality of life. The researchers found 
that, at 3 years, only one item showed a statistically significant 
difference between the treatment groups (moderate to big bother for 
urinary frequency: The control group of 18 percent versus the 
SpaceOAR[supreg] System group of 5 percent; P <.05). At 3 years after 
treatment, 2.2 percent of the men in the SpaceOAR[supreg] System group 
evaluated their overall bowel function as a big or moderate bother. 
This compares to 4.4 percent in the control group, which was not a 
statistically significant difference. None of the components of rectal 
bother were statistically significantly better in the men who received 
the SpaceOAR[supreg] System. In contrast, regarding the question of 
bowel pain, none of the control group patients reported a moderate or 
big bother after 3 years, while 1.1 percent of the SpaceOAR[supreg] 
System group patients reported that

[[Page 58943]]

bowel pain was a moderate or big bother.\52\ The study by Pinkawa et 
al.\53\ looking at 1\1/2\ and 5 year results comparing quality of life 
of patients pretreated with hydrogel and controls further demonstrates 
inconsistency in looking at substantial improvements with the 
SpaceOAR[supreg] System. In this study percentages of big problems with 
bowel urgency, control of stools and bowel habitus overall favored 
SpaceOAR at 1\1/2\ years. However, only differences in percentage of 
problems of bowel urgency remained after the 5-year follow-up. Also, no 
statistically significant difference was shown between the 
SpaceOAR[supreg] System group and the control group in comparing mean 
bowl bother scores at 1\1/2\ years and 5 years after radiation therapy.
---------------------------------------------------------------------------

    \52\ Ibid.
    \53\ Pinkawa, M. et al. (2017). Quality of Life after Radiation 
Therapy for Prostate Cancer With a Hydrogel Spacer: Five Year 
Results. Int J Radiat Oncol Biol Phys., Vol. 99, No. 2, pp. 374e377.
---------------------------------------------------------------------------

    The manufacturer stated that CMS incorrectly stated in the proposed 
rule that the SpaceOAR[supreg] System patients reported similar 
erectile function compared with the control group based on patient-
reported sexual quality of life. The manufacturer is correct; in a 
study by Hamstra et al.,\54\ the patient-reported quality of life 
analysis of baseline potent men found that men in this group treated 
with the SpaceOAR[supreg] System had improved ``erections sufficient 
for intercourse'' as well as statistically significant higher scores on 
7 of 13 items in the sexual domain in comparison to the control group 
at 3 years. However, at baseline, sexual functioning in the study was 
low; only 41 percent of patients had no sexual dysfunction at baseline 
(EPIC sexual quality of life scores >60, n=88). When comparing men with 
poor baseline sexual quality of life (EPIC score <=60, n=125), there 
was no difference between the SpaceOAR[supreg] System group and the 
control group in function, bother, or sexual summary score at the 3-
year follow up.\55\ We also note that the Pinkawa \56\ study shows that 
more men with the SpaceOAR[supreg] System reported erections firm 
enough for intercourse to be statistically significant. However, again 
the same study reported the changes in sexual quality of life bother 
score were not statistically different between the two groups at 5 
years. Again, along with the instability of the 3-year data stated 
above, the fact that the data are inconsistent and not supported by the 
long-term quality of life data, we are unable to substantiate 
substantial clinical improvement.
---------------------------------------------------------------------------

    \54\ Hamstra, DA et al. (2018) Sexual quality of life following 
prostate intensity modulated radiation therapy (IMRT) with a rectal/
prostate spacer: secondary analysis of a phase 3 trial. Practical 
Radiation Oncology, Vol. 8, e7-e15.
    \55\ Ibid.
    \56\ Pinkawa, M. et al. (2017). Quality of Life after Radiation 
Therapy for Prostate Cancer With a Hydrogel Spacer: Five Year 
Results. Int J Radiat Oncol Biol Phys., Vol. 99, No. 2, pp. 374e377.
---------------------------------------------------------------------------

    We appreciate the comments received from the urological and the 
oncological community as well members of the public in support of this 
technology. The SpaceOAR[supreg] System device effectively displaces 
the anterior wall reducing the dose of radiation the rectum receives 
during radiation treatment for prostate cancer. However, after 
consideration of the public comments and the application materials we 
received, at this time we do not believe that the SpaceOAR[supreg] 
System meets the substantial clinical improvement criterion to receive 
device pass-through payment. The submitted studies were not designed to 
show primary clinical outcomes, and consequently the data on toxicity 
and quality of life improvement are inconsistent and fail to show 
enduring improvements. It is difficult to attribute the reductions in 
late rectal toxicity solely to the device, given improvements in 
radiation therapy and planning as well as the large number of 
nonresponders at 3 years postradiation and the 3-year follow-up data 
were being taken from volunteer centers that decided to continue in the 
study. We note that many favorable clinical outcomes were not 
statistically significant but trended in favor of the SpaceOAR[supreg] 
System group. We agree with many authors that seem to suggest that the 
greatest utility of the SpaceOAR[supreg] System will be its use in 
populations at greatest risk for radiation toxicity such as 
hypofractionated treatment or other dose intensifications.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that the 
SpaceOAR[supreg] System would be reported with CPT code 0438T (which 
was deleted and replaced with CPT code 55874, effective January 1, 
2018). CPT code 0438T was assigned to APC 5374 (Level 4 Urology and 
Related Services). To meet the cost criterion for device pass-through 
payment, a device must pass all three tests of the cost criterion for 
at least one APC. For our calculations, we used APC 5374, which had a 
CY 2017 payment rate of $2,542.56 at the time the application was 
received. Beginning in CY 2017, we calculate the device offset amount 
at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT 
code 0438T had a device offset amount of $587.07 at the time the 
application was received. According to the applicant, the cost of the 
SpaceOAR[supreg] System was $2,850.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $2,850 for the SpaceOAR[supreg] System 
exceeds 112 percent of the applicable APC payment amount for the 
service related to the category of devices of $2,542.56 ($2850/
$2,542.56 x 100 = 112 percent). Therefore, we believe the 
SpaceOAR[supreg] system meets the first cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means that the device cost needs to be at least 125 percent of the 
offset amount (the device-related portion of the APC found on the 
offset list). The estimated average reasonable cost of $2,850 for the 
SpaceOAR[supreg] System exceeds the cost of the device-related portion 
of the APC payment amount for the related service of $587.07 by 485 
percent ($2,850/$587.07) x 100 = 485 percent). Therefore, we believe 
that the SpaceOAR[supreg] System meets the second cost significance 
test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that the difference between the estimated average reasonable cost of 
the devices in the category and the portion of the APC payment amount 
for the device must exceed 10 percent of the APC payment amount for the 
related service. The difference between the estimated average 
reasonable cost of $2,850 for the SpaceOAR[supreg] System and the 
portion of the APC payment amount for the device of $587.07 exceeds the 
APC payment amount for the related service of $2,542.56 by 89 percent 
(($2,850-$587.07)/$2,542.56 x 100 = 89 percent). Therefore, we believe 
that the SpaceOAR[supreg] System meets the third cost significance 
test.
    We invited public comments on whether the SpaceOAR[supreg] System 
meets the device pass-through payment

[[Page 58944]]

criteria discussed in this section, including the cost criteria.
    Comment: The manufacturer of the SpaceOAR[supreg] System believed 
this device meets the eligibility criteria for device pass-through 
payment status, but did not specifically comment on whether this device 
meets the cost criterion.
    Response: We appreciate the manufacturer's input.
    After consideration of the public comments we received, we believe 
that SpaceOAR[supreg] System meets the cost criterion for device pass-
through payment status.
    After consideration of the public comments we received, we believe 
that SpaceOAR[supreg] System does not qualify for device pass-through 
payment status because it does not meet the substantial clinical 
improvement criterion, although it may have clinical benefit for 
certain patients. As such, we are not approving the application for 
device pass-through payment status for the SpaceOAR[supreg] System for 
CY 2019.

B. Device-Intensive Procedures

1. Background
    Under the OPPS, prior to CY 2017, device-intensive status for 
procedures was determined at the APC level for APCs with a device 
offset percentage greater than 40 percent (79 FR 66795). Beginning in 
CY 2017, CMS began determining device-intensive status at the HCPCS 
code level. In assigning device-intensive status to an APC prior to CY 
2017, the device costs of all the procedures within the APC were 
calculated and the geometric mean device offset of all of the 
procedures had to exceed 40 percent. Almost all of the procedures 
assigned to device-intensive APCs utilized devices, and the device 
costs for the associated HCPCS codes exceeded 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.4. of this final rule with comment period. A 
related device policy was the requirement that certain procedures 
assigned to device-intensive APCs require the reporting of a device 
code on the claim (80 FR 70422). For further background information on 
the device-intensive APC policy, we refer readers to the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70421 through 70426).
a. HCPCS Code-Level Device-Intensive Determination
    As stated earlier, prior to CY 2017, the device-intensive 
methodology assigned device-intensive status to all procedures 
requiring the implantation of a device that were assigned to an APC 
with a device offset greater than 40 percent and, beginning in CY 2015, 
that met the three criteria listed below. Historically, the device-
intensive designation was at the APC level and applied to the 
applicable procedures within that APC. In the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79658), we changed our methodology to 
assign device-intensive status at the individual HCPCS code level 
rather than at the APC level. Under this policy, a procedure could be 
assigned device-intensive status regardless of its APC assignment, and 
device-intensive APCs were no longer applied under the OPPS or the ASC 
payment system.
    We believe that a HCPCS code-level device offset is, in most cases, 
a better representation of a procedure's device cost than an APC-wide 
average device offset based on the average device offset of all of the 
procedures assigned to an APC. Unlike a device offset calculated at the 
APC level, which is a weighted average offset for all devices used in 
all of the procedures assigned to an APC, a HCPCS code-level device 
offset is calculated using only claims for a single HCPCS code. We 
believe that this methodological change results in a more accurate 
representation of the cost attributable to implantation of a high-cost 
device, which ensures consistent device-intensive designation of 
procedures with a significant device cost. Further, we believe a HCPCS 
code-level device offset removes inappropriate device-intensive status 
for procedures without a significant device cost that are granted such 
status because of APC assignment.
    Under our existing policy, procedures that meet the criteria listed 
below in section IV.B.1.b. of this final rule with comment period are 
identified as device-intensive procedures and are subject to all the 
policies applicable to procedures assigned device-intensive status 
under our established methodology, including our policies on device 
edits and no cost/full credit and partial credit devices discussed in 
sections IV.B.3. and IV.B.4. of this final rule with comment period, 
respectively.
b. Use of the Three Criteria To Designate Device-Intensive Procedures
    We clarified our established policy in the CY 2018 OPPS/ASC final 
rule with comment period (82 FR 52474), where we explained that device-
intensive procedures require the implantation of a device and 
additionally are subject to the following criteria:
     All procedures must involve implantable devices that would 
be reported if device insertion procedures were performed;
     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
     The device offset amount must be significant, which is 
defined as exceeding 40 percent of the procedure's mean cost.
    We changed our policy to apply these three criteria to determine 
whether procedures qualify as device-intensive in the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66926), where we stated that we 
would apply the no cost/full credit and partial credit device policy--
which includes the three criteria listed above--to all device-intensive 
procedures beginning in CY 2015. We reiterated this position in the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70424), where we 
explained that we were finalizing our proposal 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. Under the policies we adopted in CYs 2015, 
2016, and 2017, all procedures that require the implantation of a 
device and meet the above criteria are assigned device-intensive 
status, regardless of their APC placement.
2. Changes to the Device-Intensive Procedure Policy for CY 2019 and 
Subsequent Years
    As part of CMS' effort to better capture costs for procedures with 
significant device costs, in the CY 2019 OPPS/ASC proposed rule (83 FR 
37108), for CY 2019, we proposed to modify our criteria for device-
intensive procedures. We have heard from stakeholders that the current 
criteria exclude some procedures that stakeholders believe should 
qualify as device-intensive procedures. Specifically, we were persuaded 
by stakeholder arguments that procedures requiring expensive surgically 
inserted or implanted devices that are not capital equipment should 
qualify as device-intensive procedures, regardless of whether the 
device remains in the patient's body after the conclusion of the 
procedure. We agreed that a broader definition of device-intensive 
procedures was warranted, and proposed two modifications to the 
criteria for CY 2019. First, we proposed to allow procedures that 
involve surgically inserted or implanted, single-use devices that meet 
the device offset percentage threshold to qualify as device-intensive 
procedures, regardless

[[Page 58945]]

of whether the device remains in the patient's body after the 
conclusion of the procedure. We proposed this policy because we no 
longer believed that whether a device remains in the patient's body 
should affect its designation as a device-intensive procedure, as such 
devices could, nonetheless, comprise a large portion of the cost of the 
applicable procedure. Second, we proposed to modify our criteria to 
lower the device offset percentage threshold from 40 percent to 30 
percent, to allow a greater number of procedures to qualify as device-
intensive. We stated in the proposed rule that we believe allowing 
these additional procedures to qualify for device-intensive status will 
help ensure these procedures receive more appropriate payment in the 
ASC setting, which will help encourage the provision of these services 
in the ASC setting. In addition, we stated in the proposed rule that 
this proposed change would help to ensure that more procedures 
containing relatively high-cost devices are subject to the device 
edits, which leads to more correctly coded claims and greater accuracy 
in our claims data. Specifically, for CY 2019 and subsequent years, we 
proposed that device-intensive procedures would be subject to the 
following criteria:
     All procedures must involve implantable devices assigned a 
CPT or HCPCS code;
     The required devices (including single-use devices) must 
be surgically inserted or implanted; and
     The device offset amount must be significant, which is 
defined as exceeding 30 percent of the procedure's mean cost.
    In addition, to further align the device-intensive policy with the 
criteria used for device pass-through payment status, we proposed to 
specify, for CY 2019 and subsequent years, that for purposes of 
satisfying the device-intensive criteria, a device-intensive procedure 
must involve a device that:
     Has received FDA marketing authorization, has received an 
FDA investigational device exemption (IDE), and has been classified as 
a Category B device by the FDA in accordance with 42 CFR 405.203 
through 405.207 and 405.211 through 405.215, or meets another 
appropriate FDA exemption from premarket review;
     Is an integral part of the service furnished;
     Is used for one patient only;
     Comes in contact with human tissue;
     Is surgically implanted or inserted (either permanently or 
temporarily); and
     Is not any of the following:
    (a) Equipment, an instrument, apparatus, implement, or item of this 
type for which depreciation and financing expenses are recovered as 
depreciable assets as defined in Chapter 1 of the Medicare Provider 
Reimbursement Manual (CMS Pub. 15-1); or
    (b) A material or supply furnished incident to a service (for 
example, a suture, customized surgical kit, scalpel, or clip, other 
than a radiological site marker).
    As part of this proposal, we solicited public comment on these 
proposed revised criteria, including whether there are any devices that 
are not capital equipment that commenters believe should be deemed part 
of device-intensive procedures that would not meet the proposed 
definition of single-use devices. In addition, we solicited public 
comments on the full list of proposed CY 2019 OPPS device-intensive 
procedures provided in Addendum P 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. Specifically, we invited public comment on whether any 
procedures proposed to receive device-intensive status for CY 2019 
should not receive device-intensive status according to the proposed 
criteria, or if we did not assign device-intensive status for CY 2019 
to any procedures commenters believed should receive device-intensive 
status based on the proposed criteria.
    Comment: The majority of commenters supported CMS' proposal to 
modify the device-intensive criteria to allow procedures that involve 
single-use devices, regardless of whether they remain in the body after 
the conclusion of the procedure, to qualify as device-intensive 
procedures. The commenters believed that this proposed policy change 
will better support accurate payment for procedures where an 
implantable device is a significant proportion of the total cost of the 
procedure. Some commenters indicated that this proposed change would 
help to spur innovation in the device industry.
    Response: We appreciate the commenters' support.
    Comment: The majority of commenters supported the proposal to lower 
the device offset percentage threshold for procedures to qualify as 
device-intensive from greater than 40 percent to greater than 30 
percent. The commenters believed that this proposed policy change will 
encourage migration of services from the hospital outpatient department 
into the ASC setting, resulting in cost savings to the Medicare program 
and Medicare beneficiaries. Some of these commenters encouraged CMS to 
further modify its proposal and instead lower the device offset 
percentage threshold for procedures to qualify as device-intensive to 
25 percent instead of 30 percent, to allow even more procedures to be 
designated as device-intensive.
    Response: We appreciate commenters' support. At this time, we 
continue to believe that applying a device offset percentage threshold 
of greater than 30 percent for procedures to qualify as device-
intensive is most appropriate for the reasons described in our original 
proposal. Because the ASC payment system is budget neutral, when the 
device-intensive threshold is set lower, it results in transfer of 
payment from services with high device offsets or that do not qualify 
as device-intensive to the services being newly designated as device-
intensive. As a result, it is important that the device-intensive 
threshold not be set too low or it will result in the transfer of 
payments from procedures with high device offsets to procedures with 
low device offsets, which is the opposite of the intended purpose of 
this policy. We will take the commenters' suggestion of applying a 
device offset percentage threshold of greater than 25 percent for 
procedures to qualify as device-intensive into consideration for future 
rulemaking.
    In addition, for new HCPCS codes describing procedures requiring 
the implantation of medical devices that do not yet have associated 
claims data, in the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79658), we finalized a policy for CY 2017 to apply device-intensive 
status with a default device offset set at 41 percent for new HCPCS 
codes describing procedures requiring the implantation or insertion of 
a medical device that do not yet have associated claims data until 
claims data are available to establish the HCPCS code-level device 
offset for the procedures. This default device offset amount of 41 
percent is not calculated from claims data; instead, it is applied as a 
default until claims data are available upon which to calculate an 
actual device offset for the new code. The purpose of applying the 41-
percent default device offset to new codes that describe procedures 
that implant or insert medical devices is to ensure ASC access for new 
procedures until claims data become available.
    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37108 
through 37109), in accordance with our proposal stated above to lower 
the

[[Page 58946]]

device offset percentage threshold for procedures to qualify as device-
intensive from greater than 40 percent to greater than 30 percent, for 
CY 2019 and subsequent years, we proposed to modify this policy and 
apply a 31-percent default device offset to new HCPCS codes describing 
procedures requiring the implantation of a medical device that do not 
yet have associated claims data until claims data are available to 
establish the HCPCS code-level device offset for the procedures. In 
conjunction with the proposal to lower the default device offset from 
41 percent to 31 percent, we proposed to continue our current policy 
of, in certain rare instances (for example, in the case of a very 
expensive implantable device), temporarily assigning a higher offset 
percentage if warranted by additional information such as pricing data 
from a device manufacturer (81 FR 79658). Once claims data are 
available for a new procedure requiring the implantation of a medical 
device, device-intensive status will be applied to the code if the 
HCPCS code-level device offset is greater than 30 percent, according to 
our policy of determining device-intensive status by calculating the 
HCPCS code-level device offset.
    In addition, in the proposed rule, we clarified that since the 
adoption of our policy in effect as of CY 2018, the associated claims 
data used for purposes of determining whether or not to apply the 
default device offset are the associated claims data for either the new 
HCPCS code or any predecessor code, as described by CPT coding 
guidance, for the new HCPCS code. Additionally, for CY 2019 and 
subsequent years, in limited instances where a new HCPCS code does not 
have a predecessor code as defined by CPT, but describes a procedure 
that was previously described by an existing code, we proposed to use 
clinical discretion to identify HCPCS codes that are clinically related 
or similar to the new HCPCS code but are not officially recognized as a 
predecessor code by CPT, and to use the claims data of the clinically 
related or similar code(s) for purposes of determining whether or not 
to apply the default device offset to the new HCPCS code. Clinically 
related and similar procedures for purposes of this policy are 
procedures that have little or no clinical differences and use the same 
devices as the new HCPCS code. In addition, clinically related and 
similar codes for purposes of this policy are codes that either 
currently or previously describe the procedure described by the new 
HCPCS code. Under this proposal, claims data from clinically related 
and similar codes would be included as associated claims data for a new 
code, and where an existing HCPCS code is found to be clinically 
related or similar to a new HCPCS code, we proposed to apply the device 
offset percentage derived from the existing clinically related or 
similar HCPCS code's claims data to the new HCPCS code for determining 
the device offset percentage. We stated in the proposed rule that we 
believe that claims data for HCPCS codes describing procedures that 
have very minor differences from the procedures described by new HCPCS 
codes would provide an accurate depiction of the cost relationship 
between the procedure and the device(s) that are used, and would be 
appropriate to use to set a new code's device offset percentage, in the 
same way that predecessor codes are used. For instance, for CY 2019, we 
proposed to use the claims data from existing CPT code 36568 (Insertion 
of peripherally inserted central venous catheter (PICC), without 
subcutaneous port or pump; younger than 5 years of age), for which the 
description as of January 1, 2019 is changing to ``(Insertion of 
peripherally inserted central venous catheter (PICC), without 
subcutaneous port or pump, without imaging guidance; younger than 5 
years of age)'', to determine the appropriate device offset percentage 
for new CPT code 36X72 (Insertion of peripherally inserted central 
venous catheter (PICC), without subcutaneous port or pump, including 
all imaging guidance, image documentation, and all associated 
radiological supervision and interpretation required to perform the 
insertion; younger than 5 years of age). We believe that although CPT 
code 36568 is not identified as a predecessor code by CPT, the 
procedure described by new CPT code 36X72 was previously described by 
CPT code 36568 and, therefore, CPT code 36X72 is clinically related and 
similar to CPT code 36568, and the device offset percentage for CPT 
code 36568 can be accurately applied to both codes. If a new HCPCS code 
has multiple predecessor codes, the claims data for the predecessor 
code that has the highest individual HCPCS-level device offset 
percentage would be used to determine whether the new HCPCS code 
qualifies for device-intensive status. Similarly, in the event that a 
new HCPCS code does not have a predecessor code but has multiple 
clinically related or similar codes, the claims data for the clinically 
related or similar code that has the highest individual HCPCS level 
device offset percentage would be used to determine whether the new 
HCPCS code qualifies for device-intensive status.
    In the CY 2019 OPPS/ASC proposed rule, we indicated that additional 
information for our consideration of an offset percentage higher than 
the proposed default of 31 percent for new HCPCS codes describing 
procedures requiring the implantation (or, in some cases, the 
insertion) of a medical device that do not yet have associated claims 
data, such as pricing data or invoices from a device manufacturer, 
should be directed to the Division of Outpatient Care, Mail Stop C4-01-
26, Centers for Medicare and Medicaid Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850, or electronically at 
outpatientpps@cms.hhs.gov. Additional information can be submitted 
prior to issuance of an OPPS/ASC proposed rule or as a public comment 
in response to an issued OPPS/ASC proposed rule. Device offset 
percentages will be set in each year's final rule.
    The full listing of proposed CY 2019 OPPS device-intensive 
procedures was included in Addendum P to the proposed rule (which is 
available via the internet on the CMS website).
    Comment: Commenters supported the proposal to apply a default 
device offset of 31 percent to procedures requiring devices that do not 
yet have claims data, as well as the proposal to use claims data from 
clinically similar and related codes to establish device offsets for 
procedures with new codes that do not have direct predecessor codes 
according to CPT.
    Response: We appreciate the commenters' support.
    Comment: A few commenters suggested that CMS only adjust the non-
device portion of the payment by the wage index, consistent with the 
Agency's policy for separately payable drugs and biologicals.
    Response: While we did not make such a proposal in this year's 
proposed rule, we will take this comment into consideration for future 
rulemaking. We note that such a policy would increase payments to 
providers with a wage index value of less than 1 and be offset by a 
budget neutral decrease in payments to other providers.
    Comment: A group of commenters urged CMS to calculate the device 
offset percentage for potential device-intensive procedures using the 
standard (noncomprehensive APC) ASC ratesetting methodology and to 
assign device-intensive status in the ASC system based on that device 
offset percentage, as they believed it is more consistent with the 
overall ASC payment system. One commenter requested some clarification 
in the final

[[Page 58947]]

rule about the current methodology for calculating the device offset 
percentage for device-intensive procedures and specifically asked that 
CMS:
     Confirm that the ASC device-intensive status as assigned 
by CMS is based on the offset calculated according to the ASC 
ratesetting methodology;
     Disclose what offset data (meaning the calculation 
methodology used) appear in the second spreadsheet of Addendum P titled 
``2019 NPRM HCPCS Offsets'';
     Display the device offsets in Addendum P, in future 
rulemaking, based on the ASC methodology and not the OPPS methodology 
if the offset data displayed in the second spreadsheet of Addendum P is 
based on the OPPS methodology and device intensive status is based on 
the ASC methodology; and
     Modify the second worksheet of Addendum P titled ``2019 
NPRM HCPCS Offsets'' to only include the codes for procedures that 
employ implantable and insertable devices and exclude all of the codes 
that do not employ implantable or insertable devices.
    Response: As stated in the CY 2019 OPPS/ASC proposed rule (83 FR 
37158), according to our established 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 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 ASC payment system.
    In response to the commenter's questions and suggestions relating 
to Addendum P, we note that the device offset percentages reflected in 
both worksheets of Addendum P are based upon the OPPS methodology 
(including the C-APC methodology). We believe this is appropriate as 
Addendum P is created to display the device offsets, device offset 
percentages, and device-intensive codes under the OPPS. Specific to the 
commenter's suggestion that we modify the second worksheet of Addendum 
P titled ``2019 NPRM HCPCS Offsets'' to only include the codes for 
procedures that employ implantable and insertable devices and exclude 
all of the codes that do not employ implantable or insertable devices, 
we note that the second worksheet of Addendum P is intended to display 
the device offsets and device offset percentages for all codes for 
which we have such data under the OPPS. In addition, the list of 
services that qualify as device-intensive under the ASC payment system 
and the services' device offset percentages for the ASC payment system 
are included on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Policy-Files.html as 
``CY 2019 Final ASC Device-Intensive Procedures and Procedures to which 
the No Cost/Full Credit and Partial Credit Device Adjustment Policy 
Applies.''
    Comment: Commenters supported the proposed device-intensive status 
for the following CPT codes:
     CPT code 28297 (Correction, hallux valgus (bunionectomy), 
with sesamoidectomy, when performed; with first metatarsal and medial 
cuneiform joint arthrodesis, any method);
     CPT code 28730 (Arthrodesis, midtarsal or tarsometatarsal, 
multiple or transverse);
     CPT code 28740 (Arthrodesis, midtarsal or tarsometatarsal, 
single joint);
     CPT code 36903 (Introduction of needle(s) and/or 
catheter(s), dialysis circuit, with diagnostic angiography of the 
dialysis circuit, including all direct puncture(s) and catheter 
placement(s), injection(s) of contrast, all necessary imaging from the 
arterial anastomosis and adjacent artery through entire venous outflow 
including the inferior or superior vena cava, fluoroscopic guidance, 
radiological supervision and interpretation and image documentation and 
report; with transcatheter placement of intravascular stent(s), 
peripheral dialysis segment, including all imaging and radiological 
supervision and interpretation necessary to perform the stenting, and 
all angioplasty within the peripheral dialysis segment);
     CPT code 36904 (Percutaneous transluminal mechanical 
thrombectomy and/or infusion for thrombolysis, dialysis circuit, any 
method, including all imaging and radiological supervision and 
interpretation, diagnostic angiography, fluoroscopic guidance, catheter 
placement(s), and intraprocedural pharmacological thrombolytic 
injection(s)); and
     CPT code 36906 (Percutaneous transluminal mechanical 
thrombectomy and/or infusion for thrombolysis, dialysis circuit, any 
method, including all imaging and radiological supervision and 
interpretation, diagnostic angiography, fluoroscopic guidance, catheter 
placement(s), and intraprocedural pharmacological thrombolytic 
injection(s); with transcatheter placement of intravascular stent(s), 
peripheral dialysis segment, including all imaging and radiological 
supervision and interpretation necessary to perform the stenting, and 
all angioplasty within the peripheral dialysis circuit).
    Other commenters requested that CMS assign device-intensive status 
to:
     HCPCS code C9747 (Ablation of prostate, transrectal, high 
intensity focused ultrasound (hifu), including imaging guidance);
     CPT code 43210 (Esophagogastroduodenoscopy, flexible, 
transoral; with esophagogastric fundoplasty, partial or complete, 
includes duodenoscopy when performed);
     CPT code 0275T (Percutaneous laminotomy/laminectomy 
(interlaminar approach) for decompression of neural elements, (with or 
without ligamentous resection, discectomy, facetectomy and/or 
foraminotomy), any method, under indirect image guidance (e.g., 
fluoroscopic, ct), single or multiple levels, unilateral or bilateral; 
lumbar);
     CPT code 55874 (Transperineal placement of biodegradable 
material, peri-prostatic, single or multiple injection(s), including 
image guidance, when performed);
     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);
     CPT code 0410T (Insertion or replacement of permanent 
cardiac contractility modulation system, including contractility 
evaluation when performed, and programming of sensing and therapeutic 
parameters; atrial electrode only);
     CPT code 0411T (Insertion or replacement of permanent 
cardiac contractility modulation system, including contractility 
evaluation when performed, and programming of sensing and therapeutic 
parameters; ventricular electrode only); and
     CPT code 0414T (Removal and replacement of permanent 
cardiac contractility modulation system pulse generator only).
    Response: We appreciate the commenters' support. With respect to 
the commenters' request that we assign the device-intensive designation 
to

[[Page 58948]]

HCPCS code C9747 and CPT codes 43210, 0275T, and 55874, we note that 
the device offset percentage for all four of these procedures (as 
identified by the above mentioned HCPCS codes or predecessor codes) is 
not above the 30-percent threshold, and therefore these procedures are 
not eligible to be assigned device-intensive status. CPT codes 0409T, 
0410T, 0411T, and 0414T were inadvertently omitted from the listing of 
proposed device-intensive procedures in the CY 2019 OPPS/ASC proposed 
rule. However, we have included them as device-intensive procedures in 
this final rule with comment period. CPT code 36904 was proposed as a 
device-intensive procedure. However, using the most currently available 
data for this CY 2019 OPPS/ASC final rule with comment period, we have 
determined that its device offset percentage is not above the 30-
percent threshold, and therefore this procedure is not eligible to be 
assigned device-intensive status.
    Comment: One commenter stated that CPT code 86891 (Autologous blood 
or component, collection processing and storage; intra- or 
postoperative salvage) was incorrectly proposed to have device-
intensive status for CY 2019.
    Response: We agree with the commenter. CPT code 86891 was 
inadvertently included in the listing of device-intensive procedures in 
Addendum P to the CY 2019 OPPS/ASC proposed rule.
    After consideration of the public comments we received, we are 
finalizing our proposals to allow procedures that involve surgically 
inserted or implanted, single-use devices that meet the device offset 
percentage threshold to qualify as device-intensive procedures, 
regardless of whether the device remains in the patient's body after 
the conclusion of the procedure and to modify our criteria to lower the 
device offset percentage threshold from 40 percent to 30 percent. The 
full listing of the final CY 2019 device-intensive procedures is 
included in Addendum P to this final rule with comment period (which is 
available via the internet on the CMS website).
3. 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 in Table 5 of the CY 2015 OPPS/ASC 
final rule with comment period (the CY 2015 device-dependent APCs) is 
reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70422), we modified our previously existing 
policy and applied the device coding requirements exclusively to 
procedures that require the implantation of a device that are assigned 
to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with 
comment period, we also finalized our policy that the claims processing 
edits are such that any device code, when reported on a claim with a 
procedure assigned to a device-intensive APC (listed in Table 42 of the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will 
satisfy the edit.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658 
through 79659), we changed our policy for CY 2017 and subsequent years 
to apply the CY 2016 device coding requirements to the newly defined 
device-intensive procedures. For CY 2017 and subsequent years, we also 
specified that any device code, when reported on a claim with a device-
intensive procedure, will satisfy the edit. In addition, we created 
HCPCS code C1889 to recognize devices furnished during a device-
intensive procedure that are not described by a specific Level II HCPCS 
Category C-code. Reporting HCPCS code C1889 with a device-intensive 
procedure will satisfy the edit requiring a device code to be reported 
on a claim with a device-intensive procedure.
    We did not propose any changes to this policy for CY 2019.
    Comment: Some commenters expressed concern about a potential claims 
processing issue that would arise from a number of codes (listed below 
in Table 36) that were proposed to have device-intensive status, which, 
in their clinical opinion, do not always require the involvement of 
implantable or insertable single-use devices and, therefore, could be 
subject to the claims edit requiring device-intensive procedures to be 
billed with a device., when the procedure may not require the 
involvement of a device.

BILLING CODE 4120-01-P

[[Page 58949]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.054


[[Page 58950]]


[GRAPHIC] [TIFF OMITTED] TR21NO18.055

BILLING CODE 4120-01-C

    Response: We have noted the commenters' concern. We have performed 
a clinical examination of the potential device-intensive procedures and 
believe the codes listed in Addendum P to this CY 2019 OPPS/ASC final 
rule with comment period (which is available via the internet on the 
CMS website) as OPPS device-intensive meet the newly finalized criteria 
of being a device-intensive procedure. To address any potential claims 
processing issues pertaining to the device edit policy, we will use 
subregulatory authority to ensure that the device edit does not 
improperly prevent correctly coded claims from being paid.
    Comment: One commenter requested that CMS either revise the 
descriptor for HCPCS code C1889 (Implantable/insertable device for 
device-intensive procedure, not otherwise classified) to remove the 
specific applicability to device-intensive procedures or establish a 
new ``Not Otherwise Classified'' (NOC) HCPCS code for devices that do 
not have a specific device HCPCS code or are used in a procedure not 
designated as device-intensive.
    Response: We agree with the commenter and have revised the NOC 
HCPCS code to remove the specific applicability to device-intensive 
procedures. HCPCS code C1889 now reads ``(Implantable/insertable 
device, not otherwise classified)''.
    Comment: One commenter requested that CMS restore the device-to-
procedure and procedure-to-device edits.
    Response: As we stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66794), 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. More specifically, 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 
note that, under our current policy, hospitals are still expected to 
adhere to the guidelines of correct coding and append the correct 
device code to the claim when applicable. We also note that, as with 
all other items and services recognized under the OPPS, we expect 
hospitals to code and report their costs appropriately, regardless of 
whether there are claims processing edits in place.
4. 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 were 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 were instructed to report as the 
device charge the difference between the hospital's usual charge for 
the device being implanted and the hospital's usual charge for the 
device for which it received full credit. In CY 2008, we expanded this 
payment adjustment policy to include cases in which hospitals receive 
partial credit of 50 percent or more of the cost of a specified device. 
Hospitals were instructed to append the ``FC'' modifier to the 
procedure code that reports the service provided to furnish the device 
when they receive a partial credit of 50 percent or more of the cost of 
the new device. We refer readers to the CY 2008 OPPS/ASC final rule 
with comment period for more background information on the ``FB'' and 
``FC'' modifiers payment adjustment policies (72 FR 66743 through 
66749).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), beginning in CY 2014, we modified our policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. For CY 
2013 and prior years, our policy had been to reduce OPPS payment by 100 
percent of the device offset amount when a hospital furnishes a 
specified device without cost or with a full credit and by 50 percent 
of the device offset amount when the hospital receives partial credit 
in the amount of 50 percent or more of the cost for the specified 
device. For CY 2014, we reduced OPPS payment, for the applicable APCs, 
by the full or partial credit a hospital receives for a replaced 
device. Specifically, under this modified policy, hospitals are 
required to report on the claim the amount of the credit in the amount 
portion for value code ``FD'' (Credit Received from the Manufacturer 
for a Replaced Medical Device) when the hospital receives a credit for 
a replaced device that is 50 percent or greater than the cost of the 
device. For CY 2014, we also limited the OPPS payment deduction for the 
applicable APCs to the total amount of the device offset when the 
``FD'' value code appears on a claim. For CY 2015, we continued our 
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). In the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70424), we finalized our policy to no longer specify a 
list of devices to which the OPPS payment adjustment for no cost/full 
credit and partial credit devices would

[[Page 58951]]

apply and instead 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.
b. Policy for No Cost/Full Credit and Partial Credit Devices
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79659 
through 79660), for CY 2017 and subsequent years, we finalized our 
policy to reduce OPPS payment for device-intensive procedures, by the 
full or partial credit a provider receives for a replaced device, when 
a hospital furnishes a specified device without cost or with a full or 
partial credit. Under our current policy, hospitals 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 the CY 2019 OPPS/ASC proposed rule (83 FR 37110), for CY 2019 
and subsequent years, we proposed to apply our no cost/full credit and 
partial credit device policies to all procedures that qualify as 
device-intensive under our proposed modified criteria discussed in 
section IV.B.2. of the proposed rule and this final rule with comment 
period.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to apply our no cost/full credit and 
partial credit device policies to all procedures that qualify as 
device-intensive under our finalized modified criteria discussed in 
section IV.B.2. of this final rule with comment period, for CY 2019 and 
subsequent years.
5. Payment Policy for Low-Volume Device-Intensive Procedures
    In CY 2016, we used our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act and used the median cost (instead of 
the geometric mean cost per our standard methodology) to calculate the 
payment rate for the implantable miniature telescope procedure 
described by CPT code 0308T (Insertion of ocular telescope prosthesis 
including removal of crystalline lens or intraocular lens prosthesis), 
which is the only code assigned to APC 5494 (Level 4 Intraocular 
Procedures) (80 FR 70388). We note that, as stated in the CY 2017 OPPS/
ASC proposed rule (81 FR 45656), we proposed to reassign the procedure 
described by CPT code 0308T to APC 5495 (Level 5 Intraocular 
Procedures) for CY 2017, but it would be the only procedure code 
assigned to APC 5495. The payment rates for a procedure described by 
CPT code 0308T (including the predecessor HCPCS code C9732) were 
$15,551 in CY 2014, $23,084 in CY 2015, and $17,551 in CY 2016. The 
procedure described by CPT code 0308T is a high-cost device-intensive 
surgical procedure that has a very low volume of claims (in part 
because most of the procedures described by CPT code 0308T are 
performed in ASCs), and we believe that the median cost is a more 
appropriate measure of the central tendency for purposes of calculating 
the cost and the payment rate for this procedure because the median 
cost is impacted to a lesser degree than the geometric mean cost by 
more extreme observations. We stated that, in future rulemaking, we 
would consider proposing a general policy for the payment rate 
calculation for very low-volume device-intensive APCs (80 FR 70389).
    For CY 2017, we proposed and finalized a payment policy for low-
volume device-intensive procedures that is similar to the policy 
applied to the procedure described by CPT code 0308T in CY 2016. In the 
CY 2017 OPPS/ASC final rule with comment period (81 FR 79660 through 
79661), we established our current policy that the payment rate for any 
device-intensive procedure that is assigned to a clinical APC with 
fewer than 100 total claims for all procedures in the APC be calculated 
using the median cost instead of the geometric mean cost, for the 
reasons described above for the policy applied to the procedure 
described by CPT code 0308T in CY 2016. The CY 2018 final rule 
geometric mean cost for the procedure described by CPT code 0308T 
(based on 19 claims containing the device HCPCS C-code, in accordance 
with the device-intensive edit policy) was approximately $21,302, and 
the median cost was approximately $19,521. The final CY 2018 payment 
rate (calculated using the median cost) was approximately $17,560.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37111), for CY 2019, 
we proposed to continue with our current policy of establishing the 
payment rate for any device-intensive procedure that is assigned to a 
clinical APC with fewer than 100 total claims for all procedures in the 
APC based on calculations using the median cost instead of the 
geometric mean cost. We stated in the proposed rule that, due to the 
proposed change in APC assignment for CPT code 0308T to APC 5493 (Level 
3 Intraocular Procedures) from APC 5495 (Level 5 Intraocular 
Procedures), our payment policy for low-volume device-intensive 
procedures would not apply to CPT code 0308T for CY 2019 because there 
are now more than 100 total claims for the APC to which CPT code 0308T 
would be assigned. For more information on the proposed and final APC 
assignment change for CPT code 0308T, we refer readers to section 
III.D.13. of this final rule with comment period.
    Based on the CY 2017 claims data available for ratesetting, in the 
CY 2019 OPPS/ASC proposed rule, we proposed to assign CPT code 0308T to 
APC 5493, noting that we would continue to monitor the data. In the CY 
2019 OPPS final rule claims data, we found that the estimated cost of 
the single claim with CPT code 0308T as the primary service is 
$12,939.75. To recognize the estimated cost based on the final rule 
claims data, we have assigned CPT code 0308T to APC 5494 (Level 4 
Intraocular Procedures) for CY 2019 instead of APC 5493. Due to the 
assignment of CPT code 0308T to APC 5494 for CY 2019, our payment 
policy for low-volume device-intensive procedures will apply to CPT 
code 0308T for CY 2019 because there are less than 100 total claims for 
the APC to which CPT code 0308T is assigned. For more information on 
the proposed and final APC assignment change for CPT code 0308T, 
including a summary of public comments and our responses, we refer 
readers to section III.D.13. of this final rule with comment period.

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. A ``biological'' as used in this final rule 
with comment period includes (but is not necessarily limited to) a 
``biological product'' or a ``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 
pass-through payment 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

[[Page 58952]]

and biologicals and brachytherapy sources used in cancer therapy; and 
current radiopharmaceutical drugs and biologicals. ``Current'' refers 
to those types of drugs or biologicals mentioned above that are 
hospital outpatient services under Medicare Part B for which 
transitional pass-through 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 2019 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 website).
    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. The 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 website 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 described on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Three-Year Transitional Pass-Through Payment Period for All Pass-
Through Drugs, Biologicals, and Radiopharmaceuticals and Quarterly 
Expiration of Pass-Through Status
    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. Our current policy is to 
accept pass-through applications on a quarterly basis and to begin 
pass-through payments for newly approved pass-through drugs and 
biologicals on a quarterly basis through the next available OPPS 
quarterly update after the approval of a product's pass-through status. 
However, prior to CY 2017, we expired pass-through status for drugs and 
biologicals on an annual basis through notice-and-comment rulemaking 
(74 FR 60480). In the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79662), we finalized a policy change, beginning with pass-
through drugs and biologicals newly approved in CY 2017 and subsequent 
calendar years, to allow for a quarterly expiration of pass-through 
payment status for drugs, biologicals, and radiopharmaceuticals to 
afford a pass-through payment period that is as close to a full 3 years 
as possible for all pass-through drugs, biologicals, and 
radiopharmaceuticals.
    This change eliminated the variability of the pass-through payment 
eligibility period, which previously varied based on when a particular 
application was initially received. We adopted this change for pass-
through approvals beginning on or after CY 2017, to allow, on a 
prospective basis, for the maximum pass-through payment period for each 
pass-through drug without exceeding the statutory limit of 3 years.
3. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2018
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37112), we proposed 
that the pass-through payment status of 23 drugs and biologicals would 
expire on December 31, 2018, as listed in Table 19 of the proposed rule 
(83 FR 37112). 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, 2018. These drugs and biologicals were approved for 
pass-through payment status on or before January 1, 2017. In accordance 
with the policy finalized in CY 2017 and described earlier, pass-
through payment status for drugs and biologicals newly approved in CY 
2017 and subsequent years will expire on a quarterly basis, with a 
pass-through payment period as close to 3 years as possible. With the 
exception of those groups of drugs and biologicals that are always 
packaged when they do not have pass-through payment 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 payment 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 $125 for CY 2019), as discussed further in 
section V.B.2. of this final rule with comment period. In the CY 2019 
OPPS/ASC proposed rule (83 FR 37112), we proposed that if the estimated 
per day cost for the drug or biological is less than or equal to the 
applicable OPPS drug packaging threshold, we would package payment for 
the drug or biological into the payment for the associated procedure in 
the upcoming calendar year. If the estimated per day cost of the drug 
or biological is greater than the OPPS drug packaging threshold, we 
proposed to provide separate payment at the applicable relative ASP-
based payment amount (which was proposed at ASP+6 percent for CY 2019, 
and is finalized at ASP+6 percent for CY 2019, as discussed further in 
section V.B.3. of this final rule with comment period).
    Comment: A number of commenters requested that pass-through payment 
status for HCPCS code A9515 (Choline

[[Page 58953]]

c-11, diagnostic, per study dose up to 20 millicuries) be extended 
until March 2019 to give 3 full years of pass-through payment status 
for the drug. The drug described by HCPCS code A9515 received pass-
through status in April 2016, and in the CY 2019 OPPS/ASC proposed 
rule, the pass-through payment period for the drug was scheduled to end 
on December 31, 2018, consistent with the policy in effect in CY 2016 
that drugs and biologicals receive at least 2 years but no more than 3 
years of pass-through payment status where pass-through payment status 
for drugs and biologicals was expired on an annual basis through 
notice-and-comment rulemaking. One commenter requested an extension of 
pass-through payment status to allow for the collection of more cost 
data for HCPCS code A9515. Another commenter believed pass-through 
payment status for HCPCS code A9515 should be extended because of 
concern that the cost of HCPCS code A9515 exceeds the payment rate for 
the nuclear medicine services with which HCPCS code A9515 will be 
packaged. The commenter cited data showing the pass-through payment 
rate for HCPCS code A9515 was $5,700, while the highest APC payment 
rate for a nuclear medicine service was $1,377.22 with a drug offset of 
$248.31. Two commenters also requested that HCPCS codes Q9982 
(Flutemetamol f18, diagnostic, per study dose, up to 5 millicuries) and 
Q9983 (Florbetaben f18, diagnostic, per study dose, up to 8.1 
millicuries) not be taken off of pass-through payment status due to 
similar concerns.
    Response: As noted in the proposed rule, all three 
radiopharmaceuticals are covered under the pass-through payment 
expiration policy in effect in CY 2016 which stated that drugs and 
biologicals receive at least 2 years and no more than 3 years of pass-
through payment status, with the pass-through payment period expiring 
at the end of a calendar year. Beginning with pass-through drugs and 
biologicals newly approved in CY 2017 and subsequent calendar years, a 
new policy is in effect to allow for a quarterly expiration of pass-
through payment status for drugs and biologicals to afford a pass-
through payment period that is as close to a full 3 years as possible 
for all pass-through drugs, biologicals, and radiopharmaceuticals (82 
FR 59337). HCPCS codes A9515, Q9982, and Q9983 are covered by the 
policy in effect for CY 2016, and pass-through payment status for these 
HCPCS codes will end on December 31, 2018. We note that when a 
radiopharmaceutical or other drug or biological is newly packaged into 
a related medical procedure, the amount of the payment rate for the 
related medical procedure does not stay the same. Instead, the payment 
rate for the medical procedure will be adjusted to reflect the 
additional cost of the newly packaged radiopharmaceutical in the 
overall cost of the medical procedure.
    Comment: Some commenters recommended that CMS allow products 
covered by Medicare in the context of a coverage with evidence 
development (CED) clinical trial to retain their pass-through payment 
status for the duration of the CED trial. Two of the commenters focused 
on the packaging of diagnostic radiopharmaceuticals that do not have 
pass-through payment status. One of the commenters requested that pass-
through payment status for NeuraceqTM (florbetaben F18, 
HCPCS code Q9982) and VizamylTM (flutemetamol F18, HCPCS 
code Q9983), which is scheduled to end on December 31, 2018, be 
extended because of a current CED trial for amyloid positron emission 
tomography (PET) that will be active through at least CY 2019. 
(Information on this CED trial can be found on the CMS website at 
https://www.cms.gov/Medicare/Coverage/Coverage-with-Evidence-Development/Amyloid-PET.html). This commenter also suggested that if 
pass-through payment status is not extended, these drugs could be paid 
separately under their own assigned APCs to avoid having the cost of 
these drugs packaged into the primary procedures for which they are 
used. Another commenter was more broadly concerned about not receiving 
payment for a drug or biological when a CED trial is ongoing and a drug 
or biological used in the trial loses pass-through payment status and 
becomes packaged. The commenters were concerned that ending pass-
through payment for drugs that will no longer be paid separately could 
negatively impact CED trials as hospitals would be less likely to 
participate because of the risk of receiving lower payment for the 
services covered by the CED trial.
    Response: We disagree with the commenters' concern that expiration 
of pass-through payment status for NeuraceqTM (HCPCS code 
Q9982) and VizamylTM (HCPCS code Q9983), and subsequent 
packaging of them as ``policy-packaged'' drugs, will affect trial 
results. We note that hospitals are not precluded from billing for 
NeuraceqTM and VizamylTM in the context of a CED 
trial once their pass-through payment status expires. We also note that 
the payment for both NeuraceqTM and VizamylTM 
will be reflected in the payment rate for the associated procedure. 
With respect to the request that we create a new APC for 
NeuraceqTM and VizamylTM, we do not believe it is 
appropriate, prudent, or practicable to create unique APCs for specific 
drugs or biologicals or other individual items that are furnished with 
a particular procedure or procedures. Finally, with respect to the 
commenters' request that we allow drug or biological pass-through 
payment status for products covered by a CED trial for the duration of 
the CED trial, we reiterate that the statute limits the period of pass-
through payment eligibility to no more than 3 years after the product's 
first payment as a hospital outpatient service under Medicare Part B. 
As such, we are unable to extend pass-through payment status beyond 3 
years.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to expire the pass-
through payment status of the 23 drugs and biologicals listed in Table 
37 below on December 31, 2018.
BILLING CODE 4120-01-P

[[Page 58954]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.056

    The final packaged or separately payable status of each of these 
drugs or biologicals is listed in Addendum B to this final rule with 
comment period (which is available via the internet on the CMS 
website).
4. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Payment Status in CY 2019
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37112), we proposed to 
continue pass-through payment status in CY 2019 for 45 drugs and 
biologicals. These drugs and biologicals, which were approved for pass-
through payment status between January 1, 2017, and July 1, 2018, were 
listed in Table 20 of the proposed rule (83 FR 37113 through 37114). 
The APCs and HCPCS codes for these drugs and biologicals approved for 
pass-through

[[Page 58955]]

payment status through December 31, 2018 were assigned status indicator 
``G'' in Addenda A and B to the proposed rule (which are available via 
the internet on the CMS website). In addition, as indicated in the 
proposed rule, there are four drugs and biologicals that have already 
had 3 years of pass-through payment status but for which pass-through 
payment status is required to be extended for an additional 2 years 
under section 1833(t)(6)(G) of the Act, as added by section 
1301(a)(1)(C) of the Consolidated Appropriations Act of 2018 (Pub. L. 
115-141). Because of this requirement, these drugs and biologicals were 
also included in Table 20 of the proposed rule, which brought the total 
number of drugs and biologicals with proposed pass-through payment 
status in CY 2019 to 49. The requirements of section 1301 of Public Law 
115-141 are described in further detail in section V.A.5. of this final 
rule with comment period, and we address public comments that we 
received related to this topic in that section.
    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. For CY 2019, we proposed to continue to pay for 
pass-through drugs and biologicals at ASP+6 percent, equivalent to the 
payment rate these drugs and biologicals would receive in the 
physician's office setting in CY 2019. We proposed that a $0 pass-
through payment amount would be paid for pass-through drugs and 
biologicals under the CY 2019 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 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: 
Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); 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 2019 minus a payment 
offset for any predecessor drug products contributing to the pass-
through payment as described in section V.A.6. of the proposed rule. We 
made this proposal because, if not for the pass-through payment status 
of these policy-packaged products, payment for these products would be 
packaged into the associated procedure.
    We proposed to continue to update pass-through payment rates on a 
quarterly basis on the CMS website during CY 2019 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 
payment 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).
    For CY 2019, consistent with our CY 2018 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 
earlier, 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 2019, 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+3 percent (consistent 
with our proposed policy in section V.B.2.b. of the proposed rule), the 
equivalent payment provided to pass-through payment drugs and 
biologicals without ASP information. Additional detail and comments on 
the WAC+3 percent payment policy can be found in section V.B.2.b. of 
this final rule. 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.
    We did not receive any public comments regarding our proposals. 
Therefore, we are implementing these proposals for CY 2019 without 
modification. We note that public comments pertaining to our proposal 
to pay WAC+3 percent for drugs and biologicals without ASP information 
as well as public comments on section 1301 pass-through payment status 
extensions are addressed elsewhere in this final rule with comment 
period.
    The drugs and biologicals that continue to have pass-through 
payment status for CY 2019 or have been granted pass-through payment 
status as of January 2019 are shown in Table 38 below.

[[Page 58956]]

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BILLING CODE 4120-01-C
5. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Status as a Result of Section 1301 of the Consolidated Appropriations 
Act of 2018 (Pub. L. 115-141)
    As mentioned earlier, section 1301(a)(1) of the Consolidated 
Appropriations Act of 2018 (Pub. L. 115-141) amended section 1833(t)(6) 
of the Act and added a new section 1833(t)(6)(G), which provides that 
for drugs or biologicals whose period of pass-through payment status 
ended on December 31, 2017 and for which payment was packaged into a 
covered hospital outpatient service furnished beginning January 1, 
2018, such pass-through payment status shall be extended for a 2-year 
period beginning on October 1, 2018 through September 30, 2020. There 
are four products whose period of drug and biological pass-through 
payment status ended on December 31, 2017. These products were listed 
in Table 21 of the CY 2019 OPPS/ASC proposed rule (83 FR 37115). For CY 
2019, we proposed to continue pass-through payment status for the drugs 
and biologicals listed in Table 21 of the proposed rule (we note that 
these drugs and biologicals were also listed in Table 20 of the 
proposed rule). The APCs and HCPCS codes for these drugs and 
biologicals approved for pass-through payment status were assigned 
status indicator ``G'' in Addenda A and B to the proposed rule (which 
are available via the internet on the CMS website).
    In addition, new section 1833(t)(6)(H) of the Act specifies that 
the payment amount for such drug or biological under this subsection 
that is furnished during the period beginning on October 1, 2018, and 
ending on March 31, 2019, shall be the greater of: (i) The payment 
amount that would otherwise apply under section 1833(t)(6)(D)(i) of the 
Act for such drug or biological during such period; or (ii) the payment 
amount that applied under section 1833(t)(6)(D)(i) of the Act for such 
drug or biological on December 31, 2017. We stated in the proposed rule 
that we intended to address pass-through payment for these drugs and 
biologicals for the last quarter of CY 2018 through program 
instruction. The program instruction covering pass-through payment for 
these drugs and biologicals for the last quarter of CY 2018 is 
Transmittal 4123 titled ``October 2018 Update of the Hospital 
Outpatient Prospective Payment System (OPPS)'', and can be found on the 
CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/
Transmittals/

[[Page 58961]]

2018Downloads/R4123CP.pdf. For January 1, 2019 through March 31, 2019, 
we proposed that pass-through payment for these four drugs and 
biologicals would be the greater of: (1) ASP+6 percent based on current 
ASP data; or (2) the payment rate for the drug or biological on 
December 31, 2017. We also proposed for the period of April 1, 2019 
through December 31, 2019 that the pass-through payment amount for 
these drugs and biologicals would be the amount that applies under 
section 1833(t)(6)(D)(i) of the Act.
    We proposed to continue to update pass-through payment rates for 
these four drugs and biologicals on a quarterly basis on the CMS 
website during CY 2019 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).
    The four drugs and biologicals that we proposed would have pass-
through payment status for CY 2019 under section 1833(t)(6)(G) of the 
Act, as added by section 1301(a)(1)(C) of the Consolidated 
Appropriations Act of 2018, were shown in Table 21 of the CY 2019 OPPS/
ASC proposed rule (83 FR 37115). Included as one of the four drugs and 
biologicals with pass-through payment status for CY 2019 is HCPCS code 
Q4172 (Puraply, and Puraply AM per square centimeter). PuraPly is a 
skin substitute product that was approved for pass-through payment 
status on January 1, 2015 through the drug and biological pass-through 
payment process. Beginning on April 1, 2015, skin substitute products 
are evaluated for pass-through payment status through the device pass-
through payment process. However, we stated in the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66887) that skin substitutes that 
are approved for pass-through payment status as biologicals effective 
on or before January 1, 2015 would continue to be paid as pass-through 
biologicals for the duration of their pass-through payment period. 
Because PuraPly was approved for pass-through payment status through 
the drug and biological pass-through payment pathway, we proposed to 
consider PuraPly to be a drug or biological as described by section 
1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the 
Consolidated Appropriations Act of 2018, and to be eligible for 
extended pass-through payment under our proposal for CY 2019.
    Comment: Several commenters were opposed to PuraPly and PuraPly AM 
receiving pass-through payment status for CY 2019. These commenters 
stated that because PuraPly and PuraPly AM received a 510(k) clearance 
from the FDA, PuraPly and PuraPly AM should be considered devices 
rather than drugs or biologicals or that there is at least some 
ambiguity about whether PuraPly and PuraPly AM are devices. The 
commenters encouraged CMS to use its discretion and consider PuraPly 
and PuraPly AM to be devices along the same lines of reasoning as CMS 
has considered biologicals used as skin substitutes to be considered 
devices for the purposes of receiving pass-through payment since April 
2015. In addition, the commenters noted that PuraPly and PuraPly AM 
should not have pass-through payment status extended because they are 
no longer new products. Further, the commenters noted that these 
products would receive a significant market advantage by being the only 
graft skin substitute product to receive separate payment. Other 
commenters noted that extending the pass-through payment status of 
PuraPly and PuraPly AM would work against the goals CMS has stated in 
other parts of the proposed rule regarding skin substitute payment. 
Finally, these commenters maintained that extending pass-through 
payment status would encourage the use of more high-cost skin 
substitute products and lead to increased pricing instability by 
increasing the cost thresholds for the high-cost skin substitute group. 
Another commenter opposed extending pass-through payment status for 
PuraPly and PuraPly AM based on the belief that the manufacturer of 
these products may be unfairly increasing the prices for these products 
when they return to pass-through payment status.
    Response: In the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66887), we stated that skin substitutes that are approved for 
pass-through payment status as biologicals effective on or before 
January 1, 2015 would continue to be paid as pass-through biologicals 
for the duration of their pass-through payment period. PuraPly and 
PuraPly AM were originally approved for pass-through payment status on 
January 1, 2015 under the drug and biological pass-through payment 
pathway as biologicals. We interpret section 1833(t)(6)(G) of the Act, 
as added by section 1301(a)(1)(C) of the Consolidated Appropriations 
Act of 2018, as extending the original pass-through payment period that 
was established for PuraPly and PuraPly AM on January 1, 2015, and 
therefore, PuraPly and PuraPly AM will continue to be paid as pass-
through drugs and biologicals. While we acknowledge the comments 
pointing out that we currently treat skin substitute products as 
devices for purposes of pass-through payment status, this does not 
change the fact that PuraPly and PuraPly AM were originally approved 
for pass-through payments as biologicals. We believe that PuraPly and 
PuraPly AM's original approval for pass-through status as biologicals 
means that they should continue to receive pass-through payments under 
section 1833(t)(6)(G) of the Act.
    We also recognize that the commenters raised important concerns 
about the impact that extending pass-through payment status for PuraPly 
and PuraPly AM could have on the payment of wound care services using 
graft skin substitute products. However, we nonetheless believe that 
section 1833(t)(6)(G) of the Act requires us to extend the pass-through 
payment period for PuraPly and PuraPly AM.
    Comment: One commenter, the manufacturer of PuraPly and PuraPly AM, 
urged CMS to implement the proposal to give PuraPly and PuraPly AM 
pass-through payment status based on the requirements of section 
1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the 
Consolidated Appropriations Act of 2018. The commenter stated that 
PuraPly and PuraPly AM are biologicals and cited language in OPPS 
regulations supporting that designation. The commenter also made the 
point that the pass-through payment status granted to PuraPly and 
PuraPly AM starting on October 1, 2018 was described in the statute as 
an extension of the original pass-through payment status and not a new 
pass-through payment period. The commenter stated that this means the 
requirements in effect when pass-through payment status for PuraPly and 
PuraPly AM was established on January 1, 2015 apply to the extended 
pass-through payment period. The commenter noted that CMS changed how 
skin substitute products are evaluated for pass-through payment status 
by evaluating skin substitutes through the medical device pass-through 
pathway in April of 2015, but emphasized that the change was not 
retroactive. Therefore, the commenter agreed that PuraPly and PuraPly 
AM should continue to receive pass-through payment status.
    Several members of Congress supported extending pass-through 
payment status for PuraPly and PuraPly

[[Page 58962]]

AM and requested that CMS consider the products to be biologicals that 
are covered by section 1833(t)(6)(G) of the Act, as added by section 
1301(a)(1)(C) of the Consolidated Appropriations Act of 2018.
    Response: We appreciate the commenters' support. We are finalizing 
our proposal to extend pass-through payment status for PuraPly and 
PuraPly AM based on section 1833(t)(6)(G) of the Act, as added by 
section 1301(a)(1)(C) of the Consolidated Appropriations Act of 2018.
    Comment: One commenter, the manufacturer of Omidria (HCPCS code 
C9447), supported the extended pass-through payment status for Omidria. 
Likewise, a second commenter, the manufacturer of Lumason[supreg] 
(HCPCS code Q9950), supported the extended pass-through payment status 
for Lumason[supreg].
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposals, with modification, to accommodate a coding 
change related to the PuraPly products. Specifically, after the 
proposed rule was published, we became aware that HCPCS code Q4172 
(Puraply, and Puraply AM per square centimeter) will be deleted 
effective January 1, 2019, and will be replaced by three new HCPCS 
codes: Q4195 (Puraply, per square centimeter); Q4196 (Puraply am, per 
square centimeter); and Q4197 (Puraply xt, per square centimeter), 
effective January 1, 2019. Two of these products, PuraPly (HCPCS code 
Q4195) and PuraPly AM (HCPCS code Q4196), were products that received 
original pass-through payment status on January 1, 2015, and will 
continue to receive pass-through payment status in CY 2019 when our 
finalized policies are implemented.
    For January 1, 2019 through March 31, 2019, we are finalizing our 
proposal that pass-through payment for the covered drugs and 
biologicals will be the greater of: (1) ASP+6 percent based on current 
ASP data; or (2) the payment rate for the drug or biological on 
December 31, 2017. We also are finalizing our proposal that the pass-
through payment amount for these drugs and biologicals will be the 
amount that applies under section 1833(t)(6)(D)(i) of the Act for the 
period of April 1, 2019 through December 31, 2019.
    We are finalizing our proposal to continue to update pass-through 
payment rates for these covered drugs and biologicals on a quarterly 
basis on the CMS website during CY 2019 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. We refer readers to Table 39 below 
for the drugs and biologicals covered by the requirements of this 
section.
[GRAPHIC] [TIFF OMITTED] TR21NO18.062

6. Provisions for Reducing Transitional Pass-Through Payments for 
Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset 
Costs Packaged Into APC Groups
    Under the regulations at 42 CFR 419.2(b), nonpass-through drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure are packaged in the OPPS. This 
category includes diagnostic radiopharmaceuticals, contrast agents, 
stress agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), 
nonpass-through drugs and biologicals that function as supplies in a 
surgical procedure are packaged in the OPPS. This category includes 
skin substitutes and other surgical-supply drugs and biologicals. As 
described earlier, 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 policy-packaged drugs, biologicals, and 
radiopharmaceuticals an amount reflecting the portion of the APC 
payment associated with predecessor products in order to ensure no 
duplicate payment is made. This amount reflecting the portion of the 
APC payment associated with predecessor products is called the payment 
offset.
    The payment offset policy applies to all policy packaged drugs, 
biologicals, and radiopharmaceuticals. For a full

[[Page 58963]]

description of the payment offset policy as applied to diagnostic 
radiopharmaceuticals, contrast agents, stress agents, and skin 
substitutes, we refer readers to the discussion in the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70430 through 70432). In the CY 
2019 OPPS/ASC proposed rule (83 FR 37115), for CY 2019, as we did in CY 
2018, we proposed to continue to apply the same policy packaged offset 
policy to payment for pass-through diagnostic radiopharmaceuticals, 
pass-through contrast agents, pass-through stress agents, and pass-
through skin substitutes. The proposed APCs to which a payment offset 
may be applicable for pass-through diagnostic radiopharmaceuticals, 
pass-through contrast agents, pass-through stress agents, and pass-
through skin substitutes were identified in Table 22 of the proposed 
rule (83 FR 37115).
    We did not receive any comments on this proposal. Therefore, we are 
finalizing this proposal without modification.
[GRAPHIC] [TIFF OMITTED] TR21NO18.063

    In the CY 2019 OPPS/ASC proposed rule, we proposed to continue to 
post annually on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.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 payment 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. We did not receive any public 
comments on our proposal, and therefore are finalizing it without 
modification.

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

1. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Packaging Threshold
    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 $120 for CY 
2018 (82 FR 59343).
    Following the CY 2007 methodology, for this CY 2019 OPPS/ASC final 
rule with comment period, 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 2019 and 
rounded the resulting dollar amount ($127.01) to the nearest $5 
increment, which yielded a figure of $125. 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. For this CY 2019 OPPS/ASC final rule with comment period, 
based on these calculations using the CY 2007 OPPS methodology,

[[Page 58964]]

we are finalizing a packaging threshold for CY 2019 of $125.
b. Packaging of Payment for HCPCS Codes That Describe Certain Drugs, 
Certain Biologicals, and Therapeutic Radiopharmaceuticals Under the 
Cost Threshold (``Threshold-Packaged Drugs'')
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37116), to determine 
the proposed CY 2019 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 2017 and were paid (via 
packaged or separate payment) under the OPPS. We used data from CY 2017 
claims processed before January 1, 2018 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.1.d. of the proposed rule, or for the following policy-
packaged items that we proposed to continue to package in CY 2019: 
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.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2019, 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 2019, 
as discussed in more detail in section V.B.2.b. of the proposed rule) 
to calculate the CY 2019 proposed rule per day costs. We used the 
manufacturer-submitted ASP data from the fourth quarter of CY 2017 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2018) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2019, we proposed to use 
payment rates based on the ASP data from the first quarter of CY 2018 
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 website) 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, 2018. 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 
2017 hospital claims data to determine their per day cost.
    We proposed to package items with a per day cost less than or equal 
to $125, and identify items with a per day cost greater than $125 as 
separately payable unless they are policy-packaged. Consistent with our 
past practice, we cross-walked historical OPPS claims data from the CY 
2017 HCPCS codes that were reported to the CY 2018 HCPCS codes that we 
displayed in Addendum B to the proposed rule (which is available via 
the internet on the CMS website) for proposed payment in CY 2019.
    Comment: A few commenters requested that CMS not finalize the 
proposed increase to the packaging threshold to $125 and suggested that 
CMS instead lower the packaging threshold. These commenters expressed 
concern with the annual increases in the drug packaging threshold, 
citing that yearly increases have outpaced conversion factor updates 
and place a financial burden on providers.
    Response: We have received and addressed similar comments in prior 
rules, including most recently in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79666). 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 the commenters' recommendation 
to delay updating the packaging threshold or freeze the packaging 
threshold at $120.
    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 
2019 packaging threshold of $125.
    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 2019 OPPS/ASC final 
rule with comment period, we used ASP data from the third quarter of CY 
2018, 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, 2018, along with updated hospital claims 
data from CY 2017. We note that we also used these data for budget 
neutrality estimates and impact analyses for this CY 2019 OPPS/ASC 
final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B for this final rule with 
comment period are based on ASP data from the third quarter of CY 2018. 
These data are the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2018. These payment rates will then 
be updated in the January 2019 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2019. For items that do not currently have an ASP-based 
payment rate, we proposed to recalculate their mean unit cost from all 
of the CY 2017 claims data and updated cost report information 
available for this CY 2019 final rule with comment period to determine 
their final per day cost.
    Consequently, as stated in the CY 2019 OPPS/ASC proposed rule (83 
FR 37117), the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the proposed rule 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for this final rule with comment 
period. Under such circumstances, in the CY 2019 OPPS/ASC proposed rule 
(83 FR 37117), we proposed to continue to follow the established 
policies

[[Page 58965]]

initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more 
equitably pay for those drugs whose costs fluctuate relative to the 
proposed CY 2019 OPPS drug packaging threshold and the drug's payment 
status (packaged or separately payable) in CY 2018. These established 
policies have not changed for many years and are the same as described 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434). 
Specifically, for CY 2019, 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 2018 and that were proposed for separate payment in CY 
2019, and that then have per day costs equal to or less than the CY 
2019 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for this CY 2019 final rule, would continue 
to receive separate payment in CY 2019.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2018 and that were proposed for separate payment in CY 2019, and 
that then have per day costs equal to or less than the CY 2019 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for this CY 2019 final rule, would remain packaged in 
CY 2019.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2019 but that then have per-day costs 
greater than the CY 2019 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for this CY 2019 final 
rule, would receive separate payment in CY 2019.
    We did not receive any public comments on our proposal to 
recalculate the mean unit cost for items that do not currently have an 
ASP-based payment rate from all of the CY 2017 claims data and updated 
cost report information available for this CY 2019 final rule with 
comment period to determine their final per day cost. We also did not 
receive any public comments on our proposal to continue to follow the 
established policies, initially adopted for the CY 2005 OPPS (69 FR 
65780), when the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the proposed rule 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for the final rule with comment 
period. Therefore, for CY 2019, we are finalizing these two proposals 
without modification.
c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals
    As mentioned earlier in this section, in the OPPS, we package 
several categories of drugs, biologicals, and radiopharmaceuticals, 
regardless of the cost of the products. Because the products are 
packaged according to the policies in 42 CFR 419.2(b), we refer to 
these packaged drugs, biologicals, and radiopharmaceuticals as 
``policy-packaged'' drugs, biologicals, and radiopharmaceuticals. These 
policies are either longstanding or based on longstanding principles 
and inherent to the OPPS and are as follows:
     Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations (Sec.  419.2(b)(4));
     Intraoperative items and services (Sec.  419.2(b)(14));
     Drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure (including, but 
not limited to, diagnostic radiopharmaceuticals, contrast agents, and 
pharmacologic stress agents) (Sec.  419.2(b)(15)); and
     Drugs and biologicals that function as supplies when used 
in a surgical procedure (including, but not limited to, skin 
substitutes and similar products that aid wound healing and implantable 
biologicals) (Sec.  419.2(b)(16)).
    The policy at Sec.  419.2(b)(16) is broader than that at Sec.  
419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with 
comment period: ``We consider all items related to the surgical outcome 
and provided during the hospital stay in which the surgery is 
performed, including postsurgical pain management drugs, to be part of 
the surgery for purposes of our drug and biological surgical supply 
packaging policy'' (79 FR 66875). The category described by Sec.  
419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, 
contrast agents, stress agents, and some other products. The category 
described by Sec.  419.2(b)(16) includes skin substitutes and some 
other products. We believe it is important to reiterate that cost 
consideration is not a factor when determining whether an item is a 
surgical supply (79 FR 66875).
    We did not make any proposals to revise our policy-packaged drug 
policy. We solicited public comment on the general OPPS packaging 
policies as discussed in section II.3.a. of this final rule with 
comment period.
    Comment: One commenter recommended that CMS continue to apply the 
nuclear medicine procedure to radiolabeled product edits to ensure that 
all packaged costs are included on nuclear medicine claims in order to 
establish appropriate payment rates in the future. The commenter was 
concerned that many providers performing nuclear medicine procedures 
are not including the cost of diagnostic radiopharmaceuticals used for 
the procedures in their claims submissions. The commenter believed this 
lack of drug cost reporting is causing the cost of nuclear medicine 
procedures to be underreported, and that the radiolabeled product edits 
will ensure providers are reporting the cost of diagnostic 
radiopharmaceuticals in their claims data.
    Response: We do not agree with the commenter that we should 
reinstate the nuclear medicine procedure to radiolabeled product edits, 
which required a diagnostic radiopharmaceutical to be present on the 
same claim as a nuclear medicine procedure for payment under the OPPS 
to be made. The edits were in place between CY 2008 and CY 2014 (78 FR 
75033). We believe the period of time in which the edits were in place 
was sufficient for hospitals to gain experience reporting procedures 
involving radiolabeled products and to become accustomed to ensuring 
that they code and report charges so that their claims fully and 
appropriately reflect the costs of those radiolabeled products. As with 
all other items and services recognized under the OPPS, we expect 
hospitals to code and report their costs appropriately, regardless of 
whether there are claims processing edits in place.
    Comment: Several commenters requested that diagnostic 
radiopharmaceuticals be paid separately in all cases, not just when the 
drugs have pass-through payment status. The commenters provided limited 
data that showed that procedures where diagnostic radiopharmaceuticals 
are considered to be a surgical supply often are paid at a lower rate 
than what the payment rate is for the diagnostic radiopharmaceutical 
itself when the drug is paid separately on pass-through payment status. 
The commenters stated that diagnostic radiopharmaceuticals are highly 
complex drugs that undergo a rigorous approval process by the FDA.

[[Page 58966]]

The commenters believed that the type of procedure in which a drug or 
biological is used should not dictate whether that drug or biological 
is a supply and is packaged.
    Response: We continue to believe that diagnostic 
radiopharmaceuticals are an integral component of many nuclear medicine 
and imaging procedures and charges associated with radiopharmaceuticals 
should be reported on hospital claims to the extent they are used. 
Therefore, payment for the radiopharmaceuticals is reflected within the 
payment for the primary procedure. While at least one commenter 
provided limited data showing the proposed cost of the packaged 
procedure in CY 2019 is substantially lower than the cost of the 
separately paid radiopharmaceutical on pass-through payment plus the 
cost of the procedure associated with the radiopharmaceutical, we note 
the rates are established in a manner that takes the average (more 
specifically, the geometric mean) of reported costs to furnish the 
procedure based on data submitted to us from all hospitals paid under 
the OPPS. Accordingly, the costs that are calculated by Medicare 
reflect the average costs of items and services that are packaged into 
a primary procedure and will not necessarily equal the sum of the cost 
of the primary procedure and the average sales price of items and 
services because the billing patterns of hospitals may not reflect that 
a particular item or service is always billed with the primary 
procedure. Further, the costs will be based on the reported costs 
submitted to Medicare by hospitals, not the list price established by 
the manufacturer. Claims data that include the radiopharmaceutical 
packaged with the associate procedure reflect the combined cost of the 
procedure and the radiopharmaceutical used in the procedure.
d. 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).
    Skin substitutes assigned to the high cost group are described by 
HCPCS codes 15271 through 15278. Skin substitutes assigned to the low 
cost group are described by HCPCS codes C5271 through C5278. Geometric 
mean costs for the various procedures are calculated using only claims 
for the skin substitutes that are assigned to each group. Specifically, 
claims billed with HCPCS code 15271, 15273, 15275, or 15277 are used to 
calculate the geometric mean costs for procedures assigned to the high 
cost group, and claims billed with HCPCS code C5271, C5273, C5275, or 
C5277 are used to calculate the geometric mean costs for procedures 
assigned to the low cost group (78 FR 74935).
    Each of the HCPCS codes described above are assigned to one of the 
following three skin procedure APCs according to the geometric mean 
cost for the code: APC 5053 (Level 3 Skin Procedures) (HCPCS codes 
C5271, C5275, and C5277); APC 5054 (Level 4 Skin Procedures) (HCPCS 
codes C5273, 15271, 15275, and 15277); or APC 5055 (Level 5 Skin 
Procedures) (HCPCS code 15273). In CY 2018, the payment rate for APC 
5053 (Level 3 Skin Procedures) was $488.20, the payment rate for APC 
5054 (Level 4 Skin Procedures) was $1,568.43, and the payment rate for 
APC 5055 (Level 5 Skin Procedures) was $2,710.48. This information also 
is available in Addenda A and B of the CY 2018 OPPS/ASC final rule with 
comment period (which is available via the internet on the CMS 
website).
    We have continued the high cost/low cost categories policy since CY 
2014, and in the CY 2019 OPPS/ASC proposed rule (83 FR 37117), we 
proposed to continue it for CY 2019. Under this current policy, skin 
substitutes in the high cost category are reported with the skin 
substitute application CPT codes, and skin substitutes in the low cost 
category are reported with the analogous skin substitute HCPCS C-codes. 
For a discussion of the CY 2014 and CY 2015 methodologies for assigning 
skin substitutes to either the high cost group or the low cost group, 
we refer readers to the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 74932 through 74935) and the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66882 through 66885).
    For a discussion of the high cost/low cost methodology that was 
adopted in CY 2016 and has been in effect since then, we refer readers 
to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434 
through 70435). For CY 2019, as with our policy since CY 2016, we 
proposed to continue to determine the high cost/low cost status for 
each skin substitute product based on either a product's geometric mean 
unit cost (MUC) exceeding the geometric MUC threshold or the product's 
per day cost (PDC) (the total units of a skin substitute multiplied by 
the mean unit cost and divided by the total number of days) exceeding 
the PDC threshold. For CY 2019, as for CY 2018, we proposed to assign 
each skin substitute that exceeds either the MUC threshold or the PDC 
threshold to the high cost group. In addition, as described in more 
detail later in this section, for CY 2019, as for CY 2018, we proposed 
to assign any skin substitute with a MUC or a PDC that does not exceed 
either the MUC threshold or the PDC threshold to the low cost group. 
For CY 2019, we proposed that any skin substitute product that was 
assigned to the high cost group in CY 2018 would be assigned to the 
high cost group for CY 2019, regardless of whether it exceeds or falls 
below the CY 2019 MUC or PDC threshold.
    For this CY 2019 OPPS/ASC final rule with comment period, 
consistent with the methodology as established in the CY 2014 through 
CY 2017 final rules with comment period, we analyzed updated CY 2017 
claims data to calculate the MUC threshold (a weighted average of all 
skin substitutes' MUCs) and the PDC threshold (a weighted average of 
all skin substitutes' PDCs). The final CY 2019 MUC threshold is $49 per 
cm\2\ (rounded to the nearest $1) (proposed at $49 per cm\2\) and the 
final CY 2019 PDC threshold is $872 (rounded to the nearest $1) 
(proposed at $895).
    For CY 2019, we proposed to continue to assign skin substitutes 
with pass-through payment status to the high cost category. We proposed 
to assign skin substitutes with pricing information but without claims 
data to calculate a geometric MUC or PDC 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 proposed to 
use WAC+3 percent to assign a product to either the high cost or low 
cost category. Finally, if neither ASP nor WAC is available, we stated 
in the proposed rule that we would use 95 percent of AWP to assign a 
skin substitute to either the high cost or low cost category. We 
proposed to use WAC+3 percent instead of WAC+6 percent to conform to 
our proposed policy described in section V.B.2.b. of the proposed rule 
to establish a payment rate of WAC+3 percent for separately payable 
drugs and biologicals that do not have ASP data available. We also

[[Page 58967]]

stated in the proposed rule that new skin substitutes without pricing 
information would be assigned to the low cost category until pricing 
information is available to compare to the CY 2019 MUC threshold. For a 
discussion of our existing policy under which we assign skin 
substitutes without pricing information to the low cost category until 
pricing information is available, we refer readers to the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70436).
    Some skin substitute manufacturers have raised concerns about 
significant fluctuation in both the MUC threshold and the PDC threshold 
from year to year. The fluctuation in the thresholds may result in the 
reassignment of several skin substitutes from the high cost group to 
the low cost group which, under current payment rates, can be a 
difference of approximately $1,000 in the payment amount for the same 
procedure. In addition, these stakeholders were concerned that the 
inclusion of cost data from skin substitutes with pass-through payment 
status in the MUC and PDC calculations would artificially inflate the 
thresholds. Skin substitute stakeholders requested that CMS consider 
alternatives to the current methodology used to calculate the MUC and 
PDC thresholds and also requested that CMS consider whether it might be 
appropriate to establish a new cost group in between the low cost group 
and the high cost group to allow for assignment of moderately priced 
skin substitutes to a newly created middle group.
    We share the goal of promoting payment stability for skin 
substitute products and their related procedures as price stability 
allows hospitals using such products to more easily anticipate future 
payments associated with these products. We have attempted to limit 
year-to-year shifts for skin substitute products between the high cost 
and low cost groups through multiple initiatives implemented since CY 
2014, including: Establishing separate skin substitute application 
procedure codes for low-cost skin substitutes (78 FR 74935); using a 
skin substitute's MUC calculated from outpatient hospital claims data 
instead of an average of ASP+6 percent as the primary methodology to 
assign products to the high cost or low cost group (79 FR 66883); and 
establishing the PDC threshold as an alternate methodology to assign a 
skin substitute to the high cost group (80 FR 70434 through 70435).
    To allow additional time to evaluate concerns and suggestions from 
stakeholders about the volatility of the MUC and PDC thresholds, in the 
CY 2018 OPPS/ASC proposed rule (82 FR 33627), for CY 2018, we proposed 
that a skin substitute that was assigned to the high cost group for CY 
2017 would be assigned to the high cost group for CY 2018, even if it 
does not exceed the CY 2018 MUC or PDC thresholds. We finalized this 
policy in the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59347). We stated in the CY 2018 OPPS/ASC proposed rule that the goal 
of our proposal to retain the same skin substitute cost group 
assignments in CY 2018 as in CY 2017 was to maintain similar levels of 
payment for skin substitute products for CY 2018 while we study our 
skin substitute payment methodology to determine whether refinement to 
the existing policies is consistent with our policy goal of providing 
payment stability for skin substitutes.
    We stated in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59347) that we would continue to study issues related to the 
payment of skin substitutes and take these comments into consideration 
for future rulemaking. We received many responses to our requests for 
comments in the CY 2018 OPPS/ASC proposed rule about possible 
refinements to the existing payment methodology for skin substitutes 
that would be consistent with our policy goal of providing payment 
stability for these products. In addition, several stakeholders have 
made us aware of additional concerns and recommendations since the 
release of the CY 2018 OPPS/ASC final rule with comment period. As 
discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37118 through 
37119), we have identified four potential methodologies that have been 
raised to us that we encouraged the public to review and provide 
comments on. We stated in the proposed rule that we are especially 
interested in any specific feedback on policy concerns with any of the 
options presented as they relate to skin substitutes with differing per 
day or per episode costs and sizes and other factors that may differ 
among the dozens of skin substitutes currently on the market. We also 
specified in the proposed rule that we are interested in any new ideas 
that are not represented below along with an analysis of how different 
skin substitute products would fare under such ideas. We stated that we 
intend to explore the full array of public comments on these ideas for 
the CY 2020 rulemaking, and we indicated that we will consider the 
feedback received in response to our requests for comments in the CY 
2019 proposed rule in developing proposals for CY 2020.
     Establish a lump-sum ``episode-based'' payment for a wound 
care episode. Under this option, a hospital would receive a lump sum 
payment for all wound care services involving procedures using skin 
substitutes. The payment would be made for a wound care ``episode'' 
(such as 12 weeks) for one wound. The lump sum payment could be the 
same for all skin substitutes or could vary based on the estimated 
number of applications for a given skin substitute during the wound 
care episode. Under this option, payment to the provider could be made 
at the start of treatment, or at a different time, and could be made 
once or split into multiple payments. Quality metrics, such as using 
the recommended number of treatments for a given skin substitute during 
a treatment episode, and establishing a plan of care for patients who 
do not experience 30 percent wound healing after 4 weeks, could be 
established to ensure the beneficiary receives appropriate care while 
limiting excessive additional applications of skin substitute products.
     Eliminate the high cost/low cost categories for skin 
substitutes and only have one payment category and set of procedure 
codes for all skin substitute products. This option would reduce the 
financial incentives to use expensive skin substitutes and would 
provide incentives to use less costly skin substitute products that 
have been shown to have similar efficacy treating wounds as more 
expensive skin substitute products. A single payment category would 
likely have a payment rate that is between the current rates paid for 
high cost and low cost skin substitute procedures. Initially, a single 
payment category may lead to substantially higher payment for skin 
graft procedures performed with cheaper skin substitutes as compared to 
their costs. However, over time, payment for skin graft procedures 
using skin substitutes might reflect the lower cost of the procedures.
     Allow for the payment of current add-on codes or create 
additional procedure codes to pay for skin graft services between 26 
cm\2\ and 99 cm\2\ and substantially over 100 cm\2\. Under this option, 
payment for skin substitutes would be made more granularly based on the 
size of the skin substitute product being applied. This option also 
would reduce the risk that hospitals may not use enough of a skin 
substitute to save money when performing a procedure. However, such 
granularity in the use of skin substitutes could conflict with the 
goals of a prospective payment system, which is based on a system of 
averages. Specifically, it is expected that

[[Page 58968]]

some skin graft procedures will be less than 25 cm\2\ or around 100 
cm\2\ and will receive higher payments compared to the cost of the 
services. Conversely, services between 26 cm\2\ and 99 cm\2\ or those 
that are substantially larger than 100 cm\2\ will receive lower 
payments compared to the cost of the services, but the payments will 
average over many skin graft procedures to an appropriate payment rate 
for the provider.
     Keep the high cost/low cost skin substitute categories, 
but change the threshold used to assign skin substitutes in the high 
cost or low cost group. Consider using other benchmarks that would 
establish more stable thresholds for the high cost and low cost groups. 
Ideas include, but are not limited to, fixing the MUC or PDC threshold 
at an amount from a prior year, or setting global payment targets for 
high cost and low cost skin substitutes and establishing a threshold 
that meets the payment targets. Establishing different thresholds for 
the high cost and low cost groups could allow for the use of a mix of 
lower cost and higher cost skin substitute products that acknowledges 
that a large share of skin substitutes products used by Medicare 
providers are higher cost products but still providing substantial cost 
savings for skin graft procedures. Different thresholds may also reduce 
the number of skin substitute products that switch between the high 
cost and low cost groups in a given year to give more payment stability 
for skin substitute products.
    Comment: Several commenters supported the four options presented in 
the CY 2019 OPPS proposed rule (83 FR 37118 through 37119). Other 
commenters opposed the four options.
    Response: We appreciate the feedback we received from the 
commenters. We will continue to study issues related to changing the 
methodology for paying for skin substitute products, and we will take 
these comments into consideration for CY 2020 rulemaking.
    To allow stakeholders time to analyze and comment on the potential 
ideas raised above, in the CY 2019 OPPS/ASC proposed rule (83 FR 
37119), for CY 2019, we proposed to continue our policy established in 
CY 2018 to assign skin substitutes to the low cost or high cost group. 
However, for CY 2020, we stated in the proposed rule that we may revise 
our policy to reflect one of the potential new methodologies discussed 
above or a new methodology included in public comments in response to 
the CY 2019 proposed rule. Specifically, for CY 2019, we proposed to 
assign a skin substitute with a MUC or a PDC that does not exceed 
either the MUC threshold or the PDC threshold to the low cost group, 
unless the product was assigned to the high cost group in CY 2018, in 
which case we would assign the product to the high cost group for CY 
2019, regardless of whether it exceeds the CY 2019 MUC or PDC 
threshold. We also proposed to assign to the high cost group any skin 
substitute product that exceeds the CY 2019 MUC or PDC thresholds and 
assign to the low cost group any skin substitute product that does not 
exceed the CY 2019 MUC or PDC thresholds and were not assigned to the 
high cost group in CY 2018. We proposed to continue to use payment 
methodologies including ASP+6 percent and 95 percent of AWP for skin 
substitute products that have pricing information but do not have 
claims data to determine if their costs exceed the CY 2019 MUC. In 
addition, we proposed to use WAC+3 percent instead of WAC+6 percent for 
skin substitute products that do not have ASP pricing information or 
have claims data to determine if those products' costs exceed the CY 
2019 MUC. We also proposed to retain our established policy to assign 
new skin substitute products with pricing information to the low cost 
group.
    Table 23 in the CY 2019 OPPS/ASC proposed rule (83 FR 37119 through 
37120) displayed the proposed CY 2019 high cost or low cost category 
assignment for each skin substitute product.
    Comment: Two commenters requested that CMS implement a single skin 
substitute payment category in CY 2019 rather than keeping the current 
high cost and low cost categories. The commenters believed that the 
existence of separate categories for high cost and low cost skin 
substitutes encourages the over-utilization of high cost skin 
substitutes which increases program cost for CMS and copayments for 
beneficiaries.
    Response: At this time, we do not believe that establishing one 
cost category for all skin substitute products is prudent. While 
several commenters supported a single payment category for skin 
substitutes as a potential future refinement to the payment policy for 
these products, several other commenters expressed significant concern 
about this payment method. Accordingly, we do not believe it would be 
appropriate to establish such a major payment change in this final rule 
with comment period without having proposed it.
    Comment: A number of commenters supported the proposal to assign a 
skin substitute with a MUC or a PDC that does not exceed either the MUC 
threshold or the PDC threshold to the low cost group, unless the 
product was assigned to the high cost group in CY 2018, in which case 
CMS would assign the product to the high cost group for CY 2019, 
regardless of whether it exceeds the CY 2019 MUC or PDC threshold. 
These commenters also supported the proposal to assign to the high cost 
group any skin substitute product that exceeds the CY 2019 MUC or PDC 
thresholds and assign to the low cost group any skin substitute product 
that does not exceed the CY 2019 MUC or PDC thresholds and was not 
assigned to the high cost group in CY 2018. One of the commenters 
supported the proposal for CY 2019, but requested that CMS establish 
new skin substitute payment policy for CY 2020. Another commenter 
requested that CMS maintain the current payment methodologies for up to 
5 years until a new skin substitute payment system is implemented.
    Response: We appreciate the support from the commenters for our 
proposals and their support for developing a new methodology for paying 
for skin substitute procedures in future rulemaking.
    Comment: One commenter expressed appreciation to CMS for assigning 
HCPCS codes Q4122 (Dermacell, per square centimeter) and Q4150 
(Allowrap ds or dry, per square centimeter) to the high cost group.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign a skin substitute with a MUC or a PDC 
that does not exceed either the MUC threshold or the PDC threshold to 
the low cost group, unless the product was assigned to the high cost 
group in CY 2018, in which case we would assign the product to the high 
cost group for CY 2019, regardless of whether it exceeds the CY 2019 
MUC or PDC threshold. We also are finalizing our proposal to assign to 
the high cost group any skin substitute product that exceeds the CY 
2019 MUC or PDC thresholds and assign to the low cost group any skin 
substitute product that does not exceed the CY 2019 MUC or PDC 
thresholds and was not assigned to the high cost group in CY 2018. We 
are finalizing our proposal to continue to use payment methodologies 
including ASP+6 percent and 95 percent of AWP for skin substitute 
products that have pricing information but do not have claims data to 
determine if their costs exceed the CY 2019 MUC. In addition, we are 
finalizing our proposal to use WAC+3 percent instead of WAC+6

[[Page 58969]]

percent for skin substitute products that do not have ASP pricing 
information or claims data to determine if those products' costs exceed 
the CY 2019 MUC. We also are finalizing our proposal to retain our 
established policy to assign new skin substitute products with pricing 
information to the low cost group.
    Table 41 below displays the final CY 2019 cost category assignment 
for each skin substitute product.
BILLING CODE 4120-01-P

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e. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological but Different Dosages
    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 2019 
OPPS/ASC proposed rule (83 FR 37121), 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 2019.
    For CY 2019, 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 2017 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 2019 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 2017 claims data to make the proposed 
packaging determinations for these drugs: HCPCS code J1840 (Injection, 
kanamycin sulfate, up to 500 mg); HCPCS code J1850 (Injection, 
kanamycin sulfate, up to 75 mg); HCPCS code J3472 (Injection, 
hyaluronidase, ovine, preservative free, per 1,000 usp units); HCPCS 
code J7100 (Infusion, dextran 40, 500 ml); and HCPCS code J7110 
(Infusion, dextran 75, 500 ml).
    For all other drugs and biologicals that have HCPCS codes 
describing different doses, we then multiplied the proposed weighted 
average ASP+6 percent per unit payment amount across all dosage levels 
of a specific drug or biological by the estimated units per day for all 
HCPCS codes that describe each drug or biological from our claims data 
to determine the estimated per day cost of each drug or biological at 
less than or equal to the proposed CY 2019 drug packaging threshold of 
$125 (so that all HCPCS codes for the same drug or biological would be 
packaged) or greater than the proposed CY 2019 drug packaging threshold 
of $125 (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 2019 
was displayed in Table 24 of the CY 2019 OPPS/ASC proposed rule (83 FR 
37121).
    We did not receive any public comments on this proposal. Therefore, 
for CY 2019, we are finalizing our CY 2019 proposal, without 
modification, 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. Table 42 below displays the final packaging status 
of each drug and biological HCPCS code to which the finalized 
methodology applies for CY 2019.

[[Page 58973]]

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[[Page 58974]]


BILLING CODE 4120-01-C
2. 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 for purposes of paragraph (14). We refer to this alternative 
methodology as the ``statutory default.'' Most physician Part B drugs 
are paid at ASP+6 percent in accordance with section 1842(o) and 
section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.\57\
---------------------------------------------------------------------------

    \57\ Medicare Payment Advisory Committee. June 2005 Report to 
the Congress. Chapter 6: Payment for pharmacy handling costs in 
hospital outpatient departments. Available at: http://www.medpac.gov/docs/default-source/reports/June05_ch6.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    It has been our policy since CY 2006 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 2019 OPPS/
ASC proposed rule (83 FR 37122), 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.
    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). In the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68386 through 68389), we 
first adopted the statutory default policy to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act. We continued this policy of paying 
for separately payable drugs and biologicals at the statutory default 
for CYs 2014 through 2018.
    Comment: One commenter requested that HCPCS code J0476 (Injection, 
baclofen, 50 mcg for intrathecal trial) be separately payable in CY 
2019 and be assigned status indicator ``K'' (Paid under OPPS; separate 
APC payment).
    Response: The per day cost of the drug described by HCPCS code 
J0476 is less than the drug packaging threshold amount of $125. 
Therefore, the drug described by HCPCS code J0476 will be packaged into 
the cost of the related services for CY 2019.
    Comment: One commenter supported the assignment of GenVisc 850, 
described by HCPCS code J7320, to a separately payable status with 
status indicator ``K'' (Paid under OPPS; separate APC payment) for CY 
2019. The commenter also requested that TriVisc, described by HCPCS 
code J7329, also be assigned to a separately payable status for CY 
2019.
    Response: We appreciate the commenter's support. For HCPCS code 
J7329, we are not able to assign the code to a payable status because 
no pricing information is available for the code. If pricing 
information becomes available prior to the next rulemaking cycle, we 
would expect to assign a payable status in a quarterly update to the 
OPPS.
b. CY 2019 Payment Policy
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37122), for CY 2019, 
we proposed to continue our payment policy that has been in effect 
since CY 2013 to pay for separately payable drugs and biologicals at 
ASP+6 percent in accordance with section 1833(t)(14)(A)(iii)(II) of the 
Act (the statutory default). We proposed to continue to pay for 
separately payable nonpass-through drugs acquired with a 340B discount 
at a rate of ASP minus 22.5 percent. We refer readers to section V.A.7. 
of the proposed rule and this final rule with comment period for more 
information about how the payment rate for drugs acquired with a 340B 
discount was established.
    In the case of a drug or biological during an initial sales period 
in which data on the prices for sales for the drug or biological are 
not sufficiently available from the manufacturer, section 1847A(c)(4) 
of the Act permits the Secretary to make payments that are based on 
WAC. Under section 1833(t)(14)(A)(iii)(II), the amount of payment for a 
separately payable drug equals the average price for the drug for the 
year established under, among other authorities, section 1847A of the 
Act. As explained in greater detail in the CY 2019 PFS proposed rule, 
under section 1847A(c)(4), although payments may be based on WAC, 
unlike section 1847A(b) of the Act (which specifies that certain 
payments must be made with a 6 percent add-on), section 1847A(c)(4) of 
the Act does not require that a particular

[[Page 58975]]

add-on amount be applied to partial quarter WAC-based pricing. 
Consistent with section 1847A(c)(4) of the Act, in the CY 2019 PFS 
proposed rule, we proposed that, effective January 1, 2019, WAC-based 
payments for Part B drugs made under section 1847A(c)(4) of the Act 
would utilize a 3 percent add-on in place of the 6 percent add-on that 
is currently being used per our policy in effect as of CY 2018. For the 
OPPS, in the CY 2019 OPPS/ASC proposed rule (83 FR 37122), we also 
proposed to utilize a 3 percent add-on instead of a 6 percent add-on 
for WAC-based drugs pursuant to our authority under section 
1833(t)(14)(A)(iii)(II) of the Act, which provides, in part, that the 
amount of payment for a SCOD is the average price of the drug in the 
year established under section 1847A of the Act. We also apply this 
provision to non-SCOD separately payable drugs. Because we proposed to 
establish the average price for a WAC-based drug under section 1847A of 
the Act as WAC+3 percent instead of WAC+6 percent, we believe it is 
appropriate to price separately payable WAC-based drugs at the same 
amount under the OPPS. We proposed that, if finalized, our proposal to 
pay for drugs or biologicals at WAC+3 percent, rather than WAC+6 
percent, would apply whenever WAC-based pricing is used for a drug or 
biological. We stated in the proposed rule that for drugs and 
biologicals that would otherwise be subject to a payment reduction 
because they were acquired under the 340B Program, the 340B Program 
rate (in this case, WAC minus 22.5 percent) would continue to apply. We 
referred readers to the CY 2019 PFS proposed rule for additional 
background on this anticipated proposal.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37123), we proposed 
that payments for separately payable drugs and biologicals are included 
in the budget neutrality adjustments, under the requirements in section 
1833(t)(9)(B) of the Act. We also proposed that the budget neutral 
weight scalar not be applied in determining payments for these 
separately paid drugs and biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period 
(available via the internet on the CMS website), which illustrate the 
final CY 2019 payment of ASP+6 percent for separately payable nonpass-
through drugs and biologicals and ASP+6 percent for pass-through drugs 
and biologicals, reflect either ASP information that is the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting effective October 1, 2018, or WAC, AWP, or mean unit 
cost from CY 2017 claims data and updated cost report information 
available for this final rule with comment period. In general, these 
published payment rates are not the same as the actual January 2019 
payment rates. This is because payment rates for drugs and biologicals 
with ASP information for January 2019 will be determined through the 
standard quarterly process where ASP data submitted by manufacturers 
for the third quarter of CY 2018 (July 1, 2018 through September 30, 
2018) will be used to set the payment rates that are released for the 
quarter beginning in January 2019 near the end of December 2018. 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 2018 are based on mean unit cost in 
the available CY 2017 claims data. If ASP information becomes available 
for payment for the quarter beginning in January 2019, 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 2018 ASP data) that do not have ASP information 
available for the quarter beginning in January 2019. As stated in the 
CY 2019 OPPS/ASC proposed rule (83 FR 37123), these drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2017 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2019 
payment purposes and are only illustrative of the CY 2019 OPPS payment 
methodology using the most recently available information at the time 
of issuance of this final rule with comment period.
    Comment: A number of commenters supported CMS' proposal to continue 
to pay for separately payable drugs and biologicals based on the 
statutory default rate of ASP+6 percent.
    Response: We appreciate the commenters' support.
    Comment: Several commenters supported the proposal to utilize a 3 
percent add-on instead of a 6 percent add-on for drugs that are paid 
based on WAC under section 1847A(c)(4) of the Act, pursuant to CMS' 
authority under section 1833(t)(14)(A)(iii)(II) of the Act. These 
commenters recommended this as a first step to lowering drug costs for 
beneficiaries and the Medicare Program as well as removing the 
financial incentive associated with a specific prescribing choice. The 
commenters suggested modifying the add-on to be a flat fee.
    Response: We appreciate the commenters' support. We proposed a 
fixed percentage, instead of a flat fee, in order to be consistent with 
other provisions in section 1847A of the Act that specify fixed add-on 
percentages of 6 percent (section 1847A(b) of the Act) or 3 percent 
(section 1847A(d)(3)(C) of the Act). A fixed percentage is also 
administratively simple to implement and administer, is predictable, 
and is easy for manufacturers, providers and the public to understand.
    Comment: Many commenters opposed the proposal to utilize a 3 
percent add-on instead of a 6 percent add-on for drugs that are paid 
based on WAC under section 1847A(c)(4) of the Act. Several commenters 
were concerned that paying less for new drugs may discourage the use of 
innovative drugs due to concerns about decreased payment, especially 
with the sequestration cuts decreasing the payment further. The 
commenters also were concerned that the proposal would only affect 
payment to the provider, and would not address pricing on the 
pharmaceutical manufacturer side. The commenters requested additional 
studies to analyze the appropriateness and accuracy of the 3 percent 
reduction, and encouraged additional modifications to ASP reporting, 
such as requiring all Part B drug manufacturers to report pricing 
information and for all Part B drugs to be included in the ASP 
quarterly update file.
    Response: We appreciate these comments. The implementation of these 
proposals will improve Medicare payment rates by better aligning 
payments with drug acquisition costs, which is of great importance to 
CMS because spending on Part B drugs has grown significantly. A WAC+3 
percent add-on is more comparable to an ASP+6 percent add-on, as the 
WAC pricing does not reflect many of the discounts associated with ASP, 
such as rebates. The utilization of a 3 percent add-on instead of a 6 
percent add-on for drugs that are paid based on WAC under section 
1847A(c)(4) of the Act is consistent with MedPAC's analysis and 
recommendations cited in its June 2017 Report to the Congress, and as 
discussed in the CY 2019 PFS proposed rule (83 FR 35854 through 35855). 
Overall, this policy still represents a net payment greater than the 
WAC. In addition, this policy decreases beneficiary cost-sharing for 
these drugs, which would help Medicare beneficiaries afford to pay for 
new drugs by reducing out-of-pocket expenses.

[[Page 58976]]

    Comment: Some commenters did not support the inclusion of 
radiopharmaceuticals in the proposal to utilize a 3 percent add-on 
instead of a 6 percent add-on for drugs that are paid based on WAC. The 
commenters cited pharmacy overhead and handling costs for 
radiopharmaceuticals, pointed out that these costs are higher than for 
any other class of drugs, and suggested an increased payment rate. In 
addition, the commenters were concerned that this reduction would 
disproportionately affect the pass-through payments for diagnostic 
radiopharmaceuticals.
    Response: We appreciate these comments. We recognize that 
radiopharmaceuticals tend to utilize the WAC-based payment methodology 
more compared to other products. However, no significant evidence has 
been presented to substantiate that a 3 percent add-on instead of a 6 
percent add-on for drugs that are paid based on WAC would negatively 
affect access, including during the pass-through payment status period, 
if applicable. We received limited current data from commenters to 
justify the exclusion of radiopharmaceuticals from this proposal.
    Comment: Several commenters made recommendations to exclude certain 
drugs and biologicals from this proposal, including skin substitutes 
and biosimilar biological products. The commenters were concerned about 
skin substitutes being assigned to the high- or low-cost category when 
ASP data are not available based on a WAC+3 percent methodology 
compared to a WAC+6 percent methodology. The commenters recommended 
maintaining payment for biosimilars at WAC+6 percent to encourage the 
increase in utilization of biosimilars.
    Response: We appreciate these comments. However, use of a 3 percent 
add-on instead of a 6 percent add-on for drugs that are paid based on 
WAC under section 1847A(c)(4) of the Act is consistent with MedPAC's 
analysis and recommendations cited in its June 2017 Report to the 
Congress, and as discussed in the CY 2019 PFS proposed rule (83 FR 
35854 through 35855). This policy is not meant to give preferential 
treatment to any drugs or biologicals.
    Comment: Commenters were concerned about coverage for drugs that 
are not included in the ASP Quarterly Update File being paid at WAC+3 
percent instead of the current rate of ASP+6 percent. For example, the 
commenters were concerned that OTIPRIO (HCPCS code J7342), a drug that 
is not included in the ASP Quarterly Update File, will not be paid at 
ASP+6 percent, and would be paid at WAC+3 percent. In addition, the 
commenters requested clarification regarding MAC payment for drugs that 
fall under sections 1847A(c)(4) and 1847A(b)(1) of the Act.
    Response: Drugs that are not included in the ASP Quarterly Update 
File will continue to be paid at their current rate of ASP+6 percent as 
long as the manufacturer continues to submit ASP information to CMS on 
a timely basis and assuming the drug is not packaged.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to utilize a 3 percent 
add-on instead of a 6 percent add-on for drugs that are paid based on 
WAC under section 1847A(c)(4) of the Act pursuant to our authority 
under section 1833(t)(14)(A)(iii)(II) of the Act.
c. Biosimilar Biological Products
    For CY 2016 and CY 2017, we finalized a policy to pay for 
biosimilar biological products based on the payment allowance of the 
product as determined under section 1847A of the Act and to subject 
nonpass-through biosimilar biological products to our annual threshold-
packaged policy (for CY 2016, 80 FR 70445 through 70446; and for CY 
2017, 81 FR 79674). In the CY 2018 OPPS/ASC proposed rule (82 FR 
33630), for CY 2018, we proposed to continue this same payment policy 
for biosimilar biological products.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59351), we noted that, with respect to comments we received regarding 
OPPS payment for biosimilar biological products, in the CY 2018 PFS 
final rule, CMS finalized a policy to implement separate HCPCS codes 
for biosimilar biological products. Therefore, consistent with our 
established OPPS drug, biological, and radiopharmaceutical payment 
policy, HCPCS coding for biosimilar biological products will be based 
on policy established under the CY 2018 PFS final rule.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59351), after consideration of the public comments we received, we 
finalized our proposed payment policy for biosimilar biological 
products, with the following technical correction: All biosimilar 
biological products will be eligible for pass-through payment and not 
just the first biosimilar biological product for a reference product. 
In the CY 2019 OPPS/ASC proposed rule (83 FR 37123), for CY 2019, we 
proposed to continue the policy in place from CY 2018 to make all 
biosimilar biological products eligible for pass-through payment and 
not just the first biosimilar biological product for a reference 
product.
    In addition, in CY 2018, we adopted a policy that biosimilars 
without pass-through payment status that were acquired under the 340B 
Program would be paid the ASP of the biosimilar minus 22.5 percent of 
the reference product (82 FR 59367). We adopted this policy in the CY 
2018 OPPS/ASC final rule with comment period because we believe that 
biosimilars without pass-through payment status acquired under the 340B 
Program should be treated in the same manner as other drugs and 
biologicals acquired through the 340B Program. As noted earlier, 
biosimilars with pass-through payment status are paid their own ASP+6 
percent of the reference product's ASP. Separately payable biosimilars 
that do not have pass-through payment status and are not acquired under 
the 340B Program are also paid their own ASP+6 percent of the reference 
product's ASP.
    As noted in the CY 2019 OPPS/ASC proposed rule (83 FR 37123), 
several stakeholders raised concerns to us that the current payment 
policy for biosimilars acquired under the 340B Program could unfairly 
lower the OPPS payment for biosimilars not on pass-through payment 
status because the payment reduction would be based on the reference 
product's ASP, which would generally be expected to be priced higher 
than the biosimilar, thus resulting in a more significant reduction in 
payment than if the 22.5 percent was calculated based on the 
biosimilar's ASP. We agreed with stakeholders that the current payment 
policy could unfairly lower the price of biosimilars without pass-
through payment status that are acquired under the 340B Program. In 
addition, we believed that these changes would better reflect the 
resources and production costs that biosimilar manufacturers incur. We 
also believed this approach is more consistent with the payment 
methodology for 340B-acquired drugs and biologicals, for which the 22.5 
percent reduction is calculated based on the drug or biological's ASP, 
rather than the ASP of another product. In addition, we believed that 
paying for biosimilars acquired under the 340B Program at ASP minus 
22.5 percent of the biosimilar's ASP, rather than 22.5 percent of the 
reference product's ASP, will more closely approximate hospitals' 
acquisition costs for these products.
    Accordingly, in the CY 2019 OPPS/ASC proposed rule (83 FR 37123), 
for CY 2019, we proposed changes to our Medicare Part B drug payment 
methodology for biosimilars acquired

[[Page 58977]]

under the 340B Program. Specifically, for CY 2019 and subsequent years, 
in accordance with section 1833(t)(14)(A)(iii)(II) of the Act, we 
proposed to pay nonpass-through biosimilars acquired under the 340B 
Program at ASP minus 22.5 percent of the biosimilar's ASP instead of 
the biosimilar's ASP minus 22.5 percent of the reference product's ASP.
    Comment: Many commenters supported CMS' proposal to pay nonpass-
through biosimilars acquired under the 340B Program at ASP minus 22.5 
percent of the biosimilar's ASP, in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act. The commenters stated that this 
proposal would ensure fair access to biosimilar treatments.
    Response: We appreciate the commenters' support. We believe this 
proposal appropriately reflects the resources and production costs that 
manufacturers incur, as well as more closely aligns with the hospitals' 
acquisition costs for these products.
    Comment: Several commenters supported CMS' proposal to continue the 
policy in place from CY 2018 to make all biosimilar biological products 
eligible for pass-through payment and not just the first biosimilar 
biological product for a reference product. The commenters stated that 
this proposal would continue to lower costs and improve access to 
treatments.
    Response: We appreciate the commenters' support.
    Comment: Some commenters recommended eliminating the proposal to 
continue the policy in place from CY 2018 to make all biosimilar 
biological products eligible for pass-through payment and not just the 
first biosimilar biological product for a reference product. The 
commenters believed this policy could potentially encourage 
inappropriate treatment changes from a reference product without pass-
through payment to a biosimilar product with pass-through payment.
    Response: We are not convinced that making all biosimilar 
biological products eligible for pass-through payment will lead to 
inappropriate treatment changes from a reference product without pass-
through payment to a biosimilar product with pass-through payment. 
Eligibility for pass-through payment status reflects the unique, 
complex nature of biosimilars and is important as biosimilars become 
established in the market, just as it is for all other new drugs and 
biologicals.
    After consideration of the public comments we received, we are 
finalizing our proposed payment policy for biosimilar products, without 
modification, to continue the policy in place from CY 2018 to make all 
biosimilar biological products eligible for pass-through payment and 
not just the first biosimilar biological product for a reference 
product. We also are finalizing our proposal to pay nonpass-through 
biosimilars acquired under the 340B Program at the biosimilar's ASP 
minus 22.5 percent of the biosimilar's ASP instead of the biosimilar's 
ASP minus 22.5 percent of the reference product's ASP, in accordance 
with section 1833(t)(14)(A)(iii)(II) of the Act.
3. Payment Policy for Therapeutic Radiopharmaceuticals
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37123), for CY 2019, 
we proposed to continue the payment policy for therapeutic 
radiopharmaceuticals that began in CY 2010. We pay for separately 
payable 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 2019. Therefore, we proposed for CY 2019 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 2017 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 unavailable. 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 2019 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 website).
    Comment: Commenters supported continuation of the policy to pay 
ASP+6 percent for therapeutic radiopharmaceuticals, if available, and 
to base payment on the mean unit cost derived from hospital claims data 
when not available. The commenters also requested that CMS examine ways 
to compensate hospitals for their documented higher overhead and 
handling costs associated with radiopharmaceuticals.
    Response: We appreciate the commenters' support. However, as we 
stated earlier in section V.B.1.c. of this final rule with comment 
period in response to a similar request for additional 
radiopharmaceutical payment and as previously stated in the CY 2018 
OPPS final rule with comment period (82 FR 59352), we continue to 
believe that a single payment is appropriate for radiopharmaceuticals 
with pass-through payment status in CY 2019 and that the payment rate 
of ASP+6 percent is appropriate to provide payment for both the 
radiopharmaceutical's acquisition cost and any associated nuclear 
medicine handling and compounding costs incurred by the hospital 
pharmacy. Payment for the radiopharmaceutical and radiopharmaceutical 
processing services is made through the single ASP-based payment. We 
refer readers to the CMS guidance document available via the internet 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Archives.html for details on submission of ASP 
data for therapeutic radiopharmaceuticals.
    Comment: One commenter asked CMS to clarify the payment rate 
reported for APC 1675, P32 Na phosphate (HCPCS code A9563), which is 
based on geometric mean unit cost. The commenter stated that, in the 
proposed rule, the payment rate for HCPCS code A9563 was reported as 
$256.00, but the mean unit cost for the radiopharmaceutical as reported 
in data files accompanying the proposed rule was $519.21.
    Response: We thank the commenter for bringing this reporting error 
to our attention. We are providing a corrected payment rate for APC 
1675, P32 Na

[[Page 58978]]

phosphate (HCPCS code A9563) in Addenda A and B of this final rule with 
comment period (which is available via the internet on the CMS 
website).
    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 2017 mean unit cost data derived from hospital claims data for 
payment rates for therapeutic radiopharmaceuticals for which ASP data 
are unavailable. The CY 2019 final 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 website).
4. 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. Some of the Technetium-99 (Tc-99m), the radioisotope used 
in the majority of such diagnostic imaging services, is 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. We expect that 
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, beginning in 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 (77 FR 68321).
    We stated in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68321) that our expectation is that this additional payment will 
be needed for the duration of the industry's conversion to alternative 
methods to producing Tc-99m without HEU. We also 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 (77 FR 68316). A 2016 report from the 
National Academies of Sciences, Engineering, and Medicine anticipates 
the conversion of Tc-99m production from non-HEU sources will not be 
complete until the end of 2019.\58\ In addition, one of the 
manufacturers of Tc-99m generators sent a letter to CMS to support 
continuing the payment adjustment at the current level because only 30 
percent of Tc-99m is produced from non-HEU sources. We also met with a 
trade group of nuclear pharmacies and cyclotron operators who support 
an increase in the payment adjustment by the rate of inflation to cover 
more of the cost of Tc-99m from non-HEU sources.
---------------------------------------------------------------------------

    \58\ National Academies of Sciences, Engineering, and Medicine. 
2016. Molybdenum-99 for Medical Imaging. Washington, DC: The 
National Academies Press. Available at: https://doi.org/10.17226/23563.
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    We appreciate the feedback from stakeholders. However, as stated in 
the CY 2019 OPPS/ASC proposed rule, we continue to believe that the 
current adjustment is sufficient for the reasons we have outlined in 
this and prior rulemakings. The information from stakeholders and the 
National Academies of Sciences, Engineering, and Medicine indicates 
that the conversion of the production of Tc-99m from non-HEU sources 
may take more than 1 year after CY 2018. Therefore, in the CY 2019 
OPPS/ASC proposed rule (83 FR 37124), for CY 2019 and subsequent years, 
we proposed to continue to provide an additional $10 payment for 
radioisotopes produced by non-HEU sources. We noted in the proposed 
rule our intention to reassess this payment policy once conversion to 
non-HEU sources is closer to completion or has been completed.
    Comment: Several commenters requested that the additional payment 
for radioisotopes produced by non-HEU sources be increased to either 
$30 or $10 plus the percentage increase in hospital charge data for APC 
1442 for the period of 2014 through 2019, which appears to be a request 
from the commenter to increase the payment by the rate of hospital 
inflation. One of the commenters supported this request by supplying 
provider cost data showing the cost difference between HEU Mo-99 and 
non-HEU Mo-99 in 2017 per curie was around $30.
    One commenter requested that CMS provide an explanation for not 
applying an annual inflation update to the $10 payment for 
radioisotopes produced by non-HEU sources, provide details on plans to 
offset nuclear medicine procedures by the amount of cost paid through 
the non-HEU policy, and make available to the public data regarding the 
claims submitted to date under this policy. The commenter also stated 
that CMS should assess whether the beneficiary copayment policy is 
adversely impacting patient access.
    Response: We appreciate the information we received from 
stakeholders supporting an increase to the payment rate of $10 for 
HCPCS code Q9969. As we stated in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68317), ``The purpose for the additional payment 
is limited to mitigating any adverse impact of existing payment policy 
and is based on the authority set forth at section 1833(t)(2)(E) of the 
Act.'' However, we are open to further study of this issue and are 
interested in exploring whether a higher add-on payment, such as $30, 
may be warranted for a future year. We invite stakeholders to continue 
to submit data and evidence for further consideration as we continue to 
evaluate this policy. As discussed in the CY 2013 OPPS/ASC final rule 
with comment period, we did not finalize a policy to use the usual OPPS 
methodologies to update the non-HEU add-on payment (77 FR 68317). The 
purpose of the additional payment is limited to mitigating any adverse 
impact of transitioning to non-HEU sources and is based on the 
authority set forth at section 1833(t)(2)(E) of the Act. Therefore, we 
will maintain the current payment rate of $10.
    With respect to the comment that we should assess whether the 
beneficiary copayment amount is adversely affecting patient access, we 
will consider the commenter's concern. However, we note that increasing 
the add-on payment from the current level as the commenter suggested 
would necessarily increase the beneficiary copayment liability. 
Finally, the offset for nuclear medicine procedures does not include 
the cost of the non-HEU add-on payment.
    Comment: One commenter requested that CMS provide detailed data on 
hospital costs associated with radiopharmaceuticals reported with HCPCS 
code Q9969.
    Response: It is unclear what specific data this commenter is 
seeking that are not already available through public use

[[Page 58979]]

files. We note that, in 2017, HCPCS code Q9969 was billed 34,439 times 
and is commonly reported with Level II HCPCS codes A9500 (Technetium 
tc-99m sestamibi, diagnostic, per study dose) and A9503 (Technetium tc-
99m medronate, diagnostic, per study dose, up to 30 millicuries). The 
geometric mean costs of this and all Level II HCPCS drug codes, 
including radiopharmaceutical drug codes, can be found in the cost 
statistics file that is released with this final rule with comment 
period.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the policy 
of providing an additional $10 payment for radioisotopes produced by 
non-HEU sources for CY 2019 and subsequent years. We will reassess this 
payment policy once conversion to non-HEU sources is closer to 
completion or has been completed.
5. Payment for Blood Clotting Factors
    For CY 2018, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee (82 FR 59353). That is, for CY 2018, 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 2018 updated furnishing fee was $0.215 per unit.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37124), for CY 2019, 
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's office 
and in the 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 PFS 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 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    Comment: Commenters supported CMS' proposal to continue to pay for 
blood clotting factors at ASP+6 percent plus a blood clotting factor 
furnishing fee in the hospital outpatient department.
    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 website.
6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims 
Data
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37125), for CY 2019, 
we proposed to continue to use the same payment policy as in CY 2018 
for nonpass-through drugs, biologicals, and radiopharmaceuticals with 
HCPCS codes but without OPPS hospital claims data, which describes how 
we determine the payment rate for drugs, biologicals, or 
radiopharmaceuticals without an ASP. For a detailed discussion of the 
payment policy and methodology, we refer readers to the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70442 through 70443). The 
proposed CY 2019 payment status of each of the nonpass-through drugs, 
biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS 
hospital claims data was listed in Addendum B to the proposed rule, 
which is available via the internet on the CMS website.
    We did not receive any comments on our proposal. Therefore, we are 
finalizing our CY 2019 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 2019 if pricing 
information becomes available. The CY 2019 payment status of each of 
the nonpass-through drugs, biologicals, and radiopharmaceuticals with 
HCPCS codes but without OPPS hospital claims data is listed in Addendum 
B to this final rule with comment period, which is available via the 
internet on the CMS website.
7. CY 2019 OPPS Payment Methodology for 340B Purchased Drugs
    In the CY 2018 OPPS/ASC proposed rule (82 FR 33558 through 33724), 
we proposed changes to the Medicare Part B drug payment methodology for 
340B hospitals. We proposed these changes to better, and more 
accurately, reflect the resources and acquisition costs that these 
hospitals incur. We believed that such changes would allow Medicare 
beneficiaries (and the Medicare program) to pay a more appropriate 
amount when hospitals participating in the 340B Program furnish drugs 
to Medicare beneficiaries that are purchased under the 340B Program. 
Subsequently, in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59369 through 59370), we finalized our proposal and adjusted the 
payment rate for separately payable drugs and biologicals (other than 
drugs on pass-through payment status and vaccines) acquired under the 
340B Program from average sales price (ASP)+6 percent to ASP minus 22.5 
percent. Our goal is to make Medicare payment for separately payable 
drugs more aligned with the resources expended by hospitals to acquire 
such drugs, while recognizing the intent of the 340B Program to allow 
covered entities, including eligible hospitals, to stretch scarce 
resources in ways that enable hospitals to continue providing access to 
care for Medicare beneficiaries and other patients. Critical access 
hospitals are not included in this 340B policy change because they are 
paid under section 1834(g) of the Act. We also excepted rural sole 
community hospitals, children's hospitals, and PPS-exempt cancer 
hospitals from the 340B payment adjustment in CY 2018. In addition, as 
stated in the CY 2018 OPPS/ASC final rule with comment period, this 
policy change does not apply to drugs on pass-through payment status, 
which are required to be paid based on the ASP methodology, or

[[Page 58980]]

vaccines, which are excluded from the 340B Program.
    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37125), 
another topic that has been brought to our attention since we finalized 
the payment adjustment for 340B-acquired drugs in the CY 2018 OPPS/ASC 
final rule with comment period is whether drugs that do not have ASP 
pricing but instead receive WAC or AWP pricing are subject to the 340B 
payment adjustment. We did not receive public comments on this topic in 
response to the CY 2018 OPPS/ASC proposed rule. However, we have since 
heard from stakeholders that there has been some confusion about this 
issue. We clarified in the CY 2019 proposed rule that the 340B payment 
adjustment applies to drugs that are priced using either WAC or AWP, 
and it has been our policy to subject 340B-acquired drugs that use 
these pricing methodologies to the 340B payment adjustment since the 
policy was first adopted. The 340B payment adjustment for WAC-priced 
drugs is WAC minus 22.5 percent and AWP-priced drugs have a payment 
rate of 69.46 percent of AWP when the 340B payment adjustment is 
applied. The 69.46 percent of AWP is calculated by first reducing the 
original 95 percent of AWP price by 6 percent to generate a value that 
is similar to ASP or WAC with no percentage markup. Then we apply the 
22.5 percent reduction to ASP/WAC-similar AWP value to obtain the 69.46 
percent of AWP, which is similar to either ASP minus 22.5 percent or 
WAC minus 22.5 percent. The number of separately payable drugs 
receiving WAC or AWP pricing that are affected by the 340B payment 
adjustment is small--consisting of less than 10 percent of all 
separately payable Medicare Part B drugs in April 2018.
    Furthermore, data limitations previously inhibited our ability to 
identify which drugs were acquired under the 340B Program in the 
Medicare OPPS claims data. This lack of information within the claims 
data has limited researchers' and our ability to precisely analyze 
differences in acquisition cost of 340B and non-340B acquired drugs 
with Medicare claims data. Accordingly, in the CY 2018 OPPS/ASC 
proposed rule (82 FR 33633), we stated our intent to establish a 
modifier, to be effective January 1, 2018, for hospitals to report with 
separately payable drugs that were not acquired under the 340B Program. 
Because a significant portion of hospitals paid under the OPPS 
participate in the 340B Program, we stated our belief that it is 
appropriate to presume that a separately payable drug reported on an 
OPPS claim was purchased under the 340B Program, unless the hospital 
identifies that the drug was not purchased under the 340B Program. We 
stated in the CY 2018 proposed rule that we intended to provide further 
details about this modifier in the CY 2018 OPPS/ASC final rule with 
comment period and/or through subregulatory guidance, including 
guidance related to billing for dually eligible beneficiaries (that is, 
beneficiaries covered under Medicare and Medicaid) for whom covered 
entities do not receive a discount under the 340B Program. As discussed 
in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 
through 59370), to effectuate the payment adjustment for 340B-acquired 
drugs, CMS implemented modifier ``JG'', effective January 1, 2018. 
Hospitals paid under the OPPS, other than a type of hospital excluded 
from the OPPS (such as critical access hospitals or those hospitals 
paid under the Maryland waiver), or excepted from the 340B drug payment 
policy for CY 2018, are required to report modifier ``JG'' on the same 
claim line as the drug HCPCS code to identify a 340B-acquired drug. For 
CY 2018, rural sole community hospitals, children's hospitals and PPS-
exempt cancer hospitals are excepted from the 340B payment adjustment. 
These hospitals are required to report informational modifier ``TB'' 
for 340B-acquired drugs, and continue to be paid ASP+6 percent.
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59353 through 59370) for a full discussion and rationale 
for the CY 2018 policies and use of modifier ``JG''.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37125), for CY 2019, 
we proposed to continue the 340B Program policies that were implemented 
in CY 2018 with the exception of the way we calculate payment for 340B-
acquired biosimilars (that is, we proposed to pay for nonpass-through 
340B-acquired biosimilars at ASP minus 22.5 percent of the biosimilar's 
ASP, rather than of the reference product's ASP). More information on 
our revised policy for the payment of biosimilars acquired through the 
340B Program is available in section V.B.2.c. of this final rule. We 
proposed, in accordance with section 1833(t)(14)(A)(iii)(II) of the 
Act, to pay for separately payable Medicare Part B drugs (assigned 
status indicator ``K''), other than vaccines and drugs on pass-through 
payment status, that meet the definition of ``covered outpatient drug'' 
as defined in section 1927(k) of the Act, that are acquired through the 
340B Program at ASP minus 22.5 percent when billed by a hospital paid 
under the OPPS that is not excepted from the payment adjustment. 
Medicare Part B drugs or biologicals excluded from the 340B payment 
adjustment include vaccines (assigned status indicator ``L'' or ``M'') 
and drugs with OPPS transitional pass-through payment status (assigned 
status indicator ``G''). As discussed in section V.B.2.c. of the 
proposed rule, we proposed to pay nonpass-through biosimilars acquired 
under the 340B Program at the biosimilar's ASP minus 22.5 percent of 
the biosimilar's ASP. We also proposed that Medicare would continue to 
pay for drugs or biologicals that were not purchased with a 340B 
discount at ASP+6 percent.
    As stated earlier, to effectuate the payment adjustment for 340B-
acquired drugs, CMS implemented modifier ``JG'', effective January 1, 
2018. For CY 2019, we proposed that hospitals paid under the OPPS, 
other than a type of hospital excluded from the OPPS, or excepted from 
the 340B drug payment policy for CY 2018, continue to be required to 
report modifier ``JG'' on the same claim line as the drug HCPCS code to 
identify a 340B-acquired drug. We also proposed for CY 2019 that rural 
sole community hospitals, children's hospitals, and PPS-exempt cancer 
hospitals continue to be excepted from the 340B payment adjustment. We 
proposed that these hospitals be required to report informational 
modifier ``TB'' for 340B-acquired drugs, and continue to be paid ASP+6 
percent.
    Comment: One commenter supported the proposal to continue to pay 
for separately payable drugs and biologicals obtained through the 340B 
program at ASP minus 22.5 percent. The commenter believed the payment 
rate of ASP minus 22.5 percent will help CMS address the large amount 
of growth in the 340B Program by increasing oversight and promoting the 
integrity of the program.
    Another commenter, MedPAC, also supported the proposal. MedPAC 
believed a lower payment rate allows beneficiaries to share in the 
savings from the 340B Program, better targets resources to hospitals 
providing the most uncompensated care, and still allows 340B hospitals 
to make a profit off the drugs obtained through the program. MedPAC 
preferred that the payment rate be ASP+6 percent minus a 10 percent 
discount with the savings assigned to a Medicare-funded uncompensated 
care pool, but noted that this policy requires Congressional action.
    Response: We appreciate the commenters' support.

[[Page 58981]]

    Comment: Several commenters opposed the CY 2019 proposal to 
continue to pay for separately payable drugs and biologicals obtained 
through the 340B Program at ASP minus 22.5 percent. Many commenters 
stated that the new payment rate has hurt hospitals financially and has 
hurt efforts by hospitals to provide safety-net care to their patients. 
The commenters were also concerned about the same service costing more 
at non-340B hospitals than at hospitals enrolled in the 340B Program 
because drugs furnished at a non-340B hospital would be paid at ASP+6 
percent while drugs furnished at a 340B hospital would be paid at ASP 
minus 22.5 percent. One commenter whose hospital provides cancer 
treatment stated the reductions in 340B payment mean the hospital 
cannot provide the broader cancer care options available at non-340B 
hospitals. Commenters also stated that reducing payment for drugs 
acquired through the 340B Program does not help reduce high drug costs. 
Many commenters asserted, as they have previously done, that CMS does 
not have the legal authority to implement payment reductions for drugs 
and biologicals obtained through the 340B Program. The commenters 
requested that CMS end its policy of paying for drugs obtained through 
the 340B program at ASP minus 22.5 percent. Instead, the commenters 
suggested that CMS go back to the payment policy that was in place 
before CY 2018 where drugs acquired through the 340B Program were paid 
at ASP+6 percent.
    Response: The commenters stated that the payment rate of ASP minus 
22.5 percent for drugs and biologicals has caused financial harm to 
hospitals and has caused problems for hospitals to provide safety-net 
care to their patients. We noted in the CY 2018 final rule with comment 
period (82 FR 59358 through 59359) that the OPPS payment rate of ASP+6 
percent at that time significantly exceeded the discounts received for 
covered outpatient drugs by hospitals enrolled in the 340B Program, 
which can be as much as 50 percent below ASP (or higher through the 
PVP). As stated throughout that section, ASP minus 22.5 percent 
represents the average minimum discount that 340B enrolled hospitals 
paid under the OPPS receive.
    Regarding the concerns of the commenters that drugs and biologicals 
and services where drugs and biologicals are packaged into the cost of 
the service would cost more at hospitals that do not participate in the 
340B Program as compared to hospitals participating in the 340B 
Program, any differential in these costs is a feature of the 340B 
Program rather than Medicare payment policy. In fact, one of the 
objectives of our payment policy for drugs and biologicals acquired 
through the 340B Program is to lower costs for Medicare beneficiaries, 
and we believe it is appropriate that hospitals participating in the 
340B Program pass the cost savings they receive to their beneficiaries.
    Finally, regarding the commenters' assertion that CMS lacks the 
legal authority to continue requiring payment reductions for drugs and 
biologicals obtained through the 340B Program, we refer these 
commenters to our detailed response regarding our statutory authority 
to require payment reductions for drugs and biologicals obtained 
through the 340B Program in the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59359 through 59364).
    After consideration of the public comments we received, we are 
finalizing our proposals without modification. For CY 2019, we are 
continuing the 340B Program policies that were implemented in CY 2018 
with the exception of the way we are calculating payment for 340B-
acquired biosimilars, which is discussed in section V.B.2.c. of this 
final rule with comment period. We refer readers to the CY 2018 final 
rule with comment period (82 FR 59369 through 59370) for more detail on 
the policies implemented in CY 2018 for drugs acquired through the 340B 
Program.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate pro-rata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2019 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 2019. 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 2018 or beginning in CY 2019. 
The sum of the CY 2019 pass-through spending estimates for these two 
groups of device categories equals the total CY 2019 pass-through 
spending estimate for device categories with pass-through payment 
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 2019 OPPS/ASC proposed rule (83 
FR 37126), 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 through 66888). Therefore, 
as we did beginning in CY 2015, for CY 2019, we

[[Page 58982]]

also proposed to include an estimate of any skin substitutes and 
similar products in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. Our estimate of drug and biological pass-through payment 
for CY 2019 for this group of items is $0, as discussed below, because 
we proposed to pay for most nonpass-through separately payable drugs 
and biologicals under the CY 2019 OPPS at ASP+6 percent (with the 
exception of 340B-acquired separately payable drugs, for which we do 
not yet have sufficient data to estimate a share of total drug 
payments), and because we proposed to pay for CY 2019 pass-through 
payment drugs and biologicals at ASP+6 percent, as we discuss in 
section V.A. of the proposed rule and this final rule with comment 
period.
    Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents without pass-through payment 
status is 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 the proposed rule and this final rule with comment period. 
In the CY 2019 OPPS/ASC proposed rule (83 FR 37126), we proposed that 
all of these policy-packaged drugs and biologicals with pass-through 
payment status would be paid at ASP+6 percent, like other pass-through 
drugs and biologicals, for CY 2019. Therefore, our estimate of pass-
through payment for policy-packaged drugs and biologicals with pass-
through payment status approved prior to CY 2019 was not $0, as 
discussed below. In section V.A.5. of the proposed rule, we discussed 
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 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 spending 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 2019. 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 2018 or beginning in CY 2019. 
The sum of the CY 2019 pass-through spending estimates for these two 
groups of drugs and biologicals equals the total CY 2019 pass-through 
spending estimate for drugs and biologicals with pass-through payment 
status.

B. Estimate of Pass-Through Spending

    In the CY 2019 OPPS/ASC proposed rule (83 FR 37127), we proposed to 
set the applicable pass-through payment percentage limit at 2.0 percent 
of the total projected OPPS payments for CY 2019, consistent with 
section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 
2004 through CY 2018 (82 FR 59371 through 59373).
    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 2019, there are no active 
categories for CY 2019. Because there are no active device categories 
for CY 2019, we proposed an estimate for the first group of devices of 
$0. We did not receive any public comments on the proposal. Therefore, 
we are finalizing the proposed estimate for the first group of devices 
of $0 for CY 2019.
    In estimating our proposed CY 2019 pass-through spending for device 
categories in the second group, we included: Device categories that we 
knew at the time of the development of the proposed rule will be newly 
eligible for pass-through payment in CY 2019; 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, 2019; and contingent projections for new device categories 
established in the second through fourth quarters of CY 2019. In the CY 
2019 OPPS/ASC proposed rule (83 FR 37127), 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 2019 pass-through spending for 
this second group of device categories was $10 million.
    We did not receive any public comments on this proposal. As stated 
earlier in this final rule with comment period, we have decided to 
approve one device to receive pass-through status, the 
remed[emacr][supreg] System Transvenous Neurostimulator. The 
manufacturer of the remed[emacr][supreg] System provided utilization 
data that indicate the spending for the device would be approximately 
$2.5 million. However, it is possible that additional new devices may 
receive pass-through payment status during CY 2019, which would lead to 
the higher pass-through spending for new devices closer to our proposed 
estimate of $10 million. Therefore, we are finalizing the proposed 
estimate for this second group of devices of $10 million for CY 2019.
    To estimate proposed CY 2019 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 2019, we proposed to 
use the most recent Medicare hospital outpatient 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 2019 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

[[Page 58983]]

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 2019, we estimated 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 payment status, we 
proposed to include in the CY 2019 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 2019 proposed spending estimate for this first group of 
drugs and biologicals of approximately $61.5 million.
    We did not receive any public comments on our proposal. Using our 
methodology for this final rule with comment period, we calculated a CY 
2019 spending estimate for this first group of drugs and biologicals of 
approximately $50.9 million.
    To estimate proposed CY 2019 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 2019, 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, 2018, and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2019), 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 2019 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 2019 pass-through payments for this second group of 
drugs, we calculated a proposed spending estimate for this second group 
of drugs and biologicals of approximately $55.2 million.
    We did not receive any public comments on our proposal. Therefore, 
for CY 2019, we are continuing to use the general methodology described 
above. For this final rule with comment period, we calculated a CY 2019 
spending estimate for this second group of drugs and biologicals of 
approximately $39.9 million.
    In summary, in accordance with the methodology described earlier 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 
2019 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2019 is 
approximately $100.8 million (approximately $10 million for device 
categories and approximately $90.8 million for drugs and biologicals) 
which represents 0.14 percent of total projected OPPS payments for CY 
2019 (approximately $74 billion). Therefore, we estimate that pass-
through spending in CY 2019 will not amount to 2.0 percent of total 
projected OPPS CY 2019 program spending.

VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services

    In the CY 2019 OPPS/ASC proposed rule (83 FR 37128), for CY 2019, 
we proposed to continue with our current clinic and emergency 
department (ED) hospital outpatient visits payment policies. For a 
description of the current clinic and ED hospital outpatient visits 
policies, we refer readers to the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70448). We also proposed to continue and did not 
propose any change to our payment policy for critical care services for 
CY 2019. For a description of the current payment policy for critical 
care services, we refer readers to the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70449), and 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 2019 OPPS/ASC 
proposed rule, we sought public comments on any changes to these codes 
that we should consider for future rulemaking cycles. We continue to 
encourage commenters to provide the data and analysis necessary to 
justify any suggested changes.
    We did not receive any public comments on our proposals to continue 
our current clinic and ED hospital outpatient visits payment policies 
and our current critical care services payment policies. Therefore, we 
are adopting these proposals as final without modification.
    In section X.V. of the CY 2019 OPPS/ASC proposed rule (83 FR 37138 
through 37143), for 2019, we proposed a method to control unnecessary 
increases in the volume of covered outpatient department services under 
section 1833(t)(2)(F) of the Act by utilizing a Medicare Physician Fee 
Schedule (PFS)-equivalent payment rate for the hospital outpatient 
clinic visit (HCPCS code G0463) when it is furnished by excepted off-
campus provider-based departments (PBDs). For a full discussion of the 
proposal as well as the comment solicitation on potential methods to 
control for unnecessary increases in the volume of covered outpatient 
department services, we refer readers to section X.B. of this final 
rule with comment period.

VIII. Payment for Partial Hospitalization Services

A. Background

    A partial hospitalization program (PHP) is an intensive outpatient 
program of psychiatric services provided as an alternative to inpatient 
psychiatric care for individuals who have an acute mental illness, 
which includes, but is not limited to, conditions such as depression, 
schizophrenia, and substance use disorders. 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 community mental 
health center (CMHC), as a distinct and organized

[[Page 58984]]

intensive ambulatory treatment service, offering less than 24-hour-
daily care, in a location other than an individual's home or 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 outpatient department (OPD) services to be 
covered under the OPPS. The Medicare regulations that implement this 
provision specify, at 42 CFR 419.21, that payments under the OPPS will 
be made for partial hospitalization services furnished by CMHCs as well 
as Medicare Part B services furnished to hospital outpatients 
designated by the Secretary, which include partial hospitalization 
services (65 FR 18444 through 18445).
    Section 1833(t)(2)(C) of the Act requires the Secretary, in part, 
to establish relative payment weights for covered OPD services (and any 
groups of such services described in section 1833(t)(2)(B) of the Act) 
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, section 1833(t)(2)(B) of the 
Act 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. 
Because a day of care is the unit that defines the structure and 
scheduling of partial hospitalization services, we established a per 
diem payment methodology for the PHP APCs, effective for services 
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the median per diem costs were used to calculate the 
relative payment weights for 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 section 1833(t)(2) of the Act 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.
    We began efforts to strengthen the PHP benefit through extensive 
data analysis, along with policy and payment changes finalized in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 
66676). In that final rule with comment period, 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.
    In CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tier payment approach for partial 
hospitalization services under which we paid one amount for days with 3 
services under PHP APC 0172 (Level 1 Partial Hospitalization) and a 
higher amount for days with 4 or more services under PHP APC 0173 
(Level 2 Partial Hospitalization) (73 FR 68688 through 68693). We also 
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). We also revised the partial 
hospitalization benefit to include several coding updates (73 FR 68695 
through 68697).
    For CY 2010, we retained the two-tier payment approach for partial 
hospitalization 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 the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we established four separate PHP APC per diem payment rates: 
Two for CMHCs (APC 0172 (for Level 1 services) and APC 0173 (for Level 
2 services)) and two for hospital-based PHPs (APC 0175 (for Level 1 
services) and 0176 (for Level 2 services)), based on each provider 
type's own unique data. For CY 2011, we also instituted a 2-year 
transition period for CMHCs to the CMHC APC per diem payment rates 
based solely on CMHC data. Under the transition methodology, CMHC 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 partial hospitalization 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 
Medicare 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.
    In addition, 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 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 (75 FR 71990).
    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 partial hospitalization services provided by CMHCs 
based on data derived solely from CMHCs and the relative payment 
weights for partial hospitalization services provided by hospital-based 
PHPs based exclusively on hospital data.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized our proposal to base the relative payment weights that 
underpin the OPPS APCs, including the four PHP APCs (APCs 0172, 0173, 
0175, and 0176), on geometric mean costs rather than on the median 
costs. We established these 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. For a detailed discussion on this 
policy, we refer readers to the CY 2013 OPPS/ASC

[[Page 58985]]

final rule with comment period (77 FR 68406 through 68412).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), 
we solicited comments on possible future initiatives that may help to 
ensure the long-term stability of PHPs and further improve the accuracy 
of payment for PHP services, but proposed no changes. In the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75050 through 75053), we 
summarized the comments received on those possible future initiatives. 
We also continued to apply our established policies to calculate the 
four PHP APC per diem payment rates based on geometric mean per diem 
costs using the most recent claims data for each provider type. For a 
detailed discussion on this policy, we refer readers to the CY 2014 
OPPS/ASC final rule with comment period (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.
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 
through 70465), we described our extensive analysis of the claims and 
cost data and ratesetting methodology. We found aberrant data from some 
hospital-based PHP providers that were not captured using the existing 
OPPS 3 standard deviation trims for extreme cost-to-charge 
ratios (CCRs) and 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. 
Consequently, we implemented a trim to remove hospital-based PHP 
service days that use a CCR that was greater than 5 to calculate costs 
for at least one of their component services, and a trim on CMHCs with 
a geometric mean cost per day that is above or below 2 (2) 
standard deviations from the mean. We stated in the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70456) that, without using a 
trimming process, the data from these providers would inappropriately 
skew the geometric mean per diem cost for Level 2 CMHC services.
    In addition, in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70459 through 70460), we corrected a cost inversion that 
occurred in the final rule data with respect to hospital-based PHP 
providers. We corrected the cost inversion with an equitable adjustment 
to the actual geometric mean per diem costs by increasing the Level 2 
hospital-based PHP APC geometric mean per diem costs and decreasing the 
Level 1 hospital-based PHP APC geometric mean per diem costs by the 
same factor, to result in a percentage difference equal to the average 
percent difference between the hospital-based Level 1 PHP APC and the 
Level 2 PHP APC for partial hospitalization services from CY 2013 
through CY 2015.
    Finally, we renumbered the PHP APCs, which were previously 0172, 
0173, 0175, and 0176, to 5851, 5852, 5861, and 5862, respectively. For 
a detailed discussion of the PHP ratesetting process, we refer readers 
to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 
through 70467).
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 
through 79691), we continued to apply our established policies to 
calculate the 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. However, we finalized a policy to combine the Level 1 
and Level 2 PHP APCs for CMHCs and to combine the Level 1 and Level 2 
APCs for hospital-based PHPs because we believed this would best 
reflect actual geometric mean per diem costs going forward, provide 
more predictable per diem costs, particularly given the small number of 
CMHCs, and generate more appropriate payments for these services, for 
example by avoiding the cost inversions for hospital-based PHPs 
addressed in the CY 2016 and CY 2017 OPPS/ASC final rules with comment 
period (80 FR 70459 and 81 FR 79682). We implemented an 8-percent 
outlier cap for CMHCs to mitigate potential outlier billing 
vulnerabilities by limiting the impact of inflated CMHC charges on 
outlier payments. We will continue to monitor the trends in outlier 
payments and consider policy adjustments as necessary.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59373 
through 59381), we continued to apply our established policies to 
calculate the 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 continued to designate a portion of the estimated 1.0 
percent hospital outpatient outlier threshold specifically for CMHCs, 
consistent with the percentage of projected payments to CMHCs under the 
OPPS, excluding outlier payments.
    For a comprehensive description of PHP payment policy, including a 
detailed methodology for determining PHP per diem amounts, we refer 
readers to the CY 2016 and CY 2017 OPPS/ASC final rules with comment 
period (80 FR 70453 through 70455 and 81 FR 79678 through 79680).

B. PHP APC Update for CY 2019

1. PHP APC Geometric Mean per Diem Costs
    For CY 2019, in the CY 2019 OPPS/ASC proposed rule (83 FR 37130), 
we proposed to continue to apply our established policies to calculate 
the 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. Specifically, we proposed to continue to use CMHC APC 5853 
(Partial Hospitalization (3 or More Services Per Day)) and hospital-
based PHP APC 5863 (Partial Hospitalization (3 or More Services Per 
Day)). We proposed to continue to calculate the geometric mean per diem 
costs for CY 2019 for APC 5853 for CMHCs using only CY 2017 CMHC claims 
data and the most recent CMHC cost data, and the CY 2019 geometric mean 
per diem costs for APC 5863 for hospital-based PHPs using only CY 2017 
hospital-based PHP claims data and the most recent hospital cost data.
    We summarize the public comments we received related to these PHP 
proposals and methodology and include our responses in the sections 
below focused on CMHC ratesetting and on hospital-based PHP ratesetting 
in this CY 2019 OPPS/ASC final rule with comment period.
2. Development of the PHP APC Geometric Mean per Diem Costs
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37130), for CY 2019 
and subsequent years, we proposed to follow the PHP ratesetting 
methodology described in section VIII.B.2. of the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70462 through 70466) to determine 
the PHP APCs' geometric mean per diem costs and to calculate the 
payment rates for APCs 5853 and 5863, incorporating the modifications 
made in the CY 2017 OPPS/ASC final rule with comment period. As 
discussed in section VIII.B.1. of the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79680 through 79687), the geometric mean per diem 
cost for hospital-based PHP APC 5863 is based upon actual hospital-
based PHP claims and costs for PHP service days providing 3 or more 
services. Similarly, the geometric mean per diem cost for CMHC APC 5853 
is based upon actual CMHC claims and costs for CMHC service days 
providing 3 or more services.

[[Page 58986]]

    The CMHC or hospital-based PHP APC per diem costs are the provider-
type specific costs derived from the most recent claims and cost data. 
The CMHC or hospital-based PHP APC per diem payment rates are the 
national unadjusted payment rates calculated from the CMHC or hospital-
based PHP APC per diem costs, after applying the OPPS budget neutrality 
adjustments described in section II.A.4. of this final rule with 
comment period.
    As previously stated, in the CY 2019 OPPS/ASC proposed rule, we 
proposed to apply our established methodologies in developing the CY 
2019 geometric mean per diem costs and payment rates, including the 
application of a 2 standard deviation trim on costs per day 
for CMHCs and a CCR greater than 5 hospital service day trim for 
hospital-based PHP providers. These two trims were finalized in the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70455 through 
70462) for CY 2016 and subsequent years.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For this CY 2019 final rule with comment period, prior to 
calculating the final geometric mean per diem cost for CMHC APC 5853, 
we prepared the data by first applying trims and data exclusions, and 
assessing CCRs as described in the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70463 through 70465), so that ratesetting is not 
skewed by providers with extreme data. For this CY 2019 OPPS/ASC final 
rule with comment period, we used the same data preparation steps. 
Before any trims or exclusions were applied, there were 45 CMHCs in the 
final PHP claims data file (compared to 44 in the CY 2019 OPPS/ASC 
proposed rule). Under the 2 standard deviation trim policy, 
we excluded any data from a CMHC for ratesetting purposes when the 
CMHC's geometric mean cost per day was more than 2 standard 
deviations from the geometric mean cost per day for all CMHCs. By 
applying this trim for CY 2019 ratesetting, in this final rule with 
comment period, we excluded 4 CMHCs with geometric mean costs per day 
below the trim's lower limit of $49.86 and 2 CMHCs with geometric mean 
costs per day above the trim's upper limit of $293.60. This standard 
deviation trim removed 6 providers from the ratesetting whose overall 
effect on the data would have skewed downward the calculation of the 
final geometric mean per diem costs for CMHCs.
    In accordance with our PHP ratesetting methodology, as stated in 
the proposed rule, we also remove service days with no wage index 
values, because we use the wage index data to remove the effects of 
geographic variation in costs prior to APC geometric mean per diem cost 
calculation (80 FR 70465). For this CY 2019 final rule with comment 
period ratesetting, 1 CMHC was missing wage index data for all of its 
service days and was excluded.
    In addition to our trims and data exclusions, before determining 
the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 
70463). Our longstanding PHP OPPS ratesetting methodology defaults any 
CMHC CCR greater than 1 to the statewide hospital CCR (80 FR 70457). 
For this CY 2019 final rule with comment period ratesetting, we 
identified 3 CMHCs that had CCRs greater than 1. These CMHCs' CCRs were 
1.053, 1.009, and 1.025, and each was defaulted to its appropriate 
statewide hospital CCR for CY 2019 ratesetting purposes.
    In summary, these data preparation steps adjusted the CCR for 3 
CMHCs by defaulting to the appropriate statewide hospital CCR and 
excluded 7 CMHCs, resulting in the inclusion of a total of 38 CMHCs (45 
total--7 excluded) in our CY 2019 final rule with comment period 
ratesetting modeling (compared to a total of 36 CMHCs in our modeling 
in the CY 2019 OPPS/ASC proposed rule). The 2 standard 
deviation trim and the exclusion for missing wage index data removed 
425 CMHC claims out of a total of 14,431 CMHC claims, resulting in 
14,006 CMHC claims used for ratesetting purposes. We believe that 
excluding providers with extremely low or high geometric mean costs per 
day or extremely low or high CCRs protects CMHCs from having that data 
inappropriately skew the calculation of the CMHC APC geometric mean per 
diem cost.
    After applying all of the above trims, exclusions, and adjustments, 
we followed the methodology described in the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70464 through 70465) and modified in 
the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 
through 79688, and 79691) to calculate the final PHP APC geometric mean 
per diem cost.\59\ The final CY 2019 geometric mean per diem cost for 
all CMHCs for providing 3 or more services per day (CMHC PHP APC 5853) 
is $121.62 (compared to the proposed geometric mean per diem cost of 
$119.51).
---------------------------------------------------------------------------

    \59\ Each revenue code on the CMHC claim must have a HCPCS code 
and charge associated with it. We multiply each claim service line's 
charges by the CMHC's overall CCR (or statewide CCR, where the 
overall CCR was greater than 1) to estimate CMHC costs. Only the 
claims service lines containing PHP allowable HCPCS codes and PHP 
allowable revenue codes from the CMHC claims remaining after 
trimming are retained for CMHC 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. CMHC service days must have 3 or more 
services provided to be assigned to CMHC APC 5853. The geometric 
mean per diem cost for CMHC APC 5853 is calculated by taking the nth 
root of the product of n numbers, for days where 3 or more services 
were provided. CMHC service days with costs 3 standard 
deviations from the geometric mean costs within APC 5853 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 by 
taking the nth root of the product of n numbers for days where 3 or 
more services were provided.
---------------------------------------------------------------------------

    Below we summarize the public comments we received on our proposals 
related to continuing to follow our existing CMHC ratesetting 
methodology and the calculation of the CMHC geometric mean per diem 
costs.
    Comment: Two commenters objected to the continuation of separate 
APCs by provider type for CY 2019, stating that CMHCs and hospital-
based PHPs provide the same services and follow the same regulations, 
but CMHCs provide them for less costs. One commenter acknowledged that 
hospitals have higher cost structures, which the commenter asserted was 
due to hospitals' higher overhead allocation, but believed that CMHCs 
are being punished for providing more cost-effective and more intensive 
services.
    Response: We disagree that CMHCs are being punished for providing 
more cost-effective and more intensive services. The difference in 
payment between CMHCs and hospital-based PHPs reflects differences in 
resource use. When Congress required the Secretary to implement a 
hospital outpatient prospective payment system, it required the payment 
system to group covered services with respect to clinical similarity 
and resource use (section 1833(t)(2) of the Act). Because CMHCs' and 
hospital-based PHPs' resource uses are different, these two provider 
types are paid under different APCs, based on their actual resource 
use.
    Because the cost of providing partial hospitalization services 
differs significantly by site of service, we established different PHP 
payment rates for hospital-based PHPs and CMHCs in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71991 through 71994). With 
respect to the continued use of PHP APC geometric mean per diem costs 
for determining payment rates by provider, we refer readers to the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68406 through

[[Page 58987]]

68412) for a discussion of the implementation of this policy. The 
resulting payment rates reflect the geometric mean cost of what 
providers expend to maintain such programs, based on data provided by 
CMHCs and hospital-based PHPs, which we believe is an improvement over 
the two-tiered methodology calculated based on median costs using only 
hospital-based data.
    Comment: Two commenters opposed the continued use of the single-
tiered payment system implemented in CY 2017 OPPS/ASC rulemaking. One 
of these commenters asserted that the single-tiered system was 
implemented due to the cost inversion in hospital-based PHP data and, 
therefore, was unfairly applied to CMHCs. Another commenter did not 
object to the single payment tier, but suggested that CMS monitor the 
data to ensure that the single-tiered APCs do not result in a decrease 
in the number of operational PHPs.
    Response: We thank the commenters for their input. In the CY 2017 
OPPS/ASC final rule with comment period, we cited several reasons for 
implementing the single-tiered payment system (81 FR 79682 through 
79686), including the cost inversion in the hospital-based PHP data 
which the commenter cited. A cost inversion exists when, under a 2-
tiered payment system, the Level 1 geometric mean per diem cost for 
providing exactly 3 services per day exceeds the Level 2 PHP APC 
geometric mean per diem cost for providing 4 or more services per day. 
The commenter is correct that CMHCs were not affected by a cost 
inversion as hospital-based PHPs were. However, in that same CY 2017 
OPPS/ASC final rule with comment period, we noted that another primary 
reason for combining the 2-tiered system into a single tier, by 
provider type, was the decrease in the number of CMHCs (81 FR 79683). 
With a small number of providers, data from large providers with a high 
percentage of all PHP service days and unusually high or low geometric 
mean costs per day would have a more pronounced effect on the PHP APCs 
geometric mean per diem costs, skewing costs up or down. The effect 
would be magnified by continuing to split the geometric mean per diem 
costs further by distinguishing between Level 1 and Level 2 PHP 
services. A single PHP APC for each provider type for providing 3 or 
more PHP services per day reduces these cost fluctuations and provides 
more stability in the PHP APC geometric mean per diem costs.
    We do not believe that the single-tier payment system will lead to 
a reduction in the number of PHPs because total payments to an 
individual CMHC using the single-tier payment system are approximately 
equal to total payments to that same CMHC if the previous 2-tiered 
payment system were used instead. The calculated rates for APCs 5853 
and 5863 continue to be based upon the actual costs for CMHCs and 
hospital-based PHPs, respectively. Therefore, the payment rates for the 
single-tier PHP APCs are an appropriate approximation of provider 
costs, and should not result in reduced access. As we noted in the CY 
2017 OPPS/ASC final rule with comment period (81 FR 79685), the single-
tier PHP APCs are calculated by following the existing methodology for 
ratesetting, except that the geometric mean per diem costs for each 
provider type were calculated for days providing 3 or more partial 
hospitalization services, as opposed to being calculated separately for 
days with exactly 3 services and for days with 4 or more services, as 
was previously done. The combined PHP APCs' geometric mean costs are 
similar to a weighted average of actual provider costs. As such, 
combining the PHP APCs geometric mean per diem costs does not reduce 
total costs or total payments by provider type. We refer readers to the 
CY 2017 OPPS/ASC final rule with comment period for a detailed review 
of the methodology used in determining per diem costs using the single-
tier PHP APCs (81 FR 79686 through 79688).
    The 2017 claims data used for this CY 2019 ratesetting are the 
first year of data using the single-tier payment system. We will 
monitor the data for any unintended consequences on the number of 
operational PHPs associated with using the single-tier payment system. 
We note that the number of PHP providers is generally affected by 
multiple factors, such as business and market conditions, competition, 
estimated profit margins, private insurance coverage changes, Federal 
and State fraud and abuse efforts, and community support for mental 
health treatment.
    Comment: Several commenters questioned CMS' use of the 2 standard deviation trim on CMHC costs/per day, and asked why it 
was different from the OPPS 3 standard deviation trim which 
is applied to hospital-based PHPs. The commenters noted that the trims 
were implemented to help prevent inappropriate fluctuations in the 
data, but were concerned that this trim removed CMHCs from the data, 
and that this trim resulted in the decline in the costs per day.
    Response: The 2 standard deviation trim on CMHC costs/
per day was implemented in the CY 2016 OPPS final rule with comment 
period (80 FR 70455 through 70462) in order to protect CMHCs from 
having extreme costs per day inappropriately skew the CMHC PHP APC 
geometric mean per diem costs.
    As part of the effort to increase the accuracy of the PHP per diem 
costs, for the CY 2016 ratesetting, we completed an extensive analysis 
of the claims and cost data. That analysis identified aberrant data 
from several providers that impacted the calculation of the proposed 
PHP 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) 
(80 FR 70456). The 2 standard deviation trim on CMHC costs 
per day excludes providers with extremely low or extremely high costs 
per day, and protects CMHCs from having those extreme costs 
inappropriately skew the CMHC PHP APC geometric mean per diem costs.
    In addition, in that CY 2016 OPPS final rule with comment, we noted 
that the 2 standard deviation trim aligned the geometric 
mean and median per diem costs for the CMHC Level 2 PHP APC payment 
tier, which indicated that the trim removed the skewing in the data 
caused by the inclusion of aberrant data (80 FR 70456). We continue to 
believe that the 2 standard deviation trim excludes 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. For normally distributed data, 2 standard 
deviations from the mean capture approximately 95 percent of the data. 
Our analyses for the CY 2016 ratesetting also showed that a higher trim 
level, such as a 2.5 standard deviation trim or the 3 standard deviation trim used by the rest of OPPS, did not 
remove the CMHCs with aberrant data from the ratesetting process (80 FR 
70456 and 70457).
    In this CY 2019 OPPS/ASC final rule, the 2 standard 
deviation trim on CMHC costs/day removed 6 CMHCs from ratesetting, 
which affected the final

[[Page 58988]]

per diem costs. It removed both low-cost and high-cost providers that 
fail the trim; its net effect on the CY 2019 ratesetting data was to 
increase CMHC geometric mean per diem costs. For CY 2019, if we did not 
apply the 2 standard deviation trim on CMHC costs/day, the 
final CMHC geometric mean per diem cost would have been $120.77. This 
is less than the geometric mean per diem cost of $121.62 which we are 
finalizing, and which is after applying the 2 standard 
deviation trim.
    With regard to the questions about why the same trims are not used 
for both CMHCs and hospital-based PHPs, we refer readers to the 
discussion in the CY 2016 OPPS/ASC final rule with comment period (80 
FR 70458). As we noted in that CY 2016 OPPS/ASC 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. As noted previously, the OPPS 3 standard deviation trim on per diem costs did not remove the 
aberrant CMHC data. We considered applying the 2 standard 
deviation trim on per diem costs to hospital-based PHP providers, but 
an alternative trim on hospital-based CCRs greater than 5 allowed for 
use of more data from hospital-based providers and still removed 
aberrant data. We continue to believe this trim based on hospital-based 
PHP CCRs is more effective in removing aberrant hospital-based PHP data 
and allows for the use and retention of more data than a 2 
standard deviation trim on hospital-based PHP costs per day.
    Comment: Several commenters objected to the decline in the CMHC per 
diem costs that were proposed, and were concerned about the ability to 
maintain access to services. One commenter noted that CMHCs cannot 
provide all of the services they provide on a daily basis at the 
proposed payment rate. Some commenters also stated that CMHCs incur 
extra costs to meet the CMHC conditions of participation (CoPs), have 
more costly staff, or have experienced an increase in bad debt expense. 
A few commenters noted that the number of CMHCs nationally had declined 
greatly as a result of declines in payment and payment fluctuations. 
One commenter stated that setting CMHCs' payment rates based on a small 
number of CMHCs does not reflect the actual cost of providing these 
services and expressed concern that basing payments at the mean or 
median level would result in half of CMHCs receiving payments less than 
their cost, which would guarantee that more CMHCs would close, further 
limiting access. Commenters requested that CMS reconsider the payment 
rate reduction, which one commenter believed resulted in PHP services 
moving toward extinction in the current mode. Another commenter 
questioned if CMS had a veiled motivation to eliminate CMHCs 
altogether, and wondered if CMHCs were still considered the ``fraud 
benefit.'' Commenters also were concerned that if CMHC access declined, 
beneficiaries would be pushed toward higher-cost outpatient 
departments, resulting in higher out-of-pocket costs for beneficiaries. 
One commenter noted that CMHCs are in keeping with the health care 
trend to service patients in their communities, rather than forcing 
patients to travel to a medical center.
    Response: The OPPS pays for outpatient services, including partial 
hospitalization services, based on the geometric mean per diem costs of 
providing services using provider data from claims and cost reports, in 
accordance with statute. For this CY 2019 OPPS/ASC final rule with 
comment period, the final geometric mean per diem cost for CMHC APC 
5853 is $121.62, which is a slight increase from the proposed geometric 
mean per diem cost, but a 15-percent reduction from the CY 2018 final 
geometric mean per diem cost.
    In response to commenters concerned that CMHCs cannot provide all 
of the services offered on a daily basis at the proposed payment rate, 
we remind commenters that we calculate the PHP APC geometric mean per 
diem costs based on the data provided for each type of provider to 
determine payment for these services. The final PHP APC geometric mean 
per diem costs for CY 2019 reflect actual provider costs of covered 
services. We believe that this system provides appropriate payment for 
covered partial hospitalization services based on actual provider 
costs. We further note that section 1861(ff)(2)(I) of the Act 
explicitly prohibits Medicare from paying for the costs of meals or 
transportation, which some CMHCs incur. Therefore, these costs, 
although incurred by CMHCs, are not covered under the OPPS.
    In response to the commenters who stated that CMHCs incur extra 
costs to meet the CMHC CoPs, most (if not all) of the costs associated 
with adhering to CoPs should be captured in the cost report data used 
in ratesetting and, therefore, are accounted for when computing the 
geometric mean per diem costs. Similar to the requirement for CMHCs to 
comply with CMHC CoPs, hospital-based PHPs must also comply with 
hospital CoPs. All Medicare-participating facilities have CoPs or other 
requirements that must be met, and CMHCs are not specifically being 
singled out for compliance, nor are there ``extra'' costs associated 
with the CMHC CoPs.
    Allowable labor costs for providing direct patient care would also 
be captured in the cost report data used for ratesetting. We refer the 
commenters to the instructions for the CMHC cost reports for more 
information on capturing the costs associated with meeting CoPs and 
with labor costs for direct patient care, which are available online in 
links to Chapters 18 and 45 found at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=scending. The 
covered costs of providing PHP care to beneficiaries at CMHCs are 
captured as part of CMHC ratesetting, and include allowable labor costs 
and the costs of complying with CoPs.
    The reduction to bad debt reimbursement was a result of provisions 
of section 3201 of the Middle Class Tax Extension and Job Creation Act 
of 2012 (Pub. L. 112-96). The reduction to bad debt reimbursement 
impacted all providers eligible to receive bad debt reimbursement, as 
discussed in the CY 2013 End-Stage Renal Disease final rule (77 FR 
67518). Medicare currently reimburses bad debt for eligible providers 
at 65 percent. Therefore, CMHCs are not specifically being singled out 
for a payment reduction as a result of bad debt expenses. Because this 
percentage was enacted by Congress, CMS does not have the authority to 
change the percentage.
    We appreciate the commenter's input regarding the effect any 
reduction in PHP payment rates would have on access to care, but we 
disagree with the commenter's assertion that CMS considers CMHCs to be 
a ``fraud benefit'' or that CMS has any motivation (veiled or 
otherwise) to eliminate CMHCs. Both are simply not true; we appreciate 
the work CMHCs do to care for a particularly vulnerable population with 
serious mental illnesses. We are very concerned about the decline in 
the number of CMHCs, but, as noted in a previous comment response in 
this section, we believe that a number of factors affect PHP provider 
closures. We will continue working to strengthen

[[Page 58989]]

access to both CMHCs and hospital-based PHPs for eligible Medicare 
beneficiaries. As part of that process, we regularly review our 
methodology to ensure that it is appropriately capturing the cost of 
care reported by providers. For example, for the CY 2016 ratesetting, 
we extensively reviewed the methodology used for PHP ratesetting. In 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 
through 70466), we also included a detailed description of the 
ratesetting process to help all PHP providers record costs correctly so 
that we can more fully capture PHP costs in ratesetting.
    We want to ensure that CMHCs remain a viable option as providers of 
mental health care in the beneficiary's own community. We agree that 
beneficiaries receiving care at a CMHC instead of a hospital-based PHP 
would have a lower out-of-pocket cost, which increases the 
attractiveness of CMHCs to those needing their services. We will 
continue to explore policy options for strengthening the PHP benefit 
and increasing access to the valuable services provided by CMHCs as 
well as by hospital-based PHPs.
    Comment: One commenter suggested that CMS consider paying CMHCs 
using a quality-based payment system, and that CMS use value-based 
purchasing. The commenter recommended that, instead of basing payment 
rates on estimated actual median costs of claims, CMS look at the value 
provided by the quality of provided services using different methods 
such as records reviews, denials due to lack of medical necessity or 
inadequate documentation, site visits, interviews with patients, and, 
most importantly, patient outcomes. The commenter believed that 
rewarding providers for higher-quality care, as measured by selected 
standards instead of rewarding providers by increasing costs, is a 
better way to improve the quality of any service.
    Response: Currently, there is no statutory language explicitly 
authorizing a value-based purchasing program for PHPs. We responded to 
a similar public comment in the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70462) and refer readers to a summary of that 
comment and our response. To reiterate, sections 1833(t)(2) and 
1833(t)(9) of the Act set forth the requirements for establishing and 
adjusting OPPS payment rates, which include PHP payment 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 Readmission; (2) Group 
Therapy; and (3) No Individual Therapy. We also refer readers to the CY 
2015 OPPS/ASC final rule with comment period (79 FR 66957 through 
66958) 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, and there are no quality measures 
applied to CMHCs.
    Comment: One commenter noted that, in the past, CMS stated that 
CMHCs provide fewer services and have less costly staff than hospitals.
    Response: We believe that the commenter may be referring to the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71991), wherein CMS 
stated we believe that CMHCs have a lower cost structure than their 
hospital-based PHP counterparts because the data showed that CMHCs 
provide fewer PHP services in a day and use less costly staff than 
hospital-based PHPs. Those statements were based on CY 2009 claims and 
cost data, which differ from more recent claims and cost data. Each 
year, we calculate geometric mean per diem costs based on updated 
claims and cost reports. For example, our CY 2019 geometric mean per 
diem costs and the APC payment rates are based upon CY 2017 claims and 
cost data. We refer the commenter to the utilization data in section 
VIII.B.4. of this CY 2019 final rule with comment period for details on 
current CMHC utilization. In addition, we continually seek to increase 
the accuracy of our payment rates. As noted previously, as part of the 
effort to increase the accuracy of the PHP APCs' per diem costs, for 
the CY 2016 ratesetting, we completed an extensive analysis of the 
claims and cost data. That analysis identified aberrant data from 
several providers that impacted the calculation of the proposed PHP 
APCs' geometric mean per diem costs.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For the CY 2019 proposed rule and for this CY 2019 final rule with 
comment period, we followed a data preparation process for hospital-
based PHP providers that is similar to that used for CMHCs by applying 
trims and data exclusions as described in the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70463 through 70465) so that our 
ratesetting is not skewed by providers with extreme data. Before any 
trimming or exclusions were applied, there were 426 hospital-based PHP 
providers in the final CY 2017 PHP claims data used in this CY 2019 
OPPS/ASC final rule with comment period (compared to 394 hospital-based 
PHPs in the CY 2019 OPPS/ASC proposed rule).
    For hospital-based PHP providers, we applied a trim on hospital 
service days when the CCR was greater than 5 at the cost center level. 
This trim removed hospital-based PHP service days that use a CCR 
greater than 5 to calculate costs for at least one of their component 
services. Unlike the 2 standard deviation trim, which 
excluded CMHC providers that failed the trim, the CCR greater than 5 
trim excluded any hospital-based PHP service day where any of the 
services provided on that day were associated with a CCR greater than 5 
(in other words, the CCR greater than 5 trim is a (service) day-level 
trim in contrast to the CMHC 2 standard deviation trim, 
which is a provider-level trim). Applying this CCR greater than 5 trim 
removed from our final rule ratesetting affected service days from 3 
hospital-based PHP providers with CCRs greater than 5. However, 100 
percent of the service days for 1 of these affected hospital-based PHP 
providers had at least 1 service associated with a CCR of 9.5744, so 
the trim removed that 1 provider entirely from our final rule 
ratesetting. The two other providers remained in the ratesetting data, 
but with affected service days trimmed out. In addition, 48 hospital-
based PHPs were removed for having no PHP costs and, therefore, no days 
with PHP payment. No hospital-based PHPs were removed for missing wage 
index data or by the OPPS 3 standard deviation trim on 
costs per day.
    Therefore, we trimmed out 49 hospital-based PHP providers [(1 with 
all service days having a CCR greater than 5) + (48 with zero daily 
costs and no PHP payment)], resulting in 377 (426 total-49 excluded) 
hospital-based PHP providers in the data used for final rule with 
comment period ratesetting (compared to 374 hospital-based PHPs in the 
CY 2019 OPPS/ASC proposed rule). No hospital-based PHP providers were 
defaulted to using their overall hospital ancillary CCRs due to outlier 
cost center CCR values. After completing these data preparation steps, 
we calculated the final CY 2019 geometric mean per diem cost for 
hospital-based PHP APC 5863 for hospital-based PHP services by 
following the methodology described in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70464 through 70465) and modified in the CY 
2017

[[Page 58990]]

OPPS/ASC final rule with comment period (81 FR 79687 and 79691) to 
calculate the geometric mean per diem cost.\60\ The final CY 2019 
geometric mean per diem cost for hospital-based PHP providers that 
provide 3 or more services per service day (hospital-based PHP APC 
5863) is $222.76 (compared to $220.52 in the CY 2019 OPPS/ASC proposed 
rule).
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    \60\ Each revenue code on the hospital-based PHP claim must have 
a HCPCS code and charge associated with it. We multiply each claim 
service line's charges by the hospital's department-level CCR; that 
CCR is determined by using the OPPS Revenue-code-to-cost-center 
crosswalk. Only the claims service lines containing PHP-allowable 
HCPCS codes and PHP-allowable revenue codes from the hospital-based 
PHP claims remaining after trimming are retained for hospital-based 
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. Hospital-based 
PHP service days must have 3 or more services provided to be 
assigned to hospital-based PHP APC 5863. The geometric mean per diem 
cost for hospital-based PHP APC 5863 is calculated by taking the nth 
root of the product of n numbers, for days where 3 or more services 
were provided. Hospital-based PHP service days with costs 3 standard deviations from the geometric mean costs within APC 
5863 are deleted and removed from modeling. The remaining hospital-
based PHP service days are used to calculate the geometric mean per 
diem cost for hospital-based PHP APC 5863.
---------------------------------------------------------------------------

    Comment: One commenter appreciated the CY 2019 per diem increase 
for hospital-based PHPs. The commenter stated that the minimum rate 
should be set at the geometric mean rate, rather than at the 2-percent 
reduction rate of $216.55, as providers are hit with a second 2-percent 
reduction again at actual claim payout. The commenter stated this 
reduced the hospital-based PHP rate by 4 percent total, and places more 
than half of the providers in a payment setting below their daily costs 
of providing the services.
    Response: The final hospital-based PHP APC geometric mean per diem 
cost is $222.76, which is a slight increase from the proposed $220.52 
geometric mean per diem cost in the CY 2019 OPPS/ASC proposed rule (83 
FR 37131), and a 7-percent increase from the $208.09 CY 2018 final 
geometric mean per diem cost (82 FR 59378). In the OPPS ratesetting, 
the geometric mean per diem costs are the basis for the final per diem 
rates. However, those costs undergo additional ratesetting steps before 
they are developed into payment rates, a process which is described in 
Part 2 of the Claims Accounting narrative under supporting 
documentation for this CY 2019 OPPS/ASC final rule with comment period 
available on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. We believe 
that the commenter may have misunderstood that these steps are not 
simply a ``standard'' 2-percent reduction applied to those costs when 
we determine PHP APC per diem payment rates. Rather, those costs follow 
a ratesetting process, which can result in the final per diem payment 
rates being more or less than the final per diem costs due to budget 
neutrality and other adjustments. It is also possible that the 
commenter has not misunderstood the ratesetting process, but is 
referring to the 2 percentage point reduction in the provider's annual 
ratesetting update factor due to failure to comply with Hospital 
Outpatient Quality Reporting Program requirements, which is described 
in more detail in section XIII.E. of this final rule with comment 
period.
    For the second 2-percent reduction that the commenter referenced, 
which the commenter noted occurs at actual claim payout, we believe 
that the commenter is referencing the required sequestration 2-percent 
reduction to the Medicare portion of claim payments. That reduction is 
a Congressionally-mandated decrease, established by the Budget Control 
Act of 2011 (Pub. L. 112-25) and amended by the American Taxpayer 
Relief Act of 2012 (Pub. L. 112-240). Sequestration is discussed in a 
Medicare Fee-for-Service Provider eNews article available at: https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/Downloads/2013-03-08-standalone.pdf. The reduction in payments due to 
sequestration is outside the scope of the CY 2019 OPPS/ASC proposed 
rule and this final rule with comment period.
    Regarding the usage of the geometric mean per diem cost for 
determining payment rates, as we noted in a previous comment response 
in this section, we refer readers to the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68406 through 68412) for a discussion of the 
implementation of this policy. We believe that this system provides 
appropriate payment for partial hospitalization services based on 
actual provider costs. The final PHP APC geometric mean per diem costs 
for CY 2019 reflect these actual provider costs, using our existing 
methodology.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, to continue to follow 
our existing ratesetting methodologies for both CMHCs and for hospital-
based PHPs in determining geometric mean per diem costs. Specifically, 
we are applying our established methodologies in developing the CY 2019 
geometric mean per diem costs and payment rates, including the 
application of a 2 standard deviation trim on costs per day 
for CMHCs and a CCR greater than 5 hospital service day trim for 
hospital-based PHP providers. We also are finalizing our proposals, 
without modification, to continue to use CMHC APC 5853 (Partial 
Hospitalization (3 or More Services Per Day)) and hospital-based PHP 
APC 5863 (Partial Hospitalization (3 or More Services Per Day)) and 
base the CMHC geometric mean per diem costs on the most recent 
available CMHC claims and CMHC cost data, and the hospital-based PHP 
geometric mean per diem costs on the most recent available hospital 
claims and cost data.
    The final CY 2019 PHP APC geometric mean per diem costs for CMHC 
PHP APC 5853 are $121.62 and for hospital-based PHP APC 5863 are 
$222.76, as stated above and shown in Table 43. The final PHP APCs 
payment rates, which are derived from these PHP APCs geometric mean per 
diem costs, are included in Addendum A to this final rule with comment 
period (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).\61\
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    \61\ As discussed in section II.A. of this CY 2019 OPPS/ASC 
final rule with comment period, OPPS APC geometric mean per diem 
costs (including PHP APC geometric mean per diem costs) are divided 
by the geometric mean per diem costs for APC 5012 (Clinic Visits 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. 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. The OPPS Claims Accounting narrative is available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

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3. Changes to the Revenue-Code-to-Cost Center Crosswalk
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79691), we received public comments identifying an issue that may have 
contributed to a decreased PHP median cost for hospital-based PHPs. The 
commenters stated that the lack of a required standardized PHP cost 
center on the Medicare cost report may be creating some cost-finding 
nuances in the cost report itself--for example, inaccurate step-down of 
overhead cost allocations to the PHP program, diluted CCRs by the 
comingling of PHP and ``Intensive Outpatient Program (IOP)'' on the 
cost report, among others. We agreed with the commenters that, if PHP 
costs are combined with other less intensive outpatient mental health 
treatment costs in the same cost center, the CCR values could be 
diluted, leading to lower geometric mean per diem costs being 
calculated. We stated in response that we would consider adding a cost 
center to the hospital cost report for PHP costs only.
    On November 17, 2017, in Transmittal No. 12, we added a new cost 
center, ``Partial Hospitalization Program,'' on Line 93.99 of Worksheet 
A (Line 93.99 is also displayed on Worksheets B, Parts I and II, B-1; 
and C, Parts I and II) for hospital-based PHPs, for cost reporting 
periods ending on or after August 31, 2017 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R12P240.pdf). On January 30, 2018, in Transmittal No. 13, we changed 
the implementation date from cost reporting periods ending on or after 
August 31, 2017, to cost reporting periods ending on or after September 
30, 2017 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R12P240.pdf). The instructions for this new 
PHP cost center (Line 93.99) indicate that effective for cost reporting 
periods ending on or after September 30, 2017, the provider is to enter 
the costs of providing hospital-based partial hospitalization program 
(PHP) services as defined in section 1861(ff) of the Act. Therefore, 
this cost center is to include all costs associated with providing PHP 
services, as defined in the statute (for example, occupational therapy, 
individual and group therapy, among others). It should not include 
costs for non-PHP outpatient mental health services, such as costs from 
what providers refer to as ``Intensive Outpatient Programs.''
    During current hospital-based PHP ratesetting, costs are estimated 
by multiplying revenue code charges on the claim by the appropriate 
cost center-level CCR from the hospital cost report (80 FR 70465). Each 
PHP revenue code is associated with particular cost centers on the cost 
report (80 FR 70464). The appropriate cost center-level CCR is 
identified by using the OPPS Revenue-Code-to-Cost-Center crosswalk; the 
current crosswalk is discussed in the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59228) and is available on the CMS website at: 
https://www.cms.gov/apps/ama/license.asp?file=/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CMS-1678-FC-2018-OPPS-FR-Revenue-Code-to-Cost-Center-Crosswalk.zip. The Revenue-Code-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. As discussed in the CY 2002 OPPS interim final rule (66 FR 
59885), hospital-based PHP CCRs are assessed 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. In 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70464), we 
stated that, if the primary cost center has no CCR or if it fails the 
3 standard deviation trim, the ratesetting system will look 
for a CCR in the secondary cost center. If the secondary cost center 
has no CCR or if it fails the 3 standard deviation trim, 
the system will move to the tertiary cost center to look for a CCR. If 
the tertiary cost center has no CCR or if it fails the 3 
standard deviation trim, the ratesetting system will default to using 
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. While the hierarchy requires a 
primary cost center to be associated with a given revenue code, it is 
optional for there to be secondary or tertiary cost centers.
    With the new PHP cost center, the crosswalk must be updated for 
hospital-based PHP cost estimation to correctly match hospital-based 
PHP revenue code charges with the PHP cost center CCR for future 
ratesetting. However, because the PHP-allowable revenue codes are also 
used for reporting non-PHP mental health services, we could not 
designate the PHP cost center as the primary cost center in the 
existing OPPS Revenue-Code-to-Cost-Center crosswalk. Therefore, in the 
CY 2019 OPPS/ASC proposed rule (83 FR 37132 through 37133), we proposed 
to create a separate PHP-only Revenue-Code-to-Cost-Center crosswalk for 
use in CY 2019 and subsequent years, which would provide a more 
accurate and operationally simpler method of matching hospital-based 
PHP charges to the correct hospital-based PHP cost center CCR without 
affecting non-PHP ratesetting. We note that, because CMHCs have their 
own cost reports, we use each CMHC's overall CCR in estimating costs 
for PHP ratesetting (80 FR 70463 through 70464). As such, CMHCs do not 
have a crosswalk and, therefore, the proposal to create a PHP-only 
crosswalk does not apply to CMHCs.
    Therefore, we proposed that, for CY 2019 and subsequent years, 
hospital-

[[Page 58992]]

based PHPs would follow a new Revenue-Code-to-Cost-Center crosswalk 
that only applies to hospital-based PHPs. We proposed that this new 
PHP-only Revenue-Code-to-Cost-Center crosswalk would be comprised of 
the existing PHP-allowable revenue codes and would map each of those 
PHP-allowable revenue codes to the new PHP cost center Line 93.99 as 
the primary cost center source for the CCR. We also proposed to 
designate as the new secondary cost center the cost center that is 
currently listed as the existing primary cost center, and to designate 
as the new tertiary cost center the cost center that is listed as the 
existing secondary cost center.
    In addition, we proposed one exception to this policy for the 
mapping for revenue code 0904, which is the only PHP-allowable revenue 
code in the existing crosswalk with a tertiary cost center source for 
the CCR. We proposed that for revenue code 0904, the secondary cost 
center for CY 2019 and subsequent years would be the existing secondary 
cost center 3550 (``Psychiatric/Psychological Services''). Similarly, 
we proposed that for revenue code 0904, the tertiary cost center for CY 
2019 and subsequent years would be existing tertiary cost center 9000 
(``Clinic''). We considered expanding the Revenue-Code-to-Cost-Center 
crosswalk hierarchy to add a 4th or quaternary level to the hierarchy, 
before the system would default to the overall hospital ancillary CCR. 
However, we evaluated the usage of the current hierarchy for revenue 
code 0904 for the CY 2017, CY 2018, and CY 2019 PHP ratesetting 
modelling, and found that expanding the hierarchy would not be 
necessary. Our analysis showed that the existing primary cost center 
3580 (``Recreational Therapy'') for revenue code 0904 had not been used 
during any of the past 3 years.
    We did not receive any public comments on our proposals related to 
the PHP-only Revenue-Code-to-Cost-Center crosswalk and, therefore, are 
finalizing our proposals, as proposed, for CY 2019 and subsequent 
years.
    Our previous and newly finalized PHP-only Revenue-Code-to-Cost-
Center Crosswalks are shown in Table 44 below.
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4. PHP Service Utilization Updates
    We stated in the CY 2019 OPPS/ASC proposed rule (83 FR 37133 
through 37134) that, while we were not proposing any changes to the 
policy on PHP service utilization, we would continue to monitor the 
provision of days with only 3 services. In the CY 2016 OPPS/ASC final 
rule with comment period (81 FR 79684 through 79685), we expressed 
concern over the low frequency of individual therapy provided to 
beneficiaries. The CY 2017 claims data used for this CY 2019 final rule 
with comment period revealed some changes in the provision of 
individual therapy compared to CY 2016 and CY 2015 claims data as shown 
in the Table 45 below.
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[[Page 58995]]


    As shown in Table 45, both CMHCs and hospital-based PHPs have 
decreased the provision of individual therapy, based on the CY 2017 
claims used for this final rule with comment period.
    In the CY 2018 OPPS/ASC proposed rule and final rule with comment 
period (82 FR 33640 and 82 FR 59378), we stated that we are aware that 
our single-tier payment policy may influence a change in service 
provision because providers are able to obtain payment that is heavily 
weighted to the cost of providing 4 or more services when they provide 
only 3 services. We indicated that we are interested in ensuring that 
providers furnish an appropriate number of services to beneficiaries 
enrolled in PHPs. Therefore, with the CY 2017 implementation of APC 
5853 and APC 5863 for providing 3 or more PHP services per day, we are 
continuing to monitor utilization of days with only 3 PHP services.
    For this CY 2019 OPPS/ASC final rule with comment period, we used 
the final update of the CY 2017 claims data. Table 46 below shows the 
utilization findings based on the most recent claims data.
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BILLING CODE 4120-01-C

    As shown in Table 46, the CY 2017 claims data used for this final 
rule with comment period showed that PHPs maintained an appropriately 
low utilization of 3 service days compared to CY 2016 and CY 2015. 
Compared to CY 2016, hospital-based PHPs have provided fewer days with 
3 services only, fewer days with 4 services only, and more days with 5 
or more services. Compared to CY 2016, CMHCs have slightly increased 
their provision of 3 service days, increased their provision of days 
with 4 services, but have decreased their provision of days with 5 or 
more services.
    As we noted in the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79685), we will continue to monitor the provision of days with 
only 3 services, particularly now that the single-tier PHP APCs 5853 
and 5863 are in place for providing 3 or more services per day to CMHCs 
and hospital-based PHPs, respectively. The CY 2017 data are the first 
year of claims data to reflect the change to the single-tier PHP APCs, 
and the declining level of utilization of days with 3 services only by 
hospital-based PHPs indicates that these providers did not reduce care 
for this patient population. It is too early to determine if the 
increase in days providing 3 services only by CMHCs is a trend. We will 
continue to monitor the data for both hospital-based PHPs and CMHCs.
    It is important to reiterate our expectation that days with only 3 
services are meant to be an exception and not the typical PHP day. In 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68694), we 
clearly stated that we consider the acceptable minimum units of PHP 
services required in a PHP day to be 3 and explained that it was never 
our intention that 3 units of service represent the number of services 
to be provided in a typical PHP day. PHP is furnished in lieu of 
inpatient psychiatric hospitalization and is intended to be more 
intensive than a half-day program. We further indicated that a typical 
PHP day should generally consist of 5 to 6 units of service (73 FR 
68689). We explained that days with only 3 units of services may be 
appropriate to bill in certain limited circumstances, such as when a 
patient might need to leave early for a medical appointment and, 
therefore, would be unable to complete a full day of PHP treatment. At 
that time, we noted that if a PHP were to only provide days with 3 
services, it would be difficult for patients to meet the eligibility 
requirement in 42 CFR 410.43(c)(1), that patients must require a 
minimum of 20 hours per week of therapeutic services as evidenced in 
their plan of care (73 FR 68689).
    We made no proposals in this section of the CY 2019 OPPS/ASC 
proposed rule, but received several public comments related to 
utilization.
    Comment: Some commenters were concerned that the single-tiered 
payment system implemented in CY 2017 could have unintended 
consequences, including reducing the number of services provided per 
day, and urged CMS to monitor the data.

[[Page 58996]]

Another commenter thanked CMS for not instituting a code edit for 20 
hours per week, and welcomed a further discussion of clinical intensity 
and situations affecting weekly attendance. This commenter offered to 
convene a meeting of experts from the field to discuss, develop, and 
recommend ideas on how best to ensure the appropriate clinical 
intensity in PHPs. Another commenter wrote that the utilization data in 
Table 28 of the CY 2019 OPPS/ASC proposed rule demonstrated the 
commitment of both CMHCs and hospital-based PHPs to fully comply with 
and exceed the expectations of the 20-hour rule.
    Response: We appreciate these comments and will take them into 
consideration.

C. Outlier Policy for CMHCs

    In the CY 2019 OPPS/ASC proposed rule (83 FR 37134 through 37136), 
for CY 2019, we proposed to continue to calculate the CMHC outlier 
percentage, cutoff point and percentage payment amount, outlier 
reconciliation, outlier payment cap, and fixed-dollar threshold 
according to previously established policies. These topics are 
discussed in more detail below. We refer readers to section II.G. of 
this final rule with comment period for our general policies for 
hospital outpatient outlier payments.
1. Background
    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), we noted a significant difference in the 
amount of outlier payments made to hospitals and CMHCs for PHP 
services. Given the difference in PHP charges between hospitals and 
CMHCs, we did not believe it was appropriate to make outlier payments 
to CMHCs using the outlier percentage target amount and threshold 
established for hospitals. Therefore, beginning in CY 2004, we created 
a separate outlier policy specific to the estimated costs and OPPS 
payments provided to CMHCs. We designated a portion of the estimated 
OPPS outlier threshold 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. This 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 (82 FR 59381). In 
contrast, in CY 2003, more than $30 million was paid to CMHCs in 
outlier payments (82 FR 59381).
2. CMHC Outlier Percentage
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), we described the current outlier policy for hospital 
outpatient payments and CMHCs. We note that we also discussed our 
outlier policy for CMHCs in more detail in section VIII. C. of that 
same final rule (82 FR 59381). We set our projected target for all OPPS 
aggregate outlier payments at 1.0 percent of the estimated aggregate 
total payments under the OPPS (82 FR 59267). We estimate CMHC per diem 
payments and outlier payments by using the most recent available 
utilization and charges from CMHC claims, updated CCRs, and the updated 
payment rate for APC 5853. For increased transparency, we are providing 
a more detailed explanation of the existing calculation process for 
determining the CMHC outlier percentages below. As previously stated, 
we proposed to continue to calculate the CMHC outlier percentage 
according to previously established policies, and we did not propose 
any changes to our current methodology for calculating the CMHC outlier 
percentage for CY 2019. To calculate the CMHC outlier percentage, we 
followed three steps:
     Step 1: We multiplied the OPPS outlier threshold, which is 
1.0 percent, by the total estimated OPPS Medicare payments (before 
outliers) for the prospective year to calculate the estimated total 
OPPS outlier payments:
    (0.01 x Estimated Total OPPS Payments) = Estimated Total OPPS 
Outlier Payments.
     Step 2: We estimated CMHC outlier payments by taking each 
provider's estimated costs (based on their allowable charges multiplied 
by the provider's CCR) minus each provider's estimated CMHC outlier 
multiplier threshold (we refer readers to section VIII.C.3. of this 
final rule with comment period). That threshold was determined by 
multiplying the provider's estimated paid days by 3.4 times the CMHC 
PHP APC payment rate. If the provider's costs exceeded the threshold, 
we multiplied that excess by 50 percent, as described in section 
VIII.C.3. of this final rule with comment period, to determine the 
estimated outlier payments for that provider. CMHC outlier payments are 
capped at 8 percent of the provider's estimated total per diem payments 
(including the beneficiary's copayment), as described in section 
VIII.C.5. of this final rule with comment period, so any provider's 
costs that exceed the CMHC outlier cap will have its payments adjusted 
downward. After accounting for the CMHC outlier cap, we summed all of 
the estimated outlier payments to determine the estimated total CMHC 
outlier payments.
    (Each Provider's Estimated Costs--Each Provider's Estimated 
Multiplier Threshold) = A. If A is greater than 0, then (A x 0.50) = 
Estimated CMHC Outlier Payment (before cap) = B. If B is greater than 
(0.08 x Provider's Total Estimated Per Diem Payments), then cap-
adjusted B = (0.08 x Provider's Total Estimated Per Diem Payments); 
otherwise, B = B. Sum (B or cap-adjusted B) for Each Provider = Total 
CMHC Outlier Payments.
     Step 3: We determined the percentage of all OPPS outlier 
payments that CMHCs represent by dividing the estimated CMHC outlier 
payments from Step 2 by the total OPPS outlier payments from Step 1:
    (Estimated CMHC Outlier Payments/Total OPPS Outlier Payments).
    In CY 2018, we designated approximately 0.03 percent of that 
estimated 1.0 percent hospital outpatient outlier threshold for CMHCs 
(82 FR 59381), based on this methodology. In the proposed rule, we 
proposed to continue to use the same methodology for CY 2019. 
Therefore, based on our CY 2019 payment estimates, CMHCs are projected 
to receive 0.02 percent of total hospital outpatient payments in CY 
2019, excluding outlier payments. We proposed to designate 
approximately less than 0.01 percent of the estimated 1.0 percent 
hospital outpatient outlier threshold for CMHCs. This percentage is 
based upon the formula given in Step 3 above.
    We did not receive any public comments on our proposal and, 
therefore, are finalizing our proposal, without modification, to 
continue with this existing policy on outliers, and are implementing 
this policy as proposed for CY 2019.
3. Cutoff Point and Percentage Payment Amount
    As described in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59381), our policy has been to pay CMHCs for outliers if the 
estimated cost of the day exceeds a cutoff point. In CY 2006, we set 
the cutoff point for outlier payments at 3.4 times the highest CMHC PHP 
APC payment rate implemented for that calendar year (70 FR 68551). This 
cutoff point is sometimes called a multiplier threshold (70 FR 68550). 
For CY 2018, the highest CMHC PHP APC payment rate is the payment rate 
for CMHC PHP APC 5853. In addition, in 2002, the final OPPS outlier 
payment percentage for costs above the multiplier threshold was set at 
50 percent (66 FR

[[Page 58997]]

59889). In CY 2018, we continued to apply the same 50 percent outlier 
payment percentage that applies to hospitals to CMHCs and continued to 
use the existing cutoff point (82 FR 59381). Therefore, for CY 2018, we 
continued to pay for partial hospitalization services that exceeded 3.4 
times the CMHC PHP APC payment rate at 50 percent of the amount of CMHC 
PHP APC geometric mean per diem costs over the cutoff point. For 
example, for CY 2018, if a CMHC's cost for partial hospitalization 
services paid under CMHC PHP APC 5853 exceeds 3.4 times the CY 2018 
payment rate for CMHC PHP APC 5853, the outlier payment would be 
calculated as 50 percent of the amount by which the cost exceeds 3.4 
times the CY 2018 payment rate for CMHC PHP APC 5853 [0.50 x (CMHC 
Cost-(3.4 x APC 5853 rate))].
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37135), for CY 2019, 
in accordance with our existing policy, we proposed to continue to pay 
for partial hospitalization services that exceed 3.4 times the proposed 
CMHC PHP APC payment rate at 50 percent of the CMHC PHP APC geometric 
mean per diem costs over the cutoff point. That is, for CY 2019, if a 
CMHC's cost for partial hospitalization services paid under CMHC PHP 
APC 5853 exceeds 3.4 times the payment rate for CMHC APC 5853, the 
outlier payment will be calculated as [0.50 x (CMHC Cost-(3.4 x APC 
5853 rate))].
    We did not receive any public comments on our proposals. We are 
finalizing our proposals, without modification, to continue to 
calculate the CMHC outlier percentage according to previously 
established policies, and are implementing this policy as proposed for 
CY 2019.
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 
through 68599), we established an outlier reconciliation policy to 
address charging aberrations related to OPPS outlier payments. We 
addressed vulnerabilities in the OPPS outlier payment system that lead 
to differences between billed charges and charges included in the 
overall CCR, which are used to estimate cost and would apply to all 
hospitals and CMHCs paid under the OPPS. The main vulnerability in the 
OPPS outlier payment system is the time lag between the update of the 
CCRs that are based on the latest settled cost report and the current 
charges that creates the potential for hospitals and CMHCs to set their 
own charges to exploit the delay in calculating new CCRs. CMS initiated 
steps to ensure that outlier payments appropriately account for the 
financial risk when providing an extraordinarily costly and complex 
service, but are only being made for services that legitimately qualify 
for the additional payment.
    The current outlier reconciliation policy requires that providers 
whose outlier payments meet a specified threshold (currently $500,000 
for hospitals and any outlier payments for CMHCs) and whose overall 
ancillary CCRs change by plus or minus 10 percentage points or more, 
are subject to outlier reconciliation, pending approval of the CMS 
Central Office and Regional Office (73 FR 68596 through 68599). The 
policy also includes provisions related to CCRs and to calculating the 
time value of money for reconciled outlier payments due to or due from 
Medicare, as detailed in the CY 2009 OPPS/ASC final rule with comment 
period and in the Medicare Claims Processing Manual (73 FR 68595 
through 68599 and Medicare Claims Processing internet Only Manual, 
Chapter 4, Section 10.7.2 and its subsections, available online at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37135), we proposed to 
continue these policies for CY 2019.
    We did not receive any public comments on our proposals and, 
therefore, are finalizing our proposals, without modification, to 
continue our existing policy for CY 2019.
5. Outlier Payment Cap
    In the CY 2017 OPPS/ASC final rule with comment period, we 
implemented a CMHC outlier payment cap to be applied at the provider 
level, such that in any given year, an individual CMHC will receive no 
more than a set percentage of its CMHC total per diem payments in 
outlier payments (81 FR 79692 through 79695). We finalized the CMHC 
outlier payment cap to be set at 8 percent of the CMHC's total per diem 
payments (81 FR 79694 through 79695). This outlier payment cap only 
affects CMHCs, does not affect other provider types (that is, hospital-
based PHPs), and is in addition to and separate from the current 
outlier policy and reconciliation policy in effect. For CY 2018, we 
continued this policy in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59381).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37135 through 37136), 
we proposed to continue this policy for CY 2019, such that the CMHC 
outlier payment cap would be 8 percent of the CMHC's total per diem 
payments.
    We did not receive any public comments on our proposal and, 
therefore, are finalizing our proposal, without modification, to 
continue our existing policy for CY 2019, such that the CMHC outlier 
payment cap will be 8 percent of the CMHC's total per diem payments.
6. Fixed-Dollar Threshold
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), for the hospital outpatient outlier payment policy, we 
set a fixed-dollar threshold in addition to an APC multiplier 
threshold. Fixed-dollar thresholds are typically used to drive outlier 
payments for very costly items or services, such as cardiac pacemaker 
insertions. CMHC PHP APC 5853 is the only APC for which CMHCs may 
receive payment under the OPPS, and is for providing a defined set of 
services that are relatively low cost when compared to other OPPS 
services. Because of the relatively low cost of CMHC services that are 
used to comprise the structure of CMHC PHP APC 5853, it is not 
necessary to also impose a fixed-dollar threshold on CMHCs. Therefore, 
in the CY 2018 OPPS/ASC final rule with comment period, we did not set 
a fixed-dollar threshold for CMHC outlier payments (82 FR 59381).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37134 through 37136), 
we proposed to continue this policy for CY 2019.
    We did not receive any public comments on our proposal and, 
therefore, are finalizing our proposal, without modification, to 
continue with this existing policy, and are implementing this policy as 
proposed for CY 2019.

D. Proposed Update to PHP Allowable HCPCS Codes

    CMS received the CY 2019 CPT codes from the AMA in time for 
inclusion in the CY 2019 OPPS/ASC proposed rule (83 FR 37088). The new, 
revised, and deleted CY 2019 Category I and III CPT codes were included 
in Addendum B to the proposed rule (which is available via the internet 
on the CMS website). We are aware that the AMA will be deleting the 
following psychological and neuropsychological testing CPT codes, which 
affect PHPs, as of January 1, 2019:
     CPT code 96101 (Psychological testing by psychologist/
physician);
     CPT code 96102 (Psychological testing by technician);
     CPT code 96103 (Psychological testing administered by 
computer);

[[Page 58998]]

     CPT code 96118 (Neuropsychological testing by 
psychologist/physician)
     CPT code 96119 (Neuropsychological testing by technician); 
and
     CPT code 96120 (Neuropsychological test administered w/
computer).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37088), we proposed to 
delete these 6 CPT codes for the 2019 OPPS update under section 
III.A.4. (``Proposed Treatment of New and Revised CY 2019 Category I 
and III CPT Codes That Will Be Effective January 1, 2019 For Which We 
Are Soliciting Public Comments In This CY 2019 OPPS/ASC Proposed 
Rule'').
    In addition, the AMA will be adding the following psychological and 
neuropsychological testing CPT codes to replace the deleted codes, as 
of January 1, 2019:
     CPT code 96130 (Psychological testing evaluation by 
physician/qualified health care professional; first hour);
     CPT code 93131 (Psychological testing evaluation by 
physician/qualified health care professional; each additional hour);
     CPT code 96132 (Neuropsychological testing evaluation by 
physician/qualified health care professional; first hour);
     CPT code 96133 (Neuropsychological testing evaluation by 
physician/qualified health care professional; each additional hour);
     CPT code 96136 (Psychological/neuropsychological testing 
by physician/qualified health care professional; first 30 minutes);
     CPT code 96137 (Psychological/neuropsychological testing 
by physician/qualified health care professional; each additional 30 
minutes);
     CPT code 96138 (Psychological/neuropsychological testing 
by technician; first 30 minutes);
     CPT code 96139 (Psychological/neuropsychological testing 
by technician; each additional 30 minutes); and
     CPT code 96146 (Psychological/neuropsychological testing; 
automated result only).
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37088), we also 
proposed to recognize and assign these 9 CPT codes under the CY 2019 
OPPS in section III.A.4. (``Proposed Treatment of New and Revised CY 
2019 Category I and III CPT Codes That Will Be Effective January 1, 
2019 For Which We Are Soliciting Public Comments In This CY 2019 OPPS/
ASC Proposed Rule'').
    While these proposed changes to the above-referenced codes were 
included in the CY 2019 OPPS/ASC proposed rule (and are being finalized 
in section III.A.3. in this final rule with comment period for the CY 
2019 OPPS), PHP is a part of the OPPS and PHP providers may not have 
been aware of those proposed changes because we did not also include 
the proposals in the PHP discussion presented in the proposed rule. To 
ensure that PHP providers are aware of the codes and have the 
opportunity to comment on the proposed changes, we are utilizing a 
practice similar to the one we use under the OPPS for new Level II 
HCPCS codes that become effective after the proposed rule is published. 
Therefore, in this final rule with comment period, we are proposing to 
delete the same 6 CPT codes listed above from the PHP-allowable code 
set for CMHC APC 5853 and hospital-based PHP APC 5863, and replace them 
with 9 new CPT codes as shown in Table 47 below, effective January 1, 
2019. We are soliciting public comments on these proposals. We will 
consider the public comments we receive and seek to finalize our 
proposed actions in the CY 2020 OPPS/ASC final rule with comment 
period.
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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 (IPO) list) and, therefore, will not be paid by Medicare 
under the OPPS, and on the criteria that we use to review the IPO list 
each year to determine whether or not any procedures should be removed 
from the list. The complete list of codes that describe procedures that 
will be paid by Medicare in CY 2019 as inpatient only procedures is 
included as Addendum E to this CY 2019 OPPS/ASC final rule with comment 
period, which is available via the internet on the CMS website.

B. Changes to the Inpatient Only (IPO) List

1. Methodology for Identifying Appropriate Changes to IPO List
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37136 through 37143), 
for CY 2019, 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 IPO list to identify 
any procedures that may be removed from the list. We have established 
five criteria that are part of this methodology. As noted in the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74353), we utilize 
these criteria when reviewing procedures to determine whether or not 
they should be removed from the IPO list and assigned to an APC group 
for payment under the OPPS when provided in the hospital outpatient 
setting. We note that a procedure is not required to meet all of the 
established criteria to be removed from the IPO list. The criteria 
include the following:
    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 IPO 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 the above-listed criteria, for the CY 2019 OPPS, we 
identified two procedures described by the following codes that we 
proposed to remove from the IPO list for CY 2019: CPT code 31241 
(Nasal/sinus endoscopy, surgical; with ligation of sphenopalatine 
artery) and CPT code 01402 (Anesthesia for open or surgical 
arthroscopic procedures on knee joint; total knee arthroplasty). We 
also proposed to add to the IPO list for CY 2019 the procedure 
described by HCPCS code C9606 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of drug-eluting intracoronary stent, artherectomy and 
angioplasty, including aspiration thrombectomy when performed, single 
vessel). Table 29 of the proposed rule (83 FR 37137) displayed the 
proposed changes to the IPO list for CY 2019 and subsequent years, 
including the HCPCS codes, long descriptors, and the proposed CY 2019 
payment indicators.
    As noted earlier, we proposed to remove the procedure described by 
CPT code 31241 from the IPO list for CY 2019. Specifically, we stated 
that after reviewing the clinical characteristics of the procedure 
described by CPT code 31241 and consulting with stakeholders and our 
clinical advisors regarding this procedure, we believed that this 
procedure met criterion 3; that is, the procedure is related to codes 
that we have already removed from the IPO list. We proposed that the 
procedure described by CPT code 31241 be assigned to C-APC 5153 (Level 
3 Airway Endoscopy) with a status indicator of ``J1.'' We sought public 
comments on whether the public believes that the procedure described by 
CPT code 31241 meets criterion 3 and whether the procedure meets any of 
the other five criteria for removal from the IPO list.
    Comment: A majority of the commenters supported the proposed 
removal of CPT code 31241 from the IPO list and the proposed APC 
assignment to APC 5153 with a status indicator of ``J1''. The 
commenters agreed that the procedure described by CPT code 31241 meets 
criterion 3 (that is, the procedure described by CPT code 31241 is 
related to codes that we have already removed from the IPO list).
    Response: We appreciate the commenters' support.
    Comment: One commenter opposed the removal of CPT code 31241. 
However, the commenter did not provide a rationale for its opposition.
    Response: We have noted the commenter's general opposition. 
However, for the reasons cited in the proposed rule, we continue to 
believe that removal of the procedure described by CPT code 31241from 
the IPO list is appropriate. In addition, we received support for the 
removal of CPT code 31241 from the IPO list from many other 
stakeholders.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to remove CPT code 31241 
from the IPO list and to assign the procedure to C-APC 5153 (Level 3 
Airway Endoscopy) with a status indicator of ``J1''.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37136), we also 
proposed to remove the procedure described by CPT code 01402 from the 
IPO list. We reviewed the clinical characteristics of the procedure 
described by CPT code 01402, and proposed that this procedure be 
removed from the IPO list because it meets above-listed criteria 3 and 
4. This procedure is typically billed with the procedure described by 
CPT code 27447 (Arthroplasty, knee, condyle and plateau; medial and 
lateral compartments with or without patella resurfacing (total knee 
arthroplasty)), which was removed from the IPO list for CY 2018 (82 FR 
52526). This procedure is also often performed safely in the outpatient 
department setting. We sought public comments on whether the procedure 
described by CPT code 01402 meets criteria 3 and 4 and whether the 
procedure meets any of the other five criteria for removal from the IPO 
list.
    Comment: Commenters supported the removal of the procedure 
described by CPT code 01402 from the IPO list and agreed that the 
procedure described by CPT code 01402 was both related to codes that 
were previously removed from the IPO list and is performed safely in 
numerous hospitals on an outpatient basis.
    Response: We thank the commenters for their support.
    Comment: One commenter opposed the removal of the procedure 
described by CPT code 01402 from the IPO list because the commenter 
believed that there would be potential detrimental lateral impacts on 
hospitals participating in the Comprehensive Care for Joint Replacement 
(CJR) Model, the Bundled Payments for Care Improvement (BPCI) 
Initiative, the Hospital Value-Based Purchasing (VBP)

[[Page 59000]]

Program, and the Hospital Readmissions Reduction Program (HRRP).
    Response: Removal of the procedure described by CPT code 01402 does 
not in any way affect a provider's ability to participate in any of the 
initiatives the commenter mentioned. We remind readers that the removal 
of any procedure from the IPO list does not mandate that all cases be 
performed on an outpatient basis. Rather, such removal allows for 
Medicare payment to be made to the hospital when the procedure is 
performed in the hospital outpatient department setting. The decision 
to admit a patient is a complex medical judgment that is made by the 
treating physician. We refer readers to the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79698 through 79699) in which we originally 
proposed to remove total knee arthroplasty (TKA) procedure codes from 
the IPO list and sought comments on how to modify the CJR Model and the 
BPCI Initiative to reflect the shift of some Medicare beneficiaries 
from an inpatient TKA procedure to an outpatient TKA procedure in the 
BPCI Initiative and the CJR Model pricing methodologies, including 
target price calculations and reconciliation processes. However, we 
invite interested parties to direct any questions about these 
initiatives to the CMS Center for Medicare and Medicaid Innovation.
    Comment: One commenter representing a coalition of industry 
stakeholders recommended that CMS collect and publish data on morbidity 
and mortality rates for TKA performed in the outpatient setting versus 
in the inpatient setting. The commenter believed that collecting these 
data would allow CMS to evaluate the quality of services in both 
settings since the removal of TKA procedures from the IPO list.
    Response: We note that since we removed the CPT codes related to 
TKA from the IPO list, TKA procedures have only been payable under the 
OPPS for less than one year. Accordingly, we do not believe that we 
have sufficient data at this time for a meaningful comparison of 
quality outcomes associated with TKA procedures performed in the 
hospital outpatient setting versus the hospital inpatient setting. 
However, we will consider reviewing mortality rates in the future when 
appropriate data are available. We would not expect there to be 
statistically significant differences in morbidity and mortality among 
Medicare beneficiaries based solely on whether the patient was admitted 
to the hospital or remained a hospital outpatient (especially because 
it is likely the same surgeon, the same clinical protocol, and the same 
staff at a given hospital for both inpatient and outpatient orthopaedic 
procedures) and would expect that other factors, such as underlying 
disease-state and condition of the patient, surgical complications, and 
ability to avoid blood clots and other potential adverse event within 
90 days postsurgery. We remind readers that there are several short 
stay inpatient cases with a length of stay of 1 or 2 days, which is 
generally similar to the length of stay for outpatient cases. To be 
clear, there is a plethora of surgical procedures that may be performed 
on either an inpatient basis or an outpatient basis. However, we are 
not aware of differences in clinical outcomes for patients based solely 
on this factor. While there are some studies relating to the non-
Medicare population regarding differences in outcomes, depending on 
whether the care setting is inpatient versus outpatient (which could 
include ASCs), we are not aware of any such studies since the TKA has 
become a payable procedure under the OPPS in 2018. In addition, we note 
that interested stakeholders are welcome to research these or other 
statistics by analyzing data that Medicare makes available. The 
Hospital Inpatient Quality Reporting (IQR) Program and the Hospital 
Outpatient Quality Reporting (OQR) Program collect and share 
information regarding the quality of care in both the hospital 
inpatient setting and the hospital outpatient setting. Specifically, 
the Hospital IQR Program maintains measures that include complications 
and deaths during inpatient hip/knee replacement procedures. However, 
an analogous measure for outpatient procedures does not currently 
exist.
    Comment: One commenter requested that CMS provide guidance and 
education regarding the removal of TKA procedures from the IPO list 
beginning in CY 2018. The commenter noted that there was confusion 
around the policy for hospital systems and health insurance plans, and 
that many hospital systems and Medicare Advantage plans were denying 
inpatient admissions by default and requiring Medicare patients to 
undergo a TKA procedure as a hospital outpatient.
    Response: As previously stated in the discussion of the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59383), we continue to 
believe that the decision regarding the most appropriate care setting 
for a given surgical procedure is a complex medical judgment made by 
the physician based on the beneficiary's individual clinical needs and 
preferences and on the general requirement that any procedure be 
reasonable and necessary. We also reiterate our previous statement that 
the removal of any procedure from the IPO list does not require the 
procedure to be performed only on an outpatient basis. Rather, we 
believe that as technology and clinical practice continue to evolve, 
beneficiaries should continue to receive care in the most appropriate 
setting.
    While we continue to expect providers who perform an outpatient TKA 
procedure on Medicare beneficiaries to use comprehensive patient 
selection criteria to identify appropriate candidates for the 
procedure, we believe that the surgeons, clinical staff, and medical 
specialty societies representing physicians who perform outpatient TKA 
procedures and possess specialized clinical knowledge and experience 
are most suited to create such guidelines.
    After consideration of the public comments we received, we are 
adopting, as final without modification, our proposal to remove the 
procedure described by CPT code 01402 from the IPO list. In accordance 
with the regulations at 42 CFR 419.2(b)(4), under the OPPS, this 
anesthesia service is packaged with the associated procedure and 
assigned status indicator ``N'' (Items and Services Packaged into APC 
Rates) for CY 2019.
    In addition, in the CY 2019 OPPS/ASC proposed rule (83 FR 37136 
through 37137), we proposed to add the procedure described by HCPCS 
code C9606 (Percutaneous transluminal revascularization of acute total/
subtotal occlusion during acute myocardial infarction, coronary artery 
or coronary artery bypass graft, any combination of drug-eluting 
intracoronary stent, atherectomy and angioplasty, including aspiration 
thrombectomy when performed, single vessel) to the IPO list for CY 
2019. The IPO list specifies those procedures and services for which 
the hospital will be paid only when the procedures are provided in the 
inpatient setting because of the nature of the procedure, the 
underlying physical condition of the patient, or the need for at least 
24 hours of postoperative recovery time or monitoring before the 
patient can be safely discharged (76 FR 74353). After evaluating the 
procedure described by HCPCS code C9606 using the criteria described 
above, we believe that the procedure should be added to the IPO list 
because this procedure is performed during acute myocardial infarction 
and it is similar to a procedure already on the IPO list (that is, the 
procedure described by CPT code 92941 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial

[[Page 59001]]

infarction, coronary artery or coronary artery bypass graft, any 
combination of intracoronary stent, artherectomy and angioplasty, 
including aspiration thrombectomy when performed, single vessel)), 
which was added to the IPO list for CY 2018 (82 FR 52526). We sought 
public comments on whether the procedure described by HCPCS code C9606 
should be added to the IPO list for CY 2019 and subsequent years.
    Comment: Several commenters, largely from specialty medical 
societies, supported adding the procedure described by HCPCS code C9606 
to the IPO list for CY 2019.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
adopting as final without modification, our proposal to add the 
procedure described by HCPCS code C9606 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of drug eluting intracoronary stent, atherectomy and 
angioplasty, including aspiration thrombectomy when performed, single 
vessel) to the IPO list for CY 2019.
2. Summary of Public Comments Received in Response to CMS' Solicitation 
on the Potential Removal of Procedure Described by CPT Code 0266T From 
the IPO List and Our Responses
    CPT code 0266T describes the implantation or replacement of carotid 
sinus baroreflex activation device; total system (includes generator 
placement, unilateral or bilateral lead placement, intra-operative 
interrogation, programming, and repositioning, when performed). The 
procedure described by CPT code 0266T has been included on the IPO list 
since the procedure code became effective in CY 2011.
    There are several codes that describe procedures that are similar 
to the procedure described by CPT code 0266T that are not on the IPO 
list, including: CPT code 0267T (Implantation or replacement of carotid 
sinus baroreflex activation device; lead only, unilateral (includes 
intra-operative interrogation, programming, and repositioning, when 
performed)) and CPT code 0268T (Implantation or replacement of carotid 
sinus baroreflex activation device; pulse generator only (includes 
intra-operative interrogation, programming, and repositioning, when 
performed)). The device that is billed with these two procedures has 
been granted a Category B Investigational Device Exemption (IDE) from 
FDA.\62\ Currently, there is limited information available to determine 
the typical site of service and the ability for the procedure to be 
safely performed in the outpatient setting. At the time of development 
of the CY 2019 OPPS/ASC proposed rule, we did not believe that we had 
adequate information to determine whether the procedure described by 
CPT code 0266T should be removed from the IPO list. Therefore, we 
sought public comments on the removal of the procedure described by CPT 
code 0266T from the IPO list. Specifically, we sought public comments 
on whether the procedure described by CPT code 0266T meets any of the 
criteria to be removed from the IPO list as well as the appropriate APC 
assignment and status indicator for this code.
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    \62\ Available at: https://www.cms.gov/Medicare/Coverage/IDE/Approved-IDE-Studies.html.
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    Comment: Numerous commenters responded to CMS' solicitation for 
discussion of the removal of the Barostim procedure from the IPO list. 
Commenters included the manufacturer and practitioners, specifically 
cardiologists and cardiovascular surgeons, who have performed the 
Barostim procedure multiple times. Commenters referenced their personal 
experience with the procedure described by CPT code 0266T, the 
advancements and safety of the procedure, and patients' experience 
after undergoing the procedure. These commenters argued that procedures 
related to CPT code 0266T are commonly being performed safely in the 
hospital outpatient department. The manufacturer specifically cited the 
CY 2019 NPRM CPT Cost Statistics Files associated with the proposed 
rule to show the number of related procedures that have been performed 
in the hospital outpatient department this year. Further, another 
commenter supported the assertion provided in the proposed rule that 
the simplest procedures described by CPT code 0266T, the procedure to 
implant or replace the lead or IPG, currently have separate and 
distinct CPT codes (0267T and 0268T) that are not included on the IPO 
list.
    Response: We reviewed clinical characteristics of the Barostim 
procedure and related evidence, including input from multiple physician 
and cardiology specialty societies, and determined that the procedure 
described by CPT code 0266T is an appropriate candidate for removal 
from the IPO list. CPT code 0266T is similar to CPT code 0268T, which 
is performed in numerous hospitals on an outpatient basis (criterion 
3). Furthermore, we believe that most outpatient departments are 
equipped to provide the described services to the Medicare population 
(criterion 1). Therefore, we are removing the procedure described by 
CPT code 0266T from the IPO list for CY 2019.
    Comment: Several commenters recommended the removal of several 
procedures not originally proposed by CMS for removal from the IPO list 
for CY 2019. These recommended procedures related to other procedures 
that were recently removed from the IPO. In addition, several 
commenters recommended the removal of all orthopaedic, arthroplasty, 
and joint replacement procedures from the IPO list. Table 48 below 
contains the procedures that were explicitly requested by the 
commenters to be removed from the IPO list for CY 2019.

[[Page 59002]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.074

    Response: We appreciate the diligence that commenters continue to 
show in proposing changes to the IPO list. For the CY 2019 OPPS, we 
believe that it is appropriate to remove the procedure described by CPT 
code 00670 from the IPO list, as recommended by the commenters. We 
refer readers to the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79695 through 79696) in which CMS removed six related codes 
(four spine procedure codes and two laryngoplasty codes) from the IPO 
list for CY 2017. We believe that the procedure described by CPT code 
00670 is appropriate for removal from the IPO list because it relates 
to the following codes that CMS removed from the IPO list in CY 2017: 
CPT code 22840 (Posterior non-segmental instrumentation (e.g., 
Harrington rod technique, pedicle fixation across 1 interspace, 
atlantoaxial transarticular screw fixation, sublaminar wiring at C1, 
facet screw fixation) (List separately in addition to code for primary 
procedure)); CPT code 22842 (Posterior segmental instrumentation (e.g., 
pedicle fixation, dual rods with multiple hooks and sublaminar wires); 
3 to 6 vertebral segments (List separately in addition to code for 
primary procedure)); CPT code 22845 (Anterior instrumentation; 2 to 3 
vertebral segments (List separately in addition to code for primary 
procedure)); and CPT code 22858 (Total disc arthroplasty (artificial 
disc), anterior approach, including discectomy with end plate 
preparation (includes osteophytectomy for nerve root or spinal cord 
decompression and microdissection); second level, cervical (List 
separately in addition to code for primary procedure)). We also believe 
that this procedure is being performed in numerous hospitals on an 
outpatient basis. Accordingly, we are removing the procedure described 
by CPT code 00670 from the IPO list for CY 2019. Because this spine 
procedure code is an add-on code, in accordance with the regulations at 
42 CFR 419.2(b)(18), under the OPPS, this procedure is packaged with 
the associated procedure and assigned status indicator ``N'' (Items and 
Services Packaged into APC Rates) for CY 2019.
    With respect to the commenters' recommendation that we remove CPT 
code 63265 (Laminectomy for excision or evacuation of intraspinal 
lesion other than neoplasm, extradural; cervical), CPT code 63266 
(Laminectomy for excision or evacuation of intraspinal lesion other 
than neoplasm, extradural; thoracic), CPT code 63267 (Laminectomy for 
excision or evacuation of intraspinal lesion other than neoplasm, 
extradural; lumbar), and CPT code 63268 (Laminectomy for excision or 
evacuation of intraspinal lesion other than neoplasm, extradural; 
sacral) from the IPO list, we intend to continue to review these 
procedures and the appropriateness of the potential removal from the 
IPO list for subsequent rulemaking.
    In regard to the commenters' recommendation to remove all 
orthropaedic, arthroplasty, and joint replacement procedures from the 
IPO list, we do not believe that we have sufficient data to support 
removal of all orthopaedic, arthroplasty, and joint replacement 
procedures from the IPO list. However, we encourage stakeholders to 
submit specific procedures, along with evidence, to support their 
requests for removal from the IPO list.
    In conclusion, the complete list of procedure codes that are placed 
on the IPO list for CY 2019 is included as Addendum E to this CY 2019 
OPPS/ASC final rule with comment period (which is available via the 
internet on the CMS website).
    Table 49 below contains the final changes that we are making to the 
IPO list for CY 2019.
BILLING CODE 4120-01-P

[[Page 59003]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.075

BILLING CODE 4120-01-C

X. Nonrecurring Policy Changes

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

    The June 2017 Report to Congress \63\ by the Medicare Payment 
Advisory Commission (MedPAC) states that, in recent years, there has 
been significant growth in the number of health care facilities located 
apart from hospitals that are devoted primarily to emergency department 
services. This includes both off-campus provider-based emergency 
departments that are eligible for payment under the OPPS and 
independent freestanding emergency departments not affiliated with a 
hospital that are not eligible for payment under the OPPS. Since 2010, 
we have observed a noticeable increase in the number of hospital 
outpatient emergency department visits furnished under the OPPS. MedPAC 
and other entities have expressed concern that services may be shifting 
to the higher acuity and higher cost emergency department setting due 
to: (1) Higher payment rates for services performed in off-campus 
provider-based emergency departments compared to similar services 
provided in other settings (that is, physician offices or urgent care 
clinics); and (2) the exemption for services provided in an emergency 
department included under section 603 of the Bipartisan Budget Act of 
2015 (Pub. L. 114-25), whereby all items and services (emergency and 
nonemergency) furnished in an emergency department are excepted from 
the payment implications of section 603, as long as the department 
maintains its status as an emergency department under the regulation at 
42 CFR 489.24(b).
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    \63\ Available at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
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    MedPAC and other entities are concerned that these payment 
incentives may be a key factor contributing to the growth in the number 
of emergency departments located off-campus from a hospital. MedPAC 
recommended in its March 2017 \64\ and June 2017 Reports to Congress 
that CMS require hospitals to append a modifier to claims for all 
services furnished in off-campus

[[Page 59004]]

provider-based emergency departments, so that CMS can track the growth 
of OPPS services provided in this setting.
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    \64\ Available at: http://medpac.gov/docs/default-souce/reports/mar17_entirereport.pdf.
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    In order to participate in Medicare as a hospital, the facility 
must meet the statutory definition of a hospital at section 1861(e) of 
the Act, which requires a facility to be primarily engaged in providing 
care and services to inpatients. In addition, 42 CFR 482.55 requires 
hospital emergency department services (to include off-campus provider-
based emergency departments) to be fully integrated with departments 
and services of the hospital. The integration must be such that the 
hospital can immediately make available the full extent of its patient 
care resources to assess and furnish appropriate care for an emergency 
patient. Such services would include, but are not limited to, surgical 
services, laboratory services, and radiology services, among others. 
The emergency department must also be integrated with inpatient 
services, which means the hospital must have a sufficient number of 
inpatient beds and nursing units to support the volume of emergency 
department patients that could require inpatient services. The 
provision of services, equipment, personnel and resources of other 
hospital departments and services to emergency department patients must 
be within timeframes that protect the health and safety of patients and 
is within acceptable standards of practice.
    We agree with MedPAC's recommendation and believe we need to 
develop data to assess the extent to which OPPS services are shifting 
to off-campus provider-based emergency departments. Therefore, we 
announced in the CY 2019 OPPS/ASC proposed rule (83 FR 37138) that we 
are implementing through the subregulatory HCPCS modifier process a new 
modifier for this purpose, effective beginning January 1, 2019.
    We stated in the proposed rule that we will create a HCPCS modifier 
(``ER''--Items and services furnished by a provider-based off-campus 
emergency department) that is to be reported with every claim line for 
outpatient hospital services furnished in an off-campus provider-based 
emergency department. We specified in the proposed rule that the 
modifier would be reported on the UB-04 form (CMS Form 1450) for 
hospital outpatient services. We stated that critical access hospitals 
(CAHs) would not be required to report this modifier.
    In response to our announcement of the creation of HCPCS modifier 
``ER'' (Items and services furnished by a provider-based off-campus 
emergency department), we received the following feedback from 
commenters in response to the CY 2019 OPPS/ASC proposed rule: Some 
commenters, including MedPAC, supported the creation of HCPCS modifier 
``ER'', citing the opportunity to facilitate the collection of data on 
services furnished in off-campus emergency departments. Other 
commenters were opposed to the creation of the HCPCS modifier ``ER'' 
because they believed it would be an undue and unnecessary 
administrative burden on hospitals. Another commenter expressed a 
desire to have a better understanding of the reasoning for the creation 
of the modifier.
    While we note that the creation of the HCPCS modifier ``ER'' was 
included in the CY 2019 OPPS/ASC proposed rule as an announcement, as 
opposed to a proposal, and therefore was not subject to public comment, 
we nonetheless appreciate the feedback provided by interested 
stakeholders, and will consider such feedback in potential future 
policy development.

B. Method To Control for Unnecessary Increases in the Volume of 
Outpatient Services

    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37138 
through 37143), when the Medicare program was first implemented, 
payment for hospital services (inpatient and outpatient) was based on 
hospital-specific reasonable costs attributable to furnishing services 
to Medicare beneficiaries. Although payment for most Medicare hospital 
inpatient services became subject to a prospective payment system (PPS) 
under section 1886(d) of the Act in 1983, Medicare hospital outpatient 
services continued to be paid based on hospital-specific costs. This 
methodology for payment provided little incentive for hospitals to 
furnish such outpatient services efficiently and in a cost effective 
manner. At the same time, advances in medical technology and changes in 
practice patterns were bringing about a shift in the site of medical 
care from the hospital inpatient setting to the hospital outpatient 
setting.
    In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. 
L. 99-509), the Congress paved the way for development of a PPS for 
hospital outpatient services. Section 9343(g) of OBRA 1986 mandated 
that fiscal intermediaries require hospitals to report claims for 
services under the Healthcare Common Procedure Coding System (HCPCS). 
Section 9343(c) of OBRA 1986 extended the prohibition against 
unbundling of hospital services under section 1862(a)(14) of the Act to 
include outpatient services as well as inpatient services. The codes 
under the HCPCS enabled us to determine which specific procedures and 
services were billed, while the extension of the prohibition against 
unbundling ensured that all nonphysician services provided to hospital 
outpatients were reported on hospital bills and captured in the 
hospital outpatient data that were used to develop an outpatient PPS.
    The brisk increase in hospital outpatient services further led to 
an interest in creating payment incentives to promote more efficient 
delivery of hospital outpatient services through a Medicare outpatient 
PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus 
Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 101-508) 
required that we develop a proposal to replace the existing hospital 
outpatient payment system with a PPS and submit a report to the 
Congress on a new proposed system. The statutory framework for the 
Outpatient Prospective Payment System (OPPS) was established by section 
4523 of the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33), which 
amended section 1833 of the Act by adding subsection (t), which 
establishes a PPS for hospital outpatient department services, and by 
section 201 of the Balanced Budget Reconciliation Act (BBRA) of 1999 
(Pub. L. 106-113), which amended section 1833(t) of the Act to require 
outlier and transitional pass-through payments. At the outset of the 
OPPS, there was significant concern over observed increases in the 
volume of outpatient services and corresponding rapidly growing 
beneficiary coinsurance. Accordingly, most of the focus was on finding 
ways to address those issues.
    When section 4523 of the BBA of 1997 established the OPPS, it 
included specific authority under section 1833(t)(2)(F) of the Act that 
requires the Secretary to develop a method for controlling unnecessary 
increases in the volume of covered outpatient department (OPD) 
services.\65\ In the initial rule that proposed to implement the OPPS 
(63 FR 47585 through 47587), we discussed several possible approaches 
for controlling the volume of covered outpatient department services 
furnished in subsequent years, solicited comments on those options, and 
stated that the agency would propose an appropriate ``volume control'' 
mechanism for services furnished in CY 2001 and beyond after completing 
further analysis. For the CY

[[Page 59005]]

2000 OPPS, we proposed to implement a method that was similar to the 
one used under the Medicare Physician Fee Schedule (PFS) (known as the 
sustainable growth rate or ``SGR''), which would be triggered when 
expenditure targets, based on such factors as volume, intensity, and 
beneficiary enrollment, were exceeded (63 FR 47586 through 47587). 
However, as we discussed in the CY 2001 OPPS final rule (65 FR 18503) 
and the CY 2002 OPPS final rule (66 FR 59908), we delayed the 
implementation of the proposed volume control method as suggested by 
the ``President's Plan to Modernize and Strengthen Medicare for the 
21st Century'' to give hospitals time to adjust to the OPPS and CMS 
time to continue to examine methods to control unnecessary increases in 
the volume of covered OPD services.
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    \65\ Available at: https://www.ssa.gov/OP_Home/ssact/title18/1833.htm.
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    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66611 
through 66612), we noted that we had significant concerns about the 
growth in program expenditures for hospital outpatient services, and 
that while the OPPS was developed in order to address some of those 
concerns, its implementation had not generally slowed that growth in 
expenditures. To address some of those concerns, we established a set 
of packaging policies beginning in CY 2008 that would explicitly 
encourage efficiency in the provision of services in the hospital 
outpatient setting and potentially control future growth in the volume 
of OPPS services (72 FR 66612). Specifically, in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66580), we adopted a policy to 
package seven categories of items and services into the payment for the 
primary diagnostic or therapeutic modality to which we believe these 
items are typically ancillary or supportive.
    Similarly, in the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 74925 through 74948), we expanded our packaging policies to 
include more categories of packaged items and services as part of a 
broader initiative to make the OPPS more like a prospective payment 
system and less like a per service fee schedule. Packaging can 
encourage hospitals to furnish services efficiently while also enabling 
hospitals to manage their resources with the maximum flexibility, 
thereby encouraging long-term cost containment, which is an essential 
component of a prospective payment system. While most of the packaging 
policies established in the CY 2014 OPPS focused on ancillary services 
that were part of a primary procedure, we also introduced the concept 
of comprehensive APCs (C-APCs) (78 FR 74861 through 74910), which were 
implemented beginning in the CY 2015 OPPS (79 FR 66798 through 66810). 
Comprehensive APCs package payment for adjunctive and secondary items, 
services, and procedures into the most costly primary procedure under 
the OPPS at the claim level.
    While we have developed many payment policies with these goals in 
mind, growth in program expenditures for hospital outpatient services 
paid under the OPPS continues. As illustrated in Table 30 in the CY 
2019 OPPS/ASC proposed rule (83 FR 37139), total spending has been 
growing at a rate of roughly 8 percent per year under the OPPS, and 
total spending under the OPPS is projected to further increase by more 
than $5 billion from approximately $70 billion in CY 2018 through CY 
2019 to nearly $75 billion. This is approximately twice the total 
estimated spending in CY 2008, a decade ago. We continue to be 
concerned with this rate of increase in program expenditures under the 
OPPS for several reasons. The OPPS was originally designed to manage 
Medicare spending growth. What was once a cost-based system was 
mandated by law to become a prospective payment system, which arguably 
should have slowed the increases in program spending. To the contrary, 
the OPPS has been the fastest growing sector of Medicare payments out 
of all payment systems under Medicare Parts A and B. Furthermore, we 
are concerned that the rate of growth suggests that payment incentives, 
rather than patient acuity or medical necessity, are affecting site-of-
service decision-making. This site-of-service selection has an impact 
on not only the Medicare program, but also on Medicare beneficiary out-
of-pocket spending. Therefore, to the extent that there are lower-cost 
sites-of-service available, we believe that beneficiaries and the 
physicians treating them should have that choice and not be encouraged 
to receive or provide care in higher paid settings solely for financial 
reasons. For example, to provide for easier comparisons between 
hospital outpatient departments and ASCs, as previously discussed in 
the CY 2018 OPPS/ASC final rule with comment period (82 FR 59389), we 
stated in the CY 2019 OPPS/ASC proposed rule that we also will make 
available a website that provides comparison information between the 
OPPS and ASC payment and copayment rates, as required under section 
4011 of the 21st Century Cures Act (Pub. L. 114-255). Making this 
information available can help beneficiaries and their physicians 
determine the cost and appropriateness of receiving care at different 
sites-of-service. Although resources such as this website will help 
beneficiaries and physicians select a site-of-service, we do not 
believe this information alone is enough to control unnecessary volume 
increases. The growth in OPPS expenditures and the increase in the 
volume and intensity of hospital outpatient services were illustrated 
in Tables 30 and 31, respectively, of the CY 2019 OPPS/ASC proposed 
rule (83 FR 37139 through 37140). These tables, which include updated 
information, are presented below.
BILLING CODE 4120-01-P

[[Page 59006]]

[GRAPHIC] [TIFF OMITTED] TR21NO18.076

[GRAPHIC] [TIFF OMITTED] TR21NO18.077

BILLING CODE 4120-01-C
    As noted in its March 2018 Report to Congress, the Medicare Payment 
Advisory Commission (MedPAC) found that, from 2011 through 2016, 
combined program spending and beneficiary cost-sharing on services 
covered under the OPPS increased by 51 percent, from $39.8 billion to 
$60.0 billion, an average of 8.6 percent per year.\66\ In its 2018 
report, MedPAC also noted that ``A large source of growth in spending 
on services furnished in hospital outpatient departments (HOPDs) 
appears to be the result of the shift of services from (lower cost) 
physician offices to (higher cost) HOPDs''. \67\ We consider these 
shifts in the sites of service unnecessary if the beneficiary can 
safely receive the same services in a lower cost setting but instead 
receives care in a higher cost setting.
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    \66\ Available at: http://www.medpac.gov/docs/default-source/reports/mar18_medpac_entirereport_sec.pdf?sfvrsn=0.
    \67\ Ibid.
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    As noted in MedPAC's March 2017 Report to Congress, ``from 2014 to 
2015, the use of outpatient services increased by 2.2 percent per 
Medicare FFS beneficiary. Over the decade ending in 2015, volume per 
beneficiary grew by 47 percent. One-third of the growth in outpatient 
volume from 2014 to 2015 was due to an increase in the number of 
evaluation and management (E&M) visits billed as outpatient services. 
This growth in part reflects hospitals purchasing freestanding 
physician practices and converting the billing from the Physician Fee 
Schedule to higher paying hospital outpatient department (HOPD) visits. 
These conversions shift market share from freestanding physician 
offices to HOPDs. From 2012 to 2015, hospital-based E&M visits per 
beneficiary grew by 22 percent, compared with a 1-percent decline in 
physician office-based visits.'' \68\
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    \68\ Available at: http://www.medpac.gov/docs/default-source/reports/mar17_medpac_ch3.pdf?sfvrsn=0.
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    MedPAC has documented how the billing for these services has 
shifted from physician offices to higher-cost outpatient sites of care 
for several years. At the same time, MedPAC has repeated its 
recommendation that the difference in payment rates between hospital 
outpatient departments and physician offices should be reduced or 
eliminated. It specifically recommended in its 2012

[[Page 59007]]

Report to Congress that the payment rates for E&M visits provided in 
hospital outpatient departments be reduced so that total payment rates 
for these visits are the same, whether the service is provided in a 
hospital outpatient department or a physician office. In its 2014 
Report to Congress, MedPAC recommended that Congress direct the 
Secretary to reduce or eliminate differences in payment rates between 
hospital outpatient departments and physician offices for selected 
APCs. Both of these recommendations were reiterated in MedPAC's March 
2017 Report to Congress.
    As previously noted, in addition to the concern that the difference 
in payment is leading to unnecessary increases in the volume of covered 
outpatient department services, we also are concerned that this shift 
in care setting increases beneficiary cost-sharing liability because 
Medicare payment rates for the same or similar services are generally 
higher in hospital outpatient departments than in freestanding 
physician offices. For example, MedPAC estimates that ``the Medicare 
program spent $1.0 billion more in 2009, $1.3 billion more in 2014, and 
$1.6 billion more in 2015 than it would have if payment rates for E&M 
office visits in HOPDs were the same as freestanding office rates. 
Relatedly, beneficiaries' cost-sharing was $260 million higher in 2009, 
$325 million higher in 2014, and $400 million higher in 2015 than it 
would have been because of the higher rates paid in HOPD settings.'' 
\69\ We believe that this volume growth and the resulting increase in 
beneficiary cost-sharing is unnecessary because it appears to have been 
incentivized by the difference in payment for each setting rather than 
patient acuity. If there was not a difference in payment rates, we 
believe that we would not have seen the increase in beneficiaries' 
cost-sharing and the shift in site-of-service.
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    \69\ Ibid.
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    In the CY 2015 OPPS/ASC proposed rule (79 FR 41013), we stated that 
we continued to seek a better understanding of how the growing trend 
toward hospital acquisition of physicians' offices and subsequent 
treatment of those locations as off-campus provider-based departments 
(PBDs) of hospitals affects payments under the PFS and the OPPS, as 
well as beneficiary cost-sharing obligations. We noted that MedPAC 
continued to question the appropriateness of increased Medicare payment 
and beneficiary cost-sharing when physicians' offices become hospital 
outpatient departments and that MedPAC recommended that Medicare pay 
selected hospital outpatient services at PFS rates (MedPAC March 2012 
and June 2013 Reports to Congress).
    To understand how this trend was affecting Medicare, we explained 
that we needed information on the extent to which this shift was 
occurring. To that end, during the CY 2014 OPPS/ASC rulemaking cycle, 
we sought public comment regarding the best method for collecting 
information and data that would allow us to analyze the frequency, 
type, and payment for physicians' services and hospital outpatient 
services furnished in off-campus PBDs of hospitals (78 FR 75061 through 
75062 and 78 FR 74427 through 74428). Based on our analysis of the 
public comments we received, we believed that the most efficient and 
equitable means of gathering this important information across two 
different payment systems would be to create a HCPCS modifier to be 
reported with every code for physicians' services and hospital 
outpatient services furnished in an off-campus PBD of a hospital on 
both the CMS-1500 claim form for physicians' services and the UB-04 
form (CMS Form 1450 and OMB Control Number 0938-0997) for hospital 
outpatient services. We noted that a main provider may treat an off-
campus facility as provider-based if certain requirements at 42 CFR 
413.65 are satisfied, and we define a ``campus'' at 42 CFR 413.65(a)(2) 
to be the physical area immediately adjacent to the provider's main 
buildings, other areas and structures that are not strictly contiguous 
to the main buildings but are located within 250 yards of the main 
buildings, and any other areas determined on an individual case basis, 
by the CMS regional office, to be part of the provider's campus.
    In 2015, the Congress took steps to address the higher Medicare 
payments for services furnished by certain off-campus PBDs that may be 
associated with hospital acquisition of physicians' offices through 
section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74), 
enacted on November 2, 2015. In the CY 2017 OPPS/ASC proposed rule, we 
discussed section 603 of the Bipartisan Budget Act of 2015, which 
amended section 1833(t) of the Act. For the full discussion of our 
initial implementation of this provision, we refer readers to the CY 
2017 OPPS/ASC final rule with comment period (81 FR 79699 through 
79719) and the interim final rule with comment period (79720 through 
79729).
    Section 603 of the Bipartisan Budget Act of 2015 (Section 603) 
amended section 1833(t) of the Act by amending paragraph (1)(B) and 
adding a new paragraph (21). As a general matter, under sections 
1833(t)(1)(B)(v) and (t)(21) of the Act, applicable items and services 
furnished by certain off-campus outpatient departments of a provider on 
or after January 1, 2017 are not considered covered OPD services as 
defined under section 1833(t)(1)(B) of the Act for purposes of payment 
under the OPPS and are instead paid ``under the applicable payment 
system'' under Medicare Part B if the requirements for such payment are 
otherwise met. We note that, in order to be considered part of a 
hospital, an off-campus department of a hospital must meet the 
provider-based criteria established under 42 CFR 413.65.
    Section 603 amended section 1833(t)(1)(B) of the Act by adding a 
new clause (v), which excludes from the definition of ``covered OPD 
services'' applicable items and services (defined in paragraph (21)(A) 
of the section) that are furnished on or after January 1, 2017, by an 
off-campus PBD, as defined in paragraph (21)(B) of the section. Section 
603 also added a new paragraph (21) to section 1833(t) of the Act, 
which defines the terms ``applicable items and services'' and ``off-
campus outpatient department of a provider,'' requires the Secretary to 
make payments for such applicable items and services furnished by an 
off-campus PBD under an applicable payment system (other than the 
OPPS), provides that hospitals shall report on information as needed 
for implementation of the provision, and establishes a limitation on 
administrative and judicial review of the Secretary's determinations of 
applicable items and services, applicable payment system, whether a 
department meets the definition of an off-campus outpatient department 
of a provider, and information hospitals are required to report. In 
defining the term ``off-campus outpatient department of a provider,'' 
section 1833(t)(21)(B)(i) of the Act specifies that the term means a 
department of a provider (as defined at 42 CFR 413.65(a)(2) as that 
regulation was in effect on November 2, 2015, the date of enactment of 
Pub. L. 114-74) that is not located on the campus of such provider, or 
within the distance from a remote location of a hospital facility. 
Section 1833(t)(21)(B)(ii) of the Act excepts from the definition of 
``off-campus outpatient department of a provider,'' for purposes of 
paragraphs (1)(B)(v) and (21)(B) of the section, an off-campus PBD that 
was billing under section 1833(t) of the Act with respect to covered 
OPD services furnished prior

[[Page 59008]]

to the date of enactment of the Bipartisan Budget Act of 2015, that is, 
November 2, 2015. We note that the definition of ``applicable items and 
services'' specifically excludes items and services furnished by a 
dedicated emergency department as defined at 42 CFR 489.24(b) and the 
definition of ``off-campus outpatient department of a provider'' does 
not include PBDs located on the campus of a hospital or within the 
distance (described in the definition of campus at Sec.  413.65(a)(2)) 
from a remote location of a hospital facility; the items and services 
furnished by these excepted off-campus PBDs on or after January 1, 2017 
continued to be paid under the OPPS.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79699 
through 79720), we established a number of policies to implement 
section 603 of the Bipartisan Budget Act of 2015. Broadly, we: (1) 
Defined applicable items and services in accordance with section 
1833(t)(21)(A) of the Act for purposes of determining whether such 
items and services are covered OPD services under section 
1833(t)(1)(B)(v) of the Act or whether payment for such items and 
services will instead be made under the applicable payment system 
designated under section 1833(t)(21)(C) of the Act; (2) defined off-
campus PBD for purposes of sections 1833(t)(1)(B)(v) and (t)(21) of the 
Act; and (3) established policies for payment for applicable items and 
services furnished by an off-campus PBD (nonexcepted items and 
services) under section 1833(t)(21)(C) of the Act. To do so, we 
finalized policies that define whether certain items and services 
furnished by a given off-campus PBD may be considered excepted and, 
thus, continue to be paid under the OPPS; established the requirements 
for the off-campus PBDs to maintain excepted status (both for the 
excepted off-campus PBDs and for the items and services furnished by 
such excepted off-campus PBDs); and described the applicable payment 
system for nonexcepted items and services (generally, the PFS).
    As part of developing policies to implement the section 603 
amendments to section 1833(t) of the Act, we solicited public comments 
on information collection requirements for implementing this provision 
in accordance with section 1833(t)(21)(D) of the Act (81 FR 45686; 81 
FR 79709 through 79710). In the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79719 and 79725), we created modifier ``PN'' to 
collect data for purposes of implementing section 603 but also to 
trigger payment under the newly adopted PFS rates for nonexcepted items 
and services.
    While the changes required by the section 603 amendments to section 
1833(t) of the Act address some of the concerns related to shifts in 
settings of care and overutilization in the hospital outpatient 
setting, the majority of hospital off-campus departments continue to 
receive full OPPS payment (including off-campus emergency departments 
and excepted off-campus departments of a hospital), which is often 
higher than the payment that would have been made if a similar service 
had been furnished in the physician office setting. Therefore, the 
current site-based payment creates an incentive for an unnecessary 
increase in the volume of this type of OPD service, which results in 
higher costs for the Medicare program, its beneficiaries, and taxpayers 
more generally. These differences in payment rates have unnecessarily 
shifted services away from the lower paying physician's office to the 
higher paying hospital outpatient department. We believe that the 
higher payment that is made under the OPPS, as compared to payment 
under the PFS, contributes to incentivizing providers to furnish care 
in the hospital outpatient setting rather than the physician office 
setting. In 2012, Medicare was paying approximately 80 percent more for 
a 15-minute office visit in a hospital outpatient department than in a 
freestanding physician office.\70\
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    \70\ Available at: http://www.medpac.gov/docs/default-source/reports/march-2012-report-to-the-congress-medicare-payment-policy.pdf.
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    For example, under Medicare payment policy in effect for CY 2018, 
the Medicare program would pay more for a clinic visit (HCPCS code 
G0463) furnished under the OPPS than it would for the visit codes under 
the PFS. In the CY 2017 OPPS/ASC interim final rule, we noted that the 
most frequently billed service with the ``PO'' modifier was described 
by HCPCS code G0463 (Hospital outpatient clinic visit for assessment 
and management of a patient), which is paid under APC 5012 (Clinic 
Visits and Related Services); the total number of CY 2017 claim lines 
for this service was approximately 10.8 million lines with the ``PO'' 
modifier as of October 2018, out of a total 30.5 million lines in CY 
2017. When services are furnished in the hospital outpatient setting, 
an additional payment for the professional services is generally made 
under the PFS using the ``facility'' rate. For example, in CY 2017, the 
OPPS payment rate for APC 5012, which is the APC to which the 
outpatient clinic visit code was assigned, was $106.56. The CY 2017 PFS 
``facility'' payment rate for a Level 3 visit, a service that commonly 
corresponds to the OPPS clinic visit, was $77.88 for a new patient and 
$51.68 for an established patient.
    However, when services are furnished in the physician office 
setting, only one payment is made--typically, the ``nonfacility'' rate 
under the PFS. The CY 2017 PFS nonfacility payment rates for a Level 3 
visit, a commonly billed service under the PFS, was $109.46 for a new 
patient and $73.93 for an established patient. Therefore, the total 
Medicare Part B payment rate (for the hospital and professional 
service) for a new patient when the service was furnished in the 
hospital outpatient setting was $184.44 ($106.56 + $77.88) compared to 
$109.46 in the physician office setting (approximately $75 or 68 
percent more per visit), or for an established patient, $158.24 
($106.56 + $51.68) in the hospital outpatient setting compared to 
$73.93 in the physician office setting (approximately $84 or 114 
percent more per visit). Under these examples, the payment rate was 
approximately $75 to $84 more for the same service when furnished in 
the hospital outpatient setting instead of the physician office 
setting, 20 percent of which was the responsibility of the beneficiary. 
Taking into account that this payment discrepancy occurs across tens of 
millions of claims each year, this is a significant source of 
unnecessary spending by Medicare beneficiaries directly (in the form of 
unnecessarily high copayments) and on behalf of Medicare beneficiaries 
(in the form of unnecessarily high Medicare payments for services that 
could be performed in a different setting).
    We understand that many off-campus departments converted from 
physicians' offices to hospital outpatient departments without a change 
in either the physical location or a change in the acuity of the 
patients seen. To the extent that similar services can be safely 
provided in more than one setting, we do not believe it is prudent for 
the Medicare program to pay more for these services in one setting than 
another. We believe the difference in payment for these services is a 
significant factor in the shift in services from the physician's office 
to the hospital outpatient department, thus unnecessarily increasing 
hospital outpatient department volume and Medicare program and 
beneficiary expenditures.
    We consider the shift of services from the physician office to the 
hospital outpatient department unnecessary if the beneficiary can 
safely receive the same services in a lower cost setting but is instead 
receiving services in the

[[Page 59009]]

higher paid setting due to payment incentives. We believe the increase 
in the volume of clinic visits is due to the payment incentive that 
exists to provide this service in the higher cost setting. Because 
these services could likely be safely provided in a lower cost setting, 
we believe that the growth in clinic visits paid under the OPPS is 
unnecessary. Further, we believe that capping the OPPS payment at the 
PFS-equivalent rate would be an effective method to control the volume 
of these unnecessary services because the payment differential that is 
driving the site-of-service decision will be removed. In particular, we 
believe this method of capping payment will control unnecessary volume 
increases both in terms of numbers of covered outpatient department 
services furnished and costs of those services.
    Therefore, given the unnecessary increases in the volume of clinic 
visits in hospital outpatient departments, in the CY 2019 OPPS/ASC 
proposed rule (83 FR 37142), for the CY 2019 OPPS, we proposed to use 
our authority under section 1833(t)(2)(F) of the Act to apply an amount 
equal to the site-specific PFS payment rate for nonexcepted items and 
services furnished by a nonexcepted off-campus PBD (the PFS payment 
rate) for the clinic visit service, as described by HCPCS code G0463, 
when provided at an off-campus PBD excepted from section 1833(t)(21) of 
the Act (departments that bill the modifier ``PO'' on claim lines). 
Off-campus PBDs that are not excepted from section 603 (departments 
that bill the modifier ``PN'') already receive a PFS-equivalent payment 
rate for the clinic visit.
    In CY 2019, for an individual Medicare beneficiary, the standard 
unadjusted Medicare OPPS proposed payment for the clinic visit was 
approximately $116, with approximately $23 being the average copayment. 
The proposed PFS equivalent rate for Medicare payment for a clinic 
visit was approximately $46, and the copayment would be approximately 
$9. Under this proposal, an excepted off-campus PBD would continue to 
bill HCPCS code G0463 with the ``PO'' modifier in CY 2019, but the 
payment rate for services described by HCPCS code G0463 when billed 
with modifier ``PO'' would now be equivalent to the payment rate for 
services described by HCPCS code G0463 when billed with modifier 
``PN''. This would save beneficiaries an average of $14 per visit. For 
a discussion of the amount paid under the PFS for clinic visits 
furnished by nonexcepted off-campus PBDs, we referred readers to the CY 
2018 PFS final rule (82 FR 53023 through 53024), as well as the CY 2019 
PFS proposed rule and final rule.
    In addition, in the CY 2019 OPPS/ASC proposed rule (83 FR 37142), 
we proposed to implement this proposed method in a nonbudget neutral 
manner. Specifically, while section 1833(t)(9)(B) of the Act requires 
that certain changes made under the OPPS be made in a budget neutral 
manner, we note that this section does not apply to the volume control 
method under section 1833(t)(2)(F) of the Act. In particular, section 
1833(t)(9)(A) of the Act, titled ``Periodic review,'' provides, in 
part, that the Secretary must annually review 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'' (emphasis added). 
Section 1833(t)(9)(B) of the Act, titled ``Budget neutrality 
adjustment'' provides that if ``the Secretary makes adjustments under 
subparagraph (A), then the adjustments for a year may not cause the 
estimated amount of expenditures under this part for the year to 
increase or decrease from the estimated amount of expenditures under 
this part that would have been made if the adjustments had not been 
made'' (emphasis added). However, section 1833(t)(2)(F) of the Act is 
not an ``adjustment'' under paragraph (2). Unlike the wage adjustment 
under section 1833(t)(2)(D) of the Act and the outlier, transitional 
pass-through, and equitable adjustments under section 1833(t)(2)(E) of 
the Act, section 1833(t)(2)(F) of the Act refers to a ``method'' for 
controlling unnecessary increases in the volume of covered OPD 
services, not an adjustment. Likewise, sections 1833(t)(2)(D) and (E) 
of the Act also explicitly require the adjustments authorized by those 
paragraphs to be budget neutral, while the volume control method 
authority at section 1833(t)(2)(F) of the Act does not. Therefore, the 
volume control method proposed under section 1833(t)(2)(F) of the Act 
is not one of the adjustments under section 1833(t)(2) of the Act that 
is referenced under section 1833(t)(9)(A) of the Act that must be 
included in the budget neutrality adjustment under section 
1833(t)(9)(B) of the Act. Moreover, section 1833(t)(9)(C) of the Act 
specifies that if the Secretary determines under methodologies 
described in paragraph (2)(F) that the volume of services paid for 
under this subsection increased beyond amounts established through 
those methodologies, the Secretary may appropriately adjust the update 
to the conversion factor otherwise applicable in a subsequent year. We 
interpret this provision to mean that the Secretary will have 
implemented a volume control method under section 1833(t)(2)(F) of the 
Act in a nonbudget neutral manner in the year in which the method is 
implemented, and that the Secretary may then make further adjustments 
to the conversion factor in a subsequent year to account for volume 
increases that are beyond the amounts estimated by the Secretary under 
the volume control method.
    We stated in the CY 2019 OPPS/ASC proposed rule (83 FR 37143) that 
we believe implementing a volume control method in a budget neutral 
manner would not appropriately reduce the overall unnecessary volume of 
covered OPD services, and instead would simply shift the movement of 
the volume within the OPPS system in the aggregate, a concern similar 
to the one we discussed in the CY 2008 OPPS final rule with comment 
period (72 FR 66613). This estimated payment impact was displayed in 
Column 5 of Table 42.-- Estimated Impact of the Proposed Changes for 
the Hospital Outpatient Prospective Payment System in the CY 2019 OPPS/
ASC proposed rule (83 FR 37228 through 37229). An estimate that 
includes the effects of estimated changes in enrollment, utilization, 
and case-mix based on the FY 2019 President's Budget approximates the 
estimated savings at $760 million, with $610 million of the savings 
accruing to Medicare, and $150 million saved by Medicare beneficiaries 
in the form of reduced copayments. In order to effectively establish a 
method for controlling the unnecessary growth in the volume of clinic 
visits furnished by excepted off-campus PBDs that does not simply 
reallocate expenditures that are unnecessary within the OPPS, we 
believe that this method must be adopted in a nonbudget neutral manner. 
The impact associated with this proposal is further described in 
section XXI. of the CY 2019 OPPS/ASC proposed rule.
    Comment: Numerous commenters, including organizations representing 
private health insurance plans, physician associations, specialty 
medical associations, and individual Medicare beneficiaries, supported 
the proposal. Some of these commenters commended CMS for its proposal, 
which they believed will help to control costs for both beneficiaries 
and the Medicare program, as well as foster greater competition in the 
physician services market. Commenters were

[[Page 59010]]

supportive of the immediate impact this policy would have in lowering 
Medicare beneficiaries' out-of-pocket costs. One commenter noted that 
there ``is no principled basis for treating excepted and nonexcepted 
PBDs differently with respect to payment for E&M services or for 
perpetuating the payment differential between off-campus PBDs and 
physician offices.'' Several commenters supported implementing this 
policy in a nonbudget neutral manner because they believed to do 
otherwise would be simply to redistribute expenditures for unnecessary 
services within the OPPS rather than eliminating those expenditures 
from the OPPS altogether. A number of commenters urged CMS to continue 
on a path to bring full parity in payment for outpatient services, 
regardless of the site-of-service, to lower beneficiary cost-sharing, 
reduce Medicare expenditures, and stem the tide of provider 
consolidation. Two commenters believed that several factors demonstrate 
to them that HOPDs drive up volume for several other common outpatient 
services, including:
     Patients receive more chemotherapy administration 
sessions, on average, when treated in the HOPD. Chemotherapy days per 
beneficiary were an estimated 9 to 12 percent higher in the hospital 
outpatient department than the physician office setting.\71\
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    \71\ The Moran Company: Cost Differences in Cancer Care Across 
Settings; August 2013.
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     Differences in utilization of chemotherapy drugs and 
services between hospital outpatient departments and physicians' 
offices resulted in an estimated increase in Medicare payments and 
Medicare beneficiary copayments of $167 million. Over 93 percent of the 
additional payments were related to chemotherapy and other 
chemotherapy-related drugs.\72\
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    \72\ BRG: Impact of Medicare Payments of Shift in Site of Care 
for Chemotherapy Administration; June 2014.
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     Cardiac imaging procedures resulted in higher payments for 
a 3-day episode (217 percent) and 22-day episodes (80 percent) when 
performed in a HOPD compared to a physician's office.\73\
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    \73\ Avalere: Medicare Payment Differentials Across Outpatient 
Settings of Care; February 2016.
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     For certain cardiology, orthopedic, and gastroenterology 
services, employed physicians were seven times more likely to perform 
services in a HOPD setting than independent physicians, resulting in 
additional costs of $2.7 billion to Medicare and $411 million in 
patient copayments over a 3-year period.\74\
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    \74\ Avalere, PAI: Physician Practice Acquisition Study: 
National and Regional Employment Changes, October 2016.
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    One commenter believed that payment differentials between 
independent physician practices and hospital outpatient departments 
stem in part from inadequate Medicare physician payment rates and that 
any savings from site neutrality proposals derived from OPPS should be 
reinvested in increasing payment rates elsewhere in Part B, including 
payments to physicians. Some commenters urged HHS to work with Congress 
to expand site-neutral policies in the OPPS.
    Response: We appreciate the commenters' support. As mentioned in 
the proposed rule (83 FR 37138 through 37143), we share the commenters' 
concern that the current payment incentives, rather than patient acuity 
or medical necessity, are affecting site-of-service decision-making. As 
we noted in the proposed rule (83 FR 37138 through 37143), ``[a] large 
source of growth in spending on services furnished in hospital 
outpatient departments (HOPDs) appears to be the result of the shift of 
services from (lower cost) physician offices to (higher cost) 
HOPDs''.\75\ We continue to believe that these shifts in the sites of 
service are unnecessary if the beneficiary can safely receive the same 
services in a lower cost setting but instead receives care in a higher 
cost setting due to payment incentives. In addition to the concern that 
the difference in payment is leading to unnecessary increases in the 
volume of covered outpatient department services, we remain concerned 
that this shift in care setting increases beneficiary cost-sharing 
liability because Medicare payment rates for the same or similar 
services are generally higher in hospital outpatient departments than 
in physician offices.
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    \75\ Available at: http://www.medpac.gov/docs/default-source/reports/mar18_medpac_entirereport_sec.pdf?sfvrsn=0.
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    We appreciate the comments supporting the implementation of this 
policy in a nonbudget neutral manner. As we stated in the proposed rule 
(83 FR 37138 through 37143), we believe implementing a volume control 
method in a budget neutral manner would not appropriately reduce the 
overall unnecessary volume of covered OPD services, and instead would 
simply shift the volume of services within the OPPS system in the 
aggregate. As detailed later in this section, we are finalizing our 
proposal, with modifications, in response to public comments. We will 
continue to take information submitted by the commenters into 
consideration for future study.
    With respect to the comment that it is inappropriate to establish a 
PFS-equivalent rate because PFS rates are inadequate and that any 
savings should be redistributed across Medicare Part B, we disagree 
that PFS rates as a whole are inadequate and note that the methodology 
to develop such rates was established by law and regulations and is 
updated each year through notice-and-comment rulemaking. We note that 
the overall amount of Medicare payments to physicians and other 
entities made under the PFS is determined by the PFS statute, and the 
rates for individual services are determined based on the resources 
involved in furnishing these services relative to other services paid 
under the PFS. To the extent the commenter believes that the PFS rate 
for a particular service is misvalued relative to other PFS services, 
we encourage the commenter to nominate the service for review as a 
potentially misvalued service under the PFS.
    Comment: MedPAC supported the proposal to reduce the OPPS payment 
rate for clinic visits provided in an excepted off-campus PBD to a PFS-
equivalent payment rate. MedPAC noted that the policy would be 
consistent with its past recommendations for site-neutral payments 
between HOPDs and freestanding physician offices. In its comments, 
MedPAC highlighted two key points from its March 2012 recommendation on 
site-neutral payments. While MedPAC recommended that OPPS payment rates 
for clinic visits be reduced so that Medicare payments for these 
services are the same whether they are provided in HOPDs or physician 
offices, it also recommended that this policy be phased in over 3 years 
to allow providers time to adjust to lower payment rates. During the 
phase-in, MedPAC recommended that payment reductions to hospitals with 
a disproportionate share (DSH) patient percentage at or above the 
median be limited to 2 percent of overall Medicare payments because 
these hospitals are often the primary source of care for low-income 
beneficiaries and limiting the reduction in revenue would help maintain 
access to care for these beneficiaries.
    Response: We thank MedPAC for its comments and support of this 
policy. In its comments, MedPAC recommended this policy be phased in 
over 3 years to allow providers time to adjust to lower payment rates. 
As detailed later in this section, we will be implementing this policy 
with a 2-year phase-in. We believe that a 2-year phase-in allows us

[[Page 59011]]

to balance the immediate need to address the unnecessary increases in 
the volume of clinic visits with concerns like those articulated by 
MedPAC regarding providers' need for time to adjust to these payment 
changes. While we acknowledge and share MedPAC's concern about 
beneficiary access to care, we do not believe that a limit on the 
payment reduction to hospitals with a DSH patient percentage at or 
above the median is necessary because we believe the increase in the 
volume of clinic visits in excepted off-campus provider-based 
departments of hospitals with high DSH percentages is equally 
unnecessary as it is at other hospitals.
    Many commenters challenged the statutory authority for various 
aspects of the proposal. These comments are summarized below.
    Comment: Several commenters disagreed with CMS' interpretation of 
section 1833(t)(2)(F) of the Act. The commenters contended that section 
1833(t)(2)(F) of the Act does not confer direct authority on CMS to 
modify OPPS payment rates for specific services. Rather, the commenters 
asserted that section 1833(t)(2)(F) of the Act only permits the agency 
to develop a ``method,'' which the commenters interpreted to mean a 
``way of doing things'' or a ``plan.'' The commenters stated that 
utilizing the authority at section 1833(t)(2)(F) of the Act to reduce 
payments to excepted off-campus PBDs to rates that equal the lower 
payment amounts received by nonexcepted off-campus PBDs was improper. 
The commenters maintained that the Secretary can only control 
unnecessary increases in volume using authority conferred by other 
provisions of section 1833(t) of the Act, such as through the equitable 
adjustment authority at section 1833(t)(2)(E) of the Act. The 
commenters believed that the clinic visit proposal was arbitrary and 
capricious for this and other reasons. In particular, the commenters 
expressed concern that there was no data-driven basis to conclude that 
OPD services have increased unnecessarily. The commenters also claimed 
that the proposal is based on unsupported assertions and assumptions 
regarding increases in volume. The commenters were concerned that other 
factors, such as the shift from inpatient services to outpatient 
services or the 2-midnight policy, might be driving the increases in 
the volume of outpatient services. Other commenters asserted that CMS 
should consider the impact of severity of illness and patient 
demographics on outpatient volume prior to moving forward with any 
payment changes. One commenter stated that, relative to patients seen 
in physician offices, patients seen in HOPDs:
     Have more severe chronic conditions;
     Have higher prior utilization of hospitals and EDs;
     Are more likely to live in low-income areas;
     Are 1.8 times more likely to be dually eligible for 
Medicare and Medicaid;
     Are 1.4 times more likely to be nonwhite;
     Are 1.6 times more likely to be under age 65 and disabled; 
and
     Are 1.1 times more likely to be over 85 years old.
    The commenters also noted that Medicare beneficiaries with cancer 
seen in HOPDs relative to those beneficiaries seen in physician offices 
have more severe chronic conditions, higher prior utilization of 
services in hospitals and emergency departments, and higher likelihood 
of residing in low-income areas. In addition, the commenters noted that 
these cancer patients were more likely to be dually eligible for 
Medicare and Medicaid and be nonwhite, under age 65, and disabled.
    Response: After consideration of these comments, we continue to 
believe that section 1833(t)(2)(F) of the Act gives the Secretary broad 
authority to develop a method for controlling unnecessary increases in 
the volume of covered outpatient department (OPD) services, including a 
method that controls unnecessary volume increases by removing a payment 
differential that is driving a site-of-service decision, and as a 
result, is unnecessarily increasing service volume.\76\ We continue to 
believe shifts in the sites of service described in the preceding 
paragraphs are inherently unnecessary if the beneficiary can safely 
receive the same services in a lower cost setting but instead receives 
care in a higher cost setting due to the payment incentives created by 
the difference in payment amounts. While we did receive some data 
illustrating that HOPDs serve unique patient populations and provide 
services to medically complex beneficiaries, these data did not 
demonstrate the need for higher payment for all clinic visits provided 
in HOPDs. The fact that the commenters did not supply data supporting 
these assertions is suggestive that the payment differential may be the 
main driver for unnecessary volume increases in outpatient department 
services, particularly clinic visits.
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    \76\ Available at: https://www.ssa.gov/OP_Home/ssact/title18/1833.htm.
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    In fact, the Government Accountability Office (GAO) found that 
``the percentage of E/M visits--as well as the number of E/M office 
visits per beneficiary--performed in HOPDs, rather than physician 
offices, was generally higher in counties with higher levels of 
vertical consolidation in 2007-2013.'' \77\ Vertical consolidation is 
the practice of hospitals acquiring physician practices. We believe 
that higher payment rates for services furnished in HOPDs, which 
include clinic visits, have led hospitals to increasingly purchase 
physician practices. We believe there is a correlation among the 
increasing volume of HOPD clinic visits, vertical integration, and the 
higher OPPS payment rates for clinic visits. The GAO discovered that 
``the median percentage of E/M office visits performed in HOPDs in 
counties with the lowest levels of vertical consolidation was 4.1 
percent in 2013. In contrast, this rate was 14.1 percent for counties 
with the highest levels of consolidation.'' The GAO also found that, in 
2013, the number of E/M office visits performed in HOPDs per 100 
beneficiaries was 26 for the counties with low levels of vertical 
consolidation, whereas the number was substantially higher--82 services 
per 100 beneficiaries--in counties with the highest levels of vertical 
consolidation.\78\ The GAO determined that the association between 
higher levels of vertical consolidation and high utilization of E/M 
office visits in HOPDs remained even after controlling for differences 
in county-level characteristics and other market factors that could 
affect the setting in which E/M office visits are performed. The GAO 
describes the model it ran as a ``regression model that controlled for 
county characteristics that do not change over relatively short periods 
of time, such as whether a county is urban or rural, and county 
characteristics that could change over time, such as the level of 
competition among hospitals and physicians within counties.'' The GAO 
explained that its ``regression model's results were similar to [its] 
initial results: the level of vertical consolidation in a county was 
significantly and positively associated with a higher number and 
percentage of E/M office visits performed in HOPDs--that is, as 
vertical consolidation increased in a given county, the number and 
percentage of E/M office visits

[[Page 59012]]

performed in HOPDs in that county also tended to be higher.'' \79\
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    \77\ Available at: https://www.gao.gov/assets/680/674347.pdf.
    \78\ Ibid.
    \79\ Available at: https://www.gao.gov/assets/680/674347.pdf.
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    The GAO findings align with our assertions in the proposed rule (83 
FR 37138 through 37143). Paying substantially more for the same service 
when performed in an HOPD rather than a physician office provides an 
incentive to shift services that were once performed in physician 
offices to HOPDs after consolidation has occurred. The GAO findings 
suggest that providers responded to this financial incentive: E/M 
office visits were more frequently performed in HOPDs in counties with 
higher levels of vertical consolidation. The GAO found this association 
in both of its analyses of E/M office visit utilization in counties 
with varying levels of vertical consolidation and in its regression 
analyses.
    We heard from many commenters that the higher payment rate was 
justified by the fact that HOPDs were treating sicker patient 
populations. The GAO's study did not support this conclusion. It 
examined counties that experienced large growth in the billing of 
clinic visits in HOPDs and was able to determine that: ``Beneficiaries 
from counties with higher levels of vertical consolidation were not 
sicker, on average, than beneficiaries from counties with lower levels 
of consolidation. Specifically, beneficiaries from counties with higher 
levels of vertical consolidation tended to have either similar or 
slightly lower median risk scores, death rates, rates of end-stage 
renal disease, and rates of disability compared to those from counties 
with lower levels of consolidation. Further, counties with higher 
levels of consolidation had a lower percentage of beneficiaries dually 
eligible for Medicaid, who tend to be sicker and have higher Medicare 
spending than Medicare beneficiaries who are not dually eligible for 
Medicaid.''
    This suggests that areas with higher E/M office visit utilization 
in HOPDs are not composed of sicker-than-average beneficiaries. As we 
stated in the proposed rule (83 FR 37138 through 37143), paying more 
for the same service when performed in an HOPD rather than a 
physician's office provides an incentive to shift services that were 
once performed in physician offices to HOPDs. The GAO's findings 
suggest that providers responded to this financial incentive. As we 
noted in the proposed rule (83 FR 37138 through 37143), we have 
developed many payment policies, such as packaging policies and 
comprehensive APCs, to address the rapid growth of services in the 
OPPS. However, these policies have not been able to control for 
unnecessary increases in volume that are due to site-of-service payment 
differentials, which create an incentive to furnish a service in the 
OPD that could be furnished in a lower cost setting based solely on the 
higher payment amount available under the OPPS. Here, the clinic visit 
service furnished in excepted off-campus PBDs is the same as the clinic 
visit service furnished in nonexcepted off-campus PBDs. We believe that 
applying an amount equal to the site-specific PFS payment rate for 
nonexcepted items and services furnished by a nonexcepted off-campus 
PBD (the PFS payment rate) for the clinic visit service, as described 
by HCPCS code G0463, when provided at an off-campus PBD excepted from 
section 1833(t)(21) of the Act is an appropriate method to control the 
unnecessary increase in the volume of outpatient services.
    Comment: Several commenters expressed concern that CMS lacks the 
statutory authority to reduce OPPS payments for certain clinic visit 
services furnished at off-campus PBDs that are excepted from payment 
``under the applicable payment system'' under section 1833(t)(21) of 
the Act. The commenters stated that Congress expressly chose in section 
603 of the Bipartisan Budget Act of 2015 not to confer on CMS authority 
to pay excepted off-campus PBDs at the reduced rates paid to 
nonexcepted off-campus PBDs. The commenters asserted that CMS is 
ignoring the express and statutorily mandated grandfathering exception 
created by section 603.
    Response: We believe the changes required by section 603 of the 
Bipartisan Budget Act of 2015 made in section 1833(t) of the Act 
address some of the concerns related to shifts in settings of care and 
overutilization of services in the hospital outpatient setting for new 
off-campus PBDs after November 1, 2015. However, the majority of 
hospital off-campus departments continue to receive full OPPS payment 
(including off-campus emergency departments and excepted off-campus 
departments of a hospital), which is often higher than the payment that 
would have been made if a similar service had been furnished in the 
physician office setting. Therefore, the current site-based payment 
creates an incentive for an unnecessary increase in the volume of this 
type of OPD service, which results in higher costs for the Medicare 
program, beneficiaries, and taxpayers more generally. We interpret our 
authority under section 1833(t)(2)(F) of the Act to allow us to 
implement our proposed method of applying an amount equal to the site-
specific PFS payment rate for nonexcepted items and services furnished 
by a nonexcepted off-campus PBD (the PFS payment rate) for the clinic 
visit service, as described by HCPCS code G0463, when provided at off-
campus PBDs, even those that are excepted from section 1833(t)(21) of 
the Act. We believe that this is an appropriate method because the 
clinic visit service is the same service furnished in excepted and 
nonexcepted off-campus PBDs.
    When Congress passed the Bipartisan Budget Act of 2015, Medicare 
OPPS expenditures were $56 billion and growing at an annual rate of 
about 7.3 percent. In addition, the percentage increase in volume and 
intensity of outpatient services was increasing at 3.4 percent. For the 
upcoming 2019 calendar year, we estimate that, without this policy, 
OPPS expenditures would be $74.5 billion, growing at a rate of 9.1 
percent, with the volume and intensity of outpatient services 
increasing at 5.4 percent, based on the Midsession Review for 2019. 
While it is clear that the action Congress took in 2015 to address 
certain off-campus PBDs helped stem the tide of these increases in the 
volume of OPD services, it is likewise clear that the more specific 
payment adjustment has not adequately addressed the overall increase in 
the volume of these types of OPD services because most off-campus PBDs 
continue to be paid the higher OPPS amount for these services. We would 
not be able to adequately address the unnecessary increases in the 
volume of clinic visits in HOPDs if we did not apply this policy to all 
off-campus HOPDs. We do not believe that the section 603 amendments to 
section 1833(t) of the Act, which exclude applicable items and services 
furnished by nonexcepted off-campus PBDs from payments under the OPPS, 
preclude us from exercising our authority in section 1833(t)(2)(F) of 
the Act to develop a method for controlling unnecessary increases in 
the volume of covered outpatient department services under the OPPS.
    Comment: Several commenters believed that CMS does not have 
statutory authority to implement this policy in a nonbudget neutral 
manner. The commenters explained that, because CMS lacks the authority 
to reduce clinic visit payment rates as a method to control unnecessary 
increases in the volume of covered outpatient department services under 
section 1833(t)(2)(F) of the Act, that provision cannot provide 
authority for the

[[Page 59013]]

payment reduction to be made in a nonbudget neutral way. The commenters 
also claimed that the only nonbudget neutral option available to the 
agency is to adjust the conversion factor in a subsequent year, as 
provided under section 1833(t)(9)(C) of the Act. The commenters argued 
that if Congress had intended to give CMS the authority to make a 
volume control method nonbudget neutral, it would have done so in 
clearer and more express terms. Other commenters stated that if this 
policy is finalized, it should be done so only in a budget neutral 
manner.
    Response: We maintain that while section 1833(t)(9)(B) of the Act 
does require that certain changes made under the OPPS be made in a 
budget neutral manner, this provision does not apply to the volume 
control method under section 1833(t)(2)(F) of the Act as outlined 
through our proposal. As we noted in the proposed rule (83 FR 37138 
through 37143), unlike the wage adjustment under section 1833(t)(2)(D) 
of the Act and the outlier, transitional pass-through, and equitable 
adjustments under section 1833(t)(2)(E) of the Act, section 
1833(t)(2)(F) of the Act refers to a ``method'' for controlling 
unnecessary increases in the volume of covered OPD services, not an 
adjustment. Likewise, sections 1833(t)(2)(D) and (E) of the Act also 
explicitly require the adjustments authorized by those paragraphs to be 
budget neutral, while the volume control method authority at section 
1833(t)(2)(F) of the Act does not include such a requirement. 
Therefore, we maintain that the volume control method proposed under 
section 1833(t)(2)(F) of the Act is not one of the adjustments under 
section 1833(t)(2) of the Act that is referenced under section 
1833(t)(9)(A) of the Act that must be included in the budget neutrality 
adjustment under section 1833(t)(9)(B) of the Act. Moreover, section 
1833(t)(9)(C) of the Act specifies that if the Secretary determines 
under methodologies described in paragraph (2)(F) of section 1833(t) of 
the Act that the volume of services paid for under this subsection 
increased beyond amounts established through those methodologies, the 
Secretary may appropriately adjust the update to the conversion factor 
otherwise applicable in a subsequent year. We continue to interpret 
this provision to mean that the Secretary will have implemented a 
volume control method under section 1833(t)(2)(F) of the Act in a 
nonbudget neutral manner in the year in which the method is 
implemented. Further, as we stated in the proposed rule (83 FR 37138 
through 37143), we believe that implementing a volume control method in 
a budget neutral manner would not appropriately reduce the overall 
unnecessary volume of covered OPD services, and instead would simply 
shift the volume within the OPPS system in the aggregate.
    Comment: Several commenters supported the recommendation from the 
HOP Panel not to implement this proposal and to instead study the 
matter to better understand the reasons for increased utilization.
    Response: Section 1833(t)(9)(A) of the Act provides that the 
Secretary shall consult with the Panel on policies affecting the 
clinical integrity of the ambulatory payment classifications and their 
associated weights under the OPPS. The Panel met on August 20, 2018 and 
made recommendations on this proposed policy, and we consulted with the 
Panel on those recommendations. The HOP Panel's recommendations, along 
with public comments on provisions of the proposed rule, have been 
taken into consideration in the development of this final rule with 
comment period. While we are not accepting the HOP Panel's 
recommendation to not implement this proposal, we will continue to 
monitor and study the utilization of outpatient services as recommended 
by the Panel.
    Comment: Several commenters expressed concern that this policy 
proposal would disproportionately affect safety net hospitals and rural 
providers. Numerous commenters representing providers and beneficiaries 
in the State of Washington expressed concerned about the impact this 
proposal would have on their area. Several commenters also requested 
that sole community hospitals (urban and rural), rural referral 
centers, and Medicare-dependent hospitals be exempted from this policy. 
A number of commenters, including many State hospital associations, 
expressed concern that the magnitude of the proposed payment reduction 
would have a drastic effect on their margins and endanger the 
investments many hospitals have made in their provider-based 
facilities. In addition, commenters suggested that the reduction in 
payment would ultimately lead to a reduction of services that would 
adversely affect vulnerable patient populations. One commenter 
conducted a trend analysis and found that 200 hospitals would shoulder 
73 percent of the proposed payment reduction. According to this 
commenter's analysis, for the 200 hospitals most affected by this 
proposal, the average reduction would be 5.5 percent. For the remaining 
hospitals, the average reduction would be 0.5 percent.
    Response: We share the commenters' concerns about access to care, 
especially in rural areas where access issues