[Federal Register Volume 84, Number 154 (Friday, August 9, 2019)]
[Proposed Rules]
[Pages 39398-39644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16107]



[[Page 39397]]

Vol. 84

Friday,

No. 154

August 9, 2019

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





42 CFR Parts 405, 410, 412. 416, et al.





Office of the Secretary

45 Part 180





Medicare Program: Proposed Changes to Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Price Transparency of Hospital Standard Charges; 
Proposed Revisions of Organ Procurement Organizations Conditions of 
Coverage; Proposed Prior Authorization Process and Requirements for 
Certain Covered Outpatient Department Services; Potential Changes to 
the Laboratory Date of Service Policy; Proposed Changes to 
Grandfathered Children's Hospitals-Within-Hospitals; Proposed Rule

  Federal Register / Vol. 84 , No. 154 / Friday, August 9, 2019 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 416, 419, and 486

Office of the Secretary

45 CFR Part 180

[CMS-1717-P]
RIN 0938-AT74


Medicare Program: Proposed Changes to Hospital Outpatient 
Prospective Payment and Ambulatory Surgical Center Payment Systems and 
Quality Reporting Programs; Price Transparency of Hospital Standard 
Charges; Proposed Revisions of Organ Procurement Organizations 
Conditions of Coverage; Proposed Prior Authorization Process and 
Requirements for Certain Covered Outpatient Department Services; 
Potential Changes to the Laboratory Date of Service Policy; Proposed 
Changes to Grandfathered Children's Hospitals-Within-Hospitals

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule proposes revisions to the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2020 based on 
our continuing experience with these systems. In this proposed rule, we 
describe the proposed changes to the amounts and factors used to 
determine the payment rates for Medicare services paid under the OPPS 
and those paid under the ASC payment system. In addition, this proposed 
rule would update and refine the requirements for the Hospital 
Outpatient Quality Reporting (OQR) Program and the ASC Quality 
Reporting (ASCQR) Program. In addition, in this proposed rule, we are 
proposing to establish requirements for all hospitals in the United 
States for making hospital standard charges available to the public; 
establish a process and requirements for prior authorization for 
certain covered outpatient department services; revise the conditions 
for coverage of organ procurement organizations; and revise the 
regulations to allow grandfathered children's hospitals-within-
hospitals to increase the number of beds without resulting in the loss 
of grandfathered status. We also solicit comments on potential 
revisions to the laboratory date of service policy under the Clinical 
Laboratory Fee Schedule. Finally, we solicit comments on an appropriate 
remedy in litigation involving our OPPS payment policy for 340B-
acquired drugs, which would inform future rulemaking in the event of an 
adverse decision on appeal in that litigation.

DATES: Comment period: To be assured consideration, comments on this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EST on September 27, 2019.

ADDRESSES: In commenting, please refer to file code CMS-1717-P when 
commenting on the issues in this proposed rule. 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-1717-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1717-P, 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: 
    2-Midnight Rule (Short Inpatient Hospital Stays), contact Lela 
Strong-Holloway via email [email protected] or at 410-786-3213.
    Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact 
the HOP Panel mailbox at [email protected].
    Ambulatory Surgical Center (ASC) Payment System, contact Scott 
Talaga via email [email protected] or at 410-786-4142.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia via email [email protected] or at 410-786-7236.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Measures, contact Vinitha Meyyur via email [email protected] 
or at 410-786-8819.
    Blood and Blood Products, contact Josh McFeeters via email 
[email protected] or at 410-786-9732.
    Cancer Hospital Payments, contact Scott Talaga via email 
[email protected] or at 410-786-4142.
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver via email [email protected] or at 410-786-6719.
    Control for Unnecessary Increases in Volume of Outpatient Services, 
contact Elise Barringer via email [email protected] or at 
410-786-9222.
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Elise Barringer via email [email protected] or at 
410-786-9222.
    Comprehensive APCs (C-APCs), contact Lela Strong-Holloway via email 
[email protected] or at 410-786-3213, or Mitali Dayal via email 
at [email protected] or at 410-786-4329.
    CPT and Level II HCPCS Codes, contact Marjorie Baldo via email 
[email protected] or at 410-786-4617.
    Grandfathered Children's Hospitals-within-Hospitals, contact 
Michele Hudson via email [email protected] or 410-786-4487.
    Hospital Cost Reporting and Chargemaster Comment Solicitation, 
contact Dr. Terri Postma via email at 
[email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Anita Bhatia via email 
[email protected] or at 410-786-7236.
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Vinitha Meyyur via email [email protected] or at 410-
786-8819.
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Elise Barringer via email

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[email protected] or at 410-786-9222.
    Inpatient Only (IPO) Procedures List, contact Lela Strong-Holloway 
via email [email protected] or at 410-786-3213, or Au'Sha 
Washington via email at [email protected] or at 410-786-
3736.
    New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga 
via email [email protected] or at 410-786-4142.
    No Cost/Full Credit and Partial Credit Devices, contact Scott 
Talaga via email [email protected] or at 410-786-4142.
    OPPS Brachytherapy, contact Scott Talaga via email 
[email protected] 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 
[email protected] or at 410-786-1816, Steven Johnson via email 
[email protected] or at 410-786-3332, or Scott Talaga via 
email [email protected] or at 410-786-4142, or Josh McFeeters 
via email at [email protected] or at 410-786-9732.
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Josh McFeeters via email [email protected] 
or at 410-786-9732.
    OPPS New Technology Procedures/Services, contact the New Technology 
APC mailbox at [email protected].
    OPPS Packaged Items/Services, contact Lela Strong-Holloway via 
email [email protected] or at 410-786-3213, or Mitali Dayal via 
email at [email protected] or at 410-786-4329.
    OPPS Pass-Through Devices, contact the Device Pass-Through mailbox 
at [email protected].
    OPPS Status Indicators (SI) and Comment Indicators (CI), contact 
Marina Kushnirova via email [email protected] or at 410-
786-2682.
    Organ Procurement Organization (OPO) Conditions for Coverage 
(CfCs), contact Alpha-Banu Wilson via email at 
[email protected] or at 410-786-8687, or Diane Corning via 
email at [email protected] or at 410-786-8486.
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at 
[email protected].
    Price Transparency of Hospital Standard Charges, contact Dr. Terri 
Postma or Elizabeth November via email at 
[email protected].
    Prior Authorization Process and Requirements for Certain Hospital 
Outpatient Department Services, contact Thomas Kessler via email at 
[email protected] or at 410-786-1991.
    Quality Measurement Relating to Price Transparency, contact Dr. 
Reena Duseja or Dr. Terri Postma via email at 
[email protected]
    Rural Hospital Payments, contact Josh McFeeters via email at 
[email protected] or at 410-786-9732.
    Skin Substitutes, contact Josh McFeeters via email 
[email protected] or at 410-786-9732.
    Supervision of Outpatient Therapeutic Services in Hospitals and 
CAHs, contact Josh McFeeters via email [email protected] or 
at 410-786-9732, or Mitali Dayal via email at [email protected] 
or at 410-786-4329.
    All Other Issues Related to Hospital Outpatient and Ambulatory 
Surgical Center Payments Not Previously Identified, contact Elise 
Barringer via email [email protected] or at 410-786-9222.

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.

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 proposed rule, 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 on the CY 2019 OPPS/ASC Final Rule 
With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default Cost-to-Charge Ratios 
(CCRs)
    E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) 
and Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2020
    F. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2020
    G. Proposed Hospital Outpatient Outlier Payments
    H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New and Revised HCPCS Codes
    B. Proposed OPPS Changes--Variations Within APCs
    C. Proposed New Technology APCs
    D. Proposed APC-Specific Policies
IV. Proposed OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    B. Proposed Device-Intensive Procedures
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals

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    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Payment Status
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits and 
Critical Care Services
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2020
    C. Proposed Outlier Policy for CMHCs
    D. Update to PHP Allowable HCPCS Codes
IX. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient Only (IPO) List
X. Proposed Nonrecurring Policy Changes
    A. Proposed Changes in the Level of Supervision of Outpatient 
Therapeutic Services in Hospitals and Critical Access Hospitals 
(CAHs)
    B. Short Inpatient Hospital Stays
    C. Method To Control Unnecessary Increases in the Volume of 
Clinic Visit Services Furnished in Excepted Off-Campus Provider-
Based Departments (PBDs)
XI. Proposed CY 2020 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2020 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2020 Comment Indicator Definitions
XII. MedPAC Recommendations
    A. OPPS Payment Rates Update
    B. ASC Conversion Factor Update
    C. ASC Cost Data
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    A. Background
    B. Proposed ASC Treatment of New and Revised Codes
    C. Proposed Update to the List of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    D. Proposed Update and Payment for ASC Covered Surgical 
Procedures and Covered Ancillary Services
    E. New Technology Intraocular Lenses (NTIOLs)
    F. Proposed ASC Payment and Comment Indicators
    G. Proposed Calculation of the ASC Payment Rates and the ASC 
Conversion Factor
XIV. 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. Proposed Payment Reduction for Hospitals That Fail To Meet 
the Hospital OQR Program Requirements for the CY 2020 Payment 
Determination
XV. 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
XVI. Proposed Requirements for Hospitals To Make Public a List of 
Their Standard Charges
    A. Introduction and Overview
    B. Proposed Definition of ``Hospital'' and Proposed Special 
Requirements That Would Apply to Certain Types of Hospitals
    C. Proposed Definition of ``Items and Services'' Provided by 
Hospitals
    D. Proposed Definitions for Types of ``Standard Charges''
    E. Proposed Requirements for Public Disclosure of All Hospital 
Standard Charges for All Items and Services
    F. Proposed Requirements for Consumer-Friendly Display of the 
Payer-Specific Negotiated Charges for Selected Shoppable Services
    G. Proposed Monitoring and Enforcement of Requirements for 
Making Standard Charges Public
    H. Proposed Appeals Process
XVII. Request for Information (RFI): Quality Measurement Relating to 
Price Transparency for Improving Beneficiary Access to Provider and 
Supplier Charge Information
    A. Introduction
    B. Request for Information
XVIII. Organ Procurement Organizations (OPOs) Conditions for 
Coverage (CfCs): Proposed Revision of the Definition of ``Expected 
Donation Rate''
    A. Background
    B. Proposed Revision of the Definition of ``Expected Donation 
Rate''
    C. Request for Information Regarding Potential Changes to the 
Organ Procurement Organization and Transplant Center Regulations
XIX. Clinical Laboratory Fee Schedule: Potential Revisions to the 
Laboratory Date of Service Policy
    A. Background on the Medicare Part B Laboratory Date of Service 
Policy
    B. Medicare DOS Policy and the ``14-Day Rule''
    C. Billing and Payment for Laboratory Services Under the OPPS
    D. ADLTs Under the New Private Payor Rate-Based CLFS
    E. Additional Laboratory DOS Policy Exception for the Hospital 
Outpatient Setting
    F. Potential Revisions to Laboratory DOS Policy and Request for 
Public Comments
XX. Proposed Prior Authorization Process and Requirements for 
Certain Hospital Outpatient Department (OPD) Services
    A. Background
    B. Proposal for a Prior Authorization Process for Certain OPD 
Services
    C. Proposed List of Outpatient Department Services Requiring 
Prior Authorization
XXI. Comment Solicitation on Cost Reporting, Maintenance of Hospital 
Chargemasters, and Related Medicare Payment Issues
XXII. Proposed Changes to Requirements for Grandfathered Children's 
Hospitals-Within-Hospitals (HwHs)
XXIII. Files Available to the Public Via the internet
XXIV. 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. ICR for Proposal on Hospital Price Transparency
    E. ICRs for Proposed Revision of the Definition of ``Expected 
Donation Rate'' for Organ Procurement Organizations
    F. ICR for Proposed Prior Authorization Process and Requirements 
for Certain Hospital Outpatient Department (OPD) Services
    G. Potential Revisions to Laboratory Date of Service (DOS) 
Policy
    H. Total Reduction in Burden Hours and in Costs
XXV. Response to Comments
XXVI. Economic Analyses
    A. Statement of Need
    B. Overall Impact for the Provisions of This Proposed Rule
    C. Detailed Economic Analyses
    D. Effects of the Proposals Relating to Price Transparency in 
Hospital Standard Charges
    E. Effects of Proposed Prior Authorization Process and 
Requirements for Certain Hospital Outpatient Department (OPD) 
Services
    F. Effects of Proposal Relating to Changes in the Definition of 
Expected Donation Rate for Organ Procurement Organizations
    G. Potential Revisions to the Laboratory Date of Service Policy
    H. Effect of Proposed Changes to Requirements for Grandfathered 
Children's Hospitals-Within-Hospitals (HwHs)
    I. Regulatory Review Costs
    J. Regulatory Flexibility Act (RFA) Analysis
    K. Unfunded Mandates Reform Act Analysis
    L. Reducing Regulation and Controlling Regulatory Costs
    M. Conclusion
XXVII. Federalism Analysis Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this proposed rule, we are proposing to update the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments (HOPDs) and ambulatory 
surgical centers (ASCs), beginning January 1, 2020. Section 1833(t) of 
the Social Security Act (the Act) requires us to

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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, the 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. We describe these and various other statutory 
authorities in the relevant sections of this proposed rule. In 
addition, this proposed rule would update and refine the requirements 
for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC 
Quality Reporting (ASCQR) Program.
    In this proposed rule, we also are proposing to: Establish 
requirements for all hospitals (including hospitals not paid under the 
OPPS) in the United States for making hospital standard charges 
available to the public; establish a process and requirements for prior 
authorization for certain covered outpatient department services; 
revise the conditions for coverage for organ procurement organizations; 
and revise the regulations to allow grandfathered children's hospitals-
within-hospitals to increase the number of beds without resulting in 
the loss of grandfathered status. We also solicit comments on potential 
revisions to the laboratory date of service policy under the Clinical 
Laboratory Fee Schedule.
2. Summary of the Major Provisions
     OPPS Update: For CY 2020, we are proposing to increase the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 2.7 percent. This increase factor is based 
on the proposed hospital inpatient market basket percentage increase of 
3.2 percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the proposed multifactor 
productivity (MFP) adjustment of 0.5 percentage point. Based on this 
proposed update, we estimate that total payments to OPPS providers 
(including beneficiary cost-sharing and estimated changes in 
enrollment, utilization, and case-mix) for CY 2020 would be 
approximately $79 billion, an increase of approximately $6 billion 
compared to estimated CY 2019 OPPS payments.
    We are proposing to continue to implement the statutory 2.0 
percentage point reduction in payments for hospitals failing to meet 
the hospital outpatient quality reporting requirements, by applying a 
reporting factor of 0.980 to the OPPS payments and copayments for all 
applicable services.
     2-Midnight Rule (Short Inpatient Hospital Stays): For CY 
2020, we are proposing to establish a 1-year exemption from Beneficiary 
and Family-Centered Care Quality Improvement Organizations (BFCC-QIOs) 
referrals to Recovery Audit Contractors (RACs) and RAC reviews for 
``patient status'' (that is, site-of-service) for procedures that are 
removed from the inpatient only (IPO) list under the OPPS beginning on 
January 1, 2020.
     Comprehensive APCs: For CY 2020, we are proposing to 
create two new comprehensive APCs (C-APCs). These proposed new C-APCs 
include the following: C-APC 5182 (Level 2 Vascular Procedures) and 
proposed C-APC 5461 (Level 1 Neurostimulator and Related Procedures). 
This proposal would increase the total number of C-APCs to 67.
     Proposed Changes to the Inpatient Only (IPO) List: For CY 
2020, we are proposing to remove one procedure from the inpatient only 
list and we are seeking public comment on the removal of six procedures 
from the inpatient only (IPO) list.
     Method to Control Unnecessary Increases in the Volume of 
Clinic Visit Services Furnished in Excepted Off-Campus Provider-Based 
Departments (PBDs): For CY 2020, we are completing the phase-in of the 
reduction in payment for the clinic visit services described by HCPCS 
code G0463 furnished in expected off-campus provider-based departments 
as a method to control uncessary increases in the volume of this 
service.
     Device Pass-Through Payment Applications: For CY 2020, we 
are evaluating seven applications for device pass-through payments and 
are seeking public comments in this CY 2020 proposed rule on whether 
these applications meet the criteria for device pass-through payment 
status.
     Proposed Changes to Substantial Clinical Improvement 
Criterion: For CY 2020, we are proposing an alternative pathway to the 
substantial clinical improvement criterion for devices approved under 
the FDA Breakthrough Devices Program to qualify for device pass-through 
status beginning with applications received on or after January 1, 
2020.
     Cancer Hospital Payment Adjustment: For CY 2020, we are 
proposing to continue to provide additional payments to cancer 
hospitals so that a 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, a proposed target PCR of 0.89 will be used to determine the 
CY 2020 cancer hospital payment adjustment to be paid at cost report 
settlement. That is, the payment adjustment will be the additional 
payments needed to result in a PCR equal to 0.89 for each cancer 
hospital.
     Rural Adjustment: For 2020 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 such 7.1 percent adjustment in the absence of data 
to suggest a different percentage adjustment should apply.
     340B-Acquired Drugs: We are proposing to continue to pay 
ASP-22.5 percent for 340B-acquired drugs including when furnished in 
nonexcepted off-campus PBDs paid under the PFS. On December 27, 2018, 
in the case of American Hospital Association et al. v. Azar et al., the 
United States District Court for the District of Columbia (hereinafter 
referred to as ``the district court'') concluded in the context of 
reimbursement requests for CY 2018 that the Secretary exceeded his 
statutory authority by adjusting the Medicare payment rates for drugs 
acquired under the 340B Program to ASP minus 22.5 percent for that 
year. CMS respectfully disagreed with the district court's 
understanding of the scope of CMS' adjustment authority and asked the 
district court to enter final judgment so as to permit an immediate 
appeal. On July 10, 2019, the district court granted the government's 
request and entered final judgment, and the agency does intend to 
pursue its appeal rights. Nonetheless, CMS is taking the steps 
necessary to craft an appropriate remedy in the event of an unfavorable 
decision on appeal. We are soliciting public comments on the 
appropriate OPPS payment rate for 340B-acquired drugs, including 
whether a rate of ASP+3 percent could be an appropriate payment amount 
for these drugs, both for CY 2020 and for purposes of determining the 
remedy for CYs 2018 and 2019. In addition to comments on the 
appropriate payment amount for

[[Page 39402]]

calculating the remedy for CYs 2018 and 2019 and for use for CY 2020, 
we also seek public comment on how to structure the remedy for CYs 2018 
and 2019. This request for public comment includes comments on whether 
such a remedy should be retrospective in nature (for example, made on a 
claim-by-claim basis), whether such a remedy could be prospective in 
nature (for example, an upward adjustment to 340B claims in the future 
to account for any underpayments in the past), and whether there is 
some other mechanism that could produce a result equitable to hospitals 
that do not acquire drugs through the 340B program while respecting the 
budget neutrality mandate. In the event of an adverse decision on 
appeal, we would anticipate proposing the specific remedy for CYs 2018 
and 2019, and, if necessary, to the CY 2020 rates, in the next 
available rulemaking vehicle, which is the CY 2021 OPPS/ASC proposed 
rule. Those proposals will be informed by the comments solicited in 
this proposed rule.
     ASC Payment Update: For CYs 2019 through 2023, we update 
the ASC payment system using the hospital market basket update. Using 
the hospital market basket methodology, for CY 2020, we are proposing 
to increase payment rates under the ASC payment system by 2.7 percent 
for ASCs that meet the quality reporting requirements under the ASCQR 
Program. This proposed increase is based on a proposed hospital market 
basket of 3.2 percent minus a proposed multifactor productivity 
adjustment required by the Affordable Care Act of 0.5 percentage point. 
Based on this proposed update, we estimate that total payments to ASCs 
(including beneficiary cost-sharing and estimated changes in 
enrollment, utilization, and case-mix) for CY 2020 would be 
approximately $4.89 billion, an increase of approximately $200 million 
compared to estimated CY 2019 Medicare payments.
     Proposed Changes to the List of ASC Covered Surgical 
Procedures: For CY 2020, we are proposing to add 8 procedures to the 
ASC list of covered surgical procedures. Additions to the list include 
a total knee arthroplasty procedure, a mosaicplasty procedure, as well 
as six coronary intervention procedures. We are soliciting public 
comments with respect to whether certain other surgical procedures 
related to the cardiovascular system should be added to the ASC list of 
covered surgical procedures.
     Proposed Changes to the Level of Supervision of Outpatient 
Therapeutic Services in Hospitals and Critical Access Hospitals: For CY 
2020, we are proposing to change the minimum required level of 
supervision from direct supervision to general supervision for all 
hospital outpatient therapeutic services provided by all hospitals and 
CAHs. This proposal would ensure a standard minimum level of 
supervision for each hospital outpatient service furnished incident to 
a physician's service.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are proposing to remove OP-33: External 
Beam Radiotherapy for Bone Metastases for the CY 2022 payment 
determination and subsequent years.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are proposing to adopt one new 
measure, ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers, beginning 
with the CY 2024 payment determination and for subsequent years.
     Proposed Requirements for Hospitals to Make 
Public a List of Their Standard Charges: We are proposing to add a new 
Part 180--Hospital Price Transparency to Title 45 of the Code of 
Federal Regulations (CFR) which would contain our proposed regulations 
on price transparency for purposes of section 2718(e) of the PHS Act. 
In this section, we make proposals related to: (1) A definition of 
``hospital''; (2) different reporting requirements that would apply to 
certain hospitals; (3) definitions for two types of ``standard 
charges'' (specifically, gross charges and payer-specific negotiated 
charges) that hospitals would be required to make public, and a request 
for public comment on other types of standard charges that hospitals 
should be required to make public; (4) a definition of hospital ``items 
and services'' that would include all items and services (including 
individual items and services and service packages) provided by the 
hospital to a patient in connection with an inpatient admission or an 
outpatient department visit; (5) requirements for making public a 
machine-readable file that contains a hospital's gross charges and 
payer-specific negotiated charges for all items and services provided 
by the hospital; (6) requirements for making public payer-specific 
negotiated charges for select hospital-provided items and services that 
are ``shoppable'' and that are displayed in a consumer-friendly manner; 
(7) monitoring for hospital noncompliance with public disclosure 
requirements to make public standard charges; (8) actions that would 
address hospital noncompliance, which include issuing a written warning 
notice, requesting a corrective action plan, and imposing civil 
monetary penalties (CMPs) on noncompliant hospitals and publicizing 
these penalties on a CMS website; and (9) appeals of CMPs.
     Proposed Prior Authorization Process and Requirements for 
Certain Hospital Outpatient Department (OPD) Services: We are proposing 
a prior authorization process using the authority in section 
1833(t)(2)(F) of the Act as a method for controlling unnecessary 
increases in the volume of the following five categories of services: 
(1) Blepharoplasty, (2) botulinum toxin injections, (3) panniculectomy, 
(4) rhinoplasty, and (5) vein ablation.
     Organ Procurement Organizations (OPOs) Conditions for 
Coverage (CfCs) Proposed Revision of the Definition of ``Expected 
Donation Rate'': We are proposing to revise the definition of 
``expected donation rate'' that is included in the second outcome 
measure to match the Scientific Registry of Transplant Recipients 
(SRTR) definition.
    We are also proposing to reduce the time period for the second 
outcome measure and calculate the expected donation rate using 12 out 
of the 24 months of data (from January 1, 2020 through December 31, 
2020) for the 2022 recertification cycle only.
     Request for Information Regarding Potential Changes to the 
Organ Procurement Organization and Transplant Center Regulations: We 
are soliciting public comments regarding what revisions may be 
appropriate for the current OPO CfCs and the current transplant center 
CoPs. In addition, we are seeking public comments on two potential 
outcome measures for OPOs.
3. Summary of Costs and Benefits
    In sections XXVI. and XXVII. of this proposed rule, we set forth a 
detailed analysis of the regulatory and federalism impacts that the 
proposed changes would have on affected entities and beneficiaries. Key 
estimated impacts are described below.
a. Impacts of All OPPS Proposed Changes
    Table 41 in section XXVI. of this proposed rule displays the 
distributional impact of all the proposed OPPS changes on various 
groups of hospitals and CMHCs for CY 2020 compared to all estimated 
OPPS payments in CY 2019. We estimate that the policies in this 
proposed rule would result in a 2.0 percent overall increase in OPPS 
payments to providers. We estimate that total OPPS payments for

[[Page 39403]]

CY 2020, including beneficiary cost-sharing, to the approximately 3,734 
facilities paid under the OPPS (including general acute care hospitals, 
children's hospitals, cancer hospitals, and CMHCs) would increase by 
approximately $940 million compared to CY 2019 payments, excluding our 
estimated changes in enrollment, utilization, and case-mix.
    We estimated the isolated impact of our proposed OPPS policies on 
CMHCs because CMHCs are only paid for partial hospitalization services 
under the OPPS. Continuing the provider-specific structure we adopted 
beginning in CY 2011, and basing payment fully on the type of provider 
furnishing the service, we estimate a 3.9 percent increase in CY 2020 
payments to CMHCs relative to their CY 2019 payments.
b. Impacts of the Proposed Updated Wage Indexes
    We estimate that our proposed update of the wage indexes based on 
the FY 2020 IPPS proposed rule wage indexes would result in no 
estimated payment change for urban hospitals under the OPPS and an 
estimated increase of 0.8 percent for rural hospitals. These proposed 
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 proposed rule.
c. Impacts of the Proposed Rural Adjustment and the Cancer Hospital 
Payment Adjustment
    There are no significant impacts of our proposed CY 2020 payment 
policies for hospitals that are eligible for the rural adjustment or 
for the cancer hospital payment adjustment. We are not proposing to 
make any change in policies for determining the rural hospital payment 
adjustments. While we are proposing to implement the reduction to the 
cancer hospital payment adjustment required by section 16002 of the 
21st Century Cures Act for CY 2020, the target payment-to-cost ratio 
(PCR) for CY 2020 is 0.89, compared to 0.88 for CY 2019, and therefore 
has a slight impact on budget neutrality adjustments.
d. Impacts of the Proposed OPD Fee Schedule Increase Factor
    For the CY 2020 OPPS/ASC, we are proposing an OPD fee schedule 
increase factor of 2.7 percent and applying that increase factor to the 
conversion factor for CY 2020. As a result of the proposed OPD fee 
schedule increase factor and other budget neutrality adjustments, we 
estimate that urban hospitals would experience an increase of 
approximately 2.8 percent and that rural hospitals would experience an 
increase of 3.0 percent. Classifying hospitals by teaching status, we 
estimate nonteaching hospitals would experience an increase of 3.0 
percent, minor teaching hospitals would experience an increase of 3.1 
percent, and major teaching hospitals would experience an increase of 
2.3 percent. We also classified hospitals by the type of ownership. We 
estimate that hospitals with voluntary ownership would experience an 
increase of 2.7 percent in payments, while hospitals with government 
ownership would experience an increase of 2.8 percent in payments. We 
estimate that hospitals with proprietary ownership would an experience 
an increase of 3.6 percent in payments.
e. Impacts of the Proposed ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the proposed CY 2020 
payment rates, compared to estimated CY 2019 payment rates, generally 
ranges between an increase of 2 and 5 percent, depending on the 
service, with some exceptions. We estimate the impact of applying the 
hospital market basket update to proposed ASC payment rates would 
increase payments by $100 million under the ASC payment system in CY 
2020.
f. Impact of the Proposed Changes to the Hospital OQR Program
    Across 3,300 hospitals participating in the Hospital OQR Program, 
we estimate that our proposed requirements would result in the 
following changes to costs and burdens related to information 
collection for the Hospital OQR Program compared to previously adopted 
requirements: If all proposals are adopted as final, there is a net 
reduction of one measure reported by hospitals, which would result in a 
minimal net reduction in burden of $21,379.
g. Impact of the Proposed Changes to the ASCQR Program
    Across 3,937 ASCs participating in the ASCQR Program, we estimate 
that our proposed requirements would not result in changes to costs and 
burdens related to information collection for the ASCQR Program, 
compared to previously adopted requirements.
h. Impact of the Proposed Requirements for Hospitals To Make Public a 
List of Their Standard Charges
    We estimate the total annual burden for hospitals to review and 
post their standard charges to be 12 hours per hospital at $1,017.24 
per hospital for a total burden of 72,024 hours (12 hours x 6,002 
hospitals) and total cost of $6,105,474 ($1,017.24 x 6,002 hospitals) 
if our policies, as discussed in section XVI. of this proposed rule are 
finalized as proposed.
i. Impact of the Proposed Prior Authorization Process and Requirements 
for Certain Hospital Outpatient Department (OPD) Services
    Across all providers, we estimate that the total burden for year 
one (6 months) would be 73,647 hours and $2,604,281 (Table 48--Year 1 
(6 Month) Private Sector Costs of this proposed rule) for the five 
categories of services for which we are proposing to require prior 
authorization. In addition, we estimate that the total annual burden, 
allotted across all providers, would be 125,242 hours and $4,475,116 
per year for the services. An annualized burden is estimated at 108,044 
hours and $3,851,504. The annualized burden is based on an average of 3 
years, that is, 1 year at the 6-month burden and 2 years at the 12-
month burden. This accounts for the time associated with submitting the 
prior authorization request package and related medical documentation 
to support Medicare payment of the service(s). Medicare would incur 
$5,787,055 for the first 6 months (Table 49--Year 1 (6 Month) Estimated 
Annual Medicare Costs of this proposed rule) and $11,571,179 annually 
therafter, in additional costs associated with processing the prior 
authorization requests, as well as education, outreach, and systems. 
Benefits include decreased unnecessary utilization of these OPD 
services, and subsequently, reduced improper payments made for claims 
for these services that do not meet Medicare requirements.
j. Impacts of the Proposed Revision of the Definition of ``Expected 
Donation Rate'' for Organ Procurement Organizations
    All 58 OPOs are required to meet two out of three outcome measures 
detailed in the OPO CfC regulations at 42 CFR 486.318(b). We are 
proposing to revise the definition of ``expected donation rate'' in the 
OPO CfCs. This revision would eliminate the potential for confusion in 
the OPO community due to different definitions of the same term.

[[Page 39404]]

The proposal would not affect data collection or reporting by the OPTN 
and SRTR, nor their statistical evaluation of OPO performance. 
Therefore, it would not result in any quantifiable financial impact.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security Act (the 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 proposed rule. Section 
1833(t)(1)(B) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by CMHCs), and 
certain inpatient hospital services that are paid under Medicare Part 
B.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use, as required by 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 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

[[Page 39405]]

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 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act, 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;
     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 19, 2018, for a 2-year period.
    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). The next meeting will take place on August 19-20, 2019. 
Complete information on the 2019 summer meeting, including information 
related to meeting presentations and submittals, meeting attendance/
admittance, and web streaming of the meeting, can be found in the 
meeting notice published in the Federal Register on June 5, 2019 (84 FR 
26117) and available on the website at: https://www.govinfo.gov/content/pkg/FR-2019-06-05/pdf/2019-11756.pdf. Registration to attend 
the meeting in person may be made through the CMS website at: https://www.cms.gov/apps/events/event.asp?id=3745.
    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

[[Page 39406]]

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 final rule with comment period (83 FR 58827). 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 on the CY 2019 OPPS/ASC Final Rule With 
Comment Period

    We received over 540 timely pieces of correspondence on the CY 2019 
OPPS/ASC final rule with comment period that appeared in the Federal 
Register on November 30, 2018 (83 FR 61567), 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).

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are 
proposing to recalibrate the APC relative payment weights for services 
furnished on or after January 1, 2020, and before January 1, 2021 (CY 
2020), using the same basic methodology that we described in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 58827 through 
58828), using updated CY 2018 claims data. That is, we are proposing to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for hospital outpatient department (HOPD) 
services, using the most recent available data to construct a database 
for calculating APC group weights.
    For the purpose of recalibrating the APC proposed relative payment 
weights for CY 2020, we began with approximately 164 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, 2018, and before January 1, 2019, before applying our 
exclusionary criteria and other methodological adjustments. After the 
application of those data processing changes, we used approximately 88 
million final action claims to develop the proposed CY 2020 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 this CY 
2020 OPPS/ASC proposed rule on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Addendum N to this proposed rule (which is available via the 
internet on the CMS website) includes the proposed list of bypass codes 
for CY 2020. The proposed list of bypass codes contains codes that were 
reported on claims for services in CY 2018 and, therefore, includes 
codes that were in effect in CY 2018 and used for billing, but were 
deleted for CY 2019. We retained these deleted bypass codes on the 
proposed CY 2020 bypass list because these codes existed in CY 2018 and 
were covered OPD services in that period, and CY 2018 claims data were 
used to calculate proposed CY 2020 payment rates. Keeping these deleted 
bypass codes on the bypass list potentially allows us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that are members of the proposed multiple imaging 
composite APCs are identified by asterisks (*) in the third column of 
Addendum N to this proposed rule. HCPCS codes that we are proposing to 
add for CY 2020 are identified by asterisks (*) in the fourth column of 
Addendum N.
    Table 1 contains the list of codes that we are proposing to remove 
from the CY 2020 bypass list.
[GRAPHIC] [TIFF OMITTED] TP09AU19.000


[[Page 39407]]


b. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2020, in this CY 2020 OPPS/ASC proposed rule, we are 
proposing to continue to use the hospital-specific overall ancillary 
and departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the proposed CY 2020 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 2018 claims data by comparing these claims 
data to the most recently available hospital cost reports, which, in 
most cases, are from CY 2017. For the proposed CY 2020 OPPS payment 
rates, we used the set of claims processed during CY 2018. 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 2018 
(the year of claims data we used to calculate the proposed CY 2020 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2018 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 this proposed rule.
    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 had 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 reductions in the imaging APC 
payment rates.
    Table 2 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 3 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] TP09AU19.001

    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 2,184 providers and the number of valid CT 
CCRs has increased by 15.1 percent to 2,274 providers. However, as 
shown in Table 2, nearly all imaging APCs would see an increase in 
payment rates for CY 2020 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 
``square feet'' cost allocation method as shown in Table 2.
    For the CY 2019 OPPS, in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58831), we extended our transition policy for an 
additional year and removed 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.
    We note that the CT and MRI cost center CCRs have been available 
for ratesetting since the CY 2014 OPPS in which we established the 
transition policy. Since the initial 4-year transition, we have 
extended the transition an additional 2 years to offer provider 
flexibility in applying cost allocation methodologies for CT and MRI 
cost centers other than ``square feet.'' We believe we have provided 
sufficient time for providers to adopt an alternative cost allocation 
methodology for CT and MRI cost centers if they intended to do so. 
However, many providers continue to use the ``square feet'' cost 
allocation methodology, which we believe indicates that these providers 
believe this methodology is a sufficient method for attributing costs 
to this cost center. Additionally, we generally believe that increasing 
the amount of claims data available for use in ratesetting improves our 
ratesetting process. Therefore, we are proposing that, for the CY 2020 
OPPS/ASC proposed rule and final rule with comment period, we will use 
all claims with valid CT and MRI cost center CCRs, including those that 
use a ``square feet'' cost allocation method, to estimate costs for the 
APCs for CT and MRI identified in Table 2. We do not believe another 
extension is warranted and

[[Page 39409]]

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.
    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 (PFS) 
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 on the PFS and the ASC payment system.
2. Proposed Data Development and Calculation of Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2020. The Hospital 
OPPS page on the CMS website on which this proposed rule is posted 
(http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used 
in the development of the proposed payment rates. That accounting 
provides additional detail regarding the number of claims derived at 
each stage of the process. In addition, below in this section, we 
discuss the file of claims that comprises the data set that is 
available 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 2018 claims that 
were used to calculate the proposed payment rates for this CY 2020 
OPPS/ASC proposed rule.
    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 
this CY 2020 OPPS/ASC proposed rule, we are proposing to continue to 
use geometric mean costs to calculate the proposed relative weights on 
which the CY 2020 OPPS payment rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.c. of this proposed rule to calculate the costs we used to 
establish the proposed relative payment weights used in calculating the 
proposed OPPS payment rates for CY 2020 shown in Addenda A and B to 
this proposed rule (which are available via the internet on the CMS 
website). We refer readers to section II.A.4. of this proposed rule for 
a discussion of the conversion of APC costs to scaled payment weights.
    We note that, under the OPPS, CY 2019 was the first year in which 
claims data containing lines with the modifier ``PN'' were 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 final rule with comment period (83 FR 58832), we finalized a policy 
to remove those claim lines reported with modifier ``PN'' from the 
claims data used in ratesetting for the CY 2019 OPPS and subsequent 
years. For the CY 2020 OPPS, we will continue to remove these claim 
lines with modifier ``PN'' from the ratesetting process.
    For details of the claims process used in this proposed rule, we 
refer readers to the claims accounting narrative under supporting 
documentation for this CY 2020 OPPS/ASC proposed rule on the CMS 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
a. Proposed 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 this CY 2020 OPPS/ASC proposed rule, we are proposing to 
continue to establish payment rates for blood and blood products using 
our blood-specific CCR methodology, which utilizes actual or simulated 
CCRs from the most recently available hospital cost reports to convert 
hospital charges for blood and blood products to costs. This 
methodology has been our standard ratesetting methodology for blood and 
blood products since CY 2005. It was developed in response to data 
analysis indicating that there was a significant difference in CCRs for 
those hospitals with and without blood-specific cost centers, and past 
public comments indicating that the former OPPS policy of defaulting to 
the overall hospital CCR for hospitals not reporting a blood-specific 
cost center often resulted in an underestimation of the true hospital 
costs for blood and blood products. Specifically, in order to address 
the differences in CCRs and to better reflect hospitals' costs, we are 
proposing to continue to simulate blood CCRs for each hospital that 
does not report a blood cost center by calculating the ratio of the 
blood-specific CCRs to hospitals' overall CCRs for those hospitals that 
do report costs and charges for blood cost centers. We also are 
proposing to apply this mean ratio to the overall CCRs of hospitals not 
reporting costs and charges for blood cost centers on their cost 
reports in order to simulate blood-specific CCRs for those hospitals. 
We are proposing to calculate the costs upon which the proposed CY 2020 
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 continue to

[[Page 39410]]

believe that this methodology in CY 2020 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.(1). of the CY 2019 
OPPS/ASC final rule with comment period (82 FR 58837 through 58843), 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 this CY 2020 OPPS/ASC proposed rule, 
we are proposing to continue to apply the blood-specific CCR 
methodology described in this section when calculating the costs of the 
blood and blood products that appear on claims with services assigned 
to the C-APCs. 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 
proposed payment rates of the C-APCs), we are proposing to not make 
separate payments for blood and blood products when they appear on the 
same claims as services assigned to the C-APCs (we refer readers to the 
CY 2015 OPPS/ASC final rule with comment period (79 FR 66796)).
    We also refer readers to Addendum B to this CY 2020 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website) 
for the proposed CY 2020 payment rates for blood and blood products 
(which are identified with status indicator ``R''). For a more detailed 
discussion of the blood-specific CCR methodology, we refer readers to 
the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full 
history of OPPS payment for blood and blood products, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 
through 66810).
(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 59233) 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 (HCPCS code Q9988) for HCPCS code P9072 
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 (the successor code to HCPCS code P9072 
established January 1, 2018) to the payment amount for services 
described by HCPCS code 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 in the CY 2017 claims data available for CY 2019 rulemaking. 
Accordingly, we believed that there were a sufficient number of claims 
to calculate a payment rate for HCPCS code P9073 for CY 2019 without 
using a crosswalk.
    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 implied 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 have contained rapid bacterial 
testing of platelets claims, was $468.11, which was 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 was 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 was higher than the geometric mean cost 
for services described by HCPCS code P9072.

[[Page 39411]]

    However, we received many comments from providers and stakeholders 
requesting that we not implement our proposal for CY 2019, and instead 
that we should once again establish the payment rate for 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 code P9037. The commenters were concerned that the 
payment rate for HCPCS code P9073 calculated by using claims data for 
that service was too low. Several 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 when billing the service, and confusion over whether to use 
the hospital CCR or the blood center CCR to report charges for 
pathogen-reduced platelets. We considered the comments we received and 
decided not to finalize our proposal for CY 2019 to calculate the 
payment rate for services described by HCPCS code P9073 using claims 
payment history. Instead, for CY 2019, we established the payment rate 
for services described by HCPCS code P9073 by crosswalking the payment 
rate for the services described by HCPCS code P9073 from the payment 
rate for services described by HCPCS code P9037 (83 FR 58834).
    For CY 2020 and subsequent years, we are proposing to calculate the 
payment rate for services described by HCPCS code P9073 by using claims 
payment history, which is the standard methodology used under the OPPS 
to calculate payment rates for HCPCS codes with at least 2 years of 
claims history. Claims for HCPCS code P9073 and its predecessor codes 
have been billed under the OPPS for over 3 years and we believe 
providers have had sufficient time to become familiar with the services 
covered by the procedure code and the appropriate charges and CCRs used 
to report the service. Also, it has been more than a year and half 
since the issue in which payment for pathogen-reduced platelets and 
payment for rapid bacterial testing were combined under the same code 
was resolved. In our analysis of claims data from CY 2018, we found 
that approximately 4,700 claims have been billed for services described 
by HCPCS code P9073 and the estimated payment rate for services 
described by HCPCS code P9073 based on the claims data is approximately 
$585. The claims-based payment rate for services described by HCPCS 
code P9073 is approximately $60 less than the estimated crosswalked 
payment rate using HCPCS code P9037 of approximately $645. The claims 
data show that services described by HCPCS code P9073 have been 
reported regularly by providers during CY 2018 and the payment rate is 
close to the payment rate of the crosswalked payment rate for services 
described by HCPCS code P9037. Therefore, we believe that the payment 
rate for services described by HCPCS code P9073 can be determined using 
claims data without a crosswalk from the payment rate for services 
described by HCPCS code P9037.
    We refer readers to Addendum B of this 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.
(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 this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are 
proposing to use the costs derived from CY 2018 claims data to set the 
proposed CY 2020 payment rates for brachytherapy sources because CY 
2018 is the year of data we are proposing to use to set the proposed 
payment rates for most other items and services that would be paid 
under the CY 2020 OPPS. We are proposing to base the payment rates for 
brachytherapy sources on the geometric mean unit costs for each source, 
consistent with the methodology that we are proposing for other items 
and services paid under the OPPS, as discussed in section II.A.2. of 
this proposed rule. We also are proposing to continue the other payment 
policies for brachytherapy sources that we finalized and first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537). We are proposing to pay for the stranded and nonstranded not 
otherwise specified (NOS) codes, HCPCS codes C2698 (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 are proposing to continue the 
policy we first implemented in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60537) regarding payment for new brachytherapy 
sources for which we have no claims data, based on the same reasons we 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66786; which was delayed until January 1, 2010 by section 142 of Pub. 
L. 110-275). 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 2020 payment rates 
for brachytherapy sources are included in Addendum B to this proposed 
rule (which is available via the internet on the CMS website) and are 
identified with status indicator ``U''. For CY 2020, we are proposing 
to continue to assign status indicator ``U'' (Brachytherapy Sources, 
Paid under OPPS; separate APC payment) to HCPCS code C2645 
(Brachytherapy planar source,

[[Page 39412]]

palladium-103, per square millimeter). However, our CY 2018 claims data 
include two claims with over 9,000 units of HCPCS code C2645. For the 
CY 2019 OPPS/ASC final rule with comment period, our CY 2017 claims 
data only included one claim with one unit of HCPCS code C2645. 
Therefore, we believe the CY 2018 claims data are adequate to establish 
an APC payment rate for HCPCS code C2645 and to discontinue our use of 
external data for this brachytherapy source. Specifically, we are 
proposing to set the proposed CY 2020 payment rate at the geometric 
mean cost of HCPCS code C2645 based on CY 2018 claims data, which is 
$1.02 per mm\2\.
    We continue to invite hospitals and other parties to submit 
recommendations to us for new codes to describe new brachytherapy 
sources. Such recommendations should be directed to the Division of 
Outpatient Care, Mail Stop C4-01-26, 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. Proposed Comprehensive APCs (C-APCs) for CY 2020
(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 1 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. In the CY 2019 OPPS/ASC 
final rule with comment period, we created 3 new C-APCs, increasing the 
total number to 65 (83 FR 58844 through 58846).
    Under our C-APC 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 proposed rule 
(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

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(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 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. 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

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     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 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 2020, in this CY 2020 OPPS/ASC proposed rule, we are 
proposing 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 list the proposed complexity adjustments for 
``J1'' and add-on code combinations for CY 2020, along with all of the 
other proposed complexity adjustments, in Addendum J to this CY 2020 
OPPS/ASC proposed rule (which is available via the internet on the CMS 
website).
    Addendum J to this proposed rule includes 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 
this proposed rule also contains summary cost statistics for each of 
the paired code combinations that describe a complex code combination 
that would qualify for a complexity adjustment and are proposed to be 
reassigned to the next higher cost C-APC within the clinical family. 
The combined statistics for all proposed reassigned complex code 
combinations are represented by an alphanumeric code with the 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 are proposed to 
be reassigned to C-APC 5224 when CPT code 33208 is the primary code. 
Providing the information contained in Addendum J to this proposed rule 
allows 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.
(2) Proposed Additional C-APCs for CY 2020
    For CY 2020 and subsequent years, in this CY 2020 OPPS/ASC proposed 
rule, we are proposing to continue to apply the C-APC payment policy 
methodology. 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 this proposed rule, 
we are proposing to add two C-APCs under the existing C-APC payment 
policy in CY 2020: Proposed C-APC 5182 (Level 2 Vascular Procedures); 
and proposed C-APC 5461 (Level 1 Neurostimulator and Related 
Procedures). These APCs were selected to be included in this proposed 
rule 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 4 of 
this proposed rule lists the proposed C-APCs for CY 2020. All C-APCs 
are displayed in Addendum J to this proposed rule (which is available 
via the internet on the CMS website). Addendum J to this proposed rule 
also contains all of the data related to the C-APC payment policy 
methodology, including the list of proposed complexity adjustments and 
other information.
    We also are considering developing an episode-of-care for skin 
substitutes and are interested in comments regarding a future C-APC for 
procedures using skin substitute products furnished in the hospital 
outpatient department

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setting. We note that this comment solicitation is discussed in section 
V.B.7. of this proposed rule.
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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. Prior to CY 2019 when a 
procedure assigned to a New Technology APC was included on the claim 
with a primary procedure, identified by OPPS status indicator ``J1'', 
payment for the new technology service was typically packaged into the 
payment for the primary procedure. Because the new technology service 
was not separately paid in this scenario, the overall number of single 
claims available to determine an appropriate clinical APC for the new 
service was reduced. This was 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 final rule with comment period (83 FR 58847), we excluded 
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. For 
CY 2020, we are proposing to continue to exclude payment for any 
procedure that is assigned to a New Technology APC from being packaged 
when included on a claim with a ``J1'' service assigned to a C-APC.
    Some stakeholders have raised questions about whether the policy 
established in the CY 2019 OPPS/ASC final rule with comment period 
would also apply to comprehensive observation services assigned status 
indicator ``J2.'' We recognize that the policy described and adopted in 
the CY 2019 rulemaking may have been ambiguous with respect to this 
issue. While our intention in the CY 2019 rulemaking was only to 
exclude payment for services assigned to New Technology APCs from being 
bundled into the payment for a comprehensive ``J1'' service, we believe 
that there may also be some instances in which it would be clinically 
appropriate to provide a new technology service when providing 
comprehensive observation services. We would not generally expect that 
to be the case, because procedures assigned to New Technology APCs 
typically are new or low-volume surgical procedures, or are specialized 
tests to diagnosis a specific condition. In addition, it is highly 
unlikely a general observation procedure would be assigned to a New 
Technology APC because there are clinical APCs already established 
under the OPPS to classify general observation procedures. As we stated 
in the CY 2016 OPPS/ASC final rule with comment period, observation 
services may not be used for post-operative recovery and, as such, 
observation services furnished with services assigned to status 
indicator ``T'' will always be packaged (80 FR 70334). Therefore, we 
are proposing that payment for services assigned to a New Technology 
APC when included on a claim for a service assigned status indicator 
``J2'' assigned to a C-APC will be packaged into the payment for the 
comprehensive service. Nonetheless, we are seeking public comments on 
whether it would be clinically appropriate to exclude payment for any 
New Technology APC procedures from

[[Page 39418]]

being packaged into the payment for a comprehensive ``J2'' service 
starting in CY 2020.
c. Proposed Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way enables 
hospitals to manage their resources with maximum flexibility by 
monitoring and adjusting the volume and efficiency of services 
themselves. An additional advantage to the composite APC model is that 
we can use data from correctly coded multiple procedure claims to 
calculate payment rates for the specified combinations of services, 
rather than relying upon single procedure claims which may be low in 
volume and/or incorrectly coded. Under the OPPS, we currently have 
composite policies for 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.
(1) Mental Health Services Composite APC
    In this CY 2020 OPPS/ASC proposed rule, we are proposing to 
continue our longstanding policy of limiting the aggregate payment for 
specified less resource-intensive mental health services furnished on 
the same date to the payment for a day of partial hospitalization 
services provided by a hospital, which we consider to be the most 
resource-intensive of all outpatient mental health services. We refer 
readers to the April 7, 2000 OPPS final rule with comment period (65 FR 
18452 through 18455) for the initial discussion of this longstanding 
policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74168) for more recent background.
    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 this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are 
proposing 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 2020. In addition, we are proposing to set the proposed 
payment rate for composite APC 8010 at the same payment rate that we 
are proposing 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.
(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 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

[[Page 39419]]

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 this CY 2020 OPPS/ASC proposed rule, we are proposing, for CY 
2020, to continue to pay for all multiple imaging procedures within an 
imaging family performed on the same date of service using the multiple 
imaging composite APC payment methodology. We continue to believe that 
this policy would reflect and promote the efficiencies hospitals can 
achieve when performing multiple imaging procedures during a single 
session.
    The proposed CY 2020 payment rates for the five multiple imaging 
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) are based on 
proposed geometric mean costs calculated from CY 2018 claims available 
for the CY 2020 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), are identified by asterisks in Addendum N to this 
CY 2020 OPPS/ASC proposed rule (which is available via the internet on 
the CMS website) and are discussed in more detail in section II.A.1.b. 
of this CY 2020 OPPS/ASC proposed rule.
    For this CY 2020 OPPS/ASC proposed rule, we were able to identify 
approximately 700,000 ``single session'' claims out of an estimated 4.9 
million potential claims for payment through composite APCs from our 
ratesetting claims data, which represents approximately 14 percent of 
all eligible claims, to calculate the proposed CY 2020 geometric mean 
costs for the multiple imaging composite APCs. Table 5 of this CY 2020 
OPPS/ASC proposed rule lists the proposed HCPCS codes that would be 
subject to the multiple imaging composite APC policy and their 
respective families and approximate composite APC proposed geometric 
mean costs for CY 2020.
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3. Proposed Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging to establish a payment rate for services. The 
payment may be more or less than the estimated cost of providing a 
specific service or a bundle of specific services for a particular 
beneficiary. The OPPS packages

[[Page 39424]]

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. 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), the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59250), and the CY 2019 OPPS/ASC 
final rule with comment period (83 FR 58854). 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 2020, 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 for 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 this CY 2020 OPPS/ASC proposed rule, for CY 
2020, we are proposing 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 changes to the packaging policies beginning in CY 
2020.
b. Packaging Policy for Non-Opioid Pain Management Treatments
(1) Background on OPPS/ASC Non-Opioid Pain Management Packaging 
Policies
    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 who responded to 
the CY 2018 OPPS/ASC proposed rule expressed a variety of views on 
packaging under the OPPS. In the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59255), we summarized these public comments. The 
public 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.
    In terms of Exparel[supreg] in particular, we received several 
requests to pay separately for the drug Exparel[supreg] rather than 
packaging payment for it as a surgical supply. We had previously stated 
that we considered Exparel[supreg] to be a drug that functions as a 
surgical supply because it is indicated for the alleviation of 
postoperative pain (79 FR 66874 and 66875). We had also stated before 
that we considered 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. (We note that Exparel[supreg] 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[supreg] was approved by the FDA for single-dose 
infiltration into the surgical site to provide postsurgical 
analgesia.1 2 Exparel[supreg] 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[supreg] was packaged as a surgical supply 
under both the OPPS and the ASC payment system.)
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    \1\ 2011 product label available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2011/022496s000lbl.pdf.
    \2\ 2011 FDA approval letter available at: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2011/022496Orig1s000Approv.pdf.
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    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59345), we reiterated our position with regard to

[[Page 39425]]

payment for Exparel[supreg], stating that we believed that payment for 
this drug is appropriately packaged with the primary surgical 
procedure. We also 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 in response to the CY 2018 OPPS/ASC proposed rule, the 
President's Commission on Combating Drug Addiction and the Opioid 
Crisis (the Commission) had 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 
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 President declared the opioid crisis a national public 
health emergency under Federal law \7\ and this declaration was most 
recently renewed on April 19, 2019.\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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    For the CY 2019 rulemaking, we reviewed available literature with 
respect to Exparel[supreg], including a briefing document \9\ submitted 
for the FDA Advisory Committee Meeting held February 14-15, 2018, by 
the manufacturer of Exparel[supreg] that notes that ``. . . 
Bupivacaine, the active pharmaceutical ingredient in Exparel[supreg], 
is a local anesthetic that has been used for infiltration/field block 
and peripheral nerve block for decades'' and that ``since its approval, 
Exparel[supreg] has been used extensively, with an estimated 3.5 
million patient exposures in the US.'' \10\ On April 6, 2018, the FDA 
approved Exparel[supreg]'s new indication for use as an interscalene 
brachial plexus nerve block to produce postsurgical regional 
analgesia.\11\ We 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[supreg] for either of the drug's indications when furnished in 
the hospital outpatient department setting.
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    \9\ 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.
    \10\ Ibid, page 9.
    \11\ 2018 updated product label available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2018/022496s009lbledt.pdf.
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    In the CY 2019 OPPS/ASC proposed rule, in response to stakeholder 
comments on the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59345) and in light of the recommendations regarding payment policies 
for certain drugs, we 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. Our packaging policy is that 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 to determine whether this packaging policy 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.
    The results of the evaluation of our packaging policies under the 
OPPS and the ASC payment system showed decreased utilization for 
certain drugs that function as a supply in the ASC setting, in 
comparison to the hospital outpatient department setting. In light of 
these results, as well as the Commission's recommendation to examine 
payment policies for non-opioid pain management drugs that function as 
a supply, we believed it was 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, in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 58855 through 
58860), we finalized the proposed policy 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 also stated that we would continue to 
analyze the issue of access to non-opioid alternatives in the hospital 
outpatient department setting and in the ASC setting as we implemented 
section 6082 of the Substance Use-Disorder Prevention that Promotes 
Opioid Recovery and Treatment for Patients and Communities (SUPPORT) 
Act (Pub. L. 115-271) enacted on October 24, 2018 (83 FR 58860 through 
58861).
(2) Evaluation and CY 2020 Proposal for Payment for Non-Opioid 
Alternatives
    Section 1833(t)(22)(A)(i) of the Act, as added by section 6082(a) 
of the SUPPORT Act, states that the Secretary must review payments 
under the OPPS for opioids and evidence-based non-opioid alternatives 
for pain management (including drugs and devices, nerve blocks, 
surgical injections, and neuromodulation) with a goal of

[[Page 39426]]

ensuring that there are not financial incentives to use opioids instead 
of non-opioid alternatives. As part of this review, under section 
1833(t)(22)(A)(iii) of the Act, the Secretary must consider the extent 
to which revisions to such payments (such as the creation of additional 
groups of covered OPD services to separately classify those procedures 
that utilize opioids and non-opioid alternatives for pain management) 
would reduce the payment incentives for using opioids instead of non-
opioid alternatives for pain management. In conducting this review and 
considering any revisions, the Secretary must focus on covered OPD 
services (or groups of services) assigned to C-APCs, APCs that include 
surgical services, or services determined by the Secretary that 
generally involve treatment for pain management. If the Secretary 
identifies revisions to payments pursuant to section 
1833(t)(22)(A)(iii) of the Act, section 1833(t)(22)(C) of the Act 
requires the Secretary to, as determined appropriate, begin making 
revisions for services furnished on or after January 1, 2020. Any 
revisions under this paragraph are required to be treated as 
adjustments for purposes of paragraph (9)(B), which requires any 
adjustments to be made in a budget neutral manner. Pursuant to these 
requirements, in our evaluation of whether there are payment incentives 
for using opioids instead of non-opioid alternatives, for this CY 2020 
OPPS/ASC proposed rule, we used currently available data to analyze the 
payment and utilization patterns associated with specific non-opioid 
alternatives, including drugs that function as a supply, nerve blocks, 
and neuromodulation products, to determine whether our packaging 
policies have reduced the use of non-opioid alternatives. We focused on 
covered OPD services for this review, including services assigned to C-
APCs, surgical APCs, and other pain management services. We believed 
that if the packaging policy discouraged the use of these non-opioid 
alternatives or impeded access to these products, we would expect to 
see a decline in the utilization over time, although we note that a 
decline in utilization could also reflect other factors, such as the 
availability of alternative products.
    We evaluated continuous peripheral nerve blocks and neuromodulation 
alternatives to determine if the current packaging policy represented a 
barrier to access. For each product, we examined the most recently 
available Medicare claims data. All of the alternatives examined showed 
consistent or increasing utilization in recent years, with no products 
showing decreases in utilization.
    We also evaluated drugs that function as surgical supplies over a 
6-year time period (CYs 2013 through 2018). During our evaluation, 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 surgical supplies, 
including Exparel[supreg] (HCPCS code C9290). This trend indicates 
appropriate packaged payments that adequately reflect the cost of the 
drug and are not prohibiting beneficiary access.
    From CYs 2013 through 2018, we found that there was an overall 
increase in the OPPS Medicare utilization of Exparel[supreg] of 
approximately 491 percent (from 2.3 million units to 13.6 million 
units) during this 6-year time period. The total number of claims 
reporting the use of Exparel[supreg] increased by 463 percent (from 
10,609 claims to 59,724 claims) over this 6-year time period. This 
increase in utilization continued, even after the expiration of the 3-
year pass-through payment status for this drug in 2014, resulting in a 
109-percent overall increase in the total number of units used between 
CYs 2015 and 2018, from 6.5 million units to 13.6 million units. The 
number of claims reporting the use of Exparel[supreg] increased by 112 
percent during this time period, from 28,166 claims to 59,724 claims.
    The results of our review and evaluation of our claims data do not 
provide evidence to indicate that the OPPS packaging policy has had the 
unintended consequence of discouraging the use of non-opioid treatments 
for postsurgical pain management in the hospital outpatient department. 
Therefore, based on this data evaluation, we do not believe that 
changes are necessary under the OPPS for the packaged drug policy for 
drugs that function as a surgical supply, nerve blocks, surgical 
injections, and neuromodulation products when used in a surgical 
procedure in the OPPS setting at this time.
    For Exparel[supreg], we reviewed claims data for development of 
this CY 2020 OPPS/ASC proposed rule and, based on these data and 
available literature, we concluded that there is no clear evidence that 
the OPPS packaging policy discourages the use of Exparel[supreg] for 
either of the drug's indications in the hospital outpatient department 
setting because the use of Exparel[supreg] continues to increase in 
this setting. Accordingly, we continue to believe it is appropriate to 
package payment for the use of Exparel[supreg], as we do for other 
postsurgical pain management drugs, when it is furnished in a hospital 
outpatient department. In addition, our updated review of claims data 
showed a continued decline in the utilization of Exparel[supreg] in the 
ASC setting, which we believe supports our proposal to continue paying 
separately for Exparel[supreg] in the ASC setting.
    Therefore, for CY 2020, we are proposing to continue our policy to 
pay separately at ASP+6 percent for the cost of non-opioid pain 
management drugs that function as surgical supplies in the performance 
of surgical procedures when they are furnished in the ASC setting and 
continue to package payment for non-opioid pain management drugs that 
function as surgical supplies in the performance of surgical procedures 
in the hospital outpatient department setting for CY 2020. However, we 
are inviting public comments on this proposal and asking the public to 
provide peer reviewed evidence, if any, to describe existing evidence-
based non-opioid pain management therapies used in the outpatient and 
ASC setting. We are also inviting the public to provide detailed 
claims-based evidence to document how specific unfavorable utilization 
trends are due to the financial incentives of the payment systems 
rather than other factors.
    Multiple stakeholders, largely manufacturers of devices and drugs, 
have requested separate payments for various non-opioid pain management 
treatments, such as continuous nerve blocks (including a disposable 
elastomeric pump that delivers non-opioid local anesthetic to a 
surgical site or nerve), cooled thermal radiofrequency ablation, and 
local anesthetics designed to reduce postoperative pain for cataract 
surgery and other procedures. These stakeholders have suggested various 
mechanisms through which separate payment or a higher-paying APC 
assignment for the primary service could be made. The stakeholders have 
offered surveys, reports, studies, and anecdotal evidence of varying 
degrees to support why the devices, drugs, or services offer an 
alternative to or a reduction of the need for opioid prescriptions. The 
majority of these stakeholder offerings have lacked adequate sample 
size, contained possible conflicts of interest such as studies 
conducted by employees of device manufacturers, have not been fully 
published in peer-reviewed literature, or have only provided anecdotal 
evidence as to how the drug

[[Page 39427]]

or device could serve as an alternative to, or reduce the need for, 
opioid prescriptions.
    After reviewing the data from stakeholders and Medicare claims 
data, we have not found compelling evidence to suggest that revisions 
to our OPPS payment policies for non-opioid pain management 
alternatives are necessary for CY 2020. Additionally, MedPAC's March 
2019 Report to Congress supports CMS' conclusion. Specifically, Chapter 
16 of MedPAC's report, titled Mandated Report: Opioids and Alternatives 
in Hospital Settings--Payments, Incentives, and Medicare Data, 
concludes that there is no clear indication that Medicare's OPPS 
provides systematic payment incentives that promote the use of opioid 
analgesics over non-opioid analgesics.\12\ However, we are inviting 
public comments on whether there are other non-opioid pain management 
alternatives for which our payment policy should be revised to allow 
separate payment. We are requesting public comments that provide 
evidence-based support, such as published peer-reviewed literature, 
that 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 revised, including 
possibly separate, payment under the OPPS. Evidence that current 
payment policy provides a payment incentive for using opioids instead 
of non-opioid alternatives should align with available Medicare claims 
data.
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    \12\ Available at: http://www.medpac.gov/-documents-/reports.
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4. Proposed 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 2019 OPPS/
ASC final rule with comment period (83 FR 58860 through 58861), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2019 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 2020, as we did 
for CY 2019, we are proposing to continue to apply the policy 
established in CY 2013 and calculate relative payment weights for each 
APC for CY 2020 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 2020, as we did for CY 2019, we 
are proposing 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 2020, as we did for CY 2019, we are proposing 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 note that in the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59004 through 59015), we discussed our policy, implemented on 
January 1, 2019, 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 a 
reduced rate. While the volume associated with these visits is included 
in the impact model, and thus used in calculating the weight scalar, 
the policy has a negligible effect on the scalar. Specifically, under 
this policy, there was 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 this policy, the savings that 
would result from the change in payments for these clinic visits would 
not be budget neutral. Therefore, the impact of this policy would 
generally not be reflected in the budget neutrality adjustments, 
whether the adjustment is to the OPPS relative weights or to the OPPS 
conversion factor.
    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 2020 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare the estimated 
aggregate weight using the CY 2019 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2020 unscaled 
relative payment weights.
    For CY 2019, we multiplied the CY 2019 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2018 claims to calculate the total relative 
payment weight for each service. We then added together the total 
relative payment weight for each of these services in order to 
calculate an estimated aggregate weight for the year. For CY 2020, we 
are proposing to apply the same process using the estimated CY 2020 
unscaled relative payment weights rather than scaled relative payment 
weights. We are proposing to calculate the weight scalar by dividing 
the CY 2019 estimated aggregate weight by the proposed unscaled CY 2020 
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 2020 OPPS 
proposed rule link and open the claims accounting document link at the 
bottom of the page.
    We are proposing to compare the estimated unscaled relative payment 
weights in CY 2020 to the estimated total relative payment weights in 
CY

[[Page 39428]]

2019 using CY 2018 claims data, holding all other components of the 
payment system constant to isolate changes in total weight. Based on 
this comparison, we are proposing to adjust the calculated CY 2020 
unscaled relative payment weights for purposes of budget neutrality. We 
are proposing to adjust the estimated CY 2020 unscaled relative payment 
weights by multiplying them by a proposed weight scalar of 1.4401 to 
ensure that the proposed CY 2020 relative payment weights are scaled to 
be budget neutral. The proposed CY 2020 relative payment weights listed 
in Addenda A and B to this 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 
this proposed rule.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act provides that 
additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the conversion factor, weighting, 
and other adjustment factors for 2004 and 2005 under paragraph (9), but 
shall be taken into account for subsequent years. Therefore, the cost 
of those SCODs (as discussed in section V.B.2. of this proposed rule) 
is included in the budget neutrality calculations for the CY 2020 OPPS.

B. Proposed Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. In the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19401), consistent with current law, based on IHS 
Global, Inc.'s fourth quarter 2018 forecast of the FY 2020 market 
basket increase, the proposed FY 2020 IPPS market basket update is 3.2 
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 
2020.
    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). 
According to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19402), the 
proposed MFP adjustment for FY 2020 is 0.5 percentage point.
    For CY 2020, we are proposing that the MFP adjustment for the CY 
2020 OPPS is 0.5 percentage point. We are proposing that if more recent 
data become subsequently available after the publication of this 
proposed rule (for example, a more recent estimate of the market basket 
increase and the MFP adjustment), we would use such updated data, if 
appropriate, to determine the CY 2020 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 2020 OPPS/ASC proposed rule.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we are proposing to apply an OPD fee schedule increase factor of 
2.7 percent for the CY 2020 OPPS (which is 3.2 percent, the proposed 
estimate of the hospital inpatient market basket percentage increase, 
less the proposed 0.5 percentage point MFP adjustment).
    Hospitals that fail to meet the Hospital OQR Program reporting 
requirements are subject to an additional reduction of 2.0 percentage 
points from the OPD fee schedule increase factor adjustment to the 
conversion factor that would be used to calculate the OPPS payment 
rates for their services, as required by section 1833(t)(17) of the 
Act. For further discussion of the Hospital OQR Program, we refer 
readers to section XIV. of this proposed rule.
    We are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a 
new paragraph (11) to reflect the requirement in section 
1833(t)(3)(F)(i) of the Act that, for CY 2020, we reduce the OPD fee 
schedule increase factor by the MFP adjustment as determined by CMS.
    To set the OPPS conversion factor for CY 2020, we are proposing to 
increase the CY 2019 conversion factor of $79.490 by 2.7 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we are proposing 
further to adjust the conversion factor for CY 2020 to ensure that any 
revisions made to the wage index and rural adjustment were made on a 
budget neutral basis. We are proposing to calculate an overall budget 
neutrality factor of 0.9993 for wage index changes. This adjustment is 
comprised of a 1.0005 proposed budget neutrality adjustment, using our 
standard calculation, of comparing proposed total estimated payments 
from our simulation model using the proposed FY 2020 IPPS wage indexes 
to those payments using the FY 2019 IPPS wage indexes, as adopted on a 
calendar year basis for the OPPS as well as a 0.9988 proposed budget 
neutrality adjustment for the proposed CY 2020 5 percent cap on wage 
index decreases to ensure that this transition wage index is 
implemented in a budget neutral manner, consistent with the proposed FY 
2020 IPPS wage index policy (84 FR 19398). We believe it is appropriate 
to ensure that this proposed wage index transition policy (that is, the 
proposed CY 2020 5 percent cap on wage index decreases) does not 
increase estimated aggregate payments under the OPPS beyond the 
payments that would be made without this transition policy. We are 
proposing to calculate this budget neutrality adjustment by comparing 
total estimated OPPS payments using the FY 2020 IPPS wage index, 
adopted on a calendar year basis for the OPPS, where a 5 percent cap on 
wage index decreases is not applied to total estimated OPPS payments 
where the 5 percent cap on wage index decreases is applied. These two 
proposed wage index budget neutrality adjustments would maintain budget 
neutrality for the proposed CY 2020 OPPS wage index (which, as 
discussed in section II.C of this proposed rule, would use the FY 2020 
IPPS post-reclassified wage index and any adjustments, including 
without limitation any proposed adjustments

[[Page 39429]]

finalized under the IPPS to address wage index disparities).
    For the CY 2020 OPPS, we are maintaining the current rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment is 1.0000.
    For this CY 2020 OPPS/ASC proposed rule, we are proposing to 
continue previously established policies for implementing the cancer 
hospital payment adjustment described in section 1833(t)(18) of the 
Act, as discussed in section II.F. of this proposed rule. We are 
proposing to calculate a CY 2020 budget neutrality adjustment factor 
for the cancer hospital payment adjustment by comparing estimated total 
CY 2020 payments under section 1833(t) of the Act, including the 
proposed CY 2020 cancer hospital payment adjustment, to estimated CY 
2020 total payments using the CY 2019 final cancer hospital payment 
adjustment, as required under section 1833(t)(18)(B) of the Act. The 
proposed CY 2020 estimated payments applying the proposed CY 2020 
cancer hospital payment adjustment are the same as estimated payments 
applying the CY 2019 final cancer hospital payment adjustment. 
Therefore, we are proposing to apply a budget neutrality adjustment 
factor of 0.9998 to the conversion factor for the cancer hospital 
payment adjustment. In accordance with section 16002(b) of the 21st 
Century Cures Act, we are proposing to apply a budget neutrality factor 
calculated as if the proposed cancer hospital adjustment target 
payment-to-cost ratio is 0.90, not the 0.89 target payment-to-cost 
ratio we are proposing to apply as stated in section II.F. of this 
proposed rule.
    For this CY 2020 OPPS/ASC proposed rule, we estimate that proposed 
pass-through spending for drugs, biologicals, and devices for CY 2020 
would equal approximately $268.8 million, which represents 0.34 percent 
of total projected CY 2020 OPPS spending. Therefore, the proposed 
conversion factor would be adjusted by the difference between the 0.14 
percent estimate of pass-through spending for CY 2019 and the 0.34 
percent estimate of proposed pass-through spending for CY 2020, 
resulting in a proposed decrease for CY 2020 of 0.20 percent. Proposed 
estimated payments for outliers would remain at 1.0 percent of total 
OPPS payments for CY 2020. We estimate for this proposed rule that 
outlier payments would be 1.03 percent of total OPPS payments in CY 
2019; the 1.00 percent for proposed outlier payments in CY 2020 would 
constitute a 0.03 percent increase in payment in CY 2020 relative to CY 
2019.
    For this CY 2020 OPPS/ASC proposed rule, we also are proposing that 
hospitals that fail to meet the reporting requirements of the Hospital 
OQR Program would continue to be subject to a further reduction of 2.0 
percentage points to the OPD fee schedule increase factor. For 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we are proposing to make all other adjustments discussed 
above, but use a reduced OPD fee schedule update factor of 0.7 percent 
(that is, the proposed OPD fee schedule increase factor of 2.7 percent 
further reduced by 2.0 percentage points). This would result in a 
proposed reduced conversion factor for CY 2020 of $79.770 for hospitals 
that fail to meet the Hospital OQR Program requirements (a difference 
of -1.628 in the conversion factor relative to hospitals that meet the 
requirements).
    In summary, for CY 2020, we are proposing to amend Sec.  419.32 by 
adding a new paragraph (b)(1)(iv)(B)(11) to reflect the reductions to 
the OPD fee schedule increase factor that are required for CY 2020 to 
satisfy the statutory requirements of sections 1833(t)(3)(F) and 
(t)(3)(G)(v) of the Act. We are proposing to use a reduced conversion 
factor of $79.770 in the calculation of payments for hospitals that 
fail to meet the Hospital OQR Program requirements (a difference of -
1.628 in the conversion factor relative to hospitals that meet the 
requirements).
    For CY 2020, we are proposing to use a conversion factor of $81.398 
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 2.7 percent for CY 2020, the required proposed wage index 
budget neutrality adjustment of approximately 0.9993, the proposed 
cancer hospital payment adjustment of 0.9998, and the proposed 
adjustment of -0.20 percentage point of projected OPPS spending for the 
difference in pass-through spending that resulted in a proposed 
conversion factor for CY 2020 of $81.398. We refer readers to section 
XXVI.B. of this proposed rule for a discussion of the estimated effect 
on the conversion factor of a policy to pay for 340B-acquired drugs at 
ASP+3 percent, which is a policy on which we solicit comments for 
potential future rulemaking in the event of an adverse decision on 
appeal in the ongoing litigation involving our payment policy for 340B-
acquired drugs.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B. of this proposed rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). In this CY 2020 OPPS/ASC proposed rule, 
we are proposing to continue this policy for the CY 2020 OPPS. We refer 
readers to section II.H. of this proposed rule for a description and an 
example of how the wage index for a particular hospital is used to 
determine payment for the hospital.
    As discussed in the claims accounting narrative included with the 
supporting documentation for this proposed rule (which is available via 
the internet on the CMS website), for estimating APC costs, we would 
standardize 60 percent of estimated claims costs for geographic area 
wage variation using the same FY 2020 pre-reclassified wage index that 
CMS is proposing to use under the IPPS 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

[[Page 39430]]

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 (3) of our regulations. For the 
CY 2020 OPPS, we are proposing to implement this provision in the same 
manner as we have since CY 2011. Under this policy, the frontier State 
hospitals would receive a wage index of 1.00 if the otherwise 
applicable wage index (including reclassification, the rural floor, and 
rural floor budget neutrality) is less than 1.00. Because the HOPD 
receives a wage index based on the geographic location of the specific 
inpatient hospital with which it is associated, the frontier State wage 
index adjustment applicable for the inpatient hospital also would apply 
for any associated HOPD. We refer readers to the FY 2011 through FY 
2019 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; 
for FY 2018, 82 FR 38142; and for FY 2019, 83 FR 41380.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2020 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). In 
addition, we note that, as discussed in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19393 through 19399), we proposed a number of 
policies under the IPPS to address wage index disparities between high 
and low wage index value hospitals. In particular, in the FY 2020 IPPS/
LTCH PPS proposed rule, we proposed to (1) calculate the rural floor 
without including the wage data of urban hospitals that have 
reclassified as rural under section 1886(d)(8)(E) of the Act (as 
implemented in Sec.  412.103) (84 FR 19396 through 19398); (2) remove 
the wage data of urban hospitals that have reclassified as rural under 
Sec.  412.103 from the calculation of ``the wage index for rural areas 
in the State'' for purposes of applying section 1886(d)(8)(C)(iii) of 
the Act (84 FR 19398); (3) increase the wage index values for hospitals 
with a wage index below the 25th percentile wage index value across all 
hospitals by half the difference between the otherwise applicable final 
wage index value for a year for that hospital and the 25th percentile 
wage index value for that year, and to offset the estimated increase in 
payments to hospitals with wage index values below the 25th percentile 
by decreasing the wage index values for hospitals with wage index 
values above the 75th percentile wage index value across all hospitals 
(84 FR 19394 through 19396); and (4) apply a 5-percent cap for FY 2020 
on any decrease in a hospital's final wage index from the hospital's 
final wage index in FY 2019, as a proposed transition wage index to 
help mitigate any significant negative impacts on hospitals (84 FR 
19398). In addition, in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19398), we proposed to apply a budget neutrality adjustment to the 
standardized amount so that our proposed transition wage index for 
hospitals that may be negatively impacted (described in item (4) above) 
would be implemented in a budget neutral manner. Furthermore, in the FY 
2020 IPPS/LTCH PPS proposed rule (84 FR 19398 through 19399), we noted 
that our proposed adjustment relating to the rural floor calculation 
also would be budget neutral. We refer readers to the FY 2020 IPPS/LTCH 
PPS proposed rule (84 FR 19373 through 19399) for a detailed discussion 
of all proposed changes to the FY 2020 IPPS wage indexes.
    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), 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.
    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 
provided detailed information on the update to the statistical areas 
since July 15, 2015, and were 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 the CY 2019 OPPS/ASC final rule with comment period (83 FR 
58863 through 58865), we adopted the updates set forth in OMB Bulletin 
No. 17-01, effective January 1, 2019, beginning with the CY 2019 wage 
index. We continue to 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. For a complete discussion of the adoption of the

[[Page 39431]]

updates set forth in OMB Bulletin No. 17-01, we refer readers to the CY 
2019 OPPS/ASC final rule with comment period (83 FR 58864 through 
58865).
    As we stated in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19374), for the FY 2020 IPPS wage indexes, we would continue to use the 
OMB delineations that were adopted, beginning with FY 2015 (based on 
the revised delineations issued in OMB Bulletin No. 13-01) to calculate 
the area wage indexes, with updates as reflected in OMB Bulletin Nos. 
15-01 and 17-01. Similarly, in this CY 2020 OPPS/ASC proposed rule, for 
the CY 2020 OPPS wage indexes, we would continue to use the OMB 
delineations that were adopted under the OPPS, beginning with CY 2015 
(based on the revised delineations issued in OMB Bulletin No. 13-01) to 
calculate the area wage indexes, with updates as reflected in OMB 
Bulletin Nos. 15-01 and 17-01.
    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. 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 (which, as of May 6, 2019, migrated to: 
https://www.census.gov/programs-surveys/geography.html). 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. For CY 2020, under the OPPS, we are continuing to use 
only the FIPS county codes for purposes of crosswalking counties to 
CBSAs.
    In this CY 2020 OPPS/ASC proposed rule, we are proposing to use the 
FY 2020 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 2020. Therefore, any adjustments for the FY 2020 IPPS post-
reclassified wage index, including, but not limited to, any proposed 
policies finalized under the IPPS to address wage index disparities 
between low and high wage index value hospitals as discussed above and 
in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 19393 through19399, 
would be reflected in the final CY 2020 OPPS wage index beginning on 
January 1, 2020. (We refer readers to the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19373 through 19399) and the proposed FY 2020 
hospital wage index files posted on the CMS website.) With regard to 
budget neutrality for the CY 2020 OPPS wage index, we refer readers to 
section II.B. of this proposed rule. We continue to believe that using 
the IPPS wage index as the source of an adjustment factor for the OPPS 
is reasonable and logical, given the inseparable, subordinate status of 
the HOPD within the hospital overall.
    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 this CY 2020 OPPS/ASC proposed 
rule, we are proposing to continue this policy for CY 2020, and are 
including a brief summary of the major proposed FY 2020 IPPS wage index 
policies and adjustments that we are proposing to apply to these 
hospitals under the OPPS for CY 2020, which we have summarized below. 
We refer readers to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19373 through 19399) for a detailed discussion of the proposed changes 
to the FY 2020 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 index 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 2020, we are proposing to continue our policy of 
allowing non-IPPS hospitals paid under the OPPS to qualify for the out-
migration adjustment if they are located in a section 505 out-migration 
county (section 505 of the MMA). In addition, for non-IPPS hospitals 
paid under the OPPS, we are proposing to apply any proposed policies 
that are finalized under the IPPS relating to wage index disparities as 
discussed earlier in this proposed rule and in the FY 2020 IPPS/LTCH 
PPS proposed rule at 84 FR 19393 through 19399. We also are proposing 
that the wage index that would apply to non-IPPS hospitals for CY 2020 
would include the rural floor adjustment.
    For CMHCs, for CY 2020, we are proposing to continue to calculate 
the wage index by using the post-reclassification IPPS wage index based 
on the CBSA where the CMHC is located. We also are proposing to apply 
any proposed policies that are finalized under the IPPS relating to 
wage index disparities as discussed earlier in this proposed rule and 
in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 19393 through 
19399. In addition, we are proposing that the wage index that would 
apply to CMHCs for CY 2020 would include the rural floor adjustment. 
Also, we are proposing that the wage index that would apply to CMHCs 
would not include the out-migration adjustment because that adjustment 
only applies to hospitals.
    Table 4 associated with the FY 2020 IPPS/LTCH PPS proposed 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. Table 2 
associated with the FY 2020 IPPS/LTCH PPS proposed rule (available for 
download via the website above) identifies IPPS hospitals that would 
receive the out-migration adjustment for FY 2020. We are including the 
out-migration adjustment information from Table 2 associated with the 
FY 2020 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule 
with the addition of non-IPPS hospitals that would receive the section 
505 out-migration adjustment under this CY

[[Page 39432]]

2020 OPPS/ASC proposed rule. 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 proposed FY 2020 IPPS wage index tables and Addendum L.

D. Proposed 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. For 
certain hospitals, under the regulations at 42 CFR 419.43(d)(5)(iii), 
CMS uses the statewide average default CCRs to determine the payments 
mentioned earlier if it is unable to determine an accurate CCR for a 
hospital in certain circumstances. This includes 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 whose CCR falls outside the 
predetermined ceiling threshold for a valid CCR or for hospitals in 
which the most recent cost report reflects an all-inclusive rate status 
(Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 
10.11).
    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 details on our process for 
calculating the statewide average CCRs, we refer readers to the CY 2020 
OPPS proposed rule Claims Accounting Narrative that is posted on the 
CMS website. In this CY 2020 OPPS/ASC proposed rule, we are proposing 
to update the default ratios for CY 2020 using the most recent cost 
report data. We will update these ratios in the final rule if more 
recent cost report data are available.
    Beginning with this CY 2020 proposed rule, we are no longer 
publishing a table in the Federal Register containing the statewide 
average CCRs in the annual OPPS proposed rule and final rule. These 
CCRs with the upper limit will be available for download with each OPPS 
calendar year proposed rule and final rule on the CMS website. We refer 
the reader to the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; click on the link on the left 
of the page titled ``Hospital Outpatient Regulations and Notices'' and 
then select the relevant regulation to download the statewide CCRs and 
upper limit in the downloads section of the web page.

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2020

    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 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, items paid at charges reduced to 
costs, 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 Public Law 105-33, a hospital can no 
longer become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outlier payments and copayments. We stated in the CY 2006 
OPPS final rule with comment period (70 FR 68560) that we would not 
reestablish the adjustment amount on an annual basis, but we may review 
the adjustment in the future and, if appropriate, would revise the 
adjustment. We provided the same 7.1 percent adjustment to rural SCHs, 
including EACHs, again in CYs 2008 through 2019. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    For the CY 2020 OPPS, we are proposing 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, brachytherapy sources, items paid at charges reduced to 
costs, and devices paid under the pass-through payment policy.

F. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2020

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid 
the 11 hospitals that meet the criteria for cancer hospitals identified 
in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered 
outpatient hospital services. These cancer hospitals are exempted from 
payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced 
Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established 
section 1833(t)(7) of the Act, ``Transitional Adjustment to Limit 
Decline in Payment,'' to determine OPPS payments to cancer and 
children's hospitals based on their pre-BBA payment amount (often 
referred to as ``held harmless'').
    As required under section 1833(t)(7)(D)(ii) of the Act, a cancer 
hospital receives the full amount of the difference between payments 
for covered outpatient services under the OPPS and a ``pre-BBA 
amount.'' That is, cancer hospitals are permanently held harmless to 
their ``pre-BBA amount,'' and they receive transitional outpatient 
payments (TOPs) or hold harmless payments to ensure that they do not

[[Page 39433]]

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 was 0.90. 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). For CY 2019, the 
target PCR was 0.88, as discussed in the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58871 through 58873).
2. Proposed Policy for CY 2020
    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.
    For CY 2020, we are proposing 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 this 
proposed rule, reduced by 1.0 percentage point, to comply with section 
16002(b) of the 21st Century Cures Act.
    We are not proposing an additional reduction beyond the 1.0 
percentage point reduction required by section 16002(b) for CY 2020. To 
calculate the proposed CY 2020 target PCR, we are using the same 
extract of cost report data from HCRIS, as discussed in section II.A. 
of this proposed rule, used to estimate costs for the CY 2020 OPPS. 
Using these cost report data, we are including 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 2018 claims 
data that we used to model the impact of the proposed CY 2020 APC 
relative payment weights (3,770 hospitals) because it is appropriate to 
use the same set of hospitals that are being used to calibrate the 
modeled CY 2020 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2016 to 2018. We then removed the cost report data of the 49 
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 23 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 3,539 
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 90 percent of reasonable cost 
(weighted average PCR of 0.90). Therefore, after applying the 1.0 
percentage point reduction, as required by section 16002(b) of the 21st 
Century Cures Act, we are proposing that the payment amount associated 
with the cancer hospital payment

[[Page 39434]]

adjustment to be determined at cost report settlement would be the 
additional payment needed to result in a proposed target PCR equal to 
0.89 for each cancer hospital.
    Table 6 shows the estimated percentage increase in OPPS payments to 
each cancer hospital for CY 2020, due to the cancer hospital payment 
adjustment policy. The actual amount of the CY 2020 cancer hospital 
payment adjustment for each cancer hospital will be determined at cost 
report settlement and will depend on each hospital's CY 2020 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.
[GRAPHIC] [TIFF OMITTED] TP09AU19.009

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    The OPPS provides outlier payments to hospitals to help mitigate 
the financial risk associated with high-cost and complex procedures, 
where a very costly service could present a hospital with significant 
financial loss. As explained in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66832 through 66834), we set our projected target 
for aggregate outlier payments at 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. 
Outlier payments are provided on a service-by-service basis when the 
cost of a service exceeds the APC payment amount multiplier threshold 
(the APC payment amount multiplied by a certain amount) as well as the 
APC payment amount plus a fixed-dollar amount threshold (the APC 
payment plus a certain amount of dollars). In CY 2019, 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 $4,825 (the fixed-dollar 
amount threshold) (83 FR 58874 through 58875). 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 2018 OPPS payments, using CY 2018 claims available for this CY 
2020 OPPS/ASC proposed rule, is approximately 1.0 percent of the total 
aggregated OPPS payments. Therefore, for CY 2018, 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 2020 OPPS 
proposed rule, we estimate that we paid

[[Page 39435]]

approximately 1.03 percent of the total aggregated OPPS payments in 
outliers for CY 2018.
    For this CY 2020 OPPS/ASC proposed rule, using CY 2018 claims data 
and CY 2019 payment rates, we estimate that the aggregate outlier 
payments for CY 2019 would be approximately 1.03 percent of the total 
CY 2019 OPPS payments. We are providing estimated CY 2020 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. Proposed Outlier Calculation for CY 2020
    For CY 2020, we are proposing to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS. We are proposing that a portion of that 1.0 
percent, an amount equal to 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 this proposed rule, we are proposing 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 this proposed rule.
    To ensure that the estimated CY 2020 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we are proposing that the hospital outlier threshold be set so 
that outlier payments would be triggered when a hospital's cost of 
furnishing a service exceeds 1.75 times the APC payment amount and 
exceeds the APC payment amount plus $4,950.
    We calculated the proposed fixed-dollar threshold of $4,950 using 
the standard methodology most recently used for CY 2019 (83 FR 58874 
through 58875). For purposes of estimating outlier payments for the 
proposed rule, we are using the hospital-specific overall ancillary 
CCRs available in the April 2019 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 2020 hospital outlier payments for this 
proposed rule, we inflate the charges on the CY 2018 claims using the 
same inflation factor of 1.11189 that we used to estimate the proposed 
IPPS fixed-dollar outlier threshold for the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19596). We used an inflation factor of 1.05446 to 
estimate CY 2019 charges from the CY 2018 charges reported on CY 2018 
claims. The methodology for determining this charge inflation factor is 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41717 through 
41718). 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 do not apply a CCR inflation 
adjustment factor. Therefore, we are proposing to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 2020 
IPPS outlier calculation to the CCRs used to simulate the proposed CY 
2020 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2020, we are proposing to apply an adjustment 
factor of 0.97517 to the CCRs that were in the April 2019 OPSF to trend 
them forward from CY 2019 to CY 2020. The methodology for calculating 
the proposed adjustment is discussed in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19597).
    To model hospital outlier payments for the proposed rule, we are 
applying the overall CCRs from the April 2019 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.97517 to 
approximate CY 2020 CCRs) to charges on CY 2018 claims that were 
adjusted (using the proposed charge inflation factor of 1.11189 to 
approximate CY 2020 charges). We simulated aggregated CY 2020 hospital 
outlier payments using these costs for several different fixed-dollar 
thresholds, holding the 1.75 multiplier threshold constant and assuming 
that outlier payments would continue to be made at 50 percent of the 
amount by which the cost of furnishing the service would exceed 1.75 
times the APC payment amount, until the total outlier payments equaled 
1.0 percent of aggregated estimated total CY 2020 OPPS payments. We are 
estimating that a proposed fixed-dollar threshold of $4,950, 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 are proposing 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, 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 XIV. of this 
proposed rule.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2020 OPPS/ASC proposed 
rule, the payment rate for most services and procedures for which 
payment is made under the OPPS is the product of the

[[Page 39436]]

conversion factor calculated in accordance with section II.B. of this 
proposed rule and the relative payment weight determined under section 
II.A. of this proposed rule. Therefore, the proposed national 
unadjusted payment rate for most APCs contained in Addendum A to this 
proposed rule (which is available via the internet on the CMS website) 
and for most HCPCS codes to which separate payment under the OPPS has 
been assigned in Addendum B to this proposed rule (which is available 
via the internet on the CMS website) was calculated by multiplying the 
proposed CY 2020 scaled weight for the APC by the proposed CY 2020 
conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals, as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XIV. of this proposed rule.
    Below we demonstrate the steps used 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 this 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 note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements.
    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 proposed 
rule (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 2020 
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 proposed CY 2020 OPPS policy for 
continuing to use the OMB labor market area delineations based on the 
2010 Decennial Census data for the wage indexes used under the IPPS, a 
hold harmless policy for the wage index may apply, as discussed in 
section II.C. of this proposed rule. The 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 2020 under 
the IPPS, reclassifications through the Medicare 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 proposed changes to the FY 2020 IPPS wage indexes, as 
applied to the CY 2020 OPPS, we refer readers to section II.C. of this 
proposed rule. We are proposing to continue to apply a wage index floor 
of 1.00 to frontier States, in accordance with section 10324 of the 
Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule (which is available via the 
internet on the CMS website) contains the qualifying counties and the 
associated wage index increase developed for the proposed FY 2020 IPPS, 
which are listed in Table 2 associated with the FY 2020 IPPS/LTCH PPS 
proposed rule and 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 2020 IPPS Proposed Rule Home Page'' and select 
``FY 2020 Proposed 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).

[[Page 39437]]

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

    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.

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

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

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

    We are providing examples below of the calculation of both the 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 are using 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 proposed CY 2020 
full national unadjusted payment rate for APC 5071 is approximately 
$617.00. The proposed reduced national unadjusted payment rate for APC 
5071 for a hospital that fails to meet the Hospital OQR Program 
requirements is approximately $604.66. This reduced rate is calculated 
by multiplying the reporting ratio of 0.980 by the full unadjusted 
payment rate for APC 5071.
    The proposed FY 2020 wage index for a provider located in CBSA 
35614 in New York, which includes the proposed adoption of IPPS 2020 
wage index policies, is 1.2747. The labor-related portion of the 
proposed full national unadjusted payment is approximately $471.89 (.60 
* $617.00 * 1.2747). The labor-related portion of the proposed reduced 
national unadjusted payment is approximately $462.46 (.60 * 604.66 * 
1.2747). The nonlabor-related portion of the proposed full national 
unadjusted payment is approximately $246.80 (.40 * $617.00). The 
nonlabor-related portion of the proposed reduced national unadjusted 
payment is approximately $241.86. (.40 * $604.66). The sum of the 
labor-related and nonlabor-related portions of the proposed full 
national adjusted payment is approximately $718.69 ($471.89. + 
$246.80). The sum of the portions of the proposed reduced national 
adjusted payment is approximately $704.32 ($462.46. + $241.86).

I. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure (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. Proposed OPPS Copayment Policy
    For CY 2020, we are proposing to determine copayment amounts for 
new and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458).) In addition, we are 
proposing to use the same standard rounding principles that we have 
historically used in instances where the application of our standard 
copayment methodology would result in a copayment amount that is less 
than 20 percent and cannot be rounded, under standard rounding 
principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66687) in which we discussed 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, 2020 are included in Addenda A 
and B to this proposed rule (which are available via the internet on 
the CMS website).
    As discussed in section XIV.E. of this proposed rule, for CY 2020, 
the proposed Medicare beneficiary's minimum unadjusted copayment and 
national unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We note that OPPS copayments may increase or decrease each year 
based on changes in the calculated APC payment rates, due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. However, as described in the CY 2004 OPPS final rule with 
comment period, the development of the copayment methodology generally 
moves beneficiary copayments closer to 20 percent of OPPS APC payments 
(68 FR 63458 through 63459).
    In the CY 2004 OPPS final rule with comment period (68 FR 63459), 
we adopted a new methodology to calculate unadjusted copayment amounts 
in situations including reorganizing APCs, and we finalized the 
following rules to determine copayment amounts in CY 2004 and 
subsequent years.

[[Page 39438]]

     When an APC group consists solely of HCPCS codes that were 
not paid under the OPPS the prior year because they were packaged or 
excluded or are new codes, the unadjusted copayment amount would be 20 
percent of the APC payment rate.
     If a new APC that did not exist during the prior year is 
created and consists of HCPCS codes previously assigned to other APCs, 
the copayment amount is calculated as the product of the APC payment 
rate and the lowest coinsurance percentage of the codes comprising the 
new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a decrease in the coinsurance 
percentage for the reconfigured APC, the copayment amount would not 
change (unless retaining the copayment amount would result in a 
coinsurance rate less than 20 percent).
     If HCPCS codes are added to an APC and, after 
recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in an increase in the coinsurance 
percentage for the reconfigured APC, the copayment amount would be 
calculated as the product of the payment rate of the reconfigured APC 
and the lowest coinsurance percentage of the codes being added to the 
reconfigured APC.
    We noted in 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).
3. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 5071, $617.00 is approximately 20 percent of the 
proposed full national unadjusted payment rate of $123.40. For APCs 
with only a minimum unadjusted copayment in Addenda A and B to this 
proposed rule (which are available via the internet on the CMS 
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 proposed rule. Calculate the rural 
adjustment for eligible providers, as indicated in Step 6 under section 
II.H. of this proposed rule.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary payment percentage to the adjusted payment rate 
for a service calculated under section II.H. of this proposed rule, 
with and without the rural adjustment, to calculate the adjusted 
beneficiary copayment for a given service.

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2020, are shown in Addenda A 
and B to this proposed rule (which are available via the internet on 
the CMS website). We note that the proposed national unadjusted payment 
rates and copayment rates shown in Addenda A and B to this proposed 
rule reflect the proposed CY 2020 OPD fee schedule increase factor 
discussed in section II.B. of this proposed rule.
    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. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies

A. Proposed OPPS Treatment of New and Revised HCPCS Codes

    Payment for OPPS procedures, services, and items are generally 
based on medical billing codes, specifically, HCPCS codes, that are 
reported on HOPD claims. The HCPCS is divided into two principal 
subsystems, referred to as Level I and Level II of the HCPCS. Level I 
is comprised of CPT (Current Procedural Terminology), a numeric and 
alphanumeric coding system maintained by the American Medical 
Association (AMA), and consist of Category I, II, and III CPT codes. 
Level II, which is maintained by CMS, is a standardized coding system 
that is used primarily to identify products, supplies, and services not 
included in the CPT codes. HCPCS codes are used to report surgical 
procedures, medical 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, 
diagnostic and therapeutic services, and vaccine codes;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and

[[Page 39439]]

     Level II HCPCS codes (also known as alphanumeric codes), 
which are used primarily to identify drugs, devices, ambulance 
services, durable medical equipment, orthotics, prosthetics, supplies, 
temporary surgical procedures, and medical services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
while the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and Level II HCPCS code changes that affect the OPPS are published 
through the annual rulemaking cycle and through the OPPS quarterly 
update Change Requests (CRs). Generally, these code changes are 
effective January 1, April 1, July 1, or October 1. CPT code changes 
are released by the AMA while Level II HCPCS code changes are released 
to the public via the CMS HCPCS website. CMS recognizes the release of 
new CPT and Level II HCPCS codes and makes the 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 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 more 
accurately describe items or services furnished and provides payment 
for these items or services in a timelier manner than if we waited for 
the annual rulemaking process. We solicit public comments on the new 
CPT and Level II HCPCS codes and finalize our proposals 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. In section XI. of this proposed rule (Proposed CY 
2020 OPPS Payment Status and Comment Indicators), we discuss the 
various status indicators used under the OPPS. We also provide a 
complete list of the status indicators and their definitions in 
Addendum D1 to this CY 2020 OPPS/ASC proposed rule.
1. April 2019 Codes for Which We Are Soliciting Public Comments in This 
Proposed Rule
    For the April 2019 update, there were no new CPT codes. However, 
eight new Level II HCPCS codes were established and made effective on 
April 1, 2019. These codes and their long descriptors are listed in 
Table 7. Through the April 2019 OPPS quarterly update CR (Transmittal 
4255, Change Request 11216, dated March 15, 2019), we recognized 
several new Level II HCPCS codes for separate payment under the OPPS. 
In this CY 2020 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments for the 
codes listed Table 7. The proposed status indicator, APC assignment, 
and payment rate for each HCPCS code can be found in Addendum B to this 
proposed rule. The complete list of status indicators and corresponding 
definitions used under the OPPS can be found in Addendum D1 to this 
proposed rule. These new codes that are effective April 1, 2019 are 
assigned to comment indicator ``NP'' in Addendum B to this proposed 
rule to indicate that the codes are assigned to an interim APC 
assignment and that comments will be accepted on their interim APC 
assignments. Also, the complete list of comment indicators and 
definitions used under the OPPS can be found in Addendum D2 to this 
proposed rule. We note that OPPS Addendum B, Addendum D1, and Addendum 
D2 are available via the internet on the CMS website.
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[[Page 39440]]

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2. July 2019 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    For the July 2019 update, 58 new codes were established and made 
effective July 1, 2019. The codes and long descriptors are listed in 
Table 8. Through the July 2019 OPPS quarterly update CR (Transmittal 
4313, Change Request 11318, dated May 24, 2019), we recognized several 
new codes for separate payment and assigned them to appropriate interim 
OPPS status indicators and APCs. In this CY 2020 OPPS/ASC proposed 
rule, we are soliciting public comments on the proposed APC and status 
indicator assignments for the codes implemented on July 1, 2019, all of 
which are listed in Table 8. The proposed status indicator, APC 
assignment, and payment rate for each HCPCS code can be found in 
Addendum B to this proposed rule. The complete list of status 
indicators and corresponding definitions used under the OPPS can be 
found in Addendum D1 to this proposed rule. These new codes that are 
effective July 1, 2019 are assigned to comment indicator ``NP'' in 
Addendum B to this proposed rule to indicate that the codes are 
assigned to an interim APC assignment and that comments will be 
accepted on their interim APC assignments. Also, the complete list of 
comment indicators and definitions used under the OPPS can be found in 
Addendum D2 to this proposed rule. We note that OPPS Addendum B, 
Addendum D1, and Addendum D2 are available via the internet on the CMS 
website.

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BILLING CODE 4120-01-C
3. October 2019 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2020 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we will solicit comments on 
the new CPT and Level II HCPCS codes that will be effective October 1, 
2019 in the CY 2020 OPPS/ASC final rule with comment period, thereby 
allowing us to finalize the status indicators and APC assignments for 
the codes in the CY 2021 OPPS/ASC final rule with comment period. The 
Level II HCPCS codes will be released to the public through the October 
2019 OPPS Update CR and the CMS HCPCS website while the CPT codes will 
be released to the public through the AMA website.
    For CY 2020, we are proposing to continue our established policy of 
assigning comment indicator ``NI'' in Addendum B to the OPPS/ASC final 
rule with comment period to those new HCPCS codes that are effective 
October 1, 2019 to indicate that we are assigning them an interim 
status indicator, which is subject to public comment. We will be 
inviting public comments in the CY 2020 OPPS/ASC final rule with 
comment period on the status indicator and APC assignments, which would 
then be finalized in the CY 2021 OPPS/ASC final rule with comment 
period.
4. January 2020 HCPCS Codes
a. New Level II HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2020 OPPS/ASC Final Rule With Comment Period
    Consistent with past practice, we will solicit comments on the new 
Level II HCPCS codes that will be effective January 1, 2020 in the CY 
2020 OPPS/ASC final rule with comment period, thereby allowing us to 
finalize the status indicators and APC assignments for the codes in the 
CY 2021 OPPS/ASC final rule with comment period. Unlike the CPT codes 
that are effective January 1 and are included in the OPPS/ASC proposed 
rules, and except for the G-codes listed in Addendum O of this proposed 
rule, most Level II HCPCS codes are not released until sometime around 
November to be effective January 1. Because these codes are not 
available until November, we are unable to include them in the OPPS/ASC 
proposed rules. Therefore, these Level II HCPCS codes will be released 
to the public through the CY 2020 OPPS/ASC final rule with comment 
period, January 2020 OPPS Update CR, and the CMS HCPCS website.
    For CY 2020, we are proposing to continue our established policy of 
assigning comment indicator ``NI'' in Addendum B to the OPPS/ASC final 
rule with comment period to the new HCPCS codes that will be effective 
January 1, 2020 to indicate that we are assigning them an interim 
status indicator, which is subject to public comment. We will be 
inviting public comments in the CY 2020 OPPS/ASC final rule with 
comment period on the status indicator and APC assignments, which would 
then be finalized in the CY 2021 OPPS/ASC final rule with comment 
period.
b. CPT Codes for Which We Are Soliciting Public Comments in This 
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

[[Page 39450]]

include proposed APC and status indicator assignments for all new and 
revised CPT codes that the AMA makes publicly available in time for us 
to include them in the proposed rule, and to avoid the resort to HCPCS 
G-codes and the resulting delay in utilization of the most current CPT 
codes. Also, we finalized our proposal to make interim APC and status 
indicator assignments for CPT codes that are not available in time for 
the proposed rule and that describe wholly new services (such as new 
technologies or new surgical procedures), solicit public comments, and 
finalize the specific APC and status indicator assignments for those 
codes in the following year's final rule.
    For the CY 2020 OPPS update, we received the CPT codes that will be 
effective January 1, 2020 from AMA in time to be included in this 
proposed rule. The new, revised, and deleted CPT codes can be found in 
Addendum B to this proposed rule (which is available via the internet 
on the CMS website). We note that the new and revised CPT codes are 
assigned to comment indicator ``NP'' in Addendum B of this proposed 
rule to indicate that the code is new for the next calendar year or the 
code is an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to current calendar 
year with a proposed APC assignment, and that comments will be accepted 
on the proposed APC assignment and status indicator.
    Further, we note that the CPT code descriptors that appear in 
Addendum B are short descriptors and do not accurately describe the 
complete procedure, service, or item described by the CPT code. 
Therefore, we are including the 5-digit placeholder codes and the long 
descriptors for the new and revised CY 2020 CPT codes in Addendum O to 
this proposed rule (which is available via the internet on the CMS 
website) so that the public can adequately comment on our proposed APCs 
and status indicator assignments. The 5-digit placeholder codes can be 
found in Addendum O, specifically under the column labeled ``CY 2020 
OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code''. The final CPT 
code numbers will be included in the CY 2020 OPPS/ASC final rule with 
comment period.
    In summary, we are soliciting public comments on the proposed CY 
2020 status indicators and APC assignments for the new and revised CPT 
codes that will be effective January 1, 2020. Because the CPT codes 
listed in Addendum B appear with short descriptors only, we list them 
again in Addendum O to this proposed rule with long descriptors. In 
addition, we are proposing to finalize the status indicator and APC 
assignments for these codes (with their final CPT code numbers) in the 
CY 2020 OPPS/ASC final rule with comment period. The proposed status 
indicator and APC assignment for these codes can be found in Addendum B 
to this proposed rule (which is available via the internet on the CMS 
website).
    Finally, in Table 9, we summarize our current process for updating 
codes through our OPPS quarterly update CRs, seeking public comments, 
and finalizing the treatment of these codes under the OPPS.
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[[Page 39451]]



B. Proposed OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in regulations at 42 CFR[thinsp]419.31. We use Level I (also known as 
CPT codes) and Level II HCPCS codes (also known as alphanumeric 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 proposed 
rule.
    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. For CY 2020, we are proposing that each APC relative payment 
weight represents the hospital cost of the services included in that 
APC, relative to the hospital cost of the services included in 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 2020 OPPS update 
will be discussed in the relevant specific sections throughout the CY 
2020 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 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 this section of 
this proposed rule, for CY 2020, we are proposing 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 2020 OPPS update, we have identified the APCs with 
violations of the 2 times rule. Therefore, we are proposing changes to 
the procedure codes assigned to these APCs in Addendum B to this 
proposed rule. We note that Addendum B does not appear in the printed 
version of the Federal Register as part of this CY 2020 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 are proposing to reassign these procedure codes to new 
APCs that contain services that are similar with regard to both their 
clinical and resource characteristics. In many cases, the proposed 
procedure code reassignments and associated APC reconfigurations for CY 
2020 included in this proposed rule are related to changes in costs of 
services that were observed in the CY 2018 claims data newly available 
for CY 2020 ratesetting. Addendum B to this CY 2020 OPPS/ASC proposed 
rule identifies with a comment indicator ``CH'' those procedure codes 
for which we are proposing a change to the APC assignment or status 
indicator, or both, that were initially assigned in the July 1, 2019 
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. Proposed APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we are proposing to make 
for CY 2020, 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;

[[Page 39452]]

     Clinical homogeneity;
     Hospital outpatient setting utilization;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    Based on the CY 2018 claims data available for this CY 2020 
proposed rule, we found 18 APCs with violations of the 2 times rule. We 
applied the criteria as described above to identify the APCs for which 
we are proposing to make exceptions under the 2 times rule for CY 2020, 
and found that all of the 18 APCs we identified meet the criteria for 
an exception to the 2 times rule based on the CY 2018 claims data 
available for this proposed rule. We did not include in that 
determination those APCs where a 2 times rule violation was not a 
relevant concept, such as 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 have 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 10 of this proposed rule lists the 18 APCs that we are 
proposing to make an exception for under the 2 times rule for CY 2020 
based on the criteria cited above and claims data submitted between 
January 1, 2018, and December 31, 2018, and processed on or before 
December 31, 2018. For the final rule with comment period, we intend to 
use claims data for dates of service between January 1, 2018, and 
December 31, 2018, that were processed on or before June 30, 2019, and 
updated CCRs, if available. The proposed geometric mean costs for 
covered hospital outpatient services for these and all other APCs that 
were used in the development of this proposed rule can be found on the 
CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
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C. Proposed New Technology APCs

1. Background
    In the CY 2002 OPPS 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

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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 2019, 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 adjusted for multifactor productivity. 
We 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 technologies 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 2020, 
we are including the proposed payment rates for New Technology APCs 
1491 through 1599 and 1901 through 1908 in Addendum A to this CY 2020 
OPPS/ASC proposed rule (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. As we explained in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58890), we were 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 for 
these low-volume procedures.
    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 
determined in the CY 2019 OPPS/ASC final rule with comment period that 
it was appropriate to utilize our equitable adjustment authority at 
section 1833(t)(2)(E) of the Act to adjust how we determined the costs 
for low-volume services assigned to New Technology APCs (83 FR 58892 
through 58893). 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

[[Page 39454]]

have used this adjustment authority on a case-by-case basis in the 
past, we stated in the CY 2019 OPPS/ASC final rule with comment period 
that we believe it is appropriate to adopt an adjustment for low-volume 
services assigned to New Technology APCs in order to mitigate the wide 
payment fluctuations that have occurred for new technology services 
with fewer than 100 claims and to provide more predictable payment for 
these services.
    For purposes of this adjustment, we stated that 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 adopted a policy to 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. We 
explained that we were 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 low-volume 
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 stated that we believe using the median 
or arithmetic mean rather than the geometric mean (which ``trims'' the 
costs of certain claims out) could 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 also explained that we believe 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 
final rule with comment period (83 FR 58893), we established that, in 
each of our annual rulemakings, we will seek public comments on which 
statistical methodology should be used for each low-volume service 
assigned to a New Technology APC. In the preamble of each annual 
rulemaking, we stated that we would 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 will assign the service to 
the New Technology APC with the cost band that includes its payment 
rate.
    Accordingly for CY 2020, we are proposing to continue our policy 
adopted in CY 2019 under which we will utilize our equitable adjustment 
authority under section 1833(t)(2)(E) of the Act to calculate the 
geometric mean, arithmetic mean, and median using multiple years of 
claims data to select the appropriate payment rate for purposes of 
assigning services with fewer than 100 claims per year to a New 
Technology APC. Additional details on our policy is available in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 58892 through 
58893).
3. Procedures Assigned to New Technology APC Groups for CY 2020
    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 
different New Technology APC that more appropriately reflects its cost 
(66 FR 59903).
    Consistent with our current policy, for CY 2020, in this proposed 
rule, we are proposing to retain services within New Technology APC 
groups until we obtain sufficient claims data to justify reassignment 
of the service to a clinically appropriate APC. The flexibility 
associated with this policy allows us to reassign a service from a New 
Technology APC in less than 2 years if sufficient claims data are 
available. It also allows us to retain a service in a New Technology 
APC for more than 2 years if sufficient claims data upon which to base 
a decision for reassignment have not been obtained (66 FR 59902).
a. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 
1575, 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 are proposing to continue to assign to 
standard APCs, and one that we are proposing to continue to assign to a 
New Technology APC for CY 2020. 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 11 of this CY 2020 OPPS/ASC proposed rule, and as 
listed in Addendum B to this CY 2020 OPPS/ASC proposed rule, we are 
proposing to continue to assign the procedures described by CPT codes 
0071T and 0072T to APC 5414 (Level 4 Gynecologic Procedures) for CY 
2020. We also are proposing to continue to assign the APC to status 
indicator ``J1'' (Hospital Part B services paid through a comprehensive 
APC). In addition, we are proposing 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) for CY 
2020. We also are proposing to continue to assign HCPCS code C9734 to 
status indicator ``J1''. We refer readers to Addendum B to this 
proposed rule for the proposed payment rates for CPT codes 0071T and 
0072T and HCPCS code C9734 under the OPPS. Addendum B is available via 
the internet on the CMS website.

[[Page 39455]]

    For the procedure described by CPT code 0398T, we have identified 
37 paid claims from CY 2016 through CY 2018 (1 claim in CY 2016, 11 
claims in CY 2017, and 25 claims in CY 2018). We note that the 
procedure described by CPT code 0398T was first assigned to a New 
Technology APC in CY 2016. Accordingly, there are 3 years of claims 
data available for the OPPS ratesetting purposes. The payment amounts 
for the claims vary widely, with a cost of approximately $29,254 for 
the sole CY 2016 claim, a geometric mean cost of approximately $4,647 
for the 11 claims from CY 2017, and a geometric mean cost of 
approximately $11,716 for the 25 claims from CY 2018. We are concerned 
about the large fluctuation in the cost of the procedure described by 
CPT code 0398T from year to year and the relatively small number of 
claims available to establish a payment rate for the service. To be 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 this proposed rule, 
we are proposing to apply the policy we adopted in CY 2019, under which 
we will utilize our equitable adjustment authority under section 
1833(t)(2)(E) of the Act to calculate the geometric mean, arithmetic 
mean, and median costs using multiple years of claims data to select 
the appropriate payment rate for purposes of assigning CPT code 0398T 
to a New Technology APC. We believe using this approach to assign CPT 
code 0398T to a New Technology APC is more likely to yield a payment 
rate that will be representative of the cost of the procedure described 
by CPT code 0398T, despite the fluctuating geometric mean costs for the 
procedure available in the claims data used for this proposed rule. We 
continue to believe that the situation for the procedure described by 
CPT code 0398T is unique, given the limited number of claims for the 
procedure and the high variability for the cost of the claims, which 
makes it challenging to determine a reliable payment rate.
    Our analysis found that the estimated geometric mean cost of the 37 
claims was approximately $8,829, the estimated arithmetic mean cost of 
the claims was approximately $10,021, and the median cost of the claims 
was approximately $11,985. While the results of using different 
methodologies range from approximately $8,800 to nearly $12,000, two of 
the estimates fall within the cost bands of New Technology APC 1575 
(New Technology--Level 38 ($10,001-$15,000)), with a proposed payment 
rate of $12,500.50. Consistent with our policy stated in section 
III.C.2. of this proposed rule, we are presenting the result of each 
statistical methodology in this preamble, and we are seeking public 
comments on which methodology should be used to establish payment for 
the procedures described by CPT code 0398T. We note that we believe 
that the median cost estimate is the most appropriate representative 
cost of the procedure described by CPT code 0398T because it is 
consistent with the payment rates established for the procedure from CY 
2017 to CY 2019 and does not involve any trimming of claims. 
Calculating the payment rate using either the geometric mean cost or 
the arithmetic mean cost would involve trimming the one paid claim from 
CY 2016, because the paid amount for the claim of $29,254 is 
substantially larger than the amount for any other paid claim reported 
for the procedure described by CPT code 0398T. The median cost estimate 
for CPT code 0398T also falls within the same New Technology APC cost 
band that was used to set the payment rate for CY 2019, which is 
$12,500.50 for this procedure. Therefore, for purposes of determining 
the proposed CY 2020 payment rate, we are proposing to estimate the 
cost for the procedure described by CPT code 0398T by calculating the 
median cost of the 37 paid claims for the procedures in CY 2016 through 
CY 2018, and assigning the procedure described by CPT code 0398T to the 
New Technology APC that includes the estimated cost. Accordingly, we 
are proposing to maintain the procedure described by CPT code 0398T in 
APC 1575 (New Technology--Level 38 ($10,001-$15,000)), with a proposed 
payment rate of $12,500.50 for CY 2020. We refer readers to Addendum B 
to this 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.
BILLING CODE 4120-01-P

[[Page 39456]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.022


[[Page 39457]]


[GRAPHIC] [TIFF OMITTED] TP09AU19.023

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 included 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 OPPS/ASC 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 for 6 claims 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, but closer to the CY 2016 payment rate for the 
procedure. 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 fluctuations 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, for CY 
2018, 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.
    For CY 2019, the reported cost of the Argus[supreg] II procedure 
based on the geometric mean cost of 12 claims from the CY 2017 hospital 
outpatient claims data was approximately $171,865, which was 
approximately $49,364 more than the payment rate for the procedure for 
CY 2018. In the CY 2019 OPPS/ASC

[[Page 39458]]

final rule with comment period, 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 (83 FR 58897 through 58898). 
In addition, the number of claims submitted continued to be very low 
for the Argus[supreg] II procedure. We stated that we continued to 
believe that it is important to mitigate significant payment 
fluctuations for a procedure, 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 CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58892 through 58893), 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 establish a payment rate that is more representative of 
the likely cost of the service. We stated that we believed the likely 
cost of the Argus[supreg] II procedure is higher than the geometric 
mean cost calculated from the claims data used for the CY 2018 OPPS/ASC 
final rule with comment period but lower than the geometric mean cost 
calculated from the claims data used for the CY 2019 OPPS/ASC final 
rule with comment period.
    For CY 2019, we analyzed claims data for the Argus[supreg] II 
procedure using 3 years of available data from CY 2015 through CY 2017. 
These data included claims from the last year that the Argus[supreg] II 
received transitional device pass-through payments (CY 2015) and the 
first 2 years since device pass-through payment status for the 
Argus[supreg] II expired. We found that the geometric mean cost for the 
procedure was approximately $145,808, the arithmetic mean cost was 
approximately $151,367, and the median cost was approximately $151,266. 
As we do each year, we reviewed 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 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). For CY 2019, 
the estimated costs using all three potential statistical methods for 
determining APC assignment under the New Technology low-volume policy 
fell within the cost band of New Technology APC 1908, which is between 
$145,001 and $160,000. Therefore, we reassigned 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.
    For CY 2020, the number of reported claims for the Argus[supreg] II 
procedure continues to be very low with a substantial fluctuation in 
cost from year to year.
    The high annual variability of the cost of the Argus[supreg] II 
procedure continues to make it difficult to establish a consistent and 
stable payment rate for the procedure. In accordance with section 
1833(t)(2)(B) of the Act, we are required to establish that services 
classified within each APC are comparable clinically and with respect 
to the use of resources. Therefore, for CY 2020, we are proposing to 
apply the policy we adopted in CY 2019, under which we utilize our 
equitable adjustment authority under section 1833(t)(2)(E) of the Act 
to calculate the geometric mean, arithmetic mean, and median costs 
using multiple years of claims data to select the appropriate payment 
rate for purposes of assigning the Argus[supreg] II procedure (CPT code 
0100T) to a New Technology APC.
    We identified 35 claims reporting the procedure described by CPT 
code 0100T for the 4-year period of CY 2015 through CY 2018. We found 
the geometric mean cost for the procedure described by CPT code 0100T 
to be approximately $146,059, the arithmetic mean cost to be 
approximately $152,123, and the median cost to be approximately 
$151,267. All of the resulting estimates from using the three 
statistical methodologies fall within the same New Technology APC cost 
band ($145,001-$160,000), where the Argus[supreg] II procedure is 
assigned for CY 2019. Consistent with our policy stated in section 
III.C.2. of this proposed rule, we are presenting the result of each 
statistical methodology in this preamble, and we are seeking public 
comments on which method should be used to assign procedures described 
by CPT code 0100T to a New Technology APC. All three potential 
statistical methodologies used to estimate the cost of the 
Argus[supreg] II procedure fall within the cost band for New Technology 
APC 1908, with the estimated cost being between $145,001 and $160,000. 
Accordingly, we are proposing to maintain the assignment of the 
procedure described by CPT code 0100T in APC 1908 (New Technology--
Level 52 ($145,001-$160,000)), with a proposed payment rate of 
$152,500.50 for CY 2020. We note that the proposed payment rate 
includes both the surgical procedure (CPT code 0100T) and the use of 
the Argus[supreg] II device (HCPCS code C1841). We refer readers to 
Addendum B to this 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.
    As we discussed in the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58898), the claims data from CY 2017 showed another 
payment issue with regard to the Argus[supreg] II procedure. We found 
that payment for the Argus[supreg] II procedure was sometimes bundled 
into the payment for another procedure. Therefore in CY 2019, we 
implemented a policy 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 2020, we are proposing to continue this 
policy as described in section II.A.2.b.(3) of this proposed rule. Our 
proposal would continue to exclude payment for any procedure that is 
assigned to a New Technology APC from being packaged when included on a 
claim with a service assigned to status indicator ``J1''. While we are 
not proposing to exclude payment for a procedure assigned to a New 
Technology APC from being packaged when included on a claim with a 
service assigned to status indicator ``J2'', we are seeking public 
comments on this issue.
c. Bronchoscopy With Transbronchial Ablation of Lesion(s) by Microwave 
Energy
    Effective January 1, 2019, CMS 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.,

[[Page 39459]]

aspiration[s]/biopsy[ies]) and all mediastinal and/or hilar lymph node 
stations or structures and therapeutic intervention(s)). 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 would be between $8,001 and $8,500. We 
have not received any claims data for this service. Therefore, we are 
proposing to continue to assign the procedure described by HCPCS code 
C9751 to New Technology APC 1571 (New Technology--Level 34 ($8,001-
$8,500)), with a proposed payment rate of $8,250.50 for CY 2020. 
Details regarding HCPCS code C9751 are shown in Table 12.
[GRAPHIC] [TIFF OMITTED] TP09AU19.024

d. Pathogen Test for Platelets
    As stated in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59281), HCPCS code P9100 is used to report any test used to 
identify bacterial or other pathogen contamination in blood platelets. 
Currently, there are two rapid bacterial detection tests cleared by the 
FDA that are described by HCPCS code P9100. According to their 
instructions for use, rapid bacterial detection tests should be 
performed on platelets from 72 hours after collection. Currently, 
certain rapid and culture-based tests can be used to extend the dating 
for platelets from 5 days to 7 days. Blood banks and transfusion 
services may test and use 6-day old to 7-day old platelets if the test 
results are negative for bacterial contamination.
    HCPCS code P9100 was assigned in CY 2019 to New Technology APC 1493 
(New Technology--Level 1C ($21-$30)), with a payment rate of $25.50. 
For CY 2020, based on CY 2018 claims data, there are approximately 
1,100 claims reported for this service with a geometric mean cost of 
approximately $32. This geometric mean cost would result in the 
assignment of the service described by HCPCS code P9100 to a New 
Technology APC, based on the associated cost band, with a higher 
payment rate than where the service is currently assigned. Therefore, 
for CY 2020, we are proposing to reassign the service described by 
HCPCS code P9100 to New Technology APC 1494 (New Technology--Level 1D 
($31-$40)), with a proposed payment rate of $35.50.
e. Fractional Flow Reserve Derived From Computed Tomography (FFRCT)
    Fractional Flow Reserve Derived From Computed Tomography (FFRCT), 
also known by the trade name HeartFlow, is a noninvasive diagnostic 
service that allows physicians to measure coronary artery disease in a 
patient through the use of coronary CT scans. The HeartFlow procedure 
is intended for clinically stable symptomatic patients with coronary 
artery disease, and, in many cases, may avoid the need for an invasive 
coronary angiogram procedure. HeartFlow uses a proprietary data 
analysis process performed at a central facility to develop a three-
dimensional image of a patient's coronary arteries, which allows 
physicians to identify the fractional flow reserve to assess whether or 
not patients should undergo further invasive testing (that is, a 
coronary angiogram).
    For many procedures in the OPPS, payment for analytics that are 
performed after the main diagnostic/image procedure are packaged into 
the payment for the primary procedure. However, in CY 2018, we 
determined that HeartFlow should receive a separate payment because the 
procedure is performed by a separate entity (that is, a HeartFlow 
technician who conducts computer analysis offsite) rather than the 
provider performing the CT scan. We assigned CPT code 0503T, which 
describes the analytics performed, to New Technology APC 1516 (New 
Technology--Level 16 ($1,401-$1,500)), with a payment rate of $1,450.50 
based on pricing information provided by the developer of the procedure 
that indicated the price of the procedure was approximately $1,500.
    For CY 2020, based on our analysis of the CY 2018 claims data, we 
found that over 840 claims had been submitted for payment for HeartFlow 
during CY 2018. The estimated geometric mean cost of HeartFlow is 
$788.19, which is over $660 lower that the payment rate for CY 2019 of 
$1,450.50. Therefore, for CY 2020, we are proposing to reassign the 
service described by CPT code 0503T in order to adjust the payment rate 
to better reflect the cost for the service. We are proposing to 
reassign the service described by CPT code 0503T to New Technology APC 
1509 (New Technology--Level 9 ($701-$800)), with a proposed payment 
rate of $750.50 for

[[Page 39460]]

CY 2020. We are seeking public comments on this proposal.

D. Proposed APC Specific Policies

1. Intraocular Procedures (APCs 5491 Through 5494)
    In prior years, CPT code 0308T (Insertion of ocular telescope 
prosthesis including removal of crystalline lens or intraocular lens 
prosthesis) was assigned to the APC 5495 (Level 5 Intraocular 
Procedures) based on its estimated costs. In addition, its relative 
payment weight has been based on its median cost under our payment 
policy for low-volume device-intensive procedures because the APC 
contained a low volume of claims. The low-volume device-intensive 
procedures payment policy is discussed in more detail in section 
III.C.2. of this proposed rule.
    In the CY 2019 OPPS/ASC proposed rule, we proposed to reassign CPT 
code 0308T from APC 5495 to APC 5493 (Level 3 Intraocular Procedures), 
based on the data for two claims available for ratesetting for the 
proposed rule, and to delete APC 5495 (83 FR 37096 through 37097). 
However in the CY 2019 OPPS/ASC final rule with comment period, based 
on updated data on a single claim available for ratesetting for the 
final rule, we modified our proposal and reassigned procedure code CPT 
code 0308T to the APC 5494 (Level 4 Intraocular Procedures) (83 FR 
58917 through 58918). We made this change based on the similarity of 
the estimated cost for the single claim of $12,939.75 compared to that 
of the APC ($11,427.14). However, this created a discrepancy in 
payments between the OPPS setting and the ASC setting in which the ASC 
payments would be higher than the OPPS payments for the same service 
because of the intersection of the estimated cost for the encounter 
determined under a comprehensive methodology within the OPPS and the 
estimated cost determined under the payment methodology for device-
intensive services within the ASC payment system.
    In reviewing the claims data available for this proposed rule for 
CY 2020 OPPS ratesetting, we found several claims reporting the 
procedure described by CPT code 0308T. Based on the claims data, the 
procedure would have a geometric mean cost of $28,122.51 and a median 
cost of $19,864.38. These cost statistics are significantly higher than 
the geometric mean cost of the other procedure assigned to APC 5494, 
that is, the procedure described by CPT code 67027 (Implant eye drug 
system), which has a geometric mean cost of $12,296.27. In addition, if 
we continued to assign the procedure described by CPT code 0308T to APC 
5494 (the Level 4 Intraocular Procedures APC), the discrepancy between 
payments within the OPPS and the ASC payment system would also continue 
to exist. As a result, we are proposing to reestablish APC 5495 (Level 
5 Intraocular Procedures) because we believe that the procedure 
described by CPT code 0308T would be most appropriately placed in this 
APC based on its estimated cost. Assignment of the procedure to the 
Level 5 Intraocular Procedures APC is consistent with its historical 
placement and would also address the large differential discrepancy in 
payment for the procedure between the OPPS and the ASC payment system. 
We note that, based on data available for the proposed rule, the 
proposed payment rate for this procedure when performed in an ASC, as 
discussed in more detail in section XIII.D.1.c. of this proposed rule, 
would be no higher than the OPPS payment rate for this procedure 
performed in the hospital outpatient setting. We will continue to 
monitor the volume of claims data available for the procedure for 
ratesetting purposes.
    Therefore, for CY 2020, we are proposing to reestablish APC 5495 
(Level 5 Intraocular Procedures) and reassign the procedure described 
by CPT code 0308T from APC 5494 to APC 5495. Under this proposal, the 
proposed CY 2020 OPPS payment rate for the service would be established 
based on its median cost, as discussed in section V.A.5. of this 
proposed rule, because it is a device-intensive procedure assigned to 
an APC with fewer than 100 total annual claims within the APC.
2. 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 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 provided clinical 
homogeneity. However, we indicated that we would continue to review the 
structure of these APCs to determine whether additional granularity 
would be necessary.
    In the CY 2019 OPPS proposed rule (83 FR 37096), we recognized that 
commenters had previously expressed concerns regarding the granularity 
of the current APC levels and, therefore, requested comment on the 
establishment of additional levels. Specifically, we solicited comments 
on the creation of a new APC level between the current Level 5 and 
Level 6 within the Musculoskeletal APC series. While some commenters 
provided suggested APC reconfigurations and requests for change to APC 
assignments, many commenters requested that we maintain the current 
six-level structure and continue to monitor the claims data as they 
become available. Therefore, in the CY 2019 OPPS/ASC final rule with 
comment period, we maintained the six-level APC structure for the 
Musculoskeletal Procedures APCs (83 FR 58920 through 58921).
    Based on the claims data available for this CY 2020 OPPS/ASC 
proposed rule, we continue to believe that the six-level APC structure 
for the Musculoskeletal Procedures APC series is appropriate. 
Therefore, we are proposing to maintain the APC structure for the CY 
2020 OPPS update.
    We note that this is the first year for which claims data are 
available for the total knee arthroplasty procedure described by CPT 
code 27447, which was removed from the inpatient only list in the CY 
2018 OPPS/ASC final rule with comment period (82 FR 59382 through 
59385). Based on approximately 60,000 hospital outpatient claims 
reporting the procedure that are available for ratesetting in this 
proposed rule, the geometric mean cost is approximately $12,472.05, 
which is similar to the geometric mean cost for APC 5115 (Level 5 
Musculoskeletal Procedures) of $11,879.66, and within a range of the 
lowest geometric mean cost of the significant procedure costs of 
$9,969.37 and the highest geometric mean cost of the significant 
procedure costs of $12,894.18. Therefore, we believe that the 
assignment of the procedure described by CPT code 27447 in the Level 5 
Musculoskeletal Procedures APC series remains appropriate and, 
therefore, we are proposing to continue to assign CPT code 27447 to APC 
5115 (Level 5 Musculoskeletal Procedures) for CY 2020.
    We also are proposing to remove the procedure described by CPT code 
27130 (Total hip arthroplasty) from the CY 2020 OPPS inpatient only 
list. Based on the estimated costs derived from in the available claims 
data, as well as the 50th

[[Page 39461]]

percentile IPPS payment for TKA/THA procedures without major 
complications or comorbidities (MS-DRG 470) of approximately $11,900 
for FY 2020 when the procedure is performed on an inpatient basis, we 
believe that it is appropriate to assign the procedure described by CPT 
code 27130 to the Level 5 Musculoskeletal Procedures APC series, which 
has a geometric mean cost of $11,879.66. Therefore, for CY 2020, we 
also are proposing to assign the procedure described by CPT code 27130 
to APC 5115. We note that we will monitor the claims data reflecting 
these procedures as they become available. For a more detailed 
discussion of the procedures that are being proposed to be removed from 
the inpatient only (IPO) list for CY 2020 under the OPPS, we refer 
readers to section IX. of this proposed rule.
    Table 13 displays the CY 2020 Musculoskeletal Procedures APC 
series' structure and APC geometric mean costs.
[GRAPHIC] [TIFF OMITTED] TP09AU19.025

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payment 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 had 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 is one device category eligible for pass-
through payment: HCPCS code C1822 (Generator, neurostimulator 
(implantable), high frequency, with rechargeable battery and charging 
system), which was established effective January 1, 2019. The pass-
through payment status of the device category for HCPCS code C2624 will 
expire on December 31, 2022. Therefore, HCPCS code C2624 will continue 
to receive device pass-through payments in CY 2020.
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

[[Page 39462]]

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). We 
note that, in section IV.A.4. of this proposed rule, we are proposing 
an alternative pathway that would grant fast-track device pass-through 
payment under the OPPS for devices approved under the FDA Breakthrough 
Device Program for OPPS device pass-through payment applications 
received on or after January 1, 2020. We refer the reader to section 
IV.A.4. of this proposed rule for a complete discussion on this 
proposal.
    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:
     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;
     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
     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 cryoablation, 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 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 of 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 2020
    We received seven complete applications by the March 1, 2019 
quarterly deadline, which was the last quarterly deadline for 
applications to be received in time to be included in this CY 2020 
OPPS/ASC proposed rule. We received one of the applications in the 
second quarter of 2018, three of the applications in the fourth quarter 
of 2018, and three of the applications in the first quarter of 2019. 
None of the applications were approved for device pass-through payment 
during the quarterly review process.
    Applications received for the later deadlines for the remaining 
2019 quarters (June 1, September 1, and December 1), if any, will be 
presented in the CY 2021 OPPS/ASC proposed rule. We note that the 
quarterly application process and requirements

[[Page 39463]]

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 
applications received by the March 1, 2019 deadline is presented below.
(1) Surefire[supreg] SparkTM Infusion System
    TriSalus Life Sciences submitted an application for a new device 
category for transitional pass-through payment status for the 
Surefire[supreg] SparkTM Infusion System. The 
Surefire[supreg] SparkTM Infusion System is described as a 
flexible, ultra-thin microcatheter with a self-expanding, nonocclusive 
one-way microvalve at the distal end. The applicant stated that it has 
designed the Pressure Enabled Drug DeliveryTM technology of 
the Surefire[supreg] SparkTM Infusion System to overcome 
intratumoral pressure in solid tumors and improve distribution and 
penetration of therapy during Transcatheter Arterial Chemoembolization 
(TACE) procedures. TACE is a minimally invasive, image-guided procedure 
used to infuse a high dose of chemotherapy into liver tumors. According 
to the applicant, the pliable, one-way valve at the distal tip of the 
Surefire[supreg] SparkTM Infusion System creates a temporary 
local increase in pressure during infusion, opening up collapsed 
vessels in tumors, which enables perfusion and therapy delivery in 
areas inaccessible to the systemic circulation, a positive hydrostatic 
pressure gradient, and restores convective flow to enable therapy to 
penetrate deeper into the tumor. During the TACE procedure, the 
physician first gains catheter access into the arterial system of the 
hepatic arteries through a small incision in the groin or the wrist. 
The applicant stated that the physician then uses real-time 
fluoroscopic guidance to navigate the Surefire[supreg] 
SparkTM Infusion System into the blood vessels feeding the 
tumors, infusing the chemotherapy and embolic materials through the 
Surefire[supreg] SparkTM Infusion System until the tumor bed 
is completely saturated.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted 510(k) premarket clearance as of April 3, 2018. The 
application for a new device category for transitional pass-through 
payment status for the Surefire[supreg] SparkTM Infusion 
System was received on November 29, 2018, which is within 3 years of 
the date of the initial FDA approval or clearance. We are inviting 
public comments on whether the Surefire[supreg] SparkTM 
Infusion System meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the use of the Surefire[supreg] 
SparkTM Infusion System is integral to the service of 
providing delivery of chemotherapy into liver tumors, 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 
Surefire[supreg] SparkTM Infusion 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. We are inviting public comments on 
whether the Surefire[supreg] SparkTM Infusion System meets 
the eligibility criteria at Sec.  419.66(b).
    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 
identified several existing pass-through payment categories that may be 
applicable to the Surefire[supreg] SparkTM Infusion System. 
The Surefire[supreg] SparkTM Infusion System may be 
described by HCPCS code C1887 (Catheter, guiding (may include infusion/
perfusion capability)). The applicant describes the Surefire[supreg] 
SparkTM Infusion System as a device used in vascular 
interventional procedures to deliver diagnostic and therapeutic agents 
in the peripheral vasculatures. The CMS List of Device Category Codes 
for Present or Previous Pass-Through Payment and Related Definitions 
describes HCPCS code C1887 as intended for the introduction of 
interventional/diagnostic devices into the coronary or peripheral 
vascular systems. The Surefire[supreg] SparkTM Infusion 
System may also be described by HCPCS code C1751 (Catheter, infusion, 
inserted peripherally, centrally or midline (other than hemodialysis)). 
The applicant describes the Surefire[supreg] SparkTM 
Infusion System as being inserted through a small incision in the groin 
or the wrist. We are inviting public comments on this issue.
    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 four studies to support the claim that their technology 
represents a substantial clinical improvement over existing 
technologies. The applicant asserts that the Surefire[supreg] 
SparkTM Infusion System represents a substantial clinical 
improvement over existing technologies because it offers a treatment 
option that no other catheters currently available can provide. The 
manufacturer notes that the self-expanding, nonocclusive, one-way valve 
can infuse therapy at pressure higher than the baseline mean arterial 
pressure, and this pressurized delivery opens up collapsed vessels in 
tumors and enables perfusion and therapy delivery into hypoxic areas of 
the liver tumors. The applicant also believes that the Surefire[supreg] 
SparkTM Infusion System represents a substantial clinical 
improvement because the technology has shown improved tumor response 
rates in hepatocellular carcinoma, as well as a decrease in the rate of 
disease recurrence and the need for subsequent treatment.
    The first pilot study of nine patients being treated for 
hepatocellular carcinoma, who received infusions via both a 
conventional end-hole catheter and an antireflux microcatheter, 
demonstrated statistically significant reductions in downstream 
distribution of embolic particles with the antireflux catheter and 
increases in tumor deposition (p<0.05).\13\ The second singlecenter 
retrospective study was conducted with 22 patients treated for 
hepatocellular carcinoma with the Surefire[supreg] SparkTM 
Infusion System and TACE. As assessed by MRI, there appeared to be 
overall disease response in 91 percent of patients and 85 percent of 
lesions and complete response in 32 percent of patients and 54 percent 
of lesions.\14\ In the first study for a case-control series, 19 
patients undergoing treatment using SIS-TACE had a statistically 
significant improvement in

[[Page 39464]]

disease response rate compared to 19 patients treated with end-hole 
microcatheters, 78.9 percent compared to 36.8 percent for initial 
overall response rate (p = 0.008).\15\ In the second study, a multi-
center registry of 72 patients demonstrated high response rate when 
compared to historical control at 6 months follow-up.\16\
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    \13\ Pasciak AS, McElmurray JH, Bourgeois AC, Heidel RE, Bradley 
YC. Impact of an antireflux catheter on target volume particulate 
distribution in liver-directed embolotherapy: A pilot study. J Vasc 
Interv Radiol. 2015 May;26(5):660-9.
    \14\ Kim AY, Frantz S, Krishnan P, DeMulder D, Caridi T, Lynskey 
GE, et al. (2017) Short-term imaging response after drug-eluting 
embolic trans- arterial chemoembolization delivered with the 
Surefire Infusion System[supreg] for the treatment of hepatocellular 
carcinoma. PloS one 12.9 (2017): e0183861.
    \15\ N Apseloff, J Keung, T Caridi, D Buckley, G Lynskey, A Kim. 
Case-control evaluation of endhole microcatheter versus Surefire 
Infusion System for use during transarterial chemoembolization for 
hepatocellular carcinoma. Conference abstract presented at 2017 
Society of Intervention Radiology Annual Congress, March 8, 2017.
    \16\ Kapoor B, Contreras F, Katz M, Arepally A, Fischman A, Rose 
S, Kim A, Ferraro J. Surefire Infusion System (SIS) hepatocellular 
carcinoma registry study interim results: A multicenter study of the 
safety, feasibility, and outcomes of the SIS expandable-tip 
microcatheter in DEB-TACE.
    Conference abstract presented at 2018 Society of Intervention 
Radiology Annual Congress, March 19, 2017.
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    Based on the information submitted by the applicant, one concern is 
that large-scale studies with long-term follow-up are limited. Also, 
the majority of studies presented had a sample size of less than 25 and 
the highest sample size presented was less than 100 patients. 
Additionally, patient follow-up occurred mostly within a 3 to 6 month 
timeframe with few studies occurring beyond this range.
    Another concern is that none of the studies presented improvements 
in mortality with the use of the Surefire[supreg] SparkTM 
Infusion System. Outcomes focused primarily on tumor response rates and 
lesion size, based upon imaging. Additional data on mortality endpoints 
would be helpful to fully assess substantial clinical improvement.
    We are inviting public comments on whether the Surefire[supreg] 
SparkTM Infusion System meets 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. The applicant stated that the 
Surefire[supreg] SparkTM Infusion System would be reported 
with CPT code 37243, which is assigned to APC 5193 (Level 3 
Endovascular Procedures). To meet the cost criterion for device pass-
through payment status, a device must pass all three tests of the cost 
criterion for at least one APC. For our calculations, we used APC 5193, 
which has a CY 2019 payment rate of $9,669.04. Beginning in CY 2017, we 
calculated the device offset amount at the HCPCS/CPT code level instead 
of the APC level (81 FR 79657). CPT code 37243 had a device offset 
amount of $3,894.69 at the time the application was received. According 
to the applicant, the cost of the Surefire[supreg] SparkTM 
Infusion System is $7,750.
    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 $7,750 for the Surefire[supreg] 
SparkTM Infusion System is 80.2 percent of the applicable 
APC payment amount for the service related to the category of devices 
of $9,669.04 ($7,750/$9,669.04 x 100 = 80.2 percent). Therefore, we 
believe the Surefire[supreg] SparkTM Infusion System meets 
the first cost significance requirement.
    The second cost significance requirement, 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 $7,750 for the 
Surefire[supreg] SparkTM Infusion System exceeds the cost of 
the device-related portion of the APC payment amount for the related 
service of $3,894.69 by 199 percent ($7,750/$3,894.69) x 100 = 198.99 
percent). Therefore, we believe that the Surefire[supreg] 
SparkTM Infusion System meets the second cost significance 
requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides 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 $7,750 for the SparkTM Infusion System 
and the portion of the APC payment amount for the device of $3,894.69 
exceeds the APC payment amount for the related service of $9,669.04 by 
40 percent (($7,750-$3,894.69)/$9,669.04) x 100 = 39.87 percent). 
Therefore, we believe that the Surefire[supreg] SparkTM 
Infusion System meets the third cost significance requirement.
    We are inviting public comments on whether the Surefire[supreg] 
SparkTM Infusion System meets the device pass-through 
payment criteria discussed in this section, including the cost 
criterion.
(2) TracPatch
    According to the applicant, TracPatch is a wearable device which 
utilizes an accelerometer, temperature sensor and step counter to allow 
the surgeon and patient to monitor recovery and help ensure critical 
milestones are being met. The applicant states that TracPatch utilizes 
wearable monitoring technology and methods in an effort to enhance the 
rehabilitation experience for both patients and physicians. 
Accelerometers are utilized to recognize and record the results when 
patients perform standard physical therapy exercises, in addition to 
providing standard step count and high-acceleration events that may 
indicate a fall. A temperature sensor monitors the skin temperature 
near the joint.
    TracPatch is described by the applicant as a 24/7 remote monitoring 
wearable device that captures a patient's key daily activities: Such as 
range of motion progress, exercise compliance, and ambulation. 
TracPatch is used for pre- and post-operative patient monitoring, 
patient engagement, data analytics and post-op cost reduction.
    According to the applicant, the wearable devices stick on the skin 
above and below the knee. The wearables are applied before total knee 
surgery to determine a patient's baseline activity levels, and then 
again after surgery to allow the patient and surgeon to monitor 
activity, pain, range of motion and physical therapy. The use of the 
Bluetooth connectivity allows the device to be paired with any 
smartphone and the TracPatch cloud allows for unlimited data collection 
and storage. The applicant states that TracPatch includes a web 
dashboard and computer application, which permit a health care provider 
to monitor a patient's recovery in real-time, allowing for immediate 
care adjustments and the ability for providers and patients to respond 
to issues that may occur during recovery from surgery.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant stated that TracPatch does not need FDA clearance because it 
is a Class I device that would be assigned to a generic category of 
devices described in title 21 of the Code of Federal Regulations, parts 
862 through 892 (21 CFR parts 862 through 892) that do not require FDA 
clearance. However, the applicant did not identify which category of 
exempted devices that TracPatch would be assigned. The applicant also 
stated that TracPatch will be introduced into the market in 2019, which 
would be within 3 years of the device pass-through payment application 
for TracPatch that

[[Page 39465]]

was received in March 2019. We are inviting public comments on whether 
the TracPatch is exempt from FDA clearance and if the TracPatch meets 
the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
the applicant claimed that the TracPatch is an integral part of 
monitoring the range of motion for a knee prior to and after total knee 
arthroplasty, is used for one patient only, and is placed on the skin 
above and below the knee and secured by Velcro strips. The applicant 
stated that the device is not surgically implanted or inserted into the 
patient and is not applied in or on a wound or other skin lesion. We 
have concerns with the TracPatch's eligibility with respect to the 
criterion at Sec.  419.66(b)(3) because to be eligible for pass-through 
payment a device must be surgically implanted or inserted into the 
patient or applied in a wound or on other skin lesions. In addition, 
the applicant stated that the TracPatch 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. We have determined that TracPatch is not a 
material or supply furnished incident to a service. We are inviting 
public comments on whether the TracPatch 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 
TracPatch, the applicant suggested a category descriptor of ``Real time 
patient monitoring surface sensor technology for pre and post-op Total 
Knee Arthroplasty.'' We have not identified an existing pass-through 
payment category that describes the TracPatch, but we welcome public 
comments on this topic.
    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. The applicant asserted that use of the TracPatch 
significantly improves clinical outcomes for a patient population 
because the TracPatch allows both real-time and remote monitoring of 
the knee after total knee arthroplasty, which allows providers to make 
care decisions with up-to-the-minute data. The applicant noted that 
health care providers have instant access to a patient's pre-operative 
and post-operative data and can adjust care plans based on the data. 
The applicant stated that physicians will be able to preoperatively 
monitor patient activity to set a clinical baseline, but surgeons will 
also be able to monitor how their patients are recovering long after 
they have been discharged, which the applicant claims will ultimately 
result in fewer patients being readmitted to the hospital and higher 
success rates of surgery. The applicant asserted that the use of the 
TracPatch will result in decreased rate of subsequent diagnostics and 
therapeutic interventions and physician visits. The applicant also 
noted that the TracPatch system will allow physicians to monitor their 
patients in real-time and take corrective actions in a timely manner, 
which will result in reduced recovery time as well as improved patient 
outcomes.
    Although the applicant presented these claims, the applicant 
provided no clinical research evidence to support them; only the 
testimonials from practicing physicians and large hospital systems were 
presented. The testimonials addressed the benefits of remote data 
monitoring and stated that the real-time data would provide better 
information to understand the effectiveness of surgeries performed, 
according to one provider. However, there were no reference articles 
submitted to support the claims made in the application and the 
testimonials nor were any data provided on the clinical effectiveness 
of the use of the TracPatch. We are concerned that, without clinical 
data to support the applicant's claims, we do not have sufficient 
information to determine whether the use of the TracPatch is a 
substantial clinical improvement over the current methods to monitor 
recovery from total knee arthroplasty. We are inviting public comments 
on whether the TracPatch meets 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 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 use of the 
TracPatch would be reported with either CPT code 99453 (Remote 
monitoring of physiologic parameter(s) (e.g., weight, blood pressure, 
pulse oximetry, respiratory flow rate), initial; set-up and patient 
education on use of equipment) or CPT code 99454 (Remote monitoring of 
physiologic parameter(s) (e.g., weight, blood pressure, pulse oximetry, 
respiratory flow rate), initial; device(s) supply with daily 
recording(s) or programmed alert(s) transmission, each 30 days). CPT 
code 99453 is assigned to APC 5012 (Clinic Visits and Related 
Services), with a proposed CY 2020 payment rate of $120.16, and there 
is no device offset for the procedure. CPT code 99454 is assigned to 
APC 5741 (Level 1 Electronic Analysis of Devices), with a proposed CY 
2020 payment rate of $38.04, and there is no device offset for the 
procedure. The applicant stated that the cost of the TracPatch device 
is $3,250.
    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 cost of $3,250 
for the TracPatch exceeds the applicable APC amount for CPT code 99454 
of $38.04 by 8,543.64 percent ($3,250/$38.04 x 100 = 8,543.64 percent). 
Therefore, the TracPatch appears to meet the first cost significance 
requirement.
    The second cost significance requirement, 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 two 
procedure codes that would be billed for the use of the TracPatch do 
not have a device offset amount, which means the TracPatch would appear 
to meet the second cost significance requirement.
    Section 419.66(d)(3), the third cost significance requirement, 
provides 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 cost of $3,250 for the TracPatch and the portion of the APC 
payment for the device of $0.00 exceeds 10 percent at 8,543.64 percent 
(($3,250 - $0.00)/$38.04 x 100 = 8,543.64 percent). Therefore, the 
TracPatch

[[Page 39466]]

appears to meet the third cost significance requirement and, therefore, 
satisfies the cost significance criterion. We are inviting public 
comments on whether the TracPatch meets the device pass-through payment 
criteria discussed in this section.
(3) Vagus Nerve Stimulation (VNS) Therapy[supreg] System for Treatment 
Resistant Depression (TRD)
    LivaNova USA Inc. submitted an application for the Vagus Nerve 
Stimulation (VNS) Therapy[supreg] System for Treatment Resistant 
Depression (TRD). According to the applicant, the VNS Therapy[supreg] 
System consists of two implantable components: A programmable 
electronic pulse generator and a bipolar electrical lead that is 
connected to the programmable electronic pulse generator. The applicant 
stated that the surgical procedure to implant the VNS Therapy[supreg] 
System involves subcutaneous implanting of the pulse generator in the 
intraclavicular region as well as insertion of the bipolar electrical 
lead which entails wrapping two spiral electrodes around the cervical 
portion of the left vagus nerve within the carotid sheath.
    According to the applicant, following implant and recovery, the 
physician programs the pulse generator to intermittently stimulate the 
vagus nerve at a level that balances efficacy and patient tolerability. 
The pulse generator delivers electrical stimulation via the bipolar 
electrical lead to the cervical portion of the left vagus nerve within 
the carotid sheath thereby relaying information to the brain stem 
modulating structures relevant to depression. Stimulation typically 
consists of a 30-second period of ``on time,'' during which the device 
stimulates at a fixed level of output current, followed by a 5-minute 
``off time'' period of no stimulation.
    The applicant states that a hand-held programmer is utilized to 
program the pulse generator stimulation parameters, including the 
current charge, pulse width, pulse frequency, and the on/off stimulus 
time, which is also known as the on/off duty cycle. Initial settings 
can be adjusted to enhance the tolerability of the device as well as 
its clinical effects on the patient. The generator runs continuously, 
but patients can temporarily turn off the device by holding a magnet 
over it. The generator can also be turned on and off by the programmer.
    The applicant states that the VNS Therapy[supreg] System provides 
indirect modulation of brain activity through the stimulation of the 
vagus nerve. The vagus nerve, the tenth cranial nerve, has 
parasympathetic outflow that regulates the autonomic (that is, 
involuntary) functions of heart rate and gastric acid secretion, and 
also includes the primary functions of sensation from the pharynx, 
muscles of the vocal cords and swallowing. It is a nerve that carries 
both sensory and motor information to and from the brain. Importantly, 
the vagus nerve has influence over widespread brain areas and it is 
believed that electrical stimulation of the vagus nerve alters various 
networks of the brain in order to treat psychiatric disease.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received FDA clearance for the VNS Therapy[supreg] System for 
TRD through the premarket approval (PMA) process on July 15, 2005, and 
the VNS Therapy[supreg] for TRD device was introduced to the market in 
September 2005. However, on May 4, 2007, a national coverage 
determination (NCD 160.18) was released prohibiting Medicare from 
covering the use of the VNS Therapy[supreg] System for TRD. This NCD 
remained in effect until February 15, 2019, when CMS determined that 
the VNS Therapy[supreg] for TRD could receive payment if the service 
was performed in CMS-approved coverage with evidence development (CED) 
studies. Although the VNS Therapy[supreg] System for TRD was introduced 
to the market in September 2005, Medicare has only covered it for 
slightly more than 1\1/2\ years. However, Sec.  419.66(b)(1) states 
that a pass-through payment application for a device must be received 
within 3 years of when the device either received FDA approval or was 
introduced to the market. The applicant stated that the VNS 
Therapy[supreg] System for TRD was introduced to the market in 
September 2005, which means the device pass-through payment application 
would have needed to have been submitted to CMS by September 2008. 
However, the pass-through application for the device was not received 
by CMS until March 2019.
    In addition, it appears that the neurostimulator device for the VNS 
Therapy[supreg] System for TRD is the same device that has been used 
since 1997 to treat epilepsy.\17\ The applicant stated the following 
three differences between the two devices: (1) How the device is 
programmed to treat epilepsy versus TRD; (2) how the external magnets 
of the device are used for epilepsy treatment as compared to TRD 
treatment; and (3) that the battery life of the device to treat 
epilepsy is different than the battery life of the device when treating 
TRD. However, it is not clear that these differences demonstrate that 
the actual device used to treat TRD is any different than the device 
used to treat epilepsy.
---------------------------------------------------------------------------

    \17\ Current Behavioral Neuroscience Reports. 2014 Jun; 1(2): 
64-73.
---------------------------------------------------------------------------

    Based on the information presented, we are inviting public comments 
on whether the VNS Therapy[supreg] System for TRD meets the newness 
criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
the applicant claimed that the VNS Therapy[supreg] System for TRD is an 
integral part of a procedure to provide adjunctive treatment of chronic 
or recurrent depression in adult patients that have failed four or more 
antidepressant treatments. The VNS Therapy[supreg] System for TRD is 
used for one patient only, comes in contact with human tissue, and is 
surgically implanted or inserted into the patient. In addition, the 
applicant stated that the VNS Therapy[supreg] System for TRD 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. We have determined that the VNS 
Therapy[supreg] for TRD is not a material or supply furnished incident 
to a service. We are inviting public comments on whether the VNS 
Therapy[supreg] for TRD 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 
device used for the VNS Therapy[supreg] System for TRD, the applicant 
suggested a category descriptor of ``Generator, neurostimulator 
(implantable), treatment resistant depression, non-rechargeable.'' 
However, the device category represented by HCPCS code C1767 is 
described as ``Generator, neurostimulator (implantable), non-
rechargeable,'' which appears to encompass the device category 
descriptor for the VNS Therapy[supreg] System for TRD suggested by the 
applicant. The applicant asserts that the device category descriptor 
for HCPCS code C1767 is overly broad and noted the establishment of 
HCPCS code C1823 (Generator, neurostimulator (implantable), 
nonrechargeable, with transvenous sensing and stimulation leads), 
effective January 1, 2019, as an

[[Page 39467]]

example of where a new device category for a nonrechargeable 
neurostimulation system to treat central sleep apnea was carved out 
from the broad category described by HCPCS code C1767.
    The applicant believes its proposed category for the device for the 
VNS Therapy[supreg] System for TRD should qualify for a similar carve-
out. However, HCPCS code C1823 was established due to specific device 
features which distinguish that device category from HCPCS code C1767. 
The applicant for the VNS Therapy[supreg] System for TRD requested a 
new device category based on a beneficiary's diagnosis, but OPPS does 
not differentiate payment by diagnosis. We welcome public comments on 
whether the proposed device category for the VNS Therapy[supreg] for 
TRD is not described by any existing categories or by any category 
previously in effect and meets the requirements of Sec.  419.66(c)(1).
    The second criterion for establishing a device category, at 
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. The applicant stated that the VNS Therapy[supreg] 
System for TRD would be a substantial clinical improvement because it 
is a treatment option for beneficiaries that have failed four or more 
antidepressant treatments. Patients with residual depressive symptoms 
despite treatment may be demonstrating TRD, but a universally accepted 
definition of TRD has yet to be achieved.\18\ The applicant described 
the VNS Therapy[supreg] System for TRD as a treatment option for 
beneficiaries who have exhausted all other available options to treat 
depression. The applicant also provided studies to show how beneficial 
impacts on the quality of life by using the VNS Therapy[supreg] System 
for TRD can be maintained for multiple years. These studies have been 
fully reviewed and discussed by the CMS Coverage and Analysis Group's 
(CAG) national coverage determination with coverage with evidence 
development for VNS therapy for TRD.\19\
---------------------------------------------------------------------------

    \18\ ``Decision Memo for Vagus Nerve Stimulation (VNS) for 
Treatment Resistant Depression (TRD) (CAG-00313R2).'' Available at: 
https://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=292&NCDId=230&ncdver=2&IsPopup=y&bc=AAAAAAAAQAAA&.
    \19\ Ibid.
---------------------------------------------------------------------------

    We reviewed the studies provided by the applicant to determine if 
the VNS Therapy[supreg] for TRD and its associated device offered a 
treatment option for patients unresponsive to or ineligible for 
currently available treatments. Our review also examined whether the 
VNS Therapy[supreg] System for TRD provides a benefit relative to a 
previously established device category or other available treatment. To 
show that the VNS Therapy[supreg] for TRD provides a relative benefit, 
the applicant submitted the same studies it had submitted to the CMS 
CAG in October 2017. These studies had been submitted as a part of a 
request to reconsider the NCD in place at that time that prohibited 
Medicare from providing coverage for the VNS Therapy[supreg] System for 
TRD. Therefore, our review focuses on and is consistent with the eight 
studies discussed in detail in the ``Decision Memo for Vagus Nerve 
Stimulation (VNS) for Treatment Resistant Depression (TRD)'' (CAG-
00313R2).\20\ We also reviewed an additional study submitted by the 
applicant for this device pass-through application.
---------------------------------------------------------------------------

    \20\ Ibid.
---------------------------------------------------------------------------

    The first study was a randomized control trial.\21\ The study was a 
double-blind, randomized, multi-centered study and its goal was to 
compare the clinical outcomes in patients diagnosed with TRD of three 
VNS dose response curves with variable output currents and pulse 
widths, but with the same duty cycle and pulse frequency. Groups were 
designated high, medium and low dose and a total of 331 patients 
participated in the study. Enrollment criteria included: Individuals 18 
years of age or older with a diagnosis of a chronic (>2 years) or 
recurrent (>=2 prior episodes) MDD or bipolar disorder and a current 
diagnosis of MDE as defined by the DSM-4 and determined using the Mini- 
International Neuropsychiatric Interview; a history of failure to 
respond to four or more adequate dose/duration of antidepressant 
treatment trials from at least two different antidepressant treatment 
categories as documented through medical history and record review; a 
minimum pre-study and baseline score of 24 on the MADRS, with no 
greater than a 25-percent decrease between the pre-study and baseline 
visits; current recipient of at least one antidepressant treatment 
(medication or ECT); and a stable regimen of all current antidepressant 
treatments for at least 4 weeks before the baseline visit. Furthermore, 
patients with bipolar disease had to be receiving a mood stabilizer at 
baseline. Exclusion criteria included a history of psychotic disorder, 
a history of rapid cycling bipolar disorder, a current history of 
bipolar disorder mixed phase, a history of borderline personality 
disorder, clinically significant suicidal intent at the time of 
screening, a history of drug/alcohol dependence in the last year, and a 
previous history of use of VNS. The only study personnel unblinded to 
the assignment of treatment groups were study programmers at each site 
and clinical engineers who were employed by the sponsor to monitor the 
programmers.
---------------------------------------------------------------------------

    \21\ Aaronson ST, Carpenter LL, Conway CR, et al. Vagus Nerve 
Stimulation Therapy Randomized to Different Amounts of Electrical 
Charge for Treatment-Resistant Depression: Acute and Chronic 
Effects. Brain Stimul. 2013; 6(4):631-40.
---------------------------------------------------------------------------

    Eligible patients were implanted with a VNS Therapy[supreg] System 
for TRD device and then randomized to low, medium or high target 
settings. The low dose was chosen to deliver active stimulation at the 
lowest available setting for amplitude of output current with a narrow 
pulse width (0.25 mA; 130 [mu]s). The high dose was chosen to be 
consistent with higher levels of stimulation, often seen in the 
treatment of epilepsy (1.25-1.5mA; 250 [mu]s). The medium dose was 
chosen to track closely to the high dose, but without overlap (0.5-1.0 
mA; 250 [mu]s), potentially providing a better opportunity to 
demonstrate efficacy versus the low dose.
    The study authors reported that in neither the acute nor the long-
term phase were there any significant differences in response or 
remission rates among the treatment groups (response was defined as 
>=50 percent improvement from baseline; remission was defined as <=14 
on the Inventory of Depressive Symptomatology Clinician Administered 
Version (IDS-C)). However, the authors stated that although effect 
sizes were limited, statistically significant decreases in mean 
depression scores (based on IDS-C) were observed in all groups. Mean 
IDS-C scores decreased approximately 15 points from baseline through 
week 50. The authors concluded that within the limits of this study, 
the VNS Therapy[supreg] System for TRD provided as adjunctive treatment 
to patients diagnosed with TRD as described above offers significant 
improvement at study endpoint as compared with baseline and that the 
effect is durable over 1 year. The authors also stated that higher 
electrical dose parameters were associated with higher response 
durability.
    The second study by Aaronson et al. was a prospective, multi-
center, open label, nonrandomized, longitudinal, naturalistic, 
observational post

[[Page 39468]]

marketing FDA surveillance study for which a registry was designed to 
follow the clinical response and outcome over 5 years of patients with 
a major depressive disorder (MDD), including those with unipolar or 
bipolar depression.\22\ Patients participating in this study were 
recruited by physician referral and received treatment as usual (TAU) 
and VNS or just TAU. Subjects included those who were being evaluated 
for surgery or anesthesia to undergo VNS implantation, patients who had 
signed consent forms to receive a VNS device, patients who had 
scheduled VNS implantation surgery, and patients who had completed 
participation in a previous study termed the D-21 study [NCT 00305565: 
Study Comparing Outcomes for Patients With Treatment Resistant 
Depression Who Receive VNS Therapy at Different Doses].
---------------------------------------------------------------------------

    \22\ Aaronson ST, Sears P, Ruvuna F, et al.: A 5-Year 
Observational Study of Patients With Treatment--Resistant Depression 
Treated With Vagus Nerve Stimulation or Treatment as Usual: 
Comparison of Response, Remission, and Suicidality. Am J Psychiatry. 
2017; 174(7):640-648.
---------------------------------------------------------------------------

    The VNS arm included 335 patients without prior VNS treatment as 
well as 159 patients who received VNS treatment in the previous D-21 
investigation. The TAU arm contained 301 patients. Eligibility criteria 
for the study included: Age 18 years or older; a current major 
depressive disorder diagnosed according to DSM-IV-TR criteria and 
confirmed by the Mini International Neuropsychiatric Interview of at 
least 2 years in duration (unipolar or bipolar depression) or a history 
of at least three depressive episodes including the current major 
depression episode; and a history of inadequate response to at least 
four depression treatments (including maintenance pharmacotherapy, 
psychotherapy and ECT). Maintenance pharmacotherapy was defined as 
dosage per Physician's Desk Reference labeling for a minimum of 4 
weeks. Exclusion criteria included a history of schizophrenia, 
schizoaffective disorder, other psychotic disorder, current psychosis, 
history of rapid cycling bipolar disorder and a CGI score <4. Other 
than the patients from the D-21 study, the individuals in the study had 
not previously experienced VNS.
    All patients (except those who participated in the D-21 study) were 
allowed to choose the treatment arm of their choice. However, the 
patients could be assigned to receive the alternate treatment due to 
various reasons (for example, availability of surgical implantation at 
a site, failure to receive insurance coverage for the procedure, 
availability of donated VNS devices, among others). There were no 
restrictions on concomitant treatments.
    Post baseline follow-up visits for all patients were scheduled to 
occur at 3, 6, 9, 12, 18, 24, 30, 36, 42, 48, 54, and 60 months. During 
these scheduled visits, data were collected on medical status, need for 
adjustment of mood disorder therapy and concomitant treatments. Also, 
various depression scale ratings were collected as well as data 
concerning mortality and suicidality. Central raters (un-blinded nurses 
with special training) conducted an assessment of suicidality via 
telephone after each patient visit.
    Propensity scores were used to adjust for imbalance of baseline 
prognostic factors between treatment arms. The ITT population included 
those study participants who completed a baseline visit, received their 
respective treatment and completed at least one post-baseline 
treatment.
    Of the 494 patients in the VNS arm, 300 (61 percent) completed all 
5 years of data. It is noted that the D-21 patients rolled over into 
this study at various time points after implantation. Of the 301 TAU 
patients, 138 (46 percent) completed all 5 years of data.
    Approximately 70 percent of all study participants were female and 
over 90 percent were Caucasian in both groups. A diagnosis of severe 
recurrent major depressive disorder was reported in 46 percent of the 
patients in the VNS arm and 32 percent in the TAU arm. A diagnosis of 
primary bipolar I or bipolar II disorder was reported in 28 percent of 
patients in the VNS arm and 24 percent in the TAU arm. Other 
psychiatric diagnoses included moderate recurrent major depression, 
moderate single episode major depression, severe recurrent major 
depression, and severe single episode major depression. Fifty-seven 
percent of the VNS group and 40 percent of the TAU group had 
experienced past treatments of ECT.
    Of the patients who withdrew early, 40 percent (195) were from the 
VNS arm and 54 percent (163) were from the TAU arm. The investigators 
observed that reasons for early withdrawal were similar between the 
treatment arms. It was also noted that after premature closure of a 
study site where 48 patients were participating in the TAU arm, most of 
the patients at that site were either lost to follow up or were dropped 
from the study for nonadherence.
    The primary efficacy measure was a response rate, defined as a 
decrease of >=50 percent in baseline Montgomery-[Auml]sberg Depression 
Rating Scale (MADRS) score at any post-baseline visit during the study. 
The study authors report a 5-year cumulative response rate of 67.6 
percent [95 percent CI = 63.4, 71.7] in the VNS group and 40.9 percent 
[95 percent CI = 35.4, 47.1] in the TAU group (p <0.001). Also, the 
authors note that the cumulative percentage of first-time responders in 
the VNS Therapy[supreg] System arm was approximately double that in the 
TAU arm at all post-baseline points in time through the 5 years of the 
study. The authors concluded that adjunctive treatment with the use of 
the VNS Therapy[supreg] System device resulted in superior outcomes in 
both effectiveness and mortality over a 5-year period compared with 
treatment as usual for patients diagnosed with chronic, severe TRD.
    A third study by Conway et al. compared quality of life (QoL) 
changes associated with treatment using VNS + TAU versus TAU in 
patients diagnosed with unipolar and bipolar TRD.\23\ QoL data were 
gathered on all patients using the patient reported Quality of Life 
Enjoyment and Satisfaction Questionnaire Short Form (Q-LES-Q-SF), as 
well as the clinician reported CGI-I scale.
---------------------------------------------------------------------------

    \23\ Conway CR, Kumar A, Xiong W, et al. Chronic Vagus Nerve 
Stimulation Significantly Improves Quality of Life in Treatment-
Resistant Major Depression. J Clin Psychiatry. 2018; 79:e1-e7.
---------------------------------------------------------------------------

    The data were collected as part of the 5 year registry described in 
Aaronson et al. (2017), noted above. However, the patient population 
analyzed was somewhat different, in that patients who rolled over from 
the previous D-21 study (Aaronson et al., 2017) were excluded so that 
all subjects had the same follow-up period. Furthermore, patients who 
were not depressed at baseline according to their MADRS scores, were 
also excluded. Therefore, the data from 328 patients treated with VNS + 
TAU and 271 patients treated with TAU were analyzed.
    Females comprised 68.6 percent of the VNS + TAU group and 70.8 
percent of the TAU group; 97 percent of the VNS + TAU group and 90.8 
percent of the TAU group were Caucasian. Major depressive disorder was 
diagnosed in 70.4 percent of the VNS + TAU group and 78.2 percent of 
the TAU group. Bipolar I or II disorder (most recent episode depressed) 
was diagnosed in 29.6 percent of the VNS + TAU group and 21.7 percent 
of the TAU group.
    Paired data analysis (for example, change in Q-LES-Q-SF versus 
percent change in MADRS score) were matched by assigned visit number; 
however these assessments for any given month might have taken place on 
separate visits (visit window was 45 days until 1 year of

[[Page 39469]]

follow-up; thereafter 90 days). The authors report that the 
time difference between the paired measures was similar between the two 
groups and was a median of 4 weeks. Missing data were excluded if one 
component of a paired observation was lacking.
    Among the results, the authors reported that on average, there was 
a comparative QoL advantage observed for the VNS + TAU group as early 
as 3 months, which was sustained throughout the 5-year study. The VNS + 
TAU treatment group demonstrated a significantly greater improvement in 
Q-LES-Q-SF scores than the TAU treatment group for the same percentage 
drop in MADRS score from baseline. The authors reported a similar 
pattern when the Clinical Global Impression (CGI) score was used. The 
authors concluded that adjunctive treatment using the VNS 
Therapy[supreg] System for TRD provided greater and sustained 
improvements in QoL as compared to TAU alone. Further, TRD patients 
treated with THE VNS Therapy[supreg] System for TRD experienced 
clinically meaningful QoL improvements even with symptom reduction less 
than the traditional 50 percent reduction used to describe a 
``response'' to treatment.
    The goal of the fourth study by Olin et al. was to characterize 
all-cause mortality rate and suicide risk in patients diagnosed with 
TRD who were treated with standard TAU and those treated with VNS + 
TAU.\24\
---------------------------------------------------------------------------

    \24\ Olin B, Jayewardene AK, Bunker M, Moreno F. Mortality and 
Suicide Risk in Treatment-Resistant Depression: An Created on 04/12/
2019. Page 19 of 49 Observational Study of the Long-Term Impact of 
Intervention. PLOS ONE. 2012.
---------------------------------------------------------------------------

    The study was an observational, open label, longitudinal, multi-
center registry. The registry was a post-market surveillance study 
required by the FDA as a condition of approval of the TRD indication 
for VNS therapy to evaluate long-term patient outcomes. Patients were 
followed for 60 months, until withdrawal from the study, death or study 
completion.
    Patients in the VNS + TAU group had been followed for an average of 
3.2 years; those in the TAU group had been followed for 2.1 years. 
Because baseline characteristics of each group showed areas of 
imbalance, the use of propensity score modeling was required.
    Suicidal ideation was evaluated by a central ratings group using 
both the Assessment of Suicidality (AOS) [Has the patient made a 
suicidal gesture or attempt since the last visit; yes or no] and MADRS 
Item 10, score >=4, [``Probably better off dead. Suicide thoughts are 
common, and suicide is considered a possible solution, but without 
specific plans or intention'']. Among other criteria, eligible patients 
for the Registry were: Individuals who had been diagnosed with a 
current MDE according to the DSM-IV-TR criteria; individuals who had 
been in the current depressive episode for at least 2 years or had 
experienced at least three lifetime MDEs (including the current 
episode); individuals who had an inadequate response to four or more 
adequate antidepressive treatments; and individuals who had a CGI-S of 
4 or greater. Exclusion criteria included schizophrenia, 
schizoaffective disorder, any other psychotic disorder, a history of 
rapid cycling bipolar disorder, or previous use of VNS.
    After completing a screening visit, patients self-selected the 
treatment course that they believed was the best medical option. 
However, after the study started, there were some treatment arm changes 
due to the implementation of a Medicare noncoverage policy and 
subsequent lack of reimbursement for the VNS procedure. The authors 
stated that they believed that the majority of individuals who chose 
VNS + TAU did so as a final alternative when all other treatments 
failed.
    There were 335 patients in the VNS + TAU group and 301 subjects in 
the TAU group. Average age of all patients was between 48 and 50 years. 
In the VNS + TAU group, 68.4 percent of patients were female; 96.4 
percent were Caucasian. In the TAU group, 70.1 percent of the patients 
were female; 91 percent were Caucasian. Major depressive disorder was 
diagnosed in 71.1 percent of the VNS + TAU group and 76.4 percent of 
the TAU group. Bipolar disorder was diagnosed in 28.9 percent of the 
VNS + TAU group and 23.6 percent of the TAU group. In the VNS + TAU 
group, 58.2 percent of patients had a history of ECT; in the TAU group, 
45.2 percent had a history of ECT treatment.
    The authors found that the standardized all-cause mortality (4.46 
[VNS + TAU] versus 8.06 [TAU only] per 1,000 person years) and suicide 
rates (0.88 [VNS + TAU] versus 1.61 [TAU only] per 1,000 person years) 
for patients treated with VNS + TAU were approximately half that of the 
patients treated only with TAU. However, the specific results were not 
statistically different due to the low mortality rates in both groups. 
Similar results were noted when stratifying by propensity score 
quintiles.
    However, both groups had a significantly higher rate of suicide 
relative to the U.S. population; VNS + TAU 5.72 (95 percent CI; 0.07, 
31.82) and TAU 9.98 (95 percent CI; 0.13, 55.55). The authors stated 
that individuals treated with VNS + TAU had a 10 percent--20 percent 
reduction in the risk of suicidality as compared to individuals treated 
with TAU alone, as measured by the MADRS Item 10 score. However, when 
the Assessment of Suicidality was used, no statistical difference was 
noted between treatment groups.
    The authors further noted that the side effects profiles as 
measured by the Frequency, Intensity and Burden of Side Effects Rating 
questionnaire demonstrated that the percentage of unacceptable side 
effects for VNS + TAU was higher than that of TAU; however, this 
difference lessens over time.
    The authors concluded that treatment with adjunctive VNS in this 
population can potentially lower the risk of all-cause mortality, 
suicide and suicide attempts.
    The fifth study by Berry et al. performed a Bayesian meta-analysis 
of patient level data from six clinical studies that had been 
previously performed and supported by the manufacturer of the VNS 
Therapy[supreg] System for TRD device (Cyberonics).\25\ The 
investigations included in the meta-analysis were two single arm 
studies of VNS + TAU, a randomized trial of VNS + TAU versus TAU, a 
single arm study of patients receiving only TAU, a randomized trial of 
VNS + TAU comparing different VNS intensities, and a nonrandomized 
registry of patients who received either VNS + TAU or TAU.
---------------------------------------------------------------------------

    \25\ Berry SM, Broglio K, Bunker M, Jayewardene A, Olin B, Rush 
AJ. A patient-level meta-analysis of studies evaluating vagus nerve 
stimulation therapy for treatment-resistant depression. Med Devices 
(Auckl). 2013.
---------------------------------------------------------------------------

    The MADRS and CGI-I were selected as the primary endpoints for the 
meta-analysis, though they were not necessarily the primary outcome 
measures in the individual studies analyzed. Outcomes of interest were 
response, remission and sustained response based on these scales of 
disease severity. Response was assessed across five of the six studies 
using the MADRS and defined as a follow up score of at least a 50 
percent reduction compared to baseline score. Response per the CGI 
Improvement subscale (CGI-I) was defined as a follow-up score of 1--
``very much improved'' or 2--``much improved.'' Remission was assessed 
using the MADRS (score at follow up <10 points). The study designs of 
the original investigations included in the meta-analysis necessitated 
that the TAU group data be

[[Page 39470]]

limited to two trials for the CGI-I scale and one trial for the MADRS 
scale.
    Because only one of the studies randomized patients to VNS + TAU or 
TAU groups, the authors used propensity scores to control for potential 
differences between treatment groups. The researchers calculated 
propensity scores using standard methods and included the score in 
mixed effects repeated measures models to account for the fact that the 
patients in all of the different studies arrived at their assessment 
points at different points in real time.
    In the final analysis, there were 425 TAU patients, and 1,035 VNS + 
TAU patients. The authors reported that while outcomes for both groups 
tended to improve, those who were treated with VNS + TAU demonstrated 
better outcomes over 96 weeks of treatment. The repeated measures 
analysis showed that, compared to patients who received TAU only, those 
who received VNS + TAU had lower MADRS scores (mean difference -3.26 
points; 95 percent CI: -3.99, -2.54). The odds of a MADRS response in 
the VNS + TAU group was 3.19 times greater (95 percent CI: 2.12, 4.66) 
and the odds of a MADRS remission was 4.99 times greater (95 percent 
CI: 2.93, 7.76) than those individuals who received TAU alone. 
Similarly, those in the VNS + TAU group had lower CGI-I scores (mean 
difference of -0.49 points; 95 percent CI: -0.59, -0.39) and had 7 
times the odds of a CGI-I response (95 percent CI: 4.63, 10.83) 
compared to individuals receiving TAU alone. The authors concluded that 
the Bayesian meta-analysis demonstrated consistent superiority of VNS + 
TAU as compared to the use of TAU alone. The authors stated that, for 
patients diagnosed with TRD, treatment using VNS + TAU has greater 
response and remission rates that are more likely to persist than TAU.
    The sixth study was another meta-analysis study, by Cimpianu et 
al., involving a systematic review that summarized the evidence 
regarding the use of invasive and noninvasive VNS for the treatment of 
TRD and other psychiatric disorders.\26\ The study authors searched 
through the PubMed/MEDLINE database (up to September 2016) to identify 
relevant publications for their review.
---------------------------------------------------------------------------

    \26\ Cimpianu C, Strube W, Falkai P, Palm U, Hasan A. Vagus 
nerve stimulation in psychiatry: A systematic review of the 
available evidence. J Neural Transm (Vienna). 2017.
---------------------------------------------------------------------------

    The authors noted that very few studies exhibited a double-blind 
randomized sham controlled design; instead the majority were single 
blinded, open label observational or cohort investigations. 
Nonetheless, the text of the review pertaining to invasive VNS in the 
treatment of depressive disorders focused on those studies that used a 
randomized double blind design in at least one period (beginning) of a 
trial. However, of those investigations described, the authors observed 
that, for the most part, effect sizes were either not reported at all 
or were not reported in detail.
    The authors found that the application of the VNS Therapy[supreg] 
System for TRD received a mixed recommendation in national guidelines. 
They stated that there is a consensus in the field that further 
randomized controlled studies, as well as long term naturalistic 
studies are needed for the future evaluation of the efficacy of VNS for 
the treatment of depression.
    The seventh study was a meta-analysis study as well. Daban et al. 
performed a systematic review of studies published between 2000 and 
September 2007, found in the Medline, Psychological Abstracts and 
Current Content databases, that evaluated the safety and efficacy of 
VNS therapy in TRD patients.\27\ The authors reviewed 6 short-term 
studies and 12 long-term studies. The measured outcomes consisted of 
baseline depression severity compared to ratings 2 weeks after 
implantation and after 3 months in acute and long-term studies and also 
after 6, 9, 12, and subsequent months in long-term studies. The authors 
stated their review demonstrated that VNS therapy has been reported to 
have antidepressant effects in open and long-term studies and that 
these effects may be sustained. However, they also noted that the 
evidence base is weak and the only blinded randomized trial was 
inconclusive, and they suggest more double-blinded, sham-controlled, 
randomized studies be conducted.
---------------------------------------------------------------------------

    \27\ Daban C., Martinez-Aran A., Cruz N., Vieta E. Safety and 
efficacy of Vagus Nerve Stimulation in treatment-resistant 
depression. A systematic review. J Affect Disord. 2008; 110(1-2):1-
15.
---------------------------------------------------------------------------

    The eighth and final study discussed in the NCD with CED 
reconsideration decision memo was also a meta-analysis study. This 
study, by Martin et al., performed a systematic review to determine the 
efficacy of VNS for the treatment of depression.\28\ In order to 
achieve this goal, a review of the pertinent scientific literature 
available until December 2010 was conducted. The databases searched 
were Medline/PubMed, Embase, The Cochrane Controlled Trials Register, 
Pascal Biomed and CINAL. References found on the web pages of ongoing 
clinical trials were also examined. Selection criteria included any RCT 
or pre/post design study, in which depressive symptomatology was 
measured and the intervention studied was VNS. The outcomes assessed 
were levels of depression severity as measured by depression 
symptomatology scales and percentage of responders, defined as subjects 
whose symptomatology scores demonstrated >=50 percent change from 
baseline. The outcomes were analyzed in the short term (<=12 weeks), 
medium term (>12 and <48 weeks) and long term (>48 weeks).
---------------------------------------------------------------------------

    \28\ Martin JLR and Martin-Sanchez E. Systematic review and 
meta-analysis of vagus nerve stimulation in the treatment of 
depression: Variable results based on study designs. Eur Psychiatry. 
2012; 27(3).
---------------------------------------------------------------------------

    In their literature search, the authors found only one randomized 
controlled trial involving VNS for treatment of depression. The primary 
outcome was a response rate as measured by the Hamilton Depression 
Rating Scale (HDRS). No statistically significant differences between 
the active and the placebo group were noted. However, the meta analysis 
of efficacy for the uncontrolled pre/post studies, showed a significant 
reduction in HDRS scores and the percentage of responders was 31.8 
percent ([23.2 percent-41.8 percent]. p<0.001). To study the cause of 
this heterogeneity, a meta-regression was performed, which implied that 
an 84 percent variation in effect size across the studies was explained 
by baseline severity of depression (p<0.0001). In the uncontrolled pre/
post studies that were meta-analyzed, the incidence density of suicide 
or attempted suicides was practically identical in the studies of the 
use of VNS and selective serotonin reuptake inhibitors. Therefore, the 
authors stated that the use of VNS did not appear to provoke suicide 
conduct any more than treatment with the comparator antidepressant.
    The authors concluded that insufficient data exist to describe VNS 
as an effective treatment for depression. Moreover, they stated that 
the ability of the uncontrolled studies to show causality is limited 
and positive outcomes might be caused by placebo effect, regression to 
the mean, spontaneous remission, differences in patient characteristics 
or the Hawthorn effect (the alteration of behavior by subjects in a 
study because they are aware of being observed). They stated that 
evidence to determine the benefit (or not) of VNS therapy should be 
based on long-term clinical trials with a control group aimed at 
monitoring the possible latency involved in the effect of the use of 
VNS, as well as the associated adverse effects.

[[Page 39471]]

    The applicant submitted an additional study by Kumar et al. This 
was an observational study attempting to compare the duration of 
treatment response for patients that received VNS and treatment as 
usual (TAU) together as compared to the duration of response for 
patients receiving only TAU.\29\ Data from 271 participants receiving 
TAU and 328 participants receiving VNS + TAU were analyzed. Response 
was defined as >=50 percent decrease in baseline MADRS score at post-
baseline visit and was considered retained until the decrease was <40 
percent. In the VNS + TAU group, 62.5 percent (205/328) of participants 
had a first response over 5 years compared with 39.9 percent (108/271) 
in the TAU group. The time to first response was significantly shorter 
for VNS + TAU participants than for TAU participants (P<0.01). The 
authors of the study concluded that combining VNS therapy with TAU for 
patients having severe TRD leads to a faster response and a greater 
likelihood of response to treatment as compared to TAU alone. Also, the 
duration of the treatment response is longer for those receiving VNS + 
TAU.
---------------------------------------------------------------------------

    \29\ Kumar A, Bunker M, Aaronson S, Conway C, Rothschild A, 
Mordenti G, Rush A. Durability of symptomatic responses obtained 
with adjunctive vagus nerve stimulation in treatment-resistant 
depression. Neuropsychiatr Dis Treat. 2019:15 457-468.
---------------------------------------------------------------------------

    With regard to the studies presented, we are concerned that the 
clinical utility of the VNS Therapy[supreg] System for TRD has not been 
well demonstrated by the applicant. The majority of the studies 
presented were case series, open labeled, or not randomized. The 
literature presented did not appear to have comparator arms with 
current treatment options like Magnetic Stimulation (TMS). We note that 
the CMS CAG found that all of the studies they reviewed and submitted 
for this application indicated some positive findings regarding 
clinical improvement with the use of VNS therapy. However, the CMS CAG 
also identified significant issues with the studies that either reduced 
the overall quality and strength of evidence and/or the clinical 
significance of the outcomes. Nevertheless, some of the published 
evidence suggests that the use of VNS is a promising treatment for 
patients diagnosed with TRD, which contributed to CMS CAG's decision to 
propose coverage with evidence development.
    We are inviting public comments on whether the VNS Therapy[supreg] 
System for TRD meets 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. With 
respect to the cost criterion, the applicant stated that the VNS 
Therapy[supreg] System for TRD would be reported with CPT code 64568 
(Incision for implantation of cranial nerve (e.g., vagus nerve) 
neurostimulator electrode array and pulse generator), which is assigned 
to APC 5464 (Level 4 Neurostimulator and Related Services). The 
proposed CY 2020 payment rate for CPT code 64568 is $28,511.24, with a 
device offset of $24,168.98. The applicant stated that the cost of the 
VNS Therapy[supreg] System for TRD device is $42,000.
    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 cost of $42,000 
for the VNS Therapy[supreg] System for TRD device exceeds the 
applicable APC amount for CPT code 64568 of $28,511.24 by 147.31 
percent ($42,000/$28,511.24 x 100 = 147.31 percent). Therefore, the VNS 
Therapy[supreg] System for TRD appears to meet the first cost 
significance requirement.
    The second cost significance requirement, 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 cost of $42,000 for the VNS Therapy[supreg] System for TRD 
device exceeds the device-related portion of the APC amount for the 
related service of $24,168.98 by 173.78 percent ($42,000/$24,168.98 x 
100 = 173.78 percent). Therefore, the VNS Therapy[supreg] System for 
TRD appears to meet the second cost significance requirement.
    Section 419.66(d)(3), the third cost significance requirement, 
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 cost of $42,000 for the VNS Therapy[supreg] System for TRD and 
the portion of the APC payment for the device of $24,168.98 exceeds 10 
percent at 62.54 percent (($42,000-$24,168.98)/$28,511.24 x 100 = 62.54 
percent). Therefore, the VNS Therapy[supreg] System for TRD appears to 
meet the third cost significance requirement and, therefore, satisfies 
the cost significance criterion. We are inviting public comments on 
whether the VNS Therapy[supreg] System for TRD meets the device pass-
through payment criteria discussed in this section, including the cost 
criterion.
(4) Optimizer[supreg] System
    Impulse Dynamics submitted an application for a new device category 
for transitional pass-through payment status for the Optimizer[supreg] 
System. According to the applicant, the Optimizer[supreg] System is an 
implantable device that delivers Cardiac Contractility Modulation (CCM) 
therapy for the treatment of patients with moderate to severe chronic 
heart failure. CCM therapy is intended to treat patients with 
persistent symptomatic heart failure despite receiving guideline 
directed medical therapy (GDMT). The applicant stated that the 
Optimizer System consists of the Optimizer Implantable Pulse Generator 
(IPG), Optimizer Mini Charger, and Omni II Programmer with Omni Smart 
Software. Lastly, the applicant stated that the Optimizer[supreg] 
System delivers CCM signals to the myocardium. CCM signals are 
nonexcitatory electrical signals applied during the cardiac absolute 
refractory period that, over time, enhance the strength of cardiac 
muscle contraction.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received a Category B-3 Investigational Device Exemption 
(IDE) from the FDA on April 6, 2017. Subsequently, the applicant 
received its premarket approval (PMA) application from the FDA on March 
21, 2019. We received the application for a new device category for 
transitional pass-through payment status for the Optimizer[supreg] 
System on February 26, 2019, which is within 3 years of the date of the 
initial FDA approval or clearance. We are inviting public comments on 
whether the Optimizer[supreg] System meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the Optimizer[supreg] System is integral to 
the CCM therapy 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 stated that the Optimizer[supreg] 
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

[[Page 39472]]

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 
Optimizer[supreg] System.
    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. The applicant stated that the use of CCM 
significantly improves clinical outcomes for a patient population 
compared to currently available treatments. With respect to this 
criterion, the applicant submitted studies that examined the impact of 
CCM on quality of life, exercise tolerance, hospitalizations, and 
mortality.
    The applicant noted that the use of the Optimizer[supreg] System 
significantly improves clinical outcomes for patients with moderate-to-
severe chronic heart failure, and specifically improves exercise 
tolerance, quality of life, and functional status of patients that are 
otherwise underserved. The applicant claims that the Optimizer[supreg] 
System fulfills an unmet need because there is currently no therapeutic 
medical device therapies available for the 70 percent of heart failure 
patients who have New York Heart Association (NYHA) Class III heart 
failure, normal QRS duration and reduced ejection fraction (EF).
    The applicant presented several studies to support these claims. 
According to the applicant, the results of a randomized clinical study 
in which patients with NYHA functional Class III, ambulatory Class IV 
heart failure despite OMT, an EF from 25-45 percent, or a normal sinus 
rhythm with QRS duration <130 ms (n=160) were randomized to continued 
medical therapy (n=86) or CCM with the Optimizer[supreg] System (n=74) 
for 24 weeks showed a statistically significant improvement in the 
primary endpoint of peak oxygen consumption (pVO2 = 0.84, 95 percent 
Bayesian credible interval 0.123 to 1.52) compared with the patients 
who were randomized to continued medical therapy.\30\ The secondary 
endpoint of quality of life, measured by Minnesota Living with Heart 
Failure Questionnaire (MLWHFQ) (p<0.001), 6-minute hall walk test 
(p=0.02), and an NYHA function class assessment (p<0.001) were better 
in the treatment group versus control group. The secondary endpoint of 
heart failure-related hospitalizations was lowered from 10.8 percent to 
2.9 percent (p=0.048). The applicant also reported a registry study of 
140 patients with a left ventricular ejection fraction from 25-45 
percent receiving CCM therapy with a primary endpoint of comparing 
observed survival to Seattle Heart Failure Model (SHFM) predicted 
survival over 3 years of follow-up. All patients implanted with the 
Optimizer[supreg] System at participating centers were offered 
participation and 72 percent of patients agreed to enroll in the 
registry. There were improvements in quality of life markers (MLWHFQ) 
and a 75-percent reduction in heart failure hospitalizations 
(p<0.0001). Survival at 3 years was similar between the two study arms 
with CCM at 82.8 percent [73.4 percent-89.1 percent] and SHFM at 76.7 
percent (p = 0.16). However, for patients with a left ventricular 
ejection fraction from 35-45 percent receiving CCM therapy, the 3-year 
mortality for CCM therapy was significantly better than predicted with 
88 percent for CCM compared to 74.7 percent for SHFM (p=0.0463).\31\ 
The applicant presented a randomized, double blind, crossover study of 
CCM signals with 164 patients with EF <=35 percent and NYHA Class II 
(24 percent) or III (76 percent) symptoms who received a CCM pulse 
generator. After the 6-month treatment period, results indicated 
statistically significantly improved peak VO2 and MLWHFQ (p=0.03 for 
each parameter), concluding that CCM signals appear to be safe for 
patients and that exercise tolerance and quality of life were 
significantly better while patients were receiving active CCM 
treatment.\32\
---------------------------------------------------------------------------

    \30\ Abraham, W.T., Kuck, K.H., Goldsmith, R.L., Lindenfeld, J., 
Reddy, V.Y., Carson, P.E., & Wiegn, P. (2018). A randomized 
controlled trial to evaluate the safety and efficacy of cardiac 
contractility modulation. JACC: Heart Failure, 6(10), 874-883.
    \31\ Anker, S.D., Borggrefe, M., Neuser, H., Ohlow, M. A., 
R[ouml]ger, S., Goette, A., & Rousso, B. Cardiac contractility 
modulation improves long-term survival and hospitalizations in heart 
failure with reduced ejection fraction. Eur J Heart Fail. 2019 Jan 
16. doi: 10.1002/ejhf.1374. [Epub ahead of print]
    \32\ Borggrefe MM, Lawo T, Butter C, Schmidinger H, Lunati M, 
Pieske B, Misier AR, Curnis A, Bocker D, Remppis A, Kautzner J, 
Stuhlinger M, Leclerq C, Taborsky M, Frigerio M, Parides M, Burkhoff 
D and Hindricks G. Randomized, double blind study of non-excitatory, 
cardiac contractility modulation electrical impulses for symptomatic 
heart failure. Eur Heart J. 2008;29:1019-28.
---------------------------------------------------------------------------

    A study was conducted with 68 consecutive heart failure patients 
with NYHA Class II or III symptoms, QRS duration <=130 ms, and who had 
been implanted with a CCM device between May 2002 and July 2013 in 
Germany. Based upon pre-implant SHFM survival rates, 4.5 years mean 
follow-up, and an average patient age of 61 years old, the study found 
lower mortality rates for CCM therapy group with 0 percent at 1 year, 
3.5 percent at 2 years, and 14.2 percent at 5 years, compared to 6.1 
percent, 11.8 percent, and 27.7 percent predicted by SHFM, respectively 
(p=0.007). \33\ In a study on long-term outcomes, 41 consecutive heart 
failure patients with left ventricular ejection fraction (EF) <40 
percent receiving CCM therapy were compared to a control group of 41 
similar heart failure patients and primarily evaluated for all-cause 
mortality, as well as heart failure hospitalization, cardiovascular 
death, and a death and heart failure hospitalization composite. After 6 
years of follow-up, the results showed that all-cause mortality was 
lower for the CCM group as compared to the control group (39 percent 
versus 71 percent respectively, p=0.001), especially among patients 
with EF >=25-40 percent with 36 percent for the CCM group versus 80 
percent for the control group (p<0.001). Although heart failure 
hospitalization was similar between the treatment and control cohorts, 
there was a significantly lower heart failure hospitalization rate for 
CCM patients with EF >=25-40 percent (36 percent versus 64 percent 
respectively, p=0.005).\34\ The applicant also presented additional 
studies 35 36 that presented similar conclusions to the 
studies discussed above, noting that CCM therapy provided improvements 
in quality of life, exercise capacity, NYHA class, and mortality rates.
---------------------------------------------------------------------------

    \33\ Kloppe A, Lawo T, Mijic D, et al. Long-term survival with 
Cardiac Contractility Modulation in patients with NYHA II or III 
symptoms and normal QRS duration. Int J Cardiol. 2016 Apr 
15;209:291-5.
    \34\ Liu M, Fang F, Luo XX, Shlomo BH, Burkhoff D, Chan JY, Chan 
CP, Cheung L, Rousso B, Gutterman D, Yu CM. Improvement of long-term 
survival by cardiac contractility modulation in heart failure 
patients: A case-control study. Int J Cardiol. 2016 Mar 1;206:122-6.
    \35\ M[uuml]ller D, Remppis A, Schauerte P, et al. Clinical 
effects of long-term cardiac contractility modulation (CCM) in 
subjects with heart failure caused by left ventricular systolic 
dysfunction. Clin Res. Cardiol. 2017 Nov 1;106(11):893-904.
    \36\ Kuschyk J, Roeger S, Schneider R, et al. Efficacy and 
survival in patients with cardiac contractility modulation: Long-
term single center experience in 81 patients. Int J Cardiol. 
2015;183C:76-81.
---------------------------------------------------------------------------

    We noted several concerns with the studies presented by the 
applicant. One

[[Page 39473]]

concern regarding the evidence for the Optimizer[supreg] System 
involves the mixed mortality outcomes presented. Three studies showed 
significantly lower mortality rates with the use of CCM compared to 
controls or predicted mortality. Each of these studies focused on 
slightly different mortality outcomes, including all-cause mortality, a 
composite of death and heart failure hospitalization, and cardiac 
mortality rates from 1 to 5 years. Two studies show mixed results. For 
the first, 3-year survival was not significant for the overall 
population, despite a significantly higher survival rate found in a 
subpopulation. For the second, mortality rates were significant 
compared to predictions at 1 year, but not 3 years. The final study did 
not report significance in its overall survival at 2 years. Although 
the studies and trials presented show improvements in mortality when 
evaluating CCM therapy with comparators, the studies have small sample 
sizes and limited timeframes for measuring survival. Additionally, 
three studies compared observed mortality rates to statistically 
projected mortality rates. In the two studies with observed mortality 
rates, the overall improvement in mortality was not significant, 
despite some significance found in subanalyses. These issues raise 
concerns about the strength of the conclusions related to the use of 
CCM therapy improving patient outcomes.
    Another concern with the studies presented for the 
Optimizer[supreg] System is that the included study population may not 
be necessarily representative of the Medicare beneficiary population. 
Several studies had a predominantly white, male patient population, 
which could make generalization of study results to a more diverse 
Medicare population difficult. Additionally, the average age of 
patients for several studies was under 65 years old, which may also be 
a limitation in applying these study results to the Medicare 
population.
    Overall, there is a lack of evidence from large trials for the CCM 
therapy provided by the Optimizer[supreg] System. The studies presented 
had sample sizes fewer than 500 patients. Other limitations include the 
potential placebo effects and selection bias that may have impacted 
study results. Only two studies presented were randomized and only one 
of those two was a double-blinded study. For the remaining studies, no 
blinding occurred to minimize potential biases, which indicates that 
patients and researchers knew they were receiving CCM therapy. This is 
a limitation because observed outcomes may be impacted by the placebo 
effect. Although most studies matched participants for similar 
demographics, there could be systematic differences and unmeasured bias 
between the two groups beyond the similarities addressed in the study 
that could affect outcomes. The lack of randomization may have 
implications for the strength of the studies' conclusions.
    Based upon the evidence presented, we are inviting public comments 
on whether the Optimizer[supreg] System meets 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. The applicant stated that the 
Optimizer[supreg] System would be reported with CPT codes 0408T, 0409T, 
0410T, 0411T, 0412T, 0413T, 0414T, 0415T, 0416T, 0417T, and 0418T. The 
associated APCs are APC 5231 (Level 1 ICD and Similar Procedures) and 
APC 5222 (Level 2 Pacemaker and Similar Procedures). To meet the cost 
criterion for device pass-through payment status, a device must pass 
all three tests of the cost criterion for at least one APC. For our 
calculations, we used APC 5222, which had a CY 2019 payment rate of 
$7,404.11 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 0410T had a device 
offset amount of $2,295.27 at the time the application was received. 
According to the applicant, the cost of the Optimizer[supreg] System 
was $15,700.
    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 $15,700 for the Optimizer[supreg] System 
exceeds 212 percent of the applicable APC payment amount for the 
service related to the category of devices of $7,404.11 ($15,700/
$7,404.11 x 100 = 212 percent). Therefore, we believe the 
Optimizer[supreg] System meets the first cost significance requirement.
    The second cost significance requirement, 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 $15,700 for the 
Optimizer[supreg] System exceeds the cost of the device-related portion 
of the APC payment amount for the related service of $2,295.27 by 684 
percent ($15,700/$2,295.27) x 100 = 684 percent. Therefore, we believe 
that the Optimizer[supreg] System meets the second cost significance 
requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides 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 $15,700 for the Optimizer[supreg] System and the 
portion of the APC payment amount for the device of $2,295.27 exceeds 
the APC payment amount for the related service of $7,404.11 by 181 
percent (($15,700-$2,295.27)/$7,404.11) x 100 = 181 percent). 
Therefore, we believe that the Optimizer[supreg] System meets the third 
cost significance requirement.
    We are inviting public comments on whether the Optimizer[supreg] 
System meets the device pass-through payment criteria discussed in this 
section, including the cost criterion for device pass-through payment 
status.
(5) AquaBeam[supreg] System
    PROCEPT BioRobotics Corporation submitted an application for a new 
device category for transitional pass-through payment status for the 
AquaBeam[supreg] System as a resubmission of their CY 2019 application. 
The AquaBeam[supreg] 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.\37\ According to the 
applicant, the AquaBeam[supreg] system resects the prostate to relieve 
symptoms of urethral compression. The resection is performed 
robotically using a high

[[Page 39474]]

velocity, nonheated sterile saline water jet (in a procedure called 
Aquablation). The applicant stated that the AquaBeam[supreg] 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[supreg] System 
consists of a disposable, single-use handpiece as well as other 
components that are considered capital equipment.
---------------------------------------------------------------------------

    \37\ Chungtai B. Forde JC. Thomas DDM et al. Benign Prostatic 
Hyperplasia. Nature Reviews Disease Primers 2 (2016) article 16031.
---------------------------------------------------------------------------

    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted a De Novo request classifying the AquaBeam[supreg] System 
as a Class II device under section 513(f)(2) of the Federal Food, Drug, 
and Cosmetic Act on December 21, 2017. The application for a new device 
category for transitional pass-through payment status for the 
AquaBeam[supreg] System was received on March 1, 2018, which is within 
3 years of the date of the initial FDA approval or clearance. We are 
inviting public comments on whether the AquaBeam[supreg] System meets 
the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the AquaBeam[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 AquaBeam[supreg] 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 2019 OPPS/ASC 
proposed and final rules, we cited the CY 2000 OPPS interim final rule 
with comment period (65 FR 67804 through 67805), where 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 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 OPPS final rule 
with comment period (70 FR 68329 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.
    The applicant resubmitted their application with additional 
information that they believe supports their stance that the device 
should be considered eligible under the device pass-through payment 
eligibility criteria. The applicant stated that the AquaBeam[supreg] 
System's handpiece is temporarily surgically inserted into the urethra 
via the urinary meatus. The applicant indicated that the 
AquaBeam[supreg] System's handpiece does not create an incision or 
surgical opening or pathway, but instead ablates prostate tissue. The 
applicant further stated that the device only cuts the prostatic tissue 
after being inserted into the prostatic urethra and therefore it should 
be considered eligible. The applicant also stated that the prostatic 
urethra tissue is cut because it is at the center of the obstruction in 
the prostate. Additionally, the applicant explained that to relieve the 
symptoms of BPH, both the prostatic urethra and prostate tissue 
encircling the prostatic urethra must be ablated, or cut, to relieve 
the symptoms of BPH and provide some additional clearance for future 
swelling or growth of the prostate. The applicant stated that the 
prostatic urethra tissue is not cut or disturbed to access the prostate 
tissue underneath, but the removal of the prostatic urethra is a key 
aspect of treating the obstruction that causes BPH symptoms. Finally, 
the applicant believes that clinically the distinction between the 
prostatic urethra tissue and the prostate tissue are not meaningful in 
the context of a BPH surgical intervention. We are inviting public 
comments on whether the AquaBeam[supreg] System meets the eligibility 
criteria at Sec.  419.66(b).
    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 
AquaBeam[supreg] System. The applicant proposed a category descriptor 
for the AquaBeam[supreg] System of ``Probe, image guided, robotic 
resection of prostate.'' We are inviting public comments on whether the 
AquaBeam[supreg] System meets this 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. The applicant stated that the AquaBeam[supreg] 
System provides a substantial clinical improvement as the first 
autonomous tissue resection robot for the treatment of lower urinary 
tract symptoms due to BPH. The applicant further provided that the 
AquaBeam[supreg] System is also a substantial clinical improvement 
because the Aquablation procedure demonstrated superior efficacy and 
safety for larger prostates (prostates sized 50-80 mL) as compared to 
transurethral resection of the prostate (TURP). The applicant also 
believes that the Aquablation procedure would provide better outcomes 
for patients with large prostates (>80 mL) who may undergo open 
prostatectomy whereas the open prostatectomy procedure would require a 
hospital inpatient admission. With respect to this criterion, the 
applicant submitted several articles that examined the use of a current 
standard treatment for BPH--transurethral prostatectomy TURP, including 
complications associated with the procedure and the comparison of the 
effectiveness of TURP to other modalities used to treat BPH, including 
holmium laser enucleation of the

[[Page 39475]]

prostate (HoLEP) \38\ and photoselective vaporization (PVP).\39\
---------------------------------------------------------------------------

    \38\ Montorsi, F. et al.: Holmium Laser Enucleation Versus 
Transurethral Resection of The Prostate: Results from A 2-Center, 
Prospective, Randomized Trial In Patients With Obstructive Benign 
Prostatic Hyperplasia. J. Urol. 172, 1926-1929 (2004).
    \39\ Bachmann A, et al.: 180-W XPS GreenLight laser vaporisation 
versus transurethral resection of the prostate for the treatment of 
benign prostatic obstruction: 6-month safety and efficacy results of 
a European Multicentre Randomised Trial--the GOLIATH study. Eur 
Urol, 2014;65(5):931-42.
---------------------------------------------------------------------------

    The most recent clinical study involving the AquaBeam[supreg] 
System was an accepted manuscript describing a double-blind trial that 
compared men treated with the AquaBeam[supreg] System versus men 
treated with traditional TURP.\40\ This was a multicenter study in 4 
countries with 17 sites, 6 of which contributed 5 patients or fewer. 
Patients were randomized to receive treatment with either the 
AquaBeam[supreg] System or TURP in a two-to-one ratio. With exclusions 
and dropouts, 117 patients were treated with the AquaBeam[supreg] 
System and 67 patients with TURP. The data on efficacy supported the 
equivalence of the two procedures based upon noninferiority analysis. 
The safety data were reported as showing superiority of the 
AquaBeam[supreg] System over TURP, although the data were difficult to 
track because adverse consequences were combined into categories. The 
applicant claimed that the International Prostate Symptom Scores (IPPS) 
were significantly improved in AquaBeam[supreg] System patients as 
compared to TURP patients in men whose prostate was greater the 50 ml 
in size. The applicant also claimed that the proportion of men with a 
worsening of sexual function (as shown with a decrease in Male Sexual 
Health Questionnaire for Ejaculatory Dysfunction (MSHQ) score of at 
least 2 points or a decrease in International Index of Erectile 
Function (IIEF-5) score of at least 6 points by 6 months) was lower for 
the Aquablation procedure at 32.9 percent compared to the TURP groups 
at 52.8 percent.
---------------------------------------------------------------------------

    \40\ Gilling P. Barber M. Anderson P et al.: WATER--A Double-
Blind Randomized Controlled Trial of Aquablation vs Transurethal 
Resection of the Prostate in Benign Prostatic Hyperplasia. J Urol. 
Accepted December 29, 2017 doi 10.1016/j.juro.2017.12.065.
---------------------------------------------------------------------------

    Although there may be some evidence of the improved safety of the 
AquaBeam[supreg] System over TURP, we believe that the comparison of 
the AquaBeam[supreg] System with TURP does not recognize that there are 
other treatment modalities available that are likely to have a similar 
safety profile as the AquaBeam[supreg] System. No studies comparing 
other treatment modalities were cited to show that the AquaBeam[supreg] 
System is a significant improvement over other available procedures.
    Based on the evidence submitted with the application, we are 
concerned that there is a lack of sufficient evidence that the 
AquaBeam[supreg] System provides a substantial clinical improvement 
over other similar products, particularly in the outpatient setting 
where large prostates are less likely to be treated. We are inviting 
public comments on whether the AquaBeam[supreg] System meets 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. The applicant stated that the 
AquaBeam[supreg] System would be reported with CPT code 0421T. CPT code 
0421T is assigned to APC 5375 (Level 5 Urology and Related Services). 
To meet the cost criterion for device pass-through payment status, a 
device must pass all three tests of the cost criterion for at least one 
APC. For our calculations, we used APC 5375, which has a CY 2018 
payment rate of $3,706.03. 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 0421T had device offset amount of $0.00 
at the time the application was received. According to the applicant, 
the cost of the handpiece for the AquaBeam[supreg] System is $2,500.
    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 $2,500 for the AquaBeam[supreg] System 
exceeds 25 percent of the applicable APC payment amount for the service 
related to the category of devices of $3,706.03 ($2,500/$3,706.03 x 100 
= 67.5 percent). Therefore, we believe the AquaBeam[supreg] System 
meets the first cost significance requirement.
    The second cost significance requirement, 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 $2,500 for the 
AquaBeam[supreg] System exceeds the cost of the device-related portion 
of the APC payment amount for the related service of $0.00 by at least 
25 percent. Therefore, we believe that the AquaBeam[supreg] System 
meets the second cost significance requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides 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 $2,500 for the AquaBeam[supreg] System and the 
portion of the APC payment amount for the device of $0.00 exceeds the 
APC payment amount for the related service of $3,706.03 by 68 percent 
(($2,500 - $0.00)/$3,706.03 x 100 = 67.5 percent). Therefore, we 
believe that the AquaBeam[supreg] System meets the third cost 
significance requirement.
    We are inviting public comments on whether the AquaBeam[supreg] 
System meets the device pass-through payment criteria discussed in this 
section, including the cost criterion.
(6) EluviaTM Drug-Eluting Vascular Stent System
    Boston Scientific Corporation submitted an application for new 
technology add-on payments for the EluviaTM Drug-Eluting 
Vascular Stent System for FY 2020. According to the applicant, the 
EluviaTM system is a sustained-release drug-eluting stent 
indicated for improving luminal diameter in the treatment of peripheral 
artery disease (PAD) with symptomatic de novo or restenotic lesions in 
the native superficial femoral artery (SFA) and/or the proximal 
popliteal artery (PPA) with reference vessel diameters (RVD) ranging 
from 4.0 to 6.0 mm and total lesion lengths up to 190 mm.
    The applicant stated that PAD is a circulatory condition in which 
narrowed arteries reduce blood flow to the limbs, usually in the legs. 
Symptoms of PAD may include lower extremity pain due to varying degrees 
of ischemia, claudication which is characterized by pain induced by 
exercise and relieved with rest. According to the applicant, risk 
factors for PAD include individuals who are age 70 years old and older; 
individuals who are between the ages of 50 years old and 69 years old 
with a history of smoking or diabetes; individuals who are between the 
ages of 40 years old and 49 years old with diabetes and at least one 
other risk factor for atherosclerosis; leg symptoms

[[Page 39476]]

suggestive of claudication with exertion, or ischemic pain at rest; 
abnormal lower extremity pulse examination; known atherosclerosis at 
other sites (for example, coronary, carotid, renal artery disease); 
smoking; hypertension, hyperlipidemia, and homocysteinemia.\41\ PAD is 
primarily caused by atherosclerosis--the buildup of fatty plaque in the 
arteries. PAD can occur in any blood vessel, but it is more common in 
the legs than the arms. Approximately 8.5 million people in the United 
States have PAD, including 12 to 20 percent of individuals who are age 
60 years old and older.\42\
---------------------------------------------------------------------------

    \41\ Neschis, David G. & MD, Golden, M., ``Clinical features and 
diagnosis of lower extremity peripheral artery disease.'' Available 
at: https://www.uptodate.com/contents/clinical-features-and-diagnosis-of-lower-extremity-peripheral-artery-disease.
    \42\ Centers for Disease Control and Prevention, ``Peripheral 
Arterial Disease (PAD) Fact Sheet,'' 2018, Available at: https://www.cdc.gov/DHDSP/data_statistics/fact_sheets/fs_PAD.htm.
---------------------------------------------------------------------------

    Management of the disease is aimed at improving symptoms, improving 
functional capacity, and preventing amputations and death. Management 
of patients who have been diagnosed with lower extremity PAD may 
include medical therapies to reduce the risk for future cardiovascular 
events related to atherosclerosis, such as myocardial infarction, 
stroke, and peripheral arterial thrombosis. Such therapies may include 
antiplatelet therapy, smoking cessation, lipid-lowering therapy, and 
treatment of diabetes and hypertension. For patients with significant 
or disabling symptoms unresponsive to lifestyle adjustment and 
pharmacologic therapy, intervention (percutaneous, surgical) may be 
needed. Surgical intervention includes angioplasty, a procedure in 
which a balloon-tip catheter is inserted into the artery and inflated 
to dilate the narrowed artery lumen. The balloon is then deflated and 
removed with the catheter. For patients with limb-threatening ischemia 
(for example, pain while at rest and/or ulceration), revascularization 
is a priority to reestablish arterial blood flow. According to the 
applicant, treatment of the SFA is problematic due to multiple issues 
including high rate of restenosis and significant forces of 
compression.
    The applicant describes the EluviaTM Drug-Eluting 
Vascular Stent System as a sustained-release drug-eluting self-
expanding, nickel titanium alloy (nitinol) mesh stent used to 
reestablish blood flow to stenotic arteries. According to the 
applicant, the EluviaTM stent is coated with the drug 
paclitaxel, which helps prevent the artery from restenosis. The 
applicant stated that EluviaTM's polymer-based drug delivery 
system is uniquely designed to sustain the release of paclitaxel beyond 
1 year to match the restenotic process in the SFA. According to the 
applicant, the EluviaTM Drug-Eluting Vascular Stent System 
is comprised of: (1) The implantable endoprosthesis; and (2) the stent 
delivery system (SDS). On both the proximal and distal ends of the 
stent, radiopaque markers made of tantalum increase visibility of the 
stent to aid in placement. The tri-axial designed delivery system 
consists of an outer shaft to stabilize the stent delivery system, a 
middle shaft to protect and constrain the stent, and an inner shaft to 
provide a guide wire lumen. The delivery system is compatible with 
0.035 in (0.89 mm) guide wires. The EluviaTM stent is 
available in a variety of diameters and lengths. The delivery system is 
offered in 2 working lengths (75 cm and 130 cm).
    With respect to the newness criterion at Sec.  419.66(b)(1), 
EluviaTM received FDA premarket approval (PMA) on September 
18, 2018. The application for a new device category for transitional 
pass-through payment status for EluviaTM was received on 
November 15, 2018, which is within 3 years of the date of the initial 
FDA approval or clearance. We are inviting public comments on whether 
the EluviaTM Drug-Eluting Vascular Stent System meets the 
newness criterion. With respect to the eligibility criterion at Sec.  
419.66(b)(3), according to the applicant, the EluviaTM Drug-
Eluting Vascular Stent 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 that the EluviaTM Drug-Eluting Vascular Stent 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. We are inviting 
public comments on whether the EluviaTM Drug-Eluting 
Vascular Stent System meets the eligibility criterion at Sec.  
419.66(b).
    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 
EluviaTM Drug-Eluting Vascular Stent System. The applicant 
proposed a category descriptor for the EluviaTM Drug-Eluting 
Vascular Stent System of ``Stent, non-coronary, polymer matrix, minimum 
12-month sustained drug release, with delivery system.'' We are 
inviting public comments on this issue.
    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 articles that examined the use of a current standard 
treatment for peripheral artery disease (PAD) with symptomatic de novo 
or restenotic lesions in the native superficial femoral artery (SFA) 
and/or proximal popliteal artery (PPA), with claims of substantial 
clinical improvement in achieving superior primary patency; reducing 
the rate of subsequent therapeutic interventions; decreasing the number 
of future hospitalizations or physician visits; reducing hospital 
readmission rates; reducing the rate of device-related complications; 
and achieving similar functional outcomes and EQ-5D index values while 
associated with half the rate of target lesion revascularizations 
(TLRs) procedures.
    The applicant submitted the results of the MAJESTIC study, a 
single-arm, first-in-human study of the EluviaTM Drug-
Eluting Vascular Stent System. The MAJESTIC \43\ study is a 
prospective, multi-center, single-arm, open-label study. According to 
the applicant, the MAJESTIC study demonstrated long-term treatment 
durability among patients whose femoropopliteal arteries were treated 
with the EluviaTM stent. The applicant asserts that the 
MAJESTIC study demonstrates the sustained impact of the 
EluviaTM stent on primary patency. The MAJESTIC study 
enrolled 57 patients who had been diagnosed with symptomatic lower limb 
ischemia and lesions in the SAF or PPA. Efficacy measures at 2 years 
included primary patency, defined as duplex ultrasound peak systolic 
velocity ratio of less than 2.5 and the absence of

[[Page 39477]]

TLR or bypass. Safety monitoring through 3 years included adverse 
events and TLR. The 24-month clinic visit was completed by 53 patients; 
52 had Doppler ultrasound evaluable by the core laboratory, and 48 
patients had radiographs taken for stent fracture analysis. The 3-year 
follow-up was completed by 54 patients. At 2 years, 90.6 percent (48/
53) of the patients had improved by 1 or more Rutherford categories as 
compared with the pre-procedure level without the need for TLR (when 
those with TLR were included, 96.2 percent sustained improvement); only 
1 patient exhibited a worsening in level, 66.0 percent (35/53) of the 
patients exhibited no symptoms (Category 0) and 24.5 percent (13/53) 
had mild claudication (Category 1) at the 24-month visit. Mean ABI 
improved from 0.73  0.22 at baseline to 1.02  
0.20 at 12 months and 0.93  0.26 at 24 months. At 24 
months, 79.2 percent (38/48) of the patients had an ABI increase of at 
least 0.1 compared with baseline or had reached an ABI of at least 0.9. 
The applicant also noted that at 12 months the Kaplan-Meier estimate of 
primary patency was 96.4 percent.
---------------------------------------------------------------------------

    \43\ M[uuml]ller-H[uuml]lsbeck, S., et al., ``Long-Term Results 
from the MAJESTIC Trial of the Eluvia Paclitaxel-Eluting Stent for 
Femoropopliteal Treatment: 3-Year Follow-up,'' Cardiovasc Intervent 
Radiol, December 2017, vol. 40(12), pp. 1832-1838.
---------------------------------------------------------------------------

    With regard to the EluviaTM stent achieving superior 
primary patency, the applicant submitted the results of the IMPERIAL 
\44\ study in which the EluviaTM stent is compared, head-to-
head, to the Zilver[supreg] PTX Drug-Eluting stent. The IMPERIAL study 
is a global, multi-center, randomized controlled trial consisting of 
465 subjects. Eligible patients were aged 18 years old or older and had 
a diagnosis of symptomatic lower-limb ischaemia, defined as Rutherford 
Category 2, 3, or 4 and stenotic, restenotic (treated with a drug-
coated balloon greater than 12 months before the study or standard 
percutaneous transluminal angioplasty only), or occlusive lesions in 
the native SFA or PPA, with at least 1 infrapopliteal vessel patent to 
the ankle or foot. Patients had to have stenosis of 70 percent or more 
(via angiographic assessment), vessel diameter between 4 mm and 6 mm, 
and total lesion length between 30 mm and 140 mm.
---------------------------------------------------------------------------

    \44\ Gray, W.A., et al., ``A polymer-coated, paclitaxel-eluting 
stent (Eluvia) versus a polymer-free, paclitaxel-coated stent 
(Zilver PTX) for endovascular femoropopliteal intervention 
(IMPERIAL): A randomised, non-inferiority trial,'' Lancet, September 
24, 2018.
---------------------------------------------------------------------------

    Patients who had previously stented target lesion/vessels treated 
with drug-coated balloon less than 12 months prior to randomization/
enrollment and patients who had undergone prior surgery of the SFA/PPA 
in the target limb to treat atherosclerotic disease were excluded from 
the study. Two concurrent single-group (EluviaTM only) 
substudies were done: A nonblinded, nonrandomized pharmacokinetic sub-
study and a nonblinded, nonrandomized study of patients who had been 
diagnosed with long lesions (greater than 140 mm in diameter).
    The IMPERIAL study is a prospective, multi-center, single-blinded 
randomized, controlled (RCT) noninferiority trial. Patients were 
randomized (2:1) to implantation of either a paclitaxel-eluting polymer 
stent (EluviaTM) or a paclitaxel-coated stent 
(Zilver[supreg] PTX) after the treating physician had successfully 
crossed the target lesion with a guide wire. The primary endpoints of 
the study are Major Adverse Events defined as all causes of death 
through 1 month, Target Limb Major Amputation through 12 months and/or 
Target Lesion Revascularization (TLR) procedure through 12 months and 
primary vessel patency at 12 months post-procedure. Secondary endpoints 
included the Rutherford categorization, Walking Impairment 
Questionnaire, and EQ-5D assessments at 1 month, 6 months, and 12 
months post-procedure. Patient demographic and characteristics were 
balanced between the EluviaTM stent and Zilver[supreg] PTX 
stent groups.
    The applicant noted that lesion characteristics for the patients in 
the EluviaTM stent versus the Zilver[supreg] PTX stent arms 
were comparable. Clinical follow-up visits related to the study were 
scheduled for 1 month, 6 months, and 12 months after the procedure, 
with follow-up planned to continue through 5 years, including clinical 
visits at 24 months and 5 years and clinical or telephone follow-up at 
3 and 4 years.
    The applicant asserted that in the IMPERIAL study the 
EluviaTM stent demonstrated superior primary patency over 
the Zilver[supreg] PTX stent, 86.8 percent versus 77.5 percent, 
respectively (p=0.0144). The noninferiority primary efficacy endpoint 
was also met. The applicant asserts that the superior primary patency 
results at the SFA are noteable because the SFA presents unique 
challenges with respect to maintaining long-term patency. There are 
distinct pathological differences between the SFA and coronary 
arteries. The SFA tends to have higher levels of calcification and 
chronic total occlusions when compared to coronary arteries. Following 
an intervention within the SFA, the SFA produces a healing response 
which often results in restenosis or re-narrowing of the arterial 
lumen. This cascade of events leading to restenosis starts with 
inflammation, followed by smooth muscle cell proliferation and matrix 
formation.\45\ Because of the unique mechanical forces in the SFA, this 
restenotic process of the SFA can continue well beyond 300 days from 
the initial intervention. Results from the IMPERIAL study showed that 
primary patency at 12 months, by Kaplan-Meier estimate, was 
significantly greater for EluviaTM than for Zilver[supreg] 
PTX, 88.5 percent and 79.5 percent, respectively (p=0.0119). According 
to the applicant, these results are consistent with the 96.4 percent 
primary patency rate at 12 months in the MAJESTIC study.
---------------------------------------------------------------------------

    \45\ Forrester, J.S., Fishbein, M., Helfant, R., Fagin, J., ``A 
paradigm for restenosis based on cell biology: Clues for the 
development of new preventive therapies,'' J Am Coll Cardiol, March 
1, 1991, vol. 17(3), pp. 758-69.
---------------------------------------------------------------------------

    The IMPERIAL study included two concurrent single-group 
(EluviaTM only) substudies: A nonblinded, nonrandomized 
pharmacokinetic substudy and a nonblinded, nonrandomized study of 
patients with long lesions (greater than 140 mm in diameter). For the 
pharmacokinetic sub-study, patients had venous blood drawn before stent 
implantation and at intervals ranging from 10 minutes to 24 hours post 
implantation, and again at either 48 hours or 72 hours post 
implantation. The pharmacokinetics sub-study confirmed that plasma 
paclitaxel concentrations after EluviaTM stent implantation 
were well below thresholds associated with toxic effects in studies in 
patients who had been diagnosed with cancer (0.05 [mu]M or ~43 ng/mL).
    The IMPERIAL substudy long lesion subgroup consisted of 50 patients 
with average lesion length of 162.8 mm that were each treated with two 
EluviaTM stents. According to the applicant, 12-month 
outcomes for the long lesion subgroup are 87 percent primary patency 
and 6.5 percent TLR. According to the applicant, in a separate subgroup 
analysis of patients 65 years old and older (Medicare population), the 
primary patency rate in the EluviaTM stent group is 92.6 
percent, compared to 75.0 percent for the Zilver[supreg] PTX stent 
group (p=0.0386).
    With regard to reducing the rate of subsequent therapeutic 
interventions, secondary outcomes in the IMPERIAL study included repeat 
re-intervention on the same lesion, referred to as target lesion 
revascularization (TLR), over the 12 months following the index 
procedure. The rate of subsequent interventions, or TLRs, in the 
EluviaTM stent group was 4.5 percent compared to 9.0 percent 
in the Zilver[supreg] PTX stent group. The applicant asserted that the 
TLR rate in the EluviaTM stent group

[[Page 39478]]

represents a substantial reduction in reintervention on the target 
lesion compared to that of the Zilver[supreg] PTX stent group (at a 
p=0.067 p-value). The Eluvia[supreg] stent group clinically driven TLR 
rates through 12 months following the index procedure were likewise 
lower for U.S. patients age 65 and older as well as for those with 
medically treated diabetes (confidential and unpublished as of the date 
of the device transitional pass-through payment application, data on 
file with Boston Scientific). In the subgroup of U.S. patients age 65 
and older, the rates of TLR were 2.4 percent in the EluviaTM 
group compared to 3.1 percent in the Zilver[supreg] PTX group, and in 
the subgroup of medically treated diabetes patients, the rates of TLR 
were 3.7 percent compared to 13.6 percent in the Zilver[supreg] PTX 
group (p=0.0269).
    With regard to decreasing the number of future hospitalizations or 
physician visits, the applicant asserted that the substantial reduction 
in the lesion revascularization rate led to a reduced need to provide 
additional intensive care, distinguishing the EluviaTM stent 
group from the Zilver[supreg] PTX stent group. In the IMPERIAL study, 
the EluviaTM-treated patients required fewer days of re-
hospitalization. Patients in the EluviaTM group averaged 
13.9 days of rehospitalization for all adverse events compared to 17.7 
days of rehospitalization for patients in the Zilver[supreg] PTX stent 
group. Patients in the EluviaTM group were rehospitalized 
for 2.8 days for TLR/Total Vessel Revascularization (TVR) compared to 
7.1 days in the Zilver[supreg] PTX stent group. Lastly, patients in the 
EluviaTM stent group were rehospitalized for 2.7 days for 
procedure/device-related adverse events compared to 4.5 days from the 
Zilver[supreg] PTX stent group.
    Regarding reduction in hospital readmission rates, the applicant 
asserted that patients treated in the EluviaTM stent group 
experienced reduced rates of hospital readmission following the index 
procedure compared to those in the Zilver[supreg] PTX stent group. 
Hospital readmission rates at 12 months were 3.9 percent for the 
EluviaTM stent group compared to 7.1 percent for the 
Zilver[supreg] PTX stent group. Similar results were noted at 1 and 6 
months; 1.0 percent versus 2.6 percent and 2.4 percent versus 3.8 
percent, respectively.
    With regard to reducing the rate of device-related complications, 
the applicant asserted that while the rates of adverse events were 
similar in total between treatment arms in the IMPERIAL study, there 
were measurable differences in device-related complications. Device-
related adverse-events were reported in 8 percent of the patients in 
the EluviaTM stent group compared to 14 percent of the 
patients in the Zilver[supreg] PTX stent group.
    Lastly, the applicant asserted that while functional outcomes 
appear similar between the EluviaTM and Zilver[supreg] PTX 
stent groups at 12 months, these improvements for the Zilver[supreg] 
PTX stent group are associated with twice as many TLRs to achieve 
similar EQ-5D index values.\46\ Secondary endpoints improved after 
stent implantation and were generally similar between the groups. At 12 
months, of the patients with complete Rutherford assessment data, 241 
(86 percent) of the 281 patients in the EluviaTM group and 
120 (85 percent) of the 142 patients in the Zilver[supreg] PTX group 
had symptoms reported as Rutherford Category 0 or 1 (none to mild 
claudication). The mean ankle-brachial index was 1.0 (SD 0.2) in both 
groups at 12 months (baseline mean ankle-brachial index 0.7 [SD 0.2] 
for EluviaTM; 0.8 [0.2] for Zilver[supreg] PTX), with 
sustained hemodynamic improvement for approximately 80 percent of the 
patients in both groups. Walking function improved significantly from 
baseline to 12 months in both groups, as measured with the Walking 
Impairment Questionnaire and the 6-minute walk test. In both groups, 
the majority of patients had sustained improvement in the mobility 
dimension of the EQ-5D, and approximately half had sustained 
improvement in the pain or discomfort dimension. No significant 
between-group differences were observed in the Walking Impairment 
Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results 
for the EluviaTM stent and Zilver[supreg] PTX stent groups 
are as follows:
---------------------------------------------------------------------------

    \46\ Gray, W.A., Keirse, K., Soga, Y., et al., ``A polymer-
coated, paclitaxel-eluting stent (Eluvia) versus a polymer-free, 
paclitaxel-coated stent (Zilver PTX) for endovascular 
femoropopliteal intervention (IMPERIAL): a randomized, non-
inferiority trial,'' Lancet, 2018. Available at: http://dx.doi.org/10.1016/S0140-6736(18)32262-1.
[GRAPHIC] [TIFF OMITTED] TP09AU19.026


[[Page 39479]]


    We note that the IMPERIAL study, which showed significant 
differences in primary patency at 12 months, was designed for 
noninferiority and not superiority. Therefore, we are concerned that 
results showing primary patency at 12 months may not be valid given the 
study design. We also are concerned that the results of a recently 
published meta-analysis of randomized controlled trials of the risk of 
death associated with the use of paclitaxel-coated balloons and stents 
in the femoropopliteal artery of the leg, which found that there is 
increased risk of death following application of paclitaxel-coated 
balloons and stents in the femoropopliteal artery of the lower limbs 
and that further investigations are urgently warranted,\47\ although 
the EluviaTM system was not included in the meta-analysis. 
We are concerned that the findings from this study indicate that the 
data suggesting that drug-coated stents are substantially clinically 
improved are unconfirmed. We are inviting public comments on whether 
the EluviaTM Drug-Eluting Vascular Stent System meets the 
substantial clinical improvement criterion, including the implications 
of the meta-analysis results with respect to a finding of substantial 
clinical improvement for the EluviaTM system.
---------------------------------------------------------------------------

    \47\ Katsanos, K., et al., ``Risk of Death Following Application 
of Paclitaxel-Coated Balloons and Stents in the Femoropopliteal 
Artery of the Leg: A Systematic Review and Meta-Analysis of 
Randomized Controlled Trials,'' JAHA, vol. 7(24).
---------------------------------------------------------------------------

    We further note that the applicant for the EluviaTM Drug 
Eluting Vascular Stent System also applied for the IPPS new technology 
add-on payment (FY 2020 IPPS/LTCH PPS proposed rule; 86 FR 19314). In 
the FY 2020 IPPS/LTCH PPS proposed rule, we discuss several publicly 
available comments that also raised concerns relating to substantial 
clinical improvement. We list several of those concerns below. While 
the EluviaTM IMPERIAL study does cite a reduced rate of 
``Subsequent Therapeutic Interventions'', public comments for the IPPS 
proposed rule note that ``Subsequent Therapeutic Interventions'' was 
not further defined in the New Technology Town Hall presentation nor in 
the IMPERIAL study. The commenters stated that it would appear from the 
presentation materials, however, that this claim refers specifically to 
``target lesion revascularizations (TLR)'', which does not appear 
statistically significant.
    With regard to the applicant's assertion that the use of the 
EluviaTM stent reduces hospital readmission rates, a 
commenter noted that during the New Technology Town Hall presentation, 
the presenter noted that the EluviaTM group had a hospital 
readmission rate at 12 months of 3.9 percent compared to the 
Zilver[supreg] PTX group's rate of 7.1 percent, and that no p-value was 
included on the slide used for the presentation to offer an assessment 
of the statistical significance of this difference. The commenter noted 
that the manufacturer of the EluviaTM stent did not discuss 
this particular hospital readmission rate data comparison in the main 
body of the Lancet paper; however, the data could be found in the 
online appendix and is shown as not statistically significant.
    With regards to longer-term data on the Zilver[supreg] PTX stent 
and the EluviaTM stent, the commenter noted that in the 
commentary in The Lancet paper accompanying the IMPERIAL study, Drs. 
Salvatore Cassese and Robert Byrne write that a follow-up duration of 
12 months is insufficient to assess late failure, which is not 
infrequently observed. According to Drs. Cassese and Byrne, the 
preclinical models of restenosis after stenting of peripheral arteries 
have shown that stents permanently overstretch the arterial wall, thus 
stimulating persistent neointimal growth, which might cause a catch-up 
phenomenon and late failure. The Lancet paper noted that, in this 
regard, data on outcomes beyond 1 year will be important to confirm the 
durability of the efficacy of the EluviaTM stent.\48\ The 
commenter stated that, at this point in time, very limited longer-term 
data are available on the use of the EluviaTM stent and that 
the IMPERIAL study offers only 12-month data, although data out to 3 
years have been published from the relatively small 57-patient single-
arm MAJESTIC study. The commenter noted that the MAJESTIC study 
demonstrates a decrease in primary patency from 96.4 percent at 1 year 
to 83.5 percent at 2 years; and a doubling in TLR rates from 1 year to 
2 years (3.6 percent to 7.2 percent) and again from 2 years to 3 years 
(7.2 percent to 14.7 percent). The commenter stated that this is not 
inconsistent with Drs. Cassese and Byrne's commentary regarding late 
failure, and that the relatively small, single-arm design of the study 
does not lend itself well to direct comparison to other SFA treatment 
options such as the Zilver[supreg] PTX stent.
---------------------------------------------------------------------------

    \48\ Cassese, S., & Byrne, R.E., ``Endovascular stenting in 
femoropopliteal arteries,'' The Lancet, 2018, vol. 392(10157), pp. 
1491-1493.
---------------------------------------------------------------------------

    The commenter also stated that EluviaTM's lack of long-
term data contrasts with 5-year data that is available from the 
Zilver[supreg] PTX stent's pivotal 479-patient RCT comparing the use of 
the Zilver[supreg] PTX stent to angioplasty (with a sub-randomization 
comparing provisional use of Zilver[supreg] PTX stenting to bare metal 
Zilver stenting in patients experiencing an acute failure of 
percutaneous transluminal angioplasty (PTA)). The commenter believed 
that these 5-year data demonstrate that the superiority of the use of 
the Zilver[supreg] PTX stent demonstrated at 12 and 24 months is 
maintained through 5 years compared to PTA and provisional bare metal 
stenting, and actually increases rather than decreases over time. The 
commenter also believed that, given that these stent devices are 
permanent implants and they are used to treat a chronic disease, long-
term data are important to fully understand an SFA stent's clinical 
benefits. The commenter stated that with 5-year data available to 
support the ongoing safety and effectiveness of the use of the 
Zilver[supreg] PTX stent, but no such corresponding data available for 
the use of the EluviaTM stent, it seems incongruous to 
suggest that the use of the EluviaTM stent results in a 
substantial clinical improvement compared to the Zilver[supreg] PTX 
stent.
    The commenter further stated that, in addition to the limited long-
term data available for the EluviaTM stent, there is also a 
lack of clinical data for the use of the EluviaTM stent to 
confirm the benefit of the device outside of a strictly controlled 
clinical study population. The commenter stated that, in contrast, the 
Zilver[supreg] PTX stent has demonstrated comparable outcomes across a 
broad patient population, including a 787 patient study conducted in 
Europe with 2-year follow-up and a 904-patient study of all-comers (no 
exclusion criteria) in Japan with 5-year follow-up completed. The 
commenter believed that, with no corresponding data for the use of the 
EluviaTM stent in a broad patient population, it seems 
unreasonable to suggest that the use of the EluviaTM stent 
results in a substantial clinical improvement compared to the 
Zilver[supreg] PTX stent.
    Based on the evidence submitted with the application, we are 
concerned that there is a lack of sufficient evidence that the 
EluviaTM Vascular Drug-Eluting Stent System provides a 
substantial clinical improvement over other similar products. We are 
inviting public comments on whether EluviaTM Vascular Drug-
Eluting Stent System meets 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

[[Page 39480]]

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 use of the 
EluviaTM stent would be reported with CPT code 37226, which 
is assigned to APC 5193 (Level 3 Endovascular Procedures). To meet the 
cost criterion for device pass-through payment status, a device must 
pass all three tests of the cost criterion for at least one APC. For 
our calculations, we used APC 5193, which has a CY 2019 payment rate of 
$10,509.72. 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 37226 had a device offset amount of $4,996.32. According to the 
applicant, the cost of the EluviaTM Vascular Drug-Eluting 
Stent System is $1,995 to $2,895 per stent, with each procedure 
requiring approximately 2.2 stents per procedure at an average device 
cost of $5,768 per procedure.
    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 the EluviaTM stent exceeds 25 
percent of the applicable APC payment amount for the service related to 
the category of devices of $10,509.72-(($5,768/$10,509.72) x 100 = 55 
percent). Therefore, we believe that the EluviaTM Vascular 
Drug-Eluting Stent System meets the first cost significance 
requirement.
    The second cost significance requirement, 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 $5,768 for the 
EluviaTM stent exceeds the cost of the device-related 
portion of the APC payment amount for the related service of $4,996.32 
by less than 25 percent (($5,768/$4,996.32) x 100 = 115 percent). 
Therefore, we do not believe that the EluviaTM Vascular 
Drug-Eluting Stent System meets the second cost significance 
requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides 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 $5,768 for the EluviaTM stent and the 
portion of the APC payment amount for the device of $4,996.32 does not 
exceed 10 percent of the APC payment amount for the related service of 
$10,509.72 (($5,768 - $4,996.32)/$10,509.72 x 100 = 7.3 percent). 
Therefore, we do not believe that the EluviaTM Vascular 
Drug-Eluting Stent System meets the third cost significance 
requirement.
    We are inviting public comments on whether the EluviaTM 
Vascular Drug-Eluting Stent System meets the device pass-through 
payment criteria discussed in this section, including the cost 
criterion.
(7) AUGMENT[supreg] Bone Graft
    Wright Medical submitted an application for a new device category 
for transitional pass-through payment status for the AUGMENT[supreg] 
Bone Graft. The applicant describes AUGMENT[supreg] Bone Graft as a 
device/drug indicated for use as an alternative to autograft in 
arthrodesis of the ankle and/or hindfoot where the need for 
supplemental graft material is required. The applicant stated that the 
product has two components: Recombinant human platelet-derived growth 
factor-BB (rhPDGF-BB) solution (0.3 mg/mL) and Beta-tricalcium 
phosphate ([beta]-TCP) granules (1000 - 2000 [mu]m). The two components 
are combined at the point of use and applied to the surgical site. The 
beta-TCP provides a porous osteoconductive scaffold for new bone growth 
and the rhPDGF-BB, which act as an osteoinductive chemo-attractant and 
mitogen for cells involved in wound healing and through promotion of 
angiogenesis.
    According to the applicant, the AUGMENT[supreg] Bone Graft is 
indicated for use in arthrodesis of the ankle and/or hindfoot due to 
osteoarthritis, post-traumatic arthritis (PTA), rheumatoid arthritis, 
psoriatic arthritis, avascular necrosis, joint instability, joint 
deformity, congenital defect or joint arthropathy as an alternative to 
autograft in patients needing graft material. Osteoarthritis is the 
most common joint disease among middle aged and older individuals and 
has been shown to also have health related mental and physical 
disabilities, which can be compared to the severity as patients with 
end-stage hip arthritis.\49\ Additionally, post-traumatic arthritis 
develops after an acute direct trauma to the joint and can cause 12 
percent of all osteoarthritis cases.\50\ Common causes leading to PTOA 
include intra-articular fractures and meniscal, ligamentous and 
chondral injuries.\51\ The ankle is cited as the most affected joint, 
reportedly accounting for 54 to 78 percent of over 300,000 injuries 
occurring in the USA annually. The applicant stated that autologous 
bone graft has often been used in ankle arthrodesis. Autologous bone is 
retrieved from a donor site, which may require an incision separate 
from the arthrodesis.\52\ The applicant stated that, in these 
procedures, harvested autologous bone graft is implanted to stimulate 
healing between the bones across a diseased joint. The applicant 
further stated that the procedures may require the use of synthetic 
bone substitutes to fill the bony voids or gaps or to serve as an 
alternative to the autograft where autograft is not feasible. The 
applicant stated that the AUGMENT[supreg] Bone Graft removes the need 
for autologous retrieval. The applicant noted that during the 
procedure, the surgeon prepares the joint for the graft application and 
locates any potential bony defect, then applying and packing the 
AUGMENT[supreg] Bone Graft into the joint defects intended for 
arthrodesis.
---------------------------------------------------------------------------

    \49\ Greaser M, Ellington JK. 2014. ``Ankle arthritis.'' Journal 
of Arthritis, 3:129. doi:10.4172/2167-7921.1000129.
    \50\ Punzi, Leonardo et al. 2016. ``Post-traumatic arthritis: 
overview on pathogenic mechanisms and role of inflammation.'' 
Rheumatic & Musculoskeletal Diseases. RMD open, 2(2), e000279. 
doi:10.1136/rmdopen-2016-000279.
    \51\ Ibid.
    \52\ Lareau, Craig R. et al. 2015.''Does autogenous bone graft 
work? A logistic regression analysis of data from 159 papers in the 
foot and ankle literature.'' Foot and Ankle Surgery. 21(3): 150-59.
---------------------------------------------------------------------------

    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted the AUGMENT[supreg] Bone Graft premarket approval on 
September 1, 2015. The application for a new device category for 
transitional pass-through payment status for the AUGMENT[supreg] Bone 
Graft was received May 31, 2018, which is within 3 years of the date of 
the initial FDA approval or clearance. We are inviting public comments 
on whether the AUGMENT[supreg] Bone Graft meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the use of the AUGMENT[supreg] Bone Graft 
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 that the AUGMENT[supreg] 
Bone Graft meets the device eligibility requirements of Sec.  
419.66(b)(4) because it is not an

[[Page 39481]]

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.
    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 
AUGMENT[supreg] Bone Graft. The applicant proposed a category 
descriptor for the AUGMENT[supreg] of ``rhPDGF-BB and [beta]-TCP as an 
alternative to autograft in arthrodesis of the ankle and/or hindfoot.''
    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. The applicant claims that the AUGMENT[supreg] Bone 
Graft provides a substantial clinical improvement over autograft 
procedures by reducing pain at the autograft donor site. With respect 
to this criterion, the applicant submitted data that examined the use 
of autograft arthrodesis of the ankle and/or hind foot and arthrodesis 
with the use of the AUGMENT[supreg] Bone Graft.
    In a randomized, nonblinded, placebo controlled, noninferiority 
trial of the AUGMENT[supreg] Bone Graft versus autologous bone graft, 
the AUGMENT[supreg] arm showed equivalence bone bridging as 
demonstrated by CT, pain on weight bearing, The American Orthopaedic 
Foot & Ankle Society Ankle-Hindfoot (AOFAS-AHS) score, and the Foot 
Function Index to autologous bone graft. The study noted that patients 
experienced significantly decreased (in fact no) pain due to 
elimination of the donor site procedure. In the autograft group, at 6 
months, 18/142 patients (13 percent) experienced pain >20 mm (of 100 
mm) on the Visual Analog Scale (VAS) at the autograft donor site as 
compared to 0/272 in the AUGMENT[supreg] Bone Graft group. At 12 
months, 13/142 autograft patients (9 percent) had pain defined as >20 
mm VAS as compared to 0/272 AUGMENT[supreg] patients.\53\ The VAS has 
patients mark a visual representation of pain on a ruler based scale 
from 1 to 100. The measured distance (in mm) on the 10-cm line between 
the ``no pain'' anchor and the patient's mark represents the level of 
pain. We are concerned that we are unable to sufficiently determine 
substantial clinical improvement using the provided data, given that a 
comparison to alternatives to autologous bone graft, such as the 
reamer-irrigator-aspirator (RIA) technique were not evaluated. 
Specifically, the RIA technique has been suggested in a number of 
studies to be a viable alternative to bone autograft, because 
autogenous bone graft can be readily obtained without the need for 
additional incisions, therefore eliminating pain from an incisional 
site.\54\ Another concern is the time period of the study because 
certain ankle arthrodesis complications such as ankle replacement and 
repeat arthrodesis can happen more than 2 years after the initial 
surgery.\55\ A long-term study of at least 60 months is currently 
underway in order to assess long-term safety and efficacy, looking at 
the following 4 primary outcomes: Bone bridging as demonstrated by CT, 
pain on weight bearing, The American Orthopaedic Foot & Ankle Society 
Ankle-Hindfoot (AOFAS-AHS) score, and the Foot Function Index. We 
believe that this long-term study is necessary for meaningful 
information about long-term efficacy of the Augment[supreg] Bone Graft. 
Further, there was a notable difference in the infection rate, 
musculoskeletal and tissue disorders, and pain in extremity for those 
in the AUGMENT[supreg] Bone Graft group. These findings were 
unfortunately not tested for significance and also were not necessarily 
focused on relevance to the procedure. Should these be significant and 
related to the device, these findings would suggest that the adverse 
outcomes due to the Augment[supreg] Bone Graft may outweigh its 
potential benefits.
---------------------------------------------------------------------------

    \53\ DiGiovanni CW, Lin SS, Baumbauer JF, et al. 2013. 
``Recombinant Human Platelet-Derived Growth Factor-BB and Beta-
Tricalcium Phosphate (rhPDGF-BB/b-TCP): An Alternative to Autogenous 
Bone Graft.'' J Bone Joint Surg Am., 95: 1184-92.
    \54\ Herscovici, D., Scaduto, J.M. 2012. ``Use of the reamer-
irrigator-aspirator technique to obtain autograft for ankle and 
hindfoot arthrodesis.'' The Journal of Bone & Joint Surgery. 94-B: 
75-9.
    \55\ Stavrakis, AL., SooHoo, NF. 2016. ``Trends in complication 
rates following ankle arthrodesis and total ankle replacement.'' The 
Journal of Bone & Joint Surgery. JBJS 1453-1458.
---------------------------------------------------------------------------

    We are inviting public comments on whether the AUGMENT[supreg] Bone 
Graft meets 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. The applicant stated that the use of the 
AUGMENT[supreg] Bone Graft would be reported with CPT code 27870 
(Arthrodesis, ankle, open), which is assigned to APC 5115 (Level 5 
Musculoskeletal Procedures). To meet the cost criterion for device 
pass-through payment status, a device must pass all three tests of the 
cost criterion for at least one APC. For our calculations, we used APC 
5115, which has a CY 2019 payment rate of $10,122.92. 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 27870 had a device 
offset amount of $4,553.29. According to the applicant, the cost of the 
AUGMENT[supreg] Bone Graft is $3,077 per device/drug combination. The 
applicant further provided a weighted average cost of the graft, 
accounting for how many procedures required one, two, or three 
AUGMENT[supreg] Bone Graft device/drug kits, equaling a weighted 
average cost of $6,020.22.
    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 the AUGMENT[supreg] Bone Graft is more than 
25 percent of the applicable APC payment amount \56\ for the service 
related to the category of devices of $10,122.92 (($6,020.22/
$10,122.92) x 100 = 59 percent)). Therefore, we believe that the 
AUGMENT[supreg] Bone Graft meets the first cost significance 
requirement.
---------------------------------------------------------------------------

    \56\ Due to the timing of the application, the AUGMENT[supreg] 
Bone Graft cost values were calculated using the 2018 proposed rule 
data.
---------------------------------------------------------------------------

    The second cost significance requirement, 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 $6,020.22 for 
AUGMENT[supreg] Bone Graft

[[Page 39482]]

exceeds the cost of the device-related portion of the APC payment 
amount for the related service of $4,553.29 by at least 25 percent 
(($6,020.22/$4,553.29) x 100 = 132 percent). Therefore, we have 
concerns about whether the AUGMENT[supreg] Bone Graft meets the second 
cost significance requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides 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 $6,020.22 for the AUGMENT[supreg] Bone Graft and the 
portion of the APC payment amount for the device of $4,553.29 exceeds 
the APC payment amount for the related service of $10,122.92 by more 
than 10 percent (($6,020.22-$4,553.29)/$10,122.92 x 100 = 15 percent). 
Therefore, we believe that AUGMENT[supreg] Bone Graft meets the third 
cost significance test. We are inviting public comments on whether the 
AUGMENT[supreg] Bone Graft meets the device pass-through payment 
criteria discussed in this section, including the cost criterion.
3. Request for Information and Potential Revisions to the OPPS Device 
Pass-Through Substantial Clinical Improvement Criterion in the FY 2020 
IPPS/LTCH PPS Proposed Rule
    As mentioned earlier, 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. Separately, the criteria as set 
forth under Sec.  419.66(c) are used to determine whether a new 
category of pass-through payment devices should be established. One of 
these criteria, at Sec.  419.66(c)(2), states 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. CMS considers the totality of 
the substantial clinical improvement claims and supporting data, as 
well as public comments, when evaluating this aspect of each 
application. CMS summarizes each applicant's claim of substantial 
clinical improvement as part of its discussion of the entire 
application in the relevant proposed rule, as well as any concerns 
regarding those claims. In the relevant final rule for the OPPS, CMS 
responds to public comments and discusses its decision to approve or 
deny the application for separate transitional pass-through payments.
    Over the years, applicants and commenters have indicated that it 
would be helpful for CMS to provide greater guidance on what 
constitutes ``substantial clinical improvement.'' In the FY 2020 IPPS/
LTCH PPS proposed rule (84 FR 19368 through 19371), we requested 
information on the substantial clinical improvement criterion for OPPS 
transitional pass-through payments for devices and stated that we were 
considering potential revisions to that criterion. In particular, we 
sought public comments in the FY 2020 IPPS/LTCH PPS proposed rule on 
the type of additional detail and guidance that the public and 
applicants for device pass-through transitional payment would find 
useful (84 FR 19367 to 19369). This request for public comments was 
intended to be broad in scope and provide a foundation for potential 
rulemaking in future years. We refer readers to the FY 2020 IPPS/LTCH 
proposed rule for the full text of this request for information.
    In addition to this broad request for public comments for potential 
rulemaking in future years, in order to respond to stakeholder feedback 
requesting greater understanding of CMS' approach to evaluating 
substantial clinical improvement, we also solicited comments from the 
public in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19369 through 
19371) on specific changes or clarifications to the IPPS and OPPS 
substantial clinical improvement criterion that CMS might consider 
making in the FY 2020 IPPS/LTCH PPS final rule to provide greater 
clarity and predictability. We refer readers to the FY 2020 IPPS/LTCH 
PPS proposed rule for complete details on those potential revisions. We 
note that any responses to public comments we receive on potential 
revisions to the OPPS substantial clinical improvement criterion in 
response to the FY 2020 IPPS/LTCH PPS proposed rule, as well as any 
revisions that might be adopted, will be included in the CY 2020 OPPS/
ASC final rule and will inform future OPPS rulemaking. We further 
invite public comment on this topic in this rule.
4. Proposed Alternative Pathway to the OPPS Device Pass-Through 
Substantial Clinical Improvement Criterion for Transformative New 
Devices
    Since 2001 when we first established the substantial clinical 
improvement criterion, the FDA programs for helping to expedite the 
development and review of transformative new technologies that are 
intended to treat serious conditions and address unmet medical needs 
(referred to as FDA's expedited programs) have continued to evolve in 
tandem with advances in medical innovations and technology. There is 
currently one expedited FDA program for devices, the Breakthrough 
Devices Program. The 21st Century Cures Act (Cures Act) (Pub. L. 144-
255) established the Breakthrough Devices Program to expedite the 
development of, and provide for priority review of, medical devices and 
device-led combination products that provide for more effective 
treatment or diagnosis of life-threatening or irreversibly debilitating 
diseases or conditions and which meet one of the following four 
criteria: (1) That represent breakthrough technologies; (2) for which 
no approved or cleared alternatives exist; (3) that offer significant 
advantages over existing approved or cleared alternatives, including 
the potential, compared to existing approved alternatives, to reduce or 
eliminate the need for hospitalization, improve patient quality of 
life, facilitate patients' ability to manage their own care (such as 
through self-directed personal assistance), or establish long-term 
clinical efficiencies; or (4) the availability of which is in the best 
interest of patients.
    Some stakeholders over the years have requested that devices that 
receive marketing authorization and are part of an FDA expedited 
program be deemed as representing a substantial clinical improvement 
for purposes of OPPS device pass-through status. We understand this 
request would arguably create administrative efficiency because the 
commenters currently view the two sets of criteria as the same, 
overlapping, similar, or otherwise duplicative or unnecessary.
    The Administration is committed to addressing barriers to health 
care innovation and ensuring Medicare beneficiaries have access to 
critical and life-saving new cures and technologies that improve 
beneficiary health outcomes. As detailed in the President's FY 2020 
Budget (we refer readers to HHS FY 2020 Budget in Brief, Improve 
Medicare Beneficiary Access to Breakthrough Devices, pp. 84-85), HHS is 
pursuing several policies that will instill greater transparency and 
consistency around how Medicare covers and pays for innovative 
technology.
    Therefore, given the FDA programs for helping to expedite the 
development

[[Page 39483]]

and review of transformative devices that meet expedited program 
criteria (that is, new devices that treat serious or life-threatening 
diseases or conditions for which there is an unmet medical need), we 
considered whether it would also be appropriate to similarly facilitate 
access to these transformative new technologies for Medicare 
beneficiaries taking into consideration that marketing authorization 
(that is, Premarket Approval (PMA); 510(k) clearance; or the granting 
of a De Novo classification request) for a product that is the subject 
of one of FDA's expedited programs could lead to situations where the 
evidence base for demonstrating substantial clinical improvement in 
accordance with CMS' current standard has not fully developed at the 
time of FDA marketing authorization (that is, PMA; 510(k) clearance; 
the granting of a De Novo classification request) (as applicable). We 
also considered whether FDA marketing authorization of a product that 
is part of an FDA expedited program is evidence that the product is 
sufficiently different from existing products for purposes of newness.
    After consideration of these issues, and consistent with the 
Administration's commitment to addressing barriers to health care 
innovation and ensuring Medicare beneficiaries have access to critical 
and life-saving new cures and technologies that improve beneficiary 
health outcomes, we concluded that it would be appropriate to develop 
an alternative pathway for transformative medical devices. In 
situations where a new medical device is part of the Breakthrough 
Devices Program and has received FDA marketing authorization (that is, 
the device has received PMA; 510(k) clearance; or the granting of a De 
Novo classification request), we are proposing an alternative 
outpatient pass-through pathway to facilitate access to this technology 
for Medicare beneficiaries beginning with applications received for 
pass-through payment on or after January 1, 2020.
    We continue to believe that hospitals should receive pass-through 
payments for devices that offer clear clinical improvement and that 
cost considerations should not interfere with patient access. In light 
of the criteria applied under the FDA's Breakthrough Devices Program, 
and because we recognize that the technology may not have a sufficient 
evidence base to demonstrate substantial clinical improvement at the 
time of FDA marketing authorization, we are proposing to amend the OPPS 
device transitional pass-through payment regulations to create an 
alternative pathway to demonstrating substantial clinical improvement 
that would enable devices approved under the FDA Breakthrough Devices 
Program to qualify for our quarterly approval process for device pass-
through payment under the OPPS for pass-through payment applications 
received on or after January 1, 2020. With this proposal, OPPS device 
pass-through payment applicants approved under the FDA Breakthrough 
Devices Program would not be evaluated in terms of the current 
substantial clinical improvement criterion at Sec.  419.66(c)(2) for 
the purposes of determining device pass-through payment status, but 
would continue to need to meet the other requirements for pass-through 
payment status in our regulation at Sec.  419.66. Devices approved 
under the Breakthrough Devices Program that are approved for OPPS 
device transitional pass-through payment can be approved through the 
quarterly process and would be announced through that process (81 FR 
79655). Finally, we would include proposals regarding these devices and 
whether pass-through payment status should continue to apply in the 
next applicable OPPS rulemaking cycle.
    As such, we are proposing to revise paragraph (c)(2) under Sec.  
419.66. Under proposed revised paragraph (c)(2), we are proposing to 
establish an alternative pathway where applications for device pass-
through payment status for new medical devices received on or after 
January 1, 2020 that are a part of FDA's Breakthrough Devices Program 
and have received FDA marketing authorization (that is, the device has 
received PMA, 510(k) clearance, or the granting of a De Novo 
classification request) will not be evaluated for substantial clinical 
improvement for the purposes of determining device pass-through payment 
status. Under this proposed alternative pathway, a medical device that 
has received FDA marketing authorization (that is, has been approved or 
cleared by, or had a De Novo classification request granted by, the 
FDA) and that is part of the FDA's Breakthrough Devices Program would 
still need to meet the eligibility criteria under Sec.  419.66(b), the 
other criteria for establishing device categories under Sec.  
419.66(c), and the cost criterion under Sec.  419.66(d). We note that 
this proposal aligns with a proposal in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19371 through 19373) and will help achieve the 
goals of expedited access to innovative therapies and further reduce 
administrative burden.

B. Proposed 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 proposed rule. 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

[[Page 39484]]

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 proposed rule 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 proposed rule, 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. 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 final rule with 
comment period (83 FR 58944 through 58948), for CY 2019, we modified 
our criteria for device-intensive procedures. We had heard from 
stakeholders that the criteria excluded some procedures that 
stakeholders believed 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 made two 
modifications to the criteria for CY 2019 (83 FR 58948). First, we 
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. We 
established this policy because we no longer believe 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 modified 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 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 that this 
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 finalized that 
device-intensive procedures will 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 (83 FR 
58945).
    In addition, to further align the device-intensive policy with the 
criteria used for device pass-through payment status, we finalized, 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 either 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) (83 FR 58945).
    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 did 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

[[Page 39485]]

amount of 41 percent was not calculated from claims data; instead, it 
was applied as a default until claims data were 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 was to 
ensure ASC access for new procedures until claims data become 
available.
    As discussed in the CY 2019 OPPS/ASC proposed rule and final rule 
with comment period (83 FR 37108 through 37109 and 58945 through 58946, 
respectively), in accordance with our policy stated above to lower the 
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 modified this policy to 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 policy to lower the default device offset from 41 percent to 31 
percent, we continued 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 
is 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 CY 2019 OPPS/ASC final rule with comment 
period, 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 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 (83 FR 58946). 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 policy, claims 
data from clinically related and similar codes are 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 
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 that we believe 
that claims data for HCPCS codes describing procedures that have minor 
differences from the procedures described by new HCPCS codes will 
provide an accurate depiction of the cost relationship between the 
procedure and the device(s) that are used, and will be appropriate to 
use to set a new code's device offset percentage, in the same way that 
predecessor codes are used. 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 is 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 is used to 
determine whether the new HCPCS code qualifies for device-intensive 
status.
    As we indicated in the CY 2019 OPPS/ASC proposed rule and final 
rule with comment period, additional information for our consideration 
of an offset percentage higher than the 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 
[email protected]. 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.
    For CY 2020, we are not proposing any changes to our device-
intensive policy. The full listing of the proposed CY 2020 device-
intensive procedures can be found in Addendum P to this CY 2020 OPPS/
ASC proposed rule (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. In the CY 2019 OPPS/ASC 
final rule with comment period, we revised the description of

[[Page 39486]]

HCPCS code C1889 to remove the specific applicability to device-
intensive procedures (83 FR 58950). For CY 2019 and subsequent years, 
the description of HCPCS code C1889 is ``Implantable/insertable device, 
not otherwise classified''.
    We are not proposing any changes to this policy for CY 2020.
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 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.
    We are not proposing any changes to our no cost/full credit and 
partial credit device policies in this proposed rule.
5. Proposed 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 noted 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). 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

[[Page 39487]]

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 final rule with comment period (83 FR 
58951), for CY 2019, we continued with our 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. For more information on the specific policy for 
assignment of low-volume device-intensive procedures for CY 2019, we 
refer readers to section III.D.13. of the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58917 through 58918).
    For CY 2020, we are proposing to continue 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 using the median cost instead of the geometric 
mean cost. For CY 2020, this policy would apply to CPT code 0308T, 
which we are proposing to assign to APC 5495 (Level 5 Intraocular 
Procedures) in this proposed rule. The CY 2020 proposed rule geometric 
mean cost for the procedure described by CPT code 0308T (based on 7 
claims containing the device HCPCS C-code, in accordance with the 
device-intensive edit policy) is approximately $28,237, and the median 
cost is approximately $19,270. The proposed CY 2020 payment rate 
(calculated using the median cost) is approximately $19,740 and can be 
found in Addendum B to this proposed rule (which is available via the 
internet on the CMS website).

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout this proposed rule, the term ``biological'' 
is used because this is the term that appears in section 1861(t) of the 
Act. A ``biological'' as used in this proposed rule includes (but is 
not necessarily limited to) a ``biological product'' or a ``biologic'' 
as defined under section 351 of 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 for rare disease and conditions, as 
designated under section 526 of the Federal Food, Drug, and Cosmetic 
Act; current drugs and biologicals and brachytherapy sources used in 
cancer therapy; and current radiopharmaceutical drugs and biologicals. 
``Current'' refers to 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. Proposed CY 2020 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G'' in Addenda A and B to this proposed rule (which are available via 
the internet on the CMS 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 proposed rule, the term ``ASP methodology'' and ``ASP-
based'' are inclusive of all data sources and methodologies described 
therein. Additional information on the ASP methodology can be found on 
the CMS 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

[[Page 39488]]

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. 
Notice of drugs whose pass-through payment status is ending during the 
calendar year will continue to be included in the quarterly OPPS Change 
Request transmittals.
3. Proposed Drugs and Biologicals With Expiring Pass-Through Payment 
Status in CY 2019
    We are proposing that the pass-through payment status of six drugs 
and biologicals would expire on December 31, 2019 as listed in Table 
14. These drugs and biologicals will have received OPPS pass-through 
payment for 3 years during the period of January 1, 2017 until December 
31, 2019.
    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 proposed to be $130 for CY 2020), as discussed 
further in section V.B.2. of this proposed rule. We are proposing 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 are proposing to provide separate payment at 
the applicable relative ASP-based payment amount (which is proposed at 
ASP+6 percent for CY 2020, as discussed further in section V.B.3. of 
this proposed rule).
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    The proposed packaged or separately payable status of each of these 
drugs or biologicals is listed in Addendum B to this proposed rule 
(which is available via the internet on the CMS website).
4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Payment Status in CY 2020
    We are proposing to continue pass-through payment status in CY 2020 
for 61 drugs and biologicals. These drugs and biologicals, which were 
approved for pass-through payment status between April 1, 2017 and 
April 1, 2019 are listed in Table 15. The APCs and HCPCS codes for 
these drugs and biologicals approved for pass-through payment status on 
or after January 1, 2020 are assigned status indicator ``G'' in Addenda 
A and B to this proposed rule (which are available via the internet on 
the CMS website). In addition, 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, effective October 1, 2018 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). That means 
the last 9 months of pass-through status for these drugs will occur in 
CY 2020. Because of this requirement, these drugs and biologicals are 
also included in Table 15, which brings the total number of drugs and 
biologicals with proposed pass-through payment status in CY 2020 to 65.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the

[[Page 39489]]

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 2020, we are proposing 
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 2020. We are 
proposing that a $0 pass-through payment amount would be paid for pass-
through drugs and biologicals under the CY 2020 OPPS because the 
difference between the amount authorized under section 1842(o) of the 
Act, which is proposed at ASP+6 percent, and the portion of the 
otherwise applicable OPD fee schedule that the Secretary determines is 
appropriate, which is 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 are proposing that their pass-through 
payment amount would be equal to ASP+6 percent for CY 2020 minus a 
payment offset for any predecessor drug products contributing to the 
pass-through payment as described in section V.A.6. of this proposed 
rule. We are making 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 are proposing to continue to update pass-through payment rates 
on a quarterly basis on the CMS website during CY 2020 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 2020, consistent with our CY 2019 policy for diagnostic and 
therapeutic radiopharmaceuticals, we are proposing to provide payment 
for both diagnostic and therapeutic radiopharmaceuticals that are 
granted pass-through payment status based on the ASP methodology. As 
stated 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 2020, we are proposing to follow the standard 
ASP methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
are proposing to provide pass-through payment at WAC+3 percent 
(consistent with our proposed policy in section V.B.2.b. of this 
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 proposed rule. If WAC information also is not 
available, we are proposing to provide payment for the pass-through 
radiopharmaceutical at 95 percent of its most recent AWP.
    The drugs and biologicals that we are proposing to continue to have 
pass-through payment status on or after January 1, 2020 or that have 
been granted pass-through payment status as of April 2019 are shown in 
Table 15.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
5. Proposed 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 and for which payment would 
have been packaged beginning January 1, 2018. These products were 
listed in Table 39 of the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58962).
    Starting in CY 2019, the HCPCS code Q4172 (PuraPly, and PuraPly 
Antimicrobial, any type, per square centimeter) was discontinued. In 
its place, two new HCPCS codes were established--Q4195 (Puraply, per 
square centimeter) and Q4196 (Puraply am, per square centimeter). 
Because these HCPCS codes are direct successors to HCPCS code Q4172, 
the provisions of section 1833(t)(6)(G) of the Act apply to HCPCS codes 
Q4195 and Q4196, and these codes are listed in Table 16. For CY 2020, 
we are proposing to continue pass-through payment status for the drugs 
and biologicals listed in Table 16 of this proposed rule (we note that 
these drugs and biologicals are also listed in Table 15 of this 
proposed rule) through September 30, 2020 as required in section 
1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the 
Consolidated Appropriations Act of 2018. The APCs and HCPCS codes for 
these drugs and biologicals approved for pass-through payment status 
are assigned status indicator ``G'' in Addenda A and B to this proposed 
rule (which are available via the internet on the CMS website).
    We are proposing to continue to update pass-through payment rates 
for HCPCS codes Q4195 and Q4196 along with the other three drugs and 
biologicals covered by section 1833(t)(6)(G) of the Act on a quarterly 
basis on the CMS website during CY 2020 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. The replacement of HCPCS code Q4172 
by HCPCS codes Q4195 and Q4196 means there are five HCPCS codes for 
drugs and biologicals covered by section 1833(t)(6)(G) of the Act. For 
a full description of this policy, we refer readers to the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58960 through 58962).
    The five HCPCS codes for drugs and biologicals that we are 
proposing would have pass-through payment status for CY 2020 under 
section 1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of 
the Consolidated Appropriations Act of 2018, are shown in Table 16. 
Included as two of the five HCPCS codes for drugs and biologicals with 
pass-through payment status for CY 2020 are HCPCS codes Q4195 (Puraply, 
per square centimeter) and Q4196 (Puraply am, per square centimeter). 
PuraPly and PuraPly AM are skin substitute products that were 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 and PuraPly AM were approved for pass-
through payment status through the drug and biological pass-through 
payment pathway, we finalized a policy to consider both PuraPly and 
PuraPly AM to be drugs or biologicals 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 2020 (83 FR 
58961 through 58962).

[[Page 39495]]

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6. Proposed 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 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). For CY 2020, as we did in CY 2019, 
we are proposing 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 are identified in Table 17.

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[GRAPHIC] [TIFF OMITTED] TP09AU19.034

    We are proposing 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.

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

1. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Proposed 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 $125 for CY 
2019 (83 FR 58963 through 58964).
    Following the CY 2007 methodology, for this CY 2020 OPPS/ASC 
proposed rule, we used the most recently available four quarter moving 
average PPI levels to trend the $50 threshold forward from the third 
quarter of CY 2005 to the third quarter of CY 2020 and rounded the 
resulting dollar amount ($131.19) to the nearest $5 increment, which 
yielded a figure of $130. 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 2020 OPPS/ASC proposed rule, based on these calculations using 
the CY 2007 OPPS methodology, we are proposing a packaging threshold 
for CY 2020 of $130.
b. Proposed Packaging of Payment for HCPCS Codes That Describe Certain 
Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals Under 
the Cost Threshold (``Threshold-Packaged Drugs'')
    To determine the proposed CY 2020 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 2018 
and were paid (via packaged or separate payment) under the OPPS. We 
used data from CY 2018 claims processed before January 1, 2019 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 this proposed rule, or for 
the following policy-packaged items that we are proposing to continue 
to package in CY 2020: 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 2020, we used the methodology that was

[[Page 39497]]

described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 
through 42724) and finalized in the CY 2006 OPPS final rule with 
comment period (70 FR 68636 through 68638). For each drug and 
biological HCPCS code, we used an estimated payment rate of ASP+6 
percent (which is the payment rate we are proposing for separately 
payable drugs and biologicals for CY 2020, as discussed in more detail 
in section V.B.2.b. of this proposed rule) to calculate the CY 2020 
proposed rule per day costs. We used the manufacturer-submitted ASP 
data from the fourth quarter of CY 2018 (data that were used for 
payment purposes in the physician's office setting, effective April 1, 
2019) to determine the proposed rule per day cost.
    As is our standard methodology, for CY 2020, we are proposing to 
use payment rates based on the ASP data from the first quarter of CY 
2019 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the internet on the CMS website) because these 
are the most recent data available for use at the time of development 
of this proposed rule. These data also were the basis for drug payments 
in the physician's office setting, effective April 1, 2019. 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 
2018 hospital claims data to determine their per day cost.
    We are proposing to package items with a per day cost less than or 
equal to $130, and identify items with a per day cost greater than $130 
as separately payable unless they are policy-packaged. Consistent with 
our past practice, we cross-walked historical OPPS claims data from the 
CY 2018 HCPCS codes that were reported to the CY 2019 HCPCS codes that 
we display in Addendum B to this proposed rule (which is available via 
the internet on the CMS website) for proposed payment in CY 2020.
    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 2020 OPPS/ASC 
proposed rule, we are proposing to use ASP data from the fourth 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 April 1, 2019, along with updated hospital 
claims data from CY 2018. We note that we also are proposing to use 
these data for budget neutrality estimates and impact analyses for this 
CY 2020 OPPS/ASC proposed rule.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B for the final rule with comment 
period will be based on ASP data from the third quarter of CY 2019. 
These data will be the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2019. These payment rates would then 
be updated in the January 2020 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2020. For items that do not currently have an ASP-based 
payment rate, we are proposing to recalculate their mean unit cost from 
all of the CY 2018 claims data and updated cost report information 
available for the CY 2020 final rule with comment period to determine 
their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this proposed rule 
may be different from the same drugs' HCPCS codes' packaging status 
determined based on the data used for the final rule with comment 
period. Under such circumstances, we are proposing to continue to 
follow the established policies initially adopted for the CY 2005 OPPS 
(69 FR 65780) in order to more equitably pay for those drugs whose 
costs fluctuate relative to the proposed CY 2020 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2019. 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 2020, 
consistent with our historical practice, we are proposing to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2019 and that are proposed for separate payment in CY 
2020, and that then have per day costs equal to or less than the CY 
2020 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2020 final rule, would continue to 
receive separate payment in CY 2020.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2019 and that are proposed for separate payment in CY 2020, and 
that then have per day costs equal to or less than the CY 2020 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2020 final rule, would remain packaged in 
CY 2020.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2020 but that then have per-day costs 
greater than the CY 2020 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2020 final 
rule, would receive separate payment in CY 2020.
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,

[[Page 39498]]

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).
d. Proposed 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, we are proposing 
to continue our policy to make packaging determinations on a drug-
specific basis, rather than a HCPCS code-specific basis, for those 
HCPCS codes that describe the same drug or biological but different 
dosages in CY 2020.
    For CY 2020, 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 2018 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
this CY 2020 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 2018 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 2020 drug packaging threshold of 
$130 (so that all HCPCS codes for the same drug or biological would be 
packaged) or greater than the proposed CY 2020 drug packaging threshold 
of $130 (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 2020 
is displayed in Table 18.
BILLING CODE 4120-01-P

[[Page 39499]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.035

BILLING CODE 4120-01-C
2. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable 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.

[[Page 39500]]

     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 this CY 2020 
OPPS/ASC proposed rule, we are proposing to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    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 2019.
b. Proposed CY 2020 Payment Policy
    For CY 2020, we are proposing 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 are 
proposing to continue to pay for separately payable nonpass-through 
drugs acquired with a 340B discount at a rate of ASP minus 22.5 
percent, but are also soliciting comments on alternative policies as 
well as the appropriate remedy for CYs 2018 and 2019 in the event that 
we do not prevail on appeal in the pending litigation, as discussed in 
greater detail later in this section. We refer readers to the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59353 through 59371) and 
the CY 2019 OPPS/ASC final rule with comment period (83 FR 58979 
through 58981) 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 final rule, 
under section 1847A(c)(4), although payments may be based on WAC, 
unlike section 1847A(b) of the Act (which specifies that payments using 
ASP or WAC must be made with a 6 percent add-on), section 1847A(c)(4) 
of the Act does not require that a particular add-on amount be applied 
to WAC-based pricing for this initial period when ASP data is not 
available. Consistent with section 1847A(c)(4) of the Act, in the CY 
2019 PFS final rule (83 FR 59661 to 59666), we finalized a policy that, 
effective January 1, 2019, WAC-based payments for Part B drugs made 
under section 1847A(c)(4) of the Act will utilize a 3-percent add-on in 
place of the 6-percent add-on that was being used according to our 
policy in effect as of CY 2018. For the CY 2019 OPPS, we followed the 
same policy finalized in the CY 2019 PFS final rule (83 FR 59661 to 
59666). For the CY 2020 OPPS, we are proposing to continue 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 are proposing to apply this provision to non-
SCOD separately payable drugs. Because we are proposing 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 are proposing 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. 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 refer readers to the CY 2019 PFS final rule (83 FR 59661 to 
59666) for additional background on this proposal.
    We are proposing that payments for separately payable drugs and 
biologicals are included in the budget neutrality adjustments, under 
the requirements in section 1833(t)(9)(B) of the Act. We also are 
proposing 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 proposed rule

[[Page 39501]]

(available via the internet on the CMS website), which illustrate the 
proposed CY 2020 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 April 1, 2019, or WAC, AWP, or 
mean unit cost from CY 2018 claims data and updated cost report 
information available for this proposed rule. In general, these 
published payment rates are not the same as the actual January 2020 
payment rates. This is because payment rates for drugs and biologicals 
with ASP information for January 2020 will be determined through the 
standard quarterly process where ASP data submitted by manufacturers 
for the third quarter of CY 2019 (July 1, 2019 through September 30, 
2019) will be used to set the payment rates that are released for the 
quarter beginning in January 2020 near the end of December 2019. In 
addition, payment rates for drugs and biologicals in Addenda A and B to 
this proposed rule for which there was no ASP information available for 
April 2019 are based on mean unit cost in the available CY 2018 claims 
data. If ASP information becomes available for payment for the quarter 
beginning in January 2020, we will price payment for these drugs and 
biologicals based on their newly available ASP information. Finally, 
there may be drugs and biologicals that have ASP information available 
for this proposed rule (reflecting April 2019 ASP data) that do not 
have ASP information available for the quarter beginning in January 
2020. These drugs and biologicals would then be paid based on mean unit 
cost data derived from CY 2018 hospital claims. Therefore, the proposed 
payment rates listed in Addenda A and B to this proposed rule are not 
for January 2020 payment purposes and are only illustrative of the CY 
2020 OPPS payment methodology using the most recently available 
information at the time of issuance of this proposed rule.
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 is 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 are 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's ASP (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. If a biosimilar does not have ASP pricing, but instead 
has WAC pricing, the WAC pricing add-on of either 3 percent or 6 
percent is calculated from the biosimilar's WAC and is not calculated 
from the WAC price of the reference product.
    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 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. This proposal was 
finalized without modification in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58977).
    For CY 2020, we are proposing to continue our policy 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 proposing to continue our policy 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. In

[[Page 39502]]

addition, as discussed further below, we are soliciting comments on the 
appropriate remedy in the event of an adverse decision on appeal in the 
litigation related to our policy for payment of 340B-acquired drugs and 
biologicals, and we are specifically soliciting comments here on 
whether paying for 340B-acquired biosimilars at ASP+3 percent of the 
reference product's ASP would be an appropriate policy in line with 
that discussion.
3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2020, we are proposing 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 2020. Therefore, we are proposing for CY 
2020 to pay all nonpass-through, separately payable therapeutic 
radiopharmaceuticals at ASP+6 percent, based on the statutory default 
described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full 
discussion of ASP-based payment for therapeutic radiopharmaceuticals, 
we refer readers to the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60520 through 60521). We also are proposing to rely on CY 2018 
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 2020 payment rates for 
nonpass-through, separately payable therapeutic radiopharmaceuticals 
are included in Addenda A and B to this proposed rule (which are 
available via the internet on the CMS website).
4. Proposed Payment for Blood Clotting Factors
    For CY 2019, 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 (83 FR 58979). That is, for CY 2019, 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 2019 updated furnishing fee was $0.220 per unit.
    For CY 2020, we are proposing to pay for blood clotting factors at 
ASP+6 percent, consistent with our proposed payment policy for other 
nonpass-through, separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Our policy to pay for a furnishing fee for blood clotting 
factors under the OPPS is consistent with the methodology applied in 
the physician'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 is based on the percentage increase in the 
Consumer Price Index (CPI) for medical care for the 12-month period 
ending with June of the previous year. Because the Bureau of Labor 
Statistics releases the applicable CPI data after the PFS and OPPS/ASC 
proposed rules are published, we are not able to include the actual 
updated furnishing fee in the proposed rules. Therefore, in accordance 
with our policy, as finalized in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66765), we are proposing to announce the actual 
figure for the percent change in the applicable CPI and the updated 
furnishing fee calculated based on that figure through applicable 
program instructions and posting on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    For CY 2020, we are proposing to continue to use the same payment 
policy as in CY 2019 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 2020 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 proposed rule, which is available via the internet on the CMS 
website.
    The proposed CY 2020 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 
proposed rule, which is available via the internet on the CMS website.
6. CY 2020 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. We stated that our goal was 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

[[Page 39503]]

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 vaccines, which are excluded from the 340B Program.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79699 
through 79706), we implemented section 603 of the Bipartisan Budget Act 
of 2015. As a general matter, applicable items and services furnished 
in certain off-campus outpatient departments of a provider on or after 
January 1, 2017 are not considered covered outpatient services for 
purposes of payment under the OPPS and are paid ``under the applicable 
payment system,'' which is generally the Physician Fee Schedule (PFS). 
However, consistent with our policy to pay separately payable, covered 
outpatient drugs and biologicals acquired under the 340B Program at ASP 
minus 22.5 percent, rather than ASP+6 percent, when billed by a 
hospital paid under the OPPS that is not excepted from the payment 
adjustment, in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59015 through 59022), we finalized a policy to pay ASP minus 22.5 
percent for 340B-acquired drugs and biologicals furnished in 
nonexcepted off-campus PBDs paid under the PFS. We adopted this payment 
policy effective for CY 2019 and for subsequent years.
    As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37125), 
another topic that had 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 was 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 since heard 
from stakeholders that there had 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 the CY 2019 OPPS/ASC 
final rule with comment period. For CY 2019, 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 ``F'', ``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 CY 2019 OPPS/ASC 
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 for CY 2019 that Medicare would 
continue to pay for

[[Page 39504]]

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 for CY 2019 that these hospitals be required to report 
informational modifier ``TB'' for 340B-acquired drugs, and continue to 
be paid ASP+6 percent. In the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58981), after consideration of the public comments we 
received, we finalized our proposals without modification.
    Our CY 2018 and 2019 OPPS payment policies for 340B-acquired drugs 
are the subject of ongoing litigation. On December 27, 2018, in the 
case of American Hospital Association et al. v. Azar et al., the United 
States District Court for the District of Columbia (hereinafter 
referred to as ``the district court'') concluded in the context of 
reimbursement requests for CY 2018 that the Secretary exceeded his 
statutory authority by adjusting the Medicare payment rates for drugs 
acquired under the 340B Program to ASP minus 22.5 percent for that 
year.\58\ In that same decision, the district court recognized the 
```havoc that piecemeal review of OPPS payment could bring about' in 
light of the budget neutrality requirement,'' and ordered supplemental 
briefing on the appropriate remedy.\59\ On May 6, 2019, after briefing 
on remedy, the district court issued an opinion that reiterated that 
the 2018 rate reduction exceeded the Secretary's authority, and 
declared that the rate reduction for 2019 (which had been finalized 
since the Court's initial order was entered) also exceeded his 
authority.\60\ Rather than ordering HHS to pay plaintiffs their alleged 
underpayments, however, the district court recognized that crafting a 
remedy is ``no easy task, given Medicare's complexity,'' \61\ and 
initially remanded the issue to HHS to devise an appropriate remedy 
while also retaining jurisdiction. The district court acknowledged that 
``if the Secretary were to retroactively raise the 2018 and 2019 340B 
rates, budget neutrality would require him to retroactively lower the 
2018 and 2019 rates for other Medicare Part B products and services.'' 
\62\ Id. at 19. ``And because HHS has already processed claims under 
the previous rates, the Secretary would potentially be required to 
recoup certain payments made to providers; an expensive and time-
consuming prospect.'' \63\
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    \58\ American Hosp. Ass'n, et al. v. Azar, et al., No. 1:18-cv-
2084 (D.D.C. Dec. 27, 2018).
    \59\ Id. at 35 (quoting Amgen, Inc. v. Smith, 357 F.3d 103, 112 
(D.C. Cir. 2004) (citations omitted)).
    \60\ See May 6, 2019 Memorandum Opinion, Granting in Part 
Plaintiffs' Motion for a Permanent Injunction; Remanding the 2018 
and 2019 OPPS Rules to HHS at 10-12.
    \61\ Id. at 13.
    \62\ Id. at 19.
    \63\ Id. (citing Declaration of Elizabeth Richter).
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    CMS respectfully disagreed with the district court's understanding 
of the scope of its adjustment authority and asked the district court 
to enter final judgment so as to permit an immediate appeal. On July 
10, 2019, the district court granted the government's request and 
entered final judgment, and the agency does intend to pursue its appeal 
rights. Nonetheless, CMS is taking the steps necessary to craft an 
appropriate remedy in the event of an unfavorable decision on appeal.
    Devising an appropriate remedy requires an opportunity for public 
input. First, these types of changes to the OPPS must be budget 
neutral, and reversal of the policy change, which raised rates for non-
drug items and services to the tune of an estimated $1.7 billion for 
2018 alone, could have a significant economic impact on the 
approximately 3,900 facilities that are reimbursed for outpatient items 
and services covered under the OPPS. Second, any remedy is likely to 
significantly affect beneficiary cost-sharing. The items and services 
that could be affected by the remedy were provided to millions of 
different Medicare beneficiaries, who, by statute, are required to pay 
cost-sharing for such items and services, which is usually 20 percent 
of the total Medicare payment rate.
    CMS is soliciting initial public comment on how to formulate a 
solution that accounts for all of the complexities that the district 
court recognized. We intend to use this public input to further inform 
the steps that are required under the Administrative Procedure Act to 
provide adequate notice and an opportunity for meaningful comment on 
our proposed policies, which would entail devising the specific remedy 
itself, presenting the specific budget neutrality implications of that 
remedy in the proposed rule, and potentially calculating all the 
different payment rates under the OPPS for 340B-acquired drugs, as well 
as all other items and services under the OPPS. (In essence, we would 
need to provide hospitals with sufficient notice of the impact of the 
remedy on their rates to enable them to comment meaningfully on the 
proposed rule.) Our own best practices for preparing notices of 
proposed rulemaking dictate that we begin policy development in the 
year before the proposed rule is issued, and that we begin the rule 
drafting process in the first quarter of each year.
    In order to comply with the requirements of the Administrative 
Procedure Act and our regulatory development process and calendar, we 
would anticipate proposing the specific remedy for CYs 2018 and 2019, 
as well as changes to the CY 2020 rates, in the next available 
rulemaking vehicle, which is the CY 2021 OPPS/ASC proposed rule. Those 
proposals will be informed by the comments solicited in this proposed 
rule. Specifically, we are using this proposed rule to solicit comment 
in advance of next year's rulemaking on approaches to the CY 2018 and 
2019 remedy, as well as how best to address CY 2020 rates, so we are 
poised to propose those policies in the CY 2021 rule if necessary.
    Thus, for CY 2020 we are proposing to continue to pay ASP-22.5 
percent for 340B-acquired drugs including when furnished in nonexcepted 
off-campus PBDs paid under the PFS. Our proposal would continue 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 the CY 2019 
OPPS/ASC final rule with comment period, and would continue the policy 
we finalized in CY 2019 to pay ASP minus 22.5 percent for 340B-acquired 
drugs and biologicals furnished in nonexcepted off-campus PBDs paid 
under the PFS.
    We also seek public comment on the appropriate OPPS payment rate 
for 340B-acquired drugs, including whether a rate of ASP+3 percent 
could be an appropriate remedial payment amount for these drugs, both 
for CY 2020 and for purposes of determining the remedy for CYs 2018 and 
2019. To be sure, this amount would result in payment rates that are 
well above the actual costs hospitals incur in purchasing 340B drugs, 
and it is being proposed solely because of the court decision. However, 
to the extent the courts are limiting the

[[Page 39505]]

size of the payment reduction the agency can permissibly apply, the 
agency believes it could be appropriate to apply a payment reduction 
that is at the upper end of that limit, to the extent it has been or 
could be clearly defined, given the substantial discounts that 
hospitals receive through the 340B program. For example, absent further 
guidance from the Court of Appeals on what it believes is an 
appropriate ``adjustment'' amount, CMS could look to the district 
court's December 27, 2018 opinion, which cites to payment reductions of 
0.2 percent and 2.9 percent as ``not significant enough'' to fall 
outside of the Secretary's authority to ``adjust'' ASP.\64\ This 
payment rate would apply to 340B-acquired drugs and biologicals billed 
by a hospital paid under the OPPS that are not excepted from the 
payment adjustment and to 340B-acquired drugs and biologicals furnished 
in nonexcepted off-campus PBDs paid under the PFS. We welcome public 
comments on payment rates other than ASP+3 percent that commenters 
believe would be appropriate for purposes of addressing CY 2020 payment 
as an alternative to our proposal above, as well as for potential 
future rulemaking related to CY 2018 and 2019 underpayments.
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    \64\ 348 F. Supp. 3d 62, 81 (D.D.C. 2018) (citing to payment 
reductions of 0.2 percent and 2.9 percent that other decisions have 
recognized as being within the agency's adjustment authority for 
Medicare rates under the inpatient prospective payment system).
---------------------------------------------------------------------------

    In addition to comments on the appropriate payment amount for 
calculating the remedy for CYs 2018 and 2019 and for use for CY 2020, 
we also seek public comment on how to structure the remedy for CYs 2018 
and 2019. This request for public comment includes comments on whether 
such a remedy should be retrospective in nature (for example, made on a 
claim-by-claim basis), whether such a remedy could be prospective in 
nature (for example, an upward adjustment to 340B claims in the future 
to account for any underpayments in the past), and whether there is 
some other mechanism that could produce a result equitable to hospitals 
that do not acquire drugs through the 340B program while respecting the 
budget neutrality mandate.
    One potential remedy for alleged underpayments in 2018 and 2019 
would involve making additional payments to the parties who have 
demonstrated harm from the alleged underpayments (which could be 
defined as hospitals that submitted a claim for drug payment with the 
``JG'' modifier in CYs 2018 and 2019) outside the normal claims 
process. Under this approach, we would calculate the amount that such 
hospitals should have been paid and would utilize our Medicare 
contractors to make one payment to each affected hospital. This 
approach--one additional payment made to each affected hospital by our 
contractors--is a different approach than reprocessing each and every 
claim submitted by plaintiff hospitals for 2018 and 2019. Then, 
depending on when a final decision is rendered, the Secretary would 
propose to budget-neutralize those additional expenditures for each of 
CYs 2018 and 2019. For example, if the Court of Appeals were to render 
a decision in February of 2020, under such an approach we might propose 
those additional payments and an appropriate budget neutrality 
adjustment for each of CYs 2018, 2019, and, if necessary, 2020, in time 
for the CY 2021 rule. We note that we would need to receive a final 
decision from the Court of Appeals sufficiently early in CY 2020 
(likely by March 1, 2020) to make it potentially possible for us to 
propose and finalize an appropriate remedy and budget neutrality 
adjustments in the CY 2021 rulemaking. We solicit public comment on 
this approach as well as other suggested approaches from commenters.
    In considering these potential future proposals, we note that we 
would rely on our statutory authority under section 1833(t)(14) for 
determining the OPPS payment rates for drugs and biologicals as well as 
section 1833(t)(9)(A) of the Act to review certain components of the 
OPPS not less often than annually and to revise the groups, relative 
payment weights, and other adjustments. In addition, we note that under 
section 1833(t)(14)(H) of the Act, any adjustments made by the 
Secretary to payment rates using the statutory formula outlined in 
section 1833(t)(14)(A)(iii)(II) of the Act are required to be taken 
into account under the budget neutrality requirements outlined in 
section 1833(t)(9)(B) of the Act. We are soliciting public comments on 
the best, most appropriate way to maintain budget neutrality, either 
under a retrospective claim-by-claim approach, with a prospective 
approach, or any other proposed remedy. We also solicit comments on 
whether, depending on the amount of those additional expenditures, we 
should consider spreading out the relevant budget neutrality adjustment 
across multiple years. We would be interested to receive public comment 
on the advantages and disadvantages of such an approach.
    In addition, we are interested in public comments on the best, most 
appropriate treatment of Medicare beneficiary cost-sharing 
responsibilities under any proposed remedy. These issues--the statutory 
budget neutrality requirement and beneficiary cost-sharing--are 
extremely difficult to balance, and we are interested in stakeholder 
comments as we continue to review the viability of alternative remedies 
in the event of an adverse decision from the Court of Appeals.
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59369 through 59370) and the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58976 through 58977 and 59015 through 59022) 
for more detail on the policies implemented in CY 2018 and CY 2019 for 
drugs acquired through the 340B Program.
7. Proposed High Cost/Low Cost Threshold for Packaged Skin Substitutes
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74938), we unconditionally packaged skin substitute products into their 
associated surgical procedures as part of a broader policy to package 
all drugs and biologicals that function as supplies when used in a 
surgical procedure. As part of the policy to finalize the packaging of 
skin substitutes, we also finalized a methodology that divides the skin 
substitutes into a high cost group and a low cost group, in order to 
ensure adequate resource homogeneity among APC assignments for the skin 
substitute application procedures (78 FR 74933).
    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 2019, the payment rate for

[[Page 39506]]

APC 5053 (Level 3 Skin Procedures) was $482.89, the payment rate for 
APC 5054 (Level 4 Skin Procedures) was $1,548.96, and the payment rate 
for APC 5055 (Level 5 Skin Procedures) was $2,766.13. This information 
also is available in Addenda A and B of the CY 2019 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 we are proposing to continue it for CY 2020. 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 2020, consistent with our policy since CY 2016, 
we are proposing 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 2020, as we did for CY 2019, 
we are proposing 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 2020, as we 
did for CY 2019, we are proposing 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 2020, we are proposing that any 
skin substitute product that was assigned to the high cost group in CY 
2019 would be assigned to the high cost group for CY 2020, regardless 
of whether it exceeds or falls below the CY 2020 MUC or PDC threshold. 
This policy was established in the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59346 through 59348).
    For this CY 2020 OPPS/ASC proposed rule, consistent with the 
methodology as established in the CY 2014 through CY 2017 final rules 
with comment period, we analyzed CY 2018 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 proposed CY 2020 MUC threshold is $49 per cm\2\ (rounded to the 
nearest $1) and the proposed CY 2020 PDC threshold is $789 (rounded to 
the nearest $1).
    For CY 2020, we are proposing to continue to assign skin 
substitutes with pass-through payment status to the high cost category. 
We are proposing 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 are proposing 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 would use 95 percent of AWP to assign a skin substitute 
to either the high cost or low cost category. We are proposing to 
continue to use WAC+3 percent instead of WAC+6 percent to conform to 
our proposed policy described in section V.B.2.b. of this proposed rule 
to establish a payment rate of WAC+3 percent for separately payable 
drugs and biologicals that do not have ASP data available. New skin 
substitutes without pricing information would be assigned to the low 
cost category until pricing information is available to compare to the 
CY 2020 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), 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

[[Page 39507]]

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 final rule 
with comment period (83 FR 58967 through 58968), we 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 CY 2019 
OPPS/ASC final rule with comment period that we were 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 CY 2019 OPPS/ASC final rule with comment period that 
we were 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. Finally, 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 developing 
proposals for CY 2020.
a. Discussion of CY 2019 Comment Solicitation for Episode-Based Payment 
and Solicitation of Additional Comments for CY 2020
    The methodology that commenters discussed most in response to our 
comment solicitation in CY 2019 and that stakeholders raised in 
subsequent meetings we have had with the wound care community has been 
a lump-sum ``episode-based'' payment for a wound care episode. 
Commenters that supported an episode-based payment believe that it 
would allow health care professionals to choose the best skin 
substitute to treat a patient's wound and would give providers 
flexibility with the treatments they administer. These commenters also 
believe an episode-based payment helps to reduce incentives for 
providers to use excessive applications of skin substitute products or 
use higher cost products to generate more payment for the services they 
furnish. In addition, they believe that episode-based payment could 
help with innovations with skin substitutes by encouraging the 
development of products that require fewer applications. These 
commenters noted that episode-based payment would make wound care 
payment more predictable for hospitals and provide incentives to manage 
the cost of care that they furnish. Finally, commenters for an episode-
based payment believe that workable quality metrics can be developed to 
monitor the quality of care administered under the payment methodology 
and limit excessive applications of skin substitutes.
    However, many commenters opposed establishing an episode-based 
payment. One of the main concerns of commenters who opposed episode-
based payment was that wound care is too complex and variable to be 
covered through such a payment methodology. These commenters stated 
that every patient and every wound is different; therefore, it would be 
very challenging to establish a standard episode length for coverage. 
They noted that it would be too difficult to risk-stratify and 
specialty-adjust an episode-based payment, given the diversity of 
patients receiving wound care and their providers who administer 
treatment, as well as the variety of pathologies covered in treatment. 
Also, these commenters questioned how episodes would be defined for 
patients when they are having multiple wounds treated at one time or 
had another wound develop while the original wound was receiving 
treatment. These commenters expressed concerns that episode-based 
payment would be burdensome both operationally and administratively for 
providers. They believe that CMS will need to create a large number of 
new APCs and HCPCS codes to account for all of the patient situations 
that would be covered with an episode-based payment, which would 
increase burdens on providers. Finally, these commenters had concerns 
about the impacts of episode-based payment on the usage of higher cost 
skin substitute products. They believed that a single payment could 
discourage the use of higher-cost products because of the large 
variability in the cost of skin substitute products, which could limit 
innovations for skin substitute products.
    The wide array of views on episode-based payment for skin 
substitute products and the unforeseen issues that may arise from the 
implementation of such a policy make us reluctant to present a proposal 
for this CY 2020 proposed rule without more review of the issues 
involved with episode-based payment. Therefore, we are seeking further 
comments from stakeholders and other interested parties regarding skin 
substitute payment policies that could be applied in future years to 
address concerns about excessive utilization and spending on skin 
substitute products, while avoiding administrative issues such as 
establishing additional HCPCS codes to describe different treatment 
situations. One possible policy construct that we are seeking comments 
on would be to establish a payment period for skin substitute 
application services (CPT codes 15271 through 15278 and HCPCS codes 
C5271 through C5278) between 4 weeks and 12 weeks. Under this option, 
we could also assign CPT codes 15271, 15273, 15275, and 15277, and 
HCPCS codes C5271, C5273, C5275, and C5277 to comprehensive APCs with 
the option for a complexity adjustment that would allow for an increase 
in the standard APC payment for more resource-intensive cases. Our 
research has found that most wound care episodes require one to three 
skin substitute applications. Those cases would likely receive the 
standard APC payment for the comprehensive procedure. Then the 
complexity adjustment could be applied for the relatively small number 
of cases that require more intensive treatments. We look forward to 
comments from stakeholders and other interested parties on this 
possible policy construct.
b. Potential Revisions to the OPPS Payment Policy for Skin Substitutes: 
Comment Solicitation for CY 2020
    In addition to possible future rulemaking based on the responses to 
the comment solicitations in the preceding section, we are considering 
adopting for CY 2020 another payment methodology that generated 
significant public comments in response to the CY 2019 comment 
solicitation. That option would be to eliminate the high cost and low 
cost categories for skin substitutes and have only one payment category 
and set of procedure codes for the application of all graft skin 
substitute products. The only available procedure codes to bill for 
skin substitute graft procedures would be CPT codes 15271 through 
15278. HCPCS codes C5271 through C5278 would be eliminated. Providers 
would bill CPT codes 15271 through 15278 without having to consider 
either the MUC or PDC of the graft skin substitute product used in the 
procedure. There would be only one APC for the graft skin substitute 
application procedures described by CPT codes 15271 (Skin sub graft 
trnk/arm/leg), 15273 (Skin sub grft t/arm/lg child), 15275 (Skin sub 
graft face/nk/hf/g), and 15277 (Skn sub grft f/n/hf/g child). The 
payment rate would be the geometric mean of all graft skin substitutes 
procedures for a given CPT

[[Page 39508]]

code that are covered through the OPPS. For example under the current 
skin substitute payment policy, there are two procedure codes (CPT code 
15271 and HCPCS code C5271) that are reported for the procedure 
described as ``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''. The geometric mean cost for CPT code 15271 is 
currently $1,572.17 and the geometric mean cost for HCPCS code C5271 is 
$728.28. If this policy option was implemented, only CPT code 15271 
would be available in the OPPS, and the geometric mean cost for the 
procedure code would be $1,465.18.
    Commenters that supported this option believe this would remove the 
incentives for manufacturers to develop and providers to use high cost 
skin substitute products and lead to the use of lower-cost, quality 
products. Commenters noted that lower Medicare payments for graft skin 
substitute procedures would lead to lower copayments for beneficiaries. 
In addition, commenters believed a single payment category would reduce 
incentives to apply skin substitute products in excessive amounts. 
Commenters also believed a single payment category is clinically 
justified because many studies have shown that no one skin substitute 
product is superior to another. Finally, supporters of a single payment 
category believed it will simplify coding for providers and reduce 
administrative burden.
    There were also commenters that raised concerns that a single 
payment category would not offer providers incentives to furnish 
quality care and would reduce the use of higher-cost skin substitute 
products. Eliminating the high cost and low cost payment categories 
also does not maintain homogeneity among APC assignments for services 
using skin substitutes according to opponents of the single payment 
category. Commenters stated that instead of having categories grouped 
by the relative cost of products, there would be only one category to 
cover the payment of products with a mean unit cost ranging from less 
than $1 to over $750. Commenters believed a single payment category 
would favor inexpensive products, which could limit innovation, and 
could eliminate all but the most inexpensive products from the market. 
Finally, opponents of a single payment category believed a single 
payment category would discourage the treatment of wounds that are 
difficult and costly to treat.
    The responses to the comment solicitation show the potential of a 
single payment category to reduce the cost of wound care services for 
graft skin substitute procedures for both beneficiaries and Medicare in 
general. In addition, a single payment category may help to lower 
administrative burden for providers. Conversely, we are cognizant of 
other commenters' concerns that a single payment category may hinder 
innovation of new graft skin substitute products and cause some 
products that are currently well-utilized to leave the market. 
Nonetheless, we are persuaded that a single payment category could 
potentially provide a more equitable payment for many products used 
with graft skin substitute procedures, while recognizing that 
procedures performed with expensive skin substitute products would 
likely receive substantially lower payment.
    We believe a more equitable payment rate for graft skin substitute 
procedures could substantially reduce the amount Medicare pays for 
these procedures. We welcome suggestions or other information regarding 
the possibility of utilizing a single payment category to pay for skin 
substitute products under the OPPS, and, depending on the information 
we receive in response to this request, we may consider modifying our 
skin substitute payment policy in the CY 2020 OPPS/ASC final rule with 
comment period.
    We believe some of the concerns commenters who oppose a single 
payment category for skin substitute products raised might be mitigated 
if stakeholders have a period of time to adjust to the changes inherent 
in establishing a single payment category. We are soliciting public 
comments that provide additional information about how commenters 
believe we should transition from the current low cost/high cost 
payment methodology to a single payment category.
    Such suggestions to facilitate the payment transition from a low 
cost/high cost payment methodology to a single payment category 
methodology could include, but are not limited to--
     Delaying implementation of a single category payment for 1 
or 2 years after the payment methodology is adopted; and
     Gradually lowering the MUC and PDC thresholds over 2 or 
more years to add more graft skin substitute procedures into the 
current high cost group until all graft skin substitute procedures are 
assigned to the high cost group and it becomes a single payment 
category.
    We are seeking commenters' feedback on these ideas, or other 
approaches, to mitigate challenges that could impact providers, 
manufacturers, and other stakeholders if we establish a single payment 
category, which we might include as part of a final skin substitute 
payment policy that we would adopt in the CY 2020 OPPS/ASC final rule 
with comment period.
c. Proposals for Packaged Skin Substitutes
    To allow stakeholders time to analyze and comment on the issues 
discussed above, we are proposing for CY 2020 to continue our policy 
established in CY 2018 to assign skin substitutes to the low cost or 
high cost group. Specifically, we are proposing 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 2019, in which case 
we would assign the product to the high cost group for CY 2020, 
regardless of whether it exceeds the CY 2020 MUC or PDC threshold. We 
also are proposing to assign to the high cost group any skin substitute 
product that exceeds the CY 2020 MUC or PDC thresholds and assign to 
the low cost group any skin substitute product that does not exceed the 
CY 2020 MUC or PDC thresholds and was not assigned to the high cost 
group in CY 2019. We are proposing 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 2020 MUC. In 
addition, we are proposing to use WAC+3 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 2020 MUC. We are 
proposing to continue our established policy to assign new skin 
substitute products without pricing information to the low cost group. 
We look forward to public comments on our proposals.
    Table 19 displays the proposed CY 2020 cost category assignment for 
each skin substitute product.
BILLING CODE 4120-01-P

[[Page 39509]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.036


[[Page 39510]]


[GRAPHIC] [TIFF OMITTED] TP09AU19.037

BILLING CODE 4120-01-C

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all

[[Page 39511]]

covered services under the OPPS furnished for that year. If we estimate 
before the beginning of the calendar year that the total amount of 
pass-through payments in that year would exceed the applicable 
percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform 
prospective reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not 
exceeded. We estimate the pass-through spending to determine whether 
payments exceed the applicable percentage and the appropriate prorata 
reduction to the conversion factor for the projected level of pass-
through spending in the following year to ensure that total estimated 
pass-through spending for the prospective payment year is budget 
neutral, as required by section 1833(t)(6)(E) of the Act.
    For devices, developing a proposed estimate of pass-through 
spending in CY 2020 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 2020. 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 2019 or beginning in CY 
2020. The sum of the proposed CY 2020 pass-through spending estimates 
for these two groups of device categories equals the proposed total CY 
2020 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 
methodology 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 this 
proposed rule, we are proposing to include an estimate of any 
implantable biologicals eligible for pass-through payment in our 
estimate of pass-through spending for devices. Similarly, we finalized 
a policy in CY 2015 that applications for pass-through payment for skin 
substitutes and similar products be evaluated using the medical device 
pass-through process and payment methodology (76 FR 66885 through 
66888). Therefore, as we did beginning in CY 2015, for CY 2020, we are 
also proposing to include an estimate of any skin substitutes and 
similar products in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. Our estimate of drug and biological pass-through payment 
for CY 2020 for this group of items is $224.1 million, as discussed 
below, because we are proposing to pay for most nonpass-through 
separately payable drugs and biologicals under the CY 2020 OPPS at 
ASP+6 percent with the exception of 340B-acquired separately payable 
drugs that are paid at ASP minus 22.5 percent, and because we are 
proposing to pay for CY 2020 pass-through payment drugs and biologicals 
at ASP+6 percent, as we discuss in section V.A. of this proposed rule. 
We refer readers to section V.B.6 of this proposed rule where we 
solicit comments on an appropriate remedy in litigation involving our 
OPPS payment policy for 340B purchased drugs, which would inform CY 
2021 rulemaking in the event of an adverse decision on appeal in that 
litigation.
    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 this proposed rule. In this proposed rule, we are proposing 
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 2020. Therefore, our proposed 
estimate of pass-through payment for policy-packaged drugs and 
biologicals with pass-through payment status approved prior to CY 2020 
is not $0, as discussed below. In section V.A.5. of this 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 are 
proposing to offset the amount of pass-through payment for the policy-
packaged drug or biological. For these drugs or biologicals, the APC 
offset amount is the portion of the APC payment for the specific 
procedure performed with the pass-through drug or biological, which we 
refer to as the policy-packaged drug APC offset amount. If we determine 
that an offset is appropriate for a specific policy-packaged drug or 
biological receiving pass-through payment, we are proposing to reduce 
our estimate of pass-through payments for these drugs or biologicals by 
this amount.
    Similar to pass-through 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 2020. 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 2019 or beginning in CY 2020. 
The sum of the CY 2020 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. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2020, consistent with section 1833(t)(6)(E)(ii)(II) of the Act 
and our OPPS policy from CY 2004

[[Page 39512]]

through CY 2019 (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 2020, there is one active 
category for CY 2020. The active category is described by HCPCS code 
C1823 (Generator, neurostimulator (implantable), nonrechargeable, with 
transvenous sensing and stimulation leads). Based on the information 
from the device manufacturer, we are estimating that 100 devices will 
receive payment in the OPPS in CY 2019 at an estimated cost of $5,655 
per device. Therefore, we are proposing an estimate for the first group 
of devices of $565,500. In estimating our proposed CY 2020 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 2020; 
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, 2020; and contingent projections for new device 
categories established in the second through fourth quarters of CY 
2020. For CY 2020, we are proposing to use the general methodology 
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66778), while also taking into account recent OPPS experience in 
approving new pass-through device categories. For this proposed rule, 
the proposed estimate of CY 2020 pass-through spending for this second 
group of device categories is $10 million.
    To estimate proposed CY 2020 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 at least one quarter in 
CY 2020, we are proposing 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 2020 
OPPS utilization of the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies when used in a surgical procedure) that will be continuing 
on pass-through payment status in CY 2020, 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. Separately payable drugs are paid at a rate of ASP+6 
percent with the exception of 340B-acquired drugs that are paid at ASP 
minus 22.5 percent. Therefore, the payment rate difference between the 
pass-through payment amount and the nonpass-through payment amount is 
$224.1 million 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 are proposing to 
include in the CY 2020 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, which we estimate for CY 2020 to be 
$17.0 million. For this proposed rule, using the proposed methodology 
described above, we calculated a CY 2020 proposed spending estimate for 
this first group of drugs and biologicals that includes drugs currently 
on pass-through payment status that would otherwise be separately 
payable or policy-packaged of approximately $241.1 million.
    To estimate proposed CY 2020 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 2020, additional drugs and 
biologicals that we estimated could be approved for pass-through status 
subsequent to the development of this proposed rule and before January 
1, 2020 and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2020), we are proposing to use utilization 
estimates from pass-through applicants, pharmaceutical industry data, 
clinical information, recent trends in the per unit ASPs of hospital 
outpatient drugs, and projected annual changes in service volume and 
intensity as our basis for making the CY 2020 pass-through payment 
estimate. We also are proposing to consider the most recent OPPS 
experience in approving new pass-through drugs and biologicals. Using 
our proposed methodology for estimating CY 2020 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 $17.1 million.
    In summary, in accordance with the methodology described earlier in 
this section, for this proposed rule, we estimate that total pass-
through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2020 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2020 is 
approximately $268.8 million (approximately $10.6 million for device 
categories and approximately $258.2 million for drugs and biologicals) 
which represents 0.34 percent of total projected OPPS payments for CY 
2020 (approximately $80 billion). Therefore, we estimate that pass-
through spending in CY 2020 would not amount to 2.0 percent of total 
projected OPPS CY 2020 program spending.

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

    For CY 2020, we are proposing 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 are proposing to 
continue our payment policy for critical care services for CY 2020. 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 this proposed rule, we are seeking 
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.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 
through 59015), we adopted a method to control unnecessary increases in 
the

[[Page 39513]]

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). As discussed in section X.D of this 
proposed rule and the CY 2019 final rule (FR 58818 through 59179), CY 
2020 will be the second year of the 2-year transition of this policy, 
and in CY 2020, these departments will be paid the site-specific PFS 
rate for the clinic visit service. For a full discussion of this 
policy, we refer readers to that final rule with comment period.

VIII. Proposed 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 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. Since 
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). Additionally, 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 APC 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

[[Page 39514]]

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 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 APCs 
0172 and 0173 for CMHCs' partial hospitalization Level 1 and Level 2 
services, and APCs 0175 and 0176 for hospital-based partial 
hospitalization Level 1 and Level 2 services to APCs 5851 and 5852 for 
CMHCs' partial hospitalization Level 1 and Level 2 services, and APCs 
5861 and 5862 for hospital-based partial hospitalization Level 1 and 
Level 2 services, 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 also 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 stated that we will continue to monitor the trends 
in outlier payments and consider policy adjustments as necessary.
    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).
    In the CYs 2018 and 2019 OPPS/ASC final rules with comment period 
(82 FR 59373 through 59381, and 83 FR 58983 through 58998, 
respectively), 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 also 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

[[Page 39515]]

OPPS, excluding outlier payments. In the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58997 through 58998), we also included 
proposed updates to the PHP allowable HCPCS codes. Specifically, we 
proposed to delete 6 psychological and neuropsychological testing CPT 
codes, which affect PHPs, and to add 9 new codes as replacements. We 
refer readers to section VIII.D. of this proposed rule for a discussion 
of those proposed updates and the applicability for CY 2020.

B. Proposed PHP APC Update for CY 2020

1. Proposed PHP APC Geometric Mean Per Diem Costs
    In summary, for CY 2020, we are proposing to use the CY 2020 CMHC 
geometric mean per diem cost and the CY 2020 hospital-based PHP 
geometric mean per diem cost, each calculated in accordance with our 
existing methodology, but with a cost floor equal to the CY 2019 final 
geometric mean per diem cost for CMHCs of $121.62 and for hospital-
based PHPs of $222.76 (83 FR 58991), as the basis for developing the CY 
2020 PHP APC per diem rates. As part of this proposal, in the final 
rule with comment period, we are proposing that we would use the most 
recent updated claims and cost data to calculate CY 2020 geometric mean 
per diem costs.
    Also, we are proposing 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)). These 
proposals are discussed in more detail below.
2. Development of the Proposed PHP APC Geometric Mean Per Diem Costs
    In preparation for CY 2020 and subsequent years, we followed 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 calculate the PHP APCs' geometric mean per diem costs and 
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 proposed geometric mean 
per diem cost for hospital-based PHP APC 5863 would be based upon 
actual hospital-based PHP claims and costs for PHP service days 
providing 3 or more services. Similarly, the proposed geometric mean 
per diem cost for CMHC APC 5853 would be based upon actual CMHC claims 
and costs for CMHC service days providing 3 or more services.
    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 geometric mean per diem costs, after applying the OPPS 
budget neutrality adjustments described in section II.A.4. of this 
proposed rule.
    As previously stated, in this CY 2020 OPPS/ASC proposed rule, we 
applied our established methodologies in calculating the CY 2020 
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 CY 2020, prior to calculating the 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. Before any 
trims or exclusions were applied, there were 41 CMHCs in the PHP claims 
data file. 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. In 
applying this trim for CY 2020 ratesetting, no CMHCs had geometric mean 
costs per day below the trim's lower limit of $21.13 or had geometric 
mean costs per day above the trim's upper limit of $506.11. Therefore, 
we did not exclude any CMHCs because of the 2 standard 
deviation trim.
    In accordance with our PHP ratesetting methodology, 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 CY 
2020, no CMHC was missing wage index data for all of its service days 
and, therefore, no CMHC was excluded.
    In addition to our trims and data exclusions, before calculating 
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 CY 2020, there were no CMHCs in the outpatient provider specific 
file (OPSF) that showed CCRs greater than 1. Therefore, it was not 
necessary to default any CMHC to its statewide hospital CCR for 
ratesetting.
    In summary, these data preparation steps did not adjust the CCR for 
any CMHCs shown in the OPSF with a CCR greater than 1 during our 
ratesetting process. We also did not exclude any CMHCs for other 
missing data or for failing the 2 standard deviation trim, 
resulting in the inclusion of all 41 CMHCs. There were 188 CMHC claims 
removed during data preparation steps because they either had no PHP-
allowable codes or had zero payment days, leaving 10,271 CMHC claims in 
our CY 2020 proposed rule ratesetting modeling.
    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 a CMHC APC geometric mean per 
diem cost.\65\ The calculated CY 2020 geometric mean per diem cost for 
all CMHCs for providing 3 or more services per day (CMHC APC 5853) is 
$103.42, a decrease from

[[Page 39516]]

$121.62 calculated last year for CY 2019 ratesetting (83 FR 58986 
through 58989).
---------------------------------------------------------------------------

    \65\ 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 from the OPSF (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 proposed 
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 proposed 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.
---------------------------------------------------------------------------

    Due to this fluctuation, we investigated why the calculated CMHC 
APC geometric mean per diem cost had decreased from the prior year, and 
found that a single large provider that reported low costs per day was 
heavily influencing the calculated geometric mean per diem cost. 
Because this provider had a high number of paid PHP days, and because 
the CMHC data set is so small (n=41), this provider had a significant 
influence on the calculated CY 2020 CMHC APC geometric mean per diem 
cost. In the case of PHPs provided by CMHCs, we note that we have an 
unusually low number of PHP providers in our ratesetting dataset (41 
CMHCs compared to 364 hospital-based PHPs) that provide a small volume 
of services and, therefore, account for a limited amount of payments, 
relative to the rest of OPPS payments (total CY 2018 CMHC payments are 
estimated to be approximately 0.02 percent of all OPPS payments).
    We are concerned that a CMHC APC geometric mean per diem cost of 
$103.42 would not support ongoing access to PHPs in CMHCs. This cost is 
nearly a 15 percent decrease from the final CY 2019 CMHC geometric mean 
per diem cost. We believe access to partial hospitalization services 
and PHPs is better supported when the geometric mean per diem cost does 
not fluctuate greatly. In addition, while the CMHC APC 5853 is 
described as providing 3 or more partial hospitalization services per 
day (81 FR 79680), 95 percent of CMHC paid days in CY 2018 were for 
providing 4 or more services per day. To be eligible for a PHP, a 
patient must need at least 20 hours of therapeutic services per week, 
as evidenced in the patient's plan of care (42 CFR 410.43(c)(1)). To 
meet those patient needs, most PHP provider paid days are for providing 
4 or more services per day (we refer readers to Table 22.--Percentage 
of PHP Days by Service Unit Frequency of this proposed rule). 
Therefore, the CMHC APC 5853 is actually heavily weighted to the cost 
of providing 4 or more services. The per diem costs for CMHC APC 5853 
have been calculated as $124.92, $143.22, and $121.62 for CY 2017 (81 
FR 79691), CY 2018 (82 FR 59378), and CY 2019 (83 FR 58991), 
respectively. We do not believe it is likely that the actual cost of 
providing partial hospitalization services through a PHP by CMHCs has 
suddenly declined when costs generally increase over time. We are 
concerned by this fluctuation, which we believe is influenced by data 
from a single large provider.
    Therefore, rather than simply proposing to use the calculated CY 
2020 CMHC APC geometric mean per diem cost for CY 2020 ratesetting, we 
are instead proposing to use the CY 2020 CMHC APC geometric mean per 
diem cost, calculated in accordance with our existing methodology, but 
with a cost floor equal to the CY 2019 final geometric mean per diem 
cost for CMHCs of $121.62 (83 FR 58991), as the basis for developing 
the CY 2020 CMHC APC per diem rate. As part of this proposal, in the 
final rule with comment period, we are proposing that we would use the 
most recent updated claims and cost data to calculate CY 2020 CMHC 
geometric mean per diem cost. This proposal aligns with our proposal 
for hospital-based PHPs. We believe using the CY 2019 CMHC geometric 
mean per diem cost as the floor is appropriate because it is based on 
very recent CMHC PHP claims and cost data and would help to protect 
provider access by preventing wide fluctuation in the per diem costs 
for CMHC APC 5853. Because the calculated amount of $103.42 is less 
than the final CY 2019 CMHC APC geometric mean per diem cost of 
$121.62, the inclusion of a cost floor means that the proposed CY 2020 
CMHC geometric mean per diem cost at the time of the development of 
this proposed rule is $121.62. The inclusion of the cost floor would 
protect CMHCs if the final CY 2020 calculated per diem cost still 
results in an amount that is less than $121.62. We believe this 
proposal for CY 2020 ratesetting allows us to use the most recent or 
very recent CMHC claims and cost reporting data while still protecting 
provider access. To be clear, this policy would only apply for the CY 
2020 ratesetting.
    In crafting this proposal, we also considered proposing a 3-year 
rolling average calculated using the final PHP geometric mean per diem 
costs, by provider type, from CY 2018 (82 FR 59378), CY 2019 (83 FR 
58991), and the calculated CY 2020 geometric mean per diem costs of 
$103.42 discussed earlier in this section for CMHCs and the calculated 
CY 2020 geometric mean per diem costs for hospital-based PHPs discussed 
in section VIII.B.2.b. of this proposed rule. The 3-year rolling 
averages results in geometric mean per diem cost for CMHCs that would 
have been $122.75 and for hospital-based PHPs that would have been 
$209.79. While we believe this option would have avoided the 
fluctuation in the geometric mean per diem cost and, therefore, 
supported access to PHPs provided by CMHCs, it would have maintained 
the fluctuation in the geometric mean per diem costs used to derive the 
hospital-based PHP APC per diem payment rates. This is further 
discussed in the hospital-based PHP section VIII.B.2.b. of this 
proposed rule. In addition, we believe that it is necessary to 
recalculate the CMHC geometric mean per diem cost for the final rule 
with comment period using updated claims and cost data, and simply 
proposing to use a 3-year rolling average for the CMHC geometric mean 
per diem cost for CY 2020 would not have allowed us to do so. 
Therefore, we believe that it is more appropriate to propose to use the 
final CY 2019 geometric mean per diem costs, by provider type, as the 
cost floor for use with the calculated CY 2020 PHP geometric mean per 
diem costs, by provider type, because those CY 2019 per diem costs are 
based on very recent CMHC and hospital-based PHP claims and cost data, 
are the easiest to understand, and would result in proposed geometric 
mean per diem costs which would support access for both CMHCs and 
hospital-based PHPs.
    We estimate the aggregate difference in the (prescaled) CMHC 
geometric mean per diem costs for CY 2020 from proposing the CMHC cost 
floor amount of $121.62 rather than the calculated CMHC geometric mean 
per diem cost of $103.42 to be $1.4 million. We refer readers to 
section XXVI. of this proposed rule for payment impacts, which are 
budget neutral.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For this CY 2020 proposed rule, we prepared data consistent with 
our policies as described in the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70463 through 70465) for hospital-based PHP 
providers, which is similar to that used for CMHCs. The CY 2018 PHP 
claims included data for 427 hospital-based PHP providers for our 
calculations in this CY 2020 OPPS/ASC proposed rule.
    Consistent with our policies as stated in the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70463 through 70465), we prepared 
the data by applying trims and data exclusions. We applied a trim on 
hospital service days for hospital-based PHP providers with a CCR 
greater than 5 at the cost center level. To be clear, 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 affected service days 
from 1 hospital-based PHP provider with a CCR of 6.944 from our 
proposed rule ratesetting. However, 100 percent of the

[[Page 39517]]

service days for this 1 hospital-based PHP provider had at least 1 
service associated with a CCR greater than 5, so the trim removed this 
provider entirely from our proposed rule ratesetting. In addition, 60 
hospital-based PHPs were removed for having no PHP costs and, 
therefore, no days with PHP payment. Two hospital-based PHPs were 
removed because none of their days included PHP-allowable HCPCS codes. 
No hospital-based PHPs were removed for missing wage index data, nor 
were any hospital-based PHPs removed by the OPPS 3 standard 
deviation trim on costs per day. (We refer readers to the OPPS Claims 
Accounting Document, available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CMS-1695-FC-2019-OPPS-FR-Claims-Accounting.pdf.)
    Overall, we removed 63 hospital-based PHP providers [(1 with all 
service days having a CCR greater than 5) + (60 with zero daily costs 
and no PHP payment) + (2 with no PHP-allowable HCPCS codes)], resulting 
in 364 (427 total-63 excluded) hospital-based PHP providers in the data 
used for calculating ratesetting. In addition, 3 hospital-based PHP 
providers were defaulted to their overall hospital ancillary CCRs due 
to outlier cost center CCR values.
    After completing these data preparation steps, we calculated the CY 
2020 geometric mean per diem cost for hospital-based PHP APC 5863 for 
hospital-based partial hospitalization 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 OPPS/ASC 
final rule with comment period (81 FR 79687 and 79691).\66\ The 
calculated CY 2020 hospital-based PHP APC 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 $198.53, a decrease from 
$222.76 calculated last year for CY 2019 ratesetting (83 FR 58989 
through 58991).
---------------------------------------------------------------------------

    \66\ 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; in CY 
2020 and subsequent years, that CCR is determined by using the PHP-
only 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 proposed 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 proposed geometric mean per diem cost 
for hospital-based PHP APC 5863.
---------------------------------------------------------------------------

    Due to this fluctuation, we investigated why this calculated 
hospital-based PHP APC geometric mean per diem cost decreased from the 
prior year, and found that a single provider with a large number of 
paid PHP service days had a significant decrease in its cost per day 
and, therefore, was heavily influencing the data. We are concerned that 
a hospital-based PHP APC geometric mean per diem cost of $198.53 would 
not support ongoing access to hospital-based PHPs. This cost is nearly 
an 11 percent decrease from the final CY 2019 hospital-based PHP 
geometric mean per diem cost. We believe access is better supported 
when the geometric mean per diem cost does not fluctuate greatly. In 
addition, while the hospital-based PHP APC 5863 is described as 
providing payment for the cost of 3 or more services per day (81 FR 
79680), 89 percent of hospital-based PHP paid service days in CY 2018 
were for providing 4 or more services per day. To be eligible for a 
PHP, a patient must need at least 20 hours of therapeutic services per 
week, as evidenced in the patient's plan of care (42 CFR 410.43(c)(1)). 
To meet those patient needs, most PHP paid service days provide 4 or 
more services (we refer readers to Table 22.--Percentage of PHP Days by 
Service Unit Frequency in this proposed rule). Therefore, the hospital-
based PHP APC 5863 is actually heavily weighted to the cost of 
providing 4 or more services. The per diem costs for hospital-based PHP 
APC 5863 have been calculated as $213.14, $208.09, and $222.76 for CY 
2017 (81 FR 79691), CY 2018 (82 FR 59378), and CY 2019 (83 FR 58991), 
respectively. We do not believe that it is likely that the cost of 
providing hospital-based PHP services has suddenly declined when costs 
generally increase over time. We are concerned by this fluctuation, 
which we believe is influenced by data from a single large provider 
that had low service costs per day.
    Therefore, rather than proposing the calculated CY 2020 hospital-
based PHP APC geometric mean per diem cost, we are instead proposing to 
use the CY 2020 hospital-based PHP APC geometric mean per diem cost, 
calculated in accordance with our existing methodology, but with a cost 
floor equal to the CY 2019 final geometric mean per diem cost for 
hospital-based PHPs of $222.76 (83 FR 58991), as the basis for 
developing the CY 2020 hospital-based PHP APC per diem rate. As part of 
this proposal, in the final rule with comment period, we are proposing 
that we would use the most recent updated claims and cost data to 
calculate CY 2020 geometric mean per diem costs. This proposal aligns 
with our proposal for CMHCs. We believe using the CY 2019 hospital-
based PHP per diem cost as the floor is appropriate because it is based 
on very recent hospital-based PHP claims and cost data and would help 
to protect provider access by preventing wide fluctuation in the per 
diem costs for hospital-based APC 5863. Because the calculated amount 
of $198.53 is less than the final CY 2019 hospital-based PHP APC 
geometric mean per diem cost of $222.76, the inclusion of a cost floor 
means that the proposed CY 2020 hospital-based PHP geometric mean per 
diem cost, as of the time of this proposed rule, is $222.76. The 
inclusion of the cost floor would protect hospital-based PHPs if the 
final CY 2020 calculated hospital-based PHP APC geometric mean per diem 
cost results in an amount that is still less than $222.76. We believe 
this proposal for CY 2020 ratesetting allows us to use the most recent 
or very recent hospital-based PHP claims and cost reporting data while 
still protecting provider access. To be clear, this policy would only 
apply for the CY 2020 ratesetting.
    In crafting this proposal, we also considered proposing a 3-year 
rolling average calculated using the final PHP geometric mean per diem 
costs, by provider type, from CY 2018 (82 FR 59378) and CY 2019 (83 FR 
58991), and the calculated CY 2020 geometric mean per diem cost of 
$198.53 discussed earlier in this section for hospital-based PHPs. As 
discussed previously in this section, the 3-year rolling average per 
diem cost floor for CMHCs would have been $122.75, but the resulting 
rolling average per diem cost floor for hospital-based PHPs would have 
been $209.79. While we believe that this option would have supported 
access to CMHCs, as discussed previously, it would have resulted in a 
geometric mean per diem cost for the hospital-based PHP APC which still 
would have been a decrease from the hospital-based PHP APC geometric 
mean per diem cost of $222.76 finalized in CY 2019 (83 FR 58991). In 
addition, we believe that it is necessary to recalculate the hospital-

[[Page 39518]]

based PHP geometric mean per diem cost for the final rule using updated 
claims and cost data and simply proposing to use a 3-year rolling 
average per diem cost floor for the hospital-based PHP APC per diem 
costs for CY 2020 would not have allowed us to do so. We are concerned 
that this 3-year rolling average per diem cost would continue to result 
in a fluctuation in the cost of a hospital providing 4 or more 
hospital-based PHP services per day. We believe that it is important to 
support access to partial hospitalization services in both CMHCs and in 
hospital-based PHPs, and note that hospital-based PHPs provide 80 
percent of all paid PHP service days. Therefore, we believe that it is 
more appropriate to propose to use the final CY 2019 geometric mean per 
diem costs, by provider type, as the cost floor for use with the 
calculated CY 2020 PHP geometric mean per diem costs, by provider type, 
because those CY 2019 per diem costs are based on very recent CMHC and 
hospital-based PHP claims and cost data, are the easiest to understand, 
and would result in proposed geometric mean per diem costs which would 
help to protect provider access by preventing wide fluctuation in the 
per diem costs for both CMHCs and hospital-based PHPs.
    We estimate the aggregate difference in the (prescaled) hospital-
based PHP geometric mean per diem costs for CY 2020 from proposing the 
hospital-based PHP cost floor amount of $222.76 rather than the 
calculated hospital-based PHP geometric mean per diem cost of $198.53 
to be $9.3 million. We refer readers to section XXVI. of this proposed 
rule for payment impacts, which are budget neutral.
    In summary, for CY 2020, we are proposing to use the calculated CY 
2020 CMHC geometric mean per diem cost and the calculated CY 2020 
hospital-based PHP geometric mean per diem cost, each calculated in 
accordance with our existing methodology, but with a cost floor equal 
to the CY 2019 final geometric mean per diem costs as the basis for 
developing the CY 2020 PHP APC per diem rates. Because the CY 2020 
calculated geometric mean per diem costs for these provider types were 
both less than their respective final CY 2019 APC geometric mean per 
diem costs, the inclusion of a cost floor in this proposal means that 
both the proposed CY 2020 CMHC geometric mean per diem cost and the 
proposed CY 2020 hospital-based PHP geometric mean per diem cost, as of 
the time of this proposed rule, are $121.62 and $222.76, respectively. 
As part of this proposal, in the final rule with comment period, we are 
proposing that we would use the most recent updated claims and cost 
data to calculate CY 2020 geometric mean per diem costs. The inclusion 
of a cost floor, which is based on very recent data, would protect 
providers should the final CY 2020 calculated per diem costs for CMHCs 
or for hospital-based PHPs result in amounts that are still less than 
the final CY 2019 CMHC and hospital-based PHP geometric mean per diem 
costs.
    These proposed CY 2020 PHP geometric mean per diem costs are shown 
in Table 20, and are used to derive the proposed CY 2020 PHP APC per 
diem rates for CMHCs and hospital-based PHPs. The proposed CY 2020 PHP 
APC per diem rates are included in Addendum A to this proposed rule 
(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).\67\
[GRAPHIC] [TIFF OMITTED] TP09AU19.038

3. PHP Service Utilization Updates
a. Provision of Individual Therapy
---------------------------------------------------------------------------

    \67\ As discussed in section II.A. of this CY 2020 OPPS/ASC 
proposed rule, proposed OPPS APC geometric mean per diem costs 
(including proposed PHP APC geometric mean per diem costs) are 
divided by the proposed 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 proposed 
rule for more information on scaling the weights, and for details on 
the final steps of the process that lead to proposed 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.
---------------------------------------------------------------------------

    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 2018 claims data 
used for this CY 2020 proposed rule revealed some changes in the 
provision of individual therapy compared to CY 2015, CY 2016, and CY 
2017 claims data as shown in the Table 21.

[[Page 39519]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.039

    As shown in Table 21, the CY 2018 claims show that both CMHCs and 
hospital-based PHPs have slightly increased the provision of individual 
therapy on days with 4 or more services, compared to CY 2017 claims. 
However, on days with 3 services, CMHCs decreased the provision of 
individual therapy, while hospital-based PHPs provided the same level 
of individual therapy as in CY 2017.
b. Provision of 3-Service Days
    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 CMHC 
APC 5853 and hospital-based PHP 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 2020 OPPS/ASC proposed rule, we used the CY 2018 claims 
data. Table 22 shows the utilization findings based on the most recent 
claims data.

[[Page 39520]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.040

    As shown in Table 22, the CY 2018 claims data used for this 
proposed rule showed that PHPs maintained an appropriately low 
utilization of 3 service days compared to the 3 prior claim years. 
Compared to CY 2017, in CY 2018 hospital-based PHPs provided slightly 
more days with 3 services only, more days with 4 services only, and 
fewer days with 5 or more services. Compared to CY 2017, in CY 2018 
CMHCs decreased their provision of 3 service days, slightly increased 
their provision of days with 4 services, but have decreased their 
provision of days with 5 or more services.
    The CY 2017 data are the first year of claims data to reflect the 
change to the single-tier PHP APCs. 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 established for 
providing 3 or more services per day for CMHCs and hospital-based PHPs, 
respectively.
    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).

C. Proposed Outlier Policy for CMHCs

    In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are 
proposing 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 proposed rule 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

[[Page 39521]]

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 are proposing to continue 
to calculate the CMHC outlier percentage according to previously 
established policies, and we are not proposing any changes to our 
current methodology for calculating the CMHC outlier percentage for CY 
2020. To calculate the CMHC outlier percentage, we follow three steps:
     Step 1: We multiply 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 estimate 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 
proposed rule). That threshold is determined by multiplying the 
provider's estimated paid days by 3.4 times the CMHC PHP APC payment 
rate. If the provider's costs exceed the threshold, we multiply that 
excess by 50 percent, as described in section VIII.C.3. of this 
proposed rule, 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 
proposed rule, so any provider's costs that exceed the CMHC outlier cap 
would have its payments adjusted downward. After accounting for the 
CMHC outlier cap, we sum 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 determine 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 2019, we designated approximately 0.01 percent of that 
estimated 1.0 percent hospital outpatient outlier threshold for CMHCs 
(83 FR 58996), based on this methodology. In this proposed rule, we are 
proposing to continue to use the same methodology for CY 2020. 
Therefore, based on our CY 2020 payment estimates, CMHCs are projected 
to receive 0.02 percent of total hospital outpatient payments in CY 
2020, excluding outlier payments. We are proposing 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.
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). For 
CY 2018, the highest CMHC PHP APC payment rate is the payment rate for 
CMHC PHP APC 5853. In addition, in CY 2002, the final OPPS outlier 
payment percentage for costs above the multiplier threshold was set at 
50 percent (66 FR 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 this CY 2020 OPPS/ASC proposed rule, for CY 2020, in accordance 
with our existing policy, we are proposing 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 2020, if a 
CMHC's cost for partial hospitalization services paid under CMHC PHP 
APC 5853 exceeds 3.4 times the proposed payment rate for CMHC APC 5853, 
the outlier payment would be calculated as [0.50 x (CMHC Cost-(3.4 x 
APC 5853 rate))].
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. 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.
    For a comprehensive description of outlier reconciliation, we refer 
readers to the CY 2019 OPPS/ASC final rules with comment period (83 FR 
58874 through 58875 and 81 FR 79678 through 79680).
    In this CY 2020 OPPS/ASC proposed rule, we are proposing to 
continue these policies for partial hospitalization services provided 
through PHPs for CY 2020. 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

[[Page 39522]]

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).
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, it 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 
2019, we continued this policy in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58997).
    For CY 2020 and subsequent years, we are proposing to continue to 
apply the 8 percent CMHC outlier payment cap to 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 this CY 2020 OPPS/ASC proposed rule, we are proposing to 
continue this policy for CY 2020.

D. Update to PHP Allowable HCPCS Codes

    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58997 
through 58998), we discussed that, during the CY 2019 rulemaking, we 
received the Category I and III CPT codes from the AMA that were new, 
revised, and deleted, effective January 1, 2019. This included the 
deleting of 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);
     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 addition, the AMA added 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).
    As we proposed, in the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58997 through 58998), we included these replacement codes 
in Addenda B and O. As is our usual practice for including new and 
revised Category I and III CPT codes under the OPPS, we included 
interim APC assignments and status indicators for these codes and 
provided an opportunity under the OPPS for the public to comment on 
these interim assignments. That is, we included comment indicator 
``NP'' to indicate that the code is new for the next calendar year or 
the code is an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to current calendar 
year with a proposed APC assignment, and that comments will be accepted 
on the proposed APC and status indicator assignments.
    While these interim APC and status indicator assignments under the 
OPPS were included in Addendum B and Addendum O to the CY 2019 OPPS/ASC 
proposed rule and final rule with comment period, PHP is a part of the 
OPPS and PHP providers may not have been aware of those changes because 
we did not also include these in the PHP discussion presented in the 
proposed rule. To ensure that PHP providers were aware of the new and 
replacement codes related to CMHC and hospital-based partial 
hospitalization programs and had the opportunity to comment on the 
changes, we utilized 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 the CY 2019 OPPS/ASC final 
rule with comment period, we proposed 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 of the final rule with comment period, effective 
January 1, 2019. We solicited public comments on these proposals and 
indicated that we will consider the public comments we receive in 
response to the CY 2019 final rule with comment period and seek to 
finalize our proposed actions in the CY 2020 OPPS/ASC final rule with 
comment period.
    We also refer readers to section III.A.4. of this proposed rule for 
a detailed discussion of how we include new and revised Category I and 
III CPT codes for a related calendar year, assign interim APC and 
status indicator assignments, and allow for public

[[Page 39523]]

comments on these interim assignments for finalization in the next 
calendar year final rule with comment period.

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

A. Background

    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74352 through 74353) for a full historical discussion of 
our longstanding policies on how we identify procedures that are 
typically provided only in an inpatient setting (referred to as the 
inpatient only (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 proposed codes that describe 
procedures that would be paid by Medicare in CY 2020 as inpatient only 
procedures is included as Addendum E to this CY 2020 proposed rule, 
which is available via the internet on the CMS website.

B. Proposed Changes to the Inpatient Only (IPO) List

1. Methodology for Identifying Appropriate Changes to IPO List
    In this proposed rule, for CY 2020, we are proposing 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.
2. Procedures Proposed for Removal From the IPO List
    Using the above-listed criteria, for the CY 2020 OPPS, we have 
identified one procedure described by the following code that we are 
proposing to remove from the IPO list for CY 2020: CPT code 27130 
(Arthroplasty, acetabular and proximal femoral prosthetic replacement 
(total hip arthroplasty) with or without autograft or allograft). The 
procedure that we are proposing to remove from the IPO list for CY 2020 
and subsequent years, including the CPT/HCPCS code, long descriptor, 
and the proposed CY 2020 payment indicator is displayed in Table 23 of 
this proposed rule.
    For a number of years, total hip arthroplasty (THA) has been a 
topic of discussion for removal from the IPO list with both stakeholder 
support and opposition. Most recently, in the CY 2018 OPPS/ASC proposed 
rule (82 FR 33644 and 33645), we sought public comment on the possible 
removal of partial hip arthroplasty (PHA), CPT code 27125 
(Hemiarthroplasty, hip, partial (eg, femoral stem prosthesis, bipolar 
arthroplasty)), and total hip arthroplasty (THA) or total hip 
replacement, CPT code 27130 (Arthroplasty, acetabular and proximal 
femoral prosthetic replacement (total hip arthroplasty), with or 
without autograft or allograft from the IPO list. Both THA and PHA were 
placed on the original IPO list in the CY 2001 OPPS/ASC final rule with 
comment period (65 FR 18780).
    Among those commenters expressing support in response to the CY 
2018 OPPS/ASC proposed rule (which we summarized and responded to in 
the CY 2018 OPPS/ASC final rule with comment period (82 FR 52527 
through 52528) for removal of THA from the IPO list were several 
surgeons and other stakeholders who believed that, given thorough 
preoperative screening by medical teams with significant experience and 
expertise involving hip replacement procedures, the THA procedure could 
be provided on an outpatient basis for some Medicare beneficiaries. 
These commenters noted significant success involving same day discharge 
for patients who met the screening criteria and whose experienced 
medical teams were able to perform the procedure early enough in the 
day for the patients to achieve postoperative goals, allowing home 
discharge by the end of the day. The commenters believed that the 
benefits of providing the THA procedure on an outpatient basis would 
lead to significant enhancements in patient well-being, improved 
efficiency, and cost savings to the Medicare program, including shorter 
hospital stays resulting in fewer medical complications, improved 
results, and enhanced patient satisfaction.
    We stated in the CY 2018 OPPS/ASC proposed rule that, like most 
surgical procedures, both PHA and THA need to be tailored to the 
individual patient's needs. Patients with a relatively low anesthesia 
risk and without significant comorbidities who have family members at 
home who can assist them may likely be good candidates for an 
outpatient PHA or THA procedure. These patients may be determined to 
also be able to tolerate outpatient rehabilitation in either an 
outpatient facility or at home postsurgery. On the other hand, patients 
with multiple medical comorbidities, aside from their osteoarthritis, 
would more likely require inpatient hospitalization and possibly 
postacute care in a skilled nursing facility or other facility. 
Surgeons who discussed outpatient PHA and THA procedures in public 
comments in response to our CY 2017 OPPS/ASC proposed rule (81 FR 
45679) comment solicitation (which we summarized and responded to in 
the CY 2017 OPPS/ASC final rule with comment period (81 FR 79696)) on 
the TKA procedure emphasized the importance of careful patient 
selection and strict protocols to optimize outpatient hip replacement 
outcomes. These protocols typically manage all aspects of the patient's 
care, including the at-home preoperative and postoperative environment, 
anesthesia, pain management, and rehabilitation to maximize rapid 
recovery, ambulation, and performance of activities of daily living.
    Numerous commenters representing a variety of stakeholders, 
including physicians and other care providers, individual stakeholders, 
specialty societies, hospital associations, hospital systems, ASCs, 
device manufacturers, and beneficiaries, responded to our solicitation 
of comments regarding the removal of PHA and THA from the IPO list 
(which we summarized and responded to in CY 2018 OPPS/ASC final rule 
with comment period (82 FR 52527 through 52528)). The comments were 
diverse and some were similar to the comments we received on our 
proposal to remove TKA from the IPO

[[Page 39524]]

list. Some commenters, including hospital systems and associations as 
well as specialty societies and physicians, stated that it would not be 
clinically appropriate to remove PHA and THA from the IPO list, 
indicating that the patient safety profile of outpatient THA and PHA in 
the non-Medicare population is not well-established. Commenters 
representing orthopedic surgeons also stated that patients requiring a 
hemiarthroplasty (PHA) for fragility fractures are by nature higher 
risk, suffer more extensive comorbidities and require closer monitoring 
and preoperative optimization; therefore, it would not be medically 
appropriate to remove the PHA procedure from the IPO list.
    Other commenters, including ambulatory surgery centers, physicians, 
and beneficiaries, supported the removal of PHA and THA from the IPO 
list. These commenters stated that the procedures were appropriate for 
certain Medicare beneficiaries and most outpatient departments are 
equipped to provide THA to some Medicare beneficiaries. They also 
referenced their own personal successful experiences with outpatient 
THA.
    After reviewing the clinical characteristics of the procedure 
described by CPT code 27130, considering the public comments described 
earlier from past rules, additional feedback from stakeholders, and 
with further consultation with our clinical advisors regarding this 
procedure, we believe that this procedure meets criterion 2 (the 
simplest procedure described by the code may be performed in most 
outpatient departments) and criterion 3 (the procedure is related to 
codes that we have already removed from the IPO list). As such, we 
believe that appropriately selected patients could have this procedure 
performed on an outpatient basis. Therefore, we are proposing to remove 
THA from the IPO list and to assign the THA procedure (CPT code 27130) 
to C-APC 5115 with status indicator ``J1''. We are seeking public 
comments on our conclusion that the procedure described by CPT code 
27130 meets criteria 2 and 3 and our proposal to assign the procedure 
to C-APC 5115 with status indicator ``J1''. At this time, we are not 
proposing to remove PHA from the IPO list because we continue to 
believe that it does not meet the criteria for removal.
3. Solicitation of Public Comments on the Potential Removal of 
Procedures Described by CPT Codes 22633, 22634, 63265, 63266, 63267, 
63268 From the IPO List
    Throughout the years, we have received several public comments on 
additional CPT codes that stakeholders believe fit our criteria and 
should be removed from the IPO list. In this CY 2020 OPPS/ASC proposed 
rule, we are seeking public comment on the removal of the following 
procedures from the IPO list in Table 23.
[GRAPHIC] [TIFF OMITTED] TP09AU19.041

    We have reviewed the clinical characteristics of CPT code 22633 and 
CPT code 22634 and believe that they are related to codes that we have 
already removed from the IPO list. Specifically, stakeholders have 
suggested that CPT codes 22633 and 22634 are related to CPT code 
22551(Arthrodesis, anterior interbody, including disc space

[[Page 39525]]

preparation, discectomy, osteophytectomy and decompression of spinal 
cord and/or nerve roots; cervical below c2), which is currently 
performed in the outpatient hospital setting. However, after reviewing 
the current data available on CPT codes 22633 and 22634, we are 
concerned that the available data do not provide a large enough 
sampling of outpatient procedures and do not directly address the 
criteria for removal from the IPO list. At this time, we are seeking 
public comments that would provide additional information on the safety 
of performing CPT codes 22633 and 22634 in the outpatient hospital 
setting.
    In addition, we have reviewed CPT codes 63265, 63266, 63267, and 
63268. Over the years, stakeholders have indicated that this series of 
CPT codes should be considered minimally invasive, arguing that CPT 
codes 63265, 63266, 63267, and 63268 meet criteria one and two for 
removal from the IPO list: Most outpatient departments are equipped to 
provide the services to the Medicare population and the simplest 
procedure described by the code may be performed in most outpatient 
departments. At this time, we do not believe that there is sufficient 
information to demonstrate that CPT codes 63265, 63266, 63267, and 
63268 meet the IPO list removal criteria. However, we are seeking 
public comment on whether CPT codes 63265 through 63268 meet criteria 
to be removed from the IPO list, including information from commenters 
to demonstrate that the codes meet these criteria.
    Table 24 contains the proposed change that we are proposing to make 
to the IPO list for CY 2020.
[GRAPHIC] [TIFF OMITTED] TP09AU19.042

X. Proposed Nonrecurring Policy Changes

A. Proposed Changes in the Level of Supervision of Outpatient 
Therapeutic Services in Hospitals and Critical Access Hospitals (CAHs)

    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59390 
through 59391) and in the CY 2009 OPPS/ASC proposed rule and final rule 
with comment period (73 FR 41518 through 41519 and 73 FR 68702 through 
68704, respectively), we clarified that direct supervision is required 
for hospital outpatient therapeutic services covered and paid by 
Medicare that are furnished in hospitals as well as in provider-based 
departments (PBDs) of hospitals, as set forth in the CY 2000 OPPS final 
rule with comment period (65 FR 18525). In the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60575 through 60591), we finalized a 
technical correction to the title and text of the applicable regulation 
at 42 CFR 410.27 to clarify that this standard applies in critical 
access hospitals (CAHs) as well as hospitals. In response to concerns 
expressed by the hospital community, in particular CAHs and small rural 
hospitals, that they would have difficulty meeting this standard, on 
March 15, 2010, we instructed all MACs not to evaluate or enforce the 
supervision requirements for therapeutic services provided to 
outpatients in CAHs from January 1, 2010 through December 31, 2010, 
while the agency revisited the supervision policy during the CY 2011 
OPPS/ASC rulemaking cycle.
    Due to continued concerns expressed by CAHs and small rural 
hospitals, we extended this notice of nonenforcement (``enforcement 
instruction'') as an interim measure for CY 2011, and expanded it to 
apply to small rural hospitals having 100 or fewer beds (75 FR 72007). 
We continued to consider the issue further in our annual OPPS notice-
and-comment rulemaking, and implemented an independent review process 
in 2012 to obtain advice from the HOP Panel on this matter (76 FR 74360 
through 74371). Under this process used since CY 2012, the HOP Panel 
considers and advises CMS regarding stakeholder requests for changes in 
the required minimum level of supervision of individual hospital 
outpatient therapeutic services. In addition, we extended the 
enforcement instruction through CY 2012 and CY 2013. For the period of 
CY 2014 through CY 2017, Congress took legislative action (Pub. L. 113-
198, Pub. L. 114-112, Pub. L. 114-255, and Pub. L. 115-123) to extend 
nonenforcement of the direct supervision requirement for hospital 
outpatient therapeutic services in CAHs and small rural hospitals 
having 100 or fewer beds through December 31, 2017. Then in the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59391), we reinstated 
the enforcement instruction providing for the nonenforcement of the 
direct supervision requirement for hospital outpatient therapeutic 
services in CAHs and small rural hospitals having 100 or fewer beds 
through December 31, 2019. The current enforcement instruction is 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/Supervision-Moratorium-on-Enforcement-for-CAHs-and-Certain-Small-Rural-Hospitals.pdf.
    As discussed in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59390 through 59391), stakeholders have consistently requested 
that CMS continue the nonenforcement of the direct supervision 
requirement for hospital outpatient therapeutic services for CAHs and 
small rural hospitals having 100 or fewer beds. Stakeholders stated 
that some small rural hospitals and CAHs have insufficient staff 
available to furnish direct supervision. The primary reason 
stakeholders cited for this request is the difficulty that CAHs and 
small rural hospitals have in

[[Page 39526]]

recruiting physicians and nonphysician practitioners to practice in 
rural areas. These stakeholders noted that it is particularly difficult 
to furnish direct supervision for critical specialty services, such as 
radiation oncology services, that cannot be directly supervised by a 
hospital emergency department physician or nonphysician practitioner 
because of the volume of emergency patients or lack of specialty 
expertise. In addition, we are not aware of any supervision-related 
complaints from beneficiaries or providers regarding quality of care 
for services furnished during the several years that the enforcement 
instruction has been in effect.
    The upcoming expiration of the latest enforcement instruction 
providing for the nonenforcement of the direct supervision requirement 
for hospital outpatient therapeutic services for CAHs and small rural 
hospitals having 100 or fewer beds has prompted us to consider whether 
to change the level of supervision for hospital outpatient therapeutic 
services for all hospitals and CAHs. The enforcement instructions and 
legislative actions that have been in place since 2010 have created a 
two-tiered system of physician supervision requirements for hospital 
outpatient therapeutic services for providers in the Medicare program, 
with direct supervision required for most hospital outpatient 
therapeutic services in most hospital providers, but only general 
supervision required for most hospital outpatient therapeutic services 
in CAHs and small rural hospitals with fewer than 100 beds.
    However, we have not learned of any data or information from CAHs 
and small rural hospitals indicating that the quality of outpatient 
therapeutic services has been affected by requiring only general 
supervision for these services. It is important to remember that the 
requirement for general supervision for outpatient therapeutic services 
does not preclude these hospitals from providing direct supervision for 
outpatient therapeutic services when the physicians administering the 
medical procedures decide that it is appropriate to do so. Many 
outpatient therapeutic services involve a level of complexity and risk 
such that direct supervision would be warranted even though only 
general supervision is required.
    In addition, CAHs and hospitals in general continue to be subject 
to conditions of participation (CoPs) that complement the general 
supervision requirements for hospital outpatient therapeutic services 
to ensure that the medical services Medicare patients receive are 
properly supervised. The CoPs for hospitals require Medicare patients 
to be under the care of a physician (42 CFR 482.12(c)(4))), and for the 
hospital to ``have an organized medical staff that operates under 
bylaws approved by the governing body, and which is responsible for the 
quality of medical care provided to patients by the hospital'' (42 CFR 
482.22). The CoPs for CAHs (42 CFR 485.631(b)(1)(i)) require physicians 
to provide medical direction for the CAHs' health care activities, 
consultation for, and medical supervision of the health care staff. The 
physicians' responsibilities in hospitals and CAHs include supervision 
of all services performed at those facilities. In addition, physicians 
must also follow State laws regarding scope of practice. Failure of 
doctors of medicine or osteopathy to provide adequate supervision in 
accordance with the hospital and CAH CoPs does not cause payment to be 
denied for that individual service. However, consistent violations of 
the CoP supervision requirements can lead to a provider having to 
establish a corrective action plan to address supervision deficiencies, 
and if the provider still fails to meet the CoP requirements, the 
hospital or CAH can be terminated from Medicare participation.
    Our experience indicates that Medicare providers will provide a 
similar quality of hospital outpatient therapeutic services, regardless 
of whether the minimum level of supervision required under the Medicare 
program is direct or general. We have come to believe that the direct 
supervision requirement for hospital outpatient therapeutic services 
places an additional burden on providers that reduces their flexibility 
to provide medical care. The issues with increased burden and reduced 
flexibility to provide medical care have a more significant impact on 
CAHs and small rural hospitals due to their recruiting and staffing 
challenges, as we have recognized over the years in providing for 
nonenforcement of the policy for these hospitals. Larger hospitals and 
hospitals in urban or suburban areas are less affected by the burden 
and reduced flexibility of the direct supervision requirement. However, 
given that the direct supervision requirement has not yet been enforced 
for CAHs and small rural hospitals, we believe it is time to end what 
is effectively a two-tiered system of supervision levels for hospital 
outpatient therapeutic services by proposing a policy that sets an 
appropriate and uniformly enforceable supervision standard for all 
hospital outpatient therapeutic services.
    Therefore, we are proposing to change the generally applicable 
minimum required level of supervision for hospital outpatient 
therapeutic services from direct supervision to general supervision for 
services furnished by all hospitals and CAHs. General supervision, as 
defined in our regulation at 42 CFR 410.32(b)(3)(i) means that the 
procedure is furnished under the physician's overall direction and 
control, but that the physician's presence is not required during the 
performance of the procedure. This proposal would ensure a standard 
minimum level of supervision for each hospital outpatient therapeutic 
service furnished incident to a physician's service in accordance with 
the statute. We are proposing to amend the existing regulation at Sec.  
410.27(a)(1)(iv) to provide that the default minimum level of 
supervision for each hospital outpatient therapeutic service is 
``general.''
    We will continue to have the HOP Panel provide advice on the 
appropriate supervision levels for hospital outpatient services as 
described in section I.E.2. of this proposed rule. We will also retain 
the ability to consider a change to the supervision level of an 
individual hospital outpatient therapeutic service to a level of 
supervision that is more intensive than general supervision through 
notice and comment rulemaking. We are seeking public comments on this 
proposal. Additionally, we are seeking public comments on whether 
specific types of services, such as chemotherapy administration or 
radiation therapy, should be excepted from this proposal.

B. Short Inpatient Hospital Stays

1. Background on the 2-Midnight Rule
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50913 through 
50954), we clarified our policy regarding when an inpatient admission 
is considered reasonable and necessary for purposes of Medicare Part A 
payment. Under this policy, we established a benchmark providing that 
surgical procedures, diagnostic tests, and other treatments would be 
generally considered appropriate for inpatient hospital admission and 
payment under Medicare Part A when the physician expects the patient to 
require a stay that crosses at least 2 midnights and admits the patient 
to the hospital based upon that expectation. Conversely, when a 
beneficiary enters a hospital for a surgical procedure not designated 
as an inpatient-only (IPO) procedure as

[[Page 39527]]

described in 42 CFR 419.22(n), a diagnostic test, or any other 
treatment, and the physician expects to keep the beneficiary in the 
hospital for only a limited period of time that does not cross 2 
midnights, the services would be generally inappropriate for payment 
under Medicare Part A, regardless of the hour that the beneficiary came 
to the hospital or whether the beneficiary used a bed. With respect to 
services designated under the OPPS as IPO procedures, we explained that 
because of the intrinsic risks, recovery impacts, or complexities 
associated with such services, these procedures would continue to be 
appropriate for inpatient hospital admission and payment under Medicare 
Part A regardless of the expected length of stay. We also indicated 
that there might be further ``rare and unusual'' exceptions to the 
application of the benchmark, which would be detailed in subregulatory 
guidance.
2. Current Policy for Medical Review of Inpatient Hospital Admissions 
Under Medicare Part A
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70538 
through 70549), we revised the previous rare and unusual exceptions 
policy and finalized a proposal to allow for case-by-case exceptions to 
the 2-midnight benchmark, whereby Medicare Part A payment may be made 
for inpatient admissions where the admitting physician does not expect 
the patient to require hospital care spanning 2 midnights, if the 
documentation in the medical record supports the physician's 
determination that the patient nonetheless requires inpatient hospital 
care.
    We note that, in the CY 2016 OPPS/ASC final rule with comment 
period, we reiterated our position that the 2-midnight benchmark 
provides clear guidance on when a hospital inpatient admission is 
appropriate for Medicare Part A payment, while respecting the role of 
physician judgment. We stated that the following criteria will be 
relevant to determining whether an inpatient admission with an expected 
length of stay of less than 2 midnights is nonetheless appropriate for 
Medicare Part A payment:
     Complex medical factors such as history and comorbidities;
     The severity of signs and symptoms;
     Current medical needs; and
     The risk of an adverse event.
    In other words, for purposes of Medicare payment, an inpatient 
admission is payable under Part A if the documentation in the medical 
record supports either the admitting physician's reasonable expectation 
that the patient will require hospital care spanning at least 2 
midnights, or the physician's determination based on factors such as 
those identified above that the patient nonetheless requires care on an 
inpatient basis. The exceptions for procedures on the IPO list and for 
``rare and unusual'' circumstances designated by CMS as national 
exceptions were unchanged by the CY 2016 OPPS/ASC final rule with 
comment period.
    As we stated in the CY 2016 OPPS/ASC final rule with comment 
period, the decision to formally admit a patient to the hospital is 
subject to medical review. For instance, for cases where the medical 
record does not support a reasonable expectation of the need for 
hospital care crossing at least 2 midnights, and for inpatient 
admissions not related to a surgical procedure specified by Medicare as 
an IPO procedure under 42 CFR 419.22(n) or for which there was not a 
national exception, payment of the claim under Medicare Part A is 
subject to the clinical judgment of the medical reviewer. The medical 
reviewer's clinical judgment involves the synthesis of all submitted 
medical record information (for example, progress notes, diagnostic 
findings, medications, nursing notes, and other supporting 
documentation) to make a medical review determination on whether the 
clinical requirements in the relevant policy have been met. In 
addition, Medicare review contractors must abide by CMS' policies in 
conducting payment determinations, but are permitted to take into 
account evidence-based guidelines or commercial utilization tools that 
may aid such a decision. While Medicare review contractors may continue 
to use commercial screening tools to help evaluate the inpatient 
admission decision for purposes of payment under Medicare Part A, such 
tools are not binding on the hospital, CMS, or its review contractors. 
This type of information also may be appropriately considered by the 
physician as part of the complex medical judgment that guides their 
decision to keep a beneficiary in the hospital and formulation of the 
expected length of stay.
3. Proposed Change for Medical Review of Certain Inpatient Hospital 
Admissions Under Medicare Part A for CY 2020 and Subsequent Years
    As stated earlier in this section, the procedures on the IPO list 
of procedures under the OPPS are not subject to the 2-midnight 
benchmark for purposes of inpatient hospital payment. However, the 2-
midnight benchmark is applicable once procedures have been removed from 
the IPO list. Procedures that are removed from the IPO list are also 
subject to initial medical reviews of claims for short-stay inpatient 
admissions conducted by Beneficiary and Family-Centered Care Quality 
Improvement Organizations (BFCC-QIOs).
    BFCC-QIOs may also refer providers to the Recovery Audit 
Contractors (RACs) for further medical review due to exhibiting 
persistent noncompliance with Medicare payment policies, including, but 
not limited to:
     Having high denial rates;
     Consistently failing to adhere to the 2-midnight rule; or
     Failing to improve their performance after QIO educational 
intervention.
    As part of our continued effort to facilitate compliance with our 
payment policy for inpatient admissions, we are proposing to establish 
a 1-year exemption from certain medical review activities for 
procedures removed from the IPO list under the OPPS in CY 2020 and 
subsequent years. Specifically, we are proposing that procedures that 
have been removed from the IPO list would not be eligible for referral 
to RACs for noncompliance with the 2-midnight rule within the first 
calendar year of their removal from the IPO list. These procedures 
would not be considered by the BFCC-QIOs in determining whether a 
provider exhibits persistent noncompliance with the 2-midnight rule for 
purposes of referral to the RAC nor would these procedures be reviewed 
by RACs for ``patient status.'' During this 1-year period, BFCC-QIOs 
would have the opportunity to review such claims in order to provide 
education for practitioners and providers regarding compliance with the 
2-midnight rule, but claims identified as noncompliant would not be 
denied with respect to the site-of-service under Medicare Part A. 
Again, information gathered by the BFCC-QIO when reviewing procedures 
that are newly removed from the IPO list could be used for educational 
purposes and would not result in a claim denial during the proposed 1-
year exemption period.
    We believe that a 1-year exemption from BFCC-QIO referral to RACs 
and RAC ``patient status'' review of the setting for procedures removed 
from the IPO list under the OPPS and performed in the inpatient setting 
would be an adequate amount of time to allow providers to gain 
experience with application of the 2-midnight rule to these procedures 
and the

[[Page 39528]]

documentation necessary for Part A payment for those patients for which 
the admitting physician determines that the procedures should be 
furnished in an inpatient setting. Furthermore, we believe that this 1-
year exemption from referrals to RACs, RAC patient status review, and 
claims denials would be sufficient to allow providers time to update 
their billing systems and gain experience with respect to newly removed 
procedures eligible to be paid under either the IPPS or the OPPS, while 
avoiding potential adverse site-of-service determinations. Nonetheless, 
we are soliciting public comments regarding the appropriate period of 
time for this proposed exemption. Commenters may indicate whether and 
why they believe the proposed 1-year period is appropriate, or whether 
they believe a longer or shorter exemption period would be more 
appropriate.
    In summary, for CY 2020 and subsequent years, we are proposing to 
establish a 1-year exemption from site-of-service claim denials, BFCC-
QIO referrals to RACs, and RAC reviews for ``patient status'' (that is, 
site-of-service) for procedures that are removed from the IPO list 
under the OPPS beginning on January 1, 2020. We encourage BFCC-QIOs to 
review these cases for medical necessity in order to educate themselves 
and the provider community on appropriate documentation for Part A 
payment when the admitting physician determines that it is medically 
reasonable and necessary to conduct these procedures on an inpatient 
basis. We note that we will monitor changes in site-of-service to 
determine whether changes may be necessary to certain CMS Innovation 
Center models.

C. Method To Control Unnecessary Increases in the Volume of Clinic 
Visit Services Furnished in Excepted Off-Campus Provider-Based 
Departments (PBDs)

    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 
through 59014), we adopted a method to control unnecessary increases in 
the volume of the clinic visit service furnished in excepted off-campus 
provider-based departments (PBDs) by removing the payment differential 
that drives the site-of-service decision and, as a result, 
unnecessarily increases service volume. We refer readers to the CY 2019 
OPPS/ASC final rule with comment period for a detailed discussion of 
the background, legislative provisions, and the changes in payment 
policies we developed to address increases in the volume of covered OPD 
services. Below we discuss the specific policy we finalized in the CY 
2019 OPPS/ASC final rule with comment period and its application under 
the OPPS for CY 2020.
    For the CY 2019 OPPS, using our authority under section 
1833(t)(2)(F) of the Act to adopt a method to control unnecessary 
increases in the volume of covered outpatient department services, we 
applied an amount equal to the site-specific Medicare Physician Fee 
Schedule (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). 
However, we phased in the application of the reduction in payment for 
the clinic visit service described by HCPCS code G0463 in the excepted 
provider-based department setting over 2 years. For CY 2019, the 
payment reduction was transitioned by applying 50 percent of the total 
reduction in payment that was applied if these departments were paid 
the site-specific PFS rate for the clinic visit service. The PFS-
equivalent rate was 40 percent of the OPPS payment for CY 2019 (that 
is, 60 percent less than the OPPS rate). We provided for a 2-year 
phase-in of this policy under which one-half of the total 60-percent 
payment reduction (a 30-percent reduction) was applied in CY 2019. 
These departments are paid approximately 70 percent of the OPPS rate 
(100 percent of the OPPS rate minus the 30-percent payment reduction 
that is applied in CY 2019) for the clinic visit service in CY 2019.
    For CY 2020, the second year of the 2-year phase-in, we stated that 
we would apply the total reduction in payment that is applied if these 
departments (departments that bill the modifier ``PO'' on claims lines) 
are paid the site-specific PFS rate for the clinic visit service 
described by HCPCS code G0463. The proposed PFS-equivalent rate for CY 
2020 is 40 percent of the proposed OPPS payment (that is, 60 percent 
less than the proposed OPPS rate) for CY 2020. Under this policy, 
departments will be paid approximately 40 percent of the OPPS rate (100 
percent of the OPPS rate minus the 60-percent payment reduction that is 
applied in CY 2020) for the clinic visit service in CY 2020.
    In addition, as we stated in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59013), for CY 2020, this policy will be 
implemented in a non-budget neutral manner. The estimated payment 
impact of this policy is displayed in Column 5 of Table 44--Estimated 
Impact of the Proposed CY 2020 Changes for the Hospital Outpatient 
Prospective Payment System in this CY 2020 OPPS/ASC proposed rule. 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 non-
budget neutral manner. The impact associated with this policy is 
further described in section XXVI. of this CY 2020 OPPS/ASC proposed 
rule.

XI. Proposed CY 2020 OPPS Payment Status and Comment Indicators

A. Proposed CY 2020 OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs serve an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system, and also, whether 
particular OPPS policies apply to the code.
    For CY 2020, we are not proposing to make any changes to the 
definitions of status indicators that were listed in Addendum D1 to the 
CY 2019 OPPS/ASC final rule with comment period available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1717-P.html?DLPage=1&DLEntries=10&10DLSort=2DLSortDir=descending.
    We are requesting public comments on the proposed definitions of 
the OPPS status indicators for CY 2020. The complete list of the 
proposed payment status indicators and their definitions that would 
apply for CY 2020 is displayed in Addendum D1 to this proposed rule, 
which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    The proposed CY 2020 payment status indicator assignments for APCs 
and HCPCS codes are shown in Addendum A and Addendum B, respectively, 
to this proposed rule, which are available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

[[Page 39529]]

B. Proposed CY 2020 Comment Indicator Definitions

    In this proposed rule, we are proposing to use four comment 
indicators for the CY 2020 OPPS. These comment indicators, ``CH'', 
``NC'', ``NI'', and ``NP'', are in effect for CY 2019 and we are 
proposing to continue their use in CY 2020. The proposed CY 2020 OPPS 
comment indicators are as follows:
     ``CH''--Active HCPCS code in current and next calendar 
year, status indicator and/or APC assignment has changed; or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NC''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year for which we 
requested comments in the proposed rule, final APC assignment; comments 
will not be accepted on the final APC assignment for the new code.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
     ``NP''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year, proposed APC 
assignment; comments will be accepted on the proposed APC assignment 
for the new code.
    The definitions of the proposed OPPS comment indicators for CY 2020 
are listed in Addendum D2 to this proposed rule, which is available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

XII. MedPAC Recommendations

    The Medicare Payment Advisory Commission (MedPAC) was established 
under section 1805 of the Act in large part to advise the U.S. Congress 
on issues affecting the Medicare program. As required under the 
statute, MedPAC submits reports to the Congress no later than March and 
June of each year that present its Medicare payment policy 
recommendations. The March report typically provides discussion of 
Medicare payment policy across different payment systems and the June 
report typically discusses selected Medicare issues. We are including 
this section of the proposed rule to make stakeholders aware of certain 
MedPAC recommendations for the OPPS and ASC payment systems as 
discussed in its March 2019 report.

A. OPPS Payment Rates Update

    The March 2019 MedPAC ``Report to the Congress: Medicare Payment 
Policy'' recommended that Congress update Medicare OPPS payment rates 
of 2 percent, with the difference between this and the update amount 
specified in current law to be used to increase payments in a new 
suggested Medicare quality program, the ``Hospital Value Incentive 
Program (HVIP).'' We refer readers to the March 2019 MedPAC report, 
which is available for download at www.medpac.gov, for a complete 
discussion on these recommendations. We appreciate MedPAC's 
recommendations, but as MedPAC acknowledged in its report, Congress 
would need to change current law to enable us to implement its 
recommendations.

B. ASC Conversion Factor Update

    In the March 2019 MedPAC ``Report to the Congress: Medicare Payment 
Policy'' MedPAC found that, based on its analysis of indicators of 
payment adequacy, the number of Medicare-certified ASCs had increased, 
beneficiaries' use of ASCs had increased, and ASC access to capital has 
been adequate.\68\ As a result, for CY 2020, MedPAC stated that 
payments to ASCs are adequate and recommended that no payment update 
should be given for 2020 (that is, the update factor would be 0 
percent).
---------------------------------------------------------------------------

    \68\ Medicare Payment Advisory Committee. March 2019 Report to 
the Congress. Chapter 5: Ambulatory surgical center services. 
Available at: http://www.medpac.gov/docs/default-source/reports/mar19_medpac_ch5_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59079), we adopted a policy, which we codified at 42 CFR 416.171(a)(2), 
to apply the hospital market basket update to ASC payment system rates 
for an interim period of 5 years. We refer the reader to the CY 2019 
OPPS/ASC final rule with comment period for complete details regarding 
our policy to use the hospital market basket update for the ASC payment 
system. Therefore, consistent with our policy for the ASC payment 
system, we are proposing to apply a 2.7 percent MFP-adjusted hospital 
market basket update factor to the CY 2019 ASC conversion factor for 
ASCs meeting the quality reporting requirements to determine the CY 
2020 ASC payment amounts. See section XIII of this proposed rule for a 
complete explanation of our relevant policies.

C. ASC Cost Data

    MedPAC recommended that Congress require ASCs to report cost data 
to enable the Commission to examine the growth of ASCs' costs over time 
and analyze Medicare payments relative to the costs of efficient 
providers, and that CMS could use ASC cost data to examine whether an 
existing Medicare price index is an appropriate proxy for ASC costs or 
an ASC specific market basket should be developed. Further, MedPAC 
suggested that CMS could limit the scope of the cost reporting system 
to minimize administrative burden on ASCs and the program.\69\
---------------------------------------------------------------------------

    \69\ Medicare Payment Advisory Committee. March 2019 Report to 
the Congress. Chapter 5: Ambulatory surgical center services. 
Available at: http://www.medpac.gov/docs/default-source/reports/mar19_medpac_ch5_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    We recognize that the submission of cost data places additional 
administrative burden on ASCs. We are interested in methods that would 
mitigate the burden of reporting costs on ASCs while also collecting 
enough data to reliably use such data in the determination of ASC 
costs. We are not proposing any cost reporting requirements for ASCs in 
this CY 2020 OPPS/ASC proposed rule.
    The full March 2019 MedPAC report can be downloaded from MedPAC's 
website at: http://www.medpac.gov/docs/default-source/reports/mar19_medpac_entirereport_sec.pdf.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to payments to ASCs under Medicare, we refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 
32292). For a discussion of prior rulemaking on the ASC payment system, 
we refer readers to the CYs 2012, 2013, 2014, 2015, 2016, 2017, 2018 
and 2019 OPPS/ASC final rules with comment period (76 FR 74378 through 
74379; 77 FR 68434 through 68467; 78 FR 75064 through 75090; 79 FR 
66915 through 66940; 80 FR 70474 through 70502; 81 FR 79732 through 
79753; 82 FR 59401 through 59424; and 83 FR 59028 through 59080, 
respectively).

[[Page 39530]]

2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under 42 CFR 416.2 and 416.166 of the Medicare regulations, subject 
to certain exclusions, covered surgical procedures in an ASC are 
surgical procedures that are separately paid under the OPPS, that would 
not be expected to pose a significant risk to beneficiary safety when 
performed in an ASC, and for which standard medical practice dictates 
that the beneficiary would not typically be expected to require active 
medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered under the ASC payment system as an 
indicator of the complexity of the procedure and its appropriateness 
for Medicare payment in ASCs. We use this standard only for purposes of 
evaluating procedures to determine whether or not they are appropriate 
to be furnished to Medicare beneficiaries in ASCs. Historically, we 
have defined surgical procedures as those described by Category I CPT 
codes in the surgical range from 10000 through 69999 as well as those 
Category III CPT codes and Level II HCPCS codes that directly crosswalk 
or are clinically similar to procedures in the CPT surgical range that 
we have determined do not pose a significant safety risk, that we would 
not expect to require an overnight stay when performed in ASCs, and 
that are separately paid under the OPPS (72 FR 42478).
    In the August 2, 2007 final rule (72 FR 42495), we also established 
our policy to make separate ASC payments for the following ancillary 
items and services when they are provided integral to ASC covered 
surgical procedures: (1) Brachytherapy sources; (2) certain implantable 
items that have pass-through payment status under the OPPS; (3) certain 
items and services that we designate as contractor-priced, including, 
but not limited to, procurement of corneal tissue; (4) certain drugs 
and biologicals for which separate payment is allowed under the OPPS; 
and (5) certain radiology services for which separate payment is 
allowed under the OPPS. In the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66932 through 66934), we expanded the scope of ASC 
covered ancillary services to include certain diagnostic tests within 
the medicine range of CPT codes for which separate payment is allowed 
under the OPPS when they are provided integral to an ASC covered 
surgical procedure. Covered ancillary services are specified in Sec.  
416.164(b) and, as stated previously, are eligible for separate ASC 
payment. Payment for ancillary items and services that are not paid 
separately under the ASC payment system is packaged into the ASC 
payment for the covered surgical procedure.
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services in ASCs in conjunction with 
the annual proposed and final rulemaking process to update the OPPS and 
the ASC payment system (Sec.  416.173; 72 FR 42535). We base ASC 
payment and policies for most covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, and we use quarterly change requests (CRs) to update 
services covered under the OPPS. We also provide quarterly update CRs 
for ASC covered surgical procedures and covered ancillary services 
throughout the year (January, April, July, and October). We release new 
and revised Level II HCPCS codes and recognize the release of new and 
revised CPT codes by the AMA and make these codes effective (that is, 
the codes are recognized on Medicare claims) via these ASC quarterly 
update CRs. We recognize the release of new and revised Category III 
CPT codes in the July and January CRs. These updates implement newly 
created and revised Level II HCPCS and Category III CPT codes for ASC 
payments and update the payment rates for separately paid drugs and 
biologicals based on the most recently submitted ASP data. New and 
revised Category I CPT codes, except vaccine codes, are released only 
once a year, and are implemented only through the January quarterly CR 
update. New and revised Category I CPT vaccine codes are released twice 
a year and are implemented through the January and July quarterly CR 
updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed 
rule for an example of how this process, which we finalized in the CY 
2012 OPPS/ASC final rule with comment period, is used to update HCPCS 
and CPT codes (76 FR 42291; 76 FR 74380 through 74384).
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new codes, and codes with revised descriptors, to identify any that we 
believe meet the criteria for designation as ASC covered surgical 
procedures or covered ancillary services. Updating the lists of ASC 
covered surgical procedures and covered ancillary services, as well as 
their payment rates, in association with the annual OPPS rulemaking 
cycle is particularly important because the OPPS relative payment 
weights and, in some cases, payment rates, are used as the basis for 
the payment of many covered surgical procedures and covered ancillary 
services under the revised ASC payment system. This joint update 
process ensures that the ASC updates occur in a regular, predictable, 
and timely manner.
3. Definition of ASC Covered Surgical Procedures
    Since the implementation of the ASC prospective payment system, we 
have historically defined a ``surgical'' procedure under the payment 
system as any procedure described within the range of Category I CPT 
codes that the CPT Editorial Panel of the American Medical Association 
(AMA) defines as ``surgery'' (CPT codes 10000 through 69999) (72 FR 
42478). We also have included as ``surgical,'' procedures that are 
described by Level II HCPCS codes or by Category III CPT codes that 
directly crosswalk or are clinically similar to procedures in the CPT 
surgical range that we have determined do not pose a significant safety 
risk, would not expect to require an overnight stay when performed in 
an ASC, and that are separately paid under the OPPS (72 FR 42478).
    As we noted in the CY 2008 final rule that implemented the revised 
ASC payment system, using this definition of surgery would exclude from 
ASC payment certain invasive, ``surgery-like'' procedures, such as 
cardiac catheterization or certain radiation treatment services that 
are assigned codes outside the CPT surgical range (72 FR 42477). We 
stated in that final rule that we believed continuing to rely on the 
CPT definition of surgery is administratively straightforward, is 
logically related to the categorization of services by physician 
experts who both establish the codes and perform the procedures, and is 
consistent with a policy to allow ASC payment for all outpatient 
surgical procedures (72 FR 42477).
    However, in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59029 through 59030), after consideration of public comments 
received in response to the CY 2019 proposed rule and earlier OPPS/ASC 
rulemaking cycles, we revised our definition of a surgical procedure 
under the ASC payment system. We now

[[Page 39531]]

define a surgical procedure under the ASC payment system as any 
procedure described within the range of Category I CPT codes that the 
CPT Editorial Panel of the American Medical Association (AMA) defines 
as ``surgery'' (CPT codes 10000 through 69999) (72 FR 42476), as well 
as procedures that are described by Level II HCPCS codes or by Category 
I CPT codes or by Category III CPT codes that directly crosswalk or are 
clinically similar to procedures in the CPT surgical range that we have 
determined are not expected to pose a significant risk to beneficiary 
safety when performed in an ASC, for which standard medical practice 
dictates that the beneficiary would not typically be expected to 
require an overnight stay following the procedure, and are separately 
paid under the OPPS.

B. Proposed ASC Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised HCPCS 
Codes
    Payment for ASC procedures, services, and items are generally based 
on medical billing codes, specifically, HCPCS codes, that are reported 
on ASC claims. The HCPCS is divided into two principal subsystems, 
referred to as Level I and Level II of the HCPCS. Level I is comprised 
of CPT (Current Procedural Terminology) codes, a numeric and 
alphanumeric coding system maintained by the American Medical 
Association (AMA), and includes Category I, II, and III CPT codes. 
Level II of the HCPCS, which is maintained by CMS, is a standardized 
coding system that is used primarily to identify products, supplies, 
and services not included in the CPT codes. Together, Level I and II 
HCPCS codes are used to report procedures, services, items, and 
supplies under the ASC payment system. Specifically, we recognize the 
following codes on ASC claims:
     Category I CPT codes, which describe surgical procedures, 
diagnostic and therapeutic services, and vaccine codes;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes (also known as alphanumeric codes), 
which are used primarily to identify drugs, devices, supplies, 
temporary procedures, and services not described by CPT codes.
    We finalized a policy in the August 2, 2007 final rule (72 FR 42533 
through 42535) to evaluate each year all new and revised Category I and 
Category III CPT codes and Level II HCPCS codes that describe surgical 
procedures, and to make preliminary determinations during the annual 
OPPS/ASC rulemaking process regarding whether or not they meet the 
criteria for payment in the ASC setting as covered surgical procedures 
and, if so, whether or not they are office-based procedures. In 
addition, we identify new and revised codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. In prior rulemakings, we refer to this process as 
recognizing new codes. However, this process has always involved the 
recognition of new and revised codes. We consider revised codes to be 
new when they have substantial revision to their code descriptors that 
necessitate a change in the current ASC payment indicator. To clarify, 
we refer to these codes as new and revised in this CY 2020 OPPS/ASC 
proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we are proposing to solicit public comments in 
this proposed rule (and respond to those comments in the CY 2020 OPPS/
ASC final rule with comment period) or whether we will be soliciting 
public comments in the CY 2020 OPPS/ASC final rule with comment period 
(and responding to those comments in the CY 2021 OPPS/ASC final rule 
with comment period).
2. April 2019 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Proposed Rule
    For the April 2019 update, there were no new CPT codes, however, 
there were several new Level II HCPCS codes. In the April 2019 ASC 
quarterly update (Transmittal 4263, CR 11232, dated March 22, 2019), we 
added eight new Level II HCPCS codes to the list of covered ancillary 
services. Table 25 list the new Level II HCPCS codes that were 
implemented April 1, 2019, along with their proposed payment indicators 
for CY 2020. The proposed comment indicators, payment indicators and 
payment rates, where applicable, for these April codes can be found in 
Addendum BB to this proposed rule. The list of ASC payment indicators 
and corresponding definitions can be found in Addendum DD1 to this 
proposed rule. These new codes that are effective April 1, 2019 are 
assigned to comment indicator ``NP'' in Addendum BB to this proposed 
rule to indicate that the codes are assigned to an interim APC 
assignment and that comments will be accepted on their interim APC 
assignments. Also, the list of comment indicators and definitions used 
under the ASC can be found in Addendum DD2 to this proposed rule. We 
note that ASC Addendum BB, Addendum DD1, and Addendum DD2 are available 
via the internet on the CMS website.
BILLING CODE 4120-01-P

[[Page 39532]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.043

    We are inviting public comments on these proposed payment 
indicators and payment rates for the new HCPCS codes that were 
recognized as ASC ancillary services in April 2019 through the 
quarterly update CRs, as listed in Table 25. We are proposing to 
finalize their payment indicators in the CY 2020 OPPS/ASC final rule 
with comment period.
3. July 2019 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    In the July 2019 ASC quarterly update (Transmittal 4076, Change 
Request 10788, dated June 14, 2019), we added several separately 
payable Category III CPT and Level II HCPCS codes to the list of 
covered surgical procedures and ancillary services. Table 26 lists the 
new HCPCS codes that are effective July 1, 2019. The proposed payment 
indicators and payment rates for these codes can be found in Addendum 
AA and Addendum BB to this proposed rule. The list of ASC payment 
indicators and corresponding definitions can be found in Addendum DD1 
to this proposed rule. These new codes that are effective July 1, 2019 
are assigned to comment indicator ``NP'' in Addendum BB to this 
proposed rule to indicate that the codes are assigned to an interim APC 
assignment and that comments will be accepted on their interim APC 
assignments. Also, the list of comment indicators and definitions used 
under the ASC can be found in Addendum DD2 to this proposed rule. We 
note that ASC Addendum BB, Addendum DD1, and Addendum DD2 are available 
via the internet on the CMS website.

[[Page 39533]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.044

    In addition, through the July 2019 quarterly update CR, we are also 
implementing an ASC payment for one new Category III CPT code as an ASC 
covered ancillary service, effective July 1, 2019. This code is listed 
in Table 27, along with the proposed comment indicator and payment 
indicator. The CY 2020 proposed payment rate for this new Category III 
CPT code can be found in Addendum BB. As noted above, the list of 
payment indicators and comment indicators used under the ASC can be 
found in Addendum DD1 and DD2, respectively, of this proposed rule. We 
note that ASC Addendum BB, Addendum DD1, and Addendum DD2 are available 
via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP09AU19.045

BILLING CODE 4120-01-C

[[Page 39534]]

    We are inviting public comments on these proposed payment 
indicators for the new Category III CPT code and Level II HCPCS codes 
newly recognized as ASC covered surgical procedures or covered 
ancillary services in July 2019 through the quarterly update CRs, as 
listed in Tables 25, 26, and 27. We are proposing to finalize the 
payment indicators in the CY 2020 OPPS/ASC final rule with comment 
period.
4. October 2019 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2020 OPPS/ASC Final Rule With Comment Period
    For CY 2020, consistent with our established policy, we are 
proposing that the Level II HCPCS codes that will be effective October 
1, 2019, would be flagged with comment indicator ``NI'' in Addendum BB 
to the CY 2020 OPPS/ASC final rule with comment period to indicate that 
we have assigned the codes an interim ASC payment status for CY 2020. 
We will invite public comments in the CY 2020 OPPS/ASC final rule with 
comment period on the interim payment indicators, which would then be 
finalized in the CY 2021 OPPS/ASC final rule with comment period.
5. January 2020 HCPCS Codes
a. Level II HCPCS Codes for Which We Will Be Soliciting Public Comments 
in the CY 2020 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Level II HCPCS codes that are effective January 1 in the final rule 
with comment period, thereby updating the ASC payment system for the 
calendar year. We note that unlike the CPT codes that are effective 
January 1 and are included in the OPPS/ASC proposed rules, and except 
for the G-codes listed in Addendum O to this proposed rule, most Level 
II HCPCS codes are not released until sometime around November to be 
effective January 1. Because these codes are not available until 
November, we are unable to include them in the OPPS/ASC proposed rules. 
Therefore, these Level II HCPCS codes will be released to the public 
through the CY 2020 OPPS/ASC final rule with comment period, January 
2020 ASC Update CR, and the CMS HCPCS website.
    In addition, for CY 2020, we will propose to continue our 
established policy of assigning comment indicator ``NI'' in Addendum AA 
and Addendum BB to the OPPS/ASC final rule with comment period to the 
new Level II HCPCS codes that will be effective January 1, 2020 to 
indicate that we are assigning them an interim payment indicator, which 
is subject to public comment. We will be inviting public comments in 
the CY 2020 OPPS/ASC final rule with comment period on the payment 
indicator assignments, which would then be finalized in the CY 2021 
OPPS/ASC final rule with comment period.
b. CPT Codes for Which We Will Be Soliciting Public Comments in This 
Proposed Rule
    For new and revised CPT codes effective January 1, 2020 that were 
received in time to be included in this proposed rule, we are proposing 
the appropriate payment indicator assignments, and soliciting public 
comments on the payment assignments. We will accept comments and 
finalize the payment indicators in the CY 2020 OPPS/ASC final rule with 
comment period. For those new/revised CPT codes that are received too 
late for inclusion in this OPPS/ASC proposed rule, we may either make 
interim final assignments in the final rule with comment period or 
possibly 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.
    For the CY 2020 ASC update, the new and revised Category I and III 
CPT codes that will be effective on January 1, 2020, can be found in 
ASC Addendum AA and Addendum BB to this proposed rule (which are 
available via the internet on the CMS website). The CPT codes are 
assigned to comment indicator ``NP'' to indicate that the code is new 
for the next calendar year or the code is an existing code with 
substantial revision to its code descriptor in the next calendar year 
as compared to current calendar year and that comments will be accepted 
on the proposed payment indicator. Further, we remind readers that the 
CPT code descriptors that appear in Addendum AA and Addendum BB are 
short descriptors and do not describe the complete procedure, service, 
or item described by the CPT code. Therefore, we include the 5-digit 
placeholder codes and their long descriptors for the new and revised CY 
2020 CPT codes in Addendum O to this proposed rule (which is available 
via the internet on the CMS website) so that the public can comment on 
our proposed payment indicator assignments. The 5-digit placeholder 
codes can be found in Addendum O to this proposed rule, specifically 
under the column labeled ``CY 2020 OPPS/ASC Proposed Rule 5-Digit 
Placeholder Code.'' The final CPT code numbers will be included in the 
CY 2020 OPPS/ASC final rule with comment period where possible.
    In summary, we are soliciting public comments on the proposed CY 
2020 payment indicators for the new and revised Category I and III CPT 
codes that will be effective January 1, 2020. Because these codes are 
listed in Addendum AA and Addendum BB with short descriptors only, we 
are listing them again in Addendum O with the long descriptors. We are 
also proposing to finalize the payment indicator for these codes (with 
their final CPT code numbers) in the CY 2020 OPPS/ASC final rule with 
comment period. The proposed payment indicator and comment indicator 
for these codes can be found in Addendum AA and Addendum BB to this 
proposed rule. The list of ASC payment indicators and corresponding 
definitions can be found in Addendum DD1 to this proposed rule. The new 
CPT codes that will be effective January 1, 2020 are assigned to 
comment indicator ``NP'' in Addendum AA and Addendum BB to this 
proposed rule to indicate that the codes are assigned to an interim 
payment indicator and that comments will be accepted on their interim 
ASC payment assignments. Also, the list of comment indicators and 
definitions used under the ASC can be found in Addendum DD2 to this 
proposed rule. We note that ASC Addendum BB, Addendum DD1, and Addendum 
DD2 are available via the internet on the CMS website.
    Finally, in Table 28, we summarize our process for updating codes 
through our ASC quarterly update CRs, seeking public comments, and 
finalizing the treatment of these new codes under the ASC.

[[Page 39535]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.046

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

1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC Covered Procedures List (CPL) in CY 2008 or later years that we 
determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC CPL beginning in CY 2008 that we determined were 
office-based were identified in Addendum AA to that rule by payment 
indicator ``P2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS 
relative payment weight); ``P3'' (Office-based surgical procedures 
added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; 
payment based on MPFS nonfacility PE RVUs); or ``R2'' (Office-based 
surgical procedure added to ASC list in CY 2008 or later without MPFS 
nonfacility PE RVUs; payment based on OPPS relative payment weight), 
depending on whether we estimated the procedure would be paid according 
to the standard ASC payment methodology based on its OPPS relative 
payment weight or at the MPFS nonfacility PE RVU-based amount.
    Consistent with our final policy to annually review and update the 
ASC CPL to include all covered surgical procedures eligible for payment 
in ASCs, each year we identify covered surgical procedures as either 
temporarily office-based (these are new procedure codes with little or 
no utilization data that we have determined are clinically similar to 
other procedures that are permanently office-based), permanently 
office-based, or nonoffice-based, after taking into account updated 
volume and utilization data.
(2) Proposed Changes for CY 2020 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this proposed rule, we followed our policy to 
annually review and update the covered surgical procedures for which 
ASC payment is made and to identify new procedures that may be 
appropriate for ASC payment, including their potential designation as 
office-based. We reviewed CY 2018 volume and utilization data and the 
clinical characteristics for all covered surgical procedures that are 
assigned payment indicator ``G2'' (Nonoffice-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) in CY 2018, as well as for those procedures assigned one of the 
temporary office-based payment indicators, specifically ``P2'', ``P3'', 
or ``R2'' in the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59039 through 59040).
    As we stated in the CY 2019 final rule with comment period (83 FR 
59036), the office-based utilization for CPT codes 36902 and 36905 
(dialysis vascular

[[Page 39536]]

access procedures) was greater than 50 percent. However, we did not 
designate CPT codes 36902 and 36905 as office-based procedures for CY 
2019. These codes became effective January 1, 2017 and CY 2017 was the 
first year we had claims volume and utilization data for CPT codes 
36902 and 36905. We shared commenters' concerns that the available data 
were not adequate to make a determination that these procedures should 
be office-based, and believed it was premature to assign office-based 
payment status to those procedures for CY 2019. For CY 2019, CPT codes 
36902 and 36905 were assigned payment indicators of ``G2''--Non office-
based surgical procedure added in CY 2008 or later; payment based on 
OPPS relative weight.
    In reviewing the CY 2018 volume and utilization data for CPT code 
36902 we determined that the procedure was performed more than 50 
percent of the time in physicians' offices based on 2018 volume and 
utilization data.
    However, the office-based utilization for CPT code 36902 has fallen 
from 62 percent based on 2017 data to 52 percent based on 2018 data. In 
addition, there was a sizeable increase in claims for this service in 
ASCs--from approximately 14,000 in 2017 to 38,000 in 2018. As 
previously stated in the CY 2019 OPPS/ASC final rule (83 FR 59036), 
when we believe that the available data for our review process are 
inadequate to make a determination that a procedure should be office-
based, we either make no change to the procedure's payment status or 
make the change on a temporary basis, and reevaluate our decision when 
more data become available for our next evaluation. In light of these 
changes in utilization and due to the high utilization of this 
procedure in all settings (over 125,000 claims in 2018), we believe it 
may be premature to assign office-based payment status to CPT code 
36902 at this time.
    Therefore, for CY 2020, we are not proposing to designate CPT code 
36902 as an office-based procedure and continue to assign CPT code 
36902 a payment indicator of ``G2''--nonoffice-based surgical procedure 
paid based on OPPS relative weights.
    The CY 2018 volume and utilization data for CPT code 36905 show the 
procedure was not performed more than 50 percent of the time in 
physicians' offices. Therefore, we are not considering assigning an 
office-based designation for CPT code 36905 and the procedure will 
retain its payment indicator of ``G2''--non office-based surgical 
procedure based on OPPS relative weights.
    Our review of the CY 2018 volume and utilization data resulted in 
our identification of 9 other covered surgical procedures that we 
believe meet the criteria for designation as permanently office-based. 
The data indicate that these procedures are performed more than 50 
percent of the time in physicians' offices, and we believe that the 
services are of a level of complexity consistent with other procedures 
performed routinely in physicians' offices. The CPT codes that we are 
proposing to permanently designate as office-based for CY 2020 are 
listed in Table 29.
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    We also reviewed CY 2018 volume and utilization data and other 
information for 12 procedures designated as temporarily office-based in 
Tables 57 and 58 in the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59039 through 59040). Of these 12 procedures, there were very 
few claims in our data and no claims data for 11 procedures described 
by CPT codes 10005, 10007, 10009, 10011, 11102, 11104, 11106, 65785, 
67229, 0402T and 0512T. Consequently, we are proposing to maintain the 
temporary office-based designations for these 11 CPT codes for CY 2020. 
We list all of those codes for which we proposed to maintain the 
temporary office-based designations for CY 2020 in Table 30. The 
procedures for which the proposed office-based designations for CY 2020 
are temporary also are indicated by asterisks in Addendum AA to this 
proposed rule (which is available via the internet on the CMS website).
    The volume and utilization data for the one remaining procedure 
that has a temporary office-based designation for CY 2019, described by 
CPT code 38222 (Diagnostic bone marrow; biopsy(ies) and aspiration(s)), 
are sufficient to indicate that this covered surgical procedures was 
not performed predominantly in physicians' offices and, therefore, we 
are proposing to assign a nonoffice-based payment indicator--``G2''--to 
this code for CY 2020.

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    For CY 2020, we are proposing to designate 7 new CY 2020 CPT codes 
for ASC covered surgical procedures as temporarily office-based, as 
displayed in Table 31. After reviewing the clinical characteristics, 
utilization, and volume of related procedure codes, we determined that 
the procedures in Table 30 described by the new CPT codes would be 
predominantly performed in physicians' offices. We believe the 
procedure described by CPT codes 93X00 (Duplex scan of arterial inflow 
and venous outflow for preoperative vessel assessment prior to creation 
of hemodialysis access; complete bilateral study) and 93X01 (Duplex 
scan of arterial inflow and venous outflow for preoperative vessel 
assessment prior to creation of hemodialysis access; complete 
unilateral study) is clinically similar to HCPCS code G0365 (Vessel 
mapping of vessels for hemodialysis access (services for preoperative 
vessel mapping prior to creation of hemodialysis access using an 
autogenous hemodialysis conduit, including arterial inflow and venous 
outflow)), which is currently on the list of covered surgical 
procedures and assigned a proposed payment indicator ``R2''--Office-
based surgical procedure added to ASC list in CY 2008 or later without 
MPFS nonfacility PE RVUs; payment based on OPPS relative payment 
weight--for CY 2020. As such, we are proposing to add CPT codes 93X00 
and 93X01 in Table 30 to the list of temporarily office-based covered 
surgical procedures.
    Because we have no utilization data for the procedures specifically 
described by these new CPT codes, we are proposing to make the office-
based designation temporary rather than permanent, and we will 
reevaluate the procedures when data become available. The procedures 
for which the proposed office-based designation for CY 2020 is 
temporary are indicated by asterisks in Addendum AA to this proposed 
rule (which is available via the internet on the CMS website).

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BILLING CODE 4120-01-C
b. Proposed ASC Covered Surgical Procedures To Be Designated as Device-
Intensive
(1) Background
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59040 through 59041), for a summary of our existing 
policies regarding ASC covered surgical procedures that are designated 
as device-intensive.
(2) Proposed Changes To List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2020
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
590401 through 59043), for CY 2019 we modified our criteria for device-
intensive procedures to better capture costs for procedures with 
significant device costs. We adopted a policy to allow procedures that 
involve surgically inserted or implanted, high-cost, single-use devices 
to qualify as device-intensive procedures. In addition, we modified our 
criteria to lower the device offset percentage threshold from 40 
percent to 30 percent. Specifically, for CY 2019 and subsequent years, 
we adopted a policy 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. 
Corresponding to this change in the cost criterion we adopted a policy 
that the default device offset for new codes that describe procedures 
that involve the implantation of medical devices will be 31 percent 
beginning in CY 2019. For new codes describing procedures that are 
payable when furnished in an ASC involving the implantation of a 
medical device, we adopted a policy that the default device offset 
would be applied in the same manner as the policy we adopted in section 
IV.B.2. of the CY 2019 OPPS/ASC final rule with comment period (83 FR 
58944 through 58948). We amended Sec.  416.171(b)(2) of the regulations 
to reflect these new device criteria.

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    In addition, as also adopted in section IV.B.2. of that final rule 
with comment period, to further align the device-intensive policy with 
the criteria used for device pass-through status, we specified, 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).
    Based on our modified device-intensive criteria, for CY 2020, we 
are proposing to update the ASC CPL to indicate procedures that are 
eligible for payment according to our device-intensive procedure 
payment methodology, based on the proposed individual HCPCS code 
device-offset percentages using the CY 2018 OPPS claims and cost report 
data available for this proposed rule.
    The ASC covered surgical procedures that we are proposing to 
designate as device-intensive, and therefore subject to the device-
intensive procedure payment methodology for CY 2020, are assigned 
payment indicator ``J8'' and are included in ASC Addendum AA to this 
proposed rule (which is available via the internet on the CMS website). 
The CPT code, the CPT code short descriptor, and the proposed CY 2020 
ASC payment indicator, and an indication of whether the full credit/
partial credit (FB/FC) device adjustment policy would apply because the 
procedure is designated as device-intensive also are included in 
Addendum AA to this proposed rule (which is available via the internet 
on the CMS website). In addition, we note that in our CY 2019 OPPS/ASC 
proposed rule (83 FR 37158 through 37159), we proposed to apply our 
device-intensive procedure payment methodology to device-intensive 
procedures under the ASC payment system only when the device-intensive 
procedure is furnished with a surgically-inserted or implanted device 
(including single-used medical devices). We inadvertently omitted 
language finalizing this policy for CY 2019. For CY 2020 and subsequent 
calendar years, we are proposing to only apply our device-intensive 
procedure payment methodology to device-intensive procedures under the 
ASC payment system when the device-intensive procedure is furnished 
with a surgically inserted or implanted device (including single use 
medical devices). The payment rate under the ASC payment system for 
device-intensive procedures furnished without an implantable or 
inserted medical device would be calculated by applying the uniform ASC 
conversion factor to both the device portion and service (non-device) 
portion of the OPPS relative payment weight for the device-intensive 
procedure and summing both portions (device and service) to establish 
the ASC payment rate.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC payment policy for costly devices implanted in ASCs at no 
cost/full credit or partial credit, as set forth in Sec.  416.179 of 
our regulations, is consistent with the OPPS policy that was in effect 
until CY 2014. Specifically, the OPPS policy that was in effect through 
CY 2013 provided a reduction in 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 (77 FR 68356 
through 68358). The established ASC policy reduces payment to ASCs when 
a specified device is furnished without cost or with full credit or 
partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68742 through 68744) for a full 
discussion of the ASC payment adjustment policy for no cost/full credit 
and partial credit devices.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37159), we noted that, 
as discussed in section IV.B. of the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 75005 through 75006), we finalized our proposal 
to modify our former policy of reducing OPPS payment for specified APCs 
when a hospital furnishes a specified device without cost or with a 
full or partial credit. Formerly, under the OPPS, our policy was to 
reduce OPPS payment by 100 percent of the device offset amount when a 
hospital furnished a specified device without cost or with a full 
credit and by 50 percent of the device offset amount when the hospital 
received partial credit in the amount of 50 percent or more (but less 
than 100 percent) of the cost for the specified device. For CY 2014, we 
finalized our proposal to reduce OPPS payment for applicable APCs by 
the full or partial credit a provider receives for a replaced device, 
capped at the device offset amount.
    Although we finalized our proposal to modify the policy of reducing 
payments when a hospital furnishes a specified device without cost or 
with full or partial credit under the OPPS, in that final rule with 
comment period (78 FR 75076 through 75080), we finalized our proposal 
to maintain our ASC policy for reducing payments to ASCs for specified 
device-intensive procedures when the ASC furnishes a device without 
cost or with full or partial credit. Unlike the OPPS, there is 
currently no mechanism within the ASC claims processing system for ASCs 
to submit to CMS the actual credit received when furnishing a specified 
device at full or partial credit. Therefore, under the ASC payment 
system, we finalized our proposal for CY 2014 to continue to reduce ASC 
payments by 100 percent or 50 percent of the device offset amount when 
an ASC furnishes a device without cost or with full or partial credit, 
respectively.
    All ASC covered device-intensive procedures are subject to the no 
cost/full credit and partial credit device adjustment policy. 
Specifically, when a device-intensive procedure is performed to implant 
a device that is furnished at no cost or with full credit from the 
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the 
line in the claim with the procedure to implant the device. The 
contractor would reduce payment to the ASC by the device offset amount 
that we estimate represents the cost of the device when the necessary 
device is furnished without cost or with full credit to the ASC. We 
continue to

[[Page 39542]]

believe that the reduction of ASC payment in these circumstances is 
necessary to pay appropriately for the covered surgical procedure 
furnished by the ASC.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59043 
through 59044), for partial credit, we adopted a policy to reduce the 
payment for a device-intensive procedure for which the ASC receives 
partial credit by one-half of the device offset amount that would be 
applied if a device was provided at no cost or with full credit, if the 
credit to the ASC is 50 percent or more (but less than 100 percent) of 
the cost of the new device. The ASC will append the HCPCS ``FC'' 
modifier to the HCPCS code for the device-intensive surgical procedure 
when the facility receives a partial credit of 50 percent or more (but 
less than 100 percent) of the cost of a device. To report that the ASC 
received a partial credit of 50 percent or more (but less than 100 
percent) of the cost of a new device, ASCs have the option of either: 
(1) Submitting the claim for the device replacement procedure to their 
Medicare contractor after the procedure's performance, but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment, once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more (but less than 100 percent) of 
the cost of the replacement device. Beneficiary coinsurance would be 
based on the reduced payment amount. As finalized in the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66926), to ensure our policy 
covers any situation involving a device-intensive procedure where an 
ASC may receive a device at no cost or receive full credit or partial 
credit for the device, we apply our ``FB''/``FC'' modifier policy to 
all device-intensive procedures.
    In this proposed rule, we are not proposing any changes to these 
policies.
d. Proposed Additions to the List of ASC Covered Surgical Procedures
(1) Proposed Additions to the List of ASC Covered Surgical Procedures 
for CY 2020
    As finalized in section XII.A.3. of the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 59029 through 59030), we revised our 
definition of ``surgery'' for CY 2019 to include certain ``surgery-
like'' procedures that are assigned codes outside the CPT surgical 
range. For CY 2020 and subsequent years we are proposing to adopt the 
modified definition we finalized for CY 2019, to include procedures 
that are described by Category I CPT codes that are not in the surgical 
range but directly crosswalk or are clinically similar to procedures in 
the Category I CPT code surgical range that we have determined do not 
pose a significant safety risk, would not be expected to require an 
overnight stay when performed in an ASC, and are separately paid under 
the OPPS. We also are proposing to continue to include in our 
definition of surgical procedures those procedures described by 
Category I CPT codes in the surgical range from 10000 through 69999 as 
well as those Category III CPT codes and Level II HCPCS codes that 
directly crosswalk or are clinically similar to procedures in the CPT 
surgical range that we have determined do not pose a significant safety 
risk, that we would not expect to require an overnight stay when 
performed in ASCs, and that are separately paid under the OPPS.
    We conducted a review of HCPCS codes that currently are paid under 
the OPPS, but not included on the ASC CPL, and that meet our proposed 
definition of surgery to determine if changes in technology and/or 
medical practice affected the clinical appropriateness of these 
procedures for the ASC setting. Based on this review, we are proposing 
to update the list of ASC covered surgical procedures by adding a 
mosiacplasty procedure and three coronary intervention procedures to 
the list for CY 2020, as shown in Table 32. After reviewing the 
clinical characteristics of these procedures and consulting with 
stakeholders and our clinical advisors, we determined that these four 
procedures are separately paid under the OPPS, would not be expected to 
pose a significant risk to beneficiary safety when performed in an ASC, 
and would not be expected to require active medical monitoring and care 
of the beneficiary at midnight following the procedure. Our regulation 
at 42 CFR 416.166(c) lists general exclusions from the list of ASC 
covered surgical procedures based primarily on factors relating to 
safety, including procedures that generally result in extensive blood 
loss, require major or prolonged invasion of body cavities, or directly 
involve major blood vessels. We have assessed each of the proposed 
added procedures against the regulatory safety criteria and believe 
that these procedures meet each of the criteria. Although the proposed 
coronary intervention procedures may involve blood vessels that could 
be considered major, as stated in the August 2, 2007 ASC final rule (72 
FR 42481), we believe the involvement of major blood vessels is best 
considered in the context of the clinical characteristics of individual 
procedures, and we do not believe that it is logically or clinically 
consistent to exclude certain cardiac procedures from the list of ASC 
covered surgical procedures on the basis of the involvement of major 
blood vessels, yet continue to provide ASC payment for similar 
procedures involving major blood vessels that have a history of safe 
performance in ASCs, such as CPT code 36473 (Mechanicochemical 
destruction of insufficient vein of arm or leg, accessed through the 
skin using imaging guidance) and CPT code 37223 (Insertion of stents 
into groin artery, endovascular, accessed through the skin or open 
procedure). Based on our review of the clinical characteristics of the 
procedures and their similarity to other procedures that are currently 
included on the ASC CPL, we believe these procedures can be safely 
performed in an ASC. Therefore, we are proposing to include these 3 
coronary intervention procedures on the list of ASC covered surgical 
procedures for CY 2020. We are also proposing to add their respective 
add-on procedures which are packaged under the ASC payment system.
    In the CY 2018 OPPS/ASC proposed rule, we solicited public comments 
on whether the total knee arthroplasty (TKA) procedure, CPT code 27447 
(Arthroplasty, knee, condyle and plateau; medial and lateral 
compartments with or without patella resurfacing (total knee 
arthroplasty)), should be added to the ASC CPL. In the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59411 through 59412) we noted 
that some commenters argued that many ASCs are equipped to perform 
these procedures and orthopedic surgeons in ASCs are increasingly 
performing these procedures safely and effectively on non-Medicare 
patients and appropriate Medicare patients. However, other commenters 
noted that the majority of ASCs were not well-equipped to safely 
perform TKA procedures on patients and that the majority of Medicare 
patients are not suitable candidates to receive ``overnight'' joint 
arthroplasty procedures in an ASC setting. For CY 2018, we did not 
finalize adding TKA to the ASC covered surgical procedures list, but 
noted that we would take the

[[Page 39543]]

suggestions and recommendations into consideration for future 
rulemaking.
    In this CY 2020 OPPS/ASC proposed rule, we continue to promote 
site-neutrality, where possible, between the hospital outpatient 
department and ASC settings. Further, we agree with commenters that 
there is a small subset of Medicare beneficiaries who may be suitable 
candidates to receive TKA procedures in an ASC setting based on their 
clinical characteristics. For example, based on Medicare Advantage 
encounter data, we estimate over 800 TKA procedures were performed in 
an ASC on Medicare Advantage enrollees in 2016. We believe that 
beneficiaries not enrolled in an MA plan should also have the option of 
choosing to receive the TKA procedure in an ASC setting based on their 
physicians' determinations.
    As we stated in the August 2, 2007 final rule (72 FR 42483 through 
42484), we exclude procedures that would otherwise pose a significant 
safety risk to the typical Medicare beneficiary. However, we believe 
physicians should continue to play an important role in exercising 
their clinical judgment when making site-of-service determinations, 
including for TKA. In light of the information commenters submitted in 
support of adding TKA to the ASC CPL in response to our CY 2018 public 
comment solicitation, we are proposing to add TKA to the ASC CPL in CY 
2020.
    We note that TKA procedures were still predominantly performed in 
the inpatient hospital setting in CY 2018 (82 percent of the time) 
based on professional claims data, and we are cognizant of the fact 
that the majority of beneficiaries may not be suitable candidates to 
receive TKA in an ASC setting. We believe that appropriate limits are 
necessary to ensure that Medicare Part B payment will only be made for 
TKA procedures performed in the ASC setting when that setting is 
clinically appropriate. Therefore, we are soliciting public comment on 
the appropriate approach to provide safeguards for Medicare 
beneficiaries who should not receive the TKA procedure in an ASC 
setting. Specifically, we are soliciting public comment on methods to 
ensure beneficiaries receive surgical procedures in the ASC setting 
only as clinically appropriate. For instance, CMS could issue a new 
modifier that indicates the physician believes that the beneficiary 
would not be expected to require active medical monitoring and care at 
midnight following a particular procedure furnished in the ASC setting. 
CMS could require that such a modifier be included on the claims line 
for a surgical procedure performed in an ASC. Alternatively, given the 
importance of post-operative care in making determinations about 
whether the ASC is an appropriate setting for a procedure, CMS could 
require that an ASC has a defined plan of care for each beneficiary 
following a surgical procedure. We could also establish certain 
requirements for ASCs that choose to perform certain surgical 
procedures on Medicare patients, such as requiring an ASC to have a 
certain amount of experience in performing a procedure before being 
eligible for payment for performing the procedure under Medicare. We 
are soliciting comment on these options, and other options, for 
ensuring that beneficiaries receive surgical procedures, including TKA, 
that do not pose a significant safety risk when performed in an ASC.
    In light of the information we received from commenters in support 
of adding TKA to the ASC-CPL in response to our comment solicitation in 
the CY 2018 OPPS/ASC proposed rule, we believe TKA would meet our 
regulatory requirements established under 42 CFR 416.2 and 416.166(b) 
for covered surgical procedures in the ASC setting. Therefore, we are 
proposing to add TKA to the ASC CPL as shown in Table 31 below. Based 
on the public comments we receive, we will consider appropriate 
safeguards and limitations for surgical procedures furnished in the ASC 
setting.
    As we stated in the CY 2019 OPPS/ASC proposed rule (83 FR 59054 
through 59055), section 1833(i)(1) of the Act requires us, in part, to 
specify, in consultation with appropriate medical organizations, 
surgical procedures that are appropriately performed on an inpatient 
basis in a hospital, but can be safely performed in an ASC, and to 
review and update the ASC covered surgical procedures list at least 
every 2 years.
    We are also soliciting comment on how CMS should think about the 
role of the ASC-CPL compared to State regulations and market forces in 
providing payment for certain surgical procedures in an ASC and whether 
any modifications should be made to the ASC-CPL. Comments on this topic 
could help formulate the basis for future policy development regarding 
how we determine what procedures are payable for Medicare fee-for-
service beneficiaries in the ASC setting and maintain the balance 
between safety and access. Finally, we are soliciting comment on how 
our proposed additions to the list of ASC covered surgical procedures 
might affect rural hospitals to the extent rural hospitals rely on 
providing such procedures.
    The procedures that we are proposing to add to the ASC list of 
covered surgical procedures, including the HCPCS code long descriptors 
and the proposed CY 2020 payment indicators, are displayed in Table 32.

[[Page 39544]]

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(2) Comment Solicitation on Coronary Intervention Procedures
    For CY 2020, as discussed above, we are proposing to add three 
coronary intervention procedures (along with the codes describing their 
respective add-on procedures) that involve major blood vessels that we 
believe can be safely performed in an ASC setting and would not pose a 
significant safety risk to beneficiaries if performed in an ASC 
setting. For this CY 2020 OPPS/ASC proposed rule, in addition to the 
three coronary intervention procedures we are proposing to add to the 
ASC CPL, we also reviewed several other coronary intervention 
procedures. While we do not believe the procedures included in Table 33 
meet our criteria for inclusion on the ASC CPL at this time, and we are 
not proposing to add such procedures to the ASC CPL for CY 2020, we are 
soliciting public comments on whether stakeholders believe they can be 
safely performed in an ASC setting and to provide any materials 
supporting their position. In considering whether or not these 
procedures should be added to the ASC CPL, we are requesting that 
commenters provide information and data that specifically address the 
requirements in our regulations at 42 CFR 416.2 and 416.166. For 
example, commenters should provide information to support their 
position as to whether each of these procedures would be expected to 
pose a significant risk to beneficiary safety when performed in an ASC, 
whether standard medical practice dictates that the beneficiary would 
typically be expected to require active medical monitoring and care at 
midnight following the procedure (``overnight stay''), and whether the 
procedure would fall under our general exclusions for covered surgical 
procedures at 42 CFR 416.166(c) (for example, would it generally result 
in extensive blood loss). We will consider public comments we receive 
in future rulemaking cycles.
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BILLING CODE 4120-01-C
2. Covered Ancillary Services
    Consistent with the established ASC payment system policy (72 FR 
42497), we are proposing to update the ASC list of covered ancillary 
services to reflect the payment status for the services under the CY 
2020 OPPS. Maintaining consistency with the OPPS may result in proposed 
changes to ASC payment indicators for some covered ancillary services 
because of changes that are being proposed under the OPPS for CY 2020. 
For example, if a covered ancillary service was separately paid under 
the ASC payment system in CY 2019, but is proposed for packaged status 
under the CY 2020 OPPS, to maintain consistency with the OPPS, we would 
also propose to package the ancillary service under the ASC payment 
system for CY 2020. We are proposing to continue this reconciliation of 
packaged status for subsequent calendar years. Comment indicator 
``CH'', which is discussed in section XIII.F. of this proposed rule, is 
used in Addendum BB to this proposed rule (which is available via the 
internet on the CMS website) to indicate covered ancillary services for 
which we are proposing a change in the ASC payment indicator to reflect 
a proposed change in the OPPS treatment of the service for CY 2020.
    All ASC covered ancillary services and their proposed payment 
indicators for CY 2020 are included in Addendum BB to this proposed 
rule (which is available via the internet on the CMS website).

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

1. Proposed ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy, we use the ASC standard ratesetting methodology of 
multiplying the ASC relative payment weight for the procedure by the 
ASC conversion factor for that same year to calculate the national 
unadjusted payment rates for procedures with payment indicators ``G2'' 
and ``A2''. Payment indicator ``A2'' was developed to identify 
procedures that were included on the list of ASC covered surgical 
procedures in CY 2007 and, therefore, were subject to transitional 
payment prior to CY 2011. Although the 4-year transitional period has 
ended and payment indicator ``A2'' is no longer required to identify 
surgical procedures subject to transitional payment, we retained 
payment indicator ``A2'' because it is used to identify procedures that 
are exempted from the application of the office-based designation.
    The rate calculation established for device-intensive procedures 
(payment indicator ``J8'') is structured so only the service portion of 
the rate is subject to the ASC standard ratesetting methodology. In the 
CY 2019 OPPS/ASC final rule with comment period (83 FR 59028 through 
59080), we updated the CY 2018 ASC payment rates for ASC covered 
surgical procedures with payment indicators of ``A2'', ``G2'', and 
``J8'' using CY 2017 data, consistent with the CY 2019 OPPS update. We 
also updated payment rates for device-intensive procedures to 
incorporate the CY 2019 OPPS device offset percentages calculated under 
the standard APC ratesetting methodology, as discussed earlier in this 
section.
    Payment rates for office-based procedures (payment indicators 
``P2'', ``P3'', and ``R2'') are the lower of the PFS nonfacility PE 
RVU-based amount or the amount calculated using the ASC standard rate 
setting methodology for the procedure. In the CY 2018 OPPS/ASC final 
rule with comment period, we updated the payment amounts for office-
based procedures (payment indicators ``P2'', ``P3'', and ``R2'') using 
the most recent available MPFS and OPPS data. We compared the estimated

[[Page 39547]]

CY 2018 rate for each of the office-based procedures, calculated 
according to the ASC standard rate setting methodology, to the PFS 
nonfacility PE RVU-based amount to determine which was lower and, 
therefore, would be the CY 2018 payment rate for the procedure under 
our final policy for the revised ASC payment system (Sec.  416.171(d)).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75081), we finalized our proposal to calculate the CY 2014 payment 
rates for ASC covered surgical procedures according to our established 
methodologies, with the exception of device removal procedures. For CY 
2014, we finalized a policy to conditionally package payment for device 
removal procedures under the OPPS. Under the OPPS, a conditionally 
packaged procedure (status indicators ``Q1'' and ``Q2'') describes a 
HCPCS code where the payment is packaged when it is provided with a 
significant procedure but is separately paid when the service appears 
on the claim without a significant procedure. Because ASC services 
always include a covered surgical procedure, HCPCS codes that are 
conditionally packaged under the OPPS are always packaged (payment 
indicator ``N1'') under the ASC payment system. Under the OPPS, device 
removal procedures are conditionally packaged and, therefore, would be 
packaged under the ASC payment system. There would be no Medicare 
payment made when a device removal procedure is performed in an ASC 
without another surgical procedure included on the claim; therefore, no 
Medicare payment would be made if a device was removed but not 
replaced. To ensure that the ASC payment system provides separate 
payment for surgical procedures that only involve device removal--
conditionally packaged in the OPPS (status indicator ``Q2'')--we 
continued to provide separate payment since CY 2014 and assigned the 
current ASC payment indicators associated with these procedures.
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 
CY 2020
    We are proposing to update ASC payment rates for CY 2020 and 
subsequent years using the established rate calculation methodologies 
under Sec.  416.171 and using our definition of device-intensive 
procedures, as discussed in section XII.C.1.b. of this proposed rule. 
Because the proposed OPPS relative payment weights are generally based 
on geometric mean costs, the ASC system would generally use geometric 
means to determine proposed relative payment weights under the ASC 
standard methodology. We are proposing to continue to use the amount 
calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicators ``A2'' and ``G2''.
    We are proposing to calculate payment rates for office-based 
procedures (payment indicators ``P2'', ``P3'', and ``R2'') and device-
intensive procedures (payment indicator ``J8'') according to our 
established policies and, for device-intensive procedures, using our 
modified definition of device-intensive procedures, as discussed in 
section XII.C.1.b. of this proposed rule. Therefore, we are proposing 
to update the payment amount for the service portion of the device-
intensive procedures using the ASC standard rate setting methodology 
and the payment amount for the device portion based on the proposed CY 
2020 OPPS device offset percentages that have been calculated using the 
standard OPPS APC ratesetting methodology. Payment for office-based 
procedures would be at the lesser of the proposed CY 2020 MPFS 
nonfacility PE RVU-based amount or the proposed CY 2020 ASC payment 
amount calculated according to the ASC standard ratesetting 
methodology.
    As we did for CYs 2014 through 2019, for CY 2020, we are proposing 
to continue our policy for device removal procedures, such that device 
removal procedures that are conditionally packaged in the OPPS (status 
indicators ``Q1'' and ``Q2'') would be assigned the current ASC payment 
indicators associated with these procedures and would continue to be 
paid separately under the ASC payment system.
c. Proposed Limit on ASC Payment Rates for Low Volume Device-Intensive 
Procedures
    As stated in section XIII.D.1.b. of this proposed rule, the ASC 
payment system generally uses OPPS geometric mean costs under the 
standard methodology to determine proposed relative payment weights 
under the standard ASC ratesetting methodology. However, for low-volume 
device-intensive procedures, the proposed relative payment weights are 
based on median costs, rather than geometric mean costs, as discussed 
in section IV.B.5. of this proposed rule.
    While we believe this policy generally helps to provide more 
appropriate payment for low-volume device intensive procedures, these 
procedures can still have data anomalies as a result of the limited 
data available for these procedures in our ratesetting process. For the 
Level 5 Intraocular APC, which includes only HCPCS code 0308T (insj 
ocular telescope prosth), based on the CY 2018 claims data available 
for this proposed rule, the geometric mean cost and median cost under 
the standard ASC ratesetting methodology is $67,946.51 and $111,019.30, 
respectively. As described in section IV.B.5. of this proposed rule, a 
device-intensive procedure that is assigned to a clinical APC with 
fewer than 100 total claims for all procedures is considered ``low-
volume'' and the cost of the procedure is based on calculations using 
the APC's median cost instead of the APC's geometric mean cost. Since 
this APC meets the criteria for low-volume device-intensive procedure 
designation, the ASC relative weight would be based on the median cost 
rather than the geometric mean cost. We note that this median cost for 
this APC is significantly higher than either the OPPS geometric mean 
cost or median cost based on the OPPS comprehensive ratesetting 
methodology, which are $28,122.51 and $19,269.55, respectively. This 
very large difference in cost calculations between these two settings 
is largely attributable to the APC's low claims volume and to the 
comprehensive methodology used under the OPPS which is not utilized in 
ratesetting under the ASC payment system. The cost calculation for this 
APC under the ASC payment system is primarily based on charges from one 
hospital with a significantly higher device cost center cost-to-charge 
ratio and significantly higher charges when compared to other hospitals 
providing the procedure.
    If the ASC payment system were to base the CY 2020 payment rate for 
HCPCS code 0308T on the median cost of $111,019.30, the ASC payment 
rate would be several times greater than the OPPS payment rate for 
HCPCS code 0308T. We note that the median cost under the OPPS 
ratesetting methodology based on CY 2018 claims data is closer to the 
historical average for the median cost of HCPCS code 0308T 
(approximately $19,000). In addition, given that the outpatient 
hospital setting is generally considered to have higher costs than the 
ASC setting and that the payment rates for both settings are based on 
hospital outpatient cost data, we do not believe there should be a 
scenario where the payment rate for a low-volume device intensive 
procedure under the ASC payment system is significantly greater than 
payment under the OPPS.
    Therefore, for CY 2020 and subsequent years, we are proposing to 
limit the ASC payment rate for low-volume device intensive procedure to 
a payment rate equal to the OPPS

[[Page 39548]]

payment rate for that procedure. Under this proposal, where the ASC 
payment rate based on the standard ASC ratesetting methodology for low 
volume device-intensive procedures would exceed the rate paid under the 
OPPS for the same procedure, we are proposing to establish an ASC 
payment rate for such procedures equal to the OPPS payment rate for the 
same procedure. In this CY 2020 proposed rule, our proposed policy 
would only affect HCPCS code 0308T, which has very low claims volume (7 
claims used for ratesetting in the OPPS). We are proposing to amend 42 
CFR 416.171(b) of the regulations to reflect the proposed new limit on 
ASC payment rates for low-volume device-intensive procedures. CMS' 
existing regulation at 42 CFR 416.171(b)(2) requires the payment of the 
device portion of a device-intensive procedure at an amount derived 
from the payment rate for the equivalent item under the OPPS using our 
standard ratesetting methodology. We are proposing to add paragraph 
(b)(4) to Sec.  416.171 to require that, notwithstanding paragraph 
(b)(2), low volume device-intensive procedures where the otherwise 
applicable payment rate calculated based on the standard methodology 
for device-intensive procedures would exceed the payment rate for the 
same procedure set under the OPPS, the payment rate for the procedure 
under the ASC payment system would be equal to the payment rate for the 
same procedure under the OPPS.
    Covered surgical procedures and their proposed payment rates for CY 
2020 are listed in Addendum AA to this proposed rule (which is 
available via the internet on the CMS website).
2. Proposed Payment for Covered Ancillary Services
a. Background
    Our payment policies under the ASC payment system for covered 
ancillary services generally vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged or 
conditionally packaged (status indicators ``N'', ``Q1'', and ``Q2'') 
under the OPPS. In the CY 2013 OPPS/ASC rulemaking (77 FR 45169 and 77 
FR 68457 through 68458), we further clarified our policy regarding the 
payment indicator assignment of procedures that are conditionally 
packaged in the OPPS (status indicators ``Q1'' and ``Q2''). Under the 
OPPS, a conditionally packaged procedure describes a HCPCS code where 
the payment is packaged when it is provided with a significant 
procedure but is separately paid when the service appears on the claim 
without a significant procedure. Because ASC services always include a 
surgical procedure, HCPCS codes that are conditionally packaged under 
the OPPS are generally packaged (payment indictor ``N1'') under the ASC 
payment system (except for device removal procedures, as discussed in 
section IV. of this proposed rule). Thus, our policy generally aligns 
ASC payment bundles with those under the OPPS (72 FR 42495). In all 
cases, in order for those ancillary services also to be paid, ancillary 
items and services must be provided integral to the performance of ASC 
covered surgical procedures for which the ASC bills Medicare.
    Our ASC payment policies generally provide separate payment for 
drugs and biologicals that are separately paid under the OPPS at the 
OPPS rates and package payment for drugs and biologicals for which 
payment is packaged under the OPPS. However, as discussed in section 
XIII.D.3. of this proposed rule, below, for CY 2019 we finalized a 
policy to unpackage and pay separately at ASP + 6 percent for the cost 
of non-opioid pain management drugs that function as surgical supplies 
when furnished in the ASC setting, even though payment for these drugs 
continues to be packaged under the OPPS. We generally pay for 
separately payable radiology services at the lower of the PFS 
nonfacility PE RVU-based (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (72 FR 
42497). However, as finalized in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72050), payment indicators for all nuclear 
medicine procedures (defined as CPT codes in the range of 78000 through 
78999) that are designated as radiology services that are paid 
separately when provided integral to a surgical procedure on the ASC 
list are set to ``Z2'' so that payment is made based on the ASC 
standard ratesetting methodology rather than the MPFS nonfacility PE 
RVU amount (``Z3''), regardless of which is lower (42 CFR 
416.171(d)(1)).
    Similarly, we also finalized our policy to set the payment 
indicator to ``Z2'' for radiology services that use contrast agents so 
that payment for these procedures will be based on the OPPS relative 
payment weight using the ASC standard ratesetting methodology and, 
therefore, will include the cost for the contrast agent (42 CFR 
416.171(d)(2)).
    ASC payment policy for brachytherapy sources mirrors the payment 
policy under the OPPS. ASCs are paid for brachytherapy sources provided 
integral to ASC covered surgical procedures at prospective rates 
adopted under the OPPS or, if OPPS rates are unavailable, at 
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs 
have been paid for brachytherapy sources provided integral to ASC 
covered surgical procedures at prospective rates adopted under the 
OPPS.
    Our ASC policies also provide separate payment for: (1) Certain 
items and services that CMS designates as contractor-priced, including, 
but not limited to, the procurement of corneal tissue; and (2) certain 
implantable items that have pass-through payment status under the OPPS. 
These categories do not have prospectively established ASC payment 
rates according to ASC payment system policies (72 FR 42502 and 42508 
through 42509; 42 CFR 416.164(b)). Under the ASC payment system, we 
have designated corneal tissue acquisition and hepatitis B vaccines as 
contractor-priced. Corneal tissue acquisition is contractor-priced 
based on the invoiced costs for acquiring the corneal tissue for 
transplantation. Hepatitis B vaccines are contractor-priced based on 
invoiced costs for the vaccine.
    Devices that are eligible for pass-through payment under the OPPS 
are separately paid under the ASC payment system and are contractor-
priced. Under the revised ASC payment system (72 FR 42502), payment for 
the surgical procedure associated with the pass-through device is made 
according to our standard methodology for the ASC payment system, based 
on only the service (non-device) portion of the procedure's OPPS 
relative payment weight if the APC weight for the procedure includes 
other packaged device costs. We also refer to this methodology as 
applying a ``device offset'' to the ASC payment for the associated 
surgical procedure. This ensures that duplicate payment is not provided 
for any portion of an implanted device with OPPS pass-through payment 
status.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933 
through 66934), we finalized that, beginning in CY 2015, certain 
diagnostic tests within the medicine range of CPT codes for which 
separate payment is allowed under the OPPS are covered

[[Page 39549]]

ancillary services when they are integral to an ASC covered surgical 
procedure. We finalized that diagnostic tests within the medicine range 
of CPT codes include all Category I CPT codes in the medicine range 
established by CPT, from 90000 to 99999, and Category III CPT codes and 
Level II HCPCS codes that describe diagnostic tests that crosswalk or 
are clinically similar to procedures in the medicine range established 
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also 
finalized our policy to pay for these tests at the lower of the PFS 
nonfacility PE RVU-based (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (79 FR 
66933 through 66934). We finalized that the diagnostic tests for which 
the payment is based on the ASC standard ratesetting methodology be 
assigned to payment indicator ``Z2'' and revised the definition of 
payment indicator ``Z2'' to include a reference to diagnostic services 
and those for which the payment is based on the PFS nonfacility PE RVU-
based amount be assigned payment indicator ``Z3,'' and revised the 
definition of payment indicator ``Z3'' to include a reference to 
diagnostic services.
b. Proposed Payment for Covered Ancillary Services for CY 2020
    We are proposing to update the ASC payment rates and to make 
changes to ASC payment indicators, as necessary, to maintain 
consistency between the OPPS and ASC payment system regarding the 
packaged or separately payable status of services and the proposed CY 
2020 OPPS and ASC payment rates and subsequent year payment rates. We 
also are proposing to continue to set the CY 2020 ASC payment rates and 
subsequent year payment rates for brachytherapy sources and separately 
payable drugs and biologicals equal to the OPPS payment rates for CY 
2020 and subsequent year payment rates.
    We note that stakeholders requested that we propose to add CPT code 
91040 (Esophageal balloon distension study, diagnostic, with 
provocation when performed) to the ASC Covered Procedures List (CPL) 
and ASC list of covered ancillary services as it is integral to the 
performance of covered surgical procedures such as CPT code 43235 
(Esophagogastroduodenoscopy, flexible, transoral; diagnostic, including 
collection of specimen(s) by brushing or washing, when performed 
(separate procedure)) and 43239 (Esophagogastroduodenoscopy, flexible, 
transoral; with biopsy, single or multiple). Based on available data 
and other information related to CPT code 91040, we do not believe this 
diagnostic test is integral to the covered surgical procedures of CPT 
codes 43235 or 43239. Therefore, we are not proposing to add CPT code 
91040 as a covered ancillary service.
    Covered ancillary services and their proposed payment indicators 
for CY 2020 are listed in Addendum BB to this proposed rule (which is 
available via the internet on the CMS website). For those covered 
ancillary services where the payment rate is the lower of the proposed 
rates under the ASC standard rate setting methodology and the PFS 
proposed rates, the proposed payment indicators and rates set forth in 
this proposed rule are based on a comparison using the proposed PFS 
rates effective January 1, 2020. For a discussion of the PFS rates, we 
refer readers to the CY 2020 PFS proposed rule, which will be available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
3. Proposed CY 2020 ASC Packaging Policy for Non-Opioid Pain Management 
Treatments
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59066 
through 59072), we finalized the policy 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 also finalized conforming changes to 42 CFR 
416.164(a)(4) to exclude non-opioid pain management drugs that function 
as a supply when used in a surgical procedure from our policy to 
package payment for drugs and biologicals for which separate payment is 
not allowed under the OPPS into the ASC payment for the covered 
surgical procedure. We added a new 42 CFR 416.164(b)(6) to include non-
opioid pain management drugs that function as a supply when used in a 
surgical procedure as covered ancillary services that are integral to a 
covered surgical procedure. Finally, we finalized a change to 42 CFR 
416.171(b)(1) to exclude non-opioid pain management drugs that function 
as a supply when used in a surgical procedure from our policy to pay 
for ASC covered ancillary services an amount derived from the payment 
rate for the equivalent item or service set under the OPPS.
    In that final rule with comment period, we noted that we will 
continue to analyze the issue of access to non-opioid alternatives in 
the OPPS and ASC settings as we implement section 6082 of the Substance 
Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for 
Patients and Communities Act (SUPPORT for Patients and Communities Act) 
(Pub. L. 115-271), enacted on October 24, 2018. We also discussed our 
policy to unpackage and pay separately at ASP + 6 percent for the cost 
of non-opioid pain management drugs that function as surgical supplies 
when furnished in the ASC setting in section II.A.3.b. of the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58854 through 58860). As 
required under Section 6082(b) of the SUPPORT Act, we will continue to 
review and revise ASC payments for non-opioid alternatives for pain 
management, as appropriate. For more information on our implementation 
of section 6082 of the SUPPORT for Patients and Communities Act and 
related proposals, we refer readers to section II.A.3.b. of this 
proposed rule.

E. New Technology Intraocular Lenses (NTIOLs)

    New Technology Intraocular Lenses (NTIOLs) are intraocular lenses 
that replace a patient's natural lens that has been removed in cataract 
surgery and that also meet the requirements listed in 42 CFR 416.195.
1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
NTIOLs is as follows:
     Applicants submit their NTIOL requests for review to CMS 
by the annual deadline. For a request to be considered complete, we 
require submission of the information that is found in the guidance 
document entitled ``Application Process and Information Requirements 
for Requests for a New Class of New Technology Intraocular Lenses 
(NTIOLs) or Inclusion of an IOL in an Existing NTIOL Class'' posted on 
the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually, in the proposed rule updating the 
ASC and OPPS payment rates for the following calendar year, a list of 
all requests to establish new NTIOL classes accepted for review during 
the calendar year in which the proposal is published. In accordance 
with section 141(b)(3) of Public Law 103-432 and our regulations at 42 
CFR 416.185(b), the deadline for receipt of public comments is 30 days 
following publication of the list of requests in the proposed rule.

[[Page 39550]]

     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    ++ Provide a list of determinations made as a result of our review 
of all new NTIOL class requests and public comments;
    ++ When a new NTIOL class is created, identify the predominant 
characteristic of NTIOLs in that class that sets them apart from other 
IOLs (including those previously approved as members of other expired 
or active NTIOL classes) and that is associated with an improved 
clinical outcome.
    ++ Set the date of implementation of a payment adjustment in the 
case of approval of an IOL as a member of a new NTIOL class 
prospectively as of 30 days after publication of the ASC payment update 
final rule, consistent with the statutory requirement.
    ++ Announce the deadline for submitting requests for review of an 
application for a new NTIOL class for the following calendar year.
2. Requests To Establish New NTIOL Classes for CY 2020
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2020 by March 1, 2019, the due date published in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 59072).
3. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2020.

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we created final comment indicators for the 
ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy-
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC CPL 
prior to CY 2008; payment designation, such as device-intensive or 
office-based, and the corresponding ASC payment methodology; and their 
classification as separately payable ancillary services, including 
radiology services, brachytherapy sources, OPPS pass-through devices, 
corneal tissue acquisition services, drugs or biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators included in Addenda AA and BB to the 
proposed rules and final rules with comment period serve to identify, 
for the revised ASC payment system, the status of a specific HCPCS code 
and its payment indicator with respect to the timeframe when comments 
will be accepted. The comment indicator ``NI'' is used in the OPPS/ASC 
final rule to indicate new codes for the next calendar year for which 
the interim payment indicator assigned is subject to comment. The 
comment indicator ``NI'' also is assigned to existing codes with 
substantial revisions to their descriptors such that we consider them 
to be describing new services, and the interim payment indicator 
assigned is subject to comment, as discussed in the CY2010 OPPS/ASC 
final rule with comment period (74 FR 60622).
    The comment indicator ``NP'' is used in the OPPS/ASC proposed rule 
to indicate new codes for the next calendar year for which the proposed 
payment indicator assigned is subject to comment. The comment indicator 
``NP'' also is assigned to existing codes with substantial revisions to 
their descriptors, such that we consider them to be describing new 
services, and the proposed payment indicator assigned is subject to 
comment, as discussed in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70497).
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
proposed rule (which are available via the internet on the CMS website) 
to indicate that the payment indicator assignment has changed for an 
active HCPCS code in the current year and the next calendar year, for 
example if an active HCPCS code is newly recognized as payable in ASCs; 
or an active HCPCS code is discontinued at the end of the current 
calendar year. The ``CH'' comment indicators that are published in the 
final rule with comment period are provided to alert readers that a 
change has been made from one calendar year to the next, but do not 
indicate that the change is subject to comment.
2. Proposed ASC Payment and Comment Indicators for CY 2020
    For CY 2020, there are proposed new and revised Category I and III 
CPT codes as well as new and revised Level II HCPCS codes. Therefore, 
proposed Category I and III CPT codes that are new and revised for CY 
2019 and any new and existing Level II HCPCS codes with substantial 
revisions to the code descriptors for CY 2020 compared to the CY 2019 
descriptors that are included in ASC Addenda AA and BB to this proposed 
rule are labeled with proposed comment indicator ``NP'' to indicate 
that these CPT and Level II HCPCS codes are open for comment as part of 
this proposed rule. Proposed comment indicator ``NP'' means a new code 
for the next calendar year or an existing code with substantial 
revision to its code descriptor in the next calendar year, as compared 
to current calendar year; and denotes that comments will be accepted on 
the proposed ASC payment indicator for the new code.
    We will respond to public comments on ASC payment and comment 
indicators and finalize their ASC assignment in the CY 2020 OPPS/ASC 
final rule with comment period. We refer readers to Addenda DD1 and DD2 
to this proposed rule (which are available via the internet on the CMS 
website) for the complete list of ASC payment and comment indicators 
proposed for the CY 2020 update.

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

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

[[Page 39551]]

2008 being equal to aggregate Medicare expenditures that would have 
occurred in CY 2008 in the absence of the revised system, taking into 
consideration the cap on ASC payments in CY 2007, as required under 
section 1833(i)(2)(E) of the Act (72 FR 42522). We adopted a policy to 
make the system budget neutral in subsequent calendar years (72 FR 
42532 through 42533; 42 CFR 416.171(e)).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across the OPPS, ASC, and 
MPFS payment systems. However, because coinsurance is almost always 20 
percent for ASC services, this interpretation of expenditures has 
minimal impact for subsequent budget neutrality adjustments calculated 
within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures, covered ancillary radiology services (excluding covered 
ancillary radiology services involving certain nuclear medicine 
procedures or involving the use of contrast agents, as discussed in 
section XII.D.2. of this proposed rule), and certain diagnostic tests 
within the medicine range that are covered ancillary services, the 
established policy is to set the payment rate at the lower of the MPFS 
unadjusted nonfacility PE RVU-based amount or the amount calculated 
using the ASC standard ratesetting methodology. Further, as discussed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 
through 66843), we also adopted alternative ratesetting methodologies 
for specific types of services (for example, device-intensive 
procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42517 through 
42518) and as codified at Sec.  416.172(c) of the regulations, the 
revised ASC payment system accounts for geographic wage variation when 
calculating individual ASC payments by applying the pre-floor and pre-
reclassified IPPS hospital wage indexes to the labor-related share, 
which is 50 percent of the ASC payment amount based on a GAO report of 
ASC costs using 2004 survey data. Beginning in CY 2008, CMS accounted 
for geographic wage variation in labor costs when calculating 
individual ASC payments by applying the pre-floor and pre-reclassified 
hospital wage index values that CMS calculates for payment under the 
IPPS, using updated Core Based Statistical Areas (CBSAs) issued by OMB 
in June 2003.
    The reclassification provision in section 1886(d)(10) of the Act is 
specific to hospitals. We believe that using the most recently 
available pre-floor and pre-reclassified IPPS hospital wage indexes 
results in the most appropriate adjustment to the labor portion of ASC 
costs. We continue to believe that the unadjusted hospital wage 
indexes, which are updated yearly and are used by many other Medicare 
payment systems, appropriately account for geographic variation in 
labor costs for ASCs. Therefore, the wage index for an ASC is the pre-
floor and pre-reclassified hospital wage index under the IPPS of the 
CBSA that maps to the CBSA where the ASC is located.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. On February 28, 
2013, OMB issued OMB Bulletin No. 13-01, which provides the 
delineations of all Metropolitan Statistical Areas, Metropolitan 
Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, 
and New England City and Town Areas in the United States and Puerto 
Rico based on the standards published on June 28, 2010 in the Federal 
Register (75 FR 37246 through 37252) and 2010 Census Bureau data. (A 
copy of this bulletin may be obtained at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2013/b13-01.pdf). In the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963), we 
implemented the use of the CBSA delineations issued by OMB in OMB 
Bulletin 13-01 for the IPPS hospital wage index beginning in FY 2015.
    OMB occasionally issues minor updates and revisions to statistical 
areas in the years between the decennial censuses. On July 15, 2015, 
OMB issued OMB Bulletin No. 15-01, which provides updates to and 
supersedes OMB Bulletin No. 13-01 that was issued on February 28, 2013. 
OMB Bulletin No. 15-01 made changes that are relevant to the IPPS and 
ASC wage index. We refer readers to the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79750) for a discussion of these changes and 
our implementation of these revisions. (A copy of this bulletin may be 
obtained at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2015/15-01.pdf).
    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. We refer readers to the CY 2019 OPPS/ASC final 
rule with comment period (83 FR 58864 through 58865) for a discussion 
of these changes and our implementation of these revisions. (A copy of 
this bulletin may be obtained at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf).
    For CY 2020, the proposed CY 2020 ASC wage indexes fully reflect 
the OMB labor market area delineations (including the revisions to the 
OMB labor market delineations discussed above, as set forth in OMB 
Bulletin Nos. 15-01 and 17-01).
    We note that, in certain instances, there might be urban or rural 
areas for which there is no IPPS hospital that has wage index data that 
could be used to set the wage index for that area. For these areas, our 
policy has been to use the average of the wage indexes for CBSAs (or 
metropolitan divisions as applicable) that are contiguous to the area 
that has no wage index (where ``contiguous'' is defined as sharing a 
border). For example, for CY 2014, we applied a proxy wage index based 
on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort 
Stewart, GA) and CBSA 08 (Rural Delaware).
    When all of the areas contiguous to the urban CBSA of interest are 
rural and there is no IPPS hospital that has wage index data that could 
be used to set the wage index for that area, we determine the ASC wage 
index by calculating the average of all wage indexes for urban areas in 
the State (75 FR 72058 through 72059). (In other situations, where 
there are no IPPS hospitals located in a relevant labor market area, we 
continue our current policy of calculating an urban or rural area's 
wage index by

[[Page 39552]]

calculating the average of the wage indexes for CBSAs (or metropolitan 
divisions where applicable) that are contiguous to the area with no 
wage index.)
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2020 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and PFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). Consistent with our established 
policy, we are proposing to scale the CY 2020 relative payment weights 
for ASCs according to the following method. Holding ASC utilization, 
the ASC conversion factor, and the mix of services constant from CY 
2018, we are proposing to compare the total payment using the CY 2019 
ASC relative payment weights with the total payment using the CY 2020 
ASC relative payment weights to take into account the changes in the 
OPPS relative payment weights between CY 2019 and CY 2020. We are 
proposing to use the ratio of CY 2019 to CY 2020 total payments (the 
weight scalar) to scale the ASC relative payment weights for CY 2020. 
The proposed CY 2020 ASC weight scalar is 0.8452 and scaling would 
apply to the ASC relative payment weights of the covered surgical 
procedures, covered ancillary radiology services, and certain 
diagnostic tests within the medicine range of CPT codes, which are 
covered ancillary services for which the ASC payment rates are based on 
OPPS relative payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights) would be scaled to eliminate any difference in the 
total payment between the current year and the update year.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. At the time of this proposed rule, we had available 98 
percent of CY 2018 ASC claims data.
    To create an analytic file to support calculation of the weight 
scalar and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2017 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2018 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file, available to the public as a supporting 
data file for this proposed rule, is posted on the CMS website at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2017 ASC payment system and 
subsequent years, in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79751 through 79753), we finalized our policy to 
calculate and apply a budget neutrality adjustment to the ASC 
conversion factor for supplier level changes in wage index values for 
the upcoming year, just as the OPPS wage index budget neutrality 
adjustment is calculated and applied to the OPPS conversion factor. For 
CY 2020, we calculated the proposed adjustment for the ASC payment 
system by using the most recent CY 2018 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2020 ASC wage indexes. Specifically, 
holding CY 2018 ASC utilization, service-mix, and the proposed CY 2020 
national payment rates after application of the weight scalar constant, 
we calculated the total adjusted payment using the CY 2019 ASC wage 
indexes and the total adjusted payment using the proposed CY 2020 ASC 
wage indexes. We used the 50-percent labor-related share for both total 
adjusted payment calculations. We then compared the total adjusted 
payment calculated with the CY 2019 ASC wage indexes to the total 
adjusted payment calculated with the proposed CY 2020 ASC wage indexes 
and applied the resulting ratio of 1.0008 (the proposed CY 2020 ASC 
wage index budget neutrality adjustment) to the CY 2019 ASC conversion 
factor to calculate the proposed CY 2020 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary 
has not updated amounts established under the revised ASC payment 
system in a calendar year, the payment amounts shall be increased by 
the percentage increase in the Consumer Price Index for all urban 
consumers (CPI-U), U.S. city average, as estimated by the Secretary for 
the 12-month period ending with the midpoint of the year involved. The 
statute does not mandate the adoption of any particular update 
mechanism, but it requires the payment amounts to be increased by the 
CPI-U in the absence of any update. Because the Secretary updates the 
ASC payment amounts annually, we adopted a policy, which we codified at 
42 CFR 416.171(a)(2)(ii)), to update the ASC conversion factor using 
the CPI-U for CY 2010 and subsequent calendar years.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59075 
through 59080), we finalized our proposal to apply the hospital market 
basket update to ASC payment system rates for an interim period of 5 
years (CY 2019 through CY 2023), during which we will assess whether 
there is a migration of the performance of procedures from the hospital 
setting to the ASC setting as a result of the use of a hospital market 
basket update, as well as whether there are any unintended 
consequences, such as less than expected migration of the performance 
of procedures from the hospital setting to the ASC setting. In 
addition, we finalized our proposal to revise our regulations under 42 
CFR 416.171(a)(2), which address the annual update to the ASC 
conversion factor. During this 5-year period, we intend to assess the 
feasibility of collaborating with stakeholders to collect ASC cost data 
in a minimally burdensome manner and could propose a plan to collect 
such information. We refer readers to that final rule for a detailed 
discussion of the rationale for these policies.
    For this proposed rule, the hospital market basket update for CY 
2020 is projected to be 3.2 percent, as published in the FY 2020 IPPS/
LTCH PPS proposed rule (84 FR 19402), based on IHS Global Inc.'s 
(IGI's) 2018 fourth quarter forecast with historical data through the 
third quarter of 2018.

[[Page 39553]]

    We finalized the methodology for calculating the MFP adjustment in 
the CY 2011 PFS final rule with comment period (75 FR 73394 through 
73396) and revised it in the CY 2012 PFS final rule with comment period 
(76 FR 73300 through 73301) and the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70500 through 70501). For this proposed rule, the 
proposed MFP adjustment for CY 2020 is projected to be 0.5 percentage 
point, as published in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19402) based on IGI's 2018 fourth quarter forecast.
    For CY 2020, we are proposing to utilize the hospital market basket 
update of 3.2 percent minus the MFP adjustment of 0.5 percentage point, 
resulting in an MFP-adjusted hospital market basket update factor of 
2.7 percent for ASCs meeting the quality reporting requirements. 
Therefore, we are proposing to apply a 2.7 percent MFP-adjusted 
hospital market basket update factor to the CY 2019 ASC conversion 
factor for ASCs meeting the quality reporting requirements to determine 
the CY 2020 ASC payment amounts. The ASCQR Program affected payment 
rates beginning in CY 2014 and, under this program, there is a 2.0 
percentage point reduction to the update factor for ASCs that fail to 
meet the ASCQR Program requirements. We refer readers to section XIV.E. 
of the CY 2019 OPPS/ASC final rule with comment period (83 FR 59138 
through 59139) and section XIV.E. of this proposed rule for a detailed 
discussion of our policies regarding payment reduction for ASCs that 
fail to meet ASCQR Program requirements. We are proposing to utilize 
the hospital market basket update of 3.2 percent reduced by 2.0 
percentage points for ASCs that do not meet the quality reporting 
requirements and then subtract the 0.5 percentage point MFP adjustment. 
Therefore, we are proposing to apply a 0.7 percent MFP-adjusted 
hospital market basket update factor to the CY 2019 ASC conversion 
factor for ASCs not meeting the quality reporting requirements. We also 
are proposing that if more recent data are subsequently available (for 
example, a more recent estimate of the hospital market basket update 
and MFP), we would use such data, if appropriate, to determine the CY 
2020 ASC update for the final rule with comment period.
    For CY 2020, we are proposing to adjust the CY 2019 ASC conversion 
factor ($46.532) by the proposed wage index budget neutrality factor of 
1.0008 in addition to the MFP-adjusted hospital market basket update 
factor of 2.7 percent discussed above, which results in a proposed CY 
2020 ASC conversion factor of $47.827 for ASCs meeting the quality 
reporting requirements. For ASCs not meeting the quality reporting 
requirements, we are proposing to adjust the CY 2019 ASC conversion 
factor ($46.532) by the proposed wage index budget neutrality factor of 
1.0008 in addition to the quality reporting/MFP-adjusted hospital 
market basket update factor of 0.7 percent discussed above, which 
results in a proposed CY 2020 ASC conversion factor of $46.895.
3. Display of Proposed CY 2020 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available on the 
CMS website) display the proposed updated ASC payment rates for CY 2020 
for covered surgical procedures and covered ancillary services, 
respectively. For those covered surgical procedures and covered 
ancillary services where the payment rate is the lower of the proposed 
rates under the ASC standard ratesetting methodology and the MPFS 
proposed rates, the proposed payment indicators and rates set forth in 
this proposed rule are based on a comparison using the proposed PFS 
rates that would be effective January 1, 2020. For a discussion of the 
PFS rates, we refer readers to the CY 2020 PFS proposed rule that is 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
    The proposed payment rates included in these addenda reflect the 
full ASC payment update and not the reduced payment update used to 
calculate payment rates for ASCs not meeting the quality reporting 
requirements under the ASCQR Program. These addenda contain several 
types of information related to the proposed CY 2020 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``To be 
Subject to Multiple Procedure Discounting'' indicates that the surgical 
procedure would be subject to the multiple procedure payment reduction 
policy. As discussed in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66829 through 66830), most covered surgical procedures 
are subject to a 50-percent reduction in the ASC payment for the lower-
paying procedure when more than one procedure is performed in a single 
operative session.
    Display of the comment indicator ``CH'' in the column titled 
``Comment Indicator'' indicates a change in payment policy for the item 
or service, including identifying discontinued HCPCS codes, designating 
items or services newly payable under the ASC payment system, and 
identifying items or services with changes in the ASC payment indicator 
for CY 2020. Display of the comment indicator ``NI'' in the column 
titled ``Comment Indicator'' indicates that the code is new (or 
substantially revised) and that comments will be accepted on the 
interim payment indicator for the new code. Display of the comment 
indicator ``NP'' in the column titled ``Comment Indicator'' indicates 
that the code is new (or substantially revised) and that comments will 
be accepted on the ASC payment indicator for the new code.
    The values displayed in the column titled ``Proposed CY 2020 
Payment Weight'' are the proposed relative payment weights for each of 
the listed services for CY 2020. The proposed relative payment weights 
for all covered surgical procedures and covered ancillary services 
where the ASC payment rates are based on OPPS relative payment weights 
were scaled for budget neutrality. Therefore, scaling was not applied 
to the device portion of the device-intensive procedures, services that 
are paid at the MPFS nonfacility PE RVU-based amount, separately 
payable covered ancillary services that have a predetermined national 
payment amount, such as drugs and biologicals and brachytherapy sources 
that are separately paid under the OPPS, or services that are 
contractor-priced or paid at reasonable cost in ASCs. This includes 
separate payment for non-opioid pain management drugs.
    To derive the proposed CY 2020 payment rate displayed in the 
``Proposed CY 2020 Payment Rate'' column, each ASC payment weight in 
the ``Proposed CY 2020 Payment Weight'' column was multiplied by the 
proposed CY 2020 conversion factor of $47.827. The proposed conversion 
factor includes a budget neutrality adjustment for changes in the wage 
index values and the annual update factor as reduced by the 
productivity adjustment (as discussed in section XIII.G.2.b. of this 
proposed rule).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Proposed CY 2020 Payment Weight'' column for items and services 
with predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Proposed CY 2020 Payment'' column displays 
the proposed CY 2020 national unadjusted ASC payment rates for all 
items and services. The proposed CY 2020 ASC payment rates listed in 
Addendum BB for separately payable drugs and biologicals are based on 
ASP data used

[[Page 39554]]

for payment in physicians' offices in April 2019.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are proposed to be excluded from payment in 
ASCs for CY 2020.

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

A. Background

1. Overview
    CMS seeks to promote higher quality and more efficient healthcare 
for Medicare beneficiaries. Consistent with these goals, CMS has 
implemented quality reporting programs for multiple care settings 
including the quality reporting program for hospital outpatient care, 
known as the Hospital Outpatient Quality Reporting (OQR) Program, 
formerly known as the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP). The Hospital OQR Program is generally aligned with 
the quality reporting program for hospital inpatient services known as 
the Hospital Inpatient Quality Reporting (IQR) Program, formerly known 
as the Reporting Hospital Quality Data for Annual Payment Update 
(RHQDAPU) Program.
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58820 through 58822) and section I.A.2. of this proposed 
rule where we discuss our Meaningful Measures Initiative and our 
approach in evaluating quality program measures.
2. Statutory History of the Hospital OQR Program
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064 through 72065) for a detailed discussion of the 
statutory history of the Hospital OQR Program.
3. Regulatory History of the Hospital OQR Program
    We refer readers to the CY 2008 through 2019 OPPS/ASC final rules 
with comment period (72 FR 66860 through 66875; 73 FR 68758 through 
68779; 74 FR 60629 through 60656; 75 FR 72064 through 72110; 76 FR 
74451 through 74492; 77 FR 68467 through 68492; 78 FR 75090 through 
75120; 79 FR 66940 through 66966; 80 FR 70502 through 70526; 81 FR 
79753 through 79797; 82 FR 59424 through 59445; and 83 FR 59080 through 
59110) for the regulatory history of the Hospital OQR Program. We have 
codified certain requirements under the Hospital OQR Program at 42 CFR 
419.46.

B. Hospital OQR Program Quality Measures

1. Considerations in the Selection of Hospital OQR Program Quality 
Measures
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74458 through 74460) for a detailed discussion of the 
priorities we consider for the Hospital OQR Program quality measure 
selection. We are not proposing any changes to these policies in this 
proposed rule.
2. Retention of Hospital OQR Program Measures Adopted in Previous 
Payment Determinations
    We previously adopted a policy to retain measures from a previous 
year's Hospital OQR Program measure set for subsequent years' measure 
sets in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68471) whereby quality measures adopted in a previous year's rulemaking 
are retained in the Hospital OQR Program for use in subsequent years 
unless otherwise specified. For more information regarding this policy, 
we refer readers to that final rule with comment period. We codified 
this policy at 42 CFR 419.46(h)(1) in the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 59082).
3. Removal of Quality Measures From the Hospital OQR Program Measure 
Set
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60635), we finalized a process to use the regular 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.\70\ 
We codified this policy at 42 CFR 419.46(h)(3) in the CY 2019 OPPS/ASC 
final rule with comment period (83 FR 59082).
---------------------------------------------------------------------------

    \70\ We initially referred to this process as ``retirement'' of 
a measure in the 2010 OPPS/ASC proposed rule, but later changed it 
to ``removal'' during final rulemaking.
---------------------------------------------------------------------------

a. Considerations in Removing Quality Measures From the Hospital OQR 
Program
(1) Immediate Removal
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60634 
through 60635), we finalized a process for immediate retirement, which 
we later termed ``removal,'' of Hospital OQR Program measures, based on 
evidence that the continued use of the measure as specified raises 
patient safety concerns.\71\ We codified this policy at 42 CFR 
419.46(h)(2) in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59082).
---------------------------------------------------------------------------

    \71\ We refer readers to the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68472 through 68473) for a discussion of our 
reasons for changing the term ``retirement'' to ``removal'' in the 
Hospital OQR Program.
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(2) Consideration Factors for Removing Measures
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59083 
through 59085), we clarified, finalized, and codified at 42 CFR 
419.46(h)(2) and (3) an updated set of factors \72\ and policies for 
determining whether to remove measures from the Hospital OQR Program. 
We refer readers to that final rule with comment period for a detailed 
discussion of our policies regarding measure removal. The factors are:
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    \72\ We note that we previously referred to these factors as 
``criteria'' (for example, 77 FR 68472 through 68473); we now use 
the term ``factors'' in order to align the Hospital OQR Program 
terminology with the terminology we use in other CMS quality 
reporting and pay-for-performance (value-based purchasing) programs.
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     Factor 1. Measure performance among hospitals is so high 
and unvarying that meaningful distinctions and improvements in 
performance can no longer be made (``topped out'' measures).
     Factor 2. Performance or improvement on a measure does not 
result in better patient outcomes.
     Factor 3. A measure does not align with current clinical 
guidelines or practice.
     Factor 4. The availability of a more broadly applicable 
(across settings, populations, or conditions) measure for the topic.
     Factor 5. The availability of a measure that is more 
proximal in time to desired patient outcomes for the particular topic.
     Factor 6. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic.
     Factor 7. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm.
     Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
b. Proposed Removal of Quality Measure From the Hospital OQR Program 
Measure Set: OP-33: External Beam Radiotherapy (NQF# 1822)
    In this proposed rule, we are proposing to remove one measure from 
the Hospital OQR Program for the CY 2022 payment determination as 
discussed below. Specifically, beginning with the CY 2022 payment

[[Page 39555]]

determination, we are proposing to remove OP-33: External Beam 
Radiotherapy for Bone Metastases under removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program.
    We refer readers to the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70507 through 70510), where we adopted OP-33: External 
Beam Radiotherapy (NQF# 1822), beginning with the CY 2018 payment 
determination and for subsequent years. This measure assesses the 
``percentage of patients (all-payer) with painful bone metastases and 
no history of previous radiation who receive EBRT with an acceptable 
dosing schedule.'' \73\ We adopted this measure to address the 
performance gap in External Beam Radiotherapy (EBRT) treatment 
variation, ensure appropriate use of EBRT, and prevent the overuse of 
radiation therapy (80 FR 70508).
---------------------------------------------------------------------------

    \73\ 80 FR 70508.
---------------------------------------------------------------------------

    We believe that removing EBRT from the Hospital OQR Program is 
appropriate at this time because the costs associated with this measure 
outweigh the benefit of its continued use in the program (removal 
Factor 8). The Hospital OQR Program implemented the EBRT measure using 
``radiation delivery'' Current Procedural Terminology (CPT) codes, 
which are appropriate for hospital-level measurement. We have 
identified issues with reporting this measure, finding that more 
questions are received about how to report the EBRT measure than about 
any other measure in the program. In addition, the measure steward has 
received feedback on data collection of the measure in the outpatient 
setting, and has indicated new and significant concerns regarding the 
``radiation delivery'' CPT coding used to report the EBRT measure in 
the Hospital OQR Program including complicated measure exclusions, 
sampling concerns, and administrative burden.
    ``Radiation delivery'' CPT codes require complicated measure 
exclusions, and the use of ``radiation delivery'' CPT codes causes the 
administration of EBRT to different anatomic sites to be considered 
separate cases for this measure. The numerator for this measure 
includes all patients, regardless of age, with painful bone metastases, 
and no previous radiation to the same anatomic site who receive EBRT 
with any of the following recommended fractionation schemes: 30Gy/
10fxns, 24Gy/6fxns, 20Gy/5fxns, 8Gy/1fxn. The denominator for this 
measure includes all patients with painful bone metastases and no 
previous radiation to the same anatomic site who receive EBRT.\74\ As 
noted above, each anatomic site is considered a different case, and as 
a result it is necessary to determine when EBRT has been administered 
to different anatomic sites. This determination is not possible without 
completing a detailed manual review of the patient's record, creating 
burden and difficulty in determining which sites and instances of EBRT 
administration are considered cases and should be included in the 
denominator for the measure. These challenges in determining which 
cases are included in the denominator for the measure result in 
difficulty in determining if sample size requirements for the measure 
are being met.
---------------------------------------------------------------------------

    \74\ National Quality Forum. NQF #1822 External Beam 
Radiotherapy for Bone Metastases. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

    Further, current information systems do not automatically calculate 
the total dose provided, so manual review of patient records by 
practice staff is also required in order to determine the total dose 
and fractionation scheme, which in turn is used to determine which 
cases fall into the numerator for this measure. This manual review of 
patient records is a labor-intensive process that contributes to burden 
and difficulty in reporting this measure. As a result, we believe that 
the complexity of reporting this measure places substantial 
administrative burden on facilities. This also reflects observations 
made by the measure steward that implementing the measure in the 
outpatient setting has proven to be very burdensome, given that 
facilities have noted confusion regarding when the administration of 
EBRT to different numbers and locations of bone metastases are 
considered separate cases. These issues identifying cases have led to 
questions about sampling and difficulty determining if sample size 
requirements are met. Additional burdens associated with this measure 
have come to our attention,--including complicated measure exclusions, 
sampling concerns, and administrative burden. These challenges cause 
difficulty in tracking and reporting data for this measure and 
additional administrative burden, as evidenced by numerous questions 
about how to report this measure received by CMS and its contractors.
    This EBRT measure was also adopted into another CMS quality 
reporting program, the PCHQR Program (79 FR 50278 through 50279). That 
program initially used ``radiation planning'' CPT codes billable at the 
physician level, but beginning in March 2016, the PCHQR program updated 
the measure to enable the use of ``radiation delivery'' CPT codes.\75\ 
In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19502 through 19503), 
CMS proposed to remove the measure from the PCHQR Program because the 
burden associated with the measure outweighs the value of its inclusion 
in the PCHQR Program. Specifically, the PCHQR Program has proposed to 
remove the measure because it is overly burdensome and because the 
measure steward is no longer maintaining the measure. As such, the 
PCHQR Program stated it can no longer ensure that the measure is in 
line with clinical guidelines and standards (84 FR 19502 through 
19503). We note that while the version of the measure using ``radiation 
planning'' CPT codes is less burdensome, Hospital Outpatient 
Departments (HOPDs) do not have access to physician billing data, and 
so it is not operationally feasible to use ``radiation planning'' CPT 
codes (as opposed to the current ``radiation delivery'' CPT codes) for 
the EBRT measure in the Hospital OQR Program.
---------------------------------------------------------------------------

    \75\ QualityNet. 2018 EBRT Measure Information Form. Available 
at: https://www.qualitynet.org/dcs/ContentServer?cid=1228774479863&pagename=QnetPublic%2FPage%2FQnetTier4&c=Page.
---------------------------------------------------------------------------

    This measure was originally adopted to address the performance gap 
in EBRT treatment variation, ensure appropriate use of EBRT, and 
prevent the overuse of radiation therapy. While we still believe that 
these goals are important, the benefits of this measure have 
diminished. Stakeholder feedback has shown that this measure is 
burdensome and difficult to report. Since the measure steward is no 
longer maintaining this measure,\76\ we no longer believe that we can 
ensure that the measure is in line with clinical guidelines and 
standards. Thus, considering these circumstances, we believe the costs 
associated with this measure outweigh the benefit of its continued use 
in the program (removal Factor 8).
---------------------------------------------------------------------------

    \76\ See language about measure steward no longer maintaining 
this measure in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 
19502 through 19503.
---------------------------------------------------------------------------

    Therefore, we are proposing to remove the measure beginning with 
October 2020 encounters used in the CY 2022 payment determination and 
for subsequent years. We note that in crafting our proposal, we 
considered removing this measure beginning with the CY 2021 payment 
determination, but we decided on proposing to delay removal until the 
CY 2022 payment determination to be sensitive to facilities' planning 
and operational

[[Page 39556]]

procedures given that data collection for this measure begins during CY 
2019 for the CY 2021 payment determination. We believe that this 
proposed removal date balances reporting burden, while recognizing that 
HOPDs must use resources to modify information systems and reporting 
processes to discontinue reporting the measure.
    In summary, we are proposing to remove OP-33: External Beam 
Radiotherapy for Bone Metastases (NQF #1822) from the Hospital OQR 
Program beginning with the CY 2022 payment determination and for 
subsequent years under removal Factor 8.
4. Summary of Proposed Hospital OQR Program Measure Sets for the CY 
2022 Payment Determination
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59099 through 59102) for a summary of the previously 
finalized Hospital OQR Program measure sets for the CY 2020 and CY 2021 
payment determinations and subsequent years.
    We are not proposing to add any measures and are proposing to 
remove one measure for the CY 2022 payment determination for the 
Hospital OQR Program. The Table 34 summarizes the proposed Hospital OQR 
Program measure set for the CY 2022 payment determination and 
subsequent years (including previously adopted measures and excluding 
one measure proposed for removal in this proposed rule).
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP09AU19.054


[[Page 39557]]


BILLING CODE 4120-01-C
5. Hospital OQR Program Measures and Topics for Future Consideration
    We are requesting comment on the potential future adoption of four 
patient safety measures as well as future outcome measures generally.
a. Request for Comment on the Potential Future Adoption of Four Patient 
Safety Measures
    We are seeking comment on the potential future adoption of four 
patient safety measures for the Hospital OQR Program that were 
previously adopted for the ASCQR Program: ASC-1: Patient Burn; ASC-2: 
Patient Fall; ASC-3: Wrong Site, Wrong Side, Wrong Procedure, Wrong 
Implant; and ASC-4: All-Cause Hospital Transfer/Admission.\77\ We refer 
readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74497 through 74499), where we adopted these measures (referred to as 
NQF #0263, NQF #0266, NQF #0267, and NQF #0265 at the time) in the 
ASCQR Program. We note that data collection for these measures was 
suspended in the ASCQR Program due to concerns with their data 
submission method using quality data codes (QDCs) in the CY 2019 OPPS/
ASC final rule with comment period (83 FR 59117 through 59123; 59134 
through 59135); however, we refer readers to section XV.B.5. of this 
proposed rule, in which the ASCQR Program is requesting public comment 
on updating the submission method for these measures in the future. We 
are requesting public comment on potentially adding these measures with 
the updated submission method using a CMS online data submission tool, 
to the Hospital OQR Program in future rulemaking. These measures are 
currently specified for the ASC setting; we are considering having them 
specified for the hospital outpatient setting and would seek 
collaboration with the measure steward if we do so.
---------------------------------------------------------------------------

    \77\ ASCQR Specifications Manual, discussing these measures, 
available at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754.
---------------------------------------------------------------------------

    We believe these measures could be valuable to the Hospital OQR 
Program because they would allow us to monitor these types of events 
and prevent their occurrence to ensure that they remain rare, and 
because they provide critical data to beneficiaries and further 
transparency for care provided in the outpatient setting that could be 
useful in choosing a HOPD. In addition, these measures address an 
important Meaningful Measure Initiative quality priority, Making Care 
Safer by Reducing Harm Caused in the Delivery of Care.\78\ There has 
been broad stakeholder support for these measures in the ASC setting; 
stakeholders believe these measures provide important data for 
facilities and patients because they are serious and the occurrence of 
these events should be zero (83 FR 59118). A few commenters noted in 
the CY 2019 OPPS/ASC final rule with comment period that it would be 
beneficial to also include these ASCQR Program measures in the Hospital 
OQR Program in order to provide patients with more meaningful data to 
compare sites of service (83 FR 59119). The future addition of these 
measures would further align the Hospital OQR and ASCQR Programs, which 
would benefit patients because these are two outpatient settings that 
patients may be interested in comparing, especially if they are able to 
choose in which of these two settings they receive care.
---------------------------------------------------------------------------

    \78\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Hub. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
---------------------------------------------------------------------------

    Although NQF endorsement for these ASC measures was removed (in 
February 2016 for the All-Cause Hospital Transfer/Admission measure; 
\79\ in May 2016 for the Patient Burn \80\ and the Wrong Site, Wrong 
Side, Wrong Patient, Wrong Procedure, Wrong Implant \81\ measures; and 
in June 2018 for the Patient Fall measure \82\), as one commenter 
pointed out in the CY 2019 OPPS/ASC final rule with comment period, the 
NQF endorsement of the ASC measures was removed as endorsement was 
allowed to lapse by the measure steward, not because they failed the 
endorsement maintenance process (83 FR 59119). If specified for the 
HOPD setting, we plan to coordinate with the measure steward to seek 
NQF endorsement for those measures. These measures are discussed in 
more detail below.
---------------------------------------------------------------------------

    \79\ National Quality Forum. 0265 All-Cause Hospital Transfer/
Admission. Available at: http://www.qualityforum.org/QPS/0265.
    \80\ National Quality Forum. 0263 Patient Burn. Available at: 
http://www.qualityforum.org/QPS/0263.
    \81\ National Quality Forum. 0267 Wrong Site, Wrong Side, Wrong 
Patient, Wrong Procedure, Wrong Implant. Available at: http://www.qualityforum.org/QPS/0267.
    \82\ National Quality Forum. 0266 Patient Fall. Available at: 
http://www.qualityforum.org/QPS/0266.
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(1) Patient Burn
    The ASCQR Patient Burn measure assesses the percentage of 
admissions experiencing a burn prior to discharge. The numerator for 
this measure is defined as ASC admissions experiencing a burn prior to 
discharge and the denominator is defined as all ASC admissions.\83\ We 
believe this measure, if specified for the hospital outpatient setting, 
would allow HOPDs, Medicare beneficiaries, and other stakeholders to 
develop a better understanding of the incidence of these events. In the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74497 through 
74498), we adopted this measure for the ASCQR Program because ASCs 
serve surgical patients who may face the risk of burns during 
ambulatory surgical procedures and we believe monitoring patient burns 
is valuable to patients and other stakeholders. HOPDs also serve 
surgical patients who may face the risk of burns during outpatient 
procedures, so we believe this measure would be valuable for the HOPD 
setting. Further, we have reviewed studies demonstrating the high 
impact of monitoring patient burns because patient burns are serious 
reportable events in healthcare \84\ and because patient burns are 
preventable.85 86
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    \83\ ASC Quality Collaboration. Quality measures developed and 
tested by the ASC Quality Collaboration. Available at: http://ascquality.org/documents/2019-Summary-ASC-QC-Measures.pdf.
    \84\ National Quality Forum. Serious Reportable Events in 
Healthcare 2006 Update. Washington, DC: NQF, 2007. Available at: 
https://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx.
    \85\ ECRI Institute. New clinical guide to surgical fire 
prevention. Health Devices 2009 Oct;38(10):314-32.
    \86\ 170. National Fire Protection Association (NFPA). NFPA 99: 
Standard for health care facilities. Quincy (MA): NFPA; 2005.
---------------------------------------------------------------------------

(2) Patient Fall
    The ASCQR Program Patient Fall measure assesses the percentage of 
admissions experiencing a fall. The numerator for this measure is 
defined as ASC admissions experiencing a fall within the confines of 
the ASC and excludes ASC admissions experiencing a fall outside the 
ASC. The denominator is defined as all ASC admissions and excludes ASC 
admissions experiencing a fall outside the ASC.\87\ We believe this 
measure, if specified for the hospital outpatient setting, would enable 
HOPDs to take steps to reduce the risk of falls. In the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74498), we adopted this 
measure for the ASCQR Program because falls, particularly in the 
elderly, can cause injury and loss of functional status; because the 
use of anxiolytics, sedatives, and anesthetic

[[Page 39558]]

agents may put patients undergoing outpatient surgery at increased risk 
for falls; and because falls in healthcare settings can be prevented 
through the assessment of risk, care planning, and patient monitoring. 
These same risks for patient falls are a concern in the HOPD setting. 
Further, we have reviewed studies demonstrating the high impact of 
monitoring patient burns because patient falls are serious reportable 
events in healthcare \88\ and because patient falls are 
preventable.\89\
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    \87\ ASC Quality Collaboration. Quality measures developed and 
tested by the ASC Quality Collaboration. Available at: http://ascquality.org/documents/2019-Summary-ASC-QC-Measures.pdf.
    \88\ National Quality Forum. Serious Reportable Events in 
Healthcare--2006 Update: A Consensus Report. March 2007. Available 
at: https://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx.
    \89\ Boushon B, Nielsen G, Quigley P, Rutherford P, Taylor J, 
Shannon D. Transforming Care at the Bedside How-to Guide: Reducing 
Patient Injuries from Falls. Cambridge, MA: Institute for Healthcare 
Improvement; 2008.
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(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong 
Implant
    The ASCQR Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant measure assesses the percentage of admissions 
experiencing a wrong site, wrong side, wrong patient, wrong procedure, 
or wrong implant. The numerator for this measure is defined as ASC 
admissions experiencing a wrong site, a wrong side, a wrong patient, a 
wrong procedure, or a wrong implant, and the denominator is defined as 
all ASC admissions.\90\ We believe this measure, if specified for the 
hospital outpatient setting, would provide important HOPD information 
about surgeries and procedures performed on the wrong site/side, and 
wrong patient. In the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74498 through 74499), we adopted this measure for the ASCQR 
Program because surgeries and procedures performed on the wrong site/
side, and wrong patient can result in significant impact on patients, 
including complications, serious disability or death. We also stated 
that while the prevalence of such serious errors may be rare, such 
events are considered serious reportable events. These same significant 
impacts on patients apply for the HOPD setting. Further, we have 
reviewed studies demonstrating the high impact of monitoring wrong 
site, wrong side, wrong patient, wrong procedure, wrong implant 
procedures and surgeries because these types of errors are serious 
reportable events in healthcare \91\ and because these errors are 
preventable.\92\
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    \90\ ASC Quality Collaboration. Quality measures developed and 
tested by the ASC Quality Collaboration. Available at: http://ascquality.org/documents/2019-Summary-ASC-QC-Measures.pdf.
    \91\ National Quality Forum. Serious Reportable Events in 
Healthcare--2006 Update: A Consensus Report. March 2007. Available 
at: https://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx.
    \92\ American College of Obstetricians and Gynecologists. ACOG 
committee opinion #464: patient safety in the surgical environment. 
Obstet Gynecol. 2010;116(3):786-790.
---------------------------------------------------------------------------

(4) All-Cause Hospital Transfer/Admission
    The All-Cause Hospital Transfer/Admission measure assesses the rate 
of admissions requiring a hospital transfer or hospital admission upon 
discharge. The numerator for this measure is defined as ASC admissions 
requiring a hospital transfer or hospital admission upon discharge from 
the ASC and the denominator is defined as all ASC admissions.\93\ We 
believe this measure, if specified for the hospital outpatient setting, 
would be valuable for HOPDs. In the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74499), we adopted this measure for ASCs because 
the transfer or admission of a surgical patient from an outpatient 
setting to an acute care setting can be an indication of a 
complication, serious medical error, or other unplanned negative 
patient outcome. We also stated that while acute intervention may be 
necessary in these circumstances, a high rate of such incidents may 
indicate suboptimal practices or patient selection criteria. These same 
potential negative patient outcomes apply to the HOPD setting. Further, 
we have reviewed studies demonstrating the high impact of monitoring 
patient transfers and admissions because facilities can take steps to 
prevent and reduce these types of events.94 95
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    \93\ ASC Quality Collaboration. Quality measures developed and 
tested by the ASC Quality Collaboration. Available at: http://ascquality.org/documents/2019-Summary-ASC-QC-Measures.pdf.
    \94\ Coley KC, Williams BA, DaPos SV, Chen C, Smith RB. 
Retrospective evaluation of unanticipated admissions and 
readmissions after same day surgery and associated costs. J Clin 
Anesth. 2002 Aug; 14(5):349-53.
    \95\ Junger A, Klasen J, Benson M, Sciuk G, Hartmann B, Sticher 
J, Hempelmann G. Factors determining length of stay of surgical day-
case patients. Eur J Anaesthesiol. 2001 May;18(5):314-21.
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b. Future Outcome Measures
    In this proposed rule, we are also requesting public comment on 
future measure topics for the Hospital OQR Program. Specifically, we 
are requesting public comment on any outcome measures that would be 
useful to add as well as feedback on any process measures that should 
be eliminated from the Hospital OQR Program to further our goal of 
developing a comprehensive set of quality measures for informed 
decision-making and quality improvement in HOPDs. We are moving towards 
greater use of outcome measures and away from use of clinical process 
measures across our Medicare quality reporting programs to better 
assess the results of care. The current measure set for the Hospital 
OQR Program includes measures that assess process of care, imaging 
efficiency patterns, care transitions, ED throughput efficiency, Health 
Information Technology (health IT) use, care coordination, and patient 
safety. Measures are of various types, including those of process, 
structure, outcome, and efficiency. Through future rulemaking, we 
intend to propose new measures that support our goal of achieving 
better health care and improved health for Medicare beneficiaries who 
receive health care in the HOPD setting, while aligning quality 
measures across the Medicare program to the extent possible.
6. Maintenance of Technical Specifications for Quality Measures
    CMS maintains technical specifications for previously adopted 
Hospital OQR Program measures. These specifications are updated as we 
modify the Hospital OQR Program measure set. The manuals that contain 
specifications for the previously adopted measures can be found on the 
QualityNet website at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1196289981244. We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59104 through 59105), where we changed the frequency of 
the Hospital OQR Program Specifications Manual release beginning with 
CY 2019 and for subsequent years, such that we will release a manual 
once every 12 months and release addenda as necessary. We are not 
proposing any changes to these policies in this proposed rule.
7. Public Display of Quality Measures
    We refer readers to the CY 2014 and CY 2017 OPPS/ASC final rules 
with comment period (78 FR 75092 and 81 FR 79791 respectively) for our 
previously finalized policies regarding public display of quality 
measures. In this proposed rule, we are not proposing any changes to 
our previously finalized public display policies.

[[Page 39559]]

C. Administrative Requirements

1. QualityNet Account and Security Administrator
    The previously finalized QualityNet security administrator 
requirements, including setting up a QualityNet account and the 
associated timelines, are described in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75108 through 75109). We codified these 
procedural requirements at 42 CFR 419.46(a) in that final rule with 
comment period. We are not proposing any changes to our requirements 
for the QualityNet account and security administrator in this proposed 
rule.
2. Requirements Regarding Participation Status
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75108 through 75109), the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70519) and the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 59103 through 59104) for requirements for 
participation and withdrawal from the Hospital OQR Program. We codified 
these procedural requirements regarding participation status at 42 CFR 
419.46(a) and (b). We are not proposing any changes to our 
participation status policies in this proposed rule.

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

1. Hospital OQR Program Annual Payment Determinations
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75110 
through 75111) and the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70519 through 70520), we specified our data submission 
deadlines. We codified these submission requirements at 42 CFR 
419.46(c).
    We refer readers to the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70519 through 70520), where we finalized our proposal to 
shift the quarters upon which the Hospital OQR Program payment 
determinations are based beginning with the CY 2018 payment 
determination. The deadlines for the CY 2022 payment determination and 
subsequent years are illustrated in Table 35.
[GRAPHIC] [TIFF OMITTED] TP09AU19.055

    In the CY 2018 OPPS/ASC final rule with comment period, we 
finalized a policy to align the initial data submission timeline for 
all hospitals that did not participate in the previous year's Hospital 
OQR Program and made conforming revisions at 42 CFR 419.46(c)(3). We 
are not proposing any changes to these policies in this proposed rule.
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data 
Are Submitted Directly to CMS for the CY 2022 Payment Determination and 
Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68481 through 68484) for a discussion of the form, 
manner, and timing for data submission requirements of chart-abstracted 
measures for the CY 2014 payment determination and subsequent years. In 
this proposed rule, we are not proposing any changes to our policies 
regarding the submission of chart-abstracted measure data where 
patient-level data are submitted directly to CMS.
    The following previously finalized Hospital OQR Program chart-
abstracted measures will require patient-level data to be submitted for 
the CY 2022 payment determination and subsequent years:
     OP-2: Fibrinolytic Therapy Received Within 30 Minutes of 
ED Arrival (NQF #0288);
     OP-3: Median Time to Transfer to Another Facility for 
Acute Coronary Intervention (NQF #0290);
     OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients (NQF #0496); and
     OP-23: Head CT Scan Results for Acute Ischemic Stroke or 
Hemorrhagic Stroke Patients who Received Head CT Scan Interpretation 
Within 45 Minutes of ED Arrival (NQF #0661).
3. Claims-Based Measure Data Requirements for the CY 2022 Payment 
Determination and Subsequent Years
    Currently, the following previously finalized Hospital OQR Program 
claims-based measures are required for the CY 2022 payment 
determination and subsequent years:
     OP-8: MRI Lumbar Spine for Low Back Pain (NQF #0514);
     OP-10: Abdomen CT--Use of Contrast Material;
     OP-13: Cardiac Imaging for Preoperative Risk Assessment 
for Non-Cardiac, Low Risk Surgery (NQF #0669);
     OP-32: Facility 7-Day Risk-Standardized Hospital Visit 
Rate after Outpatient Colonoscopy (NQF #2539);
     OP-35: Admissions and Emergency Department Visits for 
Patients Receiving Outpatient Chemotherapy; and
     OP-36: Hospital Visits after Hospital Outpatient Surgery 
(NQF #2687).
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59106 through 59107), where we established a three-year 
reporting period for OP-32: Facility 7-Day Risk-Standardized Hospital 
Visit Rate after Outpatient Colonoscopy beginning with the CY 2020 
payment determination and for subsequent years. In that final rule with 
comment period (83 FR 59136 through 59138), we established a similar 
policy under the ASCQR Program. In this proposed rule, we are not 
proposing any changes regarding the submission of claims-based 
measures.

[[Page 39560]]

4. Data Submission Requirements for the OP-37a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures for the CY 2022 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79792 through 79794) for a discussion of the previously 
finalized requirements related to survey administration and vendors for 
the OAS CAHPS Survey-based measures. In addition, we refer readers to 
the CY 2018 OPPS/ASC final rule with comment period (82 FR 59432 
through 59433), where we finalized a policy to delay implementation of 
the OP-37a-e OAS CAHPS Survey-based measures beginning with the CY 2020 
payment determination (2018 reporting period) until further action in 
future rulemaking. In this proposed rule, we are not proposing any 
changes to the previously finalized requirements related to survey 
administration and vendors for the OAS CAHPS Survey-based measures.
5. Data Submission Requirements for Measures for Data Submitted via a 
Web-Based Tool for the CY 2022 Payment Determination and Subsequent 
Years
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75112 through 75115) and the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70521) and the CMS QualityNet website 
(https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1205442125082) for a discussion of the requirements for measure data submitted 
via the CMS QualityNet website for the CY 2017 payment determination 
and subsequent years. In addition, we refer readers to the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75097 through 75100) for 
a discussion of the requirements for measure data submitted via the CDC 
NHSN website. In this proposed rule, we are not proposing any changes 
to our policies regarding the submission of measure data submitted via 
a web-based tool. However, as discussed in section XIV.B.3.b. of this 
proposed rule, we are proposing to remove OP-33: External Beam 
Radiotherapy for Bone Metastases beginning with the CY 2022 payment 
determination and for subsequent years.
    If our proposal to remove OP-33 is finalized, the following 
previously finalized quality measures will require data to be submitted 
via a web-based tool for the CY 2022 payment determination and 
subsequent years:
     OP-22: Left Without Being Seen (NQF #0499) (via CMS' 
QualityNet website);
     OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up 
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) 
(via CMS' QualityNet website); and
     OP-31: Cataracts: Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery (NQF #1536) (via CMS' 
QualityNet website).
6. Population and Sampling Data Requirements for the CY 2021 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74482 through 74483) for discussions of our 
population and sampling requirements. We are not proposing any changes 
to our population and sampling requirements for chart-abstracted 
measures in this proposed rule.
7. Hospital OQR Program Validation Requirements
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68484 through 68487), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66964 through 66965), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70524), and the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59441 through 59443), and 42 CFR 
419.46(e) for our policies regarding validation. We are not proposing 
any changes to these policies in this proposed rule.
8. Extraordinary Circumstances Exception (ECE) Process for the CY 2021 
Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66966), the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70524), the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79795), the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59444), and 42 CFR 419.46(d) for a complete 
discussion of our extraordinary circumstances exception (ECE) process 
under the Hospital OQR Program. We are not proposing any changes to our 
ECE policy in this proposed rule.
9. Hospital OQR Program Reconsideration and Appeals Procedures for the 
CY 2021 Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487 through 68489), the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75118 through 75119), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70524), the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79795), and 42 CFR 419.46(f) for 
our reconsideration and appeals procedures. We are not proposing any 
changes to our reconsideration and appeals procedures in this proposed 
rule.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2020 Payment Determination

1. Background
    Section 1833(t)(17) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), states 
that hospitals that fail to report data required to be submitted on 
measures selected by the Secretary, in the form and manner, and at a 
time, specified by the Secretary will incur a 2.0 percentage point 
reduction to their Outpatient Department (OPD) fee schedule increase 
factor; that is, the annual payment update factor. Section 
1833(t)(17)(A)(ii) of the Act specifies that any reduction applies only 
to the payment year involved and will not be taken into account in 
computing the applicable OPD fee schedule increase factor for a 
subsequent year.
    The application of a reduced OPD fee schedule increase factor 
results in reduced national unadjusted payment rates that apply to 
certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data in order to receive the full 
payment update factor and that fail to meet the Hospital OQR Program 
requirements. Hospitals that meet the reporting requirements receive 
the full OPPS payment update without the reduction. For a more detailed 
discussion of how this payment reduction was initially implemented, we 
refer readers to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68769 through 68772).
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative payment weight for the APC to which

[[Page 39561]]

the service is assigned. The OPPS conversion factor, which is updated 
annually by the OPD fee schedule increase factor, is used to calculate 
the OPPS payment rate for services with the following status indicators 
(listed in Addendum B to this proposed rule, which is available via the 
internet on the CMS website): ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', 
``Q3'', ``R'', ``S'', ``T'', ``V'', or ``U''. In the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79796), we clarified that the 
reporting ratio does not apply to codes with status indicator ``Q4'' 
because services and procedures coded with status indicator ``Q4'' are 
either packaged or paid through the Clinical Laboratory Fee Schedule 
and are never paid separately through the OPPS. Payment for all 
services assigned to these status indicators will be subject to the 
reduction of the national unadjusted payment rates for hospitals that 
fail to meet Hospital OQR Program requirements, with the exception of 
services assigned to New Technology APCs with assigned status indicator 
``S'' or ```T''. We refer readers to the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68770 through 68771) for a discussion of 
this policy.
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
reduce the OPD fee schedule increase factor for hospitals that fail to 
meet reporting requirements, we calculate two conversion factors--a 
full market basket conversion factor (that is, the full conversion 
factor), and a reduced market basket conversion factor (that is, the 
reduced conversion factor). We then calculate a reduction ratio by 
dividing the reduced conversion factor by the full conversion factor. 
We refer to this reduction ratio as the ``reporting ratio'' to indicate 
that it applies to payment for hospitals that fail to meet their 
reporting requirements. Applying this reporting ratio to the OPPS 
payment amounts results in reduced national unadjusted payment rates 
that are mathematically equivalent to the reduced national unadjusted 
payment rates that would result if we multiplied the scaled OPPS 
relative payment weights by the reduced conversion factor. For example, 
to determine the reduced national unadjusted payment rates that applied 
to hospitals that failed to meet their quality reporting requirements 
for the CY 2010 OPPS, we multiplied the final full national unadjusted 
payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule 
with comment period by the CY 2010 OPPS final reporting ratio of 0.980 
(74 FR 60642).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the reporting 
ratio to both the minimum unadjusted copayment and national unadjusted 
copayment for services provided by hospitals that receive the payment 
reduction for failure to meet the Hospital OQR Program reporting 
requirements. This application of the reporting ratio to the national 
unadjusted and minimum unadjusted copayments is calculated according to 
Sec.  419.41 of our regulations, prior to any adjustment for a 
hospital's failure to meet the quality reporting standards according to 
Sec.  419.43(h). Beneficiaries and secondary payers thereby share in 
the reduction of payments to these hospitals.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68772), we established the policy that all other applicable adjustments 
to the OPPS national unadjusted payment rates apply when the OPD fee 
schedule increase factor is reduced for hospitals that fail to meet the 
requirements of the Hospital OQR Program. For example, the following 
standard adjustments apply to the reduced national unadjusted payment 
rates: The wage index adjustment; the multiple procedure adjustment; 
the interrupted procedure adjustment; the rural sole community hospital 
adjustment; and the adjustment for devices furnished with full or 
partial credit or without cost. Similarly, OPPS outlier payments made 
for high cost and complex procedures will continue to be made when 
outlier criteria are met. For hospitals that fail to meet the quality 
data reporting requirements, the hospitals' costs are compared to the 
reduced payments for purposes of outlier eligibility and payment 
calculation. We established this policy in the OPPS beginning in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a 
complete discussion of the OPPS outlier calculation and eligibility 
criteria, we refer readers to section II.G. of this proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2020
    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2020 annual payment update factor. 
For the CY 2020 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of $79.770 by the 
proposed full conversion factor of $81.398. We are proposing to 
continue to apply the reporting ratio to all services calculated using 
the OPPS conversion factor. For the CY 2020 OPPS, we are proposing to 
apply the reporting ratio, when applicable, to all HCPCS codes to which 
we have proposed status indicator assignments of ``J1'', ``J2'', ``P'', 
``Q1'', ``Q2'', ``Q3'', ``R'', ``S'', ``T'', ``V'', and ``U'' (other 
than new technology APCs to which we have proposed status indicator 
assignment of ``S'' and ``T''). We are proposing to continue to exclude 
services paid under New Technology APCs. We are proposing to continue 
to apply the reporting ratio to the national unadjusted payment rates 
and the minimum unadjusted and national unadjusted copayment rates of 
all applicable services for those hospitals that fail to meet the 
Hospital OQR Program reporting requirements. We are also proposing to 
continue to apply all other applicable standard adjustments to the OPPS 
national unadjusted payment rates for hospitals that fail to meet the 
requirements of the Hospital OQR Program. Similarly, we are proposing 
to continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced payment rates for those hospitals that fail to 
meet the reporting requirements.

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

A. Background

1. Overview
    We refer readers to section XIV.A.1. of this proposed rule for a 
general overview of our quality reporting programs and to the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58820 through 58822) and 
section I.A.2. of this proposed rule where we discuss our Meaningful 
Measures Initiative and our approach in evaluating quality program 
measures.

[[Page 39562]]

2. Statutory History of the ASCQR Program
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74492 through 74494) for a detailed discussion of the 
statutory history of the ASCQR Program.
3. Regulatory History of the ASCQR Program
    We seek to promote higher quality and more efficient health care 
for beneficiaries. This effort is supported by the adoption of widely 
accepted quality of care measures. We have collaborated with relevant 
stakeholders to define such measures in most healthcare settings and 
currently measure some aspect of care for almost all settings of care 
available to Medicare beneficiaries. These measures assess structural 
aspects of care, clinical processes, patient experiences with care, and 
clinical outcomes. We have implemented quality measure reporting 
programs for multiple healthcare settings. To measure the quality of 
ASC services and to make such information publicly available, we 
implemented the ASCQR Program. We refer readers to the CYs 2014 through 
2019 OPPS/ASC final rules with comment period (78 FR 75122; 79 FR 66966 
through 66987; 80 FR 70526 through 70538; 81 FR 79797 through 79826; 82 
FR 59445 through 59476; and 83 FR 59110 through 59139, respectively) 
for an overview of the regulatory history of the ASCQR Program. We have 
codified certain requirements under the ASCQR Program at 42 CFR part 
16, subpart H (42 CFR 416.300 through 416.330).

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68493 through 68494) for a detailed discussion of the 
priorities we consider for ASCQR Program quality measure selection. We 
are not proposing any changes to these policies in this proposed rule.
2. Policies for Retention and Removal of Quality Measures From the 
ASCQR Program
a. Retention of Previously Adopted ASCQR Program Measures
    We previously finalized a policy that quality measures adopted for 
an ASCQR Program measure set for a previous payment determination year 
be retained in the ASCQR Program for measure sets for subsequent 
payment determination years, except when they are removed, suspended, 
or replaced as indicated (76 FR 74494 and 74504; 77 FR 68494 through 
68495; 78 FR 75122; and 79 FR 66967 through 66969). We are not 
proposing any changes to this policy in this proposed rule.
b. Removal Factors for ASCQR Program Measures
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59111 
through 59115), we clarified, finalized and codified at 42 CFR 416.320 
an updated set of factors \96\ and the process for removing measures 
from the ASCQR Program. The factors are:
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    \96\ We note that we previously referred to these factors as 
``criteria'' (for example, 79 FR 66967 through 66969); we now use 
the term ``factors'' in order to align the ASCQR Program terminology 
with the terminology we use in other CMS quality reporting and pay-
for-performance (value-based purchasing) programs.
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     Factor 1. Measure performance among ASCs is so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made (``topped-out'' measures).
     Factor 2. Performance or improvement on a measure does not 
result in better patient outcomes.
     Factor 3. A measure does not align with current clinical 
guidelines or practice.
     Factor 4. The availability of a more broadly applicable 
(across settings, populations, or conditions) measure for the topic.
     Factor 5. The availability of a measure that is more 
proximal in time to desired patient outcomes for the particular topic.
     Factor 6. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic.
     Factor 7. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm.
     Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59111 through 59115) for a detailed discussion of our 
process regarding measure removal.
3. Proposed New Quality Measure for the ASCQR Program Measure Set: 
Proposal To Adopt ASC-19: Facility-Level 7-Day Hospital Visits After 
General Surgery Procedures Performed at Ambulatory Surgical Centers 
(NQF #3357)
    In this proposed rule, we are proposing one new quality measure for 
the ASCQR Program for the CY 2024 payment determination and subsequent 
years--ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers (NQF 
#3357).
a. Background
    Ambulatory surgery in the outpatient setting is common in the 
United States. Nearly 70 percent of all surgeries in the United States 
are performed in an outpatient setting with an expanding number and 
variety of procedures being performed at stand-alone 
ASCs.97 98 General surgery procedures are commonly performed 
at ASCs. Based on an analysis of Medicare fee-for-service (FFS) claims 
for patients aged 65 years and older, from January 1, 2015 through 
December 31, 2015, 3,251 ASCs performed 149,468 general surgery 
procedures. These procedures include abdominal, alimentary tract, 
breast, skin/soft tissue, wound, and varicose vein stripping 
procedures. Of the 3,251 ASCs that performed general surgery 
procedures, 1,157 (35.5 percent) performed at least 25 such procedures 
during this time period. Because of the large number of general surgery 
procedures that occur in the ambulatory setting, we believe that 
adopting ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers in the 
ASCQR Program will provide beneficiaries with transparent quality data 
that can be utilized in choosing healthcare facilities.
---------------------------------------------------------------------------

    \97\ Cullen KA, Hall MJ, Golosinskiy A, Statistics NCfH. 
Ambulatory surgery in the United States, 2006. US Department of 
Health and Human Services, Centers for Disease Control and 
Prevention, National Center for Health Statistics; 2009.
    \98\ Medicare Payment Advisory Committee. Report for the 
Congress: Medicare Payment Policy, March 2019. http://medpac.gov/docs/default-source/reports/mar19_medpac_entirereport_sec.pdf?sfvrsn=0. Accessed May 24, 2019.
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    While ambulatory surgery is considered low risk for complications, 
there are well-described and potentially preventable adverse events 
that can occur after ambulatory surgery leading to unplanned care at a 
hospital, such as emergency department (ED) visits, observation stays, 
or hospital admissions. These events include uncontrolled pain, urinary 
retention, infection, bleeding, and venous 
thromboembolism.99 100
---------------------------------------------------------------------------

    \99\ Coley KC, Williams BA, DaPos SV, Chen C, Smith RB. 
Retrospective evaluation of unanticipated admissions and 
readmissions after same day surgery and associated costs. Journal of 
clinical anesthesia. 2002;14(5):349-353.
    \100\ Bain J, Kelly H, Snadden D, Staines H. Day surgery in 
Scotland: patient satisfaction and outcomes. Quality in Health Care. 
1999;8(2):86-91.

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[[Page 39563]]

    Hospital visits following same-day surgery are an important and 
broadly accepted patient-centered outcome reported in the 
literature.101 102 103 104 105 106 107 108 National 
estimates of hospital visit rates following outpatient surgery vary 
from 0.5 to 9.0 percent, based on the type of surgery, outcome measured 
(admissions alone or admissions and ED visits), and length of time 
between the surgery and the hospital visit. 
109 110 111 112 113 114 115 116 117 The frequency of such 
events also varies among ASCs, suggesting variation in quality of pre-
surgical assessment, surgical care, post-surgical care, and the care 
and support provided to patients post-discharge. 
118 119 120 121 122 123 124 125
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    \101\ Majholm BB. Is day surgery safe? A Danish multicentre 
study of morbidity after 57,709 day surgery procedures. Acta 
anaesthesiologica Scandinavica. 2012;56(3):323-331.
    \102\ Whippey A, Kostandoff G, Paul J, Ma J, Thabane L, Ma HK. 
Predictors of unanticipated admission following ambulatory surgery: 
a retrospective case-control study. Canadian Journal of Anesthesia/
Journal canadien d'anesth[eacute]sie. 2013;60(7):675-683.
    \103\ Fleisher LA, Pasternak LR, Herbert R, Anderson GF. 
Inpatient hospital admission and death after outpatient surgery in 
elderly patients: importance of patient and system characteristics 
and location of care. Arch Surg. 2004;139(1):67-72.
    \104\ Coley KC, Williams BA, DaPos SV, Chen C, Smith RB. 
Retrospective evaluation of unanticipated admissions and 
readmissions after same day surgery and associated costs. Journal of 
clinical anesthesia. 2002;14(5):349-353.
    \105\ Hollingsworth JMJM. Surgical quality among Medicare 
beneficiaries undergoing outpatient urological surgery. The Journal 
of urology. 2012;188(4):1274-1278.
    \106\ Bain J, Kelly H, Snadden D, Staines H. Day surgery in 
Scotland: patient satisfaction and outcomes. Quality in Health Care. 
1999;8(2):86-91.
    \107\ Fortier J, Chung F, Su J. Unanticipated admission after 
ambulatory surgery--a prospective study. Canadian journal of 
anaesthesia = Journal canadien d'anesthesie. 1998;45(7):612-619.
    \108\ Aldwinckle R, Montgomery J. Unplanned admission rates and 
postdischarge complications in patients over the age of 70 following 
day case surgery. Anaesthesia. 2004;59(1):57-59.
    \109\ Coley KC, Williams BA, DaPos SV, Chen C, Smith RB. 
Retrospective evaluation of unanticipated admissions and 
readmissions after same day surgery and associated costs. Journal of 
clinical anesthesia. 2002;14(5):349-353.
    \110\ Hollingsworth JMJM. Surgical quality among Medicare 
beneficiaries undergoing outpatient urological surgery. The Journal 
of urology. 2012;188(4):1274-1278.
    \111\ Baugh RR. Safety of outpatient surgery for obstructive 
sleep apnea. Otolaryngology--head and neck surgery. 2013;148(5):867-
872.
    \112\ Bhattacharyya N. Ambulatory sinus and nasal surgery in the 
United States: Demographics and perioperative outcomes. The 
Laryngoscope. 2010;120(3):635-638.
    \113\ Bhattacharyya NN. Unplanned revisits and readmissions 
after ambulatory sinonasal surgery. The Laryngoscope. 
2014;124(9):1983-1987.
    \114\ Bhattacharyya NN. Revisits and postoperative hemorrhage 
after adult tonsillectomy. The Laryngoscope. 2014;124(7):1554-1556.
    \115\ Hansen DG, Abbott LE, Johnson RM, Fox JP. Variation in 
hospital-based acute care within 30 days of outpatient plastic 
surgery. Plastic and reconstructive surgery (1963). 
2014;134(3):370e-378e.
    \116\ Mahboubi HH. Ambulatory laryngopharyngeal surgery: 
evaluation of the national survey of ambulatory surgery. JAMA 
otolaryngology-- head & neck surgery. 2013;139(1):28-31.
    \117\ Orosco RKRK. Ambulatory thyroidectomy: a multistate study 
of revisits and complications. Otolaryngology--head and neck 
surgery. 2015;152(6):1017-1023.
    \118\ Baugh RR. Safety of outpatient surgery for obstructive 
sleep apnea. Otolaryngology--head and neck surgery. 2013;148(5):867-
872.
    \119\ Bhattacharyya N. Ambulatory sinus and nasal surgery in the 
United States: Demographics and perioperative outcomes. The 
Laryngoscope. 2010;120(3):635-638.
    \120\ Bhattacharyya NN. Unplanned revisits and readmissions 
after ambulatory sinonasal surgery. The Laryngoscope. 
2014;124(9):1983-1987.
    \121\ Bhattacharyya NN. Revisits and postoperative hemorrhage 
after adult tonsillectomy. The Laryngoscope. 2014;124(7):1554-1556.
    \122\ Hansen DG, Abbott LE, Johnson RM, Fox JP. Variation in 
hospital-based acute care within 30 days of outpatient plastic 
surgery. Plastic and reconstructive surgery (1963). 
2014;134(3):370e-378e.
    \123\ Mahboubi HH. Ambulatory laryngopharyngeal surgery: 
evaluation of the national survey of ambulatory surgery. JAMA 
otolaryngology-- head & neck surgery. 2013;139(1):28-31.
    \124\ Menachemi. Quality of care differs by patient 
characteristics: outcome disparities after ambulatory surgical 
procedures. American journal of medical quality. 2007;22(6):395-401.
    \125\ Orosco RKRK. Ambulatory thyroidectomy: a multistate study 
of revisits and complications. Otolaryngology--head and neck 
surgery. 2015;152(6):1017-1023.
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    We calculated the national unadjusted rate of hospital visits (ED 
visits, observation stays, or hospital admissions) following any 
general surgery procedure at an ASC. In a Medicare FFS dataset of 
claims for services during CY 2015 (January 1, 2015-December 31, 2015), 
the distribution of unadjusted outcome rates was skewed, suggesting 
variation in quality of care. Among 1,153 ASCs with at least 25 
qualifying general surgery cases in the Medicare FFS CY 2015 dataset, 
the unadjusted rate of unplanned hospital visits ranged from 0.0 
percent to 13.2 percent. These results suggest opportunity for ASCs to 
improve the quality of care for patients seeking general surgery 
procedures.
    ASCs may be unaware of patients' subsequent unplanned hospital 
visits given that patients tend to present to the ED or to hospitals 
unaffiliated with the ASC. In addition, information on the rate of 
patients' subsequent unplanned hospital visits would provide 
transparent data to beneficiaries that could be utilized when choosing 
ambulatory surgery sites of care. Quality measurement of the number of 
unplanned hospital visits following general surgery procedures 
performed at ASCs, coupled with transparency through public reporting 
would make these outcomes more visible to both ASCs and beneficiaries. 
Therefore, we expect that this would encourage ASCs to incorporate 
quality improvement activities to reduce the number of unplanned 
hospital visits and track quality improvement over time.
    Therefore, in this proposed rule, we are proposing to adopt ASC-19: 
Facility-Level 7-Day Hospital Visits after General Surgery Procedures 
Performed at Ambulatory Surgical Centers (NQF #3357) (hereafter 
referred to as the proposed ASC-19 measure) into the ASCQR Program for 
the CY 2024 payment determination and subsequent years.
    The proposed ASC-19 measure was developed in conjunction with two 
other measures adopted for the ASCQR Program beginning with the CY 2022 
payment determination as finalized in the CY 2018 OPPS/ASC final rule 
with comment period: ASC-17: Hospital Visits After Orthopedic 
Ambulatory Surgical Center Procedures (82 FR 59455) and ASC-18: 
Hospital Visits After Urology Ambulatory Surgical Center Procedures (82 
FR 59463). All three measures assess the same patient outcome for care 
provided in the ASC setting and use the same risk-adjustment 
methodology. These three measures differ in surgical procedures 
considered (orthopedic, urological, or general surgery), specific risk 
variables included, and reporting of the outcome, unplanned hospital 
visits. The proposed ASC-19 measure reports the outcome as a risk-
standardized ratio because the diverse mix of procedures included in 
the proposed ASC-19 measure can have varying levels of risk of 
unplanned hospital visits; while the ASC-17 and ASC-18 measures report 
a risk-standardized rate that reflects clinically specific cohorts with 
fairly comparable mixes of procedures. We refer readers to section 
XV.B.3.d. of this proposed rule for a full discussion on the measure 
outcome calculation.
b. Overview of Measure
    The proposed ASC-19 measure is a risk-adjusted outcome measure of 
acute, unplanned hospital visits within 7 days of a general surgery 
procedure performed at an ASC among Medicare FFS patients aged 65 years 
and older. We define an unplanned hospital visit as including an 
emergency department (ED) visit, observation stay, or unplanned 
inpatient admission. The measure aligns with the Admissions and 
Readmissions to Hospitals and Preventable Healthcare Harm Meaningful 
Measure areas of our

[[Page 39564]]

Meaningful Measures Initiative.\126\ This measure was developed with 
input from a national Technical Expert Panel (TEP) consisting of 
patients, surgeons, methodologists, researchers, and providers. We also 
held a three-week public comment period soliciting stakeholder input on 
the measure methodology, and publicly posted a summary of the comments 
received as well as our responses (available in the Downloads section 
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html).
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    \126\ 83 FR 58820 through 58822.
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    During the measure development public comment period, we received 
public comment recommending the removal of two specific procedures (CPT 
29893 endoscopic plantar and CPT 69222 clean out mastoid cavity) deemed 
outside the scope of general surgery and to review the cohort procedure 
list with general surgeons to ensure appropriateness. In response to 
this feedback, we reviewed the cohort of procedures incorporating 
feedback from general surgeons and removed 15 individual skin/soft 
tissue and wound procedure codes from the measure that are outside the 
scope of general surgery practice. These procedures include those 
specifically suggested for removal (that is, endoscopic plantar and 
clean out mastoid cavity) as well as chemical peels, dermabrasions, and 
nerve procedures.
    Section 1890A of the Act requires the Secretary to establish a pre-
rulemaking process with respect to the selection of certain categories 
of quality and efficiency measures. Under section 1890A(a)(2) of the 
Act, the Secretary must make available to the public by December 1 of 
each year a list of quality and efficiency measures that the Secretary 
is considering. The ASC-19: Facility-Level 7-Day Hospital Visits after 
General Surgery Procedures Performed at Ambulatory Surgical Centers 
measure was included on a publicly available document entitled ``List 
of Measures under Consideration for December 1, 2017.'' \127\ The MAP 
reviewed this measure (MUC17-233) and provided conditional support for 
rulemaking, pending NQF review and endorsement, with the recognition 
that this measure assesses an important outcome for patients receiving 
care at ASCs.\128\ The MAP had some concerns about the attribution 
model of the measure, noting that hospital visits after ASC procedures 
are relatively rare events and could disproportionately affect low-
income or rural ASCs and that the measure may need risk adjustment for 
social risk factors. At the time of the MAP's review, this measure was 
still undergoing field testing.
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    \127\ National Quality Forum. List of Measures under 
Consideration for December 1, 2017. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86526.
    \128\ National Quality Forum. MAP 2018 Considerations for 
Implementing Measures: Hospitals--Final Report. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=87096.
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    Since the MAP's conditional support,\129\ we completed testing for 
the proposed ASC-19 measure by estimating risk-standardized scores 
using two full years of Medicare FFS claims data (CYs 2014 and 2015) 
containing 286,999 procedures. The results showed score variation 
across ASCs, from a minimum risk-standardized ratio of 0.42 to a 
maximum of 2.13; the median was 0.97 and the 25th and 75th percentiles 
were 0.90 and 1.10, respectively. After adjusting for case and 
procedure mixes of ASCs, these results suggest there are underlying 
differences in the quality of care and opportunities for quality 
improvement. The reliability testing found an intraclass correlation 
coefficient (ICC) score of 0.530, indicating moderate measure score 
reliability.\130\ We considered the face validity of the measure score 
among TEP members. Among the 14 TEP members, 12 agreed that the measure 
scores are valid and useful measures of ASC quality of care for general 
surgery procedures and will provide ASCs with information that can be 
used to improve their quality of care. Detailed testing results are 
available in the technical report for this measure, located at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \129\ Ibid.
    \130\ Landis JR, Koch GG. The Measurement of Observer Agreement 
for Categorical Data. Biometrics. 1977;33(1):159-174.
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    On June 6, 2018, the NQF's Consensus Standards Approval Committee 
endorsed ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers (NQF 
#3357).\131\ The proposed ASC-19 measure is consistent with the 
information submitted to the NQF and the MAP, supporting its scientific 
acceptability for use in quality reporting programs. We note that we 
have made minor annual coding updates to the measure to incorporate 
changes to the CPT and ICD-10 coding systems and to incorporate 
clinical input to remove select procedures outside the scope of general 
surgery as noted above, endoscopic plantar, clean out mastoid cavity, 
chemical peels, dermabrasions, and nerve procedures. For the current 
list of codes that define the proposed ASC-19 measure and a description 
of updates since development, we refer readers to the zip file labeled 
``Version 1.0 Hospital Visits General Surgery ASC Procedures Measure 
Technical Report'' located at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \131\ National Quality Forum. Facility-Level 7-Day Hospital 
Visits after General Surgery Procedures Performed at Ambulatory 
Surgical Centers. Available at: http://www.qualityforum.org/QPS/3357.
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    We believe this proposed measure reflects consensus among 
stakeholders because it was developed with stakeholder input from a TEP 
convened by a CMS contractor as well as from the measure development 
public comment period.\132\ During the measure development processes 
and the MAP meeting, the majority of public commenters supported the 
measure's focus on assessing patient outcomes after general surgery 
procedures performed in ASC setting of care. Most commenters supported 
MAP's conditional support of the measure, noting it should be further 
developed and NQF-endorsed before implementation in the ASCQR Program. 
Importantly, the proposed ASC-19 measure addresses the MAP-identified 
priority measure area of addressing preventable healthcare harm, such 
as surgical complications, for the ASCQR Program.\133\ Therefore, we 
believe it is appropriate to incorporate this proposed measure into the 
ASCQR Program measure set because collecting and publicly reporting 
these data would increase transparency, inform patients and ASCs, and 
foster quality improvement efforts.
---------------------------------------------------------------------------

    \132\ National Quality Forum. ``MAP 2018 Considerations for 
Implementing Measures in Federal Programs: Hospitals.'' Report. 
2017. Available at: http://www.qualityforum.org/map/ under 
``Hospitals--Final Report.''
    \133\ The Centers for Medicare and Medicaid Services Center for 
Clinical Standards and Quality. ``2018 Measures under Consideration 
List: Program-Specific Measure Needs and Priorities''. Available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/2018-CMS-Measurement-Priorities-and-Needs.pdf. Accessed February 28, 2019.
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c. Data Sources
    The proposed ASC-19 measure is claims-based using Part A and Part B 
Medicare administrative claims and

[[Page 39565]]

Medicare enrollment data to calculate the measure.
    We are proposing that the data collection period for the proposed 
ASC-19 measure would be the 2 calendar years ending 2 years prior to 
the applicable payment determination year. For example, for the CY 2024 
payment determination, the data collection period would be CYs 2021 to 
2022. Because the measure data are collected via claims, ASCs will not 
need to submit any additional data directly to CMS. We refer readers to 
section XV.D.4. of this proposed rule for a more detailed discussion of 
the requirements for data submitted via claims.
d. Measure Calculation
    The measure outcome is all-cause, unplanned hospital visits within 
7 days of any general surgery procedure performed at an ASC. For the 
purposes of this measure, ``hospital visits'' include emergency 
department visits, observation stays, and unplanned inpatient 
admissions. The outcome of hospital visits is limited to 7 days since 
existing literature suggests that the vast majority of adverse events 
after outpatient surgery occur within the first 7 days following the 
surgery.134 135 When there are two or more qualifying 
surgical procedures within a 7-day period, the measure considers all 
procedures as index procedures; however, the timeframe for outcome 
assessment is defined as the interval between procedures (including the 
day of the next procedure) and then 7 days after the last procedure.
---------------------------------------------------------------------------

    \134\ Fleisher LA, Pasternak LR, Herbert R, Anderson GF. 
Inpatient hospital admission and death after outpatient surgery in 
elderly patients: Importance of patient and system characteristics 
and location of care. Arch Surg. 2004;139(1):67-72.
    \135\ Mattila K, Toivonen J, Janhunen L, Rosenberg PH, Hynynen 
M. Postdischarge symptoms after ambulatory surgery: First-week 
incidence, intensity, and risk factors. Anesthesia and analgesia. 
2005;101(6):1643-1650.
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    The facility-level score is a risk-standardized hospital visit 
ratio (RSHVR), an approach that accounts for the clustering of patients 
within ASCs and variation in sample size across ASCs. The proposed ASC-
19 measure reports the outcome as a risk-standardized ratio because the 
diverse mix of procedures included in the proposed measure can have 
varying levels of risk of unplanned hospital visits. The RSHVR is 
calculated as the ratio of the predicted to the expected number of 
unplanned hospital visits among ASC patients. For each ASC, the 
numerator of the ratio is the number of hospital visits predicted for 
the ASC's patients accounting for its observed rate, the number of the 
general surgery procedures performed at the ASC, the case-mix, and the 
surgical complexity mix. The denominator of the ratio is the number of 
hospital visits expected nationally given the ASC's case-mix and 
surgical complexity mix. To calculate an ASC's predicted-to-expected 
(P/E) ratio, the measure uses a two-level hierarchical logistic 
regression model. The log-odds of the outcome for an index procedure is 
modeled as a function of the patient demographic, comorbidity, 
procedure characteristics, and a random ASC-specific intercept. A ratio 
of less than one indicates the ASC facility's patients were estimated 
as having fewer post-surgical visits than expected compared to ASCs 
with similar surgical complexity and patients; and a ratio of greater 
than one indicates the ASC facility's patients were estimated as having 
more visits than expected. This approach is analogous to an observed-
to-expected ratio, but the method accounts for within-facility 
correlation of the observed outcome and sample size differences, 
accommodates the assumption that underlying differences in quality 
across ASCs lead to systematic differences in outcomes, and is tailored 
to and appropriate for a publicly reported outcome measure as 
articulated in published scientific guidelines.136 137 138 
For more information on measure calculations, we refer readers to: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \136\ Krumholz HM, Brindis RG, Brush JE, et al. Standards for 
Statistical Models Used for Public Reporting of Health Outcomes An 
American Heart Association Scientific Statement From the Quality of 
Care and Outcomes Research Interdisciplinary Writing Group: 
Cosponsored by the Council on Epidemiology and Prevention and the 
Stroke Council Endorsed by the American College of Cardiology 
Foundation. Circulation. 2006;113(3):456-462.
    \137\ Normand S-LT, Shahian DM. Statistical and clinical aspects 
of hospital outcomes profiling. Statistical Science. 2007;22(2):206-
226.
    \138\ National Quality Forum. Measure Evaluation Criteria and 
Guidance for Evaluating Measures for Endorsement. 2015. Available 
at: http://www.qualityforum.org/Measuring_Performance/Submitting_Standards/2015_Measure_Evaluation_Criteria.aspx. Accessed 
July 26, 2016.
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e. Cohort
    The patient cohort for the proposed ASC-19 measure includes all 
Medicare beneficiaries ages 65 and older undergoing outpatient general 
surgery procedures at an ASC who have 12 prior months of Medicare FFS 
(Medicare Parts A and B) enrollment. The target group of procedures 
includes those that: (1) Are routinely performed at ASCs; (2) involve 
some increased risk of post-surgery hospital visits; and (3) are within 
the scope of general surgery training. These include the following 
types of procedures: Abdominal (for example, hernia repair), alimentary 
tract (for example, hemorrhoid procedures), breast (for example, 
mastectomies), skin/soft tissue (for example, skin grafting), wound 
(for example, incision and drainage of skin and subcutaneous tissue), 
and varicose vein stripping. The proposed ASC-19 measure does not 
include gastrointestinal endoscopy, endocrine, or vascular procedures, 
other than varicose vein procedures, because for these procedures, 
reasons for hospital visits are typically related to patients' 
underlying comorbidities.
    The scope of general surgery overlaps with that of other 
specialties (for example, vascular surgery and plastic surgery). For 
this measure, we targeted surgeries that general surgeons are trained 
to perform with the understanding that other subspecialists may also be 
performing many of these surgeries at ASCs. Since the type of surgeon 
performing a particular procedure may vary across ASCs in ways that 
affect quality, the measure is neutral to surgeons' specialty training.
    Procedures included in the measure cohort are on CMS' list of 
covered ASC procedures.\139\ We developed this list to identify 
surgeries that have a low-to-moderate risk profile. Surgeries on the 
ASC list of covered procedures do not involve or require major or 
prolonged invasion of body cavities, extensive blood loss, major blood 
vessels, or care that is either urgent or life threatening. We annually 
review and update this list, which includes a transparent public 
comment submission and review process for addition and/or removal of 
procedures codes.\140\ The current list is accessible in the Downloads 
section at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates.html.
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    \139\ Centers for Medicare and Medicaid Services. ``Ambulatory 
Surgical Center (ASC) Payment: Addenda Updates.'' Available at: 
https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates.html.
    \140\ Ibid.
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    In addition, the measure includes only ``major'' and ``minor'' 
procedures, as indicated by the Medicare Physician Fee Schedule global 
surgery indicator (GSI) values of 090 and 010, respectively, to focus 
the measure only on the subset of surgeries on CMS' list of covered ASC 
procedures that impose a meaningful risk of post-procedure hospital 
visits. This list of GSI values is publicly available for CY 2015 at: 
https://www.cms.gov/Medicare/

[[Page 39566]]

Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-
Regulation-Notices-Items/CMS-1612-FC.html (download PFS Addenda, 
Addendum B). Moreover, to identify the subset of ASC procedures within 
the scope of general surgery, we used the Clinical Classifications 
Software (CCS) developed by the Agency for Healthcare Research and 
Quality.\141\ We identified and included CCS categories within the 
scope of general surgery, and only included individual procedures 
within the CCS categories at the procedure (CPT code) level if they 
were within the scope of general surgery practice. For more cohort 
details, we refer readers to the measure technical report located at: 
https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-
Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \141\ Healthcare Cost and Utilization Project. Clinical 
Classifications Software for Services and Procedures. Available at: 
https://www.hcup-us.ahrq.gov/toolssoftware/ccs_svcsproc/ccssvcproc.jsp.
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    To ensure that all patients included under this measure have full 
data available for outcome assessment, the measure excludes patients 
who survived at least 7 days following general surgery procedures at an 
ASC, but were not continuously enrolled in Medicare FFS (Medicare Parts 
A and B) during the 7 days after surgery. There are no additional 
patient inclusion or exclusion criteria for the proposed ASC-19 
measure. Additional methodology and measure development details are 
available at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-
Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
f. Risk Adjustment
    The statistical risk-adjustment model includes clinically relevant 
risk-adjustment variables that are strongly associated with risk of 
hospital visits within 7 days following ASC general surgery procedures. 
Accordingly, only comorbidities that convey information about the 
patient at that time or in the 12 months prior, and not complications 
that arise during the course of the index procedure, are included in 
the risk adjustment. The measure risk adjusts for age, 18 
comorbidities, procedure type (abdomen vs. alimentary tract vs. breast 
vs. skin/soft tissue vs. wound vs. varicose vein), a variable for work 
Relative Value Units (RVUs) to adjust for surgical complexity, and an 
interaction term of procedure type and surgical complexity.\142\
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    \142\ S. Coberly. The Basics; Relative Value Units (RVUs). 
National Health Policy Forum. January 12, 2015. Available at: http://www.nhpf.org/library/the-basics/Basics_RVUs_01-12-15.pdf.
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    To select the final set of variables for the risk-adjustment model, 
candidate risk variables were entered into logistic regression analyses 
\143\ predicting the outcome of hospital visits within 7 days. To 
develop a parsimonious risk model, non-significant variables were 
iteratively removed from the model using a stepwise selection approach 
described by Hosmer and Lemeshow.\144\ All variables significant at 
p<0.05 were retained in the final model. We also tested interaction 
terms and retained those that were both significant at p<0.05 and 
demonstrated a clinically plausible relationship to the outcome. 
Finally, after reviewing TEP and public comments, as well as the 
statistically selected variables for face validity, we settled upon the 
model variables. We retained one additional variable (opioid use) for 
the final risk model because experts advised it was an important risk 
predictor and expressed a strong preference for including it in the 
model even though it was not statistically selected. Additional details 
on risk model development and testing are available in the technical 
report at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \143\ Hosmer DW, Lemeshow S. Introduction to the logistic 
regression model. Applied Logistic Regression, Second Edition. 
2000:1-30.
    \144\ Hosmer DW, Lemeshow S. Introduction to the logistic 
regression model. Applied Logistic Regression, Second Edition. 
2000:1-30.
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g. Public Reporting
    We are proposing that if the proposed ASC-19 measure is adopted, we 
would publicly report results only for facilities with sufficient case 
numbers to meet moderate reliability standards.\145\ We would determine 
the case size cutoff for meeting moderate reliability standards by 
calculating reliability at different case sizes using the ratio of true 
variance to observed variance during the measure dry run (discussed 
below).\146\ We would provide confidential performance data directly to 
all facilities including those which do not meet the criteria for 
sufficient case numbers for reliability considerations so that all 
facilities can benefit from seeing their measure results and individual 
patient-level outcomes. We believe that the measure will provide 
beneficiaries with information about the quality of care for general 
surgery procedures in the ASC setting. In addition, we believe that 
these performance data may help ASCs track their patient outcomes and 
provide information on their cases that facilities can use to improve 
quality of care.
---------------------------------------------------------------------------

    \145\ Ibid.
    \146\ Snijders TA, Bosker RJ. Multilevel Analysis: An 
introduction to basic and advanced multilevel modeling. SAGE 
Publications. 2000. London.
---------------------------------------------------------------------------

h. Provision of Facility-Specific Information Prior to Public Reporting
    If this proposed measure is finalized, we intend to conduct a dry 
run before the official data collection period or any public reporting. 
A dry run is a period of confidential reporting and feedback during 
which ASCs may review their dry run measure results, and in addition, 
further familiarize themselves with the measure methodology and ask 
questions. For the dry run, we intend to use the most current 2-year 
set of complete claims (usually 12 months prior to the start date) 
available at the time of dry run. For example, if the dry run began in 
June 2020, the most current 2-year set of data available would likely 
be July 2017 to June 2019. Because we use paid, final action Medicare 
claims, ASCs would not need to submit any additional data for the dry 
run. The dry run would generate confidential feedback reports for ASCs, 
including patient-level data indicating whether the patient had a 
hospital visit and, if so, the type of visit (emergency department 
visit, observation stay, or unplanned inpatient admission), the 
admitting facility, and the principal discharge diagnosis. Further, the 
dry run would enable ASCs to see their dry run measure results prior to 
the measure being implemented. General information about the dry run as 
well as confidential facility-specific reports would be made available 
for ASCs to review on their accounts at: http://www.qualitynet.org. We 
plan to continue to generate these reports for ASCs after we implement 
the proposed measure if it is finalized so ASCs can use the information 
to identify performance gaps and develop quality improvement 
strategies.
    These confidential dry run results are not publicly reported and do 
not affect payment. We expect the dry run to take approximately one 
month to conduct, during which facilities would be provided the 
confidential report and the opportunity to review their performance and 
provide feedback to us. After the dry run, measure results would have a 
payment impact and would be publicly reported as discussed above 
beginning with the CY 2024 payment determination and for subsequent 
years.

[[Page 39567]]

4. Summary of ASCQR Program Quality Measure Set Proposed for the CY 
2024 Payment Determination and for Subsequent Years
    As discussed above, we are proposing to add one measure beginning 
with the CY 2024 payment determination and for subsequent years to the 
ASCQR Program. We refer readers to the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59129 through 59132) for previously finalized 
ASCQR Program measure sets.
    Table 36 summarizes the proposed ASCQR Program measure set for the 
CY 2024 payment determination and subsequent years (including 
previously adopted measures).
[GRAPHIC] [TIFF OMITTED] TP09AU19.056

5. ASCQR Program Measures and Topics for Future Consideration
    In this proposed rule, we are considering one topic for future 
implementation: Updates to the submission method for 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 measures.
    ASC-1, ASC-2, ASC-3, and ASC-4 were adopted into the ASCQR Program 
in the CY 2012 OPPS/ASC final rule with comment period beginning with 
the CY 2014 payment determination (76 FR 74496 through 74500). These

[[Page 39568]]

measures were developed by the ASC Quality Collaboration (ASC QC). The 
ASC QC is a cooperative effort of organizations and companies formed in 
2006 with a common interest in ensuring that ASC quality data is 
measured and reported in a meaningful way.\147\ Stakeholders in the ASC 
QC include ASC corporations, ASC associations, professional societies 
and accrediting bodies that focus on ASC quality and safety.\148\ The 
ASC QC initiated a process of standardizing ASC quality measure 
development through evaluation of existing nationally endorsed quality 
measures to determine which could be directly applied to the outpatient 
surgery facility setting.\149\
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    \147\ ASC Quality Collaboration. ASC Quality Measures 
Implementation Guide Version 6.1 March 2019. Available at: http://ascquality.org/documents/ASC-QC-Implementation-Guide-6.1-March-2019.pdf.
    \148\ Ibid.
    \149\ Ibid.
---------------------------------------------------------------------------

    The ASC QC developed and pilot-tested ASC-1, ASC-2, ASC-3, and ASC-
4 at the facility-level for feasibility and usability (76 FR 74496). 
These measures are calculated via quality data codes (QDCs), as 
described in section XV.D.1. of this proposed rule. ASCs were formerly 
required to submit the appropriate QDCs on individual Medicare FFS 
claims billed by the facility (78 FR 75135). In the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53640 through 53641), we finalized our policy 
that the minimum threshold for successful reporting be that at least 50 
percent of claims meeting measure specifications contain QDCs. At that 
time, we believed that 50 percent was a reasonable minimum threshold 
for the initial implementation years of the ASCQR Program, because ASCs 
were not yet familiar with how to report quality data under the ASCQR 
Program and because many ASCs are relatively small and may have needed 
more time to set up reporting systems (77 FR 53641). We stated in that 
final rule that we intended to propose to increase this percentage for 
subsequent years' payment determinations as ASCs become more familiar 
with reporting requirements for the ASCQR Program. We have assessed 
this reporting threshold annually and have found that over 78 percent 
of reporting ASCs report data for at least 90 percent of eligible 
claims.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59117 
through 59123), we expressed concern that the data submission method 
for these measures may impact the completeness and accuracy of the data 
due to the inability of ASCs to correct errors in submitted QDCs that 
are used to calculate these measures. An ASC that identifies an 
erroneous or missing QDC is unable to correct or add a QDC if the claim 
has already been submitted to Medicare and been processed. We also 
stated that we believe that revising the data submission method for the 
measures, such as via QualityNet, would address this issue and allow 
ASCs to correct any data submissions errors, resulting in more complete 
and accurate data. In that final rule with comment period, we explained 
that we agree it is important to continue to monitor the types of 
events included in these measures considering the potential negative 
impacts to patients' morbidity and mortality, in order to continue to 
prevent their occurrence and ensure that they remain rare. We 
acknowledged that these measures provide critical data to beneficiaries 
and further transparency for care provided in the ASC setting that 
would be useful in choosing an ASC for care, and that these measures 
are valuable to the ASC community.
    As such, in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59117 through 59123; 59134 through 59135), we retained these 
measures in the ASCQR Program, but suspended their data submission 
until further action in rulemaking with the goal of updating their data 
submission method.
    In this proposed rule, we are requesting comment about potential 
future updates to the data submission method for 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. Specifically, we have considered updating the data 
submission method to a CMS online data submission tool. We refer 
readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59473) (and the previous rulemakings cited therein) and 42 CFR 
416.310(c)(1) for our requirements regarding data submitted via a CMS 
online data submission tool. We are currently using the QualityNet 
website (https://www.qualitynet.org) as our CMS online data submission 
tool.
    To submit measures via an online data submission tool to the 
QualityNet website, ASCs and any agents submitting data on an ASC's 
behalf would have to maintain a QualityNet account (42 CFR 
416.310(c)(1)). A QualityNet security administrator would be necessary 
to set up such an account for the purpose of submitting this 
information (42 CFR 416.310(c)(1)). We believe that using a CMS online 
data collection tool would address our concern about the ability of 
ASCs to correct data submission errors because ASCs would simply report 
their data via the online tool. If data for these measures were 
submitted via QualityNet, ASCs would still submit claims for 
reimbursement to CMS, but would not be required to include QDCs. As 
specified at 42 CFR 416.310(c)(1)(ii), the data collection time period 
for quality measures for which data are submitted via a CMS online data 
submission tool is for services furnished during the calendar year 2 
years prior to the payment determination year. ASCs would then submit 
their data for ASC-1, ASC-2, ASC-3, and ASC-4 via QualityNet during the 
data submission period, January 1 through May 15 in the year prior to 
the payment determination year. ASCs would be able to submit and modify 
their data throughout the data submission period and could correct any 
errors during this period. We are seeking comments on whether updating 
the data submission method for ASC-1, ASC-2, ASC-3, and ASC-4 to a CMS 
online data submission tool would be appropriate for these measures in 
the future.
    We are committed to work with stakeholders to ensure the ASCQR 
Program measure set does not place an inappropriate amount of burden on 
facilities while addressing and providing information about these types 
of patient safety, adverse, rare events to patients and other 
consumers. We recognize that updating the data submission method to a 
CMS online data submission tool would add some burden to the ASCQR 
Program due to the additional time for submitting any of these four 
measures via QualityNet for each payment determination year. Thus, we 
are also seeking comment about the burden associated with potentially 
updating the data submission method for ASC-1, ASC-2, ASC-3, and ASC-4 
to a CMS online data submission tool (for example, the QualityNet 
website) in future years.
6. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74513 through 74514), where we finalized our proposal to 
follow the same process for updating the ASCQR Program measures that we 
adopted for the Hospital OQR Program measures, including the 
subregulatory process for updating adopted measures. In the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68496 through 68497), 
the CY 2014 OPPS/ASC final rule with comment period (78 FR 75131), and 
the CY 2015 OPPS/ASC

[[Page 39569]]

final rule with comment period (79 FR 66981), we provided additional 
clarification regarding the ASCQR Program policy in the context of the 
previously finalized Hospital OQR Program policy, including the 
processes for addressing nonsubstantive and substantive changes to 
adopted measures. In the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70531), we provided clarification regarding our decision 
to not display the technical specifications for the ASCQR Program on a 
CMS website, but stated that we will continue to display the technical 
specifications for the ASCQR Program on the QualityNet website. In 
addition, our policies regarding the maintenance of technical 
specifications for the ASCQR Program are codified at 42 CFR 416.325. In 
this proposed rule, we are not proposing any changes to our policies 
regarding the maintenance of technical specifications for the ASCQR 
Program.
7. Public Reporting of ASCQR Program Data
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 
through 74515), we finalized a policy to make data that an ASC 
submitted for the ASCQR Program publicly available on a CMS website 
after providing an ASC an opportunity to review the data to be made 
public. In the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70531 through 70533), we finalized our policy to publicly display data 
by the National Provider Identifier (NPI) when the data are submitted 
by the NPI and to publicly display data by the CCN when the data are 
submitted by the CCN. In addition, we codified our policies regarding 
the public reporting of ASCQR Program data at 42 CFR 416.315 (80 FR 
70533). In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79819 through 79820), we formalized our current public display 
practices regarding timing of public display and the preview period by 
finalizing our proposals to: Publicly display data on the Hospital 
Compare website, or other CMS website as soon as practicable after 
measure data have been submitted to CMS; to generally provide ASCs with 
approximately 30 days to review their data before publicly reporting 
the data; and to announce the timeframes for each preview period 
starting with the CY 2018 payment determination on a CMS website and/or 
on our applicable listservs. In the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59455 through 59470), we discussed specific 
public reporting policies associated with two measures beginning with 
the CY 2022 payment determination: ASC-17: Hospital Visits after 
Orthopedic Ambulatory Surgical Center Procedures, and ASC-18: Hospital 
Visits after Urology Ambulatory Surgical Center Procedures. We are not 
proposing any changes to our public reporting policies in this proposed 
rule.

C. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75132 through 75133) for a detailed discussion of the 
QualityNet security administrator requirements, including setting up a 
QualityNet account, and the associated timelines, for the CY 2014 
payment determination and subsequent years. In the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70533), we codified the 
administrative requirements regarding maintenance of a QualityNet 
account and security administrator for the ASCQR Program at 42 CFR 
416.310(c)(1)(i). We are not proposing any changes to these policies in 
this proposed rule.
2. Requirements Regarding Participation Status
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75133 through 75135) for a complete discussion of the 
participation status requirements for the CY 2014 payment determination 
and subsequent years. In the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70533 through 70534), we codified these requirements 
regarding participation status for the ASCQR Program at 42 CFR 416.305. 
We are not proposing any changes to these policies in this proposed 
rule.

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

1. Requirements Regarding Data Processing and Collection Periods for 
Claims-Based Measures Using Quality Data Codes (QDCs)
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75135) for a complete summary of the data processing and 
collection periods for the claims-based measures using QDCs for the CY 
2014 payment determination and subsequent years. In the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70534), we codified the 
requirements regarding data processing and collection periods for 
claims-based measures using QDCs for the ASCQR Program at 42 CFR 
416.310(a)(1) and (2).
    We are not proposing any changes to these requirements in this 
proposed rule. We note that data submission for the following claims-
based measures using QDCs was suspended in the CY 2019 OPPS/ASC final 
rule with comment period (83 FR 59117 through 59123; 59134 through 
59135) until further action in rulemaking:
     ASC-1: Patient Burn;
     ASC-2: Patient Fall;
     ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong 
Procedure, Wrong Implant; and
     ASC-4: Hospital Transfer/Admission.
    We also note that we are requesting comment on updating the 
submission method for the above measures in section XV.B.5. of this 
proposed rule.
    These data processing and collection period requirements will 
remain in the ASCQR Program for application to any future claims-based 
measures using QDCs adopted by the ASCQR Program.
2. Minimum Threshold, Minimum Case Volume, and Data Completeness for 
Claims-Based Measures Using QDCs
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59472) (and the previous rulemakings cited therein), as 
well as 42 CFR 416.310(a)(3) and 42 CFR 416.305(c) for our policies 
about minimum threshold, minimum case volume, and data completeness for 
claims-based measures using QDCs. In this proposed rule, we are not 
proposing any changes to these policies.
3. Requirements for Data Submitted via an Online Data Submission Tool
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59472) (and the previous rulemakings cited therein) and 
42 CFR 416.310(c) for our previously finalized policies for data 
submitted via an online data submission tool. For more information on 
data submission using QualityNet, we refer readers to: https://www.qualitynet.org.
a. Requirements for Data Submitted via a Non-CMS Online Data Submission 
Tool
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75139 through 75140) and the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66985 through 66986) for our requirements 
regarding data submitted via a non-CMS online data submission tool 
(that is, the CDC NHSN website). We codified our existing policies 
regarding the data collection time periods for measures involving 
online data submission and

[[Page 39570]]

the deadline for data submission via a non-CMS online data submission 
tool at 42 CFR 416.310(c)(2).
    As we noted in the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59135), no measures submitted via a non-CMS online data 
submission tool remain in the ASCQR Program beginning with the CY 2020 
payment determination. We are not proposing any changes to our non-CMS 
online data submission tool reporting requirements; these requirements 
would apply to any future non-CMS online data submission tool measures 
adopted in the ASCQR Program.
b. Requirements for Data Submitted via a CMS Online Data Submission 
Tool
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59473) (and the previous rulemakings cited therein) and 
42 CFR 416.310(c)(1) for our requirements regarding data submitted via 
a CMS online data submission tool. We are currently using the 
QualityNet website to host our CMS online data submission tool: https://www.qualitynet.org. We note that in the CY 2018 OPPS/ASC final rule 
with comment period (82 FR 59473), we finalized expanded submission via 
the CMS online tool to also allow for batch data submission and made 
corresponding changes to 42 CFR 416.310(c)(1)(i).
    In this proposed rule, we are not proposing any changes to this 
policy. The following previously finalized measures will require data 
to be submitted via a CMS online data submission tool for the CY 2021 
payment determination and subsequent years:

 ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up 
Interval for Normal Colonoscopy in Average Risk Patients
 ASC-11: Cataracts: Improvement in Patients' Visual Function 
within 90 Days Following Cataract Surgery
 ASC-13: Normothermia Outcome
 ASC-14: Unplanned Anterior Vitrectomy
4. Requirements for Non-QDC Based, Claims-Based Measure Data
    We are not proposing any changes to our requirements for non-QDC 
based, claims-based measures in this proposed rule. We refer readers to 
the CY 2019 OPPS/ASC final rule with comment period (83 FR 59136 
through 59138, where we established a 3-year reporting period for the 
previously adopted measure, ASC-12: Facility 7-Day Risk-Standardized 
Hospital Visit Rate after Outpatient Colonoscopy. In that final rule 
with comment period (83 FR 59106 through 59107), we established a 
similar policy under the Hospital OQR Program.
    We also note that we are proposing to adopt ASC-19: Facility-Level 
7-Day Hospital Visits after General Surgery Procedures Performed at 
Ambulatory Surgical Centers (NQF #3357) in section XV.B.3. of this 
proposed rule to which these requirements for non-QDC based, claims-
based measures would apply if the proposed ASC-19 measure is finalized 
as proposed.
5. Requirements for Data Submission for ASC-15a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79822 through 79824) for our previously finalized 
policies regarding survey administration and vendor requirements for 
the CY 2020 payment determination and subsequent years. In addition, we 
codified these policies at 42 CFR 416.310(e). However, in the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59450 through 59451), we 
delayed implementation of the ASC-15a-e: OAS CAHPS Survey-based 
measures beginning with the CY 2020 payment determination (CY 2018 data 
submission) until further action in future rulemaking, and we refer 
readers to that discussion for more details. In this proposed rule, we 
are not proposing any changes to this policy.
6. Extraordinary Circumstances Exception (ECE) Process for the CY 2020 
Payment Determination and Subsequent Years
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59474 through 59475) (and the previous rulemakings cited 
therein) and 42 CFR 416.310(d) for the ASCQR Program's policies for 
extraordinary circumstance exceptions (ECE) requests.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59474 
through 59475), we: (1) Changed the name of this policy from 
``extraordinary circumstances extensions or exemption'' to 
``extraordinary circumstances exceptions'' for the ASCQR Program, 
beginning January 1, 2018; and (2) revised 42 CFR 416.310(d) of our 
regulations to reflect this change. We also clarified that we will 
strive to complete our review of each request within 90 days of 
receipt. In this proposed rule, we are not proposing any changes to 
these policies.
7. ASCQR Program Reconsideration Procedures
    We refer readers to the CY 2016 OPPS/ASC final rule with comment 
period (82 FR 59475) (and the previous rulemakings cited therein) and 
42 CFR 416.330 for the ASCQR Program's reconsideration policy. In this 
proposed rule, we are not proposing any changes to this policy.

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

1. Statutory Background
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68499) for a detailed discussion of the statutory 
background regarding payment reductions for ASCs that fail to meet the 
ASCQR Program requirements.
2. Policy Regarding Reduction to the ASC Payment Rates for ASCs That 
Fail To Meet the ASCQR Program Requirements for a Payment Determination 
Year
    The national unadjusted payment rates for many services paid under 
the ASC payment system are equal to the product of the ASC conversion 
factor and the scaled relative payment weight for the APC to which the 
service is assigned. For CY 2020, the proposed ASC conversion factor is 
equal to the conversion factor calculated for the previous year updated 
by the multifactor productivity (MFP)-adjusted hospital market basket 
update factor. The MFP adjustment is set forth in section 
1833(i)(2)(D)(v) of the Act. The MFP-adjusted hospital market basket 
update is the annual update for the ASC payment system for a 5-year 
period (CY 2019 through CY 2023). Under the ASCQR Program in accordance 
with section 1833(i)(7)(A) of the Act and as discussed in the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68499), any annual 
increase shall be reduced by 2.0 percentage points for ASCs that fail 
to meet the reporting requirements of the ASCQR Program. This reduction 
applied beginning with the CY 2014 payment rates (77 FR 68500). For a 
complete discussion of the calculation of the ASC conversion factor and 
our finalized proposal to update the ASC payment rates using the 
inpatient hospital market basket update for CYs 2019 through 2023, we 
refer readers to the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59073 through 59080).
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 
through 68500), in order to implement

[[Page 39571]]

the requirement to reduce the annual update for ASCs that fail to meet 
the ASCQR Program requirements, we finalized our proposal that we would 
calculate two conversion factors: A full update conversion factor and 
an ASCQR Program reduced update conversion factor. We finalized our 
proposal to calculate the reduced national unadjusted payment rates 
using the ASCQR Program reduced update conversion factor that would 
apply to ASCs that fail to meet their quality reporting requirements 
for that calendar year payment determination. We finalized our proposal 
that application of the 2.0 percentage point reduction to the annual 
update may result in the update to the ASC payment system being less 
than zero prior to the application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to the proposed rule, which are available via the internet on 
the CMS website): ``A2'', ``G2'', ``P2'', ``R2'' and ``Z2'', as well as 
the service portion of device-intensive procedures identified by ``J8'' 
(77 FR 68500). We finalized our proposal that payment for all services 
assigned the payment indicators listed above would be subject to the 
reduction of the national unadjusted payment rates for applicable ASCs 
using the ASCQR Program reduced update conversion factor (77 FR 68500).
    The conversion factor is not used to calculate the ASC payment 
rates for separately payable services that are assigned status 
indicators other than payment indicators ``A2'', ``G2'', ``J8'', 
``P2'', ``R2'' and ``Z2.'' These services include separately payable 
drugs and biologicals, pass-through devices that are contractor-priced, 
brachytherapy sources that are paid based on the OPPS payment rates, 
and certain office-based procedures, radiology services and diagnostic 
tests where payment is based on the PFS nonfacility PE RVU-based 
amount, and a few other specific services that receive cost-based 
payment (77 FR 68500). As a result, we also finalized our proposal that 
the ASC payment rates for these services would not be reduced for 
failure to meet the ASCQR Program requirements because the payment 
rates for these services are not calculated using the ASC conversion 
factor and, therefore, not affected by reductions to the annual update 
(77 FR 68500).
    Office-based surgical procedures (generally those performed more 
than 50 percent of the time in physicians' offices) and separately paid 
radiology services (excluding covered ancillary radiology services 
involving certain nuclear medicine procedures or involving the use of 
contrast agents) are paid at the lesser of the PFS nonfacility PE RVU-
based amounts or the amount calculated under the standard ASC 
ratesetting methodology. Similarly, in the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66933 through 66934), we finalized our 
proposal that payment for certain diagnostic test codes within the 
medical range of CPT codes for which separate payment is allowed under 
the OPPS will be at the lower of the PFS nonfacility PE RVU-based (or 
technical component) amount or the rate calculated according to the 
standard ASC ratesetting methodology when provided integral to covered 
ASC surgical procedures. In the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68500), we finalized our proposal that the 
standard ASC ratesetting methodology for this type of comparison would 
use the ASC conversion factor that has been calculated using the full 
ASC update adjusted for productivity. This is necessary so that the 
resulting ASC payment indicator, based on the comparison, assigned to 
these procedures or services is consistent for each HCPCS code, 
regardless of whether payment is based on the full update conversion 
factor or the reduced update conversion factor.
    For ASCs that receive the reduced ASC payment for failure to meet 
the ASCQR Program requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced coinsurance liability for 
beneficiaries (77 FR 68500). Therefore, in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68500), we finalized our proposal that 
the Medicare beneficiary's national unadjusted coinsurance for a 
service to which a reduced national unadjusted payment rate applies 
will be based on the reduced national unadjusted payment rate.
    In that final rule with comment period, we finalized our proposal 
that all other applicable adjustments to the ASC national unadjusted 
payment rates would apply in those cases when the annual update is 
reduced for ASCs that fail to meet the requirements of the ASCQR 
Program (77 FR 68500). For example, the following standard adjustments 
would apply to the reduced national unadjusted payment rates: The wage 
index adjustment; the multiple procedure adjustment; the interrupted 
procedure adjustment; and the adjustment for devices furnished with 
full or partial credit or without cost (77 FR 68500). We believe that 
these adjustments continue to be equally applicable to payment for ASCs 
that do not meet the ASCQR Program requirements (77 FR 68500).
    In the CY 2015, CY 2016, CY 2017, CY 2018, and CY 2019 OPPS/ASC 
final rules with comment period (79 FR 66981 through 66982; 80 FR 70537 
through 70538; 81 FR 79825 through 79826; 82 FR 59475 through 59476; 
and 83 FR 59138 through 59139, respectively), we did not make any other 
changes to these policies. We are not proposing any changes to these 
policies for CY 2020 in this proposed rule.

XVI. Proposed Requirements for Hospitals To Make Public a List of Their 
Standard Charges

A. Introduction and Overview

1. Statutory Basis and Current Guidance
    Section 1001 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 10101 of the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), amended Title 
XXVII of the Public Health Service Act (the PHS Act), in part, by 
adding a new section 2718(e). Section 2718 of the PHS Act, entitled 
``Bringing Down the Cost of Health Care Coverage,'' requires each 
hospital operating within the United States for each year to establish 
(and update) and make public a list of the hospital's standard charges 
for items and services provided by the hospital, including for 
diagnosis-related groups established under section 1886(d)(4) of the 
Social Security Act (the Act).
    In the FY 2015 IPPS/LTCH PPS proposed and final rules (79 FR 28169 
and 79 FR 50146, respectively), we reminded hospitals of their 
obligation to comply with the provisions of section 2718(e) of the PHS 
Act and provided guidelines for its implementation. At that time, we 
required hospitals to either make public a list of their standard 
charges or their policies for allowing the public to view a list of 
those charges in response to an inquiry. In addition, we stated that we 
expected hospitals to update the information at least annually, or more 
often as appropriate, to reflect current charges. We also encouraged 
hospitals to undertake efforts to engage in consumer-friendly 
communication of their charges to enable consumers to compare charges 
for similar services across hospitals and to help consumers understand 
what their potential financial liability might be for items and 
services they obtain at the hospital.

[[Page 39572]]

    In the FY 2019 IPPS/LTCH PPS proposed rule and final rule (83 FR 
20164 and 83 FR 41144, respectively), we again reminded hospitals of 
their obligation to comply with the provisions of section 2718(e) of 
the PHS Act and updated our guidelines for its implementation. The 
announced update to our guidelines became effective January 1, 2019, 
and took one step to further improve the public accessibility of 
standard charge information. Specifically, we updated our guidelines to 
require hospitals to make available a list of their current standard 
charges via the internet in a machine-readable format and to update 
this information at least annually, or more often as appropriate. We 
subsequently published two sets of Frequently Asked Questions (FAQs) 
\150\ that provided additional guidance to hospitals, including a FAQ 
clarifying that while hospitals could choose the format they would use 
to make public a list of their standard charges, the publicly posted 
information should represent their standard charges as reflected in the 
hospital's chargemaster. We also clarified that the requirement applies 
to all hospitals operating within the United States and to all items 
and services provided by the hospital.
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    \150\ Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FAQs-Req-Hospital-Public-List-Standard-Charges.pdf and https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/Downloads/Additional-Frequently-Asked-Questions-Regarding-Requirements-for-Hospitals-To-Make-Public-a-List-of-Their-Standard-Charges-via-the-internet.pdf.
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2. Background
    As health care costs continue to rise, health care affordability 
has become an area of intense focus. Health care spending is projected 
to consume 20 percent of the economy by 2026.\151\ One reason for this 
upward trajectory in spending is the lack of transparency in health 
care pricing.\152\ Additionally, numerous studies suggest that 
consumers want greater transparency. For example, a study of high 
deductible health plan enrollees found that respondents wanted 
additional health care price information so that they could make more 
informed decisions about where to seek care based on price.\153\ Health 
economists and other experts state that significant cost containment 
cannot occur without widespread and sustained transparency in provider 
prices.\154\ We believe there is a direct connection between 
transparency in hospital standard charge information and having more 
affordable health care and lower health care coverage costs. We believe 
health care markets could work more efficiently and provide consumers 
with higher-value health care if we promote policies that encourage 
choice and competition.\155\ In short, as articulated by the CMS 
Administrator, we believe that transparency in health care pricing is 
``critical to enabling patients to become active consumers so that they 
can lead the drive towards value.'' \156\
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    \151\ CMS. National Health Expenditures Projections, 2018-2027: 
Forecast Summary. Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ForecastSummary.pdf.
    \152\ Scheurer, D. Lack of Transparency Plagues U.S. Health Care 
System. The Hospitalist. 2013 May; 2013(5). Available at: https://www.the-hospitalist.org/hospitalist/article/125866/health-policy/lack-transparency-plagues-us-health-care-system. Bees, J. Survey 
Snapshot: Is Transparency the Answer to Rising Health Care Costs? 
New England Journal of Medicine Catalyst. March 20, 2019. Available 
at: https://catalyst.nejm.org/health-care-cost-transparency-answer/. 
Wetzell, S. Transparency: A Needed Step Towards Health Care 
Affordability. American Health Policy Institute. March, 2014. 
Available at: http://www.americanhealthpolicy.org/Content/documents/resources/Transparency%20Study%201%20-%20The%20Need%20for%20Health%20Care%20Transparency.pdf. Robert Wood 
Johnson Foundation. How Price Transparency Can Control the Cost of 
Health Care. March 1, 2016. Available at: https://www.rwjf.org/en/library/research/2016/03/how-price-transparency-controls-health-care-cost.html.
    \153\ Sinaiko, A.D., Mehrotra, A., & Sood, N. (2016). Cost-
Sharing Obligations, High-Deductible Health Plan Growth, and 
Shopping for Health Care: Enrollees with Skin in the Game. JAMA 
internal medicine, 176(3), 395-397. doi:10.1001/
jamainternmed.2015.7554.
    \154\ Boynton A, and Robinson, JC. Appropriate Use of Reference 
Pricing Can Increase Value. July 7, 2015. Available at: https://www.healthaffairs.org/do/10.1377/hblog20150707.049155/full/.
    \155\ Azar, A.M., Mnuchin, S.T., and Acosta, A. ``Reforming 
America's Healthcare System Through Choice and Competition.'' 
December 3, 2018. Available at: https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf.
    \156\ Bresnick J. Verma: Price Transparency Rule a ``First 
Step'' for Consumerism. January 11, 2019. Available at: https://healthpayerintelligence.com/news/verma-price-transparency-rule-a-first-step-for-consumerism.
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    Many empirical studies have investigated the impact of price 
transparency on markets, with most research showing that price 
transparency leads to lower and more uniform prices, consistent with 
predictions of standard economic theory.\157\ Traditional economic 
analysis suggests that if consumers have better pricing information for 
health care services, providers would face pressure to lower prices and 
provide better quality care.\158\ Falling prices may, in turn, expand 
access to health care for consumers.\159\
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    \157\ Congressional Research Service Report to Congress: Does 
Price Transparency Improve Market Efficiency? Implications of 
Empirical Evidence in Other Markets for the Healthcare Sector, July 
24, 2007.
    \158\ Ibid.
    \159\ Ibid.
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    Presently, however, the information that health care consumers need 
to make informed decisions based on the prices of health care services 
is not readily available. The Government Accountability Office (GAO) 
report (2011), ``Health Care Price Transparency: Meaningful Price 
Information is Difficult for Consumers to Obtain Prior to Receiving 
Care,'' \160\ found that opacity in health care prices, coupled with 
the often wide pricing disparities for particular procedures within the 
same market, can make it difficult for consumers to understand health 
care prices and to effectively shop for value. The report references a 
number of barriers that make it difficult for consumers to obtain price 
estimates in advance for health care services. Such barriers include 
the difficulty of predicting health care service needs in advance, a 
complex billing structure resulting in bills from multiple providers, 
the variety of insurance benefit structures, and concerns related to 
the public disclosure of rates negotiated between providers and third 
party payers. The GAO report goes on to explore various price 
transparency initiatives, including tools that consumers could use to 
generate price estimates in advance of receiving a health care service. 
The report notes that pricing information displayed by tools varies 
across initiatives, in large part due to limits reported by the 
initiatives in their access or authority to collect certain necessary 
price data. According to the GAO report, transparency initiatives were 
best able to provide reasonable estimates of consumers' complete costs 
when they had access and integrated pricing data from both providers 
and insurers.
---------------------------------------------------------------------------

    \160\ Available at: https://www.gao.gov/products/GAO-11-791.
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    The concept of making health care provider charges and insurance 
benefit information available to consumers is not new; some States have 
required disclosure of pricing information by providers and payers for 
a number of years. More than half of the States have passed legislation 
establishing price transparency websites or mandating that health 
plans, hospitals, or physicians make price information available to 
consumers.\161\ As of early 2012, there

[[Page 39573]]

were 62 consumer-oriented, State-based health care price comparison 
websites.\162\ Half of these websites were launched after 2006, and 
most were developed and funded by a State government agency (46.8 
percent) or hospital association (38.7 percent).\163\ Most websites 
report prices of inpatient care for medical conditions (72.6 percent) 
or surgeries (71.0 percent). Information about prices of outpatient 
services such as diagnostic or screening procedures (37.1 percent), 
radiology studies (22.6 percent), prescription drugs (14.5 percent), or 
laboratory tests (9.7 percent) are reported less often.\164\
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    \161\ Desai S, Hatfield LA, Hicks AL, et al. Association Between 
Availability of a Price Transparency Tool and Outpatient Spending. 
JAMA. 2016;315(17):1874-1881. Available at: https://jamanetwork.com/journals/jama/fullarticle/2518264.
    \162\ Kullgren JT, Duey KA, Werner RM. A census of state health 
care price transparency websites. JAMA. 2013;309(23):2437-2438. 
Available at: https://jamanetwork.com/journals/jama/fullarticle/1697957.
    \163\ Ibid.
    \164\ Ibid.
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    Since the early 2000s, California-licensed hospitals have been 
required to submit annually to the State for public posting on a State 
website: The charge description master (CDM, also known as a 
``chargemaster''); a list of the hospital's average charges for at 
least 25 common outpatient procedures, including ancillary services; 
and the estimated percentage increase in gross revenue due to price 
changes.\165\ The information is required to be submitted in plain 
language using easily understood terminology.\166\ In 2012, 
Massachusetts began requiring insurers to provide, upon request, the 
estimated amount insured patients will be responsible to pay for 
proposed admissions, procedures, or services based upon the information 
available to the insurer at the time, and also began requiring 
providers to disclose the charge for the admission, procedure, or 
service upon request by the patient within 2 working days.\167\ Since 
2015, Oregon has offered pricing data for the top 100 common hospital 
outpatient procedures and top 50 common inpatient procedures on its 
OregonHospitalGuide.org website, which displays the median negotiated 
amount of the procedure by hospital and includes patient paid amounts 
such as deductibles and copayments. The data are derived from State-
mandated annual hospital claims collection by the State's all payer 
claims database (APCD) and represent the service package cost for each 
of the procedures, including ancillary services and elements related to 
the procedure, with the exception of professional fees which are billed 
separately.\168\ More recently, in 2018, Colorado began requiring 
hospitals to post the prices of the 50 most used diagnosis-related 
group (DRG) codes, and the 25 most used outpatient Current Procedural 
Terminology (CPT) codes or health care services procedure codes with a 
``plain-English description'' of the service, which must be updated at 
least annually.\169\
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    \165\ Available at: https://oshpd.ca.gov/data-and-reports/cost-transparency/hospital-chargemasters/2018-chargemasters/.
    \166\ Jenkins K. CMS Price Transparency Push Trails State 
Initiatives. The National Law Review. February 8, 2019. Available 
at: https://www.natlawreview.com/article/cms-price-transparency-push-trails-state-initiatives.
    \167\ Ibid.
    \168\ Available at: http://oregonhospitalguide.org/ and http://oregonhospitalguide.org/understanding-the-data/procedure-costs.html.
    \169\ Jenkins K. CMS Price Transparency Push Trails State 
Initiatives. The National Law Review. February 8, 2019. Available 
at: https://www.natlawreview.com/article/cms-price-transparency-push-trails-state-initiatives.
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    Not only have States taken an interest in price transparency, but 
insurers and self-funded employers have also moved in this direction. 
For example, some self-funded employers are using price transparency 
tools to incentivize their employees to make cost-conscious decisions 
when purchasing health care services. Most large insurers have embedded 
cost estimation tools into their member websites, and some provide 
their members with comparative cost and value information, which 
includes rates that the insurers have negotiated with in-network 
providers and suppliers.
    Research suggests that making such consumer-friendly pricing 
information available to the public can reduce health care costs for 
consumers. Specifically, recent research evaluating the impact of New 
Hampshire's price transparency efforts reveals that providing insured 
patients with information about prices can have an impact on the out-
of-pocket costs paid by consumers for medical imaging procedures, not 
only by helping users of New Hampshire's website choose lower-cost 
options, but also by leading to lower prices that benefited all 
patients, including those in the State that did not use the 
website.\170\
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    \170\ Brown, ZY. What would happen if hospitals openly shared 
their prices? The Conversation. January 30, 3019. Available at: 
https://theconversation.com/what-would-happen-if-hospitals-openly-shared-their-prices-110352. And http://www-personal.umich.edu/
~zachb/zbrown_empirical_model_price_transparency.pdf.
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    Despite the growing consumer demand and awareness of the need for 
health care pricing data, there continues to be a gap in easily 
accessible pricing information for consumers to use for health care 
shopping purposes. Specifically, there is inconsistent (and many times 
nonexistent) availability of provider charge information. We believe 
this information gap can, in part, be filled by the proposals in this 
proposed rule which seek to further price transparency by proposing to 
adopt new requirements under section 2718(e) of the PHS Act, as 
described below. We believe that ensuring public access to hospital 
standard charge data will promote and support current and future price 
transparency efforts. We believe that this, in turn, will enable health 
care consumers to make more informed decisions, increase market 
competition, and ultimately drive down the cost of health care 
services, making them more affordable for all patients.
3. Summary of Stakeholder Engagement
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20548 and 20549) 
and other Requests for Information (RFIs) published during 2018 (which 
we will refer to as the 2018 RFIs),\171\ we remarked that challenges 
continue to exist for consumers because of insufficient transparency in 
pricing information. Therefore, we sought public comment on a variety 
of questions related to our price transparency efforts, including:
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    \171\ FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20164); CY 2019 
Home Health proposed rule (83 FR 32473); CY 2020 ESRD PPS proposed 
rule (83 FR 34394); CY 2020 PFS proposed rule (83 FR 36009); and CY 
2019 OPPS/ASC proposed rule (83 FR 37211).
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     What types of information would be most beneficial to 
patients, how can health care providers and suppliers best enable 
patients to use charge and cost information in their decision-making, 
and how can CMS and providers help third parties create patient-
friendly interfaces with these data?
     Should health care providers and suppliers be required to 
inform patients how much their out-of- pocket costs for a service will 
be before those patients are furnished that service? What changes would 
be needed to support greater transparency around patient obligations 
for their out-of-pocket costs? What can be done to better inform 
patients of these obligations? Should health care providers and 
suppliers play any role in helping to inform patients of what their 
out-of-pocket obligations will be?
    Most of the commenters who responded to the 2018 RFIs supported 
furthering price transparency efforts, although a few stakeholders 
opposed efforts to make hospital pricing information available to the 
public. Reasons stakeholders cited in opposition included, for example: 
That hospital chargemasters are highly technical documents that 
frequently

[[Page 39574]]

identify items and services by the complex payment codes used by 
hospitals for purposes of billing, instead of terms that consumers can 
understand; concern that hospital charge data as found in the hospital 
chargemaster may not be helpful to consumers for determining what they 
are likely to pay for a service or facility encounter because most 
consumers have health insurance; concern that some pricing information 
might be commercially sensitive; and that posting price information 
without corresponding educational tools might increase patient 
confusion.
    In addition to seeking public input on price transparency issues 
through the 2018 RFIs, we hosted a series of five listening sessions in 
the summer and fall of 2018 that were attended by a wide representation 
of stakeholders, including hospitals, clinicians, payers, tool 
developers, and consumer and patient advocacy groups. During the 
listening sessions, several stakeholders applauded our efforts to 
release public use files on a quarterly basis and stated that they use 
the information in those files to supplement their algorithms to 
provide Medicare fee-for-service patients with out-of-pocket pricing 
information. Price transparency tool developers asserted that machine-
readable chargemaster release would provide promising opportunities and 
support existing efforts for user-friendly tool development, including 
the development of out-of-pocket comparison cost estimates for self-pay 
and commercially insured health care consumers. Some stakeholders noted 
that the most useful pricing information for consumers is information 
that displays a patient's expected out-of-pocket costs for nonurgent 
health care services that can be scheduled in advance, also referred to 
as ``shoppable'' services.
    We appreciate the many detailed comments and suggestions 
stakeholders have provided us during the past year. In this proposed 
rule, after taking into consideration our past pricing transparency 
efforts and stakeholder feedback and our policy objective to make price 
information more readily available, we are proposing to codify a set of 
requirements that further implement section 2718(e) of the PHS Act. We 
believe that the public posting of hospital standard charge information 
will be useful to health care consumers who need to obtain items and 
services from a hospital, health care consumers who wish to view 
hospital prices prior to selecting a hospital, clinicians who use the 
data at the point of care when making referrals, and other members of 
the public who may develop consumer-friendly price transparency tools. 
These proposed requirements represent an important step towards putting 
health care consumers at the center of their health care and ensuring 
they have access to the hospital standard charge information they need.
4. Summary of Proposals
    Health care consumers continue to lack the meaningful pricing 
information they need to choose the healthcare services they want and 
need despite prior requirements for hospitals to publicly post their 
chargemaster rates online. Therefore, in response to stakeholders and 
in accordance with President's Executive Order on ``Improving Price and 
Quality Transparency in American Healthcare to Put Patients First'' 
(June 24, 2019), we are proposing an expansion of hospital charge 
display requirements to include charges and information based on 
negotiated rates and for common shoppable items and services, in a 
manner that is consumer-friendly. We believe this will meaningfully 
inform patients' decision making and allow consumers to compare prices 
across hospitals. We are also proposing to establish a mechanism for 
monitoring and the application of penalties for noncompliance.
    Specifically, we are proposing to add a new Part 180--Hospital 
Price Transparency to title 45 of the Code of Federal Regulations (CFR) 
which would contain our regulations on price transparency for purposes 
of section 2718(e) of the PHS Act. In our discussions in the sections 
that follow, we make proposals related to: (1) A definition of 
``hospital''; (2) different reporting requirements that would apply to 
certain hospitals; (3) definitions for two types of ``standard 
charges'' (specifically, gross charges and payer-specific negotiated 
charges) that hospitals would be required to make public, and a request 
for public comment on other types of standard charges that hospitals 
should be required to make public; (4) a definition of hospital ``items 
and services'' that would include all items and services (both itemized 
and packaged) provided by the hospital to a patient in connection with 
an inpatient admission or an outpatient department visit; (5) 
requirements for making public a machine-readable file that contains a 
hospital's gross charges and payer-specific negotiated charges for all 
items and services provided by the hospital; (6) requirements for 
making public payer-specific negotiated charges for select hospital-
provided items and services that are ``shoppable'' and that are 
displayed and packaged in a consumer-friendly manner; (7) monitoring 
for hospital noncompliance with public disclosure requirements to make 
public standard charges; (8) actions that would address hospital 
noncompliance, which include issuing a written warning notice, 
requesting a corrective action plan, and imposing civil monetary 
penalties (CMPs) on noncompliant hospitals and publicizing these 
penalties on a CMS website; and (9) appeals of CMPs.
    We believe that these proposals requiring public release of 
hospital standard charge information are a necessary and important 
first step in ensuring transparency in health care prices for 
consumers, although we recognize that the release of hospital standard 
charge information is not sufficient by itself to achieve our ultimate 
goals for price transparency. For example, we know through our 
stakeholder engagement and research conducted over the past year that 
consumers of health care services simply want to know where they can 
get a needed health care service and what that service will cost them 
out-of-pocket. There are many barriers to achieving this simple desire 
to make price comparisons for health care services, including that the 
data necessary for such an analysis are not available to the general 
public. Necessary data to make price comparisons depends on an 
individual's circumstances. For example, a self-pay individual may 
simply want to know the amount a health care provider will accept in 
cash (or cash equivalent) as payment in full, while an individual with 
health insurance may want to know the charge negotiated between the 
health care provider and payer, along with additional individual 
benefit-specific information such as the amount of cost-sharing, the 
network status of the health care provider, how much of a deductible 
has been paid to date, and other information. The proposals in this 
proposed rule seek to address the barriers related to lack of hospital 
data by standardizing the release of two types of hospital standard 
charge information--gross charges and payer-specific negotiated 
charges.
    We believe these proposed policies are an important first step in 
our efforts to achieve price transparency in health care, and believe 
our proposed policies should be viewed in the context of the broader 
price transparency initiative. We are continuing to explore other 
authorities that the Department can use to further advance our goal of 
getting

[[Page 39575]]

patients the information they need to make informed health care 
decisions.

B. Proposed Definition of ``Hospital'' and Proposed Special 
Requirements That Would Apply to Certain Types of Hospitals

1. Proposed Definition of ``Hospital''
    Section 2718(e) of the PHS Act does not define ``hospital.'' 
Initially, we considered proposing to adopt a definition of 
``hospital'' that is used either in other sections of the PHS Act or in 
the Social Security Act, but we found that no single or combined 
definition was suitable because those other definitions were applicable 
to specific programs or Medicare participation and therefore had 
program-specific requirements that made them too narrow for our 
purposes. For example, we considered referencing the definition of 
``hospital'' at section 1861(e) of the Social Security Act because that 
definition is well understood by institutions that participate as 
hospitals for purposes of Medicare. However, we were concerned that 
doing so could have had the unintentional effect of limiting the 
institutions we believe should be covered by section 2718(e) of the PHS 
Act. Even so, we believe that the licensing requirement described at 
section 1861(e)(7) of the Social Security Act captures the institutions 
that we believe should be characterized as hospitals for purposes of 
this section.
    Accordingly, we are proposing to define a ``hospital'' as an 
institution in any State in which State or applicable local law 
provides for the licensing of hospitals, (1) is licensed as a hospital 
pursuant to such law or (2) is approved, by the agency of such State or 
locality responsible for licensing hospitals, as meeting the standards 
established for such licensing (which we propose to codify in new 45 
CFR 180.20).
    We believe this proposed definition is the best way to ensure that 
section 2718(e) of the PHS Act applies to each hospital operating 
within the United States. First, in addition to applying to all 
Medicare-enrolled hospitals (that, by definition, must be licensed by a 
State as a hospital, or otherwise approved by the State or local 
licensing agency as meeting hospital licensing standards), the proposed 
definition would also capture any institutions that are, in fact, 
operating as hospitals under State or local law, but might not be 
considered hospitals for purposes of Medicare participation. As 
discussed in section XVI.A.2. of this proposed rule, many States have 
promoted price transparency initiatives and some require institutions 
they license as hospitals to make certain charges public as a part of 
those initiatives. Therefore, defining a hospital by its licensure (or 
by its approval by the State or locality as meeting licensing 
standards) may carry the advantage of aligning the application of 
Federal and State price transparency initiatives to the same 
institutions.
    We also are proposing that, for purposes of the definition of 
``hospital,'' a State includes each of the several States, the District 
of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and 
the Northern Mariana Islands. This proposed definition of State would 
be consistent with how that term is defined under section 2791(d)(14) 
of the PHS Act. We believe that adopting this definition of ``State'' 
for purposes of section 2718(e) of the PHS Act is appropriate because, 
unlike the other provisions in section 2718 which apply to health 
insurance issuers, section 2718(e) applies to hospitals. Therefore, it 
is distinguishable from the approach outlined in the July 2014 letters 
\172\ to the Territories regarding the PHS Act health insurance 
requirements established or amended by Public Law 111-148 and Public 
Law 111-152.
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    \172\ The July 2014 letters are available at: https://www.cms.gov/CCIIO/Resources/Letters/index.html#Health%20Market%20Reforms.
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    Our proposed definition focuses on whether or not the institution 
is licensed by the State or under applicable local law as a hospital, 
or is approved, by the agency of such State or locality responsible for 
licensing hospitals, as meeting the standards established for such 
licensing. As such, a ``hospital'' would include each institution that 
satisfies the definition, regardless of whether that institution is 
enrolled in Medicare or, if enrolled, regardless of how Medicare 
designates the institution for its purposes. Thus, the proposed 
definition would include critical access hospitals (CAHs), inpatient 
psychiatric facilities (IPFs), sole community hospitals (SCHs), and 
inpatient rehabilitation facilities (IRFs), which we previously 
identified in our guidelines as being hospitals for the purposes of 
section 2718(e),\173\ as well as any other type of institution, so long 
as such institutions are licensed as a hospital (or otherwise approved) 
as meeting hospital licensing standards.
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    \173\ Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/Downloads/Additional-Frequently-Asked-Questions-Regarding-Requirements-for-Hospitals-To-Make-Public-a-List-of-Their-Standard-Charges-via-the-internet.pdf.
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    Finally, we note that the proposed definition of ``hospital'' would 
not include entities such as ambulatory surgical centers (ASCs) or 
other non-hospital sites-of-care from which consumers may seek health 
care items and services. For example, nonhospital sites may offer 
ambulatory surgical services, laboratory or imaging services, or other 
services that are similar or identical to the services offered by 
hospital outpatient departments. In the interest of increasing 
opportunities for health care consumers to compare prices for similar 
services and promoting widespread transparency in health care prices, 
we encourage non-hospital sites-of-care to make public their lists of 
standard charges in alignment with these proposed requirements so that 
consumers can make effective pricing comparisons.
    We invite public comments on our proposed definition of 
``hospital,'' which we are proposing to codify at 45 CFR 180.20.
2. Proposed Special Requirements That Would Apply to Certain Hospitals
    In sections XVI.E. and XVI.F of this proposed rule, we propose the 
requirements that most institutions meeting our definition of 
``hospital'' would have to meet in order to comply with section 2718(e) 
of the PHS Act. However, we are proposing that these requirements would 
not apply to federally-owned or operated hospitals, including Indian 
Health Service (IHS) facilities (including Tribally-owned and operated 
facilities), Veterans Affairs (VA) facilities, and Department of 
Defense Military Treatment Facilities (MTFs), because, with the 
exception of some emergency services, these facilities do not provide 
services to the general public and the established payment rates for 
services are not subject to negotiation. Instead, each of these 
facility types is authorized to provide services only to patients who 
meet specific eligibility criteria. For example, individuals must meet 
the requirements enumerated at 42 CFR 136.22 through 136.23 to be 
eligible to receive services from IHS and Tribal facilities. Similarly, 
under 38 CFR 17.43 through 17.46, Veterans Affairs hospitals provide 
hospital, domiciliary, and nursing home services to individuals with 
prior authorization who are discharged or retiring members of the Armed 
Forces and, upon authorization, beneficiaries of the Public Health 
Service, Office of Workers' Compensation Programs, and other Federal 
agencies (38 CFR 17.43). In addition, federally-owned or operated 
hospitals such as IHS and Tribal

[[Page 39576]]

facilities \174\ impose no cost-sharing, or, in the case of VA 
hospitals \175\ and Department of Defense MTFs,\176\ little cost-
sharing. With respect to such facilities where there is cost-sharing, 
the charges are publicized through the Federal Register, Federal 
websites, or direct communication and therefore known to the 
populations served by such facilities in advance of receiving health 
care services. Only emergency services at federally-owned or operated 
facilities are available to non-eligible individuals. Because these 
hospitals do not treat the general public, their rates are not subject 
to negotiation, and the cost sharing obligations for hospital provided 
services are known to their patients in advance, we believe it is 
appropriate to establish different requirements that apply to these 
hospitals. Specifically, we are proposing to deem federally owned or 
operated hospitals that do not treat the general public (except for 
emergency services) and whose rates are not subject to negotiation, 
meet the requirements of section 2718(e) of the PHS Act when their 
charges for hospital provided services are publicized to their patients 
in advance (for example, through the Federal Register) (proposed new 45 
CFR 180.30(b)).
---------------------------------------------------------------------------

    \174\ Section 1680r(b) of the Indian Health Care Improvement Act 
(25 U.S.C. 1680r).
    \175\ VA cost-sharing information available at: https://www.va.gov/HEALTHBENEFITS/cost/copays.asp.
    \176\ MTF cost-sharing information available at: https://tricare.mil/Costs/Compare and https://comptroller.defense.gov/Portals/45/documents/rates/fy2019/2019_ia.pdf.
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    In addition, as a result of public comments received in response to 
the 2018 RFIs suggesting that certain hospitals be exempted from having 
to make public their standard charges, we considered whether it was 
appropriate to establish different requirements for hospitals located 
in a rural areas, critical access hospitals (CAHs), or hospitals that 
are not federally owned or operated but that serve special populations 
(such as children's hospitals and State psychiatric hospitals). 
However, because such hospitals are open to the general public, and 
their charges are generally not made available to the public, we 
continue to believe there is value in such hospitals making public 
their standard charges. For example, hospitals may gain market share 
and enjoy increased patient satisfaction as a result of being 
transparent with their prices.\177\ Moreover, we believe that the 
proposed requirements are not overly burdensome because hospitals 
already have these data readily available. Therefore, at this time, we 
are not proposing different requirements for hospitals located in rural 
areas, CAHs or hospitals that are not federally owned or operated but 
that treat special populations. However, we are requesting public 
comments on whether exceptions to our proposed requirements might be 
warranted for hospitals (for example, hospitals located in rural areas, 
CAHs, or hospitals that treat special populations) that are not 
federally owned or operated, while also ensuring that charges for the 
services provided by such hospitals are available to the public. 
Specifically, we recognize that many hospitals are going above and 
beyond these proposed requirements, for example, by offering patient-
friendly price transparency tools that calculate individualized out-of-
pocket cost estimates. We seek comment on whether offering such tools 
could qualify a hospital to be excepted from some of the proposed 
requirements, for example, the consumer-friendly display requirements 
discussed in section XVI.F.
---------------------------------------------------------------------------

    \177\ Hammer, David C. ``Adapting customer service to consumer-
directed health care: by implementing new tools that provide greater 
transparency in billing, hospitals can decrease collection costs 
while improving consumer satisfaction.'' Healthcare Financial 
Management, Sept. 2006, p. 118+. Academic OneFile, Accessed 8 July 
2019. https://www.mckesson.com/documents/providers/hfma---adapting-customer-service-to-consumer-directed-health-care/.
---------------------------------------------------------------------------

C. Proposed Definition of ``Items and Services'' Provided by Hospitals

    Section 2718(e) of the PHS Act requires that hospitals make public 
a list of the hospital's standard charges for items and services 
provided by the hospital, including for diagnosis related groups 
(DRGs). We are proposing that, for purposes of section 2718(e), ``items 
and services'' provided by the hospital are all items and services, 
including individual items and services and service packages, that 
could be provided by a hospital to a patient in connection with an 
inpatient admission or an outpatient department visit for which the 
hospital has established a standard charge. Examples of these items and 
services include, but are not limited to, supplies, procedures, room 
and board, use of the facility and other items (generally described as 
facility fees), services of employed physicians and non-physician 
practitioners (generally reflected as professional charges), and any 
other items or services for which a hospital has established a charge.
    Our proposed definition includes both individual items and services 
as well as ``service packages'' for which a hospital has established a 
charge. Every hospital maintains a file system known as the 
chargemaster (or Charge Description Master ``CDM''), which contains all 
billable procedure codes performed at the hospital, along with 
descriptions of those codes and the hospitals' own list prices. The 
format and contents of the chargemaster vary from one hospital to the 
next, although the source codes are derived from common billing code 
systems (such as the AMA's CPT system). Chargemasters can include tens 
of thousands of line items, depending on the type of facility, and can 
be maintained in spreadsheet or database formats.\178\ For purposes of 
section 2718(e) of the PHS Act, we are proposing to define 
``chargemaster'' to mean the list of all individual items and services 
maintained by a hospital for which the hospital has established a 
standard charge (at proposed new 45 CFR 180.20). Each individual item 
or service found on the hospital chargemaster has a corresponding 
``gross'' charge (discussed in more detail in section XVI.D.2). Each 
individual item or service may also have a corresponding negotiated 
discount because some hospitals negotiate with third party payers to 
establish a flat percent discounted rate off the gross charge for each 
individual item and service listed on the chargemaster; for example, a 
hospital may negotiate a 50 percent discount off all chargemaster gross 
rates with a third party payer.
---------------------------------------------------------------------------

    \178\ https://www.healthaffairs.org/doi/10.1377/hlthaff.25.1.45.
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    In contrast to the chargemaster or so-called ``fee-for-service'' 
price list, hospitals also routinely negotiate rates with third party 
payers for bundles of services or ``service packages'' in lieu of 
charging for each and every imaging study, laboratory test, or alcohol 
swab found on the chargemaster.\179\ Such service packages may have 
charges established on, for example, the basis of a common procedure or 
patient characteristic, or may have an established per diem rate that 
includes all individual items and services furnished during an 
inpatient stay. Some hospitals present ``self-pay package pricing'' for 
prompt same-day payment from health care consumers. The hospital's 
billing and accounting systems maintain the negotiated charges for 
service packages which are commonly identified in the hospital's 
billing system by recognized industry standards and codes. For example, 
a diagnosis-related group (DRG) system may be used to define a hospital 
product based on the characteristics of patients receiving similar sets 
of

[[Page 39577]]

[itemized] services.\180\ Medicare and some commercial insurers have 
adopted DRG classifications as a method of inpatient hospital payment. 
Other codes (for example, payer specific codes, CPT or HCPCS codes) are 
used by hospitals and payers to identify service packages based on 
procedures.
---------------------------------------------------------------------------

    \179\ https://www.healthaffairs.org/doi/10.1377/hlthaff.25.1.81.
    \180\ https://repository.library.georgetown.edu/handle/10822/556896.
---------------------------------------------------------------------------

    For purposes of section 2718(e) of the PHS Act, we are proposing to 
define a ``service package'' to mean an aggregation of individual items 
and services into a single service with a single charge (proposed new 
45 CFR 180.20). We believe this is appropriate and consistent with 
section 2718(e) of the PHS Act because we believe its inclusion of DRGs 
as an item or service in section 2718(e) recognizes that hospital 
services can be provided and charged for based on the service's 
individual component parts or as a more inclusive packaged service. 
While section 2718(e) of the PHS Act specifically includes items and 
services grouped into DRGs as an example of the items and services for 
which hospitals must list their standard charges, we believe that our 
definition of ``items and services'' should include not just all DRGs 
(as established under 1886(d)(4) of the Social Security Act) but also 
all other service packages provided by the hospital, including, for 
example, service packages the hospital provides in an outpatient 
setting for which a hospital may have established a standard charge. 
Therefore, our proposed definition of ``items and services'' includes 
both individual items and services and service packages.
    We would also include in our proposed definition of ``items and 
services'' provided by the hospital the services furnished by 
physicians and non-physician practitioners who are employed by the 
hospital. We believe the services the hospital provides through its 
employed physicians (and non-physician practitioners) are items and 
services provided by the hospital, because such physicians (and non-
physician practitioners) are employed by the hospital specifically so 
that the hospital can offer such services to the hospital's patients. 
In addition, the hospital establishes and negotiates the charges for 
the employed physician and non-physician services. The hospital bills 
and retains the payment for the professional services of employed 
physician and non-physician practitioners. We therefore believe it is 
appropriate for these services to be included in our proposed 
definition of hospital items and services provided by the hospital 
under Section 2718(e), and for hospitals to make public the charges for 
the services of their employed physician and non-physician 
practitioners.
    We also considered including in our proposed definition of items 
and services the services provided by physicians and non-physician 
practitioners who are not employed by the hospitals, but who provide 
services at a hospital location. For example, a procedure performed in 
a hospital setting may involve anesthesiology services provided by a 
non-employed physician who has established his or her own charge for 
the service he or she is providing at a hospital location. These 
physicians and non-physician practitioners may send a bill that is 
separate from the hospital bill, or, they may elect to reassign their 
billing rights to the hospital that will send a single bill that 
includes both hospital charges and professional service charges. Often, 
health care consumers are not expecting an additional charge or are 
otherwise surprised when they receive bills from entities other than 
the hospital, or when charges for non-employed physicians and non-
physician practitioners are higher than expected (for example, when a 
non-employed physician is out-of-network and the consumer's third party 
payer declines payment for those services for that reason). We believe 
that the provision of such additional charge information would be 
exceptionally valuable to give consumers a more complete picture of the 
total amount they might be charged in connection with an inpatient 
admission or an outpatient department visit at a hospital location, 
potentially helping to address the widely recognized ``surprise 
billing'' issue. However, because physicians and non-physician 
practitioners who are not employed by the hospital are practicing 
independently, establish their own charges for services, and receive 
the payment for their services, we do not believe their charges for 
their services fall within the scope of section 2718(e) as they are not 
services ``provided by the hospital.''
    We welcome comment on these proposals.

D. Proposed Definitions for Types of ``Standard Charges''

1. Overview and Background
    Under our current guidelines regarding section 2718(e) of the PHS 
Act (as discussed in the FY 2019 IPPS/LTCH PPS proposed rule and final 
rule (83 FR 20164 and 41144, respectively)), a hospital may choose the 
format it uses to make public a list of its standard charges, so long 
as the information represents the hospital's current standard charges 
as reflected in its chargemaster.
    In response to the 2018 RFIs, several commenters, including 
hospitals and patient advocacy organizations, commented that gross 
charges as reflected in hospital chargemasters may only apply to a 
small subset of consumers; for example, those who are self-pay or who 
are being asked to pay the chargemaster rate because the hospital is 
not included in the patient's insurance network. Many commenters also 
noted that the charges listed in a hospital's chargemaster are 
typically not the amounts that hospitals actually charge to consumers 
who have health insurance because, for the insured population, 
hospitals charge amounts reflect discounts to the chargemaster rates 
that the hospital has negotiated with third party payers. Further, with 
respect to patients who qualify for financial assistance or who pay in 
cash, commenters pointed out that some hospitals will charge lower 
amounts than the rates that appear on the chargemaster. Adding to the 
complexity, some commenters noted that hospitals often package items 
and services and charge a single discounted negotiated amount for the 
packaged service. For example, as discussed in XVI.C. of this proposed 
rule, instead of itemizing and charging for each individual hospital 
item or service found on the chargemaster, a hospital may identify a 
primary common condition or procedure and charge a single negotiated or 
``cash'' amount for the primary common condition or procedure that 
includes all associated items and services that are necessary for 
treatment of the common condition or to perform the procedures. We 
believe that these comments illustrate a fundamental challenge of 
making health care prices transparent in general, and specifically with 
respect to the issue of how we should best implement section 2718(e) of 
the PHS Act; simply put, hospitals do not offer all consumers a single 
``standard charge'' for the items and services they furnish. Rather, 
the ``standard charge'' for an item or service (including service 
packages) varies depending on the circumstances particular to the 
consumer.
    Therefore, we sought public comment through the RFIs issued in 2018 
\181\ on

[[Page 39578]]

a definition of ``standard charges.'' Specifically, we requested 
information on the following:
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    \181\ FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20164); CY 2019 
Home Health proposed rule (83 FR 32473); CY 2020 ESRD PPS proposed 
rule (83 FR 34394); CY 2020 PFS proposed rule (83 FR 36009); and CY 
2019 OPPS/ASC proposed rule (83 FR 37211).
---------------------------------------------------------------------------

     Should ``standard charges'' be defined to mean: Average or 
median rates for the items in the chargemaster; average or median rates 
for groups of services commonly billed together (such as for an MS-
DRG), as determined by the hospital based on its billing patterns; or 
the average discount off the chargemaster amount across all payers, 
either for each item on the chargemaster or for groups of services 
commonly billed together?
     Should ``standard charges'' be defined and reported for 
both some measure of the average contracted rate and the chargemaster 
[rate]? Or is the best measure of a hospital's standard charges its 
chargemaster [rate]?
    Commenters responded with a number of suggestions for defining 
``standard charges'' including the following:
     Chargemaster rates.
     Average discount off the chargemaster amount across all 
payers (for example, an average negotiated rate).
     Actual, estimated, or average out-of-pocket costs to 
individuals.
     The amount the hospital will accept as payment in full for 
items and services (without complications) by non-governmental payers 
and individuals (for example, a negotiated rate).
     Usual and customary charges as defined by the National 
Council of Insurance Legislators (NCIL). Specifically, the NCIL defines 
usual and customary as the 80th percentile of physician charges in a 
geographic region based on an independent unbiased benchmarking charge 
database.
     Median or average charges for groups of services routinely 
billed together, such as at the DRG or APC level, or other layman-
termed groupings.
     Average median payment rate or average out-of-pocket 
charges for shoppable services (that is, nonemergent or elective 
procedures that patients will most likely use).
     Net negotiated charges for health insurance plan networks.
    We appreciate the many comments and suggestions on this issue 
offered by stakeholders. We believe the variety of suggested 
definitions reflects our assessment that hospitals can have different 
standard charges for various groups of individuals. In general, for 
purposes of 2718(e), we believe a standard charge can be identified as 
a charge that is the regular rate established by the hospital for the 
items and services provided to a specific group of paying patients. 
Therefore, we considered what types of standard charges may reflect 
certain common and identifiable groups of paying patients. After 
considering the feedback noted above and the various types of standard 
charges that may exist, we are proposing to define standard charges to 
mean ``gross charges'' and ``payer-specific negotiated charges,'' and 
to codify this definition in proposed new 45 CFR 180.20. ``Gross 
charges'' and ``payer-specific negotiated charges'' are further defined 
in sections XVI.D.2. and XVI.D.3., respectively, of this proposed rule. 
We believe the proposal to define standard charges as gross charges and 
payer-specific negotiated charges reflects the fact that a hospital's 
standard charge for an item or service is not typically a single fixed 
amount, but, rather, depends on factors such as who is being charged 
for the item or service, and particular circumstances that apply to an 
identifiable group of people, including, for example, health care 
consumers that are insured members of third party insurance products 
and plans that have negotiated a rate on its members' behalf.
    We are proposing to define standard charges as ``gross charges'' 
and ``payer-specific negotiated charges'' based on our research and 
prior stakeholder input. Hospitals would be required to make public 
these two types of standard charges in the form and manner proposed in 
sections XVI.E and F. As explained in section XVI.C. of this proposed 
rule, gross charges found in the chargemaster as well as negotiated 
charges are both informative and necessary for consumers to understand 
their potential out-of-pocket cost obligations, but such information is 
not readily available to consumers. We believe these two specific types 
of standard charges have the potential to inform two large identifiable 
groups of health care consumers who do not currently have ready access 
to hospital charge information, specifically those who have limited 
power to negotiate charges (for example, self-pay individuals) and 
those who rely on third party payers to negotiate charges on their 
behalf. We also believe that these two specific types of standard 
charges present a limited burden for hospitals to make publicly 
available, because these charges are already available, maintained, and 
in use in hospital billing systems. Moreover, we believe these two 
specific types of standard charges are necessary basic information 
needed to begin to ensure that consumers have the ability to shop for 
and compare pricing for health care services. We believe these 
proposals will help provide information to consumers to help make 
health care more affordable and drive down the cost of health care 
coverage.
    We acknowledge that the proposed definition of hospital ``standard 
charges'' is limited to only two of the many possibilities that exist 
for defining types of hospital ``standard charges,'' and we discuss 
below other potential definitions that we considered, but decided not 
to propose at this time. We are seeking public input and comment on the 
alternatives and additional types of standard charges that may be 
useful to consumers.
2. Proposed Definition of ``Gross Charges'' as a Type of Standard 
Charge
    As previously noted, in general, for purposes of 2718(e), we 
believe a standard charge can be identified as a charge that is the 
regular rate established by the hospital for the items and services 
provided to a specific group of paying patients. We are proposing that, 
for purposes of the first type of ``standard charge,'' a ``gross 
charge'' would be defined as the charge for an individual item or 
service that is reflected on a hospital's chargemaster, absent any 
discounts (at proposed new 45 CFR 180.20). As we explain in section 
XVI.C. of this proposed rule, the hospital chargemaster contains a list 
of all individual items and services the hospital provides. The gross 
charges reflected in the chargemaster often apply to a specific group 
of individuals who are self-pay, but do not reflect charges negotiated 
by third party payers. We also note that the chargemaster does not 
include charges that the hospital may have negotiated for service 
packages, such as per diem rates, DRGs or other common payer service 
packages, and therefore this type of standard charge would not include 
standard charges for service packages.
    We are proposing to require hospitals to make public their gross 
charges because, in addition to applying to a specific group of 
individuals, based on research and stakeholder input, we believe gross 
charges are useful to the general public, necessary to promote price 
transparency, and necessary to drive down premium and out-of-pocket 
costs for consumers of health care. For example, studies suggest that 
the gross charge plays an important role in the negotiation of third 
party insurance products that are subsequently sold to consumers.\182\ 
Specifically, as hospital

[[Page 39579]]

executives and others familiar with hospital billing cycles often note, 
hospitals routinely use gross charges as a starting point for 
negotiating discounted rates with third party payers, and higher gross 
charges have been found to be associated with both higher negotiated 
rates and, in turn, higher premiums and out-of-pocket costs for insured 
individuals.\183\ \184\ As such, gross charges are relevant to all 
consumers, including those with insurance coverage. We believe that 
requiring transparency of hospital gross charges may drive competition, 
which might, in turn, have the effect of not only lowering hospital 
charges for the most vulnerable consumers and those with the least 
market power to negotiate prices, but also for consumers who have 
access to charges negotiated on their behalf by a third party payer.
---------------------------------------------------------------------------

    \182\ Bai G and Anderson GF. Market Power: Price Variation Among 
Commercial Insurers for Hospital Services. Health Affairs. Oct 2018; 
37(10): 1615-1622. Available at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.0567.
    \183\ Bai G and Anderson GF. Extreme Markup: The Fifty US 
Hospitals With The Highest Charge-To-Cost Ratios. Health Affairs. 
Jun 2015; 34(6): 922-928. Available at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2014.1414.
    \184\ Batty M and Ippolito B. Mystery of The Chargemaster: 
Examining The Role Of Hospital List Prices in What Patients Actually 
Pay. Health Affairs. April 2017; 36(4): 689-696. Available at: 
https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0986.
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    In addition, as a result of stakeholder feedback, we learned that 
third party developers of consumer price transparency tools can use 
gross charges in conjunction with additional information (such as an 
individual's specific insurance and benefit information and quality 
data) to develop and make available consumer-friendly out-of-pocket 
cost estimates that allow consumers to compare health care service 
prices across hospitals and other nonhospital settings of care. 
Moreover, as previously noted in section XVI.A.2., research suggests 
that making such consumer-friendly information available to the public 
has been demonstrated to reduce consumer health care costs. As such, we 
believe that public access to hospital gross charges is critical to 
inform all patients (both self-pay and insured) of their choices and 
drive transparency in prices.
    We are proposing to codify the proposed definition of ``gross 
charges'' at proposed new 45 CFR 180.20. We are inviting public 
comments on our proposal to define a type of ``standard charge'' as a 
``gross charge'' and on our proposed definition of ``gross charge.''
3. Proposed Definition of ``Payer-Specific Negotiated Charge'' as a 
Type of Standard Charge
    As noted in section XVI.D.1, in general, for purposes of 2718(e), 
we believe a standard charge can be identified based on the regular 
rate established by the hospital for the items and services provided to 
a specific group of paying patients. We are proposing that, for 
purposes of the second type of ``standard charge,'' a ``payer-specific 
negotiated charge'' would be defined as the charge that the hospital 
has negotiated with a third party payer for an item or service. We are 
further proposing to define ``third party payer'' for purposes of 
section 2718(e) of the PHS Act as an entity that is, by statute, 
contract, or agreement, legally responsible for payment of a claim for 
a health care item or service and to codify this definition at proposed 
new 45 CFR 180.20. As the reference to ``third party'' suggests, this 
definition excludes an individual who pays for a health care item or 
service that he or she receives (such as self-pay patients).
    We are proposing to focus on a second type of ``standard charge'' 
related to negotiated rates because most consumers (over 90 percent 
\185\) rely on a third party payer to cover a portion or all of the 
cost of health care items and services, including a portion or all of 
the cost of items and services provided by hospitals (in accordance 
with the terms and conditions of the third party payer's contract 
agreement with that consumer). Some third party payers (for example, 
Medicare fee-for-service or Medicaid fee-for-service) currently make 
public the maximum rate they pay for a hospital item or service. 
However, many third party payers do not reveal their negotiated rates, 
even to individuals on behalf of whom they pay. Additionally, many 
contracts between third party payers and hospitals contain so-called 
``gag clauses'' that prohibit hospitals from disclosing the rates they 
have negotiated with third party payers.\186\ Because consumers are not 
generally part of the negotiations or privy to the resulting negotiated 
rates, consumers often find it difficult to learn in advance of 
receiving a health care service the rate their third party payers may 
pay. Having insight into the charges that have been negotiated on one's 
behalf, however, is necessary for insured health care consumers to 
determine their potential out-of-pocket obligations prior to receipt of 
a health care service. For example, if a health care consumer knows 
that he or she will be responsible for 20 percent of the charges for a 
hospital service, her or she can compare the charges that the third 
party negotiated with hospital A and hospital B and, from that, the 
consumer can determine his or her expected out-of-pocket costs at 
hospital A versus hospital B.
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    \185\ https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-264.pdf.
    \186\ https://pdfs.semanticscholar.org/f604/1a0484c65c593525d0c07e040cf655697f2d.pdf.
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    Knowing a negotiated charge is also important because a growing 
number of insured health care consumers are finding that some services 
are more affordable if the consumer chooses to forego insurance and pay 
out-of-pocket. For example, stakeholders and reports indicate that an 
increasing number of consumers are discovering that sometimes the 
providers' cash discount can mean paying lower out-of-pocket costs than 
paying the out-of-pocket costs calculated after taking a third party 
payer's higher negotiated rate into account.\187\ \188\ \189\ \190\ 
However, consumers cannot make such determinations without knowing the 
rate their third party payer has negotiated.
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    \187\ Beck, M. How to Cut Your Health-Care Bill: Pay Cash. The 
Wall Street Journal. February 15, 2016. Available at: https://www.wsj.com/articles/how-to-cut-your-health-care-bill-pay-cash-1455592277.
    \188\ Rosato, D. How Paying Your Doctor in Cash Could Save You 
Money. Consumer Reports. May 4, 2018. Available at: https://www.consumerreports.org/healthcare-costs/how-paying-your-doctor-in-cash-could-save-you-money/.
    \189\ Terhune, C. Many hospitals, doctors offer cash discount 
for medical bills. Los Angeles Times. March 27, 2012. Available at: 
https://www.latimes.com/business/healthcare/la-fi-medical-prices-20120527-story.html.
    \190\ https://khn.org/news/an-arm-and-a-leg-can-you-shop-around-for-a-lower-priced-mri/.
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    For the reasons discussed above, we agree with commenters that 
gross charges (as a type of standard charge) are largely applicable to 
one identifiable group of consumers (for example, self-pay) and are not 
enough for another large and identifiable group of consumers (for 
example, those with third party insurance) to know their charges for 
hospital items. Thus, we are proposing that a type of `standard charge' 
is the ``payer-specific negotiated charge'' that would be defined as 
all charges that the hospital has negotiated with third party payers 
for an item or service. We decided to focus on negotiated rates rather 
than all payer rates because charges that are not negotiated (for 
example, Medicare fee-for-service or Medicaid fee-for-service rates) 
are often already publicly available.
    We recognize that the impact resulting from the release of 
negotiated rates is largely unknown. While it is

[[Page 39580]]

clear that such data is necessary for consumers to be able to determine 
their potential out-of-pocket costs in advance, and we believe the 
release of such data will help drive down health care costs (as 
discussed above), some stakeholders have expressed concern with the 
public display of de-identified negotiated rates which may have the 
unintended consequence of increasing health care costs of hospital 
services in highly concentrated markets or as a result of 
anticompetitive behaviors without additional legislative or regulatory 
efforts.\191\
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    \191\ https://pdfs.semanticscholar.org/f604/1a0484c65c593525d0c07e040cf655697f2d.pdf.
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    Moreover, we recognize that requiring release of all payer-specific 
negotiated charges for all hospital items and services (both individual 
items and services as well as service packages) would mean releasing a 
large amount of data. To get a sense for the number of potential 
negotiated rates a hospital may have, we conducted an internal analysis 
of plans in the regulated individual and small group insurance markets 
under the Patient Protection and Affordable Care Act. Our analysis 
indicates that the number of products or lines of service per rating 
area ranges from approximately 1 to 200 in the individual market 
(averaging nearly 20 products or lines of service in each rating area), 
while in the small market group, the number ranges from 1 to 400 
(averaging nearly 40 products or lines of service in each rating area). 
Most (if not all) hospitals maintain such data electronically because 
these data are used routinely for billing, and therefore we believe it 
presents little burden for a hospital to electronically pull and 
display these data online in a machine-readable format (as discussed in 
more detail in section XVI.E). However, we recognize that ensuring 
display of such a large amount of data in a consumer-friendly manner 
may pose greater challenges that we address in section (XVI.F).
    We note that, in displaying the payer-specific negotiated charges, 
hospitals would display all negotiated charges, including, for example, 
charges negotiated with Medicare Advantage (MA) plans because such 
rates are negotiated. Conversely, hospitals would not include payment 
rates that are not negotiated, such as rates set by certain health care 
programs that are directly government-financed, for example, those set 
by CMS for Medicare fee-for-service. We believe, however, that the 
display of a non-negotiated rate, for example, display of a Medicare 
and Medicaid fee-for-service rate for an item or service, in 
conjunction with the gross charge and the payer-specific negotiated 
charges for the same item or service could be informative for the 
public and that nothing in this proposed rule would preclude hospitals 
from displaying them.
    We are proposing to codify the definition of ``payer-specific 
negotiated charge'' and ``third party payer'' at proposed new 45 CFR 
180.20. We invite public comments on our proposal to define a type of 
``standard charge'' as a ``payer-specific negotiated charge''. Given 
concerns raised by stakeholders related to release of identifiable 
negotiated charges, we are seeking public comment on whether and how 
the release of such specific charge information could result in 
unintended consequences. We also seek comment on whether and how there 
may be different methods for making such information available to 
individuals who seek to understand what their out-of-pocket cost 
obligations may be in advance of receiving a health care service.
4. Request for Comment on Alternative Definitions for Types of Standard 
Charges Under Consideration
    Although we propose above that two types of charges would be 
standard charges for purposes of section 2718(e), we are seeking public 
comments on whether we should instead, or additionally, require the 
disclosure of other types of charges discussed below as standard 
charges. We considered alternatives for types of standard charges 
related to groups of individuals with third party payer coverage and 
also for types of standard charges that could be useful to groups of 
individuals who are self-pay.
a. Alternative Types of ``Standard Charges'' Related to Groups of 
Individuals With Third Party Payer Coverage
    Access to the rate one's third party payer has negotiated on one's 
behalf can be a challenge. As discussed earlier, we believe that 
disclosure of negotiated charges will help many consumers with health 
care coverage know the charge hospitals have negotiated with their 
third party payers for items and services. However, we understand that 
the ``payer-specific negotiated charge'' represents a type of standard 
charge for some, but not all, groups of individuals with health care 
coverage; for example, individuals who have third party payer coverage 
for charges that are not negotiated. Additionally, we recognize 
concerns that may exist related to the unintended consequence of 
increased healthcare costs in some geographic regions as a result of 
disclosure of all negotiated charges. For this reason, we considered 
several additional or alternative types of ``standard charges'' that 
hospitals could be required to make public that would provide estimated 
or additional information for individuals with health care coverage. 
Specifically, we considered the following types of ``standard 
charges'':
     Volume driven negotiated charge. As a variant of the 
definition of the ``payer-specific negotiated charge,'' we considered 
defining a type of ``standard charge'' based on the volume of patients 
to whom the hospital applies the standard charge. Specifically, we 
considered defining a type of ``standard charge'' as the ``modal 
negotiated charge.'' The mode of a distribution represents the number 
that occurs most frequently in a set of numbers. Here, we considered 
defining ``modal negotiated charge'' as the most frequently charged 
rate across all rates the hospital has negotiated with third party 
payers for an item or service. We believe that this definition could 
provide a useful and reasonable proxy for payer-specific negotiated 
charges and decrease burden for the amount of data the hospital would 
have to make public and display in a consumer-friendly format. While we 
are not proposing this definition at this time, we are seeking public 
comment on whether the modal negotiated charge would be as informative 
to consumers with insurance and whether it should be required as an 
alternative or in addition to the payer-specific negotiated charges.
     Minimum, median and maximum negotiated charge. We also 
considered defining a type of ``standard charge'' as the minimum, 
median, and maximum negotiated charge. Under this definition, the 
hospital would be required to make public the lowest, median, and 
highest charges of the distribution of all negotiated charges across 
all third party payer plans and products. This information could 
provide health care consumers with an estimate of what a hospital may 
charge, because it conveys the range of charges negotiated by all third 
party payers. Such a definition may also limit the amount of data a 
hospital would have to make public and package in a consumer-friendly 
manner which may reduce some burden. It may also relieve some concerns 
by stakeholders related to the potential for increased healthcare costs 
in some markets as a result of the disclosure of third party payer 
negotiated charges.
     All Allowed Charges. We also considered defining a type of 
``standard charge'' as the charges for all items and

[[Page 39581]]

services for all third party payer plans and products, including 
charges that are non-negotiated (such as FFS Medicare rates), which we 
would call ``all allowed charges.'' This option would require hospitals 
to provide the broadest set of charge information for all individuals 
with health insurance coverage because it would have the advantage of 
including all identified third party payer charges (including third 
party payer rates that are not negotiated). Additionally, every 
consumer would have access to charge information specific to their 
insurance plan. We considered, but are not proposing, this alternative 
because we believe consumers with non-negotiated health care coverage 
already have adequate and centralized access to non-negotiated charges 
for hospital items and services and are largely protected from out-of-
pocket costs which may make them less sensitive to price shopping. 
However, we seek public comment on whether increasing the data hospital 
would be required to make public would pose a burden, particularly for 
smaller or rural hospitals that may not keep such data electronically 
available.
b. Alternative Types of ``Standard Charges'' Considered for Groups of 
Individuals That Are Self-Pay
    As discussed earlier, hospital gross charge information may be most 
directly relevant to a large group of self-pay consumers who do not 
have third party payer insurance coverage or who seek care out-of-
network. Such consumers would not need information in additional to 
hospital gross charges in order to determine their potential out-of-
pocket cost obligations. However, stakeholders have indicated that 
hospitals often offer discounts off the gross charge or make other 
concessions to individuals who are self-pay. Thus, we considered 
additional definitions of hospital standard charges that may be 
relevant to certain subgroups of individuals who are self-pay.
     Discounted Cash Price. We considered defining a type of 
``standard charge'' as the ``discounted cash price,'' defined as the 
price the hospital would charge individuals who pay cash (or cash 
equivalent) for an individual item or service or service package. We 
considered this alternative definition because there are many consumers 
who pay in cash (or cash equivalent) for hospital items and services.
    The first subgroup of self-pay consumers that could benefit from 
knowing the discount cash price would be those who are uninsured. The 
number of uninsured individuals in the United States rose to 27.4 
million in 2017.\192\ These individuals' need for transparency in 
hospital charges differs from patients with insurance who generally are 
otherwise shielded from the full cost of hospitalization and hospital 
items and services. Uninsured individuals do not have the advantage of 
having access to a discounted group rate that has been negotiated by a 
third party payer. Therefore, individuals without insurance may face 
higher out-of-pocket costs for health care services.
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    \192\ Kaiser Family Foundation. Available at: https://www.kff.org/uninsured/press-release/the-number-of-uninsured-people-rose-in-2017-reversing-some-of-the-coverage-gains-under-the-affordable-care-act/.
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    The second subgroup of self-pay consumers who may benefit from 
knowing the discounted cash price are those who may have some health 
care coverage but who still bear the full cost of at least certain 
health care services. For example, these may be individuals who: Have 
insurance but who go out of network; have exceeded their insurance 
coverage limits; have high deductible plans but have not yet met their 
deductible; prefer to pay through a health savings account (HSA) or 
similar vehicle; or seek noncovered and/or elective items or services.
    Many hospitals offer discounts to these groups of individuals, 
either as a flat percentage discount off the chargemaster rate or the 
insurer's negotiated rate, while some hospitals offer consumers a cash 
discount if they pay in full on the day of the service.\193\ Other 
hospitals have developed and offer standardized cash prices for service 
packages for certain segments of the population who traditionally pay 
in cash for health care services. Currently, it is difficult for most 
consumers to determine in advance of receiving a service what 
discount(s) the hospital may offer an individual because cash and 
financial need discounts and policies can vary widely among hospitals.
---------------------------------------------------------------------------

    \193\ Beck, M. How to Cut Your Health-Care Bill: Pay Cash. The 
Wall Street Journal. February 15, 2016. Available at: https://www.wsj.com/articles/how-to-cut-your-health-care-bill-pay-cash-1455592277.
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    Under this option, we specifically considered an option that would 
require hospitals to make public the cash discount that would apply for 
shoppable service packages that would include all ancillary services, 
similar to our proposals in XVI.F for consumer-friendly display of 
payer-specific negotiated charges. In this case, the discounted cash 
price would represent the amount a hospital would accept as payment in 
full for the shoppable service package from an individual. Such charges 
could be lower than the rate the hospital negotiates with third party 
payers because it would not require many of the administrative 
functions that exist for hospitals to seek payment from third party 
payers (for example, prior authorization and billing functions). 
However, we recognize, that many hospitals have not determined or 
maintain a standard cash discount that would apply uniformly to all 
self-pay consumers for each of the items and services provided by the 
hospital or for services packages, unlike they do for negotiated 
charges. We are seeking comment on this option, specifically, how many 
shoppable services for which it would be reasonable to require 
hospitals to develop and maintain and make public a discounted cash 
price.
     Median Cash Price. Similar to rates hospitals negotiate 
with third party payers, a hospital may offer a range of cash (or cash 
equivalent) discounts to various certain groups of self-pay consumers. 
For example, in addition to other cash discount prices mentioned 
earlier, many hospitals offer cash discounts on a sliding scale 
according to financial need. In such instances, as noted above, it may 
be difficult for a hospital to establish and make public a single 
standardized cash rate for such groups of consumers. For this reason, 
we also considered a definition that would take sliding scale cash 
discounts into account by defining a standard charge as the median cash 
price. The median cash price would be the midpoint of all cash 
discounts offered to consumers, including prices for self-pay patients 
and those qualifying for financial assistance. For uninsured patients 
who may qualify for financial assistance, the value of making a median 
cash price public could raise awareness of their available options, 
including the ability to apply for financial assistance. At this time, 
we are not proposing to require hospitals to make public their median 
cash price because we believe such a rate would be less useful to the 
public than a single standard cash price that the hospital would accept 
as payment in full as discussed above. However, we continue to consider 
it and seek public comments on whether this definition would be useful 
and whether it would enhance our policy goals for improving consumer 
health care affordability.

E. Proposed Requirements for Public Disclosure of All Hospital Standard 
Charges for All Items and Services

1. Overview
    Section 2718(e) of the PHS Act requires hospitals to make their

[[Page 39582]]

standard charges public in accordance with guidelines developed by the 
Secretary. Therefore, in the following sections we make proposals for 
hospitals to make public their standard charges in two ways: (1) A 
comprehensive machine-readable file that makes public all standard 
charge information for all hospital items and services (XVI.E), and (2) 
a consumer-friendly display of common ``shoppable'' services derived 
from the machine-readable file (XVI.F). We believe that these two 
different methods of making hospital standard charges public is 
necessary to ensure such data is available to consumers where and when 
it is needed (for example, via integration into price transparency 
tools, EHRs, and consumer apps), and also directly available and useful 
to consumers that search for hospital-specific charge information 
without use of a developed price transparency tool.
    In this section, we make proposals for requirements for hospitals 
to make public online in a machine-readable file the standard charges 
(both gross charges and payer-specific negotiated charges) for all 
items and services (both individual items and services as well as 
service packages) provided by the hospital. For display of these 
standard charge data, we are proposing requirements for the file 
format, the content of the data in the file, and how to ensure the 
public can easily access and find the file. We believe these data could 
be of most use to health care consumers indirectly; that is, such data 
could be used by the public in price transparency tools or integrated 
into EHRs for purposes of clinical decision-making and referrals.
    In section XVI.F. of this proposed rule, we propose requirements 
for hospitals to make public a limited amount of standard charge data 
for a limited set of the items and services the hospital provides 
online in a form and manner that is more user-friendly. Specifically, 
we are proposing to require hospitals to make public their payer-
specific negotiated rates for certain ``shoppable'' services online in 
a consumer-friendly format. To do so, we are proposing that the 
hospital would disply their payer-specific negotiated charges for the 
primary shoppable service side-by-side with payer-specific negotiated 
charges for all ancillary items and services the hospital customarily 
as part of or in conjunction with the primary service. We make 
additional proposals related to consumer-friendly form, content, and 
manner of public display of these data. We believe these proposed 
requirements are responsive to stakeholder feedback and will assist 
health care consumers by making hospital standard charge information 
more directly useful and understandable to the public without the use 
of a developed price transparency tool.
2. Proposed Standardized Data Elements
    As discussed in more detail in section XVI.E.3. of this proposed 
rule, we are proposing that hospitals disclose their list of standard 
charges for all items and services online in a single digital file that 
is machine-readable. Without specifying a minimum reporting standard 
for the machine-readable file, the standard charges data made publicly 
available by each hospital could vary, making it difficult for 
consumers to compare items and services. For example, some hospitals 
currently post a single column of gross charges without any 
associations to CPT or HCPCS codes or other identifying descriptions of 
the items and services to which the gross charge applies. A similar 
example would be a hospital that displays a list of gross charges that 
is correlated with a list of item numbers that are meaningful to the 
hospital billing personnel, but a not understandable to the general 
public. By contrast, some hospitals list their gross charges along with 
a brief description of the item or service to which each gross charge 
applies and the corresponding standardized identifying codes (typically 
HCPCS or CPT codes).
    We are concerned that the lack of uniformity leaves the public 
unable to meaningfully use, understand, and compare standard charge 
information across hospitals. Therefore, for the first way we are 
proposing hospital make public their standard charges, which would 
contain gross charges and payer-specific negotiated charges for all 
hospital items and services, we are making a proposal to ensure 
uniformity of the data made publicly available by each hospital. To 
inform this proposal, we considered what data elements are typically 
included in a hospital's billing system and which of those elements 
would result in hospital standard charge data being most transparent, 
identifiable, meaningful, and comparable.
    Based on a review of current State requirements and a sampling of 
hospitals that are currently making public their charges, we are 
proposing that hospitals make public a list of each item or service the 
hospital provides and that the list include the following corresponding 
information, as applicable, for each item or service:
     Description of each item or service (including both 
individual items and services and service packages).
     The corresponding gross charge that applies to each 
individual item or service when provided in, as applicable, the 
hospital inpatient setting and outpatient department setting.
     The corresponding payer-specific negotiated charge that 
applies to each item or service (including charges for both individual 
items and services as well as service packages) when provided in, as 
applicable, the hospital inpatient setting and outpatient department 
setting. Each list of payer-specific charges must be clearly associated 
with the name of the third party payer.
     Any code used by the hospital for purposes of accounting 
or billing for the item or service, including, but not limited to, the 
Current Procedural Terminology (CPT) code, Healthcare Common Procedure 
Coding System (HCPCS) code, Diagnosis-Related Group (DRG), National 
Drug Code (NDC), or other common payer identifier.
     Revenue code, as applicable.
    We are proposing to codify these requirements at proposed new 45 
CFR 180.50(b). We believe that these elements are necessary to ensure 
that the public can compare standard charges for similar or the same 
items and services provided by different hospitals.
    We are proposing that hospitals associate each standard charge with 
a CPT or HCPCS code, DRG, NDC, or other common payer identifier, as 
applicable, because hospitals uniformly understand them and commonly 
use them for billing items and services (including both individual 
items and services and service packages). We also are proposing that 
hospitals include item descriptions for each item or service. In the 
case of items and services that are associated with common billing 
codes (such as the HCPCS codes), the hospital could use the code's 
associated short text description.
    In addition, based on stakeholder feedback suggesting hospital 
charge information should include revenue codes to be comparable, we 
are proposing to require that the hospital include a revenue code where 
applicable and appropriate. Hospitals use revenue codes to associate 
items and services to various hospital departments. When a hospital 
charges differently for the same item or service in a different 
department, we are proposing that the hospital associate the charge 
with the department represented by the revenue code, providing the 
public some additional detail about the charges they may expect for 
hospital services provided in different hospital departments.

[[Page 39583]]

    In developing this proposal, we also considered whether the 
following data elements, which are commonly included in hospital 
billing systems, might be useful to the public:
     Numeric designation for hospital department.
     General ledger number for accounting purposes.
     Long text description.
     Other identifying elements.
    However, we determined that, for various reasons, these data 
elements may not be as useful as the data elements that we are 
proposing to require hospitals to make public. For example, data 
elements such as general ledger numbers are generally relevant to the 
hospital for accounting purposes but may not add value for the public, 
while data elements such as alternative code sets (such as ICD-10 
codes) or long text descriptions associated with CPT codes, while 
useful, might be difficult to associate with a single item or service 
or be otherwise difficult to display in a file that is intended mainly 
for further computer processing. Because of this, while long text 
descriptions might benefit health care consumers and be appropriate for 
the consumer-friendly display of shoppable services (discussed in 
XVI.F), we believe it may add unnecessary burden for hospitals when 
such descriptions are not readily electronically available, or when the 
display of such data is not easily formatted into a machine-readable 
file. Therefore, we are not proposing to require these additional 
elements for the machine-readable data file that contains a list of all 
standard charges for all hospital items and services. We invite public 
comments on the proposed data elements for standard charge data that 
hospitals would be required to make public. We also seek public 
comments on the other data elements that, as we detail above, we 
considered but are not proposing to require, and on any other standard 
charge data elements that CMS should consider requiring hospitals to 
make public.
3. Proposed File Format Requirements
    To make public their list of all gross charges and all payer-
specific negotiated charges for all hospital items and services, we are 
proposing to require that hospitals post the charge information in a 
single digital file that is in a machine-readable format. We are 
proposing to define a machine-readable format as a digital 
representation of data or information in a file that can be imported or 
read into a computer system for further processing. Examples of 
machine-readable formats include, but are not limited to, .XML, JSON 
and .CSV formats. A PDF would not meet this definition because the data 
contained within the PDF file cannot be easily extracted without 
further processing or formatting. We are proposing to codify these 
format requirements at proposed new 45 CFR 180.50(c) and the definition 
of machine-readable at proposed new 45 CFR 180.20. We believe that 
making public such data in a machine-readable format poses little 
burden on hospitals because many (if not all) hospitals already keep 
these data in electronic format in their accounting systems for 
purposes of, for example, ensuring accurate billing. However, we seek 
comment on this assumption and the burden associated with transferring 
hospital charge data into a machine-readable format.
    As an alternative, we considered proposing to require that 
hospitals post their list of all standard charges for all items and 
services using a single standardized file format, specifically.XML 
only, because this format is generally easily downloadable and readable 
for many health care consumers, and it could simplify the ability of 
price transparency tool developers to access the data. However, we did 
not want to be overly prescriptive in our requirements for formatting. 
We are seeking public comments on whether we should require that 
hospitals use a specific machine-readable format, and if so, which 
format(s). Specifically, we are seeking public comment on whether we 
should require hospitals to make all standard charge data for all items 
and services available as an .XML file only.
    In addition, we considered formats that could allow direct public 
access to hospital standard charge information. For example, through 
the HHS' outreach on innovation,\194\ we have heard ideas from 
stakeholders about processes involving standards and technologies that 
could allow public access to hospital standard charge data in real 
time. Such a process could have a number of benefits for the public and 
hospitals. Specifically, such a process could ensure the public has 
access to the most up-to-date standard charge information, rather than 
waiting for the hospital to update data that is publicly posted in a 
static digital file. Such technology may require or involve a type of 
portal or standard(s) in which entities have access to certain 
nonsensitive data elements or files within the hospital IT system 
environment, such as the chargemaster, but that otherwise restricts 
access to sensitive, personal identifying information (PII) commercial, 
protected health information (PHI), and/or confidential information.
---------------------------------------------------------------------------

    \194\ https://www.hhs.gov/cto/initiatives/index.html.
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    Therefore, we seek public comment from all stakeholders, 
particularly hospitals and innovative information technology vendors, 
regarding such technologies or standards that could facilitate public 
access to real-time updates in a format to make it easier for 
information to be available when and where consumers want to use it, 
for example, into applications used by health care consumers or into 
electronic medical records for point-of-care decision-making and 
referral opportunities by clinicians. For example, application 
programming interface (API) standards could be used to facilitate 
public access to real-time hospital charge information. An API can be 
thought of as a set of commands, functions, protocols, or tools 
published by one software developer (``A'') that enable other software 
developers to create programs (applications or ``apps'') that can 
interact with A's software without needing to know the internal 
workings of A's software, all while maintaining consumer privacy data 
standards. This is how API technology enables the seamless user 
experiences associated with applications familiar from other aspects of 
many consumers' daily lives, such as travel and personal finance. 
Standardized, transparent, and procompetitive API technology can 
similarly benefit consumers of health care services. In the case of 
``open'' APIs, technical and other information required for a third-
party application to connect is openly published. More information on 
API certification criteria and how APIs can be used by patients and 
health care providers and other entities to exchange electronic 
information can be found on the website at: https://www.healthit.gov/api-education-module/story_content/external_files/hhs_transcript_module.pdf.
    We are specifically seeking public comment on adopting a 
requirement that hospitals make public their standard charges through 
an ``openly published'' (or simply ``open'') API through which they 
would disclose the standard charges and associated data elements 
discussed in XVI.E.2. of this proposed rule. Being able to access these 
data through open APIs would allow the health care consumers to use the 
application of their choice to obtain personalized, actionable health 
care service price estimates.
    An ``open API,'' for purposes of this comment solicitation, would 
simply be one for which the technical and other

[[Page 39584]]

information required for a third-party application to connect to it is 
openly published. Open API does not imply that any and all applications 
or application developers would have unfettered access to sensitive 
information. Rather, an open API's published technical and other 
information specifically includes what an application developer would 
need to know to connect to and obtain the data required to be disclosed 
under this proposed rule. For example, hospitals could use the CMS open 
source implementation which would facilitate adoption.\195\ We also 
seek public comment on the additional burden that may be associated 
with a requirement that hospitals make public their standard charges 
through an open API.
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    \195\ https://developer.cms.gov/.
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4. Proposed Location and Accessibility Requirements
    We have reviewed how hospitals are currently implementing our 
updated guidelines, which took effect on January 1, 2019, and we are 
concerned that some charge information made public by hospitals may be 
difficult for the public to locate. For example, information may be 
difficult to locate if the public is required to click down several 
levels in order to find the information. We also are concerned about 
barriers that could inhibit the public's ability to access the 
information once located. For example, we are aware that some hospitals 
require consumers to set up a username and password, or require 
consumers to submit various types of other information, including, but 
not limited to, their email address, in order to access the data. We 
are concerned that these requirements might deter the public from 
accessing hospital charge information.
    Accordingly, we are proposing that a hospital would have discretion 
to choose the internet location it uses to post its file containing the 
list of standard charges so long as the file is displayed on a 
publicly-available web page, it is displayed prominently and clearly 
identifies the hospital location with which the standard charges 
information is associated, and the standard charge data are easily 
accessible, without barriers, and the data can be digitally searched. 
For purposes of these proposed requirements: (1) ``displayed 
prominently'' would mean that the value and purpose of the web page 
\196\ and its content \197\ is clearly communicated, there is no 
reliance on breadcrumbs \198\ to help with navigation, and the link to 
the standard charge file is visually distinguished on the web page; 
\199\ (2) ``easily accessible'' would mean that standard charge data 
are presented in a single machine-readable file that is searchable and 
that the standard charges file posted on a website can be accessed with 
the fewest number of clicks; \200\ and (3) ``without barriers'' would 
mean the data can be accessed free of charge, users would not have to 
input information (such as their name, email address, or other PII) or 
register to access or use the standard charge data file. We are 
proposing to codify this requirement at proposed new 45 CFR 180.50(d).
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    \196\ https://webstandards.hhs.gov/guidelines/49.
    \197\ Nielsen, J. (2003, November 10). The ten most violated 
homepage design guidelines. Alertbox. Available at: http://www.useit.com/alertbox/20031110.html.
    \198\ https://webstandards.hhs.gov/guidelines/78.
    \199\ https://webstandards.hhs.gov/guidelines/88.
    \200\ https://webstandards.hhs.gov/guidelines/181.
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    We encourage hospitals to review the HHS Web Standards and 
Usability Guidelines (available at: https://webstandards.hhs.gov/), 
which are research-based and are intended to provide best practices 
over a broad range of web design and digital communications issues.
    We also are requesting public comments on an alternative we 
considered, which would require hospitals to submit a link to the 
standard charges file to a CMS-specified central website, or submit a 
link to the standard charge file to CMS that would be made public on a 
CMS web page. Such a method could allow the public to access standard 
charge information for their purposes in one centralized location. We 
believe this could reduce potential confusion about where to find 
standard charge information and potentially allow standard charge 
information to be posted alongside CMS hospital quality information. It 
could also assist in the assessment of hospital compliance with section 
2718(e) of the PHS Act. In spite of these possible benefits, we are not 
now proposing to require hospitals to submit or upload a link to their 
standard charge information to a CMS-specified centralized website 
because we believe such an effort could be unnecessarily duplicative of 
ongoing State and private sector efforts to centralize hospital pricing 
information and potentially confuse consumers who may reasonably look 
to a hospital website directly for charge information. However, because 
we appreciate the advantages of having all data available through a 
single site, we are considering this alternative and seek public 
comments. We seek comment on this alternative option, specifically, 
whether the burden outweighs the advantages.
    Finally, we seek public comments on potential additional 
requirements, including easily-searchable file naming conventions and 
whether we should specify the website location for posting rather than 
our current proposal that would permit hospitals some flexibility in 
choosing an appropriate website. Current instances of machine-readable 
charge files posted on hospital websites contain variable file types, 
file names, and locations on each website. Standardizing file name or 
website location information could provide consumers with a standard 
pathway to find the information and would provide uniformity, making it 
easier for potential software to review information on each website. 
Specific requirements for file naming conventions and locations for 
posting on websites could also facilitate the monitoring and 
enforcement of the requirement. Therefore, we are seeking public 
comments on whether we should propose to adopt these additional 
requirements or other requirements related to these issues.
5. Proposed Frequency of Updates
    The statute requires hospitals to establish, update, and make 
public their standard charges for each year. Therefore, we are 
proposing to require hospitals to make public and update their file 
containing the list of all standard charges for all items and services 
at least once annually (proposed new 45 CFR 180.50(e)). We recognize 
that hospital charges may change more frequently and therefore we 
encourage (but are not requiring) hospitals to update this file more 
often, as appropriate, so that the public may have access to the most 
up-to-date charge information. We also recognize that hospitals update 
their charges at different times during the year and may also have 
various State price transparency reporting requirements that require 
updates. For purposes of these requirements, we believe that updates 
that occur at least once in a 12-month period will satisfy our proposed 
requirement to update at least once annually and reduce reporting 
burden for hospitals. In other words, the hospital could make public 
and update its list of standard charges at any point in time during the 
year, so long as the update to the charge data occurs no more than 12 
months after posting.
    We also are proposing to require hospitals to clearly indicate the 
date of the last update they have made to the standard charge data, 
with some

[[Page 39585]]

discretion as to where the date of late update is indicated. For 
example, if a hospital chooses to make public its list of standard 
charges in .XML format, the first row of the spreadsheet could indicate 
the date the file was last updated. The hospital could also indicate 
the date the file was last updated in text associated with the file on 
the web page on which it is posted, or could indicate the date in some 
other way, as long as that date is clearly indicated and associated 
with the file or location containing the standard charge information.
6. Proposed Requirements for Making Public Separate Files for Different 
Hospital Locations
    We recognize that some hospitals may have different locations 
operating under a consolidated or single State license, and that 
different hospital locations may offer different services that have 
different associated standard charges. To address this circumstance, we 
are proposing at proposed new 45 CFR 180.50(a)(2) that the proposed 
requirements for making public the file containing all standard charges 
for all items and services in this section of this proposed rule would 
separately apply to each hospital location such that each hospital 
location would be required to make public a separate identifiable list 
of standard charges.

F. Proposed Requirements for Consumer-Friendly Display of the Payer-
Specific Negotiated Charges for Selected Shoppable Services

1. Background and Overview
    We believe that our proposal in section XVI.E. of this proposed 
rule requiring hospitals to post on the internet a machine-readable 
file containing a list of all standard charges (both gross charges and 
payer-specific negotiated charges) for all items and services (both 
individual items and services and service packages) is a good first 
step for driving transparency in health care pricing. As noted earlier, 
we also believe our proposed policy for making these data available in 
a machine-readable format will help make these data accessible to 
health care consumers when and where it is needed to make decisions, 
for example, via integration in price transparency tools or into 
electronic health record systems. However, as noted by many 
stakeholders in the 2018 RFIs and listening sessions, such long lists 
of charges in a file posted online in a machine-readable format may not 
be immediately or directly useful for many health care consumers, 
because the amount of data could be overwhelming or not easily 
understood by consumers. Because of this, we considered ways of 
requiring or encouraging hospitals to make public standard charges for 
frequently provided services in a form and manner that is more directly 
accessible and consumer friendly. In addition to including all their 
payer-specific negotiated charges for all items and services in the 
machine-readable file (as described in section XVI.E. of this proposed 
rule), in the following sections we propose that hospitals must make 
public their payer-specific negotiated charges for common services for 
which consumers may have the opportunity to shop.
    First, we propose requirements for hospitals to display a list of 
payer-specific negotiated charges for a set of `shoppable' services. We 
believe doing so will enable consumers to make comparisons across 
hospital sites of care. Second, we make proposals intended to ensure 
the charge information for `shoppable' services are presented in a way 
that is consumer-friendly. To be consumer-friendly, we believe that the 
information should be displayed in a way that is understandable to 
patient (for example, by including plain-language descriptions of the 
services), that the shoppable service charge is displayed along with 
charges for ancillary services the hospital customarily provides with 
the primary shoppable service, and that the consumer can easily search 
for and find charges for the shoppable services based on the service 
description, by the code associated with the shoppable service, or by 
payer.
    We believe the proposals related to consumer-friendly display of 
hospital charge information align with and enhance many ongoing State 
and hospital efforts. We seek comment from hospitals regarding the 
extent to which our proposals are duplicative of such ongoing efforts, 
and how best to ensure consistency of consumer-friendly data display 
across hospital settings. We further seek comment from consumers 
regarding their potential engagement with a list of `shoppable' 
hospital items and services, including whether our proposals provide 
for a useful amount of data and data elements that allow for actionable 
comparisons of `shoppable' hospital provided items and services.
2. Proposed Definition of ``Shoppable Service''
    For purposes of this requirement, a ``shoppable service'' would be 
defined as a service package that can be scheduled by a health care 
consumer in advance. Shoppable services are typically those that are 
routinely provided in non-urgent situations that do not require 
immediate action or attention to the patient, thus allowing patients to 
price shop and schedule a service at a time that is convenient for 
them. We are proposing this definition because it is consistent with 
definitions proposed by policy experts or used by researchers who 
identify a service as `shoppable' if a patient is able to determine 
where and when they will receive services and can compare charges for 
multiple providers.\201\ Since hospitals may not have insight into 
whether a particular service is available across multiple providers or 
where a consumer will ultimately determine where they want to receive a 
particular services, we have focused our proposed definition on the 
first aspect, that is, whether or not a service offered by the hospital 
could be scheduled by the consumer in advance.
---------------------------------------------------------------------------

    \201\ White, Chapin and Eguchi, Megan. Reference Pricing: A 
Small Piece of the Health Care Price and Quality Puzzle. National 
Institute for Health Care Reform Research Brief Number 18 (2014). 
https://nihcr.org/wp-content/uploads/2016/07/Research_Brief_No._18.pdf.
---------------------------------------------------------------------------

    Additionally, we are proposing that the charges for such services 
be displayed as a grouping of related services, meaning that the charge 
for the shoppable service is displayed along with charges for ancillary 
items and services the hospital customarily provides as part of or in 
addition to the primary shoppable service. We are proposing that 
hospital make public the payer-specific negotiated charge for a 
shoppable service that is grouped together with charges for associated 
ancillary services because we believe charge information displayed in 
such a way is consumer-friendly and patient-focused. In other words, we 
believe that consumers want to see and shop for healthcare services in 
the way they experience the service. We are proposing to define an 
``ancillary service'' as an item or service a hospital customarily 
provides as part of or in conjunction with a shoppable primary service 
(proposed new 45 CFR 180.20). Ancillary items and services may include 
laboratory, radiology, drugs, delivery room (including maternity labor 
room), operating room (including post-anesthesia and postoperative 
recovery rooms), therapy services (physical, speech, occupational), 
hospital fees, room and board charges, and charges for employed 
professional services. Ancillary services may also include other 
special items and services for which charges are customarily made in 
addition to a routine service charge. For example, an outpatient 
procedure

[[Page 39586]]

may include many services that are provided by the hospital, for 
example, local and/or global anesthesia, services of employed 
professionals, supplies, facility and/or ancillary facility fees, 
imaging services, lab services and pre- and post-op follow up. To the 
extent that a hospital customarily provides (and bills for) such 
services as a part of or in conjunction with the primary service, the 
hospital should group the service charge along with the other payer-
specific negotiated charges that are displayed for the shoppable 
service. We believe such a practice is consumer-friendly by presenting 
charge information in a way that reflects how the patient experiences 
the service.
    Examples of shoppable services may include certain imaging and 
laboratory services, medical and surgical procedures, and outpatient 
clinic visits. The emphasis on shoppable services aligns with various 
State price transparency efforts and is consistent with stakeholder 
feedback. We also believe that this emphasis is consistent with 
research demonstrating that improving price transparency for shoppable 
services can have an impact on driving down the cost of health care (we 
refer readers to section XVI.A.2. of this proposed rule). We are 
proposing to add this definition to our regulations at proposed new 45 
CFR 180.20.
3. Proposed Selected Shoppable Services
    We are proposing to require hospitals to make public a list of 
their payer-specific negotiated charges for as many of the 70 shoppable 
services that we identify in Table 37 below that are provided by the 
hospital, and as many additional shoppable services selected by the 
hospital as is necessary for a combined total of at least 300 shoppable 
services (new Sec.  180.60(a)).
    In a study of 2011 claims by autoworkers, researchers identified a 
set of 350 frequently billed healthcare services that consumers could 
schedule in advance and for which there was variation in charges across 
providers.\202\ Hospitals that are early adopters of price transparency 
have suggested that it is possible to initially identify and display 
good-faith individualized price estimates for at least 350 shoppable 
health care services identified by primary billing codes (including 
prices for ancillary services) with more sophisticated price 
transparency tool developers creating and being able to display 
individualized pricing estimates for at least 1000 shoppable services. 
In contrast, most States that require hospital posting of shoppable 
services range in requiring 25-50 shoppable services, with California 
being the only State that requires the corresponding charge information 
to include ancillary services. Since these proposed regulations will 
apply to all hospitals operating in the United States, some of which 
may not have any experience in displaying charges for shoppable 
services, we believe it is reasonable to propose a starting point of at 
least 300 shoppable services for which hospitals would be required to 
display payer-specific negotiated charges. We anticipate we would 
increase this number over time as hospitals become accustomed to 
displaying charge information to consumers as a grouping of related 
charges and as such data is more routinely used by consumers.
---------------------------------------------------------------------------

    \202\ https://nihcr.org/wp-content/uploads/2016/07/Research_Brief_No._18.pdf.
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    Moreover, we believe it is reasonable to require a portion of the 
300 shoppable services to be CMS-selected in order to ensure 
standardization that would provide consumers with the ability to 
compare prices across hospital settings. We further believe it would be 
prudent to permit hospitals to select a portion of the shoppable 
services themselves, recognizing that some hospitals may specialize in 
certain services (for example, specialized procedures) or may serve 
populations that utilize other shoppable services with more frequency 
or are more relevant than the ones we have identified for purposes of 
the CMS-selected services.
    The proposed 70 CMS-specified shoppable services are identified by 
a primary HCPCS, CPT, or DRG code and are in Table 37.
BILLING CODE 4120-01-P

[[Page 39587]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.057


[[Page 39588]]


[GRAPHIC] [TIFF OMITTED] TP09AU19.058


[[Page 39589]]


[GRAPHIC] [TIFF OMITTED] TP09AU19.059

BILLING CODE 4120-01-C
    These 70 shoppable services were selected based on an analysis of 
shoppable services that are currently made public under State price 
transparency requirements, a review of services that frequently appear 
in web-based price transparency tools, an analysis of high volume 
services and high cost procedures derived from External Data Gathering 
Environment (EDGE) server data \203\), and a review by CMS medical 
officers. In other words, we used a combination of quantitative 
analysis of the EDGE server claims data, a qualitative review of 
commonly selected services for State and hospital price transparency 
initiatives and tools, and clinician review to ensure such services 
could be scheduled in advance in order to identify our list of 70 CMS-
selected shoppable services.
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    \203\ Consistent with 45 CFR 153.700, in States where HHS is 
operating the risk adjustment program, issuers must submit 
enrollment, claims, and encounter data for risk adjustment-covered 
plans in the individual and small group markets through the External 
Data Gathering Environment (EDGE) servers. Issuers upload enrollee, 
pharmaceutical claim, medical claim, and supplemental diagnosis 
information from their systems to an issuer-owned and controlled 
EDGE server.
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    In addition to the 70 CMS-selected shoppable services proposed 
above, we also are proposing that each hospital would select, at 
minimum, 230 additional shoppable services, identified by a primary 
HCPCS, CPT, DRG, or other widely used industry code, as applicable, and 
make publicly available a list of its payer-specific negotiated charges 
for each of those shoppable services, including the payer-specific 
negotiated charges for the shoppable service in both the inpatient 
setting and the outpatient setting, if different. We further propose 
that hospitals select such services based on the utilization or billing 
rate of the services in the past year. We believe that enabling 
hospitals to select most of the shoppable services for which they make 
their payer-specific negotiated charges available will permit them to 
tailor their list of shoppable services to their specific patient 
populations and area of expertise. For example, a children's hospital 
could select additional shoppable services that are predominantly 
provided to children.
    Although we believe that most hospitals provide the 70 CMS-selected 
shoppable services which are very common and frequently billed by 
hospitals, it is possible that some hospitals may not offer all of them 
(for example, specialty hospitals). Therefore, we are propose that 
hospitals make public a list of their payer-specific negotiated charges 
for as many of the 70 shoppable services that we identify in Table 36 
that are provided by the hospital, plus as many additional shoppable 
services as is necessary to reach a total of at least 300 shoppable 
services.
    An alternative option would be for us to propose a larger set of 
shoppable services and allow hospitals to select up to 70 CMS-selected 
shoppable services from the larger list for which it would make its 
payer-specific negotiated charges publicly available. The hospital 
would then select an additional 230 shoppable services for a total of 
300 shoppable services. However, we are not proposing this because we 
believe most hospitals provide the 70 CMS selected shoppable services 
and because we have concerns that more discretion will erode our desire 
to ensure consumers can get hospital charge information for a minimum 
standardized set of services.
    We seek public comments on the 70 CMS-selected shoppable services 
we identify in Table 36. We are particularly interested in feedback 
regarding the specific services we have identified as shoppable 
services and whether other services should be included because they are 
more common, more shoppable or both. We also are interested in feedback 
on whether we should require more or less than a total of 300 shoppable 
services. Specifically, we seek comment from hospitals and consumers on 
whether a list of 100 shoppable services (or less) is a reasonable 
starting point. We also are seeking public comment on whether we should 
identify more specific requirements related to hospital-selected 
shoppable services; for example, requiring hospitals to select their 
most frequently billed shoppable services (that are not included in the 
CMS-specified list).
4. Proposed Required Corresponding Data Elements
    We are proposing that the consumer-friendly charge information the 
hospital makes available to the public online for the CMS and hospital-
selected shoppable services must include certain corresponding data 
elements in order to ensure that consumers understand the hospital's 
payer-specific negotiated charge for each shoppable service and can use 
that information to make comparisons across hospitals. Specifically, we 
are proposing that the consumer-friendly display of payer-specific 
negotiated charge information contain the following corresponding 
information for each of the 70 CMS-selected and at least 230 hospital-
selected shoppable services:
     A plain-language description of each shoppable service. 
For example,

[[Page 39590]]

hospitals would not be required but are invited to review and use the 
Federal plain language guidelines.\204\
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    \204\ found here: https://plainlanguage.gov/guidelines/.
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     The payer-specific negotiated charge that applies to each 
shoppable service. If the hospital does not provide one or more of the 
CMS-selected shoppable services, the hospital may indicate ``N/A'' for 
the corresponding charge or otherwise make it clear that the service is 
not provided by the hospital. Each payer-specific charge must be 
clearly associated with the name of the third party payer.
     A list of all the associated ancillary items and services 
that the hospital provides with the shoppable service, including the 
payer-specific negotiated charge for each ancillary item or service.
     The location at which each shoppable service is provided 
by the hospital (for example, Smithville Campus or XYZ Clinic), 
including whether the payer-specific negotiated charge for the 
shoppable service applies at that location to the provision of that 
shoppable service in the inpatient setting or the outpatient department 
setting or both. If the payer-specific negotiated charge for the 
shoppable service varies based upon location or whether the hospital 
provides the shoppable service in the inpatient setting versus the 
outpatient setting, the hospital would be required to identify each 
payer-specific negotiated charge.
     Any primary code used by the hospital for purposes of 
accounting or billing for the shoppable service, including, but not 
limited to, the Current Procedural Terminology (CPT) code, the 
Healthcare Common Procedure Coding System (HCPCS) code, the Diagnosis-
Related Group (DRG), or other commonly used service billing code.
    As discussed in more detail in section XVI.F, we are proposing that 
hospital make public the payer-specific negotiated charge for a 
shoppable service in a manner that groups the payer-specific negotiated 
charge for the primary shoppable service along with charges for 
associated ancillary services because we believe charge information 
displayed in such a way is consumer-friendly and patient-focused. In 
other words, we believe that consumers want to see and shop for 
healthcare services in the way they experience the service. We 
recognize that not all hospitals will customarily provide exactly the 
same ancillary items or services with a primary shoppable service and 
therefore we believe it is important for hospitals to display a list of 
which ancillary services are included in conjunction with or as part of 
the primary shoppable service.
    We are proposing to codify these proposed required data elements at 
proposed new 45 CFR 180.60(b). We are seeking public comments on these 
data elements and whether there are additional data elements that 
should be displayed to the public in a consumer-friendly manner. We 
emphasize that nothing in this proposed rule is meant to inhibit or 
restrict hospitals from including additional data elements that would 
improve the ability of health care consumers to understand the 
hospital's charges for shoppable services, for example, a hospital 
could choose to display the cash price the hospital would accept as 
payment in full for the shoppable service from a consumer.
5. Proposals for Format of Display of Consumer-Friendly Information
    We are aware that many hospitals are already making public various 
types of standard charges for shoppable services available online in 
various formats. For example, some hospitals offer searchable price 
transparency tools on their website that offer estimated charges 
(averages or individualized out-of-pocket costs) or may display charges 
for shoppable services in brochures (both online and offline) that 
contain self-pay discounted prices for a service package. Because there 
are a variety of consumer-friendly ways to display charges for hospital 
services and because we do not want to restrict hospitals from 
innovating or from having to duplicate efforts, we are not proposing a 
specific format for making such data public online in a consumer-
friendly manner. Specifically, unlike our proposals for the machine-
readable list of standard charges for all items and services (discussed 
in section XVI.E), we are not proposing to require that hospitals make 
payer-specific charge data public in a single digital file posted 
online. Instead, we are proposing that hospitals retain flexibility on 
how best to display the payer-specific negotiated charge data and 
proposed associated data elements to the public online, so long as the 
website is easily accessible to the public. We believe this approach 
would permit some flexibility for hospitals to, for example, post one 
or more files online with a list of payer-specific charges for the 
shoppable services and associated data elements, or, for example, to 
integrate such data into existing price estimate tools.
    Additionally, we note that we are not proposing, but are 
considering, an option that would require hospitals to make these data 
available in API format. As explained in more detail in section 
XVI.E.3. of this proposed rule, an API enabled format could allow 
consumers to access the data by searching for it directly when they do 
not have a computer by, for example, putting a CPT code in the URL path 
of the hospital to render in one's mobile phone browser the gross or 
payer-specific negotiated charge for the service. For example, a 
consumer searching for the price of a blood test for cholesterol (CPT 
code 80061) at fictional hospital ABC could look it up by inserting the 
URL path https://hospitalABC.com/api/80061.
    We further recognize not all consumers have access to the internet. 
Therefore, we are proposing to require hospitals make the data elements 
proposed in section XVI.F.4. of this proposed rule available in a 
consumer-friendly manner offline. Specifically, we are proposing that 
the hospital must provide a paper copy (for example, a brochure or 
booklet) of the information is available to consumers upon request 
within 72 hours of the request. We are proposing to codify this 
provision at proposed new 45 CFR 180.60(c).
6. Proposed Location and Accessibility Requirements
    Additionally, we are proposing that hospitals make the data 
elements proposed in section XVI.F.4. of this proposed rule online in 
such a way that the payer-specific negotiated charge and associated 
data elements can be located and accessed easily by consumers.
    First, we propose that a hospital would have discretion to select 
an appropriate internet location it uses to post the standard charge 
information required under this section (that is, the payer-specific 
charges for shoppable services and associated data elements). We 
further propose that the website location be publicly available, that 
the data be displayed prominently and clearly identifies the hospital 
location with which the standard charge information is associated, and 
the standard charge data are easily accessible, without barriers, and 
the data can be digitally searched. For purposes of these proposed 
requirements: (1) ``displayed prominently'' would mean that the value 
and purpose of the web page \205\ and its content \206\ is clearly 
communicated, there is no reliance on breadcrumbs \207\ to help with 
navigation, and the link to the standard charge

[[Page 39591]]

information is visually distinguished on the web page; \208\ (2) 
``easily accessible'' would mean that standard charge data are 
presented in format that is searchable by service description, billing 
code, and payer, and that the standard charge data posted on the 
website can be accessed with the fewest number of clicks; \209\ and (3) 
``without barriers'' would mean the data can be accessed free of 
charge, users would not have to input information (such as their name, 
email address, or other PII) or register to access or use the standard 
charge data. We are proposing to codify this requirement at proposed 
new 45 CFR 180.50(d).
---------------------------------------------------------------------------

    \205\ https://webstandards.hhs.gov/guidelines/49.
    \206\ Nielsen, J. (2003, November 10). The ten most violated 
homepage design guidelines. Alertbox. Available at: http://www.useit.com/alertbox/20031110.html.
    \207\ https://webstandards.hhs.gov/guidelines/78.
    \208\ https://webstandards.hhs.gov/guidelines/88.
    \209\ https://webstandards.hhs.gov/guidelines/181.
---------------------------------------------------------------------------

    We encourage hospitals to review the HHS Web Standards and 
Usability Guidelines (available at: https://webstandards.hhs.gov/), 
which are research-based and are intended to provide best practices 
over a broad range of web design and digital communications issues.
    We seek comment on these proposed location and accessibility 
requirements and specifically regarding whether there are additional 
requirements that should be considered to ensure public access to 
payer-specific negotiated charges for shoppable services.
7. Proposed Frequency of Updates
    The statute requires hospitals to establish, update, and make 
public their standard charges for each year. Therefore, we are 
proposing to require hospitals to make public and update the standard 
charge information proposed in section XVI.F.2 at least once annually 
(proposed new 45 CFR 180.60(e)). We recognize that hospital charges may 
change more frequently and therefore we encourage (but are not 
requiring) hospitals to update this file more often, as appropriate, so 
that the public may have access to the most up-to-date charge 
information. We also recognize that hospitals update their charges at 
different times during the year and may also have various State price 
transparency reporting requirements that require updates. For purposes 
of these requirements, we believe that updates that occur at least once 
in a 12-month period will satisfy our proposed requirement to update at 
least once annually and reduce reporting burden for hospitals. In other 
words, the hospital could make public and update its list of standard 
charges at any point in time during the year, so long as the update to 
the charge data occurs no more than 12 months after posting.
    We also are proposing to require hospitals to clearly indicate the 
date of the last update they have made to the standard charge data, 
with some discretion as to where the date of late update is indicated.

G. Proposed Monitoring and Enforcement of Requirements for Making 
Standard Charges Public

1. Background
    Section 2718(b)(3) of the PHS Act requires the Secretary to 
promulgate regulations to enforce the provisions of section 2718 of the 
PHS Act, and in so doing, the Secretary may provide for appropriate 
penalties. As such, we are proposing that we may impose penalties on 
hospitals that fail to make their standard charges public in accordance 
with the requirements we finalize under section 2718(e) of the PHS Act. 
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20549), we sought 
public comments on a variety of issues related to enforcement of the 
requirement that hospitals make public their standard charges and noted 
our intent to address enforcement and other actions to ensure 
compliance in future rulemaking.
    We specifically sought comments on the following:
     What is the most appropriate mechanism for CMS to enforce 
price transparency requirements?
     Should CMS require hospitals to attest to meeting 
requirements in the provider agreement or elsewhere?
     How should CMS assess hospital compliance?
     Should CMS publicize complaints regarding access to price 
information or review hospital compliance and post results? What is the 
most effective way for CMS to publicize information regarding hospitals 
that fail to comply?
     Should CMS impose civil monetary penalties (CMPs) on 
hospitals that fail to make standard charges publicly available as 
required by section 2718(e) of the PHS Act?
     Should CMS use a framework similar to the Federal civil 
penalties under 45 CFR 158.601 through 158.615, that apply to issuers 
that fail to report information and pay rebates related to medical loss 
ratios, as required by sections 2718(a) and (b) of the PHS Act, or 
would a different framework be more appropriate?
    We received a number of comments in response to this RFI. Many 
commenters agreed that enforcing this requirement under section 2718(e) 
of the PHS Act would send an important signal that CMS values 
transparency and ensure that the public has access to hospital charge 
information. Some commenters suggested that CMS model enforcement after 
various quality reporting programs, such as the Hospital Inpatient and 
Outpatient Quality Reporting Programs or the LTCH Quality Reporting 
Program. Some commenters recommended publicizing noncompliant hospitals 
or providing a mechanism for the public to file complaints against 
noncompliant hospitals. Some commenters suggested that CMS propose to 
make the publication of standard charges a Medicare condition of 
participation or provider enrollment. However, one commenter indicated 
that revoking a provider agreement over lack of a website disclosure 
would be unnecessarily punitive. Other commenters warned that 
subjecting hospitals violating pricing transparency provisions to 
compliance actions could pose a challenge, particularly for smaller 
hospitals, and recommended limiting or deferring compliance actions to 
a later date. Some commenters agreed that imposing monetary penalties 
on noncompliant hospitals was appropriate, while other commenters 
believed that CMS does not have authority to enforce section 2718(e) of 
the PHS Act and, for that reason, should not adopt penalties for 
noncompliance.
    We agree with commenters who noted that an enforcement regime 
signals the value we place on price transparency and assurance of 
public access to hospital standard charges. We interpret section 
2718(b)(3) of the PHS Act as authorizing us to enforce the provisions 
of section 2718(e). Therefore, in this proposed rule, we are proposing 
to adopt mechanisms to monitor and enforce our requirements for making 
standard charges public.
2. Proposed Monitoring Methods
    Section 2718(e) of the PHS Act requires hospitals to make public 
their list of standard charges and authorizes the Secretary to 
promulgate additional criteria that hospitals must satisfy in order to 
make such charges public. The statute does not prescribe monitoring 
procedures or the factors we should consider in imposing penalties on 
hospitals for noncompliance. Based on our experience with the Medicare 
program and health care marketplace plans, we believe it is important 
for the public to be informed, and, therefore, for CMS to ensure 
compliance with this statutory requirement. Therefore, we are proposing 
to employ methods to monitor and assess hospital compliance with 
section 2718(e) of the PHS Act, and specifically proposed new 45 CFR 
180.40, 180.50, and 180.60.
    In general, we are proposing that CMS may use methods to monitor 
hospital

[[Page 39592]]

compliance with the requirements under proposed 45 CFR part 180. We 
anticipate relying predominantly on complaints made to CMS by 
individuals or entities regarding a hospital's potential noncompliance. 
Therefore, we are proposing that our monitoring methods may include, 
but are not limited to, the following, as appropriate:
     CMS' evaluation of complaints made by individuals or 
entities to CMS.
     CMS review of individuals' or entities' analysis of 
noncompliance.
    As we gain experience with monitoring compliance with the 
requirements for proposed 45 CFR part 180, based on reports of 
potential noncompliance, we may consider self-initiating audits of 
hospitals' websites as a monitoring method. Therefore, we are proposing 
that our monitoring methods may include CMS audit of hospitals' 
websites.
    We are proposing to set forth these monitoring methods in the 
regulations at proposed new 45 CFR 180.70.
3. Proposed Actions To Address Hospital Noncompliance With Requirements 
To Make Public Standard Charges
    We are proposing that hospitals that CMS identifies as noncompliant 
would be notified of their deficiencies and given an opportunity to 
take corrective action to come into compliance. As discussed in section 
XVI.G.4. of this proposed rule, for hospitals determined by CMS to be 
noncompliant with section 2718(e) of the PHS Act that fail to respond 
to CMS' requests to submit a corrective action plan (CAP) or comply 
with the requirements of a CAP, we are proposing that we may impose 
CMPs on hospitals and publicize these penalties on a CMS website.
    Should we conclude, based upon the proposed monitoring activities 
previously described, that a hospital is noncompliant with section 
2718(e) of the PHS Act and the requirements of proposed 45 CFR part 
180, we are proposing that CMS may take any of the following actions, 
which generally, but not necessarily, would occur in this order:
     We may provide a written warning notice to the hospital of 
the specific violation(s).
     We would request a CAP from the hospital if its 
noncompliance constitutes a material violation of one or more 
requirements.
     If the hospital fails to respond to CMS' request to submit 
a CAP or comply with the requirements of a CAP, CMS may impose a CMP on 
the hospital and publicize the penalty on a CMS website as discussed in 
section XVI.G.4. of this proposed rule.
    Prior to requesting a CAP, or in the case of violations that are 
deemed nonmaterial violations warranting a CAP, CMS anticipates 
warning, via written notice, a hospital of noncompliance with one or 
more of the requirements to make public standard charges (according to 
section 2718(e) of the PHS Act and the requirements of proposed 45 CFR 
part 180), and of the need for voluntary corrective action. We would 
then reevaluate the hospital's compliance with the statutory and 
proposed regulatory requirements. Should we determine the hospital 
remains noncompliant and that the noncompliance constitutes a material 
violation of one or more requirements, we anticipate requiring that the 
hospital submit a CAP, and there would be increasing consequences for 
failure to remedy noncompliance.
    We are proposing that a material violation may include, but is not 
limited to, the following:
     A hospital's failure to make public its standard charges 
required by proposed new 45 CFR 180.40.
     A hospital's failure to make public its standard charges 
in the form and manner required under to proposed new 45 CFR 180.50 and 
180.60.
    We are proposing that CMS may request that a hospital submit a CAP, 
specified in a notice of violation issued by CMS to a hospital. A 
hospital required to submit a CAP must do so, in the form and manner, 
and by the deadline, specified in the notice of violation issued by CMS 
to the hospital and must comply with the requirements of the CAP.
    We are proposing that a hospital's CAP must specify elements 
including, but not limited to, the deficiency or deficiencies that 
caused noncompliance to occur, the corrective actions or processes the 
hospital will take to come into compliance with the requirements of 45 
CFR part 180, and the timeframe by which the hospital will complete the 
corrective action. We are proposing that a CAP would be subject to CMS 
review and approval. We are proposing that after CMS' review and 
approval of a hospital's CAP, CMS may monitor and evaluate the 
hospital's compliance with the corrective actions.
    We are proposing that a hospital's failure to respond to CMS' 
request to submit a CAP includes failure to submit a CAP in the form, 
manner, or by the deadline, specified in a notice of violation issued 
by CMS to the hospital. We are proposing that a hospital's failure to 
comply with the requirements of a CAP includes failure to correct 
violation(s) within the specified timeframes.
    We are proposing to set forth in the regulations at proposed new 45 
CFR 180.70 the actions CMS may take to address a hospital's 
noncompliance with the requirements to make public standard charges, 
and to set forth in proposed new 45 CFR 180.80 the requirements for a 
CAP, as discussed in this section of this proposed rule.
4. Proposal To Impose Civil Monetary Penalties
    We are proposing that we may impose a CMP on a hospital that we 
identify as noncompliant with the requirements of proposed 45 CFR part 
180, and that fails to respond to CMS' request to submit a CAP or 
comply with the requirements of a CAP as we describe earlier.
    We are proposing that we may impose a CMP upon a hospital for a 
violation of each requirement of proposed 45 CFR part 180. The maximum 
daily dollar amount for a CMP to which a hospital may be subject would 
be $300. We are proposing that even if a hospital is in violation of 
multiple discrete requirements of proposed 45 CFR part 180, the maximum 
total sum that a single hospital may be assessed per day is $300.
    Further, we are proposing to adjust the CMP amount annually by 
applying the cost-of-living adjustment multiplier determined by OMB for 
adjusting applicable CMP amounts pursuant to the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015. This 
multiplier, based on the Consumer Price Index for All Urban Consumers 
(CPI-U), not seasonally adjusted, is applied to the CMPs in 45 CFR 
102.3. For instance, the cost-of-living adjustment multiplier for 2018, 
based on the CPI-U for the month of October 2017, not seasonally 
adjusted, was 1.02041 (83 FR 51369).
    Given the importance of compliance with the price transparency 
policies, we believe this proposed CMP amount strikes a balance between 
penalties that are sufficiently harsh to incentivize compliance but not 
so severe as to be punitive. We reviewed CMP amounts for other CMS 
programs that require reporting information and we believe our proposed 
$300 maximum daily dollar amount for a CMP is commensurate with the 
level of severity of the potential violation, taking into consideration 
that nondisclosure of standard charges does not rise to the level of 
harm to the public as other violations (such as safety and quality 
issues) for which CMS imposes CMPs and, therefore, should remain at a 
relatively lower level.

[[Page 39593]]

    We considered applying lower and higher maximum dollar amounts for 
a CMP for noncompliance with the requirements of proposed 45 CFR part 
180. For example, we considered that CMS has imposed $100 per day 
penalty amounts with respect to other compliance matters, such as where 
health insurers fail to comply with premium revenue reporting and 
rebate requirements found at 45 CFR 158.606. The basis for the CMPs 
under 45 CFR 158.606 is the number of individuals affected. With 
respect to the disclosure requirements under proposed 45 CFR part 180, 
where the lack of information could affect an unknown number of 
consumers and in myriad ways (for example, not just individuals who 
paid more for items and services), we do not believe it is feasible to 
utilize a ``per person'' type basis. We also considered proposing 
higher maximum daily dollar amounts, such as $400 per day, $500 per day 
or more.
    Further, we considered establishing a cumulative annual total limit 
for the CMP to which a hospital is subject for noncompliance with 
proposed 45 CFR part 180. For example, we considered applying a 
cumulative annual total limit of $100,000 per hospital for each 
calendar year. However, we are concerned that such an approach could, 
for example, mitigate the amount of penalty imposed on hospitals that 
remain noncompliant for multiple years.
    If CMS imposes a penalty in accordance with the requirements of 
proposed 45 CFR part 180, we are proposing that CMS provides a written 
notice of imposition of a CMP to the hospital via certified mail or 
another form of traceable carrier. This notice may include, but would 
not be limited to, the following:
     The basis for the hospital's noncompliance, including, but 
not limited to, the following: CMS' determination as to which 
requirement(s) the hospital violated; and the hospital's failure to 
respond to CMS' request to submit a CAP or comply with the requirements 
of a CAP.
     CMS' determination as to the effective date for the 
violation(s). This date would be the latest date of the following:
    ++ The first day the hospital is required to meet the requirements 
of proposed 45 CFR part 180.
    ++ If a hospital previously met the requirements of this part but 
did not update the information annually as required, the date 12 months 
after the date of the last annual update specified in information 
posted by the hospital.
    ++ A date determined by CMS, such as one resulting from monitoring 
activities specified in proposed new 45 CFR 180.70, or development of a 
CAP as specified in proposed new 45 CFR 180.80.
     The amount of the penalty as of the date of the notice.
     A statement that a CMP may continue to be imposed for 
continuing violation(s).
     Payment instructions.
     Intent to publicize the hospital's noncompliance and CMS' 
determination to impose a CMP on the hospital for noncompliance with 
the requirements of proposed 45 CFR part 180 by posting the notice of 
imposition of a CMP on a CMS website.
     A statement of the hospital's right to a hearing (as 
described in section XVI.H. of this proposed rule).
     A statement that the hospital's failure to request a 
hearing within 30 calendar days of the issuance of the notice permits 
the imposition of the penalty, and any subsequent penalties pursuant to 
continuing violations, without right of appeal.
    Further, in the event that a hospital elects to appeal the penalty, 
and if the CMP is upheld, in part, by a final and binding decision, we 
propose that CMS would issue a modified notice of imposition of a CMP.
    We are proposing that a hospital must pay a CMP in full within 60 
calendar days after the date of the notice of imposition of a CMP from 
CMS. In the event a hospital requests a hearing (as described in 
section XVI.H. of this proposed rule), we are proposing that the 
hospital must pay the amount in full within 60 calendar days after the 
date of a final and binding decision to uphold, in whole or in part, 
the CMP. We are also proposing that if the 60th calendar day is a 
weekend or a Federal holiday, then the timeframe is extended until the 
end of the next business day.
    We also are proposing to publicize, by posting on a CMS website, 
our notice of imposition of a CMP on a hospital for noncompliance with 
these requirements, and any subsequently issued notice of imposition of 
a CMP for continuing violations. In the event that a hospital requests 
a hearing (as described in section XVI.H. of this proposed rule), we 
are proposing that CMS would indicate in its posting that the CMP is 
under review. If the CMP amount is upheld, in whole, by a final and 
binding decision, we would maintain the posting of the notice of 
imposition of a CMP on a CMS website. If the CMP is upheld, in part, by 
a final and binding decision, we would issue a modified notice of 
imposition of a CMP, and would make this modified notice public on a 
CMS website. If the CMP is overturned in full by a final and binding 
decision, we would remove the notice of imposition of a CMP from a CMS 
website.
    In addition, we are proposing that CMS may issue subsequent 
notice(s) of imposition of a CMP, as described in this section of this 
proposed rule, that result from the same instance(s) of noncompliance.
    We are proposing to set forth in proposed new 45 CFR 180.90 the 
proposed CMPs for hospitals determined by CMS to be noncompliant with 
requirements for making standard charges public.
    We seek comment on whether the proposed amount of a CMP, in 
combination with making public on a CMS website our notice of 
imposition of a CMP, are reasonable and sufficient to ensure hospitals' 
compliance with the proposed requirements to make public standard 
charges. We are interested in public comments on our proposed $300 
maximum daily dollar amount for a CMP for noncompliance with section 
2718(e) of the PHS Act and proposed 45 CFR part 180. In particular, we 
seek comment on whether we should impose stronger penalties for 
noncompliance, or whether we should further limit the maximum amount of 
penalty we would impose on a hospital for a calendar year and the 
methodology for creating such a limit (for instance through limiting 
the maximum daily penalty amount, by establishing a cumulative annual 
total limit on the penalty amount, or both). We seek comment on 
unintended consequences of the proposed penalties for noncompliance. We 
also seek commenters' suggestions on whether other penalties should be 
applied for noncompliance with section 2718(e) of the PHS Act.

H. Proposed Appeals Process

    Under section 2718(b)(3) of the PHS Act, we are proposing to impose 
penalties on hospitals that fail to make their standard charges public 
in accordance with the requirements we finalize under section 2718(e). 
We believe it is important to establish a fair administrative process 
by which a hospital may appeal CMS' decisions to impose penalties under 
section 2718(b)(3) regarding the hospital's noncompliance with the 
requirements of section 2718(e) of the PHS Act and the requirements of 
proposed 45 CFR part 180. Through various Medicare programs, we have 
gained experience with administrative hearings and other processes to 
review CMS' determinations.
    We are proposing to align the procedures for the appeals process 
with

[[Page 39594]]

the procedures established under section 2718(b)(3) of the PHS Act for 
an issuer to appeal a CMP imposed by HHS for its failure to report 
information and pay rebates related to medical loss ratios, as required 
by sections 2718(a) and (b) of the PHS Act, and according to 45 CFR 
parts 158 and 150. Therefore, we are proposing that a hospital upon 
which CMS has imposed a penalty under proposed 45 CFR part 180 may 
appeal that penalty in accordance with 45 CFR part 150, subpart D, 
except as we have proposed otherwise.
    Generally, under this proposed approach, a hospital upon which CMS 
has imposed a penalty may request a hearing before an Administrative 
Law Judge (ALJ) of that penalty. The Administrator of CMS, at his or 
her discretion, may review in whole or in part the ALJ's decision. A 
hospital against which a final order imposing a CMP is entered may 
obtain judicial review.
    For purposes of applying the appeals procedures at 45 CFR part 150 
to appeals of CMPs under proposed 45 CFR part 180, we are proposing the 
following exceptions to the provisions of 45 CFR part 150:
     Civil money penalty means a civil monetary penalty 
according to proposed new 45 CFR 180.90.
     Respondent means a hospital that received a notice of 
imposition of a CMP according to proposed new 45 CFR 180.90(b).
     References to a notice of assessment or proposed 
assessment, or notice of proposed determination of CMPs, are considered 
to be references to the notice of imposition of a CMP specified in 
proposed new 45 CFR 180.90(b).
     Under 45 CFR 150.417(b), in deciding whether the amount of 
a civil money penalty is reasonable, the ALJ may only consider evidence 
of record relating to the following:
    ++ The hospital's posting(s) of its standard charges, if available.
    ++ Material the hospital timely previously submitted to CMS 
(including with respect to corrective actions and CAPs).
    ++ Material CMS used to monitor and assess the hospital's 
compliance according to proposed new 45 CFR 180.70(a)(2).
     The ALJ's consideration of evidence of acts other than 
those at issue in the instant case under 45 CFR 150.445(g) does not 
apply.
    We are proposing to set forth in proposed new 45 CFR 180.100 the 
proposed procedures for a hospital to appeal the CMP imposed by CMS for 
its noncompliance with the requirements of proposed 45 CFR part 180.
    We also are proposing to set forth in proposed new 45 CFR 180.110 
the consequences for failure of a hospital to request a hearing. If a 
hospital does not request a hearing within 30 calendar days of the 
issuance of the notice of imposition of a CMP described in proposed new 
45 CFR 180.90(b), we are proposing that CMS may impose the CMP 
indicated in such notice and may impose additional penalties pursuant 
to continuing violations according to proposed new 45 CFR 180.90(f) 
without right of appeal. We propose that if the 30th calendar day is a 
weekend or a Federal holiday, then the timeframe is extended until the 
end of the next business day. We also are proposing that the hospital 
has no right to appeal a penalty with respect to which it has not 
requested a hearing in accordance with 45 CFR 150.405, unless the 
hospital can show good cause, as determined at 45 CFR 150.405(b), for 
failing to timely exercise its right to a hearing.
    Alternatively, we considered and are seeking public comment on 
following a process for appealing CMPs similar to the approach 
specified in 42 CFR part 498, subparts D through F. There are 
differences between the appeals procedures at 42 CFR part 498 compared 
to 45 CFR part 150. Under the regulations at 42 CFR part 498, for 
example, either party dissatisfied with a hearing decision by the ALJ 
may request Departmental Appeals Board review of the ALJ's decision.

XVII. Request for Information (RFI): Quality Measurement Relating to 
Price Transparency for Improving Beneficiary Access to Provider and 
Supplier Charge Information

A. Introduction

    Last year, we published Requests for Information (RFIs) on price 
transparency in several Medicare payment rules,\210\ including the CY 
2019 OPPS/ASC proposed rule (83 FR 37211 and 37212). In the RFIs, we 
sought public comments on a variety of issues related to making 
provider and supplier charges for health care services furnished in 
hospitals more transparent. In general, we encouraged all providers and 
suppliers of health care services to undertake efforts to engage in 
consumer-friendly communication of their charges to help patients 
understand what their potential financial liability might be for 
services they plan to obtain, and to enable patients to compare charges 
for similar services. We encouraged providers and suppliers of health 
services to update this information at least annually, or more often as 
appropriate, to reflect current charges. We expressed concern that 
challenges continue to exist for patients due to insufficient price 
transparency. We also indicated that we are considering potential 
actions that would be appropriate to further our objective of having 
providers and suppliers of health care services undertake efforts to 
engage in consumer-friendly communication of their charges to help 
patients understand what their potential financial liability might be 
for services they obtain from them, and to enable patients to compare 
charges for similar services across providers and suppliers, including 
when services could be offered in more than one setting, such as a 
hospital outpatient department or an ambulatory surgical center.
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    \210\ FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20164); CY 2019 
Home Health proposed rule (83 FR 32473); CY 2020 ESRD PPS proposed 
rule (83 FR 34394); CY 2020 PFS proposed rule (83 FR 36009); and CY 
2019 OPPS/ASC proposed rule (83 FR 37211).
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    In response to the RFIs, stakeholders consistently indicated 
support for our efforts to improve transparency in health care pricing. 
Stakeholders noted that out-of-pocket costs are the most relevant and 
beneficial information for patients and that such pricing information 
should be shared with patients along with associated quality of care 
and outcome data. Some stakeholders suggested that educational efforts 
would help to increase health care pricing literacy. Stakeholders 
believed that pricing and quality of care information should be shared 
with patients in a user-friendly format and be comparable across 
services and providers, which would allow patients to ``shop'' for the 
best value of health care. Multiple stakeholders commented that quality 
of care and outcome data should be paired with price information to 
allow patients to make informed decisions about where they could 
receive their care and to help ensure that consumers do not assume that 
the high cost of services necessarily equates to higher quality of 
care. Respondents to the RFIs suggested that quality information could 
be displayed by health care entities (such as hospitals) in conjunction 
with the posting of hospital standard charges, integrated 
electronically with cost and coverage data in electronic health records 
(EHRs) or regional health information exchanges (HIEs) for use in 
shared decision making at the point of care, or incorporated into 
public facing websites and price transparency tools.
    Over the years, CMS has made much progress in improving health care 
quality measurement and making such quality information publicly 
available

[[Page 39595]]

through various mechanisms, including public use files (PUFs) on the 
CMS website. In addition, CMS makes quality of health care information 
publicly available on the website at https://data.Medicare.gov for a 
number of different health care providers and suppliers, including 
hospitals, nursing homes, and physicians. Such data are available for 
the public and could be used by providers and suppliers of health care 
and pricing tool developers and integrated into EHRs in the manner 
identified by respondents to the RFI in the CY 2019 OPPS/ASC proposed 
rule. In addition, CMS has adopted Medicare quality measures that 
encourage patient engagement, improve patient experience of care, and 
create incentives for health care providers and suppliers to help 
patients understand their treatment choices and the financial 
implications. For example, starting in 2019, Merit-Based Incentive 
Payment System eligible clinicians participating in the Quality Payment 
Program will have the opportunity to receive points in the Improvement 
Activities performance category for helping patients or their 
caregivers understand the costs of care and explore different payment 
options by providing financial counseling (83 FR 60289).

 B. Request for Information

    To enhance our future efforts to improve policies related to 
transparency in health care charges, we are interested in stakeholder 
input on a number of related quality of health care issues, including 
the following:
    1. Improving availability and access to existing quality of health 
care information for third parties and health care entities to use when 
developing price transparency tools and when communicating charges for 
health care services. Stakeholders are invited to submit specific 
suggestions and comments on the following:
     What type of existing quality of health care information 
would be most beneficial to patients, and how can health care providers 
and suppliers best enable patients to use quality of health care 
information in conjunction with information on charges in their 
decision making before or at the time a service is sought? For example, 
would it be feasible to use health care quality information from the 
Medicare Quality Payment Program (QPP) or the Quality Measures 
Inventory (QMI)? Could quality of health care information from state-
mandated quality reporting initiatives or quality reporting initiatives 
by nationally recognized accrediting entities, such as the National 
Committee for Quality Assurance, URAC, the Joint Commission, and the 
National Quality Forum, be engaged to help patients meaningfully assess 
quality information at the time care is sought?
     How can CMS help providers, suppliers, and third parties 
create patient-friendly interfaces with this information? What steps 
should be taken to ensure that quality outcome and experience of care 
measure data can be used by providers, suppliers, third party pricing 
tool developers, and consumers when and where health care decisions are 
being made? Are there potential strategies CMS should consider to 
create standardized quality data? We are also interested in comments on 
the timing of information delivery relative to the referral or event, 
the form of delivery of the information, and the channels (for 
instance, verbally by the referring doctor, via a mobile application, 
and on a website, among others) through which the information could 
best be delivered.
     Is there value in displaying volume and complications of 
procedures side by side with charge information for patients? If so, 
should this information be best displayed at the individual physician 
level, the group practice level, or the facility level and why?
     Should health care providers and suppliers integrate 
quality information when informing patients of how much their out-of-
pocket costs for services will be before patients are furnished 
services? How would providers that are not included in certain 
hospital-based quality initiatives, such as critical access hospitals, 
integrate quality information? What can be done better to inform 
patients of quality outcomes and patient experience with various 
providers and suppliers?
    2. Improving incentives and assessing the ability of health care 
providers and suppliers to communicate and share charge information 
with patients. Stakeholders are invited to submit specific suggestions 
and comments on the following:
     Should CMS develop Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) questions to assess how well 
hospitals and other providers and suppliers communicate and discuss the 
cost of care with their patients? Example questions could be: ``How 
well did your doctor communicate the expected out-of-pocket cost for 
your health care services in advance?'' ``Were you surprised by the 
amount of out-of-pocket costs you had for a given procedure or hospital 
stay?''
     Are there existing measures or measure concepts to develop 
that can help patients when assessing the accuracy of charges that 
providers and suppliers communicate in advance of a service, including 
the accuracy of expected out-of-pocket cost information? What indices 
should be used to assess how well a provider or supplier aggregates 
charge and quality information for public display?
     Are there Medicare value-based purchasing initiatives that 
could be improved by developing or implementing additional assessments 
of how well Medicare providers and suppliers engage and respond to 
patient inquiries related to cost of care, or how Medicare providers 
and suppliers engage in shared decision making for future care, 
including discussions of both charges and quality of referral services?

XVIII. Organ Procurement Organizations (OPOs) Conditions for Coverage 
(CfCs): Proposed Revision of the Definition of ``Expected Donation 
Rate''

A. Background

1. Organ Procurement Organizations (OPOs)
    Organ procurement organizations (OPOs) are vital partners in the 
procurement, distribution, and transplantation of human organs in a 
safe and equitable manner for all potential transplant recipients. The 
role of OPOs is critical to ensuring that the maximum possible number 
of transplantable human organs is available to seriously ill patients 
who are on a waiting list for an organ transplant. OPOs are responsible 
for identifying eligible donors, recovering organs from deceased 
donors, and complying with all CMS outcome and process performance 
measures. OPOs also must be a member of, participate in, and abide by 
the rules and requirements of the Organ Procurement and Transplantation 
Network (OPTN) that have been approved by the Secretary. The OPTN is a 
membership organization that links all professionals in the United 
States organ donation and transplantation system and whose board 
establishes and maintains transplant policies (which are available on 
the OPTN website at: https://optn.transplant.hrsa.gov/governance/about-the-optn/). Currently, the United Network for Organ Sharing (UNOS) 
serves as the OPTN under contract. OPOs are required to report specific 
information to the OPTN, including the data used to calculate the 
outcome measures for OPOs.

[[Page 39596]]

2. Statutory and Regulatory Provisions
    To be an OPO, an entity must meet the applicable requirements of 
both the Act and the Public Health Service Act (the PHS Act). Section 
1138(b) of the Act provides the statutory qualifications and 
requirements that an OPO must meet in order for organ procurement costs 
to be paid under the Medicare program or the Medicaid program. Section 
1138(b)(1)(A) of the Act specifies that an OPO must operate under a 
grant made under section 371(a) of the PHS Act or must be certified or 
recertified by the Secretary as meeting the standards to be a qualified 
OPO within a certain time period. Congress has provided that payment 
may be made for organ procurement cost ``only if'' the OPO meets the 
performance-related standards prescribed by the Secretary. To receive 
payment under the Medicare program or the Medicaid program for organ 
procurement costs, the entity must have an agreement with, or be 
designated by, the Secretary (section 1138(b)(1)(F) of the Act and 42 
CFR 486.304).
    Pursuant to section 371(b)(1)(D)(ii)(II) of the PHS Act, the 
Secretary is required to establish outcome and process performance 
measures for OPOs to meet based on empirical evidence, obtained through 
reasonable efforts, of organ donor potential and other related factors 
in each service area of the qualified OPO. An OPO also must be a member 
of and abide by the rules and requirements of the OPTN that have been 
approved by the Secretary (section 1138(b)(1)(D) of the Act). We 
established Conditions for Coverage (CfCs) for OPOs to be able to 
receive payments from the Medicare and Medicaid programs at 42 CFR part 
486, subpart G, to implement the statutory requirements. These 
regulations set forth the certification and recertification processes, 
outcome requirements, and process performance measures for OPOs and 
were effective on July 31, 2006 (71 FR 30982).
3. HHS Initiatives Related to OPO Services
    In 2000, the Secretary's Advisory Committee on Organ 
Transplantation (ACOT) was established under the general authority of 
section 222 of the PHS Act, as amended, and implementing regulations 
under 42 CFR 121.12. A 2012 recommendation by ACOT stated: ``The ACOT 
recognizes that the current CMS and HRSA/OPTN structure creates 
unnecessary burdens and inconsistent requirements on transplant centers 
(TCs) and OPOs and that the current system lacks responsiveness to 
advances in TC and OPO performance metrics. The ACOT recommends that 
the Secretary direct CMS and HRSA to confer with the OPTN, [Scientific 
Registry of Transplant Recipients] SRTR, the OPO community, and TC 
representatives to conduct a comprehensive review of regulatory and 
other requirements, and to promulgate regulatory and policy changes to 
requirements for OPOs and TCs that unify mutual goals of increasing 
organ donation, improving recipient outcomes, and reducing organ 
wastage and administrative burden on TCs and OPOs. These revisions 
should include, but not be limited to, improved risk adjustment 
methodologies for TCs and a statistically sound method for yield 
measures for OPOs. . . .'' \211\ We believe that our proposal to 
harmonize the definitions of ``expected donation rate'' as discussed 
below would address this ACOT recommendation. We also believe that the 
proposal demonstrates responsiveness to advances in OPO metrics and 
resolves an inconsistency in the OPO requirements for how OPO measures 
are being determined.
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    \211\ Available at: https://www.organdonor.gov/about-dot/acot/acotrecs55.html.
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B. Proposed Revision of the Definition of ``Expected Donation Rate''

    As set forth in 42 CFR 486.328, which specifies the condition for 
reporting of data, transplant hospitals and OPOs must report data to 
the OPTN and those data are transmitted on a monthly basis to the SRTR 
contractor. The OPTN members, including OPOs, are required to submit 
certain data to the OPTN or SRTR. The OPTN and SRTR collect and analyze 
the data pursuant to the HRSA mission to increase organ donation and 
transplantation. Periodically, the data that OPOs must report to the 
OPTN or the SRTR is revised based on methodologies and clinical 
practice improvements that enable them to draw more accurate 
conclusions about donor and organ suitability for transplantation.
    The CfCs for OPOs regulations at 42 CFR 486.318(a) and (b) require 
that an OPO must meet two of the three following outcome measures:
     The OPOs donation rate of eligible donors as a percentage 
of eligible deaths is no more than 1.5 standard deviations below the 
mean national donation rate of eligible donors as a percentage of 
eligible deaths, averaged over the 4 years of the re-certification 
cycle. Both the numerator and denominator of an individual OPO's 
donation rate ratio are adjusted by adding a 1 for each donation after 
cardiac death donor and each donor over the age of 70;
     The observed donation rate is not significantly lower than 
the expected donation rate for 18 or more months of the 36 months of 
data used for re-recertification, as calculated by SRTR;
     The OPO data reports, averaged over the 4 years of the re-
certification cycle, must meet the rules and requirements of the most 
current OPTN aggregate donor yield measure.
    The expected donation rate used in the second outcome measure is 
calculated by the SRTR. The CfCs for OPOs at 42 CFR 486.302 defines 
``expected donation rate'' as the donation rate expected for an OPO 
based on the national experience for OPOs serving similar hospitals and 
donation service areas (DSAs). This rate is adjusted for the following 
hospital characteristics: Level I or Level II trauma center; 
Metropolitan Statistical Area (MSA) size; Metropolitan Statistical (MS) 
case-mix index; total bed size; number of intensive care unit (ICU) 
beds; primary service; presence of a neurosurgery unit; and hospital 
control/ownership.
    In 2009, the SRTR modified the definition of ``expected donation 
rate'' we used for this outcome measure. The updated SRTR's definition 
states: ``[t]he expected donation rate per 100 eligible deaths is the 
rate expected for an OPO based on the national experience for OPOs 
serving similar eligible donor populations and DSAs. This rate is 
adjusted for the distributions of age, sex, race, and cause of death 
among eligible deaths.'' \212\
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    \212\ Available at: https://www.srtr.org/about-the-data/technical-methods-for-the-opo-specific-reports/.
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    To determine the expected donation rate, the SRTR believed that it 
was important to adjust for characteristics that would allow for 
isolation of the effects that OPOs' practices were having on donation 
in that DSA. The SRTR determined that basing the expected donation rate 
for an OPO on the national experience for OPOs serving similar 
hospitals and DSAs and then adjusting for hospital characteristics did 
not take into consideration the eligible donor population in the DSA. 
The SRTR found that the eligible donor population varies from DSA to 
DSA across the country and such variations do have an impact on 
donation rates. Therefore, the SRTR determined that a more precise 
method to calculate an OPO's expected donation rate would be to base it 
on the national experience for OPOs serving similar eligible donor 
populations and DSAs and then adjust for patient characteristics, that 
is age, sex, race, and cause of death among eligible deaths.

[[Page 39597]]

    Due to an oversight, CMS did not make a corresponding change to the 
definition in the CfCs for OPOs at the time that the SRTR made its 
change. In order to address this issue, we are proposing to change our 
requirements so that we are consistent with the SRTR's definition for 
the second outcome measure. Therefore, in this proposed rule, we are 
proposing to make a change to harmonize the CMS definition with the 
SRTR definition. We are proposing to make this change at this time in 
order to clarify the regulatory standard so that we may properly 
enforce the second outcome measure, eliminate any provider confusion, 
and further support our goals of accurately and reliably measuring OPO 
performance.
    Specifically, we are proposing to revise the definition to state 
that the expected donation rate per 100 eligible deaths is the rate 
expected for an OPO based on the national experience for OPOs serving 
similar eligible donor populations and DSAs. We are proposing that this 
rate would be adjusted for the distributions of age, sex, race, and 
cause of death among eligible deaths.
    If we finalize this proposal, this change would take effect on the 
effective date of the final rule with comment period, which would occur 
during the 2022 recertification cycle. Because the final regulation 
change would not be retroactive and, in order to give OPOs adequate 
time to comply with the change to the definition for ``expected 
donation rate,'' we are proposing to change the time period for the 
observed donation rate for the second outcome measure for the 2022 
recertification cycle only. As a result, we also are proposing to 
revise Sec.  486.318(a)(2), (b)(2), and (c)(1) to reduce the time 
period for this outcome measure. We are proposing to calculate the 
expected donation rate using 12 of the 24 months of data following the 
effective date of the final rule with comment period (using data from 
January 1, 2020 through December 31, 2020). After the 2022 
recertification cycle, and if there are no other changes to the OPO 
outcome measures, we would assess OPO performance based on 36 months of 
data.

C. Request for Information Regarding Potential Changes to the Organ 
Procurement Organization and Transplant Center Regulations

    Since the OPO and the transplant center regulations were finalized, 
we have received substantial feedback from the organ procurement and 
transplant communities recommending modifications to the current 
requirements. Therefore, we are considering a comprehensive proposal to 
update the CfCs for OPOs and possibly the CoPs for transplant centers. 
We are including transplant centers in this request for information due 
to the inextricable connection between transplant centers and OPOs. We 
are seeking public input regarding what revisions may be appropriate 
for the current CfCs for OPOs that are set forth at 42 CFR 486.301 
through 486.360 and the current CoPs for transplant centers that are 
set forth at 42 CFR 482.68 through 482.104. The CfCs for OPOs set forth 
the requirements each OPO must meet to be eligible for payment under 
the Medicare and Medicaid programs. The CoPs for transplant centers set 
forth the requirements each transplant center must meet to be eligible 
for payment under the Medicare. In addition, more information on how 
data regarding OPOs as well as transplant centers are identified and 
used can be found on the website at: https://www.srtr.org/.
    The following are key areas on which we are seeking public input:
     Do the current OPO outcome measures that are set forth at 
42 CFR 486.318 accurately and reliably reflect an OPO's performance? If 
not, please explain.
     What are the impacts or consequences of the current 
outcome measures on: (1) An OPO's performance; and (2) the availability 
of transplantable organs?
     What impact, if any, do the certification and 
decertification processes for OPOs have on organ procurement and 
transplantation?
     Are there any potential, empirically based outcome 
measures, other than those currently at Sec.  486.318, that could be 
used either in addition to, or instead of, the current outcome measures 
for OPOs? If recommending another outcome measure, what is the 
empirical evidence for that recommended measure?
     In addition to the outcome measures, are there other 
indicators of quality that could be used for OPOs in the CfCs? If 
recommending another quality indicator, why should that indicator be 
used in the OPOs CfCs and what is the supporting evidence for this 
indicator?
     Are there any transplant center CoPs that conflict with or 
should be harmonized with the OPOs CfCs? If yes, identify the specific 
requirements and how they would harmonize or otherwise modify the 
requirements.
    We also are soliciting public comment on whether the following two 
potential OPO outcome measures would be valid measures and would be 
consistent with statutory requirements. We are especially interested in 
public comments about the validity and reliability of these possible 
measures.
    The first potential measure would be the actual deceased donors as 
a percentage of inpatient deaths among patients 75 years of age or 
younger with a cause of death consistent with organ donation. The data 
on inpatient deaths, including additional related demographic data, 
would be derived from the CDC Detailed Mortality File and the National 
Center for Health Statistic's National Vital Statistics Report. We 
believe that the consistency and quality of this measure could be a 
significant improvement over the current measures because it relies on 
independent data to measure true organ donation potential. While this 
donation rate might include potential donors in the denominator who 
would never clinically qualify as organ donors, it does so consistently 
across all OPOs, which provides a reliable comparative performance 
measure across all OPO DSAs. This outcome measure also would account 
for: (1) Geographic differences in the manner of deaths across the 
United States (for example, trauma deaths); (2) geographic differences 
in the age distribution of deaths; and (3) geographic differences in 
in-hospital versus out-of-hospital deaths. This measure would reward 
efforts to maximize total organ procurement and efforts to improve 
placements of all procured organs.
    The second potential measure is the actual organs transplanted as a 
percentage of inpatient deaths among patients 75 years of age or 
younger with a cause of death consistent with organ donation. This 
measure also would reward efforts to maximize total organ procurement 
and efforts to improve placements of all procured organs.
    In addition to public comments on both of these potential outcome 
measures, we are interested in public comments on appropriate 
parameters for these measures. How should we determine what percentage 
indicates that an OPO's performance is acceptable or successful? If 
commenters cannot recommend a specific percentage, how should we 
determine what the parameters for the outcome measures should be? We 
are requesting that commenters explain and include any evidence or data 
they have to support their comments. We are interested in any comments 
about what commenters believe would be the benefit or consequences, or 
perhaps unintended consequences, of using these measures and the 
potential impact on OPOs,

[[Page 39598]]

transplant centers, organ donation, and transplant recipients. We are 
also interested in comments on potential additional compliance burdens 
on OPOs and transplant centers. Finally, we are seeking comments that 
demonstrate how revising the OPO outcome measures would benefit or 
negatively impact patient outcomes, access, and quality of life.
    For additional information on these potential outcome measures, we 
refer readers to the document, Changing Metrics of Organ Procurement 
Organization Performance in Order to Increase Organ Donation Rates in 
the United States, published in the American Journal for 
Transplantations.\213\
---------------------------------------------------------------------------

    \213\ Changing Metrics of Organ Procurement Organization 
Performance in order to Increase Organ Donation Rates in the United 
States, Am J Transplant, 2017 Dec; 17(12): 3183-3192. doi: 10.1111/
ajt. 14391. Epub 2017 Jul20.
---------------------------------------------------------------------------

    We will consider the public comments that we receive from this 
request for information for future rulemaking and potential revisions 
to the CfCs for OPOs and the CoPs for transplant centers.

XIX. Clinical Laboratory Fee Schedule: Potential Revisions to the 
Laboratory Date of Service Policy

A. Background on the Medicare Part B Laboratory Date of Service Policy

    The date of service (DOS) is a required data field on all Medicare 
claims for laboratory services. However, a laboratory service may take 
place over a period of time--the date the laboratory test is ordered, 
the date the specimen is collected from the patient, the date the 
laboratory accesses the specimen, the date the laboratory performs the 
test, and the date results are produced may occur on different dates. 
In the final rule on coverage and administrative policies for clinical 
diagnostic laboratory services published in the Federal Register on 
November 23, 2001 (66 FR 58791 through 58792), we adopted a policy 
under which the DOS for clinical diagnostic laboratory services 
generally is the date the specimen is collected. In that final rule, we 
also established a policy that the DOS for laboratory tests that use an 
archived specimen is the date the specimen was obtained from storage 
(66 FR 58792).
    In 2002, we issued Program Memorandum AB-02-134, which permitted 
contractors discretion in making determinations regarding the length of 
time a specimen must be stored to be considered ``archived.'' In 
response to comments requesting that we issue a national standard to 
clarify when a stored specimen can be considered ``archived,'' in the 
Procedures for Maintaining Code Lists in the Negotiated National 
Coverage Determinations for Clinical Diagnostic Laboratory Services 
final notice, published in the Federal Register on February 25, 2005 
(70 FR 9357), we defined an ``archived'' specimen as a specimen that is 
stored for more than 30 calendar days before testing. Specimens stored 
for 30 days or less continued to have a DOS of the date the specimen 
was collected.

B. Medicare DOS Policy and the ``14-Day Rule''

    In the final rule with comment period entitled, in relevant part, 
``Revisions to Payment Policies, Five-Year Review of Work Relative 
Value Units, Changes to the Practice Expense Methodology Under the 
Physician Fee Schedule, and Other Changes to Payment Under Part B'' 
published in the Federal Register on December 1, 2006 (December 1, 2006 
MPFS final rule) (71 FR 69705 through 69706), we added a new Sec.  
414.510 in title 42 of the CFR regarding the clinical laboratory DOS 
requirements and revised our DOS policy for stored specimens. We 
explained in that MPFS final rule that the DOS of a test may affect 
payment for the test, especially in situations in which a specimen that 
is collected while the patient is being treated in a hospital setting 
(for example, during a surgical procedure) is later used for testing 
after the patient has been discharged from the hospital. We noted that 
payment for the test is usually bundled with payment for the hospital 
service, even when the results of the test did not guide treatment 
during the hospital stay. To address concerns raised for tests related 
to cancer recurrence and therapeutic interventions, we finalized 
modifications to the DOS policy in Sec.  414.510(b)(2)(i) for a test 
performed on a specimen stored less than or equal to 30 calendar days 
from the date it was collected (a non-archived specimen), so that the 
DOS is the date the test was performed (instead of the date of 
collection) if the following conditions are met:
     The test is ordered by the patient's physician at least 14 
days following the date of the patient's discharge from the hospital;
     The specimen was collected while the patient was 
undergoing a hospital surgical procedure;
     It would be medically inappropriate to have collected the 
sample other than during the hospital procedure for which the patient 
was admitted;
     The results of the test do not guide treatment provided 
during the hospital stay; and
     The test was reasonable and medically necessary for the 
treatment of an illness.
    As we stated in the December 1, 2006 MPFS final rule, we 
established these five criteria, which we refer to as the ``14-day 
rule,'' to distinguish laboratory tests performed as part of 
posthospital care from the care a beneficiary receives in the hospital. 
When the 14-day rule applies, laboratory tests are not bundled into the 
hospital stay, but are instead paid separately under Medicare Part B 
(as explained in more detail below).
    We also revised the DOS requirements for a chemotherapy sensitivity 
test performed on live tissue. As discussed in the December 1, 2006 
MPFS final rule (71 FR 69706), we agreed with commenters that these 
tests, which are primarily used to determine posthospital chemotherapy 
care for patients who also require hospital treatment for tumor removal 
or resection, appear to be unrelated to the hospital treatment in cases 
where it would be medically inappropriate to collect a test specimen 
other than at the time of surgery, especially when the specific drugs 
to be tested are ordered at least 14 days following hospital discharge. 
As a result, we revised the DOS policy for chemotherapy sensitivity 
tests, based on our understanding that the results of these tests, even 
if they were available immediately, would not typically affect the 
treatment regimen at the hospital. Specifically, we modified the DOS 
for chemotherapy sensitivity tests performed on live tissue in Sec.  
414.510(b)(3) so that the DOS is the date the test was performed if the 
following conditions are met:
     The decision regarding the specific chemotherapeutic 
agents to test is made at least 14 days after discharge;
     The specimen was collected while the patient was 
undergoing a hospital surgical procedure;
     It would be medically inappropriate to have collected the 
sample other than during the hospital procedure for which the patient 
was admitted;
     The results of the test do not guide treatment provided 
during the hospital stay; and
     The test was reasonable and medically necessary for the 
treatment of an illness.
    We explained in the December 1, 2006 MPFS final rule that, for 
chemotherapy sensitivity tests that meet this DOS policy, Medicare 
would allow separate payment under Medicare Part

[[Page 39599]]

B; that is, separate from the payment for hospital services.

C. Billing and Payment for Laboratory Services Under the OPPS

    The DOS requirements at 42 CFR 414.510 are used to determine 
whether a hospital bills Medicare for a clinical diagnostic laboratory 
test (CDLT) or whether the laboratory performing the test bills 
Medicare directly. Separate regulations at 42 CFR 410.42(a) and 
411.15(m) generally provide that Medicare will not pay for a service 
furnished to a hospital patient during an encounter by an entity other 
than the hospital unless the hospital has an arrangement (as defined in 
42 CFR 409.3) with that entity to furnish that particular service to 
its patients, with certain exceptions and exclusions. These 
regulations, which we refer to as the ``under arrangements'' provisions 
in this discussion, require that if the DOS falls during an inpatient 
or outpatient stay, payment for the laboratory test is usually bundled 
with the hospital service.
    Under our current rules, if a test meets all DOS requirements in 
Sec.  414.510(b)(2)(i), (b)(3), or (b)(5) (an additional exception 
finalized in the CY 2018 OPPS/ASC final rule with comment period that 
we describe later in this section), the DOS is the date the test was 
performed. In this situation, the laboratory would bill Medicare 
directly for the test and would be paid under the Clinical Laboratory 
Fee Schedule (CLFS) directly by Medicare. However, if the test does not 
meet the DOS requirements in Sec.  414.510(b)(2)(i), (b)(3), or (b)(5), 
the DOS would be the date the specimen was collected from the patient. 
In that case, the hospital would bill Medicare for the test and then 
would pay the laboratory that performed the test, if the laboratory 
provided the test under arrangement.
    In recent rulemakings, we have reviewed appropriate payment under 
the OPPS for certain diagnostic tests that are not commonly performed 
by hospitals. In CY 2014, we finalized a policy to package certain 
CDLTs under the OPPS (78 FR 74939 through 74942 and 42 CFR 419.2(b)(17) 
and 419.22(l)). In CYs 2016 and 2017, we made some modifications to 
this policy (80 FR 70348 through 70350; 81 FR 79592 through 79594). 
Under our current policy, certain CDLTs that are listed on the CLFS are 
packaged as integral, ancillary, supportive, dependent, or adjunctive 
to the primary service or services provided in the hospital outpatient 
setting during the same outpatient encounter and billed on the same 
claim. Specifically, we conditionally package most CDLTs and only pay 
separately for a laboratory test when it is: (1) The only service 
provided to a beneficiary on a claim; (2) considered a preventive 
service; (3) a molecular pathology test; or (4) an advanced diagnostic 
laboratory test (ADLT) that meets the criteria of section 
1834A(d)(5)(A) of the Act (78 FR 74939 through 74942; 80 FR 70348 
through 70350; and 81 FR 79592 through 79594). In the CY 2016 OPPS/ASC 
final rule with comment period, we excluded all molecular pathology 
laboratory tests from packaging because we believed these relatively 
new tests may have a different pattern of clinical use, which may make 
them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged.
    For similar reasons, in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79592 through 79594), we extended the exclusion 
to also apply to all ADLTs that meet the criteria of section 
1834A(d)(5)(A) of the Act, which we describe below. We stated that we 
will assign status indicator ``A'' (Separate payment under the CLFS) to 
ADLTs once a laboratory test is designated an ADLT under the CLFS. 
Laboratory tests that are separately payable and are listed on the CLFS 
are paid at the CLFS payment rates outside the OPPS.

D. ADLTs Under the New Private Payor Rate-Based CLFS

    Section 1834A of the Act, as established by section 216(a) of 
Public Law 113-93, the Protecting Access to Medicare Act of 2014 
(PAMA), requires significant changes to how Medicare pays for CDLTs 
under the CLFS. Section 216(a) of PAMA also establishes a new 
subcategory of CDLTs known as ADLTs, with separate reporting and 
payment requirements under section 1834A of the Act. In the CLFS final 
rule published in the Federal Register on June 23, 2016, entitled 
``Medicare Program; Medicare Clinical Diagnostic Laboratory Tests 
Payment System Final Rule'' (81 FR 41036), we implemented the 
requirements of section 1834A of the Act.
    As defined in Sec.  414.502, an ADLT is a CDLT covered under 
Medicare Part B that is offered and furnished only by a single 
laboratory, and cannot be sold for use by a laboratory other than the 
single laboratory that designed the test or a successor owner. Also, an 
ADLT must meet either Criterion (A), which implements section 
1834A(d)(5)(A) of the Act, or Criterion (B), which implements section 
1834A(d)(5)(B) of the Act, as follows:
     Criterion (A): The test is an analysis of multiple 
biomarkers of deoxyribonucleic acid (DNA), ribonucleic acid (RNA), or 
proteins; when combined with an empirically derived algorithm, yields a 
result that predicts the probability a specific individual patient will 
develop a certain condition(s) or respond to a particular therapy(ies); 
provides new clinical diagnostic information that cannot be obtained 
from any other test or combination of tests; and may include other 
assays.
    Or:
     Criterion (B): The test is cleared or approved by the Food 
and Drug Administration.
    Generally, under the revised CLFS, ADLTs are paid using the same 
methodology based on the weighted median of private payor rates as 
other CDLTs. However, updates to ADLT payment rates occur annually 
instead of every 3 years. The payment methodology for ADLTs is detailed 
in the June 23, 2016 CLFS final rule (81 FR 41076 through 41083). For 
additional information regarding ADLTs, we refer readers to the CMS 
website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/PAMA-regulations.html.

E. Additional Laboratory DOS Policy Exception for the Hospital 
Outpatient Setting

    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59393 
through 59400), we established an additional exception at Sec.  
414.510(b)(5) for the hospital outpatient setting so that the DOS for 
molecular pathology tests and certain ADLTs that are excluded from the 
OPPS packaging policy is the date the test was performed (instead of 
the date of specimen collection) if certain conditions are met. Under 
the exception that we finalized at Sec.  414.510(b)(5), in the case of 
a molecular pathology test or a test designated by CMS as an ADLT under 
paragraph (1) of the definition of an ADLT in Sec.  414.502, the DOS of 
the test must be the date the test was performed only if:
     The test was performed following a hospital outpatient's 
discharge from the hospital outpatient department;
     The specimen was collected from a hospital outpatient 
during an encounter (as both are defined in 42 CFR 410.2);
     It was medically appropriate to have collected the sample 
from the hospital outpatient during the hospital outpatient encounter;

[[Page 39600]]

     The results of the test do not guide treatment provided 
during the hospital outpatient encounter; and
     The test was reasonable and medically necessary for the 
treatment of an illness.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59397), we explained that we believed the laboratory DOS policy in 
effect prior to CY 2018 created administrative complexities for 
hospitals and laboratories with regard to molecular pathology tests and 
laboratory tests expected to be designated by CMS as ADLTs that meet 
the criteria of section 1834A(d)(5)(A) of the Act. We noted that under 
the laboratory DOS policy in effect prior to CY 2018, if the tests were 
ordered less than 14 days following a hospital outpatient's discharge 
from the hospital outpatient department, laboratories generally could 
not bill Medicare directly for the molecular pathology test or ADLT. In 
those circumstances, the hospital had to bill Medicare for the test, 
and the laboratory had to seek payment from the hospital. We noted that 
commenters informed us that because ADLTs are performed by only a 
single laboratory and molecular pathology tests are often performed by 
only a few laboratories, and because hospitals may not have the 
technical ability to perform these complex tests, the hospital may be 
reluctant to bill Medicare for a test it would not typically (or never) 
perform. The commenters also stated that as a result, the hospital 
might delay ordering the test until at least 14 days after the patient 
is discharged from the hospital outpatient department, or even cancel 
the order to avoid the DOS policy, which may restrict a patient's 
timely access to these tests. In addition, we noted that we had heard 
from commenters that the laboratory DOS policy in effect prior to CY 
2018 may have disproportionately limited access for Medicare 
beneficiaries under Medicare Parts A and B, because Medicare Advantage 
plans under Medicare Part C and other private payors allow laboratories 
to bill directly for tests they perform.
    We also recognized that greater consistency between the laboratory 
DOS rules and the current OPPS packaging policy would be beneficial and 
would address some of the administrative and billing issues created by 
the DOS policy in effect prior to CY 2018. We noted that we exclude all 
molecular pathology tests and ADLTs under section 1834A(d)(5)(A) of the 
Act from the OPPS packaging policy because we believe these tests may 
have a different pattern of clinical use, which may make them generally 
less tied to a primary service in the hospital outpatient setting than 
the more common and routine laboratory tests that are packaged, and we 
had already established exceptions to the DOS policy that permit the 
DOS to be the date of performance for certain tests that we believe are 
not related to the hospital treatment and are used to determine 
posthospital care. We stated that we believed a similar exception is 
justified for the molecular pathology tests and ADLTs excluded from the 
OPPS packaging policy, which we understood are used to guide and manage 
the patient's care after the patient is discharged from the hospital 
outpatient department. We noted that we believed that, like the other 
tests currently subject to DOS exceptions, these tests can legitimately 
be distinguished from the care the patient receives in the hospital, 
and thus we would not be unbundling services that are appropriately 
associated with hospital treatment. Moreover, we reiterated that these 
tests are already paid separately outside of the OPPS at CLFS payment 
rates. Therefore, we agreed with the commenters that the laboratory 
performing the test should be permitted to bill Medicare directly for 
these tests, instead of relying on the hospital to bill Medicare on 
behalf of the laboratory under arrangements.
    A list of the specific laboratory tests currently subject to the 
laboratory DOS exception at Sec.  414.510(b)(5) is available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/Clinical-Lab-DOS-Policy.html.
    Following publication of the CY 2018 OPPS/ASC final rule with 
comment period, we issued Change Request (CR) 10419, Transmittal 4000, 
the claims processing instruction implementing the laboratory DOS 
exception at Sec.  414.510(b)(5), with an effective date of January 1, 
2018 and an implementation date of July 2, 2018. After issuing CR 
10419, we heard from stakeholders that many hospitals and laboratories 
were having administrative difficulties implementing the DOS exception 
set forth at Sec.  414.510(b)(5). On July 3, 2018, we announced that, 
for a 6-month period, we would exercise enforcement discretion with 
respect to the laboratory DOS exception at Sec.  414.510(b)(5). We 
explained that stakeholder feedback suggested many providers and 
suppliers would not be able to implement the laboratory DOS exception 
by the July 2, 2018 implementation date established by CR 10419, and 
that such entities required additional time to develop the systems 
changes necessary to enable the performing laboratory to bill for tests 
subject to the exception. We noted that this enforcement discretion 
applies to all providers and suppliers with regard to ADLTs and 
molecular pathology tests subject to the laboratory DOS exception 
policy, and that during the enforcement discretion period, hospitals 
may continue to bill for these tests that would otherwise be subject to 
the laboratory DOS exception.
    We then extended the enforcement discretion period for two 
additional, consecutive 6-month periods, after learning through 
communications with representatives of providers and suppliers affected 
by the policy that there are still many entities who will not be able 
to implement the laboratory DOS exception and will need additional time 
to come into compliance. The enforcement discretion period is currently 
in effect until January 2, 2020. The latest enforcement discretion 
announcement as well as CR 10419, Transmittal 4000 is available on the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/Clinical-Lab-DOS-Policy.html.
    During this time, we have continued to gage the industry's 
readiness to implement the laboratory DOS exception at Sec.  
414.510(b)(5). Stakeholders, including representatives of hospitals, 
have informed us that hospitals, in particular, are having difficulty 
with developing the systems changes necessary to provide the performing 
laboratory with the patient's hospital outpatient status, beneficiary 
demographic information, and insurance information, such as whether the 
beneficiary is enrolled in original fee-for-service Medicare or a 
specific Medicare Advantage plan. According to stakeholders, the 
performing laboratory requires this information so that it can bill 
Medicare directly for the test instead of seeking payment from the 
hospital.
    In addition, stakeholders, including representatives of 
laboratories, have noted that some entities performing molecular 
pathology testing subject to the laboratory DOS exception, such as 
blood banks and blood centers, may not be enrolled in the Medicare 
program and may not have established a mechanism to bill Medicare 
directly. According to these stakeholders, blood banks and blood 
centers that are not currently enrolled in the Medicare program would 
need to establish a billing mechanism so that they can bill Medicare 
directly when the requirements of Sec.  414.510(b)(5) are met. 
Stakeholders have asserted that establishing a billing mechanism is

[[Page 39601]]

labor intensive and that blood banks and blood centers currently lack 
the financial resources and expertise to take on this task.
    We also note that protein-based Multianalyte Assays with 
Algorithmic Analysis (MAAAs) that are not considered molecular 
pathology tests and are not designated as ADLTs under paragraph (1) of 
the definition of ADLT in Sec.  414.502, are also conditionally 
packaged under the OPPS at this time. Several stakeholders have 
suggested that they believe that the pattern of clinical use of some of 
these protein-based MAAAs make them relatively unconnected to the 
primary hospital outpatient service, though they do not currently 
qualify for the DOS exception at Sec.  414.510(b)(5) solely because 
they are MAAAs. We note that a protein-based MAAA that is designated by 
CMS as an ADLT under paragraph (1) of the definition of an ADLT in 
Sec.  414.502 would be eligible for the DOS exception at Sec.  
414.510(b)(5), and we intend to consider policies regarding MAAAs for 
future rulemaking.

F. Potential Revisions to Laboratory DOS Policy and Request for Public 
Comments

    In response to the implementation concerns raised by stakeholders, 
we are considering making additional changes to the laboratory DOS 
policy.
    As discussed previously, under the exception that we finalized at 
Sec.  414.510(b)(5), a molecular pathology test or a test designated by 
CMS as an ADLT under paragraph (1) of the definition of an ADLT in 
Sec.  414.502, the DOS of the test must be the date the test was 
performed only if: (i) The test was performed following a hospital 
outpatient's discharge from the hospital outpatient department; (ii) 
the specimen was collected from a hospital outpatient during an 
encounter (as both are defined in 42 CFR 410.2); (iii) it was medically 
appropriate to have collected the sample from the hospital outpatient 
during the hospital outpatient encounter; (iv) the results of the test 
do not guide treatment provided during the hospital outpatient 
encounter; and (v) the test was reasonable and medically necessary for 
the treatment of an illness. When all conditions under the laboratory 
DOS exception at Sec.  414.510(b)(5) are met, the DOS is the date of 
test performance, instead of the date of specimen collection, which 
effectively unbundles the test from the hospital outpatient encounter. 
As such, the test is not considered a hospital outpatient service for 
which the hospital must bill Medicare and for which the performing 
laboratory must seek payment from the hospital, but rather a laboratory 
test under the CLFS for which the performing laboratory must bill 
Medicare directly. We are considering three options for potential 
changes to the laboratory DOS exception at Sec.  414.510(b)(5), and we 
seek comment on these changes. Specifically, we are seeking comment on:
    1. Changing the Test Results Requirement at 42 CFR 
414.510(b)(5)(iv);
    2. Limiting the Laboratory DOS Exception at 42 CFR 414.510(b)(5) to 
ADLTs; and/or
    3. Excluding Blood Banks and Blood Centers from the Laboratory DOS 
Exception at 42 CFR 414.510(b)(5).
    These potential revisions are discussed below.
1. Changing the Test Results Requirement at 42 CFR 414.510(b)(5)(iv)
    Since finalizing the laboratory DOS exception at Sec.  
414.510(b)(5), we have continued to review and analyze the factors we 
use to determine whether a molecular pathology test or Criterion (A) 
ADLT is unrelated to the hospital treatment and used to determine 
posthospital care, and therefore should have a DOS that is the date of 
performance rather than the date of specimen collection. One such 
factor, in Sec.  414.510(b)(5)(iv), is that the results of the test 
must not guide treatment provided during the hospital outpatient 
encounter--meaning, the encounter in which the specimen was collected. 
We are no longer convinced that the determination as to whether a 
molecular pathology test or ADLT is separable from a hospital service 
should be based on whether the test results guide treatment during the 
specific hospital outpatient encounter in which the specimen was 
collected. We believe that a molecular pathology test or an ADLT that 
is performed on a specimen collected during a hospital outpatient 
encounter, in which the results of the test are intended to guide 
treatment during a future hospital outpatient encounter, is a hospital 
service, and therefore should be billed by the hospital that collected 
the specimen under arrangements, just like if the test does not meet 
one of the other prongs of Sec.  414.510(b)(5). In contrast, if the 
results of the test are not intended to guide treatment during a 
hospital outpatient encounter, and if all other requirements in Sec.  
414.510(b)(5) are met, the test is separable from a hospital service 
and therefore, should be considered a laboratory service and the 
performing laboratory should bill for the test.
    We believe that a test's relationship to a hospital outpatient 
encounter depends on many factors, including the patient's current 
diagnosis (or lack of a current diagnosis), the procedure(s) being 
considered for the patient, the patient's current and previous medical 
history, and other factors and that the ordering physician would be 
aware of these beneficiary characteristics. As such, we believe that it 
should be the role of the ordering physician to determine whether the 
results of a molecular pathology test or ADLT are or are not intended 
to guide treatment during a hospital outpatient encounter.
    Therefore, we are considering a revision to our current laboratory 
DOS policy at Sec.  414.510(b)(5)(iv) to specify that the ordering 
physician would determine whether the results of the ADLT or molecular 
pathology test are intended to guide treatment provided during a 
hospital outpatient encounter, if the other four requirements under 
Sec.  414.510(b)(5) are met. Under this approach, the test would be 
considered a hospital service unless the ordering physician determines 
that the test does not guide treatment during a hospital outpatient 
encounter. If the ordering physician determines that the test results 
are not intended to guide treatment during the hospital outpatient 
encounter from which the specimen was collected or during a future 
hospital outpatient encounter, for purposes of the laboratory DOS 
exception at Sec.  414.510(b)(5), the DOS service of the test would be 
the date of test performance. In this situation, the test would not be 
considered a hospital service and the performing laboratory would be 
required to bill for the test.
    Conversely, if the other four requirements under Sec.  
414.510(b)(5) are met, but the ordering physician determines that the 
results of the laboratory test are intended to guide treatment during a 
hospital outpatient encounter, the DOS would be the date of specimen 
collection. As a result, the hospital that collected the specimen would 
bill for the laboratory test under arrangements and the laboratory 
would seek payment from the hospital for the test. This potential 
revision to the laboratory DOS exception at Sec.  414.510(b)(5) would 
be consistent with our belief that a molecular pathology test or a 
Criterion (A) ADLT is a hospital service when the results of the test 
are intended to guide treatment during a hospital outpatient encounter.
    We are requesting comments from hospitals, laboratories, physicians 
and non-physician practitioners, and other interested stakeholders 
regarding this potential revision to the laboratory DOS

[[Page 39602]]

exception at Sec.  414.510(b)(5). We are particularly interested in 
comments regarding our position that when the results of molecular 
pathology testing and Criterion (A) ADLTs are intended to guide 
treatment during a future hospital outpatient encounter, the test is a 
hospital service. We also are interested in receiving public comments 
regarding the administrative aspects of requiring the ordering 
physician to determine when the test results are not intended to guide 
the treatment during a hospital outpatient encounter, as well as the 
process for the ordering physician to document this decision and 
provide notification to the hospital that collected the specimen for 
billing purposes. We note that we would consider finalizing this 
potential revision to the laboratory DOS policy as a result of our 
review of the comments received on this topic.
    We note that at this time, we are only soliciting comments on 
potential changes to the laboratory DOS exception at Sec.  
414.510(b)(5), and not the 14-day rule DOS exception at Sec.  
414.510(b)(2) and the chemotherapy sensitivity test DOS exception at 
Sec.  414.510(b)(3). These exceptions would continue to include the 
requirement that the results of the test do not guide treatment 
provided during the hospital stay, meaning the hospital stay in which 
the specimen was collected. Although we recognize that the 
considerations about how a hospital service is determined under Sec.  
414.510(b)(5) discussed previously may also be applicable to the 14-day 
rule DOS exception and chemotherapy sensitivity test DOS exception, we 
are only considering revisions to the laboratory DOS exception at Sec.  
414.510(b)(5) at this time. Because of the administrative issues raised 
by stakeholders regarding the implementation of the laboratory DOS 
exception at Sec.  414.510(b)(5), we believe a cautious and incremental 
approach to making changes to laboratory DOS policy is warranted. As 
such, any potential changes to the 14-day rule DOS exception at Sec.  
414.510(b)(2) and the chemotherapy sensitivity test DOS exception at 
Sec.  414.510(b)(3) would be addressed in future rulemaking.
2. Limiting the Laboratory DOS Exception at 42 CFR 414.510(b)(5) to 
ADLTs
    As discussed previously in this section, we established a 
laboratory DOS policy exception for the hospital outpatient setting at 
Sec.  414.510(b)(5), in part, because of stakeholder concerns that the 
laboratory DOS policy in effect prior to CY 2018 created beneficiary 
access issues with regard to molecular pathology tests and laboratory 
tests expected to be designated by CMS as ADLTs that meet the criteria 
of section 1834A(d)(5)(A) of the Act. In the CY 2018 OPPS/ASC proposed 
rule (82 FR 33653), we considered revising the DOS rule to create an 
exception only for ADLTs that meet the criteria in section 
1834A(d)(5)(A) of the Act because ADLTs are offered and furnished only 
by a single laboratory (as defined in 42 CFR 414.502). We noted that a 
hospital, or another laboratory that is not the single laboratory (as 
defined in 42 CFR 414.502), cannot furnish the ADLT, and there may be 
additional beneficiary concerns for these ADLTs that may not apply to 
the molecular pathology tests. For example, a hospital may not have an 
arrangement with the single laboratory that furnishes a particular 
ADLT, which could lead the hospital to delay the order for the ADLT 
until 14 days after the patient's discharge to avoid financial risk and 
thus potentially delay medically necessary care for the beneficiary. We 
solicited comments as to whether molecular pathology tests present the 
same concerns of delayed access to medically necessary care as ADLTs, 
noting that molecular pathology tests are not required to be furnished 
by a single laboratory and that there may be ``kits'' for certain 
molecular pathology tests that a hospital can purchase, allowing the 
hospital to perform the test. In the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59399) we agreed with commenters that limiting 
the new laboratory DOS exception to include only ADLTs (and not 
molecular pathology tests) would be inconsistent with the OPPS 
packaging policy and that relatively few laboratories may perform 
certain molecular pathology testing. We also acknowledged that 
hospitals may not currently have the technical expertise or 
certification requirements necessary to perform molecular pathology 
testing and therefore must rely on independent laboratories to perform 
the test. Therefore, we concluded that similar beneficiary access 
concerns that apply to ADLTs may also apply to molecular pathology 
tests, and we decided not to limit the exception at 42 CFR 
414.510(b)(5) to ADLTs only.
    However, after further review of this issue, we no longer believe 
the same beneficiary access concerns that apply to ADLTs also apply to 
molecular pathology tests. In particular, unlike ADLTs, molecular 
pathology tests are not required by statute to be furnished by a single 
laboratory, so hospital laboratories and independent laboratories are 
not prevented from performing molecular pathology testing. In addition, 
we understand that a number of kits have recently been developed and 
approved by FDA that would allow a hospital to more easily perform some 
of these molecular pathology tests. As such, we are no longer convinced 
that molecular pathology tests present the same concerns of delayed 
access to medically necessary care as ADLTs, which must be performed by 
a single laboratory. We believe a hospital's laboratory can develop the 
expertise to perform a molecular pathology test or establish an 
arrangement with an independent laboratory to perform the test. 
Therefore, we believe that any incentives that may exist to delay 
ordering until at least 14 days following a patient's discharge from 
the hospital outpatient department do not apply to molecular pathology 
tests.
    We recognize that limiting the laboratory DOS exception to ADLTs is 
not consistent with OPPS packaging policy. As discussed previously in 
this section of the proposed rule, we exclude all molecular pathology 
laboratory tests from OPPS packaging because we believe these tests may 
have a different pattern of clinical use, which may make them generally 
less tied to a primary service in the hospital outpatient setting than 
the more common and routine laboratory tests that are packaged (80 FR 
70348 through 70350). However, consistency with the OPPS packaging 
policy only formed part of the basis for the laboratory DOS exception 
at Sec.  414.510(b)(5). We note that beneficiary access concerns were 
the primary reason for establishing this laboratory DOS exception and 
we no longer believe the access concerns are sufficiently compelling 
for the molecular pathology tests. In light of the billing and 
enrollment concerns raised by the blood banks and blood centers and 
administrative issues raised by other stakeholders, CMS believes the 
policy reasons for removing these tests from the laboratory DOS 
exception at Sec.  414.510(b)(5) outweigh the difference it creates 
with the OPPS packaging policy.
    Therefore, we are considering a potential revision that would limit 
the laboratory DOS provisions of Sec.  414.510(b)(5) to tests 
designated by CMS as an ADLT under paragraph (1) of the definition of 
an ADLT in Sec.  414.502. Molecular pathology tests would be removed 
from the provisions of Sec.  414.510(b)(5). However, we note that 
molecular pathology tests would still be subject to the laboratory DOS 
provisions of Sec.  414.510(b)(2) and (3).

[[Page 39603]]

    We are requesting comments on potentially limiting the laboratory 
DOS exception policy at Sec.  414.510(b)(5) to Criterion (A) ADLTs that 
have been granted ADLT status by CMS. We note that we would consider 
finalizing this approach as a result of the public comments received.
3. Excluding Blood Banks and Blood Centers From the Laboratory DOS 
Exception at 42 CFR 414.510(b)(5)
    Following publication of the CY 2018 OPPS/ASC final rule with 
comment period, stakeholders informed us that blood banks and blood 
centers perform some of the molecular pathology test codes that are 
subject to the laboratory DOS exception policy at Sec.  414.510(b)(5). 
Based on information from stakeholders, it is our understanding that 
blood banks and centers are entities whose primary function is the 
collection, storage and dissemination of blood products and are 
typically accredited by the AABB (formally known as the American 
Association of Blood Banks). Representatives of blood banks and centers 
contend that while these entities may perform the same molecular 
pathology tests that are performed and billed by other laboratories 
that are not blood banks and centers, the blood banks and centers 
perform these tests for different reasons. Specifically, they assert 
that the blood banks and centers perform molecular pathology testing 
primarily to identify the most compatible blood product for a patient, 
whereas other laboratories typically provide molecular pathology 
testing for diagnostic purposes. According to these stakeholders, the 
patient has already been diagnosed with a specific disease or condition 
before the blood sample is provided to the blood bank or center, who 
are then tasked with providing compatible blood products and assessing 
risks of incompatibility for hospitals. In other words, blood banks and 
centers perform molecular pathology testing for patients to enable 
hospitals to prevent adverse conditions associated with blood 
transfusions, rather than perform molecular pathology testing for 
diagnostic purposes. Examples of molecular pathology testing performed 
by blood banks and centers include red blood cell phenotyping, as 
described by HCPCS code 81403, red blood cell antigen testing as 
described by HCPCS code 0001U, and platelet antigen testing as 
described by HCPCS code 81105.
    As discussed previously, when a test meets all of the conditions in 
the current laboratory DOS exception at Sec.  414.510(b)(5), the DOS of 
the test must be the date the test was performed, and the laboratory 
that performed the test must bill Medicare directly for the test. This 
would include circumstances when a laboratory that is a blood bank or 
blood center performs the test. However, given the different purpose of 
molecular pathology testing performed by the blood banks and centers, 
that is, blood compatibility testing, we question whether the molecular 
pathology testing performed by blood banks and centers is appropriately 
separable from the hospital stay, given that it typically informs the 
same patient's treatment during a future hospital stay. We are 
concerned that our current policy may unbundle molecular testing 
performed by a blood bank or center for a hospital patient. As such, we 
believe that molecular pathology testing, when performed by blood banks 
or centers, is inherently tied to a hospital service because hospitals 
receive payment for and/or use the blood and/or blood products provided 
by blood banks and blood centers to treat patients in the hospital 
setting. Accordingly, we believe that such testing is so connected to 
the treatment furnished to the patient in the hospital that it must be 
considered a hospital service and that hospitals should be permitted to 
bill and receive payment for such testing performed on these blood and/
or blood-related products.
    Based on our concern and the comments we have received from 
stakeholders, we are considering a regulatory change that would exclude 
blood banks and centers from the laboratory DOS exception at Sec.  
414.510(b)(5). Under this potential revision, the DOS for laboratory 
testing performed by blood banks and centers on specimens collected 
from a hospital outpatient during a hospital outpatient encounter 
would, depending on the underlying service, be the date of specimen 
collection. As a result, the hospital would bill for the laboratory 
test under arrangements and the blood bank or center performing the 
test would seek payment from the hospital. In addition, for purposes of 
excluding blood banks and centers from the provisions of Sec.  
414.510(b)(5), we would define a blood bank and center as an entity 
whose primary function is the collection, storage and dissemination of 
blood products. We believe this potential definition of a blood bank 
and center describes the primary responsibility of all blood banks and 
centers, which distinguishes these entities from other laboratory 
types. In developing a definition of blood banks and centers we are 
distinguishing blood banks and blood centers from non-blood bank and 
blood center laboratories that perform the same molecular pathology 
test codes but for different reasons, that is, for diagnostic purposes 
rather than for blood compatibility testing.
    We are requesting comments from hospitals, blood banks and centers, 
and other interested stakeholders regarding a potential revision to 
laboratory DOS policy that would exclude blood banks and centers from 
the laboratory DOS exception policy at Sec.  414.510(b)(5). We also are 
requesting specific comments as to how a blood bank and blood center 
may be defined in the context of this provision, and particularly how 
to distinguish blood banks and centers from other laboratories. We note 
that we would consider finalizing a revision to the laboratory DOS 
policy that excludes blood banks and centers from the provisions of 
Sec.  414.510(b)(5) as a result of comments received on this topic.

XX. Proposed Prior Authorization Process and Requirements for Certain 
Hospital Outpatient Department (OPD) Services

A. Background

    As part of its responsibility to protect the Medicare Trust Funds, 
CMS routinely analyzes data associated with all facets of the Medicare 
program. This responsibility includes monitoring the total amount or 
types of claims submitted by providers and suppliers; analyzing the 
claims data to assess the growth in the number of claims submitted over 
time (for example, monthly and annually, among other intervals); and 
conducting comparisons of the data with other relevant data, such as 
the total number of Medicare beneficiaries served by providers to help 
ensure the continued appropriateness of payment for services furnished 
in the hospital outpatient department (OPD).
    In line with this responsibility, CMS recently completed an 
analysis of the volume of covered OPD services furnished and determined 
that CMS has experienced significant increases in the utilization 
volume of some of these services. As an initial effort to focus our 
analysis, we chose to target services that represent procedures that 
are likely to be cosmetic surgical procedures and/or are directly 
related to cosmetic surgical procedures that are not covered by 
Medicare, but may be combined with or masquerading as therapeutic 
services.\214\ However, we also recognized the need to establish 
baseline measures for comparison purposes, including, but not limited 
to, the yearly rate-of-increase in the number of OPD claims submitted

[[Page 39604]]

and the average annual rate-of-increase in Medicare allowed amounts. 
Our analysis included the review of over 1.1 billion claims related to 
OPD services during the 11-year period from 2007 through 2017.\215\ We 
note that we determined that the overall rate of OPD claims submitted 
for payment to the Medicare program increased each year by an average 
rate of 3.2 percent. This equated to an increase from approximately 90 
million OPD claims submitted for payment in 2007 to approximately 118 
million claims submitted for payment in 2017. Our analysis also showed 
an average annual rate-of-increase in the Medicare allowed amount (the 
amount that Medicare would pay for services regardless of external 
variables, such as beneficiary plan differences, deductibles, and 
appeals) of 8.2 percent. We found that the total Medicare allowed 
amount for the OPD services claims processed in 2007 was approximately 
$31 billion and increased to $65 billion in 2017, while during this 
same 11-year period, the average annual increase in the number of 
Medicare beneficiaries per year was only 1.1 percent. The 8.2 percent 
increase exceeds the average annual increase of 5.8 percent per year in 
overall health care spending during that same time period (2007-2017), 
according to the analysis of the U.S. Bureau of Labor and Statistics 
Consumer Price Index for medical care.\216\
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    \214\ Medicare Benefit Policy Manual. Internet Only. Publication 
100-02, Chapter 16, Sec.  120.
    \215\ The data reviewed are maintained in the CMS Integrated 
Data Repository (IDR). The IDR is a high-volume data warehouse 
integrating Medicare Parts A, B, C, and D, and DME claims, 
beneficiary and provider data sources, along with ancillary data 
such as contract information and risk scores. Additional information 
is available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/IDR/index.html.
    \216\ The 5.8 percent average increase per year in overall 
health care spending was arrived at using data publicly available on 
the Bureau of Labor and Statistics web page, located at: https://www.bls.gov/cpi/factsheets/medical-care.htm.
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    Upon reviewing specific OPD categories of services in comparison to 
these figures, we found higher than expected volume increases for 
several services. Many of these services fall within the following five 
general categories of services: (1) Blepharoplasty; (2) botulinum toxin 
injections; (3) panniculectomy; (4) rhinoplasty; and (5) vein ablation.
    As discussed in the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59004 through 59015), and addressed again in section X.D. of 
this proposed rule, we have developed many payment policies with the 
goal in mind of managing the growth in Medicare spending for OPD 
services, and most recently, to control unnecessary increases in the 
volume of OPD services using our authority under section 1833(t)(2)(F) 
of the Act. Section 1833(t)(2)(F) of the Act authorizes CMS to develop 
a method for controlling unnecessary increases in the volume of covered 
OPD services. We believe the increases in volume associated with 
certain covered OPD services described earlier in this section are 
unnecessary because the data show that the volume of utilization of 
these services far exceeds what would be expected in light of the 
average rate-of-increase in the number of Medicare beneficiaries; these 
procedures are often considered cosmetic and, in those instances, would 
not be covered by Medicare; and we are unaware of other factors that 
might contribute to clinically valid increases in volume. Therefore, 
these above-average increases in volume suggest an increase in 
unnecessary utilization. As discussed in detail below, we are proposing 
to use the authority under section 1833(t)(2)(F) of the Act to require 
prior authorization for certain covered OPD services as a condition of 
Medicare payment.

B. Proposal for a Prior Authorization Process for Certain OPD Services

    We believe a prior authorization process for certain OPD services 
would ensure that Medicare beneficiaries continue to receive medically 
necessary care while protecting the Medicare Trust Funds from improper 
payments, and at the same time keeping the medical necessity 
documentation requirements unchanged for providers. We believe prior 
authorization for these services will be an effective method for 
controlling increases in the volume of these services because we expect 
that it will reduce the instances in which Medicare pays for these 
services when they are merely cosmetic and not medically necessary. As 
a method for controlling unnecessary increases in the volume of certain 
covered OPD services, we are proposing to use our authority under 
section 1833(t)(2)(F) of the Act to establish a process through which 
providers would submit a prior authorization request for a provisional 
affirmation of coverage before a covered OPD service is furnished to 
the beneficiary and before the claim is submitted for processing. We 
are proposing to establish a new subpart I under 42 CFR part 419 to 
codify the conditions and requirements for the proposed prior 
authorization for certain covered OPD services to help control 
unnecessary increases in the volume of covered OPD services. This 
subpart would establish the conditions of payment for OPD services that 
require prior authorization; establish the submission requirements for 
prior authorization requests, including methods for expedited review of 
prior authorization requests; and provide for suspension of the prior 
authorization process generally, or for particular services. In order 
to allow time for providers to better understand this proposed prior 
authorization process, for CMS to ensure sufficient time is allowed for 
outreach and education to affected stakeholders, and for contractor 
operational updates to be in place, we are proposing that this 
requirement would begin for dates of service on or after July 1, 2020. 
We note that we are proposing to pattern some of the provisions for 
prior authorization for covered OPD services after the prior 
authorization program that we have already established for certain 
durable medical equipment, prosthetics, and supplies (DMEPOS) under 42 
CFR 414.234.
    As we noted, CMS routinely analyzes data as part of its oversight 
of the Medicare program, and our analysis was used as a basis for this 
proposed rule. Moreover, the Medicare program is continuing to 
incorporate advancements in health information technology (health IT) 
into its program operations. This includes improvements in 
interoperability, the secure electronic transmission of clinical data, 
and the potential incorporation of artificial intelligence into the 
claims review process. As these advancements in health IT continue, we 
are committed to ensuring that these efficiencies and enhancements will 
be considered, whenever possible, to reduce the burden placed on 
providers.
    As stated earlier, we are proposing to establish a new subpart I 
under part 419 (containing Sec. Sec.  419.80 through 419.89 (Sec. Sec.  
419.84 through 419.89 would be reserved)) to codify the following 
proposed policies for prior authorization for certain covered OPD 
services.
1. Basis, Scope, and Definitions for Proposed New Subpart I Under Part 
419
    We are proposing to specify the basis and scope of the proposed 
subpart under proposed new Sec.  419.80, using section 1833(t)(2)(F) of 
the Act as our authority to establish the prior authorization process 
and requirements.
    We are proposing to define key terms associated with the proposed 
prior authorization process for certain covered OPD services under 
proposed new Sec.  419.81. We are proposing to define ``prior 
authorization'' to mean a

[[Page 39605]]

process through which a request for provisional affirmation of coverage 
is submitted to CMS or its contractors for review before the service is 
provided to the beneficiary and before the claim is submitted. We are 
proposing to define ``provisional affirmation'' to mean a preliminary 
finding that a future claim for the service will meet Medicare's 
coverage, coding, and payment rules. As previously mentioned, we 
patterned these proposed definitions after the prior authorization 
process for certain DMEPOS under 42 CFR 414.234. Lastly, we are 
proposing to define the ``list of hospital outpatient department 
services requiring prior authorization'' as the list of outpatient 
department services CMS publishes in accordance with proposed new Sec.  
419.83(a) that require prior authorization as a condition of payment.
2. Prior Authorization as a Method for Controlling Unnecessary 
Increases in the Volume of Covered Outpatient Services (Proposed New 
Sec.  419.82)
    In proposed new Sec.  419.82(a), we are proposing that, as a 
condition of Medicare payment, a provider must submit a prior 
authorization request for services on the list of hospital outpatient 
department services requiring prior authorization to CMS that meets the 
requirements of the proposed new Sec.  419.82(c); namely, that the 
prior authorization request includes all documentation necessary to 
show that the service meets applicable Medicare coverage, coding, and 
payment rules, and that the request be submitted before the service is 
furnished to the beneficiary and before the claim is submitted. We are 
proposing that claims submitted for services that require prior 
authorization that have not received a provisional affirmation of 
coverage from CMS or its contractors would be denied, unless the 
provider is exempt under Sec.  419.83(c) (proposed new in Sec.  
419.82(b)(1)). This would include the denial of any claims associated 
with the denial of a service listed in proposed Sec.  419.83(a)(1), 
including services such as anesthesiology services, physician services, 
and/or facility services. Moreover, we are proposing that even when a 
provisional affirmation has been received, a claim for services may be 
denied based on either technical requirements that can only be 
evaluated after the claim has been submitted for formal processing or 
information not available at the time the prior authorization request 
is received (proposed new Sec.  419.82(b)(2)(i) and (ii)).
    We are proposing that a provider must submit a prior authorization 
request for any service on the list of outpatient department services 
requiring prior authorization that would be published by CMS (proposed 
new Sec.  419.82(c)). As noted earlier, we are proposing that, in 
submitting a prior authorization request, the provider must include all 
relevant documentation necessary to show that the service meets 
applicable Medicare coverage, coding, and payment rules and that the 
request be submitted before the service is provided to the beneficiary 
and before the claim is submitted (proposed new Sec.  419.82(c)(1)(i) 
and (ii)). We also are proposing that providers have an opportunity to 
submit prior authorization requests for expedited review when a delay 
could seriously jeopardize the beneficiary's life, health, or ability 
to regain maximum function (proposed new Sec.  419.82(c)(2). 
Documentation that the beneficiary's life, health, or ability to regain 
maximum function is in serious jeopardy must be submitted with this 
request.
    We are proposing that CMS or its contractor will review a prior 
authorization request for compliance with applicable Medicare coverage, 
coding, and payment rules (proposed new Sec.  419.82(d)). If the 
request meets the applicable Medicare coverage, coding, and payment 
rules, CMS or its contractor would issue a provisional affirmation to 
the requesting provider (proposed new Sec.  419.82(d)(1)(i)). If the 
request does not meet the applicable Medicare coverage, coding, and 
payment rules, CMS or its contractor would issue a non-affirmation 
decision to the requesting provider (proposed new Sec.  
419.82(d)(1)(ii)). In proposed new Sec.  419.82(d)(iii), we are 
proposing that CMS or its contractor would issue a decision 
(affirmative or non-affirmative) within 10 business days.
    We are proposing that, if the provider receives a non-affirmation 
decision, we would allow the provider to resubmit a prior authorization 
request with any applicable additional relevant documentation. This 
would include the resubmission of requests for expedited reviews 
(proposed new Sec.  419.82(e)(1) and (2)).
    We are proposing that CMS or its contractor would initiate an 
expedited review of a prior authorization request when requested by a 
provider and where CMS or its contractor determines that a delay could 
seriously jeopardize the beneficiary's life, health or ability to 
regain maximum function (proposed new Sec.  419.82(d)(2)). Upon making 
this determination, we are proposing that CMS or its contractor would 
issue a provisional affirmation or non-affirmation in accordance with 
proposed new Sec.  419.82(d)(1) using an expedited timeframe of 2 
business days.
    As part of the requirements for the DMEPOS prior authorization 
process,\217\ under 42 CFR 405.926(t), we specified that a prior 
authorization request that is non-affirmed is not an initial 
determination on a claim for payment for services provided and, 
therefore, would not be appealable. We are proposing to apply this same 
provision to the OPD services prior authorization process. Therefore, 
we are proposing to revise Sec.  405.926(t) so that OPD prior 
authorization requests that are determined non-affirmed also would not 
be considered an initial determination and, therefore, would not be 
appealable. However, the provider will still have the opportunity to 
resubmit a prior authorization request under proposed new Sec.  
419.82(e) provided the claim has not yet been submitted and denied.
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    \217\ 80 FR 81674 (December 30, 2015).
---------------------------------------------------------------------------

    If a claim is submitted for the services listed in proposed new 
Sec.  419.83(a)(1) without a provisional affirmation, it will be 
denied. The claim denial is an initial determination and a 
redetermination request may be submitted in accordance with 42 CFR 
405.940. Consistent with current policy, we also are proposing in 
proposed new Sec.  419.82(b)(3) that any claims associated with or 
related to a service listed in proposed new Sec.  419.83(a)(1) for 
which a claim denial is issued will be denied as well since these 
services would be unnecessary if the service listed in proposed new 
Sec.  419.83(a)((1) had not been provided. These associated services 
include, but are not limited to, services such as anesthesiology 
services, physician services, and/or facility services. The associated 
claims would be denied whether a non-affirmation was received for a 
service listed in proposed new Sec.  419.83(a)(1) or the provider did 
not request a prior authorization request. A contractor is not required 
to request medical documentation from the provider who billed the 
associated claims before making such a denial. We are requesting public 
comments on whether the requirement in proposed new Sec.  419.82(b)(3) 
should remain in 42 CFR part 419 or be co-located with the regulatory 
provisions governing initial determinations located in 42 CFR part 405.
3. Proposed List of Outpatient Department Services That Would Require 
Prior Authorization (Proposed New Sec.  419.83)
    We are proposing that the list of covered OPD services that would 
require prior authorization are those

[[Page 39606]]

identified by the CPT codes in Table 38. For ease of review, we are 
only including the five categories of services within which these CPT 
codes fall in proposed new Sec.  419.83(a)(1). The five categories of 
services would be: Blepharoplasty; botulinum toxin injections; 
panniculectomy; rhinoplasty; and vein ablation. In proposed new Sec.  
419.83(a)(2), we are proposing that technical updates, such as 
corrections or conforming changes to the names of the services or CPT 
codes, may be made on the CMS web page.
    Also, we are proposing that CMS may elect to exempt a provider from 
the prior authorization process in proposed new Sec.  419.82 upon a 
provider's demonstration of compliance with Medicare coverage, coding, 
and payment rules and that this exemption would remain in effect until 
CMS elects to withdraw the exemption (proposed new Sec.  419.83(c)). We 
would exempt providers that achieve a prior authorization provisional 
affirmation threshold of at least 90 percent during a semiannual 
assessment. We anticipate that an exemption will take approximately 90 
calendar days to effectuate. We believe that, by achieving this 
percentage, the provider would be demonstrating an understanding of the 
requirements for submitting accurate claims. We do not believe it is 
necessary for a provider to achieve 100 percent compliance to qualify 
for an exemption because innocent and sporadic errors could occur that 
are not deliberate or systematic attempts to submit claims that are not 
payable. In addition, we propose that we might withdraw an exemption if 
evidence becomes available based on a review of claims that the 
provider has begun to submit claims that are not payable based on 
Medicare's billing, coding or payment requirements. If the rate of 
nonpayable claims submitted becomes higher than 10 percent during a 
biannual assessment, we will consider withdrawing exemption. Again, we 
anticipate that withdrawing the exemption may take approximately 90 
calendar days to effectuate.
    Moreover, we are proposing that CMS may suspend the outpatient 
department services prior authorization process requirements generally 
or for a particular service(s) at any time by issuing notification on 
CMS' web page (proposed new Sec.  419.83(d)). While we believe this is 
unlikely to occur, we nonetheless believe it is necessary for us to 
retain this flexibility in the event of certain circumstances, such as 
where the cost of the prior authorization program exceeds the savings 
it generates.

C. Proposed List of Outpatient Department Services Requiring Prior 
Authorization

    As mentioned earlier, we have identified a list of specific 
services (Table 38) that, based on review and analysis of claims data 
for the 11-year period from 2007 through 2017, show higher than 
expected, and therefore, we believe, unnecessary, increases in the 
volume of service utilization. These services fall within the following 
five categories: blepharoplasty; botulinum toxin injections; 
panniculectomy; rhinoplasty; and vein ablation. In making the decision 
to propose to include the specific services in the proposed list of 
hospital outpatient department services requiring prior authorization 
as shown in Table 38, we first considered that these services are most 
often considered cosmetic and, therefore, are only covered by Medicare 
in very rare circumstances. We then viewed the current volume of 
utilization of these services and determined that the utilization far 
exceeds what would be expected in light of the average rate-of-increase 
in the number of Medicare beneficiaries. We note that we are unaware of 
other factors that might contribute to increases in volume of services 
that indicate that the services are increasingly medically necessary, 
such as clinical advancements or expanded coverage criteria that would 
have led to the increases. Below we describe what we believe are the 
unnecessary increases in volume of each of the categories of services 
for which we are proposing to require prior authorization:
     Botulinum Toxin Injections: In reviewing CMS data 
available through the Integrated Data Repository (IDR), we determined 
that destruction of nerves to muscles of the face via botulinum toxin 
injections had an overall average annual increase in the number of 
unique claims of approximately 19.3 percent from 2007 through 2017, 
with an average annual increase in financial expense to the Medicare 
program as a result of allowed amounts in service costs and payments of 
approximately 27.8 percent and an average annual increase in the number 
of unique patients of approximately 17.9 percent. Based on analysis and 
comparisons of claims data, these increases in service utilization 
volume, financial expense, and the number of Medicare patients far 
exceed the typical baseline rates or trends we identified.
     Panniculectomy: Our analysis of IDR data showed that 
panniculectomy had an average annual increase in the number of unique 
claims of approximately 9.2 percent from 2007 through 2017, with an 
average annual increase in financial expense to the Medicare program as 
a result of allowed amounts in service costs and payments of 
approximately 13.9 percent and an average annual increase in the number 
of unique patients of approximately 9.2 percent. Based on analysis and 
comparisons of claims data, these increases in service utilization 
volume, financial expense to the Medicare program, and the number of 
Medicare patients also far exceed the typical baseline rates or trends 
we identified (that is, the 9.2 percent average annual increase in the 
rate of Medicare beneficiaries receiving a panniculectomy is 
significantly higher than the 1.1 percent average annual increase in 
the Medicare beneficiaries who received outpatient services over that 
eleven-year period). Additionally, some panniculectomy services were 
reported on claims by providers in combination with procedures 
performed on the patient's chest region, in addition to abdominal 
procedures.
     Vein Ablation: In reviewing the available data from the 
IDR, vein ablation had an average annual increase in the number of 
unique claims of approximately 11.1 percent from 2007 through 2017, 
with an average annual increase in financial expense to the Medicare 
program as a result of allowed amounts in service costs and payments of 
approximately 11.5 percent and an average annual increase in the number 
of unique patients of approximately 9.5 percent. Based on analysis and 
comparisons of claims data, these increases in service utilization 
volume, financial expense to the Medicare program, and the number of 
Medicare patients also far exceed the typical baseline rates or trends 
we identified (that is, the 9.5 percent average annual increase in the 
rate of Medicare beneficiaries receiving vein ablation is significantly 
higher than the 1.1 percent average annual increase in the Medicare 
beneficiaries who received outpatient services over that eleven-year 
period).
     Rhinoplasty: In reviewing available IDR data, rhinoplasty 
had an average annual increase in the number of unique patients of 
approximately 1.9 percent. This represents a 64.1 percent increase in 
comparison to the 1.1 percent rate of increase for unique patients for 
all OPPS services for that same time period. Even though this category 
of services includes some procedures that had annual increases in 
service utilization volume far exceeding what we would expect based on 
the typical rate, this was not true for all services within the 
category. One example that did exceed the

[[Page 39607]]

expected rate was the number of unique claims for the procedure of 
widening of the nasal passage. This rate increased significantly more 
than the expected rate and was as much as 34.8 percent from 2016 
through 2017.
     Blepharoplasty: In reviewing the IDR data, blepharoplasty, 
like rhinoplasty, had overall statistics that were similar to the rate 
increases expected for outpatient services. However, some procedures 
had annual increases in service utilization volume that far exceeded 
these expected rates. As an example, the number of unique claims for 
the procedure of repairing of the upper eyelid muscle to correct 
drooping or paralysis increased as high as 48.9 percent from 2011 
through 2012, which far exceeds the rate we would expect for such a 
service.
    Table 38 lists the specific procedures within the five categories 
of services that we are proposing for the proposed list of hospital 
outpatient department services requiring prior authorization.
BILLING CODE 4120-01-P

[[Page 39608]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.060


[[Page 39609]]


[GRAPHIC] [TIFF OMITTED] TP09AU19.061

BILLING CODE 4120-01-C

XXI. Comment Solicitation on Cost Reporting, Maintenance of Hospital 
Chargemasters, and Related Medicare Payment Issues

    The Department is examining the relationship of hospital 
chargemasters to the Medicare cost report and its use in setting 
Medicare payment for hospital services in connection with the 
Department's effort to increase innovation in its programs. For this 
cause, the Department is seeking public comments, including comments 
from hospitals and revenue cycle management experts, cost report 
experts, accounting firms, or others who understand hospital cash 
flows, on innovative and streamlined methods for establishing hospital 
payment to the extent permitted by law.
    Medicare-certified institutional providers are required to submit 
an annual cost report to CMS which is used to set prospective payment 
rates for institutions. The cost report contains provider information 
such as facility characteristics, utilization data, cost and charges by 
cost center (in total and for Medicare), Medicare settlement data, and 
financial statement data.\218\ The reported charges are generally those 
that are derived from the hospital chargemaster. We are seeking public 
comments on the continued value of the chargemaster charges in setting 
hospital payment and to other stakeholders, as well as the costs 
associated with maintaining the chargemaster for purposes of Medicare 
cost reporting and payment. Further, we are seeking public comments on 
whether it would be possible to modernize or streamline the Medicare 
cost reporting process, for example, by replacing it with other 
processes or if it could be modified in content, methodology, or 
approach. We also recognize that hospital charge data are used in 
calculating a number of payments CMS makes to hospitals (for example, 
in recalibrating relative weights, the calculation of outlier payments, 
critical access hospital payments, new technology add-on payments, and 
pretransplant cost reimbursement) and that these charge data may 
reflect the charges found on the hospital's chargemaster. We are 
seeking public comments on whether and how the replacement or 
modification of the chargemaster might affect the submission of data 
used by CMS to calculate these payments, as well as alternative sources 
that could be used for the information necessary to calculate these 
payments. We also are seeking public comments on the decision process, 
and why the chargemaster might be updated more frequently than on an 
annual basis and how this more frequent updating could affect costs for 
patients.
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    \218\ https://www.cms.gov/research-statistics-data-and-systems/downloadable-public-use-files/cost-reports/.
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XXII. Proposed Changes to Requirements for Grandfathered Children's 
Hospitals-Within-Hospitals (HwHs)

    Existing regulations at Sec.  412.22(e) define a hospital-within-a-
hospital (HwH) as a hospital that occupies space in the same building 
as another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.

[[Page 39610]]

Existing Sec.  412.22(f) provides for the grandfathering of HwHs that 
were in existence on or before September 30, 1995, so long as the HwH 
continues to operate under the same terms and conditions, including the 
number of beds. Sections 412.22(h) and 412.25(e), relating to 
satellites of hospitals and hospital units, respectively, excluded from 
the IPPS, define a satellite facility as a part of a hospital or unit 
that provides inpatient services in a building also used by another 
hospital, or in one or more entire buildings located on the same campus 
as buildings used by another hospital. Sections 412.22(h)(3) and 
412.25(e)(3) provide for the grandfathering of excluded hospitals and 
units that were structured as satellite facilities on September 30, 
1999, to the extent that they operate under the same terms and 
conditions in effect on that date. While these rules initially only 
applied to LTCHs, in 1997, CMS expanded the scope of these rules to all 
hospitals excluded from the IPPS (including children's hospitals) 
because the underlying policy concern of hospitals creating new 
entities that were separate in name only (essentially operating as 
units of the hospital) in order to increase Medicare revenue was not 
unique to LTCHs. For example, we have expressed our concerns that an 
HwH's ``configuration could result in patient admission, treatment, and 
discharge patterns that are guided more by attempts to maximize 
Medicare payments than by patient welfare'' and that ``the unregulated 
linking of an IPPS hospital and a hospital excluded from the IPPS could 
lead to two Medicare payments for what was essentially one episode of 
patient care'' (69 FR 48916 and 49191).
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38292 through 
38294), we finalized a change to our HwH regulations at Sec.  412.22(e) 
to only require, as of October 1, 2017, that IPPS-excluded HwHs that 
are co-located with IPPS hospitals comply with the separateness and 
control requirements in those regulations. We adopted this change 
because we believe that the policy concerns that underlay the previous 
HwH regulations are sufficiently moderated in situations where IPPS-
excluded hospitals are co-located with each other, in large part due to 
changes that have been made to the way most types of IPPS-excluded 
hospitals are paid under Medicare. As part of our ongoing efforts to 
reduce regulatory burdens, we have continued to examine areas in which 
the rules for co-located entities are no longer necessary. As a result 
of this examination, we believe that there is no Medicare payment 
policy rationale for prohibiting grandfathered children's HwHs from 
increasing their number of beds. Given the low number of Medicare 
claims submitted by these children's hospitals, which results in a 
minimal level of Medicare reimbursement to them relative to the 
payments they receive from other payers, we believe that such a 
regulatory change would allow these hospitals to address changing 
community needs for services without any increased incentive for 
inappropriate patient shifting to maximize Medicare payments. 
Additionally, we do not believe that allowing grandfathered children's 
HwHs to increase their bed size would impart an economic advantage to 
these hospitals relative to other hospitals; however, we invite comment 
on this area. We are proposing to revise Sec.  412.22(f)(1) and (2) of 
the regulations to allow a grandfathered children's HwH to increase its 
number of beds without resulting in the loss of grandfathered status. 
We are seeking public comment on this proposal. Additionally, we are 
seeking public comment on whether this proposal could create unintended 
or inadvertent consequences.

XXIII. Files Available to the Public via the Internet

    The Addenda to the OPPS/ASC proposed rules and the final rules with 
comment period are published and available via the internet on the CMS 
website. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59154), for CY 2019, we changed the format of the OPPS Addenda A, B, 
and C, by adding a column entitled ``Copayment Capped at the Inpatient 
Deductible of $1,364.00'' where we flag, through use of an asterisk, 
those items and services with a copayment that is equal to or greater 
than the inpatient hospital deductible amount for any given year (the 
copayment amount for a procedure performed in a year cannot exceed the 
amount of the inpatient hospital deductible established under section 
1813(b) of the Act for that year). For CY 2020, we are proposing to 
retain these columns, updated to reflect the amount of the 2020 
inpatient deductible.
    To view the Addenda to this proposed rule pertaining to CY 2020 
payments under the OPPS, we refer readers to the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; 
select ``1717-P'' from the list of regulations. All OPPS Addenda to 
this proposed rule are contained in the zipped folder entitled ``2020 
NPRM OPPS Addenda'' at the bottom of the page. To view the Addenda to 
this proposed rule pertaining to CY 2020 payments under the ASC payment 
system, we refer readers to the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html; select ``1717-P'' from the list of regulations. All 
ASC Addenda to this proposed rule are contained in a zipped folder 
entitled ``Addendum AA, BB, DD1, DD2, and EE.''

XXIV. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

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

B. ICRs for the Hospital OQR Program

1. Background
    The Hospital OQR Program is generally aligned with the CMS quality 
reporting program for hospital inpatient services known as the Hospital 
IQR Program. We refer readers to the CY 2011 through CY 2019 OPPS/ASC 
final rules with comment periods (75 FR 72111 through 72114; 76 FR 
74549 through 74554; 77 FR 68527 through 68532; 78 FR 75170 through 
75172; 79 FR 67012 through 67015; 80 FR 70580 through 70582; 81 FR 
79862 through 79863; 82 FR 59476 through 59479; and 83 FR 59155 through 
59156, respectively) for detailed discussions of

[[Page 39611]]

Hospital OQR Program information collection requirements we have 
previously finalized. The information collection requirements 
associated with the Hospital OQR Program are currently approved under 
OMB control number 0938-1109 which expires on March 31, 2021. Below we 
discuss only the changes in burden that would result from the proposed 
policies in this proposed rule with comment period, if finalized.
    In section XIV.B.3.b. of this proposed rule, we are proposing to 
remove one measure from the Hospital OQR Program for the CY 2022 
payment determination; OP-33: External Beam Radiotherapy for Bone 
Metastases. The reduction in burden associated with this proposal is 
discussed below.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59477), we finalized a proposal to utilize the median hourly wage rate, 
in accordance with the Bureau of Labor Statistics (BLS), to calculate 
our burden estimates for the Hospital OQR Program. The BLS describes 
Medical Records and Health Information Technicians as those responsible 
for organizing and managing health information data; therefore, we 
believe it is reasonable to assume that these individuals will be 
tasked with abstracting clinical data for submission for the Hospital 
OQR Program. In the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59156), we utilized a median hourly wage of $18.29 per hour. We note 
that since then, more recent wage data have become available, and we 
are updating the wage rate used in these calculations. The more recent 
data (May 2018) from the Bureau of Labor Statistics reflects a median 
hourly wage of $19.40 \219\ per hour for a Medical Records and Health 
Information Technician professional. We have finalized a policy to 
calculate the cost of overhead, including fringe benefits, at 100 
percent of the mean hourly wage (82 FR 59477). This is necessarily a 
rough adjustment, both because fringe benefits and overhead costs vary 
significantly from employer-to-employer and because methods of 
estimating these costs vary widely from study-to-study. Nonetheless, we 
believe that doubling the hourly wage rate ($19.40 x 2 = $38.80) to 
estimate total cost is a reasonably accurate estimation method and 
allows for a conservative estimate of hourly costs. This approach is 
consistent with our previously finalized burden calculation methodology 
(82 FR 59477). Accordingly, we calculate cost burden to facilities 
using a wage plus benefits estimate of $38.80 per hour throughout the 
discussion below for the Hospital OQR Program.
---------------------------------------------------------------------------

    \219\ Occupational Employment and Wages, May 2018. Available at: 
https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm. Accessed May 7, 2019.
---------------------------------------------------------------------------

2. Proposed Removal of OP-33 for the CY 2022 Payment Determination and 
Subsequent Years
    In section XIV.B.3.b. of this proposed rule, we are proposing to 
remove one measure submitted via a web-based tool beginning with the CY 
2022 payment determination and for subsequent years: OP-33: External 
Beam Radiotherapy for Bone Metastases. As we stated in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70582), we estimate that 
hospitals spend approximately 10 minutes, or 0.167 hours, per measure 
to report web-based measures. Accordingly, we believe that the proposal 
to remove OP-33 for the CY 2022 payment determination would reduce 
burden by 0.167 hours per hospital, resulting in a burden reduction of 
551 hours (0.167 hours x 3,300 hospitals) and $21,379 (551 hours x 
$38.80) across 3,300 hospitals.

C. ICRs for the ASCQR Program

1. Background
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74554), the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53672), and the CY 2013, CY 2014, CY 2015, CY 2016, CY 2017, CY 2018, 
and CY 2019 OPPS/ASC final rules with comment period (77 FR 68532 
through 68533; 78 FR 75172 through 75174; 79 FR 67015 through 67016; 80 
FR 70582 through 70584; 81 FR 79863 through 79865; 82 FR 59479 through 
59481; and 83 FR 59156 through 59157, respectively) for detailed 
discussions of the ASCQR Program information collection requirements we 
have previously finalized. The information collection requirements 
associated with the ASCQR Program are currently approved under OMB 
control number 0938-1270 which expires on January 31, 2022. As 
discussed below, there are only nominal changes in burden that would 
result from the proposed policies in this proposed rule.
2. Proposal To Adopt ASC-19: Facility-Level 7-Day Hospital Visits After 
General Surgery Procedures Performed at Ambulatory Surgical Centers 
(NQF #3357)
    In section XV.B.3. of this this proposed rule, we are proposing, 
beginning with the CY 2024 payment determination and for subsequent 
years, to adopt one measure collected via Medicare claims: ASC-19: 
Facility-Level 7-Day Hospital Visits after General Surgery Procedures 
Performed at Ambulatory Surgical Centers (NQF #3357). Data used to 
calculate scores for this measure are collected via Medicare Part A and 
Part B administrative claims and Medicare enrollment data; therefore, 
ASCs would not be required to report any additional data. Because this 
measure does not require ASCs to submit any additional data, we believe 
there would be only a nominal change in other costs experienced by ASCs 
associated with this proposal due to having to review and track 
confidential feedback and reports related to the proposed ASC-19 
measure.

D. ICR for Proposal on Hospital Price Transparency

    In section XVI. of this proposed rule, we seek to promote price 
transparency in hospital standard charges so that consumers can be 
empowered to make more informed decisions about their health care. If 
finalized, we believe these proposed requirements would represent an 
important step towards putting consumers at the center of their health 
care and ensuring they have access to needed information.
    We note that hospitals in the United States maintain chargemasters, 
a list of their gross charges for all individual items and services as 
part of their standard billing and business practices.\220\ 
Additionally, hospitals maintain electronic data on charges they 
negotiate with third party payers for hospital items and services as 
well as service packages. As such, we believe that the burden for 
making this information publicly available is minimal and estimate only 
a small burden for each hospital to extract, review, and conform the 
posting of gross charges and payer-specific negotiated charges for all 
hospital items and services in the machine-readable format as specified 
in this proposed rule. In addition, we estimate some burden associated 
with hospitals making public their payer-specific negotiated charges 
for a set of at least 300 (70 CMS-specified and at least 230 hospital-
selected) shoppable services in a consumer-friendly manner, with 
flexibility for hospitals to determine the most consumer-friendly 
format, as

[[Page 39612]]

discussed in section XVI.F.5. of this proposed rule.
---------------------------------------------------------------------------

    \220\ Batty, M., & Ippolito, B. (2017). Mystery of the 
chargemaster: Examining the role of hospital list prices in what 
patients actually pay. Health Affairs, 36(4), 689-696. Available at: 
https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0986.
---------------------------------------------------------------------------

    We estimate that this proposed rule applies to 6,002 hospitals 
operating within the United States under the definition of ``hospital'' 
discussed in section XVI.B.1. of this proposed rule. To estimate this 
number, we subtract 208 federally-owned hospitals from the total number 
of U.S. hospitals, 6,210 hospitals \221\ (6,210 total hospitals--208 
federally-owned hospitals).
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    \221\ American Hospital Association. Fast Facts on U.S. 
Hospitals, 2019. Available at: https://www.aha.org/statistics/fast-facts-us-hospitals.
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    We estimate the hourly cost for each labor category used in this 
analysis by referencing Bureau of Labor Statistics report on 
Occupational Employment and Wages (May 2018 \222\) in the Table 39. 
There are many professions involved in any business's processes. 
Therefore, we use the wages of General and Operations Managers as a 
proxy for management staff, the wages of Lawyers as a proxy for legal 
staff, the wages of Network and Computer Systems Administrators as a 
proxy for information technology (IT) staff, and the wage of Business 
Operations Specialists as a proxy for other business staff throughout 
this analysis. Obtaining data on overhead costs is challenging. 
Overhead costs vary greatly across industries and facility sizes. In 
addition, the precise cost elements assigned as ``indirect'' or 
``overhead'' costs, as opposed to direct costs or employee wages, are 
subject to some interpretation at the facility level. Therefore, we 
calculate the cost of overhead at 100 percent of the mean hourly wage 
in line with the Hospital Inpatient Quality Reporting Program and the 
Hospital Outpatient Quality Reporting Program (81 FR 57260 and 82 FR 
59477, respectively).
---------------------------------------------------------------------------

    \222\ Bureau of Labor Statistics. National Occupational 
Employment and Wage Estimates, May 2018. Available at: http://www.bls.gov/oes/2018/may/oes_nat.htm.
[GRAPHIC] [TIFF OMITTED] TP09AU19.062

    In order to comply with regulatory updates proposed in this 
proposed rule, affected hospitals would first need to review the rule. 
We estimate that this task would take a lawyer on average 1 hour (at 
$138.68 per hour, which is based on the Bureau of Labor Statistics 
(BLS) wage for Lawyers (23-1011) \223\) to perform the initial review, 
and a general operations manager on average 1 hour (at $119.12 per 
hour, which is based on the Bureau of Labor Statistics (BLS) wage for 
General and Operations Managers (11-1021) \224\) to review and 
determine compliance requirements. Therefore, we estimate 2 hours per 
hospital, with a total of 12,004 hours (2 hours x 6,002 hospitals). The 
cost is $257.80 per hospital (1 hour x $138.68 + 1 hour x $119.12), 
with a total cost of $1,547,316 ($257.80 x 6,002 hospitals).
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    \223\ Bureau of Labor Statistics. Occupational Employment and 
Wage Estimates, May 2018: 23-1011 Lawyers. Available at: https://www.bls.gov/oes/current/oes231011.htm.
    \224\ Bureau of Labor Statistics. Occupational Employment and 
Wage Estimates, May 2018: 11-1021 General and Operations Managers. 
Available at: https://www.bls.gov/oes/current/oes111021.htm.
---------------------------------------------------------------------------

    After reviewing the rule, hospitals would need to review their 
policies and business practices in the context of the defined terms and 
requirements for information collection then determine how to comply. 
We believe this will require minimal changes for affected hospitals 
because the standard charge information to be collected is already 
compiled and maintained as part of hospitals' management practices and 
electronic accounting and billing systems. Moreover, we are proposing 
requirements to make payer-specific negotiated rates public for a total 
of 300 shoppable services (70 CMS-specified and 230 hospital-selected) 
in a consumer-friendly manner, including listing the charges for 
associated ancillary services provided by the hospital so that the 
hospital charge information is more accessible and easier to digest for 
consumers seeking to obtain pricing information for making decisions 
about their treatment. We are proposing several definitions and 
requirements for making data publicly available pertaining to gross 
charges, negotiated charges and shoppable services at proposed 45 CFR 
part 180. We estimate it would take a business operations specialist, 
on average, 8 hours (at $74.00 per hour, which is based on the Bureau 
of Labor Statistics (BLS) wage for Business Operations Specialists, All 
Other (13-1199) \225\) to complete necessary processes and procedures 
to gather and compile required information and post it to the web in 
the form and manner specified by this proposed rule. We estimate 8 
hours per hospital. The total burden hours are 48,016 hours (8 hours x 
6,002 hospitals). The cost is $592.00 per hospital (8 hours x $74.00), 
with a total cost of $3,553,184 (48,016 hours x $74.00).
---------------------------------------------------------------------------

    \225\ Bureau of Labor Statistics. Occupational Employment and 
Wages, May 2018: 13-1199 Business Operations Specialist, All Other. 
Available at: https://www.bls.gov/oes/current/oes131199.htm.
---------------------------------------------------------------------------

    We also are proposing several requirements for posting required 
information at proposed 45 CFR 180.50 and 180.60. These requirements 
impose form and manner standards for the hospitals as defined in this 
proposed rule. We estimate that a network and computer system 
administrator would spend on average 2 hours (at $83.72 per hour, which 
is based on the Bureau of Labor Statistics (BLS) wage for Network and 
Computer Systems Administrators (15-1142) \226\) to meet requirements 
specified by this proposed rule. Therefore, we estimate 2 hours per 
hospital. The total burden hours are 12,004 hours (2 hours x 6,002 
hospitals). The cost is $167.44 per hospital (2 hours

[[Page 39613]]

x $83.72), with a total cost of $1,004,975 (12,004 hours x $83.72).
---------------------------------------------------------------------------

    \226\ Bureau of Labor Statistics. Occupational Employment and 
Wages, May 2018: 15-1142 Network and Computer System Administrators. 
Available at: https://www.bls.gov/oes/current/oes151142.htm.
---------------------------------------------------------------------------

    We conclude that the annual burden per hospital should be 
calculated with all activities performed by four professions combined. 
We estimate an annual burden assessment to be 12 hours (2 hours + 8 
hours + 2 hours) per hospital with a cost of $1,017.24 ($257.80 + 
$592.00 + $167.44) per hospital. We also estimate a total national 
burden of 72,024 hours (12 hours x 6,002 hospitals) and total cost of 
$6,105,474 ($1,017.24 x 6,002 hospitals). (See Table 40.)
[GRAPHIC] [TIFF OMITTED] TP09AU19.063

E. ICRs for Proposed Revision of the Definition of ``Expected Donation 
Rate'' for Organ Procurement Organizations

    As described in section XVIII. of this proposed rule, we are 
proposing to revise the definition of ``expected donation rate'' in the 
OPO CfCs. This change would allow OPOs to receive payment for organ 
donor costs under the Medicare and Medicaid programs using a definition 
that is consistent with the definition used by the Scientific Registry 
of Transplant Recipients (SRTR). Because we will be using data from the 
OPTN and the SRTR in assessing whether OPOs have satisfied the outcome 
measures of 42 CFR 486.318(b), we are proposing to adopt the definition 
currently used by the OPTN and SRTR in their statistical evaluation of 
OPO performance. This proposal would not change the data that are 
already collected by the OPTN and SRTR, and therefore it will not 
affect the information collection burden on OPOs.

F. ICR for Proposed Prior Authorization Process and Requirements for 
Certain Hospital Outpatient Department (OPD) Services

    In section XX. of this proposed rule, we are proposing to establish 
a prior authorization process for certain hospital outpatient services 
as a condition for Medicare payment. We are proposing to use our 
authority under section 1833(t)(2)(F) of the Act, which authorizes CMS 
to develop a method for controlling unnecessary increases in the volume 
of covered OPD services, to establish the prior authorization process. 
We believe a prior authorization process for OPD services would ensure 
beneficiaries receive medically necessary care while minimizing the 
risk of improper payments without changing the documentation 
requirements for providers and, therefore, protect the Medicare Trust 
fund.
    We are proposing that providers would be required to obtain prior 
authorization from CMS for five groups of services and their related 
services before the services are provided to Medicare beneficiaries and 
before the provider could submit claims for payment under Medicare for 
these services. The five groups of services proposed are: 
Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, 
Rhinoplasty, and Vein Ablation. The information collection requirements 
associated with prior authorization requests for these covered 
outpatient department services would be the required documentation 
submitted by providers. We are proposing that a prior authorization 
request must include all relevant documentation necessary to show that 
the service meets applicable Medicare coverage, coding, and payment 
rules and that the request be submitted before the service is provided 
to the beneficiary and before the claim is submitted for processing. 
The burden associated with this proposed process is the time and effort 
necessary for the submitter to locate and obtain the relevant 
supporting documentation to show that the service meets applicable 
coverage, coding, and payment rules, and to forward the information to 
CMS or its contractor (MAC) for review and determination of a 
provisional affirmation. We expect that this information will generally 
be maintained by providers within the normal course of business and 
that this information will be readily available. We estimate that the 
average time for office clerical activities associated with this task 
to be 30 minutes, which is equivalent to that for normal prepayment or 
postpayment medical review. We anticipate that most prior authorization 
requests would be sent by means other than mail. However, we estimate a 
cost of $5 per request for mailing medical records. Due to a July start 
date, the first year of the prior authorization will only include 6 
months. Based on calendar year 2017 data, we estimate that for those 
first 6 months at a minimum there will be 23,309 initial requests 
mailed during a year. In addition, we estimate there will be 7,650 
resubmissions of a request mailed following a non-affirmed decision. 
Therefore, the total mailing cost is estimated to be $154,799. Based on 
calendar year 2017 data, we estimate that annually at a minimum there 
will be 46,618 initial requests mailed during a year. In addition, we 
estimate there will be 15,299 resubmissions of a request mailed 
following a non-affirmed decision. Therefore, the total mailing cost is 
estimated to be $309,584. We also estimate that an additional 3 hours 
would be required for attending educational meetings and reviewing 
training documents. While there may be an associated burden on 
beneficiaries while they wait for the prior authorization decision, we 
are unable to quantify that burden.
    The average labor costs (including 100 percent fringe benefits) 
used to estimate the costs were calculated using data available from 
the Bureau of Labor Statistics. Based on the Bureau of Labor Statistics 
information, we estimate an average hourly rate of $16.63 with a loaded 
rate of $33.26. Therefore, we estimate that the total burden for the 
first year (6 months), allotted across all providers, would be 73,647 
hours (.5 hours x 103,199 submisions plus 3 hours x 7,349 providers for 
education). The burden cost for the first year (6 months) is $2,604,281 
(73,647 hours x $33.26 plus $154,799 for mailing costs). In addition, 
we estimate that the total annual burden hours, allotted across all 
providers, would be 125,242 hours (.5 hours x 206,389 submissions plus 
3 hours x 7,349 providers for education). The annual burden cost would 
be $4,475,116 (125,242 hours x $33.26 plus $309,584 for mailing costs). 
For the total

[[Page 39614]]

burden and associated costs, we estimate the annualized burden to be 
108,044 hours and $3,851,504 million. The annualized burden is based on 
an average of 3 years, that is, 1 year at the 6-month burden and 2 
years at the 12-month burden. The information collection request is 
under development and will be submitted to OMB for approval.

G. Potential Revision to Laboratory Date of Service (DOS) Policy

    In section XIX. of this proposed rule, we are soliciting comments 
regarding potential revisions to the laboratory date of service (DOS) 
provisions at Sec.  414.510(b)(5) for a molecular pathology test or a 
test designated by CMS as an ADLT under paragraph (1) of the definition 
of an ``advanced diagnostic laboratory test'' in Sec.  414.502. The 
laboratory DOS service policy does not impose any information 
collection requirements. Consequently, review by the Office of 
Management and Budget under the authority of the PRA is not required.

H. Total Reduction in Burden Hours and in Costs

    The chart below reflects the total burden and associated costs for 
the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP09AU19.064

XXV. Response to Comments

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

XXVI. Economic Analyses

A. Statement of Need

    This proposed rule is necessary to make updates to the Medicare 
hospital OPPS rates. It is necessary to make changes to the payment 
policies and rates for outpatient services furnished by hospitals and 
CMHCs in CY 2020. We are required under section 1833(t)(3)(C)(ii) of 
the Act to update annually the OPPS conversion factor used to determine 
the payment rates for APCs. We also are required under section 
1833(t)(9)(A) of the Act to review, not less often than annually, and 
revise the groups, the relative payment weights, and the wage and other 
adjustments described in section 1833(t)(2) of the Act. We must review 
the clinical integrity of payment groups and relative payment weights 
at least annually. We are proposing to revise the APC relative payment 
weights using claims data for services furnished on and after January 
1, 2018, through and including December 31, 2018, and processed through 
December 31, 2018, and updated cost report information.
    We note that we are completing the phase-in of our method, as 
described below, to control unnecessary increases in the volume of 
covered outpatient department services by paying for clinic visits 
furnished at off-campus PBDs at 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). The site-specific 
PFS payment rate for clinic visits furnished in excepted off-campus 
PBDs is the OPPS rate reduced to the amount paid for clinic visits 
furnished by nonexcepted off-campus PBDs under the PFS, which is 40 
percent of the OPPS rate. In the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59013 through 59014), we implemented this policy 
with a 2-year phase-in. In CY 2019, the payment reduction is 
transitioned by applying 50 percent of the total reduction in payment 
that would apply if these off-campus PBDs were paid the site-specific 
PFS payment rate for the clinic visit service. In other words, these 
excepted off-campus PBDs are paid 70 percent of the OPPS rate for the 
clinic visit service

[[Page 39615]]

in CY 2019. In CY 2020, we will complete the transition to paying the 
PFS-equivalent amount for clinic visits furnished in excepted off-
campus PBDs. In other words, these excepted off-campus PBDs will be 
paid the full reduced payment, or 40 percent of the OPPS rate for the 
clinic visit service in CY 2020.
    This proposed rule also is necessary to make updates to the ASC 
payment rates for CY 2020, enabling CMS to make changes to payment 
policies and payment rates for covered surgical procedures and covered 
ancillary services that are performed in an ASC in CY 2020. Because ASC 
payment rates are based on the OPPS relative payment weights for most 
of the procedures performed in ASCs, the ASC payment rates are updated 
annually to reflect annual changes to the OPPS relative payment 
weights. In addition, we are required under section 1833(i)(1) of the 
Act to review and update the list of surgical procedures that can be 
performed in an ASC, not less frequently than every 2 years.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59075 
through 59079), we finalized a policy to update the ASC payment system 
rates using the hospital market basket update instead of the CPI-U for 
CY 2019 through 2023. We believe that this policy will help stabilize 
the differential between OPPS payments and ASC payments, given that the 
CPI-U has been generally lower than the hospital market basket, and 
encourage the migration of services to lower cost settings as 
clinically appropriate.

B. Overall Impact for Provisions of This Proposed Rule

    We have examined the impacts of this proposed rule, as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 
804(2)), and Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs (January 30, 2017). This section of this 
proposed rule contains the impact and other economic analyses for the 
provisions we are proposing for CY 2020.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule has been designated as an economically 
significant rule under section 3(f)(1) of Executive Order 12866 and a 
major rule under the Congressional Review Act. Accordingly, this 
proposed rule has been reviewed by the Office of Management and Budget. 
We have prepared a regulatory impact analysis that, to the best of our 
ability, presents the costs and benefits of the provisions of this 
proposed rule. We are soliciting public comments on the regulatory 
impact analysis in this proposed rule, and we will address any public 
comments we receive in the final rule with comment period, as 
appropriate.
    We estimate that the proposed total increase in Federal Government 
expenditures under the OPPS for CY 2020, compared to CY 2019, due only 
to the proposed changes to the OPPS in this proposed rule, would be 
approximately $940 million. Taking into account our estimated changes 
in enrollment, utilization, and case-mix for CY 2020, we estimate that 
the OPPS expenditures, including beneficiary cost-sharing, for CY 2020 
would be approximately $79.2 billion, which is approximately $6.2 
billion higher than estimated OPPS expenditures in CY 2019. We note 
that these spending estimates include the CY 2020 completion of the 
phase-in, finalized in CY 2019, to control for unnecessary increases in 
the volume of covered outpatient department services by paying for 
clinic visits furnished at excepted off-campus PBDs in CY 2020 at a 
rate that will be 40 percent of the OPPS rate for a clinic visit 
service. Because the proposed provisions of the OPPS are part of a 
proposed rule that is economically significant, as measured by the 
threshold of an additional $100 million in expenditures in 1 year, we 
have prepared this regulatory impact analysis that, to the best of our 
ability, presents its costs and benefits. Table 38 of this proposed 
rule displays the distributional impact of the proposed CY 2020 changes 
in OPPS payment to various groups of hospitals and for CMHCs.
    As noted in section V.B.5 of this proposed rule, we are proposing 
for CY 2020 to pay for separately payable drugs and biological products 
that do not have pass-through payment status and are not acquired under 
the 340B program at WAC+3 percent instead of WAC+6 percent, if ASP data 
are unavailable for payment purposes. If WAC data are not available for 
a drug or biological product, we are proposing to continue our policy 
to pay separately payable drugs and biological products at 95 percent 
of the AWP. We note that under our proposed CY 2020 policy, drugs and 
biologicals that are acquired under the 340B Program would continue to 
be paid at ASP minus 22.5 percent, WAC minus 22.5 percent, or 69.46 
percent of AWP, as applicable.
    We note that in the impact tables as displayed in this impact 
analysis, we have modeled current and prospective payments as if 
separately payable drugs acquired under the 340B program from hospitals 
not excepted from the policy are paid in CY 2020 under the OPPS at ASP-
22.5 percent. As discussed in more detail in section V.B.6. of this 
proposed rule, there is ongoing litigation involving our payment policy 
for 340B-acquired drugs. We are soliciting public comments on the 
appropriate OPPS payment rate for 340B-acquired drugs, including 
whether a rate of ASP+3 percent could be an appropriate payment amount 
for these drugs, both for CY 2020 and for purposes of determining the 
remedy for CYs 2018 and 2019 in the event of an adverse decision on 
appeal in that litigation. In addition to comments on the appropriate 
payment amount for calculating the remedy for CYs 2018 and 2019 and for 
use for CY 2020, we also seek public comment on how to structure the 
remedy for CYs 2018 and 2019.
    We note that a policy to pay for 340B-acquired drugs and 
biologicals under the CY 2020 OPPS at an amount of ASP+3 percent would 
necessitate an accompanying budget neutrality adjustment to the OPPS 
conversion factor to account for that payment differential. Based on 
alternative modeling we expect that a policy to pay for 340B-acquired 
drugs at ASP+3 percent would result in an additional adjustment of 
0.9710 to the OPPS conversion factor, with an alternative conversion 
factor of $79.029, which would result in a reduction of approximately 
$1.4 billion in payments for non-drug items and services for CY 2020.
    We estimate that the proposed update to the conversion factor and 
other adjustments (not including the effects of outlier payments, the 
pass-through payment estimates, the application of

[[Page 39616]]

the frontier State wage adjustment for CY 2020, and the completion of 
the phase-in to control for unnecessary increases in the volume of 
covered outpatient department services described in section X.D. of 
this proposed rule) would increase total OPPS payments by 2.0 percent 
in CY 2020. The proposed changes to the APC relative payment weights, 
the proposed changes to the wage indexes, the proposed continuation of 
a payment adjustment for rural SCHs, including EACHs, and the proposed 
payment adjustment for cancer hospitals would not increase OPPS 
payments because these proposed changes to the OPPS are budget neutral. 
However, these proposed updates would change the distribution of 
payments within the budget neutral system. We estimate that the total 
proposed change in payments between CY 2019 and CY 2020, considering 
all proposed budget neutral payment adjustments, proposed changes in 
estimated total outlier payments, proposed pass-through payments, the 
proposed application of the frontier State wage adjustment, and the 
completion of the phase-in to control unnecessary increases in the 
volume of outpatient services as described in section X.D. of this 
proposed rule, in addition to the application of the proposed OPD fee 
schedule increase factor after all adjustments required by sections 
1833(t)(3)(F), 1833(t)(3)(G), and 1833(t)(17) of the Act, would 
increase total estimated OPPS payments by 2.8 percent.
    We estimate the total increase (from proposed changes to the ASC 
provisions in this proposed rule as well as from enrollment, 
utilization, and case-mix changes) in Medicare expenditures (not 
including beneficiary cost-sharing) under the ASC payment system for CY 
2020 compared to CY 2019, to be approximately $200 million. Because the 
proposed provisions for the ASC payment system are part of a proposed 
rule that is economically significant, as measured by the $100 million 
threshold, we have prepared a regulatory impact analysis of the 
proposed changes to the ASC payment system that, to the best of our 
ability, presents the costs and benefits of this portion of this 
proposed rule. Tables 42 and 43 of this proposed rule display the 
redistributive impact of the proposed CY 2020 changes regarding ASC 
payments, grouped by specialty area and then grouped by procedures with 
the greatest ASC expenditures, respectively.

C. Detailed Economic Analyses

1. Estimated Effects of Proposed OPPS Changes in This Proposed Rule
a. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2020 policy changes on various hospital groups. We 
post on the CMS website our hospital-specific estimated payments for CY 
2020 with the other supporting documentation for this proposed rule. To 
view the hospital-specific estimates, we refer readers to the CMS 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the website, select 
``regulations and notices'' from the left side of the page and then 
select ``CMS-1717-P'' from the list of regulations and notices. The 
hospital-specific file layout and the hospital-specific file are listed 
with the other supporting documentation for this proposed rule. We show 
hospital-specific data only for hospitals whose claims were used for 
modeling the impacts shown in Table 41. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We 
refer readers to section II.A. of this proposed rule for a discussion 
of the hospitals whose claims we do not use for ratesetting and impact 
purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our proposed policy changes in order 
to isolate the effects associated with specific policies or updates, 
but any policy that changes payment could have a behavioral response. 
In addition, we have not made adjustments for future changes in 
variables, such as service volume, service-mix, or number of 
encounters.
b. Estimated Effects of the CY 2020 Completion of Phase-In To Control 
for Unnecessary Increases in the Volume of Outpatient Services
    In section X.D. of this proposed rule, we discuss the CY 2020 
completion of the phase-in of our CY 2019 finalized method to control 
for unnecessary increases in the volume of outpatient department 
services by paying for clinic visits furnished at an off-campus PBD at 
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). Specifically, in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59013 through 59014), we finalized our proposal 
to pay for HCPCS code G0463 (Hospital outpatient clinic visit for 
assessment and management of a patient) when billed with modifier 
``PO'' at 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), with a 2-year transition period. For a 
discussion of the PFS payment amount for outpatient clinic visits 
furnished at nonexcepted off-campus PBDs, we refer readers to the CY 
2018 PFS final rule with comment period discussion (82 FR 53023 through 
53024), as well as the CY 2019 PFS final rule and the CY 2020 PFS 
proposed rule.
    To develop an estimated impact of this policy, we began with CY 
2018 outpatient claims data used in ratesetting for the CY 2020 OPPS. 
We then flagged all claim lines for HCPCS code G0463 that contained 
modifier ``PO'' because the presence of this modifier indicates that 
such claims were billed for services furnished by an off-campus 
department of a hospital paid under the OPPS. Next, we excluded those 
that were billed as a component of C-APC 8011 (Comprehensive 
Observation Services) or packaged into another C-APC because, in those 
instances, OPPS payment is made for a broader package of services. We 
then simulated payment for the remaining claim lines as if they were 
paid at the PFS-equivalent rate. An estimate of the policy that 
includes the effects of estimated changes in enrollment, utilization, 
and case-mix based on the FY 2020 President's budget approximates the 
estimated decrease in total payment under the OPPS at $810 million, 
with Medicare OPPS payments decreasing by $650 million and beneficiary 
copayments decreasing by $160 million in CY 2020. This estimate is 
utilized for the accounting statement displayed in Table 42 of this 
proposed rule because the impact of this CY 2020 policy, which is not 
budget neutral, is combined with the impact of the OPD update, which is 
also not budget neutral, to estimate changes in Medicare spending under 
the OPPS as a result of the changes proposed in this proposed rule.
    We note that our estimates may differ from the actual effect of the 
proposed policy due to offsetting factors, such as changes in provider 
behavior. We note that, by removing this payment differential that may 
influence site-of-service decision-making, we anticipate an associated 
decrease in the volume of clinic visits provided in the excepted off-
campus PBD setting. We note that

[[Page 39617]]

this estimate could change in the final rule with comment period based 
on factors such as the availability of updated data.
c. Estimated Effects of Proposed OPPS Changes on Hospitals
    Table 41 shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all facilities, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA amount. We also include CMHCs in the first line that 
includes all providers. We include a second line for all hospitals, 
excluding permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 41, and we discuss 
them separately below, because CMHCs are paid only for partial 
hospitalization services under the OPPS and are a different provider 
type from hospitals. In CY 2020, we are proposing to pay CMHCs for 
partial hospitalization services under APC 5853 (Partial 
Hospitalization for CMHCs), and we are proposing to pay hospitals for 
partial hospitalization services under APC 5863 (Partial 
Hospitalization for Hospital-Based PHPs).
    The estimated increase in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor under the 
statutory methodology. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
conversion factor is updated annually by the OPD fee schedule increase 
factor, as discussed in detail in section II.B. of this proposed rule.
    Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee 
schedule increase factor is equal to the market basket percentage 
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which 
we refer to as the IPPS market basket percentage increase. The proposed 
IPPS market basket percentage increase for FY 2020 is 3.2 percent. 
Section 1833(t)(3)(F)(i) of the Act reduces that 3.2 percent by the 
multifactor productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is proposed to be 0.5 
percentage point for FY 2020 (which is also the proposed MFP adjustment 
for FY 2020 in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19411)), 
resulting in the proposed OPD fee schedule increase factor of 2.7 
percent. We are using the proposed OPD fee schedule increase factor of 
2.7 percent in the calculation of the proposed CY 2020 OPPS conversion 
factor. Section 10324 of the Affordable Care Act, as amended by HCERA, 
further authorized additional expenditures outside budget neutrality 
for hospitals in certain frontier States that have a wage index less 
than 1.0000. The amounts attributable to this frontier State wage index 
adjustment are incorporated in the CY 2020 estimates in Table 41 of 
this proposed rule.
    To illustrate the impact of the proposed CY 2020 changes, our 
analysis begins with a baseline simulation model that uses the CY 2019 
relative payment weights, the FY 2019 final IPPS wage indexes that 
include reclassifications, and the final CY 2019 conversion factor. 
Table 41 shows the estimated redistribution of the proposed increase or 
decrease in payments for CY 2020 over CY 2019 payments to hospitals and 
CMHCs as a result of the following factors: The impact of the APC 
reconfiguration and recalibration changes between CY 2019 and CY 2020 
(Column 2); the wage indexes and the provider adjustments (Column 3); 
the combined impact of all of the proposed changes described in the 
preceding columns plus the proposed 2.7 percent OPD fee schedule 
increase factor update to the conversion factor (Column 4); the 
proposed off-campus PBD clinic visits payment policy (Column 5), and 
the estimated impact taking into account all proposed payments for CY 
2020 relative to all payments for CY 2019, including the impact of 
proposed changes in estimated outlier payments, and proposed changes to 
the pass-through payment estimate (Column 6).
    We did not model an explicit budget neutrality adjustment for the 
rural adjustment for SCHs because we are proposing to maintain the 
current adjustment percentage for CY 2020. Because the proposed updates 
to the conversion factor (including the proposed update of the OPD fee 
schedule increase factor), the estimated cost of the proposed rural 
adjustment, and the estimated cost of projected pass-through payment 
for CY 2020 are applied uniformly across services, observed 
redistributions of payments in the impact table for hospitals largely 
depend on the mix of services furnished by a hospital (for example, how 
the APCs for the hospital's most frequently furnished services will 
change), and the impact of the proposed wage index changes on the 
hospital. However, total payments made under this system and the extent 
to which this proposed rule will redistribute money during 
implementation also will depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2019 and CY 2020 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the proposed rates for CY 2020 would 
increase Medicare OPPS payments by an estimated 2.0 percent. Removing 
payments to cancer and children's hospitals because their payments are 
held harmless to the pre-OPPS ratio between payment and cost and 
removing payments to CMHCs results in an estimated 2.0 percent increase 
in Medicare payments to all other hospitals. These estimated payments 
would not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 41 shows the total number of 
facilities (3,734), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2018 hospital 
outpatient and CMHC claims data to model CY 2019 and CY 2020 payments, 
by classes of hospitals, for CMHCs and for dedicated cancer hospitals. 
We excluded all hospitals and CMHCs for which we could not plausibly 
estimate CY 2019 or CY 2020 payment and entities that are not paid 
under the OPPS. The latter entities include CAHs, all-inclusive 
hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
proposed rule. At this time, we are unable to calculate a DSH variable 
for hospitals that are not also paid under the IPPS because DSH 
payments are only made to hospitals paid under the IPPS. Hospitals for 
which we do not have a DSH variable are grouped separately and 
generally include freestanding psychiatric hospitals, rehabilitation 
hospitals, and long-term care hospitals. We show the total number of 
OPPS hospitals (3,627), excluding the hold-harmless cancer and 
children's hospitals and CMHCs, on the second line of the table. We 
excluded cancer and children's hospitals because section 1833(t)(7)(D) 
of the Act permanently holds harmless cancer hospitals and children's 
hospitals to their ``pre-BBA amount'' as specified under the terms of 
the statute, and therefore, we removed them from our impact analyses. 
We show the isolated impact on the 41 CMHCs at the bottom of the impact 
table (Table 41) and discuss that impact separately below.
Column 2: APC Recalibration--All Proposed Changes
    Column 2 shows the estimated effect of proposed APC recalibration. 
Column

[[Page 39618]]

2 also reflects any proposed changes in multiple procedure discount 
patterns or conditional packaging that occur as a result of the 
proposed changes in the relative magnitude of payment weights. As a 
result of proposed APC recalibration, we estimate that urban hospitals 
would experience a 0.1 percent increase, with the impact ranging from 
an increase of 0.5 percent to no increase, depending on the number of 
beds. Rural hospitals would experience a decrease of up to 0.8 percent 
depending on the number of beds. Major teaching hospitals would 
experience a 0.1 percent decrease.
Column 3: Proposed Wage Indexes and the Effect of the Proposed Provider 
Adjustments
    Column 3 demonstrates the combined budget neutral impact of the 
proposed APC recalibration; the proposed updates for the wage indexes 
with the proposed FY 2020 IPPS post-reclassification wage indexes; the 
proposed rural adjustment; the proposed frontier adjustment, and the 
proposed cancer hospital payment adjustment. We modeled the independent 
effect of the proposed budget neutrality adjustments and the proposed 
OPD fee schedule increase factor by using the relative payment weights 
and wage indexes for each year, and using a CY 2019 conversion factor 
that included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indexes.
    Column 3 reflects the independent effects of the proposed updated 
wage indexes, including the application of budget neutrality for the 
rural floor policy on a nationwide basis, as well as the CY 2020 
proposed changes in wage index policy discussed in section II.C. of 
this proposed rule. We did not model a budget neutrality adjustment for 
the rural adjustment for SCHs because we are continuing the rural 
payment adjustment of 7.1 percent to rural SCHs for CY 2020, as 
described in section II.E. of this proposed rule. We also modeled a 
budget neutrality adjustment for the cancer hospital payment adjustment 
because we are using a proposed payment-to-cost ratio target for the 
cancer hospital payment adjustment in CY 2020 of .90, which is higher 
than the ratio that was reported for the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58873). We note that, in accordance with 
section 16002 of the 21st Century Cures Act, we are proposing to apply 
a budget neutrality factor calculated as if the cancer hospital 
adjustment target payment-to-cost ratio was 0.90, not the 0.89 target 
payment-to-cost ratio we are applying in section II.F. of this proposed 
rule.
    We modeled the independent effect of updating the wage indexes by 
varying only the wage indexes, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the proposed 
CY 2020 scaled weights and a CY 2019 conversion factor that included a 
budget neutrality adjustment for the effect of the proposed changes to 
the wage indexes between CY 2019 and CY 2020.
Column 4: All Proposed Budget Neutrality Changes Combined With the 
Proposed Market Basket Update
    Column 4 demonstrates the combined impact of all of the proposed 
changes previously described and the proposed update to the conversion 
factor of 2.7 percent. Overall, these proposed changes would increase 
payments to urban hospitals by 2.8 percent and to rural hospitals by 
3.0 percent. Urban hospitals would receive an increase in line with the 
2.8 percent overall increase for all facilities after the update is 
applied to the proposed budget neutrality adjustments. The increase for 
classes of rural hospitals would be more variable with sole community 
hospitals receiving a 3.1 percent increase and other rural hospitals 
receiving an increase of 3.0 percent.
Column 5: Off-Campus PBD Visits Payment Policy
    Column 5 displays the estimated effect of our CY 2020 volume 
control method, finalized in CY 2019, to pay for clinic visit HCPCS 
code G0463 (Hospital outpatient clinic visit for assessment and 
management of a patient) when billed with modifier ``PO'' by an 
excepted off-campus PBD at a rate that will be 40 percent of the OPPS 
rate for a clinic visit service for CY 2020. We note that the numbers 
provided in this column isolate the estimated effect of this policy 
adjustment relative to the numerator of Column 4. Therefore, the 
numbers reported in Column 5 show how much of the difference between 
the estimates in Column 4 and the estimates in Column 6 are a result of 
the off-campus PBD visits policy for CY 2020, as finalized in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 59013 through 
59014).
Column 6: All Proposed Changes for CY 2020
    Column 6 depicts the full impact of the proposed CY 2020 policies 
on each hospital group by including the effect of all proposed changes 
for CY 2020 and comparing them to all estimated payments in CY 2019. 
Column 6 shows the combined budget neutral effects of Columns 2 through 
3; the proposed OPD fee schedule increase; the effect of the CY 2020 
off-campus PBD visits policy finalized in CY 2019, the impact of 
estimated OPPS outlier payments, as discussed in section II.G. of this 
proposed rule; the proposed change in the Hospital OQR Program payment 
reduction for the small number of hospitals in our impact model that 
failed to meet the reporting requirements (discussed in section XIV. of 
this proposed rule); and the difference in proposed total OPPS payments 
dedicated to transitional pass-through payments.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2019 update (and assumed, for 
modeling purposes, to be the same number for CY 2020), we included 23 
hospitals in our model because they had both CY 2018 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
proposed changes for CY 2020 would increase payments to all facilities 
by 2.0 percent for CY 2020. We modeled the independent effect of all 
proposed changes in Column 6 using the final relative payment weights 
for CY 2019 and the proposed relative payment weights for CY 2020. We 
used the final conversion factor for CY 2019 of $79.490 and the 
proposed CY 2020 conversion factor of $81.398 discussed in section 
II.B. of this proposed rule.
    Column 6 contains simulated outlier payments for each year. We used 
the 1-year charge inflation factor used in the proposed FY 2020 IPPS/
LTCH PPS proposed rule (84 FR 19596) of 5.4 percent (1.05446) to 
increase individual costs on the CY 2018 claims, and we used the most 
recent overall CCR in the April 2019 Outpatient Provider-Specific File 
(OPSF) to estimate outlier payments for CY 2019. Using the CY 2018 
claims and a 5.4 percent charge inflation factor, we currently estimate 
that outlier payments for CY 2019, using a multiple threshold of 1.75 
and a fixed-dollar threshold of $4,825, would be approximately 1.03 
percent of total payments. The estimated current outlier payments of 
1.03 percent are incorporated in the comparison in Column 6. We used 
the same set of claims and a charge inflation factor of 11.2 percent 
(1.11189) and the CCRs in the April 2019 OPSF, with an adjustment of 
0.975167, to reflect relative changes in cost and charge inflation 
between CY 2018 and CY 2020, to model the proposed CY 2020 outliers at 
1.0 percent of estimated total payments using a multiple threshold of 
1.75 and a fixed-dollar threshold of

[[Page 39619]]

$4,950. The charge inflation and CCR inflation factors are discussed in 
detail in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19596 through 
19597).
    Overall, we estimate that facilities would experience an increase 
of 2.0 percent under this proposed rule in CY 2020 relative to total 
spending in CY 2019. This projected increase (shown in Column 6) of 
Table 38 reflects the proposed 2.7 percent OPD fee schedule increase 
factor, minus 0.6 percent for the off-campus PBD visits policy, minus 
0.2 percent for the proposed change in the pass-through payment 
estimate between CY 2019 and CY 2020, plus a proposed decrease of 0.03 
percent for the difference in estimated outlier payments between CY 
2019 (1.03 percent) and CY 2020 (proposed 1.0 percent). We estimate 
that the combined effect of all proposed changes for CY 2020 would 
increase payments to urban hospitals by 2.0 percent. Overall, we 
estimate that rural hospitals would experience a 1.9 percent increase 
as a result of the combined effects of all the proposed changes for CY 
2020.
    Among hospitals, by teaching status, we estimate that the impacts 
resulting from the combined effects of all proposed changes would 
include an increase of 1.3 percent for major teaching hospitals and an 
increase of 2.3 percent for nonteaching hospitals. Minor teaching 
hospitals would experience an estimated increase of 2.1 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would experience an increase of 1.8 percent, proprietary hospitals 
would experience an increase of 3.0 percent, and governmental hospitals 
would experience an increase of 1.9 percent.
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d. Estimated Effects of Proposed OPPS Changes on CMHCs
    The last line of Table 41 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization services under the 
OPPS. In CY 2019, CMHCs are paid under APC 5853 (Partial 
Hospitalization (3 or more services) for CMHCs). We modeled the impact 
of this APC policy assuming CMHCs will continue to provide the same 
number of days of PHP care as seen in the CY 2018 claims used for 
ratesetting in this proposed rule. We excluded days with 1 or 2 
services because our policy only pays a per diem rate for partial 
hospitalization when 3 or more qualifying services are provided to the 
beneficiary. We estimate that CMHCs would experience an overall 3.9 
percent increase in payments from CY 2019 (shown in Column 6). We note 
that this includes the trimming methodology as well as the proposed CY 
2020 floor on geometric mean costs used for developing the PHP payment 
rates described in section VIII.B. of this proposed rule. The CY 2020 
proposal to establish a floor based on geometric mean costs, rather 
than based on a predetermined payment rate, makes the OPPS budget 
neutrality adjustments for both the weight scaler and the conversion 
factor applicable.
    Column 3 shows that the estimated impact of adopting the proposed 
FY 2020 wage index values would result in an increase of 0.4 percent to 
CMHCs. Column 4 shows that combining this proposed OPD fee schedule 
increase factor, along with proposed changes in APC policy for CY 2020 
and the proposed FY 2020 wage index updates, would result in an 
estimated increase of 4.1 percent. Column 5 shows that the off-campus 
PBD clinic visits payment policy has no estimated effect on CMHCs. 
Column 6 shows that adding the proposed changes in outlier and pass-
through payments would result in a total 3.9 percent increase in 
payment for CMHCs. This reflects all proposed changes for CMHCs for CY 
2020.
e. Estimated Effect of Proposed OPPS Changes on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary's payment would increase 
for services for which the OPPS payments would rise and would decrease 
for services for which the OPPS payments would fall. For further 
discussion on the calculation of the national unadjusted copayments and 
minimum unadjusted copayments, we refer readers to section II.I. of 
this proposed rule. In all cases, section 1833(t)(8)(C)(i) of the Act 
limits beneficiary liability for copayment for a procedure performed in 
a year to the hospital inpatient deductible for the applicable year.
    We estimate that the aggregate beneficiary coinsurance percentage 
would be 18.2 percent for all services paid under the OPPS in CY 2020. 
The estimated aggregate beneficiary coinsurance reflects general system 
adjustments, including the proposed CY 2020 comprehensive APC payment 
policy discussed in section II.A.2.b. of this proposed rule.
f. Estimated Effects of Proposed OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs, as discussed in section XIII 
of this proposed rule. No types of providers or suppliers other than 
hospitals, CMHCs, and ASCs would be affected by the proposed changes in 
this proposed rule.
g. Estimated Effects of Proposed OPPS Changes on the Medicare and 
Medicaid Programs
    The effect on the Medicare program is expected to be an increase of 
$940 million in program payments for OPPS services furnished in CY 
2020. The effect on the Medicaid program is expected to be limited to 
copayments that Medicaid may make on behalf of Medicaid recipients who 
are also Medicare beneficiaries. We estimate that

[[Page 39624]]

the proposed changes in this proposed rule would increase these 
Medicaid beneficiary payments by approximately $45 million in CY 2020. 
Currently, there are approximately 10 million dual-eligible 
beneficiaries, which represents approximately one third of Medicare 
Part B fee-for-service beneficiaries. The impact on Medicaid was 
determined by taking one-third of the beneficiary cost-sharing impact. 
The national average split of Medicaid payments is 57 percent Federal 
payments and 43 percent State payments. Therefore, for the estimated 
$45 million Medicaid increase, approximately $25 million would be from 
the Federal Government and $20 million would be from State government.
h. Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are proposing and the reasons 
for our selected alternatives are discussed throughout this proposed 
rule.

 Alternatives Considered for the Methodology for Assigning Skin 
Substitutes to High or Low Cost Groups

    We refer readers to section V.B.7. of this proposed rule for a 
discussion of our policy to assign any skin substitute product that was 
assigned to the high cost group in CY 2019 to the high cost group in CY 
2020, regardless of whether the product's mean unit cost (MUC) or the 
product's per day cost (PDC) exceeds or falls below the overall CY 2020 
MUC or PDC threshold. We will continue to assign products that exceed 
either the overall CY 2020 MUC or PDC threshold to the high cost group. 
We also considered, but are not proposing, reinstating our methodology 
from CY 2017 and assigning skin substitutes to the high cost group 
based on whether an individual product's MUC or PDC exceeded the 
overall CY 2020 MUC or PDC threshold based on calculations done for 
either the proposed rule or the final rule with comment period.

 Alternatives Considered for the Methodology for Payment for 
Non-Opioid Pain Management Treatments

    We refer readers to sections II.A.3.b. and XIII.D.3. of this 
proposed rule and the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 58860) for a discussion of our change in the packaging policy 
for certain drugs when administered in the ASC setting and policy of 
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. In those sections of the CY 2019 
OPPS/ASC final rule with comment period, we discuss the comments we 
received on whether we should pay separately for other non-opioid 
treatments for pain under the OPPS and the ASC payment system. In the 
CY 2019 OPPS/ASC final rule with comment period, we also discuss the 
comments we received on an alternative policy that would use our 
equitable adjustment authority under section 1833(t)(2)(E) of the Act 
to establish an incentive payment for non-opioid alternatives that 
would apply to drugs and devices under the OPPS that are not currently 
separately paid, are supported by evidence that demonstrates such drugs 
and devices are effective at treating acute or chronic pain, and would 
result in decreased use of prescription opioid drugs and any associated 
opioid addiction, when furnished in the hospital outpatient setting.

 Alternatives Considered for the Proposed Changes in the Level 
of Supervision of Outpatient Therapeutic Services in Hospitals and 
Critical Access Hospitals (CAHs)

    We refer readers to section X.A. of this proposed rule for a 
discussion of our proposal to change the minimum required default level 
of supervision from direct supervision to general supervision for all 
hospital outpatient therapeutic services provided by all hospitals and 
CAHs. We also considered, but are not proposing, reevaluation of the 
level of physician supervision for cardiac rehabilitation services to 
determine whether we should propose to change the supervision level 
from direct supervision to general supervision. Under this alternative, 
direct supervision would remain the minimum required default level for 
most hospital outpatient therapeutic services with the exception of 
those services that have been evaluated by the HOP Panel and received a 
change in supervision level based on those recommendations.
2. Estimated Effects of Proposed CY 2020 ASC Payment System Changes
    Most ASC payment rates are calculated by multiplying the ASC 
conversion factor by the ASC relative payment weight. As discussed 
fully in section XIII. of this proposed rule, we are proposing to set 
the CY 2020 ASC relative payment weights by scaling the proposed CY 
2020 OPPS relative payment weights by the proposed ASC scalar of 
0.8452. The estimated effects of the proposed updated relative payment 
weights on payment rates are varied and are reflected in the estimated 
payments displayed in Tables 39 and 40 below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system (which we are 
proposing will be the hospital market basket for CY 2020) after 
application of any quality reporting reduction be reduced by a 
productivity adjustment. The Affordable Care Act defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period, ending with the applicable fiscal year, year, cost reporting 
period, or other annual period). For ASCs that fail to meet their 
quality reporting requirements, the CY 2020 payment determinations will 
be based on the application of a 2.0 percentage point reduction to the 
annual update factor, which we are proposing will be the hospital 
market basket for CY 2020. We calculated the proposed CY 2020 ASC 
conversion factor by adjusting the CY 2019 ASC conversion factor by 
1.0008 to account for changes in the pre-floor and pre-reclassified 
hospital wage indexes between CY 2019 and CY 2020 and by applying the 
proposed CY 2020 MFP-adjusted hospital market basket update factor of 
2.7 percent (projected hospital market basket update of 3.2 percent 
minus a projected productivity adjustment proposed to be 0.5 percentage 
point). The proposed CY 2020 ASC conversion factor is $47.827 for ASCs 
that successfully meet the quality reporting requirements.
a. Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2020 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2018 and CY 2020 with precision. We believe the net effect on 
Medicare expenditures resulting from the proposed CY 2020 changes would 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups, as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
b. Estimated Effects of Proposed ASC Payment System Policies on ASCs
    Some ASCs are multispecialty facilities that perform a wide range 
of surgical procedures from excision of

[[Page 39625]]

lesions to hernia repair to cataract extraction; others focus on a 
single specialty and perform only a limited range of surgical 
procedures, such as eye, digestive system, or orthopedic procedures. 
The combined effect on an individual ASC of the proposed update to the 
CY 2020 payments would depend on a number of factors, including, but 
not limited to, the mix of services the ASC provides, the volume of 
specific services provided by the ASC, the percentage of its patients 
who are Medicare beneficiaries, and the extent to which an ASC provides 
different services in the coming year. The following discussion 
presents tables that display estimates of the impact of the proposed CY 
2020 updates to the ASC payment system on Medicare payments to ASCs, 
assuming the same mix of services, as reflected in our CY 2018 claims 
data. Table 39 depicts the estimated aggregate percent change in 
payment by surgical specialty or ancillary items and services group by 
comparing estimated CY 2019 payments to estimated proposed CY 2020 
payments, and Table 40 shows a comparison of estimated CY 2019 payments 
to estimated proposed CY 2020 payments for procedures that we estimate 
would receive the most Medicare payment in CY 2019.
    In Table 39, we have aggregated the surgical HCPCS codes by 
specialty group, grouped all HCPCS codes for covered ancillary items 
and services into a single group, and then estimated the effect on 
aggregated payment for surgical specialty and ancillary items and 
services groups. The groups are sorted for display in descending order 
by estimated Medicare program payment to ASCs. The following is an 
explanation of the information presented in Table 42.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes, 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2019 ASC Payments were calculated 
using CY 2018 ASC utilization data (the most recent full year of ASC 
utilization) and CY 2019 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2019 ASC payments.
     Column 3--Estimated CY 2020 Percent Change is the 
aggregate percentage increase or decrease in Medicare program payment 
to ASCs for each surgical specialty or ancillary items and services 
group that is attributable to proposed updates to ASC payment rates for 
CY 2020 compared to CY 2019.
    As shown in Table 39, for the six specialty groups that account for 
the most ASC utilization and spending, we estimate that the proposed 
update to ASC payment rates for CY 2020 would result in a 3-percent 
increase in aggregate payment amounts for eye and ocular adnexa 
procedures, a 3-percent increase in aggregate payment amounts for 
nervous system procedures, 1-percent increase in aggregate payment 
amounts for digestive system procedures, a 2-percent increase in 
aggregate payment amounts for musculoskeletal system procedures, a 2-
percent increase in aggregate payment amounts for genitourinary system 
procedures, and a 5-percent increase in aggregate payment amounts for 
cardiovascular system procedures. We note that these changes can be a 
result of different factors, including updated data, payment weight 
changes, and proposed changes in policy. In general, spending in each 
of these categories of services is increasing due to the 2.7 percent 
proposed payment rate update. After the payment rate update is 
accounted for, aggregate payment increases or decreases for a category 
of services can be higher or lower than a 2.7-percent increase, 
depending on if payment weights in the OPPS APCs that correspond to the 
applicable services increased or decreased or if the most recent data 
show an increase or a decrease in the volume of services performed in 
an ASC for a category. For example, we estimate a 3-percent increase in 
proposed aggregate eye and ocular adnexa procedure payments due to an 
increase in hospital reported costs for the primary payment grouping 
for this category under the OPPS. This increases the payment weights 
for eye and ocular adnexa procedure payments and, overall, is further 
increased by the proposed 2.7 percent ASC rate update for these 
procedures. For estimated changes for selected procedures, we refer 
readers to Table 40 provided later in this section.
    Also displayed in Table 42 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. We estimate 
that aggregate payments for these items and services would increase by 
5 percent for CY 2020. This is largely attributed to the drug packaging 
policies adopted under the OPPS and ASC payment system.

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    Table 43 shows the estimated impact of the proposed updates to the 
revised ASC payment system on aggregate ASC payments for selected 
surgical procedures during CY 2020. The table displays 30 of the 
procedures receiving the greatest estimated CY 2019 aggregate Medicare 
payments to ASCs. The HCPCS codes are sorted in descending order by 
estimated CY 2019 program payment.
     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2019 ASC Payments were calculated 
using CY 2018 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2019 ASC payment rates. The estimated CY 2019 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2020 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2019 and 
the estimated payment for CY 2020 based on the proposed update.
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c. Estimated Effects of Proposed ASC Payment System Policies on 
Beneficiaries
    We estimate that the proposed CY 2020 update to the ASC payment 
system would be generally positive (that is, result in lower cost-
sharing) for beneficiaries with respect to the new procedures we are 
proposing to add to the ASC list of covered surgical procedures and for 
those we are proposing to designate as office-based for CY 2020. For 
example, using 2018 utilization data and proposed CY 2020 OPPS and ASC 
payment rates, we estimate that if 5 percent of coronary intervention 
procedures migrate from the hospital outpatient setting to the ASC 
setting as a result of this proposed policy, Medicare payments would be 
reduced by approximately $15 million in CY 2020 and total beneficiary 
copayments would decline by approximately $3 million in CY 2020. First, 
other than certain preventive services where coinsurance and the Part

[[Page 39628]]

B deductible is waived to comply with sections 1833(a)(1) and (b) of 
the Act, the ASC coinsurance rate for all procedures is 20 percent. 
This contrasts with procedures performed in HOPDs under the OPPS, where 
the beneficiary is responsible for copayments that range from 20 
percent to 40 percent of the procedure payment (other than for certain 
preventive services), although the majority of HOPD procedures have a 
20-percent copayment. Second, in almost all cases, the ASC payment 
rates under the ASC payment system are lower than payment rates for the 
same procedures under the OPPS. Therefore, the beneficiary coinsurance 
amount under the ASC payment system will almost always be less than the 
OPPS copayment amount for the same services. (The only exceptions would 
be if the ASC coinsurance amount exceeds the hospital inpatient 
deductible. The statute requires that copayment amounts under the OPPS 
not exceed the hospital inpatient deductible.) Beneficiary coinsurance 
for services migrating from physicians' offices to ASCs may decrease or 
increase under the ASC payment system, depending on the particular 
service and the relative payment amounts under the MPFS compared to the 
ASC. While the ASC payment system bases most of its payment rates on 
hospital cost data used to set OPPS relative payment weights, services 
that are performed a majority of the time in a physician office are 
generally paid the lesser of the ASC amount according to the standard 
ASC ratesetting methodology or at the nonfacility practice expense 
based amount payable under the PFS. For those additional procedures 
that we are proposing to designate as office-based in CY 2020, the 
beneficiary coinsurance amount under the ASC payment system generally 
would be no greater than the beneficiary coinsurance under the PFS 
because the coinsurance under both payment systems generally is 20 
percent (except for certain preventive services where the coinsurance 
is waived under both payment systems).
3. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/OMB/circulars/a004/a-4.html), we have 
prepared accounting statements to illustrate the impacts of the 
proposed OPPS and ASC changes in this proposed rule. The first 
accounting statement, Table 44, illustrates the classification of 
expenditures for the CY 2020 estimated hospital OPPS incurred benefit 
impacts associated with the proposed CY 2020 OPD fee schedule increase. 
This $940 million in additional Medicare spending estimate includes the 
$1.6 billion in additional Medicare spending associated with updating 
the CY 2019 OPPS payment rates by the hospital market basket update for 
CY 2020, offset by the $650 million in Medicare savings associated with 
the CY 2020 completion of phase-in finalized in CY 2019 to pay for 
clinic visits furnished at off-campus PBDs at a PFS-equivalent rate. In 
addition, we estimate that proposed OPPS changes in this proposed rule 
would increase copayments that Medicaid may make on behalf of Medicaid 
recipients who are also Medicare beneficiaries by approximately $45 
million in CY 2020. The second accounting statement, Table 45, 
illustrates the classification of expenditures associated with the 
proposed 2.7 percent CY 2020 update to the ASC payment system, based on 
the provisions of this proposed rule and the baseline spending 
estimates for ASCs. Both tables classify most estimated impacts as 
transfers. The estimated costs of ICR Burden and Regulatory 
Familiarization are included in Table 46.
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4. Effects of Proposed Changes in Requirements for the Hospital OQR 
Program
a. Background
    We refer readers to the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59492 through 59494), for the previously estimated 
effects of changes to the Hospital OQR Program for the CY 2018, CY 
2019, and CY 2020 payment determinations. Of the approximately 3,300 
hospitals that met eligibility requirements for the CY 2019 payment 
determination, we determined that 14 hospitals did not meet the 
requirements to receive the full OPD fee schedule increase factor. In 
this proposed rule, we are not proposing to add any quality measures to 
the Hospital OQR Program measure set for the CY 2021 or CY 2022 payment 
determinations. However, we are proposing to remove one measure from 
the program measure set, as discussed in section XIV.B.3.b. of this 
proposed rule. We do not believe that this proposed policy would 
increase the number of hospitals that do not receive a full annual 
payment update for the CY 2021 or CY 2022 payment determinations.
b. Estimated Effects of Proposed Removal of OP-33 for the CY 2022 
Payment Determination and Subsequent Years
    In section XIV.B.3.b. of this proposed rule, we are proposing to 
remove OP-33: External Beam Radiotherapy for Bone Metastases beginning 
with the CY 2022 payment determination and for subsequent years. As 
discussed in section XXVI.B.2. of this proposed rule, we anticipate a 
burden reduction of 551 hours and $21,379 associated with the removal 
of OP-33 for the CY 2022 payment determination. In addition to burden 
associated with information collection however, we also anticipate that 
hospitals would experience a general burden and cost reduction 
associated with this proposal stemming from no longer having to 
implement, review, track, and maintain program requirements associated 
with this measure.
5. Effects of Proposed Requirements for the ASCQR Program
a. Background
    In section XV. of this proposed rule, we discuss our proposed 
policies affecting the ASCQR Program. For the CY 2019 payment 
determination, of the 6,393 ASCs that met eligibility requirements for 
the ASCQR Program, 203 ASCs did not meet the requirements to receive 
the full annual payment update. In section XV.B.3. of this proposed 
rule, we are proposing to adopt ASC-19: Facility-Level 7-Day Hospital 
Visits After General Surgery Procedures Performed at Ambulatory 
Surgical Centers to the ASCQR Program measure set for the CY 2024 
payment determination and subsequent years. We do not believe that 
adoption of the proposed ASC-19 measure would cause any ASCs to fail to 
meet the ASCQR Program requirements. Therefore, we do not believe that 
our proposal would increase the number of ASCs that do not receive a 
full annual payment update for the CY 2024 payment determination. Below 
we discuss only the effects that would result from the provisions 
proposed in this proposed rule.
b. Estimated Effects of the Proposal To Adopt ASC-19: Facility-Level 7-
Day Hospital Visits After General Surgery Procedures Performed at 
Ambulatory Surgical Centers (NQF #3357)
    In section XV.B.3. of this proposed rule, we are proposing, 
beginning with the CY 2024 payment determination and for subsequent 
years, to adopt one measure: ASC-19: Facility-Level 7-Day Hospital 
Visits after General Surgery Procedures Performed at Ambulatory 
Surgical Centers (NQF #3357). As discussed in section XXVI.C.2. of this 
proposed rule, data used to calculate scores for this proposed measure 
are collected via Medicare Part A and Part B administrative claims and 
Medicare enrollment data. Therefore, ASCs would not be required to 
report any additional data. Because this change does not affect ASCQR 
Program participation requirements or data reporting requirements, we 
do not expect this proposed measure to change the information 
collection burden and would only nominally affect other costs

[[Page 39630]]

experienced by ASCs due to having to review and track confidential 
feedback and reports related to the proposed ASC-19 measure.

D. Effects of the Proposals Relating to Price Transparency in Hospital 
Standard Charges

1. Background
    In section XVI. of this proposed rule, we are proposing to adopt 
requirements that would implement section 2718(e) of the Public Health 
Service Act, which requires that each hospital operating within the 
United States, for each year, establish (and update) and make public 
(in accordance with guidelines developed by the Secretary) a list of 
the hospital's standard charges for items and services provided by the 
hospital, including for diagnosis-related groups established under 
section 1886(d)(4) of the Act.
    In the FY 2015 IPPS/LTCH PPS proposed and final rules (79 FR 28169 
and 79 FR 50146, respectively), we reminded hospitals of their 
obligation to comply with the provisions of section 2718(e) of the PHS 
Act and provided guidelines for its implementation. At that time, we 
required hospitals to either make public a list of their standard 
charges or their policies for allowing the public to view a list of 
those charges in response to an inquiry. In addition, we stated that we 
expected hospitals to update the information at least annually, or more 
often as appropriate, to reflect current charges. We also encouraged 
hospitals to undertake efforts to engage in consumer-friendly 
communication of their charges to enable consumers to compare charges 
for similar services across hospitals and to help consumers understand 
what their potential financial liability might be for items and 
services they obtain at the hospital.
    In the FY 2019 IPPS/LTCH PPS proposed rule and final rule (83 FR 
20164 and 83 FR 41144, respectively), we again reminded hospitals of 
their obligation to comply with the provisions of section 2718(e) of 
the PHS Act and updated our guidelines for its implementation. The 
announced update to our guidelines became effective January 1, 2019, 
and took one step to further improve the public accessibility of 
standard charge information. Specifically, we updated our guidelines to 
require hospitals to make available a list of their current standard 
charges via the internet in a machine-readable format and to update 
this information at least annually, or more often as appropriate.
    However, we continue to have concerns that health care consumers 
lack the meaningful pricing information they need to choose the 
healthcare services they want and need. Therefore, in response to 
stakeholders and in accordance with Executive Order on Improving Price 
and Quality Transparency in American Healthcare to Put Patients First 
(June 24, 2019), we are proposing that hospitals make public their 
standard charges in two ways: (1) By publicly posting standard charge 
information, including gross charges and payer-specific negotiated 
rates and for all items and services, online in a machine-readable 
format, and (2) by making make public payer-specific negotiated rates 
for at least 300 shoppable services in a manner that is consumer-
friendly that will meaningfully inform patients' decision making and 
allow consumers to compare prices across hospitals. To be consumer-
friendly, the charge information for shoppable services must be 
displayed along with the charge information for all associated 
ancillary services, and the data must be easily accessible by the 
consumer and searchable. We are also proposing to establish a mechanism 
for monitoring and the application of penalties for noncompliance.
2. Estimated Burden on Hospitals
    We estimate the total annual burden for hospitals to review and 
make public all gross and payer-specific negotiated charges for all 
items and services in a machine-readable format, and payer-specific 
negotiated charges for at least 300 shoppable services in a consumer-
friendly format, to be 12 hours per hospital at $1,017.24 per hospital 
for a total burden of 72,024 hours (12 hours x 6,002 hospitals) and 
total cost of $6,105,474 ($1,017.24 x 6,002 hospitals).
    We believe the burden is minimal for several reasons. First, this 
proposed rule is based on existing statutory requirements for hospitals 
to make public a list of standard charges (specifically, gross 
charges), which we stated in the FY 2019 IPPS/LTCH PPS final rule must 
be displayed in a machine readable format beginning January 1, 2019. 
Second, most (if not all) hospitals actively review, update, and 
maintain all gross charges and payer-specific negotiated charges in 
electronic format in hospital billing systems. Third, we have sampled 
hospital and state websites to see how hospitals are responding to 
current chargemaster posting guidance and we find that hospitals appear 
to be easily complying. Additionally, hospital executives and hospital 
finance experts have indicated that pulling already electronically 
available data out of hospital accounting and billing systems is very 
low burden. For all these reasons, we anticipate little additional 
burden for hospitals to meet the proposed requirement for making public 
gross charges and payer-specific negotiated charges online in a 
machine-readable format, other than the time accounted for below to 
review these proposed rules to ensure compliance.
    As a result, the bulk of this burden estimate (8 hours) applies to 
the newly proposed requirements related to making public payer-specific 
negotiated charges in a consumer-friendly format for at least 300 
shoppable items and services. In this estimate, we have accounted for 
activities associated with identifying hospital-selected shoppable 
services and for displaying payer-specific negotiated charges grouped 
along with the payer-specific charges for associated ancillary items 
and services the hospital customarily provides as part of or in 
conjunction with the primary service. We believe that hospitals will 
require this time to analyze their claims data to generate a list of 
hospital-selected shoppable services, to analyze claims data to 
determine the ancillary services that should be grouped with each 
shoppable service, and to display standard charges in a consumer-
friendly manner in accordance with the proposed requirements at section 
XIV.F.2 of this proposed rule. We note that we have proposed that 
hospitals have flexibility to determine the format for making charges 
for shoppable services available to the public, recognizing that many 
hospitals may already be doing so in consumer-friendly online price 
estimator tools. We further note that most of the impact would likely 
occur in the first year and that updating such data annually would 
become more routine and automated over time.
    As noted above, we believe this is an accurate estimate of burden 
because maintaining a set of negotiated charge data is part of normal 
operations for hospitals in order to work with payers and bill 
patients, and hospitals can readily access billing records to determine 
which services are commonly billed together to develop a total cost for 
the service package. Extracting from this data set should be a simple 
statistical command or formula in either MS Office applications or 
various database software, and it imposes minimal burden for hospitals' 
operations staff. We believe that our proposed accessibility 
requirements will ensure the hospital data can be easily found by 
consumers and therefore have not

[[Page 39631]]

included any burden estimates for additional public outreach and 
education, but seek public comment on whether to further consider a 
burden for this factor.
    We believe that adding to or shifting the number of CMS-specific vs 
the number of hospital selected shoppable items and services would not 
alter this burden estimate. In total, we believe that additional burden 
for our proposals to make public the hospital's standard charges in the 
form and manner proposed would be, on average, 12 hours per hospital at 
$1,017.24 per hospital for hospitals in the United States.
3. Limitations of Our Analysis
    It would be difficult for us to conduct a detailed quantitative 
analysis given the lack of studies at the national level on the 
regulatory impact of making price transparency information publicly 
available. Since we cannot produce a detailed quantitative analysis, we 
have developed a qualitative discussion for this regulatory impact 
analysis, drawing from the experiences of States that have enacted 
price transparency legislation and the use of price transparency tools 
in the private health care market. We have taken an approach that 
assesses potential directional impact of these proposed requirements 
(that is, increasing versus decreasing health care costs, increasing or 
decreasing likelihood of certain consumer or insurer behaviors) rather 
than attempting more specific estimates due to the lack of empirical 
data. We believe there are many benefits with this regulation, 
particularly for consumers who have the right to know the hospital 
services before they commit to them, and to be able to shop for the 
best value. We also discuss potential unintended consequences as a 
result of these proposals.
4. Estimated Effects on Private Sector
    We believe that by requiring hospitals to make public their 
standard changes (both gross charges and payer-specific negotiated 
rates) for all hospital items and services (including individual items 
and services and service packages), our proposals will release data 
necessary to better understand how the level of price dispersion in 
various health care markets impacts health care spending and consumer 
out-of-pocket costs. As noted in section XVI. of this proposed rule, 
the negotiated charges for various procedures vary widely within and 
across geographic regions in the United States.\227\ Some factors 
associated with the level of hospital price dispersion in a geographic 
area are the hospital's size, health care demand, labor costs, and 
technology, although it was the hospital's market power (level of 
competition) that was most positively associated with high price 
dispersion.228 229 Cooper found that variation in prices 
across hospital referral regions is the primary driver of variation in 
spending per enrollee for those privately insured, while the quantity 
of care provided across hospital referral regions is the primary driver 
of variation in spending per beneficiary for Medicare.\230\ One major 
barrier to fully understanding health care price variation (and 
understanding the impact of transparency of health care pricing in 
general) is the lack of availability of negotiated charges to 
researchers and the public.\231\ Our proposals would make hospital 
charge information available which would generate a better 
understanding of (1) hospital price dispersion, and (2) the 
relationship between hospital price dispersion and health care 
spending. Additionally, we believe understanding these relationships 
through release of pricing data could lead to downward price pressure 
on hospitals and reductions in overall spending.
---------------------------------------------------------------------------

    \227\ Kennedy K., et al. Health Care Cost Institute. Past the 
Price Index: Exploring Actual Prices Paid for Specific Services by 
Metro Area. Healthy Marketplace Index. April 30, 2019. Available at: 
https://www.healthcostinstitute.org/blog/entry/hmi-2019-service-prices.
    \228\ Cooper Z., et al. The Price Ain't Right? Hospital Prices 
and Health Spending on the Privately Insured. The Quarterly Journal 
of Economics. December 2015. Available at: https://pdfs.semanticscholar.org/cb9c/f90786cc39ddac6d88f3ba1074a7c2d5f0a5.pdf.
    \229\ Bai, G., & Anderson, G.F. (2018). Market Power: Price 
Variation Among Commercial Insurers For Hospital Services. Health 
Affairs, 37(10), 1615-1622. Available at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.0567.
    \230\ Cooper Z., et al. The Price Ain't Right? Hospital Prices 
and Health Spending on the Privately Insured. The Quarterly Journal 
of Economics. December 2015. Available at: https://pdfs.semanticscholar.org/cb9c/f90786cc39ddac6d88f3ba1074a7c2d5f0a5.pdf.
    \231\ Ibid.
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    We recognize the potential concern that hospitals may attempt to 
present a more favorable or discounted view of their payer-specific 
negotiated rates for the limited set of shoppable services, while 
potentially increasing charges for other items and services (for 
example, non-shoppable services). However, we believe that this risk 
will be mitigated by the requirement to post gross charges and the 
payer-specific negotiated charges for all items and services (including 
individual items and services and service packages) in a machine-
readable format.
    In addition to this possibility, we acknowledge there could be an 
impact in the commercial insurance market. A few studies have examined 
insurer competition in relation to negotiated hospital prices,\232\ or 
price transparency and markups in health care.\233\ We also realize 
that it takes time for markets to react to public disclosure of payer-
specific negotiated rates, and its dynamic could vary state by state. 
We invite comments on the potential impact of disclosure of payer-
specific negotiated charges on commercial insurers.
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    \232\ Ho K. & Lee R.S. Insurer Competition and Negotiated 
Hospital Prices. August 2013. https://pdfs.semanticscholar.org/b6e9/11d7e171d3074b473439f93d377f4a4202bf.pdf
    \233\ Brown Z.Y. An Empirical Model of Price Transparency and 
Markups in Health Care. August 2018. http://www-personal.umich.edu/
~zachb/zbrown_empirical_model_price_transparency.pdf.
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    We believe that price transparency initiatives may reduce overall 
costs and price dispersion. In their comprehensive analysis of the 
impact of regulations across more than 30 States requiring public 
access to the prices of hospital procedures, Christensen et al. found 
that regulations lowered the price of shoppable procedures such as hip 
replacements by approximately five percent overall compared to prices 
for non-shoppable procedures such as appendectomies. They further found 
that half of the observed price reduction in charges was due to 
hospitals lowering their prices to remain competitive. This was 
particularly true for high priced hospitals and for hospitals in 
competitive urban areas.\234\ Research has also indicated that price 
transparency initiatives can decrease prices paid by consumers and 
insurers. One study found that following the introduction of a State-
run website providing out-of-pocket costs for a subset of shoppable 
outpatient services reduced the charges for these procedures by 
approximately 5 percent for consumers, in part by shifting demand to 
lower cost providers.\235\ In addition, the study found that insurers 
over time experienced a 4-percent reduction in administrative costs for 
imaging services, following the introduction of the site.
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    \234\ Christensen H.B., Floyd E., and Maffett M. ``The Effects 
of Price Transparency Regulation on Prices in the Healthcare 
Industry.'' Available at: https://www.bakerinstitute.org/media/files/event/01ce2e80/HPF-paper-AHEC-Floyd.pdf.
    \235\ Brown Z.Y. 2018. ``Equilibrium Effects of Health Care 
Price Information,'' Review of Economics and Statistics. Available 
at: https://www.mitpressjournals.org/doi/abs/10.1162/rest_a_00765.

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[[Page 39632]]

    Based on our analysis of comments from stakeholders on the 2018 
RFIs, we do not believe the economic effects will vary significantly 
between rural and critical access markets and larger or consolidated 
health care markets. However, we seek comment on whether there could be 
unforeseen effects of the proposals that may differentially impact 
markets with small, rural, or CAH hospitals.
    Another possibility is that transparency in payer-specific 
negotiated charges may narrow the dispersion of prices in a market, 
meaning that knowledge of payer-specific charges may not only result in 
lowering prices for payers currently paying rates above the median, but 
could also increase prices for payers that are currently paying rates 
below the median. Making payer-specific negotiated prices public could 
risk disrupting the ability for certain payers to extract aggressive 
discounts in the future, especially from providers in markets with 
limited competition. For example, a hospital providing an aggressive 
discount to a particular payer may become motivated to withdraw such 
discount to avoid divulging such information to other payers with whom 
they contract.
    Several studies of mandated price transparency in non-healthcare 
commodity markets have shown suppliers can use the information to their 
advantage in maximizing the prices they can charge in markets with 
limited competition or where commodities are not easily transferable 
across geographies. Although there are no definitive conclusions on the 
effects of price transparency on markets one study found that it can 
either increase or decrease prices depending on the strength of the 
bargainers and the size of the market.\236\ While price transparency 
gives buyers and sellers important information about the value of items 
and services, the effect may result in price increases by changing the 
incentives for buyers and sellers may also enable traders to observe 
deviations from collusive practices. Allowing weaker bargainers to see 
prices negotiated by stronger bargainers will change incentives facing 
buyers and sellers, and can lead to price increases. We seek comment 
from stakeholders and the public as to whether they believe these types 
of potential drawbacks are legitimate risks in their market and, if so, 
whether the potential benefits of making transparent all negotiated 
prices outweigh the risks outlined above. If commenters believe these 
are risks, we further request input on what policies could mitigate 
these risks. If commenters believe the risks are not worth the 
benefits, we request further input on whether publishing only the 
minimum, median, and maximum negotiated rates (an alternative 
considered in this proposed rule) would improve the benefit-risk 
profile.
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    \236\ Congressional Research Service Report for Congress: Does 
Price Transparency Improve Market Efficiency? Implications of 
Empirical Evidence in Other Markets for the Health Sector. July 24, 
2007. Available at: https://fas.org/sgp/crs/secrecy/RL34101.pdf.
---------------------------------------------------------------------------

    In the absence of a national model, we looked to two States that 
have previously enacted price transparency laws, California and New 
Hampshire. California enacted a requirement for hospitals to post their 
charge description master in 2004, and in 2003, New Hampshire created 
an all-payer claims database, later publishing the data in 2007 in a 
statewide, web-based price transparency comparison tool.
    Studies assessing the impact of the New Hampshire State law have 
found that the efforts focused on the wide variation of provider 
prices, which in turn created opportunities for new benefit design that 
incentivized consumer choice of lower costs providers and sites of 
service.\237\
---------------------------------------------------------------------------

    \237\ Tu H, and Gourevitch R. California HealthCare Foundation 
and Robert Wood Johnson Foundation. Moving Markets, Lessons from the 
New Hampshire Price Transparency Experiment. April 2014. Available 
at: https://www.chcf.org/wp-content/uploads/2017/12/PDF-MovingMarketsNewHampshire.pdf.
---------------------------------------------------------------------------

    In California, the link between hospital chargemaster data and 
patient cost was validated through a 10-year study of the chargemaster 
data which found that each dollar in a hospital's list price was 
associated with an additional 15 cents in payment to a hospital for 
privately insured patients (versus publicly insured patients).\238\
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    \238\ Barry M, and Ippolito B. Mystery Of The Chargemaster: 
Examining The Role Of Hospital List Prices In What Patients Actually 
Pay. Health Affairs. April, 2017. Available at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0986.
---------------------------------------------------------------------------

    This effort to improve the availability of charge data can open up 
the possibility to States to further regulate hospital charges--
examples seen in both California and New Hampshire that took further 
legislative action to reduce price dispersion, reduce surprise billing 
and to place limits on charges for the uninsured and for out-of-network 
providers.
    As noted earlier, we lack data to quantify the effects of our 
proposals along these dimensions, and we are seeking public comments on 
these impacts. In addition, we acknowledge that we may not have 
considered all areas in which the proposed rule may have effects, and 
we are seeking public comments on impacts of the proposals in areas we 
have not discussed here.
5. Estimated Effects on Consumers
    In addition to economic effects described above, consumers may feel 
more satisfied with their care when they are empowered to make 
decisions about their treatment. A recent survey \239\ indicated a 
strong desire for price transparency and openness. Eighty-eight percent 
of the population polled, demanded improved transparency with their 
total financial responsibility, including copays and deductibles. 
Another study suggests that improving a patient's financial experience 
served as the biggest area to improve overall customer 
satisfaction.\240\ According to a 2011 GAO report, transparent health 
care price information may help consumers anticipate their health care 
costs, reduce the possibility of unexpected expenses, and make more 
informed choices about their care, including for both shoppable 
services as defined in this rule and other hospital items and services 
in both outpatient and inpatient settings.\241\ We considered the 
likelihood of patients would shifting from seeking services from lower 
cost non-hospital sites such as ASCs, advanced radiology centers, or 
stand-alone labs as a result of this proposed rule and seek public 
comment on this potential effect.
---------------------------------------------------------------------------

    \239\ See Gruessner V. Consumer Satisfaction Dips When Payers 
Lack Price Transparency. Private Payers News (October 3, 2016). 
Available at: https://healthpayerintelligence.com/news/consumer-satisfaction-dips-when-payers-lack-price-transparency.
    \240\ Experian Health, Improve the healthcare financial journey. 
Patient Engagement (June 21, 2018). Available at: https://www.experian.com/blogs/healthcare/2018/06/healthcare-financial-journey/.
    \241\ Government Accountability Office. September 2011. Health 
Care Price Transparency: Meaningful Price Information Is Difficult 
for Consumers to Obtain Prior to Receiving Care. Available at: 
https://www.gao.gov/assets/590/585400.pdf.
---------------------------------------------------------------------------

    A large part of the literature on consumer use of price information 
comes from studies of price transparency tools, particularly those 
offered by third party payers and for shoppable services. Some studies 
of consumer use of price information through web-based tools, such as 
those offered by self-insured employers or plans, indicate that they 
may help consumers save money on shoppable services. One study examined 
consumer use of an employer-sponsored, private price transparency tool 
and its impact on claims payments for three common medical services: 
laboratory tests;

[[Page 39633]]

advanced imaging services; and clinician office visits. \242\ That 
study found that those who used the tool had lower claims payments by 
approximately 14 percent for laboratory tests; 13 percent for advanced 
imaging services; and approximately 1 percent for office visits 
compared to those who did not use the tool. Another study found that 
those employed by a large corporation who used a price transparency 
tool were able to reduce their costs by 10 to 17 percent compared to 
nonusers.\243\ Those using the tool mainly searched for information on 
shoppable services and also tended to have more limited insurance 
coverage. However, one study of the use of price transparency tools by 
consumers with an employer-based, high deductible health plan found 
that consumers' likely perception that higher price is a proxy for 
higher quality care may lead them to select higher-cost options.\244\ 
This study found a spending drop between 11.8 and 13.8 percent 
occurring across the spectrum of health care service categories at the 
health plan level; the majority of spending reductions were due to 
consumer quantity reductions across a broad range of services, 
including both high and low value care. Another study of the use of 
price transparency tools by consumers found that only 10 percent of 
consumers who were offered a tool with price information utilized it, 
and that there was a slight relative increase in their out-of-pocket 
health spending on outpatient services respective to the patient group 
that was not offered the tool.\245\
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    \242\ Whaley C., et al. ``Association Between Availability of 
Health Service Prices and Payments for These Services.'' JAMA. 
2014;312(16):1670-1676. Available at https://jamanetwork.com/journals/jama/fullarticle/1917438.
    \243\ Lieber EMJ. ``Does It Pay to Know Prices in Health Care?'' 
American Economic Journal. 2017, 9(1): 154-179. Available at: 
https://pubs.aeaweb.org/doi/pdfplus/10.1257/pol.20150124.
    \244\ Brot-Goldberg ZC, et al. What Does a Deductible Do? The 
Impact of Cost-Sharing on Health Care Prices, Quantities, and 
Spending Dynamics. Cambridge, MA: National Bureau of Economic 
Research; Working Paper, October 2015. Available at: https://www.nber.org/papers/w21632.pdf.
    \245\ Desai S, et al. Association between availability of a 
price transparency tool and outpatient spending. JAMA. 
2016;315(17):1874-1881. doi:10.1001/jama.2016.4288.
---------------------------------------------------------------------------

    Although we do not propose to require that hospitals develop a 
price comparison tool, we encourage innovation in this area by making 
standard charges available in a machine-readable format to third-party 
tool developers as well as the general public. The use of a third-party 
tool would enhance public access to pricing data, but we do not believe 
the absence of one would cause confusion among consumers on how to use 
the available standard charge data made public by the hospital because 
we are also proposing requirements for hospitals to make public their 
payer-specific charges for a set of shoppable services in a consumer-
friendly manner. A large part of consumer buy-in may depend on 
providers' willingness and ability to make public, and to have 
conversations with consumers about, their standard charge data to allow 
for price comparison and decisions about upcoming medical treatment. As 
consumers' health care costs continue to rise, clinicians are in a 
unique position to discuss the financial impacts of health care 
decisions with their patients. A paper by Chernew et al. found that 
patients will often choose services based on clinician referral rather 
than consideration of cost.\246\ We believe that if the requirements of 
this proposed rule are finalized, the pricing information made 
available would help ensure that clinicians have relevant pricing data 
to counsel patients on financial options. A systematic review found 
that clinicians and their patients believe communication about health 
care costs is important and that they have the potential to influence 
health and financial outcomes, but that discussions between clinicians 
and patients about costs are not common.\247\ We did find evidence that 
physicians were open to having these conversations, and that they were 
occurring more frequently, but providers have also identified the need 
for price information as a barrier to discussing costs with 
patients.248 249 In addition, a literature review of 18 
studies measuring the effects of charge display on cost and practice 
patterns found that having prospective access to prices for radiology 
and laboratory services changed physician's ordering behavior, and in 7 
of the 9 studies on cost reported statistically significant cost 
reduction when charges were displayed.\250\
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    \246\ Chernew M, et al. ``Are Health Care Services Shoppable? 
Evidence from the Consumption of Lower-Limb MRI Scans''. National 
Bureau of Economic Research, Working Paper No. 24869. Issued July 
2018, revised January 2019. Available at: https://www.nber.org/papers/w24869.
    \247\ Meluch AL, & Oglesby WH. (2015). Physician-patient 
communication regarding patients' healthcare costs in the US: A 
systematic review of the literature. Journal of Communication in 
Healthcare, 8(2), 151-160. Available at: https://www.tandfonline.com/doi/full/10.1179/1753807615Y.0000000010?scroll=top&needAccess=true.
    \248\ Schiavoni KH, et al. How Primary Care Physicians Integrate 
Price Information into Clinical Decision-Making, J Gen Intern 
Medicine. 2017 January; 32(1): 81-87. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5215149/.
    \249\ Alexander GC, et al. Barriers to Patient-physician 
Communication About Out-of-pocket Costs, J Gen Intern Med. 2004 
August; 19(8): 856-860. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1492500/.
    \250\ Goetz C, et al. The effect of charge display on cost of 
care and physician practice behaviors: A systematic review, Journal 
Gen Intern Med. 2015 Jun; 30(6):835-42. Available at: https://www.ncbi.nlm.nih.gov/pubmed/25691240.
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6. Alternatives Considered
    This proposed rule aims to make price information more readily 
available to the public in a manner that is consumer friendly. We 
considered a number of alternative approaches to maximize the value and 
accessibility of these data to consumers. For example, proposals to 
require release of hospital standard charge data in an API format, as 
discussed in section XVI.E.3. We also considered other types of 
``standard charges'' that could be useful to consumers in section 
XVI.D.4. For example, in addition to or instead of the requirement to 
disclose gross charges and payer-specific charges, we sought comment on 
whether we should consider a definition of `standard charge' to be a 
volume-driven negotiated charge, the minimum/median/maximum negotiated 
charge, all allowed charges. Such charges could be relevant to specific 
groups of individuals, particularly those with health insurance 
coverage. We also seek comment on a definition of `standard charge' 
that might be relevant to subgroups of individuals who are self-pay, 
specifically, types of standard charges representing the discounted 
cash price for a service package, or the median cash price.
    Under these alternative definitions of `standard charges', 
hospitals would employ statistical command or formulas to sort, extract 
or calculate the rates for all items and services and the list of 
shoppable services or service packages. We do not believe the burden 
associated with these alternative requirements would vary 
significantly, other than to account for extra analysis and statistical 
steps involved to calculate or extract the rates from the hospital's 
electronic accounting and billing system. Ultimately, however, we 
determined that most of these options would simply limit the usefulness 
of hospital charge data for consumers and that our current proposals 
for the disclosure of gross charges and payer-specific negotiated 
charges provide greater transparency and better encourage innovation 
from third party vendors.

[[Page 39634]]

    We also considered, but are not proposing, hospitals would display 
a set of at least 100 shoppable services with their payer-specific 
negotiated rates (instead of at least 300 shoppable services as 
currently proposed). As we discussed in section XVI.F.3, some states 
require hospitals to make public shoppable service packages that 
include ancillary service. Other hospitals have developed price 
estimators that take ancillary services into account. We understand 
that developing consumer-friendly shoppable service packages can be a 
challenge. With that in mind, we believe that reducing the number of 
required shoppable services would have a small impact on hospitals' 
burden, mainly due to a reduced number an analyses that would have to 
be performed as described in more detail above. We estimate that the 
burden for hospitals to display payer-specific negotiated charges for 
30 selected shoppable services rather than 230 would result in a 
reduction of 2 hours of operations. However, we assess that this 
decrease of 2 hours in burden does not outweigh the decrease in benefit 
of price transparency for consumers.

E. Effects of Proposed Prior Authorization Process and Requirements for 
Certain Hospital Outpatient Department (OPD) Services

1. Overall Impact
    As discussed in section XX. of this proposed rule, we are proposing 
to developing a new prior authorization process and requirements for 
certain hospital outpatient department (OPD) services. This proposal 
would use our authority in section 1833(t)(2)(f) of the Act to require 
provisional affirmation of coverage as a condition of Medicare payment 
unless the provider is exempt. This proposed new requirement for prior 
authorization of certain covered OPD services aims to reduce the 
unnecessary increases in volume of certain covered hospital outpatient 
department services.
    We believe there are a number of factors that may contribute to the 
potential growth assumed in the estimate presented below. For example, 
as the provider community acclimates to using prior authorization as 
part of their billing practice, there may be greater systemic or other 
processing efficiencies to allow more extensive implementation.
    The overall economic impact of this proposal on the health care 
sector is dependent on the number of claims affected. Table 47, Overall 
Economic Impact to the Health Sector, lists an estimate for the overall 
economic impact to the health sector for the services combined. The 
values populating this table were obtained from the cost reflected in 
Table 48, Annual Private Sector Costs, and Table 49, Estimated Annual 
Medicare Costs. Together, Tables 48 and 49 combine to convey the 
overall economic impact to the health sector, which is illustrated in 
Table 47. It should be noted that due to a July start date, year one 
will include only 6 months of prior authorization requests.
    Based on the estimate, the overall economic impact of this proposal 
is approximately $8.4 million in the first year based on 6 months. The 
5-year impact is approximately $71.8 million, and the 10-year impact is 
approximately $152 million. The 5 and 10 year impacts account for year 
one including only 6 months. Additional administrative paperwork costs 
to private sector providers and an increase in Medicare spending to 
conduct reviews combine to create the financial impact. However, this 
impact is offset by some savings. We believe there are likely to be 
other benefits and cost savings that result from the proposed OPD 
service prior authorization requirement. However, many of those 
benefits are difficult to quantify. For instance, we expect to see 
savings in the form of reduced unnecessary utilization, fraud, waste, 
and abuse, including a reduction in improper Medicare fee-for-service 
payments (we note that not all improper payments are fraudulent). We 
are soliciting public comments on the potential increased costs and 
benefits associated with this proposed provision.
[GRAPHIC] [TIFF OMITTED] TP09AU19.073

    The definition of small entity in the RFA includes nonprofit 
organizations. According to the RFA's use of the term, most suppliers 
and providers are small entities. Likewise, the vast majority of 
physician and nurse practitioner (NP) practices are considered small 
businesses according to the SBA's size standards total revenues of $10 
million or less in any 1 year. While the economic costs and benefits of 
this proposal are substantial in the aggregate, the economic impact on 
individual entities would be relatively small. We estimate that 90 to 
95 percent of providers who provide these services are small entities 
under the RFA definition. The rationale behind requiring prior 
authorization is to control unnecessary increases in the volume of 
covered OPD services. The impact on these providers could be 
significant; if finalized, the proposal would change the billing 
practices of providers. We believe that the purpose of the statute and 
this proposal is to avoid unnecessary utilization of OPD services. 
Therefore, we do not view decreased revenues from OPD services subject 
to unnecessary utilization by providers to be a condition that we must 
mitigate. We believe that the effect would be minimal on providers who 
are compliant with Medicare coverage and payment rules and 
requirements. This proposal would offer an additional protection to a 
provider's cash flow as the provider would know in advance if the 
Medicare requirements are met.
2. Anticipated Specific Cost Effects
a. Private Sector Costs
    We do not believe that this proposal would significantly affect the 
number of legitimate claims submitted for these services. However, we 
do expect a decrease in the overall amount paid for OPD services 
resulting from a reduction in unnecessary utilization of the services 
requiring prior authorization.

[[Page 39635]]

    As described previously in this proposed rule, we have identified a 
list of specific services that, based on review and analysis of claims 
data, show higher than expected, and therefore we believe unnecessary, 
increases in the volume of service utilization. In making the decision 
to propose to include the specific services in the proposed list of 
hospital outpatient department services requiring prior authorization, 
we first considered that these services are considered cosmetic and, 
therefore, are only covered by Medicare in very rare circumstances. We 
then viewed the current volume of utilization of these services and 
determined that the utilization far exceeded what would be expected.
    We have developed a proposed list of potential OPD services 
categories for inclusion in the OPD services prior authorization 
process--blepharoplasty; botulin toxin injections; panniculectomy; 
rhinoplasty; vein ablation, and their related services. The list 
includes services from each of five categories that have demonstrated 
an unnecessary increase in volume and can serve some cosmetic purpose 
and/or are being claimed as therapeutic services.
    We estimate that the private sector's per-case time burden 
attributed to submitting documentation and associated clerical 
activities in support of a prior authorization request is equivalent to 
that of submitting documentation and clerical activities associated for 
prepayment review, which is 0.5 hours. We apply this time burden 
estimate to initial submissions and resubmissions.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP09AU19.074

BILLING CODE 4120-01-C
b. Medicare Costs
    Medicare would incur additional costs associated with processing 
the proposed prior authorization requests. We use the range of 
potentially affected cases (submissions and resubmissions) and multiply 
it by $50, the estimated cost to review each request. The cost also 
includes other elements such as appeals, education and outreach, and 
system changes.

[[Page 39636]]

[GRAPHIC] [TIFF OMITTED] TP09AU19.075

c. Estimated Beneficiary Costs
    We expect a reduction in the utilization of Medicare OPD services 
when such utilization does not comply with one or more of Medicare's 
coverage, coding, and payment rules. While there may be an associated 
burden on beneficiaries while they wait for the prior authorization 
decision, we are unable to quantify that burden. Although the proposal 
is designed to permit utilization that is medically necessary, OPD 
services that are not medically necessary may still provide convenience 
or usefulness for beneficiaries; any rule-induced loss of such 
convenience or usefulness constitutes a cost of the rule that we lack 
data to quantify. Additionally, beneficiaries may have out-of-pocket 
costs for those services that are determined not to comply with 
Medicare requirements and thus, are not eligible for Medicare payment. 
We lack the data to quantify these costs as well.
3. Estimated Benefits
    There would be quantifiable benefits for this proposal because we 
expect a reduction in the unnecessary utilization of those Medicare OPD 
services subject to prior authorization. It is difficult to project the 
decrease in unnecessary utilization. However, we would closely monitor 
utilization and billing practices. The expected benefits would include 
a changed billing practice that also enhances the coordination of care 
for the beneficiary. For example, requiring prior authorization for 
certain OPD services ensures that the primary care practitioner 
recommending the service and the facility collaborate more closely to 
provide the most appropriate OPD services to meet the needs of the 
beneficiary. The practitioner recommending the service evaluates the 
beneficiary to determine his or her condition and what services are 
needed and medically necessary. This requires the facility to 
collaborate closely with the practitioner early on in the process to 
ensure the services are truly necessary and met all requirements and 
the documentation is complete and correct. Improper payments made 
because the practitioner did not evaluate the patient or the patient 
does not meet the Medicare requirements, would likely be reduced by the 
requirement that a provider submit clinical documentation created by as 
part of its prior authorization request.

F. Effects of Proposal Relating to Changes in the Definition of 
Expected Donation Rate for Organ Procurement Organizations

    In section XVIII. of this proposed rule, we are proposing to revise 
the definition of ``expected donation rate'' in the CfCs for OPOs. This 
proposed change would allow OPOs to receive payment for organ donor 
costs under the Medicare and Medicaid programs using a definition that 
is consistent with the definition used by the Scientific Registry of 
Transplant Recipients (SRTR).
    All 58 OPOs are required to meet two out of three outcome measures 
detailed in the CfCs for OPOs regulations at 42 CFR 486.318(b). The 
second outcome measure relies on the aforementioned definition, and 
therefore all OPOs would be affected by the proposed change. This 
revision would eliminate the potential for confusion in the OPO 
community due to different definitions of the same term. However, it 
would not affect data collection or reporting by OPTNs and SRTRs, nor 
their statistical evaluation of OPO performance, and therefore it would 
not result in any quantifiable impact.

G. Potential Revisions to the Laboratory Date of Service Policy

    In section XIX of this proposed rule, we solicit comments on 
potential revisions to the laboratory date of service policy exception 
at 42 CFR 414.510(b)(5) for molecular pathology tests and tests 
designated by CMS as an ADLT under paragraph (1) of the definition of 
advanced diagnostic laboratory test in Sec.  414.502. Because these 
tests are excluded from our packaging policy under the OPPS, and are 
paid at the applicable rate for the laboratory test under the CLFS, 
regardless of whether the hospital or the performing laboratory bills 
Medicare for the test, any aspect of this discussion will not result in 
net costs or savings to the Medicare program. Accordingly, the 
discussion in section XIX. of this proposed rule is not reflected in 
Table 41 in the regulatory impact analysis under section XXVI.C.1. of 
this proposed rule.

H. Effect of Proposed Changes to Requirements for Grandfathered 
Children's Hospitals-Within-Hospitals (HwHs)

    In section XXII. of this proposed rule, we discuss our proposal to 
revise the regulations to allow grandfathered children's HwHs to 
increased beds while maintaining their grandfathered status. This 
proposed policy change would allow providers to address changing 
community needs for services without any increased incentive for 
inappropriate patient shifting to maximize Medicare payments given the 
low Medicare utilization in children's hospitals. Based on the best 
available information, there are currently very few grandfathered 
children's HwHs (3 or less). For these reasons, we estimate any impact 
on Medicare expenditures as a result of this proposal would be 
negligible. On average there are approximately 50 Medicare discharges 
per year from children's hospitals at an average cost of approximately 
$33,000 per discharge. There are two possible sources for an increase, 
if any, in Medicare discharges at grandfathered children's hospitals as 
a result of our proposal: Either the discharges would have been treated 
at another children's hospital or the cases would have been treated at 
an IPPS hospital. In either case given the few number of Medicare 
discharges at children's hospitals, the impact of this proposal on 
Medicare spending is negligible.

I. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review a rule, we assume that the number of commenters on the 
CY 2019 OPPS/ASC proposed rule (2,990) will be the number of reviewers 
of this proposed rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this

[[Page 39637]]

proposed rule. It is possible that not all commenters will review this 
proposed rule in detail, and it is also possible that some reviewers 
will choose not to comment on this proposed rule. Nonetheless, we 
believe that the number of commenters on the CY 2019 OPPS/ASC proposed 
rule will be a fair estimate of the number of reviewers of this 
proposed rule. We welcome any comments on the approach in estimating 
the number of entities that will review this proposed rule. We also 
recognize that different types of entities are, in many cases, affected 
by mutually exclusive sections of this proposed rule and the final rule 
with comment period, and, therefore, for the purposes of our estimate, 
we assume that each reviewer reads approximately 50 percent of the 
rule. In this proposed rule, we are seeking public comments.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $109.36 per hour, including overhead and fringe benefits 
(https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average 
reading speed, we estimate that it will take approximately 8 hours for 
the staff to review half of this proposed rule. For each facility that 
reviews this proposed rule, the estimated cost is $874.88 (8 hours x 
$109.36). Therefore, we estimate that the total cost of reviewing this 
proposed rule is $2,615,891.20 ($874.88 x 2,990 reviewers).

J. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
most hospitals, ASCs and CMHCs are small entities as that term is used 
in the RFA. For purposes of the RFA, most hospitals are considered 
small businesses according to the Small Business Administration's size 
standards with total revenues of $38.5 million or less in any single 
year or by the hospital's not-for-profit status. Most ASCs and most 
CMHCs are considered small businesses with total revenues of $15 
million or less in any single year. For details, we refer readers to 
the Small Business Administration's ``Table of Size Standards'' at: 
http://www.sba.gov/content/table-small-business-size-standards.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this 
proposed rule would increase payments to small rural hospitals by less 
than 3 percent; therefore, it should not have a significant impact on 
approximately 612 small rural hospitals. We note that the estimated 
payment impact for any category of small entity will depend on both the 
services that they provide as well as the payment policies and/or 
payment systems that may apply to them. Therefore, the most applicable 
estimated impact may be based on the specialty, provider type, or 
payment system.
    We do not believe proposals related to requirements for hospitals 
to make public their standard charges would have a significant economic 
impact on small rural hospitals operations or their market positions. 
As indicated in section XX.VI.D. in this proposed rule, the total 
annual burden for making public standard charges is minimal on the 
operations of hospitals, including small rural hospitals. Moreover, 
small rural hospitals often are situated in a less competitive health 
care market and studies have indicated that the pricing transparency 
impact tends to be minimal when the provide competition is weak, which 
is a representative characteristic of rural healthcare markets.\251\ 
Therefore, we believe this proposed rule imposes minimal operational 
and/or economic impacts on small rural hospitals.
---------------------------------------------------------------------------

    \251\ Tu, Ha. Impact of HealthCare Price Transparency on Price 
Variation: The New Hampshire Experience. Center for Studying Health 
System Change Issue Brief, November, 2009. and Christiansen, Hans et 
al. The Effects of Price Transparency Regulation on Prices in the 
Healthcare Industry, The Baker Institute, 2013.
---------------------------------------------------------------------------

    The analysis above, together with the remainder of this preamble, 
provides a regulatory flexibility analysis and a regulatory impact 
analysis.

K. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $154 million. This proposed rule does 
not mandate any requirements for State, local, or tribal governments, 
or for the private sector.

L. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. It has been 
determined that this proposed rule, if finalized, would be a regulatory 
action for the purposes of Executive Order 13771. We estimate that this 
proposed rule would generate $7.85 million in annualized cost at a 7-
percent discount rate, discounted relative to 2016, over a perpetual 
time horizon.

M. Conclusion

    The changes we are proposing to make in this proposed rule would 
affect all classes of hospitals paid under the OPPS and would affect 
both CMHCs and ASCs. We estimate that most classes of hospitals paid 
under the OPPS would experience a modest increase or a minimal decrease 
in payment for services furnished under the OPPS in CY 2020. Table 41 
demonstrates the estimated distributional impact of the OPPS budget 
neutrality requirements that would result in a 2.0 percent increase in 
payments for all services paid under the OPPS in CY 2020, after 
considering all of the proposed changes to APC reconfiguration and 
recalibration, as well as the proposed OPD fee schedule increase 
factor, proposed wage index changes, including the proposed frontier 
State wage index adjustment, estimated payment for outliers, the 
finalized off-campus provider-based department clinic visits payment 
policy, and proposed changes to the pass-through payment estimate. 
However, some classes of providers that are paid under the OPPS would 
experience more significant gains or losses in OPPS payments in CY 
2020.
    The proposed updates to the ASC payment system for CY 2020 would 
affect each of the approximately 5,600 ASCs currently approved for 
participation in the Medicare program. The effect on an individual ASC 
would depend on its mix of patients, the proportion of the ASC's 
patients who are Medicare beneficiaries, the degree to which the 
payments for the procedures offered by the ASC are changed under the 
ASC payment system, and the extent to which the ASC provides a 
different set of procedures in the coming year. Table 42 demonstrates 
the estimated distributional impact among ASC surgical specialties of 
the proposed MFP-adjusted hospital market basket update factor of 2.7 
percent for CY 2020.

[[Page 39638]]

XXVII. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has federalism 
implications. We have examined the OPPS and ASC provisions included in 
this proposed rule in accordance with Executive Order 13132, 
Federalism, and have determined that they will not have a substantial 
direct effect on State, local or tribal governments, preempt State law, 
or otherwise have a federalism implication. As reflected in Table 41 of 
this proposed rule, we estimate that OPPS payments to governmental 
hospitals (including State and local governmental hospitals) would 
increase by 1.9 percent under this proposed rule. While we do not know 
the number of ASCs or CMHCs with government ownership, we anticipate 
that it is small. The analyses we have provided in this section of this 
proposed rule, in conjunction with the remainder of this document, 
demonstrate that this proposed rule is consistent with the regulatory 
philosophy and principles identified in Executive Order 12866, the RFA, 
and section 1102(b) of the Act.
    This proposed rule would affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals, CMHCs, and ASCs, and some effects may be 
significant.

List of Subjects

42 CFR Part 405

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

42 CFR Part 410

    Diseases, Health facilities, Health professions, Laboratories, 
Medicare, Reporting and recordkeeping requirements, Rural areas, X-
rays.

42 CFR Part 412

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

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 486

    Definitions, Medicare, Organ procurement.

45 CFR Part 180

    Definitions, Hospitals, Reporting and recordkeeping requirements.

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

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

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


    Authority:  42 U.S.C. 263a, 495(a), 1302, 1302b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Section 405.926 is amended by revising paragraph (t) to read as 
follows:


Sec.  405.926  Actions that are not initial determinations.

* * * * *
    (t) A contractor's prior authorization determination with regard 
to--
    (1) Durable medical equipment, prosthetics, orthotics, and supplies 
(DMEPOS)); and
    (2) Hospital outpatient department (OPD) services.
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

    Authority:  42 U.S.C. 1302, 1395m, 1395hh, 1395rr, and 1395ddd.

0
4. Section 410.27 is amended by revising paragraph (a)(1)(iv) to read 
as follows:


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

* * * * *
    (a) * * *
    (1) * * *
    (iv) Under the general supervision (or other level of supervision 
as specified by CMS for the particular service) of a physician or a 
nonphysician practitioner as specified in paragraph (g) of this 
section, subject to the following requirements:
    (A) For services furnished in the hospital or CAH, or in an 
outpatient department of the hospital or CAH, both on and off-campus, 
as defined in Sec.  413.65 of this subchapter, general supervision as 
defined in Sec.  410.32(b)(3)(i).
    (B) Certain therapeutic services and supplies may be assigned 
either direct supervision or personal supervision. For purposes of this 
section, direct supervision means that the physician or nonphysician 
practitioner must be immediately available to furnish assistance and 
direction throughout the performance of the procedure. It does not mean 
that the physician or nonphysician practitioner must be present in the 
room when the procedure is performed. And personal supervision means 
the definition specified at Sec.  410.32(b)(3)(iii);
    (C) Nonphysician practitioners may provide the required supervision 
of services that they may personally furnish in accordance with State 
law and all additional requirements, including those specified in 
Sec. Sec.  410.71, 410.73, 410.74, 410.75, 410.76, and 410.77;
    (D) For pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services, direct supervision must be 
furnished by a doctor of medicine or a doctor of osteopathy, as 
specified in Sec. Sec.  410.47 and 410.49, respectively; and
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
5. The authority citation for part 412 is revised to read as follows:


    Authority: 42 U.S.C. 1302 and 1395hh.

0
6. Section 412.22 is amended by revising paragraphs (f)(1) and (2) to 
read as follows:


Sec.  412.22  Excluded hospitals and hospital units: General rules.

* * * * *
    (f) * * *
    (1) Continues to operate under the same terms and conditions, 
including the number of beds, unless the hospital is a children's 
hospital as defined at Sec.  412.23(d), and square footage considered 
to be part of the hospital for purposes of Medicare participation and 
payment in effect on September 30, 1995; or
    (2) In the case of a hospital that changes the terms and conditions 
under which it operates after September 30, 1995, but before October 1, 
2003, continues to operate under the same terms and conditions, 
including the number of beds, unless the hospital is

[[Page 39639]]

a children's hospital as defined at Sec.  412.23(d), and square footage 
considered to be part of the hospital for purposes of Medicare 
participation and payment in effect on September 30, 2003.
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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


    Authority: 42 U.S.C. 273, 1302, 1320b-8, and 1395hh.

0
8. Section 416.171 is amended by adding paragraph (b)(4) to read as 
follows:


Sec.  416.171  Determination of payment rates for ASC services.

* * * * *
    (b) * * *
    (4) Notwithstanding paragraph (b)(2) of this section, low volume 
device-intensive procedures where the otherwise applicable payment rate 
calculated based on the standard methodology for device intensive 
procedures described in this paragraph (b) would exceed the payment 
rate for the equivalent service set under the payment system 
established under part 419 of this subchapter, for which the payment 
rate will be set at an amount equal to the amount under that payment 
system.
* * * * *

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

0
9. The authority citation for part 419 continues to read as follows:


    Authority: 42 U.S.C. 1302, 1395l(t), and 1395hh.

0
10. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)(11) to 
read as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (iv) * * *
    (B) * * *
    (11) For calendar year 2020, a multifactor productivity adjustment 
(as determined by CMS) and 0.75 percentage point.
* * * * *
0
11. Section 419.66 is amended by revising paragraph (c)(2) to read as 
follows:


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

* * * * *
    (c) * * *
    (2) CMS determines either of the following:
    (i) The 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; or
    (ii) For applications received on or after January 1, 2020, as an 
alternative pathway to paragraph (c)(2)(i) of this section, the device 
has received FDA marketing authorization and is part of the FDA's 
Breakthrough Devices Program.
* * * * *
0
12. Subpart I, consisting of Sec. Sec.  419.80 through 419.89, is added 
to read as follows:

SUBPART I--PRIOR AUTHORIZATION FOR OUTPATIENT DEPARTMENT SERVICES

Sec.
419.80 Basis and scope of this subpart.
419.81 Definitions.
419.82 Prior authorization for certain covered hospital outpatient 
department services.
419.83 List of hospital outpatient department services requiring 
prior authorization.
419.84-419.89 [Reserved]


Sec.  419.80  Basis and scope of this subpart.

    (a) Basis. The provisions in this subpart are issued under the 
authority of section 1833(t)(2)(F) of the Act, which authorizes the 
Secretary to develop a method for controlling unnecessary increases in 
the volume of covered hospital outpatient department services.
    (b) Scope. This subpart specifies the process and requirements for 
prior authorization for certain hospital outpatient department services 
as a condition of Medicare payment.


Sec.  419.81  Definitions.

    As used in this subpart, unless otherwise specified, the following 
definitions apply:
    List of hospital outpatient department services requiring prior 
authorization means the list of hospital outpatient department services 
described in Sec.  419.83(a) that CMS adopts in accordance with Sec.  
419.83(b) that require prior authorization as a condition of Medicare 
payment.
    Prior authorization means the process through which a request for 
provisional affirmation of coverage is submitted to CMS or its 
contractors for review before the service is provided to the 
beneficiary and before the claim is submitted for processing.
    Provisional affirmation means a preliminary finding that a future 
claim meets the Medicare coverage, coding, and payment rules in chapter 
IV of this title or in Title XVIII of the Social Security Act.


Sec.  419.82  Prior authorization for certain covered hospital 
outpatient department services.

    (a) Prior authorization as condition of payment. As a condition of 
Medicare payment for the services in the categories of services on the 
list of hospital outpatient department services requiring prior 
authorization as specified in Sec.  419.83(a), a provider must submit 
to CMS or its contractors a prior authorization request in accordance 
with the requirements of paragraph (c) of this section.
    (b) Denial of claim. (1) CMS or its contractors will deny a claim 
for a service that requires prior authorization if the provider has not 
received a provisional affirmation of coverage on the claim from CMS or 
its contractor unless the provider is exempt under Sec.  419.83(c).
    (2) CMS or its contractor may deny a claim that has received a 
provisional affirmation based on either of the following:
    (i) Technical requirements that can only be evaluated after the 
claim has been submitted for formal processing; or
    (ii) Information not available at the time of a prior authorization 
request.
    (3) CMS or its contractor may deny claims for services related to 
services on the list of hospital outpatient department services for 
which the provider has received a denial.
    (c) Submission of prior authorization request. A provider must 
submit to CMS or its contractor a prior authorization request for any 
service on the list of outpatient department services requiring prior 
authorization.
    (1) Prior authorization request requirements. A prior authorization 
request must--
    (i) Include all documentation necessary to show that the service 
meets applicable Medicare coverage, coding, and payment rules in 
chapter IV of this title or in Title XVIII of the Social Security Act.
    (ii) Be submitted before the service is provided to the beneficiary 
and before the claim is submitted.
    (2) Request for expedited review. A provider may submit a request 
for expedited review of a prior

[[Page 39640]]

authorization request. The request for expedited review must comply 
with the requirements in paragraphs (c)(1)(i) and (ii) of this section 
and include documentation showing that the processing of the prior 
authorization request must be expedited due to the beneficiary's life, 
health, or ability to regain maximum function being in serious 
jeopardy.
    (d) Reviews--(1) Review of prior authorization request. Upon 
receipt of a prior authorization request, CMS or its contractor will 
review the request for compliance with applicable Medicare coverage, 
coding, and payment rules in chapter IV of this title or in Title XVIII 
of the Social Security Act.
    (i) CMS or its contractor will issue a provisional affirmation to 
the provider if it is determined that applicable Medicare coverage, 
coding, and payment rules in chapter IV of this title or in Title XVIII 
of the Social Security Act are met.
    (ii) CMS or its contractor will issue a non-affirmation to the 
provider if it is determined that applicable Medicare coverage, coding, 
and payment rules in chapter IV of this title or in Title XVIII of the 
Social Security Act are not met.
    (iii) The provisional affirmation or non-affirmation will be issued 
within 10 business days of receipt of the prior authorization request.
    (2) Review of expedited review request. Upon receipt of a request 
for expedited review, CMS or its contractor will complete an expedited 
review of the prior authorization request if it is determined that a 
delay could seriously jeopardize the beneficiary's life, health, or 
ability to regain maximum function, and issue a provisional affirmation 
or non-affirmation decision in accordance with paragraph (d)(1) of this 
section within 2 business days of the expedited review request.
    (e) Resubmission. (1) A provider may resubmit a prior authorization 
request, upon receipt of a non-affirmation, consistent with the 
requirements in paragraph (c)(1) of this section.
    (2) A provider may resubmit a request for expedited review 
consistent with the requirements in paragraph (c)(1) of this section.


Sec.  419.83  List of hospital outpatient department services requiring 
prior authorization.

    (a) Service categories for the list of hospital outpatient 
department services requiring prior authorization. (1) The following 
service categories comprise the list of hospital outpatient department 
services requiring prior authorization:
    (i) Blepharoplasty.
    (ii) Botulinum toxin injections.
    (iii) Panniculectomy.
    (iv) Rhinoplasty.
    (v) Vein ablation.
    (2) Technical updates to the list of services, such as changes to 
the name of the service or CPT code, will be published on the CMS 
website.
    (b) Adoption of the list of services. CMS will adopt the list of 
hospital outpatient department service categories requiring prior 
authorization and any updates or geographic restrictions through formal 
notice-and-comment rulemaking.
    (c) Exemptions. CMS may elect to exempt a provider from the prior 
authorization process in Sec.  419.82 upon a provider's demonstration 
of compliance with Medicare coverage, coding, and payment rules in 
chapter IV of this title or in Title XVIII of the Social Security Act 
through such prior authorization process. An exemption will remain in 
effect until CMS elects to withdraw the exemption.
    (d) Suspension of prior authorization process or services. CMS may 
suspend the outpatient department services prior authorization process 
requirements generally or for a particular service(s) at any time by 
issuing notification on the CMS website.


Sec. Sec.  419.84-419.89   [Reserved]

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

0
13. The authority citation for part 486 is revised to read as follows:

    Authority:  42 U.S.C. 273, 1302, 1320b-8, and 1395hh.

0
14. Section 486.302 is amended by revising the definition of ``Expected 
donation rate'' to read as follows:


Sec.  486.302  Definitions.

* * * * *
    Expected donation rate means the expected donation rate per 100 
eligible deaths that is the rate expected for an OPO based on the 
national experience for OPOs serving similar eligible donor populations 
and donation service areas. This rate is adjusted for the distributions 
of age, sex, race, and cause of death among eligible deaths.
* * * * *
0
15. Section 486.318 is amended by revising paragraphs (a)(2), (b)(2), 
and (c)(1) to read as follows:


Sec.  486.318  Condition: Outcome measures.

    (a) * * *
    (2) The observed donation rate is not significantly lower than the 
expected donation rate for 18 or more months of the 36 months of data 
used for recertification, as calculated by the SRTR. For the 2022 
recertification cycle, the observed donation rate is not significantly 
lower than the expected donation rate for 12 of the 24 months between 
January 1, 2020 and December 31, 2021, as calculated by the SRTR.
* * * * *
    (b) * * *
    (2) The observed donation rate is not significantly lower than the 
expected donation rate for 18 or more months of the 36 months of data 
used for recertification, as calculated by the SRTR. For the 2022 
recertification cycle, the observed donation rate is not significantly 
lower than the expected donation rate for 12 of the 24 months between 
January 1, 2020 and December 31, 2021, as calculated by the SRTR.
* * * * *
    (c) * * *
    (1) Except as specified in paragraph (b)(2) of this section, an 
OPO's performance on the outcome measures is based on 36 months of 
data, beginning with January 1 of the first full year of the 
recertification cycle and ending 36 months later on December 31, 7 
months prior to the end of the recertification cycle.
* * * * *
    For reasons stated in the preamble of this document, under the 
authority 5 U.S.C. 301 and 42 U.S.C. 300gg-18, the Department of Health 
and Human Services proposes to amend title 45, subtitle A of the Code 
of Federal Regulations as set forth below:
0
16. Subchapter E, consisting of parts 180 through 199, is added to read 
as follows:

Title 45--Public Welfare

Subtitle A--Department of Health and Human Services

SUBCHAPTER E--PRICE TRANSPARENCY

181-199 [RESERVED]

PART 180--HOSPITAL PRICE TRANSPARENCY

Sec.

Subpart A--General Provisions

180.10 Basis and scope.
180.20 Definitions.
180.30 Applicability.

Subpart B--Public Disclosure Requirements

180.40 General requirements.
180.50 Requirements for making public hospital standard charges for 
all items and services.
180.60 Requirements for making public payer-specific negotiated 
charges for selected shoppable services.

[[Page 39641]]

Subpart C--Monitoring and Penalties for Noncompliance

180.70 Monitoring and enforcement.
180.80 Corrective action plans.
180.90 Civil monetary penalties.

Subpart D--Appeals of Civil Monetary Penalties

180.100 Appeal of penalty.
180.110 Failure to request a hearing.

    Authority:  42 U.S.C. 300gg-18.

Subpart A--General Provisions


Sec.  180.10  Basis and scope.

    This part implements section 2718(e) of the Public Health Service 
(PHS) Act, which requires each hospital operating within the United 
States, for each year, to establish, update, and make public a list of 
the hospital's standard charges for items and services provided by the 
hospital, including for diagnosis-related groups established under 
section 1886(d)(4) of the Social Security Act. This part also 
implements section 2718(b)(3) of the PHS Act, to the extent that 
section authorizes CMS to promulgate regulations for enforcing section 
2718(e).


Sec.  180.20  Definitions.

    The following definitions apply to this part, unless specified 
otherwise:
    Ancillary service means an item or service a hospital customarily 
provides as part of or in conjunction with a shoppable primary service.
    Chargemaster (Charge Description Master or CDM) means the list of 
all individual items and services maintained by a hospital for which 
the hospital has established a charge.
    Gross charge means the charge for an individual item or service 
that is reflected on a hospital's chargemaster, absent any discounts.
    Hospital means an institution in any State in which State or 
applicable local law provides for the licensing of hospitals, that is 
licensed as a hospital pursuant to such law or is approved, by the 
agency of such State or locality responsible for licensing hospitals, 
as meeting the standards established for such licensing. For purposes 
of this definition, a State includes each of the several States, the 
District of Columbia, Puerto Rico, the Virgin Islands, Guam, American 
Samoa, and the Northern Mariana Islands.
    Items and services means all items and services, including 
individual items and services and service packages, that could be 
provided by a hospital to a patient in connection with an inpatient 
admission or an outpatient department visit for which the hospital has 
established a standard charge. Examples include, but are not limited 
to, supplies, procedures, room and board, use of the facility and other 
items (generally described as facility fees), services of employed 
physicians and non-physician practitioners (generally reflected as 
professional charges), and any other items or services for which a 
hospital has established a standard charge.
    Machine-readable format means a digital representation of data or 
information in a file that can be imported or read into a computer 
system for further processing. Examples of machine-readable formats 
include, but are not limited to, .XML, JSON and .CSV formats.
    Payer-specific negotiated charge means the charge that a hospital 
has negotiated with a third party payer for an item or service.
    Service package means an aggregation of individual items and 
services into a single service with a single charge.
    Shoppable service means a service package that can be scheduled by 
a health care consumer in advance.
    Standard charge means the regular rate established by the hospital 
for an item or and service provided to a specific group of paying 
patients
    Third party payer means an entity that is, by statute, contract, or 
agreement, legally responsible for payment of a claim for a health care 
item or service.


Sec.  180.30  Applicability.

    (a) General applicability. Except as provided in paragraph (b) of 
this section, the requirements of this part apply to hospitals as 
defined at Sec.  180.20.
    (b) Exception. Federally owned or operated hospitals are deemed by 
CMS to be in compliance with the requirements of this part including 
but not limited to:
    (1) Federally owned hospital facilities, including hospitals 
operated by the U.S. Department of Veterans Affairs and Military 
Treatment Facilities operated by the U.S. Department of Defense.
    (2) Hospitals operated by an Indian Health Program as defined in 
section 4(12) of the Indian Health Care Improvement Act.
    (c) Online availability. Unless otherwise stated, hospital charge 
information must be made public electronically via the internet.

Subpart B--Public Disclosure Requirements


Sec.  180.40  General requirements.

    A hospital must make public the following:
    (a) A machine-readable file containing a list of all standard 
charges for all items and services as provided in Sec.  180.50.
    (b) A consumer-friendly list of payer-specific negotiated charges 
for a limited set of shoppable services as provided in Sec.  180.60.


Sec.  180.50  Requirements for making public hospital standard charges 
for all items and services.

    (a) General rules. (1) A hospital must establish, update, and make 
public a list of all standard charges for all items and services online 
in the form and manner specified in this section.
    (2) Each hospital location operating under a single hospital 
license (or approval) that has a different set of standard charges than 
the other location(s) operating under the same hospital license (or 
approval) must separately meet the requirements of this section.
    (b) Required data elements. A hospital must include all of the 
following corresponding data elements in its list of standard charges, 
as applicable:
    (1) Description of each item or service provided by the hospital.
    (2) Gross charge that applies to each individual item or service 
when provided in, as applicable, the hospital inpatient setting and 
outpatient department setting.
    (3) Payer-specific negotiated charge that applies to each item or 
service when provided in, as applicable, the hospital inpatient setting 
and outpatient department setting. Each list of payer-specific charges 
must be clearly associated with the name of the third party payer.
    (4) Any code used by the hospital for purposes of accounting or 
billing for the item or service, including, but not limited to, the 
Current Procedural Terminology (CPT) code, the Healthcare Common 
Procedure Coding System (HCPCS) code, the Diagnosis Related Group 
(DRG), the National Drug Code (NDC), or other common payer identifier.
    (5) Revenue codes, as applicable.
    (c) Format. The information described in paragraph (b) of this 
section must be published in a single digital file that is in a 
machine-readable format.
    (d) Location and accessibility. (1) A hospital may select a 
publicly available website for purposes of making public the standard 
charge information required under this section.
    (2) The standard charge information must be displayed in a 
prominent manner and clearly identified with the hospital location with 
which the standard charge information is associated.
    (3) The hospital must ensure that the standard charge data is 
easily accessible, without barriers, including but not

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limited to ensuring the data is accessible:
    (i) Free of charge,
    (ii) Without having to establish a user account or password; and
    (iii) Without having to submit personal identifying information 
(PII).
    (4) The digital file and standard charge information contained in 
it must be digitally searchable.
    (e) Frequency of updates. The hospital must update the standard 
charge information described in paragraph (b) of this section at least 
once annually. The hospital must clearly indicate the date that the 
standard charge data was most recently updated, either within the file 
itself or otherwise clearly associated with the file.


Sec.  180.60  Requirements for making public payer-specific negotiated 
charges for selected shoppable services.

    (a) General rules. (1) A hospitals must make public its payer-
specific negotiated charges for as many of the 70 CMS-selected 
shoppable services that are provided by the hospital, and as many 
additional hospital-selected shoppable services as is necessary for a 
combined total of at least 300 shoppable services.
    (2) [Reserved]
    (b) Required data elements. A hospital must include, as applicable, 
all of the following corresponding data elements when displaying its 
payer-specific negotiated charges for the shoppable services selected 
under paragraph (a) of this section:
    (1) A plain-language description of each shoppable service.
    (2) The payer-specific negotiated charge that applies to each 
shoppable service. For shoppable services not provided by the hospital, 
the charge must be indicated as ``N/A''. Each payer-specific charge 
must be clearly associated with the name of the third party payer.
    (3) A list of all associated ancillary items and services that the 
hospital provides with the shoppable service, including the payer-
specific negotiated charge for each ancillary item or service.
    (4) The location at which the shoppable service is provided, 
including whether the payer-specific negotiated charge for the 
shoppable service applies at that location to the provision of that 
shoppable service in the inpatient setting or the outpatient department 
setting or both.
    (5) Any primary code used by the hospital for purposes of 
accounting or billing for the shoppable service, including, as 
applicable, the Current Procedural Terminology (CPT) code, the 
Healthcare Common Procedure Coding System (HCPCS) code, the Diagnosis 
Related Group (DRG), or other common service billing code.
    (c) Format. (1) A hospital has discretion to choose a format for 
making public the information described in paragraph (b) of this 
section online.
    (2) The hospital must make the information described in paragraph 
(b) of this section in written format upon request within 72 hours of 
the request.
    (d) Location and accessibility of online data. (1) A hospital has 
discretion to select an appropriate publicly available internet 
location for purposes of making public the standard charge information 
required under this section.
    (2) The standard charge information must be displayed in a 
prominent manner that identifies the hospital location with which the 
standard charge information is associated.
    (3) The standard charge data must be easily accessible, without 
barriers, including but not limited to ensuring the data is:
    (i) Free of charge.
    (ii) Accessible without having to register or establish a user 
account or password.
    (iii) Accessible without having to submit personal identifying 
information (PII).
    (iv) Searchable by service description, billing code, and payer.
    (e) Frequency. The hospital must update the standard charge 
information described in paragraph (b) of this section at least once 
annually. The hospital must clearly indicate the date that the 
information was most recently updated.

Subpart C--Monitoring and Penalties for Noncompliance


Sec.  180.70  Monitoring and enforcement.

    (a) Monitoring. (1) CMS evaluates whether a hospital has complied 
with the requirements under Sec. Sec.  180.40, 180.50, and 180.60.
    (2) CMS may use methods to monitor and assess hospital compliance 
with the requirements under this part, including, but not limited to, 
the following, as appropriate:
    (i) CMS' evaluation of complaints made by individuals or entities 
to CMS.
    (ii) CMS review of individuals' or entities' analysis of 
noncompliance.
    (iii) CMS audit of hospitals' websites.
    (b) Actions to address hospital noncompliance. If CMS concludes 
that the hospital is noncompliant with one or more of the requirements 
of Sec.  180.40, Sec.  180.50, or Sec.  180.60, CMS may take any of the 
following actions, which generally, but not necessarily, will occur in 
the following order:
    (1) Provide a written warning notice to the hospital of the 
specific violation(s).
    (2) Request a corrective action plan from the hospital if its 
noncompliance constitutes a material violation of one or more 
requirements, according to Sec.  180.80.
    (3) Impose a civil monetary penalty on the hospital and publicize 
the penalty on a CMS website according to Sec.  180.90 if the hospital 
fails to respond to CMS' request to submit a corrective action plan or 
comply with the requirements of a corrective action plan.


Sec.  180.80  Corrective action plans.

    (a) Material violations requiring a corrective action plan. CMS 
determines if a hospital's noncompliance with the requirements of this 
part constitutes material violation(s) requiring a corrective action 
plan. A material violation may include, but is not limited to, the 
following:
    (1) A hospital's failure to make public its standard charges 
required by Sec.  180.40.
    (2) A hospital's failure to make public its standard charges in the 
form and manner required under Sec. Sec.  180.50 and 180.60.
    (b) Notice of violation. CMS may request that a hospital submit a 
corrective action plan, specified in a notice of violation issued by 
CMS to a hospital.
    (c) Compliance with corrective action plan requests and corrective 
actions. (1) A hospital required to submit a corrective action plan 
must do so, in the form and manner, and by the deadline, specified in 
the notice of violation issued by CMS to the hospital and must comply 
with the requirements of the corrective action plan.
    (2) A hospital's corrective action plan must specify elements 
including, but not limited to:
    (i) The deficiency or deficiencies that caused noncompliance to 
occur.
    (ii) The corrective actions or processes the hospital will take to 
come into compliance with the requirements of this part.
    (iii) The timeframe by which the hospital will complete the 
corrective action.
    (3) A corrective action plan is subject to CMS review and approval.
    (4) After CMS' review and approval of a hospital's corrective 
action plan, CMS may monitor and evaluate the hospital's compliance 
with the corrective actions.
    (d) Noncompliance with corrective action plan requests and 
requirements. (1) A hospital's failure to respond to CMS' request to 
submit a corrective action plan includes failure to submit a

[[Page 39643]]

corrective action plan in the form, manner, or by the deadline, 
specified in a notice of violation issued by CMS to the hospital.
    (2) A hospital's failure to comply with the requirements of a 
corrective action plan includes failure to correct violation(s) within 
the specified timeframes.


Sec.  180.90  Civil monetary penalties.

    (a) Basis for imposing civil monetary penalties. CMS may impose a 
civil monetary penalty on a hospital identified as noncompliant 
according to Sec.  180.70, and that fails to respond to CMS' request to 
submit a corrective action plan or comply with the requirements of a 
corrective action plan as described in Sec.  180.80(d).
    (b) Notice of imposition of a civil monetary penalty. (1) If CMS 
imposes a penalty in accordance with this part, CMS provides a written 
notice of imposition of a civil monetary penalty to the hospital via 
certified mail or another form of traceable carrier.
    (2) This notice to the hospital may include, but is not limited to, 
the following:
    (i) The basis for the hospital's noncompliance, including, but not 
limited to, the following:
    (A) CMS' determination as to which requirement(s) the hospital has 
violated.
    (B) The hospital's failure to respond to CMS' request to submit a 
corrective action plan or comply with the requirements of a corrective 
action plan, as described in Sec.  180.80(d).
    (ii) CMS' determination as to the effective date for the 
violation(s). This date is the latest date of the following:
    (A) The first day the hospital is required to meet the requirements 
of this part.
    (B) If a hospital previously met the requirements of this part but 
did not update the information annually as required, the date 12 months 
after the date of the last annual update specified in information 
posted by the hospital.
    (C) A date determined by CMS, such as one resulting from monitoring 
activities specified in Sec.  180.70, or development of a corrective 
action plan as specified in Sec.  180.80.
    (iii) The amount of the penalty as of the date of the notice.
    (iv) A statement that a civil monetary penalty may continue to be 
imposed for continuing violation(s).
    (v) Payment instructions.
    (vi) Intent to publicize the hospital's noncompliance and CMS' 
determination to impose a civil monetary penalty on the hospital for 
noncompliance with the requirements of this part by posting the notice 
of imposition of a civil monetary penalty on a CMS website.
    (vii) A statement of the hospital's right to a hearing according to 
subpart D of this part.
    (viii) A statement that the hospital's failure to request a hearing 
within 30 calendar days of the issuance of the notice permits the 
imposition of the penalty, and any subsequent penalties pursuant to 
continuing violations, without right of appeal in accordance with Sec.  
180.110.
    (3) If the civil monetary penalty is upheld, in part, by a final 
and binding decision according to subpart D of this part, CMS will 
issue a modified notice of imposition of a civil monetary penalty.
    (c) Amount of the civil monetary penalty. (1) CMS may impose a 
civil monetary penalty upon a hospital for a violation of each 
requirement of this part.
    (2) The maximum daily dollar amount for a civil monetary penalty to 
which a hospital may be subject is $300. Even if the hospital is in 
violation of multiple discrete requirements of this part, the maximum 
total sum that a single hospital may be assessed per day is $300.
    (3) The amount of the civil monetary penalty will be adjusted 
annually using the multiplier determined by OMB for annually adjusting 
civil monetary penalty amounts under part 102 of this title.
    (d) Timing of payment of civil monetary penalty. (1) A hospital 
must pay the civil monetary penalty in full within 60 calendar days 
after the date of the notice of imposition of a civil monetary penalty 
from CMS under paragraph (b) of this section.
    (2) In the event a hospital requests a hearing, pursuant to subpart 
D of this part, the hospital must pay the amount in full within 60 
calendar days after the date of a final and binding decision, according 
to subpart D of this part, to uphold, in whole or in part, the civil 
monetary penalty.
    (3) If the 60th calendar day described paragraphs (d)(1) and (2) of 
this section is a weekend or a Federal holiday, then the timeframe is 
extended until the end of the next business day.
    (e) Posting of notice. (1) CMS will post the notice of imposition 
of a civil monetary penalty described in paragraphs (b) and (f) of this 
section on a CMS website.
    (2) In the event that a hospital elects to request a hearing, 
pursuant to subpart D of this part:
    (i) CMS will indicate in its posting, under paragraph (e)(1) of 
this section, that the civil monetary penalty is under review.
    (ii) If the civil monetary penalty is upheld, in whole, by a final 
and binding decision according to subpart D of this part, CMS will 
maintain the posting of the notice of imposition of a civil monetary 
penalty on a CMS website.
    (iii) If the civil monetary penalty is upheld, in part, by a final 
and binding decision according to subpart D of this part, CMS will 
issue a modified notice of imposition of a civil monetary penalty 
according to paragraph (b)(3) of this section, and will make this 
modified notice public on a CMS website.
    (iv) If the civil monetary penalty is overturned in full by a final 
and binding decision according to subpart D of this part, CMS will 
remove the notice of imposition of a civil monetary penalty from a CMS 
website.
    (f) Continuing violations. CMS may issue subsequent notice(s) of 
imposition of a civil monetary penalty, according to paragraph (b) of 
this section, that result from the same instance(s) of noncompliance.

Subpart D--Appeals of Civil Monetary Penalties


Sec.  180.100  Appeal of penalty.

    (a) A hospital upon which CMS has imposed a penalty under this part 
may appeal that penalty in accordance with subpart D of part 150 of 
this title, except as specified in paragraph (b) of this section.
    (b) For purposes of applying subpart D of part 150 of this title to 
appeals of civil monetary penalties under this part:
    (1) Civil money penalty means a civil monetary penalty according to 
Sec.  180.90.
    (2) Respondent means a hospital that received a notice of 
imposition of a civil monetary penalty according to Sec.  180.90(b).
    (3) References to a notice of assessment or proposed assessment, or 
notice of proposed determination of civil monetary penalties, are 
considered to be references to the notice of imposition of a civil 
monetary penalty specified in Sec.  180.90(b).
    (4) Under Sec.  150.417(b) of this title, in deciding whether the 
amount of a civil money penalty is reasonable, the ALJ may only 
consider evidence of record relating to the following:
    (i) The hospital's posting(s) of its standard charges, if 
available.
    (ii) Material the hospital timely previously submitted to CMS 
(including with respect to corrective actions and corrective action 
plans).
    (iii) Material CMS used to monitor and assess the hospital's 
compliance according to Sec.  180.70(a)(2).
    (5) The ALJ's consideration of evidence of acts other than those at

[[Page 39644]]

issue in the instant case under Sec.  150.445(g) of this title does not 
apply.


Sec.  180.110  Failure to request a hearing.

    (a) If a hospital does not request a hearing within 30 calendar 
days of the issuance of the notice of imposition of a civil monetary 
penalty described in Sec.  180.90(b), CMS may impose the civil monetary 
penalty indicated in such notice and may impose additional penalties 
pursuant to continuing violations according to Sec.  180.90(f) without 
right of appeal in accordance with this part.
    (1) If the 30th calendar day described paragraph (a) of this 
section is a weekend or a Federal holiday, then the timeframe is 
extended until the end of the next business day.
    (2) [Reserved]
    (b) The hospital has no right to appeal a penalty with respect to 
which it has not requested a hearing in accordance with Sec.  150.405 
of this title, unless the hospital can show good cause, as determined 
at Sec.  150.405(b) of this title, for failing to timely exercise its 
right to a hearing.

181-199 [RESERVED]

    Dated: June 21, 2019.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.
    Dated: June 24, 2019.
Alex M Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-16107 Filed 7-29-19; 4:15 pm]
BILLING CODE 4120-01-P